市场跌势延续，以及如何应对尤瓦尔迪枪击案

Jason Calacanis (00:00:00): Hey, everybody. Welcome to another episode of the All in podcast. It's been a crazy couple of weeks here. We had the All in Summit. And, boy, was it amazing our bestie David Friedberg couldn't make it today. He had some personal things he had to attend to. So joining us again is Brad Gershner. Welcome back to the 5th bestie on his is this your 4th appearance now including the Olin Summit? I think you've been on four times now. Very good. Alright. That's about 5% of the episodes. A nice nice I think that's a nice little chip in your in your in your your belt there. Brad Gerstner (00:00:37): I mean, unworthy replacement to Friedberg, but I do what I can do. Jason Calacanis (00:00:41): Nobody can replace Friedberg. That is the truth. to let your winter ride. Rainman, David Saffens. David Sacks (00:00:51): And it said -- We opened Jason Calacanis (00:01:00): Just going around the horn here, Tremof, did you have a a favorite moment on stage, a favorite moment off stage? Well, what is your general impressions of the all in summit 2022? Chamath Palihapitiya (00:01:10): I thought The people I met were really impressive. I really enjoyed meeting people and learning what they did. I also thought you and your team organized really an an incredible event and I forgot how good you are at these things, but so I give you a lot of credit I really enjoyed participating. The only thing that I was nervous about during that whole thing which probably limited a little bit of my fun was my mom was coming. She's Jason Calacanis (00:01:44): 81. Chamath Palihapitiya (00:01:45): And so I was not I was not super psyched to really be in the throes of all the parties, to be honest, just because I was like, I didn't I didn't necessarily wanna get COVID, and then I didn't wanna introduce it to her. And Jason Calacanis (00:01:57): -- Got it. Chamath Palihapitiya (00:01:58): Yes. You know, Nat ended up getting really, really sick, but more like, a flu and a cold. Yeah. True. But, you know, I've been fine. My mom's fine. I know a bunch of folks that came unfortunately tested positive. So that was the only that's the only downside where I would I would have wanted to be a little bit more carefree, but that was the only thing that was but that's not in anybody's control. So Yeah. I mean, David Sacks (00:02:22): I I think I knew it was like Jason Calacanis (00:02:24): -- David Sacks (00:02:24): I I recall that when I had a Christmas party, Here we go. Jason Calacanis (00:02:28): Here we go. David Sacks (00:02:29): Jake is super COVID, like, a week later. He called my Christmas party as super stredder. Even though I tested everybody at the door, every single person, was negative. At this, it's all in some at AIS. So so my parents went to this conference. They both got COVID, my aunt who lives in Miami, who was in her seventies. She got COVID. How are they doing? Chamath Palihapitiya (00:02:49): Are they okay, by the way? Jason Calacanis (00:02:50): Are they okay? David Sacks (00:02:50): They're good. Yeah. They're good. Jason Calacanis (00:02:51): Most important is yeah. David Sacks (00:02:52): It's, you know, it's Omicron. It was, like, you know, it's, like, bad for 2 days and then you get better. So they're gonna be fine. Jason Calacanis (00:02:57): Do they -- Thank you. -- tax loaded or no? David Sacks (00:02:59): Yeah. 1 did and 1 didn't. So Jason Calacanis (00:03:02): My brother's got COVID and -- David Sacks (00:03:03): So your brother's got it. Jason Calacanis (00:03:04): Which one? Josh or Josh and Jamie both got it, and then Josh's wife got it. So she took the Pax Love, and everybody's great now. But, yeah, it it if you go to my a lot of people who came to the event, it was their first time out. Like, this was for a lot of people, I think, very emotional and exciting because it was their first venture out. And if you go to Miami to a conference, like, you're gonna get -- David Sacks (00:03:27): giving you COVID, especially if the event organizer doesn't test anybody. Jason Calacanis (00:03:32): It's impractical to test 850 people. Nobody would come like David Sacks (00:03:35): Not if you wanna make a profit. Right? Jason Calacanis (00:03:37): No. It wouldn't have actually been that expensive. You could put that on the people. They could just, you know, share their result. But I think at this point, you know, even on the planes going out there, nobody's wearing masks. I don't know if you know well, you guys are flying private. But, you know, my flight out there, it was all you know, nobody's wearing masks anymore. But -- Anyway, David Sacks (00:03:53): Jake, I think everybody who went to the conference took the risk upon themselves of getting COVID and, you know, it's not the the end of the world or anything. They're all fine. but I'm just pointing out the hypocrisy. Jason Calacanis (00:04:05): My hypocrisy. David Sacks (00:04:06): Yes. Exactly. It's like you're like Nancy Pelosi or something where Jason Calacanis (00:04:10): -- Oh, Chamath Palihapitiya (00:04:10): well, you're not criticizing. David Sacks (00:04:12): every time a Republican gets COVID, it's their fault. But when you throw a super spreader and I think AIS now stands for all in super spreader. Yeah. It's not your fault. It was well beyond your control. It was the virus. Absolutely. And in fact, it was probably just Florida. Jason Calacanis (00:04:26): It was just -- It was Yes. It's a Santa's false effect. I was gonna bring it up. I mean, that both Chamath Palihapitiya (00:04:31): that both of you now have thrown super spreader events. Yes? David Sacks (00:04:34): But in mine, I tested. Yeah. It's not even proven that mine was a super spreader. Jason Calacanis (00:04:40): Alright. In in all seriousness, did you have a favorite moment on stage or some reflections on the event? Chamath Palihapitiya (00:04:46): I thought the Yuan thing was really good, by the way. And the only thing I'll say is the the Palmer Lucky thing was pretty incredible. Jason Calacanis (00:04:52): Yeah. we'll be we will be releasing the pond lobby -- I'm Chamath Palihapitiya (00:04:55): excited I'm excited to see that. I think that that episode is eye opening. Jason Calacanis (00:05:00): Yeah. We we don't wanna say too much. But Chamath Palihapitiya (00:05:02): I think that you were really I think you handled yourself really well there. Jason Calacanis (00:05:07): Oh, thank you for that. Brad Gerstner (00:05:09): Chamath, what actually happened? I wasn't there for that portion. I haven't heard anything about that. Jason Calacanis (00:05:14): -- give a mini summary here of it, I guess. Chamath Palihapitiya (00:05:16): Okay. I'll I'll give I'll give you the outside inversion. He gives what I can only describe as an incredibly motivating breakdown of American defense and what his company. And you know, you have to remember to put it in context. This is a twenty nine year old young man. who has now started 2 multibillion dollar unicorns. So, you know, this he's gonna be around for a long time doing amazing things. But he talks about Andrew, which is his defense company. Really impressive. And then the whole you know, everybody's kind of like rousing and cheering and applauding, And then he said, you know, I have something else that I wanna get off my chest, and I was standing beside Jason backstage. Jason was looking at the monitor. I was looking at the mirror at myself. But Jason Calacanis (00:06:04): and checking your sweater? Chamath Palihapitiya (00:06:07): Yeah. And he said, you know, there's a person here that that has been, you know, really hard on me, you know, try to ruin my life, attack my family, and represents you know, these really this strain of very influential people in Silicon Valley who have gotten it totally wrong, basically. He called out cancel culture and then he called out Jake out. And to Jake out's credit after he was done, Jake out was the first one that walked out on stage Shook Palmer's hand, and then we all sat down, we talked to him, and then the 2 ended up hugging it out at the end. But there were moments that were very heated in the middle of it. The whole thing was Incredible to watch. I gotta be honest with you. It was super traumatic. Yeah. David Sacks (00:06:46): Incredible -- I would I would say the the most shocking And surprising aspect of the whole thing was that a person as important as Palmer Lucky felt the need to get revenge on a person that's unimportant is Jason Cauffneras. Jason Calacanis (00:07:02): That was the part I mentioned. When he's like, my career was When we Chamath Palihapitiya (00:07:06): said important people in Silicon Valley, I I initially thought, oh my god. He's talking about me. What did I say? Jason Calacanis (00:07:13): I I was I was thrown by that too if I'm being honest. He's like, my entire career was stopped in its tracks, and I had to claw my way back because Jason Calacanis said this, and I was like, Chamath Palihapitiya (00:07:25): no. Actually -- Well, looking forward to when you It's gonna Jason Calacanis (00:07:29): be a great episode. It's gonna be coming out next week. Thank you to all David Sacks (00:07:32): of us. Yeah. And I I wanna give a shout out to Glenn Greenwall and Matt Taibi and Antonio Garcia Martinez for appearing. And -- I guess. Jason Calacanis (00:07:41): -- David Sacks (00:07:41): you know, we did 2 different panels. We did one on domestic politics with Glenn and TAibi, and then the we did a debate on Ukraine, which has now been published between Glenn and Antonio. And particularly, I wanna thank Antonio because It did end up being a little bit of a 2 on one at the end, which wasn't my intention, but I have my own views on it too. Although I did try to be somewhat restrained and even handed in the moderation. But it's a really good debate. We should have had longer. We only had about 30 minutes, but you can see that online right now. Chamath Palihapitiya (00:08:12): Actually, it's a great example of actually how to listen to somebody else having a completely diametrically opposed view and still be respectful. I thought those guys were great to listen Jason Calacanis (00:08:21): think it's a new format, Saxon. I think, you know, somebody was like, hey. Maybe you and Jay Cal could do it. I think you and I moderating, like, two people with different sides. It could be, like, a really interesting format for us for future events. Brad, did you have a A favorite moment on stage may be outside of Elon. Of course, you can mention Brad Gerstner (00:08:34): it tonight. You know, maybe both on stage and off stage, You know, I think listen. I think this podcast has taken some shots and probably appropriately so at times for being a bunch of men in a little bro culture. And the effort made to build authentic community and diversity into that room, I've been to a lot of conferences. whether it's Claire Thealke, you know, Patty Wexler, extraordinary, you know, minds, women, all diverse cultures, economic backgrounds. When we walked around the floor, he you know, Indiana, Kentucky, West Virginia everywhere. Right? And who are starting companies, having authentic conversations, and frankly, we're grateful for the community and the advice that they were being given. These were from big start ups to very small start ups. And so for me, that was a a highlight. The effort you made I don't know. I'm 40% women, you know, both economic, I thought, as well as, you know, geographic diversity. And then, you know, listen. I I had a moment after Bill and I, after Gurley and I got off stage, I was stopped by a group of founders, and they said, hey. We need your help. I said what? And they said, we are that company you and Bill were just talking about and said was screwed. We raised a $100,000,000 last November from from Tiger at a hundred times ARR, what do we do? Right? And, like like, the fact that that, you know, that those conversations are going on. Of course, they're not screwed. It's a very interesting company, but it led to a real conversation that you don't often have at conferences like that. And so I thought it was much more than just a bunch of talking heads on stage. I thought it was a real give and take in the, you know, in the crowd afterwards, the parties, the in betweens. And so I really enjoyed that. Chamath Palihapitiya (00:10:30): The other big thing that we avoided failing on was putting back the AMAs. I think these AMAs are some of the most interesting parts of that conference. And I think that we should make sure that we probably do an AMA, Jason, like, both days. We do a 2 day conference. The AMAs were awesome. Jason Calacanis (00:10:49): Yeah. When the audience is asking us and and just to explain to people how we were able to you know, curate the audience. We ask people I think it's a good playbook for other people if they wanna steal it to they could They could pick the price they wanted to pay based on their station in life. And so people said, I wanna come. I'll pay 500. I'll pay a 1000. I'll pay 25100 instead of the 75100 take a price, which was like 300 people in the audience. And we just said, hey. What do you love about the show? You know, what would coming to the conference mean to you? we kinda just sorted that, and we looked for people who are passionate about the show. And then, you know, the the thing that stuck out to me, and I know Friedberg had a great time as well. was the passion of the audience and how much they appreciate what we do here every week. And so the love that we got, people asking to take selfies, people telling us the show meant to us. You know? And and people coming from all different stations in life, really, it it made it not elitist But it felt like the people who were there were all builders, and that was really an interesting part. What I instructed the team to do was anybody who was like a real estate broker, a money manager, a sales executive, a business development person. I said, let's not have them there. No offense to those, you know, critical functions, but a lot of people will come to these events to sell and get customers. But I said anybody who's a builder and artist, they're making something in the world. Let's give them the priority for these the scholarship tickets. So, you know, when you met people, they were all building something interesting in the world. and and no press, I think, also created a certain vibe there. We didn't have the media there criticizing every panel and you know, every speaker. And so it it I think it just, yeah, made it somewhat natural. Jason Calacanis (00:12:26): Well, I think it really couldn't do it without all you guys, and Friedberg, and the besties, Brad, you were helping behind the scenes, so couldn't do without everybody. And my team, you know, great job. -- David Sacks (00:12:34): turned out surprisingly well, I thought. Chamath Palihapitiya (00:12:37): I mean David Sacks (00:12:38): I thought the whole thing was a JCal Grif, and it actually turned out Well, there Jason Calacanis (00:12:41): has been there was still some Griffin going on. For sure. I mean David Sacks (00:12:43): We still haven't seen an accounting of of exactly where all the money went. Brad Gerstner (00:12:46): So it's it's pretty close. Jason Calacanis (00:12:48): We'll have that accounting any day now, Saxx. Any day now. Brad Gerstner (00:12:51): What could you have done better? What would you change for the next time? Jason Calacanis (00:12:54): You know, I It's a great question. You know, we we always do a document with lessons learned right after the event, so I went through my team and I had 26 people from my team, 21 from launch, and I think 5 from inside came and, you know, helped staff the event. A little more time to to work on the speakers and the agenda. If we had a little more time, I would have teased out of each bestie you know, maybe 5 or 10 speakers or topics they wanted and worked backwards. So just a little more time to to to to experiment with the format But I I took an experimental approach to it. We did have people who did solo, Dolo, like Ted style talks. We then had people come on stage. with the besties and do discussions. But having all besties on stage all the time is a little hard for for everybody. I know David likes to focus on maybe a couple of things. Other people like Tremoth and I like to be on stage for everything, I think. But the format was experimental, and there was a couple of great moments, I think. When we overlapped folks, so I think Nate Silver overlapped with Keith Rie Boy, you and Bill Gurley together. Tim Urban. I'm sorry. Overlapped with Keith Ray. Those were magical moments, I think. And so I have a a Something in my brain about weaving individual talks and data points with the besties and then having the next speaker on the stage, the speaker, and I would have liked to have more time to refine that format, I think. Brad Gerstner (00:14:16): Okay. My only question is -- Yeah. Jason Calacanis (00:14:17): -- Brad Gerstner (00:14:17): was the Palmer Lucky deal? Was that a plant Did you plan that? No. Did you see where did you put that in there? Jason Calacanis (00:14:24): I'll tell you the backstory is I you know, I I've had invited him on this weekend starts before all in came out. Many times, he said, fuck you, basically, in so many words. I hate Jake out. And then when Olin came out, he's a fan of this show. I think he's particularly a fan of David Saxes. And I think David knows a lot of the investors the investor pools, I think, overlap in a lot of different circles of ours. And I said, would you like to come to the summit? And I and I basically said to him heartfelt, like, listen, I think the work you're doing to protect the country, most people in Silicon Valley don't believe in building weapon systems, but I kinda am with you on this. So we probably have some common ground here. I think the mission of what you're doing is more important than our disagreement from you know, the Hillary Clinton versus Trump days, maybe we could just, you know, put that aside and have you speak. And surprisingly, as people were like, yes. I didn't know they were doing yes because he had a plot to dunk on me, but who cares? You know? Like, I don't mind being dunked on. If I'm wrong about something or I'm right, It's the whole sphere of this show is to, you know, to learn and grow and have great conversations. So with that, maybe we start the show now? Chamath Palihapitiya (00:15:26): Let's do it. Jason Calacanis (00:15:27): Alright. Let's go. Let me I am I am I still allowed to do intros, or is it too triggering? because I do have intros for this week. Chamath Palihapitiya (00:15:32): Do it. Jason Calacanis (00:15:33): So do it? Okay. I got thumbs up. Brad Gerstner (00:15:35): Only else are nice. Jason Calacanis (00:15:36): Well, you know, that's the caveat that I cannot guarantee. But, anyway, here we go. Getting ready to gallivant across the Italian countryside. He spent 40 k at all in summit on food and wine. He took 400 selfies in 3 hours. Those sweaters, my lord, They wreak of power. The dictator himself is back. Tremoth Polyha Patita. Welcome back to the show. Thank you, Jason. Alright. His body looks like he doesn't eat cake. He's got a major stake in Snowflake. You might have heard him earlier on the week with Bill Gurley. He's the crossover fund manager with that BDE. Our 5th bestie, the audience hangs on every word he has to say. The dark knight of namaste. Welcome back to the program, Brad Gershner. Brad Gerstner (00:16:17): I like it. I like it. Chamath Palihapitiya (00:16:18): What's BDE? Jason Calacanis (00:16:20): If you don't know, then you don't know. You can look that up Bourbon dictionary. He's about to turn 50, but he looks like he's 65. After 72 hours in Miami, we're not sure he's still alive. The critep reaper is jealous of the bags under his eyes. His portfolio has been down for 35 straight days. No surprise. The rain man himself is back. David Sacks. Alright. To rough on Sacks, No. David Sacks (00:16:42): It's okay. Jason Calacanis (00:16:43): Is it okay? I felt like I might have gone too rough on sex. Alright. I guess we start with markets and S and P 500 down 15% year to date, down 11%. Two stocks of note that did particularly well during COVID. zoom and Snowflake reported their earnings this week, and they beat expectations. Of course, that gives them no reprieve. Market cap for zoom 31,000,000,000. It got almost $6,000,000,000 in cash, which was a a prescient move to to cash up, I guess, during the the boom times. Their stock jumped 18% after the earnings, so great for them. q 1 revenue 2023 at 1,000,000,000, 12% year over year. kinda 80% gross margin for that business is pretty impressive. 500,000,000 adjusted free cash flow, 7000 employees, They're at almost 500,000 per employee at this point, and stock is still down 43% year to date, but a little bump here. So I I guess we might be bumping along the bottoms and then just to quickly recap Snowflake and get your comments after that. Snowflake reported their quarterly earnings yesterday. $41,000,000,000 market cap. They got almost 4,000,000,000 in cash. They were down slightly at the taping of this up today, and they're down 67 percent from the peak of $409 a share in November, so they're not in the 85% plus club like Coinbase and Peloton. but still they've lost 2 thirds of their market cap. 422,000,000 in revenue, 85% year over year beat their expectations. and gross margin 72%, net retention, a 174%, 70% growth within within their existing customers, David Sachs's point about why SaaS is so great. They got 4000 employees. 63100 total customers. So I guess maybe starting with you, Brad, since you're you're in this in the thick of it. Thoughts on I know your major snowflake early supporter. Thoughts on what's happening in the market and maybe any indication from these 2 let's face it. Strong results in the bouncing along the bottom, I think, is how we'd all describe what's happening right now. Brad Gerstner (00:18:54): Well, I think listen. What makes investing hard is sometimes you have to hold simultaneous truths. Right? And the reality is there's a lot of cognitive dissonance when you see something down 30, 40, 50%, but it may be still vet fair value. Right? We were talking about last October, like make no mistake about it. Just take Snowflake as an example. The move from 400 to 200 was probably just what I would describe as normalization in a world where rates were going back to 2 a half or Jason Calacanis (00:19:23): 3%. Brad Gerstner (00:19:25): Right? The market last October had gone too high. We discussed it on this pod. We discussed it on CNBC. And so I expected a return to what we activity that's kicked in as a result of the war in Ukraine, uncertainty about hyperinflation, uncertainty about hyper rates, And so now we're seeing software generally all risk assets, growth assets trading now Jason Calacanis (00:19:54): 30%, 40%, 50% Brad Gerstner (00:19:57): below the five year average. Right? So I don't think it's helpful to say, well, none of that should have happened. No. The reality is normalization, met that all of this stuff was going to be down 20 to 50% because it was way overvalued last fall. We gaslighted ourselves in many respects. We didn't hedge it perfectly in many respects, but that's, you know, that's what happens in late market cycles. So the question is, Where are we today? And, for example, like, why is the Nasdaq up 300 basis points today? Right? This it feels like whiplash. I come in one day, and you know, you have market caps up 10% one day down to 10% the next. And so I think it's really important to help the people listening understand, you know, like, what happened this week and what's going on? Jason Calacanis (00:20:43): It has been kind of a a pretty mixed bag this week, in fact, of of things going down. Tremoth, what do you gotta take on this of what we're seeing in the market this week specifically with precipitous drops and then, you know, the the bouncing up again? Look. We Chamath Palihapitiya (00:21:00): we still had some amount of rate uncertainty from the Fed. I think people weren't sure how aggressively they were going to hike. But by early this week, it was pretty clear there's gonna be 250 point hikes, 1 in June and 1 in July, and then effectively a pause because then the fed funds rate will be at around 2%. And everything from there will probably be path and data dependent. Okay? That's effectively what they said. Now, I think the the markets had actually already started to see that writing on the wall. So, if you go back to one of our favorite measures which is the 10 year breakeven, it's effectively rolled over, which meant that which means that From the highs in sort of late April, it started to come down which says that, you know, they were thinking that You know, the inflation was not going to be as bad in the back half of the year. And then the second is that corporate credit which is really what matters in some ways to the Fed because that's where they can intervene. What is the spread above treasuries that a company can issue debt? When it goes crazy and it goes up, it means, oh, no, the cost of capital is going up. That's gonna be hard for companies to raise money. They may have to lay people off may need to get into cost cutting mode. Right? That's what goes through everybody's mind. But that's also now about 35 40 days rolled over, which means that the gap has started to shrink, you know, between the US treasury price and what, you know, decent corporates can can issue debt at. So it looks like we are set up for potentially a decent little rally here. The problem is is it a rally that is sustainable? Or is it a rally that's basically what we call a dead cat bounce or a bear market rally where you know, you just get some 1 or 2 weeks of relief before the thing spares down again. And we're not gonna know although tomorrow on Friday there's gonna be a really important set of inflation data that gets released and I think everybody's gonna be sweating these details. Chamath Palihapitiya (00:23:09): So right now, we're in a moment of pause. And there is the potential if this data comes back as reasonably good, which means prices are, you know, not escalating as much as we thought, Inflation is not gonna be as bad. Growth is gonna be moderate. That that gives a lot of ammo for the Fed to kinda take their foot off the off the gas here. And in that case, markets will go boom. Jason Calacanis (00:23:35): Sachs, the interesting note, I think, is what we talked about here, everything was correcting except housing. And we were wondering when this you know, the the increasing rates would hit mortgage rates. Mortgage is way above 5% in the last 2 weeks. I think it's come down a little bit. But the mortgage rate basically doubled And then we finally saw it earlier in this week. What what day was it? It was 2 days ago. So we're taping this on Thursday. So I think on Tuesday, new home sales, 591,000, they expected 749 and I think the last month before that was 763. Is that indicative of the raising the rates and slowing down inflation has finally occurred and that went maybe we the fed maybe steered too much into the turn. How do you interpret that mass because it's a pretty massive miss in terms of home sales and the estimate. David Sacks (00:24:33): Well, the costs of buying a home are going way up because home loans are now more expensive. So that's gonna factor into all sorts of consumer purchases, is anything that's financed can be more expensive. But you're also seeing companies starting to slow down spending. really starting to slam on the brakes. We see it in start up land starts. We're all slashing costs right now, but that's eventually gonna percolate up to big companies too. You saw Dara's memo Basically, when he got back from Wall Street, remember he published that a couple of weeks ago saying we sharpen our pencils, cut everything. What Wall Street is looking for now is free cash flow. So it seems to me like we're headed into a pretty serious downturn or recession here. I mean, I've been saying we're in a recession for months. The the the the, you know, the tricky thing for the Fed is that they don't have a lot of good options because We have a lot of recession indicators blinking red right now. At the same time, inflation is still high. So they're kinda caught between a rock and a hard I think what the Fed should have done is, in 2020 hindsight, is back last summer, when we first got that shock CPI print, remember it was, like, Jason Calacanis (00:25:42): 5.1%, David Sacks (00:25:44): seemed to come out of the blue because for years years, we've been talking about deflation. Nobody thought inflation was a problem. All of a sudden, we got that 5.1% print. They were until denial about it. They they just dismissed it, saying that inflation was transitory. and, you know, yelling said the same thing. And so, basically, everyone just ignored the data for 6 months. And what they should have done was stop QE right then and there. They could have taken a little bit of time to think out, you know, a rate increase strategy. But they were still basically engaging in QE for 9 months after that, you know, first inflation warning. And if they had stopped QE there, then we wouldn't have had this asset bubble in the second half of last year. That's when it inflated the most. And we could have had more of a soft landing. Unfortunately, now they let the they they kept inflating. really until the end of q 1, and they've yanked away the punchbowl so violently that I think the real economies can go into recession. So that's where we are right now. I mean, I don't know what the what the right answer is now given that we're in this, you know, almost stagflationary position. Jason Calacanis (00:26:54): Let's try and answer that, Brad. What is if if we didn't act soon enough, if you agree with Saks's point, pretty hard to disagree with. and we didn't take the medicine a little bit at a time. And now maybe we've overreacted or maybe it's gonna get worse. What is the right thing for to be doing now because all these companies doing hiring freezes layoffs at the same time that the housing market tanks, at the same time crypto tanks, at the same time the stock market tanks, This feels like a a major shock to the system. Is it time to maybe reconsider some of these -- No. -- you know, for the Fed to reconsider or just slow and steady wins the race here? What what what's the best option? Brad Gerstner (00:27:35): First, we should erect statues to Senator mansion for saving the republic by vetoing STEMI2. That would have been Bill back better? That would have been devastating. So we'll revisit that. Listen. The feds said 2 really important things this week. They said, number 1, our communications have been helpful in shifting market expectations. What that means? The Fed is the air traffic control. They said to the markets, at the beginning of the year, you're 90 degrees off runway heading. Get your ass back on runway heading. It was a slap in the face to markets, and it was a radical adjustment. Now you hear the Fed in these little statements. This week, they said, hey. We're well positioned this year to assess the effect of policy firming in the back half. So they're saying we're gonna hit it with Jason Calacanis (00:28:28): 5050, Brad Gerstner (00:28:29): and then we're going to take a look. So now think of it as air traffic control. You're 2 degrees to the left. You're 2 degrees to the right. They're steering us on runway heading. I don't think the Fed wants to do anything at this moment to lose credibility. in the inflation fight. We're going to get 50. We're going to get another Jason Calacanis (00:28:48): 50. Brad Gerstner (00:28:49): But they're doing what they want to do which is keeping markets sufficiently tight. Right? They wanted to take the crypto market down, they wanted to take all the excessive risk in the stock market down, Right? You're absolutely right. The inventory of Jason Calacanis (00:29:03): $350,000 Brad Gerstner (00:29:05): homes spiked from 4 months to 9 months Right? Used car prices are rolling over the last 3 months. All the things they needed to do they're doing Right? They need to stay the course. However, the hyperventilation this week by Bill Ackman on Twitter that the Fed needs to be doing radically more that somehow we need to be raising rates to Jason Calacanis (00:29:27): 6, 7, 8% Brad Gerstner (00:29:29): in order to to squash inflation. to me seems highly misdirected and totally out of touch with the fact that on layoffs.fyi, they've already announced 750 companies that are announcing layoffs. Right? The market is getting the drill. Chamath Palihapitiya (00:29:46): I I totally agree with this. I think we're in a we're we're we're in a pretty reasonable place here. The real the real question is now, what do you need to take the market lower? And this is more of a nuance, but You know, when you look at companies that are now quote, unquote cheap, right, let's take an example like you, you know, Well, we hear a lot about Google or Facebook. Right? People will say, my gosh. This is cheap because if you run a screen on it, it's like, Jason Calacanis (00:30:11): 10, 11, 12 Chamath Palihapitiya (00:30:12): times, price to earnings. Well, the price you know because you can look on the screen. The real question is, are the earnings right? And the thing that can take the market lower is if you actually think earnings are modeled incorrectly, Right? So we saw it this week as well snap I mean, completely just blew themselves. Jason Calacanis (00:30:36): 46% down extra day yesterday, I think. Chamath Palihapitiya (00:30:38): I just wanna say something about snap. In one day. They have the most incredible propensity to self immolate on earnings calls than any other company I've ever seen. There's probably been three times, no less than three times over the last Jason Calacanis (00:30:51): 4 Chamath Palihapitiya (00:30:52): years. where I don't know whether it's just poorly scripted or not well rehearsed or the people that are helping Evan get ready for these things, but these are disastrous calls. You know, Facebook's had a couple in its lifetime, but Snap consistently probably once every 18 months will do this. Anyways, the thing just completely implodes the stock implodes by 48% or something. And then it, you know, rolls over to companies like Facebook and Google who then are off Jason Calacanis (00:31:23): 8 Chamath Palihapitiya (00:31:24): or 10%. My point in telling you the story is that if you think Facebook and Google just as an example again are cheap at ten times, while you better hope that the earnings are right, Because if the earnings are actually wrong, that's actually 27 times 19 times. You know, I'm I'm making these numbers up to give you the example because the earnings are fundamentally wrong. So That's the risk now that's left in the market, in my opinion, that could take it much, much lower, is if that, you know, all of this slowdown really contracts spend and the earnings are actually not accurate. The forecasted earnings will need to be revised over the next two or three quarters and that's where we will probably see the low. If, however, growth is muted and the Fed can, as Brad said, it's a really good analogy. Now just course correct, by degrees, you know, a degree here, a degree there, we've probably consolidated the lows. Jason Calacanis (00:32:17): So said another way, we look at a company like Snap. or Google, a lot of their expected value has to do with people's ad spend. We now see less homes being sold, so maybe people in real estate stop spending less on ads. They're a major advertising category. Maybe direct to consumer. People are not buying because of supply chain issues. The stuff is too expensive, and we're not gonna spend on ads. And so all of this ad revenue, that's some of the first to come out of people's budgets. So, you know, even as great as Snap's results, actually, look. They were up 38% year over year. They're generating over a 100,000,000 of free cash flow. Chamath Palihapitiya (00:32:55): The guide was terrible because what they said was our e Right? Our earnings Jason Calacanis (00:33:00): -- Brad Gerstner (00:33:01): Right. Jason Calacanis (00:33:01): -- Chamath Palihapitiya (00:33:01): are not modeled accurately. Right. And so that's the risk that you now have to take to every company. You cannot look at screen at Yahoo Finance or Bloomberg, look at a price to earnings ratio and say, wow. Seven times, that's so cheap. It may not be 7. You have to do your own work. It could actually be much higher than that because your earnings may be at risk. Jason Calacanis (00:33:22): The earnings being at risk is this contagion that we talked about, I don't know, 6 maybe it's like we're going on almost a year now Sachs, we talked about a contagion happening because we've all experienced it in the last two recessions to the the dot com bust and the great recession. So what are you seeing in terms of at companies, this contagion risk? Are people canceling SaaS contracts? on the margins. Obviously, people are doing hiring freezes. Obviously, people are laying people off. Are people gonna start renegotiating salaries? You know, what what what's the next couple of shoes to drop here, Saxx? And that would signal to you a true bottom here. Like, have you seen I thought maybe one would be if somebody offered somebody an investment with a a 2 or 3 times liquidation preference. Have you seen one of those yet? Have you seen people say we're gonna renegotiate salaries? because that's when it was really dark, right, the last two times. David Sacks (00:34:12): Yeah. I know. It's gonna take time to get to to that point. I mean, where you start seeing structure and deal is is in deals is when a founder is trying to preserve evaluation they got last year and that can't really be justified, but they don't wanna just take the down round. So you try to preserve the op the last round by building all these preferential terms. We don't like to do deals that way, but you'll start to see them happen later this year when, you know, companies get more desperate. That's not the first thing that happens, though. I think that that to your point about the talent market, it's definitely gonna happen. Has it happened yet? No. What has to happen is first, all these open recs get canceled. Companies freeze their hiring plans. Then eventually, they do layoffs. That's coming. And then the talent market Jason Calacanis (00:34:54): pulls out. Both of those things are here. Both are here. So what's the next in talent wars? David Sacks (00:34:59): Well, yeah. I mean, look. But within the next 6 months, the talent market's not gonna be as hot. And, you know, in the same way that startups aren't getting 10 term sheets, now that maybe they get 1 or 2 if they're a good company, Same thing with talent. Right? They're not gonna have 10 job offers. They might have 1 or 2, and that's gonna create that's not gonna create the same upward pressure. Continuing upward pressure, for for increases in in comp. To your point about, like, will SaaS contracts be cut? I mean, I think software is pretty sticky. I mean, if it's a good product, will deal cycles get longer? Yes. Will there be more more tality risk in the start up for SMB customer bases of companies, yes. I think one concept that Starps may wanna wrap their heads around is why we called deferred mortality risk, meaning that during the last few years during the boom times, the graduation rate from c to series a to series b was very high, perhaps artificially high. So there's a lot of companies that got funded in advance to the next round. wherein more normal times, they wouldn't have made it. So -- Got it. Now if those companies haven't really fixed their issues, they've just deferred the mortality. So I think all of us probably in SaaS land need to be modeling out higher logo churn for for customer bases that are skewed towards start ups or SMBs. And we don't know what those numbers are gonna be yet, but that is likely to happen. Chamath Palihapitiya (00:36:29): I think that that's right. I think the other thing is that there there's a lot of companies that are gonna have to get religion on free cash flow conversion ASAP. And I just think that most CEOs to be very blunt are poorly educated and innumerate So their level of numerous seat to even understand this is pretty poor, and most board directors are equally Jason Calacanis (00:36:53): Can you unpack it right now? What what does it mean to to get the business to free cash flow? What does it take? Why is it important? And and what what are the how do those businesses look differently to more to Chamath Palihapitiya (00:37:04): spend less than you make? Jason Calacanis (00:37:07): k. Hold on. I just wanna make sure I got it correct. You make money, but the number of the money you make is higher than the number of the money you spend. Got it. k. And then there's a delta there. There's some difference between those two numbers, and that number is important to some people is what you're saying. Chamath Palihapitiya (00:37:23): I think increasingly getting that number to be greater than 0 is going to be really important. It it allows you again, everybody starts to throw up this whole thing, which is, oh my god, you can never slow growth and the company will die. And, yeah, maybe in a vacuum that that's true. But when every other company is fighting tooth and nail to survive, the only thing that you need to do is actually survive by surviving you win. Yes. And if you can basically make your cash last as long as possible even if you cut to the bone and stop growing. If you come out the other end, and you're the only company that's left, you will win and run over the market. You may have pushed to the right a few years your plans of world dominance. but they're still available to you. It's the company that foolishly thinks that they can continue to spend money at the same rate or in the same ways that are gonna learn this hard lesson. because I think that investors are not going to tolerate being able to, you know, provide incremental capital to organizations, funds who are then, you know, misallocating that capital to basically support a poorly marked portfolio. And I think that is gonna be the real come to Jesus that actually makes all of this thing come clean, like pension funds, family offices, endowments, all these organizations are smart enough to realize that they're giving good money after bad if what those folks are gonna do is not demand portfolio rehabilitation and instead are just gonna basically keep the marks of their old funds because they're just in a in a game of waiting it out. where the hope is Jason Calacanis (00:39:01): -- -- taking action greater than, you know, blind hope and just going, you know, steady doing what you've been doing. You gotta make some changes. Chamath Palihapitiya (00:39:09): I mean, look, I love Brad's reaction. I think that most growth oriented funds are looking at their portfolios And they're trying to balance 2 strategies. Strategy 1 is get into massive rehabilitation mode. The problem is most of these people have never built or run a company, so they have no idea how to rehabilitate anything. They're, you know, market momentum folks. And in that, they were excellent. But in actually helping CEOs build and rebuild a business, think that they're not as well suited. Doesn't mean they can't do it, but they're not as well suited. That's path a. But I think that path is very painful and it requires you to take medicine, the bitter medicine, which is to basically mark your portfolio down 50 or 60 percent just like the public market terminal valuations have gone down. The other alternative is to basically raise enough money to do, for example, unpriced into those same companies so that you don't have to remark so that the auditors will be allowed to carry these fake valuations. You can maybe mark it down 10 or 15 percent but you don't have to mark it down 50 or 60 percent and hope the market returns to its previous state of But as we've all talked about, that previous state is probably unreliable because it was a moment where we had a global pandemic where we took rates to 0 and we printed $9,000,000,000,000 or $10,000,000,000,000 of excess liquidity that inflated these things. So I gotta think that, you know, Prices in 2019 were a little bit ticking up. 2020 were really ticking up. 2021 was egregious in 2022 as to come is, you know, where it all comes from to us. Jason Calacanis (00:40:46): Brad, explain to us. We we hear free cash flow. We hear income, net income, EBITDA. We we hear all these terms. Now free cash flow is what everybody is focused on. I I believe that seems to be the predominant rallying cry in a lot of public market companies now. Can you -- explain to people what the difference between these things are because people kind of bundle them together. Why would somebody like Dara at Uber just say, hey. You know, we've been talking about adjusted EBITDA, EBITDA income, net income, all this stuff. But free cash flow is what we wanna focus on now. Or is that correct? Yeah. Brad Gerstner (00:41:20): you know, and our friend Bill Gurley rails on this adjusted adjusted. And, you know, look to your left, look to your right, adjusted one more time, EBITDA. Right? Like, in markets like this, what people wanna know or what's the green stuff I can take out of the business and put under my mattress. free cash flow, distributable free cash flow. And not only that, how much per share? I think the single biggest issue is the easy way out for all these companies. They'll tap down a little bit on their hiring. They'll tap down on their spend. But out of the backdoor, they wanna give a bunch of free stock to employees to help offset that pain. This is really important to understand. because stock is a real expense, right? When a company goes public, the more shares you have, the lower your price. So it is a real expense to everybody, the founders, the employees, the investors. Right? And so what's I think the single biggest converse going on in board rooms in Silicon Valley today is, hey. Can we have a little bit more stock this year? Whether it's options or whether it's outright RSUs, to give to employees because if we don't give it to employees, they tell us they're going to leave. This is a real hard truth. I had a CEO of an incredible company call me and say, listen. We pay our engineers a million bucks ahead, but we give them stock that over the last 5 years has been worth another $1,000,000 each year. So they built their lives as though they had $2,000,000 a year in income. They bought a house. They bought cars. They sent their kids to private schools. Yeah. based upon that $2,000,000. And now when we tell them that this upcoming year, the mill we're not making whole on that 1,000,000. It can't be when when we win you win and when we'll when when we lose you win. So the tough conversation is we're not re upping you. Brad Gerstner (00:43:13): because the stock's been cut in half. And so now that engineer is saying, yeah. But this year, that means I'm only getting paid Jason Calacanis (00:43:20): 1,200,000 Brad Gerstner (00:43:22): And the answer the tough answer is yes. Right? Shared sacrifice. You should have never assumed. that that was gonna be worth an incremental $1,000,000 a year. But that takes leadership. That takes courage. That takes a board that knows what they're doing. to explain that over the full arc of that employment. And the first thing the mercenary employee says is, well, I'll just go work somewhere else. Jason Calacanis (00:43:45): Mhmm. Brad Gerstner (00:43:45): And the right answer for a good leader is okay. If that's your approach to this business, then you need to go work somewhere else. Jason Calacanis (00:43:53): mean, you just did a great test. Right? That's a great filter. You you you're a mercenary, and, you know, you were with us when we're up, but you're not with us when we have to take some austerity measures. Is this the end of entitlement across the board, Saks? I mean, we had an entitlement class. Everybody thought they raise a VC fund. Everybody thought they would have a 100 percent IRR because they would just buy NFTs and flip crypto projects that had no released product. and the same with employees. They just thought I can just keep, you know, raising my salary x amount, and now it looks like Apple said everybody comes back to work 3 days a week. and we don't see a lot of people quitting Apple because there may not be another option. And maybe a lot of the firings that are occurring. I I'm thinking of cameo here had top 3 of their top like 6 or 7 leaders leave. I interpreted that as maybe they had really big comp packages when they did the layoffs, they said, you know what? The number twos in these positions can get the job done for a third of the price. Maybe that's better for the business. So is this the end of austerity, the end of entitlement? David Sacks (00:44:55): I think so or a lot of it. There was a great article here in well, that was that came out recently about Netflix where Netflix, they're finally getting real about their kind of entitled their woke and titled employee problem. And this is in the New York Post, but there are many other newspapers that covered it. Basically, it says here Netflix tells woke workers to quit if they offend it. If you find it hard to support our content breath, Netflix may not be the best place for you, said the memo. Jason Calacanis (00:45:24): So -- Period. Full stop. David Sacks (00:45:25): Yeah. They're just sick of it. They're just not gonna put up with it anymore. They're sick of being held hostage by their employees who think that they can kinda muscle the leaders of the company by starting a petition or boycott campaign every time they wanna drive the company in a certain direction. And so I think companies are finally figuring out, this is the only way to react to basically being held hostage. If you don't like it quit. Jason Calacanis (00:45:47): If you don't have 7 job offers, you know, and recruiters calling you constantly because everybody's on the hiring freeze. Well, then maybe people will appreciate the contract of I work for you, you give me money, and then everything else is superfluous. On that note, did anybody see the Ricky Jervais, Netflix Mitchell yet? If not -- -- on Netflix? It's on Netflix. It's unbelievable. I mean, Dave Chappell, you know, in terms of bravery, Ricky Girves was like, I've already made my money. I'm burning the the whole building down. I mean, he went full equal opportunist. And, I mean, I think the trans issue became, like, 10 or 20% of the of his latest special. So It does seem like the comedians are saying, you know what? We're gonna make jokes. We're gonna make jokes about everybody. We're not gonna buy into this. You can't cancel us. We're we're just gonna keep making jokes, and we're gonna keep making And and that whole concept that, you know, people are gonna be held hostage, I think, is over and and independent of what you think of making jokes of, you know, various marginalized or smaller groups of people. David Sacks (00:46:53): Can can we please go back to something Brad said a while back about how mansions saved the Democratic Party because I think there was actually an interesting point there. Jason Calacanis (00:47:01): Yeah. On packets. David Sacks (00:47:02): Yeah. Such notorious right wingers at Jeff Bezos have said something very similar lately when do you see that where Biden tried Biden tried to blame billionaires for the inflation, and Bezos was having none of it. He said, no. Listen. It's not because of us or our companies because you printed too much money. And Joe Biden or he said Mansion saved you from yourself because it would have been another 4,000,000,000,000 of spending on top of all the other 1,000,000,000,000 of spending that we had last year. So it's absolutely the case that that if the administration was left just on devices remember, they were touting back in December. They were touting the idea that this 4,000,000,000,000,000 bill backbatter spending would somehow be the cure to inflation. Imagine if they had poured that gasoline onto the fire. Chamath Palihapitiya (00:47:44): I mean, we would go Jason Calacanis (00:47:44): to 20% inflation. We might have had a a currency you know, like, a serious currency issue. No, Shamal? Yeah. David Sacks (00:47:51): But but but hold on. But let me just finish the points. I don't I don't wanna just make a partisan point here. I wanna there's there's a serious economics point here with or learning. I hope our policymakers learned from this, which is what happened? Over the last couple of years, we had $10,000,000,000,000 of money printing. Right? Why they do that? They thought that they could stimulate our way out of this COVID recession that they had induced with lockdowns in any event. The point is they thought they could stimulate economic activity by printing money, and maybe cynically, politically, they thought it'd be good for them in the midterms. What actually happened? That 10,000,000,000,000 goes into the economy, but there's no corresponding increase in the output of goods and services. So 2 things happen. 1st, price levels rise and we get inflation. And second, we get an asset bubble in the stock market. And then the way both those things sort of come crashing down to earth is the Fed looks at this inflation and suddenly has to jack up interest rates. That pops the asset bubble it vaporizes something like 14% of global wealth. And then simultaneously, workers feel a lot poorer because their wages haven't kept up with inflation. So this whole idea that you can just print money as a way to create wealth and prosperity, I hope will we take away from this I think, recession that we're going into is that is not a viable strategy. The only thing that creates wealth in a society is the output of goods and services that people want. And you just can't try to sort of play games with that by creating Phantom. the sort of phantom money that doesn't represent a real increase in good services or productivity. Jason Calacanis (00:49:22): Yeah. It's hard for people not to take this all as partisan, but If you just look at the objective facts, the last two administrations have printed money like drunken sellers, and it's a mess right now. So you you you can divorce yourself from any conception that this is partisan. Trump spent a shit ton of money and so did Biden. And who's more qualified than Trump and Biden? Elon Bezos, the people who appear on this podcast. We have much more of a pulse on what's happening in the actual real economy and in permission and capital allocating than these people. And I love the fact that now, you know, Bezos is a shit poster. He just doesn't get he doesn't care. And and I think we're having like an honest discussion now. Right? David Sacks (00:50:04): One of the one of the areas where I I don't think Elon gets enough credit is when he explains macroeconomics. I think he actually really understands the the the what an economy is. I mean, an economy is basically a trading system for the production of goods and services. If you were to go this is a point he's made. If you were to go to a desert island and somebody just gives you a $1,000,000,000 when you're sitting there on that island, you can't buy anything. It doesn't make you wealthier. What makes you wealthier is the production of goods and services that people want. and that's ultimately what an economy is. Money is just the accounting system. The dollars is just the accounting system. If you start printing lots of money, all you're doing is debasing the accounting system. It doesn't make anyone richer. And yet, you know, the way that conversations around economics really take place, the only thing you ever hear about is stimulating demand. never really hear anything about production. And, I mean, this is an old debate that goes back to the 19 eighties about, you know, supply side economics. But regardless of what you call it, wealth ultimately comes from our capacity to produce goods and services that people want. Jason Calacanis (00:51:09): It's a great one. Chamath, all of this adds up to companies and the government's balance sheet becoming tighter and more efficient. So the talent, diffusion across the industry, perhaps everybody being entitled in getting overpaid, people not wanting to go to work, people who have jobs not wanting to go to the office. All of this seems to have actually reversed in 3 months. So this medicine we're taking, we stopped eating the bad food. We started working out. We're getting better sleep. This is gonna turn around for the the companies that take the medicine, the management teams, the capital allocators who do the hard work and sharpen their pencils as we've talked about. This will all result in a more efficient and vibrant economy. Yes? Chamath Palihapitiya (00:51:54): I think for the most part, I think there's still gonna continue to be examples of folks who basically run themselves into a brick wall because they don't wanna make the hard decisions. That it's gonna be more exaggerated in Silicon Valley because we have a culture of tolerance and we have an economic business model that supports kind of irresponsible decision making and supports poor governance. You know? Look. I I've said this many times, But a fund's job, ultimately, is to make a very important decision about whether they truly care about generating massive returns or whether the fee income becomes so meaningful so as to drown out every other incentive that they have. And I think, by and large in Silicon Valley, if you track all of the increased frequency and fundraising, You can also probably follow those dollars, and they generally will be the most poorly run. They'll be held the least accountable and I think those will have the largest negative outcomes. And then instead if you follow the dollars of the the real practitioners who have discipline. They look kind of sheepish and silly for years in the middle of a rally. But they are the ones that are able to really reset and help some of these few companies really win. And I think that you're gonna go through that cycle over the next 4 or 5 years And so, you know, that gets Jason Calacanis (00:53:25): super well said, Jmuth, because I have felt at or I've been made to feel silly by some folks who said, Why are you asking to do diligence? Why do you want to have a board seat? Why do you want to talk to customers? Why are you asking for month by month revenue? Chamath Palihapitiya (00:53:40): made a sub economic decision. Like, the idea that over the last 4 or 5 years, you optimized for anything except the market beta was kind of dumb. You know, and it's and and the worst thing that you could have done in that period was confuse alpha and beta. Meaning, alpha is what you are able to do because of your discrete skill versus anybody else. Beta is when just the market goes up said differently, you could take any NBA player and put them on a high school basketball team and they would be the, you know, college player of the year. Any single one. Okay? That's beta. Yeah. If you then can be the MVP or the NBA, that's Alpha. Yeah. Okay? And I think that a lot of folks were made to feel very silly or you know, a downer or a wet blanket in these last few years who will probably have the last laugh. Jason Calacanis (00:54:37): It's been unbelievable, Brad, to watch the changing of attitudes and the entitlement in fundraising and private markets in the last 60 days, and it's been even more pronounced in the last 30. I literally have people we talked to last month who had really crazy expectations, they've come down by 50%. They wanted 50. Now they're at 25. They didn't want board seats. Now they're okay with board seats. Information rights, they were fighting against information rights. I don't know why that's a hill to die on. Now they're like information rights. Yeah. Sure. Here's our CFO's email. We need to get money in the doors. So I guess what's the silver lining here? It does seem to me as a great setup right now. Chamath Palihapitiya (00:55:16): Jason, let me ask you a question. Jason Calacanis (00:55:17): Hold on. Chamath Palihapitiya (00:55:18): Yeah. Mike or to Brad. Like and then you're you're forgetting one other key thing. In in the in the race to raise all of this money, What did these folks do? They hired these mid level kids as partners into their venture firms and gave them money to put into companies What do these people know? Jason Calacanis (00:55:36): No mentoring. Chamath Palihapitiya (00:55:37): I'm not saying it disparagingly. I'm just like, what do they know? How do they know how to actually invest Investing is just not. You see it. You just say, okay. Brad Gerstner (00:55:45): Well, I think it -- Sounds cool. Yeah. There are some of those younger folks who are gonna turn out to be all stars in there, you just like in the NBA, and there could be some that, you know, proved to be writing the beta. But let me answer Jason's question because you know, maybe end on a on a on a note of optimism. You know, in some countries, you know, notably China right now, they're doing a lot to prop up a bunch of companies that should be allowed to fail. Right? One of the beautiful things about free market capitalism, the creative destruction, The cycle time on creative destruction in this country has never been faster. Right? Make no stake about it. If you took money at evaluation over a Jason Calacanis (00:56:25): $1,000,000,000, Brad Gerstner (00:56:27): okay, last year, you're not that's not a venture capital debt. I call it quasi public. Right? You stepped into the bigs, and you said I will deliver this plan. And if you don't deliver the plan, there's not gonna be a lot of tolerance. There's not gonna be tolerance for just giving away a bunch of more stock. There's not gonna be tolerance for no course correction. Right? Maybe in seed or series a. Right? There's a lot of tolerance because you sign up to a lot of unpredictability. But the level of tolerance that you'll see out of late stage growth investors is going to be a kin to what they do with a public company that runs them off a cliff. You know how that is. You've been on those earning calls. So I think this is going to shine a light on the bifurcation that we really have. We call all of this venture capital. But the truth of the matter is series c and before is venture. Once you're stepping into the bigs and taking money at a 1,000,002 1,000,000,000, The expectations are different. Your access to capital will be different. The expected course correction will be different. Right? But I take it as a I take it as a sign of strength that we're gonna work through this. We're going to have, you know, the the private are absolutely going to go through a reset, but we'll get through it, and the winners will win. And those who fail the course correct and wanna fly into the wall will do that. and we'll get on with the next generation of incredible entrepreneurs solving big problems. The secular curve of technology solving big problems has never been steeper, Right? And the cycles that overlay that secular curve are not suspended. We have not suspended wars We have not suspended economic cycles, and so we're gonna have to get through this one. It's happening in record pace. Jason Calacanis (00:58:17): Saks -- David Sacks (00:58:17): Actually, that that's interesting point. I wanna let me ask Brad a question about that, which is what's the potential here for more of, like, a a v shaped recession where to your point, the mark is correct. more rapidly and violent than ever. Snap misses of, you know, issues and new forecast down Jason Calacanis (00:58:34): 40%. David Sacks (00:58:36): Is there a possibility that this thing gets resolved in, say, 6 months? That's not to say that valuation levels are ever back to where they were you know, in the second half of twenty twenty one. But in 6 months, could we have sort of done this big reset, washed out a lot of the problems, And, you know, again, valuations are not back, but the market become the the capital markets become become unfrozen, and we're back to a more normal operating environment. as opposed to say, yeah, as opposed to say, like, more of a u where we're kinda bouncing around the bottoms here in this volatile state for about 18 months. You know? And then it's more like the dotcom crash. We come out of it in 2 years. I see smart people on both sides of this. I hear Jason Lemkins been saying, I think this is kind of short, deep, sweet, 6 month reset. Fred Wilson just wrote 18 months at least. I think Sequoia is saying 2 years. I mean, I think our instinct is 18 months to 2 years. But what do you think the possibility is that we could be in a more normal environment in 6 months? Brad Gerstner (00:59:38): Right. So let's Let's separate public markets and venture markets because venture markets, as you know, have a 6 to 12 month lag just in terms of the reset. But I would say, you know, the future is a distribution of probable outcomes. There's a downside case and upside case and a base case. I think the base cases by this fall will have very good evidence. right, of where inflation's rolling over. I think it is rolling over. What the Fed is likely to do, the upward bound on on interest rates, And I think we'll be at a point where we can start underwriting to the 5 year average again. Make no mistake about it. The S and P and the Nasdaq today are still 30% above where they were in January of Jason Calacanis (01:00:19): 2020. 30% Brad Gerstner (01:00:23): above where they were in January 2020. How much better is the world today? than where it was in January 2020. Well, I think what the market is saying is that we've grown the economy on a nominal basis about 15% during that time. and earnings have about doubled. Right? The earnings margins of those companies are about have about doubled. So you would expect Normal course and trajectory may be that those companies would be 30% more valuable. The problem is, as we look ahead, to Chamath point, the earnings are likely to come down. Profit margins are being squeezed. So I think there's a decent decent argument there's more pain to come in the public markets that we haven't seen the bottom. However, I do think that the Fed is taking a good course here. I don't think that we have runaway inflation. I think that, you know, we're going to have an investable environment come this fall. However, I think for venture, There's a 6 to a 12 month lag to that. So I think you gotta add it to those 6 months to really get to the market clearing prices for all these companies. but I think it's incumbent upon all of us to give really good feedback today. And I see a lot of it, right, to entrepreneurs about making that course correction. If they're only turning to playing 10 degrees, when they see lightning dead ahead, they're making a huge mistake. The default action by every founder today should be a 90 degree course correction unless they have very good idiosyncratic reason and that business in terms of their outperformance to stay the course. Chamath Palihapitiya (01:01:58): Land for the worst hope for the best. Jason Calacanis (01:02:00): Yeah. And, yeah, you you could even bifurcate the companies in private markets to ones that have strong product market fit. and the ones that don't. There's a lot of companies, to David's point, that we're getting series b's without product market fit. You know, it's it's one thing to get your series a when you this, like, weak product market fit and a great story. But when you start seeing Series bs happening on momentum, it's like, that to me is is is is gonna be impossible to resolve. That company has to go to 0 or has to reset or give even give money back to founders. Those are the really the three things I would see as a true bottom. Like, the really dark moment where people have 2 or 3 liquidation preferences, people resets reset comp tell people, listen, we're gonna cut comp 30% across the board for management if you don't like it leave. And then finally, people saying, you know what? We're gonna give the 60¢ on the dollar back to investors. Those are the three things I saw during the 2 down terms. Chamath Palihapitiya (01:02:55): You're saying something that I think is also important not really talked about, which is that there's gonna be a lot of really good companies with really horrible capital structures, really terrible cap tables, really bad valuations, really big overhangs of preference stock that are gonna have to get worked out. And in getting that worked out, Going back to what Brad said, the person that course corrects 90 degrees will win, and the reason they'll win may not even be because they're being that courageous. they're just being less stupid than everybody else, quite honestly. Because you have to remember in most of these markets over the last 4 or 5 years, we funded 4 or 5 versions of every imaginable company. Jason Calacanis (01:03:35): Right. And there's gonna be 2 winners. 70 and 30%. Yeah. Chamath Palihapitiya (01:03:38): And and there's really really gonna be one winner And then there's gonna be a marginal second kind of also ran that captures some value, and everybody else is not that valuable. And, you know, that's roughly been true. But the reason we were able to support that was that every company looked kind of interesting. Anyone with traction could be, you know, competed against because the only differentiator at the time was very cheap money that was effectively free, and it was flowing in, you know, faster than you could count. So all of that has to get sorted out. So I just think that that those dynamics shouldn't be ignored. And so, you know, Again, Jason Calacanis (01:04:13): hard work too. I mean, to the thing we've been saying here, the it's hard work for a board and founders to do this, but what choice do you have? Brad Gerstner (01:04:19): Well, the problem is The If Chamath Palihapitiya (01:04:21): you take much more sophisticated markets like the debt markets, which I would say are much more sophisticated. Okay? Jason Calacanis (01:04:27): Cut throat. Chamath Palihapitiya (01:04:28): Liquid, covenants. When you see the people that make the money, 2 things are true. Number 1 is their incredibly sharp elbow, and number 2 is they make money in moments like this. Right? If you look at Apollo's great returns or Blackstone's great returns or Cerebas, you know, these folks were the, you know, they they really were the barbarians at the gates. and they made all the money in moments of true dislocation. If you apply that construct here, we've never had to go through a period where there are some real terms and conditions attached to the incremental dollar. And I think that if that does come to pass in Silicon Valley, you're just gonna have a reckoning. And I think that that what it'll really do is just sort out the winners and the losers, and it'll sort out the folks that were able to get to default or close to default alive or at least default life support. Brad Gerstner (01:05:17): Saks Default investible. Jason Calacanis (01:05:19): default investable. I like that one too. Default investor. I mean, Saks made a great tweet. He basically says it's not default alive or dead investable or not, and that's an even finer filter. David Sacks (01:05:29): Well, default defaultalive is fantastic if you can get there. It basically just means cash flow positive. I mean, all defaultalive means is that you're cash flow positive or you're gonna be cash positive based on the money you have in Jason Calacanis (01:05:39): the -- You don't need money. Yeah. David Sacks (01:05:40): Exactly. You don't need money. Well, of course, that's the best place to be is you don't need money. But I think, you know, for early stage companies, that's almost an impossible standard. You know, it takes time to get to the point of being couch positive. So, therefore, I was trying to propose a standard that I thought was more Actionable for founders because it was because it wasn't impossible. And I call it default investable, which is here are the metrics that you need at least I can tell you what they are in in the SaaS world. You know, here's what great metrics look like. Here's what good metrics look like. Here's some danger zone metrics. And you need, you know, out of the 5 key metrics, you really need Jason Calacanis (01:06:14): 3 David Sacks (01:06:15): or 4 great ones and 1 or 2 good ones to raise in this environment and no dangerous metrics. And if you don't have those, you need to give yourself the time to fix the problems in your business to get to those metrics. On that note, you know, Sequoia had a really good chart called survival of the quickest that illustrates this concept of giving yourself time. And I threw it in the chat. But, basically, what it shows is there's a a green line and an orange line. The the green line is the company that realizes in May of 2022 that we've gone into a very different environment. And they slash their burn in half, and it they'd basically double their runway. And then there's the other company just keeps going along the same path they were at until they realize, oh, wait a second. You know? And then that, you know, some point in the future, they realize there's been a change. Then they make a small cut make another small cut, and they're always behind the eight ball. And I've seen this so many times before that the company doesn't make cuts until they're forced to. And so they never really lengthen their runway. And then when they finally do make the cuts to go into a dust spiral and die. Jason Calacanis (01:07:18): And now they're over the Atlantic and there's not enough fuel to get to a landing strip. And you're just plunge into the cold ocean and die. David Sacks (01:07:26): Found founders really have to think about the the asymmetry of the risk that they face. right, which is let's say that you cut too much and the environment is better than you think it's gonna be. Well, you can always hire back I promise you Jason Calacanis (01:07:39): -- -- low price in all likelihood. David Sacks (01:07:40): I promise you you'll be able to hire back. Okay? But on the other hand, if you don't cut it enough and the situation is worse than you think, then you just die. So you this is why Andy Gross said only the paranoid survive. You've gotta think about the downside risk and be more skewed towards the bad scenario than sort of the the sort of wishful thinking scenario. Brad Gerstner (01:08:02): Hey, Savary, but I I just just one final point here. You know, because we have all these decks flying around now by venture capitalists telling founders to go make these really tough decisions. Being a little self reflective. Where were we all 6 months ago? Where were we in October when we were putting more money in and they were hiring like crazy? Where were we in November? Right? I remember some of the conversations that we were having. But I look, I posted in in in chat layoffs.fyi. Right. The number one company on that list get here, Sequoia Company. Okay? Are they making a course correction? You bet your ass they are. They're laying at 45100 people, 15% of the workforce. The 2nd company on that list, LaceWork, an Altimeter software company that's doing terrific, growing 100 of percent, laying off 300 people, 20%, right, a 90 degrees turn of the plane. Right? That company will never need cash again, but it's not just flying toward the lightning. They're making the tough decisions because that's what leaders do in businesses that are even good businesses. There are a lot of companies that are shit businesses that should be on this list, but they're bumbling along and not making the tough decisions, we need venture capitalists that instead of, you know, this being a popularity contest, venture capitalists need to look inside as well and say, what about our firm? Didn't didn't work. Right? Why weren't we issuing these course corrections and telling people to tap the brakes a little bit when we knew markets were overheated last year? Right? And so I think there's there's a lot of responsibility that sits on both sides of the table, but I'm you know, there's 714 startups on this list. by the time we're done, there are gonna be at least 3000 startups on Jason Calacanis (01:09:54): that list. -- say add a 0. Add a 0. Brad Gerstner (01:09:56): That's another reason I say the Fed is getting what it wants. Right? This labor market is, you know, is cooling down very quickly at least in Silicon Valley. Jason Calacanis (01:10:05): Well, I mean and the fact that people felt like they didn't need to take a job and they could live off credit, and there would always be jobs for them. I think people are gonna have to rethink. Like, can I be unemployed forever? And, you know, do I need to take my career seriously? Do I need to pay down my debt? Do I need to have a a balanced balance sheet? Do I need to my my personal balance sheet needs to be in order I think that's what individual workers need to think about. David Sacks (01:10:29): Yeah. I mean, Brad's right that there's certainly enough blame to go around in the ecosystem and, you know, VC's bought into these frothy evaluation levels last year. To some degree, we're all gaslit by by the Fed and these low straight policies. I wrote my post about burn multiple and how to measure capital efficiency 2 years ago. It's getting a lot more retweets now than it did back then. But but look. I do VCs have some self reflecting to do it, definitely. But, you know, I'm seeing a lot of tweets going around, basically saying, like, people objecting to this advice on the grounds, you'll hear something like, if UVCs wanted us to operate more efficiently, then you should have invested more efficiently. Or if you wanted us to be disciplined, you should have been more disciplined in your investing. And to me, that's kinda missing the point. It's kinda cutting off your nose despite your face. The reason we're giving this advice is because we just want our companies to 5, and we've been through Jason Calacanis (01:11:26): -- -- 0. David Sacks (01:11:27): We don't want a 0. We've been through multiple down cycles. And the truth of the matter is unless you've been in the business world for over 14 years, you've never been through a down cycle. I mean, that means that, you know, no founder under the age of what, like, thirty six has even seen a down cycle before. They don't know what it can be like when you go into a 2 year nuclear winter. Jason Calacanis (01:11:48): They probably they probably weren't the pilots at that time anyway. So it's more like people who are 4045 have the scar tissue because they were in the pilot seat. David Sacks (01:11:55): Totally. Totally. So the reason you're hearing all these VCs, all of a sudden, say, get more disciplined is mainly because we've seen this movie before, and we don't want our guests to run out of money and die. Chamath Palihapitiya (01:12:06): I think you can safely short if you could. The stock of all of these random Peanut gallery CEOs tweeting their disdain on Twitter. If you're right, that would Jason Calacanis (01:12:18): be a great index index. Chamath Palihapitiya (01:12:19): Head down, fixing stuff, just write that company to Jason Calacanis (01:12:22): 0. Yeah. Just turn your fucking Twitter and and just sharpen your pencils. I I we we would be remiss if we didn't talk about at least for this last segment about the tragedy in Uvalde Uvalde, Texas. 80 Miles West of San Antonio, Tuesday, 19 elementary kids. 2 adults were murdered. Chamath Palihapitiya (01:12:44): How are we gonna talk about this without losing our shit? Jason Calacanis (01:12:47): It's really hard. I think maybe the road map I did give this a lot of thought. Chamath Palihapitiya (01:12:51): It was like, why is why is this first segment on the market trundling along on fucking life support for an hour and 10 minutes. And I think part of it is because none of us can really talk about this without losing our cool. Jason Calacanis (01:13:01): It's really hard and but I do think we did good work, Chamath, I I was thinking about the good work we did in the episode of Roe v Wade. And we actually came to a point where we said, you know, here are the extreme positions, and then you're like, hey. Wait a second. I state of point. I found this data point, and we actually figured out, hey. 80% of people want this definition of abortion in the United States. So I I'll throw it to you tomorrow. You know, we're all outraged. We're all frustrated. But maybe we could start there. Is there a consensus of what could be accomplished here? that you've come to. I've started to think about it a whole bunch, but, you know, we're all outraged. We could all yell and scream here, but A path forward is where my mind goes. Chamath Palihapitiya (01:13:43): I'll just tell you what I what I have been thinking about. k. this is just a random stream of consciousness. Let's do it. I think that the Democrats will not make any progress because they try to make this unfortunately a moral virtue signaling issue. The Republicans will not make any progress because they become sort of very binary adamant absolutists about constitutional rights and the interpretation of that right in a very specific way. The truth is in the middle. You know, if you go back before we talk about Uvalde, Peyton John Dror who was the kid that shot up atop Supermarket in Buffalo and killed umpteen, you know, black shoppers lived in a state where there was a red flag law for those that don't understand what red like Lazard David, you know, tweeted some stuff about it as well. But, essentially, it allows a community member or a family member or a school teacher or a police officer to essentially put a restraining order around an individual that they think could cause harm and use that as a way to confiscate their weapons. People have talked about red flag laws as being possible while he lived in a state. The kid was, you know, put under a cycle, you know, a year ago, and it it all just falls through the cracks. Now, you know, Ted Cruz or somebody else said, let's spend $10,000,000,000 and only have one door into a school and put an armed guard there. Well, then you find out that you've already, you know, doubled their security spend over the last 2 or 3 years. They actually had a person that may or may not have just kind of like stepped to the side or something to let them in. The police according to the AP showed up and stood around for 40 minutes before they were able to actually breach the school. You know, so much so that the quote in the AP article was that there was a parent that tried to get other parents to for for 40 minutes they were standing there. You know, in California, you have, you know, very restrictive measures But we've had, you know, in San Bernardino and other places, we've had mass shootings here as well because the guns can just get transported across state lines, and there's there's no real way to stop this. The NRA, I find out, just so if you guys are interested, Mitt Romney took $13,600,000 from the NRA. This is the moral fingerwagger of the Republican side who, you know, last time I checked is a multi centi millionaire, but somehow still needs to take $13,000,000 from these folks. Rich Burr took 7,000,000. Chamath Palihapitiya (01:16:30): Roy Blunt, Jason Calacanis (01:16:31): 4,500,000. Chamath Palihapitiya (01:16:33): Tom Tillis, 4,400,000. Corey Gardner, 4,000,000. Marco Rubio, Jason Calacanis (01:16:36): 3,300,000. Chamath Palihapitiya (01:16:38): There's no effective counter lobby that says How about we have a more moderate and restrained pro gun set of rights and field candidates on the left and the right? That could, Jason, find this middle ground. And so, you know, we're in this 2 or 3 day period, it seems like, where folks will get extreme and then nothing will happen. Here's one thing that I think we can all agree as well. If you look at the underlying family situation of all of these mass shooters. There is a really disturbing theme that I think is worth putting out there. These are all universally young men. eighteen, nineteen odd years old. They come from broken families, this individual Salvator Ramos father was absent. Again, according to the times in the Wall Street Journal article I read, mother intermittent drug use issues lived with the grandmother. Jason Calacanis (01:17:36): bullied. Chamath Palihapitiya (01:17:37): They're unemployed, barely graduated, if graduated at all in high school. They harbored these deep resentments towards women or minority groups. They then project a lot of their frustration. They were bullied potentially in high school growing up. and all of the they were posting all kinds of very challenging content. You know, apparently, this kid had a one TikTok of of where he sat in a car with a dead cat in a paper bag. You know, he would post on Instagram of assault rifles and nothing happens. So I just think that we have to acknowledge that there's a complete failure of our politicians. And at this point, I think they should all be replaced, writ large every single one. Nobody has added value to this solution. Nobody has really tried to figure this out. But then also, like, parents have to do something incrementally more from the perspective of the community because these kids are going to school with our kids. Jason Calacanis (01:18:39): And the red flags are there. The red flags are there. Chamath Palihapitiya (01:18:41): So just one last thing. And I said I said, Brad, I said to my kids, When you interact with your friends, I just want you to understand when you're on social media and you encounter this content. I hope you're never, like, either scared or embarrassed or unsure enough to just show somebody when this stuff is happening so that you can let somebody with a little bit more maturity and judgment try to figure out what to do if anything at all. But these communities are completely failing these kids as well. Jason Calacanis (01:19:07): Brad, you have something. Brad Gerstner (01:19:08): I would say that Every fucking country on the planet has kids with mental health disorders. But not every country on the planet has kids getting shot up in schools, in supermarkets, in churches. That is a unique feature of the system that we except this system we created. Right? I'm not against guns. You guys know I took my kids to a shooting range last weekend. But the idea that we let, you know, assault weapons be sold in this country with no background checks that we let assault wipe rifles be sold in this country with no limits on magazine sizes. that you can just replace magazines. It's it's total insanity. Right? So I think this is a country that does a lot to self help, but we are not self helping here. After the assassination or attempt of Ronald Reagan, Amazingly, Republicans found their voice. And they said, let's have an assault ban on assault weapons or let's have a ban on assault weapons that expired. And we as a I asked my analyst, I said plot the number of shootings since the expiration of that ban. And it's terrifying. Jason Calacanis (01:20:35): Yeah. It's obvious. Brad Gerstner (01:20:36): And it should be something that we just like don't accept. Like the middle ground, Jason, I saw what you tweeted. There is an obvious middle ground. Jason Calacanis (01:20:44): Sorry about this. Brad Gerstner (01:20:44): Yeah. There's about whether it's background checks that Steve Kerr, I mean, is he's gone viral. Yeah. Feeling the same way we all feel. but they're also technical solutions. Why the hell do we let assault weapons? Why why not put a scrambling device on these weapons so that you can't fire them in schools and churches. If somebody says that's a breach of their second amendment rights, I'm sorry. I'm also not gonna allow you to drive into the school yard with nuclear material. There are some rational limits we can agree to. So I don't think this is a partisan thing at this point in time. Nobody's saying, you know, ban all guns. Right? In fact, I I I think there's a Palihapitiya among gun owners. They too want reasonable limitations on these things which are killing machines, not hunting machines. Jason Calacanis (01:21:37): Sex. Any thoughts on this? David Sacks (01:21:40): Yeah. I mean, I I so I think if we're looking for solutions, I think these red flag laws and building on them is is the way to go. You know, the the The problem with with background checks, and and I'm not against them. I mean, you know, I've I've gone through background checks to get, you know, my guns, and I'm in favor of them. But they wouldn't have done anything to stop the buffalo shooter. They didn't. I mean, you know, the buffalo shooter was in New York. They've got the toughest gun control. laws in the nation. The but background check didn't stop him from getting the gun because he bought it lawfully. It didn't have a criminal record. So you know, it doesn't that by itself isn't gonna do it. So I think where these red flag laws are useful is that we've seen with these all these school shooters They have a similar kind of profile. Right? They are disturbed young men, like, in their who are still school age eighteen nineteen. around the twenties. Exactly. Now this shooter in Uvalde. I mean, there are reports coming out now that he had been cutting his face. that he had aimed a BB gun at people, so he was clearly ideating towards this idea of shooting people. He had posted violent fantasies, basically, of mass shootings on social media. And he told his classmates he wanted to kill him. Jason Calacanis (01:22:55): I mean -- There's almost always a call for help here. David Sacks (01:22:58): And it's same with the buffalo shooting. I mean, the people who these, like, psychos go to school with are the least surprise. They all know. because these people have been warning. They've been saying that they're gonna do it. So I think we have this problem of we've got these young psychotic people. And I think the reason why it happens young is when somehow they get into adulthood, whatever this mental illness they've got basically takes hold. and they snap, but they become psychotic. And it doesn't take long for them to act on those fan those violent fantasies. So the simple solution here, I think, is to prevent those people from getting guns. You know? If you threaten mass violence, you shouldn't be able to get a gun. And I, you know, I personally don't think that's a a bridge most second amendment rights because, look, felons can't get guns either. If you commit a felony, you can't get a gun. These people haven't committed a felony yet, but I don't wanna wait until they do. If they're if they have these kinds of red flags against them, then there should be a way to file to basically get a protective order, preventative. Jason Calacanis (01:24:02): We don't we don't let twelve year old drive cars. We don't let them drink beer because we don't want twelve year olds drunk driving. Right? And then at some point, there's a licensing that occurs. I think a lot of this is framing. I think this is once again very analogous to this abortion issue where most people are pro choice and want restrictions on abortion where they don't occur after a certain number of weeks just like Europe got to. And I was just, you know, ideating on this. And I think replacing the NRA to your point, Shamoff, they have funded people. They've become a key funding source for a lot of folks, and they've they've been overfunded themselves. What if we had Americans for reasonable gun safety? and we have this organization raise a ton of money, and they just outbid the NRA for Republicans and for people who are against background checks. And we just a good question. Chamath Palihapitiya (01:24:51): But, look, Mike Bloomberg started every town for gun control after Newtown, and it did it hasn't really had I think the impact that that we wanted. I mean Well, Jason Calacanis (01:25:00): I think part of it is, chief, what you said so let me just give you my my little 44 bullet points here and have you react. it you you are right that people are absoluteists. No abortion. You know, no restrictions. And no guns or no restrictions on guns. background checks, we all agree on, make them more intense, and make them proportional to the caliber of the weapon. If you want one of these weapons, why don't we have you go through a training course? So for a pistol, you've got a 2 hour training course for an AR 15 or something that's more powerful. How about an 8 hour course? A 4 hour course then you could actually see the red flags emerge. And would somebody who has this red flag issue go through that, the red flag law should be national and they should be very strong. And then finally, What if we introduced insurance for certain classes of weapons? Not all. If you wanna get a rifle, you know, to go hunting or a pistol for self defense, maybe you don't need to have insurance. or maybe if you have one, you don't need to have insurance. But once you get to high caliber, once you get to having clips that are of certain size, if we just had some basic insurance because that would force then somebody to underwrite the danger of that weapon? David Sacks (01:26:04): Jacob, I mean, look. The the trick here is to figure out a system that has the least possible impact on law abiding Americans. There's maybe a few 1000 of these mentally highly, mentally disturbed young men. But like I said, their schools know who they are. Yeah. Right? And what we need is a process where, you know, that doesn't turn into the no fly list, where all of a sudden everybody's on it. Or Jason Calacanis (01:26:31): -- Which training or trends be -- -- David Sacks (01:26:33): or content moderation. or something like that. This is the look. This is what the NRA is afraid of is that you create a red flag process, and all of a sudden, thousands or millions of people could be on Right? So you need a -- Right. Chamath Palihapitiya (01:26:44): But that's not true because you had you had this kid who could have been put on it in in New York. He wasn't. David Sacks (01:26:49): Right. No. No. No. Look. think we need to I think we need to figure out how do you create due process around this. And I I think I think if a school, they know. I mean, you get multiple affidavits from a teacher. They should be put on the list. Jason Calacanis (01:27:01): Yeah. School is a no brainer. -- police officer, no brainer. Yeah. Chamath Palihapitiya (01:27:04): The problem isn't that these these kids aren't identifiable because as you say, David, they're hiding in plain sight in these schools. The problem is that there is no mechanism or incentive for any of these kids, parents, educators, teachers, community members to do something about it because they don't know what that something is. And this is where these kids are left to fester fester fester and then the and it boils over, and it's all of us that have to pay A collective price. David, can you respond to him? Jason Calacanis (01:27:31): -- David Sacks (01:27:32): worse than that, Chamath, because in the buffalo case, the the buffalo shooter was referred to for psychiatric evaluation because they thought he did have mental illness. And then they released him Chamath Palihapitiya (01:27:42): after a Jason Calacanis (01:27:42): week and then he got the gun. And then he Chamath Palihapitiya (01:27:43): got the gun. And then David Sacks (01:27:43): he got the gun. Jason Calacanis (01:27:44): -- Chamath Palihapitiya (01:27:44): got the gun. David Sacks (01:27:44): he should have been put on a red flag list, and that should have been the end of it. Jason Calacanis (01:27:48): And some of the legal -- -- database, like, in the federal database, which they're the NRA fights too. Yeah. Chamath Palihapitiya (01:27:52): I also wanna say something about these technology companies. There is an explicit decision that technology companies can make to be able to review content from certain kinds of accounts and start to build a cluster and a distribution of risk. It is possible I help build 1 for one of these companies, so don't tell me it's not. and I I will not tolerate some nontechnical person telling me it's not possible. It is absolutely possible. And these technology companies should have a mechanism to be able to say, you know what? Here are these 1000 accounts, David, in the United States, of these 1000 individuals that, you know, are sort of getting to a red line here -- Yeah. -- inclined, whatever. David Sacks (01:28:35): But it's it's also it's it's not it's not just gonna be what they post on social media. It's although in both cases, Buffalo and Uvalde, they both posted that they were gonna do what they did. But in addition to that, No. Chamath Palihapitiya (01:28:47): It's the trill of breadcrumbs Jason Calacanis (01:28:49): needed up here. What he's saying is an early warning system. An early warning system is a great idea. David Sacks (01:28:53): With Uvalde, the the cop were called out multiple times for violent disturbances. You know? And you combine that with what he's telling people in the schools. and what he's posting on social media. You it's there there's an identifiable profile here. It's not one red flag. It's multiple red flags. This is Chamath Palihapitiya (01:29:10): where this is where these corporate social media companies need to take off all of this for profit focus that's extreme at this point, be willing to degrade margins to hire the tens of thousands of people to manually review content. Okay. There should be a mechanism that allows these folks to plug into some system that law enforcement can use. There is an early warning system that can be built -- Blair? Great idea. Human review before this stuff gets out of control, David, to control people's individual civil liberties. Okay? But that is a big step forward from where we are today, which is nothing. There is zero leadership in America Jason Calacanis (01:29:51): onto -- -- just ask David one question. David, you you you correctly pointed out. I think it's astute that we we can't penalize people who are legally getting guns or create too much friction for them. I understand that. would you consider training or insurance and just take each one individually for high capacity these deadly assault rifles? Would you consider what would you consider each of those in terms of realistic, you know, having some basic training, a 4 hour training class? David Sacks (01:30:18): I mean -- Like like Jason Calacanis (01:30:19): you do for a each food do for driving cars? Should we have that first assault rifles? And then should insurance be required? David Sacks (01:30:24): What training does is prevent accidental shootings. Okay? That's Jason Calacanis (01:30:28): Great. David Sacks (01:30:29): I'm not against training. I love training. I do training. But but look. Jason Calacanis (01:30:32): What Should be mandatory. David Sacks (01:30:33): What training prevents is is Exonal shootings. Buffalo and Uvalde and all these school shootings, they're not accidental shootings. They're going out there and killing as many people as possible, and they know how to use these weapons. I mean, the problem is is what their objectives are. So I don't think training solves it. Jason Calacanis (01:30:48): Well, let me ask you this. If you were in training for 4 hours and you're an instructor and you were trained to look for red flags and it predance and friction from this person going and buying it and doing the next day. Wouldn't that help? And then going to have to buy insurance? David Sacks (01:31:00): The buffalo shooter case this this grocery store for, 4 months. I mean, they are patient. They are methodical in how they go about Jason Calacanis (01:31:06): -- So they would have caused you David Sacks (01:31:07): the training. Jason Calacanis (01:31:08): -- David Sacks (01:31:08): it. I think so. The but but we don't even necessarily need that filtered, Jacob, because I'm just telling you that the profiles of these psychos, it's so dramatic when you go back and look. I mean, again, multiple red flags. They're killing animals. Chamath Palihapitiya (01:31:22): I just don't David Sacks (01:31:22): They're printing BB guns at humans. They've been the cops have been called out on them. They're posting on social media. Their classmates are all terrified of Their own families are terrified of them. Jason Calacanis (01:31:31): Now do we have -- David Sacks (01:31:32): We just need to basically we need an incentive to Shamal's point for schools, I think, to create these profiles and file the right forms, the affidavits in the database. Jason Calacanis (01:31:41): Now now do insurance for high high capacity assault rifles. Would you be in favor of do you think it's a a viable solution? -- David Sacks (01:31:47): that do? I don't understand what that does. Jason Calacanis (01:31:49): Well, it means you would have to apply and say, hey. I'm Jason Calacanis. I'm eighteen years old. I'm in this school, I would like to apply to own an ARR 15. And then some insurance company would say, okay. You're eighteen years old. You're a male. You live in Texas. your bill's gonna be $600 a year for this gun. Oh, okay. You're a forty five year old male in Wyoming, your bill's gonna be a $100 for this because we've done some actuary tables on the actual risk. Would you be in favor of insurance? David Sacks (01:32:13): I think the key to solving this problem is to create the minimum disruption on law abiding Americans Jason Calacanis (01:32:18): -- Okay. -- David Sacks (01:32:19): tens of millions of them who like Jason Calacanis (01:32:20): their guns. insurance? I David Sacks (01:32:22): look. I don't know what that would do exactly. I wanna stop that basically that I think what are a relatively small number of psychos, young psychos, maybe there's only a few 100 or a few thousand sort of candidates in the entire country. I I don't want I don't wanna wait for them to become felons to to basically prevent the And Chamath Palihapitiya (01:32:42): by the way, there's a there's there's a bunch of study about this. There's been a lot of social science studies about the individuals that own guns legally and those individuals that sort of break and commit these crimes. And whether we want to admit it or not, there is a definable archetype. It starts with gender, then there's socioeconomic conditions, then there's, you know, home situation. conditions. Yeah. These are knowable things. These can be built into a combination of software and human review and we need to create incentives so that these kids can get some kind of help or intervention. And the worst case is we kind of, you know, do something with them in a way that helps us protect everybody else because Jason Calacanis (01:33:29): -- Brad Gerstner (01:33:30): Sorry to interrupt. We do this every day. We turned this country on its head after September 11th. We started profiling everybody, And to Sakses like minimum standard of disrupting other people's lives, the Department of Homeland Security disrupted everybody's lives. Take off your shoes. Go through the security before you get on a plane. We changed everything in months because we said we're under attack. But there, we're under attack by a foreign presence, a foreign terrorist presence. Here, we're under attack by sick kids who need help. Okay? But we need to disrupt our lives. We need to change things. right, in order to save these innocent kids who are being shot up in schools where they're supposed to be safe. And so I agree. Let's profile them. Let's get these companies doing their jobs helping us identify these kids, get these kids help. but we need to raise the volume and raise the urgency in DC the way we did after September 11 2001 that this is a national crisis. as opposed to going back to the normal right distribution here. Chamath Palihapitiya (01:34:44): By the way, after 2011, I was on a no fly list. And I I think I've told you guys this story before, but I would have the triple s on my boarding pass for years until about Jason Calacanis (01:34:55): 2007 Chamath Palihapitiya (01:34:56): or 2008. constantly profiled, you know, put in the back room the whole nine yards. But in the end, you know, did did it make me feel Kind of, like, less than a lot of other people. Yes. But did I do it? Because I think it was the on the broad strokes, the right thing to do. Yeah. Jason Calacanis (01:35:15): So you would take a little friction. Chamath Palihapitiya (01:35:17): And so, you know, if I needed to basically turn over all my kids, you know, social media or there was a mechanism where, you know, As much as we try to teach our kids, you know, all of these other things that that allow us to make a socially progressive society, If the guidance counselor also sat around and asked these kids anonymously, hey. Is there anybody in your class you think needs your help? Why don't you do that too? There's there is friction because that that I think we're all willing to take because the counterfactual is too horrible to bear. And this is an example of one of those things. Jason Calacanis (01:35:52): Would you be in favor of insurance and training Tremont? I don't think -- -- rifles. Chamath Palihapitiya (01:35:57): I don't I I think these are good ideas. Jason Calacanis (01:36:00): Okay. Chamath Palihapitiya (01:36:00): I don't think they will curb the issue. I do think what David said is right. There's a level of evil or mental illness in these people that cause them to be incredibly methodical. And I think that we shouldn't underestimate Jason Calacanis (01:36:18): So they would get through the insurance screen. They get through the training screen. Chamath Palihapitiya (01:36:20): Well, I think I think, you know, look, there's a lot of people that drive cars without insurance. Right? It's You can drive along Jason Calacanis (01:36:25): a lot, and you can be insured and Chamath Palihapitiya (01:36:27): you know, so I think that those are good ideas, Jason. Where it will falter is we have a political system where the primaries for both sides are dictated by the luneast Jason Calacanis (01:36:42): 10% Chamath Palihapitiya (01:36:42): of the left and the right. Jason Calacanis (01:36:43): Yeah. We got to vote in our primaries. Chamath Palihapitiya (01:36:45): It makes practical gun control just like abortion an impossible task unless we completely turn our political class upside down on both sides of the aisle. Okay? So I think these are good ideas But in the meantime, I think parents have to do something because nobody's coming to our aid, and I think this the most important thing we can do is just say the truth out loud. there is an identifiable archetype of Jason Calacanis (01:37:11): these -- We should profile these kids. We should profile them. There's no doubt there. David Sacks (01:37:15): The politicians who are making this about lawful gun ownership. They're not helping. They're they're actually hurting because you're activating millions of Americans who lawfully owned guns and believe in the 2nd amendment to oppose reasonable measures like like I'm saying, hyper targeted measures like these red flag laws. Right? And so if we make the whole issue about gun ownership in general, you're not gonna get any reasonable changes. Chamath Palihapitiya (01:37:43): You might get my Jason Calacanis (01:37:43): VA opposite. The sales go up. The sales go up every time we have this happen. Chamath Palihapitiya (01:37:47): My kids, and I'm sure your kids as well, have now gone through multiple active shooter drills in our school. Yep. But at no point have my kids been sat down and taught some of the warning signs of their fellow classmates and a mechanism to raise their hand and say, you know what? This is actually really worrisome here. They don't have that training. They do have training on how to lock the door, how to flip a desk, how to go into a closet, which is a horrible thing to have to teach a child. But if we're already there, I just say take the extra step and teach the kids because they're living on Instagram and TikTok every day They see their friends and their, you know, classmates every day, and we need to start figuring out an early warning system because What is happening continues to happen? These politicians are ineffective. They do nothing to help parents. David Sacks (01:38:38): Right. It's true. I I I like I like the early warning system because you're right. Like, they're so so first of all, the the red flag laws are something that's done on a state by state basis. Something like 19 states have red flag laws, including New York, but it didn't work in New York at the Buffalo shooter because no Jason Calacanis (01:38:52): one -- -- federal. -- David Sacks (01:38:53): no one used the system. No. I don't think it has to be federal. I just think that people actually I think people just have to use this system. So you had in the buffalo shooter. The kid was referred for psychiatric treatment, and they still didn't red flag him. That's just bonkers. So people have to the school systems have to learn how to use these laws. We and so to Tomav's point, We need an early warning system. We need that translating into red flags that go on someone's record, and then they can't buy guns after that. It's it's really simple. At least till maybe they turn 30 or something, I mean, it's it's the the the the problem is that about half the states don't have this mechanism. and then the half that do aren't using it effectively enough. Jason Calacanis (01:39:32): I just shared with you guys a chart. The the the the most pernicious part of this debate I think this is a pretty solid debate we had here, so thank you to the gentleman for all participating in it. Is every time we have one of these? Gun sale spike. If you look at the chart in the New York Times, I just shared to Nick, you can you can share it on the YouTube channel. 2,000,000 guns in the January after Obama's reelection, the Sandy Hook shooting. We hit peak guns. Obviously, during coronavirus, people got scared and bought a bunch of guns. After September 11th, they bought a lot of guns. But these moments are sadly going to drive AR 15 set because people are here. David Sacks (01:40:04): because all the conversation is about banning guns. And what we should be doing is preventing psychos from getting guns. Known psychos -- -- controls. Jason Calacanis (01:40:12): -- reasonable gun control. -- Chamath Palihapitiya (01:40:14): capita increased by 50% in the last 10 years. The last 10 years, have been the safest 10 years in our lifetime. Yet, for some reason, people feel the need to arm themselves more and more and more. Now, I, as an immigrant into this country, accept the rules of the country that I come to. There's a constitution. There's a second amendment. I respect people's rights to own gun. I've held a gun twice once in my life, I had a panic attack and I had to put it down. I had to so it's not for me. Okay? But I respect your right to have them. I think that we need to teach people how to think about the precursors before they get the hold of these things. Jason Calacanis (01:40:53): Really sadly, what's killing our kids? It turns out I just put a I just put the tweet in the chat for you guys to take a look at New England Journal of Medicine. Massive uptick. Now guns, deaths, combined. It's all gun deaths, includes gangs, includes suicide, and includes mass shootings. But firearm related deaths and injuries now exceeds motor vehicle crashes and so does opioids. So we have a crisis after -- Chamath Palihapitiya (01:41:21): At New England Journal of Medicine, just to be very honest, It's no it's not necessarily only about kids because they included eighteen and nineteen year olds in that job. Sure. So those are adults. Jason Calacanis (01:41:33): Okay. Young adults and kids. And so drug overdoses and firearm related are spiking massively Chamath Palihapitiya (01:41:40): This is my point about having this debate. This is being armed by the by the left. And then the right says, well, hold on. It doesn't include 18 and then everybody gets caught in that whole Jason Calacanis (01:41:51): -- Absolutely. The shooting these shootings are being done by people 18, 19, but putting all this aside, I I just wanna make a bigger point about our children in the last 2 years with this COVID, the spike occurred during COVID of drug overdoses and firearms. So there's a lot of suicide in here as well. So we should think holistically about you know, how kids are dying. David Sacks (01:42:09): Well, yeah. And one other thing to that, which is we have plenty of gun laws on the books that aren't enforced right now. In San Francisco, you can't get Chase of Hudin to enforce a gun charge. He -- Yeah. Jason Calacanis (01:42:19): -- David Sacks (01:42:20): a a young kid named Kelvin Chu got killed because his his killer, a a guy named Zion Young, he was arrested weeks before on gun charges, and Jason Boudin just let him go. And in LA with Gas Ghosn, he's dropped all gun enhancements to charges. Jason Calacanis (01:42:37): The whole the whole thing David Sacks (01:42:38): is in confidence across the board. prosecutors who aren't even puting the gun laws we got on the books. That's gotta change. Jason Calacanis (01:42:44): And and Ted Cruz thinks this is about the backdoor being unlocked. I mean, the the the stupidity across the board left to right Everybody in between the incompetence is stunning, and it has to stop. David Sacks (01:42:54): Yeah. But, Jake, look. I mean, if you make this about people's lawful gun owner They're gonna oppose what you wanna do. We gotta make it Well, there has to be Jason Calacanis (01:43:01): some incremental controls. Don't you agree? There has to be some. David Sacks (01:43:04): The control the controls are basically preventing known psychos from getting weapons. Jason Calacanis (01:43:10): Okay. So you wanna focus on that. But to be clear, no additional gun control for you. Background checks or anything? Or did you David Sacks (01:43:15): just force out? Background checks. Jason Calacanis (01:43:17): or not? I just wanna be clear. Red flag laws and background checks are good. Brad Gerstner (01:43:20): I know we have to wrap. I think the consensus was around Red Flag. There's a known profile, Chamath articulated it well. David, I don't think we helped the cause to build the consensus by calling a sick sixteen year old kids struggling with self identity a psycho. And because they're they're kids who live all around us, this isn't about lecture. This is about building consensus. I think we can profile those folks. They clearly have psychotic challenges Right? But there is intervention to help these kids. I know a lot of kids who frankly had challenges during high school who turned out to be great great human beings. So these are kids at a very vulnerable age. We should profile them within the community. Social networks should help us identify these folks and we should get him help. And I think you can build a reasonable consensus around that. David Sacks (01:44:14): Yeah. I I agree just to to explain myself I'm by when I use the word psycho, I'm referring to the the ones who actually became shooters. You know, I'm referring to those ones you're right that if we're talking about people who haven't done anything yet who are mentally ill, yes, we should get them help. So I'm not trying Jason Calacanis (01:44:30): to describe this. You know, this is and this goes health care as well. We should have National Mental Health Services available freely to every American. We are in a mental health crisis between COVID and just modern life. And suicide is becoming the number one cause of death. Sadly, for many at demographics now including our kids. And so while we do a great job making cars safer and creating lifesaving drugs and and emergency rooms and and medical attention has gotten unbelievable, and we're making all these, you know, great advances. Mental health, we're not making the advances we need. Chamath Palihapitiya (01:45:07): I'm so, so, so sorry to all those families. Yeah. Jason Calacanis (01:45:10): It this is just hard Chamath Palihapitiya (01:45:11): right now. Jason Calacanis (01:45:11): -- about it. Chamath Palihapitiya (01:45:12): I get emotional. Jason Calacanis (01:45:13): Yeah. It's a very hard one. Chamath Palihapitiya (01:45:15): But I'm just so sorry for all those people dealing with -- It's heartbreaking. Jason Calacanis (01:45:18): Yeah. Yeah. Heartbreaking. Let let's take some action here. Enough with the thoughts and prayers. Let's actually come up with a fucking plan and just I've been on it. Chamath Palihapitiya (01:45:25): compiled for years. I put up with it. Sorry for the indignity. It's okay. I said, my honest perspective is There's a clustering and a technology component to this that can meaningfully help, and we need to start Knowing that there are these patterns, we need to say the words out loud. There are patterns for these school shooters, for these mass shooters, Those patterns can be written down. They have been written down, and we need to do something about it. They need to be codified in some form of algorithms And if we've already taught our kids how to duck and hide, I think we can also teach our kids how to raise their hand well before they need to learn to duck and hide. Jason Calacanis (01:46:06): Identify who's being bullied. and into your point's mouth about being profiled? If we profile somebody and they're not a mass shooter candidate, but they're just depressed, or they're being bullied? Well, that's that they they deserve help as well. So there's no downside to profiling somebody who's struggling. You're profiling them with the intent of getting them help. So let's just profile the kids who are struggling. Profile them for good. And you you'll catch some Chamath Palihapitiya (01:46:30): know who's struggling a priority. My point is that you actually know -- They're Jason Calacanis (01:46:33): being bullied. They're gonna probably be struggling. I mean, you know the kid's getting old. -- Chamath Palihapitiya (01:46:37): psychographic and demographic profiles. of the 99% of the cases that we've seen over the last 2 decades. And all I'm encouraging politicians and technology companies to do is come together, create some standard. You know? What's the downside? Jason Calacanis (01:46:53): What's the downside? Chamath Palihapitiya (01:46:54): None. 0. have mechanisms like this by the way where these technology companies already do these kinds of profiles on other kinds of situations You know, typically, you need to fizzle request and other kinds of, like, legal interventions in order to unlock this data, but it's not as if this is, you know, antithetical to what they do in other situations. Jason Calacanis (01:47:13): certainly do it for fraud in advertising. Chamath Palihapitiya (01:47:15): And it's not as if the technological prowess of these companies cannot be applied to a K means clustering of this issue. Okay? Just to use a simple machine learning context. Like, this is Jason Calacanis (01:47:24): -- They put a lot of effort into finding click fraud. Right? This is gonna be very similar. Chamath Palihapitiya (01:47:29): problem. Yeah. Brad Gerstner (01:47:30): We don't allow angry young men who've been emailing with the Middle East. who are citizens of this country who've been posting online that they want to run a plane into a building to go get their pilot's license. Right? We profiled them after September 11th then we said no mass. And all Chamath is saying is use your fucking common sense. identify these folks that we know are struggling to need help Jason Calacanis (01:47:56): and bring them on Brad Gerstner (01:47:57): a list and say they can't buy an assault weapon. Jason Calacanis (01:48:00): Period. Yeah. Alright, everybody. It's time to go. Thank you to Brad Carcner for sitting in. Thanks again to the dictator Chmuff Pali Habatita, and Thanks, Saxx. And thanks to everybody who spoke at the All In Summit. We've been releasing all of the videos. Friedberg will be back next week as well the Hammer Lucky explosive episodes. So look for a great week of all in content next week. We'll see you all next time. Bye bye. David Sacks (01:48:29): We'll let your winter Friedberg. Jason Calacanis (01:48:32): Rainman, David Sachs. David Sacks (01:48:37): We open source it to the fans, and they've Jason Calacanis (01:48:39): just gone crazy with it. Love you at high speed of besties are my dog taking it out this year driveway. Chamath Palihapitiya (01:48:59): We should all just get a room and just have one think huge already because their office is just it's like it's like sexual tension that we just need to release ourselves. Jason Calacanis (01:49:08): What? You're the big bee. What? David Sacks (01:49:10): Your feet. Jason Calacanis (01:49:12): What? Where did you get Murphy's artifact? I'm doing all.