软银愿景基金亏损逾 210 亿美元、泡沫信号、宏观图景与特朗普被搜查

Chamath Palihapitiya (00:00:00): How mad is Saks gonna get when he sees my button situation today? Jason Calacanis (00:00:03): I'm gonna join you. Speaker 3 (00:00:04): Jamal, how are you doing? Chamath Palihapitiya (00:00:05): Oh my god. Look at the collar situation. Look at the button situation. Look at that. Oh, this is fantastic. Jason Calacanis (00:00:12): Oh, hey, Basties. So let's got off the lake. Chamath Palihapitiya (00:00:16): Where the lake? Jason Calacanis (00:00:17): It's got the lake. Yeah. I was just on the lake with the boat. David Friedberg (00:00:19): Lake Cuomo? Where where were you? Jason Calacanis (00:00:21): I was doing a little wakeboarding, Tahoe. Yeah. I was still wakeboarding. You mean, suck. Chamath Palihapitiya (00:00:24): meant that took all 5 kids and we navigated the entire island of Sardinia for 8 days. Amazing. Jason Calacanis (00:00:32): And by when you say we navigated, you mean the crew navigated, and you ate seafood. Yeah. Chamath Palihapitiya (00:00:37): It took it took a village, but Jason Calacanis (00:00:40): The weather winner's pride. Rainman, David Sachs. Speaker 3 (00:00:48): open source it to the fans and make discoveries. Jason Calacanis (00:00:56): Alright, everybody. Welcome to episode 91. Episode 91 of the all in podcast. Yeah. We're still here. Lots of news to discuss this week with me, of course, to chop it up from his deposition room, the war room, the rain man himself. David Sacks. How are you doing, brother? Speaker 3 (00:01:11): Good. Jason Calacanis (00:01:11): Big week for you. David Sacks (00:01:13): They're all big weeks. Jason Calacanis (00:01:14): They're all big weeks. Yeah. You look tired. David Sacks (00:01:17): Or we're recording pretty early today. Jason Calacanis (00:01:19): It's a little exhausting. David Sacks (00:01:20): You actually look really tired. Jason Calacanis (00:01:22): What are you talking about? Just cut off the lake. I I feel fresh. I was just wake boarding this morning on Lake Tahoe. Speaker 3 (00:01:27): Oh, okay. I'm refreshed. I'm refreshed. Jason Calacanis (00:01:29): And, of course, in front of his $9 clip art that he blew up on easy prints .org, the Sultan of Science himself, David Friedberg. How are you, sir? Always great to be with you, Jake Hall. Are you working? David Friedberg (00:01:41): It boosts my self esteem and my morale to be with you every morning that we get to connect over Zoom. Jason Calacanis (00:01:47): I'm glad that your performance has been stratospheric the last 3 weeks. You're going on a hot streak. Let's see if you can continue it on episode 91. And missing many buttons this week, We've got it. We've got at least a three or four button August going. How are you doing, a dictator from your island the remote island? Did you you you invaded an island? Chamath Palihapitiya (00:02:08): Marcus scope another 5% and one more button comes undone. Speaker 3 (00:02:11): Oh, I love it. So this is 20% up. and we could go to 25. That's Chamath Palihapitiya (00:02:15): a bull shirt. Daddy's back. David Friedberg (00:02:17): The more bullish he gets on the market, the more he unbuttons. Chamath Palihapitiya (00:02:19): Daddy's back. So the -- Well, Speaker 3 (00:02:21): the low rise jeans on right now, or are Jason Calacanis (00:02:22): you wearing shorts? are you wearing? Show us those stick lines. Chamath Palihapitiya (00:02:25): -- wearing these beautiful linen shorts. David Friedberg (00:02:27): Can you stand up and show us? Jason Calacanis (00:02:28): Yeah. Come on. That was a 360. Come on. Chamath Palihapitiya (00:02:30): Let's see. like, I had I but these are the most beautiful -- Speaker 3 (00:02:34): Oh, inner thigh. -- inner thigh. That's a little too much thigh. David Friedberg (00:02:37): Yeah. That's like a chicken wing. Chamath Palihapitiya (00:02:38): You guys like this? David Friedberg (00:02:40): Nice tight too. Very tight. Are you -- Yeah. Those are definitely yours? Jason Calacanis (00:02:44): Are you wearing, like, a children's size or something? Is that a junior size? Chamath Palihapitiya (00:02:47): I like you know, I like the tighter sizes. Jason Calacanis (00:02:49): You do. Chamath Palihapitiya (00:02:50): I do like the tighter sizes. I think they they they fit my body type. David Friedberg (00:02:54): accentuate all the little bumps and Jason Calacanis (00:02:57): the nodules. Too much information. Alright. Let's start with there's a lot to talk about this week. I think one of the most interesting things last week, we're talking about it in the group chat that doesn't exist. Vision Fund's $21,000,000,000 investment loss for the quarter. Masayoshi san did a really great YouTube video. I sent it right. Did he get any of you guys watch the video? David Friedberg (00:03:19): Yes. Jason Calacanis (00:03:19): No. Oh, okay. It's it's really interesting to watch. We'll put it in the show notes. David Friedberg (00:03:23): it's like a 6 minute interview he put on his earnings page. Right? Like, right when they put out quarterly earnings. He's like, here's my interview. Jason Calacanis (00:03:30): Yeah. he he comes to a podium and basically talks about the Vision Fund. Obviously, if people don't know, the Vision Fund 1 was a $100,000,000,000 largest venture fund ever raised. And SoftBank's current market cap is 66,000,000,000. Here's the quote from the FTR article. Sunset on Monday, that SoftBank would now subject itself to dramatic cost cutting exercise after a $59,000,000,000 in been gain at the 2 Vision funds almost completely reversed over the past 6 months, they were up almost $60,000,000,000 at the peak, and it came crashing down Masa kicked off the presentation showing portraits of tokugawa, tokugawa, Iyasu. Speaker 3 (00:04:06): This is the founding show gun of Japan's Jason Calacanis (00:04:12): Tukugawa, Shuganat, and you ruled Japan for sick. I mean, I'm killing this. David Friedberg (00:04:18): It's such a long intro. Jason Calacanis (00:04:20): Got it. So hard. Yeah. I mean, Chamath Palihapitiya (00:04:21): it but it was just so great. Speaker 3 (00:04:23): Let me just play Jason Calacanis (00:04:24): a clip for you. Here here's a 68 second clip, and we'll we'll talk about it right after, and then we'll get into what all this means. Speaker 6 (00:04:30): This is a portrait of Tokugawa EA Yas. He actually made a big loss against Takeda Shingen and came back in the background of that tokugawa Eis had to face Takeda shingue, which is much, much larger army than theirs and most of the allies actually said Speaker 3 (00:04:50): this is going to be losing, but also that they Speaker 6 (00:04:50): should not go for it, but actually better to stay at the castle. However, tokugawaiyasu didn't want to lose his face so that he get out from the castle, had a battle made a complete loss and suffer and came back in that actually non lesson, he tried to remember and remind his own learnings and put it into this drawing. So since the foundation of SoftBank Group, I made Chamath Palihapitiya (00:05:16): 2 Speaker 6 (00:05:16): consecutive quarter's loss So previous quarter and this time quarter, consecutively, we made 3,000,000,000,000 level of the loss. So in total, Chamath Palihapitiya (00:05:31): 6,000,000,000,000 Speaker 6 (00:05:32): was made in the past 6 months. So I believe I need to remind that myself, Jason Calacanis (00:05:39): pretty spectacular loss, and then he he goes on to take some q and a. And this is the, I guess, the the killer quote. When we were turning out big profits, I became somewhat delirious. and looking back at myself, I am quite embarrassed and remorseful. You remember, of course, and he and he complained a little bit in the in this whole thing about how there was a giant bubble without ever recognizing that, he kinda created the bubble with a Chamath Palihapitiya (00:06:00): $4,000,000,000 Jason Calacanis (00:06:01): check to WeWork at a $47,000,000,000 valuation after a Chamath Palihapitiya (00:06:04): 20 Jason Calacanis (00:06:05): minute meeting with Adam Newman. This chart is pretty incredible. This is the net income quarterly. essentially, you can think of SoftBank as, like, a holding company of a bunch of different assets including Alibaba, previously Uber, and all of this Vision Fund stuff. Chamath Palihapitiya (00:06:20): 97% Jason Calacanis (00:06:21): decrease in terms of deployment of capital. So if you look at capital deployment as well, nobody ever put this much money to work, especially in privates. The second chart, if you look in q Chamath Palihapitiya (00:06:32): 1 Jason Calacanis (00:06:32): of 2021, they put 20,000,000,000 into work. And then q 1 this year, they're putting 600,000,000 to work. Alright. Just quick reflections on this. What we saw here with Masayoshi's on deploying $100,000,000,000 at the top of the market into and maybe it's basically creating the market top Chamouth. Are there lessons here or takeaways for you? I mean, Chamath Palihapitiya (00:06:54): I think that people don't seem to understand that if you're gonna attempt to be great, there are gonna be moments where you look the exact opposite of gray. You know, the guy that takes the final shot is the same guy that can miss the final shot. and here is a guy over his, you know, 50 year career has had some huge ups and downs. This is also the same guy that found a way to rip in 25 or $30,000,000 and made a 125,000,000,000 off of Alibaba. That's the same kind of person who has that kind of risk tolerance. He was for 7 minutes or something, the richest person in the world. Yep. And then lost 99 percent of his wealth in the dot com bubble. I have enormous respect for a person like this because I feel like it takes enormous amounts of courage. I've said this before. most people jibber jabber about investing in all of this stuff and when push comes to shove, they crumble like little bitches and run into mommy's coattails. It's hard to put lots of money to work and this is a guy that's done it. So the same person that can make a 125,000,000,000 Turns out it's the same person that can lose 30,000,000,000. And so one thing is I would just keep in mind that this is a resilient guy who seems to land on his feet. And the second thing that nobody talks about is how smart Saudi Arabia and Abu Dhabi were in how they structured the investment into the Vision Fund because half more than half their investment is in preferred equity, which is effectively debt that pays a coupon. And you see it now where SoftBank, by the way, who has been pretty smart in how they've managed their Alibaba position? have been using these derivatives and forward swaps to be able to sell and manage their liquidity. So it turns out that, you know, even if the Vision Fund breaks even, Saudi Arabia and Abu Dhabi will have made money because I think they get paid a 6% coupon on, you know, $50,000,000,000 is a lot of money over 6, 7, 8, 9 years. It's a lot. Soft Bank has found a way to sell down 25 percent of Alibaba, which is no trivial feat for half a $1,000,000,000,000 company. Chamath Palihapitiya (00:09:04): And this guy gets to keep swinging And if he, you know, hits it one more time, he'll end up with half a trillion. Jason Calacanis (00:09:09): This chart is pretty great, Saxx. If you look at this, this is the gain and loss on investments at the Vision Fund. You can see the first and fun racing up. Then coming down, I think, after that summer of IPOs that we had in the Airbnb Uber days and then a huge peak run up in 2021 and then coming crashing down. Apparently, he wasn't selling any portion of this. That to me was a big lesson of, like, maybe pairing some of these winners if it sold 10 or 20% on the way up. This could look like a completely different outcome, but I agree with Itchimov. He he swung from the fences, and there was downside protection built in for the LPs into some of these acts. What are your thoughts? Any lessons here in terms of the impact on our overall ecosystem or that you can take as a capital allocator yourself. David Sacks (00:09:56): Well, Jason, I think Masa did something you could never do, which is admit a mistake. Oh, Speaker 3 (00:10:03): Here we go. Wow. I'm personal quick. Yeah. Well, when I have my first mistake, I would certainly would like to admit it. I'm waiting. David Sacks (00:10:11): Imagine that you ran a Chamath Palihapitiya (00:10:12): 100,000,000,000 David Sacks (00:10:13): for sovereigns instead of a 100,000 for doctors and dentists. And you can kinda put yourself put yourself in Moss's position. David Friedberg (00:10:21): Yeah. Oh, I love Saxon in the morning. Saxon in the Speaker 3 (00:10:25): morning's like a cup of coffee It's up early, Ben. It's a big lesson here. David Friedberg (00:10:28): You think so. Speaker 3 (00:10:29): Let's go to a 9 AM. He's coming like David Friedberg (00:10:30): a early episode there. He's been hibernating and you poke him. Sheesh. Wow. David Sacks (00:10:34): You know, look, I think that SoftBank obviously made some decisions that were you know, they were they were sort of peak decisions. They were they were a little bit bubbly. They didn't take chips off the table when they probably should have. It's easy to to fall into these bubbles because the psychology of it is so powerful. And as, you know, Bill Gerley's pointed out, these bull markets are more like a sawtooth, which is they gradually go up for 9, 10, 11, 12 years And then when they end, they just you know, it's like an elevator going down. So, you know, if the market had continued for another couple of years, Massimo would have made a lot of money. But any event, look, you took responsibility for the losses. This was a very you sort of culturally Japanese speech. I mean, he didn't commit seppuku at the end, but it was kind of the He was heading that direction. They might Speaker 3 (00:11:23): have to move the camera off oh my god. What is he doing with that sword? David Sacks (00:11:27): It was the verbal equivalent, basically. And look. He took responsibility. What else can you do? Now one one thing I would quibble about is the idea that that SoftBank caused this bubble. You know, it wasn't just SoftBank. We had tons of Chamath Palihapitiya (00:11:41): -- David Sacks (00:11:41): Tiger comes to mind. Yeah. Tiger had huge funds they were deploying very quickly, but there was a lot of so called tourist money. Basically, money from crossover funds investors who are not primarily VCs came into the ecosystem over the last few years, and a lot of that was driven by sovereigns and by liquidity. So, you know, you can't forget that we had $10,000,000,000,000 of liquidity pumped into the system over the last couple of years. And Many billions of that found its way into the tech ecosystem. And, fundamentally, you know, VC is not that scalable. There there was an attempt to make it scalable, there's an attempt to push more money into VC. Jason Calacanis (00:12:19): Why isn't it scalable? Why isn't it scalable? because people have tried. Right? This is not a percent. David Sacks (00:12:23): It's a craft business. I mean Chamath Palihapitiya (00:12:25): -- Jason Calacanis (00:12:25): What is it? Chamath Palihapitiya (00:12:25): -- David Sacks (00:12:25): why we Chamath Palihapitiya (00:12:26): -- It is scalable. It's just that if you try to scale it, your returns will go to 0. Speaker 3 (00:12:31): Yeah. David Sacks (00:12:32): But it's kinda the same thing. Right? David Friedberg (00:12:33): Like, I wanna I wanna just critique the strategy for a second because, you know, we're talking about as if market conditions caused these massive write downs, and that is the only reason that these funds have suffered. But, you know, if you read a lot of the stories of Masa's investments in a number of these companies and the full list is available and how much he invested, There are many, many stories, and I've heard many of them personally from CEOs that have met with Masa and raised money from him. You go into Masa, You tell some the bigger the story you tell, the more excited he gets, the more of the world you can capture. And you go in and you're raising a $100,000,000, he's like I'll invest 400,000,000. You say you're raising 25,000,000. He's like, I wanna give you a 150,000,000. And his his motivation was always give you more capital so you can go capture the market. And the problem in that model is that by giving you so much money, capital becomes your primary asset as a business. And capital needs to be the fuel that enables your assets as a business to accelerate. But as soon as capital itself becomes your primary asset, the business is doomed to fail. And that's a really key point. If you let's say and let me let me be very specific about what I mean. Let's say you have a direct to consumer business that requires online marketing. And your your your business grows well. You spend a $100 to acquire a customer. suddenly, someone says, here's a $1,000,000,000 to spend on acquiring customers. As soon as you have to start deploying a $1,000,000,000, your cost of acquisition goes up, the number of customers per dollar spent goes down. and the business itself starts to look upside down and fail. And that's what happened with a number of these businesses that Masa put in, and he put oversized checks in WeWork is a really well documented example in terms of what happened. When they started to accelerate their growth beyond the natural course of the business because of the amount of capital that they took, it really started to hurt the fundamental profitability in Unit Economics of the core assets of the business. David Friedberg (00:14:23): And this strategy theoretically can work to a degree, but Masa took it to a level that had not been seen before. I think I I highlighted for you guys like back in Chamath Palihapitiya (00:14:32): 20 11, David Friedberg (00:14:35): I think, when Andreessen Horowitz, they they pitched me on this idea. I was trying to raise $25,000,000 in my company. Mark was, like, we'll give you $40,000,000. You can accelerate your growth. And and he's like, we want you to go capture the market. Peter Tiel always use these terms. Go capture the market. And these -- And blitz scaling. Chamath Palihapitiya (00:14:49): Read David Friedberg (00:14:49): And blitz scaling. Again, Reed Hoffman with blitz scaling. And and the motivation is, look, we'll give you more money because the the core asset of the business works, the core assets of the business work. So the money should be more fuel for the fire. The problem is if you over indulge, if you put too much money in and the the asset cannot handle that much capital, the whole thing collapses. Jason Calacanis (00:15:08): Yeah. And I would say David Friedberg (00:15:09): too many documented examples of this in his portfolio And I think that the strategy is worth highlighting that there are some issues with that strategy across all these business categories. It doesn't always Right. Jason Calacanis (00:15:20): The core issue here, I think, is and then I'll I'll go to You Saxon then Jamath. The core issue here that you're describing is exactly correct, and it really is up to to decide what they're gonna do with that capital. The WeWork example is so instructive because they were buying under market buildings in the in the tenderloin and then marking them up to, you know, class a office space and getting those prices. Once they got the mass of money, he started buying class a and offering kit. at class b prices and flip the whole business upside down. Chamath Palihapitiya (00:15:46): -- David Friedberg (00:15:46): at which you can deploy capital -- Yeah. Chamath Palihapitiya (00:15:47): -- David Friedberg (00:15:48): does not flex. Right? And so in in all businesses, understanding the rate at which you can deploy capital to grow is critical to understand how much capital you can raise. And then if you raise too much money and you and you flex beyond what the natural condition of the business is, in terms of capital deployment, the economics fall apart, and the business itself looks terrible, and eventually, you will have a write down. Jason Calacanis (00:16:08): And the distraction on the founder is the key. I mean, look what Adam Newman. He was easily distracted. He started buying SURF machines and companies and starting kindergarten. David Friedberg (00:16:16): You cannot really deploy that much capital. So you unnatural ways to deploy. Speaker 3 (00:16:19): Let David Sacks (00:16:19): me build on that point. I think there was a belief on the part of SoftBank that they did publicly espouse, which is that they could be the kingmaker. David Friedberg (00:16:25): Totally. David Sacks (00:16:26): And in fact, you know, we had some startups that were in competitive markets. And SoftBank would basically announce that we're gonna be anointing we're gonna be picking a winner, anointing a winner, and writing them a huge check. And everyone kinda had to play along because if your competitor got that 100 or $500,000,000 check, then you would be presumably way behind. So there was this belief that they could be a kingmaker and make the difference. And I think that what we saw is that for whatever reason, partly because of the dynamics of FreeBird is talking about, that that strategy just didn't really work that well. And it what it really goes down to is that VCs can be helpful, but they don't ultimately cause the the the winning companies to be the winner. So this idea that you could be a kingmaker I think was a little bit flawed. And I think one way that Tiger actually improved on this model was that they never tried to be a kingmaker. They just they actually went the other direction, which is we're gonna own less your company. They try to be passive nondilutive capital, and they would do high priced rounds, but you know, with with reasonably sized checks, but they didn't try to go for 25, 30% ownership at a late stage. And founders did like that model better. Now as it turned out, they both had the market timing wrong. But I think this kingmaker aspect was was a problem. And one other aspect of that I think is that and I I don't wanna beat up on softening too much. I'll see something nice about them in a second. But I think one of the mistakes they made is you'd see them writing multi $100,000,000 checks into companies that were at a very, very early stage. Jason Calacanis (00:17:59): Pre product market fit. David Sacks (00:18:00): Pre product market companies frankly that we thought were like seed investments. Jason Calacanis (00:18:03): Brandless was the perfect example. They were it was a it was a company made, like, soaps and dishwashers and cereal, but they had no brand on it. It was like Uniqlo of this. And they gave they gave them, I think, $200,000,000. And I was like, this is a seed stage company. It makes no sense. Speaker 3 (00:18:16): Right. Right. David Sacks (00:18:16): They were I mean, look, they wrote like $500,000,000 seat checks into robotics companies effectively. And it's because that, you know, the SoftBank had a thesis. And I think sometimes if again, this goes back to Kingmaker, if if you're a VC and you think you're the one with the thesis, and you're the one who's gonna make the difference. It's actually a seductive fallacy to fall into. It's the founder who has the thesis. and you can't you can only do so much to help and you can't really force it. And so I think they ended up making some cutting some really big checks into some companies that were really risky. And, you know, the way that we do growth investing is that, you know, it's milestone based. we're writing the the size of the check is proportional to the amount of proof that the company -- Right. Chamath Palihapitiya (00:19:01): -- David Sacks (00:19:01): has. And and look, the the nice thing I'll say about, say, about Bank is recently, we've actually done some SaaS deals with them that I think are some really good deals. And they've written checks that I think are appropriate to the size of the of the company and the amount of proof they have. And they've been really easy to work with, and I look forward to doing more deals with them. But I think it would behoove them to do more deals like that where again check size is related to proof. Chamath Palihapitiya (00:19:22): I think that SoftBank and Speaker 3 (00:19:23): hindsight made one critical critical error and Chamath Palihapitiya (00:19:23): only one and everything else was sort of a method complete with that one error, which is that in their fund documents, they made this a 10 year fund. Now let me explain why is that an error. That is the status quo for all these funds. And the more nuanced part of that decision to make it a 10 year fund is that your investment period is only 5 years. So you're only allowed to put the money in for the first five. And then you have to basically manage the portfolio because there's an expectation that you raise a new fund. So if all of a sudden you have a $100,000,000,000 in a 5 year lasting life, the math says, oh my gosh. Okay. Well, I need to put 20,000,000,000 out per year. And then you try to look for, I don't know, let's say, 50 companies a year while the mean check size now, all of a sudden, balloons to 400,000,000. That was the error. You see afterwards the very, very smart private equity folks who saw that Speaker 3 (00:20:26): that was the error fixed it. Chamath Palihapitiya (00:20:26): So Blackstone, Silver Lake, When they came on the heels of SoftBank, what they did was they raised funds with a 15 20 year life. And what that allows them to do and what would it would have allowed Masa to do in this situation was just slow it Speaker 3 (00:20:44): way, way down. Pace yourself. Chamath Palihapitiya (00:20:44): And do fewer deals with much more capital and then be patient and say, I'm gonna have a 10 year investment with. And I think that that would have saved them. And they would have looked incredible right now because they would be the kingmaker in a moment where there is no money flowing into venture and early stage tech. So in my opinion, I think it was just that it was such an ambitious feat that when it came time to execute, whoever was really in charge of those details kinda fucked it up. and they should have realized the math didn't work for a 5 year fund life. And they should have made it a 10 year fund life or 10 year investment life which would have put a 20 year fund life on the thing, and I think Jason Calacanis (00:21:24): they would have been fun. Yeah. I mean, if you look at it as 60 months, maybe you take out August and, like, the holidays, basically 50 months to deploy a 100 a 100,000,000,000. It's 2,000,000,000 a month. Chamath Palihapitiya (00:21:32): 500,000,000,000 Jason Calacanis (00:21:33): a week. I mean, how do you even process that many deals? It's impossible. Chamath Palihapitiya (00:21:37): The quality of the diligence by by necessity has to go to 0. Jason Calacanis (00:21:41): Yeah. It's it's it was a crazy strategy. Chamath Palihapitiya (00:21:44): If you can breathe, you get money. If you can get a meeting, you get the money. I mean -- Jason Calacanis (00:21:48): Basically, I mean and and if they had just I I'll say there's there was one Chamath Palihapitiya (00:21:52): -- Sorry, Jason. You go ahead. No. And it forces you to have a team that is so broad and large and diffuse, that is not the game. This is another thing I would love to you know, for us to talk about. Jason Calacanis (00:22:05): Correct. Correct. Chamath Palihapitiya (00:22:06): Investing has never will never and is not ever a team sport. Okay? Explain. It is like basketball. You can be on a team but you are Steph Curry or you are not Steph Curry. You are Draymond Green or you're not Draymond Green. You are LeBron James or you're not. There are Jarrah Smiths on a team. There are Tristan Thompson's on a team. And you come together and the team can win a championship But there are these exceptional individuals. Speaker 3 (00:22:35): Yes. And the firms that have really Chamath Palihapitiya (00:22:35): done well consistently over decades embrace that philosophy, benchmark, supplier. You know, these guys don't try to create this team oriented glad handing approach. But they also don't allow the teams to get so diffused that there's 500 people running around ripping money in because you basically then return the beta of the market. And if the market doesn't look good in that vintage, then all of your returns look pretty crappy. Jason Calacanis (00:23:03): The lesson for being all of this is I think we we talk about riding your winners on the show. That came from just so people understand. When we said, ride your winners, and it's famously in the in the opening song here, what we were talking about was, like, don't sell your entire position like when Sequoia sold their entire Apple position or or other people have done, But pairing your position would have changed this whole story. If he had paired 10, 20% of some of these names that were breaking Chamath Palihapitiya (00:23:25): out -- I disagree with that too. Jason Calacanis (00:23:27): Along the way. Oh, why? Go ahead. because a dumb thing Chamath Palihapitiya (00:23:30): in the world. Jason Calacanis (00:23:31): I think the opposite. He would have had it up. Chamath Palihapitiya (00:23:32): A year ago, Sequoia just put out an entire document and a road map for becoming an evergreen fun. But and I read that down. And what I thought to myself is all of this looks incredible unless the market goes down. And then a market and then the market went way way down. Why? Because their whole thesis is we're gonna park and hold money. Well okay. But they also allowed a revolving liquidity mechanism for their LPs. So, you know, you're a cancer foundation and you wanna fund cancer research and you expect Sequoia to give you back money, you fill out a form, And Sequoia basically fronts you the money. Well, excuse me, but you can see how all of a sudden this can very quickly get out of control because then where does Sequoia that money. They'll have to borrow it. Jason Calacanis (00:24:15): Or liquidate some positions. Chamath Palihapitiya (00:24:16): But the whole point is to not liquidate positions. This this is what they said. Jason Calacanis (00:24:19): Yeah. So my Chamath Palihapitiya (00:24:20): my point is really think and David said this before, I think a VC's job is to be a VC. It's hard enough to do that job well. And if you think that you're gonna cascade across all asset classes and do better than the market. It's an extremely high bar that creates tremendous pressure and forces you To bring things on like debt and all of these leverage lines, which when markets go up will work in your favor, but can very quickly turn against you. Jason Calacanis (00:24:47): Yeah. I I disagree completely because when if you look at when you're in a private company and you're you own some private shares, You know the revenue. You know the velocity. You know the management team. You have more insights than everybody. You got a massive information edge because it's all based on insider information before it's public. And pairing your positions in privates can be amazing because you have some overvalued company because someone like Maso or Tiger comes along that overvalues it. So for venture funds, I think when you start hitting these 50100 x's, pairing 10% pairing 20% along the way, which Masa could have done in these private names, especially, would have been brilliant. Chamath Palihapitiya (00:25:19): You're saying don't distribute and just hold on and use debt and give give your LPs of all liquidity. Jason Calacanis (00:25:25): What what Chamath Palihapitiya (00:25:25): are you saying? Jason Calacanis (00:25:26): I'm saying if you have the opportunity to sell in secondary. you should pair your position in your winners Chamath Palihapitiya (00:25:32): 10 Jason Calacanis (00:25:32): or 20 percent 2 or 3 times. Chamath Palihapitiya (00:25:34): I'm not saying that, honestly. I'm saying Jason Calacanis (00:25:35): if somebody did that, this would be a different position. Chamath Palihapitiya (00:25:38): No. But, like, you're using soft you're using Apple and Sequoia as an example. You do remember the trajectory of Apple basically went to a $4,000,000,000 market cap for years languishing. I mean, the the idea that Sequoia would have held those shares because they had some proprietary views ludicrous Speaker 3 (00:25:54): Why Jason Calacanis (00:25:55): is it interest? What what if they just had a philosophy Chamath Palihapitiya (00:25:57): of keeping That company was on that store step. You can see the YouTube videos. When Steve Jobs came back, he said, we may not make it. Jason Calacanis (00:26:04): Yes. But Chamath, that in that that is part of the opportunity, but putting that aside, that's exactly what Sequoia is doing is they're saying we want to hold the legendary companies, the legendary brands with the great founders forever. Chamath Palihapitiya (00:26:16): Easy in hindsight. How do you do it today? Well, today -- Yeah. -- is Unity a legendary company, or should you have distributed it a $165 a share? Well, I'm That's an extremely hard question. Jason Calacanis (00:26:28): And I'm saying you can mitigate that question by pairing your position 10, 20%, so you have the best of both worlds. Zach, what do you think? Well, I David Sacks (00:26:34): think it's it's hard to pare down a position while the company is still private because the the companies don't don't want you to buy and large. But but once they do become public, then the question is when you distribute and we talked about this. I think It sounds like SoftBank was sitting on quite a few large public positions and could have distributed. I'm not fully familiar with their structure but given that they had all this debt, Seems like you'd wanna pay off all the debt as soon as you could. And missing the chance of doing They had a preferred coupon that to pay Chamath Palihapitiya (00:27:08): PIF and and Adia every year. I think it's, like, 3 or $4,000,000,000. It's well it's documented, but that's the 6% that they that they were owed on their $50,000,000,000. David Sacks (00:27:18): But do they pay it all flat? The Chamath Palihapitiya (00:27:20): -- Well, they have to pay it every year. They have to pay it every year. David Sacks (00:27:22): So they did it. I mean, look, I would just say these bubble. It's it's easy, you know, high sites 2020. It's really easy to point out these mistakes after the market's cratered. You know, my experience with these bubbles, whether you go back to 99 or 2021, is when you're in them, they're very powerful psychologically. You know? Everyone's talking about how everything's going up, and we I think, actually, you had some really good commentary on the show about back in November about how it could be the peak, how it could be all liquidity fueled. We didn't know for sure, but there were some pretty good predictions on this pot. But by and large, it's it's pretty hard to to know whether you're, you know, whether you're Chamath Palihapitiya (00:27:59): -- Jason Calacanis (00:27:59): Is there a grounding metric that you use? I'll open up to Friedberg and then everybody else when to know that the market is overheated to Friedberg is there something you look at and go, okay. We we've disconnected from reality. Price to earnings, price to sales, some valuation metrics are the things you look for. So you know that this is overheated, and maybe it is time to pair positions. What what have you learned over? Now our 3rd collective down market. David Friedberg (00:28:26): Valuation trophy hunting I would say is a pretty good indicator of things being things being -- Explain what that is. Chamath Palihapitiya (00:28:36): -- David Friedberg (00:28:36): in a heated market. Like, if the the businesses, the CEO, the founder, the venture firms, everyone is all about how much you can mark up your investment as opposed to talking about the quality of the business and the quality of the earnings, and then you revert back as we just recently did to now people talking about, okay. How strong are the gross margins of this business? How effectively can they deploy capital? What's the return on invested cap model key metrics around the fundamentals of the business versus the value that the market is willing to pay for the business. And the more heated the market gets, the more everyone focuses on terms like unicorn, decacorn, You know? And and that becomes the key metric as opposed to saying this business is so good. For every dollar they spend, they make $3 in gross profit in 12 months. that's what fundamentally says that's a high quality, you know, valuable business over time as opposed to here's what the market is telling me it's worth today. And if the market is telling you it's worth that much today and you're and that's what you focus on, you inevitably end up in these kind of bubbly moments where you miss out on focusing on core value creation, which will actually pay off much, much more over time. Jason Calacanis (00:29:57): Schomathew pointed out another signal. Hey. When smart people who have the largest amount of capital in the markets are clearing positions, Maybe that's a a a signal of a top. And then I think it's a really good insight by Freeburg. When the conversation, the narrative is about the valuation and the status and vanity metrics as opposed to the quality of the earnings. Hey. That's a really good indicator. We're in a bubble. Maybe you should start clearing positions. What are indications for you that were either in a bubble or the market is undervalued. because we're really talking about this timing. Right? Timing is very important. Chamath Palihapitiya (00:30:28): It's not possible. This is why I think that You have to define what game you wanna play before you start playing the game. Jason Calacanis (00:30:37): Okay. Chamath Palihapitiya (00:30:39): This is why I think it's kind of nonsensical for example. I believe that at best, I am an equity investor in technology Companies or things that have a technology bias because I can generally understand them maybe a few seconds fast than everybody else which allows me to make a decision a little bit quicker. But if all of a sudden I started investing in debt you should expect that I'll lose my money because I don't know what I'm doing. And that's not the game where I have any advantage. So I think the most important thing to do is to not try to do all of this crazy stuff because this is what happens in moments where either things are very very good or things are very very bad. People try to create all these stupid rules. And the rule the only rule is there are no rules. So I don't know. I just think it's like stick to your knitting. If you're a product builder, build products. If you're an early stage investor, just do that. It's hard enough to do any one of those things really, really, really well. But this idea that, you know, you're gonna come up with like some mosaic in the system, I think it's just highly suspect. I think the market returns have showed that everybody that tries has failed except for maybe 1 or 2. Fax anything. David Sacks (00:31:59): I mean Chamath Palihapitiya (00:32:00): This is not gonna work. What's point. So I don't Speaker 3 (00:32:02): know if you're an Chamath Palihapitiya (00:32:02): early stage investor, make good deals and then give the shares and book the win. Jason Calacanis (00:32:06): That's what I do. Yeah. That's my philosophy. Sachs, what are your thoughts? David Sacks (00:32:10): There's a couple of metrics that I'll be looking at from now on that I wasn't paying a huge amount of attention to before. One is the price to ARR of the median public SaaS company. And so like Brad Gersner has these great charts where you saw that Historically, that number was around 6. You know, the median SaaS company was was trading at about six times their next 12 months revenue. And it went all the way to 15 during this sort of COVID bubble in 2021. And for the high gross asset companies, which are the ones growing 40% and set 20%, it went from, you know, like, 8 to 35. So so I'll definitely be looking at that. And, you know, what you're looking for is just how off the historical mean are we? Positively or negatively? Because these public valuations are the exit comps for you know, the private markets. And those valuations do eventually trickle down. And so if there is a bubble in the public markets, it will trickle down to the private markets. So That would be, like, one metric. I mean, again, it's not something that, like, affects me daily, but it's something I'd wanna periodically keep tabs on. The other is just interest rate policy. I mean, I've never spent so much time in my entire career, like looking at inflationary interest rates than I have this year because who knew how much this stuff was affecting us? I thought I was a micro investor. I thought I was just picking companies on a micro level, as it turns out, we were all massively impacted by macroeconomic policy. And You know, it got so we didn't even notice it. The 0 the 0 interest rate policy, the syrup, along with the quantitative easing. These are supposed to be exceptional measures that started back in 2008, but we stopped noticing them. They continued for years years years. They continued until last year. And we again, we just stopped noticing because we got used to it. We kinda got hooked on hooked on drugs. David Sacks (00:34:01): So the market did. So I'm just gonna have to pay a little bit more attention to what the Fed is doing now. And, you know, if you go all the way back to the dotcom bubble interesting is that the Fed funds rate back in 1999 wasn't low. It was, like, 4%. It wasn't like it was even today. And we still had a bubble. But what popped the bubble was that interest rates went from 4 to 6% in from 1999 to 2000. That's what popped the bubble. So You know, I I don't I don't know if it will ever have a situation again like we had over the last years with a with a zerp But, I mean, that probably looking for that next time is fighting the last battle instead of the next one. But you do probably have to be a little bit more aware of monetary policy and what the Fed is doing. Jason Calacanis (00:34:48): Yeah. This chart exhibited 6 when the Vision Fund benchmarking against peer funds that Chamath just put into the group chat is absolutely spectacular. It puts Sequoia Insight And SoftBank, you know, large, large funds. against each other, fund size, a 100,000,000,000 for SoftBank, 8,000,000,000 for Sequoia, 6,300,000,000 for Insight, and to Tremont's point earlier, the pace is Yeah. Really crazy. A 130 deals. Chamath Palihapitiya (00:35:14): Deals per month, but then the average check size is 620,000,000. Jason Calacanis (00:35:19): versus a Chamath Palihapitiya (00:35:20): 13070. Jason Calacanis (00:35:23): And the deals per month, 3.5 versus point 6 versus Chamath Palihapitiya (00:35:26): 4.2. Jason Calacanis (00:35:26): So Insight going pretty fast with small checks, Soft mind going very fast with -- -- to hear Chamath Palihapitiya (00:35:32): -- -- Jason Calacanis (00:35:32): speech checks. Chamath Palihapitiya (00:35:32): -- is really you know, Sequoia has the benefit of being able to back test against 40 years of returns. And so if essentially what they're saying is there's really no more than 5 or 6 companies a year that are worth investing in. That's a really big signal that's worth thinking about. And so, you know, 5 or 6 companies, maybe they can absorb even $600,000,000 each You know, it still puts you at 3 and a half, $4,000,000,000. Doesn't put you at 20, which is what you need to put a 100 into the ground and 2,000,000,000 Jason Calacanis (00:36:02): a month. I mean, my lord It's like Brewster's millions or something. It's it's like some crazy premise. Chamath Palihapitiya (00:36:07): I think in fairness to in fairness to SoftBank, again, you know, these are the same guys that invested in Yahoo. they invested in all of these, you know, dotcom companies and brought them into Japan, including great businesses like Cisco. You know, these guys have been big time serial winners. I think the tactical mistake was not having a 10 year investment life. Jason Calacanis (00:36:28): I mean and we can be sitting here next year. Alibaba could double in value. A couple of their other positions could recover 50%. Okay. But we could be sitting there, and they could be they could have closed the gap massively. Anything's possible. I think, actually, a good jump off point here. Great discussion, gentlemen. do we wanna talk about the markets? And we got the inflation print, Saks, I guess, depending on what political party you're handed to either 8.5% or 0, 0% month over month. It a Democrat, if you're a Republican, it's 8.5% in our polarized times. But what does this tell us, Saxx, just at least about maybe inflation is tipped over, and we're gonna be flat for a little bit. That obviously caused the market to rip a little bit, and we had this incredible Jobs report, we're now at 3.5 percent unemployment. David Sacks (00:37:22): And we're twice making Jason Calacanis (00:37:23): jobs as we predicted. I mean, it's pretty extraordinary what happened in the last 30 days to the to these prints. David Sacks (00:37:29): Yeah. Look. I think that overall, the economic data is mixed but we got a couple of good data points in the last month. So inflation did decrease from 9.1to8.5percent Inflation was until now measured on a year over year basis, not a month over month basis, but since we got the 1st good month over month reading, all of a sudden now, it's been redefined to be on a month over month basis. Just this is the same thing that happened with the definition of recession. where recession used to mean 2 quarters of negative GDP growth. Of course, that happened. And so all of a sudden, the definition became unknowable. We have to defer to this this economic board that won't render a decision till next year. By the way, if that were true, how can we ever contemporaneously talk about a recession? You know, if if you had to wait until this economic sport declares a recession a year from now, the press could never have ever have reported -- For Speaker 3 (00:38:24): one shot. Chamath Palihapitiya (00:38:25): -- David Sacks (00:38:25): on recession. Jason Calacanis (00:38:26): Yeah. I I'm shocked to politicians Speaker 3 (00:38:27): are speaking. The politics of this are David Sacks (00:38:28): obvious, which is they keep redefining terms rather than admit that there's any bad data at all. That's mixed. Chamath Palihapitiya (00:38:35): Now David Sacks (00:38:35): look, I don't I don't think the data is catastrophic. I don't I don't think -- No. Chamath Palihapitiya (00:38:39): -- David Sacks (00:38:39): I don't think it's anyone's interest to catastrophes the data, but there's a lot of negative data out here. I mean, look, inflation is still very high, 8 a half percent. If you had told any of us that in August, that inflation would still be a half 8 and a half percent at the beginning of this year. We would have said that is horrible because remember, the investment banks were all saying it's going to come down to 3% by the end of the year. So inflation is still high. The job's picture is good. We're technically in a recession. I if I were to predict, I think what's gonna happen now, I think you know, look for a double dip. I wouldn't be surprised at all if in q 3 or q 4 were back to positive GDP growth. But I don't think we're necessarily out of the woods because I think there's a pretty good chance that next year, these these rate hikes really kick in. It takes 6 to 9 months for them to ripple through the economy. So you look at the construction industry, the construction industry has been devastated. New housing starts. You talk to the builders. They tell you that the construction industry has just been clobber by these rate hikes, the inventories are piling up and the affordability of there's a chart today about the affordability. of home prices is at a 40 year low. And so the construction industry, it's really the bellwether. When a recession starts, they are the ones who are first impacted, but it's probably gonna take 6 to 9 months Chamath Palihapitiya (00:39:57): -- Jason Calacanis (00:39:58): Because the loans are so expensive and cost of capital is expensive. Speaker 3 (00:40:02): Right. Jason Calacanis (00:40:02): They can't start new projects. David Sacks (00:40:03): So look. I if I had to get I think we're in a shallow technical recession right now. I bet that we probably bounce out of it in q 3orq4. But I think there's a significant risk that we're back in we're back in it next year. Just my guess. Jason Calacanis (00:40:17): Farebraig, we've we've been talking about consumer credit a whole bunch. Buy now, pay later. household debt, now totals more than 16,000,000,000,000. Credit card balances make up 890,000,000,000 of that. Obviously, student loans, mortgages, other things are in there. And the number of credit cards is now at a massive high Chamath Palihapitiya (00:40:35): 550,000,000 Jason Calacanis (00:40:37): of them issued here in the United States. We added a massive amount of debt. It's still lower. The the the credit card debt, just to be clear, is still lower than the pre pandemic level of Chamath Palihapitiya (00:40:48): 930 1,000,000,000, Jason Calacanis (00:40:50): but consumers seem to be taking our credit, I guess, to deal with inflation or to enjoy their lives because they're not stopping their spending. And we see that in some of the stocks in the earnings reports that are coming out as well. So what's your what's your take on this, you know, conflicting data we have or is or have you made some sense of it and and what is your prediction of q Chamath Palihapitiya (00:41:09): 4? David Friedberg (00:41:09): Sorry. Are you asking what my take is on the consumer credit Jason Calacanis (00:41:13): well, basically, the overall macro situation here. We've got consumer credit. You know, people taking on a lot of debt while jobs look great. While inflation is still high. what does that look like, you know, as we go into q 4 next year? What what what is this telling you? Is there some signaling you? Sachs said shallow recession thinks we might double dip. I'm kinda getting to your prediction of q Chamath Palihapitiya (00:41:36): 4 David Friedberg (00:41:37): I mean, this is a little repetitive. I mean, I've said this I first said it in May at the All In Summit, and I said it again on the show twice Chamath Palihapitiya (00:41:43): -- Speaker 3 (00:41:44): Great. Chamath Palihapitiya (00:41:44): -- David Friedberg (00:41:44): which is I think that the definition of a recession of negative GDP growth when you're coming off of inflated GDP is, you know, it's it's not a binary catchall term. I mean, the fact is we had inflated assets, and as a result of inflated assets, we had inflated earnings, and we had inflated valuation, and we inflated income, and you know, now the capital is coming out and things are gonna go down inevitably. But I don't think that this should be deemed that there's something fundamentally negative about the US economy. The biggest risk I still see is this rising consumer credit balance, particularly in a rising rate environment. people are taking on more debt. If you look at the New York Fed, here, I'll just give you the latest. This is the household debt and credit report they put out household debt rises to Chamath Palihapitiya (00:42:34): $16,000,000,000,000 David Friedberg (00:42:35): in the growth in housing and on housing balances. And so there are variable rate loans in there. in the auto home and credit card markets, those variable rates mean that as interest rates climb, the amount to service existing debt will go up each month and the amount of debt that's being taken on is also going up each month. And so the key economic question is does the income gain that's being experienced or the asset value gain that's being experienced outpace the increase in monthly debt service needed for a large number of consumers. Student loans are also in here, by the way. And so when you put that all together, It's a it's a very technical question, which is technically where do you start to see defaults rise? And when you have defaults rise, then the money that's owed and the services that are the service payments that are owed on that debt trickles through the economy because bonds start to default equity start to decline and so on. So, you know, I this is why I can speak at a high level from a macro point of view. that the rate at which debt is going up and consumer credit is going up, and the rate at which rates are climbing that affect the revolving and variable rate debt that consumers hold could outpace the income and the asset value gain, particularly when equities are down, 401 k's are down, house housing prices are down. And so there's a tipping point. And when that starts to happen, then you start to really hit an economic crunch. And I'm I've mentioned this multiple times now that it's the thing, you know, I would kinda watch most closely while there are core elements of the current economy that looks strong, there are real concerns around whether consumers can keep up with their debt payments in the months and quarters ahead. Yeah. Jason Calacanis (00:44:21): Tremato, are you following this consumer credit surge? And do you think that this could be a black swan type event? This could be you know Chamath Palihapitiya (00:44:28): -- Jason Calacanis (00:44:29): There's no large font David Friedberg (00:44:30): because it's right here in front of us. So, you know Chamath Palihapitiya (00:44:32): -- David Friedberg (00:44:32): Okay. Cool. Yeah. Jason Calacanis (00:44:33): I I would say, like, a massive contagion where there's massive number of defaults creating a black swan contagion like event. But yes. So it's it's not it's it may be hidden in plain sight. What do you think Jamath is this important data or impacting your view on things? Chamath Palihapitiya (00:44:46): Yeah. I think it's important. It's part of a mosaic and I I don't I don't really know. Look. What are we trying to get from this discussion? I don't understand. Like like, are we trying to predict what's gonna happen? I mean, I think David basically said it best, like, If you actually just take a step back and stop overlaying what we want to happen. Look, the reality is all four of us want things to go up. And we like it when there's money in the system and everything's flush. But if we had said last year that we would open an envelope and we would show these inflation prints. We would be shocked and we would have been scared. And quite honestly, you know, in the process in November When I started selling, I would have sold even more violently than I sold. And all I can say is I saved my ass in November of last year. looking at what's happened in the last 6, 8 months. So I don't know. I just think that if you look at the CPI print, And you look at the components, we were saved because energy basically fell off a cliff. And for whatever reason, a bunch of people decided not to travel and, you know, we didn't import as much oil and we were able to keep costs contained. and that kept CPI from being really out of control. But again, we're in the summer where we don't have pressure on energy that we're gonna have in October, November this year. So I I I really don't know. I mean, I just think that there is, like, Friedberg has his pet issue. I have my pet issue. Saks has his pet issue. You ask a 100 economists they'll have their own pet issue, housing affordability, whatever it is. The point is we have a 100 whack a mole problems. And the question is which mouse trap sets off the rest of the mouse traps? I have no idea. And so, you know, I just think that right now things are a little bit too calm And that makes me feel very unsettled. Jason Calacanis (00:46:49): Another shoe might drop. I mean, the point of the conversation is to try to understand and make better decisions in capital allocation, company formation, placing bets in the next year. So that that I mean, that's the point of the discussion. David Sacks (00:46:59): We we now have the spectacle of the president saying he's gonna pass an inflation reduction act to solve a 0% inflation problem to get us out of a recession that he says doesn't exist. You guys know this, but the the politics of the and the political commentary on this are absurd. I think what we're describing here is just simply more honest, which is to say that the data is mixed, so we don't exactly know what's gonna happen. Jason Calacanis (00:47:26): Yeah. I mean, the thing that I think is encouraging is when you look at this jobs data and you look at the debt that consumers are putting on, my theory is, and I could be wrong, that people wanna keep spending. They wanna keep living their lives. They're taking on a little bit of to deal with inflation and to keep spending, but they're also going back to work. And I'm seeing that anecdotally. A lot more people going back to work, and the numbers show that. That feels to me, and I said this on previous episodes, that that feels like a possible, you know, very helpful path out here. And I think you brought it up Saks as well, which is, hey. If we have increased participation, that's great. Increases monetary velocity increases participation in the economy. That's a possible path out. Do you do you feel like that's still holding strong Speaker 3 (00:48:08): sense. Chamath Palihapitiya (00:48:08): secular decline on that trend for 25 years. So maybe maybe on the margins, a few folks run out of stimulus and decide to go and get a job. But I don't think again, it's it's kind of like, you know, when you're at you're when you're at the black check table in Vegas, and -- Clapping as a strategy. Clapping. Clapping as a strategy. I feel like all the like, what we're talking about right now is clapping as a strategy. Maybe this can happen. Maybe that cap you know what? Maybe it'll start raining gold fucking coins that we can use and just Speaker 3 (00:48:39): I'm not Chamath Palihapitiya (00:48:40): worried about I mean okay. David Sacks (00:48:41): Yeah. Everybody, Jacob. I I David Friedberg (00:48:42): feel like the last 15 minutes have been, like, not a good conversation. Like I David Sacks (00:48:45): think it's totally repetitive. It's really repetitive. Jay Kal, because look. The structure of the problem, I think, is very well defined, which is we have an inflation problem. great. It went down from 9.1to8.5percent. It's still really high. Chamath Palihapitiya (00:49:01): 2 David Sacks (00:49:01): to 3% would be would be normal. Okay? So half the problem is how fast is inflation gonna go back down to normal based on interest rate cuts. The other side of the problem Jason Calacanis (00:49:11): is increases. David Sacks (00:49:12): Is sorry. Interest rate increases not cuts. The other side of the problem is how much will the economy be hurt by these rising rates? And those are the 2 variables. And -- Yep. Chamath Palihapitiya (00:49:21): -- David Sacks (00:49:21): we see that there is a slowdown. There's still a lot of jobs being filled, which is good, but there is unquestionably an economic slowdown. And those are the two sides of this equation. And we just need to see some economic data and what's gonna play out over the next Speaker 3 (00:49:34): several months. Chamath Palihapitiya (00:49:35): -- you the same question for 3 fucking weeks. Jason Calacanis (00:49:38): If you guys don't wanna talk about the new day, that's fine. Speaker 3 (00:49:40): I know Chamath Palihapitiya (00:49:40): you guys want -- It's like Speaker 3 (00:49:41): we none of us care. Chamath Palihapitiya (00:49:43): None of us well, people don't have an opinion other than we don't know. many ways can we say Speaker 3 (00:49:47): no more David Friedberg (00:49:48): than -- -- about inflation or recession or jobs or any of that shit anymore unless there's something really for us all to say, like, something news come out? Well, at some point, economic report Jason Calacanis (00:49:57): was really important. I mean, that was a that was a massive trend, David Friedberg (00:49:59): but it's not the it's it's it's it's part of Jason Calacanis (00:50:01): it is. try sitting on David Friedberg (00:50:02): the track of what we've Speaker 3 (00:50:03): already said. David Sacks (00:50:04): It's one data point. It's one data David Friedberg (00:50:05): point, and it's on the track. And, you know, Speaker 3 (00:50:07): we're already Chamath Palihapitiya (00:50:07): -- -- David Sacks (00:50:07): some bad jobs reports before that print. Speaker 3 (00:50:10): I David Friedberg (00:50:10): think we should stop doing the recession inflation Chamath every week. It honestly is, like, repetitive. Chamath Palihapitiya (00:50:14): -- better job moderating. Can you not dial it in Speaker 3 (00:50:17): You got no. You guys asked to talk about it. Jason Calacanis (00:50:19): You guys put some of these things on David Friedberg (00:50:20): the top. I don't wanna talk about it anymore. I think we should Chamath Palihapitiya (00:50:22): -- Jason Calacanis (00:50:22): Let's move on. What do you okay. What what do you want me to function? David Friedberg (00:50:25): I think Bank was a great chat. I think, you know, that was a good talk. We should do that kind of shit. We should talk about -- I Speaker 3 (00:50:29): wanna Chamath Palihapitiya (00:50:29): know what you guys think about this Sequoia evergreen fund. Tell me what you guys think about that. Come on Geniuses. David Friedberg (00:50:34): the Sequoia, like, when they restructured? Are you joking? Chamath Palihapitiya (00:50:39): I love I love when these two go silent. Jason Calacanis (00:50:42): No. No. I I always didn't wanna interrupt anybody. But I David Friedberg (00:50:44): don't understand what you're saying. David Sacks (00:50:45): I don't understand why you guys are trying so hard to avoid the the obvious news of this week. Jason Calacanis (00:50:50): there something else in the news this week? David Friedberg (00:50:52): Sacks, if Trump actually had some material in Mar a Lago that was related to the nuclear program. And, you know, there was an attempt to try and re get recover those documents through normal means and they were not recoverable, what would your course have been if you were the director of the FBI or the president of the US in that condition? because I think that seems to be the party line of what's going on here. David Sacks (00:51:17): Well, you David Friedberg (00:51:18): know -- The democratic kind of spin on what's going on here. But, like, you know, honestly, in that circumstance, do you think would have been appropriate? So there's there's some sort of confidential material related to our nuclear program or nuclear weapons. Something's something there in those materials that were attempted to be recovered or were taken without approval, and then they tried to recover it. For you know, assume there's no nefarious intent, what would be the right kinda course here? David Sacks (00:51:42): Well, I I so I I I don't know exactly what's going on. I just think that you can't necessarily give the f sadly. I don't think you can necessarily give the FBI the benefit of the doubt here in light of their history. But let's back up. I mean, first, you had this this raid on Mar a Lago where you got 30 FBI agents. They're not wearing suits with holstered side arms. They're carrying AR fifteens, you know, weapons of war, fingers just outside the trigger guard. They're wearing body armor. It looks like a paramilitary raid, Amara Lago. It's utterly unprecedented. you look at tweets by Andrew Cuomo, for example, or Andrew Yang. I mean, these guys actually turn out to be pretty I think intellectually honest Democrats on this point saying, this is unprecedented, and it's really gonna yeah. I wanna read this by Jason Calacanis (00:52:28): Why don't you answer for this is Why don't you answer Fredericks question? David Sacks (00:52:32): I'm getting there. I know you're gonna cut me off, so I'd like to just read these tweets. So maybe you'll because, you know, maybe you'll give more credence to Andrew Yang. said, I'm no Trump fan. I want him as far away from the White House as possible, but a fundamental part of his appeal has been that it's him against a corrupt government establishment. This rate strengthens that case for millions of Americans will see this as unjust persecution. You have Andrew Cuomo saying DOJ must immediately explain the reason for its rate. It must be more then a search for inconsequential archives that will be viewed as a political tactic and undermine any future credible investigation and legitimacy of January 6 investigations. And let me read one other tweet by Elon. That's not directly about the speech. We did this on July 11th. So a month ago, And he said, I don't hate the man, but it's time for Trump to hang up his hat and seal at the sunset. That was the part that was widely reported. But he also said, Dem should also call off the attack. Don't make it so that Trump's the only way to survive is to regain the presidency. I think there was a lot of wisdom in that. And, you know, I'm old enough to remember when the case for Biden getting elected is we have to move past this partisan warfare this extreme rancor and derangement. And we were told that the media you know, all these people like TDS, that that their psychosis was due to Trump. And if we could just move past Trump, this all this sort of partisan warfare would end. And now and and I was certainly hoping that would be true. And now sadly, it seems like we're right back in this thing where Speaker 3 (00:54:01): we're right back with the media being obsessed with David Sacks (00:54:05): TDS, portraying this narrative. That somehow he's a traitor. And what is this whole thing? Hang on. Just these two words, nuclear documents. Well, listen. Until they actually produced those documents, I'm gonna suspend judgment because the FBI the last time they did this remember, They manufactured a falsified warrant to the Fisa court for this type of investigation. They have that history. So I'm just gonna suspend judgment on what's going on here until they actually produce the documents they're talking about David Friedberg (00:54:37): because Can I ask are you David Sacks (00:54:38): kidding? stinks. David Friedberg (00:54:39): do you honestly question the integrity of leadership and agents Speaker 3 (00:54:42): at the FBI? Are you serious? Jason Calacanis (00:54:42): Like, you don't think Chamath Palihapitiya (00:54:42): -- Jason Calacanis (00:54:47): Yeah. David Sacks (00:54:48): Alright. Let me read you this tweet from Michael Burberry. Speaker 3 (00:54:49): I don't wanna I don't wanna David Friedberg (00:54:50): hear the tweet. I wanna hear your point. Speaker 3 (00:54:51): Well, no. David Sacks (00:54:52): Well, I I I agree with what Michael Burry is saying. So I think somebody's helped there's a lot of thoughtful commentary about this. And what Barry says is Jaygar Hoover led the FBI for 5 decades, denied the mafia existed, fought the civil rights movement, shielded the KKK. Multiple presence acknowledged fear of him. So what he's saying is that the FBI since its inception has political origins. and and and basically meddled politically in the affairs of the country. Then he says, the FBI lied to the Fisa court, this is back in 2016, totally true, altered emails leaked lies to the press to get Trump, nothing shocking. So, Friedberg, listen. I don't know whether the FBI is telling the truth, but are you honestly gonna say that the FBI's leadership has never been political that has never harbored or pursued their own agenda and that it's never had a desire to go after that. David Friedberg (00:55:41): I'm I'm not making David Sacks (00:55:42): a payment yet. -- we saw we saw the text messages from Comey, Struck, Page McCabe. I mean, these guys basically took it upon themselves when Trump was elected to be the quote, unquote insurance policy. David Friedberg (00:55:54): Yeah. David Sacks (00:55:55): and an FBI lawyer plead guilty to falsifying documents, to seek a warrant from the Fisa court. So I just think anything's possible here. And now I'm not saying the FBI is lying about this. I don't know. But the idea that the FBI is automatically entitled to the benefit of the doubt in light of their proven history of basically pursuing Trump like AHAP pursued the White Whale. I mean -- Yeah. Chamath Palihapitiya (00:56:21): -- David Sacks (00:56:21): these guys have been after him. David Friedberg (00:56:23): I'm just gonna zoom out for a second. And the reason I'm interrogating Saxx on this is, like, it's just so telling to me that a guy like like, you sex in your position are Speaker 3 (00:56:31): are actually questioning the integrity of, like, the highest justice authority and institution in the United David Friedberg (00:56:40): States really says a lot about kind of the state of of the Speaker 3 (00:56:44): US citizenry, the state of David Friedberg (00:56:44): our society today. I I think it's speaks a lot Speaker 3 (00:56:49): to -- That Chamath Palihapitiya (00:56:49): leaves a third of Americans. David Friedberg (00:56:51): I know it's incredible. And what Ray Dahlio said in his book about how during these periods, when the empires begin their decline, And, you know, when you're challenged with kind of the economic conditions that the US is challenged by printing lots of money, lots of debt, very hard to service all that debt, And we have a ton of obligations over the next decade or 2 that are gonna be very hard to meet given our economic growth and inflation conditions right now that you start to see these sorts of behaviors historically. It's happened six times in the last 500 years. where large empires like the United States or large, you know, economic powerhouses like the United States start to decline, that the civil war begins, that the institutions get challenged by a minority and then a majority of the citizenry, and it really starts crumble and and and challenge the the integrity of the institution and its ability to hold itself together. David Sacks (00:57:41): Well, I I'm not hold on a second. I'm not I'm not challenging. Hold on a second. I'm not Chamath Palihapitiya (00:57:45): -- David Friedberg (00:57:45): Well, you're pressing the -- -- integrity. you're questioning the integrity of the Department of Justice. Right? David Sacks (00:57:49): Listen. I I -- By Speaker 3 (00:57:50): the way, I'm David Friedberg (00:57:50): not I'm not arguing you're pointing out. Like, it's it's an incredible condition for us to find ourselves in. David Sacks (00:57:55): Yeah. But I but but but my questioning did not create that condition. There this lack of trust is earned. Speaker 3 (00:58:01): I know. David Sacks (00:58:01): It's earned by the FBI in light of behaviors they took just a few years ago. Now listen, I'm not defending Trump per se. I don't know what he did or didn't do. Okay? But I think that it you can't just accept at face value without further proof these leaked what what are basically leaked comments by the FBI. Yeah. I mean, look, I'm not listen, I'm not a naive child. I mean, the fact of the matter is that power can be corrupt and power corrupts. Okay? And we have seen that the FBI from its earliest days did engage in corruption and more recently against Trump himself, head of vendetta against Trump. So I'm simply it's all on. So all I'm doing is I'm not gonna automatically accept at face value what they're saying until I see some proof. Now I'm not saying that they're wrong or they're lying about this. I'm simply saying I'm not going to accept it at face value. David Friedberg (00:58:57): Yeah. And and remember, Trump Trump was elected on on on the platform that there is this deep state that there is institutional corruption that there is malaise and lethargy in these institutions of the government that are funded on the order of 1,000,000,000 of dollars a year and that that's what he was intended to, you know, to go and and blow up and repair it. And there there's there's a very strong and and potentially close to majority percentage of voting Americans that that feel that there is this core deep state corruption institutional lethargy that is challenging our ability to give everyone the freedom and liberties that they deserve. David Sacks (00:59:33): Friedberg, these agencies are supposed to be nonpartisan. They're not supposed to have a horse in the race. And what we saw is that when Trump was in office and these texts came out, clearly, the the top levels of the FBI, these top agents, I'm not talking about the rank and file. I'm not talking about the field agents. I understand that a lot of them are law and order types to vote Republican. I get it. But I'm talking about the leadership, the highly political leadership in Washington. And it was pretty clear that they had a horse in the race. They did not like Trump and they were out to get Trump. And, you know, again, Trump is not my preferred candidate for Chamath Palihapitiya (01:00:07): 2024, David Sacks (01:00:08): but what the FBI has done with this raid, quite frankly, I think it's polarized the outcomes. They are basically going to send Trump to the big house or the White House. I mean, because now the Republicans have rallied around Trump, I think he's going to be very, very hard to beat. for as the nominee in 2024 unless the FBI comes up with ironclad evidence to show that he did something significantly wrong. David Friedberg (01:00:30): I care less about who did what and what was done wrong. I care more about the fact that this conflict is escalating, and it's creating a real condition of continuing polarization And it really is the the conditioning that, you know, Biden had some historians in in the White House. There was a report on this last week. And these historians spoke about how the conditions the United States are just as they were right before the civil war. And and that there's real concern Chamath Palihapitiya (01:00:55): -- -- David Friedberg (01:00:55): how? -- that yeah. Well, I mean, you know, they you can go read the the the anecdotal reporting that was done on this thing, but that was the general theme of the conversation. And, you know, it really it really kind of concerns me more that this level of discourse is escalating to a point of, you know, there's corruption this person is a criminal, and that sort of discussion happens, you know, in in more dire circumstances and more economic circumstances than has ever been seen. You know, the US is the largest economy in history, and we're now having these sorts of conversations that typically lead some degree of conflict, and it's really concerning. David Sacks (01:01:35): Well, I I just think listen. I I think that Trump was out of office. We were told that this partisan rancor would stop once he was out And it's you know, they're pulling him back in. And all I can say is that when the I think we know maybe 1% of the story. Okay? I think this leak around nuclear documents is it feels like a selective leak. It's not certainly All David Friedberg (01:01:57): sides are inflammatory. All sides are cantankerous. Speaker 3 (01:02:00): the I'm David Sacks (01:02:01): and I'm suspending judgment. What I'm saying is though that when all the information comes out, there better be a very significant there there. Chamath Palihapitiya (01:02:08): No. No. No. We've made that impossible too because he Trump came out and he basically said, hey. Listen. If you if these guys find something, it was planted. And now you're gonna have at least 10 or 15% of population that believes, okay. This was planted. It wasn't actually there. And you know? So whatever the outcome is will not be good. Nobody will be satisfied. And both both of the extremes in the United States will be even more angry. David Friedberg (01:02:35): Further in Flank. Yeah. further explain. Speaker 3 (01:02:37): Well, that David Sacks (01:02:37): and that's what I'm saying. That's -- The David Friedberg (01:02:38): inflammatory index has now has now skyrocketed. Yeah. Chamath Palihapitiya (01:02:41): By the way, this is why I think at some level, Maybe the lack of faith in these institutions is well deserved because where is the the, you know, the the the prudence of all of this? Like, where is the the circumspect, thoughtful, methodical thinking about all of the different outcomes that could be possible so that you exhaust every option and this is the only option left And then even then, if Merrick Garland was open to basically saying unseal the warrant, why you do it before and say, we're going to have to serve this guy unless he actually gives us these things. There's all kinds of things you could have done. Speaker 3 (01:03:23): Oh, Jason Calacanis (01:03:23): clearly, they did that. Chamath Palihapitiya (01:03:24): keep a hold on a second. To keep the temperature of this thing way way down. And that's David Sacks (01:03:29): what's frustrating. -- they could've let Trump's lawyers watch them do the search so that nobody could claim anything about anything being planted. Yeah. So if they even Jason Calacanis (01:03:38): let that happen either. Chamath Palihapitiya (01:03:39): -- David Friedberg (01:03:39): the inflammatory index is spiking. I think that's my key takeaway on all of this. I I care less about what Trump did and what the DOJ did and Speaker 3 (01:03:47): what the FBI did and what the David Friedberg (01:03:47): FBI is. Like, I'm more concerned about where this takes us Because the next step, regardless of the outcome Chamath Palihapitiya (01:03:52): -- -- takes us. You know where it takes us. When you're on tilt at the poker table, what do you do? You cannot think properly. David Friedberg (01:03:58): That's where that's where everyone's at right now. Yeah. Chamath Palihapitiya (01:04:00): When people are so inflamed with emotion, they start to make very poor decisions. I don't know whether the DOJ and Maine Justice made a or decision or not. I think this is where we have to hold our breath and hope they didn't. I don't know whether the White House knew anything or not. But the whole point of all of this is that we pulled this guy right back in to the to the to the main stage. David Sacks (01:04:24): Absolutely. I mean, you're like I said, you've polarized the outcomes. You're either gonna basically send this guy to jail or you're gonna send him to the White House. Chamath Palihapitiya (01:04:31): No. I think there's very likely no. I think there's very likely a middle path where nothing happens, but it will further erode what Freeport says, which is it's just a little bit less trust in the DOJ. -- David Friedberg (01:04:44): is eroding. And when institutional integrity erode Chamath Palihapitiya (01:04:46): -- -- David Sacks (01:04:47): in that Chamath Palihapitiya (01:04:47): -- David Friedberg (01:04:47): The the the fabric of what keeps everything working starts to fall apart. And I'm not saying this is some cataclysmic civil war happening. Just to be clear, I'm not saying this is some cataclysmic civil war happening next year. But it's an unfortunate decline in everyone's faith and and and the stability of the institutions that we all rely on to support and service us because the inflammatory index is gonna go up, and everyone's gonna be criticizing everything. And that's a nasty David Sacks (01:05:11): place -- -- thing we really have to ask, was this really necessary? I mean, why did the DOJ and the FBI think this was necessary? Yeah. And these boxes were just sitting there. Chamath Palihapitiya (01:05:19): I think that's a reasonable question is, like, if these things were actually sitting in the box with the lock that they changed. There must have been something more that was so grievous where you had to do something like this. Now by the way, David, I just wanna I read, so I don't know if it's true or not. I think maybe it was in Barry Weiss's sub stack or Matt Taib's sub stack. These folks weren't armed to the teeth. They came in jeans and shorts and t shirts. In fact, Main Justice told them, like, do it as normal. David Sacks (01:05:45): I've seen the photos. They I've seen the photos and Chamath Palihapitiya (01:05:48): they are the teams. I'm saying the people inside were there for 6 or 7 hours, and only a few people knew about it. David Sacks (01:05:53): They were there for 9 hours. They basically told Trump's people, they couldn't be there there to leave. They told him to turn the cameras off and they had, like, highly militarized guy there there was something like forty people and something like 30 of them were heavily armed. The optics were terrible. David Friedberg (01:06:08): If there was some nuclear con confidential nuclear material, in Mar a Lago. And through normal means of communication, they had asked several times to have it returned and identified this for him, and he had refused, which I think is a very reasonable kind of you know, conditioning for what may have happened here. And then they said, okay. We gotta go get it. There's no choice. This is, like, super confidential nuclear material. We gotta get this stuff. The only way to get it is to serve a warrant and go in there and get it. You know? Under those circumstances, you know, do you think that this would have been kind of inappropriate I assume all other kind of communication means were exhausted. Like, you know, what would you have done if you were president? David Sacks (01:06:44): Listen. I think there is information that could still come out to convince me that this raid was warranted. Yeah. I just haven't seen that information yet, and I think the optics of it were terrible. I'd like -- Right. Chamath Palihapitiya (01:06:55): -- David Sacks (01:06:55): the point I was making I don't know why it wouldn't have been good enough to send in the FBI agents with holstered side arms, you know. Not a r 15 weapons of war, you know, where the fingers were just outside the trigger guard. It looked like a paramilitary raid. So whoever was thinking about the political ramifications of this, clearly didn't do a very good job. I also don't know. critics. David Friedberg (01:07:15): Yeah. Yeah. David Sacks (01:07:15): I also don't know why you wouldn't give the courtesy to a former president of the United States to give them either more of a heads up or to let his lawyers attend so that just for their own protection so they can't be accused of planning anything that would have been smart And I don't know why they would have said to trans people that they couldn't record it. And I don't know why they've been reports that the FBI went through Milani's Closet? I mean, seriously, they're like going through Melania's clothes. It's just weird. It's weird. So there's a lot about this that we don't know. I'm not conclusively rendering judgment about it because there are things that absolutely could come out to convince me that it was warranted. But I haven't heard them yet. Jason Calacanis (01:07:56): Okay, everybody. We'll see you on the neck episode of the all in podcast. Love you, besties. We'll let your winners ride. Rainman, David Sachs. Speaker 3 (01:08:10): We open source it to the fans, and they've just gone crazy with it. besties are gone I'm missing your driveway. Speaker 7 (01:08:32): You should all just get a room and just have a think you, George, because they're all just useless. It's, like, this, like, sexual tension, and they just need to release their vows. Speaker 3 (01:08:41): When you're the bee What? Dear feet. What? Where did Jason Calacanis (01:08:46): you get Murphy's r back?