All-In with Chamath, Jason, Sacks & Friedberg - E19 Breaking down Robinhood's GameStop decision Why did it happen and how can it be prevented in the future

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Hey everybody welcome to the all in podcast it

was a slow news week. So we decided we’d give you a special

episode. We’re going to go around the horn with our special

picks. We’re each going to pick three picks everybody. We’re

going to pick our favorite recipe, our favorite new hobby

and our favorite streaming guilty pleasure, because there

was no news with us today. The dictator Chamath Palihapitiya

Rain Man David Sachs with his new track from Young Spielberg

just ripping across the charts. Young Spielberg at it again this

time with a track focused on the rain man himself and the

queen of quinoa, who everybody says we should upgrade to the

king of quinoa.

That’s so sexist. Why is that an upgrade? The queen of quinoa is

better. I don’t know people just felt I was being I don’t know

how people could say that anointing him as queen would be

derogatory. I think these people are not woke and they need to be


Jason, here you go again, making a lot of assumptions about

people’s pronouns. Yeah.

They queen of quinoa.

I take no offense. I take no offense to your insults to me.

And today I’m having the emotion of excitement and I am ready for

the conversation.

Good. We got the firmware upgraded. Alright, so I think we

might as well start with I don’t know if you guys caught this,

but there’s a red subreddit called Wall Street Badger. And

called Wall Street bets. And what they do on Wall Street bets

is they find angles and a thesis and then they bet on a stock,

the stock they picked for the past couple of months has been

GameStop. And boy, actually, Jason, hold on a second. Ram

is yes, that’s, that’s, that’s not true. So do you I had

actually a guy on my team put together two really important

documents, and I’m just going to read them because it’s full of

so much interesting shit. And then we can talk about where

are these documents from? You’re saying from the Wall Street

bets? No, no, no, no, I had a guy go in one of my team members,

one of my colleagues and go and summarize the entire saga from

the beginning. And then we can talk about the the corporatist

scumbags at Robin Hood and other fucking people over. So let’s

let’s do that. Okay.

This is why they call him the dictator.

Let’s start with your bias. And no, no, shut up. boring.

Document. Go. You’re an idiot, because you you just want to

defend people because you blindly stumbled into a fucking

trade that actually made a little money. Lo and behold, you

actually invested in a company that literally they got on

television yesterday, and they fucking lied to Americans right

to their face. This is a company that was insolvent, because now

let’s just put a pin in the following data point, which I

believe to be true. I know more about this than you do, because

I live in these markets. Okay, so I understand what it means to

be putting on trades to being short to being gamma squeezed to

have longs to do all of this risk management. You’re an early

stage investor. So I know the intricacies of this stuff and

what’s happening in your this company was insolvent. They did

not have the capital requirements to post the margin

that was being asked of them by their partners. And so this was

a platform level decision to ban and block people from trading

securities. It costs individuals hundreds of millions, probably

billions, maybe even 10s of billions and these motherfuckers

should go to jail. Now let me give you the timeline before we

get into that. June 2019. In June of 2019, a Wall Street bets

user named deep fucking value began buying long dated January

21 calls. What that means is, in June of 19, this person was

betting that the stock would go up by January of 2021. He spent

$50,000, which by the way, today is worth about $25 million. By

the way, we should just highlight that there are forums

where individuals that are trading stocks talk to each

other and share tips and promote things to one another. That’s

where this was taking place. Yeah. And by the way, those

forums exist in the professional organized world to amongst hedge

funds. You know, I’ve been invited to idea dinners where we

all get together and we talk about the ideas that we have and

we’re all expected to do fundamental analysis. But some

of those ideas are actually momentum driven ideas. And a lot

of the biggest dislocations in the market, just as a setup

here, have been because of momentum driven trading by

organized capital. Okay, so we’ve we’ve been stuck with this

for a while. So, so this guy deep fucking value post this and

every month since he’s posted a screenshot of his position and

he’s titled it GME YOLO update. August 22nd of 2019. Michael

Burry, who is this guy famous from the big short, who’s the

guy that caught the mortgage thing. He discloses a 3% position

in the company. And he highlights that 90% 90% of Game

Stops 5700 stores are free cash flow positive. That’s like

pretty good. He urges a buyback and he notes that the company

was trading at or near net cash levels. So he’s making a deep

value oriented fundamental thesis as well.

Come on. I think also it’s worth saying what GameStop is

because even my wife asked me what the hell is GameStop last

night. GameStop is a retail store where people buy video

games. I used to go to the mall all the time and consoles and

headphones and other stuff.

And they’ll buy back your old games.

And so the stock got beat up over the last couple years as

people stopped going to malls and stopped buying stuff in

stores, and everyone thought that the company was going to

die. And so these guys observed that maybe there’s real value in

this company and making money

digital downloads are

no one buys DVD roms anymore or anything like that. So

and and the chewy founder who is very successful at e commerce

came in to run the company.

That’s the best part of the story. So June 19 was the

original post August 22 of 19. Michael Burry comes in and says

I’m long. Then a year later, August 31 of 2020. Ryan Cohen,

who’s the founder of chewy, takes an almost 10% position in

GameStop. About two or three weeks later, on September 19 of

last year, a member of Wall Street bets writes a post on

GameStop. And he notes that GameStop has 120% short

interest, which I’ll get to in a second. So hold on, what what

does that mean? 120% short interest. And he defends the

company as a result of a few things. He says number one,

there’s a new console cycle coming just as Jason mentioned.

Number two, consoles are are not going all digital immediately.

GameStop loyalty programs have 55 million users, they have a

strong balance sheet, Ryan Cohen just bought a stake. And the

shorts were underwater and would be forced to cover if the stock

ran up. He predicted the convergence of all these factors

would lead to a big squeeze. Now November 16 of 2020. Ryan

Cohen writes a letter to the GameStop board. And he urges the

company to conduct a strategic review and share a credible plan

to capture market share in the gaming industry. He said that

they need to evolve into a technology company that delights

gamers and delivers exceptional digital experiences. I’m just

quoting here, not remain a video game retailer that

overprioritizes its brick and mortar footprint, and stumbles

around the online ecosystem. November of 2020. Someone in

Wall Street bets highlights that a hedge fund called Melvin

Capital was going long GameStop puts what does that mean that

they are synthetically shorting the stock by buying the right to

sell it at a different price in the future. Okay. And that they

had been long that position for more than four years. So all the

way going back to 2016. Fast forward to now 2021 of this

year, January of 2021. GameStop strikes an agreement with Ryan

Cohen and adds him to the board of directors and gives two of

his affiliates, his former COO and CFO of Chewy also to board

seats. They collectively, you know, bring their experience in

e commerce, online marketing, finance and strap planning. The

stock goes up 13% on that day and closes at about 20 bucks a

share. One day later. And then over the next day after that,

so for January 12 and 13 of 2021. There’s a ton of activity

around GameStop in Wall Street bets, and now in discord, and in

stock twits, claiming that Ryan Cohen is going to be the savior.

And then by January 14. So three days later, the stock closes at

40 bucks. So now it’s up 125%. So now comes to set up the pros

versus the joes. From January 12 to today, there has basically

been a battle by institutional investors on one side, shorting

GameStop and retail investors on the other, buying the stock and

also buying the right to buy the stock or what’s called call

options. And this is what has created this crazy nonsense

we’ve seen. So on the institutional side, after you

know, retail drives the stock up, the institutional guys are

like, Hey, wait a minute, you know, Ryan Cohen’s an idiot. You

know, this company is fucked, fuck these guys, they have too

many, you know, cyclical and secular tailwinds. And they

become so massively short, that the infrastructure that’s

supposed to even count all the shares can’t keep up. And now

they are short more than the actual number of shares that

actually exist. So now they’re 140% short. The joes retail,

they start to aggressively purchase all these cobble

options. And on January 13, and 14, this price keeps ticking up.

Then a bunch of quant funds and momentum hedge funds notice all

this activity. And they also participate on the long side.

And then over the past seven trading days, we have traded

over $100 billion of stock in GameStop, which is well in

excess of what retail can support. So here’s what’s crazy

to realize a bunch of value oriented, non computerized, non

quantitative hedge funds short, retail notices a dislocation

initially fundamentally, but then momentum oriented buys.

Other hedge funds realize also by and this is what’s created

this massive short squeeze. On January 19. Citroen Research, a

research firm that basically tries to, you know, find shorts

in the market announces that they were short GameStop, and

they gave five reasons why it should go to 20 bucks. The stock

was at 3550 on January 19. Then over the next two days, GameStop

calls hit an all time high. And it runs a two day rally of

almost 70%. And this is what really starts what’s called a

gamma squeeze. Okay, which is what we saw in the first part of

this week. So January 25. Ken Griffin, Stevie Cohen, they

inject almost $3 billion into Melvin Capital, the firm that

was short, 2 billion from Citadel and 750 from from Stevie

Cohen. Stevie Cohen had a billion in it from before. And

then now all of a sudden, the squeeze keeps happening, the

squeeze keeps happening. And then it starts to spill over to

the rest of the market. Now all these hedge funds, these

original hedge funds, they are getting called by the bank

saying, Hey, wait a minute, you’ve run over your collateral

limits, you need to post more collateral, we need more money

in your bank accounts. So now not only do they have to cover

GameStop, they have to cover all their other shorts. So those go

crazy. And they have to sell their longs. So now they’re

selling, you know, Facebook, Netflix, Alibaba, so those

things are going down. That accordion is what’s been

happening in the market in the last couple of days. And then

the coup de gras is what happened on January 28 of 2021.

brokerage firms, and this is where Jason, we should talk

about this, like Robinhood and interactive brokers, because in

fairness, it wasn’t just Robinhood prevented their users

from buying GameStop and a handful of other stocks, they

were only able to sell, which resulted in such a one way

pressure, it caused a 44% sell off yesterday. Now, that’s been

reversed today. And so what it speaks to is a bunch of

questions, there are questions as to whether or not this was

mandated by the platforms or the regulators. Given the fact

that it didn’t impact all the brokerage accounts, it was a

platform level decision. So some organizations like Robinhood

banded, some organizations did not. And it could be that some

of these platforms that banded is likely because and this is

where we get to the insolvency question, didn’t have enough

margin. And so they knew that if they open the doors, there would

be a run on the bank, and there would be a run on Robinhood. And

that’s why they basically, I believe, had to stop allowing

people to trade. And it just shows how, how fragile the whole

system is. The last thing I’ll say, and then we can talk about

this is, how does Robinhood make money, which I think is also

important to understand this Robinhood makes money through a

mechanism that’s called payment for order flow. So they don’t

make money from consumers, right? What they do is they

watch and monitor your orders, they create a data file about

that. And they give it to these prime brokerage, prime

brokerage institutions like Citadel milliseconds before you

do the trade. What that allows Citadel to do is if they see a

lot of people buying milliseconds before you buy,

they can buy. And that allows them to make money. So to be

clear, Citadel is responsible for 47% of all the payment for

order flow volume, they paid Robinhood almost $60 million in

the third quarter. Okay. Plus another, I think, you know,

seven and a half million for S&P 500 stocks and 31 million for

non S&P 500 stocks. They paid them almost 100 million in the

quarter or a $400 million run rate. So if we had to summarize

all of this in a nutshell, that’s what we know. We know

that it started out as people debating the true fundamental

value of GameStop. And it morphed into a momentum trade,

where a bunch of folks got dogmatic about a short, a bunch

of folks got dogmatic about being long, and belongs one. And

in the middle, what happened was a bunch of firms basically

decided at some point to gate the ability for people to

transact in all of this, which I think caused a lot of economic

disruption. And that was because they didn’t have the margin

requirements. And I think it’s because they were insolvent, i.e

Robinhood. Jason, over to you.

Okay, I think we probably agree on a lot of things here. Thank

you for the concise. So we agree that Wall Street bets and retail

investors are incredibly powerful now. And we agree that

that’s a good thing. We also probably agree that there are

shenanigans going on with shorting of stocks, ie 120% or

130% short. And we agree, I think that some of these hedge

funds do manipulate the markets with these, we all also agree

that it’s unfortunate that in order to stay solvent,

Robinhood, apparently, if this is the information, we don’t

have complete information right now. So the thing I do think

that you’re being tremendously unfair about, and I’ll try not

to make it personal to mop is that you’ve been uncouth, and

you’re attacking people without with partial information. I’ll

let you respond to that in a minute. And I think we agree

that Robinhood is responsible. Robinhood is responsible for

this revolution in retail trading, they created the

platform, and they created the innovation that got millennials

to en masse, embrace trading stocks, how did they do it, they

figured out a clever innovation of how to make it free and

friction free. They did that because they did this selling of

the data in the order flow. Okay, we can debate whether that

is fair or not. But Facebook did the same thing, they created a

data business, they provided amazing products and services

that you yourself built for five years and made a billion dollars

off of, in order to make it free for consumers. Now, there are

unintended consequences of any company at scale, whether it’s

Uber, Robinhood, Tesla, etc. And they will all have to weather

these storms. And I think that there are pieces of information

that you do not have trauma. And for you to say that they’re

criminal, and for you to say they’re scumbags, and to act

this way is, I think, unprofessional and does you a

disservice and does your argument a disservice. And you

did this as well with Uber, another one of my investments,

and that company weather the storm, and they’ve done great

things in the world. And they and I’m very proud of that.

And I will be very proud of what I believe that

CEO and they brought in Dara who cleaned it up.

Oh, agreed, agreed, but they got there. And so I believe what

happens. So what do you know that I don’t know? Well, I

haven’t talked to Vlad. I saw what he said about Vlad. He

lied on. He lied on television. I don’t believe he lied. I think

it’s not on Fox. Where did he not? What is the lie? Well,


he was confronted, he was confronted about whether there

was a liquidity crisis. And he said to their face, no, that is

not true.

I think this is being misinterpreted. And there’ll be

a clarification that’ll car. I think because they were able to

draw down 600 million, and because they were able to take

down a billion dollar investment from the top investors in the

world, that they resolved their liquidity problem. Nobody in

history has ever created this many retail investors, then

Robin Hood, they are responsible for the movement, when they

pitched me the company, they wanted to create this

revolution. It is paradoxical that they are now the enemies of

the revolution because they actually created enable this.

And I and they have been number one in the app store since this

whole fiasco starting

nothing you’re saying convinces me that this is the they are the

Lehman Brothers or Bear Stearns of 2008. To me,

they will not be they will get through this. And there has this

is an unprecedented black swan event. I think we would all

agree. Nobody has

exactly what Lehman and bear said, that is exactly what they

said. And this they will, I believe Robin Hood will write it

out, because they throttle the number of people coming to

platform. Las Vegas is not designed for everybody in

America to come to Las Vegas in the same weekend. Will you

happen? Will you admit that, that the 10s of millions of

people that had their hard earned money inside of Robin

Hood was prevented from participating in trades that

could have been executed other places because of an arbitrary

decision by Robin Hood that they added was an arbitrary, they

have to stay insolvent. How is that? How is that? Jason, Jason,

do you

Jason, that’s me telling you that they were insolvent. That’s

not them saying it. This is what I’m saying right now.

Communication was not perfect. I’ll agree. The communication

was not perfect. They should have just said we had no choice

but to stop this or we would have been insolvent. We cannot

take this many trades that but is that what we call lies when

people’s money gets fucked over? Just it’s inconvenient. Let me

just say one thing. I’m going to enter interject your your your

vigorous debate. The the important thing I think to note

is Robin Hood makes money effectively, as Chamath pointed

out, through arbitrage of pricing in the markets, and by

providing leverage to their clients. So the clients can

trade beyond their means. I used to be an investor in a forex

trading company was the largest forex trading platform in the

world for retail investors. And 60% of those accounts went

bankrupt over time. So there was a lifetime value on an account

because the customer would come in, they trade foreign exchange

rates up and down, they would ultimately just get burnt up.

And that was it. Robin Hood makes money when the market is

non volatile, when there isn’t a lot of swings. Suddenly, when

there is a swing, and that’s how they’re able to provide their

free pricing to people, they’re making a spread. But suddenly,

when there is a swing, and the spread start to widen, they are

actually exposed to losing money. So Jason, it’s true what

Chamath is saying, like they did face a liquidity crisis, to some

extent, that’s why they agreed. But it was a function of their

business model, right? Their business model provides great

benefit and value in some extent, during good times, but

when times get bad, it’s like, oh, shit, things are at risk.

And that’s very similar to kind of the Lehman and, you know, I

don’t disagree. I don’t disagree. I think this is an

unprecedented situation with a number of participants. It

reminds me of surge pricing with Uber during snowstorms. And that

also was an unintended thing that you know, who knew that it

would go up to $400 to take a ride. And that’s something that

companies will be faced with, and they will have to then

adjust, and then make it work. And I think, you know, in the

case of Robin Hood, they should have just came up on Wednesday

and said, we can’t take any more orders, we can’t take any more

new customers, we’re pausing signups, you’ll be on a

waitlist, because we will be insolvent if you guys make any

more trades. And that would have I don’t know, I agree with that.

Okay, so Jason, let me just explain the mechanical rookie

Jason, it’s beyond poor communication. People were

blocked out of their accounts, like there was hundreds of

incalculable amounts of economic loss.

That was gonna wind up being true, because all these trades

are occurring now. And the stock is rock is a rocket ship. Who’s

to say no, no, I mean, look, I mean, Jason, aren’t the shorts

all covered by now? That’s what they’ve been saying. That’s the

NBC. No, there are still people. How do you know how many people

are short right now? How many shares?

Because it’s the primes put the data together, and they send it

to us.

Do you have it handy? Because I’ve been looking for it online.

And they said 10 times the number of shares short I’ve

traded hands in the last 10 days, or five. I mean, Jason, I

don’t have, I don’t have it literally in front of me, but I

could get it in the next. Yeah, just text one of your people.

You got all these researchers there. Good.

Okay, look, I’m going to try and thread the needle here. I think

J Cal is right that we shouldn’t impugn people’s motives without

having all the information. And furthermore, you know, building

these rapidly scaling startups is really tough. And it could

have just been, you know, a function of, you know, not

knowing how to deal with unprecedented growing pain. So I

don’t think I don’t want to be too judgmental.

Can I just stop you there?

Yeah, yeah.

No, but that’s not what no, but David, that’s not can I but you

guys are not being accurate. They have known for decades for

years, sorry, dears, how this business work when somebody buys

a call option, they are legally obligated when they send that

order through, they have to post margin on behalf of that

person. So they saw this building. This happened in March

of 2020. They went through this liquidity crisis, they’ve had to

draw credit lines before they saw it building in the system.

So this was nothing except negligence.

Yeah, so so I was about to, I hadn’t gotten to the point where

I was about to agree with you, Chamath. I mean, look, all I’m

saying is, even if it was negligence, I’m not sure I would

impugn all the motives to them. That’s all I’m saying that I’m

trying to find some common ground with Jake on that point.

But where I totally agree with you, Chamath, is with respect to

the effects of their decision. I mean, the effects of that

decision they made to stop trading, and specifically, they

didn’t stop people from selling, they only stop people from

buying. So they shut down one side of the trade. And the

effect of that was we had these hedge funds from Wall Street,

they were on the ropes, right? I mean, let’s discuss who these

guys are. These are the apex predators of Wall Street. They

are in the business of shorting companies to destroy them. I

mean, that is their business model. And they are not

academic traders, okay, who are just speculating on outcome,

they engineer the outcome, right? Look at their tactics,

just watch the show billions, right? They hire PR people, they

hire private investigators, they’re participating on these

message boards, spreading disinformation. Look at the the

year of hell that Elon went went through, right? They tried to

destroy like five years. Yeah, yeah, exactly. They tried to

destroy companies to engineer that outcome, they create

nothing, they’re in the business of destruction. Now, the

beautiful thing is you had these Reddit kids, these pirates who

published this manifesto, right on Reddit, basically being the

heirs to occupy Wall Street, they recognize look, occupying

like, like a physical space does nothing to these guys, we are

going to hurt them where it counts in their pocketbook, we

are going to get together. And we’re going to basically create

a trade mob that’s even bigger than their cartel. And they did

they got 2.7 million people taking the other side of this

trade. And then when the hedge funds doubled down, they said,

fuck you, we’re gonna double we’re gonna triple down. And the

guy on Reddit said, Listen, paraphrasing john Maynard Keynes

said, we can be retarded longer than you can be solvent. And

they were winning. That was what they said, right. And they were

winning the trade. Okay. And Melvin was dead busted. And

Citron was on its way to being dead busted. And they had to go

to Big Papa Stevie Cohn, okay. And Ken Griffin to get to get

their rebias to buy the rebias to get back into the game. Okay.

And then they had these guys on the ropes, they had them felted.

Okay. And then what happens just at the moment where they’re

gonna like, basically bust them out of the game for good. Robin

Hood shuts down the buy side of the trade. And so what does that

do? It gives these hedge funds time to regroup to unspool the

trade to reposition and save themselves. And to get out of

the trade, if they want to get out of the trade, you can never

take that 24 hour time period back, no matter what Robin Hood

does now. And so I agree with your mouth. This was like, don’t

you? It was tremendous, David, on that point, I think it’s, I

am in agreement that the hedge funds deserve to get their asses

kicked. 100%. I also, as I said, we don’t have complete

information of why, you know, Robin Hood had to pause trading

and the other platforms. And it was like five platforms, by the

way, that had to stop or else they would be insolvent. Because

nothing like this has ever happened before. This is a run

that nobody’s ever seen. And now we’re back in the game. And

don’t you think all this attention, then drives more

people to buy GameStop, which is what’s happening today. And that

they’re still going to get crushed, because it’s still

going to have to cover I mean,

we look, I don’t like like I said, look, where I agree with

you is I think the consequences of this decision by Robin Hood

were I mean, they were really bad, right? And we finally had

these shorts on the ropes where they deserve to be. Finally,

they’re getting a taste of their own medicine. Yes. And it was

really bad to pull the plug on on the I wish they wish they

didn’t have to, I’m sure. Okay, exactly. And I don’t know what

went into that decision. But here’s the thing that I think

kind of stinks about it, is the point that Chamath is making

about who is doing the the trade execution for Robin Hood, those

trades are flowing to Citadel. Well, that’s part of it. That’s

part of it. But 4047%. But who is now on the short side of the

trade, Citadel went in and bailed out Melvin and Citron.

And so they’re on both sides of this trade. Now, how does that

make sense? Well, Citadel? Yeah, but I mean, what I would like to

know specifically, okay, is did anybody from Citadel reach out

and touch Robin Hood? Did anybody at Citadel put in the

fix and saying Robin Hood? Of course, that’s a valid question.

valid. We’re gonna we’re gonna cut you off. You know, unless

you freeze out the buy side. Now look, 99% chance that didn’t

happen. I don’t know. But that is a legitimate question. We

need to actually can I can I just tell you the the question

is important, but the way that you phrase it is you call them

and you basically say, Listen, you need to post $500 million

of margin. Why? Oh, well, these trades, you know what, we’re

going to arbitrarily change the margin requirements. Okay. Oh,

hey, you need to raise a you need to post. So then what they

did was they pulled all the credit lines. Okay, they post

margin trades are still happening like crazy, right? All

these people are buying GameStop calls, they have to go. Because

look, when you buy a call when you as a user with David

Friedberg, Keenwah buys a call, Robin Hood becomes synthetically

shorted. Right? Robin Hood doesn’t have the share to sell

you, but it’s giving it to you. So they’re technically short,

they got to go buy it. Okay. So this is what creates this

dynamic where Robin Hood knew they knew every second of every

moment, what was happening, and more importantly, what could

happen. At a minimum, it’s negligence. And at a maximum,

it’s the fix.

Well, it was and it was and it was fine to do it before the

market started to swing volatile, right? And so when the

market wasn’t high volume, and when it wasn’t volatile, it

didn’t matter because they had appropriate levels of surplus

capital or statutory capital or whatever the definition is in

this market, to be able to cover the quote unquote, VAR or the

value at risk of their portfolio of their customers worst case

outcome. But as soon as that spiked, as soon as the VAR

spiked, they had to go get more capital. And so what do you do

if you’re the manager of Robin Hood in that situation where

your clients who’ve been making you a bunch of money by trading

stocks over the last couple of years, suddenly they all get

themselves in a bind where the VAR on the portfolio is more

than the cash Robin Hood has to clear assuming all these people

go bankrupt. That’s where Robin Hood had to scramble. And so in

that circumstance, they drew down debt, and they had to go

get a billion dollars of equity. But if you guys were running

that business, and I’m not speaking for Robin Hood’s, I’m

not making the case for Robin Hood, but what would you guys

have done in that circumstance? You know, suddenly all your and

by the way, I’m saying they created the problem for

themselves, because they allowed people to trade on margin with

low bank with low account balances and volatile stocks

prior to this, it got away from them.

And this way, you can’t, you cannot run a business like that

and be selective and arbitrary. You can’t say some stocks on

certain days, some stocks on other days, some options over

here, some puts over there. That means you’re a fucking moron.

And what do you do on Tuesday or Wednesday, when all of a

sudden, you’re not Tuesday or Wednesday, this, if you were a

reasonable manager of a business like this, this conversation

would have been happening at a board meeting. I quarters ago,

hold on a second, let me finish, please. Okay. It needs to

happen quarters ago. And in quarters ago, what they would

have said is, hey, guys, we’ve run some scenario analyses.

We’ve done some sensitivity analyses. Here’s what happens if

all of these things can go against us. That’s a typical

stress test that a bank has to do, right? When you’re a

structurally important bank, you have legislation that

forces you to be under these conditions where you have to

make sure that you can understand some of these


And then you have to have any trading entity or insurance

company, they all have to have that analysis of what’s the

worst case scenario, and how do you plan for it?

And you have to you and by the way, coming out of 2008, we

actually legislated that we needed to have these two and

three sigma, you know, event scenario planning, and you

needed to have proper credit. So here’s what happened really.

Number one, it was under equitized, right at a minimum,

the business was massively relative to what they were

letting their customers do. Exactly. And that’s really

important, because the point is, they let people trade with high

margin, and they let people trade in volatile stocks. And it

was working until not just stocks, but options, which is

what which is what creates the real spin up the feedback loop

that blows this whole thing up.

And then number two is they don’t know what they’re doing.

I think one thing that’s really important, I just want to say

this, we should stop pretending that trading in stocks is

investing in businesses. And this is something we’ve said for

a long time on Wall Street, but stocks, shorting margin and

derivatives, those, those four things no longer look like what

the capital markets were originally set up for, which was

to help capitalize businesses and allow people to exit their

investment and helping to capitalize that business to

another investor that wants to come along, it has effectively

become a synthetic casino, or a synthetic gambling model that

lets people trade things up and down. And this has been the

mainstay of Wall Street for the last couple of decades. And as

you pointed out, Saks, it really is a leech on the system,

because the amount of money that trading firms and traders and

hedge funds make doing this, ultimately is taking away from

capital that could be invested in actual businesses that could

drive job growth, drive economic prosperity, drive innovation. And

the volatility that I think we’ve seen is the ultimate

feedback loop that emerges from when you allow a casino to

operate that sits under the guise of being business capital

and investing in businesses. It’s not. I’ll give you guys a

statistic. I downloaded the data from CBOE that analyzes

how much volume was traded across all the equity markets

last year in the US. Stocks traded a total volume last year,

you guys ready for this $121 trillion of notional across 2.7

trillion trades. Do you think that $121 trillion of notional

equity value trading provided capital to businesses anywhere

close to 1% of that total amount of trading volume? It

really is a synthetic instrument that allows people to

participate in I bet that something is going to go up and

I bet that something is going to go down with other people of an

of a similar ilk. And one person makes money and one person loses

money. And at the end of the day, the underlying business

entity doesn’t benefit whatsoever. And you see it when

shorts go against businesses like happened with Elon and

Tesla. And you see it when derivatives like CDOs blow up

the fucking housing market, where people basically trade

these derivatives that sit on top of housing and that capital

did not find its way into homes to help people buy homes, it

ultimately led to the collapse of the only the only reason that

Lehman and Bear Stearns was shut down was in 2007 and eight when

they were in a liquidity crunch in the same thing. And they

basically had all these trades blowing up against them. And

they couldn’t collateralize them was that the people on the other

side were hedge funds. And that’s why you know, they were

put into the Fed. And that’s why we were able to basically like,

you know, come out relatively unscathed. And but I mean, by

relatively unscathed is like a global calamity. The tragedy of

this is that this is the tragedy of the commons. It’s like, you

know, there is no organization of people that can say, Hey,

listen, I’m really rich and wealthy. And what happened here

was wrong, even though it’s probably on the same scale. And

so everybody that was a participant in it is, in my

opinion, I think is guilty of all of this, they were, they

were complicit in the robbing of America.

Do you think calls and puts should and shorting should be

allowed? Should those markets exist?

I do have a sense of common sense solutions. And let me let

me kind of give you them. And then you can tell me what you

think. So the first is we need to use modern technology. Let’s

just start with that, right to ensure that, you know, one share

of stock, right, isn’t loaned out multiple times so that you

can’t have a scenario where you have more than 100%.

That’s a no brainer, right?

That’s a no brainer.

So you still support shorting some up?

Yeah, let me let me just go through the list. And then you

can tell me what you think. If if high frequency firms can

trade 10s of millions of shares per day, there’s no reason why

we can’t reconcile who the beneficial owner of every share

is. So maybe that’s a, you know, now maybe we found the first

obvious use case for a blockchain, right? Like you

can’t borrow a share unless you can prove beneficial ownership

in a in a, you know, nanosecond, which can only be done on a, you

know, decentralized ledger. But the point is, number one is, we

need to rebuild this infrastructure, you can’t have

136% of a company be short, that makes no sense. The second,

what we’ve learned is that, again, this is like, are we

going to basically have these blow ups every 10 years before

we actually address the elephant in the room, which is leverage,

like you need to have leverage limits. So for example, banks

coming out of a weight have super strict oversight and

leverage limits, because they’re dubbed systematically

important. We don’t do that for hedge funds. And I think we need

to. And I think that we need to have the ability to realize that

these these guys can cause systemic risks, right. So just

on this example, I don’t know if you guys have ever heard about

long term capital management.

Yeah, the Asian currency crisis, the whole thing collapsed. So

good. There’s a good book on it.

Well, so it’s, it’s funny. But if you guys think this is the

second financial calamity, it’s not the first, it’s the third,

because the first one happened in 1998. So in 1998,

there was a firm, it was the whole, the whole economic system

was going to collapse if the bailout didn’t happen.

So listen to what these guys did. Long term capital

management borrowed. They had $4.8 billion of capital that

limited partners and investors gave them, okay. These fucking

crooks were able to then borrow $125 billion. $125 billion on

the 4.8 billion of notional. So they were able to lever

themselves up 26 times,

by the way, a synthetic margin, right? No actual capital was

allocated to these to this transaction set. It was all

synthetic, like no, no money moved accounts when

no money moved accounts. So it was literally just writing stuff

against debt that couldn’t have existed.

Yeah, so they so they built 60,000 trading positions. And

those individual positions represented, again, 1.4 trillion

right US dollars. So you took these guys in a room took 4.8

billion, got knucklehead over here to give them 125. And then

got these knuckleheads to sell them positions. And all of a

sudden, 4.8 billion equaled 1.4 trillion. And so then US US

regulators had to step in, they had to orchestrate a bailout

from a consortium of banks, because they were concerned that

if LTCM collapsed, the whole system would collapse because

they didn’t understand. So right. So we have to we have to

put leverage limits on top of hedge funds. The third is we

need to improve disclosure. The rules at the SEC right now is to

discourage disclosure. That doesn’t make any sense. We

should force everybody to publish what they own on a

weekly or monthly basis, you have the ability to do it, the

technology is simple. So you need to improve disclosure,

because then watchdogs and other people can basically be looking

at it all day and identifying these risks faster, not slower.

The third is we need to do something around open trading.

Like, why is it that you’re, you know, people are allowed to go

to casinos, why can you, you know, buy lottery tickets, but

all of a sudden, like, we’re going to decide who’s

financially literate, a platform like Robinhood can decide what’s

bought and what’s sold, I don’t think that’s fair. And then the

last thing is, I think that we should have a short term trading

tax. We tried to pass one in 2018 10 basis points, if you

would pass this 10 basis point tax in 2018, on short term

trading, it would have created a trillion dollars almost,

I did the math on this, because I actually, the reason I ran all

the equity numbers was to figure this number out. So in the US,

we generated $160 billion in capital gains tax last year. And

if you look at the volume I described earlier, in terms of

notional traded of equities and number of shares traded, if you

charge point 1%, every time someone sold a share on the

value of the share they sold, it would equal the capital gains

tax. So what you could do is you could charge point 1% on

every trade, it would reduce all of this high frequency nonsense

where people trade in and out of stocks, it would force people to

trade for the longer term or basically invest in companies.

And you could get rid of the capital gains tax. Think about

that. If we didn’t have to pay capital gains tax, and we were

only taxed when we traded out of a stock point 1%, you could see

an incredible amount of capital making its way into businesses.

And this would fuel economic growth and jobs and prosperity.

And so I think if you could pull that off, put the two together

at point 1% sales tax on every share sold and get rid of

capital gains tax, it could be incredibly powerful.

The lobbyists got to that bill, but that 10 basis point tax on

high frequency trading, it just means like, look, if you’re

going to trade a whole bunch of shit every eight seconds, you

just have to pay 10 basis points in and out $777 billion of

incremental revenue to the federal government and it was

lobbied out. And I agree with you. And by the way, the

more money goes in more money makes its way into companies,

right? And that’s the you stop all the nonsense where people

are basically trading to bet that something will go up in the

short term. And you get people to make investments in the

business as opposed to the momentum.

Lowering the capital gains rate is genius because I think that

if you if you are a retail investor, and you can for every

year you hold if you can decrease your cap gains by 20%

by the fifth year, now all of a sudden retail folks aren’t

necessarily gambling their owning and their cap gains rate

would be zero after five years, that would be amazing.

I have a basic question. I’m interested in your position

sacks and maybe even around the horn. What happens to the if the

short positions get covered, which they’re going to be at

some point in GameStop, I would think, or some large amount of

when the short squeeze is off, what happens to the people who

are buying in, you know, to the meme stock as a retail investor,

let’s say over the next 10 days, are they going to be left

holding the bags? Is there any way this company could be worth

20 billion or 25 billion? Because as freeberg points out

there, people are not buying GameStop, they’re they’re trying

to destroy a hedge fund, who made a stupid manipulative bet.

Great. We all love the the Robin Hood story of that. Not Robin

Hood TM, but the generic term Robin Hood. What what happens to

those people? Are they going to be the last people holding the


Probably this is not going to end? Well, there’s no question

about that. I totally agree with you that people engaging in this

kind of speculation and buying at these prices, it’s not going

to end well. Now, I do think that the Redditors actually had

a brilliant strategy, right? When they noticed that these

hedge funds were overshort, overexposed, and they seized on

that vulnerability, they did to the hedge funds, what the hedge

funds usually do to everybody else, which is find the Achilles

heel, right and pile in. So I think the strategy started

brilliant. Now anyone who’s piling into it, I’d be real

careful because I think the hedge funds have regrouped, you

know, and, you know, the idea that you’re going to be beat

them at their own game, you know, when, look, I mean,

Citadel is executing your trades. I mean, right, that the

trades are the order flow is going from Robin Hood to

Citadel, they’re not going to be caught flatfooted, they’re on

the other side of this trade. And so, you know, I just think

the house always wins, I’d be real careful about getting into

it at this point.

I think, just so you guys know, Robin Hood just tweeted that now

the list of restricted names is now up to almost 35 or 40.

I think it’s worth

they’re randomly picking companies, guys, RLX. What is

RLX? I think that’s a Ralph Lauren. Nope, you’re not allowed

to trade that. SNDL. I don’t know what that is. But you can

only buy 10 shares.

Would a better solution Chamath be for them if they can’t handle

this and they have the risk of ruin to just say we’re not

adding any more accounts until we can digest all this and raise

enough capital to float all this? And do you think there’s a

chance the SEC is telling them, you got to pump the brakes on

this because we can’t have a market crash? Two questions


I think that the the issue isn’t Robin Hood’s ability to grow,

it’s that they don’t have their ability to run their business.

And so their incompetence is going to cause them to, I think

have to deal with

if they had 20, well, if they had $20 billion in cash right

now, this would not be an issue, right?

I think you’re right.

Okay, so assuming they can line that up, because that’s probably

what’s going on right now is a $10 billion investment is going

to go into this company pre IPO so that they can actually take

advantage of this situation and grow. So despite the fact that

you have an axe to grind with them, because you have so far a

competitor that’s very far behind them that had its own

colossal problems. Let’s put that aside for a second, you’re

talking your own book without even mentioning it. Do you think

that if they had that 10 billion, they would just open up

all the doors? Or do you think maybe they should say, hey,

we’re not going to add anybody else?

I think that what’s going to happen is they’re going to get

sued into oblivion. I think that the class action lawsuits here

when people talk about the implied losses that that they

that they had over the last 24 hours, David Sachs is right, you

can’t undo it. The thing is, like what in all of these other

situations, like in the Uber fiasco, you know, you can’t

claim much damage, right? Because you can’t measure it,

you could have taken a bus, you could have taken a taxi, you

know, you could have taken a lift, maybe you could have

walked, who knows what it is. But the point is that the the

economic impacts, I think, were much less than maybe the

psychological impact, right? Like you were angry. Here, it’s

the exact opposite, which is that you prevented people from

transacting in an open market. And when people signed up to use

the service, that’s what they thought they were signing up for.

And they thought that that the risk on the back end would be

managed. You have to remember, it’s not that the individuals

did anything wrong by buying or selling. It’s that Robin Hood did

something wrong by not being able to manage their business

accurately. And then that then impacted the users to the tune

of 10s of billions of dollars that has to get adjudicated. And

so yeah, I think the right thing to do is to stop the business,

hit the pause button, allow people to elegantly transfer

their money out, do we have to remember, on the back end of

this, whenever that you have one of these market failures, the

clearing houses are allowed to instantaneously close your

account and transfer to another broker. Instantaneously, you

have that right. And so the market does understand the

systemic risk at some level, they just didn’t push it all the

way through to the end of retail. And so we’re going to

have to unwind this and unscramble this egg, because

it’s a really, it’s a really big problem.

Yeah, you

imagine growing, growing willy nilly, because everybody’s

infatuated with valuations and blah, blah, blah. And you move

into a regulated market where you needed to understand capital

constraints, you needed to understand modeling, you need to

understand three and four sigma events. It just means you’re

underprepared, which means at a minimum, you can’t be doing

business until you get that shit under control.

Yeah, I actually think we’re almost in sync on this. You have

a little bit of an axe to grind because of your other portfolio

company, I think that you still won’t recognize that you have a

no wait, let’s talk about worse in the race. Wait, let’s go so

far. I just did they did they finish resolving all of their

harassment lawsuits? Is that all resolved now? Or is that still

open? Yeah, we’ve we had you took them public. So did did you

work all that out before you took them public? Yeah, Jason,

we we transitioned the CEO, we’ve completely hired a new

team. Great. I mean, it’s incredible. So your company that

you took public can resolve issues, and you can give them

time. And then you can, in fact, become their mentor. And you can

become their savior to get them public and save that company.

Jason, you should Robin Hood can’t

Jamal can’t Jamal can’t talk about his company that’s going

public right now. So just as his lawyer, I’m going to step

in and okay, no, no, I just want to point out, make sure you

don’t go to him into saying something.

All of our companies, and I don’t mean to create a lot of

collateral damage here. But sacks had a company that had

challenges. Chamath had companies of challenges, we all

had companies have challenges. And I think focusing on what is

the role of an investor, when your company faces challenges, I

think the role of the investor should be and I take umbrage to

you Chamath trying to dunk on me, because I’m supporting an

investment. I think it’s a low blow. And I take it personally,

I’ll be totally honest, I am trying to work with the company

to help them resolve the issues. And I need to be loyal to my

founders. And I need to say, hey, how do we resolve this? How

do we get here and work with them? And I’m sorry that I’m

ride or die. But that’s how I approach this is I should be

trying to be helpful as a shareholder. Could you try to be


But could you make the argument that someone dunking on your

company is the equivalent of a hedge fund shorting a company?

I’m talking about my personal relationship with Chamath, which,

you know, it’s different than, you know, the public markets,


But I, what I’m saying is, like, I think in the private markets,

we hear a lot about venture investors, you know, often

speaking good about their own companies, where people really

get irritated is when venture investors speak bad about other

companies, it’s the equivalent of the hedge fund short. And I


Jake, I mean, Chamath, maybe dunking on Robin Hood, I don’t

hear him dunking on you. I mean,

I just said, I stumbled into the investment at the opening.

Well, you stumbled into Vlad in a bar. I mean,

that’s what you told me. Jason, you told the story. Jason, you

told the story.

He recognized me in a bar and came up and

fine Jason, but you told the story flippantly on television

that you ran into man Antonio’s nuthouse. What do you want us to

think? You didn’t tell us. Listen, I had I had systematic

scouts reach out based on traffic growth. I sat down.

That’s not my that’s not how I get to flow by doing a podcast.

Then Jake, if you want me to apologize for saying flow is

through this podcast. But Jason, if you want me to apologize for

saying that you stumbled into it based on your public description

on television, then I’m sorry.


but it doesn’t take away from what we have. I think the

investors responsibility. This is what I think is fundamentally

wrong with Silicon Valley. We are people that basically do

this, like hero worship around founders, and it’s stupid. I

think we have a job as fiduciaries to the users, and to

the employees, and to everybody else that doesn’t have a voice.

And most investors are incapable of actually pushing people to do

the right thing. Okay, I’m pushing to do the right thing.

And I always learned the hard way. And in this example, what

I’m saying is, this problem should have been solved three

and four quarters ago. And that’s a government. Yeah, I

mean, look, yeah, you’re such a mouth. You’re right about that.

But I mean, just to give Jake out a little support here. I

mean, the reality is, you know, we’ve all been on the inside of

these hyper growth companies. And, you know, like mistakes

happen all the time, because you’re moving so fast. And yes,

it should have, it should have been fixed. You know, but but,

you know, stuff happens. Now, the question is, when bad stuff

happens, is it an integrity issue? Or is it negligence? Or

is it just people running too fast? And I don’t think we know

that this was an integrity problem. I mean, it could have

just been people running too fast.

But David, that’s what you knew what the rules were. Meaning, I

don’t think I think it is an integrity issue. The rules were

not like all of a sudden in a crystal ball and all of there’s

a magic eight ball that spits out a rule when you do a deal

with DTCC. When you did a deal with your holding company for

clearing, you sign contracts, those contracts should have been

modelable. This is an Excel problem. This is not like I hear

what you’re saying. And I’m saying I don’t completely know,

I want to get to the bottom of the relationship between

Citadel and Robin Hood. And I want to understand if there was

any undue influence there, okay, or whether this was just

a case of hyper growth catching a company by surprise. I’m not

defending them. I’m just saying I don’t know. And therefore, I

think it’s a little bit premature to be talking about

giving this company.

And I also don’t think is there even a possibility that this has

ever happened in the history of the stock market or the modern

stock market? That 10 million new and well, hold on, I didn’t

say what it is. 10 million new retail investors came into a

stock, you know, or millions of them a day, and that the stock

traded hands. And I don’t think that we’ve ever had social media

collide with finance like this. And it’s very reminiscent of our

discussions with democracy, and journalism, censorship, and

politics, we are having weird behaviors because of virality.

And I think

this is the most important learning from this experience,

forget about the fiduciary and the governance responsibility of

these companies, whether they were good or bad will be

resolved over the next couple of weeks and months, I’m sure, as

more information comes to light. But what’s super interesting

about what happened this week, and I think is the most

impactful societally over time, is that we’re seeing this

phenomena where individuals in aggregate can believe something

to be true, and make it true. And we saw this with Tesla. And I

don’t think Tesla got this level of notoriety because it was such

a longer playout cycle. But Elon, you know, was not hitting

numbers that people thought he was going to hit margins,

production volume, etc. People were shorting the stock. But

enough people believed in the story that Elon told about what

he wanted the future to look like, that they bought the stock

and that gave him the ability to do shelf offerings, raise

additional capital, and ultimately build the business

and make it manifest in reality that he said would happen. And

the same is true of Bitcoin. And the same is true of Trump. And

the same is true of storming the capital. In all of these cases,

there was a belief in something, and there was an

aggregation of individuals using social media as a mechanism for

sharing and talking and engaging and creating a collective

outcome that wouldn’t have happened through a centralized

system or a centralized process, and wouldn’t have happened in

the traditional way where history defines the future. And

I think that is what’s so powerful about what’s happening

right now. And we’re seeing it in financial markets, but we’re

also seeing it play out in politics. And we’re seeing it

play out in the real world, in a remarkable way. And it goes

back to this notion that like a stock is worth the underlying

value of the company. And that’s not true. People can dream a

stock to be anything as they did with Tesla at the time that

people were buying Tesla stock, the historical performance of

that business was not what hedge funds considered to be a, you

know, a profitable good business. It shouldn’t be worth

anything. But the belief in what it could be is what drove the

value of that stock. And ultimately, that value enabled

that business to become true. And it’s just it’s amazing to

see it happening. And I think the counter, which is really

what makes this so striking is the centralized institutions

that are trying to block this from happening. And the shutting

down of parlor and the shutting down of Robin Hood trading are

equivalent, from my point of view, or at least equivalent, I

think will be perceived to be equivalent broadly, which is if

a group of people get together and try and use an online

service to make a change in the world, by sharing and talking

with one another and communicating a belief, a

collective belief, and that gets yanked away from them, that

institution that has the ability to yank it away from them is

evil, and it will force people to decentralize and it will

enable new ways of trading new ways of communicating new ways

of building. And that’s the profound change that I think

this decade is going to realize. And we’re just seeing it start

I agree that parlor or Wall Street bets is parlor 2.0. Right?

And what happened as soon as Wall Street bets started, which

is the the Reddit kids, they started threatening, and they

wounded these powerful insiders, these rich, you know, hedge fund

magnates, what happened, they started getting banned off of

discord, they got discord as a tech company to kick them off.

How did that happen? They’ve been talking on there for months.

And all of a sudden, just magically right, the critical

moment where they’re also not allowed to trade, their free

speech gets cut off. That’s a that was deliberate. Now, I’ll

tell you how it happens is I guarantee you what these hedge

funds did is they went through the discord room, and they

screenshotted, you know, any post that they could plausibly

characterize as, you know, hate speech or what have you. And,

you know, and by the way, I mean, those there’s a lot of

raunchiness in these rooms, but it’s not hate speech. And it’s

not organized for the purpose of hate. It’s organized for the

purpose of trades. But what they do is they weaponize the

censorship rules, and they go in and they screenshot and then

they give it to discord, and they get these guys kicked off.

And this is exactly what I’ve been talking about with

censorship, it starts with something you like, and then

becomes something you don’t. How many of the people who support

these, you know, Reddit kids were in favor of deplatforming

Trump and parlor, and now they can see where it goes. This is

a slippery slope, and we’ve only had to wait three weeks to

see where it goes. It goes to the same place, which is when

the people in power get threatened, they use these

rules, they weaponize these rules to shut down the outsiders

and the upstarts. That is a problem with censorship. That is

why you cannot let the beast get started.

I completely agree. And I think this is exactly why how I think

where we came out was, you know, the deplatforming of Trump made

no sense. I think the the economic censorship of Robin

Hood makes no sense.

Yeah, and you can argue it’s the right thing to do with a narrow

context. But when you take the broader point of view of the

implications, that’s where this becomes really shaky and really

scary. And I think really enables a decentralized

movement that is going to be a lot broader than than folks are

really realizing at this point, you know, folks don’t want to be

trading on a system that tells them how to trade and folks

don’t want to be communicating on a system that tells them how

to communicate.

If I gave if I was running Robin Hood, and I said, we’re going to

have two options, there’s gonna be a Robin Hood diamond

membership, and you pay by the trade. And, you know, you get

these special features, and then the Robin Hood free, you know,

you get your data is sold, or however it works. Would that be

a possible solution, I think, to the optics issue here where

consumers could basically pick just like a Facebook or

Instagram woke up one day and said, for 995 a month, you can

have none of your data, no advertising, ad free, like Hulu

does, you get Hulu premium,

I would. So here’s the thing, Jake out. I hope your Robin Hood

investment is successful. I just think that there are now three

moments in Robin Hood’s life, there is pre this week. And it

is what it is, it’s an $11 billion unicorn, God bless them.

Then there was this week, where we have to frankly hold people

accountable for the economic damage that they created this

week, because it is measurable. Okay, it’s not that it’s not

like missing, you know, it’s, it’s not like, you know, surge

pricing in Uber, it’s not, you know, Facebook growing too fast

and allowing, you know, pictures of breasts getting posted, not

have to catch up. It’s not that. Okay, it’s not a bunch of like

disinformation that we can’t really judge, this is very

discreetly judgeable. And so in this week, Robin Hood existed as

a different company. And I think that there’s an implication for

that, then to your point, honestly, I agree with you, it’s

what happens from here. And I and they should survive, but

they have to learn. And I think what they have to learn is you

have to stop the account growth, you have to massively shore up

the balance sheet, take the dilution, get the capital you

need, because let’s be honest, I’m sorry, but nobody’s going to

show up with five or $10 billion at 11 billion pre, they’ll show

up with five or $10 billion at 3 billion pre, and they should

take the money. And then they should allow the platform to

work as intended, or at least as perceived to be intended to

their users, and then they should reopen to everybody. What

would you do, David, if you were in charge? And then let’s move

on to our next topic?

Well, I mean, I feel like we probably talked about Robin Hood

enough. And I kind of want to go back to the point that that

Freeberg was making just kind of up leveling this a minute, which

is I definitely think this is part of this ongoing populism

versus the elites war. And social media is now the tool

that the people use to organize themselves against these

powerful elites. It’s why we cannot allow censorship,

because it always comes down it to benefit the powerful the

elites against the people are trying to organize against

them. That was, to me, one of the biggest takeaways from this

week. And, and look, the reason why people are organizing is

they’re asking the question, what is the societal benefit of

these big hedge funds in relation to the enormous sums of

money they make every year, you go to like the Forbes rich list

or whatever. And every year, these guys are taking down the

most money, they’re not creating companies, you know, and

Chamath is right, we can’t have founder worship, because they

make mistakes, too. But at least founders are creating things,

right? They’re taking big risks, that they’re not providing risk

capital, like what we do, okay, we’re investors, but we’re

funding people’s, you know, we’re taking the risk of

writing checks to start the guy who’s got nothing, right? Or

gal, yep, you know, they, them, it’s all good. All of them. So,

so, but try to keep you from getting canceled here.

But, but, but, but what, what exactly is the societal value of

these hedge funds? I know that they provide some price

discovery, and they provide greater liquidity to markets,

but is that really worth them really being the richest players

in the game? It doesn’t make any sense. And then when they lose,

like in 2008, they get bailed out. It makes no sense. It

makes no sense. Something is wrong here. Now, is this a

right wing view, a left wing view, it feels to me like

there’s a political realignment happening here, where the left

and the right, we’re all getting on board with this idea, and

it’s got to get fixed.

Yeah, this, this might be the legacy of Trumpet away sacks,

that he created so much disruption over those four

years, that now we’re actually finding out where the actual

breaking points are in society. And this is one of them. And the

healthcare system is one of them. And freedom of speech is

one of them. And we need to address each of these. And

they’re complex, but there is common ground. I mean, when AOC

and Ted Cruz are both agreeing on the same issue with something’s

going on here, like, I think we have to fight the real enemy

Chamath and I should not be fighting over this. Because I

can tell you, if Chamath did the series a and this, he would be

backing up Robin Hood like this, to the end of the end of earth.

And that’s totally fine. And I agree with Jason, I just I just

want you to know, number one, I love you with all my heart. And

I hope you make I hope you I hope you make ditto hundreds and

hundreds of millions of dollars. But there’s a it’s just like,

you know, you were you just got upset with me because you

thought I was kind of saying that you stumbled into it. I

didn’t mean it that way. I was just repeating the way that I

heard the story. But something that touches me equally

ferociously is this idea of like the little guy getting run over

by some like, you know, objective thing over here that

makes a decision that’s arbitrary.

I 100% agree with you.

And so like the idea that like, you know, somebody who’s on an

app, all of a sudden gets censored. Somebody that, you

know, makes a post gets canceled. Somebody that all

tries to make a trade can’t, it feels unfair. It feels that each

individual is suffering some pretty deep inequity. Yes. And I

can’t, I just can’t stand that it really just touches me in a

way that tilts me.

And I get very, and you know what, it’s interesting. I think

the reason I made the Robin Hood investment is because my

belief in the underdog and my belief in people’s ability to

come up from being poor or middle class to middle class or

affluent Friedberg, you haven’t chimed in yet, as we wrap here

and then move on to our second topic, I think we’re at an hour.

So it’s, um, so I just want to say, you know, we talked about

decentralization. And, you know, we all feel the emotional

response to the little guy getting screwed by the big guy

that controls the system. And we want to fight the system. That’s

the basis of every great movie. That it’s worth highlighting,

though, that decentralization, and what I would kind of

characterize as swarming behavior, uncontrolled swarming

behavior can actually have negative consequences. And

there’s a reason systems exist. You know, when you put a bunch

of people in a room, let’s say you put 100 people in a room,

and every time and someone says the word door, and every time

you hear the word door, you’re supposed to repeat it. Within 30

seconds, the entire room will be like deafening with everyone

screaming door, door, door, and suddenly everyone will be

screaming it. That’s a feedback loop that occurs in an

uncontrolled social system. And that’s what’s occurred with

GameStop. And it’s what occurred with with with Bitcoin. So there

are, as we’ve seen, remarkable outcomes when you allow systems

to operate without centralized control, and without

centralized brake pads, that kind of slow them down or put in

place some rules and some obligations to how that system

operates. The problem with decentralization, and this

swarming approach to resolution, where lots of people basically

work together individually, is you end up with things like

cancel culture, where before a judge and jury determines

whether or not someone did something wrong, the community

decides that person should be punished and shuts them down in

the real world and their career and their life is ended and

ruined. And we saw the same. And we saw the same with the capital

riots, you know, people basically died, because of the

swarm that occurred, where this idea that there was fraud in the

election became an echoing, deafening noise for these

people, and they swarmed and killed people. And the system by

which you can actually have vigorous debate, and the system

by which you can actually have controls and processes and

judges and juries and trials is what needs to be improved for

this to work. Otherwise, people will go to decentralization and

you will have a Lord of the Flies moment that engulfs civil

society, because the tools are there today. And so centralized

systems can work, but they have to adapt and adapt quickly to be

fair and to enable and to not discriminate. Otherwise, we’re

going to see Lord of the Flies and we’re going to see

decentralization being the solution to getting out of the

system that’s inhibiting us, and we’re going to end up having

really fucking ugly outcomes.

There’s a psychological term for what you’re describing. It’s the

diffusion of responsibility, when and also known as mob

behavior, when a group of people collectively do something, their

individual morality can evaporate. And the larger the

group and the more intense the behavior, the less

responsibility each person takes for it. So five people on the

steps of the Capitol, you know, one person breaks a window,

maybe somebody breaks it. But once you have 500 or 5000, and

one person breaks a window, now you got a much higher percentage

of people start breaking windows. And that’s when

tragedies happen. Of course, World War Two was the diffusion

of responsibility.

We agree. Yeah, you’re totally right. You’re totally just one

quick point, and then we can just move on. Yeah. So I think

these like viral tools, these social networks, they enable two

things, they enable mobs, but they also enable movements. I

think the mobs are bad, and the movements are good, or they can

be good depending on what their manifesto and what their mission

is. And so I think we want to enable the movements, but we

want to be really careful about the mobs. And you know, one of

the things that’s kind of disturbing about Twitter is, I

generally find that like the tweets that seem to go the most

viral are the ones that are full of rage and anger. And the ones

that are trying to make more nuanced points just kind of get

lost. And so there is something a little bit disturbing about

the mob behavior. But the movement, the enabling of these

new movements, I think is really powerful. And that’s what Wall

Street Bets was, at least in the early stage, and they did not

deserve to get shut down like that.

Social networks are a collective amygdala. They are not a

collective cerebral cortex. And I think if someone can solve that

problem and get people to think about the rational objective

outcomes in a social way, in as engaging a fashion as it is to

kind of be excited by the negative shit that excites the

amygdala, you know, it could be really powerful. But that’s

probably we’re going to need politicians who are going to

need some level of politician who has some integrity and some



Well, don’t you think don’t you think politicians with making a

transition ideas? I was gonna say don’t you guys think that

what this means is that entrepreneurs now can really

think about decentralization as the key feature, like in many of

these markets or these systems, where we have the centralized

authority, we have to move to a much more decentralized,

democratized way of doing things, whether it’s stock

trading, or whether it’s healthcare records, or whether

it’s, you know, education systems and degrees and

accreditation, there has to be a way where you can’t be


Yeah, but with morally and ethically inclined and or

legally inclined systems that ensure that the behavior of that

system doesn’t run amok. And, you know, that’s really where

things can, can go can go awry, as we’ve seen lately. But it’s a

hard problem to solve it. I don’t think we’re gonna solve it

here today.

Just a final update. I don’t know if this is exactly

correct. But I just asked on Twitter, how many shares of Game

Stop are still short. Apparently, there’s still 55

million shares are so short of the 70 million or so share total

shares and 47 million in the float. So something very bad

could still happen here. I mean, these shorts have not been

covered. So this is going to be an ongoing saga where I think

every single platform if if consumers keep buying the shares,

what is the end? Does anybody have an idea or a prediction on

the end game here? And then we’ll move on? What is the end

game? If another 5 million people buy the shares or 10

million people buy it, and it goes to 1000? Or 2000? What

happens if GameStop is worth $100 billion?

It’s a great question. Well, can I tell you, Jason, what that

means? There’s a great article in the information which Sam

lesson wrote, I don’t know if you guys read it. But it

basically said, Why did Tesla win? Now, this is not accurate.

But I think his framing is relatively accurate, which is

people were buying Elon like they would buy a trading card.

That’s right. And, and Tesla is a manifestation of Elon.

That’s right. And it actually is. So visually, it makes a ton

of sense to me, like, then I think, you know, why have like

Richard Branson’s businesses worked? Or why is the Jordan

brand work or come off all the, you know, at a smaller level?

Yeah, at a smaller level, because we’re brands, and we

have these values, and people can imbue their, their

collective decision making and support to the person versus the

institution. It’s a belief. It’s a belief in what that person

represents to, you know, I can, why did MBS buy that friggin

painting that wasn’t even a Leonardo painting for a billion

dollars? You know, there was some belief there, you know, is

it really worth a billion dollars? It doesn’t matter. At

the end of the day, most assets are most assets are purchased

under the premise that I believe the price will be higher

tomorrow than it is today. And if we all believe that, then we

will all buy it today. And we will all find more people buying

tomorrow. That’s what Bitcoin is. Do we all agree though, that

GameStop is not Tesla? I don’t agree with your premise. I don’t

think that stocks necessarily need to be reflective of the

underlying business. And that’s what so what but but no, just

think about it. It’s that’s what’s so shocking about this

week. Because we’ve all been taught in these friggin economics

books and these financial analysis books. Oh, the stock is

worth x dollars, this kind of cash flow, what company has ever

paid out dividends that equal the amount that you paid to buy

the friggin stock unless you lived in 1926. It hasn’t

happened. So everything we’ve been taught about DCFs and

future cash flows and everything is nonsense. At the end of the

day, every stock trades based on the assumption that someone will

pay more for it than I am paying for it today. That is it. That

is entirely what a stock is. And so if everyone’s belief is

completely uncoupled from the underlying asset that that stock

is meant to represent, it doesn’t friggin matter. And it

highlights what’s really going on. Trading stocks is not

investing in businesses. And I say, yeah, can I say something

else on top of this, Jason, what was the name of the member when

we were talking about censorship? What was the name of

the the left podcast that got cancelled on Twitter? Red, red

scare, red scare. Is GameStop red scare or at the real Donald

Trump? And my point is, who the hell are we to decide? Right?

How does it all three got cancelled? All three got

cancelled. What’s your prediction? We’re sitting here

a year from now full year out. What does GameStop January 2022

look like? What is the stock price look like? What is the

business look like? What How does this all resolve itself?

You know, I’m not a public stock market trader. I’m just not I

just feel like it’s I’m not a day trader. I don’t I don’t buy

public stocks. It’s just kind of like, to me, it’s a

distraction. What do you know this end? I you know, just buy

Vanguard funds. Like guys, if you’re listening to this

program, and you’re wondering where to put your money, just

buy Vanguard funds and stop worrying about it.

Index low fees index. Yeah. Yeah. I mean, if you want to

bet specific companies, because you get enjoyment out of it, do

it. But yeah, okay. So nobody has any idea what happens if it

hits 100 billion or how this adds. So I think that’s, that’s

illustrative of my point is that for somewhat intelligent people

who have some degree of expertise in this area, we have

no idea how this ends. But this is a black swan. But this is the

point it is a it is a collective Ouija board moment,

everyone’s got their hand on the Ouija board, and they’re going

to craft the sentence. Any one of us individually cannot

predict what a collective group of 3 million plus people are

going to do. And we’ve, you know, we try and struggle and

think about the underlying value of a business, which is what

these hedge funds have done historically. But at the end of

the day, this thing is going to be worth what the market tells

you it’s worth and what the market chooses to do. We

wouldn’t know because we are not the collective 3 million.

Jason, yeah, yeah. So look, Jason, there’s two questions,

right? There’s always this question of like, what should

the price be? And then who gets to decide? And you look, do I

personally think GameStop is overvalued? Yes, of course. I

think it’s going to end very badly. But the question is, who

gets to decide? And is the game can be rigged by powerful

insiders against outsiders? Just it’s just like the same

question with parlor, okay? Which is who gets it’s not about

which, look, we can say that there’s certain views that are

bad, okay? But the question is, who gets the power to decide

that? And it’s and that’s what that’s the thing we have to ask

is that second order question of who has the power to decide? Is

there any outcome is on got to decide and Robin Hood got to

decide and the victims were parlor and GameStop.

100%. Okay, so this would be a good segue to move on.

Apparently, we had a discussion on the last episode about

running for governor. And I bought the domain name

governor I had governor I got

governor sacks and governor Friedberg calm and I redirected

him and you guys own them and they’re they’re redirected to

your Twitter handles. And lo and behold, we wake up one day and

chamath for CA is live. Chamath everybody wants to know jump the

gun we were gonna have a vigorous debate and decide

which one. Yeah, who’s gonna run but somebody jumped in. And I’m

not saying other might not jump in other besties could jump in

to have domains. Stay tuned. Stay tuned. Jason, we do not

want to split the bestie vote. I think we got this is this is the

four musketeers. We’re all behind him off. Now we do not

want to split the bestie vote. Okay, it’s on you. Tell us

what’s gonna happen now. What’s gonna happen?

We are going to do an emergency pod and talk about exactly that.

So if folks want to know they’re gonna have to tune in midweek,

but maybe we have to do right now. Well, let’s talk about the

web. It’s coming up with it. Well, we’ll wrap on this the

website. You put out a platform. What’s the action been? And no,

these reactions in part? Guys, midweek, I want to be I want to

be very clear midweek midweek, but I’ll just say this. I’m

gonna be very clear. I’m gonna be very clear. I’m gonna be

guys, midweek, I want to be I want to be very clear midweek

midweek, but I’ll just tell the quick story is three young

people. These three amazing guys just built they built it. And I

just retweeted it. I can say the 10s of 1000s of people have

signed up for updates. I know that much. All these three guys

though. Here’s the can I just if I can tell a shout out to these

guys. Rahul Samir and Aman all these three guys. They don’t

live in California. Two did, but had to leave. One wants to

move but can’t because he can’t afford it. And it’s just such a

microcosm of like how beautiful California is a place is and

just what people think about when they think about the state

is just so it’s so lovely. So for another time, but anyway,

shout out to those guys for building the website. Thank you.

So essentially, the entire market has now been driven by a

group of all in of the all in army built a website, you

retweeted it. And that’s what this is all about. So there has

been no paperwork filed, there is no action committee. However,

it has traction. So it makes one and you know, I mean, there may

be a shadow cabinet meeting, maybe not. There may or may not

be. But there may be a shadow cabinet meeting. What is the


Well, I think Chamath by publishing that website just

went down the escalator.

Golden escalator, he’s gone down the escalator. And who knows

what could happen now? I’ll tell you this. I went on. I’ll do a

plug. I went on Bloomberg amazing, amazing hit. Great

amazing hit. It’s on YouTube. We can put the show notes. Yeah,

but put the link in the show notes, Nick, people need to

watch that I went through all the ways in which California is

hurting. Newsom hasn’t done a very good job. And I made my

case for Chamath. So that’s a prelude to what we’ll talk about

on the next pod. But that the amazing thing is the outpouring.

I mean, the number of people who have texted me, emailed me and

Chamath and all of us, like there’s a groundswell happening

now. 100%. So you know, I would say all the fans of the pod who

are now behind this, you guys are making it real.

Freedberg, Manifest Destiny here. What’s going on? Is this

another wisdom of the crowds or a mob or a movement?

Who am I to say?

Are you? Are you in as chief science officer? Will you be our

Dr. Fauci?

You know, here, I think we should have a good debate on our

next pod and hear the platform and discuss the platform and,

you know, make sure that we all feel like this is this is where

we should be. And I think this is going to take a little bit of

time to to build. And I think, you know, the more we kind of

build towards it, the more likely we are to have that

groundswell that we’re going to need.

Well, let’s give the oil and let’s give you all I will tell

you, it seems pretty likely that this recall effort is going to

get the signatures it needs. So we can kind of put that in the

sand that it’s very likely we’re going to end up seeing a recall


Okay, so if people want to participate in recall Gavin

Newsom, what do they do? Because that is the first step?

Yes, towards Chamath governorship,

you got to go, you got to go to rescue Rescue Go to that website, sign the petition. That

is the first step. We are very, we only need a few 100,000 more

signatures. We have 1.2 million, we need 1.5 million, go there,

sign up and then go to Chamath’s website, which is Chamath for

And so, Jason, I’ll make one more point. And I think, and I

made this the other day on that clubhouse that Saxon I did, I

think we made it before you joined. If you think about the

difference between a leader and a manager, a manager is someone

who typically delegates responsibility and authority. A

leader is effective at synthesizing multiple people’s

points of view, and creates an opportunity defines a vision

defines an objective that is the synthesis of all the people

that that report to him. And, and for which for whom he is

responsible, or she. And I think what we’ve seen in California in

particular, and really across leadership positions or governing

positions across the country during this pandemic, is a

failure of leadership. Because when times are predictable, if A

then B, it is easy to manage and it is easy to look successful. I

delegate down to the person who knows best and they are

responsible for the outcome and they do it well, great, all I’m

doing is pointing to the right person to run something. The

pandemic is difficult, and it is unpredictable. It requires the

synthesis of economic information, social information

and health information. And more often than not, a person who

typically acts like a manager points to the person they think

should be in charge under the circumstance to make a decision.

And that person is not equipped to synthesize the economic and

social ramifications of the decision. So what we have seen

during the pandemic is most often people in a governing

position have pointed to the health officer or the medical

person and said, you make the decision. And that person does

not necessarily account for the social and economic

ramifications of the decision they’re making. A health person

knows how to save lives. The best way to save lives is shut

everything down. And so the test of leadership during this

pandemic has been a test of synthesis, and recommending an

action that’s associated with the understanding of the social,

economic and health implications of what’s going on.

And that’s really where so many governing bodies and individuals

have fallen apart during this pandemic is an inability to do

that effectively. And I think that is what is needed going

forward. It is a it is a moment of test. It is a it is a moment

of truth about about the difference between a manager and

a leader. And we’re seeing across the nation, who is what,

and I think it is highlighting why some folks may not be best

suited to do this. The second thing I’ll say and I know I’m on

a little bit of a diatribe. But the second thing I’ll say is


We’ve been waiting for your diatribe. By the way, it took 19

episodes go

career, career politicians, I think simply should not exist.

If you go back to the origins of this country, right, having your

place in government, and we talked about this over email,

having your place in government was meant to be something that

everyone was supposed to take their turn doing. And the people

that were sitting in political seats, it was supposed to be the

merchant and the local farmer and the banker and we were all

supposed to take our turn representing our communities

representing our people in government. And what we’ve seen

is people who have made a career out of being a politician. And

the result of that is that their job depends on them getting

reelected. In order to remain in their career, they have to get

reelected. And they ultimately end up making trade offs that

don’t necessarily represent the best long term interest of their

community. And this is broadly true across nations across

centuries. But it’s particularly acute in the United States where

we’ve seen such wealth creation over the last 250 years. And

what’s happened is when you have career politicians sitting in

these seats for so long in an environment of severe wealth

creation, you end up having governments that are ineffective

and creating systems that fail us. And here we are. And what we

need is to have someone go in that’s not dependent on the

traditional folks that get people elected and fund

elections and result in reelections. We need someone

that can go in as an outsider and make a change. And so my

advocacy for what’s needed in California, and I think

nationally, and that’s a longer conversation is to find those

types of folks to come in and lead and be politicians that can

take a leadership role, synthesize information and not

be worried about the reelection cycle and not have anything to

lose related to a career in politics. So on on that note, I

want to say I love all of you. And let’s do our emergency pod

on Tuesday. Do you guys want to play poker tonight?

I’m still a child. I was playing that original graduation. My

mom’s in town. My parents got vaccinated. Yeah, I can play. I

can. Oh, here we go. Maybe a little guys that wants to play.

He just

one note, if you do fill out if you take if you go to rescue Is that the name sex? Yes. If you go there, you

print out the petition, and you hold it up and take a selfie

with your signature on it. And you add the besties we will like

it, possibly retweet it and possibly follow you. So go and

take a picture of your printout with your name on it. And that

proves that you’re part of the all in army, and we will like

it. We might follow you and we might even retweet you. You

could fall besties love you. And we’ll see you all next time on

the all in pocket.

See a couple’s therapy tomorrow.

Hey, everyone. Hey, everyone. Welcome to the all in park.

A billion here a billion there pretty soon you’re talking about

real money.

I love you, sex.

These are really big numbers.

This spread the opportunity that that technology represents.

We’re probably gonna have four Kardashians on there.