Zsaks is old do do do.
Zsaks is old do do do.
Zsks is old do do do do.
Zsaks is old.
Zsaks is almost dead.
Jkals fat do do do do do.
Jkals fat do do do do do dae.
Jkals is fat, oh my god.
He’s not fat anymore he’s getting the canons back.
Do do do do do.
Friedbergs not human, do do do do.
He’s a robot, do do do do do.
He’s a robot, do do do do do.
He’s a robot.
Don’t quit your day job Jamal, that’s all I can say.
Bro, you don’t remember Baby Shark?
I mean how many, no he doesn’t know his kids
first names or birthdays.
How does he know Baby Shark?
Don’t let your winners hide.
Rain Man, David Saks.
I’m going all in.
And it said.
We open sourced it to the fans
and they’ve just gone crazy with it.
Love you guys.
I’m the queen of Kinwam.
I’m going all in.
Hey everybody, welcome to episode 55
of the All In Podcast with us again this week.
The dictator himself, Jamal Palihapitiya.
The queen of Kinwam, David Friedberg.
And coming back from Portugal
and the Solana Conference, riding his.
Where heroin and prostitution are legal, David Saks.
We were gonna double click on that
but you jumped the gun here on the docket.
So David, how was the heroin in Portugal?
You’re having fun.
I was fully drinking the Kool-Aid
at the Solana Conference.
It wasn’t heroin, it was Kool-Aid.
It was literally Kool-Aid.
How many people were at the Solana Conference in Portugal?
Why is it in Portugal?
What happens at a Solana Crypto Conference?
I think there were thousands of people there
and it was, I mean, easily.
And I mean, it was kind of a madhouse
and people were trying to get in last minute
and nobody could get in
because the conference was like totally sold out.
It was a lot of crypto developers,
a lot of people with projects.
And why Portugal?
I think because there’s a lot of conferences
happening in Portugal right now
because they are easier on the COVID restrictions
than a lot of other countries.
So you can actually get in there and host a conference.
What was it, indoors with no masks?
Or masks optional?
I can’t remember if like masks were required or not.
I did see people wearing masks indoors, so.
Were you required to be vaccinated?
Did they do tests on the way in?
I think I did show a vaccine pass
at one point when I checked in.
I just did my booster.
I’m gonna do my booster shortly.
It kind of, it was a little, I would say
the same kind of shitty feeling as the second one.
Which kind though?
I just got Pfizer, I mean, the first two were Pfizer,
so I took Pfizer.
She was, the nurse actually gave me a choice.
She’s like, you can do whatever you want,
Pfizer, Moderna, or J&J.
I just, I didn’t know any better.
I texted my doctor.
So I just took Pfizer.
Although the interesting thing is
Moderna is the only one that’s dose regulated
for the third dose.
So there’s a, they actually give you less specifically,
but Pfizer is the same for all three.
I think we talked about this on the pod.
There’s one theory, which they told you
get whatever one you can get, was the instructions,
because it’s more important to just get one
than which one you get.
But they said there’s a Swiss cheese theory,
which is if you took two slices of Swiss cheese
from two different bricks of it,
the holes would not be the same,
and therefore you overlap them.
So whichever deficiencies each one had,
maybe the other one doesn’t.
So I should have gotten Moderna is what you’re saying.
That would be, if you believe in the Swiss cheese theory,
I don’t know, Friedberg, you’re a science guy.
I should ask Aaron Rogers what he thinks.
I mean, he just straight up lied
about being vaccinated, huh?
I think so.
And I think the NFL’s not doing anything about it, yeah.
That’s not cool.
Why would you lie about it?
I mean, he’s not, he would have still been allowed to play.
So there was no reason to lie about it.
I’m not totally up on that story.
The rumor is that Kyrie is gonna be playing basketball soon.
Because New York-
Because Eric Adams is gonna lift the vaccine restrictions.
You will not need to show a vaccine card or wear a mask.
Bro, I don’t think it’s gonna-
Or maybe you’ll just get a PCR test every day.
I don’t think it’s gonna matter
because the Warriors are shooting the lights out
and Klay hasn’t even come back yet.
That Gary Payton, the second kid is-
Did you see Gary Payton Jr., these clips?
I mean, he’s like living above the rim
and just destroying his Wiseman back.
And then Wiggins is playing great basketball.
I mean, the Warriors are gonna win this year.
I don’t know.
Steph is otherworldly right now.
Yeah, I think Steph’s got something to prove,
even though he doesn’t,
but he’s playing like he’s got something to prove.
Okay, so do we wanna just cover the elephant in the room?
The last episode, I think we should just get out of the way
because it relates to Solana.
There was, we took something out of the last podcast
so people understand we have an agreement
between the four of us.
If there’s something that somebody doesn’t want on the pod
after we record it, we’ll take it out
because we don’t want anybody.
I mean, I think the philosophy,
we haven’t said this out loud,
is we don’t want anybody to say something they regret
that could cause damage to other people or to themselves.
So if they wanna take something out that they said,
that’s fine with all of us.
And basically each of us has veto right on something.
So last week, two people took their veto right on something
and we took something out.
You wanna explain our thinking on that, Sax,
and why we’re reversing it?
Yeah, okay, so a few weeks ago on the pod,
there was an oblique reference
between me and Chamath regarding Solana.
And so some internet theorists claimed
that we were trying to engineer a pump and dump in Solana,
which if you actually listen to what we said,
it certainly is not a pump.
Let me explain what it was.
So Kraft is the beneficiary because we invest,
we’re the first investors in multi-coin.
We were kind of like their seed investor,
investor in there who put in something like 40%
of the money for their special opportunity fund.
They were one of the first investors in Solana.
So we are the beneficiary of about a billion dollars
of Solana, so thank you, multi-coin.
At some point, well,
so they have started doing distributions,
but at the time I texted Chamath,
they hadn’t really started doing distributions.
I didn’t know how deep and liquid the market for Solana was.
I just asked Chamath, like I’d heard,
that Chamath may have said something
that he was long Solana and wanted to accumulate.
So I sent him a text saying, hey, are you interested?
I thought maybe we could do an OTC transaction
at some point when we get our Solana.
He basically, we had a brief exchange about that.
And then he mentioned on the pod, that was the extent of it.
What I didn’t know at the time, but learned subsequently
is that the market for Solana is very deep,
about three and a half billion notional
is traded every day.
So there’s no need, even if we wanted to fully get out
of our Solana position, which by the way,
we don’t even have, multi-coin still has most of it.
It’s not necessary to do an OTC transaction.
We could just sell it.
Explain what OTC transaction is.
It just means over the counter.
It just means that instead of going to like an exchange,
you would deal with like a trading desk
or it could just be direct, like for me to Chamath.
So that was basically the exchange.
Chamath and I talked about it for maybe two minutes
and then it came up on the pod for 20 seconds.
So then some internet theorist basically clipped it
and tried to accuse us of organizing a pump and dump.
Well, obviously if you’re talking about selling something,
it’s not a pump.
It’s also not a dump either.
So anyway, the reason why we said cut it out last week
is because we didn’t want to give oxygen
to this stupid like conspiracy theory
that somebody had invented on the internet
with like no basis whatsoever
because you could spend all day
trying to like shoot this stuff down.
But then at the Solana conference,
enough people told me that this was becoming a meme
that I thought was worth addressing.
And look, the way you have to understand with crypto
is that for every cryptocurrency like Solana,
there are haters because they’re invested in Ethereum.
It’s very tribal.
Or Cardano or whatever.
Everybody’s talking up their books.
There are pump and dumps.
And there are armies of anonymous Twitter accounts
that will coordinate attacks and or memes, et cetera.
So they’re trying to spread the rumor
that like VCs are big holders in Solana
and are gonna dump it.
The reality is that Multicoin has a large position,
but they have LPs.
They are slowly distributing their positions to LPs.
We will then-
In the forms of the tokens.
They’re not selling them and giving you cash.
They’re giving you the tokens.
You get to decide what you do.
And by the way, that’s what we’d like to do as well.
We’re currently working through those mechanics
because it’s actually complicated for a VC firm
to distribute in kind through tokens, but-
If you had to give them to your LPs subsequently-
That’s what I would like to do.
People are doing that with Coinbase.
So Coinbase is providing that as a service now,
from what I understand.
So we have to work through with our LPs,
but that’s what we’re gonna try to do
is distribute it in kind
so everyone can make their own decision.
I have a couple of things to say.
So I’ve only been a buyer.
I’ve never, I haven’t sold a single Solana token.
And so we are net buyers and we’re buying a bunch of stuff.
But I hate acknowledging that.
And this is why my tone was more non-committal
when we did the pod,
is that I really don’t like this culture
that’s emerged via Twitter mostly,
where you all of a sudden have to be this maximalist
that basically falls on their sword and never sells,
in order to be legitimate.
And I think that that’s a really dangerous place to be.
So, look, if I take a-
Why is that dangerous?
Well, if I take a much, much bigger step back,
let me put Solana in the context of crypto
and let me put crypto in the context of the markets
and where we are today at the end of the week
after Q3 earnings in November of 2021.
We have the stock market at absolute all time highs.
We have crypto at absolute all time highs.
We have the art markets,
I don’t know if you guys saw Phillips and Christie’s
and Sotheby’s this past week,
at absolute all time highs.
Sold another vehicle for 25 million.
We have inflation at a 30-year high.
We have 10-year break-evens at a 25-year high.
We have 1 point some odd trillion dollars
that we just approved last week
and we’re still horse trading on another three,
1.8 trillion dollars of stimulus that we’re going to put in.
And so when you, and then you have,
and I think the most important thing,
which is the two most important founders of our generation,
the two smartest people who have really consistently won,
Elon Musk and Jeff Bezos,
have collectively sold more than $11 billion
of their holdings this year alone.
And if you can’t take all of that and decide for yourself
what’s right for you and your family,
you’re doing yourself a disservice.
I think it’s important for me to never sort of like,
be forced to tell folks whether I’m buying or selling,
although I’m willing to do it in moments
where I think it’s important.
But I think it’s really important to understand the context.
And so I think like these folks that like think derisively
about individuals who are managing risk,
I think it’s really naive.
And I think it creates a lot of missed opportunity
for them as well.
If the smartest people in the world
are now selling their core holdings
that they told you they would never sell,
and you are not reconsidering your position on things,
you’re either much smarter than them,
or you’re being really, really reckless.
All right, there you have it.
Yeah, we, just so people also know inside baseball,
we have a docket of stories that we talk about
on our group chat that make up the docket for the show,
but I’ll bring stuff up.
And I didn’t bring that up in some way
to cause trouble or anything.
I thought you guys would want to clear the air about it.
And I understand Chamath’s position of,
hey, you don’t want to give these things oxygen or whatever,
but I think Sachs also-
I didn’t even know that we needed to clear the air
until I went to the conference
and enough people mentioned it.
But what’s so funny is half the people on Twitter
spend all their time in crypto land saying things like,
never going to make it, have fun staying poor.
They’re extremely, Jason, as you said, tribal.
I’m not sure that they’re doing first principles analysis
of these things.
They’ve gotten exceptionally lucky.
Some of them are exceptionally good,
but many people broadly speaking
have gotten exceptionally lucky.
And I think a little bit of it is getting to their head
where they become very virulent against people
that they think whose perspectives may actually be
negatively affecting their position
without actually understanding what David said,
which is these are incredibly deep liquid markets
and one person’s opinion can’t do much of anything.
Right, I mean, that’s a really good point.
I mean, I’d like to give my opinion on Solana,
or just crypto in general.
The thing that’s like hard about it
is that it’s hard to talk about the benefits
of say the Solana blockchain without being seen
as a pumper of soul or a dumper of ether or whatever,
because all these things are so intrinsically connected.
I mean, I learned a lot of really bullish things
about Solana at this conference.
I mean, the biggest thing is,
I mean, there’s basically a battle
for the hearts and minds of developers going on right now
between Solana and Ethereum.
That’s why Solana has raced up
to over 200, I don’t know what, like 7,000% increase
or something incredible like that.
The reason is because Solana as a blockchain
gives confirmations back in something like 400 milliseconds,
whereas Ethereum takes minutes
and a transaction that might cost tens of dollars,
10, 20, 30, $50 of gas on Ethereum cost pennies on Solana.
And so that’s revenge.
It’s also, a lot of developers feel like the tools,
the developer tools that they’ve created
are easier than building on Solidity.
The thing that Solana gives up,
the trade-off that it makes is decentralization.
There’s basically that transactions
are processed by 20 validators
and they’re a top 20 based on holdings of soul.
So it’s kind of like this proof of stake model.
So anyway, there’s some trade-offs there.
I can tell you that, you know,
it’s the view of, you know, our friends at Multicoin.
And, you know, I heard a lot of this views at the conference,
although obviously you have to take it with a grain of salt
because these are the biggest believers,
but their view is that Solana over the next year
will flip Ethereum based on developer activity,
that there’s real companies being created.
We spend a lot of time actually before we do anything
is that’s the only thing we’ve been looking at, you know,
and Syndica, Fractal,
a lot of the stuff that we’ve done,
DSO is purely driven by developer interest.
When we see developers in the open source ecosystem,
building things on top of this stuff,
making stuff that’s composable and usable by other people
and building infrastructure,
you know, we don’t really second guess that
because they are spending the most important currency,
which is not monetary capital, but human capital.
Yeah, their time, their skill.
Their time and their skill and their reputation.
They can apply it to another project, yeah.
And so when enough developers,
so I’ve always thought you just follow the developers
and as more and more projects get started,
you just have to unemotionally support that.
I think the writing is on the wall,
which is Bitcoin is gold.
Ethereum looks like it’s trending to be silver
and Solana could be the first,
but there will be others that come after it
of real developer ecosystems
that can be built on top of it.
The other thing that I would offer up to people
for them to think about is
before you blindly go and rush into crypto,
one way in which I try to think about these things
is in the following way.
You see these projects get started all the time
and I would view each of these projects
as a mini economy and really try to think
what is the economic value
of what’s happening under the hood.
So simple example, Helium is an interesting project
that’s trying to build a completely decentralized
5G infrastructure, right?
Render is a really interesting project
that’s trying to build a completely decentralized
graphical processing infrastructure, right?
In both of those things,
you can quantifiably economically measure
what the value is that people get, right?
In the case of Render,
you’re basically displacing an AWS instance.
And so that has a price and a value.
And so for Render to be valuable,
there’s an economic value that it replaces.
If you’re joining a hotspot that has an economic value
where you hadn’t necessarily have to pay
to get internet connectivity,
if you all of a sudden are on the Helium network,
that displaces a measurable economic quantum.
Understanding that is probably
and taking the absolute value of that
is the best way of really understanding
which projects have potential.
So if you take those two ideas and marry them together,
where is their developer interest
and where is their measurable economic activity?
At the intersection of those,
I think are the really compelling projects I can win.
Well, and the thing that complicates all of this
is that the developers are not just picking
based on which language or technology or stack
they think has the most potential.
They also have acquired economic stakes in it.
So a developer who might be objective and say,
hey, this new platform is better than Ethereum,
might be sitting on millions of dollars in Ethereum.
And they’re like, I want to keep my bet going here.
And I’m going to keep talking my book.
Possibly, but I do think that developers in general
will choose the platform that’s easiest
and cheapest and fastest for them to develop on.
Which would mean the list on CoinMarketCap
of market cap ones that has been static
for a decade of crypto almost,
or largely the top 10 doesn’t change that much.
It’s XRP, it’s Stellar, Ethereum, Bitcoin, Tether.
That could be up for grabs.
That whole thing could change
now that people are actually building projects
and the projects are getting competitive with each other.
And that’s that flippity we’re talking about, correct Sax?
Yeah, I think that what’s tricky here again
is I never want to give anyone investment advice.
I mean, that’s just not my job.
And if there’s anyone out there listening to the show
because they’re trying to get like tips or tricks
or whatever for investment,
like I’m not really comfortable telling people what to do.
So, you know, everyone just has to understand that.
I do feel like what I saw at this conference
over the past week in terms of developer enthusiasm
and activity was very bullish.
Actually, it was a lot like I went to the Ethereum conference
I think it was back in 2017, several years ago.
And it felt a little bit like that.
Although I would say that this time it felt less academic.
Like several years ago, it felt more like white papers.
Now it actually feels like real projects and businesses
that people are trying to create.
Still infrastructure and less applications
or more applications and infrastructure.
Chamath mentioned a couple of them.
So there’s Helium,
which is creating a decentralized network for Wi-Fi.
which is creating a decentralized network for GPU.
There’s one called HiveMapper, I met the founder.
It’s a decentralized network for people to map the world.
You can think of, you know,
the concept of a miner that Bitcoin invented.
Think of them more as like a resource provider to a network.
So with Bitcoin, you know, we call them miners,
but they’re the validators of transactions.
And we’re trying to incentivize them
through block rewards,
basically through small bits of Bitcoin that get released
to provide these valuable computing resources
to the network.
And so people are figuring out now
how to create massively decentralized networks
where you have, you know,
thousands or millions of resource providers
provide a little bit of something
to the network for everyone’s benefit
in exchange they get some coin.
That’s like a really interesting model
that couldn’t exist before crypto.
And so, yeah, I mean, I think it’s very interesting,
but you know, in order for that to work,
you have to have like very,
you need fast, efficient, scalable blockchains.
And the feeling as, I mean, I’ll give credit here
to Tushar, who’s one of the GPs at Multicoin.
His view is that this was the iPhone moment for blockchain,
that what Solana has built,
because it’s massively scalable and also very cheap.
I mean, again,
you can run a lot of transactions for pennies.
Now, all of that is obviously very bullish for Solana.
The thing I wrestle with is,
and Chamath kind of alluded to this,
is I think everything’s kind of in a bubble right now
because of monetary and fiscal policy.
And so, you know, I guess you could say
that I’m long Solana versus ETH,
but I do kind of worry that the whole world right now
is very bubbly.
And so as a GP, like, what do you do about that?
I can tell you right now, like this second,
we are sitting on Solana that we have not sold.
So, you know, I am long in that sense.
However, sometime over the next, whatever number of years,
we will distribute out our position of Solana
And then the LPs will make their decisions.
And then they’ll make their decisions.
Some LPs might specialize in crypto and want to keep it.
Other ones might not want to hold assets
and need that money to fund their endowment
to give scholarships to students
or whatever your LPs particularly do.
Well, yeah, I mean, and so I guess to the issue of,
hey, we’re not giving investment advice here.
We are all capital allocators and startup creators.
So we’re talking about our day-to-day lives here.
Nobody should interpret this as investment advice
and especially not in a world now,
I don’t know if you guys saw what happened
with Rivian this week.
I don’t know how we don’t talk about a company
with essentially no public sales.
They’ve sold 148 cars to their employees.
It’s worth $120 billion.
Any, Freeberg, did you see this IPO, any thoughts on it?
Seems like a high-
Do you have investment advice for the audience
that you’d like to give?
Tell me what Rivian does.
Can you play that video that you found
that you shared with everyone?
You have that video, you know?
Okay, well, we do have it.
I can, we can cue it up.
Did you see this yet, Sax?
Who is this guy?
No, I haven’t.
Oh, that, yeah, yeah, yeah.
Well, but just, so I don’t want to beat this point
to death, but I just think it’s so important
for the audience that what they should be getting
out of the show, if they’re fans,
is maybe like advice on how to think.
Yeah, critical thinking.
Critical thinking and how we think about investments.
So look, if you want to invest in crypto,
first of all, like go understand
what all these different projects or blockchains do
and figure out what is the purpose of the token
in that system?
What are the token economics?
What’s the utility?
Yeah, does it even make sense or is it just a scam?
Then if it’s something like a blockchain,
go research how many projects have developers on them
and how much code is being checked in.
And maybe open a wallet and buy some NFTs
and buy some ETH and transfer it
and learn just how to set up your internet connection.
If this was 1995.
And then on top of all that,
you got to consider macro forces because,
I mean, and I think, you know,
my friends at MultiCoin would fully concede this,
that, you know, it could be the case
that if there’s a crypto bust over the next year
and this thing, you know, crypto has gone
through boom and bust cycles for many, many years.
That is the standard.
It’s the standard.
So you could have a situation in which, for example,
Solana flips ETH and yet still goes down in value
because there’s an overall bust cycle.
So, you know, you have to consider
the macroeconomic factors as well.
So there’s a lot of things to consider here.
And then you also have to consider your own risk tolerance
and, you know, what is appropriate for your portfolio.
And it may be different than us.
And when do you need your money?
Are you a 25 year old?
Everything is at all time highs
and the two smartest men in the world are selling.
Not just them, by the way.
Not just them.
There are other guys that are heavily on the other side
waiting for this whole thing to go.
Like Druckenmiller has been very vocal about this.
And he’s been the best macro trader in the last 30 years.
And his position is what exactly?
That we’re printing too much money
and we’re in a lot of trouble.
So, you know, look, I mean, generally there is,
I think a good point of view being shared here,
which is, you know, understanding how to think
about what you’re investing in
and what your expectations are
versus relying on someone’s advice
or opinion on what to do.
If you have to rely on someone else’s advice
or opinion on what to do,
you’re gonna eventually lose money.
You should not be in that investment category.
You should not be in the market.
Cause guess what?
Anyone that’s giving you advice or opinions
is gonna make money if you do what they tell you to do.
End of story.
So at some point, they’re gonna all make money
and you’re gonna end up losing money.
And it’s a better game to play
to learn how to kind of be thoughtful about
where’s your money going?
What are you investing in?
And it takes a lot of time and a lot of money.
I’ve been sitting here silently
as you guys have been talking deeply
about Solana and Ethereum and Bitcoin
and the crypto markets,
because I realized so much of, you know,
what’s needed to be successful in entering this market
is a depth of understanding and a depth of knowledge.
My time is highly limited.
I have spent no time understanding crypto markets
because it’s so deep and it’s so fluid.
It’s changing every day.
It’s changing every week.
So if I can’t get smart enough to feel confident
about the opinions and decisions
that I would be making as an investor,
I decide not to invest and I stay out.
And so I’m not an active crypto investor.
You’re a specialist and you’re on the razor’s edge
on synthetic biology and so many other categories.
There are other areas where it’s better for me
to spend my time and my energy.
And I’ve chosen to do that
versus being drawn into what feels like a very exciting
kind of, you know, turbulent time.
There are other areas that I kind of spend my time on
and I just kind of try to recognize
that maybe I don’t know what I’m doing
if I were to try and get involved here.
And so I’d rather stay out.
And I think that’s counsel for anyone.
You know, if you’re gonna make an investment,
it’s important to feel confident about the knowledge
and the depth needed to kind of be different
than the rest of the market.
I’ll build on your point.
Like when I started doing my SPACs,
I started to write these one-pagers
and those one-pagers were artifacts
for me to hold myself accountable
for how I saw something in a moment in time
and then to be able to see whether it was
tracking to that.
And then also to share it to other people, a starting point,
as David said, a journey where they should then,
if they’re curious, go and do their own work.
It turned out not enough people were doing the work.
So then I had to start adding disclaimers to these things,
saying, hey guys, I’m not telling you to buy this.
Please be abundantly clear.
These next SPACs that I will eventually launch,
you’re gonna see an entire like in bread block letters,
like please don’t buy this.
Right, because to your point,
it doesn’t matter what you say.
People want a lazy, easy way out.
And so I just want to reiterate what all of you guys said.
None of us are dispensing advice.
We are not telling you to do anything.
Please do your own work
and please come to your own conclusion.
It is your responsibility.
And if you’re not sure,
go and look at your children in the face
or your significant other in the face.
You are responsible to them.
And so do your own work.
I’ll say one more point on where I sit as an investor.
I choose to only participate in investing
in what I call productive assets.
That is you put some money into something
and whatever that thing is,
it’s generating money in some way
or it’s trying to generate value
through a set of activities like a business
or owning an apartment building where you’re making rent,
you know, anything that,
or, you know, a group of people
that are trying to have some breakthrough
or some discovery.
Those are productive assets.
There’s a lot of what’s going on now
that is what I would call speculative assets,
which is the only way you make money
is if someone else pays more in the future
versus what you’re paying.
And there isn’t an underlying productive asset
to what you’re putting money into.
You’re describing every ICO or-
Every ICO, every NFT and the art market, right?
These are examples of unproductive assets.
They’re speculative assets in the sense
that you’re speculating that at some point
the price of them are gonna go up and someone-
Somebody wants that NFT more than you.
Someone down the road will pay more for that asset
than what you paid.
But that underlying asset,
that capital that you just put in
didn’t go in to build something.
There’s no revenue generation.
There’s no IP.
It went into someone else’s pocket
that sold that asset to you
and you’re eventually gonna try and sell it to someone else.
And so, you know, there’s a real attraction here
because what we just talked about is really hard to do.
Having fundamental analysis and understanding of businesses
and a fundamental understanding of what’s working
and what’s not and when to shift and, oh my gosh,
are things different or are they not?
To do that is really hard.
So people end up relying on opinions of others
or they end up running into speculative markets.
And the speculative markets are easy to understand.
Someone just paid more for X than the other person did.
Therefore, there’s a trend line.
It’s going up.
It’s like playing roulette and black keeps coming up
and you’re like, okay, it’s gonna be black again.
It has to be black.
There were seven, correct?
There were seven blacks.
And so I think that that’s a really important
kind of takeaway for folks that might be new as investors.
We’re all susceptible.
We’re all susceptible to this.
Like I was just looking, you know,
at my own performance coming into the end of this year.
And, you know, I did a lot of SPACs this year,
but I also did these pipes,
which are these third party deals.
Private investment in public entities.
Other people’s deals that they were bringing to the market
where they said, Chamath, do you want to be a part of it?
And, you know, and I did.
And part of it was I was looking at these things
and, you know, Freeberg doing my work.
But in the end, it turned out I didn’t do nearly as much
as I probably should have,
because I ended up sitting on top of other people’s work
versus the original or underwriting that I would do
if it was my own deal itself, right?
Anyways, the net of it all, it’s like, you know,
that was very inefficient capital deployment.
And as I look at it now, it’s like, you know,
I’m down, well, I’m technically up 19%,
but that’s really because of one deal.
If I take that one deal out, which was a total outlier,
I’m down 17% on about $200 million of investment.
When you were a fast follower, not the originator,
it wasn’t your idea.
This is critically important.
There are many different ways to make money,
but you have to specialize
and you have to have first principles and your knowledge.
I trusted other people.
I did the same thing that I’m saying
to other people not to do.
Do not just copy other people.
You have to do your own principle work.
And even when you do your own principle work,
it may not be enough.
And you have to be willing to basically
see the forest from the trees and walk away.
And so all these pipes,
I’m in the midst of sort of cleaning up and selling down.
And they’ve been just a kind of a disaster for me.
Hold on, I want to build on this for a second,
because I think it’s critically important
what you said as well, Friedberg.
You have to be comfortable
with the investments you’re making.
I look at these companies
and I look at the underlying customer, the product,
you know, and what kind of revenue it’s going to generate.
And people thought I was dunking on Rivian yesterday.
And I said, listen, you know, when Tesla went public,
people forget their valuation was 1.5 billion.
Okay, so 1.7 billion when they went public.
Now they already had thousands of roadsters
and they had already had the-
No, they had 93 million of revenue in year one.
So this was dramatically different than what Rivian had.
Rivian is being valued at, you know, whatever that is,
120 billion, I think yesterday.
Rivian has 17 billion in cash.
Somebody asked me at the poker game last night
what I value Rivian at.
I said, 17 plus three,
17 million in cash plus 3 billion,
double roughly what Tesla’s was,
the market’s hotter right now, whatever.
But I put them at 20 billion
and people were giving a hard time about it.
I said, I think that’s actually
the realistic valuation for this company.
And we are in a very dangerous moment in time right now
where I think people are,
whether it’s meme stocks or crypto or NFTs,
suspending disbelief, in some cases SPACs,
because they’re not all created equal.
And certainly in private companies, we’re seeing this,
where people are giving people an amount of credit,
which makes no logical sense
and is getting further and further disconnected
So as an investor, you have a choice.
Either you take, you have your fundamentals,
which I’m not going to change my fundamentals.
I’m going to focus on the fundamentals
that got me where I am.
And I’m not going to be involved
in $100 billion market cap company
that hasn’t launched a product yet,
let alone $120 billion one.
I’ll stay focused on startups.
But what you’re saying is also important
because you’re highlighting how you value that company.
You individually said,
I think that company’s worth some multiple
of how many cars have been sold in the past.
Elon sold thousands of cars.
He was worth 1.7 billion.
These guys have sold.
And other people are coming in and looking at this company
and saying they’ve built facilities,
they’ve built assembly lines,
and they’ve got pre-orders and bookings
for lots and lots of cars in the future.
And clearly they’ve gone in and some people have gone in
and seen these plants and seen these cars actually working.
So it’s really important to take note
that your point of view is one point of view
in a very diverse market with many points of view.
And everyone’s going to come into this market.
And that’s why unless you individually as an investor
have a strong point of view
and can show that you can apply your unique insights
to consistently beat the market making decisions,
investment decisions like that,
you’re eventually going to lose
because those other points of view
will be a bigger view of the truth and you’ll lose money.
And that’s why, by the way,
that’s why picking stocks is ultimately a loser’s game
unless you have some unique ability and insight.
For most people historically and in an upmarket,
everyone looks like a genius.
You need to have an edge, right?
You need to have an edge.
And the public markets are hard to say that
because people think it means insider trading.
Yeah, there’s some unique competency
that you need to bring to the table.
I mean, if we double click on what you just said
as the things that would be reasons to embed on Rivian,
number one, they have 48,000 orders of pickup trucks
against the F-150, which is now electric from Ford
and a million Tesla Cybertrucks.
I don’t know why you’re arguing this, right?
Like you’re just making a point
that we don’t have someone on the panel right now,
but someone else could come in
and argue the other side.
Okay, go ahead, Chamath.
And I would just say, this is the part of the conversation,
to be honest, Jason, to give you feedback I don’t like
because Rivian, just in defense of Rivian for a second,
what I have heard is that it’s a well-engineered car
or truck rather.
They’ve done a very smart path to market,
which is essentially to build these delivery trucks
for Amazon that allowed them to even frankly,
be default alive.
To use the Paul Graham term, instead of default dead.
I think the point that’s more important here
is that it doesn’t affect you.
So let Rivian do well, you know?
And this is part of the cycle-
Oh, you’re saying we shouldn’t have an opinion publicly?
No, no, no.
I’m just saying this is the part of the cycle
that I don’t understand
where people legitimately have these zero-sum points of view
And this is where I think Friberg is more right
than anybody else, which is the market is the sum
of all these collective points of view.
Longs and shorts.
I think it’s fine to have one.
I think it’s a little superficial, your point of view,
because it’s not really-
Sitting on top of a model or anything else.
And I think it’s the same kind of superficiality
that the Tesla Q guys had about Tesla for many years as well.
It takes a long time.
As somebody that does this every day,
and I just want to point this out,
it takes an enormous amount of time
and enormous amount of work to be 55% right.
Listen, I’ve invested in 350 companies.
I meet with 2,000 companies a year.
No, in the public markets, Jason,
it’s different in the public markets.
Listen, and my companies are going public now,
so I take exception to what you’re saying.
I know a fraud when I see it.
I’ve seen them before.
Oh, that’s a really big statement.
I’m not saying Rubin’s at fraud level yet.
That’s not a fraud.
No, but the distance between the valuation and reality
is in the 50 to 100 billion dollar range,
and that is very dangerous.
I know, but that’s not in control of Rubin.
That’s not in their control.
Okay, that’s in a bunch
of external market participants’ control,
so you can’t pin that on them.
My point is-
What I would pin it on is,
the market right now seems dysfunctional
and is not properly measuring things.
I know, but throwing shade,
then you should throw shade at T. Rowe, Fidelity,
all these people that are bidding up your companies,
by the way, because they are the ones
that are taking Rubin to 120 billion.
It’s not Rubin’s fault.
And Jason, what’s really going on in the market-
I thought that was the thing.
It was public speculators.
No, what’s really going on, it’s not.
You can’t sell $16 billion in an IPO to speculators.
Well, that’s at a much lower price than the IPO price.
These are institutionally placed trade orders,
but regardless, the market is clearly right now,
in productive assets, businesses,
the market is looking at a time horizon
that it has never looked at before,
which is making bets that are at 10, 15,
20 years in the future,
and that’s because of the condition
that we’re in right now
from a monetary policy point of view.
Interest rates are so low,
there’s nowhere to get yield in other assets.
So you have to look further and further out to find value.
Okay, I accept that, I accept that.
So the market is betting, is making 10-year bets,
which is like a VC type bet.
It’s more than a 10-year bet, but okay, yeah.
And Jason, sorry, can I just finish my last point?
Because before you interrupt me,
my issue, Jason, is I think you are
an exceptional angel investor,
but just the same way you derided
a bunch of late-stage guys,
remember last night at poker,
when we were talking about late-stage folks
entering into the angel market and the Series A,
you were extremely dismissive
because you know what the job is to be done,
to do that job well,
and they have a different skillset.
Similarly, what I would just offer for you to think about is
the people that really underwrite public market stocks well
do things and have a skillset that is extremely specific,
and it is well-trained as well.
And I think that-
Okay, no, I accept that people were good at that.
I’ll defend me.
Let me jump into the Jake Alston facts.
But go ahead, since you want to defend me,
that’s, the people are in shock right now,
so I’m gonna let you speak.
Way to get yourself back in the game.
The sky is purple, the sky is purple,
the moon is set.
Hell is freezing over right now.
Hell is freezing over.
Okay, so here’s where I think Jake Alston,
I don’t know anything about this Rivian company,
but where I think Jake Alston’s right is
we’ve seen over and over again
that when a company gets,
when a startup gets a billion dollar plus valuation
without a product, invariably,
it ends up somewhere between a disappointment
and an outright fraud.
It was Theranos, or Magic Leap, or Quibi, or whatever.
I’m not saying they’re all frauds.
I mean, I think just Theranos was, but-
Trainwrecks, frauds, whatever.
So I think it’s reasonable for any,
let’s say seed or early venture investor
to develop the heuristic
that I’m not gonna invest in anything
with a billion dollar, with basically a unicorn valuation
without seeing the product first.
Because we’ve learned, we’ve got our hands burnt
so many times from these overhyped companies.
And here’s where I agree.
If I can’t see and use the product, I’m not investing.
I’ll invest in a seed stage,
but I will not invest in a unicorn stage, no way.
I agree with that.
But what I’m saying is
when a company is going public like that,
there is demonstrable proof of concept there, okay?
The only market in which that’s not true
is in biotechnology.
Well, I would say for Fisker and Nikola,
two related companies,
those ones seem very, very shaky.
You can debate about the scalability of these things,
and you can debate that people didn’t do the diligence,
but they had to at least put a proof of concept out there
for you to judge.
If people don’t do the work, I agree with you.
Like if you’re rolling a truck down a hill, sure.
No, but my point is if you were there and you did your work,
you would have seen what you needed to see.
What I have heard from people who were investors
in both Lucid and Rivian
is that they have sat in the cars, they’ve driven the cars,
they’ve spent time with them, they’ve seen the factories,
and it’s very much real.
Now what they’re debating is ramp and velocity and scale.
I don’t know, I don’t have a position in either.
I have the bigger macro point of view,
which is important to me,
which is just because these things are in the public markets
I think people think it’s easy to judge.
And I think actually modeling them and making good decisions
is just as hard as it is for private companies.
Okay, we need to roll this clip
because there is somebody who is giving exceptional advice
Let’s roll the clip.
Yeah, so well, Upstart’s up about 25% just in four days
since we bought it.
We bought it on about four days ago.
So that’s actually made a nice little move
in the short term, probably a little extended right now,
but longer term, that’s a good looking name.
Very powerful, very strong earnings.
These stocks are-
What do they do? I don’t even know.
What do they do?
What does Upstart do?
Well, I’m sorry.
What kind of company is it?
Yeah, I’m not, you’re breaking up.
Oh, well, I guess we’ve got an audio problem, Mark,
Oh my fucking God.
Who is this guy?
Who is he?
I have no idea.
J. Cal, is that like your uncle or something?
Who is that guy?
I mean, just to the point-
Do you want to go on CNBC?
Well, you know, the guy’s been on many times.
But doesn’t this prove what we were saying,
which is that you’ve got to do your own principal work here?
That is why we wanted to play it.
Here’s a talking head who’s probably getting paid
for selling some books and giving advice,
who knows nothing about what he’s telling you.
You can join his membership club for 1,000 a month.
Yeah, I’m sure he’s publishing lots of papers
that show that he’s a highly successful,
profitable investor, and look how smart he is.
He doesn’t even know the company he just promoted on CNBC.
On a mechanical basis here, Chamath,
you and I have been on CNBC many times.
In that moment, what is going on?
What do you think is going on in the host’s mind
and the producer who has to dump this call?
Let’s move on.
Because they’re watching this.
Let’s move on.
I just, the breakdown when he says, I’m sorry.
I have no idea.
What do they do?
I think the point’s been made.
I think the point’s been made.
Oh my Lord, everybody should do their own work.
Do your work.
All right, let’s keep going.
Zach, you look like you want to say something.
I mean, it just shows the agenda.
Yeah, look, I mean, there is a massive agenda
in corporate journalism.
There’s an agenda by the people on these shows
to promote positions.
There’s an agenda by the reporters themselves
and on and on and on it goes.
So to Chamath’s point,
if you just take face value and you don’t do your own work,
then you’re buying into someone else’s agenda.
One thing that we are trying to all understand is inflation.
The CPI has gone up 6.2% in October,
highest jump in 31 years since 1990,
according to the Wall Street Journal,
fifth largest straight month.
Fifth straight month of inflation above 5%.
Somebody tweeted out, we’ll pull it up here,
Denver Bitcoin put out a year over year commodity chart.
We can throw up on the screen.
And then I think Friedberg, you shared in the chat
the average weekly retail prices around fertilizer.
What are our thoughts on the nature of inflation
and how that affects our investment?
I think it’s persistent.
And the reason I think it’s persistent is that
all of these things are intertwined.
And so, Gina, if you want to just bear with me for a second,
like when this, let’s just go to the entry level
economic job, right?
So you’re a barista at Starbucks or you work at McDonald’s
and you’re making 17 to $20 an hour.
What that does is it shifts labor.
And eventually there are other people
that are entering the workforce or may shift jobs.
And essentially it just causes this leaky bucket effect
where everybody else has to then accommodate itself.
So you have a guy like, you have a company like Amazon,
which is now gonna pay 25 or $30 to keep folks, right?
Because otherwise they may say,
oh, if I make 15 or $16 an hour,
I’d rather work at McDonald’s, it’s simpler.
And free college.
It’s not backbreaking work, blah, blah, blah.
So then they start to increase the amount that they pay.
They increase their benefits and the like.
I saw this thing this week.
There’s a crazy thing that’s happening though,
which is it’s now pulling people
from non-traditional job classes into those jobs.
There are teachers that are leaving teaching
to go work at an Amazon warehouse.
There are firefighters that are quitting
being a firefighter to go work at an Amazon warehouse
because you make the same or more,
plus you have all of these other benefits
and the job is structurally a lot easier.
And so people are making different optimizations.
And to that point, I think we talked about this
and Nick, you can put it in the group chat.
In Reddit, as an example, there is more engagement
in the subreddit around having a simple work life
than there is now in Wall Street bets, right?
So there’s been a structural cultural change
where people need to get paid more
to do the same amount of work.
And then at the same time,
you have all of the supply side getting more expensive.
Fertilizer makes corn more expensive.
Lumber makes house prices more expensive.
Chip prices makes the iPhone and cars more expensive
or completely backlogged.
You know, yesterday at poker,
Sonny was showing us he bought a Tesla
and the delivery period is October of 2022.
Yeah, it’s crazy.
It’s freaking crazy.
So I think that this is the beginning of a persistence.
I think those are all like really valid points.
The thing I’m seeing now is I think we’ve moved
into what I’ll call a contagion phase of inflation,
which is people are hearing about inflation.
They’re seeing it in some places.
My gas went up a little bit.
My milk went up a little bit, whatever.
And they’re saying, well,
I guess if everybody’s raising prices,
I need to raise the prices as well
of whatever I provide in the world
so I can just keep up with everybody else.
And they’re not looking at their inputs necessarily
and saying, I need to charge more
or that’s the best business decision.
They’re just saying everything’s going up around me.
And so they raise prices.
I’ve literally had this happen three or four times
and I went to buy a car and they wanted 15K over sticker
and I didn’t buy it based on principle,
but I’m sitting here going like, maybe I’m an idiot.
Maybe I should just pay the 15K over sticker.
What are your thoughts, Saxon inflation?
And the contagion, if you have any thoughts.
My thoughts are I told you guys
like six months ago about this.
Can we just replay what I said on episode 32?
It’s got his researchers in the background giving.
You’ve written down what you said on per episode basis?
No, this guy’s in the fucking debate club,
Stanford debate club over here.
Some of us, when we make predictions, take them seriously.
So, you know.
Oh, was that a dig at professor ice cold takes?
I’ll give you guys a link to a prediction that was made.
Here’s, I mean, I just want to replay the 20 seconds
I said about this back in May.
Here we go.
The two Davids dueling again, just like in the group chat.
Yeah, I’m not dueling.
All right, here’s Friedberg, January 1st, 2021.
If you don’t think inflation is already here,
you missed what happened to the stock market.
Companies aren’t performing better.
We’re just inflating everything.
Financial assets first.
Everything else will follow.
That was a good one.
So just make your point.
Just make your point.
Just add the clip.
I’m beginning to wonder
if Biden’s going to be a Jimmy Carter here
because frankly, all he had to do
was leave things well enough alone.
COVID was winding down.
We had a vaccine.
All they had to do was distribute it
to as many people as possible.
End COVID, let the recovery take shape.
And instead, they push this insane $10 trillion agenda.
It’s going to backfire massively.
Look, if the economy turns,
we were set for a post-COVID boom.
And right now that is all at risk
because Jamal, like you’re saying,
they’re keeping the economy closed
or parts of it way too long.
They then overcompensate for that
by printing a ton of money.
And then they overcompensate for that
by raising taxes too much.
Just to build on that.
So that second step of their overcompensating
their inability to open with money is so true
because then what happens is your labor force
stays impaired because people make enough money
by not working.
It was true when I said in May,
it’s even more true now.
He said it was, there was inflation.
Okay, so there’s inflation.
So now, great, good job.
Somebody’s prediction was proven true.
Yeah, I made one in January that said the same thing.
Now look, you can do three things to,
you can do three things to curb inflation,
raise rates, right?
When you raise interest rates, you slow spending.
Prices come down, inflation slows.
But the issue when you raise rates
is obviously you see things like job loss
and economic growth declines,
and it can very quickly spiral the other way.
This is the big challenge of Fed tapering.
The other option is we’ve seen a significant attempt
at lately is to raise revenue, right?
So increase tax rates,
tax a broader swath of people at a higher rate
or a broader swath of business at a higher rate.
So it’s very likely that tax revenue
could kind of present itself again as a driver
if inflation continues to spiral up.
And the third, which is the least likely is cut spending,
The federal government spending the way it does right now
makes a very inefficient way of kind of putting capital
into the system and inflating.
We’ve seen historically that anything
the federal government spends money on
like healthcare and education,
the costs very quickly spiral out of control.
Why not just give that money to the free market
to make decisions on how to spend it?
It would be more efficient, et cetera.
And the market would effectively find balance
where buyers and sellers are equivalent
as opposed to having the federal government
driving the price of everything up.
The fourth option that people don’t talk about,
which I think may end up becoming an important option,
not kind of a bleak option,
but more kind of backdrop is to start a war.
And when you start a war-
Wag the dog, wag the dog.
Yeah, when you start a war,
you stimulate the economy
without needing to pump additional capital in
so you can increase growth
and avoid the risk of stagflation.
And you can source resources
that otherwise wouldn’t be kind of flowing into trade
or basically in a land grab type situation.
But it doesn’t necessarily mean that policymakers would say,
hey, let’s go start a war to decrease inflation.
But the premise that conflict can improve the economy
is a important backdrop
that starts to play into policy decisions
that might get made
over the next couple of months and quarters.
And that’s really important.
Whether or not the posturing is one of partnership
and reducing the tension with foreign nations
or one of increasing the tension,
it’s more likely that we would want to increase the tension
when we’re in an inflationary environment.
That’s quite a conspiracy there.
So what do you think, Sax?
Okay, we got to go back to first principles on this thing.
We’re not going to start a war to tame inflation, okay?
But let me just explain what inflation is,
because I’m not sure people fully understand
how this works.
Inflation is very simple.
It’s too much money chasing too few goods, okay?
And we have both sides of the equation going on right now.
On the supply side, on the good side, we’ve got shortages.
We’ve got the ports backed up.
We’ve got paying people not to work.
We still have the 2 trillion of COVID relief
passed earlier this year,
which was responding to a problem
that was largely winding down.
So we have these labor shortages.
People dropping out of the workforce in record numbers.
The number that just came out showed
we had more people quitting their jobs than ever before.
So we have a shortage in terms of the production
of goods and services that people want.
At the same time,
we have this monetary and fiscal expansion
coming out of Washington.
You’ve got, and again,
they did the 1.9 trillion of COVID relief.
They did 1.2 trillion of infrastructure.
Biden’s still talking about another 2 trillion
of social welfare.
You have the Fed still printing money with QE.
So you’ve got this massive expansion
in the amount of money.
So look, too much money chasing too few goods
creates this problem.
And it was very predictable.
And so what I said back in May,
this is what I was warning about,
and it goes back to the Druckenmiller clip
that we were talking about all the way back in May.
He said the same thing,
that we had a reckless fiscal and monetary
expansionary policy coming out of Washington
at a time we didn’t need it.
Because if you looked at retail spending back in May,
it was back to above trend.
So, you know, in other words,
like there was no demand problem.
The economy was back.
And they’ve just been pumping
and pumping out of Washington.
We made a, we had a, we had good intent.
We wanted to make people not suffer.
We wanted to get the economy on tap.
We may have just made a bigger bet than we needed to.
We overdid it.
We overdid it, clearly.
But look, who wants to be the politician, quite frankly?
Yeah, it’s not going to get you re-elected.
Who ends the eviction moratorium, right?
The gravy train, yeah.
Well, nobody wants to be the politician who says,
okay, now you suddenly have to pay your rent.
But obviously people have to pay their rent.
And we’re taking away your bonus unemployment.
People have to go back to work at some point
when there’s 10 million jobs open.
Just as a, I’ve been watching the Taiwan situation
like a hawk.
And I don’t know if you saw this this week
to go off on another tangent,
but the US is testing Israeli’s Iron Dome in Guam
as a defense against Chinese cruise missiles.
Obviously for possible deployment in Taiwan.
And I don’t know if you’re watching
Ennis Cantor in the NBA,
but he has been going on CNN and stuff like that now
talking about China.
I predict escalating global conflict.
That’ll be my prediction to mark the Q4.
Well, I think that’s a,
I think actually that’s a pretty valid prediction,
but I just think it’s a little bit separate than inflation.
Like I said, it’s not an explicit decision,
but I do think that in the backdrop
of an inflationary environment
where you have something
that can temper the condition at home,
that at the same time, you know, might sell politically.
But we don’t need,
but it’s not gonna solve anything politically.
I mean, World War II, you know,
famously got us out of the Great Depression
because that did stimulate demand.
But in the situation we’re in today,
we have too much demand.
We have retail is trending way above curve.
What we have is a supply shortage
and devoting resources,
taking them away from the productive economy
to go to war would only exacerbate the problem,
make it even worse.
What we need right now actually is for Washington
to back off, to stop pumping demand with this,
with, you know, now they’re still talking
about this $2 trillion.
Sell the money printing machine.
Sell the money printing.
That’s what we need.
We need them to get out of the way.
And to stop these disincentives for production and work.
So you have, I mean,
Manchin was exactly right about this.
Do you remember when Manchin,
when he was resisting this $2 trillion social welfare bill?
I mean, the things he said are already coming true.
I mean, he said this months ago.
He said that we should take a strategic pause
because he said, this is a quote,
by all accounts, the threat posed by record inflation
to the American people is not transitory
and is instead getting worse.
From the grocery store to the gas pump,
Americans know that the inflation tax is real
and DC can no longer ignore the economic pain
Americans feel every day.
That’s what he was saying this past summer,
several months ago.
And they rolled right over him.
The psychology of this could be self-fulfilling as well
because what’s going to happen is
you’re going to have everybody raise prices
because it’s now become an escalation.
You know, your hairdresser, your, you know,
whatever, you know, services you’re using,
whatever product you’re buying,
whatever restaurant you’re going to is going to put $2
on every appetizer and five bucks on every entree.
Everything is just going to keep going up.
And then what happens is people who are in the middle class
or, you know, who are consumers of products in a large way
will say, you know what?
I’m going to put off buying a car.
Then we’re going to be driving all this supply up.
And then people are going to say, you know what?
I’ll just drive this one for two more years.
That’s going to cause stagnation.
And it’s called stagnation.
It’s what we had in the 1970s.
And you’re right.
It’s called an inflationary spiral,
which is the future expectations of increasing prices
means that people start increasing them now.
And that feeds on itself.
And that’s what we had in the late 1970s.
And the thing that broke that was Paul Volcker,
jacking up interest rates.
It was very painful.
It caused a very severe recession in the early 1980s.
But then the economy came roaring out of that by 83.
It got Reagan elected in 84.
And you had 30 straight years of declining interest rates.
And that led to a stock market boom.
So the problem we have now, okay,
here’s the problem we have is
there’s going to be no Paul Volcker.
We can’t afford to jack up rates
because the federal government’s debt
is so much bigger than it used to be.
And we are not on a fixed rate.
We’re on a variable rate.
All of the debt we take.
The average maturity of government debt
right now is five years.
So, I mean, that means the whole debt
rolls over within five years.
So if they jack up interest rates,
we have almost 30 trillion of US federal debt right now.
So every 1% that they increase interest rates,
that means another 300 billion a year
of debt service payments.
So there’s going to be enormous pressure
on the Fed not to raise rates.
You already are hearing Biden
rattling the saber saying that Powell
may not be his choice for a second term.
By the way, Powell is very dovish.
He’s basically saying we can’t raise rates right now
because of this and that.
So, and the Biden administration,
nobody in Washington ever wants rates to go up, right?
They want to keep these low rates forever.
This is the problem is, look,
at the end of the day,
I don’t know what the inflation picture
is going to look like next year.
But what concerns me is we don’t have effective tools
to fight it anymore
because we’ve given up our ability to raise rates
because it would increase the cost of the debt so much.
And I mean, so just one article
just to share with you guys is this, again,
one of my favorite sources of economic information
is the Fred blog, which is from the St. Louis Fed.
We wrote a blog talking about two tails of federal debt.
And the article is about,
here’s why there’s so much disagreement
on whether the federal government debt is too high.
So the first chart shows debt to GDP.
This was always the way of looking at government debt
was simply looking at the ratio of debt to GDP.
It’s now something like 125% in peacetime.
I don’t think we’ve had a higher peacetime ratio
that would tell you things were out of control.
But for the last decade,
while this has been going on,
you had this whole school of thought,
the MMT, modern monetary theory,
all these economists and experts
and politicians and the media were eager to buy in
because they want to spend the money.
And what they said is, no, it’s not debt to GDP.
You should look at debt service to GDP.
This is the second chart on that blog.
And so debt service to GDP was staying constant
or even going down as the debt to GDP was going up.
Because interest rates were so low.
The problem is what was so foolish
about this point of view is,
it is assumed that interest rates were going to last forever.
Well, if that was your point of view,
why didn’t you do what Trump actually suggested
several years ago when he suggested
having a hundred year T-bills?
They should have locked in much, much longer duration,
maturities on the federal debt.
And instead, and Yellen rejected this, okay?
And so you’ve got a five-year average duration,
which means that if interest rates go back up,
the debt service cost is going to explode.
In 1980, we changed the goalposts for CPI.
So even as a measurement to know what we look at,
and I think Jack Dorsey tweeted this out.
So Nick, you may be able to find this tweet,
but we changed the measurement of how CPI measures.
And so if you go back to the original measurement,
it looks like inflation and CPI is much more pernicious
than we would otherwise think it
if we just look at the new CPI
that we started to look at as of 1980.
So that’s another sort of like point.
We did the same thing with unemployment.
I just go back to what I said early on.
We took out people who had given up looking for jobs.
The two smartest people that we both know are net sellers.
Well, they’re selling some, yeah.
I mean, they’re not selling everything.
I’m just saying the two smartest people we know.
We don’t want to get financial advice here,
but should everybody be moving to cash?
Where do you put your money?
I’m just saying, I’m totally confused.
This is, I think, the admission.
Just buy productive assets,
great businesses that have durability,
and let them ride for 20 years.
I like your answer.
The fact is we’re all confounded
as to what to do at this moment in time.
We’re all trying to figure this out,
and we do this for a living.
But then you’re trading the market
like everyone else all the time.
Like, you know, why trade the market
when you can just buy great businesses,
own stakes in them, and let it rest?
No, I’m just talking holistically
where to put money.
I mean, my practical issue
is that I don’t have infinite money.
And so in order to put my money into productive assets,
I have to sell other productive assets.
Well, if you’ve got other productive assets,
leave them in.
Well, then it’s like, then I’m basically,
you know, doubling down on a worldview
that may be old and dated, right?
So if I’m long a bunch of software companies,
and I really want to do something
in climate science or biotech,
what am I supposed to do?
Don’t try and time the market.
Shift your assets, right?
No, no, no, I’m not trying to time the market.
I’m just saying, if my worldview shifts
to really want to double down on climate science
or alternative finance or biotech,
I have to raise capital to do that.
You have to raise capital, is what you’re saying.
Right, but for me,
I’m not raising it from other people.
I’m raising it for myself.
So I have to sell things I already own.
It seems like, to me,
the best place to be right now
is in the company formation space,
because when you create a company,
like Friedberg does every three months,
there is so much value being created
at that moment in time,
and so much further capital getting poured into it,
that if you are the originator of the company,
and you get some big slice of the cap table
for doing that, which is completely valid,
you originated the company,
whether it’s Munique or Call-In or whatever it is,
man, that is a great moment of wealth creation.
And when you’re the person putting the money in
at the billion dollar valuation
before the company, whatever, Call-In,
I’m sorry, Clubhouse,
went from 100 million to 4 billion with no revenue.
I don’t know what’s happening in the world,
but pretty crazy.
Do you want to go on to Xi Jinping
and his, he’s gonna be speaking with Biden on Monday.
He got it done before his video, his Zoom with Biden.
Oh yeah, so they’re doing that.
He’s now the supreme leader.
Xi Jinping hasn’t left China in 18 months.
Explain what this means, Chamath, from the story.
I mean, I think the basic takeaway
is that they’ve been working inside the body politic
inside of China to basically reflect Xi
on the same level as Mao.
And effectively what this means is that it allows him
to remain the leader of China indefinitely.
And so there is no transition of power.
Typically what had happened was
there were these 10-year windows
and you go Jiang Zemin, Hu Jintao, 10-year cycles
and then they pass the baton.
But it now looks like we’ll be living with Xi Jinping
until he joins the afterworld.
So he’s ruler for life of China, basically, crazy.
I don’t know.
I think that’s exactly right.
What an incredible feat of political maneuvering
without judging it, just to say
how what a complicated Byzantine political infrastructure
he must’ve had to navigate.
I don’t know how he played the three-dimensional chess
with all these people,
the slow systematic dismantling of the old guard,
placing all of his people in
then slowly moving towards this kind of recognition for him.
He sounded a bit admiring, Shamath.
Yeah, no, the dictator got his name for a reason.
Somewhere Donald Trump and Steve Bannon are like,
what did we do wrong?
We were so close January 6th.
We almost, if Pence would have just played ball,
Sachs, you’d still be in power, huh?
Your guys dropped the ball.
And we wouldn’t have inflationary.
Just think, if Trump was leader for life.
Yeah, Jason, given how accurate my predictions have been,
you should have a little bit more respect
for my political positions.
What do you guys think happens now
that Xi basically is ruler for life?
I think the Chinese term for it is historic figure,
which is the parlance of saying, you’re basically.
You’re a made man, basically.
You can’t get whacked.
Nobody can touch you.
You’re good for life, the end.
Nobody can question you.
Can you imagine Mao Zedong, Deng Xiaoping,
and now Xi Jinping?
Incredible, he is at that level.
Well, it means if you start a war
and a serious military conflict
that nobody can question you.
You’re the supreme leader.
It’s sort of like Putin and MBS.
MBS can go kill a journalist
and he’s got nobody to answer to.
It means he has nobody to answer to.
Mao Zedong initiated the revolution.
And Deng Xiaoping was really the architect
of free markets that has made China
the economic powerhouse that it is today.
Their internal reflection of Xi Jinping
is on the same scale of that.
Now, I mean, I can’t claim to know enough Chinese.
But what is his vision for the future of China?
Yeah, what is the accomplishment
that’s gonna really put him in that league?
And you’d have to say it’s the annexation of Taiwan.
I mean, that’s the thing that he must be looking to do
before his time runs out.
To reunify China.
That’s the thing that could put him in that league.
And so that is the tripwire that, to Freeberg’s point,
that could lead to a conflict.
I think they, you know, I hate to say that Freeberg is wrong
because I don’t think in this case I can.
I do think that there is some left tail risk
for like a crazy wag the dog moment in Taiwan.
It would be really scary, really scary.
Right now, if I was looking at the sizes of the names,
people don’t know this.
Japan actually has a very large defensive Navy.
The UK and the United States obviously have very large ones.
China’s is large, but not on a tonnage basis.
They have a lot of ships.
But together, I don’t know if you saw
the military exercises going on,
but New Zealand, Australia, the United States,
UK and Japan were basically, I think South Korea
were basically driving their ships
around the South China Sea.
This is gonna be, I think.
Yeah, so you know, I did a really interesting interview
with the historian and commentator, Neil Ferguson,
who is also a pretty avid China watcher.
And I did an interview with him actually on my app.
You don’t want me to say the name.
The app shall not be named.
But anyway, so he had a really great line,
which is he said that the issue of Taiwan,
it’s basically like the issue of Cuba and Berlin
and the Persian Gulf all rolled into one.
It’s like Cuba and the Cuban Missile Crisis
because it’s right there off the shore of China.
It’s like Berlin, you know,
because that was basically the dividing line
between freedom and totalitarianism,
you know, where the Berlin Wall got built.
And it’s like the Persian Gulf
because the new oil are these semiconductors,
the chips that are fabbed in Taiwan at TSMC.
And so all the resources that we’re dependent on
for the new economy are all right there.
Super smart framing.
Yeah, I thought it was a clever line.
The thing we have to remember about Xi
is that his father was a commander for Mao
and was in a vice premier.
And so, you know, his historical,
he is the original princeling, right?
Remember, you know,
there’s this context of these Chinese princelings,
but he is one of these originalists.
And so his motivation will be, it seems at least,
to bring China back into that spectrum of power,
which is really about a consolidated country
and a single nation state.
And that has to include Taiwan.
It can’t not.
So to your point, David,
it’s almost more motivation for him to go off
on some crazy adventure and try to reclaim it.
That’s gonna be crazy.
It’s really interesting to look at the tonnage of ships
and the number of ships.
The United States has over 6,000 tons of ships,
949 according to globalsecurity.org.
China has only 2,000 tons and 1,000 ships.
They have a lot of smaller ships.
And then Russia, UK, India, Japan, France,
Indonesia, Turkey, Germany, Italy.
These are warships, Jason, or?
Yeah, this is their Navy warships.
And so they’re fighting.
But Japan has a very large one.
I wasn’t aware of this
because I thought they were not doing military buildup,
but they have what’s called a defensive Navy,
which can do offensive stuff.
So this is, I think this is really problematic for China.
How many of these ships are smaller than Sax’s yacht
that he rented this summer?
Yeah, Sax’s tonnage would kind of put the United States
over the top, I think, in this conflict.
The gross tonnage of Sax’s yacht this summer.
Bezos is gonna be donating his new yacht to the-
No, for sure, it’s bigger than Indonesia.
I see Indonesia on this list.
Turkey, I mean, how big could their yachts be?
In my defense, it was a starter yacht.
It was a starter, right?
In my indefensible stuff.
Next one will be bigger.
Yeah, Solana’s gonna make sure of that, right?
Yeah, you can buy yachts with Solana.
All right, I think we covered enough.
GE and Toshiba can’t run their businesses,
so they’re each separating into three separate companies.
Oh, let’s talk about that.
That’s interesting, actually.
And Johnson & Johnson.
Yeah, we should talk about it.
All right, so on Tuesday, GE announced
they were splitting into three separate companies,
Aviation, Healthcare, and Energy.
Toshiba reported a similar plan.
Johnson & Johnson today?
Johnson & Johnson was today.
This is in direct conflict with the consolidation
and the creation of conglomerates and-
But not conglomerates, I think this is an important point,
Jake, you know, in the 80s and 90s,
it was cool to create conglomerates,
meaning you would kind of stick businesses together
that were- RJR, yeah.
Somewhat disparate because you could
financially engineer a way to do it
that would juice shareholder returns, right?
You could borrow money, add lots of scale,
the cost of debt goes down,
you could increase your debt load, et cetera.
And the challenge is when you’re scaling a business,
you either need to grow your revenue organically
or you need to acquire.
And when you’re acquiring,
you’re either acquiring horizontally
or you’re acquiring vertically,
meaning you’re kind of integrating your supply chain
or you’re integrating,
or you’re adding ancillary businesses
that you can cross sell.
So you’re either reducing your costs
or increasing your cross-selling ability.
So there’s some inherent synergy in the acquisition.
The problem with conglomerates
is there is very little synergy,
meaning like when you acquire a new business,
like an aviation business,
it doesn’t create synergy for your healthcare business.
And, you know, there was always a rationalization
that these managers of these big conglomerates had,
which was like, oh, well, we could do this
and we could do that.
But at the end of the day, it was financial engineering
where they simply kind of used debt
to reduce, you know, the cost of capital
and increase the shareholder returns.
And now everyone’s kind of waking up to the fact
that you’re actually decreasing value
because an investor that wants to own an aviation company
doesn’t also want to own a healthcare company.
So the investor doesn’t buy those shares.
And the investor that wants to own the healthcare company
doesn’t want to own the aviation company
so they don’t buy those shares.
So the way to increase shareholder value
is to actually split those businesses up.
And then the investors
that want to own the aviation business
will pay more and the investors
that want to own the healthcare business will pay more.
And the overall value of those two businesses goes up
by having them be separate.
And that’s what the market’s kind of waking up to.
And this is kind of a trend
that’s been going on for years now.
You know, going back to kind of 2013, 14,
where the market started to kind of rationalize
some of these silly conglomerate business ideas
and break them apart into more kind of, you know,
targeted businesses that can actually spin out
or yeah, or break off.
That can basically attract shareholders
to bid on each one of those businesses individually
and drive value up.
You know, one business I was close to
that I saw this with was Dow DuPont,
where they, you know, Dow merged with DuPont
and then they split into several businesses
that each were focused on a particular vertical
and it made a lot of sense to drive value
for the overall shareholders.
So at the end of the day, you know,
these conglomerates are about
kind of driving economic outcomes.
And the only folks that you see doing this well
are folks like Warren Buffett,
where the job is really about capital allocation,
where, you know, you can allocate capital
to the best business
and that business on its own will grow organically
versus taking a bunch of crappy low growth,
no growth businesses,
levering them up to kind of juice the returns on each other.
And we’re seeing this slow unwinding happening.
So I think it’ll continue to,
and you could probably go
and pick a bunch of these conglomerates
and you’ll see the activist shareholders doing this.
They’ll buy a bunch of shares,
they’ll instigate and say,
hey, you guys should break up.
The share price will go up by 20, 30%.
So if you want a stock tip of the day,
you know, go find a set of conglomerates
that are gonna get attacked and broken up.
It’s interesting Chamath and, you know,
with public markets, Dell is spinning out VMware
and that’s gonna create a massive amount of cash
and shareholder value.
They’re doing a huge dividend.
So I guess my question to you Chamath is,
when do we start to see this hit,
not from a point of weakness,
but from companies that are strong and see this as,
hey, this is a way to just unlock shareholder value.
Will we see an Amazon spin out AWS,
a YouTube or an Instagram
come out of their parent companies?
I think it’s very rare that these things happen
on the offensive foot.
I think it’s typically a defensive maneuver
that’s driven by really poor returns
over long periods of time,
or activist investors who wanna push for a value unlock.
Yeah, like eBay, PayPal.
Totally, I was about to bring that up.
I mean, do you remember how hard that eBay,
I remember like John Donahoe was the CEO.
He like fought that so hard.
I remember getting a phone call from him
asking if I would support them.
He had rounded up Reid Hoffman
and other people support eBay.
I’m like, no, I can’t support.
No, wait, wait, wait, no.
Do you remember this?
We were in Vegas and Donahoe called
and we were working on a plan
and then you went and walked Donahoe through the plan.
Do you remember this thing?
No, what happened?
We were in Vegas.
You were gonna try to do a hostile spin out of PayPal.
No, Donahoe either called you or called me
and I said, you should talk to Sachs.
And we sketched out a plan for what PayPal should do.
I remember that.
Oh yeah, yeah, I do remember that.
And like on Saturday afternoon,
we sketched out this plan.
Yeah, yeah, yeah.
So I told John, no, I’m sorry, I can’t support you
because I believe it should be spun out.
And so the only two people from the original PayPal team
who said that publicly were me and Elon.
And we said that if you could get PayPal out from under,
this sort of eBay bureaucracy,
it could be $100 billion plus company.
The bar for acquisitions is extremely high.
Like I think the last really two acquisitions
that were really done well was Sachs acquisition
of WhatsApp and Instagram.
But since then, the bar is extremely high
for these conglomerates.
So as an example, PayPal was rumored to be buying Pinterest
and there was such an incredible shareholder revolt
that they had to put out a press release saying,
we have absolutely no interest in acquiring Pinterest.
But all that did was just accelerate the bleeding
because then people were saying, wait a minute,
how strategically lost must you be
that you would want to buy Pinterest?
And so then as a result,
the PayPal stock price has gotten absolutely.
Yeah, it was over a $300 billion company
and it lost the entire value of Pinterest basically.
Here’s the big issue that I think we have
in American economics and company building.
We’ve gone through 20 or 30 years
of really under investing in R&D
at the sake of share buybacks,
at the sake of market consolidation.
Private equity, driven take privates.
And so all of this capital misallocation
has really put us on the wrong foot.
And the pandemic basically showed
that we were really ill positioned.
So a lot of these conglomerates,
it doesn’t make sense today because we’ve proven
that the compensation schemes for CEOs,
the incentives for executive management
are way too perverted.
And they just create horrible outcomes.
A different example I saw in the last,
I think 15 or 20 years, IBM’s market cap
has gone down to 113 billion.
In the meantime, they’ve bought back
$132 billion of stock.
Could you imagine the kind of R&D
that IBM could have affected with that 132 billion
and where they could be?
So we have-
But they’re not good capital allocators.
Well, we have horrible capital misallocation.
Well, look at Apple.
I don’t think they know how to spend the money on R&D.
Yeah, they’re not good at it.
That’s the point.
They’re not good at it.
They’re better off taking those massive-
It’s not clear.
They’re better off taking those massive R&D budgets
and putting it into M&A budgets.
Not for like a $50 billion Pinterest acquisition
that doesn’t make any sense, has no synergies,
but on smaller acquisitions of teams
that have built really interesting technology.
I mean, look, IBM could have bought
a lot of different things with $130 billion.
They don’t seem to know how to innovate or operate.
Those guys don’t seem to know how to do anything.
My point is now we’re in this cycle
where these conglomerates will get ripped apart
so that a brighter, fresher,
and probably younger group of executive management
can take a different spin on these companies
and actually do some.
So for example, the J&J spin out is really exciting
because you take med devices and pharma
and you separate it from a really struggling,
complicated consumer goods package business.
You know, the shampoo, the Q-tips, the Listerine.
Get all that off balance sheet.
Now you can actually make drugs and med devices,
and that’s a really interesting business
that the right CEO can really do
a lot of interesting things with.
I heard an interview with the CEO of GE,
I think, Culp, who was putting forward this plan.
The line that I remember that kind of resonated with me,
the benefits of focus are immediate.
The benefits of synergy are hypothetical.
And I think that’s really the key point here.
And that’s what’s going to fuel
all this sort of deconglomeration
is that the benefits of focus to a company are so huge
that, you know, but the reason why it doesn’t happen
is because of this instinct
that all these managers have for empire building, right?
So when times are good,
they can keep building their empires
and then something bad ass to happen
to force them to focus.
And by the way, the motivation, they’re not owners.
They’re typically not founders.
And so what you end up seeing
is their comp goes up linearly with market cap.
So the bigger the business, the more money.
Right, and this is just to close the thought out
on that whole eBay PayPal thing.
I mean, it was so obvious
that eBay should spin out PayPal,
but the management resisted it
and it took an activist shareholder.
I think Icon came in there.
It was Icon, yeah.
It was Icon who came in there.
Yeah, when Carl Icon is in the lobby, you’re fucked.
Well, but Icon shouldn’t have to come in there.
The reason why there’s opportunities for Icon
is the managers want to do the right thing.
He unlocked a quarter trillion dollars of value.
He was incredible.
No, I mean, he spun that out for 40 or 50 billion.
Now it’s worth five times that amount.
It’s a quarter trillion dollars.
Yeah, it’s crazy.
And just to put this all in perspective,
the stock buybacks that are going on right now,
Apple did almost $20 billion less quarter.
They’ve done 77 billion last year.
And you want to talk about the impact
of tax policy on innovation.
Well, you’ve got on one hand here,
Apple is looking at,
well, I’m going to have to pay all these taxes.
I might as well just increase the amount
I’m buying back and be neutral.
Why would I want to show any kind of a profit here?
I’ll just buy back as many shares as possible.
The company will eventually be private.
I mean, this is,
you got to be really careful with how you do this
because there’s no incentive for people now
to put money into R and D or other stuff.
So just buy back the stock
might be the most efficient thing to do, correct?
In terms of like the share.
If you don’t know how to spend the money.
It’s the dumbest thing to do.
It basically shows you’re an idiot.
Well, it shows you got nothing better
to spend the money on.
So maybe buying back the stock
is better than throwing it away.
But yeah, it means you’re out of ideas.
It means you’re out of ideas.
Or a combination of,
my God, this core business is throwing off so much money
that we can’t come up with enough ideas at that time.
I think that’s also part of it.
No, it just means you’re not ambitious enough.
I mean, what would you spend 20 billion on?
I mean, Zuck is having a hard time spending 10 billion
on creating the metaverse a year.
I mean, you’re talking about 80 billion a year.
What would you put that towards?
What should Apple put it towards?
No, Apple could even more aggressively double down
to enter the car market.
They could have done it much sooner than they have.
They could spend 20 a year on that, sure.
You know, easily.
They could actually enter, I don’t know, power.
Yeah, I mean, but they’re, you know, Apple,
their culture is to have very few products as a company.
They’re always very proud of that.
It’s the Steve Jobs focused thing.
I mean, I think it’s worked pretty well for them.
I know you’re second guessing it.
The thing that I hear-
I just don’t like buybacks
because I think it comes at the sake of R&D
for most companies.
I think obviously- It’s not an easy choice
of crazy shareholder values.
No, the big tech companies are different,
but everybody else, what you see is R&D
is like one or 2% of their, you know, it’s a shame.
Look, Apple could definitely be more aggressive,
but I wouldn’t judge the Tim Cook era
until we see what happens with glasses
because this is the product that I hear is coming
is going to be their, you know, their AR glasses,
and that’s going to be a new computing platform
that they open up to developers.
And I guess Cook’s been there for, what, a decade?
But I think he doesn’t want to retire
until this comes out and he can see
this is going to be his signature product, I think.
But I’ll tell you, just the other thought
that just went through my head
as I saw this news about GE,
it really was kind of the end of an era.
You got to remember that back in the 80s, 90s,
I think even as late as 2000,
GE was the number one company in America by market cap.
It was the top of the S&P 500.
It later subsequently got kicked out of the Dow Jones.
But the thing that went through my head is,
you know, when I was a kid growing up,
the only two business names that I even knew
were Jack Welch and then Lee Iacocca.
You know, that was it.
That was it.
They had their posters on their wall.
Do you remember that?
GE and Chrysler.
Farrah Fawcett in between the two of them.
It was big Jack Welch and Iacocca.
And now you don’t even know the name of the GE guy.
I mean, like I know it because I watched some interview
and I saw him up there, but I mean,
you can’t think of a business leader today
who’s not in tech and really a tech founder
or somebody who’s handed the ball by the tech founder.
So we know Tim Cook because Steve Jobs handed him the ball,
but otherwise it’s all tech, all tech founders.
You don’t hear about any of these old,
like Dow Jones type companies anymore.
It’s just the business environment,
the economy has changed so much since the 80s and 90s.
It’s all totally dominated by tech now.
But tax, I would argue that the disruptive business
and the disruptive business leader are always the icons.
Back in the day, the chemical companies were the icons
and everyone knew the chemical companies
and the guys running them.
Then it was the industrial companies,
then it was kind of the financial,
then it were these guys in the 80s and 90s
that did all the LBOs.
Yeah, but Walsh and Iacocca weren’t founders.
But they were in different ways.
Tell me the top two companies on R&D spending.
Top two companies without looking on R&D spending.
In the world?
In the world.
Number one, number two.
Give me number one, number two.
I’d say Microsoft is up there.
No, it depends on classification,
but I would say Saudi Aramco.
Freebird, what do you got?
Yeah, I would probably put Exxon up there.
You guys need to think about who has been
some of the most innovative leaders.
Amazon, 42 billion in 2020.
No, but Jason, that’s an accounting thing.
If you’re saying in the world, Saudi Aramco,
their exploration, their E&P budget
is probably $200 billion a year.
Okay, I guess maybe because that’s not,
is that a corporate entity technically
wouldn’t be on the list?
Yeah, it’s a public company.
Yeah, so it could be.
Google’s got to be spending 25 billion a year.
Alphabet is second with 27 billion.
Oh, off by two.
Huawei is third, 22.
Microsoft is fourth, 19.
Apple is fifth, 18.
So tech companies, you’re saying tech companies.
No, this is all companies.
Some of this is just accounting categorization.
It’s accounting categorization too.
Because the engineering budget
is basically what goes into R&D.
So the more engineers you have on staff,
the bigger your R&D budget.
Doesn’t mean you’re producing anything, by the way.
Bigger industrial companies,
traditional companies that list things as R&D.
You know, most of those dollars flow out
to third party companies like enterprise software companies,
So it doesn’t end up, it gets accounted for,
it’s quote unquote R&D because they get to capitalize it.
But that spend is typically
not paying in-house salaries to engineers.
And that’s the distinction between true tech companies
and other companies that are quote unquote
going through a digital transformation
or have a quote unquote R&D budget.
They’re outsourcing R&D
and typically paying three times as much
and typically getting one 10th in the return.
And I think that’s maybe a good heuristic
for how you might kind of want to look at
what differentiates a true tech company.
Depending on accounting,
Saudi Aramco spends 37 and a half billion to 50 billion,
depending on how you’re accounting.
All right, so that puts them at,
probably tied with Amazon for all intents and purposes.
That just means I was right, Jason.
That’s what I care about.
Well, I mean, I’m wondering,
the reason I think that they might not be listed
is because they’re-
I’m just kidding, I’m just kidding.
No, no, it’s a really good insight.
Yeah, Cal was reading a BuzzFeed article and he had-
No, it was Barron’s, it was Barron’s.
But anyway, putting it aside,
I think the issue might be
that they are recently public, right?
So maybe they’ve only been filing public
for two years or something.
All right, I think that’s everything.
How’s everybody doing otherwise?
How’s everybody’s personal life?
Are people losing their mind?
What’s people’s plans for the end of COVID?
I’m gonna go have beer and pizza on the beach.
So I’m ready to get out of here.
I mean, I’m exhausted.
Are you guys exhausted?
This has been a fucking crazy run.
I don’t know what day it is anymore.
I’m ready to wind the year down.
I am so exhausted.
I mean, this has been the craziest pace
I’ve ever experienced in my life.
The number of deals going on, the amount of inbound-
Oh my God, I tell you at that conference,
So I have all these founders come up to me
and pitch me what they’re doing
and a couple of them are like,
that sounds really interesting.
Can we participate in that?
It’s like, no, no, the rounds are subscribed.
I’m like, why’d you come up to me and pitch me this then?
How dare you?
Rule number one.
I tweeted a new terms of service.
This is only if I’m at a conference, okay?
If you set up an appointment in my office, it’s fine.
That’s like an opt-in.
But like, if you come up to me
to pitch me your idea at a conference,
then, and I say, okay, I want to invest,
like give me an allocation.
Like, don’t come to me and pitch me
if you’re not gonna give me an allocation.
Yeah, no, that’s not cool.
That’s like being like, oh my God,
I know the best restaurant in the world.
It’s open tonight.
They’ve got the greatest steak.
And you’re like, okay, I’ll go.
Guys, tell Sax about the white truffles from yesterday.
Oh my God.
We had dinner at Chamath’s house last night.
It was incredible.
He got these white truffles from Alba.
Best meal I’ve had in a year or two.
I mean, it was really incredible.
I really appreciated it.
It was amazing.
And 2000, like it was 1996, white burgundy, Leroy.
The white burgundy 2009.
And I’m not a wine drinker.
I’m not saying that your guy,
your chef beat Sax’s from two weeks ago.
Sax’s, wasn’t Sax’s chef, your old chef, Chamath?
I think one of his chefs.
I think he lives in a stratosphere of Bern.
He lives in a stratosphere of Bern.
That’s just at a different, he’s next level.
Chamath, are you eating my sloppy seconds?
What’s going on over there?
No, no, no, I think.
I think I gotta beat that one out.
I don’t know what that term means
when you think it means anymore, Sax.
But by the way, there was a dinner conversation
last night, Sax, to your point.
Chamath, it’s up to you to decide
if you want to disclose the dinner conversation, guess.
But this guy said that there was a guy
that applied to Y Combinator
that had $750 million in crypto.
And so he’s like applying to Y Combinator with his 750K.
For 150K to give up some percent of his company.
And they’re like, all these stories of these guys
they’re like, I will pre-fund my own Series A
with $15 million to create this business
inside of the YC machine.
That was incredible.
There’s such an incredible, like inexplicable,
undescribed, I think in the mainstream media
story of crypto wealth creation that’s been going on.
And these crypto 100 millionaires, billionaires
are emerging and doing their own kind of innovation
completely under the radar right now.
The smartest people that we know are selling right now.
Yeah, and I think they changed their conversions
for the YC safe.
They’re now getting preferred shares
they used to do common.
And they now, I think it happens post-conversion.
So they want their 7% fixed, you know,
after your next round of funding is my understanding.
I don’t know if that’s, but yeah,
so they got a more aggressive, but.
It’s, you know, what’s happening is like
the accelerators have to move earlier back to incubators.
So the idea of somebody, you know,
grand or some of the other companies we funded
coming to the accelerator with 20,000
or 50,000 in revenue, in some cases,
they may be able to raise money without,
and certainly the crypto companies
are raising $25 million.
They’re outpacing regular companies,
regular startups, non-crypto startups.
And they raise it in 10 seconds from a bunch of ETH
for buying tokens.
They’ve created a whole shadow economy
that doesn’t have to play by any of the rules.
Yeah, do you really need venture anymore?
Well, if you want to obey the law, I guess you do.
But in a lot of these cases, like.
I did this, I did this to understand.
This whole new economy
could emerge completely offline, right?
Completely off the, the current.
I mean, the SEC and Gensler
do want to get this thing tightened up.
They don’t want people doing this.
I’m not surprised.
20, I think it was 2015, I presented Amazon at Irisone.
And one of the things that I did
was we calculated what Bezos'
investment track record was, right?
Because he basically took all his free cash flow
and reinvested it in the business.
And you could measure
what his return on invested capital was.
And it was like 42%.
And on a really big number, on tens of billions of dollars.
You’re saying his IRR
on the money Amazon deployed in R&D projects
like the Kindle or AWS.
Yeah, it was about 40, 42%,
over like a multi-decade period.
Double what a venture firm would do,
or top debt venture firm would do.
I mean, he’s in a class by itself.
But my takeaway in that moment was,
wow, this is the smartest investor of our generation.
That’s what I said to Bezos at the time.
And Bezos had a track record of selling
roughly a billion dollars of Amazon stock every year.
And this year he snap sold 6.6 billion.
Which, when we talk about the percentage you’re selling,
we’re talking about selling 5%, 10%.
So, they’re not diluting their whole positions,
but these are big numbers, you’re right.
I think it’s a signal.
Jake, are you gonna close this out?
All right, everybody.
It’s been another amazing episode.
Episode 55 of the All-In Podcast from,
You know where people are coming from.
The All-In Summit will be in the spring at some point.
I’m gonna go to Miami and look at the locations.
March 11th through 15th, I can’t,
because I’m playing poker.
You got your poker chip.
In an undisclosed location, big time poker.
I can go, listen, is there any way I can deal?
Can I deal the game?
Big boy poker.
You need to have a funny guy there.
I mean, I’m not a great dealer,
but can I be a waiter or something?
I think the game starts at 2,000, 4,000,
but it could get a little spicier.
Zach, you’ve had a good year.
Maybe you should go.
Yeah, maybe you should.
A Solana play?
Get the Solana chips and play?
Oh, he can play.
David can play.
A lot of bequeting this year.
Here’s what you do.
You chip off 10 milli in Solana,
you put it in an LLC,
and then you buy into the game,
and then we’re in for a breeze.
That may not be enough.
That may not be enough.
All right, 20, whatever.
For the queen of quinoa, the dictator,
and rain man, David Sacks.
I’m Jay Cowell.
We’ll see you next time on the All-In Podcast.
Subscribe to the channel.
We’ll let your winners ride.
Rain man, David Sacks.
I’m going all in.
And instead, we open-sourced it to the fans,
and they’ve just gone crazy with it.
Love you, Wesley.
The queen of quinoa.
I’m going all in.
Let your winners ride.
Let your winners ride.
Besties are gone.
That’s my dog taking a piss in your driveway.
Wait, no, no.
My avatar will meet me at Queens.
We should all just get a room
and just have one big huge orgy,
because they’re all just useless.
It’s like this sexual tension,
but they just need to release somehow.
You’re the B.
You’re the B.
You’re a B.
We need to get merch.
Besties are gone.
I’m going all in.
I’m going all in.