Adobe 200 亿美元收购 Figma，TPB 的 SPAC 与联邦快递 CEO 的衰退警告

Jason Calacanis (00:00:00): literally don't wanna talk about regaining guys, though, only because it's getting crazy, and I had to, like, mod my stuff. So -- Start David Sacks (00:00:05): the recording, please. Start the recording. Jason Calacanis (00:00:07): I'm gonna strike it. David Sacks (00:00:08): By brigades, do you mean, like, MAGA brigades? Jason Calacanis (00:00:11): Alright. Listen. David Sacks (00:00:11): It No. I'm serious. Do you think because I can call him off. You wanna call him off? How's it going? Hold on. Hold on. Hey, Donny? Hey, Donny? Yeah. Jake Allen said he's being brigated by MAGA. Yeah. Yeah. Yeah. He can't handle it. He's tapping out. Jason Calacanis (00:00:27): I tap out. I tap out. He David Sacks (00:00:29): calls the dogs? Okay. Please. Alright. It's all good. all good. They're they're It's all dumb. It's it's over. They're not gonna they're not gonna brigade anymore. The Sienna is over. Jason Calacanis (00:00:38): Thank you. Thank you. It was getting pretty it was getting pretty acute. David Sacks (00:00:41): Yeah. It's done. Don't about it. Jason Calacanis (00:00:44): The weather winner's pride. Rainman, David Sachs. We open source it Speaker 3 (00:00:52): to the fans and they just got a reasonable work. Chamath Palihapitiya (00:00:55): Love you guys, honey. Jason Calacanis (00:00:59): Alright, everybody. Welcome to episode 96 of the All in podcast. We had a bomb drop just yesterday. with Adobe agreeing to acquire Figma, the design tool will get into that in a minute what it actually does for $20,000,000,000. This is just astounding for this to happen, period, full stop. It's the largest private company purchase, I believe, in history. This company, if you don't know, it helps you design web apps or user interfaces. So if you're a designer, we used to make mock ups. We'd send them around in the industry. as images or PDFs. And then like Google Docs where you can put comments on somebody else's words and you can collaborate in real time, we call it multiplayer mode, Figma is multiplayer mode. The the company is just a juggernaut. If you work in startups, you get Figma designs all day. And Adobe stock got crushed because of this. It was down as much as 18% on Thursday. Figma's most recent valuation was $10,000,000,000 in June of 2021, their series e. So peak market. They had raised 200,000,000 at that time. There's a lot of details to get into here, but, you know, listen. Let's ask the Sultan of SAS here. what you think of this because it's double what was an incredible market last year that was overheated So what does this say about the market Figma you know, Figma itself or maybe Adobe's, you know, jumping the fence or being skittish? How do we reconcile this, Saks? David Sacks (00:02:31): Oh, if you judge Adobe stock price the other day, the market hated the deal. I mean, the Adobe stock price went down, like, 15%, and that's a Jason Calacanis (00:02:39): $150,000,000,000 David Sacks (00:02:41): company roughly. So they lost almost the entire purchase price in the market capitalization of Figma. I think that's that's basically an overreaction. I, you know, I I know all the news is basically how Adobe is paying 50 times, and that's no longer the multiple. The multiple is more like, you know, 8, 9, 10 times for high gross SaaS companies. There is truth to that, but but I think it misses some important details about how fast Figma is growing. Can we actually throw up on the the screen, the AR history of this company? So Jason Calacanis (00:03:18): -- And for people who know the multiple is the multiple times top line revenue. So it's -- Okay. So explain that to folks. Yeah. David Sacks (00:03:26): Well, ARR is just the annually recurring revenue. It's subscription revenue. Sometimes people will look at next 12 months revenue, which is a similar concept, not quite the same, but sort of in the ballpark. So, you know, what's interesting about this company? I think it was founded in 2011, 2012. It had a very long Wilderness period. That's what I call the period where the the founders are trying to figure out what the product's gonna be. Really, for almost 5 years, they finally launched a private beta in 2 1015 They then opened it up to public launch in 2016, and they didn't turn on monetization until 2017. So 5 years into the company, that hadn't made a dime. So, you know, it's it's roughly a ten year old company. And for the 1st 5 years, didn't make any money. And then they started to make money 5 years ago, And then in 2018, I think they turned on the enterprise tier, and then it's been kind of off to the races. David Friedberg (00:04:18): That's incredible. Yeah. David Sacks (00:04:20): When I when I can tell you looking at these numbers by the way, so I don't know if these numbers are perfectly correct. This is sort of I would call this scuttlebutt numbers. These are numbers that I believe To be true, but it's not like these are numbers that the company has confirmed or anything like that. This is just me gathering, you know, intelligence from talking to people in Silicon Valley. So this is what I believe David Friedberg (00:04:39): to be the case. Can you read the numbers for people that want on YouTube watching this? David Sacks (00:04:43): Yeah. So in 2017, again, first year they monetized, they did 700,000. They ended the year with 700,000 of of ARR. Remember that ARR is kind of a point in time metric. It's the amount of subscription revenue, your annual run rate subscription revenue at that time. So they ended 2017 with Jason Calacanis (00:04:59): 700,000. 2018, David Sacks (00:05:01): they ended with Jason Calacanis (00:05:02): 4,000,000 2019, David Sacks (00:05:04): they ended with Jason Calacanis (00:05:05): 23,000,000, 2020, David Sacks (00:05:07): they ended with Jason Calacanis (00:05:08): 77,000,000, 2021, 210,000,000. David Sacks (00:05:11): And then the estimated number for this year is 450. So you've seen in the press, I think it has been publicly reported. A $400,000,000 AR numbers currently where they're at. I've heard that they're gonna end with something more like 4:50 this year and then the their forecast for next year is or was at some point in time when somebody heard this, 8 or Jason Calacanis (00:05:33): 1,000,000, David Sacks (00:05:33): you know, forecast for 2023. So my point is I've seen a lot of SaaS metrics, and I can tell you that this AR ramp is phenomenal. You know, I'm sure people have kinda heard about the triple, triple, double, double. That's kinda what VCs want you to do. They want you to triple 2 years in a row, then they want you to double 2 years in a row and so forth. This company did way better than that. I mean, 700 k to 4,000,000 is a really fast ramp. And then 4000000 to 23000000 incredible. That's, like, you know, over a 5 x. And then they did over a 3 x going from 23 to 77000000. I can tell you super hard, I think, most companies, even the ones that hit, you know, low twenties tripling year over year, they tend to decelerate to two and a half times or something like that. this company was still growing over 3x. Then they roughly tripled again to get to 210. And then since They David Friedberg (00:06:28): got -- -- a question. David Sacks (00:06:28): Yeah. So now they're double that. Chamath Palihapitiya (00:06:30): Do you think the triple in Jason Calacanis (00:06:31): 2020 Chamath Palihapitiya (00:06:32): was a COVID pull forward? David Sacks (00:06:34): Or do Chamath Palihapitiya (00:06:34): you think that that was a natural, like, a Zoom or not? David Sacks (00:06:37): That's what I was gonna I mean, it's possible. But David Friedberg (00:06:41): because people were collaborating. Jason Calacanis (00:06:42): I'm not David Sacks (00:06:43): I don't see I mean, so far in the numbers, I don't see a huge slowdown here. mean, look, once the numbers get into the hundreds of millions, it's really hard to maintain the same growth rate. You're compounding off such a large base that it's just inevitable. You can't keep growing. 3 x year over year once you're at, you know, 200,000,000 of ARR. But the fact they got first from 23 to 77 and then 77 to 210 and now 210. They're at let's say they are 400 now and they're gonna be at 4:50 by the end of the year plus. It's it's pretty amazing. And so Okay. So yeah. So Adobe is paying Jason Calacanis (00:07:15): 50 David Sacks (00:07:16): times current ARR. But if you believe this, they're only paying divide by 2. They're paying 25 times end of next year, so, like, 18 months from now. And then you figure you know, within, say, 2 years after that, they're gonna be, you know, somewhere between one and a half than Jason Calacanis (00:07:36): 2,000,000,000 -- David Sacks (00:07:37): Yeah. -- of ARR. And there yes. As you guys know, there just aren't that many SaaS companies that even get to a billion of ARR. So so I I don't think Adobe's making a bad deal here. There I think there's a question about, is there any point at which this product hits some sort of market saturation? But Adobe's in a good position to know that because they understand this market. They are in this market. David Friedberg (00:07:57): It feels to me like I don't know. I've been using Adobe Photoshop right around when it first came out, like Jason Calacanis (00:08:02): 1992. David Friedberg (00:08:05): And this product I've used, it it was built web first. It was built for collaborative use. And Photoshop over the years, they've really tried to take what is a desktop installed software application and then try and create cloud based features, and it's a terrible, terrible user experience, at least from my perspective, having grown up on using Adobe Photoshop. But what's most important, I think, is a lot of people think about this on is it the right price to pay for the company. But at the end of the day, the right price to pay for the company is what Adobe views to be the risk and reward for their business. And they effectively paid roughly Jason Calacanis (00:08:42): 12% David Friedberg (00:08:42): dilution of their company to do this deal. So they're saying, let's take 12% of our company and effectively de risk the biggest risk to our business. Take out the biggest threat to our business for 12% of our company. Chamath Palihapitiya (00:08:57): Not 12%. Was it 12%? You have to factor in the actual drawdown of the stock as well. So it's about 33%. They they they effectively David Friedberg (00:09:06): Well, I'm talking about like, it assume take take the price of the stock aside, the number of shares they're they're issuing. because this by the way, the the deal value went down with the stock. So I read the the merger terms last night, and there's a couple 1,000,000,000 of cash, and then a good chunk of it is in stock. And it's a and it it's Jason Calacanis (00:09:24): 10,000,000,000 Chamath Palihapitiya (00:09:24): of cash, and it's 10,000,000,000 of shares at the price when the deal was announced and to your point. David Friedberg (00:09:30): So it's a fixed number of shares. Chamath Palihapitiya (00:09:31): The stock it's a fixed number of shares. It's not a fixed it's not a fixed monetary value. So it's down 20% from the deal announcement. So that 10,000,000,000 of stock is now actually about 8. 8,000,000,000 of stock. So no. The whole deal is now 18,000,000,000, not Jason Calacanis (00:09:45): -- David Friedberg (00:09:45): Was it 10,000,000,000 of cash to month? The 10,000,000,000 cash? Yeah. Chamath Palihapitiya (00:09:48): And then there are 2,000,000,000 that 2,000,000,000 of deferred RSUs and stock based compensation. David Friedberg (00:09:54): But there but, I mean, if you think about it, at the time of the merger, they're they're either you know, I think they have. They're gonna use some term loan that they have to get the cash. But they're effectively issuing, you know, 10 divided by their total share count which is roughly 6% of their total shares outstanding. So, you know, they're kind of taking 6% or let's just ag aggregate the 2 together and say they're kicking roughly 12% dilution, sure, the the value of the stock goes down. Chamath Palihapitiya (00:10:21): So look. I I think, like, this deal is really interesting. So first, let's just give huge kudos to the CEO and the team and the investors. What an enormous win for all those folks. That's awesome. It keeps Silicon Valley kind of going. Right? And that's awesome to see these kind of big wins. I read this incredible profile about the founder. And he sounded like such a fascinating person. He basically and the profile basically said that he was spending months and months going from office to office all around the world, meeting customers, sitting with customers, reading trouble tickets. That's what he would do. You know, reading help desk tickets about product on vacation. Whenever you see a a a CEO that is so customer obsessed, typically, there's good outcomes. And so this is just another validating point on that theme. Now let's just put Figma aside, and let's just talk about Adobe for a second. What is so incredible is you have a company. Yes. They spent Jason Calacanis (00:11:20): $20,000,000,000 Chamath Palihapitiya (00:11:21): or whatever, 18,000,000,000 now. But the way that they did it is really interesting. If you go back to Zendesk and SurveyMonkey, when those guys announced that merger, it was above a threshold of stock where you had to go to a shareholder vote. And because there was so much turbulence in the market, whether the industrial logic of that deal made sense or not, didn't matter as much to shareholders when it came time to vote, and they voted it down. Right? So interestingly, Adobe was very clever. They said I'm gonna do half cash, half stocks so that I'm below the threshold. We are below the threshold where it goes to a shareholder vote. Okay. Interesting. But then you have to factor in the dilution not just the dilution of the stock, but then the rerating of the stock. And this is where, you know, you lose 20% of your market cap, And then you tack on this. You're talking about, you know, a Jason Calacanis (00:12:13): 40, 30, $40,000,000,000 Chamath Palihapitiya (00:12:15): price tag to get the deal done. And I think that's where the head scratcher was in the public markets where folks basically rebuilt their model and said, hold on a second. You've been telling me that this problem is a solved problem. But when you pay such a premium, not only does it mean that this product is clearly materially growing and disrupting. But the existing revenue base that I was counting on in my model must be wrong as well. And that's the actual flywheel that now Adobe is in where people are trying to really figure out how under pressure are those existing cash flows. And then if you compound that with something else, which is nothing specific to Adobe, but to the whole market, which is now interest rates are going up behind the scenes, You have this sort of parade of terables for Adobe that they're gonna have to navigate. Right? They have a very large portion of cash. They have a large portion of stock. They have decaying earnings in their core business that they now have to explain. And then they don't really have a lot earnings. I think Shantanu said that it's gonna be year 3 before it's accretive, which is is typically a way of saying we're gonna lose money. And then in year 3, we'll make at least a penny. That's what accretive means. Doesn't mean you're gonna make 1,000,000,000 necessarily. And so these guys have to find a way for Figma to drop about a $1,000,000,000 of free cash flow into the business for this kind of makes sense in the short term. So I think those are all the mechanics that's sort of putting a lot of pressure on the Adobe stock, but it just goes to show you the amount of disruption that happens, this movement to the cloud or the movement to collaboration Jason Calacanis (00:13:49): -- Oh, yeah. -- Chamath Palihapitiya (00:13:50): monolithic products are just sort of very Jason Calacanis (00:13:52): much DOA. Chamath Palihapitiya (00:13:53): You know? Jason Calacanis (00:13:54): That is the key. I think you guys did a great job of summarizing it. This is an absolutely great deal for Adobe. It's a transformative deal in the same way the WhatsApp deal was for Facebook. it removes one of the 2 existential threats to Adobe and it turns Adobe, I guess, into a growth story now. As pointed out, Adobe's product was singer player mode, and Adobe grows at about 12 or 13% quarter right now. And now you have a company that doubles. And they really have been facing 3 paradigm shifts in the last 5 or so years. Obviously, you pointed out 1, Friedberg. Desktop software downloading it versus cloud based software. Well, here they go. Now they've got experts in cloud. And then the second one -- Chamath Palihapitiya (00:14:36): Yeah. But they have a thing called Creative Cloud. and, you know -- They Jason Calacanis (00:14:39): are slowly trying to figure that. It's a paradigm shift inside company. David Friedberg (00:14:42): I don't know. Jason Calacanis (00:14:43): They've really struggled. So now they have somebody who's cloud first, Shamoff. David Friedberg (00:14:46): Do you guys ever use those products? Jason Calacanis (00:14:48): little people have. But hold on. Let me finish here. The 3 paradigm shifts here. Chamath Palihapitiya (00:14:52): Feature for feature, they look very similar. No. So Jason Calacanis (00:14:57): these these 3 paradigm shifts, the one is the desktop versus the the web. The other one is subscription. So Adobe was charging a $1000 a year for the Creative Cloud. Now they charged 25 bucks a month for they successfully did that. Now they've successfully, I think, have figured it out collaboration software. Chamath Palihapitiya (00:15:12): But Adobe has one thing that they have not done, which I think is the real reason they had to buy Figma. Adobe see, this is the problem with these big public companies. Adobe and all of their investors got very addicted to the free cash flow generation of that stock, and it's been an incredible performer in be honest, Shantanu is one of the best CEOs of the last few decades in the public markets, period end of story. Okay? Since 2007, he has just run a masterful playbook. At the tail end of that though, you know, in 2022, this is a company that has, I think, 6 7. Maybe I think maybe $8,000,000,000 of free cash flow. It is a gargantuan moneymaking business. And so they refused in Creative Cloud. to go to that free tier that Figma has. And if you look at all of the stories around Figma, one of the most powerful things they did was basically allow people to use this for free effectively forever. Jason Calacanis (00:16:08): Yep. Bottom up SaaS. Chamath Palihapitiya (00:16:09): Yeah. Absolutely. And the problem with Adobe is that's a business model disruption that they could not afford in the public markets. Because if you condition a set of institutional investors, to be expecting $7,000,000,000 to $8,000,000,000 of annual free cash flow. And all of a sudden, you're willing to torch it, to take a quarter of that and take it free, That is probably the biggest reason why they had to buy this thing, which was that they needed to tuck it in, and they're like, how can I do it Well, I just have to do it by diluting the stock. David Friedberg (00:16:37): One time that was one time stock insurance. Yeah. That was it. It was a 1 -- You know what? -- 12% dilutive. Jason Calacanis (00:16:42): And then David Friedberg (00:16:42): they're it's it's 1 and done. Jason Calacanis (00:16:44): It's worth nothing more to go about. David Friedberg (00:16:45): The the point the the point you you you guys are making is more broad, which is it's not just about Adobe. This is the classic innovator's dilemma. Right? Like, any big company that reaches maturity in their market and has scale and has cash flows, you have a different shareholder base. You you move over from growth to value. And once you've got value shareholders I mean, I've been to these institutional meetings when I was on the exec team at Monsanto, and, you know, they wanted dividends and they wanted stock buybacks. And they they're like, it's nice see growth. But at the end of the day, I wanna know what's my dividend gonna be and what's my stock buyback target gonna be. And then to say, hey. I gotta go invest in innovating my way out of my corner because, you know, in this case, cloud is reinventing my marketplace. It is a very hard place for a manager of a business of that scale to be. By the way, every industry, by the way. Chamath Palihapitiya (00:17:37): I think there's another takeaway that's really interesting here, which is that if you look at Big Tech Companies, I think you almost have to sort them into 2 buckets, at least in the enterprise. And Saks you can tell me if you disagree, but there's one type of enterprise company which makes basically a single linear monolithic product or a handful of those monolithic products. Right? Think Workday, think Adobe, etcetera. But then there's this other type of company which are more platform level businesses that have this, you know, mixture of things that they do Relatively well integrated. Maybe each product is not so great, but together, they're pretty decent and you have distribution leverage and you have pricing power. Think Microsoft and the totality of those products. So what's interesting to me is you cannot effectively compete as it turns out against Microsoft at any point product. And Slack, I think, is the best example where, you know, Microsoft Teams was fundamentally cannibalizing this business, which is what drove Slack into the arms of Salesforce. And, you know, you could say that Teams was not as great of a product. I would have I would make that claim. But what Microsoft had was distribution scale and pricing power where you could count and effectively give it away for free. Adobe isn't in that situation. Right? They can't do that kind of stuff. And so when you compete against Those kinds of businesses you have a better chance of winning. The takeaway I think for the entrepreneur is when you're thinking about the next enterprise business to start, I would try to bucket these companies that you wanna compete with and say if I'm gonna build a newer version of x, make sure that version x is going after a company like Adobe versus a company like Microsoft because it's much, much, much easier to build value when you're competing against a monolithic product company versus an entangled platform company. Jason Calacanis (00:19:21): Sachs, would you bundle if you were the CEO of Figma which you now I'm sorry, CEO of Adobe, which you bundle Figma into the Creative Cloud and then just make it one subscription Would you Microsoft Teams it? David Sacks (00:19:34): Yeah. Maybe. I don't know. I'm not sure about that. I I do think that Microsoft is a little bit unique in its ability to bundle. So what so Tremont is worried about the power of the bundling. What they do is I think it's called the e 5 bundle. they have all these products that virtually all enterprises use from Office to, you know, active directory to you know, there's, like, a whole long list of them. And so what they've done is they've created one price for all of those products that they sell as a bundle under a wall to wall enterprise license. And what they do is when they see a new competitor come along, whether it's Slack or Zoom or or Okta, is they'll basically just clone it, create a worse version of that product and throw it into the bundle. And so now every single enterprise is getting the Slack clone or the Zoom clone or whatever for free, and that has a huge material impact on you know, it pulls the rug out from under those startups. So now that's not to say that Microsoft's product is anywhere near as good as those those competitors. But you know, now all of a sudden, the the Microsoft product is on a marginal basis free. But then what Microsoft does is, you know, every year or 2, they go raise the price of the bundle. So, basically, you know, they get you hooked on the bundle. They then use it to systematically kill or undermine a competitor And then they know you're stuck. And then they raise the price. They basically have inflation of the price of the whole bundle. I think it's very anti competitive, actually. I think it's It's akin to dumping. I I'm not sure what the logical stopping point of it is. Like, I don't know if we can have a healthy SaaS market if Microsoft is allowed to keep doing this forever. Because think about it. I mean, they will just every year, they will take the hot SaaS company Desjour clone it. It'll be a shitty version. David Sacks (00:21:23): They'll throw it into their bundle, and now they're dumping they're dumping the product in the market. It's basically free. It's free until they basically drive Jason Calacanis (00:21:32): -- David Sacks (00:21:32): And -- -- they drive out the competitor or destroy it. Or basically, Under minus market cap to the point where it can no longer make the kinds of investments it needs to pose a real threat to the Microsoft larger entity. Right? So think about how any competitive this is, and you don't hear a word about this from Lena Kahn or Washington. They're only focused on social networks. Chamath Palihapitiya (00:21:52): No. It's it's so funny. It's like she's more focused on, you know, making sure Amazon doesn't buy Roomba. That you know, this stuff attacks Jason Calacanis (00:21:59): -- Facebook doesn't buy one VR. Yeah. She it's not very sophisticated approach. You're right. Chamath Palihapitiya (00:22:04): This is the kind of stuff that actually really matters. I really think you nailed it on the head sacks. It's a it's an impossible strategy to defend against. The the other thing that is interesting by the way about all of this is, you know, if you think that the valuation, the takeout premium was basically 2 x post to post. What that means is that if Figma was last value to 10 is now worth 20, you know, does that mean that Canva, which was last priced at 40, is worth 80? Well, potentially to well, potentially to Adobe. Right? And if you add those 2 together now, you know what you really they have is basically the the entire totality of the Creative Cloud for Adobe is basically embedded now in these two businesses at an extreme premium. And so it makes it very difficult now, I think, as well, for Adobe to execute a strategy here without it being forced to do some more expensive dilutive m and a. Jason Calacanis (00:22:59): Well, and the other problem, Shamalff, is this is gonna ring bell. So when I said before, there were 2 existential threats. Canva is the other one, and that is the other paradigm shift that's occurred in computing is that making things radically simple. You talked about a Friedberg Photoshop is complex and it's single player. Canva is how people create, you know, any kind of marketing materials today, and they don't hire a designer anymore. The job designer is now everybody's job. Everybody can make something on Canva. But then I think Saxx or or or or Friedberg maybe you have thoughts on this. If you're Alena Kahn, And they do make a run at Canva Adobe. Now are you saying like, hey. Wait a second. You now run the table on all design tools. You can't buy it. David Friedberg (00:23:37): It's a weird classification. It's only called design tools because it was sold to someone that was called a designer before, and that's not the case anymore. Now it's a tool that anyone can use in the enterprise setting or in a small small business setting or in an individual setting to create stuff. and that wasn't the case with Photoshop. And I think that's what makes this arguably a very different business, a bigger business, a more transformative business, and a farther reaching business, and I don't think that there's necessarily a speaking of the Figma deal, right, a case to be made here that there preventing the extinction of their monopoly, they're buying what looks like a very different business, and and it's really additive. It it's a business that can turn anyone into a creator. That's really cool. Well, yeah. David Sacks (00:24:27): But you're kinda you're kinda speaking out of both sides of your mouth now because on the one hand, you're saying it's a different business, but on the other hand, you said that this is basically protecting them against an existential disruption to their core business. So if it's an existential disruption to their core business, How could it not be in the same market? Of course, it's in the same market. Jason Calacanis (00:24:44): Well, there are new entrants competitors. David Sacks (00:24:47): Yeah. Right. There are new entrants, and there are you know, different underlying, you know, technology trends. This is all about cloud. But nonetheless, I don't see how these things aren't competitors with each other to some degree. So I don't know how this doesn't get seriously reviewed Jason Calacanis (00:25:00): -- David Friedberg (00:25:01): Yeah. I it feels so -- -- authorities. It feels so similar to Facebook and Google YouTube. And by the way, it's similar in both those examples in a number of ways. Both Facebook Instagram was not competing in the same product as Facebook at the time with the News Feed or whatever, it was a photo sharing service that clearly created a broader addressable market that got more people to use a social network. And YouTube peep and people thought they were overpaying. Right? And then YouTube, everyone thought it was crazy they paid a billion 6 for that business, and it's probably the greatest acquisition of all time. It's been the greatest managed acquisition of all time, I should say. And that business, similarly, I think Google recognized that people were going to move to video content as an alternative to text based web content and that it was a bigger picture opportunity than what they were pursuing and in the lane that they operated in at that time. And they were right. And in both cases, it was more about paying whatever it took to get the deal done, then, you know, hey. How many users do you have? How much revenue? How much EBITDA? What's your ARR? All that stuff goes out the window. When you're sitting in that strategic driver seat at that big company and you're saying, this is a bigger market. These guys are transforming the market. and ultimately over time that will eclipse us. And you can say, hey, you're protecting your business, but really you're protecting your mark. I mean, The market is gonna go away is what the vision is. Like, the market that you exist in today isn't gonna exist in the same way in 5, 10 years, and that's what you're trying to buy your way too. Chamath Palihapitiya (00:26:26): I have a question and a and a and a statement. The statement is, I think Canva should absolutely go public versus sell because it seems like they'll have a much easier time competing against whomever that they compete with. I do think that David you're right that there is a lot here for regulatory review because if you go back and think about Visa plaid, It's not dissimilar. Meaning, you have a young startup that has this really credible and viable technology potentially being acquired But in that case, it was one of a duopoly. But here you could make a very credible claim that it's it's in a market where it's roughly a monopoly. because there aren't really that that many meaningful alternatives. So I think Saks is right that there's that there's some, you know, Jason Calacanis (00:27:14): Oh, but there's a case here. Chamath Palihapitiya (00:27:16): Yeah. There is a case here where Jason Calacanis (00:27:17): -- Well -- It it just depends where the -- That was literally my question. Roomba were this. Yeah. But the -- David Sacks (00:27:22): Well, not not just Roomba, how how about how about that VR game that Facebook launched? -- before. Jason Calacanis (00:27:27): Like, they that was a tiny acquisition that maybe have a million users. David Sacks (00:27:30): Look. It's the same candidate. They're just being Exactly. They are being punitive. But I think I think it seems Jason Calacanis (00:27:35): like Yeah. David Sacks (00:27:36): Well, it seems like what the antitrust authorities are doing right now in Washington is they've got a list of companies that they think are putatively suspect, and our job is to stop these companies from accumulating more power. And it's really about seeing everything through this lens of power, but that's not what the competition authority is supposed to do. They're supposed to ensure competition. It's about antitrust. Jason Calacanis (00:27:58): It should be a rule book. Right? David Sacks (00:27:59): And the the problem with just approaching things in this way of of the punitive way, we just have to stop these companies. Is it creates a chilling effect on on reasonable exits in Silicon Valley. There aren't that many great exits, and we want them to go through. Now I think if monopolies need to be reined in, there are other tools to use besides just saying that those companies can't acquire other companies no matter how unobjectionable they are. I mean, let's do things like allow side loading. Let's basically Jason Calacanis (00:28:28): -- What explain what that is, Huddl. David Sacks (00:28:30): Well, that's that's basically a way to say that. I think Google the Android already does it, but iOS does not, where you would be able to basically install an app or download an app without going through the Apple App Store. You could enable competitive app stores. Basically, you know, I think I think it's a real issue that you have operating system monopolies. I mean, Google, Android, and iOS with Apple and then Amazon with sort of, you know, white label products, those are all operating systems that are competing with apps on their own platform. And there have to be some constraints and rules around that. Otherwise, the operating system will eventually dominate and replace any app they want to on the platform. We saw that's what the whole Microsoft thing was about. Microsoft Netscape was a 100% about that. So I think if you can show that somebody has an operating system monopoly, there absolutely should be rules of constraints around that. Does it mean the company should never be able to buy anything? No. I mean, I think all that does is stifle innovation without really getting to the crux of what the issue is. Jason Calacanis (00:29:26): I think you nailed it. A good first step would be allow other app stores So Google's App Store could be on iOS. iOS's App Store could be on another platform, etcetera. And the I mean, the other issue here is Lina Khan's been pretty clear her entire thesis in taking the job was, well, I wanna prevent downstream competitive issues. So future competition, there's no better example of a future competitive issue and future consumer harm, I think it's how she phrases it, than this acquisition. If you're gonna do it through the lens of future consumer harm, this creates future consume consumer harm because Figma is not gonna compete with Adobe. Chamath Palihapitiya (00:30:03): You're you're saying that it does. Jason Calacanis (00:30:04): It does massively. Massively. I mean, it it this is the the the the dissonance here. It is great for consumers because they will bundle it. They'll bundle the two things together and it'll it'll make it more valuable and reduce churn and it'll make it simple to buy. So that's good for consumers. Right? You get more free stuff. But future harm and and a future competitive harm here is the marketplace will be less competitive if there is 1 less independent strong company in it. That's and if you if they buy Canva, that's the definition of downstream competitive harm. It'll be a less competitive marketplace with these two companies together. Full stop. So, Jake, Chamath Palihapitiya (00:30:41): I'll give you if you're Alina Khan, you actually pay attention to this Adobe Figma thing in, like, a serious way, or are you still more focused on Amazon and, you know, Facebook and Well, Jason Calacanis (00:30:56): I would that they would do multiple things. Chamath Palihapitiya (00:30:58): Same what would you do? I Jason Calacanis (00:31:00): if I was her, I would create a a rule book and apply the rule book evenly and fairly. And this is the problem. This feels very political. It feels like they're going after Facebook because of the downstream political issues faced causes, and they're ignoring the Microsoft issue, and they're ignoring issues like this. It just feels like they have their thumb on the scale. Chamath Palihapitiya (00:31:19): If you look at what happened to the Visa Platt thing, it was an enormous blessing in guys because, you know, the the thing went away, and that was, I think, like, a $5,000,000,000 acquisition. And then Platt turned around to raise money, and it's, you know, multiple teams, 1,000,000,000, and it's gonna be a wonderful independent company to your point, Jason, that will now, you know, create more competition in a space that desperately needed. Now in that case, that was sort of, like, financial payments in rails and Visa, Mastercard blah blah blah. But that that that could also be you know, if there is a lot of attention paid to the deal and it doesn't end up being consummated, that could be the positive outcome. But -- If Jason Calacanis (00:31:55): you want a future competition -- -- close. Chamath Palihapitiya (00:31:57): If you ask me if I was betting that, I think this thing is gonna close. Jason Calacanis (00:32:00): I I think it closes. Yeah. David Sacks (00:32:02): Yeah. But, I mean, Friedberg wouldn't it? It closes it closes because it doesn't intrude on the hot buttons of Washington, not because the merits of the antitrust are superior to the Roomba deal or to that VR deal that Facebook wants to have. This is all about political and cultural hot buttons. Jason Calacanis (00:32:20): So it's it's it's so weird. David Sacks (00:32:23): Yeah. But I think we all understand what what's really going on. It's all political. But, hey, Jason, can I go back to your question? I think it was a really good question. I've had more chance to think about about Should Adobe change the pricing of Figma should they basically bundle it? I've spoken about the merits of what Microsoft does. I don't think that Figma should do that here. Now that I had a chance to think about it. The reason is this that You have to think of pricing as not an element by itself but as sort of the most important element of a go to market strategy. And there's no way that you can basically reprice Figma completely as part of some other bundle and expect not to create massive disruption to your go to market organization. So for example, you've got now a whole huge sales team at Figma, including enterprise sales. They are commissioned based on their the quotas that they close, and that's based on the ACV of the deals and so on. If all of a sudden you price this as being free, because it's part of some bundle that enterprises get because they're buying old Adobe. Now all of a sudden, those salespeople can't earn commission. on that sale. They can be incentivized to take that product to market the same way. The marketing team is tasked with feeding the sales team So now all of a sudden, they're like, wait a second. Can we spend money to basically promote this product when it's gonna lead to a deal that's priced at 0 because the enterprise already has in ELA with Adobe. So you can't just look at a pricing change in isolation. You have to look at it as the tip of the spear of the whole go to market. I could tell you what's gonna happen because I kind of experienced this with with Yammer when Microsoft bought my company 10 years ago. And by the way, I'm not critical of Microsoft at all. They were an extremely high quality acquirer that lived up to all their promises and did everything they said they were gonna do. I think if you ever get an offer from Microsoft, you should take it really seriously. David Sacks (00:34:08): I think, like I said, I think they're a great company great acquirer. But I can tell you what happened is that once Yammer was folded in to the Office Suite and didn't have its own independent pricing, It didn't have its own independent sales team. It just disappeared. I mean, the promotion of it to stop because nobody had an incentive to basically go sell it. Nobody ended up to go market and promote it, and it just kinda disappeared. And that is why you remember a couple of years after we sold it, Slack kinda came out of nowhere. And there was no one to really oppose them because, you know, all the promotional activity we had done around the hammer just ended. because, again, we weren't we we didn't have the incentive that was created by the sales organization. Chamath Palihapitiya (00:34:47): Just to explain the pricing thing, David, I think that the way this decision will get made, and I'm not saying it's right or wrong. But it will get made not by the sales teams and not by the product teams, but it will get made by the CEO and the CFO in talking to their largest shareholders. And the reason is because there is an implied cost of capital that Adobe has. In fact, right now, if you look at, like, all of the models that all of the analysts use is roughly around 9%. And so, you know, they're going to have to achieve a return on top of that cost of capital. What that means is that they're going to be forced to find a way in short order to make this accretive and to start generating incremental cash flow. And I think that they will be hard pressed not to bundle and not to do these creative packaging strategies. Because otherwise, I think that there's a risk that this free cash flow machine that folks that become very addicted to at Adobe starts to shrink. And that will have huge ramifications, I think, to the stock, into the executives, into the morale. And so I think that they're going to do whatever it takes. And by the way, you've seen that you've seen that in other companies who've gone into this phase of their growth Oracle being the best example. You know, they have consistently found ways to package, to bundle, to cross sell to upsell, and they have incrementally walked free cash flow generation up. David Sacks (00:36:19): If they do that, they're taking a huge risk because here's what's gonna happen is So I I agree with you about what may happen. This may be decided by the CEO and the board, but I think if they do this, they could blow it. I mean, the the you know, Dylan Field, the founder in his blog post on this said that Adobe is committed to letting them run independently. Well, you can't run independently if you don't have your own independent pricing. You just can't. For how Jason Calacanis (00:36:43): long is the question? How long David Sacks (00:36:44): does it take? Like, 2 years, 4 years. If all of a sudden Adobe salespeople can sell this product and include it in their bundle and the marginal price is basically free because it's part of some bundle. That means the sale has been taken away from whoever the dedicated salespeople are on the Figma side of the house. I can tell you that will create irrationality in the sales organization. And very soon, there'll be pressure to consolidate the Figma sales organization with a larger Adobe sales organization. They will be moved in. They may become product specialists or experts. David Friedberg (00:37:15): I think Jason Calacanis (00:37:16): -- David Sacks (00:37:16): But the go to market efforts will be consolidated. And then Dylan's gonna end up running a a a quote standalone version of Figma that doesn't have its own go to market organization. And then you don't get feedback into product from your sales and marketing team. So all of a sudden, you're running a product and engineering team, but you don't have eyes and ears in the market Chamath Palihapitiya (00:37:35): I hear all of that. I think that the Facebook WhatsApp merger is probably pretty instructive, which is Jan had 2 years roughly. where he was left alone to kind of, like, run independently and then slowly and slowly, it is absorbed back into the mothership. And, you know, that was a product with 0 monetization But there is a lot of strategic touch points within WhatsApp and and, you know, core Facebook app and everything else that they were doing. I think that you have to do that. Because when you're spending tens of 1,000,000,000 of dollars on something, there needs to be an industrial logic that is beyond just let me just buy this thing and stick it on the shelf and let it be on its own. So I I I think that, you know, that die is sort of cast. I think we're just debating the timeline in which it happens. Let's talk about -- Yeah. David Sacks (00:38:20): I know. You're probably right. And and that's what usually happens is is when they promised the founder, that you'll be left alone that usually lasts 2 years. That coincidentally that coincidentally usually the length of the the earnout or the the golden handcuff Chamath Palihapitiya (00:38:34): And it definitely takes Jason Calacanis (00:38:34): -- David Sacks (00:38:34): That's how all my golden handcuffs were. Yeah. And they left us alone for 1 year. By the way, our ARR tripled that year. But then once they got serious about integration, the organization started merging. And, really, I was just running a product organization which is fine, but that's not running a an independent company because like I said, you lose your eyes and ears. You lose the pulse of the market when you're not selling into the market. Jason Calacanis (00:38:58): Friedberg, how did YouTube do it so well? David Friedberg (00:39:01): It was a very different situation. They were -- Yes. Google basically took a team of, you know, 2 dozen people and their infrastructure was terrible, and they basically rebuilt the entire company. So it was the complete opposite. Think about them taking the the front end shell of YouTube, and then they rebuilt everything underneath it, ran it, And then they actually put their own people in to optimize the front end. They put their own ad sales team on top of it. I mean, they just bought the skeleton of a growth engine and they built everything. And so it was a very different story. And the one thing that YouTube the the one thing that Google did so well with that acquisition was the conviction bet that they made on the business, and they made 1,000,000,000 and 1,000,000,000 of dollars of investments into that business for years before it started to make money. And that is a very hard thing to do, because to Shamab's point, you often have this question of where your free cash flows, where's your dividends, where's your buybacks as the business gets to a certain point of maturity. But what Google had that many businesses of that scale have never had before is their extraordinary growth rate that continued even as they were of that scale. So the the leeway that Google's executives and board were given by shareholders was extraordinary, not to mention the dual voting, where Larry and Sergey could decide to do whatever the heck they wanted, but they really were able to take advantage of their high growth rate to take all of this cash they were generating and reinvest it into this YouTube platform as well as many other things, many of which haven't worked out. But when they do work out, you have a business that I think YouTube's probably worth what? Jason Calacanis (00:40:42): 300, 400, $500,000,000,000 David Friedberg (00:40:44): at this point. and and it's really paid back multiple. So YouTube's really a one off because it's a one off acquirer, and it was a one off kind of acquisition scenario that that we haven't seen before. David Sacks (00:40:55): What Google in effect got when they acquired YouTube was a flywheel. I mean, it was a brand and it was a network effect. Network effect. Yeah. The network effect was massive. It was off to the races. And I remember Google had Google videos, but they just couldn't come close to catching YouTube because the flywheel of creators wanting to be where all the viewers were and viewers wanting to be where the most content was, it was just impossible to catch But that organization was relatively tiny at the time it was acquired, and it didn't have any monetization. And it was being deluged it was being deluged by legal problems that that Google Legal could solve. Jason Calacanis (00:41:27): Very unique situation. Yeah. That that was one of the bold acquisitions of all time. David Friedberg (00:41:31): But what was incredible is right after the acquisition, and Google started to scale this thing, most of the content being watched on YouTube was copyright content, and I was at a and I remember Philippe Damon, the CEO of Viacom stood up, and and Larry Page and Eric or Larry and Sergei or someone was on stage with and he yelled at them And he was like, you guys are making all this money and growing this YouTube business off of the back of our content. And, you know, the DMCA, the digital millennium copyright act, says that someone can file a takedown notice, and then the platform has a period of time to respond and to deal with it. And the amount of time it was taking them to deal with it new content was being uploaded, then they'd have to file another takedown notice. So it created this insurmountable, you know, copyright copyright thing. And And then what did Google do that YouTube would have never been able to do to Saks's point? They built an engine that could automatically recognize copyright content and pull it down before it was made publicly available -- Fingerprints. Jason Calacanis (00:42:29): -- David Friedberg (00:42:29): ruining the user experience of instant upload and availability of content for other content. Jason Calacanis (00:42:34): -- print system was even more nuanced than that. The fingerprint system not only told him, hey. This is an SNL skit or this is a music video from prints. It said, what would you like to do? And it put the power in their hands and said, turn it off, claim it, and we get the money from it. And Bennett was like, well, we're telling you before you even know about it. And what all these people did was they say, okay. Yeah. You can make a remix of my print song or this episode of a TV show. we'll collect the money, and that was David Friedberg (00:43:00): just -- Yeah. Jason Calacanis (00:43:00): The revenue share was the brilliant part about it because it put the power in the corporate holders' names. David Friedberg (00:43:04): This just speaks to how singularly how singular and unique that deal was because I don't think any other company at that time maybe Microsoft would have been able to develop technology to do this and do it at the scale and do it with this low latency and high speed for users and so on. It really was a singular transaction. Jason Calacanis (00:43:23): Which Friedberg, I think, speaks to their accumulation of talent, especially in those early years where they were just, like, hire smart people. We'll figure out what to do with them later. actually had those people sitting around who could just go jump on the YouTube team. David Friedberg (00:43:33): Oh my god. Solar Comengar went and ran YouTube and absolutely crushed it. Probably one of CEO runs that's never talked about in the history of tech. He stepped in, and he ran YouTube. And now Susan runs it, you know, another incredible run of monetizing that thing since. But I mean and these are people, by the way, both Solar and Susan were sub 30 employee people at Google. So, yeah, good point. David Sacks (00:43:55): Nick, can we throw up the slides contrasting valuation to ARR? This is actually more interesting than just who made all the money. So I actually created a plot. ARR is the red chart and the it's the right access. So as we talked about, they're at around $440,000,000 of ARR right now. And then the left axis is expected value. Basically, this was their valuation. And It's it's in purple and it obviously, it goes up to the 20,000,000,000 or 22,000,000,000 that Adobe just paid. You could see e was the last round they did in 20 21 where they're valued at 10,000,000,000. Before that, they're valued at 2,000,000,000 in 2020. And then, you know, the series c, I think they're valued at, like, 440,000,000 or something like that. And then I think the b, they were valued at, like, 125,000,000. And then the a, they were valued at, like, 50 ish 1,000,000, you know. And then there was seed and so forth. I think what you see here is that is how efficient in a way venture capital is where it's tracking just slightly out of ARR. It is predicting where the hockey stick is good. So first of all, look at ARR. It is as close to a pure hockey stick as I've ever seen in SaaS. kudos to them. I mean, the crazy thing is just how long it took for the hockey stick to get going normally. David Friedberg (00:45:15): Why didn't you invest in this company? Did you see it? David Sacks (00:45:18): Well, no. We didn't see it. Also, look at what late bloomer this thing is. You know? David Friedberg (00:45:22): Like -- Yeah. That's incredible right. Jason Calacanis (00:45:23): -- David Sacks (00:45:23): see it. Like, look look like, hockey stick didn't really start inflicting. until 2018, 2019. Right? So -- It's David Friedberg (00:45:30): more that your your your table is more striking where these guys for years were toiling away, and then all of a sudden, this thing just took off. Right? It's really incredible. David Sacks (00:45:38): Such a late bloomer. And for anyone who's doing a SaaS company and you're in it 5 years and you still have zero revenue, and like, that doesn't mean you're dead. I mean, they basically were a Jason Calacanis (00:45:47): 0 -- Keep grinding. -- David Sacks (00:45:48): for 5 years. Chamath Palihapitiya (00:45:49): Finding. Exactly. David Sacks (00:45:50): Absolutely. And that was a $200,000,000 exit 5 years later. Chamath Palihapitiya (00:45:54): I actually think David Sacks (00:45:54): I think the only hard round to invest in this company would have been if you were gonna invest in, I think, the Jason Calacanis (00:46:00): 2014 David Sacks (00:46:03): time period 2015 because you are investing in a company that hadn't even launched yet that had been grinding for 3 or 4 years. with by the way, the founder was, like, 19 when he started this. He was a teal fellow. He was one of the first, you know, 20 under 20 teal fellows. Really? Yeah. Chamath Palihapitiya (00:46:17): Yeah. Yeah. Yeah. David Sacks (00:46:18): And he dropped out of school to do this. And, you know, and they spent several years in the wilderness. I think that's when it would have been hard to invest is maybe not the first seed round because you could tell this guy was brilliant. He had a really specific idea. Moving design tools to the cloud was, I think, like, a very clear and sensible, vision, clear, you know, why now underlying trends? David Friedberg (00:46:40): I always say my my 3 biggest traits for entrepreneurial success. One of them is grit. I mean, you you know, if you have a high index on grit, you're you're able to to to grind your way there. It's really it a really incredible story. Jason Calacanis (00:46:53): This chart is brilliant because, you know, what we see in the seed stage is right before that series a is where most people give up sacks. You know, you you get 3 or 4 years in, People aren't paying for the products. You're under resourced, and they don't get the a. And they got a you know, that 2013, 2014, 15 period, they were probably trying to get an a. might have taken them 2 years to get the a. And then somebody finally decided -- -- David Friedberg (00:47:14): easy for a young person to give up and go get a freaking job at Google or go back to school and to to grind it out, to have the grit and the persistence and commit to your vision. He didn't pivot away. He persisted. and he executed Jason Calacanis (00:47:29): -- David Sacks (00:47:29): He clarified. He clarified. David Friedberg (00:47:31): He clarified. Right. David Sacks (00:47:32): Yeah. David Friedberg (00:47:32): But he but he didn't he didn't go five steps away. Hey. I'm gonna do a new startup, and you know -- No. Jason Calacanis (00:47:36): There was no credit David Friedberg (00:47:37): in his business. Right? Jason Calacanis (00:47:38): There's no credit here. Yeah. Dylan Steele, by the way, is the founder. I had him on the pod back in the day, and, really, the you know, ultimate customer focus. Customer session like you said. Chamath Palihapitiya (00:47:48): In the enterprise class, you need to just have your pulse on what your customers are saying constantly because the answer is there, you just have to develop it and give it to them. Jason Calacanis (00:47:59): By the way, also in this chart, that's, I think, very interesting, Zach. interested in your position on this. If you look at this chart one more time, they could have turned on monetization, I think, a year or 2 before they did. So they purposely didn't charge for it to get the network effects going. I would love to see in here the number of users as a third vector, you know. as a third line on here because I think they started getting a lot of users in 2014, 2015, 2016. That's when that's why they got the seed, but they purposely did not charge to let the network refer. David Sacks (00:48:25): Yeah. 2015 was a private beta. I don't think they were even had a product in 2014 that was usable yet. 2015 was private beta. 2016 was public launch. And then they turned on monetization in 2017, and then they turned on enterprise pricing in 2018. So I think that's a pretty sound progression. I I'm not I mean, to be honest, I'm not a big fan of taking 3 or 4 years in the wilderness to build your product. I think you need to get to market sooner. But I do think it is a little different in a existing industry where the table stakes are high. So, you know, Adobe is not a cloud based product, but those were very rich client products. And So to get to the point where you could even compete with them with a classic Clay Christensen, innovative dilemma lightweight version of the product, they they were significant table stakes there. And it was a significant technical challenge to move design tools into the browser. They had to do a lot of cutting edge browser tech. Jason Calacanis (00:49:21): The browser wasn't ready for it. Yeah. David Friedberg (00:49:23): This chart is gonna be call in in a few years. Jason Calacanis (00:49:26): Now that I'm doing after all in, 48 hours after it. I think that's correct. Come join me with any questions. Spacks are back. I don't know if you saw it in the news, but Friedberg launched a Spack. Chamath Palihapitiya (00:49:37): way to go. No. No. No. He he he announced a target and a merger agreement. Incredible. So now he goes into the d SPAC process. Jason Calacanis (00:49:45): Now we have 2 out of 4 besties have spacked. Friedberg, you wanna tell us about what you spec? David Friedberg (00:49:50): Well, I mean, we announced that we're merging the production board spec, which is TPB Acquisition Corp. LaVoro, which is the largest agricultural inputs retailer in Brazil and operates across Latin America. you know, we've got a good slide in the presentation that I think echoes some of the points I've talked about on our podcast here about the importance of having resiliency and redundancy in global food supply chains and increasing famine risk So we've got a slide that shows for about 30 years, you know, we've reduced the number of people globally that have been undernourished. down to about 600,000,000 as of about 3 or 4 years ago. And in the last three years, we've seen that number spike back up to 800,000,000, which we thought we were done with Global Family. And now here we are facing these issues again, climate change, the lockdown, supply chain disruption, the Ukraine war, and all the other geopolitical tension issues. So that's been a big thesis of mine individually. You guys know we've talked offline about some investments I've made and and my strong interest in the area. Brazil and Latin America is the largest ag export market in the world. So they produce calories for the rest of the world. And farmers there largely lag in terms of technology adoption I've got a nice Brazilian farm as my background today, but technology adoption doesn't look like it does in the US. There's a huge opportunity to influence and drive productivity up in that region. And so we partnered with the largest ag retailer. Ag Retail is the local locations. that work with farmers. They have these teams called agronomists. They meet with the farmers typically weekly, help them make decisions about what products to use, what to do, how to do it, And so with the footprint and the reach that they have, I think we can really drive up productivity per acre across the region in total global calorie production, and that's why I'm so excited about it. Fundamentally, it's also a great business. It's all the financials are presented in the in in the investor presentation and will be published with the SEC here in the next couple days. But it's a it's a scaled business. David Friedberg (00:51:54): It's a profitable business and growing pretty significantly. So it's got great tailwinds. It's a great base business. But for me, there's huge opportunity to continue to drive what their drive technology through the platform that they've built. And that's why, you know, we're also making a $100,000,000 investment off our balance sheet into the company. Jason Calacanis (00:52:12): So that's big skin in the game. Big skin in the game. David Friedberg (00:52:15): And, you know, we we put 2 thirds of our these founder promote shares. They're you know, the only vest if we can hit the stock price of 12.50.15 over the next 3 years. Otherwise, we lose them. So we've really tried to align ourselves with shareholders and really put our money where our mouth is on this and show people that, you know, that that this is a real strategic partnership for us. It's not just, you know, an investment that we intend to kinda you know, hold for a for a short period of time. This is a key platform for me, for our for our TPB business, and for many of the companies that we operate at TPV. So I'm super excited. It's been a long time coming. It's been a very hard process as Chamath can attest. And as we all talk about Capital markets are very difficult right now getting a transaction announced is is the first step. Now there's a bigger step of of getting it closed. But, yeah, a lot of work, but I'm I'm I'm super excited about this. Jason Calacanis (00:53:07): And it's okay. Yeah. David Friedberg (00:53:08): Thanks for letting me talk about it. Yeah. Jason Calacanis (00:53:10): Well, and and the other thing I just wanna double click on there, Chamath, this idea that 2 thirds of this the sponsor promote have to hit certain hurdles. I think that's probably a a pretty good thing for folks who maybe wanna invest to just say hey, yeah, this is great. We're we're the there's some alignment in how these shares get distributed. Yes. Chamath Palihapitiya (00:53:30): I mean, I think it's a good feature. Yeah. I think that the the thing with specs in general in a moment like this is that it's it actually performs better in periods of high volatility. And the reason is because, Jason Calacanis (00:53:40): you know, you have this redemption feature. Chamath Palihapitiya (00:53:46): which essentially allows you to get back your your basis. And so meanwhile, while, you know, Friedberg was hunting for a deal or whatever, that cash, you know, that you've contributed into this back sits in a savings account that then naturally is generating some, you know, reasonable interest as rates go up. So the whole combination of all of this stuff actually makes us back a pretty good risk adjusted vehicle when the markets are highly volatile. Because if at any point you don't like how you feel even if you love the deal. You just vote to redeem, get your $10 back and effectively win the market. Right? Let's say the market goes down 30% from here to March of next year when Friedberg deal closes? Well, an investor could theoretically just say, you know what? I just want my $10 back. Now all of a sudden, they've gotten zero they felt zero percentage of that drawdown. And that's what's so interesting about the structure in a moment like this. So I think there's a lot of really interesting features that that's facts in the future, I think we'll have to incorporate in order to in order to be a successful tool in the toolbox. Jason Calacanis (00:54:47): One thing I learned from, I guess, the pattern ag company that I think you incubated as well, or was that -- Yeah. -- a cup yeah. You incubated as well. David Friedberg (00:54:55): Yeah. And you you guys invested through the through your launch platform. Jason Calacanis (00:54:58): Yeah. Right? So we we invested this syndicate. is that the way this retail works is we have farmers, but then there are these retailers or these sales reps, I guess they call them in the industry. that service the farmers. And so that's what Chamath Palihapitiya (00:55:12): the -- Yeah. Jason Calacanis (00:55:12): Yeah. Farmers. Farmers technology. Yeah. David Friedberg (00:55:15): That's right. They don't they don't know How else is a farmer supposed to know what to buy and what to do? So ag retail, the local retail store, the people that work there are called agronomists, And so the agronomists are, like, technical salespeople. They understand the science and the technology of farming. They understand what the farmers have done in the past. and then they partner with them to help them decide what to do going forward, what products to buy, how to use them, how to get the most out of their land, And so when new technology when new ag technology comes to market, it's the retailer that can influence the farmer to make a decision on making a switch or using a new tool or using some software, you know, to to drive that decision. And so that's why ag retail is so important. And why it's critical for any new technology to get adopted in farming, it has to go through retail. You know, there's the big ag input companies. They're the seed companies and the chemistry companies and the protection companies and the software companies. They all don't sell director farmers typically, they're going through these retailers. And so yeah. Chamath Palihapitiya (00:56:16): Is there a version of LoVoro that's been that's an American company that's public or not? David Friedberg (00:56:21): Yeah. It's called Nutrien. And so Nutrien owned CPS, which is the largest retail chain in the US, ag retail chain in the US, about, I think, 70, 80 percent of nutrients business is actually fertilizer production, and then the rest is the retail business. You know, that that's the key comp that we actually show in our financial presentation that we published yesterday. Chamath Palihapitiya (00:56:45): How is Nutrien done just as a public market people understand sort of the value that it creates in the marketplace? David Friedberg (00:56:52): Yeah. So in the last year, as we've talked about on the show, Companies that are in the fertilizer business are making money hand over fist because of the the issues with the supply chain for natural gas potash and phosphate. And so if you have access to supply like Nutrien does and and various other fertilizer companies do, you are absolutely minting money this year. And so they're having record earnings right now. And, you know, people are kind of estimating that the fertilizer market will kinda reset. And as a result, these companies are over earning right now, which means that they're getting low forward multiples. But generally speaking, yeah, these businesses have done very well. And one of the you know, I would say the US is about 15 years ahead of of Latin America. And remember, Latin America produces and exports more calories than the US, and they're and and corn farmers in Brazil, for example, are only getting half the yield of corn farmers in America or a little more than half per acre, yield per acre. And The reason is the retailers in the US are so sophisticated that they're introducing services and they make a bunch of money selling services now. That wasn't the case 20 years ago. So now they're offering farmers advice using software and and other kind of custom, you know, soil testing services and whatnot, and that's really changed agriculture. It's given farmers data that they didn't have before and helped them make better decisions using that data that didn't exist before. And that's really you know, I would say concentrated in the US that kind of sophisticated behavior. I think it's really important we see it happen around the world now. because we need to grow more food, and we need to do it without expanding land and acreage and so on. And we need to do it more sustainably, which is another kind of key part of this. Chamath Palihapitiya (00:58:37): Did you worry a lot about, like, the FX risk of, you know, all these inputs coming into Brazil, having to deal in low currency than having to kinda get the revenues out in into US dollars and all of that stuff. How did you think about that? David Friedberg (00:58:52): Yeah. It's a good question. So when all ag commodities around the world most commodities, right, they trade in dollars. And so, you know, if the dollar strengthens against the local currency, the AI, the farmers actually make more money and the input companies charge more money in local currency. So, basically, the entire ag market and around the world commodity markets generally speaking, inputs and outputs create in dollars. And so if you're a a a local business, you actually make more money when your local currency goes down. you're willing to spend more money. And so businesses in the commodity cyclical business generally are are currency hedged because of that, because they're they're selling stuff in dollars, and then as a result, the places that they're buying stuff from charge them more in their local currency. and they can still make a good spread. So, you know, there may be fluctuations in FX risk. But generally speaking, I think we see And I'm just speaking generally here not about this particular transaction. We generally see and we saw this at Monsanto. So that's a good example. All Ag input companies when the local currencies devalue in a market that they're selling into, they charge more, and the farmer's gonna afford to pay more because they're making more selling their product into the market? Chamath Palihapitiya (01:00:13): I I think this company is super interesting. So I'm I'm I'm rooting for you. It looks it looks really really cool. And it seems like a very good Enter valuation. Good margin is safety too. David Friedberg (01:00:24): Yeah. Jason Calacanis (01:00:24): 1 $200,000,000 $1,200,000,000 evaluation if I'm reading correctly here. So, yeah, congratulations. It's hard to get a deal done. At this time, for people don't know FX, foreign exchange, just trading $1 or one currency for another. Chamath Palihapitiya (01:00:37): Did you guys see that there was a a title Jason Calacanis (01:00:39): 6 Chamath Palihapitiya (01:00:39): lawsuit filed against Pfizer for some You know, in the in the civil rights act, there's something called Title 6, which means that if you take federal funds of any kind, you can't discriminate. And Pfizer has a program to recruit African American and Latino people into the company. And they're not being sued because, you know, Pfizer takes NIH grants. They work with the US government. They work with Medicare. They work with Medicaid. And so as a result of that, it's it's really happening 1 month before something else that we talked about, which is there's the affirmative action case that's going to the Supreme Court where Yeah. I I think it's Harvard actually. You know, push people pushing back on Harvard's ability to have some form of race based admissions. So I just don't know if you guys were were monitoring this. For me, I just took a step back and I thought, look at what has happened legislatedly, in 2022, we basically repealed Roe V Wade The Supreme Court also went after a concealed carry in New York and said that New York cannot legislate against concealed carry. which had pretty big ramifications with respect to gun laws. The consensus opinion is that we're going to repeal affirmative action in the next month or the u the Supreme Court is gonna do that. These are three pieces of an enormous change in the United States civil society that that has happened in a really small condensed period of time. So I have these thoughts on affirmative action, but my other thought is, like, It's incredible how conservatives have been able to organize and how disorganized, you know, progressive had been in order to create a a a counter maneuver against them. because this has been a systematic effort since Carl Rove literally wrote about it in the mid 2000 said, here's what we're gonna do. gonna raise a bunch of money. We're gonna redistrict everything. We're gonna get the state legislators on our side. We're gonna basically, you know, fund the federalist society. Chamath Palihapitiya (01:02:38): We're gonna and they did it. And in 20 years, they've they've created an enormous amount of change that I'm not sure all Americans agree with. Meanwhile, the progressives are just kinda like naval gazing at each other. Jason Calacanis (01:02:50): I mean and then you left off this past week, Chamath, that it seems like the gay marriage bill is gonna be put to a vote. And that they're not gonna be able to find? Chamath Palihapitiya (01:03:01): I didn't see that. What? Jason Calacanis (01:03:02): Yeah. Yeah. And Te Cruz said he's not gonna vote for it because it's attacking religious freedom. So We had talked on a previous episode, and I think Sachu said you didn't think gay marriage would come up. David Sacks (01:03:12): And -- Well, no. If I had to guess what the political gamesmanship is here, because they think it's not gonna pass, they wanna bring it up for a vote because it preserves the issue. It intensifies the wedge issue. When it looked like they had enough votes, they weren't gonna put it up for a vote. I don't know. I think it's a lot of gamesmanship here. Look. I think enough for politicians vote for this just to pass it. I don't think that Jason Calacanis (01:03:31): -- -- David Sacks (01:03:31): day. Yeah. Well, I I think there I think there's some issues with the way the bill is written in terms of maybe requiring religious organizations to perform gay marriages. I think that somebody should just make an amendment to clarify. That's not the case to solve this religious freedom issue. I think if that happened, then you get more Republicans on board or at least it wouldn't have an excuse. But yeah. Look. I would like to see enough Republicans vote take it off the issue. I don't think gay marriage is in at any risk of being overturned by the Stream Court. Remember, it was Gorsuch who wrote that opinion. So I think this is a scare tactic that Progressive are able to use to fundraise off, you know, their their base. Nonetheless, it'd be nice if enough Republicans would vote to canonize, you know, marriage equality so that wouldn't be able to do that. That's the smart play here for Republicans. Jason Calacanis (01:04:28): Yeah. It looks like by the way, breaking is in the Washington Post. Democrats have postponed the same sex marriage vote until after the midterms. So but, I mean, you can understand why people are going to be nervous about this after -- David Sacks (01:04:40): Well, maybe they can turn that because they wanna they wanna run on it. an issue. They wanna have if that's an issue. Jason Calacanis (01:04:45): Yeah. I mean, Republicans want to enforce it. The 70% of people are in favor. Right? 80%? David Sacks (01:04:49): If if Republicans wanna be smart, find 10 Republicans in the Senate who can support this, announce now that you're gonna support it. Come on, Republicans. Have a brain. don't let them change the issue from this economy that's spiraling out of control. I mean, the Republicans are clueless. Chamath Palihapitiya (01:05:08): What do you guys think is going on there? David Sacks (01:05:10): Oh -- Right. Yeah. Jason Calacanis (01:05:11): So FedEx stock has dropped 25 as much as 25% as we're taping this this Friedberg. after the CEO after a little I don't know if you saw the video I sent to the group chat, but Kramer Jim Kramer was kind of pushing him. Do you think this recession? Do you think this recession? He finally said, yes. I think there's a global recession. They missed on revenue, and they have cut their Predictions for next year severely, and the stocks weigh down. I think based on what I heard on CNBC from and reading some right before this breaking news is happening. Some people think this is 6040 market versus management. But either way, I think The Fed's interest rates are doing their job, and less packages are being shipped because people are Chamati, you would think, spending less money? And that was the whole point of this exercise was to slow the economy down, Freeport? Chamath Palihapitiya (01:06:01): I think this is a little bit of a head scratcher. This is a new CEO. So I think the game theory on this is that it made a lot of sense for him to reset expectations. I get that, and I think that that's a that's a reasonably smart thing to do when you're incoming leader of a very complicated organization that really is at the end of the bullwhip, so to speak, on on consumer demand. The problem is there's just so much conflicting data. You know, retail sales was pretty reasonable. You know, China actually looked a little bit stronger than people selected just this past week on some data that came out there. It looks like Europe is going to really draw a hard line and make sure that they spent whatever it takes to have enough energy so that their productivity doesn't fall off a cliff. All of those signals would say that, you know, we're not at the precipice of this kind of, like, cratering of demand. And then you have Powell basically saying, yeah. We're gonna go another 75, and, you know, we're gonna take rates to probably somewhere between 4 and 5%. So the the FedEx data point was pretty starkly in contrast with at least some of the data that we've seen over the last few weeks. So I don't know. It was a bit of a head scratcher. David Friedberg (01:07:14): They got 3 things working against him. Number Jason Calacanis (01:07:16): 1, David Friedberg (01:07:18): Amazon just continues to build out local delivery infrastructure at an incredible pace. At the end of 2020, Amazon was already 25% market share, which put them ahead of both FedEx and UPS. And FedEx has seen their market share decline for the past 8 or 9 years now. So that's kind of, you know, a a key point. Number 2 is people are just shipping less stuff, doing more stuff digitally. And number 3 is this recession impact where they obviously have key economic indicators that allow them to do a better job forecasting deliveries than most companies I would imagine, and so they can see order volume and trading volume and use that as a predictor for, you know, for what volume for shipping is gonna be in the future. And I would guess that all three continue to work against them. It's not like they have a lot of diversified diversification in the business, and other ways to expand out into. So you've got a key vertically integrated player, namely Amazon, that is investing heavily to replace whatever they use you for. I think as of a few years ago, Calacanis only, like, 2% or 3% of FedEx's revenue anyway. But still, I I would imagine Amazon is playing a a key role here. Chamath Palihapitiya (01:08:32): Your first your first comment to me is is now that sounds like Vimeo's credible explanation. And, you know, to blame a recession is sort of a little bit of hiding the cheese. It's probably fair to say that their lunches get eaten by Amazon. So I can understand why FedEx is under a lot of pressure because of that. But if you just compare it to just all the other data, it doesn't seem like this whole thing makes any sense. What you just said about competition makes to me a lot more sense. David Friedberg (01:08:59): And, yeah, competition with digital and Amazon. I mean, digital. Like, how much do you guys sign letters today versus esign? I mean, there's just a and and, you know, I'm giving an example. Maybe that's a Jason Calacanis (01:09:08): 1% David Friedberg (01:09:09): impact. I mean, there's probably a few more things. And these things all layer up -- Well, Jason Calacanis (01:09:12): they could be losing market share while still growing because EU Commerce is growing so violently in the world. But, Sachs, what do you think? David Sacks (01:09:21): My thing was going on here is that whatever the issues of FedEx and no matter how overstated these warnings may have been, I think they're directionally correct. He's saying that the world's headed for a global recession. And directionally, he appears to be right. I mean, things look really grim. We just had this inflation report that was much worse than what people were expecting. it was inflation was supposed to go down to 8.0%, and actually, it was 8.3%. That's why the stock market cratered a few days ago. It's like the worst day in the stock market. I think maybe all year or certainly since June. We're almost towards the June lows. Now this FedEx executive is saying we're headed for Global Recession. So it seems to me that that the economic news is just pretty grim here. And we're in a we're in slight inflation. The fat has to keep raising interest rates at the same time that we have persistent high chronic inflation. And you have to wonder, you know, I tweeted a few months ago that the White House economic adviser Brian Deese, he said that in this interview with CNN that the Biden Jason Calacanis (01:10:26): administration was willing to endure a global David Sacks (01:10:32): recession in order to keep Russia from controlling the Donbass region in Ukraine, well, mission accomplished. It looks like it's getting its wish. The administration's made some progress in the Donbas, but we are also having a global recession. Jason Calacanis (01:10:46): So -- What percentage of this what what percentage of the recession inflation has to do with the Russian invasion of Ukraine. I David Sacks (01:10:52): think it's meaningful. It's meaningful. We we know it's a huge exacerbator of all these problems. Jason Calacanis (01:10:57): -- if you were gonna put a number on David Sacks (01:10:59): Listen, I don't think the economy is gonna get better with the risk of War 3 hanging over our heads. How does that work? Jason Calacanis (01:11:04): Yeah. But what percent of the economic issue do you think is percentage wise impact. I don't think Chamath Palihapitiya (01:11:09): we're in Jason Calacanis (01:11:09): a -- Or it's not gonna be your answer. Yeah. Chamath Palihapitiya (01:11:10): I don't think we're in a recession yet. You know, retail sales is still quite strong. There's just a lot of signals that tell us that people are still consuming a lot of things. And that GDP is pretty reasonable and that jobs and wages you know, are pretty much, you know, quite full. So I think Saks, you are right, that we will be there because you could only bring rates up so high until you break things. David Sacks (01:11:33): Do you see there's a tweet by, I think, a Charles Schwab analyst today about that issue of wages? And she was tweeting off to find it that for the 2nd year in a row, we now have because of inflation, we now have real wage decreases. So you may be right about, like, where things stand today, but this is about the trajectory right now of the economy, and the trajectory is not good. Inflation is not coming down as fast as people were anticipating. It's worse than expected. You have the situation in Ukraine where, listen, we can all cheer on Ukranians for this counter offensive that appeared to be successful, but we are playing with fire over there. I mean, I I don't recall a time during the Cold War where we did anything remotely this risky. You have listen. You have American generals. American generals were taking credit. this counter offensive. Do you see this New York Times story where they talk about the inside moment of this Ukraine counter offensive? So you now have America. America is now giving Ukraine, more and more advanced weapons, okay, this sort of the the long range artillery. They're telling them where to point the weapons. They're giving them the intelligence for it. They're training them on how to use it. They've got commanders on the ground there. And and they actually are hand correcting the battle plans. The Ukrainians had a counteroffensive plan, the Americans said that's not good enough, and they rewrote it. So the Americans are now doing everything in this war except pulling the triggers and taking the bullets. And I don't wanna minimize the sacrifice the Ukrainians are making because they are dying in huge numbers. And you know, we can all respect and admire the sacrifice they're making for their own country. But this is a very risky strategy for the United States or America to be pursuing. I mean, we are we are basically playing with fire in we are, you know, this close to being at war with a nuclear arm in Russia. David Sacks (01:13:26): And we never came close to this type of behavior during the Cold War. And I don't understand what's changed so much that we have to take this kind of risk. Now at the beginning of this conflict, I said that I was open to arming the Ukrainians under cold war rules. Cold war rules meaning covertly like we did in Afghanistan. We now have multiple examples of administration boasting and taking credit taking credit for the counteroffensive, for the sinking of the Mossfa, for killing Russian generals, this seems very risky to me. Jason Calacanis (01:13:54): So, Saks, a a court premise of the discussions we've had here is that the United States screwed up the negotiation with Putin by not taking NATO off the table of Reuters reported that Putin rejected a Ukrainian peace deal at the start of the war, at the start of the war, Russian chief envoy on Ukraine toll Putin that a provisional deal with Kyiv had been struck, deal would have satisfied Russia's demand that Ukraine stay out of NATO 2 of 3 sources said the push to get a deal finalized occurred immediately after Russia's February 24th invasion Does that change any of your thinking on what's happened here in Putin's culpability? David Sacks (01:14:35): I I think it's a data point. You know? But let me explain why I don't think it's diss this positive. And by the way, I saw the article. Every neocon on Twitter was basically tweeting this trying to prove that this Jason Calacanis (01:14:45): Yeah. No. I would cc it on everybody's cc ing David Sacks (01:14:48): your -- -- Alzheimer analysis. Let me tell you why it does them. Okay? First of all, if you read the article closely, this offer did not come until after the invasion started. Okay? And we already knew Zelensky was publicly saying in the early weeks of the war that they were willing to take Ukraine off nato off the table. So this isn't that much news it happened after. The other key point here is that not only did it happen too late. But also, the offer did not come from the Americans. This is a really important point to understand about the Russian position on this. And I'm just saying this based on all their public pronouncements. The Russians made an ultimatum in December and then Lavrov negotiated with Lincoln in January. They were absolutely insistent that they they would accept nothing less but a written guarantee from Washington. Why is that? Well, the written guarantee was necessary because they've always claimed that James Baker Yukherd Gorbachev over, you know, German adjudication and and not 1 inch eastward. So they've always demanded a written assurance from the Americans. And the reason they wanted from America and not Europe is because they know that Europe are America's poodles. And Ukraine is a client state of America. So listen. They wanted a written guarantee from America before the war started. They never got that. Now if your point is, did Putin do everything he could to avoid this war? Absolutely not. I will absolutely grant you that. But we already knew that. The question is, did the US state department do everything they could to avoid this war? And my point is absolutely not. They should have taken this Ukraine issue off the table in writing before the invasion. Jason Calacanis (01:16:23): Got it. Okay. I mean, David Friedberg (01:16:23): I'm already talking about Ukraine. Jason Calacanis (01:16:25): No. No. I just It was major news, and it we have an obligation, I think, too. David Sacks (01:16:30): No. I'm glad to I'm glad to -- Yeah. Jason Calacanis (01:16:31): We we David Sacks (01:16:32): have an obligation to -- -- this. People are taking this one article and this one being David Friedberg (01:16:36): a point. There Jason Calacanis (01:16:37): I think it's gonna talk about David Sacks (01:16:39): it because listen. I've seen it all over Twitter that people take this one article and they're like, see There's nothing to this argument. Jason Calacanis (01:16:45): -- giving you the opportunity, sex. Now let me ask you another follow-up question for Friedberg. Freberg, the other follow-up people would like us to have made here is We predicted famine and massive disruption in food. We debated that here. You were pretty clear that this was gonna be or could be disastrous. it hasn't turned out to be disastrous yet. What's the update on, you know, fertilizer is shipping, not shipping? Are we gonna have global famine? Are we not gonna have global famine? What's the update there based on this conflict. David Friedberg (01:17:12): Yeah. We have a massive starvation problem. The UN told told everyone I mean, no one writes about this stuff because it's seemingly not interesting in mainstream media, which I don't freaking understand. but the UN thinks that Jason Calacanis (01:17:28): 345,000,000 David Friedberg (01:17:29): people now are incrementally marching towards starvation. And so I think they did this at their meeting yesterday because of the war in the Ukraine. So David Beasley, whom who I know well, he's the executive director of the UN World Food Program. He told the UN Security Council yesterday that 345,000,000 people are now facing acute food insecurity in the 82 countries where the UN operates. which is two and a half times the number of acutely food insecure people that existed before the pandemic hit. And so this is creating like we talked about these rippling effects in terms of initially, it was fertilizer cost, which means less food is being produced locally. Then there was the acute crisis of getting food out of the Ukraine. and now it's less planted acres and less yield getting out of those acres, which I you know, we said was gonna start to happen in the back half of this year. And if you look at the price, you know, a good proxy for this is the price for corn, we're at near record highs, you know, for the last couple of years. in terms of corn pricing, the 2023 futures pricing for next December for corn is at 620 a bushel. You know? And it kind of peaked out right around the middle part of the the Ukraine crisis in April at 6 73. So we're getting right back to that high point. And so this is a major problem that's brewing. And as I highlighted at the beginning of our talk today, which I show in the presentation for the the the LoVora transaction I talked about earlier, we have done an incredible job building a resilient food supply, a and excellent global supply chains to feed people around the world going back 30 years, and we've been able to steadily decrease the number of people that are food insecure or or facing famine, and famine in the UN definition is less than 1200 calories per day on average for a year. David Friedberg (01:19:29): And so we went from, like, a billion people around the world facing famine about 30 years ago and got that number all the way down to 600,000,000. And then in the last two and a half, three years, it's shot back up to 800,000,000, and now the UN thinks it's gonna shoot up even more. So we may even be retracing our way all the way back 30 years because of the crises that have enveloped the the the region around Ukraine, and the resulting impact on fertilizer availability, fertilizer pricing, and so on. And as I mentioned a few weeks ago, many ammonia fertilizer plants, which is nitrogen fertilizer, the main kind of component of fertilizer in Europe are being shut down because they run on natural gas. And so government agencies and the local producers are turning those plants off to make more natural gas available for heating. Jason Calacanis (01:20:18): would you describe this Friedberg as because we we are seeing the EU. You know, they remember they made that decision. David Friedberg (01:20:24): This is why this is why South America is so important, but sorry. Go ahead. Yeah. Jason Calacanis (01:20:27): No. It makes total sense. Would you describe this though? Because the EU was also at the same time the UN was, you know, highlighting this concerns. The EU was also praising the massive progress we made from the the Russia and the Ukraine Russia and Ukraine allowing fertilizer, allowing exports and this resiliency being built up. David Friedberg (01:20:44): So -- We got week moving. And then we got some fertilizer exports moving. Right. Jason Calacanis (01:20:48): So two steps forward. One step back would be how you describe this maybe? David Friedberg (01:20:51): Yeah. Nat gas prices are still elevated. Right? And and that gas availability in Europe is obviously significantly restricted down. Jason Calacanis (01:20:59): -- through it. We'll we get through it. Do you think we can we can manage this? Yeah. David Friedberg (01:21:02): Look. I don't know how many look. There's there's some number of people, some number of tens of millions, maybe hundreds of millions of people who are gonna starve between here and there. that otherwise weren't gonna be starving. By the way, there's always, you know, some hundreds of millions, as I mentioned, of people around the world that are starving under 1200 calories a day. and that number climbing some incremental amount, that's an incremental Jason Calacanis (01:21:23): 300, 400,000,000 David Friedberg (01:21:25): people that didn't need to starve. And that's a condition we're now gonna be facing. And so people like, hey, yeah, people are still eating. You know, there's still food around the world. We don't pay much attention to these 3rd world countries. We don't pay much attention to these underdeveloped nations because we don't have press coverage there. And when people are on the streets and unable to eat, It doesn't seem to make everyday mainstream media coverage, but it is happening, and statistically, it is a massive problem. Jason Calacanis (01:21:51): Yeah. Well, we're doing we're doing a great job covering Kanye and Kim. But, yeah, we may maybe get some reporters to to cover the people starving. David Friedberg (01:21:57): We've covered, and I appreciate you guys giving me a chance to talk about it because I think it's super important. Jason Calacanis (01:22:00): Yeah. I mean -- You know, David Friedberg (01:22:01): I think that's hard. I think Jason Calacanis (01:22:02): when this show is at its best, I think we're highlighting things that other people are ignoring. Speaker 3 (01:22:05): Listen, David Sacks (01:22:05): I just wanna say on this Ukraine situation, and this applies to this episode as well as all the previous ones. I don't wanna be right about this issue just like I'm sure Friedberg doesn't wanna be right about famine coming true. We don't want these things to happen. Okay. If I could choose an outcome right now, I would say it'd be great if the Russian army collapsed because of its morale problem, tucked its tail between its legs, went back to Moscow. And then the Ukrainians had the had the good sense to respect the rights of the Russian speakers living in the Donbas and Crimea. And this whole thing basically tamped down and basically was over. Okay? But look. I think there's an equal and opposite chance that that doesn't have That certainly could happen. Okay? But I think there's an equal and opposite chance that instead what happens is that we climb the escalatory ladder that Putin, I think we are backing him into a corner. Everybody says that he cannot survive the loss of this war, and yet we're not willing to give him an off ramp. So what choice does he have but to escalate. So what does that mean? It could mean a full mobilization of that country. It could mean they resort. They if they can't achieve their aims by conventional weapons, maybe they resort to unconventional weapons. We don't know. This seems like a highly volatile, risky situation. And I just think that, you know, we, the United States of America, need to be thinking very clearly about what is in our interest because all I see is a an identification we're so interested in helping and identifying with the Ukrainians that we've lost sight of an American interest that's separate and independent of Ukraine's desire for self determination. I can understand and respect their nationalism and their patriotism. But we are a different nation. We better think really carefully about our interests here. I I yeah. David Sacks (01:23:48): And I Jason Calacanis (01:23:48): think, David, sometimes you're misinterpreted as this is a partisan issue for you. You're a dumb. Chamath Palihapitiya (01:23:52): You're David the Dove. Jason Calacanis (01:23:54): I have dubbed you David the Dove. You are already done. Not a hawk. You want peace. David Sacks (01:23:59): Listen, I believe that if America is gonna risk war with a nuclear arm power, there better be a vital interest at stake. Otherwise, we should find every diplomatic off ramp we can. Jason Calacanis (01:24:09): So do you feel optimistic about our ability to navigate them off, the Ukraine situation, the war in Ukraine, famine, supply disruption, energy. Do you think we'll get through all this? Are you optimistic? Chamath Palihapitiya (01:24:23): I think that rates are gonna go somewhere between 4 and a half to Jason Calacanis (01:24:27): 5%. Chamath Palihapitiya (01:24:28): I think Stan Druckenmiller is right. And I've said this I I don't know. I'm now at nauseam, so I'll just keep saying it. But I think everybody has consistently been wrong. And they have wanted inflation to be a transitory phenomenon that goes away and they've been consistently wrong. Even in our group chat, we see these forecasts. They've been utterly consistently wrong. So rates are gonna go higher than people expect. It'll stay around longer than people want. This will have an impact to the economy. that it could that impact in 2024, 2025 will not be that great. So that's one thing. If you wanna focus on Ukraine for a second, there's something that I think we should focus on, which I read this interesting article about Russian mothers. And, you know, in the 19 eighties when Russia was at war with Afghanistan, there were these bodies that were sent home to Russia. And these mothers got very, very upset, and they protested. And then in, you know, 2000 early 2000, I think, there was there was a nuclear submarine that basically sank got shot and sank. and then Russian mothers protested in the Chechen War. They are a group of individuals in Russia that have enormous organizing power it turns out. And they, you know, they they really can tell what the real temperature is on the ground. What Putin has done so far is that he's largely recruited people from you know, the Spartan communities inside of Central Russia and used third party contractors. So he's minimized the risk of the real cohort of the Russian population who will really stand, you know, fervently against what's going on. So until you see that happening, Those guys have a long way to go. And I think that this thing is gonna drag on for a really long time. Jason Calacanis (01:26:29): So it's a paid army. Therefore, it's obscuring the impact on actual citizens in Russia? Chamath Palihapitiya (01:26:34): It's half paid, but the other half are from places where they're organizing power is limited. And I think that that was proven you know, calculation seeing what has happened before. Again, sort of like the tip of the spear are these Russian mothers. And we're not seeing that. So that means that the ability for him to manage perception inside of Russia is pretty apparently pretty good. Yeah. Yeah. Jason Calacanis (01:26:59): Crater than people expected. Chamath Palihapitiya (01:27:00): Yeah. Crater than people expected. So this is gonna go on for as long for much longer than people think. So I would just prepare for this inevitable outcome and just kind of, you know, manage Jason Calacanis (01:27:13): -- Another year of slogging it through. A choppy waters might be one way to look at this. And -- I Chamath Palihapitiya (01:27:18): think that's a very good way I think we're in a very Volley choppy market for the foreseeable future. Jason Calacanis (01:27:24): Yeah. And the therein lies some opportunities. and also maybe some discipline in various markets. One thing to just keep in mind where most people feel these rate hikes is in the 30 year fixed mortgage. Right? This is where most Americans are gonna feel it. And if you look at the chart, you know, like, this is a big jump up from our absolutely free money environment that most Americans were feeling doing, you know you know what what do they call it when you take out equity on your mortgage, like a second mortgage or a credit line? Credit line? Homeowner credit. Yeah. People were, you know, experiencing a lot of free money and upgrading pitches and taking money out of their homes, yadayada. But when you look at it historically, you know, even at 6% or even if it goes to 7% for mortgages, It it's a lot less than we ex our parents experienced than we experienced for the first half of our adult lives. So I think it's surmountable. And this number you don't think is gonna get up to above 10%, right, the 30 year fixed? You don't see that happening. So I think it's manageable, which is gonna be choppy. Alright. listen Sachs. Didn't get to promote it, but he has a wonderful film at the Toronto film festival about Dolly, and he is doing an awesome Dolly experience with the AI that paints pictures. And so we're just going to insert into the end of the program. The beautiful work he's doing there in his Dolly film is supposed to be Lint. It's a second film David is producing after thank you for smoking. So congratulations to our own little Scorsese for the Sultan of Science, The Dictator, And the David the dove, I'm the world's greatest moderator, Jason Calacanis, and we'll see you next time. Bye bye. Chamath Palihapitiya (01:28:59): Love you, guys. Bye bye. Speaker 6 (01:29:01): Alright. So I'm at the Dolly land exhibit here at the Saint Regis. The Saint Regis Hotel is a very important hotel in Dolly's life. We actually live in the Penthouse of the St. Regis in New York. And the St. Regis Hotel has very graciously agreed to host this exhibition for us, and This exhibition is it's basically a rendering of a Dolly studio or what Dolly studio might have looked like. and those works of art are actually generated by GPT 3, the so called DALL E engine. So thanks to the OpenAI team and same Altman for giving us access to doll e, d a l l dash e, And so fans can just come here, and they can use these tablets to enter, you know, what art they wanna create. They can just enter terms. and the, you know, the engine will spit out part that is may not obviously by Salvador Dali, but it's in the style of Salvador Dolly. So I thought this is a very cool way to commemorate the film. We are premiering at the Toronto International Film Festival. this weekend. This is an independent movie I've had in development for something, like, over a decade and the great actor Academy Award winning Doctor. Bank Kingsley plays Dolly and gives a phenomenal performance, so we're excited to premiere this movie. Show it to the world for the first time this weekend. Alright. Thanks for watching. Bye. Speaker 3 (01:30:32): We'll let your winners ride. Jason Calacanis (01:30:35): Rainman, David Sachs. And I said -- We open source it Speaker 3 (01:30:41): to the fans, and they've just gone crazy with it. Jason Calacanis (01:30:46): besties are my dog kicking in. David Friedberg (01:30:56): I'm missing your driveway. Oh, man. David Sacks (01:31:01): Am I Chamath Palihapitiya (01:31:01): out of the casual meat Jason Calacanis (01:31:03): we should all just get a room and just have one big huge ordeal because they're all just useless. It's like this, like, sexual tension that we just need to release somehow. David Friedberg (01:31:11): What? You're BP. David Sacks (01:31:13): What? You're a thief. Jason Calacanis (01:31:15): What what? Good deal. Where did you get Murphy's arms out of that?