晚期 VC 的减记与失误、市场策略，以及布拉德·格斯特纳谈俄乌局势

Jason Calacanis (00:00:00): Hey, everybody. Hey, everybody. Welcome to another episode of The All In podcast. We have a new bestie Yasty filling in for the prince of panic attacks, the Queen of Kenwa, the Sultan of Science can't make it this week, I think, after his incredible performance last week, end him trending on TikTok with his incredible insights over, sadly, the the potential famine that could come after this Ukraine war, he decided he would take a week off. I think it's just a little too much attention for him. So we have a bestie guesty today. Yes. The shaman of stocks is with us. He brings the equanimity to equities. You know him. He'll bring that namaste to your payday. His predictions are, the anti Galloway. Brad Gershner. Welcome back to the program. Brad Gerstner (00:00:46): Thanks for having me. Jason Calacanis (00:00:47): Namaste. And, also, with us, of course, the rain man man himself. He's bitter on Twitter. He's brawling on Colin. He's the bill of rights from pack heights. Dave, kids, sack. David Sacks (00:01:01): Boy, you've really outdone yourself today. Wow. Jason Calacanis (00:01:03): And the prince of Palo Alto, the Overlord of the Overton window, Jamal, Polly Hopatillo. David Sacks (00:01:11): Jake, are you the stinker of Stonks? Jason Calacanis (00:01:13): Oh, god. Relax. You know, leave the comedy to me. Alright? The Langer Winter slide. Rainman, David Saffens. David Sacks (00:01:24): We open Jason Calacanis (00:01:34): It's been a pretty pretty crazy couple of weeks here. We are not a political show here. But, obviously, when world affairs become acute as they have, we cannot ignore the war that is occurring in Ukraine. We're gonna talk a little bit about markets. I think we'll start with those. with Brad Gersner here. The SaaS market and the index why don't you walk us through this HR here because everybody's wondering what's happening with the markets given the war, given interest rate hikes, and the repricing stocks. I don't know how you would look at what happened in November, December, January. Brad, how do you contextualize? Brad Gerstner (00:02:14): Oh, certainly a repricing. certainly repricing. But I I I think of it more as normalization. Chamath Palihapitiya (00:02:19): K. Brad Gerstner (00:02:19): Right? Chamath was saying it November. I was I was on CNBC talking about the fact that when When we got to a post COVID world, rates were gonna normalize. Go back to where they were in January 2020. That was around 2%. And that growth multiples would have to come off of this historic Red Bull High that we were on during most of 2020 2021. So we were 30 to 50% depending upon the index above the five year average growth multiple pre COVID. So that just needed to happen. Like, we should be celebrating in one sense that that happened because that means that we overcame a global pandemic. The downside is we couldn't play with artificial money, 0% rates, 1,000,000,000,000 of dollars, you know, of of of congressional and fed injection in order to prop up valuations. And when it happened in and of it, self, that was gonna be extraordinarily painful. What I didn't anticipate and what most people didn't anticipate is that on top of that, we're gonna have increasing fears of hyperin not just getting back to normal rates and that we were going to find ourselves in the middle of an incredibly devastating war in Ukraine. Those two things added to the uncertainty, the risk premiums Added to uncertainty around future inflation, the dot plot exploded higher and expectations of forward rates went higher. Now why the hell does this matter? it matters because when you take you know, if you're looking at that chart, the 5 year average, the 10 year was 2 a half percent. Like, we all got comfortable investing in this period of time. The market hate uncertainty, we had a predictable way for us to estimate where we thought our wow should be in our discounted cash flow models. All of a sudden, that was thrown into thrown into the arrow. Oh my god. Look what we got going on. Chamath Palihapitiya (00:04:11): I can't do anything. Look at this. Oh, yeah. Jason Calacanis (00:04:13): Never compete with babies or animals. Brad Gerstner (00:04:15): No chance. Jason Calacanis (00:04:17): No chance. Chamath Palihapitiya (00:04:17): This is Talita. Talita? at this little look at this little butterball. David Sacks (00:04:22): Oh my goodness. Chamath Palihapitiya (00:04:23): Lord. Look at that. Brad Gerstner (00:04:24): So so good. Jason Calacanis (00:04:25): Sax, that's called a child. It's you have 3 of them. Those are babies, and what you're seeing there is affection from a father and a child. Chamath Palihapitiya (00:04:32): Look at how cute this little baby is. Jason Calacanis (00:04:34): I just wanna eat the room. Sacks is like, well, this is Jake from my time. Brad Gerstner (00:04:39): Get that baby out of here. Jason Calacanis (00:04:41): Yeah. So cute. So, Brad, I guess what everybody wants to know now that we see this repricing occur is what do you think is gonna happen in 2022 and then into 2023? Brad Gerstner (00:04:53): So We're now multiples are now below the 5 year average. For for for software, we're about at the 5 year average. For Internet, we're well below the 5 year average. I said on Twitter that the rate path last week became a lot more certain. The Fed said something last week that I think is still not well reported, well understood. The Fed said at the end of the year, we're going to have 2% negative real rates. They said we expect inflation exiting the year to be 4.3, and we expect the tenure to be around 2.3. The reason the market exploded higher is because under the Fed's prior protocol, a 4% a 4% inflationary rate would mean that rates would have to go to four and a half. And if you take rates to four and a half, then growth multiples need to be about 30% below the five year average. Okay? So as investors, whether we're investing in mid stage venture late stage venture whether we're investing in the public markets, like, we need to know what exit multiples are. And it was bad enough that we had to bear the drawdown coming off of, you know, this this Red Bull High of Jason Calacanis (00:06:08): 20202021. Brad Gerstner (00:06:10): But if you think we're durably going to an inflation rate of 3% or 4% and an interest rate environment of 3% or 4%, then you simply have to adjust what you're willing to pay for growth assets. And so as I look ahead, right, we don't we don't know with certainty. The question is what's the distribution of probabilities? And, you know, just this morning, Citi, Goldman tax raised their exit year their their exit 10 year for 2022 to 2.7% and took it as high as 3 a half percent for 2023. I think it's gonna this period is gonna be marked by a lot of uncertainty around inflation and rates till we have more clarity and what that means is allocators of capital are gonna allocate less to risk assets, and they're gonna pay less for risk assets. But, you know, listen, if I look out over the the 5, 10 year horizon. I don't believe in global stagflation. I don't believe that we're in this new hyperinflation environment, but we're gonna have to get through this next 6, 12, 18 months, and it's gonna be filled with a lot of volatility and a lot of uncertainty. Jason Calacanis (00:07:15): Chamath, what rings most true about what Brad just said, and then what can you add to the prediction for this coming year? I mean, I don't know Chamath Palihapitiya (00:07:23): what the prediction for this year is. I I think the markets are mostly moving upwards for the short term. And then I think volatility is gonna come back. I'm just trying to find good long term businesses and just kind of close my eyes and not have to look at these stock prices every day. And as long as I can manage my own psychology, I think I'll be fine. And I think that's probably the thing that most of us need to be doing. The interesting thing about Brad said is that the implication of that is that it means that late stage venture is pretty badly mispriced. And I think you're going to have to knock these things back by 50, 60%. I think you saw the first real big movement there yesterday, which was the Instacart print. Right? We went from a $40,000,000,000 valuation to I think it was Jason Calacanis (00:08:18): 24. Chamath Palihapitiya (00:08:20): If you look at from February of last year, which was really the high for all of us. Right? That's when we all thought we could do no wrong. You know, the comps to Instacart are off anywhere between 50 70%. You know, takeaway is off 70%. Uber's down 60%. DoorDash was down 55% So these are some big moves, and so, you know, it made sense that Instacart had to get kind of like reset The problem that it has is that it's now the nth player trying to get public into a space with many players who've guzzled up a lot of capital in a low rate environment. And so if you think about company building, this is why entrepreneurs have to pay attention to this stuff. You wanna get money when money is cheap. But the problem is you can't control that timing. And so if you can't control your operating margins and your profitability, then you're gonna have to go and basically pay somebody an enormously high price to get their money. And I think that's what setting itself up to happen in a bunch of these markets. I think enterprise SaaS has always claimed long term profitability The thing is when you look at sort of, like, the real long term companies, they've built some enormous motes. Right? Like, if you look at a ServiceNow or Salesforce at the high end, And then there's a crop of a couple of companies like Palo Alto Networks who are the next ones coming after who seemed like behemoths in the making. But everybody else, I think people have to really question like where the long term profitability gonna come from. And so if that's true, then the late stage private SaaS companies are in trouble. Similarly in places like delivery where again you've had a bunch of comps come out. They've been curing in the public markets for years. you know, Uber, DoorDash. There's a couple of these behemoths getting built. DoorDash being the most obvious. And then there's a bunch of more kind of question mark business models including Uber, which is not really hanging together in the public markets. So I think the real question for entrepreneurs is if you have the nth business nth being not the first, not the second, but your latest 7th or 8th or 10th trying to go public. And all the 7 or 8th before you are gas guzzling machines, you're gonna pay a very heavy price to get public. Chamath Palihapitiya (00:10:35): And I think that that's the reckoning that we're starting to see. So I'm really interested to see how plays up. You know, the Instacart valuation could easily be cheap at 24, but it could just as easily be over price by another $10,000,000,000 depending on how people think about who the last buyer of resort is in the public markets. Jason Calacanis (00:10:54): Sachs, did Instacart miss their window to go public, and then what does this say about the backlog of 100 of unicorns that the venture community is investing heavily in. David Sacks (00:11:04): Some of them are probably after IPO at Downrounds. I think that's sort of the takeaway. Jason Calacanis (00:11:09): Explain what that is to to neophytes. David Sacks (00:11:10): Well, it just means that they're gonna have to go public at evaluation lower than what the last private round was. So all of these late stage private investors who assumed that they would always make money investing in a company in the last private round before went public, they they thought that was sort of an automatic gain an arbitrage, and it's not. And there's gonna be some disappointment there. Brad's been sharing these charts with me since, I guess, what, December? Brad Jason Calacanis (00:11:36): -- Chamath Palihapitiya (00:11:36): k. Jason Calacanis (00:11:36): -- David Sacks (00:11:37): where the then the charts basically show public SaaS valuations as a multiple of ARR. And then he's got a similar chart for it sort of the Internet companies, the sort of non SaaS Internet companies as a function of revenue. And we we've been looking at these charts you know, once Brad showed these to me again 4 months ago, it became so obvious what was going on, which is that valuations were reverting back to the historical mean. If you look at, you know, during the 2 year period during COVID, the they the multiples had risen to some insane level, right, and because of all the liquidity that have been pumped into the system. So as soon as you saw the the charts that way, you could just see where things were headed, which is back to historical averages. Now we're below those averages partly because -- No. No. No. No. Not really. Not really. The multiples are. Chamath Palihapitiya (00:12:27): Can I summarize Brad's chart because it is extremely elegant and simple for the layman to understand? So here's a layman's understanding of of Brad's analysis, technical analysis, and and and balance sheet and and P and L analysis, which is accurate. When rates are 0, typically people are willing to pay 8 times revenue for a company. Okay. So if you're generating Top line revenue. Top line revenue. You're generating a $100,000,000 revenue in your reasonably high margin, reasonably high growth software business. That's worth $800,000,000 in the public markets. For every 100 basis point increase in rates, You decrease the valuation between 15 20 percent. So if you think rates are at 2.75%, The price is somewhere between 30 to 40 percent cheaper than what it was when rates were at 0. So if you go back and you look at every TechCrunch article, and every Bloomberg article, and every information article, and you look at all those headline valuations when rates were at 0, we all just said rates are gonna be somewhere between, you know, 2 point to 3% at the end of this year. At a minimum, you have to haircut those things by 30 to 40% steady state meaning the company is continuing to execute on all on all cylinders. If they have a downtick in their performance, then it it increases that discount. If rates go higher, it increases the discount. But the basic way to think about this is for every 100 basis point increase in rates, You gotta down take that valuation by 15 to 20 percent. Brad Gerstner (00:14:07): And I think, you know, just to be fair, I think I don't think there's any daylight between you and Saks on this. What What's actually saying is the 40%. No. Chamath Palihapitiya (00:14:15): I'm just giving a numerical rule that that that sometimes Brad Gerstner (00:14:17): I think you're right. That is the that is the the the correlation. And so this idea listen. We all get paid to find good companies and avoid bad companies. That's generally what we get paid to do. We're we're decent at it. all of a sudden, in fact, most fundamental investors say, hey, I'm not a macro expert. I don't know where inflation's going. I don't know where interest rates going. I just find good companies. We've had a decade or longer where that was okay to do. That was easy to do because guess what? Inflation was at 2, and we had 2 a half percent tenure. When all of a sudden you have massive volatility in that, it's not acceptable as an investor just to say, well, None of this matters because it does matter. Right? Price matters because what you can exit for is essential to the game. And there were a lot of people invest in 2013, 14, and 15. When when the cost of entry was low and exited when the cost of entry was high. Multiple expansion hides many sins. Right? And now just the opposite happening in a dramatic and historic way. and that multiples were higher than they've ever been caused by a global pandemic. And the exit rate for a lot of those companies right, is gonna be very painful. I think that Saks's point about down round IPOs, I don't think this is the exception, dude. Chamath Palihapitiya (00:15:37): No. Right. it. Brad Gerstner (00:15:37): Right. Things that I think the vast majority of companies that come public in the next 12 months are going out below their last round's valuation. Chamath Palihapitiya (00:15:44): Yes. The Reddit the Reddit rumor was that Goldman put a $10,000,000,000 price on the cover and that, you know, it effectively been cut in half. Again, these are all rumors, so these could completely not be true. I don't I don't have any knowledge one way or the other. to Jason Calacanis (00:16:00): 5,000,000,000, Chamath Palihapitiya (00:16:01): and that may actually end up being too expensive. It just depends on where the market is. Jason Calacanis (00:16:05): Well, just so people are clear, When investors sophisticated investors make these late stage valuations at very high multiples like they have, they do have some downside protections. In other words, they cannot lose more than the money that was put in when this thing IPO's or they may get kickers of additional shares. So maybe, Dana, these Chamath Palihapitiya (00:16:23): IPO no. No. No. In fairness, you're talking about something very important, but they're very rarely in these high priced rounds because most of these high priced rounds are in Gogo Companies where all of those rights get stripped away. This is why I do think, Jason, what you're actually bringing up is in in the last innings of a bull market, You have incredibly irresponsible behavior by a bunch of these investors. And that's also gonna get exposed as well. So, Jason, what you're talking about is what's called an IPO ratchet. Yeah. Which means I'm giving you this money at this price. But if you can't IPO at this price, then you're gonna give me an equivalent number of shares that makes me whole. Right. Right? So it's as if I am I am indifferent to what price you IPO at. That's extremely dilutive to really one really important class of individual, which is the employees of the company. It's also really dilutive to other investors who've come in before them. But in Jason, you're probably right. To the extent that there were IPO ratchets, they'll get triggered. But I think in many of these Gogo Companies and, you know, Brad and Saks can confirm, but I see it. All those rights get stripped away. It's like, come in at this crazy price. We're not negotiating it. This is your own chance. There's no governance. Get our get get our logo on your fundraising deck for the next round. And so this is the price of the capital. It's been Jason Calacanis (00:17:35): a little bit of sloppy behavior just so people understand if the red evaluation was 10,000,000,000 somebody put in, you know, a 100,000,000 in this late stage round, if it came out at 5,000,000,000, they would get twice as many shares to make up for that difference? Brad Gerstner (00:17:48): That doesn't exist in the case of Reddit, Jake Al. You know, it was Fidelity who led that last round. So they're going to be price takers at whatever price the company comes public. Jason Calacanis (00:17:57): What does that mean? Explain that price takes or something. Brad Gerstner (00:18:00): You know, if they come public at $5,000,000,000 and you put in a $100,000,000, your stake is now worth Jason Calacanis (00:18:05): 50,000,000. Right. Brad Gerstner (00:18:06): Right. So you last spoke to those. Jason Calacanis (00:18:07): -- didn't they have the discipline to put in these protective provisions, ratchets, etcetera? What happened in the market? Brad Gerstner (00:18:14): To Chamas point, they haven't really existed in most deals for the last 5 years. Right? I go back to 2000 and, I think, 2007, 2008, KAYAK raised money with a ratchet in their last pre IPO round, it prevented them from getting public for 3 or 4 years. That dilution overhang was a significant impediment to getting public. So, you know, listen. We all know that Groupon raised it Jason Calacanis (00:18:39): $20,000,000,000 Brad Gerstner (00:18:40): when public in a year later's worth 2,000,000,000. I mean, it's not as though this hasn't happened before. But, yes, people people got a little laxity days ago. I just wanted to I just wanna say one other thing, though, because multiples coming down is a problem. What this really reveals is the importance of stock and company selection. Right? Because if you were a shitty company with an unproven business model way out on the risk curve. Okay? And you had a super high valuation last year, and you don't you know, there's a good chance you never grow in it grow into it. You never get back to that evaluation? Example? Your growth will de sell. Well -- Give Jason Calacanis (00:19:18): us an example company. Brad Gerstner (00:19:20): Okay. Discord, Ripple Labs. Jason Calacanis (00:19:23): -- 15 Brad Gerstner (00:19:24): minute in the 15 minute delivery space in Jason Calacanis (00:19:27): Europe. Gopuff? Brad Gerstner (00:19:28): You know? And I I I would say Gopuff is one of the best of them. There are a lot of startups that got funded with 1,000,000,000 of dollars in Europe, unproven business models, burning tremendous amount of cash, right, like, I don't know why they need to exist. I don't think they're gonna get funded. Right? Maybe 1 or 2 of them do. But when you have DoorDash and Uber that are free cash flow positive, that have strong brands and that can redeploy those profits back into compete in those markets. I think it's very tough. Chamath Palihapitiya (00:19:55): Neobanks are another example. Neobanks you know, the number of Neobanks that have been funded at exorbitant valuations where you know, the problem is all of these financial services companies are essentially an arbitrage on rates. Right? When rates are 0, they take that money at 0%, And then they can go and execute a business model, you know, and sell that money at 1% and take the difference. But when their cost of capital is 2 or 2 and a half or 3%, the whole business loads on them. So you're gonna see a bunch of these financial services companies get under pressure. Another example, Jason, is, like, all the low end, you know, bottoms up SaaS companies. And the reason is because they spend their time inside of Google and Facebook doing customer acquisition and managing this very intricate dance of LTV to CAC, And when all of those input costs go up, their business implodes because you can't raise rates faster or you can't raise prices. Jason Calacanis (00:20:50): I would say -- -- Chamath Palihapitiya (00:20:51): faster than the input costs are, and then all of a sudden, your unit economics blow up. And in all of this, what is the salvation in a moment like this? it's being healthy gross margins, healthy contribution margins, and a and a realistic path to profitability, which means being EBITDA positive this year or within the next 2 years. Jason Calacanis (00:21:11): Said another way, if you're profitable, you're not gonna go away. Chamath Palihapitiya (00:21:15): If you can't if you can't show that you're, you know, to use the famous Paul Graham added, default to live -- Yep. Jason Calacanis (00:21:20): -- Chamath Palihapitiya (00:21:20): in a moment like this then you are a price taker, which means that you will have to pay probably a very high cost of capital to raise incremental capital to support a fundamentally fragile and non resilient business model. Jason Calacanis (00:21:35): Here's the issue here, Sax, that when you see the getter, gorilla all these instant delivery companies get funded at exorbitant prices, and they're the 7th, 8th, 9th as Chamath is pointing out. No. Chamath Palihapitiya (00:21:48): No. No. Instacart was the 7th. Those are, like, the 10th, 11th, Jason Calacanis (00:21:51): 2013. Here we are. This, to me, seems like the fault of poor judgment by capital allocator sacks? Are there too many venture funds chasing chasing too few deals and not thinking through what investing in the 10th, 11th, or 12th player in a market is gonna be able to do. Is it too much venture? I think David Sacks (00:22:12): part I think part of with with the companies you mentioned is that they're physical world companies. They are very capital intensive. They burn a lot of money. They're operationally intensive. I have sort of sour I soured on those businesses years ago, and that's why I just focus on SaaS because they're basically perfect gross margin businesses. They're very it can be very capital efficient if the founders wanna run them that way. So what we're doing now is telling founders, lengthen your runway, be more capital still efficient. You need to understand that, you know, multiples if you raised last year at a hundred times ARR, you need to understand that the next time you raise it maybe at 20 times ARR. So Now you can grow into that. Right? If you're tripling and then triple again the next year, you'll be able to grow into that valuation. But you know, make your money last 2, 3, 4 years instead of, you know, burning it in 12 to 18 months unless you want a down round. Brad Gerstner (00:23:05): I think this is this is the point that now allocators, venture capitalists are gonna spend the next 6 months thinking about. What's in bucket 1, low quality companies burning a lot of cash that may very well not make it across the cast Jason Calacanis (00:23:21): No path to profitability. Brad Gerstner (00:23:23): What are the high quality companies that, yeah, the multiples down because public market multiples are down. Risk premiums have changed, inflation change. but they have plenty of cash on the balance sheet. And think about it this way. Snowflake became a a poster child in the public markets of a high priced SaaS business. Snowflake this year will grow its free cash flow at over a 100% a year. Next year, probably, you know, 80 or 90%. Free cash flow, not just revenue. free cash flow. In q 4, I think they booked Jason Calacanis (00:23:51): 1,400,000,000 Brad Gerstner (00:23:53): of revenue, q 4 on a business that entirely in last year did 1,200,000,000 in revenue. Right? You think about that. The incremental was more than what they had generated in the prior many years. That business So let's say we reduce the multiple by 50%, but the company's growing top line and free cash flow by a 100% doesn't take you very long. to grow through the multiple compression. So Snowflake's multiple is plummeting for 2 reasons. 1, because the stock price came down. Number 2, because, right, their growth rate and free cash flow growth is so high. And so now if you look at the multiple, it's similar to what we would expect of a regression of the 5 year analysis. Chamath Palihapitiya (00:24:35): Unless these companies unless these private companies wanna go dark for the next 3 to 5 years, meaning No. No sophisticated late stage investor doing around or going public. They'll be okay. But otherwise, they're gonna have to reckon with a version of what Brad just said, which is the high the flight to quality problem. You know, when in moments of uncertainty and high volatility, it's just more straightforward to go to the things that are reliable. And so, you know, when you think in the public tech markets, what is a reliable must own company? Well, I would put Snowflake in the list of these must own high growth software businesses. Right? You know, the fangs tend to be in the must own category. But then there are all these other businesses that then get orphaned because they're of nice to own, would love to own, would be great in any other circumstance. And that gets even more exacerbated in the in the private markets. You have to remember. Right now, like the private markets cannot really exist without an incremental buyer of equity. Right? Jason Calacanis (00:25:42): You can't be a bag holder. Somebody has to buy the stock after you. Chamath Palihapitiya (00:25:46): Somebody needs to be the bag holder after you. And the problem right now is that those folks have a lot more credible safe durable assets that they can own and not have to deal with all the crazy anxiety that comes with owning something that's that's high volatility like this. Jason Calacanis (00:26:05): Or, Chamath, correct me if I'm wrong or Brad, if they don't wanna even be involved in this, Miss Sugana, they could just be in cash, and the interest rates are going up. Chamath Palihapitiya (00:26:13): So maybe they could say, you Jason Calacanis (00:26:13): know what? I'll this out for a year. Is that also happening with those folks? David Sacks (00:26:18): Or is Jason Calacanis (00:26:18): that too hard to do because of inflation? David Sacks (00:26:20): She knows a bunch of these folks, but, like, take, for example, d one you know, it's Dan sometimes a great investor. I mean, my understanding is that they are sort of off privates completely. because y invests in a private company at X Times ARR when you can invest in a public SaaS company for 6 times. So They've substituted. I think Tiger is still in market with a gigantic fund for privates, but the valuations have come down. So they're essentially repricing everything. I think those are probably the 2 broad reactions you could have. Right, Brad? Brad Gerstner (00:26:53): Certainly. I I I would say this, broadly speaking, the late stage private financing market in venture is closed because there hasn't been. Right? We're in this this buyer seller standoff Sellers aren't to the point where they're willing to accept that a new rate a new regime of multiples exist. Right? It's painful. We saw, you know, the Instacart news here recently. But I think, you know, like, listen, we're not even 10 or 20% of the way into the psychic reset that needs to occur. in order for us to see real price discovery, that's not going to occur until these companies need money or wanna go public. This fall is when we'll start to see real price discovery. You couldn't pry a late stage dollar out of my hand right now because I don't think that we have real price discovery going on. Early stage venture for investing in an incredible, you know, software business at Jason Calacanis (00:27:47): 300,000,000, 400,000,000, 500,000,000. Brad Gerstner (00:27:49): We think it could be worth tens of Jason Calacanis (00:27:50): 1,000,000,000. Brad Gerstner (00:27:50): you can withstand a little inflation. But the later you get in the life cycle of a business, it's about IRRs, and IRRs in late stage at last year's evaluations relative to today's public market valuations, that is a negative arbitrage. Jason Calacanis (00:28:05): Explain IRR why that matters. Yeah. Just fill the Brad Gerstner (00:28:07): way We're just you know, we expect our hurdle rate in the public markets is a 20% risk adjusted rate of return. So if I'm you know, like, you know, you look at these late stage private valuations from last year. I mean, you know, Saks just talked about companies repricing down 40 or 50 or 60%. So if they haven't done that Jason Calacanis (00:28:27): -- Brad Gerstner (00:28:28): Now do you just -- -- have a conversation? Chamath Palihapitiya (00:28:30): Just to uplevel this. What Brad is saying is the following, Jason? Any person can wake up tomorrow and buy the S and P index. Right? What Buffett would tell you to do? Just buy the S and P Jason Calacanis (00:28:39): 500 Chamath Palihapitiya (00:28:40): index. That historically has compounded at around 8% a year if you reinvest the dividends. So you can do nothing. Right? Get a basket of the 500 best companies in the world that are automatically selected for you based on revenue and profitability. You don't have to do anything. and that'll compound at 8%. That is effectively the risk free rate if you wanna own an equity. So if you're gonna step into the late stage private markets and, you know, buy some shares and, you know, dingdong.com, you gotta be rewarded for that, which typically means that there is a premium above the percent. And what Brad is saying, like, you know, it's it's actually more than double. In his case, what he's saying is it's two and a half times. You know, you've got a clear 20% to you. Otherwise, you're better off on a risk Jason Calacanis (00:29:24): adjusted basis. -- sit is what's likely to happen. I'm looking here at a list. Gopuff at 40,000,000,000, Canva at 40,000,000,000 Florida at 45,000,000,000 Discord at 15,000,000,000 Ripple at 15,000,000,000. These Grammarly at 13,000,000,000. These don't make sense given that if they were public, they would be trading at Chamath Palihapitiya (00:29:41): Well, here's Jason Calacanis (00:29:41): what you can 50% of that. Chamath Palihapitiya (00:29:43): Here's what you can say. If if everything is held equal, just with the rise of rates, you have to reset those valuations between probably Jason Calacanis (00:29:52): 15 40%. Chamath Palihapitiya (00:29:54): Okay? At a minimum. Minimum. But what Brad said is also true, which is if they then keep growing at a superior rate, they can get back to even. So meaning 18 months, they could also show up again at 40 and be net net awash. Jason Calacanis (00:30:09): They could get unstuck. Chamath Palihapitiya (00:30:10): But a lot of hard work will need to happen underneath the covers of these businesses in the next 2 years -- Okay. -- for that to happen. David Sacks (00:30:16): And and that that's what's gonna happen with a lot of early stage private companies, right, is, let's say, the error multiple has gone from a hundred times to 20 or 30 times. they have to grow their ARR 5 x to get the same valuation. So the question is, can they grow their ARR 5 x before having to return to market This is to get a flat round. Now if they are tripling this year and then doubling next year, then that's 6 x growth in ARR. So even if you know, the multiples gone down 5 x, they could still get a slight up around. So that's the game I think all these companies are gonna be playing is lengthen your runway so that you can grow into your valuation and not take a down round. Because the problem is if you're ever in a situation where where you take a down round, it's way worse than just the dilution because now the psychology of everyone in the company changes, everyone has to worry that you're gone sideways It's hard to grasp. Chamath Palihapitiya (00:31:10): But here's the here's the difficulty of what Saks is saying, though. In order to grow revenue, you have to invest. Right? You have to invest in salespeople and account management functions, in engineers and product managers. Right? And all of those people need to exist, which actually increases OpEx Right? It increases burn. It doesn't maintain burn. And so this is the death spiral JSON you're talking about, which is in order to actually grow by those multiples, You actually don't have more fuel. Jason Calacanis (00:31:36): You gotta increase your speed. -- Chamath Palihapitiya (00:31:37): to burn more fuel. You don't actually have the money to to withstand 2 or 3 years. Jason Calacanis (00:31:41): Or the altitude. Chamath Palihapitiya (00:31:42): You're now So it's gonna be a very precarious balancing act of trying to figure out how these companies actually get to the other side. Because, again, I think the the buyers in this case will be will drive hard bargain. You know what I mean? Like, look, organizations like, you know, durable, d one, Tiger, Altimeter, these guys are the smartest of the smart. They're not dumb. Yeah. And so, you know, the price of capital is going up in that case. And so, you know, they're gonna strike really good opportunities for their investors right, for their LPs. Jason Calacanis (00:32:11): If we were gonna do an analogy here -- -- 20%. The analogy here is these founders were on autopilot. They were asleep at the wheel, and now all of a sudden, they're in the soup, and they got Chamath Palihapitiya (00:32:21): a really performer -- No. That's not fair. I I don't think they were asleep at the wheel at all. I just think that they you know, Boomi says this when the when the music is on, you gotta dance. They did it. They raised money at the highest valuation possible. God bless them. Now you're gonna see who is really good at what they do. And who was benefiting from a lot of just natural, you know you know -- Right. Jason Calacanis (00:32:45): But people were only when David Sacks (00:32:47): I say they Jason Calacanis (00:32:47): were on auto top although, let me just clarify those guys. -- David Sacks (00:32:49): serve them the pencils for the first Jason Calacanis (00:32:51): time that you have to make real -- That's what I'm talking about. Yes. David Sacks (00:32:52): You have to make real terminology. Look. In an in an up pocket, In a well, in an upmarket or a boom market, the the 3 things that matter are growth, growth, and growth. In a down market, the 3 things that matter are growth, burn and margins. It's not that gross stops mattering. It's just that burn and margins also matter. And now, there's gonna have to be real trade offs. Before, it was just how much money can we spend? How quickly to get growth? Now let's wait a second. Is this growth efficient? You know? And will we have enough runway? to get to the next round without having to take a down round. Jason Calacanis (00:33:24): Brad, when we saw at the peak of the pandemic some leadership, I'd say, you know, seasoned or well informed leader ship, Airbnb and Uber come to mind cut their staffs massively. They used that crisis to reset their cost structure and get to profitability quicker. Those were money losing businesses for a long time, maybe, you know, taking advantage of these hot markets. Is that what needs to happen here? Are we gonna see a cascade of companies lowering their valuation, lowering their cost, sharpening their pencils, cutting staff, and then becoming more efficient and more ruthless at, you know, the 6th, 7th, 8th product they're launching and saying, hey. Let's go to the core product and make it sing. Make it profitable. Brad Gerstner (00:34:02): You know, Frank Sluteman has said that Silicon Valley is full of companies that are walking dead, and they don't even know it. Right? Jason Calacanis (00:34:10): Some startups. Yeah. Brad Gerstner (00:34:11): Frank is you know, he says in tape sucks. He says, listen, I'm a wartime CEO, not a peacetime CEO. Right? He came into he came into snowflake when it was growing over 300%, and he took he he, you know, he he he reconstituted what what that culture was about to prepare for wartime. Right? Because he says when wartime comes, right, and it gets challenging, I wanna run the field. Right? I don't wanna be laying off employees. I wanna be that's the time to hire. That's the time to press the advantage. That's the to invest in product. That's the time to win the new customers. Unfortunately, over the course of the last 12 to 18 months, a lot of people without that experience right, took a negative signal, and the signal was money will always be available and it will be available at ever increasing valuations. And, of course, anybody who's been at this for 20 years like the 4 of us, we know that isn't true, but it's amazing. I mean, you the the behavioral psychology our ability to gaslight ourselves Jason Calacanis (00:35:12): -- Totally. -- Brad Gerstner (00:35:13): in these moments and move out on the risk curve and ignore these lessons. Right? And so I really actually hurt and I've spent a lot of time on Zooms lately with founders and with their teams talking them through this because, like, we talk about it in the abstract and and this through the lens of a spreadsheet. But there are a lot of people's lives that stake. If you're an employee and you went to this company and you took everything in stock at 15,000,000,000 that's now worth 5,000,000,000, you're totally underwater. At the same time, the cost of buying a home and mortgage rates and everything else is going up against you, I mean, this is a massive morale problem. Right? You know, for for for companies that frankly, we want to invest in. These are the innovators, but this is what happens when you have government intrusion right, that we can all debate whether or not it's worthwhile, but it was hugely distortive. What we know to be true is that we had more distortion in markets the last 2 years than probably any time since post World War 2. And the consequence of that is dramatic. And, you know, we all kinda saw it, but we all kinda gaslighted ourselves as well because you were like, well, maybe there is a new normal. Maybe we have accelerated digitization. The truth of the matter is the law of economic gravity as interest rates and inflation, and it remains. Chamath Palihapitiya (00:36:35): Yeah. And and this time turns out is not really that much different. I think, Jason, if you take your list of these high priced startups Jason Calacanis (00:36:43): -- Yep. -- Chamath Palihapitiya (00:36:43): I think it would be a a good useful exercise for somebody to do somebody in the press should probably do it But if you take that list and just rank companies based on valuation, the last announced date Jason Calacanis (00:36:53): -- Chamath Palihapitiya (00:36:54): Yep. -- and then if they are not announcing layoffs of any kind. You can probably forecast when they're going to burn through the money especially if they're hiring. And the reason that you can probably forecast it accurately is you can pretty much predict what OpEx will be especially knowing the fact that their input costs are actually going up. So for example, most of these businesses that rely on Facebook and Google and Instagram for customer acquisition Those input costs are going up. And the reason you know that is the that's $2,000,000,000,000 of market cap that doesn't give a flying fuck what's happening in startup plan. they're gonna make their numbers. Right. Okay? Those are the most important companies in the world. They will ratchet up the prices And so your input costs are going up. It's not just the physical supply of materials that I think is going up. It's just the of customer acquisition is gonna probably go up by Jason Calacanis (00:37:46): 20, 30, 40%. Chamath Palihapitiya (00:37:47): Right? And you know this because Facebook and Google guide to where they need to perform. And so if you pass that through the venture ecosystem, that all of a sudden now upticks your burn. Yep. If you're adding more people, it upticks your burn. Yep. And now back to David's Matthew, then I also have to grow 5 or 6 x. The none of this hangs together. So we are at the beginning of probably a very complicated process of unwinding Jason Calacanis (00:38:10): -- Chamath Palihapitiya (00:38:11): Yep. -- the distortion that we've lived through in the last couple of years. Jason Calacanis (00:38:13): At this point, I mean, you have to blame the capital allocators in this instance, they bought these logos. They suspended disbelief. We've had this ridiculous culture of no governance, uncapped notes, just pushing I see it on the boards I'm on. You guys probably see it too. Some people just pushing top line growth, never discussing unique economics, never discussing the bottom line. and they created these crazy Fuji markups. They raised bigger funds based on it, and they just were never the adults in the room the stories of capital. It's infuriating. Chamath Palihapitiya (00:38:43): I'll tell you an incredible conversation I had yesterday with one of my partners. So he's been, you know, with me for 10 years He was really the one that pushed us very early on to go into deep deep deep tech when nobody else is doing it. 3 d printing of rockets, satellites, all that stuff. And it's been So I I really trust and respect his perspective. And he was telling me a story. He called a recruiter You know, because we've been toying with, you know, helping get some folks to help us manage some of our early stage deal flow. And he asked her essentially something to the point of like, who are the types of GPs that are getting hired today in early stage? And he said, you know, this is how we approach our business. Right? We have a permanent capital balance sheet. You know, we do you know, at most one deal a year per partner. And she said, you're never gonna get anybody. Because a mid level executive at one of these high flying start ups that then goes and joins a venture firm she said the consistent single thing that they make her decision on are you ready for this? Jason Calacanis (00:39:43): Go by. Chamath Palihapitiya (00:39:43): Is how many deals will I be allowed to do per year? Jason Calacanis (00:39:47): What? Chamath Palihapitiya (00:39:49): And so, you know, these people are make work construction workers. Right? That's digaditchvilladitch. That is not what investing is. That's not about having a discerning philosophy on what a business should be or a market. So if you have a bunch of capital allocators, Jason, to your point, who are unsophisticated about investing, probably very sophisticated operationally. but fundamentally don't know what they're doing, and they're coming and transforming in an organization that should be a disciplined discerning, allocator of capital and turning them into a velocity deal machine. This is what you're gonna get. Jason Calacanis (00:40:24): I mean, sometimes the best money, Saks, is money you put into a bet you've already made, continuing to build the pot with a start up that's already proven themselves. Correct? So I think what we're gonna see -- David Sacks (00:40:34): We have a fall on fund. Jason Calacanis (00:40:35): Yeah. I mean -- I gotta David Sacks (00:40:36): say the the things you guys are saying are making me feel great about our portfolio. Jason Calacanis (00:40:40): Explain. David Sacks (00:40:41): Not not because we won't get hit with the same valuation corrections that everybody else is gonna suffer. But because, you know, a few years ago, we decided we were only gonna invest a certain kind of company. I mean, high margin SaaS and marketplace businesses that were not capital intensive. We defined a new metric that didn't exist called burn multiple, which is the amount of money you burn for every dollar of incremental ARR that you generate incremental subscription revenue. And, you know, we turned out investments that were growing fast, but they had a horrible burn multiple. And so and and I do think most of our companies raise last year when, you know, they made hay while the sunshine. So there's gonna be they they need to manage their cash flow so they don't have to raise too quickly. But as long as they do that and they keep growing, they're gonna weather the storm. Jason Calacanis (00:41:33): What's the right number? Spend $3 to make 1, spend $2 to add 1. What's what's your ratio? David Sacks (00:41:38): So what I've said is that if you can spend a dollar or less to generate an incremental dollar of ARR, you're doing amazing. And between 1 and Jason Calacanis (00:41:48): 2 David Sacks (00:41:48): is good. So in other words, if you're burning 20,000,000 in a year add an incremental 10,000,000 of ARR, you're doing quite well and start a plan. And then when you start getting it to two and a half, three, that's a problem. And then above 3 is just bad. Jason Calacanis (00:42:03): Horrible. Spending 30,000,000 to add 10,000,000 in ARR, it means it takes 3 years or probably 4 or 5 because you'll have churn to get that money back. Yeah. And that's just a lack of discipline. And how many VCs are we on the boards or, you know, other investors are we on the board and having that nuance of a discussion? It's always just top line, top line, top line moves it into the next shareholder. Chamath Palihapitiya (00:42:22): I think it's very difficult because I think the number of qualified investors have gone way down as the surface area of thing has gone way up. So again, just going back to this conversation, this woman is staffing most of these venture firms with their junior and mid level partners. And, again, the qualification to become a venture capitalist at this point is not that you have an ability to pick or You know, in David's case, have operated and actually run a business and then actually have developed a methodical framework or business, which is Brad had to start from literally 0 in the public markets and work his way backwards, end up with 15 or 20,000,000,000 of assets. It's none of that. It's Are you a VP at an xyzunicorn that may also be poorly run? And all of a sudden, that, you know, gives you the qualification to go into a job where and it's not their fault where what they are told is what you want is what we're gonna give you, which is the ability to write, you know, x number of checks per year. That is insanity. That's not what makes a good investor. And then your ability to then give advice. I don't know. It's probably 0. or less than Jason Calacanis (00:43:26): 0. Your ability to give advice is I think we have to qualify. Bad advice is being given. So the ability to give quality advice as to what's what's missing in this formula. I just think these people Chamath Palihapitiya (00:43:37): are really naive. Like, you know and it's not their fault, but, you know, they're given way too much rope to hang themselves. with, and they're and and the the the the unfortunate byproduct is gonna be the the companies who gets bad advice or the bad businesses that get funded. And that's not what, you know, an efficient capital market should do. David Sacks (00:43:55): So one one of the things I'm seeing our portfolio of companies do is use burn multiple a governor for how fast they're gonna grow. So, for example, they will say that the burn multiple should not exceed 2 in the next quarter. So, you know, we want to so the the old way of doing it would be that the company would just have a forecast and say we're gonna grow 3 axis here. We're gonna grow ARR from 10,000,000 to 30,000,000. And whatever that cost, it costs. Right? That was basically how companies did it. Now what I'm seeing from some of our portfolio companies is they are saying, yeah, our goal is to grow from 10 to 30, but we will not spend so much money that our burn multiple exceeds 2. So, you know, if if it turns out that there's a trade off here between growth and burn burn is gonna win. We're not gonna exceed that level of that ratio of spending. And that's actually a good I mean, I've I've seen a few companies month that already, and it's probably something they should all be doing. Jason Calacanis (00:44:55): I mean, if these are pilots, they basically created a rule to not stall the plane. Right? You gotta keep a certain altitude a certain speed. So what is the opportunity here then? If we're gonna have too many companies, too high evaluations, we're gonna hang around the rim and try to get some rebounds here and try to find opportunities, what are the opportunities? What are the layouts here for capital allocators and for founders. If we have -- There are no -- -- rate of advice for them. Chamath Palihapitiya (00:45:19): There's nothing. There there there have never been layouts. And the problem is You know, in in up markets, whenever we think that there are, it ends up being what causes our downfall later because we we just take the wrong signal away. I I I don't think that there are I don't wanna be investing incremental capital into a late stage startup that's poorly run that doesn't have their margins in line and then having to work it out. Why do that? Again, I can just go in the s and p 500 and get 8%. And then, yeah, it's 30%, but it's 8%, and I don't have to deal with all this nonsense. Like Jason Calacanis (00:45:53): -- Chamath Palihapitiya (00:45:53): Well -- -- a bunch of people -- Look. David Sacks (00:45:54): It's your crossover investor. Right? I mean, you have the ability to choose between public privates or wherever you wanna play. Chamath Palihapitiya (00:46:00): I actually think what I am as an investor. Right. Jason Calacanis (00:46:03): But, yeah, you you don't have LPs for a VC fund like Saks and I do. Chamath Palihapitiya (00:46:06): But but this but this is my point. Like, I think investing irrespective of whatever stage you do it, Still fundamentally comes down to the following, which is do you have the judgment to understand whether these decisions are marginally good marginally average or marginally destructive for the short, medium, and long term of a business. And I just don't think that enough people steep themselves in the practice that it takes to get good at that kind of a game. And I think what these moments expose is that the status games that come around investing because it just seems like it's easy. It just seems like you don't do much work. That's what ruins these periods and the implications, I think, as Brad said, is really right. It affects the employees. It affects the entrepreneurs. It affects a start up culture. It affects the incremental desire for people to take a shot at things. You can overcome all of it. We have and we will again But I really think, like, to the entrepreneur of the message is if you're, you know, taking a term sheet, I think you have to have better judgment to really look at that on that investor and say, is this person really qualified to help me? Because in these moments, in the absence of help, you're probably gonna basically have a valuation reset at Boob. Minimum case and the worst case is you go out of business. Jason Calacanis (00:47:22): What's the CFO thought? You said, Shamont, then I'll hand it to you, Brad. Yep. Is that A lot of the founders picked based on the highest valuation, who their next investor should be, and now we see what a trap that is. Brad? Brad Gerstner (00:47:33): You know, the takeaway for me is we return to a place we've always been, which is about selection. Right? Look at the mean returns for ventures for 20 years. They're lousy. Chamath Palihapitiya (00:47:46): lousy. Brad Gerstner (00:47:46): Right? 90% of the of the spoils Chamath Palihapitiya (00:47:50): They barely barely mapped to the public. Jason Calacanis (00:47:53): -- Brad Gerstner (00:47:53): to 10% of the investments, and that's the way it's always been. Look at look at Buffet. Right? by superior companies at good prices. What are the 2 technology companies Buffett bought in the public markets? Jason Calacanis (00:48:04): Apple. Brad Gerstner (00:48:05): Right? Apple and Snowflake. Chamath Palihapitiya (00:48:06): Snowflake. Brad Gerstner (00:48:07): Apple And Snowflake. He doesn't own a broad basket of long tail Internet or long tail software. And so I think what you're going to see And and to Saks's point, I think even running a recipe on software as though all ARR is created equal. I mean, I can show you 5 companies each with a 100,000,000 of ARR each growing at 30%, and there's massive dispersion in future outcomes. Chamath Palihapitiya (00:48:31): Yeah. Brad Gerstner (00:48:32): Right? And so, like, I I just think that this at the end of the day is a craft business. It's an essentialist business. It's about finding an find those very, very, very few companies that ever durably are worth more than Jason Calacanis (00:48:46): $10,000,000,000. Brad Gerstner (00:48:47): You know, on my screen today, Chamath was just talking. There are 4 Internet companies that are green today. Amazon, Google, Apple, and Facebook. Everything else on my screen is bleeding Jason Calacanis (00:48:59): -- Chamath Palihapitiya (00:48:59): Mustone. Mustone versus Jason Calacanis (00:49:02): -- Brad Gerstner (00:49:02): Everything else is red, and my growth Internet stocks are down 400 basis points. Right? The market is voting with its wallet where it wants to sit on the risk curve. Right? And I think we're just gonna go there's no new normal here. This is just back to the future. right, is what we've always done, and, you know, the reset is always painful. The only surprising thing is how often we have to go through it. Jason Calacanis (00:49:25): if if opportunities do arise, where will they where will they be, Brad? I mean, I was watching Peloton. I always love that company. I see the change in management. I see the management. you know, thinking about profitability, thinking about creating it into a marketplace, maybe having more hardware available, disconnecting from the software, etcetera. Do do you think there's opportunities there, or there will be opportunities over the next year to buy some of the names that aren't the fangs? Brad Gerstner (00:49:52): What we do in the first instance, Jason and listen. We we outperformed last year. because we owned quality and we were short, lower quality stuff. Unfortunately, this year, the market said, guess what? It's all overvalued. quality, low quality, doesn't matter. We're taking it all lower. And so for us, in moments like this, and I've lived probably through 5 of them in the public market, We always do the same thing. De gross. Take risk down. First thing is, like, have less chits on the board. Number 2, reduce the number of outliers, pull in the risk curve. Right? For me, I wanna own 5 or 6 things. because remember, I'm the biggest LP in the fund. This is my money. I wanna sleep well at night, and I wanna protect the foundations the the endowments, the good causes we represent. I can't do that with a company that has an unproven business model. I may think that it's gonna be great in the future, but I don't know. So The problem with for the Peloton's of the world, right, they may be incredible returners. But what every portfolio manager on the planet is doing today is compressing the number of names in their portfolio. Saying, what are the companies I know with absolute certainty? Whether rates are two and a half, three and a half, four and a half, five and a half is gonna be worth more over the course of the next 2 to 3 years. That's what I wanna own. Right? And so -- What Chamath Palihapitiya (00:51:17): what what what I was just gonna say not your interrupt, Brett. But, Jason, what you're talking about is what a lot of people do. You see a lot on Twitter and I call it clapping as a strategy. What about this? And what about that? And what about if they do this? And what about clapping is not a strategy? Clopping is something people do at the blackjack table. It turns out it doesn't actually influence the cards. Sure. And so I think you have to stop with the clapping as a strategy because it doesn't work. Jason Calacanis (00:51:44): That's not my strategy. I was asking Matt as the moderator. Is there some -- Just to be clear. I'm not advising that as a strategy. Chamath Palihapitiya (00:51:50): I'm saying I think you're representing a psychological reaction that a lot of people have. And I think what Brad is trying to tell you is clapping is not a strategy. Jason Calacanis (00:51:58): Yeah. No. I'm asking that on behalf of the audience. It is not my belief just to be clear. Chamath Palihapitiya (00:52:01): My my my commentary to the audience is clapping is not a strategy. Yes. Jason Calacanis (00:52:05): Correct. Yes. if enough people though do what you're saying, Brad, and they just retreat to quality. At some point, that those quality companies would then become fully valued, maybe even overvalued, and thus the cycle begins again or not? And how long does that take? Brad Gerstner (00:52:21): No. You nailed it. What happened last year Jason Calacanis (00:52:23): 2021, Brad Gerstner (00:52:24): dispersion collapsed. Go check out Chamath Ball who who does incredible software analysis on our team. dispersion collapse between the best cohort and the worst cohort of software companies last year. The first thing that happened is dispersion returns. We pay a higher price for the best shit when we pay a lower price for the low quality stuff. Right? Then when we start to recover when there's more predictability in the world when we resolve the war, when we understand the path of inflation. Right? This stuff close in on the risk curve, that'll start being fully valued. So then we will be brave enough to walk a little further out on the ice on the lake, testing it, is it safe to walk here? And then you walk out a little further. And, sadly, right, eventually, we're in the exact same pattern we've been before, which is we'll know we're at a market top 5 or 6 or 7 years from now. When we repeat the same asinide behavior that we just went through, when everybody becomes complacent again and overbidding the stuff way out on the risk curve. I'm just suggesting to you the number one question I get from GPs, venture capitalists, and others right now, is when are we going to bounce back? Let me be absolutely clear. There is no bouncing back to where we were the last 18 months. That was the outlier. That was the make believe. What I hope and expect is that we can back bounce back to the 5 year average, but even to durably trade at the 5 year average, We have to have a lot more clarity on the war in Ukraine on inflation and rates. Jason Calacanis (00:53:55): So that's a perfect place to pivot sacks. We are now here, and I think this is the 4th or 5th episode where we have been discussing the war. And we flipped it today just to do markets first. for a little change of pace. And since we had Brad here, where are we at with the war? And what are your what is your expectation of it wrapping up or it escalating? David Sacks (00:54:15): Well, actually, there's a tweetstorm this morning that Chamath you sent to the group that from a Russian official, and it seemed to indicate well, it it indicate what we've kinda known for a few weeks now, which is what the broad contours of what a piece deal would look like, which is there's 3 main pieces. neutrality for Ukraine. The Russians insist that it not be part of NATO. they get to keep Crimea with the annex in 2014. That's been a fade accomplice. And then some version of independence for these sort of breakaway territories in Eastern Ukraine, the in the Donbas region. Everyone kinda knows that's the the the broad stroke the deal, then there's you know, a lot of details are gonna matter a lot to the people who live there. Like, is there this land bridge from Korea to Don Bass. but frankly don't matter as much to all of us in the United States of America. So the question is, you know, what what is the administration gonna do about it? Biden just went to Europe. And, you know, my concern is that no one in Washington talked about this last week seems to be pushing for a ceasefire. It seems like their preferred position is for Russia to bleed out as as long as possible in Ukraine for the US to fund an insurgency, Allah, Afghanistan, where, you know, these Widers in Eastern Ukraine are sort of like the Moose Jason Calacanis (00:55:39): Jaw machines. Is that the right word? David Sacks (00:55:41): Well, sure. Because, you know, if the Jason Calacanis (00:55:43): -- They're depending their own land. David Sacks (00:55:45): and so were the mujahadeen. I mean Jason Calacanis (00:55:47): -- I know. But why would you call it an insurgency in defending their land? David Sacks (00:55:51): If if the government of Ukraine falls, then it becomes an urgency. So the point is that the administration the the question is, what's the administration's in game gear? Do they wanna lead the world to a cease fire, or do they want to contract the conflict to impose on the Russian state a Jason Calacanis (00:56:06): Afghan style, David Sacks (00:56:06): you know, debilitating defeat to destabilize the Russian regime. Neil Ferguson had a column this week in it's his Bloomberg column. Jason Calacanis (00:56:18): He's from the Institute at Stanford? David Sacks (00:56:20): No. He's from he's from Hoover. Oh, Hoover rather. Sorry. Yeah. So I'll read I'll read this. Jason Calacanis (00:56:24): Hoover is at could you just explain to people what the Hoover Institute is and how that leans? David Sacks (00:56:29): who is a national form piece. I would say it sort of leans idealistic in farm policy. I would describe Neil as sort of the most realistic idealist. Got it. Okay. Thanks for Jason Calacanis (00:56:41): your contact. David Sacks (00:56:41): But he's quite well sourced, I think, with, you know, in in with you know, various people in Washington and Europe. And he what he wrote is the US intends to keep this war going The administration will continue to supply the Ukrainians with anti aircraft stingers, anti tank javelins, explosive switched blade drones. It will keep trying to persuade other NATO governments supply heavier defensive weaponry and so on. He says, Washington will revert to the Afghanistan after 1979 playbook of supplying an insurgency only if the Ukrainian government loses the conventional war. So the concern here is that the US government has an incentive actually that they they don't want a quick end to this war is basically the theory is they want the Russian state to bleed out and be destabilized. Jason Calacanis (00:57:31): say, in in a way, it's the one chance we have for, like, regime change there without us actually starting a war is that they have this self inflicted wound. That is the theory. David Sacks (00:57:39): Yeah. And I think a lot of people are saying that. That is what a lot of people want in Washington. I don't you know, this is not like conspiracy theory. People are saying, this is our chance to topple the Russian state to destabilize it. There was a RAND Corporation Jason Calacanis (00:57:52): -- How how do you still David Sacks (00:57:53): navigate that? -- years ago. Hold on. There's a RAND Corporation study done a few years ago. that was commissioned by somebody, probably in our state department or someone like that, where they talked about this that if we wanna destabilize the Russian regime, Ukraine is the way to do it. Jason Calacanis (00:58:07): Right? They would fall for it. Right? They would actually fight that fight. That is an unwinnable fight. We would basically be putting an we'd be supporting and Afghanistan, like, path for them to go down like we did. And they did previously to that. David Sacks (00:58:18): Right. And the problem the problem that I see is just this, which is we've discuss on on this program the downsides of this war first. It's a humanitarian disaster. 2nd, we've talked about the risk of recession later in the year. 3rd, Friedberg talked about famine, the risk of famine later this year if the spring planting doesn't happen. And then 4th, we have this always will have this risk that the war spins out of control and goes nuclear, right, and leads into war 3. Those are some vital American interest to avoid all of those scenarios, I don't see an equivalent vital American interest in determining the exact nuances of who rules the Donbass In other words, the broad strokes of this agreement are there. You know, what the US should be doing is leading they should be pushing for lead, not bleed, lead the way to a cease fire, not to inflict maximum damage on the Russian regime. Jason Calacanis (00:59:09): Which we don't know exactly what their intent is because they're doing this behind closed doors. Brad, what's your take on this? Brad Gerstner (00:59:15): I think they're Dave and I talked about this at dinner the other end. I think there's something bigger playing out here. I mean, clearly, he's the expert on real politic, and you know, but it seems to me that we have had decades of military diplomacy. Right? And and most recently, the Powell doctrine of overwhelming force. We don't wanna make the same mistake we made in Vietnam, so, like, we're gonna go in with full force. And, you know, basically, the public doesn't support, you know, military adventureism anymore. Right? And so now we have maybe we'll call it the blinkin doc which is the pal doctrine equivalent but for economic force. It's the nuclear economic weapon. that is on full display by the west right now that I think has really significant implications. Right? It's reunited the west. And I don't think this is just about Putin. And I think the reason that the US and Western Europe is slow playing this a bit is they're sending a message to the Chinese as well, which is that we we are unified and we will use an economic weapon of mass destruction. if, right, you don't play by global norms. And so the box I think we're in from a negotiating perspective, right, in Ukraine right now is not a box around neutrality. I mean, neutrality is already clear. I mean, we had Zelensky didn't even for a no fly zone. He's not even asking for NATO membership. They've already ceded neutrality. I think the real question is sanctions. I don't think the West wants to roll back sanctions. And I think Putin's saying, I can't hightail it out of here unless you roll back all the sanctions and give me a little bit of the Donbas. And so watch the next week or 2, like, in any good negotiation. Unfortunately, I think both sides are gonna amp up their current strategies. We may see missiles coming out of Russia, and we may see European complete European embargo of Russian oil, 3,000,000 barrels a day. Those will be the final straws right before we enter negotiations because then they can see the last things that they took as part of the negotiation. But this, I think, is gonna be all about economic sanctions. And and and and I think the west is playing a a really strong game. Brad Gerstner (01:01:33): What I worry about and Saks has talked about this at length. is that we overreach, we overplay our hand here in an effort to send a signal to other parties around the world, Right? And that has fat tail risk associated with it that can devastate us. -- Taiwan? David Sacks (01:01:50): Me me ask a question. How many of us woke up or this at the beginning of this year or in making our New Year's resolutions and said that we need to risk recession Chamath and war in order to destabilize and topple the Russian regime. When did this become of vital American interest. No one at the beginning of year thought this was an important goal of America. What's more important is is basically getting our economy back on track and back on track after this long -- David. Jason Calacanis (01:02:20): -- David Sacks (01:02:20): after this long this this plague we've had, I mean, nobody needed this problem. And what the administration should have done was use diplomacy and all their resources to try and prevent the conflict And now the conflict has occurred, we should be pushing for a negotiated peace and cease fire. We do not have a vital national interest in the details of who rules rules the Donbass. Jason Calacanis (01:02:44): Yeah. The problem with your setting up of that question is that we did not start the war. Putin did. SHamathie, you've been silent so far. What are your thoughts on this war? That -- I'm just not David Sacks (01:02:54): saying we started the war. Jason Calacanis (01:02:55): Well, you're saying, did we wake up and say that we should do this. We did not David Sacks (01:02:58): Listen. Jason Calacanis (01:02:59): You you woke up on TV along for David Sacks (01:03:00): the people in the media woke up on February 24th, and you think Putin went mad, and there's no prehistory to this conflict. Now here's the deal. Hold on a second. This is a war of Russian aggression. It's true that Putin started it. He's the invader. However, there were things we could have done to prevent or to avoid this war. An American diplomacy completely failed, and we even discussed it the month before this war started, we talked about how the US could have given a written guarantee to Russia that Ukraine would not be part of NATO. Just this week, Zelensky in an interview with Fried Zakaria admitted, he was told by Blinken, you will not be part of NATO, but we don't wanna admit that publicly. What games were they playing? What is the point of playing that kind of game with a grave issue of war and peace? Why didn't Lincoln say publicly what he said to Zelensky? This administration did not do everything it could do to prevent war, and now we are faced with all of these existential risks. Why? For what reason? Chamath Palihapitiya (01:03:59): The reason is that it gave the United States an opportunity to topple Russia. I mean -- Exactly. Jason Calacanis (01:04:05): And David Sacks (01:04:05): who who of us thought we needed that at the beginning of this year? Chamath Palihapitiya (01:04:09): Well, I think that, you know, the thing to keep in mind and again, I don't I'm not saying that this is right, but I'm just game theorizing that these are, like, you know, grudges that these guys have held for a very long time, and I think it started when they were in the Obama White House and it carried over to now. And I think they saw an opportunity to basically execute a strategy that essentially now I think we're moving into the 2nd phase of this war, which is effectively trying to bait Russia into doing something really egregiously bad. And that is terrible, David, to your point. I think we're willing to, you know, sacrifice a lot. I think we've decided that implicitly by based on the actions of of the American government. And and it's weird. It's like we're trying to get Russia to react And so the rhetoric, in fact, the rhetoric since that do you guys remember? I think it was only 10 days ago that both Russia and Ukraine said the surface area of a deal is pretty much in sight. Oh, Friedberg from the top rope. Come in. Look at you, Friedberg. I mean, like, you you look like an everyman. I mean, I'm so proud of you. Are you actually driving your own car? Jason Calacanis (01:05:22): Cats gasoline car. SUV in the mountains. Chamath Palihapitiya (01:05:25): You you shipping -- Putin's gas in that tank? Jason Calacanis (01:05:28): Push's gas is in that tank. Is that Putin's gas? I wanna use Chamath Palihapitiya (01:05:31): I only use ethanol I make in vats in my backyard. Jason Calacanis (01:05:34): I went out of my way. -- solar panels that are handcrafted in my backyard. Chamath Palihapitiya (01:05:38): I have my way to Jason Calacanis (01:05:39): find find a luke oil gas station. Filled up? Chamath Palihapitiya (01:05:42): What I was saying, guys, was that, you know, from the 10 days from when, you know, both sides Russian and Ukraine were like, hey. You know, we think we're basically there. We have a deal. the rhetoric has gotten really insane. You know, yesterday, I think it was like the United States said, you know, we we think that Russia should be kicked out of the g Twenty. then Russia responded and said, I'm only gonna sell that gas and settle it in rubles. You know, all of a sudden, other actors, China and Saudi Arabia are in the game. Now, you know, China and Saudi Arabia are negotiating, settling a huge oil trade in Yuan. Why in the last 10 days of all these things happened when we were so close to getting something done? I think the best explanation is that We are willing to I guess we've decided. I mean, we you none of us have decided, but the American government decided that some amount of sacrifices okay. If it could trigger a Russian escalation, which could then further destabilize that country, and I think they believe that that's more important than anything else. Jason Calacanis (01:06:41): And I think we you know, from where I said, I think we can take Putin as word that he actually cares about reunification. And that's not to say he's crazy, David. And I don't think we can control his behavior. I think you're -- David Sacks (01:06:51): Wednesday or use word reunification. Chamath Palihapitiya (01:06:54): He's never sent back, Jason, and also just today, The Russian military, the tweet that I sent you guys was from the Russian military and that was an official statement. And I don't think he they would be allowed without Putin's explicit sign off. They no longer talked about denotificating Ukraine or demilitarizing Ukraine. They simply focused it on the Donbass And to use your Sun Zoo argument, it's almost like they're trying to construct their own Golden Bridge to exit in a way where they can claim victory to the Russian people to explain the tens of thousands of, you know, Russian military people that have been killed in in this whole conflict. Right? because they have an explanation that they have to give. But in in all of this, I think that we're we're probably exposing a very high risk game of poker that we're playing. which is it seems that the US government is focused more on the destabilization of of Russia than they are in getting this conflict behind us. Jason Calacanis (01:07:46): I mean, he did he did say in his speech, Since time in memorial, the people living in the southwest of what has historically been Russian land have called themselves Russians and what? How can Christians? Chamath Palihapitiya (01:07:55): That's Donbas. Jason Calacanis (01:07:56): Yeah. I know. But he is -- Chamath Palihapitiya (01:07:57): There's been David Sacks (01:07:57): a Jason, there's been a civil war going on since 2014 in this Donbas region between Ukrainians and these sort of these Russian speakers. And now that civil wars as this is a Balkan style civil war that is now escalated with, you know, Ukraine and Russia getting in and now the whole west potentially could get in. This is a very dangerous situation, though. Should not let spin out of control. Jason Calacanis (01:08:19): I'm agreeing with that. You guys asked me, did he ever talk about reunification? He did. did in his speech was in Ukraine. That was David Sacks (01:08:24): not one of his stated war objectives. Now you could keep accusing him of being a liar, but look. What his objective Jason Calacanis (01:08:29): is about his word that he believes these areas are Russian, and they should be considered Russian. -- David Sacks (01:08:34): area where they are predominantly Russian speakers. Jason Calacanis (01:08:38): Look. And that part of it. Yeah. David Sacks (01:08:39): I'm not taking a side in who should rule the Donbass. Okay. Yeah. I think it's a complicated ethnic strife sort of issue like we saw in the Balkans all the time between the Russians who live there and the Ukrainians who live there, What I do know is it's not worth risking war 3 over a Jason Calacanis (01:08:55): second kind of issue. 100% agreement 100% agreement. Brad Gerstner (01:08:58): Saks, let me can I ask you a question? So how is Putin gonna withdraw without a 100% lifting of the sanctions? And how is the west possibly going to trust him to withdraw? Right? While while taking all the sanctions off. That seems to me, like, When when I try to construct the Golden Bridge in my mind, it comes down to, you know, like, how do how how do we whack up the sanctions? Do we take some of them off, say prove to us, be out for x period of time, and then we'll roll the other ones off? because these sanctions are not gonna be rolled back in the next three months based on some cease fire. David Sacks (01:09:39): I I agree with that. I I don't know that Putin can expect the sanctions to be lifted or that he can effectively negotiate for that. I think again, where I think the the the peace deal is is that we've known all along what it's gonna be. Ukraine will agree to neutrality in exchange for some security guarantees from the west, Russia will get to keep Crimea because that's been a fait accomplice since the annexation 2014. And there will be some sort of regional autonomy for these sort of Russian speaking areas in the Donbas, which by the way, we could have had that too. There was a a deal called Mince 2 since 2015. That simply hasn't been implemented. So, you know, I think that those are the broad strokes of the deal. And then there's questions about, well, is there a land bridge from Crimea to the Donbass? And you know, what weapons exactly does Ukraine get to get from the United States or get to keep? I mean, so look. Those details matter a lot to the people who live there. But The broad strokes of this, I think, are pretty well understood. Brad Gerstner (01:10:43): I'm not betting this way with with our book. But if I had to guess, we are going to have a period of significant escalation on both sides before they both get to the table. Macron said this week, that we still have the Europeans have not made a decision about the embargo of Russian oil that will collapse the Russian economy and oil will go to a 180 or $200 a barrel. I think that's a real likelihood. And the second one is I think the Russians will amp up military aggression in some face saving measure and to have more to negotiate with. So maybe to answer my own question is if there is an oil embargo, then you take the oil embargo off, right, as part of the economic sanction whacking up of the sanctions because that's really the nuclear against the Russians economically. But it's a you know, unfortunately, I think we have to be prepared for this to get worse before it gets better because it makes sense from just a game theory for both sides to grab as much as they can right before Jason Calacanis (01:11:49): -- Chamath Palihapitiya (01:11:50): Yep. Jason Calacanis (01:11:50): -- Brad Gerstner (01:11:50): they sit down at the table, so they have more shit to give to each other. David Sacks (01:11:53): Right. But the problem is if both sides keep us I agree with that fundamental analysis is that neither Putin nor Zelensky can be trusted on their own to basically make peace because they want to push their advantage. If either one believes that they're winning on the battlefield, they're gonna push their advantage to grab as much they can to then negotiate from position of greater strength. The problem is that they're in an escalatory spiral where if, you know, 1 or both of them miscalculate, we never get that deal. And I think the longer the war drags on, the harder it is to make a deal, not easier. One one of the I I have to say one of the disturbing things that came out over the past week was in that interview that I mentioned where Fried Zicaria interviewed Zelensky. Zelensky said he said that it's I well, are they gonna get a peace deal or War War 3. And I'm listening to this thinking, wait a second. You know, that that is a pretty scary posture for him to be taking. And furthermore, who appointed him leader of the free world? You know, the decision to have war 3 is not his decision. He is not the president of the United States. We did not vote for him. We may think he's heroic. We may think he deserves our support. But he does not get to turn this into war 3 for us. The American people did not choose that. And this is where I go back to Biden in the administration and their leadership? What are they pushing for? Are they pushing for a protracted, never ending Afghan style war in Ukraine or are they gonna lead the situation to some sort of negotiation or cease fire? And I just think if we're considering the interest of the United States, we would not let this decision purely be Zelensky's. This guy is willing to entertain War 3. That can't be acceptable to us. Chamath Palihapitiya (01:13:38): But what what what it what is his worst alternative? I mean, like, he's losing his country. So, of course, he wants to say the thing that would scare us into action potentially. Right? So he has nothing to lose. Jason Calacanis (01:13:49): So Right. That's what but that's what we can't write him, but David Sacks (01:13:52): you should let him decide for us. Chamath Palihapitiya (01:13:53): He does not decide using he's he's using rhetoric to get us to talk about it, which he just won. Like, he he you can see that what he's saying David Sacks (01:14:01): is working. Chamath Palihapitiya (01:14:01): Yeah. Because you're talking about it. So I think the I think the bigger question in all of this is when is the United States willing to draw a really hard line? So there was another thing that happened, which is that, you know, Biden essentially said, like, You know, if they use chemical weapons, we will react sort of in kind. Right? There is some some version of that statement. Jason Calacanis (01:14:23): -- line, basically, he said yes. Chamath Palihapitiya (01:14:24): And And then he also said, you know, depending on, you know, how they use nuclear weapons, we could theoretically respond. So just The the rhetoric is ratcheting way, way up. And that is surprising to me because I would have thought We had a deal in sight. Just get it done. Be pregnant. David Sacks (01:14:43): But you're assuming, David, your side. Jason Calacanis (01:14:46): You're assuming that we have the influence. You assume, David, that we the influence to actually cut a deal. You were saying yourself for the last couple of months that the US power has waned and that we don't have influence. So which is it? think you're just blaming Chamath Palihapitiya (01:14:59): by it. David Sacks (01:14:59): I believe we have the influence to to get facilitated deals. Jason Calacanis (01:15:02): You were saying like, listen. We lost our influence. David Sacks (01:15:05): Listen. Let me give you an example. We are giving Zelensky and Ukrainians all these incredible weapons. What are the conditions on that? If Zelensky is unwilling to make a reasonable peace deal, Do we do we have any conditions in our giving him these weapons? Why wouldn't we insist Zelenskyy listen. We support you. We basically are against this Russian aggression. You should have the right to def defend your homeland and drive them out, but we also want you to take a reasonable peace deal if one is available. And we need you to specify what that is. You're assuming -- Are we exercising that kind of discretion? I don't think so. Jason Calacanis (01:15:39): I think you're assuming that Biden is blocking this when in fact it might be that Putin is. And I believe you're taking Putin's sort of position here over our own president. I think you need to think for a second that we don't want to have this continual escalate. You actually think there's a world in which Biden wants to see this escalate. I don't think that that's the case. I think that we don't have the influence. Shamash has explained it. David, we do not have the influence today that we did. It is no longer -- David Sacks (01:16:04): Neil Ferguson. Jason Calacanis (01:16:05): -- United States. you know, gets to dictate to the world what's going on here. We no longer have that. This is David Sacks (01:16:09): not about this is not about Chamath Palihapitiya (01:16:10): United States. Jason Calacanis (01:16:11): -- to Israel. Putin wants to talk to Macron and France, not us. David Sacks (01:16:14): because we're not seen as an honest broker. But but look, we don't Jason Calacanis (01:16:18): have the influence we once had. David Sacks (01:16:19): Okay. Let me explain. I'm not saying we can dictate the come. Okay? But we can push for a negotiated settlement instead of a protracted we can lead, not bleed. Okay? Chamath laid it out, Neil Ferguson laid it out, the RAND Corporation laid it out. These there is a significant chance that there are definitely actors in the state department. who want to see an Afghan style situation in Surgency play out in Eastern Europe. That's their goal. Okay? Now I don't know what Biden is thinking, but he has made no statement to the contrary. What have we done to help lead the situation to a negotiated settlement? Name one thing. Jason Calacanis (01:16:58): Well, I don't think we're in the room, David. But by this in your -- Why David Sacks (01:17:02): don't I ask me in the room? I I read all their public statements. I don't see anything. Jason Calacanis (01:17:05): I don't think they wanna negotiate through the press. with Putin. I don't David Sacks (01:17:08): think they wanna negotiate Jason Calacanis (01:17:09): at all. -- Europe right now. I think that says enough about what his intent is. He's in Poland. Right? He's going to Poland. He's David Sacks (01:17:16): in Poland where we're scaling up our military presence. Listen. Yeah. I mean, I don't all I'm saying is, look, I don't know exactly what Biden is saying or doing behind closed doors. What I'm saying is that the US should be playing a constructive role to get to a negotiated cease fire, not indulging this sort of fantastical thinking that we can basically perpetrate a regime change operation in Russia. Jason Calacanis (01:17:37): -- agree with you on that. I agree with you on that. Chamath Palihapitiya (01:17:39): I I'm worried that there may be a small strain of that probability in the range of outcomes here. And I didn't think that before. I really thought that Okay. Maybe we were a little bit on the outside looking in, but it looks like, you know, we're pretty close to a deal. These guys will get in a room. They'll you know, chop it up and it'll be done. And instead, honestly, if you just look at the headlines and the rhetoric and the words from all these three leaders in the last 10 days. It's been it's been in the other direction. And so you have to wonder what is the point of all of this right now other than Jason Calacanis (01:18:12): be crescendoing like Brad said. Brad Gerstner (01:18:15): It's I mean, you know, I I I listened to Blinken over the weekend, and he talked about what I think he defined what is this new doctrine of economic Statecraft. He said our objective is we have the power to impose overwhelming costs on our target. k, economic cost. And he said our cause, Putin's actions are remembered as a strategic failure, not regime change, That's what's within our control. That is very different. Bush wanted regime change, Inter Rock, and we executed it through the Pal doctrine of overwhelming military force. I think that this is a doctrine of overwhelming economic force that is meant to not only signal to the Russians, but every other rogue dictator in the world. If you go rolling into your neighbor, uninvited, you can count on the fact that there's gonna be massive economic sanctions because our our military deterrence is no longer a deterrent. Everybody knows we're not gonna go defend Taiwan. Everybody knows we're not gonna send our military to Ukraine. So we have to demonstrate that we actually have economic resolve, not these poo poo sanctions we've been having around the world for the last 20 years. And if that is the lasting impact on this, Chamath Palihapitiya (01:19:30): I think you're right. Brad Gerstner (01:19:31): You know, that that we turn this into an economic nuclear weapon. Jason Calacanis (01:19:36): Yeah. I think you're a little Brad Gerstner (01:19:37): bit better than sending our kids you're around the world to get killed. Chamath Palihapitiya (01:19:41): I think you're absolutely right, and I think Tony is very smart to say what he said. The the one thing that I would want, though, on top of that, tell me if you agree, is just to ratchet down our rhetoric, which we can control. David Sacks (01:19:54): And maybe to to to I mean, why not say that, listen, we're willing to put these sanctions on the table. We're willing to basically reinstitute economic ties with Russia if we can get to a satisfactory outcome. Jason Calacanis (01:20:06): Well, you don't wanna reward them. David Sacks (01:20:08): Like, only thing Brad Gerstner (01:20:09): I would say is we're making a big assumption to say that there's not back channel diplomacy going on from the Israelis, the Turks, the the French, you know, having those conversations on our behalf. Right? Like, I I I don't I I honestly I I don't know that there that's a high probability that we're not sending those signals. But to your point, I I just don't know. David Sacks (01:20:29): I don't know. I I I don't I don't know either, but I don't know either. But but here but here's what I would say is, look. I can only judge from the public statements, and I think there signal in these public statements. And the the statements are all one way. There is no Olive branch. It's all it's all basically about escalation. Just like in January before the war, what were the state department's statements about the situation? They said that NATO's doors open and will remain open even though they told Zelensky in private that he would not be joining NATO. Okay? That was an astounding revelation that came out this week on the Fried Zakaria show. Number 2, Blinken was saying that there there was no change in the American position and there would be no change. They said, these are all public statements that the US would never recognize the Russian annexation of Crimea never. you know, he said that we went into these peace talks represent our core values. There's no change on that. So in other words, it's been the position in the United States. to be hard lined with Russia to basically engage and no compromise whatsoever. And -- You would -- -- it's basically -- -- to double down. a double down. Jason Calacanis (01:21:35): You assume you assume, David. You don't -- No. David Sacks (01:21:36): Those are the public statements. Jason Calacanis (01:21:37): I know. But you're assuming that there's no back shelves going on. And just to just to run another, I wanted to make one quick point, Chamath, which was you know, what if we offer to take the sanctions off? And then we are training Putin that these kind of misadventures get him something, Don Bass, etcetera. and that the sanctions roll off. So isn't there a possibility to Chamath that if we don't keep the sanctions up, we're actually rewarding his behavior? Chamath Palihapitiya (01:22:02): I'm a huge guy. Look. I've been the first person in the front of the line on sanctions, I thought this was the most brilliant approach to this whole thing. And I still believe that sanctions work, and I think that this will cripple that country. What I'm saying though is that there are these moments where instead of then Sticking to the rhetoric that Tony talked about what he said well, I don't know Brad where Tony said this this weekend. But, like, sticking to that, there are these added flourishes that I think are unnecessary. So what I mean by that is to talk about, you know, us reacting or retaliating for the use of chemical weapons. Biden made a campaign valve. I don't know if you guys remember this about nuclear weapons where You know, he was very clear that, you know, it is a mechanism to demonstrate that this deterrence exists. And instead, he actually caved and instead he put out this carefully worded statement which kind of walked back the campaign vowel earlier this week and I'll just read it to you I'll just read what the Wall Street Journal said. It said by president Biden stepping back from a campaign vow has embraced the longstanding US approach of using the threat of a potential nuclear response. to deter conventional and other nuclear dangers in addition to nuclear ones. During the 2020 campaign, Biden promised to work toward policy in which the sole purpose of US nuclear, the nuclear arsenal would be deter or respond to an enemy nuclear attack. Instead, now it holds that the fundamental role of the nuclear arsenal will be to deter, but that it leaves the opening to respond and use it in extreme circumstances. So these are big changes. And if if our whole goal is to just focus a surface area to an economic set of sanctions, These are somewhat unnecessary. Wouldn't we all agree? We don't need to talk about changing our nuclear policy. David Sacks (01:23:46): Yeah. And Biden was right Jason Calacanis (01:23:47): on the David Sacks (01:23:47): campaign trail, the United States of America should never use Nukes except if Nukes are used on us, come on. We know that. Yeah. we're talking about changing that now. That's insane. Chamath Palihapitiya (01:23:58): Merrill, we changed David Sacks (01:23:58): it. We changed it. Look. It shows that there there's an influence in our government and our state department of certain hard line elements who want this very tough policy that includes destabilizing the Russian regime and maybe toppling Putin, I'm just saying, that objective is not worth all the existential risks that we're now facing. Jason Calacanis (01:24:19): Alright. Do we wanna touch on the CCP tax cuts? We wanna wrap. We're at 80 minutes. Chamath Palihapitiya (01:24:23): I mean, the c the CCP tax cuts harkens me back. Brad, you can react to this because you lived it with me. 2018, 19, I'll say it again. We we were in this unique moment where, you know, we were not sure whether there was runaway ramp in inflation. And in q4of2000 Jason Calacanis (01:24:38): 18, Chamath Palihapitiya (01:24:39): the Fed basically said, okay. You got us. You know, the boogeyman exists. We're gonna go tame inflation and they ran forward and raised rates. And lo and behold, the Chinese economy turned over in q1of2019. We had like a, you know, a kind of a blippy little recession and we had to overcome it because China became stimulative. Now here we are again. We're worried about this inflationary boogeyman. And the Chinese government basically extended these tax cuts, increased the tax cuts, and essentially said we're gonna be very stimulative in the economy especially through the back half of the year. Now China, again, is a massively export driven economy. Right? So The reality is it as goes China, so goes the rest of our economies. And so I think that it's a setup where can the United States be under so much inflationary pressure where China is effectively telling you that we are in a in a contraction and and a recessionary period. And so if that's where China is, there's a risk that we may already be there or entering that. And so I think it's a little, you know Jason Calacanis (01:25:48): -- Chamath Palihapitiya (01:25:48): Can you hit Brad Gerstner (01:25:49): do you hit 2 really important points, Jaemath? Number 1, which we didn't get to earlier. I tweeted a few weeks ago, the Fed's probably behind the curve on recession, not inflation. Right? We have massive demand destruction going on right now on the US economy. Chamath Palihapitiya (01:26:03): Massive. Brad Gerstner (01:26:04): The producer price -- Define Jason Calacanis (01:26:05): what that means, Brad. Define what that means, Chris. Brad Gerstner (01:26:07): I mean, if you just think about what does $6 gas mean? What does no STEMI checks mean? what is the fact that you actually have to go and get a job again? I mean, you know, we're we're rolling back 1,000,000,000,000 of dollars off the fed balance sheet. I'll tell you what it means. is that people can't spend as much money. Just the increase in the 30 year mortgage means you're buying power in December 4 months ago. to buy a house, and you if you could afford 1200 bucks a month, that buying power budget, a $350,000 house. Today, it buys you a $295,000 house. people's ability, right, to have money to spend money is getting crushed. So I think we are going to face an economic slowdown if you look at the PMI so this was the inflation read in January. Little people didn't really notice it. PMI in January came in at point 2 versus the consensus estimate estimate of point 6. That means the producer level of inflation was meaningfully less than we expected. If you look at consumer confidence, it's plummeted, one of the 4 biggest drawdowns over the last 20 years. Retail sales in UK this morning crashing. Consumer confidence in the UK crashing. the Chinese government sees this. We're we're not surprising. Look at the what's going on in the world with energy prices. We've never had oil over a 120 and not gone into a recession, we're facing a global slowdown. That will have big implications for inflation, big implications for rates, but China sees this coming and says we're going to get ahead of this. We've got a People's Congress in November. We promised them 5 and a half percent GDP growth. 3,000,000,000,000 of that is export driven. That means if Europe and the United States catches a cold, they catch the flu. Okay? So they have to do everything in their power. This is why they're not going to supply the Russians with weapons. Right? Brad Gerstner (01:28:00): Because it's economically assess assassinating themselves. Right? So we have this interconnected world, this idea that we're deglobalizing. What what we do doesn't impact anybody else like that ship is sailed a long time ago, and the Chinese see this. That's why I think there's also a probability by the middle of the summer The Fed in the United States is saying we now see a balanced risk between growth and inflation. Jason Calacanis (01:28:26): Saks, let's get you in on this just as we wrap here. The Chinese Communist Party Premier talked about tax cuts, and this is a quote, fertilizer applied directly to the roots of the economy. Tax rebates look like reductions, but actually are in addition Today, you get back tomorrow, you get more in returns. Does this mean the United States? People will go back and get jobs because they need to have more money and that maybe we should be looking at you know, tax cuts at some point? David Sacks (01:28:52): Listen, Jake. Al, I think we got big problems here at home in the United States. Brad Gemath. They've laid out these gigantic economic risks that are facing the country. You know, I tweeted at the beginning of the year, January 24th. The president's main job is to ensure peace and spority. And Biden's popularity was already plummeting. I think this one is poll numbers were at 38%. But if he gets us into war and recession, he ain't seen nothing yet. this war, the longer it drags on, the longer it, it basically can spin out of control and become something worse. that sucks us in the longer it creates the risk of basically causing a recession in the United States We need the American we need the the the Biden administration to help try and lead to a better outcome here instead of ratcheting up the rhetoric. Jason Calacanis (01:29:39): Alright, folks. There you have it. That's you are all in podcast for this week. Thanks so much to Brad Gershner for joining us and filling in for the Sultan Science. Chamath Palihapitiya (01:29:49): BG. Thanks, bro. Jason Calacanis (01:29:50): And a lot of great announcements here. Brad will also be joining us for the all in summit. We're about to wrap up tickets. We've announced a bunch of great speakers for the event. May 15, 16, and 17 in Miami. You can just do a search for the All In Summit. We have given out we sent 200 emails to people who asked for scholarships, and a 100 of them have taken the tickets. 500 of the 650 tickets or so are accounted for. We'll be wrapping up registration in the next week or 2, and we look forward to seeing you all at the New World Symfony in South Beach -- Chamath Palihapitiya (01:30:23): Do you have any announcements of people? Who else is appearing? Jason Calacanis (01:30:25): Oh my lord. We have great announcement. Keith Robois is coming. Joe Lonsdale is coming. Nate Silver is coming. Chamath Palihapitiya (01:30:30): Nate Zohr. I love Nate Silver. Jason Calacanis (01:30:32): Well, we we decided, Chamath, we would have people do 15 to 20 minute TED style talks like position papers. And so Who else do we have doing that? Tim Urban of Wait, but Why? Who's a brilliant time speaker and Friedberg? Nate Silver's gonna do that. And then Antonio is coming. He was just on and he was just on Rogan show. And so we're gonna have these, like, 20 minute kinda hits, then the besties will sit with them. We'll do those back to back. Kimbell Musk is gonna come and talk about his DAO that he's doing for nonprofits, Brad. We're gonna talk about what topics. So we're collecting all this talent, and then we'll figure out what positions they're gonna and the show and what the themes will be. But the themes will match what we've been talking about here. And we don't wanna pre set the themes or 7 when we 7 weeks out from the event because we don't know what the world will look like then. And then Friedberg said he wanted to do a position paper and actually give a 20 minute talk, so Bessie's will have that ability. and Bessees will start the event and end the event. Tons of different speakers rotating in and out talking about the most important topics of our time. But I would like to peter there. Can you get Peter Tilt come. He was David Sacks (01:31:39): at -- Maybe. Jason Calacanis (01:31:40): -- the most iconoclastic. Please, Peter Conner. David Sacks (01:31:42): I'm just not I I have to get over my uncertainty that this whole conference thing is really a grift. Jason Calacanis (01:31:48): It's not a script. We're putting all the money is going back to the event, and we gave 200 scholarships. There would be no profit from the event. There needs Chamath Palihapitiya (01:31:56): to be a really nice swag bag, and I think it was -- Or maybe at Jason Calacanis (01:31:59): $600 a person. I just spent 3 or 400,000 on the back. Chamath Palihapitiya (01:32:02): What is the material of the hoodie? Alright. David Sacks (01:32:06): It's gotta get cashmere hoodie if to Jason Calacanis (01:32:08): be on David Sacks (01:32:08): brand. $600 off brand for Brad Gerstner (01:32:10): so long. Jason Calacanis (01:32:10): -- Brad Gerstner (01:32:10): to be able to buy up to the to the special hoodie. Jason Calacanis (01:32:13): Brad, I just spent $600,000 per gift bag for 600 gift bags. Okay? It's like $400,000 in gift bags, and Chamath wants to put a $6000 So I wanna Chamath Palihapitiya (01:32:22): say that. I just wanted to know what the material was of the hoodie in the bag. That's all. I'm just asking a question. Jason Calacanis (01:32:27): This is my life, Brad. I am busting my ass. to put this event on. And then Tremont's complaining about the gift bag. Sacks is complaining on me making a dollar from it, and Friedberg having a panic attack. that we don't have enough great speakers. And I'm doing all the work. Chamath Palihapitiya (01:32:40): It's my whole fucking life. I I appreciate you, Jacob. Jason Calacanis (01:32:43): I'm willing to pay you. -- some nice me. You did say some nice stuff for that. Appreciate that. Maybe you wanna give it to work. David Sacks (01:32:47): with you getting a fee for your hard work. You know, Jason Calacanis (01:32:50): I don't need the same thing. -- David Sacks (01:32:51): like an hourly wage, you know, $15 an hour. Jason Calacanis (01:32:53): No. I'm not your wage save David Sacks. I'm working hard here. I'm fine. I'm working hard. Chamath Palihapitiya (01:32:59): But I I just wanted to -- -- be appreciated. I don't think you should have, like, a cotton blend is my I I think it said what. Jason Calacanis (01:33:07): Well, don't. By the way, Do you have any thoughts on the sushi? Is there should we be using brown rice and not the 2 line clot tuna? David Sacks (01:33:15): Just make sure there's gold leaf gold leaf on the sushi. Jason Calacanis (01:33:18): No. Literally, we're spending, I think, 300 or 400,000 per party. It's over Chamath Palihapitiya (01:33:24): a $1,000,000 in parties, Jason Calacanis (01:33:26): and I'm talking to talent bookers about serious talent coming to perform. Chamath Palihapitiya (01:33:30): Drake, can you get Jason Calacanis (01:33:31): Drake? How about Duluth? That's $3,000,000. Dulipo, $2,000,000. I'm deep Chamath Palihapitiya (01:33:36): in this. Jason Calacanis (01:33:36): -- 2 $1,000,000,000? That's what I got. What was that? Don't you Chamath Palihapitiya (01:33:39): catch it? How much is Don't you catch? Jason Calacanis (01:33:40): She's great. I think those are all seven figures. I would like to anyway, what I'm trying to find -- -- worthwhile Chamath Palihapitiya (01:33:46): use of well, I mean, that would make it an incredible part of it. Jason Calacanis (01:33:49): God. I mean, I really would like to get Wait. Sorry. Chamath Palihapitiya (01:33:51): How much is Drake again? 2,000,000 diners, 2 to 3,000,000 different -- -- bags and get Drake. David Sacks (01:33:56): Yeah. Good. Chamath Palihapitiya (01:33:56): Yeah. Yeah. Yeah. Cancel the bags. I already give it all give it all to Drake. So you guys are saying I should Jason Calacanis (01:34:03): bust my ass. And all the work I do, I should take $2,000,000,000 and hand it to fucking Drake. Yes. David Sacks (01:34:09): Yes. Drake is more viable than you. Jason Calacanis (01:34:13): Drink would be 5 years of working on events and media, Brad, And these these are my friends who are, like, take the 2 mili. You know, but drink yourself. You can put it in your pocket and probably make a profit on your work and just hand 2,000,000 in a David Sacks (01:34:25): bag to Drake. We don't need the bags. Jason Calacanis (01:34:28): How do you get a plane, guys? Can I get a plane? Chamath Palihapitiya (01:34:30): I'm trying to get Jason Calacanis (01:34:31): a jet card. Do we Chamath Palihapitiya (01:34:32): get to work with Drake on which songs he he would sing? Jason Calacanis (01:34:35): or perform? He he does, like, a medley of, like, 3. What I would like to do is have -- 3 songs for 2 minutes. Come on. I think it's basically, like, a 100000 a minute. I think that's what you're in for. A 100,000 per minute. That's 20 minutes. No. No. That seems that Chamath Palihapitiya (01:34:48): seems egregious. David Sacks (01:34:49): No. I Jason Calacanis (01:34:49): mean, these guys get David Sacks (01:34:50): paid bank. When when I hired Snoop, he did, like, 20 songs for me. I mean, it was unbelievable. He did, like, a 2 or 3 hour show. Jason Calacanis (01:34:57): 300, Chamath Palihapitiya (01:34:57): he's a city? Brad Gerstner (01:34:58): Saks has pity. -- forgot he was there. Yeah. David Sacks (01:35:01): He had a great time. Jason Calacanis (01:35:03): Oh my god, man. He was blowing this joint that was so powerful that I was 10 feet away and I got stoned. I mean, It was, like, I remember. He walked in and was, like, I remember loud. David Sacks (01:35:13): It was, like, 20 Super Bowl shows. Brad Gerstner (01:35:16): Good stuff. Jason Calacanis (01:35:16): Alright, everybody. Love you besties. Love you, Brad. Please. We'll let your winners ride. Rainman, David Saxon. David Sacks (01:35:28): And it said We open source it to the fans and they've just gone Chamath Palihapitiya (01:35:31): crazy with it. Love you. Jason Calacanis (01:35:36): besties are gone. Chamath Palihapitiya (01:35:45): I missed your driveway. Jason Calacanis (01:35:51): We should all just get a room into have one big huge ordeal because they're all just useless. It's like this, like, sexual tension that they just need to release that mountain. What? Your b b. What? David Sacks (01:36:02): Clear feet. What? Jason Calacanis (01:36:05): Where did you get Merckies are back?