SBF 的加密纾困、Zendesk 百亿美元卖身与 AlphaFold 新进展

Chamath Palihapitiya (00:00:00): Let's go Jason. Start. Let's go. Do you have any intros? Let's go. Let's go. Let's go. Jason Calacanis (00:00:03): Alright. If you want intros. David Sacks (00:00:05): We're not willing to pay for them, so don't even go there. David Friedberg (00:00:09): Saks is awake. Jason Calacanis (00:00:10): Alright. Well, then we'll start with you, Saks. David Sacks (00:00:12): If you wanna do your job, you'll do the intros. And if you wanna If you wanna slow roll your effort because you think you're negotiating with us. Don't. We don't give a shit. Jason Calacanis (00:00:22): Listen. I'm doing all the projects outside of town. Chamath Palihapitiya (00:00:23): -- David Sacks (00:00:23): care about your intros? do a bad job. We don't care. We're so just Chamath Palihapitiya (00:00:29): waiting in the wings all we got. Yeah. Jason Calacanis (00:00:31): Well, then I'll just do three Saxon shows in a row. Chamath Palihapitiya (00:00:34): Oh my god. It's so true. Do do a couple bad jobs so that we can boot you Jason Calacanis (00:00:37): off the show. Chamath Palihapitiya (00:00:38): Oh, that'll be so quick. Alright. Jason Calacanis (00:00:39): Here we go. to let your winter ride. Rainman, David Sachs. David Sacks (00:00:49): We open Jason Calacanis (00:00:52): All in Summit, I packed the joint, but Saks won't give me an extra point. His crypto holdings, they can't find a floor. Gonna have him flying commercial for the first time since Chamath Palihapitiya (00:01:07): 2004. Jason Calacanis (00:01:08): Welcome David Sachs back to the program, the rain man. David Sacks (00:01:11): Good to be here. Jason Calacanis (00:01:12): Now Friedberg, I never wanted to see him go, but you gotta show for work, you can't do every other show. The sultan of science, he's certainly not a fad. And, again, did you see those ratings with Brad? Welcome back to something of science. David Friedberg (00:01:26): By the way, our show beat Brad's ratings. So thank you very much, Jake Howe. Jason Calacanis (00:01:30): Okay. Well, a little drama always builds a little audience. Okay. Here we go. Shamath -- A David Friedberg (00:01:34): little healthy competition. Well, Shamath is Jason Calacanis (00:01:36): in Italy living a life so grand, his next back, a luxury wine, and sweater brand. This market is leaving him in a day, so he's been tipsy in the Mediterranean for the past 10 days. Welcome back to the dictator. Chamath Palihapitiya (00:01:47): Thank you. Thank you. Jason Calacanis (00:01:49): I just I put them on stun. I didn't wanna do any kill shots there. since everybody's a little on edge, including the audience. The audience had a lot to say about whether we cover A lot of the controversial topics, Roe V Way, January 6th, and Ukraine, all I did a bunch of surveys 50% of people want us to talk about it, Chamath Palihapitiya (00:02:09): 50% Jason Calacanis (00:02:10): don't. So we'll see which ones we get to. David Friedberg (00:02:13): Yeah. Do you think we should be surveying the audience to them what they want us to talk about because when we started the show, we just talked about stuff that we thought was interesting. Jason Calacanis (00:02:21): Sure. David Friedberg (00:02:21): And people happen to look like it and listen and tune in for it. If you end up asking the audience what they want, don't you end up becoming like a Fox News or like any other kind of media company where you just ultimately use the feedback loop to drive Jason Calacanis (00:02:34): Yeah. I mean, I wouldn't every week of the show, I will tweet, like, hey. Anything you want on the docket because sometimes people have good ideas. But, yeah, certainly, you shouldn't base it on, like, a survey. No. I think we Chamath Palihapitiya (00:02:45): -- Jason Calacanis (00:02:45): It was just like a way to get some feedback. David Friedberg (00:02:47): Yeah. We were just yeah. That's how we started was we were just kinda being intellectually honest with each other in is the best stuff we're interested in, and it and it worked. And if people don't like it, they don't like it. I mean, I mean, we could Chamath Palihapitiya (00:02:57): -- Jason Calacanis (00:02:57): The the big controversial thing. Chamath Palihapitiya (00:02:58): -- David Friedberg (00:02:58): like a like a vote for your topics, and that's what we follow. Jason Calacanis (00:03:01): Definitely not. should I think we'll all agree on that. I think just there is an ongoing debate amongst the audience of what percentage of this show should be politics? And when should we talk about politics? And are we doing too much politics. And so -- I think that's hard. -- start with markets. David Friedberg (00:03:13): Is let me ask you one more question. Do you think our objective should be to grow the audience, or should our objective to be talking about the things we wanna talk Jason Calacanis (00:03:19): What do you think? I mean, David Friedberg (00:03:20): what do you think, Saks? David Sacks (00:03:21): Yeah. I don't think it's a good idea to pull the audience about what you wanna talk about. I don't know. David Friedberg (00:03:25): Is the objective to grow the audience? David Sacks (00:03:27): Yeah. Well, I think it's good to have an audience. Otherwise, what are we doing? But Yeah. But look, what the audience showed is that half and wanted to talk about those topics roughly and half didn't. I suspect that most topics are gonna be like that. You know? Unless there's Jason Calacanis (00:03:41): just some -- -- markets. And and people want like, I think Chamath Palihapitiya (00:03:43): 80, 90% Jason Calacanis (00:03:44): of people want here to talk about markets and startups. David Friedberg (00:03:46): Yes. Jason Calacanis (00:03:47): Like our course stuff. Right, David? David Friedberg (00:03:49): I'm just saying if your objective function is to maximize your audience, you're gonna end up making a TikTok video of people twerking or something. You know, it's not like the show. Jason Calacanis (00:03:57): Did you just volunteer to twerk on the show? David Friedberg (00:03:58): I'm not gonna do that now. Jason Calacanis (00:04:00): No. I think I I'm pretty sure it's Shamakwa. I have the video of Friedberg twirking at All In Summit anyway. David Friedberg (00:04:08): Hey. Jason Calacanis (00:04:09): Who? Alright. Let's get started with I think what's going on in crypto because people do wanna hear about that, and it's been quite stunning. A British Virgin Island Court ordered the liquidation of 3 arrows capital. 3ac after creditors sued the crypto hedge fund for failing to repay its debt. They had 3,000,000,000 in assets under management. They had a huge position in the now defunct stablecoin Terra and its token Luna, and they were trading on some of amount of margin, how much and what deposits they were using to do this. We will find out Now they're being forced to liquidated to be liquidated, 3 IC owed Voyager digital 650,000,000. could not pay it, which sent Voyage or stock down 60% and caused them to need to bail out from Sam Bankman Fried. which has led to SBF as he's known in the industry, bailing out a couple of other major folks in crypto. You provided a $200,000,000 credit line to void your digital. This is a Canadian crypto lender. They'll lend you money against your crypto. And FTX provided a $250,000,000 credit line to blockify FTX is obviously SBF's company. And according to rolling block 5 investors, the f t x credit line would wipe out all existing shareholders. So we're starting to see the really onerous term sheets to keep these things alive. This is of course in the face of an entire crypto collapse with many crypto coins seeing what we saw in growth stocks. Is this the end of crypto? Is it gonna rebound again? What are your thoughts? Chamont Sachs Friedberg who wants to start on crypto. Chamath Palihapitiya (00:05:50): Did you guys see the chart that I posted into the group chat that showed bitcoin at activity as a function of year and value. Nick, can you just put that up just so that we can look at that together? The crazy thing about this chart when you look at it is and it's pretty obvious is that we are collectively in one way, shape, or form basically trading up ever since 2018, really, with all the stimulus. Because if you look at you know, the mean price at Bitcoin. Of 2018, it was a nothing burger. You know? What we were talking about was, you know, a price that was sort of between a few $1000 to 3000. 10,000. 3000. You know? And then all of a sudden, when all of this stimulus money hit the market, look what happens. to it. But I think something unique also happened, which is that people really understood how to run these very complicated off chain Bitcoin ARPS. And I think we should explain what those are because those are what's behind the three arrows capital. It's behind I think Sam had this kind of oblique tweet that said, you know, some of these exchanges are actually already in solvent. They're already the walking dead. So the first thing to keep in mind is that, you know, this is a completely unregulated market. Right? There are no middlemaker market makers say that actually have reporting requirements to any regulatory authority. There aren't any clearing houses. There isn't a way for us to understand systemic risk as it builds in the crypto market. So what happened starting in 2018 2019 is people realized the following things were true. It's sort of what we talked about last week. You go and do some crazy round. You you know mark up some Phantom Equity in a company. That company then issues tokens. You then list the tokens not on, you know, a blockchain per se, obviously. But in a place where trades can happen off chain. Right? And there's a bunch of exchanges where these things happen off chain because it's one, you know, company and then they have a bunch of segregated subaccounts. Chamath Palihapitiya (00:07:55): And what happens is when these things initially get listed, retail goes crazy. The price goes up. Folks basically dump on retail. And you know you spin that loop as fast as you can and you can extract an enormous amount of money. Along the way, all these things like DeFi all of a sudden popped out of nowhere, and it's like, hey. You can earn 15, 16, 17, 18%, just deposit the bitcoin. And so folks would deposit Bitcoin. But then what would happen is, like, the places where those deposits were held would then need to obviously find places to make that 11, 12, or 13%. And so then they would go off chain to some other random person who is offering to pay them even more than that, and they try to arb the difference. But it all catches up with you because when something like a terra goes to 0, all the bitcoin that was used to basically, you know, run that DeFi process around Tara vanishes. You know? And then all of a sudden, you, the lender, are like, hey. Can I have my Bitcoin back? And the broker's like, well, actually, I don't have it. I lent it to somebody else. let me ask that someone else. And they're like, I'm sorry. I don't have it, but I have these Terra coins, you know, because I was running some arb, and now it went to 0. And that's essentially what we're seeing right now. So we have 2 big problems. And then I think we have a third that's kind of funny. The the first big problem is, like, Obviously, in the absence of any regulatory oversight, this stuff is gonna happen. Systemic risks are gonna build up. That's what we're facing right now is an enormous amount of systemic risk largely around Bitcoin. A bunch of this money, I think, has been essentially just vaporized. And so all these people that try to find their deposits, especially in custodial accounts in off chain brokers, may be SOL at some point. And I think that's just gonna be a huge shit show if that actually happens. Jason Calacanis (00:09:48): And to be clear, Chamath, they don't have the keys to their own Bitcoin. they gave money to a custodial account. They then did this lending, went out to get them to 15%, and they don't have any recourse here. They can't get there. Chamath Palihapitiya (00:10:03): Well, look at the slide real Bitcoin owners. -- Jason Calacanis (00:10:06): in a wallet and own the keys. Chamath Palihapitiya (00:10:08): Does anybody have recourse to this 3 arrows capital and all of this other interrelated parties that are now, you know, gone completely bankrupt because of this scam? The answer is absolutely not. So that that's the first problem. You have absolutely zero oversight, which means systemic risk has been built up in the system. The second thing is that exactly what you just said, Jason, is that people don't even understand chain of custody here. which is that you thought that you owned this Bitcoin, it turns out you actually may not actually own them at all. You thought that you were properly lending them out. You actually don't. there is no enforceable contract it turns out. And so I think that's gonna be an entire set of different legal issues that are now gonna come to the service because people who actually legitimately lent this stuff out. For example, like, if you short a stock and you go and borrow stock from any one of us, They're really tight guardrails. You know? If you wanted to go and put a credit derivatives swap on against debt, there's a central clearing house that makes sure you're not over levered. You know, you have to go and get audited by a bank to even get in a the kind of account that allows you to put these derivatives on. None of that was possible encrypted. And then the last thing which I think is kind of funny is that we've had to listen to every millennial and gen z market observer in crypto tout how this is not like boomers, and they turned out to be the same, same, same. I mean, this is the funniest thing of all. It's like of all of the times you've had to hear how it's so different, it turns out it is entirely the same, entirely entirely. in fact worse. Jason Calacanis (00:11:39): The custodian issue is definitely a major one. Sacks, what do you think is happening in crypto right now? David Sacks (00:11:44): The price is obviously going down a lot. I don't really have a new point of view on it. I mainly pissed off that s b f is trying to raise my taxes in California. Jason Calacanis (00:11:55): Explain that. David Sacks (00:11:56): Sam Bankman Friedberg runs FTX. And his company, he lives in the Bahamas. Okay. And there are probably reasons for that related to liability or taxes or something like that. David Friedberg (00:12:07): Can you tell us what what FDX does? David Sacks (00:12:08): They're like a Coinbase competitor, but they obviously think it's beneficial to be sure, not under US jurisdiction. David Friedberg (00:12:14): And they're very profitable. Right? David Sacks (00:12:16): Soup yeah. Supposedly, they're super profitable. I mean, he's worth like Chamath Palihapitiya (00:12:19): $215,000,000,000. David Sacks (00:12:21): This is my understanding. So he's been very successful at this. I don't know why they're in the Bahamas. I think either, they're in there for securities regulation reasons or for tax reasons, but it's one of those 2. In any event, he doesn't live in California. And yet, he is sponsoring a ballot initiative here that would add a 0.75 percent tax on incomes over 5,000,000 to finance a pandemic prevention institute of his design. He's doing this with Dustin Moskovitz, another billionaire. He doesn't know what to do with his money. He was may remember that Dustin was the guy funding, Jason Boudin. In any event, this would be this pandemic proventions to be governed by an unaccountable board. as opposed to something like the University of California. This is like them using the ballot initiative system to fund their pet philanthropic projects. I mean, there's really no need for this. I mean, first of all, this is Chamath Palihapitiya (00:13:15): -- Jason Calacanis (00:13:15): Sounds like something that should be done federally. David Sacks (00:13:17): Yeah. Exactly. It's well, first of all, it's looking in the rearview mirror in terms of like, a a budgetary priority. But even if you believe this was a priority, I don't know why it'd be the responsibility of California taxpayers exclusively. And even if it was, you'd wanna do it under, say, the UC system some sort of accountable board as opposed to having a report to, you know, Sam and Dustin. So it makes no sense. And this is really gonna hurt the California tax base because if you start raising taxes on you know, California millionaires, more of them are gonna leave the state, and then that tax revenue leaves the state. And so it actually hurts the general budget. And that's why, you know, California Teachers Association, for example, opposes this, is because they know that this is gonna have a negative impact on core services. Jason Calacanis (00:14:05): What is David Sacks (00:14:06): Well, what's offensive to me is I mean, so first of all, this is just a a stupid idea in, like, every possible way. But what is a guy who lives in the Bahamas doing funding ballot initiatives in California to raise our taxes, thereby worsening the California fiscal situation? to fund his pet philanthropic projects. If you're worth 10,000,000,000, just fund it on your own, you know. Do it through your family foundation. I don't know why you need to raise the taxes on all of us. Jason Calacanis (00:14:32): Yeah. That that's very bizarre. Yeah. I I think -- Why is he giving Chamath Palihapitiya (00:14:35): -- Well, the simple answer is because I think it helps curry favor with politicians that he needs for other things. But that's why that's why you would do it. That's why I would do it. David Sacks (00:14:44): This is incurring negative favor because, first of all, every millionaire in California should be up in arms over this. But even, I'd say, Chamath Palihapitiya (00:14:53): you'll live across -- -- game plan. David Sacks (00:14:55): Yeah. I mean but I'd say even liberal politicians and interest groups in California, like the the like, the teacher association don't want this because the money is not going to cause they support. And it will probably it will almost certainly drive down the state's tax base. Right? Because People on the margins are gonna leave. We already have the highest taxes in the nation. We're at what, like, Chamath Palihapitiya (00:15:19): 13.3% David Sacks (00:15:20): for the We Jason Calacanis (00:15:21): have a $100,000,000,000 surplus for a reason. All these IPOs, all of these venture capitalists, CEOs, and rank and file, tech workers are just paying massive amounts of taxier, and they're leaving. David Sacks (00:15:32): Right. But that's highly levered to capital gains. Right? And so last year, we had a boom market. We now know in hindsight that it was inflated. That was all driven by this liquidity bubble. So do you think that's gonna be the case this year? I think we're due for a huge budget shortfall next year because there's gonna be no capital Jason Calacanis (00:15:49): gains this year. -- to that 100,000,000,000 for sure. David Sacks (00:15:52): The California tax base is highly leveraged to this boom bust cycle. And driving the top earners out of the state is only gonna worsen that impact. So you know? But, again, I question why is a guy in the it's it'd be one thing if it was just Dustin doing it, I guess. But I don't understand why Sam's taking the lead when he's not even a California taxpayer. Chamath Palihapitiya (00:16:12): Because I think he's a very sophisticated player in not just crypto but frankly regulated and unregulated finance and look he I think he spends a lot of money in DC as well, and I think that he has a very thoughtful game plan. And then when you look at who his parents are, his parents are really, really smart, thoughtful people as well to law professors at Stanford. And so I suspect not knowing and having spoken to them that I think that there's a really specific strategy that these guys have around who they need to influence and what they care about and then willing to, as a pass through, fund those things in order to create the, you know, influence that he needs for the things that he cares about. And I suspect that it's that kind of worst trading, which is I think it's pretty typical in US politics The the question though is what will happen if FTX has to really talk about you know, everything that's actually happening in crypto. You know, I'm sure that FTX could do a lot to help understand a lot of this off chain activity some of the, you know, especially the stuff that's really in the gray, especially the stuff that's gonna come to light over the next few years is I mean, you you you have to understand, guys. Like, you know, we've torched $2,000,000,000,000, and it's not of institutional capital. You know? This is overwhelmingly retail capital. Jason Calacanis (00:17:36): All of this is going to inspire a lot of district attorneys and DOJ activity. The discovery is gonna be bonkers, and it's all gonna be regulated to the point of in which it kills a lot of the opportunity, I think. This is gonna become the most regulated space we David Sacks (00:17:53): don't know. I mean, I I if if the goal here was to carry favor, then I think Sam must think there's not gonna be a red wave in November. because I don't think Republican politicians are gonna look very favorably on a guy who's using his money to raise taxes in a state he doesn't even live. Jason Calacanis (00:18:10): Alright. Let let well, let's move back to the crypto piece. Chamath Palihapitiya (00:18:12): Let's move back to crypto. Yeah. Yeah. Let's move back Jason Calacanis (00:18:14): to the crypto piece here. Chamath Palihapitiya (00:18:14): That's the important thing. That's the bigger thing. Not a few $1,000,000 but vlogish. Jason Calacanis (00:18:19): At this point, with this many retail investors well, actually, let me let me start with this Friedberg. Is there a real technology here and how much of what we've just witnessed with this crypto collapse and the crypto boom bust cycle, how much is this based on what you would perceive as real technology that is going to advance the human species forward and how much of this was hype if you were to put a percentage on it? You know, 1,000,000,000,000 of dollars in assets, you know, created and then wiped out. How much of this was actually real technology? How much of it was complete or a waste of fucking time? and a grift. David Friedberg (00:18:52): I'm no crypto expert, and I've not been an investor in cryptocurrencies. Though I read the original Bitcoin white paper, makes sense. Bitcoin itself, to me, makes sense as a potential initially was kind of interesting as a potential alternative currency, but the transaction fees were very high. And so it never really seemed to make sense as a replacement for traditional financial networks. until those transaction fees drop below those of the traditional financial networks. And the the biggest concern I've always had, which I've mentioned multiple times on the show is that whenever anyone talks about a, quote, cryptocurrency, they talk about the price of it in dollars. And if it really is meant to be an alternative to the US dollar, Why are you talking about it in the price of US dollars and it's up and it's down relative to dollars? And that implies ultimately that the intention would be to transact back to US dollars, which implies that the intent is not to be a replacement for the US dollar, which was a lot of the early prognostication of Bitcoin was it was gonna be a replacement for the US dollar. It's gonna be an alternative to traditional monetary systems. But, ultimately, if you're just measuring this in dollars and it's up and it's down, everyone's freaking out every day about cryptos up, cryptos down, that means it really is more like a security. except securities definitionally are supposed to have a secured interest in some underlying set of assets, and there's no underlying asset. It's not actually a security because it doesn't provide you a security interest in anything. So it is effectively a bet on some systems of computers that are meant to facilitate some set of activities that, you know, ultimately, people really only seem to value in US dollars. So So I I don't know. I mean, like, where does it all go? David Friedberg (00:20:44): It seems like I mentioned at our predictions episode last year that all of these smaller things are gonna get blown out. these, quote, unquote, cryptocurrencies even though many of them don't really act like a currency. And, you know, maybe Bitcoin itself persists, and it seems to me like that's always gonna have good staying power as an observer. I'm not a participant. And, you know, anytime someone telling you something's in dollars and it's going going down and you're betting on whether it's gonna go up or go down and your intention is to transact back to dollars. You know? And and there's no one there's Chamath Palihapitiya (00:21:15): -- Jason Calacanis (00:21:16): These have been securities David Friedberg (00:21:17): the whole time. I mean, this is the problem Jason Calacanis (00:21:19): this is the problem I have with it. This has been, you know, a shadow securities stack that was created in parallel to the existing one with a lot of you know, oversight. And what did we think would happen if you created a a global casino with no rules? David Friedberg (00:21:35): Other securities have an underlying interest in something. This has an underlying Chamath Palihapitiya (00:21:38): -- David Friedberg (00:21:38): Sure. -- interest in some line on the blockchain of that particular network. Chamath Palihapitiya (00:21:43): And that's exact that's exactly what it has. David Friedberg (00:21:46): Yeah. It's a secured interest in a line of code in on a distributed Chamath Palihapitiya (00:21:49): -- No. It's a it's it has a secure a a Bitcoin has a legitimate non fungible entry in a blockchain that says it and only it represents that thing. And I think that that you know, is is, I guess, the the David Friedberg (00:22:04): the link. Chamath Palihapitiya (00:22:05): Some may call it tenuous, but I I mean, I tend to think at this point Bitcoin probably has to be regulated like a security even even if it is not and it's more of a commodity only because of the the volume and the sheer size of both the market and the -- Jason Calacanis (00:22:23): The potential fallout is the way you're saying it. Right? The potential fallout when things go off the rails is so great you kinda need to have some rails. Chamath Palihapitiya (00:22:30): Yeah. I mean I mean, like like again, as I've said, like, look. If you're a a a market participant trying to trade you know, very sophisticated, you know, derivatives of any kind, for example, in the credit markets. We have to go and we create these things called ISDA. They're called VISTA's. You know? And it's basically a kind of an account that allows us to go and, you know, take risk in some of these very esoteric markets, but the the underlying principle around that is a common set of parameters, a clearinghouse, the ability to monitor risk, None of those things exist here. And I think that's really what folks have to solve for now. Secondarily is what were all these kind of like shadow activities. You know? It just it you know, it it seemed too good to be true when you would hear, wow, this DeFi protocol will yield you 24%, and Jason Calacanis (00:23:19): you're just like, who was paying the 24 percent? Chamath Palihapitiya (00:23:21): It never made sense really, but then none of us really questioned it enough. Jason Calacanis (00:23:25): I I had people on this week at startups. I questioned it all the time, and they could never explain it to me. And then now the explanation was, well, we were giving you we were giving short term loans to other people who basically wanted a margin loan. You know, they wanna they don't want they wanna hodle their Bitcoin, but that was only 4 or 5%. what they were also doing was giving you tokens in some other cryptocurrencies that they were basically originating. So they basically were, will give you 4% on your Bitcoin loan. Somebody else will pay that. You'll pay that. But then the other 11% is coming from some tokens we're giving you that actually you know, you have airline miles. We have to answer -- -- airline miles. Chamath Palihapitiya (00:24:03): We have to answer a really important question. If you we've we you know, look the the markets have incinerated many 1,000,000,000,000 of dollars. I just saw like, for example, there was 1,700,000,000,000,000 you know, that was just torched in ETFs alone just in the since the beginning of this year. Right? We've done that or more in the crypto side. We've done that or more on public equities. Right? We're probably gonna do that or more in other markets, but every other market is regulated and there's a full accounting of the P and Ls of the dollars that are won and the dollars that are lost. And here some folks have just basically escaped with 1,000,000,000 and 1,000,000,000 of dollars. And the bag holder is just, you know, David Friedberg (00:24:49): a Jason Calacanis (00:24:50): a a Chamath Palihapitiya (00:24:50): retail investor. So the real question is, are regulators going to actually care to try to do something? Jason Calacanis (00:24:56): Because -- Oh, yes. Chamath Palihapitiya (00:24:56): -- the the level of GIF that's happened in this market is extreme. And especially when especially when everybody was telling you, no. This time is different. This market is completely different. It's transparent. It's on chain. You can see every and it turns out, actually, most of it was not on chain. It was off chain. Jason Calacanis (00:25:15): And they were using they were using this, hey. How fun being poor, this, like, psyops to get you to participate. Okay, Boomer. You don't get it. Gensler was talking to Kramer on CNBC. Here's the quote. some like Bitcoin, and that's the only one gem I'm gonna say because I'm not going to talk about any of those these tokens that my predecessors and others have said are a commodity. And then he said many of these crypto financial assets have the key attributes of a security. Aside from Bitcoin, he believes, you know, like, these things are securities. And that makes sense because 99% of people buying them, Saxx, were buying them Because I wanted to see them appreciate. They were never using these as utility tokens. They were buying them to, you know, I see them appreciate and to flip them. So what do you think, Sax? Is there Is there when we look back on this whole mess in 10 years, is it gonna be like the dotcom era where we're like, yeah. I got overheated, but Amazon and Google came out of it, or are we gonna look at it and go, Well, that was tool up season. David Sacks (00:26:11): Well, I I think there is a future technology platform here with crypto. But, I mean, I've been saying this for the last year that just because there's a future technology platform doesn't tell you what the pricing should be. And the price action got decoupled from the level of progress in the space. You know, you should always be looking at what is the real usage, use cases, customers, revenue, things like that. And people stopped doing that. And I think part of the reason why the narrative was so powerful If you go back to last year, then the chart that Shamas showed about the the increase in the price of Bitcoin, which is really the the root of everything. Right? Because you know, 1st Bitcoin appreciates. And then if you think about it like Ethereum is Ethereum's market cap is like a derivative of of the Bitcoin market cap. It's been roughly 40%. And then the altcoins sorta get the the market cap of the altcoins is sort of derivative off Ethereum's market cap. So the whole thing kinda moved up in in sync. And the reason why Bitcoin moved up so much is that as the Fed kept printing more and more money. You had fans of Bitcoin saying, look. The Fed is debasing the US dollar. We're getting to need an alternative currency. That was a powerful narrative that the Fed seemed to be vindicating, and there was a positive feedback loop, which is the more the Fed debase the currency the more that the price of Bitcoin went up. Now the reason the price went up was not because they were debasing the currency. It was because they were creating so much liquidity that that it created a liquidity effect that then drove up the price then then so Jason Calacanis (00:27:50): So consumers had money that they could buy Bitcoin because they were there was more money in the system. Yeah. You saw in more buyers a Bitcoin? Chamath Palihapitiya (00:27:57): That's exactly what happened. They I mean, all of this idiotic narrative sorry. Go ahead, Sucks. David Sacks (00:28:02): Yeah. You you saw an increase in speculative investments across the board. including but not limited to crypto. So, again, you know, when the Fed prints too much money, it creates asset bubbles. But there's a powerful reinforcement because as the Fed was printing Bitcoin and supports Bitcoin had a really great explanation for why Bitcoin was going up, which is they're destroying the US dollar, we're gonna need an alternative soon. Now I think in the very, very long term, could Bitcoin be a non fiat currency? Yes. I mean, I actually think the technology works. You could create a a new kind of currency that's backed by math and by cryptography as opposed to fiat government. But That could take a really long time. I mean, that could be decades in the future. And but what happened is the market started thinking, well, that's gonna happen soon. and that's where it just got ahead of itself. That was the tulip part of it. Chamath Palihapitiya (00:28:53): Yeah. I think that I think that they found all of these words you know, written in these economic textbooks that allowed them frankly to justify what a lot of people were doing in a lot of other markets, which is just straight up speculation because the money printer was going for. And, you know, if the if you look at this 92% correlation to the equity markets, I suspect in Bitcoin, and crypto is probably closer to the to even a 100% because it really was the furthest out on the risk curve, and it just made the most sense when you thought money was you know, effectively, infinitely going to be available to just buy the riskiest risk assets. Jason Calacanis (00:29:31): Think about the friction taken out of this, Chamath. You could buy these, you know, cryptocurrencies so easily. You could trade them so easily. You could create one so easily. People were popping up forks of these things. So In a way, what technology has done over the last Chamath Palihapitiya (00:29:45): 30 Jason Calacanis (00:29:46): or 40 years from cloud computing to software, to open source, has made it very easy to pop up a startup. Well, you could pop up a currency, and then you could get an incredible reward And you get this incredible reward before you actually make a product for consumers. Chamath Palihapitiya (00:30:02): And and absolutely zero rules and oversight. Jason Calacanis (00:30:06): No oversight. Yeah. Chamath Palihapitiya (00:30:08): The feature that was touted was actually the first one to get thrown away which was transparency. Yeah. When all of this activity was actually happening off chain, this is why you have this systemic risk issue now. When Sam is saying, some of these exchanges are actually in solvent. What he's saying is, well, that exchange has 1 master wallet address. Every time you open an account and transact on such exchange, you're actually just transferring between a database entry inside of that company. And so it may look like it is fine, but it is actually not fine. That's what he's claiming. This is the problem with all of this. So all of this activity You know, built on these principles of openness and, you know, defensibility and, you know, you you can't inflate it and, you know, devalue it and debase it. turned out to not even matter because the fundamental principle that would allow us to verify all of that was violated right from the get go which was transparency. All of it is happening in the dark Most of this stuff is happening off chain. And if you think that, you know, it's okay to torture $1,000,000,000,000 of equities, well, at least there's rules on the equity side. But to torch $2,500,000,000,000 in crypto where there are no rules, it'll be really you know it'll be a very telling sign to see if these folks get their act together and but meaning regulators and politicians didn't do something. Jason Calacanis (00:31:33): Well, then we made this crazy hybrid where we had the venture community, and I'm not gonna talk about any specific firm here, and to be clear, you know, nobody knows exactly what's happening, but you had coins. Chamath Palihapitiya (00:31:43): You can't know, by the way, you can't know because it was happening off chain. Jason Calacanis (00:31:47): Exactly. So somebody would originate a coin, and I was, you know, offered these deals, and you would, as a venture capitalist, be buying some equity in a company And then some amount of tokens would be created. Before the token was released to the public or before anybody had insights into this, these tokens were swapping around. Everybody had different rights. Some people could sell early. Some people could never sell, and it was as if, you know, you took the process of going public and you gave that to a seed stage or a series a company before they launch their product. So you're taking a company public essentially before they But if you if you subpoenaed if they launch the product Chamath Palihapitiya (00:32:23): if you subpoenaed the exchanges, all of this gets turned over. Yeah. Because the exchanges are the honeypot of off chain activity. Jason Calacanis (00:32:32): Yeah. So that and that's what's gonna happen, I think, in all of this. And it's gonna be really funky. This is and what's terrible about this is This is why the accreditation laws exist is, like, only sophisticated people top 6% of Americans are allowed to participate in private companies. And what did we do? We allowed a 100% of people on the globe to participate Chamath Palihapitiya (00:32:51): -- Backed by pure math back that less than a thousand people in the world actually understand. That makes -- What Jason Calacanis (00:32:57): could go wrong? What could go wrong? Chamath Palihapitiya (00:32:59): You cannot buy a stock, but you can buy this cryptographic with secure Jason Calacanis (00:33:04): You're not allowed to buy a share of LinkedIn or Uber or Airbnb. Even though you stayed in an Airbnb, we're an Airbnb host. You're too stupid to buy Airbnb shares when it's private. But you can buy this cryptocurrency that doesn't even have a product in market. Chamath Palihapitiya (00:33:17): No. And and here's this white paper that has, you know, university level pure math as the explanation of why it nothing can go wrong. And you try it turns out again because nobody actually understood in the first place. Jason Calacanis (00:33:29): This is gonna be a decade of discovery. If you look Chamath Palihapitiya (00:33:32): at that if you look at that price chart, what it really means is, like, again, you know, we talked about this If the equity markets have to rebase and get all this q t a q e out of it. Yeah. Right? And then you have to rebase for earnings if you believe you're in a recession, and then you have to rebase for margins if you believe that there's rampant inflation. Those three things have to happen in the equity markets. We're in the midst of that. Jason Calacanis (00:33:53): Yeah. Chamath Palihapitiya (00:33:54): But that also has to happen on the crypto markets in the crypto markets. And if you look at that chart, what it really tells you is that the baseline price of Bitcoin where things seemed You know, we're rational supply and demand. We're meeting each other before all these, you know -- 510,000. -- 35100 Jason Calacanis (00:34:09): to Chamath Palihapitiya (00:34:10): 5000. Jason Calacanis (00:34:10): Yeah. I would say about Chamath Palihapitiya (00:34:11): 5000 looks like -- -- 75% from you. Jason Calacanis (00:34:14): Yeah. It's 20,000 now. So, yeah, we got we got we could be have ways to go. One thing that I thought was an interesting sign of potentially bouncing along the bottom. Zendesk has agreed to be acquired by an investor group in an all cash transaction. They're basically going private here. for around 10,200,000,000 if you don't know Zendesk. It's a help desk software company. It's a SaaS software company. They turned out a similar acquisition of 17,000,000,000 earlier this year. Their market cap is 9,100,000,000 in the public markets. It's it's gone up, obviously, since it's announced. This was announced, but they have a a 1,300,000,000 in revenue. They're up 30% year over year. So this is a strong company. But the acquisition price is 7.7 times their 2021 multiple. David Friedberg (00:34:57): Sorry. Did you say they're up 30% year over year. The revenue is up Chamath Palihapitiya (00:35:01): 30%. Jason Calacanis (00:35:02): Revenue is up 30% year over year. They have $1,500,000,000 in cash and securities that are, you know, marketable securities. So they they're cash rich. Small loss 223,000,000 for the year in 2021. So they have 6 years of runway if nothing were to change. Yeah. What do you make of the sax? Is why would they do this? They don't have to. So and is this to you like the sign of a bottom if we start seeing a bunch of these companies that went public that are seemingly strong start to go private and to go maybe clean up their balance sheet and go public again in 3 years. What's going on here? Well, I David Sacks (00:35:36): mean, this isn't a horrible outcome. And by the way, I mean, I remember we shared when I was doing Yammer a decade ago, we shared floor in our an office building at 410 Townsend with with Zendesk. Jason Calacanis (00:35:49): And -- They launched that TechCrunch Fifty. David Sacks (00:35:51): Yeah. Yeah. Exactly. So we had, I think, 5000 square feet and then the other 5000 square feet. And we were in a standoff. Both of us were expanding. And we needed the other half of the floor And it was like, who had moved first, basically? And and, anyway, they ended up moving, and we took over their space. But so, I mean, look. This is a company that, you know, was worth a hundred million bucks 10 years ago. So whatever it was. I mean, they were still you know, they were very early stage. So this is still a great So they have taken the 17,000,000,000 shirt with 2020 hindsight, that would have been better. But look, you're seeing the valuations here being roughly reflected. The SaaS index is now down to about five and a half times revenue. I think next 12 months' revenue. for the for the median SaaS company. And the median SaaS company is growing about 20%. If you're a high growth company, which starts at 40%, you're trading at about eight times next 12 months revenue. So then then this is sorta in there. I mean, that is what they're trading for. And SaaS founders Jason Calacanis (00:36:49): Why would founders, the board Chamath Palihapitiya (00:36:51): -- I'll tell you what. -- Jason Calacanis (00:36:52): want to go private is the question on people's minds. Chamath Palihapitiya (00:36:55): It's not it's not that they wanted to go private. I think that they wanted to stay public and they wanted to build a large business. But this is where the law of large numbers catches up with every company. That's why it's so rare to have an Apple or a Google or a Microsoft or a Facebook or a Netflix where you can grow for 20 years at 25 plus percent because at some point, 25% growth over last year just becomes too hard of a mount. It's a big knife. And so what Zendesk suffered from is what most of the SaaS companies not and I'm not trying to disparage them. Just calling it out will have to go through, which is the following. The easiest kind of SaaS company to start and the one that folks, you know, really talented investors like SaaS will fund overwhelmingly over others are what's called bottoms up SaaS. Right? Things that sell to the low end of the market, things that sell end to you know, Jason Calacanis (00:37:48): as individuals can buy them in a corporation as opposed to the CIO. Chamath Palihapitiya (00:37:52): Yeah. The the unfortunate part of that growth curve is that it's pretty terminal within 7 to 10 years. And after that, you're forced to go to the mid market and that eventually you're forced to go enterprise. But when you go to the mid market and you're selling to 500, you know, 1000, 2000 person companies and then eventually even enterprise, you're talking about massive investments of OpEx, people, engineers, product managers, salespeople, and all of that stuff cost money, and it's not clear that your product is any good. So in the Zendesk example, it's not to say their products were bad. But all of a sudden, they were going up and selling a CRM tool, Salesforce automation tool, and now you're going head to head against companies like Salesforce who are going down market. And all of a sudden Salesforce and Microsoft and all these companies can play very aggressive pricing games with their products. They can bundle all kinds of other things in 3. They can give you discounts. And it's very hard to compete as a single individual company, so your growth starts to stall. So I suspect what happened at Zendesk is they said we can make it and we believe in ourselves. And they found that it was hard. Then instead of organically growing, That's when they turned down the $17,000,000,000 offer. They tried to grow inorganically. They looked at SurveyMonkey, right, which our friend Zander runs and said we're gonna try to for $4,100,000,000, and the market said uh-uh. No. And then the market basically contracts, and now they're like, well, if we go and now torch our EBITDA goals and tell the market we're gonna go and spend all that $1,000,000,000 we have to try to go up against Salesforce and Microsoft with a product that we don't know is gonna work. our sock's gonna be at a dollar. And so I think that that's sort of the the parade of terables that happened for them, but it's a little bit of a warning sign for how difficult it is to get big. Like, what Salesforce pulled off, right, and what Workday is starting to pull off, what ServiceNow has pulled off. Chamath Palihapitiya (00:39:48): I mean, it you can't underestimate the quality of Jason Calacanis (00:39:51): these things. Google Apple Facebook. Chamath Palihapitiya (00:39:53): No. I'm saying I'm saying specifically enterprise SaaS. Yes. Those companies ServiceNow probably being the last one that's really did it. Incredible. So difficult. Palo Alto Networks is probably the next closest one now. And Jason Calacanis (00:40:05): Salesforce recognition. Let's be clear. Right? Salesforce -- Doesn't Chamath Palihapitiya (00:40:09): matter how you get there. Organically, inorganically, it doesn't matter. The point is it's very hard Most CEOs failed. Nobody -- So Jason Calacanis (00:40:16): is this going but okay. So my original question is, is this the bouncing along the bottom moment? If because we have Peloton Chamath Palihapitiya (00:40:22): you're buzzy. You have Jason Calacanis (00:40:23): so many of these companies. Chamath Palihapitiya (00:40:24): This is a warning sign. Jason Calacanis (00:40:26): Okay. There's -- Why? -- not yet the bottom. Chamath Palihapitiya (00:40:30): Well, this is a warning sign that says, you cannot go into a massive investment cycle. For all companies, unless you can prove that you can sustain margins, sustain growth, and minimize OpEx. Jason Calacanis (00:40:45): But isn't this a very sophisticated buyer taking it private, they must have a thesis of how they're gonna get their money back. Right? So that's my point is, Saxie, you think, like, that this is, like, if if the company's already public and somebody thinks, hey. You know, if I take this private, I can do better than if it's public, and I'll reintroduce it to the public market liquidity later. Isn't that what's gonna happen here in all likelihood? Chamath Palihapitiya (00:41:09): You're making that statement in the absence of understanding how these things are financed. Jason Calacanis (00:41:12): Well, it's got a 1,000,000,000, and it's and it's breakeven almost. So Chamath Palihapitiya (00:41:15): Okay. What what about the what about the the 1,000,000,000 of dollars of debt they're gonna take out and slap off in this company? Right? What about the number of people they may -- Jason Calacanis (00:41:22): You're talking about post going private. Chamath Palihapitiya (00:41:24): At the end of the day, the private equity firms are not trying to make, you know, this $10,000,000,000 go to 25. they're trying to make the 2,000,000,000 of equity they put in go to 3. And there's a lot of ways that 2 can go to 3 before 10 goes to 25. Jason Calacanis (00:41:40): So they want a modest return. Chamath Palihapitiya (00:41:42): It's not a modest return. It's 50% return. It's a lot. It's it's making a $1,000,000,000. It's hard. Jason Calacanis (00:41:48): Yeah. But but compared to the management team and the board's view of being a public company and growing 20% a year, or it's actually in their case, 30 Would that be a better opportunity for those shareholders? That's what doesn't add up here, Saks. What do you think? David Sacks (00:42:00): If I had to guess I mean, I haven't talked to Nicole about why they're doing it. I think that there operating at a new stage of the business. I don't think it's as fun to be growing a company at, call it, 20 to 30% a year and all of a sudden you have to generate cash flow, and you're being valued on that. I mean, they're passed -- So Jason Calacanis (00:42:17): management firm out is your thesis? David Sacks (00:42:18): I don't know. I mean, it's it seems Jason Calacanis (00:42:20): A potential thesis. David Sacks (00:42:21): I think that's basically why people sell good businesses. Like, I actually don't think there's a problem in their business. I think that growing 30 percent a year with 1,300,000,000 in revenue, plenty of cash in the bank I think they have a good product. I don't think there's anything wrong with the business. Yeah. I think that that I do think founders get burned out, and this is an exit. And I do think that the phase of their business they're in right now is not gonna be as fun as the high growth phase. Look, when you're growing a 100, 200 percent a year, and investors are willing to fund that growth, and they don't really care if you're profitable. That is just more fun than growing a business 20 to 30 percent a year. And Investors are breathing down your next thing when you're gonna deliver cash flow. And what the private equity guys do is they're gonna go in there and they're gonna restructure the business to deliver cash flow. Now I think, ultimately, these types of businesses, they're great the software business, they're great business to own because their high gross margin. And, you know, they they've got a subscription base that just keeps growing organically if they've got positive net dollar retention. So you've got a let's call it a $1,300,000,000 subscription base that will grow to 2,000,000,000 over the next, whatever, half dozen years. And quite frankly, I bet you, the private equity guys, you're gonna take out half the cost structure. This is no reason this thing could be generating 500,000,000 a year in free cash flow. Jason Calacanis (00:43:42): But the management team would be unwilling to do that because it's a suck. It kinda sucks to do that every day to come in and fire half the team that you hired. and take that hard medicine. It just as a bummer for that personality type. David Sacks (00:43:55): I think it is a different kind of management. challenge. And, yeah, I don't think that's fun. And but look. The thesis behind software companies, the justification for them burning money was, look. We're gonna we're gonna spend every dollar in revenue that we make and then some. because we're building a subscription revenue base Chamath Palihapitiya (00:44:14): -- Jason Calacanis (00:44:14): Mhmm. Chamath Palihapitiya (00:44:14): -- David Sacks (00:44:14): that, again, has positive net dollar retention. So one day, okay, one day We won't have to keep investing so much in sales and marketing. We won't have to keep investing so much in r and d. We'll still keep investing to some degree. We'll make the product better gonna be a little bit more maintenance mode. We will get to maturity. Jason Calacanis (00:44:33): And then you can lay off a third of the staff, and all of a sudden -- And David Sacks (00:44:35): then and then all of a sudden, the company is gonna be super profitable. And the fact of the matter is is that day never came because the markets never demanded it. Jason Calacanis (00:44:42): Well, now -- Now that day is here. Chamath Palihapitiya (00:44:44): No. No. No. Hold on. it never came because the markets kept demanding more growth. If you look at their long term operating margins, you know, when they first when they first came out public, they it, like, had, like, a negative 30% margin. 2 years later, they had a negative 50% margin. And over the last 7 years so that was 2015. Up to now, they've crawled their way back to negative 13%. So at some point, I think investors said, oh my gosh. This company has never made money. It needs to keep investing more in order to grow And I think David, to your point, maybe the decision that he didn't wanna make was to flip it to a cash cow. David Friedberg (00:45:21): I don't think that's true. I looked at these guys have been generating cash. Their reported GAAP earnings are negative because of the stock based comp expense, meaning that they're issuing securities. Chamath Palihapitiya (00:45:32): -- Jason Calacanis (00:45:32): to discuss here. David Sacks (00:45:33): And I David Friedberg (00:45:33): think that that's actually worth highlighting because this is an important one because people have been talking about this considerably lately. So this company's been making money every quarter. They generate cash. But in the last quarter, they issued $60,000,000 in stock to employees to compensate them for the work that they do. So that's Chamath Palihapitiya (00:45:51): 250,000,000 David Friedberg (00:45:52): roughly of dollars per year of stock based comp, which is 2 a half percent of the total shares outstanding in the company are issued as employee comp every year. That number results in a dilutive effect to shareholders over time, even though the business is generating cash, your relative ownership as a shareholder in a business that's generating cash is going down by 2 a half percent every year because of all the new shares that are being issued to compensate employees for the work that they're doing. And I think that's part of the issue that a lot of folks kind of have taken for granted. This was well rooted in, I would say, probably Google who became very generous, very early on with issuing RSUs and stock in their publicly traded securities to employees as part of their compensation package. But Google has a 30%, 40% EBITDA margin in terms of incremental contribution of new revenue. And they can afford to take a a point or 2 of dilution. Google, by the way, is actually not dilutive. They they buy back shares with their extra cash. So as a shareholder, you you actually benefit from this considerable cash generation. But a lot of software businesses and tech companies in general have had to rely on issuing shares to compensate employees for the work that they do. So even though the core fundamental of the business is generating cash and cash is going up every year, the business doesn't know how to get out of this cycle of how do you pay these engineers $400,000 a year without diluting shareholders issuing all these new shares every year. And you'd have to do that more likely as a private company to figure out how to consolidate earnings, how to TRIM head count and actually get the thing to generate the cash that needs to generate. Chamath Palihapitiya (00:47:29): But, Friedberg, isn't that a real like, you're pretending, like, it's some fake costs David Friedberg (00:47:33): Yeah. It's not. It's it's a real cost. It's a cost to shareholders for shareholders. Chamath Palihapitiya (00:47:36): But why but why why the asterisks? Jason Calacanis (00:47:39): Well no. There's a specific reason because the business it's the business is running David Friedberg (00:47:43): out of cash. It's not burning cash. The business is growing its cash balance, but in order to compensate employees for that cash balance, they're diluting you, the shareholder. Right? Chamath Palihapitiya (00:47:52): I look. When you own a share of a company okay. Let's just -- -- by the David Friedberg (00:47:56): way, is is another way of saying that the company is effectively issuing 2 a half percent new stock every year? to fund its operations. I mean, that's another way to think about it. Chamath Palihapitiya (00:48:03): Look. I'll I'll give you the Warren Buffett School, and you can tell me that it's stupid, but it kind of makes sense, which is you take the number of shares you own, You divide it by the total and the number of shares outstanding. You look at the total profits and you say my look through earnings equals that percentage times the total profits. David Friedberg (00:48:19): Yeah. And your percentage is going down every year with stock based comp. Chamath Palihapitiya (00:48:23): That's the problem. And so the question is, It's also going down because you're buying real estate. You're hiring people. You're paying them more. Like, it's going down for a whole host of reasons. That asterisk is an irrelevant asterisk in my opinion. Like, At the end of the day, you spend money to grow. How you spend the money is not that important to me. David Friedberg (00:48:38): Let me say 22 quick things on the topic. One is, yeah, I totally agree. It it's an expense. On on enterprise software and, Saks, you're you're the the the master of the art. But, you know, as an observer, it seems to me that many of these companies, once you have an enterprise account, you benefit from being able to cross sell new products into that account, and you can grow this net revenue retention number over time and ultimately generate cash. many of the big enterprise software companies that we've talked about from Salesforce to Workday and others have succeeded in doing that. Autodesk is another good example. And Carl Bass, I think, is on the board of Zendesk. They've done they've done this successfully by bulking up their product categories, and they're they're they've done acquisitions or they've done build outs. And so over time, your incremental cost to to to to sell a a new product and generate incremental gross profit goes down, and the business performs better with scale. This seems to be one of those businesses where, ultimately, they couldn't bulk up through acquisition and they couldn't organically build new products. and they tried. And so the challenge is they're kind of a I don't wanna say a one trick pony, but the portfolio of things that a business like this can sell into and ultimately increment gross profit is very limited. and that business becomes challenging to operate as a public company because you really do have to show that momentum as a as a scaled enterprise software business that you're actually generating real cash over time. The other thing I I just wanna say is stock based comp. And and sorry, Saks. Look. Come back in one sec. But, Shamaz, I and and you guys I don't know if you realize this, but the standard in Silicon Valley today when a company goes public in an IPO is to have what's called an evergreen stock grant proposal. And evergreen basically means that every year, The company is authorized. David Friedberg (00:50:20): The board automatically authorizes the issuance of some percentage of new shares per year. This is typically in the range of Chamath Palihapitiya (00:50:27): 4%. David Friedberg (00:50:29): And ISS and other, you know, kind of institutional shareholder advisory services actually vote against these shareholder proposals and push back against them. But most of the companies in Silicon Valley that go public automatically include Evergreen's as part of their, you know, kind of IPO prospectus Chamath Palihapitiya (00:50:46): -- Jason Calacanis (00:50:46): I mean, can we agree it's out of control? David Friedberg (00:50:47): Like, it's -- Yeah. We should be got it for sure. They can they can dilute shareholders by 4%, And you're dependent Jason Calacanis (00:50:53): of how the business operated that year. David Friedberg (00:50:54): Which is effectively the same as doing a 4% secondary cash offering every year. because it's this you're you're issuing those shares into the public market, and instead of getting cash, you're paying your employees with them. And so it avoids you having to use your own cash balance to pay your employees, so you're effectively raising money every year, and you're allowed to raise up to 4% dilutive effect to shareholders to do that every year. And it's become a real topic, and it seems to be that a lot of the big portfolio managers of big institutional funds are starting to pay really close attention to this, quote, unquote, standard in Silicon Valley that stock based comp expense has become so high, and Evergreen's have become kind of a standard. as almost like an ordinary course of business, and it's become, you know, a a really contentious topic. And I don't think it would be too surprising Number 1, to see cash salaries go up. And number 2, as a result of that, to see salaries become rationalized in Silicon Valley where engineers may start to get challenged on the standard 400 k per year that everyone's become used to, you know, in terms of, you know, high tier You know? So -- When Jason Calacanis (00:51:56): it was remote work, maybe there is a compromise that could be had. But this compensation you have to remember has been outrageous in some cases especially for senior management. And so it makes the core business look broken, but what we actually have is maybe people who are on these boards are also in on this compensation, and it's just bad hygiene. And it's not related to the performance of the company. Right? David Friedberg (00:52:19): I don't think I don't think the board people are, quote, in on it. I think that's it just it's you have to pay an engineer 400 k a year to compete effectively in Silicon Valley today. Jason Calacanis (00:52:26): Well, I was talking more about the managements. The managements stock comp. The management stock comp is different than the engineers you would agree for you. Sorry. Like, there have been some man enormous stock options. Chamath Palihapitiya (00:52:35): -- David Friedberg (00:52:35): the board. Yeah. Yeah. Certainly. David Sacks (00:52:36): If you wanna run the company as a high growth startup, employing these high paid engineers and executives, including stock compensation, That is a certain kind of way of running the business. But, again, if you're trying to run the business for profitability, that's a different way of running the business. And just to add a layer to what happened here, that Zendesk was under intense pressure from an activist investor called Jana who was basically trying to replace the board of directors. They're running a proxy battle against them. So Jana has been pressuring them to replace the board, to to make all these changes, to to take the Chamath Palihapitiya (00:53:11): $17,000,000,000 David Sacks (00:53:13): offer I guess back in March, they didn't do it. Now they did a lower offer at 10,000,000,000. Why? I think because the market has clarified, we now it's it's clearer that we're in this regime change. What the market is valuing is is free cash flow as opposed to profitless growth. And my guess is, again, without having to talk to Mickle, my guess is they probably just threw up their arms and said, listen. You know? Like, it's not gonna be fun to run the company this way. But you also have to You have to ask the question, why are these highly sophisticated private equity firms buying it for 10,000,000,000? I think they're gonna make a lot of money. And the way they're gonna make a lot of money, Jason Calacanis (00:53:48): More than a 1,000,000,000. Yeah. David Sacks (00:53:50): They are gonna slash the hell out of the cost structure. They're gonna run it to be highly profitable. They'll probably bring the growth down from 30% a year to 20% or 15%. But the the offsetting benefit to reducing the growth a little bit will be they could probably generate 3, 4, 500,000,000 of free cash flow. on that business. If it's doing 1,300,000,000 and they stop investing in r and d and they stop and they bring down the sales and marketing, that could be a that could be a cash cow like you said. So I think that's probably what's what's going on here. Is the -- I Chamath Palihapitiya (00:54:21): just want I just want you guys to know that not to burst this bubble. But when people talk about free cash flow, They touted a lot. Tech companies touted a lot because you're allowed to add back in stock based comp as if it didn't exist. The problem is that stock based comp is non cash. So when when you're only source so if you see a company that has negative EBITDA, negative to everything, all of a sudden are like, quote unquote, free cash flow positive. It's because they were able to add back in stock based comp. But that money is not real. when the only source of free cash is stock based comp, that free cash flow doesn't reflect the company's true profitability. This is what I mean by people play these Shell games with these numbers to allow, you know oh, let's, you know, value something based on EBITDA. Actually, no. Because, you know, our stock based comp is off the charts. Let's actually go to something else. You know, we'll do a non GAAP EBITDA measure, you know you know, adjusted EBITDA. And then oh, actually, wait. Sorry. Look at free cash flow because you could add back in this gargantuan amount of stock based comp. I mean, it's crazy. I'll just the quote from here We work. The the the quote from Warren Buffett summarizes the best. If compensation isn't an expense, what is it? And if real and recurring expenses don't belong in the calculation of earnings, where in the world do they belong? Jason Calacanis (00:55:43): I think what we're seeing. Right. David Sacks (00:55:45): My point is is not that comp as an an an expense it is, but rather that an expense that you can control by reducing the amount of staff. Now are you I think these private equity guys are gonna basically whack the cost structure this this business. Chamath Palihapitiya (00:55:57): I'm I'm just saying you can distort free flow as well because you can head back in stock based comp. It's a joke. Jason Calacanis (00:56:02): It's a little bit of a shell game going on. It's like the dirty secret. David Friedberg (00:56:05): Let me ask you, and I like, an an important investing accounting question. Let's say that a business like Zendesk is generating a Chamath Palihapitiya (00:56:14): $100,000,000 David Friedberg (00:56:15): of free cash a year. Chamath Palihapitiya (00:56:17): No. No. What does that mean? David Friedberg (00:56:18): Well, hold on. So every year, their cash balance goes up by a $100,000,000. They have a business that generates a $100,000,000 of incremental cash Every year, the cash balance goes up. So you, as a shareholder, own shares at a company that is creating a $100,000,000 of cap of incremental capital per year. However, your shares that you own are going down because they're getting diluted every year by roughly 2 a half, 3%, and that's it's 2 a half percent is Zendesk's actual number. So every year, you're getting diluted by 2 a half percent. Would you rather have a business that you are getting diluted by 2 a half percent but it's incrementing its overall balance by a $100,000,000, or would you rather own shares in a company that's burning cash each year? And I think that's where this ended up from a market perspective getting rationalized. Its shareholder said, I wanna have the safety and security of cash generation, and I'm willing to take on the dilution for it. And that's how this became, you know, as standard as it is. David Sacks (00:57:13): When I think about funding a new start up and I look at the competitive landscape. When I see that the competitors have all been acquired by private Equity Companies, I generally think Okay. There is room for innovation here because I know that the first thing that PE firms are gonna do when they acquire a company is, like, 0 out r and d or just put the product on maintenance mode. There's no innovation that happens Chamath Palihapitiya (00:57:38): -- David Sacks (00:57:38): Yep. -- with the product once the PE first buy the buy it. Right? So the reality is, I think Jason Calacanis (00:57:42): So those are good targets for start ups. David Friedberg (00:57:44): So we have to do acquisitions. Right, Saks? I mean, they'll find -- Yeah. They'll David Sacks (00:57:47): they'll do roll ups. Right? Roll ups. Yeah. It's they will do financial innovation. They will innovate -- Right. -- the the structure of the business. They'll cut David Friedberg (00:57:54): all the the wasteful spending and all the nonsense and lunches. David Sacks (00:57:58): Yeah. Exactly. David Friedberg (00:57:59): Jamote once to, like, cut out all the kind bars. David Sacks (00:58:01): Yeah. The kind bars would Chamath Palihapitiya (00:58:02): be okay. -- exposed brick walls, like, all this nonsense. Yeah. Yeah. So who Jason Calacanis (00:58:05): do It's a Vegas trip. Yeah. David Sacks (00:58:07): This stock based compensation is gonna go away because they're gonna get rid of all the high priced engineers. They're gonna get rid of the a lot of the high priced executives. they're gonna probably they're gonna have to keep customer support. David Friedberg (00:58:17): They're gonna increase cash salaries, probably. David Sacks (00:58:20): They'll bonus people. They'll just do bonuses for hitting targets. instead of giving people as much equity in the business. And they'll run it like a, you know, private equity type type play. David Friedberg (00:58:30): I'm gonna give you the sex. David Sacks (00:58:32): It's not fun. It's not interesting to me. Right. David Friedberg (00:58:35): Yeah. I mean, we're gonna see -- It's not like a validation product. Chamath Palihapitiya (00:58:38): I think, David, the other reason wouldn't be fun is, like, it's a it's a level of financial engineering, which is highly sophisticated. I think for some people, it is fun. I think for us, it's less fun because you're not That's the -- Creating any company per se. Jason Calacanis (00:58:48): Not innovating. David Friedberg (00:58:49): You're not being a product person here. Chamath Palihapitiya (00:58:51): Yeah. Jason Calacanis (00:58:51): But but Chamath Palihapitiya (00:58:51): I would say that it is a highly sophisticated and the that do it at these places, at these private equity firms are incredibly -- David Friedberg (00:58:57): They're very good at it. Chamath Palihapitiya (00:58:58): -- savvy at how they do it. Yeah. And it's it's all the twists and turns of how you you know, lever this up and use debt and blah and use a margin loan and pre fund the I mean, and it's not the stuff that necessarily we wanna be thinking about. But that's what you would have to do as well. David Sacks (00:59:14): I totally agree with that. Look. I'm I'm happy they exist in the ecosystem because we need firms. We need more exits. Right? And we know that right now in Washington, the the regulatory regime is difficult. It's very hard to get deals through. So at least you have private equity firms that are providing some exits. And we need the ecosystem needs Jason Calacanis (00:59:36): And those exits are saying SAC don't trigger, like, comp competitive concerns with Lina Kaun and her group. Right? Like -- Yeah. Like, some private equity firm took this private. Okay. Salesforce didn't buy it, so we don't need to get through regulators. David Friedberg (00:59:48): You're Jason Calacanis (00:59:48): gonna see a lot of Chamath Palihapitiya (00:59:49): -- David Sacks (00:59:49): We need exits in order to justify the risk capital that goes in at the earliest stages, which In most cases, it's gonna be a Chamath Palihapitiya (00:59:57): 0. Jason Calacanis (00:59:57): And and just to give you some other numbers out there, Manscaped, which is a company that sells razors for guys. They had Chamath Palihapitiya (01:00:03): 315,000,000 Jason Calacanis (01:00:05): in net loss in 2021 with 310,000,000 in stock based comp. David Friedberg (01:00:09): By the way, that number can also be distorted. Just to be clear, if you give a one time big grant, to an executive like a CEO. The way that the accounting works on stock based comp, it's not the kind of thing you can have a very simple kind of descriptor on, but you can have these very significant short term costs associated with the big grant that could vest over a long period of time -- Sure. Chamath Palihapitiya (01:00:29): -- David Friedberg (01:00:29): with that that has very high strength. prices. I mean, when Elon got that massive grant at Tesla, the stock based comp expense was significant. Jason Calacanis (01:00:38): Yeah. But you know what's interesting? Chamath Palihapitiya (01:00:39): -- David Friedberg (01:00:39): into Jason Calacanis (01:00:39): It was that was there were 20 targets or something crazy like that, and all of them were based or a lot of them were based on the stock price and the delivery of cars. that's one of the things that I think is broken. Chamath Palihapitiya (01:00:49): -- David Friedberg (01:00:49): cap. Yeah. Jason Calacanis (01:00:50): Yeah. So this is one of the things that's broken in Silicon Valley is that the the comp in the stock based comp is not tied to performance. it's like just giving people guaranteed salaries. Chamath Palihapitiya (01:00:59): In fact, I was gonna say, Jason, I could be wrong. David Friedberg (01:01:01): Like, there there is more sophistication to be clear in executive comp in public technology companies. Chamath Palihapitiya (01:01:06): -- Jason Calacanis (01:01:06): that should trickle down to the junior people too. I think everybody should rise and fall with the company's performance. That's my personal feeling. I mean, this is the problem with entitlements, you know, and and people being entitled. I'm sorry to be, like, a a red pill tier, but we should have, like, performance should be lauded and compensated for not just showing up and hanging out. There's gonna be a bunch of companies in this position, so look for this as a trend. Peloton, Chamath Palihapitiya (01:01:29): $964,000,000 Jason Calacanis (01:01:30): last quarter in revenue, lost Chamath Palihapitiya (01:01:32): $757,000,000 Jason Calacanis (01:01:33): in the quarter. They have a $3,100,000,000 market cap They've only got $879,000,000 worth of cash. I'm just looking at these numbers hopefully there. They're tight. And they have a 1,000,000,000 for an inventory. That company is gonna get taken out. Buzzfeed, I don't know why that even went public. They're down 84%. They had 91,000,000 media company, $91,000,000 in Q1 revenue, They lost 45,000,000. Their market cap is down to Chamath Palihapitiya (01:01:57): 210,000,000, Jason Calacanis (01:01:59): and they've only got 74,000,000 in cash or so with some a 100,000,000 in accounts receivable. So there's a bunch of companies right now that are public, that are about to hit in a couple of quarters running out of cash going into a recession, are we gonna see some big flame outs, do you think? And are are you watching specific companies? Because the private equity folks must be salivating watching this. David Sacks (01:02:21): Well, I mean, look, Jake, how you asked what the takeaway was around this. And I think the takeaway is there's been a regime change in the public markets. The way that investors look at these companies changing. It's not about growth at all costs anymore. They're not just looking at revenues. It's also about margins and cash flow. And, you know, we talked about in the last pod how I think a lot of founders understand intellectually that we're headed for a downturn. if not a recession, but they weren't taking the medicine of basically reducing their burn. Well, this is an indication of what investors are valuing the only way for Zendesk to create value as a public company is to sell to a private equity firm who's gonna cut -- -- half Jason Calacanis (01:03:02): the staff. Chamath Palihapitiya (01:03:03): -- David Sacks (01:03:03): is gonna cut or or some huge number of staff to run it for free cash flow, that's just an indication of the regime change. So, you know, we need founders to start internalizing this information so they can run their businesses more efficiently. You know, what investors want right now. They still want growth, but they want it with low burn. high burn operations are gonna get punished. Chamath Palihapitiya (01:03:24): I've transitioned most of my public markets time to focus on debt. And I've been looking at these companies because yeah. Because there's a lot of these really interesting tech companies with a lot of because what David said, I think, is a 100,000 percent what Saks just said. There is an a massive massive regime change here. Jason Calacanis (01:03:44): And -- Yeah. And when shopping you if you don't take the medicine, Yeah. Chamath Palihapitiya (01:03:48): And and what what's funny is, like, so many of these companies have been left for dead, but what is really juicy is the few companies that you think will survive and specifically making sure you're protected in the capital structure, which means to own the debt because the debt is always senior to the equity. And there's some really, really interesting companies out there that are in that situation. And it's just like it's a much better risk reward in a moment where again, you know, we talked about this, but why would you give up your liquidity today? I don't know the answer. Why? Why? Jason Calacanis (01:04:22): Let's go around the corner. Yeah. Chamath Palihapitiya (01:04:24): I understand. -- this term, Jason, before, like, skipping along the bottom. I just think it's, like, psychological wishful think as opposed to sort of like a rational summation of the actual. Jerome Powell just said, I will tank the economy in order to beat inflation. He just said it in the Wall Street Journal. Jason Calacanis (01:04:40): But people believe inflation might be turning over. Do you buy that or not? Chamath Palihapitiya (01:04:44): No. As I've said, I think you're gonna see 8 9 percent inflation prints for at least the next 3 or 4 months minimum. I think that things could get marginally better after that. But I think the thing we don't know and again, it just touches and I don't care what the fucking audience thinks. touches Russia and Ukraine. So sorry to bring up politics, but things are inexorably intertwined And if people wanna go and venture and gamble in the stock market, you might as well understand this because I think, you know, many of the scenarios will trade because of what's gonna happen with Putin. Jason Calacanis (01:05:20): Let let me ask the question here. How many quarters will this recession be? If we had to pick a range, pick a 2 quarter range, I'm thinking 3 to 5. What what do you think? Chamath Palihapitiya (01:05:29): I have no idea. Jason Calacanis (01:05:30): Okay. Friedberg, you gotta if this is the second, how many quarters plus or -2, let's say, is this recession gonna be? So 5 plus or -2, 4 plus or Chamath Palihapitiya (01:05:42): -2, Jason Calacanis (01:05:42): plus or -1, What what are you thinking will be the bottom out point if Chamath Palihapitiya (01:05:46): -- David Friedberg (01:05:46): I don't like the term. I've told you guys, I don't like the term quote recession as if it's some absolute negative thing. I mean, Negative GDP growth coming off of inflated GDP doesn't feel to me as systemically challenging to the economy. as, you know, some other circumstance where, for example, there was a global financial crisis or 911 or or some other kind of factor that that that drove things that that really affected the core economy. were certainly we we had we had something that that affected the core economy in COVID, then we had massive stimulus So I I I don't I I think there's this unfortunate general characterization of, quote, unquote, recession being an absolute negative. And I think that there's relative growth. And if your if your relative growth is negative off of an inflated number, But over a -- Okay. Jason Calacanis (01:06:41): Let me give you a let me let David Friedberg (01:06:42): me just finish. But over a historic 2 or 3 year period, you're still growing the economy considerably. because jobs jobs are growing and production is growing. It's not as negative as it's being made out to be. So I I I'm not Okay. Jason Calacanis (01:06:55): I get you. David Friedberg (01:06:55): Get into Jason Calacanis (01:06:56): that. Let me ask you this way then. How many more quarters will we have of stocks and real estate and assets declining in value or being flat? David Friedberg (01:07:05): That's a financial markets question, which I think is a different one. And one thing I've realized is that financial markets in the short term you know, the the old Warren Buffett quote or whomever it is that over the long term equities are a weighing machine. In the short term, they're a voting machine. As we've seen with crypto, it was a voting machine that everyone voted on the the hot thing that you're and now everyone's voting against it. So I I don't know -- -- weighing it now. Yeah. Well yeah. I mean, at some point, Chamath Palihapitiya (01:07:32): they'll have to weigh it. David Friedberg (01:07:33): You hold a cryptocurrency long enough. You'll find out how much fundamental productive value it's creating. And the same is true for owning businesses or other real assets, you'll find out over the long run how much productive value they're creating. So Chamath Palihapitiya (01:07:45): -- David Friedberg (01:07:45): So -- So you don't wanna answer Jason Calacanis (01:07:46): the question of when we hit a floor. Okay. Sachs, when do you think we hit? Are we are we hitting a floor now? We have a lot more to go down. David Friedberg (01:07:52): I'll tell you one point of view. I am looking at buying high quality share businesses, buying shares of high quality businesses right now. I think that there are things that are that are cheaply priced that if I own them for a long enough period of time, the underlying productive value of that business will return my capital to me. And so Chamath Palihapitiya (01:08:08): -- Jason Calacanis (01:08:08): You have one that you might wanna mention here that you're looking at? David Friedberg (01:08:11): I don't. Jason Calacanis (01:08:12): because you don't wanna -- I shared some David Friedberg (01:08:13): soft tips at the summit with our friend, Sonny, who he's his trades are up, but, like I told him, these are longer term trades. Jason Calacanis (01:08:20): What do you think in terms of and then we'll go to some of the political stuff that affects markets after this. David Sacks (01:08:24): Well, I mean, I think it's all related. So there's three things going on here right now economically or 3 underlying causes. One is rate expectations have changed massively. Interest rates have gone up and rate expectations are going up even more. fueled by inflation. And until we see where we're at on inflation and whether that gets controlled, that issue is not going away. The second big issue is economic slowdown, the recession. So the first one is Wall Street. This is Main Street. And these two things are related because companies are slamming on the brakes. because they're seeing that the capital availability is greatly getting reduced by this re rating, this regime change, in markets. So we're seeing an economic slowdown that threatens to turn into a recession. And consumer confidence is part of that. Right? When you're Wages don't buy you as much because food and gas prices are through the roof that reduces consumer confidence and that also plays into that. So that's the 2nd big issue. And I don't think we're gonna know about recession, it's gonna take, you know, potentially through the rest of the year before we figure out what's happening there. And then the third part of this is the overhang of this war in Europe, the Ukraine war, which is now threatening to become a forever war. There was a pretty stunning article in the Washington Post this week in which the administration officials were quoted as saying that they would effectively prefer or countenance was their word, a global recession and famine over letting Russia keep the Donbas region. So they are committed now to basically prying Russia out of the Donbass even if it means global recession. Not to mention. Chamath Palihapitiya (01:10:03): -- Jason Calacanis (01:10:03): say specifically the Donbas or specifically standing up to Putin? Well, that's -- -- kinda minimizing -- No. What we're David Sacks (01:10:09): talking about is is the Donbass region. What's happened is look. The Russians lost the 1st few weeks of the war in which they tried to strike they they basically went for a knockout blow to take over Kyiv, topple Zelensky, I think we accomplished something in preventing that. But since then, they have achieved their objective of taking over this eastern portion of the country, this Donbas region, in which this is where most of the ethnic Russians live And these Ukrainian separatists who are ethnically Russian, they've been fighting alongside the Russian troops And the Russians have basically won that part of the war. And so the question is what do we do now? And what you had is you had administration officials saying that they would not accept this does quo, that they are willing to fight on for years. You know, the same geniuses who gave us the Forever Wars of the Middle East are now giving us a forever war in Eastern Europe. And they are saying they are willing to basically continue this fight even if it means global recession. Now I don't think the American people ever voted for this, but this is what the administration is pursuing. And, you know, you gotta remember that there's always the risk that this war spins out of control that we get a nuclear escalation. So I think that this is a huge overhang on market. It's a it's a third big problem that we have. So I don't see how we get out of this bear market until you get clarity and resolution of inflation and rates. Number 1, slow down to recession number 2 and basically this war in Europe number Chamath Palihapitiya (01:11:38): 3. And it's reflective because these next 3 months as I as I kind of indicated last week. I think we're gonna see inflation prints that are really high in part because things like rents which haven't you know, which are on a lag, will get folded back in. So we're gonna be printing 8 9%. And then guess what, Jason? It's the fall. It starts to get colder. you know, Russia's depriving Europe of nat gas. Where's the oil gonna come from? OPEC is basically still stiff arming the United States with respect to expanded production capacity. Why? Because they didn't like the way that we were strong arming them at a whole bunch of other topics in in in, you know, And so where do we stand? You could have a $180 a barrel oil by November, December when it's cold, not just here but in Continental Europe. Now all of a sudden, inflation gets kicks right back up again. It could be 7, 8, 9% again. Alright. So I just think all of these things are now so inexorably intertwined. I think David's right. We need to put this war to bed. And the unfortunate consequence is that right now, if we wanna fight a proxy war, there is no elegant off ramp that I see. Jason Calacanis (01:12:51): So the prediction markets, as some people know, are are predicting point 8, point 9 percent, additional inflation in June over and I think that's over last month and last month was Chamath Palihapitiya (01:13:02): 8.6. So we're gonna be at 9 and a half, Jason. imagine what the markets do if we print a double digit inflation print 10 a half percent, 10.1, just the psychology of that? Jason Calacanis (01:13:13): Well, consumer psychology is really low right now. Chamath Palihapitiya (01:13:16): No. Not consumer psychology. I'm thinking market psychology. Jason Calacanis (01:13:19): No. Market too. Yeah. So we put those 2 things together. And then if this war is never ending, and the famine that and the impact on 40,000,000 people or something like that. That Friedberg predicted is actually going to happen in the next 6 months. This is gonna feel quite chaotic to people around the world. So we we do need to put this work to that for sure. David Sacks (01:13:38): There's no deal on the table right now, but the deal that we've talked about previous shows, there was always the broad construct here, even before the war began, was there were three pieces to it. Number one was that that Ukraine had to remain a neutral state as opposed to being brought into NATO and having American troops' weapons and bases on Russia's border. That was always a red line to them. And in exchange for neutrality, Ukraine would get security guarantees. Peace number Chamath Palihapitiya (01:14:08): 2 David Sacks (01:14:08): was that in the eastern region where you had these Russians, these Russian speakers, that their rights would be respected and that they would have some autonomy And, again, that was something that Ukraine agreed to under the Minsk accords, but it was never properly implemented. And the third piece was that Russia got to keep Kremia, which, again, was a fatal conflict that happened in 2014. Smart observers of this conflict have been outlining that 3 point plan for over a year. And that is what we're gonna end up with. The only difference is that it's gonna be implemented by force and Ukraine will be destroyed in the process. That is basically where we're at right now. Russia has taken over the Donbas. They've taken over this eastern 20% of the country. They have Crimea, and Ukraine, basically, the the the the rest of it. will not be part of NATO. That is basically what the Russians have done is implement by force a plan that, frankly, we could have agreed to through negotiation a year ago and avoided all this death and destruction. Chamath Palihapitiya (01:15:09): My my counsel is Jason's -- Maybe. Jason Calacanis (01:15:11): I mean, we don't know Putin's intent, and that's that's the wildcard here. He is a bit of a madman. I mean, he's pretty much of a wildcard here. He's a dictator who invaded another country. Yeah. Chamath Palihapitiya (01:15:20): My my calculus is slightly different. I think I see 2 things in order to get us back to a state of relatively predictable growth and price stability. Number 1 is we need to reset supply and demand by taking $30,000,000,000,000 out of global markets. And then the second is we need an off ramp to this Ukraine Russia war so that There is predictable energy and food supply to the world so that folks can just get back to what they do best. And if those 2 things can happen, then the markets will have found the bottom. But until those 2 things happen in my opinion And by the first thing doesn't actually have to happen entirely, you just need to see a path for it. And, you know, we're the only one that's doing quantitative tightening right now. The ECB hasn't even started. taking all this crazy money out. You know, I don't know when the Bank of England is gonna do it. When is, you know, the Bank of Japan gonna do it. So this has to be a global coordinated effort before we find the bottom. And this war has to stop. David Sacks (01:16:21): Well, Jay, can can I go back to this untrittable madman narrative? Jason? Yeah. Hey. Look. If if you're trying to -- Yes. If what you're trying to say here is that Putin bears moral culpability and moral responsibility. The blood is on his hands for this war. I agree with you on that. Okay? However, this Could Jason Calacanis (01:16:38): you you're not? I mean, he he's the person who invaded. Yes. David Sacks (01:16:41): I mean, but -- Just logic there. Right. But the idea that this war was unpredictable or could not have been predicted is simply false because many experts did predict it, and they did tell us exactly what's gonna happen. And the reason they knew it's gonna happen is because Russia has been saying since at least 2008, when there was this Bucharest summit and NATO declared its intent to bring Ukraine into NATO, the Russians have been saying that is a red line. And Russia experts, Biden's own CIA Director, a guy named Bill Burns, he was then our emissary to Russia, and he wrote a memo to then secretary of state Connaleza Rice. And what he said is that the idea of bringing expanding NATO to Ukraine was a red line for the entire Russian elite, not just Putin. So and if you go back and look about what other Russian leaders said about NATO expansion. Gorbatov said it was a humiliation to Russia. Yelson was against it. They've all been against it. And so Bill Burns warned in 2008 This was a red line, and the Russians have been saying this since Chamath Palihapitiya (01:17:41): 2008. David Sacks (01:17:42): Yeah. And they were saying it all of last year. If you go look at contemporaneous headlines, describing the tensions between the US and Russia. This is the headlines of articles I can provide to Nick. We can put it on the screen. They were saying this was an absolute red line for them. So the idea that this conflict was unpredictable because Putin's a madman. Listen. You can call him a dictator. Jason Calacanis (01:18:03): Zach, we call him we could also predict Chamath Palihapitiya (01:18:05): -- David Sacks (01:18:05): Highly predictable. Jason Calacanis (01:18:06): Yeah. Okay. And you know what's also highly predictable? Is that China considers, you know, Taiwan or Renegade you know, province. Like, yes. Dictators, you know, will tell us what they're gonna do. The question is, does the free world wanna stand up to dictators? And so while, you know, it's messy to stand up to a dictator, the west, you know, kinda doesn't have a choice to stand up to dictators or else they will roll into other countries history has shown that. So as messy as this is and as terrible as it is for the economy, I do think that we have to stand up to dictators. David Sacks (01:18:39): There are plenty of dictators where we work with By their Jason Calacanis (01:18:42): They're not invading other countries. They're not invading other countries. That that's the difference here, Saks. Chamath Palihapitiya (01:18:46): You -- David Sacks (01:18:47): But we could avoid it. Chamath Palihapitiya (01:18:48): We could -- -- Jason Calacanis (01:18:48): a bit of a pass here. He invaded the country. we must stand up to dictators who invade other countries. David Sacks (01:18:54): Well, look Jason Calacanis (01:18:54): look what you're standing up as foster. I mean the free world. Yeah. David Sacks (01:18:59): Well, look look where you've got us then with this policy. You and the people who you could have avoided. Yeah. Because you are basically spouting this this nonsense that look. The question is Chamath Palihapitiya (01:19:09): -- -- Jason Calacanis (01:19:09): stand up to dictators who invade other countries. I think you would agree. That's a good idea. Jay Cal, let him talk. Let let us discuss. Okay, Freeburn. David Sacks (01:19:16): Okay. Listen. The the the there's no question that Russia has been the aggressor, but the question is why do they this. You don't really have a theory on that, Jason, except that you believe that on February 24, Putin woke up and went nuts. That's basically your when they -- No. Jason Calacanis (01:19:30): That is not. -- for David Sacks (01:19:31): what's happening in the world. Jason Calacanis (01:19:32): You could just We know it's a debated. We know it's a debated region. We know that they've had this conflict for a long time. David Sacks (01:19:37): Okay. So we could we could have used Chamath Palihapitiya (01:19:39): -- -- Jason Calacanis (01:19:39): to here on the pot many times. David Sacks (01:19:40): Every every president from Bill Clinton to Obama who has dealt with Putin has written largely the same account of him in their memoirs, which is, look, they know that he's a thug. They know that he's a dictator. However, they always said, They always said he's very business like. He's very direct. He told them what their issues were. Okay? Putin was very direct. He and Biden had a summit. in June of last year. The Russian's been very direct. Your attempt to bring Ukraine into NATO is a red line for us. Why? It's a violation of our security interests, the idea of bringing a country into NATO, it has huge security externalities for them. By the way, we understand this in other context. We understood in the in the context of cuban missile crisis. We didn't say that Cuba had the right to join any military alliance that it chose to. Because we wouldn't be able to sleep as well as at night if Cuba had nukes pointed at us with a 1st track capability. Jason Calacanis (01:20:37): We've had this conversation. Do you think -- Yes. -- they know it shouldn't Sweden? Should Sweden and Finland be invited into NATO? David Sacks (01:20:43): I I would table that issue until the war is over. I don't know why we need to basically deal with that right now. But listen. don't even have to go back to the Cuban Missile Crisis. Right now, okay, there's a country called the Solomon Islands, about three thousand miles off the Australian coast. They entered into a deal with China, security deal, and the US has been up in arms about that. So, you know, and the reason is we don't want China extending its footprint in Asia. Okay? So we treat that deal as having a security externality for us. And yet, we refused last year to recognize that there'd be any security externality. For Russia, if we brought Ukraine into NATO -- Mhmm. Chamath Palihapitiya (01:21:21): -- David Sacks (01:21:21): the Russians were abundantly clearer what they needed. So my point is this Chamath Palihapitiya (01:21:25): -- -- Jason Calacanis (01:21:25): conversation on the podcast. David Sacks (01:21:26): Yes. My point is this that this war was easily avoidable through the use of diplomacy. The administration chose option. Chamath Palihapitiya (01:21:33): -- Jason Calacanis (01:21:33): that. You don't know that. You believe that. You don't know that. You don't know that. We don't. David Sacks (01:21:36): We never even tried. We actually don't Jason Calacanis (01:21:39): know that. You actually don't know that. David Sacks (01:21:40): It's worse than that, Jason, because here's what happened after the June 16th summit in Geneva between Putin and Biden last year. Okay? Putin tells Biden to his face, this is a red line as they've always said. So what does the administration do? Not only do they not negotiate the Russians. They invite Zelensky to the White House on September 1st last year. Yeah. Jason Calacanis (01:22:01): We we talked about And then hold on a David Sacks (01:22:02): second. Then on November 10th, they published a massive 10 year charter agreement. This was a huge finger in the eye to the Russians. And on the heels of that November 10th charter agreement, the Russians basically delivered an ultimatum to the US demanding a written guarantee that Ukraine not joined NATO. And then in January, Blinken was tasked with negotiating with Lavrov and Blinken said there has been no change. There will be no change. NATO's door is open and will remain open. This administration was incredibly stubborn. They were absolutely refused to use diplomacy to diffuse the crisis. Now you say, well, we can't know what it would have done. Well but the point is they never tried. Jason Calacanis (01:22:38): Is a Ukraine a sovereign country? David Sacks (01:22:40): Yeah. They are. But the point is Chamath Palihapitiya (01:22:41): -- -- Jason Calacanis (01:22:42): pick what they do in their fate? David Sacks (01:22:44): Look. This idea that there's a -- Do Jason Calacanis (01:22:45): they get to pick their fate as a sovereign country? I think you would agree. Yes. k. David Sacks (01:22:50): Well, here's the question. Is you're what you're trying to do and is is create a doctrine. Okay? You're trying to create a new doctrine that a country gets to join whatever security alliance they want, whatever military alliance they want. That is not a doctrine we believe in when it comes to the Solomon Islands, It's not a doctrine we believe in with respect to Cuba and the Cuban Missile Crisis. And the fact the matter is is that the nations of the world are engaged in security competition. And the re and if if a country like Ukraine joins a new military alliance that has huge externalities. And so we do not believe in that doctrine, Jason. This is a doctrine that did not exist until February. Jason Calacanis (01:23:29): Wait. We don't believe more people should be able to join NATO. while Sweden and Finland David Sacks (01:23:34): are safe. Chamath Palihapitiya (01:23:34): -- David Sacks (01:23:34): believe that. But this this doctrine that the countries of the world should be able to join whatever military alliance they want. that is not that is not we do not practice that doctrine. That is not a doctrine Jason Calacanis (01:23:44): we believe in. David Sacks (01:23:45): Cuba. Cuba and then more recently the Solomon Islands. Jason Calacanis (01:23:48): Okay. Yeah. I mean, listen. I I I'm not saying this war is not a mess. Whole wars tend to be a mess. I'm not saying we shouldn't try to resolve it with everything we have. do think the people of the Ukraine, you know, get to pick their fate. And and I am in support -- Listen. David Sacks (01:24:01): I think we I I agree. Chamath Palihapitiya (01:24:02): -- Jason Calacanis (01:24:02): in support of the of NATO being stronger and stronger, and I'm in favor isolating Putin, you know, and using diplomacy as the primary tactic to do that. And maybe trade as a run over country because he won't stop at Chamath Palihapitiya (01:24:15): 1. Jason Calacanis (01:24:15): I I think that's the The big question I think is, will he stop at Chamath Palihapitiya (01:24:18): 1? Jason Calacanis (01:24:18): Do you think he'll stop at one country? Listen. History has proven he won't. David Sacks (01:24:22): You just said you you wanna use -- Are you Jason Calacanis (01:24:24): okay with stopping him? David Sacks (01:24:25): Listen. You you just said that you wanna use diplomacy as the primary tactic. Of course. Yes. We agree on that. The question is what you're willing to give up? because the administration was not willing to engage on the key Russian concern, which is the admission Chamath Palihapitiya (01:24:38): -- Let me ask you one for you. -- David Sacks (01:24:39): Ukraine it to NATO. Jason Calacanis (01:24:40): Do you think Russia will stop? with Ukraine or or Donbass. Do you think that's actually the stopping point for Putin? David Sacks (01:24:46): Listen. I think there's a few ways to come at that question. One is to add what is their motivation, which is very hard to know because it's inside Putin's head. Okay? So the second is what are their interests, and the third is what are their capabilities. The capabilities question is pretty easy to answer. I mean, they have had a very hard time winning this war. They've won this eastern region of the Donbas because I think Chamath Palihapitiya (01:25:07): Why is that? Jason Calacanis (01:25:08): Why did they have a hard time? David Sacks (01:25:10): Well, because their military capabilities are obviously not as great as people thought. Jason Calacanis (01:25:14): And the -- And in Ukraine got a lot of weapons. from the West. David Sacks (01:25:17): From from NATO. Exactly. So this idea listen. I've said it before. The EU's GDP is 10 times greater than Russia's. And, you know, economic strength is the foundation for military strength. Moreover, we've seen that these NATO weapons are incredible. The US's weaponry I mean, it's Chamath Palihapitiya (01:25:35): -- Jason Calacanis (01:25:36): So you're in support of providing weapons to Ukraine. NATO, the EU. The European countries Chamath Palihapitiya (01:25:41): -- David Sacks (01:25:41): I'm not in favor of creating a forever war in in Europe. Jason Calacanis (01:25:45): That is based on what's David Sacks (01:25:46): in the cards. But but the question is, Jason, you just said that we have to isolate Putin. We have to deprive him of any of any positive outcome from this war. Jason Calacanis (01:25:55): No. No. No. I just have to get to stop him from invading countries. That's why we stop him from invading more countries that David Sacks (01:26:01): are stopped. That's all. -- invading not gonna invade NATO countries because he's so outmatched. Jason Calacanis (01:26:04): Well, not NATO, but, I mean, there's a lot of countries that are not in NATO. So, I mean, I think that's the thing. But, I mean, listen. We discussed this a million timeshare think we both agree we want the war to end. I think we might just question this from David Sacks (01:26:14): your opinion. -- to do to end the war? And, you know, my my point is this, that the Chamath Palihapitiya (01:26:19): -- Jason Calacanis (01:26:19): The question is what is Putin willing to do in terms of starting wars innovating other countries, and what does the West have to do to react to that? You know, I think that's what we're talking about here. We didn't start this war. You know? But, anyway, let's move on. I think -- Well David Sacks (01:26:31): well, hold on a second. We we have not started this war, but we failed to prevent it through the use of diplomacy. That's always been my point. Yeah. I think this war Jason Calacanis (01:26:37): I think this war was David Sacks (01:26:39): I think this war was easily preventable if we had listened allegations, obviously. easily. Yes. Jason Calacanis (01:26:44): Okay. Yes. I'm I'm not sure if that's what Chamath Palihapitiya (01:26:47): -- David Sacks (01:26:47): Let me just tell you right now. The deal that would end this war is the same deal that was on the table last year with 0 bloodshed, which is Ukraine remains a neutral state. There's autonomy for the Russian speakers in the Donbass. And Crimea basically, remains part of Russia. That was the deal. That is the deal. That will be the deal. The only question is, does the whole country have for you destroyed? Alright. Jason Calacanis (01:27:09): Well, we're gonna find out in the coming months. David Sacks (01:27:12): And does the world have to go through a global recession with famine? Jason Calacanis (01:27:15): These are big questions. Yeah. It's not the the sacrifice it takes to stand up to dictators is very significant and especially ones with nuclear bombs. And it will be even worse with Taiwan. mean, that if we think that this is difficult, can you imagine this kind of escalation with a capable adversary if Russia is not super capable and their weapons turned out to not be as strong. My god, what would Taiwan look like? Chamath Palihapitiya (01:27:38): Did you guys read this story where It was the deputy foreign minister got demoted, and there was all this speculation. Like, why did he get demoted? And one of the things that came out was that, you know, he was very very pro Russia and Jason Calacanis (01:27:57): And she is not Chamath Palihapitiya (01:27:59): And g is not and g is is much more hedged and moderate. And -- Yeah. -- you know, wanted to have more optionality and felt that he was cornered because I think there was What what was the quote? I mean, Nick, you can pull it, but it was something about, like, you know, the the strength between basically China and Russia is infinite. But that was a that was a quote that he said that was a little bit off the reservation, it seems. And so -- Yeah. Jason Calacanis (01:28:19): He's got total defense. Yeah. Yeah. Yeah. Yeah. Yeah. No. There's an important story as well. I mean and, you know, it's one of the things that we can look at what's happening in these political situations. I think we probably have 60, 70 percent of the information. Chamath Palihapitiya (01:28:31): Not even. Not even. Jason Calacanis (01:28:33): Really quick. Tell us what's going on in alpha fold world, Sultan of Science. David Friedberg (01:28:36): There was a paper published about 2 weeks ago in the journal Science. And it's actually an important paper because it used alpha fold to do some really important work. And the work is to actually create a 3 d structure, a 3 d model of the nuclear poor complex. And that nuclear poor complex is really the scaffolding that makes up the nucleus of a cell. So all eukaryotes, you know, all plants and animals have a nucleus in our cells, and the nucleus holds the DNA. And the big question Chamath Palihapitiya (01:29:11): -- Friedberg's Internet connection is getting bored. It's Jason Calacanis (01:29:16): Zukka. It's like you guys are such a jerk. David Friedberg (01:29:19): Just let him finish his sentence. Did it break up? Jason Calacanis (01:29:21): Yeah. You're fine. Keep going. David Friedberg (01:29:23): Your Internet connection with TELUS leak because Chamath Palihapitiya (01:29:25): it was so boring what you're talking about. Jason Calacanis (01:29:27): Keep going. So what does this mean in terms of Chamath Palihapitiya (01:29:30): -- David Friedberg (01:29:30): Well, hold on. So so what this team did and and this is a a a the the problem that's kind of been around for decades is we've never really understood what the physical structure of the nucleus in a cell looks like. And this is important because the physical structure regulates how molecules get into and out of the nucleus and how DNA is expressed and how the RNA that comes out of the DNA goes into the rest of the cell. And this regulates so much of human health. In fact, it's been shown and demonstrated that dysfunction in the nuclear pores or the the nuclear pore complex in the cell can lead to things like viral infection, brain injury, cancers, cardiovascular disease, many diseases their their underlying driver may result from dysfunction in the transmission of molecules into an out of the nucleus of the cell. And so scientists have always tried to figure out what does that transport mechanism look like? What does that infrastructure look like. And so for the first time and scientists have published theories on this, and they've shown using X-ray imaging, you know, some theory around what these complexes look like. And what this team at Harvard did that they published 2 weeks ago is a really groundbreaking, extremely detailed view of the entire nuclear comp nuclear core complex around the nucleus of the cell by combining both x-ray imaging and alpha fold. And so what they did is they took the predicted physical structure of those proteins from alphafold and use that to construct a sample of what the the nuclear poor complex looks Chamath Palihapitiya (01:31:10): -- Jason Calacanis (01:31:10): How did they know it's accurate? David Friedberg (01:31:12): And so using this x-ray imaging, they've been able to kind of verify some of the assumptions of alpha fold yields. And now they've created this 3 d model. And this 3 d model now gives and by the way, just to think about this physically what it means like for a second, The nuclear poor complex, think about it as like a fence, like a a spherical fence that sits around the nucleus. And some parts of that fence open and close, Some parts are static. And the way that certain things open and close and what can fit through them and how they fit through and how stuff gets stuck is really important to understand as a way to both understand the underlying cause of diseases like cancer, but also how we can create therapeutics and how we can target specific things that we can fix and how we can get molecules into the nucleus of the cell to regulate DNA expression and edit the DNA inside cells. Chamath Palihapitiya (01:31:59): -- Jason Calacanis (01:31:59): mind blowing. So wait. If I were to translate this from Nerd, You basically alphafold predicted no. I I'm being sincere. There's a map here that we were not able to see through x rays and through, you know, physics, but AlphaFold predicted some of that and filled in the gaps so now we have the map has been filled. David Friedberg (01:32:18): That's a great that's a great way to describe it. And so now we have this in incredibly detailed 3 d image, and and Nick can share the images on our YouTube screen here of what the nuclear poor complex looks like and how each of those pores work. How do they open and close? What's the structure of them? This isn't simply like a circle. This is like all these weird tentacles and little things sticking out. And that can help us predict what molecules get stuck and how one error in one of those proteins can cause things to get stuck. Jason Calacanis (01:32:46): cancer or something like that? David Friedberg (01:32:47): Or -- How how how how it could cause certain DNA to be overexpressed or under expressed causing things like cancer. Jason Calacanis (01:32:53): So we're gonna live forever. Chamath Palihapitiya (01:32:54): -- David Friedberg (01:32:54): a whole new area of research in medicine, gene therapy, and new things that we can think about targeting to fix a lot of these underlying diseases. And so this was a groundbreaking paper incredible -- What's Jason Calacanis (01:33:05): the name of the paper? David Friedberg (01:33:06): Can we Jason Calacanis (01:33:06): just get the name of the papers so people can Google it? We'll put it in the show notes as well. David Friedberg (01:33:10): That's been amazing. -- is yeah. So it's a team out of Harvard. We'll we'll send link in the in the show notes structure of cytoplasmic ring of nuclear port complex by integrated cryo EM and alpha fold, terrible naming, not for the general audience, Jason Calacanis (01:33:23): No. No. It's okay. Saks is printing it out right right now, and he's gonna use it for his kit his new kit David Friedberg (01:33:28): and solidify. I just wanna highlight you know, because we talked about alpha fold, I think, last year or the year before, Chamath Palihapitiya (01:33:33): and David Friedberg (01:33:33): how it was gonna open up all these new areas of risk. Here we are. Are you still an incredible example of how AlphaFold's been used, to solve this really misunderstood or never really well understood aspect of biology that is that the root cause of so much of disease and creates all this opportunity for medicine and therapeutics, research, and discovery. Chamath Palihapitiya (01:33:52): Alright. David Friedberg (01:33:52): This is Ben. It's great to see this breakthrough. Jason Calacanis (01:33:54): Sorry. We didn't get to January 6th for Rovi Wade. We'll get to those in the next episode, and we'll Chamath Palihapitiya (01:33:59): see -- Listen. I think Rovi Wade, I'm not sure there's I mean, much -- -- do something about the actions, but we did a pretty thorough episode. So folks really want us to double click. We double clicked with 2 of the most prolific constitutional experts in the space when it first got leaked, so please go and watch -- Yeah. -- or listen to that. Alright. Which episode is that number? Jason Calacanis (01:34:18): I don't know which number. We'll put Chamath Palihapitiya (01:34:19): it in the show It'll be Jason Calacanis (01:34:20): in the show notes for everybody, and we'll see you all next time. Bye bye. Chamath Palihapitiya (01:34:24): Bye bye. Bye bye. Love you, sir. Jason Calacanis (01:34:27): we'll let your winter ride. Rainman, David Sachs. I'm going home. David Sacks (01:34:34): And it said, we open sources to the fans and they've just gone crazy with it. Jason Calacanis (01:34:44): what airliners are trying. Besty's our car. I'm on the 13th. That is my dog, so you know. I wish driveway setbacks. Oh, man. I Chamath Palihapitiya (01:34:56): might have to be out here. Jason Calacanis (01:34:58): We should all just get a room have one big you, George, because they're all these useless. It's like this, like, sexual tension, but we just need to release them out. What you're the thief? What Where did you get Murphy's artifact?