亚当·诺伊曼的第二幕、a16z 的 3.5 亿美元押注、住房政策与《通胀削减法案》

David Friedberg (00:00:00): Hey, Cal. What's it feel like to be a guest on your own podcast today? I'm excited. Speaker 2 (00:00:04): Oh god. Jason Calacanis (00:00:04): So delightful. You did a great job, by David Sacks (00:00:06): the way. Jason Calacanis (00:00:06): Really like the punch up to the formatting where you actually put the questions in? David Friedberg (00:00:10): Yeah. I think it's I because I I want us to all agree on the stuff we wanna grok on. You know? Jason Calacanis (00:00:13): In a professional TV show, They would have pre interviews with everybody, get all their positions, then they put the positions into the document. And they, you know, they basically do what what's called preinterview. Chamath Palihapitiya (00:00:23): Or here's another idea. You could Jason Calacanis (00:00:25): do your job. Wow. I mean, do your job. Chamath Palihapitiya (00:00:27): How about that? How about you try that? Jason Calacanis (00:00:29): How about -- Or, you know, or David Friedberg (00:00:30): how about I turned you three miserable into actual likable people in 91 episodes, which nobody thought was possible. I actually think I'm becoming less likable the longer I'm on this shit. That's I think that correlates with all of us. All of our likability just Speaker 6 (00:00:48): to let your winners ride. Speaker 7 (00:00:53): Rainman, David Sachs. Speaker 6 (00:00:58): open source it to Speaker 7 (00:00:59): the fans and name discovery. Love you. Ice. David Friedberg (00:01:05): Hello, and welcome to the all in pod. I am your moderator for today out of the hot seat, doing the easy beat, Dave Freightberg. I'm joined today by our esteemed panel. Back from his European shopping spree, our national treasure, America's favorite dictator, Jaemath, Paliampatthiya, Jaemath. How are you feeling? Chamath Palihapitiya (00:01:26): I'm feeling great. David Friedberg (00:01:27): You're okay. You're recovered? Chamath Palihapitiya (00:01:28): Yeah. And the little I've got I've got a little head cold, though. David Friedberg (00:01:31): Oh, well, sorry to hear that. Hope it's not COVID 2.0. Chamath Palihapitiya (00:01:34): No. I tested. I'm COVID negative. My god. David Friedberg (00:01:37): Okay. Also with us as usual from his emergency bunker ahead of the US civil war to rainman, David Sachs, How are you, David? Good. Happy with the late start this morning. I'm sure. And, of course, everyone's favorite ski bum, producer of the Woodstock of Tech conferences, the 1 and done, all in Summit, Miami, Jason. What's it like to be a guesty today? Jason Calacanis (00:02:00): It's so delightful. When you said you wanted to moderate that to me was, Chef's Kiss. Chamath Palihapitiya (00:02:04): I get to I get Jason Calacanis (00:02:05): to comment and not be the moderator. 11. Yeah. David Friedberg (00:02:08): So we're we're mixing it up a little bit today. I'm gonna take the lead. Jay Cal is gonna sit back. I'll say a couple of words before we start because I think last week, we got a little nasty Definitely heard that from listeners. You know? And and so I wanna kinda just address it real quick, and then we can kick off the show. I I think it's important to say that none of us really started out doing this pod as a job or thinking that it would become a real regular thing. Right? We we started doing it for fun, ad hoc from time to time, And then it became this thing that people listen to, and it became this thing that we started doing every week, and people actually cared about it and suddenly became this real obligation. It's almost like we got pregnant and had a baby, and now it's like 4 men and a baby. And so, you know, I think we all feel this, like, you know, challenging obligation that we never expected to take on of, like, taking care of the show, taking care of the pod. And we all have, like, different points of view on what we want the pod to be and what we wanna to become. Jay Calacanis about, you know, getting up in the rankings and listening to the audience and ultimately has shared that he wants to monetize, you know, at points. We've not always agreed on different points about that. You know, Tamat has the things he wants to bring to the table. Sacks has things he wants to talk about. And so, you know, it's really difficult kind of running the pod, managing the pod with 4 very different points of view, very different perspectives on what it is we all wanna kinda get out of this over time. And I think it causes us to get really frustrated with each other. We end up having real fights. You know, you have the biggest fights with your best friends. You know, you really let loose and lash out. I think last week, I listened back. I was pretty contemptuous in my kind of retort to Jay Cal about hitting up on the inflation topic, and I want to apologize to Jay Cal for doing that. I think it was, you know, I think, yeah, I think it was a little rough But at the same time, I just wanna point out, like, you know, we're gonna keep doing the show because I think, you know, as much as we all disagree, as much as we fight and as much as we may even start to dislike each other and not get along, I think it's really important that we keep doing this. And and I think restating that commitment and trying to do better is really important. David Friedberg (00:04:13): So, you know, we're gonna try different stuff out, try and find ways to find common ground and keep doing the show. productively with each other. As one experiment this week, I'm gonna moderate, and we're gonna, you know, try and take it that way. But, you know, I wanted to say those few words before we kicked this off guys because I thought it was important, especially after the last couple of weeks. I think it's been a bit of a struggle. We've been having a tough time, and I just wanna be open about and, you know, highlight that, you know, as an example, you can fight with people, you can disagree with them, and you can still keep trying. And I wanna set that example. I want us to keep doing that. So, anyway, just above it. Jason Calacanis (00:04:45): I would just like to say, apology accepted. and I thought that was a lovely opening. One thing I I would just punch up there is the real reason we did this was because we missed each other. we missed hanging out with each other. And then this is, you know, something that's become more successful than any of us ever imagined. It's got an audience size that is just, you know, hard to imagine how many people are listening to this, which then a little bit of pressure on it. We we we want it to be great for the audience. And I just wanna say, like, I I don't take it personally when we when we battle on stuff. even with politics and sacks and stuff like that. I respect each of you. You are each brothers to me. I love each of you deeply. And when we fight and things don't work out, I look at it as, like, personal growth or progress towards some other goals that we each have. The amount of support I've gotten in my career from David Sachs and Chamath has been unparalleled. David Sachs was my first LP. He encouraged me to create my 1st venture fund. Chamath supported supported me relentlessly in my career showed up for me every event I ever did, and I tried to do those same things for them. You and I haven't done much business together, Friedberg. But I'm enjoying the business that we started Speaker 2 (00:06:04): shipping to. David Friedberg (00:06:04): Yeah. Sorry. -- Jason Calacanis (00:06:05): to. And I and I showed up for both of your events when you needed me. Yeah. doing some syndicates with you, and I I love doing this each week. I love doing this each week. David Friedberg (00:06:14): Yeah. It's like, like, I think my point was it's a lot easier to beef friends and have wine together and play poker together than it is to do a job together. And this has become really a job. And so, you know, you can have really good friends, and then you try and a company together or do a job together, and you can hate each other. I think it doesn't mean that you guys stop being friends or that we should stop doing the work. I think we should still keep trying to do the work. figure out a way to make it work. So, anyway, that that was the point I wanted to make at this point. Jason Calacanis (00:06:39): And and that's the end of my my savings. David Friedberg (00:06:41): Okay. I didn't Jason Calacanis (00:06:41): know it's worth to compare. Those are just some reaction to yours. I don't know if David Friedberg (00:06:43): Zach can't say anything, Jason Calacanis (00:06:44): but I doubt it. Chamath Palihapitiya (00:06:46): Okay. Let's ask, do you have David Friedberg (00:06:47): any emotions right now? Zach, what are you feeling? David Sacks (00:06:50): Yeah. I mean, Chamath, do you think grass Fed is better or the regular Speaker 2 (00:06:56): built on. Oh my gosh. David Sacks (00:06:56): Sax and I were texting while you guys were were hugging it out Chamath Palihapitiya (00:07:02): talking about different kinds of jerky. Beef jerky. Oh, well, we were jerking each other from you guys for researching jerky. Great. Beef jerk. Okay. David Sacks (00:07:10): I was recommending Bill Tong to him. David Friedberg (00:07:12): Oh, great. Awesome. Speaking of jerky, let's get into Adam Human. a o okay. Speaker 2 (00:07:15): So now, hey. David Friedberg (00:07:15): a o okay. So first thing to talk about today, and I kinda wanted to take it in a little bit of a different direction than I think all the other tech media have kind of addressed this. You know, Adam Newman is back. He raised $350,000,000 from Andreessen Horowitz. There was announcement this week for his new company called Flow, which as we under standard is trying to develop residential apartments, you know, in the same sort of vibe, quality, and attention to experience as maybe was intended with WeWork. And Flow, you know, seems to have started originated with Adam doing a bunch of acquisitions of real estate with his own capital, and now he seems to have turned this into a real business and raised money from Andreessen. So there's all the commentary and joking about Andreessen putting this money in? Are they crazy? as well as all the, you know, commentary about Adam Newman. How could anyone back him? The guy was so awful the first time around. Let me just do a quick round, the horn with you guys. You know? initial reactions to the to the Adam Newman deal, and then I'd love to talk about founders having a second act. because, you know, Adam happens to be high profile, so his failure was high profile. But a lot of founders have a failed low profile first experience and come back and kick ass the second time around, and investors have taken notice of that. And so I'd love to go there, but maybe we just do a quick reaction, Jake. I know you've talked about this on your other show. Maybe you can kinda give us your your quick commentary on on the opportunity of the transaction. And what are people talking about with respect to this this deal happening? Speaker 2 (00:08:52): You know, Jason Calacanis (00:08:52): people are wondering why he's able to raise money. And what I always tell founders is when you see these, like, weird fundings and you can't get your heads around them, it typically has to do with track record and incredible audacity Trump's prior blunders. So say what you will about Adam Newman. He is audacious, and he has credibility. People forget his origin story. They only remember the Masayoshi san $4,000,000,000 and what happened and what he did with that. And that was a complete cluster fuck. It went off the rails. He did all kinds of inside dealing, and and it was it was madness. But before that, he did GreenDesk. He was a bootstrapped entrepreneur, and then he created the category defining coworking space, which To this day, when you say, I need to get an office, the first thing people say is get a WeWork. Just like they say take an Uber, just like they say Google it. Just like you know, any other verb that we talk about. And so it's very easy to dismiss him and say, the tech industry has no morals. They just back they'll back anybody. he has a publicly traded company that's in the market right now. He defined the category, and he also put $300,000,000, apparently, of his own money at stake to buy these apartments. So I think it's I I would say the bet makes sense to me, and I think it will make sense if we go into the bet which I'd love to hear everybody else's thoughts on. It's an audacious bet because housing is one of the hardest industries to tackle, and he already did it for commercial, so why wouldn't he be able to do it for residential? David Friedberg (00:10:20): Sax, did you see this opportunity in the market? Did didn't did you guys take a look at it or have any points of view on it? David Sacks (00:10:25): No. I mean, we we we don't write David Friedberg (00:10:27): $350,000,000 David Sacks (00:10:28): size check. So it's just not something that we're gonna take a look at. For that matter, we don't really do not software investments. We don't do, you know, in the, you know, physical role type investments. And I've kinda learned that doing anything in the physical world with Adams is ten times harder than doing anything with bits. So, you know, one of my takeaways over the last few years is, you know, we tend to pure software models, not even hybrid or tech enabled models because it really does take a 10 x entrepreneur to do anything in the physical world. So -- Yeah. -- we, you know, we software is kinda our knitting and we we like to stick to that in terms of, you know, Andreessen Horowitz making this investment here here's where it's or or your larger topic of of repeat founders. Look. Most start ups fail. And most founders or good founders have an entrepreneurial streak in them. And so you combine those 2 things, and there's gonna be a lot of repeat second time founders. People who are fundamentally entrepreneurial, and their first thing doesn't work out. I think that that can be a positive thing to invest in because they've gotten some of their mistakes out of the way, and they've learned from that experience. So I think the question we would just ask is, what were the learnings? And did they conduct their failed startup honorably? You know? Like, if they -- Right. David Friedberg (00:11:44): -- David Sacks (00:11:44): lied to investors or misled investors, then, obviously, we don't want any part of that. But I don't think most failures are like that. And and so as long as the founder, I think, conducted themselves, honorably, had some good learnings. It's certainly not a disqualifier for their next startup. David Friedberg (00:12:00): I mean, Shamal, you've been open in the past about start ups that waste money and do the kind bars and red brick you know, offices and, you know, easy living at the office, there's no better example of over the top exuberance as there was at WeWork. Right? I mean, Does that indicate to you that this guy doesn't have a clue in terms of how to be prudent with investors' capital and it's not applicable, or how do you think about it? Chamath Palihapitiya (00:12:24): I have a couple of thoughts. The first is that WeWork is a really interesting business. But that business had been built many times before, and it's called The REIT. And I think what Adam was able to arbitrage was a period of time where he pitched a non real estate investor, a technology company that was really just a real estate investment trust. And that's why he was able to get these incredibly head evaluations. I think the peak valuation of WeWork was, like, 45 or $50,000,000,000. Mhmm. What happened? which is that when WeWork ultimately went public, the collective intelligence of the public markets imposed a REIT based valuation model on rework and it is now a $3,600,000,000 public company. And I don't think you can dunk on Adam for that. It's hard to build any kind of company, let alone a $3,600,000,000 company and he was instrumental in that so he should get some amount of credit. But the reality was that he was pitching people that didn't wanna hear about a business that was a real estate investment trust. They wanted to hear about some technology and all of these other things. But ultimately, when you stripped it away, it was a REIT. Now, you started again And from the outside in, not knowing anything because we don't know anything, what it looks like is the beginnings of another REIT except focused on residential. Right? So when you buy 100 or 1000 of apartments. But, again David Friedberg (00:13:53): -- Same pig different lipstick. Speaker 8 (00:13:56): The the the the issue at hand, though, is that Again, he has found a technology investor to buy a technology story. And again, Chamath Palihapitiya (00:14:04): time will tell whether there is a Speaker 8 (00:14:05): technology business here But if it ultimately is an amalgamation of a bunch of apartments with some sort of, you know, interconnected technology that helps enable a better community or what have you, those kinds of REITs have also been built before and REITs are valued in a very structured way on on this thing called FFO funds from operations. And you know what the upper bound of valuation which is if Chamath Palihapitiya (00:14:31): you go and, you know, look Speaker 8 (00:14:32): in the stock market, the most valuable REIT in the world is a company called Prologis. They have about a 1,000,000,000 square feet under management. They're about a $100,000,000,000 company. WeWork has about David Friedberg (00:14:43): 45,000,000 Speaker 8 (00:14:44): square feet under management. They're a $3,600,000,000 company. So if you just interpolate from those two data points on Chamath Palihapitiya (00:14:51): the residential side, Adam's gonna have to buy, Speaker 8 (00:14:53): you know, if you think an average apartment is 1500 square feet, he Chamath Palihapitiya (00:14:56): has to buy you know, David Friedberg (00:14:57): 665,000 Speaker 8 (00:14:59): more apartments Chamath Palihapitiya (00:15:02): in order for that to be prologist scale. You know, I don't know Speaker 8 (00:15:05): to invest at a $1,000,000,000 valuation or David Friedberg (00:15:08): 1.5 Speaker 8 (00:15:09): or 2 or whatever the number turns out to be. Make sense if you think the upper bound is unlimited, but if you think Chamath Palihapitiya (00:15:14): the upper bound is 3 or 4,000,000,000, the only reason to do it, by the way, it still makes sense for unreasonable to do it. And this is why I think people get tilted because now this comes to my second point, which is that what Adam Newman is able to take advantage of is a very obvious, powerful understanding of the venture capital business model that other founders don't, especially the ones that dunk on him. And let me just explain this. We talked about this last week. The only mistake I think that SoftBank really made was a velocity of money mistake. which is not setting the investment cycle of their Vision Fund to be 10 years instead of 5. While every other fund has a 5 year investment cycle too including a h's, And so when you have tens of 1,000,000,000 of dollars under management, guys, guess what? They have the same problem SoftBank did except with just a different quantum of capital. They want velocity of money. And so if a founder comes and asks for David Friedberg (00:16:13): $350,000,000, Chamath Palihapitiya (00:16:15): it actually in a perverse way makes your life easier. Because now that's saying yes once versus saying 5 or 6 times to people asking for $50,000,000. or haven't forbid 350 times for people asking for a David Friedberg (00:16:28): $1,000,000. And so if you're if you're in that seat, come off, if you're in the in the investor seat, are you putting all that capital once with the one guy who's managed that money before, or do you wanna find the guy who has it or the gal who hasn't? Chamath Palihapitiya (00:16:42): You have to understand the and recent business model. And recent Horowitz's business model is to become Blackstone David Friedberg (00:16:48): but for technology. You have, like, 30,000,000,000 AUM now. Right? Chamath Palihapitiya (00:16:52): Right. Which is still, you know, a dropping David Friedberg (00:16:54): -- 35,000,000,000, something like that. Chamath Palihapitiya (00:16:55): Yeah. So if you if you look at Blackstone, right, David Friedberg (00:16:57): A trillion. Chamath Palihapitiya (00:16:57): Blackstone is a $100 plus 1,000,000,000 market cap company, right, built on 3 pillars, credit, private equity, and real estate. You can make the argument that technology is near is as important as those 3 categories. And so you know, if I think it's pretty obvious, that Andresen is trying to build a publicly ownable security that represents all things in technology. So again, I don't think that they're necessarily out to generate massive returns for LPs. They wanna become a credible, reliable, institution for to absorb 100 of 1,000,000,000 of dollars. David Friedberg (00:17:37): And so, ultimately, the objective you think is to Chamath Palihapitiya (00:17:39): invest -- To monetize their Jason Calacanis (00:17:40): own need. Chamath Palihapitiya (00:17:41): Their their ultimate goal is to is for Andreson and Horowitz to monetize the equity of Andreson Horowitz. David Friedberg (00:17:47): Of the management company. Chamath Palihapitiya (00:17:48): Yeah. That's the goal. And that's a that's a by the way, that's a laudable goal. It's really hard to build a business. They've built an incredible business, and then they should get credit for that. David Friedberg (00:17:57): Zach, do you agree? David Sacks (00:17:58): Well, I mean, they are they I I think Chamath right that their stated goal is to build, like, a larger institutional VC type of I mean, doesn't Andreessen have a portrait of JPMorgan hanging on his wall or something? I mean, they wanna turn VC from being like a little craft business. It's something larger and more institutional. So, yeah, I'm sure they jump at the chance to write a $350,000,000 check if they believe in the company. But can can I shift this conversation just for a second? So I've done a lot of commercial real estate investing. I think there are reasons to think that flow, this new company could actually be better than WeWork. And let me just explain. So with WeWork, You know, if you talk to commercial office space owners, landlords about WeWork, like 10 years ago, what they would have told you is Yeah. Look. That model is great, but we want tenants who are high credit and sign long term leases. Why? because they're not worried about what happens in a bull market. They're worried about what happens in a recession, and they wanna make sure they can cover their bank debt. So landlords have always cared not just about rent. but also about having high credit long term leases. What WeWork basically did is arbitrage that. Of course, it was a much better deal for Star because if you're a start up, you don't have to go through a complicated process on a lease. You could just go month to month at a WeWork and you'd be willing to pay a premium for that. So WeWork's business work great during an upmarket because they would rent space for, say, fifty bucks a foot, lease it for a 100, and they would capture the spread. The problem is the business was highly levered to a boom cycle. And at the first recession or bust cycle, all of a sudden, they're gonna have massive vacancy because everyone can leave. And all of a sudden, their rents go below their the the rents are collecting go up below the rent They're paying and the arbitrage goes away. They magnified that problem by making 2 mistakes. Number 1, they signed a lot of top of market leases. David Sacks (00:19:50): Right? They were signing leases at a $100 plus per foot in hot markets. And the other thing is they didn't seem to have a lot of financial discipline. You know, I guess that show kinda makes fun of these sort of Bakkenelian parties they had and so forth like that. You can get away with a lack of spending discipline if you're a 90% gross margin business like a Google. But when you're a real estate business who's got real COGS, not having spending discipline is actually a problem. So For all those reasons, I think we were kinda contained the seeds of its own implosion inside of their model, and they needed to manage or mitigate those risks a lot better. That's not to say, though, that it wasn't a great product. I mean, for every David Friedberg (00:20:30): -- Jason Calacanis (00:20:30): It was in the early game. David Friedberg (00:20:31): -- David Sacks (00:20:31): an amazing product. Jason Calacanis (00:20:32): Yeah. I mean, in the early days -- Yeah. David Friedberg (00:20:34): -- Jason Calacanis (00:20:34): to your point, they were taking under market, like, really low cost per square foot space, like, in the tenderloin and then selling it for, you know, Bryant And Third Street rents. Right? I mean, that was the arbitrage, and it worked it's only they lost that discipline. It sounds like in the second half of the company's history. David Sacks (00:20:54): Right. What I think is interesting about Flow is that it's sort of multifamily, these apartment type buildings, Those tend to be, you know, let's call it 1 year leases anyway, and they're owning them. They're not leasing from a landlord. They're basically so Shamas Wright, it's basically a standard apartment replay where Newman is gonna create a consistent experience and brand across the country. I'm not sure that's really been done before where there's, like, a brand for apartment living. Speaker 2 (00:21:19): It's David Friedberg (00:21:19): never been done. David Sacks (00:21:20): Yeah. And so, actually, it it's pretty simple in terms of measuring if it's gonna work or not, which is simply can Adam Newman deliver lower vacancy rates and higher rents? And then, you know, buy apartment buildings at market prices. So in other words, That's the arbitrage. Is can he extract more rent and less vacancy from Apartment Units by creating this national brand and this experience David Friedberg (00:21:42): -- Chamath Palihapitiya (00:21:42): But this David Sacks (00:21:43): is this is my Chamath Palihapitiya (00:21:44): point. Everything you talked about is how we would actually do a tear down of any other REIT that was looking for money, David. You know? We would look at what is the FFO. Ultimately, it's like, you know, what seems like cap rates and what's the FFO. Can you get paid for only Speaker 2 (00:21:59): this week? David Friedberg (00:21:59): How much you have to spend and can you get paid? Chamath Palihapitiya (00:22:01): And this is where I this is where I think, like, you know, trying to then you know, So if if if on the if on the inside of it, what what instead, it was not that, but it was pitched as some, you know, convoluted technology play it's a little bit harder to believe. Again, we don't know the details, so maybe display. Alright. I'm sure Jason Calacanis (00:22:19): I have a level of continuity. What I would say building on Sachs. If they are gonna do 700,000 apartments, you can actually put some numbers on this. You know, 700,000 apartments, you think they can get extra 100, maybe a 150 out of a renter, I think they could for, like, that experience where people pay a little premium. They're not gonna pay 300 more, 400 more because then they would just get a larger apartment, and, you know, they they could spend that money because they're it would be better spent. If they have 700,000 of those, you're talking about a $1,000,000,000 in revenue a year. That's with 700,000 apartments. Okay. 10 times profits, you know, whatever, $10,000,000,000 valuation. If interest in Hertz is buying in at 1.5 or 2, like Jermont saying, is probably correct. Somewhere in that range, they bought 20%. Okay. Yeah. Maybe they get a 6 or 7 bagger out of this, but it's a David Friedberg (00:23:00): 6 Jason Calacanis (00:23:00): or 7 bagger on a big number, 350. It's not like a 20 x or a 50 x. And You also get the branding, which I would not undervalue here of being the firm that backs bad boy entrepreneurs and is, like, willing to go there and support -- I Chamath Palihapitiya (00:23:18): think it's a real positive trend, recent. It's like, look. Yeah. I do. You know, you you just raised a ton of money Well, guess what? You gotta put that money out because it's not as if they're gonna think to themselves, oh, I really only wanna run this fund over 3 years instead of 2. They're not thinking that. They're like, I wanna keep going out because I think their business model works by taking as much oxygen in the room as possible. which means to be actively fundraising always. That's it's tied. It's true of Blackstone. It's true of Apollo. It's true of Carlisle. It's true of KKR. any of these publicly traded investment managers, they live and die by their ability to constantly be raising funds which implicitly means you have to constantly be writing funds. The returns decay, but that's okay because now you're feeding you're taking money from pension funds and other institutional limited partners who are fine because their hurdle is like sick or 7%. So if you deliver 11%, you still look like a genius because you can absorb so much money. So, Andreessen wins by showing that Adam Newman goes and picks him. And recent wins because they have the ability to write a $350,000,000 check. And recent wins because they have $350,000,000 less that they have to actually put into the hands of other entrepreneurs. Now they can do it with just one check. So it's a multifaceted win for them, and it's a multifaceted win for Neumann. David Friedberg (00:24:43): I think there's also brand value for the entrepreneurs that have had failed startups or issues with their first startup imploding and knowing that there's still a second bite at the apple. I remember a survey, and I I just tried to pull it up, but I couldn't find it. So I may be wrong on this. But first around capital years ago surveyed or did an analysis of all the investments they had made And I think one of the biggest predictors of success in a startup was that it was the founder's second startup. And so if you've had failings the first time around you're more likely to have learned from those failings to improve your performance the second time around. And so as an entrepreneur, I looked to Andreessen Horowitz after this investment and think, you know, these guys will still back, you know, great entrepreneurs even if things went sideways where there was an issue the first time. And and you've got, you know, the ultimate kind of case for that. Okay. Speaking of Andreessen, I'm gonna move us along. You guys wanted to cover this topic, not my favorite topic just because I wanna be careful about you guys decide what you wanna say. But I I'm gonna bring up the the Andresha Nymias thing in after 10. You guys wanted to cover this. Right? Yep. Thumbs up. Sure. I mean, I mean, it's like okay. Jason Calacanis (00:25:54): Well, I mean, everybody's talking about why wouldn't we David Friedberg (00:25:56): -- Everyone's talking about it. Okay. So around COVID during COVID, Mark Andreessen wrote a an essay called Build. And I'm gonna read an excerpt. He says you don't just see the smug complacency, the satisfaction with the status quo, and the unwillingness to build in the pandemic or in health care generally You see it throughout Western Life and specifically lead throughout American Life. You see it in housing and the physical footprint of our cities. We can't build nearly enough housing in our cities with surging economic potential, which results in crazily skyrocketing housing prices in places like San Francisco and making it nearly impossible for regular people to move in and take the jobs of the future. And then last week, Mark and his wife, Laura submitted a letter to the town of Atherton to fight against multifamily housing saying, I'm writing this letter to communicate our immense objection to the creation of multifamily overlay zones in African. Please immediately remove all multifamily overlaid zoning projects from the housing element, which will be submitted to the state. In July, they will massively decrease our home values. The quality of life ourselves and our neighbors and immensely increase the noise pollution and traffic. Sex, I'm just gonna hand the mic over. David Sacks (00:27:10): Well, I mean, I'm happy to defend the residents of Atherton on this. I'm gonna take the contrarian standpoint. But does anyone David Friedberg (00:27:17): -- I I I was gonna do the same. I thought you guys weren't gonna match him. So because Well, David Sacks (00:27:21): look. I mean, do we have a a problem where housing is too hard to construct in the state of California? Yes. And there's a bunch of reasons for that. permitting process as Byzantine. It takes years. All those delays cost money. The tenant rights movement has gone so far that landlords basically can't you know, it's almost impossible to evict anybody. And that makes us so no one wants to be a landlord. No one wants to build these multifamily buildings or or buy them. And then, you know, you've got, like, all these taxes. So you're just in in San Francisco, for example, They just passed a 6% transfer tax where we talked to us in the show on. They basically just took 6% of my home, and there's like nothing you can do about it. So There's a lot of reasons why people don't wanna invest in more housing in California. And I think that This Atherton example is sort of cherry pick because what this is is really zoning. You know? There are these suburbs, and it's not just Atherton. I mean, you got the East Bay as well. where people live in these areas that are zoned for single family residences as opposed to multifamily. And that determines the character for the neighborhood. Now If you go buy a house in one of those neighborhoods with that zoning, then that's what you expect to be the case. I mean, you have to spend more money buying house in that neighborhood because you are investing in the character of that neighborhood. So it is unfair to the residence of that neighborhood for a developer to come along and say, hey. I'm gonna change the character of this place so I can make money. I'm gonna take a bunch of single family lots turn them into multifamily apartment complexes or something like that. So I can understand why the residents would be against that. So I would differentiate between legitimate reasons for zoning. And then things that the state or cities have done to undermine the market for housing, basically creating frictions are impediments in the market for housing. Now it is the case that as cities get bigger and need to free up land that you might need to rezone But the areas that you should look out for that should make sense. Right? David Sacks (00:29:24): I mean, I don't think you go off to Atherton and change the character to that neighborhood so that you can buy 5 more units. Yeah. I mean -- You should you should look at like, why not look at the areas around, say, public transit, like the parts and so forth, where you could basically go up around there and it would make sense to the neighborhood. David Friedberg (00:29:43): I mean, the example I would give to kind of paint an extreme picture is, let's say you want a farm in the countryside, someone buys the farm next to you and then besides they wanna build a fifty story tall skyscraper next to your farm, you you would have a serious objection because I think that the mean, look look at the town of Venice in Italy. I mean, Shamal, you've you've you've been there recently, but, you know, communities local communities can define the character of their community by by by making zoning laws that, you know, allow a small city to remain like a small city. I've also always been against this notion that we should allow any developer to build any size building anywhere they want in San Francisco, which has been an ardent cry from Silicon Valley Progressives for years that we need to let them build, let them build. But at the end of the day, I moved to San Francisco 22 years ago, and it was a small quaint city. It felt like a small city. and building skyscrapers made it more congested, made it less inviting, made it feel more industrial. And it wasn't appealing to me as a resident. And I think that residents need to have the right to define what they want their community to be. The question it brings up then is where do you build? Because all residents everywhere would wanna block family housing, multifamily housing, skyscrapers. So, I mean, Shamab, I don't know if you have a point of view to counter what we're saying. But, you know, how how do we think about solving this problem at scale? If everyone wants their their local communities to remain quite and interesting and and not be built out. Chamath Palihapitiya (00:31:09): Well, I I think I think that's true for people who can afford really nice homes in the suburbs. Right. but there are a lot of people that live in highly dense housing in urban environments. And I think that's where we need to focus first. If you look at the data California needs to build 3a half 1000000 extra homes by David Friedberg (00:31:28): 2025. That's a rule. Right? That's like a Chamath Palihapitiya (00:31:30): So David's right. Like, focusing on town with a population of 7000 people is not gonna solve the 3 and a half million homes we need to build. And it brings up a bigger, quite which is then who is gonna pay for all the physical infrastructure that's gonna be required. Let's just say you're able to actually double the population of Atherton to David Friedberg (00:31:47): 14,000. Chamath Palihapitiya (00:31:48): Well, you know, I live near that area. So what I'll tell you is, Atherton has bad flooding Dave you know, Saks actually used to live near there too, so Saks can can confirm this. You know, depending on when it rains, huge pockets of water just collect everywhere. That infrastructure is bad. There are no sidewalks. Right? So you kind of walk just on the road if there's a carts whipping by, you know, could pick you off at any moment. Now those were decisions that, as David said, the residents of that town, made decades ago because of the lifestyle that it created. And they traded away a highly dense urban environment. Whereas, if you just moved a mile, you know, south, there are parts of Menlo Park and parts of Palo Alto, that are already in a situation to absorb very dense housing where you could put that extra 7 or 8000 people. pretty easily into much David Friedberg (00:32:46): -- What do you what do you do when those people in that neighborhood in Menlo Park, say, I don't want another apartment building here. I want it to be down the road in Atherton. Right? How do you resolve this conflict? And I just wanna remind everyone in September, Cal Governor Newson signed these bills. Right? He signed 31 affordable housing bills. which mandate by ZIP code and by city and by town, the building of affordable housing to create equity in this problem or which basically means all these cities and all these towns are now scrambling to figure out how do we meet our state mandated objectives of new affordable housing in our ZIP code, or in our town -- No. And by the way, look -- -- coming through. Yeah. Chamath Palihapitiya (00:33:22): I I mean, look, the I and I think exactly as you said, what will happen now is it goes through some state commission, and I think that state commission can issue some sort of penalty or something. So, you know, it's it's I think the the the residents will pay for that. Freedom, if you will, to to not have that building happen. But again, I just go back to it doesn't solve the crux of the problem. The crux of the problem is we need to solve this housing crisis in the order of magnitude of millions of homes. Okay? And so millions of homes can only be absorbed mostly in cities. So the real conversation and, you know, is I have more sympathy for the residents of Atherton than I do for residents of the city of San Francisco. Okay. Because there is dense housing in San Francisco. There already is an infrastructure, social services that were designed and built. There are sidewalks. Again, simple example. There are stop lights you know, in San Francisco. That a lot of these towns don't actually have. Now, again, that was a decision they made 50 years ago and they would have to change that decision. But my point is, like, there are there are places that are already shovel ready. And the real question is why can't we build 100 of 1000 of units And so this is a good article to write because it's a Tony Neighborhood and, you know, there's a few thousand folks But I think the real issue won't get solved until we figure out how to green light 100 of 1000 and millions because we are 3a half 1000000 home short. David Friedberg (00:34:53): Jay Cal, what do you think? I mean, are you Jason Calacanis (00:34:55): Well, you know, the the truth here is that this is not about Etherton. This is every town, every city in California is fighting all development. Because if you fight the development, Well, yeah, you you would obviously have less traffic and supply and demand your homes become more valuable. The the place that's fought at most of all is San Francisco in the city. where you cannot convert homes. You cannot take your Victorian and make it into a a townhome. And then if you look at what's actually happening here, what their fighting against, and, you know, this is the hypocrisy of it is, you know, these are townhomes. This isn't like a twenty story, you know, giant apartment building. They're townhomes, and they're gonna be $3,000,000 each. And they're not gonna be for scary people and criminals and ruining people's quality life. It's gonna be the venture partner or the receptionist not even the receptionist. It's gonna be a venture partner. It's gonna be Chamath Palihapitiya (00:35:44): a CTO at a tech Jason Calacanis (00:35:45): company who's gonna be able to buy this and then be that much closer to work. And so it it does wreak of hypocrisy, and there's a really simple solution here, which is, you know, there are Caltrain stations up and down the peninsula. There are you know, in some places, you have other municipal transportation. Along those corridors, they should build up they should build 10 story apartments etcetera. Redwood City did this recently. We've all been there and seen the apartments of their gorgeous. Chamath Palihapitiya (00:36:12): They're sick -- But, Jay Kal, you're talking about you're talking about the exact kind of solution we need because instead of trying to solve a hundred units here or there, Redwood City did an incredible job. They solved it in the scale of tens of thousands of units. And it completely changed the downtown of Redwood City. It is and it's awesome. Incredible. Jason Calacanis (00:36:29): And sort of -- What is African afraid of? So what is African afraid of? This is an envious amount it's worst. In my mind, I'm I'm not gonna specifically make it about Mark Andreessen. I think Everybody, you know, has the right to live in the neighborhood they want. They they get to state their feelings. I think what we need to do is convince people, and I think there's 2 really good arguments here. Number 1, do you want your chef David Friedberg (00:36:48): to kiss? -- convince be convince people to let their neighborhoods change is what you're saying. Jason Calacanis (00:36:51): To to let them evolve modestly to have homes that their own children or their own chefs and housekeepers and associates, we all know people in the in the area who have bought apartment buildings for their nannies because you couldn't get a nanny, well, you couldn't get a chef. So you you bought some unit in Redwood City, and you rented it for your nanny. Or whatever. Like, we don't know a lot David Friedberg (00:37:11): of people that have Jason Calacanis (00:37:12): Not everyone. I do. I I know multiple -- Okay. David Friedberg (00:37:15): -- Jason Calacanis (00:37:15): who have considered it. And so that's the way you would convince nimby people to to evolve here. And then there's a second one. This has to do with work from home. When you commute, you know, the issues of domestic violence, depression, drug abuse, substance abuse, alcohol abuse, all of that goes way up. And it it's it's somewhere between 30:40 minutes of a commute you start to see people's quality of life seriously deteriorates. And so if we want people to come back to offices, which Apple just mandated last week, everybody's coming back 3 days a week, like it or not, Tuesday, Thursdays, then you pick the other Wednesday you wanna come to work, I guess. If we want people to come back to yeah, we're gonna have to build some taller homes. The CEOs, the founders of the companies, the founders of the venture firms, it's not about Mark Andre's. It's about everybody. they don't have to commute. The office is within walking distance or a bike ride of their office. People need to start thinking about their nanny, their chef, their firefighter, and their employees. Chamath Palihapitiya (00:38:12): Jason, I I may have misread it, but it wouldn't have solved the problem for the nanny, the chef, the teacher, the firefighter. Jason Calacanis (00:38:17): This should be David Friedberg (00:38:17): $3,000,000 Chamath Palihapitiya (00:38:18): units. No. They wouldn't even be that because the way that it read because I read said that it you you would have qualified it by building what's called an ADU on your property. Yes. So people so people would have built it for their grandmother or their in law. A lot of people are doing that. Jason Calacanis (00:38:33): So my Chamath Palihapitiya (00:38:34): my my point is the law the law as proposed was already hacks. And so It would never have accomplished what you were saying. I think the answer to what you're saying is what Redwood City did. It's what towns all around the country should be doing which is like in and around, particularly like transportation hubs, you should be green lighting a lot of dense housing. But, Jason, those are not. ADUs that sit on a product. No. Speaker 2 (00:38:56): No. No. Chamath Palihapitiya (00:38:56): Those are those are 500 and a thou and by the way, those also require not just the infrastructure, but it also requires the financing and all of the you know, the banks and construction -- The market Jason Calacanis (00:39:06): started to construct it. That that's not a problem in California. The the opposition is the problem, which is why the federal the I'm sorry. The state government's getting involved and superseding or trying to supersede what happens on a local level. That's why Gavin Newsom is passing these things is because each town is refusing to do it. But another possible solution is if Atherton is so good at blocking this stuff and they have so much money, let them pay a penalty and have Redwood City or San Carlos or another neighborhood Millbrae David Friedberg (00:39:31): -- Speaker 2 (00:39:32): Yeah. David Friedberg (00:39:32): -- Jason Calacanis (00:39:32): that wants money. And they wanna build up. Millbrae is building because that's where the BART station ends is in Millbrae. Just exhibiting up there. David Sacks (00:39:39): Well, you're describing, like, are all these contortions and what should be a more free market for housing I mean, the reality is we've done so many things to distort the market David Friedberg (00:39:49): -- Speaker 2 (00:39:49): Agreed. David Friedberg (00:39:50): -- David Sacks (00:39:50): with these labyrinthine permit process processes that delay projects for years years. to, you know, to all the taxes and and other rules. Yeah. Well David Friedberg (00:40:00): -- Jason Calacanis (00:40:00): because that's how they fight it. Chamath Palihapitiya (00:40:02): They fight it with all these environmental stuff. David Sacks (00:40:04): zoning is a little different. Yeah. So the Nimeonism factors into the permitting process. But but I would, again, I would differentiate zoning. But my point is just we've, like, so broken the free market for housing that we then come along and say, see, the free market's not working. We need more government mandates. Look, is this happening in Miami? No. Go to Miami. There are cranes everywhere. They're building David Friedberg (00:40:26): -- Jason Calacanis (00:40:26): Houston. David Friedberg (00:40:26): -- David Sacks (00:40:27): they're building multifamily or exactly. So In these, frankly, red cities, red states, which are much more lightly regulated, they're building a lot more. But at the same time, it's not like David Friedberg (00:40:38): -- Chamath Palihapitiya (00:40:38): And in New York, which is constrained, so you have to build up. Yeah. Jason Calacanis (00:40:41): But Houston has no zoning. David Sacks (00:40:43): Yeah. New York City is always had a very non sentimental view towards construction. The city has always said, okay. If you wanna build something bigger and better, you can tear it down and start over. I mean, they have, like, air rights and so on that you have to respect. But but New York City has never they by and large, they don't constantly label buildings as historic and say you can't touch them and things like that. New York City has always wanted to keep being dynamic and growing. So there are other places that just don't have this problem, and they're able to achieve this growth without building an apartment complex like in the lot next to you. if you live in the suburbs and have a single family residence. I mean Right. So I I just think, like, the you know, the the politicians in California are so thoroughly broken the market for housing. And now what happens is you get an article like this that's basically scapegoating the resonance of a suburb as being the source of the problem when they didn't create this problem. Jason Calacanis (00:41:42): Yeah. Just fighting to keep the status quo. So they're perpetuating it. I would Speaker 2 (00:41:46): say But, David Sacks (00:41:46): you know, like, so first of all, I have no special blow for Afton. Trust me. I I lived there for a couple of years, and it's kinda like a stepford community. I mean, I had to move back to Speaker 2 (00:41:54): Say more. Yeah. David Sacks (00:41:55): Well, I'm like, you know, somehow, I'm just more comfortable stepping over dirty needles and excrement. Jason Calacanis (00:42:01): You're voting with your dollar bills? David Sacks (00:42:03): I mean, I moved back to Sarah Cisco. David Friedberg (00:42:05): But -- Massachusetts. David Sacks (00:42:06): Yeah. But, look, it's Alpacino is like a really weird place because it's David Friedberg (00:42:10): -- -- like a alpacino and the devil's advocate. Go ahead, Saks. David Sacks (00:42:14): In in addition to there being no sidewalks, there's literally no offices. There's no grocery store. There's no commercial real estate of any kind. There is no downtown. There is there you know? So I don't know, like, where the hook is that you would all of a sudden put an apartment complex. I mean, you're literally gonna be building it in someone's backyard. So the character of that neighborhood just doesn't support it, and I think, you know, people coming together to form their own cities, you know, under the principle of subsidiarity should be allowed reasonable freedom to basically construct a city as they in the way that they wanna live. Jason Calacanis (00:42:47): And there are other cities that competition Freeburg. There's other cities like competition. Houston has no zoning, essentially. So you can if you have a lot and you wanna make it into a school or a a hotel or a restaurant, you You could do it. And then outside of Austin, you you kinda have that same thing. People build all kinds of weird compounds and stuff out there. Chamath Palihapitiya (00:43:03): Are you David Friedberg (00:43:04): guys following Jason Calacanis (00:43:04): So it's a competition between those cities. And I think San Francisco is losing. Yeah. David Friedberg (00:43:08): Are you guys following any of the startup cities that are being built, where there's, like, a new city being built from the ground up, and any of those seem, like, terrible? -- Acumen? I don't know the names of any of them, but -- Jason Calacanis (00:43:18): Call the Zach is 1. Yeah. David Friedberg (00:43:19): I mean, are these real are these real projects? Are we gonna see these emerging, like, next gencities? that, you know, could be viable places to move to and live, or is it really just about, you know, transforming some of these cities that are less regulatory, and that's ultimately what will win in the Chamath Palihapitiya (00:43:33): You know, part of why the the regulation has gotten so perverted in a lot of these towns is because you've been able to gerrymander how, you know, these public school districts get funded. Yeah. And so, you know, why folks are so protective of of it is is again. And and, you know, to to underscore one of Saksis points, this is much more prevalent in Democratic states and Democratic cities where, you know, coastal elites have really gerrymandered these school districts and that's a large reason why they they don't want a lot of building. They wanna protect the tax base and they wanna be able to funnel those specific tax dollars into a few schools for their kids, and that's it. David Friedberg (00:44:14): Yeah. And Chamath Palihapitiya (00:44:15): so it's it's at it's actually Jason Calacanis (00:44:16): a really good point, Shamak. People don't know this undercurrent, which is -- Oh, it is down the peninsula. Chamath Palihapitiya (00:44:20): By the way, this is the dirtiest little secret in these 30 Democratic states. Again, mostly democratic, But if you look inside of California and a couple of other states, how horrendously gerrymandered it is so that you can basically redistrict in a way to cordon off tax dollars, to only then send to 1 or 2 public schools that sit inside of your area, your zip code, because that's what the law says. It's a zip code oriented scheme is perverse. It's created incredibly horrible incentives for people. So I think Jason Calacanis (00:44:52): David is right, which is that Chamath Palihapitiya (00:44:53): there's there's a contortion of laws that come together that underlie some of these decisions that then manifest in a petition like this and etcetera. They all need to get cleaned up. Jason Calacanis (00:45:04): and Chamath, it's it's it's even worse than that because the same people who have rigged it so that all their tax dollars stay in their non development community then they're over funding their public schools. They could easily afford private, but they're using all that money for just their private school. And the one in the town next to it, East Palo Alto, whatever, they have no money. And then these people have the audacity to fight against school choice so that those poor people can't take tax dollars and then pick up a better school. So it's hypocrisy all the way up and down. And and, you know, I think this is why people are are are largely moving to different places around the country, and it's a competition between states and cities. David Friedberg (00:45:40): Okay. We're gonna go from super local to global. You know, this is a topic I wanted to talk about today because I I wanna bring together a couple of of breads and get your guys' take on, you know, all of these things kind of coming together and what it means for foreign policy and how things might play out on the global stage in the next, you know, call it years to decades. Xi Jinping, it's been reported this week. is taking a trip to Saudi Arabia. You know, this is just a few weeks after Joe Biden made his trip to Saudi Arabia. I'll read a just an excerpt. He's gonna end his more than 2 years of self imposed in person diplomatic isolation. and his first trip is going to be to Saudi Arabia. You know, this is from unnamed Saudi sources, so it's unclear. This isn't an official statement. this is just reporting. You know, the Wall Street Journal reported in March that after 6 years of negotiations, China and Saudi Arabia are getting close for China to start pay paying yuan for oil that they would be buying from the Saudis. So there's an important kind of economic tie up that may be emerging that that could affect the US dollar and the the importance of the US dollar on on the global economic stage. And meanwhile, this week as well, it's been reported that China is doing military exercises with Russia inside Russia. So there is an extension of China and their influence and their economic tie ups and their military activity with both China sorry, with both Russia and Saudi. I also wanna highlight another important point that came out this week. Saudi Aramco reported their earnings. The largest earnings ever for a company, $48,000,000,000 of net profit in a quarter. That is more profit than Microsoft, Apple, Facebook, and Tesla combined. in a single quarter. It is the most profitable business, and Saudis have been very public about their intention of divesting their interest in Saudi Aramco which is their state owned and state run oil company, and moving into other businesses. Over the past couple of months, it's been reported that they've accumulated a nearly $100,000,000,000 equity portfolio. Owning stocks like Alphabet, Zoom, Microsoft, and others, it's also been reported that they own over a $160,000,000,000 of US treasuries. So the US is very dependent in the private equity community and the VC community and in the public markets, on Saudi dollars. David Friedberg (00:48:14): Saudis have been large holders of US dollars. And now through China, it looks like the Saudis may be having a tie up that brings them closer to China through this trade relationship with the yuan and the visit from Xi Jinping, while China is actively exercising you know, their military inside of Russia. Is the future a China, Russia, Saudi access? And should we be concerned and should we be changing any of our tactics on foreign policy, David Sachs, as this, you know, set of threads plays out over the next couple of months and and, you know, going out. David Sacks (00:48:48): Yes. I think we do need to make some changes. Biden's backing away from this now, but in his 1st year, He declared the Saudi's peak pariahs and he did push them into China's arms. What was the point of that? Biden recently had to go to the Middle East to basically beg Saudi Arabia to increase their production of oil. So he's already acknowledged that policy did work. And one of the reasons it didn't work is because simultaneously with declaring these allies to be enemies, he basically restricted US energy production. which is, you know, strategically undermined. David Friedberg (00:49:20): So -- And the the US has military bases in Saudi Arabia. Very strategic. assets for the US military. David Sacks (00:49:26): Yeah. Listen. Listen. And Jason Calacanis (00:49:27): we sell them weapons. David Sacks (00:49:28): The the US relationship with Saudi Arabia is always gonna be complex. They're a complicated friend to have, but it's much better to have them as a friend than basically drive them into China's arms. And the reality is Whatever you think about the regime there and how oppressive it is, first of all, we don't get to choose the people running these countries. That's the lesson we should have learned. over and over again from all these failed regime change operations. 2nd, do we have any reason to believe that if that regime got toppled, it would get replaced with something better. I think we all know that if the regime there fell, it would probably be replaced with something fundamentalists that we would like even less. And, certainly, if another nation were to basically dominate the region. Like Iran, that would be worse for us as well. So our relationship with them is complicated, but, ultimately, they should be, I think, allies of the United States, and we should not be working over time to push them into China's arms. And I think similarly with Russia, we've basically declared ourselves to be engaged in this proxy war with Russia which strategically there's just nothing in it for us. You can sympathize with the people of Ukraine all you want, but it's dangerous. David Friedberg (00:50:35): You've said that in the past. And I think the question is, does this China military exercise in Russia indicate an escalation of our conflict with China to you? You know? Or is this something that, you know, just kind of par for course in terms of, you know, neighbors, you know, conducting -- David Sacks (00:50:53): Mearsheimer just sent an article in Foreign Affairs talking about the Ukraine war reminding us that it still going on. I think people somehow think that this war is just stable, and it'll settle into forever war status kind of like like Afghanistan, these conflicts in Middle leases went on for It's actually very dangerous. It can always escalate out of control. And as long as it's going on, I think we just have to remember that it's going on. It poses a huge global risk. And I would say that one of the things that, again, we should be aware of is this idea that even though we have problems and conflicts, with multiple nations, we still don't actually wanna push them into each other's arms. So again, the Soviet Union in China during the Cold War being the key example. I mean, this principle of geopolitics goes back 1000 years to the Romans. Right? A devide at Impera divided rule. You do not wanna unite your enemies. And What we've done here is we keep pushing them together. You know, China and Russia historically have not been friends. they share long borders together, neighbors generally have problems with each other. These are nations with serious conflicts or differences of interests. And we've made it really easy for China David Friedberg (00:52:03): -- Speaker 2 (00:52:03): Yeah. David Friedberg (00:52:03): -- David Sacks (00:52:03): to to turn Russia into the junior partner in that relationship. David Friedberg (00:52:07): Tumat, do you think US foreign policy needs to change and that we're setting up this, you know, access of conflict, this this access of allies that we don't want to have the allies? And, you know, would you kind of advise? And and also, you know, do you get concerned about this oil you want trade where there may be some, you know, economic tie ups that that really could affect you know, the the dollar as a reserve currency. Chamath Palihapitiya (00:52:35): Look. Couple things. I I think it's really dramatic to kind of paint it in the stark kind of, like, bipolar terms. I think we are post all of that. So I I understand how in the Cold War, it easy to fall into binary definitions of good and evil 1 and 0, us versus them, team a versus team b. But in 2022, I don't think that's how things work anymore. We're in a highly interconnected, highly global world. It's very complicated. Dollar flows are real time. They're massive. Cooperation is real time. It's all over the world. It's with every country. So it allows every country actually the first chance that they've ever really had to maximize their own potential for their own citizens and that's really what every country's goal is. Right? And so -- Mhmm. David Friedberg (00:53:22): -- Chamath Palihapitiya (00:53:22): in that lens, look what just happened today. Gas prompt said they're gonna shut off Nord Stream 1 just for a, you know, a few days. Right? But as a result of that EU net gas has just gone absolutely nuclear and just close it all time high. David Friedberg (00:53:35): 14x 14x where it was pandemic -- Right. -- you know, pricing per unit for year ahead. Chamath Palihapitiya (00:53:42): So if you if you so if you take a step back, we are at max energy production with all of the capacity all around the world, a 100 odd million barrels a day. Okay. Global productivity absorbs that. There is very little room right now to expand that without pushing the date in which that capacity is available out until, you know, 2028 to 2030. So effectively a decade from now. So if you're in this situation and you're a country with vast natural resources, of which I'll just remind us America is 1. I think the most important thing you can do for your own citizens is to monetize these petrochemicals now. Get it out of the ground in a reasonable way, Sell them in the marketplace because there's demand for it? Take that money and reinvest it in your people. And I think if you look at it that way, The best run countries are responding to this moment in time like any company would. How do you maximize demand and sell the product you have to the most number of customers globally? And so I think the Middle East is doing an incredible job. The US, by the way, by passing the IRA. Finally, I think is on the right footing because we can talk about this in a moment but the path to permitting and the path to clean up and by the way it puts fossil fuels on a level playing field with with clean energy alternatives? David Friedberg (00:55:07): Emerging alternatives. Yeah. Chamath Palihapitiya (00:55:09): The best thing that could have happened. Okay? So I think we're all behaving in a very rational market focused way. And so I would focus less on trying to dramatically kind of resolve these things as a few countries versus everybody else. I don't think that's what's happening. David Friedberg (00:55:27): Yeah. Much more complex. Chamath Palihapitiya (00:55:28): much more complicated than that. But I think the the simple explanation is people with resources in the ground of the country in which they rule have a responsibility if they believe that there's market demand to absorb that so that they can take the revenue that comes from it and reinvest it in their people. That is true for the United States. It's true for Saudi Arabia. It's true for every country in the world. David Friedberg (00:55:49): Yeah. I mean -- -- Saudi Arabia is clearly making these investments. Right? Not just on Speaker 2 (00:55:53): Yeah. Chamath Palihapitiya (00:55:53): And by the way, I mean, like David Friedberg (00:55:54): -- But also housing and new industry and education. Chamath Palihapitiya (00:55:57): And then what do we do? David Friedberg (00:55:59): -- salary rate. Saudi Arabia is becoming much more liberal as a result too. Right? The education standards. Yeah. Chamath Palihapitiya (00:56:04): And and and if you look at the investment, like, you know, you didn't you you didn't need to go to Dave Swenson and understand portfolio allocation, although I think the guys in Saudi are smart enough to have probably done it. But If you're if you have a lot of money coming from one kind of business and you need to make sure that you can diversify so that you can reinvest over a long period of time, If you look at countries that had huge petrochemical related revenue flows, the Nordics, what did they do? They stood up these huge Sovereign Wealth Funds And those Sovereign Wealth Funds went abroad, and they bought all kinds of non correlated assets to those petrochemicals. That is the same thing that Saudi is doing now. David Friedberg (00:56:45): financial security for their people. Chamath Palihapitiya (00:56:46): But it's like it's like, what is the furthest uncorrelated asset from oil? It turns out it's Apple, Facebook, Meta, and Google Tech. David Friedberg (00:56:53): And US US treasuries. Yeah. Jason Calacanis (00:56:54): Yeah. Uber. David Friedberg (00:56:55): Yeah. Hey, Jacob. Look. So, Jake, let me let me ask this contrarian question for you because -- Yeah. -- you you often talk about the authoritarianism of these states, Saudi, China, Russia. You know, it seems to me as we observe what's going on in Saudi, And maybe the case could be made in China to some degree, although there are steps taken back, but also in Russia, that the US influence the the the economic and the political influence associated with these these foreign policy conversions could they maybe be driving these these these these countries to be more liberal? You know, we're seeing in in Saudi now -- Of course. that women can drive, that there's new industry, that there's education, that there's a technology industry booming, that the you don't need to have a turnover of government and a turnover of what is often classified as authoritarian regime for the operating model to be influenced by the West in such a way that change happens more slowly, and you do see liberalism emerge in these countries Speaker 2 (00:57:56): with better educational standards, David Friedberg (00:57:56): more equality, more more human rights, And so do you think we're kind because you often kinda paint a a a picture that it's bad guys versus us. You know, do you not think that we're making an an influence on these places locally and that we're seeing -- Jason Calacanis (00:58:10): Well, I would take exception to, like, it's bad guys versus us. I don't I don't think we wanna create a legion of dictators and nor do I think that's what this is. I would actually agree with Saxx. We should be embracing these folks and having strong relationships with them even though we are fundamentally different operating systems our countries, democracy, Speaker 2 (00:58:27): things like that. David Friedberg (00:58:28): -- should be embracing our charities? You you sorry. You think we should have a relationship with Putin? Just a -- A 100%. Jason Calacanis (00:58:33): I mean, and we Right? I mean, Obama was making some progress on that. And we we did some great work when and, obviously, Trump has a very, very longstanding, very deep. We don't know exactly how deep relationship with Putin. And we we did great work with We I mean, they did the he he did his pageant over there. I'm making some jokes. They bought a lot of apartments David Friedberg (00:58:55): for that. That was a joke. Okay. Gotcha. Jason Calacanis (00:58:57): Just a little joke there, but then David Friedberg (00:58:58): I was We'll find out for China, I suppose. Okay. Jason Calacanis (00:59:01): But we do great work with China in terms of containing North Korea's nuclear ambitions. Right? And so there are things we can collaborate on. I think the most important thing, though, is that while we are embracing them, building fabric between them, communication, trade, whatever it is, we are not relying on them. And that and that's really what we have to look at when it comes to the kingdom because if not for the fact that the kingdom won the, you know, born on top of you know, oil fields lottery, we would not be in a deep relationship with this country. They're living under a 10th century you know, rule in terms of how they treat women, gay people, etcetera, and the human rights is an important issue. And we wouldn't have a deep relationship with them if we didn't have to deal with the oil, but we do. And so what I think we really need to be focusing on here is maintaining great relationships with them. Yeah. We don't want to drive them to each other's arms. But to Tremat's point, I I don't think they're creating the legion of Doom to take on the US. I think they're just doing what's in their economic interest, and we need to do what's in economic interest, which really is investing in nuclear, investing in solar, batteries, wind David Friedberg (01:00:04): -- Jason Calacanis (01:00:05): And then even -- -- and bridge -- And then the interest -- -- in the interest of the free and Europe. Exactly. And if we are independent of them, then we don't have to go over there and kiss the ring like Biden had to do. We don't have to, you know, deal with excuses when they do horrible things like murder Khashoggi or you know, just this past week, they put Saama Al Shahab in jail. She's a PhD student from the University of Leeds. she's now gonna go to jail for decades because when she went back to Saudi Arabia on vacation, this happened last week, gentlemen. because she retweeted people. And so these human rights violations, the murder of Khashogg, all these things add up, the Uighurs, etcetera. And and we'll have a better ability to negotiate and lead them as the shining city on the hill when we work on being that shining city on the hill, and we're not dependent on them. And that's really what I think we have to focus on is reducing the dependency on these countries. I think we all agree with whether it's medical devices, PPE, drugs, making our iPhones or or oil to keep us. What? And then so does Europe? And that's where nuclear comes in. David Friedberg (01:01:09): Speaking of reducing dependency, you know, Joe Biden signed the inflation reduction act. Some people have said this is the most important bill signed in years, if not decades. by, you know, passed by a US Congress signed by a president because it touches on so many points that folks believe will really move the needle with respect to climate change. Timoff, I think you made an interesting point in our group Chamath, and I think maybe we should start there, which is, you know, at the end of the day, the systems of industrial production on planet earth were made in such a way that we never accounted for the costs of the external output of these systems, meaning we can burn fuel put CO2 into the atmosphere or put methane into the atmosphere in the case of animal agriculture, and we get a low cost product that we consume and, ultimately, no one specifically pays for the cost of the carbon going into the atmosphere, which I and, you know, many scientists would argue is having an anthropogenic effect on the warming of the planet and and more catastrophic weather and and and all these other risks that we're now facing. And so the idea was, you know, 1st principles, you should tax people for tax industry, tax businesses, for the production of atmospheric carbon that causes an effect that we're all gonna have to pay to repair over time. So, you know, is that a point of view that you hold Shamont? because, you know, you kind of brought this up in our group text, but that's the that that would be the the ideal scenario to resolve climate change as if you just tax carbon. we kind of, you know, have a have a real solution here, and that this whole bill is ultimately, you know, meant to kind of resolve the fact that we simply cannot find a way to a carbon tax. Chamath Palihapitiya (01:03:02): I actually think that what this bill did was kill the idea of a carbon tax. I think it makes it completely Unimportant, and it'll never see the light of day. Why? I think it's because in the absence of what we did in the IRA, there wasn't a clear way of doing exactly what you said, which is letting people figure out what the equivalent trading price would be for burning a pound of coal versus, you know, generating the energy needed to run something off of nuclear. There was no market clearing function for that. And the reason is because you couldn't get an equivalent amount of capacity effectively available online so that they could compete 1 for 1. What we did through this IRA was essentially use money to create so many subsidies. And then to also green light the way that incremental fossil fuel projects would come to market. So that now, they actually going to be put on a level playing field in the broad open market so that they can compete. When that happens, I think you will make those trade offs better yourself And as a result, I don't think that there will be an an necessary offset mechanism that'll be required. Because this plan will still get us to about 40% of the way there of where we want it to be by 2030, which is still a pretty decent leap forward. There is no plan that gets us to where we all need to be anyways. And I think that the appetite to go from this plan to where we need to be doesn't really exist. So I think that we're just gonna have to kind of grit our teeth, get through the implementation of the IRA and realize that this is the beginning of a probably a 100 plus year project. Nothing's gonna get solved by 2050. Maybe you'll see something done by 21100. Probably not. It'll probably be a 2150, 22100 kind of an objective. And in that lens, I think like a whole bunch of business models got turned upside down. So I think carbon markets and carbon trading are not gonna be the thing that we thought it was gonna be I think stuff like direct air capture again are gonna be toy projects off to the side. Chamath Palihapitiya (01:05:19): I don't think that those are those are not those are not gonna be credible businesses. Like, we thought they were gonna be instead, the raw tonnage of dollars will do what Speaker 2 (01:05:29): America was able to do Chamath Palihapitiya (01:05:29): for solar and PV over 2000 to 2022, which has just crushed the cost per watt into the pennies so that it can be equivalent to hydro, coal, and nuclear and put everything on a level playing field and then allow the market to figure it out. David Friedberg (01:05:47): Yeah. I mean, there's a lot of other stuff in this bill. I I wanna highlight for you guys. I don't know if any of you looked at the CBO. So the CBO, the congressional budget office, Anytime the bill is being voted on, they do an accounting analysis on how much spending and how much revenue there will be as a result of this bill for 10 years. Jason Calacanis (01:06:07): Awesome. Yeah. I checked it out and sent it. David Friedberg (01:06:09): And so, yeah, if you look into a year for the next 10 years, the CBO score for this bill is that we're gonna spend and incremental, we're gonna increase the deficit by $330,000,000,000 for the next 5 years. Speaker 2 (01:06:19): And then we're gonna decrease the David Friedberg (01:06:19): deficit by 320,000,000,000 in the years after that. So the net effect over 10 years is we're only spending $17,000,000,000 on the on the bill, And then on the revenue basis, the expectation is we're gonna generate 67,000,000,000 in revenue in the 1st 5 years and then another 20,000,000,000 in the in the back 5 years. So this is actually being accounted for and presented as deficit reduction, and that's because there's 87,000 new IRS agents being hired. to go out and audit people and find new revenue, and there's a 15% corporate minimum tax being imposed on all companies. And what this means is that companies public companies, private companies doing over a 1,000,000,000 in revenue historically pay taxes on a book basis. Now they're paying taxes on a financial statement basis. meaning the actual accounting that they present to their shareholders. Speaker 2 (01:07:09): Can I can I Chamath Palihapitiya (01:07:10): ask you guys a question? How much was given to the IRS? David Friedberg (01:07:14): 80,000,000. Yeah. Yeah. Tens of 1,000,000,000. Yeah. 80,000,000,000. Chamath Palihapitiya (01:07:18): How much do you think it would cost I don't know. Pick your pick the pick the most excruciatingly expensive third party outsourcing firm you could. David Friedberg (01:07:28): Okay? Chamath Palihapitiya (01:07:30): to build an entire system to basically automatically review every single tax return and throw exceptions. and machine learn and machine learn what fraud look like or what misrepresentation. Let let's say $5,000,000,000. It'd be the most expensive piece of software ever written. And this is what was so kind of like that was the only part of the bill that made not a less sense to me. I think, like, if you put really smart computers on the case, Or gave it to deep mind at Google and said, can you guys build this system with machine learning and AI? You'd be done. Jason Calacanis (01:08:08): And a simpler tax, which I guess this is trying to do. David Friedberg (01:08:10): But, you Jason Calacanis (01:08:10): know, When I looked at this and you sent it, my initial reaction was, you know, this old adage. Chamath Palihapitiya (01:08:16): It'll be impossible for these guys to find 87,000 humans that wanna work at the IRS. David Friedberg (01:08:20): number 1. Yeah. By the way, there's a funny video on the recruiting that's been going on for that. But, yeah, go ahead. Yeah. It's pretty good. I mean, you you Jason Calacanis (01:08:25): know, the way it's like they were Chamath Palihapitiya (01:08:26): they were asking for people who were we're ready to, like, have guns and, like, be put their body in harmony as I get the eye crazy. Speaker 2 (01:08:32): I I Jason Calacanis (01:08:32): was like, that that can't be real. Anyway, the greatest this is what I got from this Excel spreadsheet. the greatest tool for writing fiction is not Microsoft Word. It's Excel. Like, there is no way this thing is netting out to 0. Like, this thing's gonna cost us a fortune. Government is in shambles. We don't know what we're doing. I thought that the links you sent for the podcast with the pros and cons of the carbon tax was really interesting because it is so complicated. When I heard these tax experts explaining how you would implement a carbon tax, and the import and export and then how often it would have to be tweaked and then who decides what your corporate footprint of your watches and and where did the minerals come from to make the watch and who gets paid on carbon, it just seemed to me there's a fool's errand. It would be much better to just Chamath Palihapitiya (01:09:17): What if your watch is made from Diamond and not carbon? Jason Calacanis (01:09:20): Well, in that case, David Friedberg (01:09:21): you should just pay a $1,000,000 because you are the Venus coastal Elite. Yeah. Jason Calacanis (01:09:27): And we should just start Chamath Palihapitiya (01:09:28): with yachts and watches. My Jason Calacanis (01:09:30): what I realized was what what we really need to focus on. And you tell me if what you think Friedberg. Instead of doing this carbon tax, which seems incredibly elegant, but we all know is impossible to get consensus across hundreds of governments and locals to to to negotiate this. It'll never happen at least not effectively and in real time. Wouldn't it be a much better technique Chamath Palihapitiya (01:09:53): to do what we do Jason Calacanis (01:09:53): in Venture, which is here are the biggest problems in the world. Here are the which in this case would be the biggest emitters. here are the best solutions. Here are the teams working on the best solutions. Let's give the teams working on the best solutions. Money -- Take help. David Friedberg (01:10:04): -- Jason Calacanis (01:10:04): to work down that list. And if it happens to be you know, ships coming from China, you know, with a bunch of containers on them and container ships, we we measure that. And, you know, the the thing I've learned after the 1st 6 months of investing in carbon because we have a syndicate now at Molly Wood who's working with me on this climate syndicate we couldn't find a lot of great investments, you know, that made sense that weren't, you know, asset heavy, but then we started to find we found 2 great monitoring companies, and they're monitoring air pollution, and they're monitoring ship pollution. And we made investments in both of those And that seems to be where we're at is we should be monitoring and figuring out where the carbon is and then trying to solve it based on which ones are the easiest to solve. David Friedberg (01:10:46): me just say two things on that. Bill Gates has done a great job of this. You can read his latest book or go to Gates Notes, and he's done exactly what you described, which is break it all down, show what we should do. And that's actually how he's investing his own money. he's putting his money where his mouth is. So there there's a really good blueprint for this. He's done the best job of anyone I've seen. The issue with the carbon tax is you have to come up with a consistent reliable way of measuring the carbon. and then you have to do it consistently and broadly. How do you miss you know, if you miss one factory or another, then you have to ratchet up the price over time. So first thing is the challenge of how do you agree on measuring. 2nd is how do you agree on broad accountability. 3rd thing is how do you ratchet the pricing over time. 4th thing is how do you deal with the offshoring problem? As soon as you start taxing companies in the US for carbon emissions, all the production is gonna go offshore where they're not taxing for carbon emissions. and there's no way to account for what they're doing offshore. And this has been the challenge with China media and so on. Chamath Palihapitiya (01:11:35): There is because part David Friedberg (01:11:36): of your first problem, Sorry. The let me just hit the final one. We'll come back to it. But the final big one is just the equity and carbon tax. People have said that the ultimate increment in cost of production is gonna adversely affect lower income people because they cannot afford the price of some stuff going up by 25 to 50%, and it's really, you know, a luxury good a luxury kind of privilege to be able to pay for the incremental cost of stuff to account for the carbon offset needed. So that that's the that's the set issues that have been pushed back against the carbon tax, and it's why it's been impossible to get implemented and to really get into market. Sorry, Timok. Go ahead. Chamath Palihapitiya (01:12:11): No. I was just gonna say part of you, the the problem in in in all of those issues if you offshore is still that there's people pushing for what's called the scope 3 accounting, which is like you know, you gotta go back to your supplier and your supplier supplier and your supplier supplier and -- Where does it end? It's impossible. Where does it end? It's it's it's not credible. So you know, I think that the bill has actually cleaned up a lot of future question marks about what we have to do as a country. to go about doing our part for climate change. And I think it probably creates a reasonable blueprint for everybody else, and now they're gonna have to do some version of the same thing. And What's amazing is that if we actually pass this framework which is still yet to be written around how to make permitting more seamless and efficient for these hydrocarbon projects, it will really unleash a massive torrent of both revenues back to the United States. It'll increase our national security and it'll allow us to really kind of put a dent in this thing because it'll pull forward the amount of competition that it creates to actually get off those hydrocarbons, which is a David Friedberg (01:13:18): -- I'll tell you -- -- I got I I got a notice from someone who's an investor there's a lot of Chamath tech funds now. A lot of funds, JKL, you said you got a syndicate in carbon, but there's a lot of funds and a lot of investors that are putting a lot of capital just into early stage climate technologies. which travels everything from energy to materials to food, to industrial and manufacturing and so on. And I I got a note from one of these these these companies startup that highlighted that the dollar 25 per gallon credit tax credit for, you know, clean production of fuel, which kit which has to demonstrate a 50% emissions reduction in the manufacturing process. will now make this startup profitable. And by the way, you get an extra penny per gallon for every 1% reduction in emissions below that 50% threshold. And so there's a lot of startups that I'm hearing about that their unit economic models were questionable before now because of this bill they are flipping profitable. And so I personally think we are gonna see a significant influx of venture capital and support for a lot of these climate tech and, you know, new energy material and manufacturing projects that otherwise may have been held back because the subsidy will kick start. The question for me that I still don't have a good answer to is, are they sustainable? Over the long run, if this bill gets shut down or repealed and the funding sources stop and the subsidy stop, do these businesses survive Or are we simply creating regulatory capture models like we did with other energy products in the past and with food? Chamath Palihapitiya (01:14:49): If you're not contribution margin positive today, Free this bill in climate change, and the bill is the only way that you get there, you're DOA. You just don't know. David Friedberg (01:14:59): Great point. Yep. Saks, the biggest line in this bill is the corporate minimum tax. I don't know if you saw this, but 15% minimum tax applied to the accounting profit reported by any company over $1,000,000,000, and they're estimating it'll generate 313,000,000,000 of incremental tax revenue over the next 10 years. Do you have a point of view on whether this corporate minimum tax is gonna cause an issue with startups and companies going public or the valuation in the public markets? Or is this just, you know, hey. This should happen. It doesn't matter. I mean, I don't know if you spent much time on David Sacks (01:15:31): this. Well, no. I mean, I I think the the issue here is that why is it that these companies are able to pay so little taxes? Well, the reason is because there's a zillion loopholes and incentives in tax brace in the existing code that they're taking advantage of. I mean, these large companies have lots of accountants and lawyers. They're not deliberately violating the law. They're scrupulously adhering to it and taking advantage of it. So it's all these tax breaks that they're able to use to pay no taxes. Well, what does this bill do? you talk about the the the spending on climate, you know, the 386,000,000,000, most of it is tax incentives and some block grants. So this is now the preferred form of, you know, quote unquote, spending in these bills are tax credits and incentives. This is the way they're gonna change people's behavior. So in other words, the bill on the one hand is complaining that corporations don't pay enough taxes because there's too many tax breaks. while the other hand creating a whole slew of new tax breaks. So there's a little bit of a contradiction there. Again, why do all why are companies paying no taxes because of the last 10 bills tax breaks that we're supposed to move the behavior of businesses and consumers in a certain direction. So just recognize that that's the case. I think you also made a really good point about the Phantom deficit reduction here. So like you mentioned, And we see this in lots of bills. All the excess spending, all the deficit spending occurs in the 1st 5 years, and all the deficit reduction occurs in the last 5 years. something always intervenes to prevent the the savings Jason Calacanis (01:17:05): from taking place. Chamath Palihapitiya (01:17:06): It's like startup projections. Right, Zach? David Sacks (01:17:08): Yeah. So we're we're -- Yeah. David Friedberg (01:17:10): I lost my sales guy. David Sacks (01:17:11): We're cutting the budget next year. You know? And so just to give one example of this, so this ACA subsidy extension. So this is the Obamacare substates about 60, something,000,000,000 a year. They're extending it for 3 years But they're assuming it's just gonna die at that point as opposed to keep being extended. And no one's gonna wanna vote to make that go away in 3 years just like they don't wanna vote to make it go away now. So if you extend that subsidy 3 years from now, just that one item alone makes the deficit reduction of this bill go from 305,000,000,000 over the David Friedberg (01:17:43): 10 David Sacks (01:17:43): year period to negative a 155,000,000,000. So just that one item if you continue it and don't sunset it. Just that one thing makes this a hugely deficit, not reducing bill, but deficit increasing bill. And so you wonder what promise this bill really solving, and they can't seem to agree on that. I mean, first, they're telling us it's a deficit reduction bill, then they're telling us it's a climate bill. they're not telling us it's an inflation reduction bill. It seems to me that if they're really proud of this and believe in it, they would choose a name for the bill that actually reflected what it was. David Friedberg (01:18:15): Well, all bills would be named something for everyone's sex. I mean, like, that's how all these bills get in order to pass a bill, a bipartisan bill, you gotta give something to everyone. I mean, David Sacks (01:18:24): But this is mostly, you know, this is mostly a climate related bill. You know, this would be mostly this is mostly tax breaks. and block grants. They're also quite David Friedberg (01:18:34): -- I mean, there there's a huge tax issue with the the the IRS agents that's, yeah, corporate minimum tax, but there's also a huge component on prescription drugs. Timoth, I don't know if you spent any time looking at this, but -- Sorry. David Sacks (01:18:45): Just on the IRS agent. Speaker 2 (01:18:46): Can I can I can David Sacks (01:18:46): I just add one detail on that? David Friedberg (01:18:48): Yeah. David Sacks (01:18:48): So the claim of the administration and the sponsors of the bill is that this would not increase taxes on any one sort of middle class. And So the Republicans, I think, this is one of the few politically smart things they did. The interest in Amendment, basically prohibiting these new 87,000 IRS agents from conducting audits of anyone making less than David Friedberg (01:19:08): $400,000 David Sacks (01:19:09): a year, which was what Biden said, you know, you wouldn't increase taxes if anyone below 400,000. That amendment was rejected on straight party lines. So this idea yes. It's called the Crapo Amendment. It was 5050. and vice president Harris had to come in and and make the tie breaking vote. So, obviously, they know that there's gonna be a lot of net new audits on people making less of what the yes. Exactly. So then I David Friedberg (01:19:34): -- My my understanding of this is it's like small business owners, people who run a small business and a service business, And are they really accounting for their books correctly? Are they really expensing the right things, etcetera? Are they accounting for all revenue? They're gonna get whamned. So Yeah. Yeah. David Sacks (01:19:47): They're gonna get remade by this because, look, let's face it. Billionaire is already getting audited. You know, Elon had a tweet saying, listen. I get audited as a matter of course every year. you know, these people already have so yeah. Chamath Palihapitiya (01:19:58): Dude, I use a big 4 accounting firm. Jason Calacanis (01:20:01): Yeah. Wait. This is, I mean, the amount of overhead this crazy. -- a Chamath Palihapitiya (01:20:04): partner crazy. I have a partner at, like, Anderson David Friedberg (01:20:07): that is literally, like, you know, covered your pocket. It comes a fortune 500 fucking company. Jason Calacanis (01:20:11): Might as well be a ridiculous. Put them in your your your put them in your Chamath Palihapitiya (01:20:15): anatomy unit and your ex -- -- people. I mean, by the way, Saks Saks is right. Like, if if you look at them, you know, the ultra wealthy I I think it would be I would be shocked if any of those folks were actually evading taxes at all because it's impossible the way that this infrastructure runs. Like, you know, you're getting k ones from Blackstone. What are you gonna do? Speaker 2 (01:20:36): Can you Chamath Palihapitiya (01:20:36): gonna change that? Like -- Totally. David Friedberg (01:20:38): -- Chamath Palihapitiya (01:20:38): you know, like, do you guys even know the PIN number of your bank card? I have no idea. Speaker 2 (01:20:42): So, like David Friedberg (01:20:43): -- Jason Calacanis (01:20:43): It's so complicated. Yeah. Chamath Palihapitiya (01:20:44): Okay. So so my point is, I don't think that if there is if there is cheating of taxes that's happening at that level, What's happening at that level are much more structural issues like carried interest, which they decided not to touch. David Friedberg (01:20:57): Or -- It's in a state law. -- Chamath Palihapitiya (01:20:58): trust in a state Jason Calacanis (01:20:59): law. Those are Chamath Palihapitiya (01:21:00): Those no. I don't think that this is my point. It's not mistakes. There's nobody with a pencil really filling out a k one for Bill Gates. Dummy. That's my point. Jason Calacanis (01:21:09): No. I know, but people can make mistakes. What if a k one gets left off? That's what I'm saying is when they find something, it's usually easily Doesn't David Friedberg (01:21:16): happen. Doesn't happen. David Sacks (01:21:17): Jason -- I've had a Jason. David Friedberg (01:21:18): -- David Sacks (01:21:18): when I get my tax return, it's it's done by an accounting firm, and I just signed it. I don't I don't -- No. I know that. Jason Calacanis (01:21:23): What I'm talking about is what are the IRS people gonna find? is, you know -- I'll Chamath Palihapitiya (01:21:27): tell you what they're gonna find. They're gonna find a lot -- Yes. They're gonna find a lot of middle class and upper middle class folks and they're gonna have to focus on them because individually, it may not represent a lot. But when you multiply it by the number of people inside the United States and this is What the Wall Street Journal and a bunch of other folks have been saying now when you apply 87,000 people and task them incrementally with doing a job It's not going to touch these folks that are already audited. It's going to touch the folks that are not audited. And by and large, a Chamath larger majority of middle income and upper middle income people are not audited, which is why I think you could spend a lot less than $80,000,000,000 and just build software that guarantees only those that should be audited are and uses machines to help figure out these leaks. Jason Calacanis (01:22:17): Or start simplifying the tax code because when you add this 15% minimum, Friedberg, what is that gonna do to the strategy of a public company? Okay. so we should show less earnings, put more to work. Oh, we're not gonna be able to depreciate this or, you know, whatever. I mean, it's gonna create all the second and third order impact impacts that we don't know. David Friedberg (01:22:34): Well, I think Saks's point is important, which is one that we don't yet have insight into, which is what is this gonna cannibalize? Because, ultimately, if there is a minimum tax, it doesn't make sense to pursue incentives that create a tax break today. And therefore, those incentives won't be invested in. Whatever those incentives are, I don't know what they are. You know, low income manufacturing zone development or or whatever. Who knows? you know, what they are, you know, come and build your business here and get tax breaks, etcetera, etcetera. Local state and federal tax breaks, If those start to get written over, then there's gonna be really adverse effects, and I think that that's something to watch. I don't understand it well enough. Certainly, I'm not an accountant But I I I would be kind of worried about and and keeping an eye on that front. I do think the bigger question, which is a biotech one, The prescription drug price cap minimizes the profits that a number of pharmaceutical companies will be making. It gives authority to go and negotiate prices. This is the 2nd largest line in the bill, and there was a survey done by healthaffairs.org on an rndsurvey, which said, will you guys reduce your your investment in new drug development. And I think that they came based on this bill, and I think that they came up with some estimate that there would be 2 the number 2, fewer drugs that would be kind of, you know, made available per year because of reduced spending as a result of the price cap, which basically reduces revenue, which will, in essence, reduce r and d investment. you know, guys like Bernie Sanders will say, hey. That's not true. All that money is going to share buybacks and dividends and so on. but it is a fact that those share buybacks and those dividends will still continue. And if they are reduced, so will the R and D expense? And if the R and D expense is reduced, fewer drugs will come to market. David Friedberg (01:24:33): And so, you know, there there's also a question mark, and people will debate this for the next decade. which is how much will this prescription drug price cap actually have an effect on R&D investment and ultimately on new drugs that come to market? My personal Chamath Palihapitiya (01:24:46): opinion sorry. Let me just David Friedberg (01:24:47): say my personal opinion is I don't think that this will have a huge effect. I think this is an excellent part of the bill. I think that the government should have authority to go and negotiate. They're the largest higher of these growths. And, typically, when the US government, the federal government steps in, to be the largest spender on a particular line, the cost of that line balloons like we've seen in healthcare, like we've seen in education, and like we've seen in military and defense spending. And so I I'm hopeful that this will actually provide a a more effective market force in allowing the biggest customer in the market to negotiate prices. and that the VCs, instead of making 48 percent IRR, they'll ultimately make 28 percent IRR on the investments that they're making in biotech startups. David Sacks (01:25:31): Well, hold on. What what what exactly does it mean for the government to negotiate prices as opposed to the government just to fix prices? I mean, is this price fixing? Chamath Palihapitiya (01:25:41): Well, in this in this example David Friedberg (01:25:42): -- -- even it's the right answer if they're the largest single largest customer sacks. Right? I mean, you know, and then they are the market. I mean, what's the right thing to do? David Sacks (01:25:52): Well, I mean, you're you're saying that these drug companies are going to make a lot less money. Well, obviously, that's going to have a downstream impact in the willingness to fund new drugs -- New Speaker 2 (01:26:02): r and d. David Friedberg (01:26:03): -- David Sacks (01:26:03): new investment? New r and Chamath Palihapitiya (01:26:04): d? Yeah. David Sacks (01:26:05): Now no one likes pharma companies, so I'm not defending exorbitant profits or whatever. But I don't really know what it means for the government to say they're negotiating. I mean, The government just tells you what it's going to be. That's price fixing. And these companies are going to adjust. Yes, the government will pay less money in the near term, in the long term, there could be reduced investment in R&D. David Friedberg (01:26:25): I think there'll be a balance of, you know, do you Jason Calacanis (01:26:28): Don't all governments, Shamath. Don't all governments. I know that you're close to some of these drug companies. Don't all governments negotiate the purchase of these drugs. And then if they don't like the price, there are alternative drugs, and they'll say, hey. Listen. Your drug is too expensive compared to these other two solutions, so we're gonna buy this one primarily for our universal health care. Chamath Palihapitiya (01:26:48): There's this interesting thing that happens, which is that there's a there's these drugs that are proprietary and under patent. Okay? These could be chemical drugs or they could be biologics. Okay? And eventually, what happens is when they go generic, then folks will step in and make lower cost versions of those generics. Like, you know, I mean, I'm on a statin. I think a couple of you guys are on a statin. Like, I don't It it it's it's Lipitor, but it's not Lipitor. Right? It's a Torvastatin. It's like some generic drug that I just take, okay, as an example. And there's a lot of folks that make that, and the cost of those pills basically go to 0. But there's a bunch categories, particularly for biologic drugs where it's very different. It's very difficult to make what's called a biosimilar. This is a generic drug. So long and short of it is there's all these classes of drugs that kind of like stand alone without enough competition. And then I think there are 2 ways to solve this problem. 1 is where the government steps in, which I think is is good, but the better way has already is already been happening in the United States. So there's a non profit which is a collective between a bunch of hospitals called CivicUP. And I think that's a really interesting example. And what those guys do was they said we're just gonna create our own generic drug manufacturer. And we're gonna make the drugs we want. We're just gonna make them super cheap. And, you know, they're they're in the midst right now of completing a massive facility, I think it's in Virginia where they'll be able to make as much insulin as is needed for the entirety of America. for no more than 35 bucks a dose. Right? -- gangster. That's gangster. It's -- Yeah. David Friedberg (01:28:24): -- Chamath Palihapitiya (01:28:24): super gangster. We'll make our own. And by the way, when California said they're gonna make their own, what they really meant was that they're gonna go and RFP it out And my hope is that they end up going with somebody like Silvica who has the experience of actually building it. Otherwise, it's just gonna Calacanis just gonna waste 100 of 1,000,000 of dollars. David Friedberg (01:28:43): -- Jason Calacanis (01:28:43): proposal if you don't know what RFP is. Request for proposal. Chamath Palihapitiya (01:28:46): But there are these emerging non profits that are basically doing the work of the government, I think that's a better solution to what Saks is actually Competition. Jason Calacanis (01:28:54): Right? Yeah. Chamath Palihapitiya (01:28:55): kinda creates competition. Jason Calacanis (01:28:56): Yeah. Competition. David Friedberg (01:28:57): We gotta move along because I think -- Jason Calacanis (01:28:59): You're doing a great job, Friedberg. Right? Just one moderator to another. an optional David Friedberg (01:29:03): job. You know, I appreciate it. I think one of the interesting things sitting in in your seat, Jay Kal, is you see everyone else's face, and you see the boredom and the annoyance that people experience during the the pond. Watch the eyeballs. Right. Leave her a drink. I think I think Chamath is eating funyans, Saxes, and -- Jerky. -- Chamath Palihapitiya (01:29:20): eating jerky. Okay. You shouldn't Jason Calacanis (01:29:22): be don't Tube in on the podcast, please. David Friedberg (01:29:24): Yeah. No. And I think that the -- The what? The the gentleman -- Don't do a Jason Calacanis (01:29:27): Jeffery Tube in on this podcast. David Friedberg (01:29:29): What is how do you the No. Jason Calacanis (01:29:31): That's pretty clear. -- was a CNN anchor who on Zoom, accidentally turned no. He masturbated on a Zoom call with this. David Friedberg (01:29:38): What the fuck does that have to do with beef jerky? Chamath Palihapitiya (01:29:40): You said jerking, and I It's just a No. I said I was eating jerky, dummy. Jason Calacanis (01:29:43): You said you were jerking something. That's all I Chamath Palihapitiya (01:29:45): had answered. I'm sorry. Oh, by the way, so I am no longer fighting with Phil Hamidith. I oh my god, guys. Jason Calacanis (01:29:51): I'm so blocked. Chamath Palihapitiya (01:29:52): No. So I was so mad at him. Okay. So, you know, I finish I finish this transaction. David Friedberg (01:29:57): -- Chamath Palihapitiya (01:29:58): tell me if Speaker 2 (01:29:58): this is David Friedberg (01:29:58): I think Speaker 2 (01:29:59): that we can Chamath Palihapitiya (01:29:59): I finished I finished the I finished the fucking transaction to sell the warriors. You know, this is a this is a 6 month ordeal. Okay? I started in November. Right? I'm starting to sell things. I decide I'm gonna sell the warriors. I sell it to a large private equity fund in November, December, and then we had to wait for them to close a second fund, and then we sold the rest of it. And it closed in June or July. And then I put up this tweet. Right? Like, thanking everybody and thanking Halmi. You see the same line in which I I I'm like, I thank Peter Till, and I thank Joe Lake Everybody is happy except for Helmut who calls me and is angry. And he's like, I I you know, he had this issue with how it was characterized at how he had introduced me or something where he wanted credit for what's in Jason Calacanis (01:30:43): a dumbass deal. -- tweet of the tweet storm. He should have been Chamath Palihapitiya (01:30:45): higher Or, you know, and I was like, well, Phil, what if it hadn't made me money? Would you have just made me whole like, what would you have done? Like, it's like you like, the architect of this thing. Anyways, I was so mad I just said, I'm not talking to this dipshit anymore. I'm done with him. I'm done. I'm breaking up with him. And he would call me when I was in Europe and I would ignore. And I would get this incredible enjoyment from just pressing to to voice mail? He would send me text messages, ignore. And then I I mean, this is always to happen this way. I did it once, and Matt caught me. She's like, why did you ignore his phone call? And I said, I hate Phil. I'm the dumbest hell of you. I told her the story. She got so fucking mad at me, and then I had to send this text I'll just read you the text because I think it's just so fucking hilarious. I was going to ignore you for the rest of my life based on your tantrum with me earlier this year. but Nat has convinced me to see where you are coming from in part. Anyways, we're good. Call me later. He called me one second later. I was waiting. David Friedberg (01:31:44): He had your text me to open. I need this picture not. Jason Calacanis (01:31:48): He's your friend. Then why Speaker 2 (01:31:49): you gotta be? Chamath Palihapitiya (01:31:50): You're such a jerk. These are your friend. Jason Calacanis (01:31:52): You have no friends. Speaker 7 (01:31:54): All your friends have gone away. Chamath Palihapitiya (01:31:56): Fear boys. Anyways, I'm back in the Speaker 2 (01:31:58): good news. I'm back Chamath Palihapitiya (01:31:58): in the good news. I'm back in the good. David Friedberg (01:32:00): Okay. Well, you gotta play Kroger. We do need to get a Jason Calacanis (01:32:03): burger game. David Friedberg (01:32:03): Before we wrap, Saks is gonna give us instead of doing science corner, we're gonna do mar a lago corner. Oh, tell us Chamath Palihapitiya (01:32:10): what it's like Saks. Jason Calacanis (01:32:11): What is Mar a Lago like? You've had your membership now for 18 months? David Sacks (01:32:14): Never been there. Never been there. But no. I wanted I wanted to I wanted to give a shout out to this article. But last week, I took some heat because somehow, I guess, you're not allowed to question any more the rectitude of the FBI. J Edgar Hoover's FBI were not allowed to question anymore, or a lot of people feel that way. There was an article that came out in real clear investigations just I think yesterday And what it exposed is pretty amazing. The group, the unit within the FBI that conducted the raid on Mar a Lago is the the same group that conducted the investigation into Trump back in David Friedberg (01:32:51): 2016 David Sacks (01:32:52): that lied to the Fisa court that had its members, its leaders. Peter Strzok were fired for basically wrongdoing. Whose members are actually under investigation right now by the special counsel, John Durham. And you've got people who are on probation right now. So this is the same unit that basically conducted the raid on Mar a Lago. So I think there's still more to come out about this, but it's just amazing to me, actually, that Christopher Ray, the head of the FBI, and Eric Garland, the head of the DOJ, thought that this wouldn't create the appearance of a conflict of interest or impropriety, the fact that you've got the same unit that previously was disciplined for wrongdoing in an investigation of Trump is the one conducting the right on Mar a Lago. So pretty amazing. David Friedberg (01:33:39): Chikau retort? Jason Calacanis (01:33:40): I'm sorry. What we're talking about. No. I I'll I'll tell Chamath Palihapitiya (01:33:44): you. -- so brutal. Jason Calacanis (01:33:46): No. I I just wanna make -- So I have David Friedberg (01:33:48): a -- -- a couple of child actors. Oh, look at these prompts. They're on camera right now. -- props. Amazing. Good work. Nice props. Oh, beautiful. David Sacks (01:33:55): And then -- -- what you're Jason Calacanis (01:33:56): seeing there hold on, Zach. Before you get back to Trump, what you're seeing there is a family unit. This is when a family gets together and expresses love towards each other, but continue about Mar a Lago. Speaker 2 (01:34:06): That's wonderful. David Sacks (01:34:06): That's wonderful. Jason Calacanis (01:34:07): That's wonderful. David Friedberg (01:34:08): You could take a picture of this, Jason Calacanis (01:34:10): and you could send it to your friends on Christmas. David Friedberg (01:34:12): Alright, Jason. You you are you do not accept the RealClear investigation report that Speaker 2 (01:34:17): maybe there Chamath Palihapitiya (01:34:17): is some long term -- I'll Jason Calacanis (01:34:21): here I I have actually some feedback. There's nothing to do with Saks. I just think a lot of times, I get positioned as Sometimes when I'm moderating, I like to challenge Hacks. Last week, I chose to stay out of it. I let him go. And I think one of the reasons people didn't like your comments last week, Saks was other than, you know, JR Grover being dead for 50 years, putting that aside and it being irrelevant, I think the reason people didn't like it was because I didn't come back at you and question some of the things you were saying. And so I think they felt it was an unbalanced discussion. They me to do that. But I don't want to be pinned as the adversary to to Saks his positions in every case because I'm an independent. I'm a moderate. I voted for probably I voted democrat my whole life. I voted for both of those parties. But I do think that what's happening here is, you know, Trump is under 5 different investigations. He's got a career of doing disgraceful criminal, fraudulent things. And I feel very bad for GOP friends. I feel bad for Republicans because they have to carry water for him. And it's they they put themselves in this really difficult position of defending him. And, you know, we've talked on this podcast about January 6th. We talked about voter fraud, my good friend, one of my besties. David Saxon said he doesn't believe that the election was there was election fraud, and he doesn't he did he thought January 6 was disgusting. I'm not speaking for you. That's what you said. And so I think, you know, the fact that the Republicans feel the need to defend him constantly is one of the big problems here. And I think on the other side, the fact that the media is forcing Republicans to defend him and creating this narrative and this hysteric like, oh my god. See Espionage Act. Jason Calacanis (01:35:57): He's doing espionage. This might be very simple. Trump lied, cheated, stole his whole career from Trump University to what's happening with, you know, the Trump Corporation now with his CFO and his nonprofit. This is his life is a history of griffs and crimes and unethical behavior. What the GOP needs to do is stop defending him and just let him go off into the sunset Sachs pointed out last week, and that's what this podcast needs to do. Because there's no reason for me to sit here and do the left wing talking points or for, you know, Saks to do the right wing talking points. The fact is, 1st principles, Trump's a grifter. He's a democrat. He'll do the GOP. That's it. David Sacks (01:36:39): My point is not to defend every shady deal that Trump's ever done or even to defend Trump at all. My interest is having a DOJ and FBI that's not politicized it is not used as a political weapon or to pursue political targeting or vendettas. And the reality is, at some point, we're gonna move past Trump as a country But the precedents that are created now are gonna stick with us for a long time. And the reality is we should not have an FBI and a unit within the FBI that is pursuing these political vendettas. And in this article by Real Clear Politics, the amazing thing yeah. The amazing thing is Christopher Ray. prohibited this unit from seeking warrants from the Fisa court. So he knew there was enough misbehavior. last time to basically prohibit them. But seems to me that's a very narrow takeaway. It seems to me that the takeaway should be. We don't allow this unit to pursue Trump again because they committed so much wrongdoing. Jason Calacanis (01:37:33): Yeah. Be cleaner to have a clean unit. Right? David Sacks (01:37:35): Why wouldn't they do that? Jason Calacanis (01:37:36): Yeah. Makes sense. if it's true, because that is from a biased source. And if it is true, David Sacks (01:37:40): then we'd be good. I mean, real clear policy is kinda like a political. David Friedberg (01:37:43): Look, guys. This has been a lot of fun. Jake House Thank you for letting me sit in your seat today. Jason Calacanis (01:37:47): Yeah. It would be great. David Friedberg (01:37:48): Awesome. I appreciate that. It was it was a lot of fun. Maybe Saks would like to have a run-in the seat at some point here. Jason Calacanis (01:37:53): He doesn't. You wanna wanna -- But for your David Friedberg (01:37:56): as your guest moderator for today, I'm Dave Friedberg, and this is your all in podcast. Thank you. Bye bye. Speaker 6 (01:38:04): We'll let your winter slide. Jason Calacanis (01:38:07): Rainman, David Saffens. Speaker 6 (01:38:12): We open source it to the fans, and they've just gone crazy lately. like, white airliners ride? Besty's RV. That Speaker 7 (01:38:27): is my dog driveway. We should all just get a room and have one big huge, George, because they're always useless. It's like it's like sexual tension, but they just need to release that mountain. David Friedberg (01:38:43): What? You're the bee bee. What? You're David Sacks (01:38:45): happy. Pure feet. Speaker 2 (01:38:46): Sweat. Sweat. We need Jason Calacanis (01:38:48): to get Murphy's arms back.