I literally don’t want to talk about
brigading guys, though,
only because it’s getting crazy
and I had to like mod my stuff.
So start the recording, please
start the recording.
I’m going to strike it by brigades.
Do you mean like MAGA brigades?
All right, listen.
No, I’m serious.
Do you think because I can call him?
I’m going to try to call him off.
Hold on, hold on, hold on, hold on.
Hey, Donny.
Hey, Donny.
Jake, I’ll say he’s being
brigaded by MAGA.
Yeah, yeah, yeah.
He can’t handle it.
He’s tapping out.
I tap out, I tap out, I tap out.
Can you call off the dogs?
OK, all right.
It’s all good.
It’s all good.
It’s over.
They’re not going to
they’re not going to brigade anymore.
The sign up is over.
Thank you.
Thank you.
It was getting pretty
getting pretty acute there.
It’s done.
Don’t worry about it.
I’m going all in.
All right, everybody, welcome
to Episode 96 of the All In podcast.
We had a bomb drop just yesterday
with Adobe agreeing to acquire Figma,
the design tool.
We’ll get into that in a minute,
what it actually does
for 20 billion dollars.
This is just astounding
for this to happen.
Period.
Full stop.
It’s the largest private
company purchase,
I believe, in history.
This company, if you don’t know,
it helps you design web apps
or user interfaces.
So if you’re a designer,
we used to make mockups.
We’d send them around in the industry.
As images or PDFs,
and then like Google Docs,
where you can put comments
on somebody else’s words
and you can collaborate in real time,
we call it multiplayer mode.
Figma is multiplayer mode.
The company is just a juggernaut.
If you work in startups,
you get Figma designs all day.
And Adobe stock got crushed
because of this was down
as much as 18 percent on Thursday.
Figma’s most recent valuation
was 10 billion dollars
in June of 2021.
Their Series E, so peak market.
They had raised 200 million
at that time.
There’s a lot of details
to get into here.
But, you know, listen,
let’s ask the sultan of SaaS here
what you think of this,
because it’s double
what was an incredible
market last year that was overheated.
So what does this say about the market?
Figma, you know, Figma itself
or maybe Adobe’s,
you know, jumping the fence
or being skittish?
How do we reconcile this, Sax?
Oh, if you judge Adobe stock price
the other day,
the market hated the deal.
I mean, the Adobe stock
price went down like 15 percent
and that’s 150 billion dollar
company roughly.
So they lost almost
the entire purchase price
in the market capitalization of Figma.
I think that’s.
That’s basically an overreaction.
I, you know, I know all the news
is basically on how
Adobe is paying 50 times
and that’s no longer the multiple.
The multiple is more like,
you know, eight, nine,
10 times for high growth SaaS companies.
There is truth to that, but
but I think it misses
some important details
about how fast Figma is growing.
Can we actually throw up on the screen
the AR history of this company?
So and for people who know
the multiple is the multiple
times top line revenue.
Times ARR, really.
So, OK, so explain that to folks.
Yeah, well, ARR is just
the annually recurring revenue.
It’s subscription revenue.
Sometimes people will look at
next 12 months revenue,
which is a similar concept,
not quite the same,
but sort of in the ballpark.
So, you know, what’s
interesting about this company,
I think it was founded 2011, 2012.
It had a very long wilderness period.
That’s what I call the period
where the founders
are trying to figure out
what the product is going to be.
Really, for almost five years,
they finally launched
a private beta in 2015.
They then opened it up
to public launch in 2016,
and they didn’t turn on monetization
until 2017.
So five years into the company,
they hadn’t made a dime.
So, you know, it’s roughly
a 10 year old company.
And for the first five years,
didn’t make any money.
And then they started to make money
five years ago.
And then in 2018,
I think they turned on
the enterprise tier
and then it’s been kind of
off to the races.
That’s incredible.
Yeah, what I can tell you
looking at these numbers,
by the way, so I don’t know
if these numbers
are perfectly correct.
This is sort of
I would call the scuttlebutt numbers.
These are numbers that I believe
to be true.
But it’s not like these are numbers
that the company’s confirmed
or anything like that.
This is just me
gathering intelligence
from talking to people
in Silicon Valley.
So this is what I believe
to be the case.
Can you read the numbers for people
that aren’t on YouTube watching this?
Yeah. So in 2017, again,
the first year they monetized,
they did 700,000.
They ended the year with 700,000 of ARR.
Remember that ARR
is kind of a point in time metric.
It’s the amount of subscription
revenue, your annual run rate,
subscription revenue at that time.
So they ended 2017 with 700,000.
2018, they ended with 4 million.
2019, they ended with 23 million.
2020, they ended with 77 million.
2021, 210 million.
And then the estimated number
for this year is 450.
So you’ve seen in the press,
I think it has been publicly reported
a 400 million dollar ARR
numbers currently where they’re at.
I’ve heard that they’re going to end
with something more like 450 this year.
And then their forecast for next year
is or was at some point in time
when somebody heard this.
800 million forecast for 2023.
So my point is, I’ve seen
a lot of SAS metrics.
And I can tell you that this ARR
ramp is phenomenal.
You know, I’m sure people
have kind of heard about the
triple, triple, double, double.
That’s kind of what VCs want you to do.
They want you to triple two years in a row.
Then they want you to double
two years in a row and so forth.
This company did way better than that.
I mean, 700K to 4 million
is a really fast ramp.
And then 4 million to 23
million is incredible.
That’s like, you know, over a 5X.
And then they did over a 3X
going from 23 to 77 million.
I can tell you that is super hard.
I think most companies,
even the ones that hit,
you know, low 20s,
tripling year over year,
they tend to decelerate
to two and a half times
or something like that.
This company was still growing over 3X.
Then they roughly tripled
again to get to 210.
And then since they got to the question.
Yeah.
So now they’re double that.
Do you think the triple in 2020
was a COVID pull forward?
Or do you think that
that was a natural, like a zoom or not?
That’s what I was going to say.
I mean, it’s possible, but
people were collaborating.
I’m not I don’t see.
I mean, so far in the numbers,
I don’t see a huge slowdown here.
I mean, look, once the numbers
get into the hundreds of millions,
it’s really hard to maintain
the same growth rate.
You’re compounding off such a large base
that it’s just inevitable.
You can’t keep growing 3X year over year
once you’re at,
you know, 200 million of ARR.
But the fact they got first from 23 to 77
and then 77 to 210 and now 210,
let’s say they’re at 400 now
and they’re going to be at 450
by the end of the year plus.
It’s it’s pretty amazing.
And so, OK, so, yeah.
So Adobe’s paying 50 times
current ARR.
But if you believe this,
they’re only paying divide by two.
They’re paying 25 times
end of next year.
So like 18 months from now.
And then you figure, you know,
within, say, two years after that.
They’re going to be,
you know, at somewhere between
one and a half and two billion of ARR.
And as you guys know,
there just aren’t that many SAS companies
that even get to a billion of ARR.
So so I don’t think Adobe’s
making a bad deal here.
I think there’s a question about
is there any point at which this product
hits some sort of market saturation?
But Adobe’s in a good position
to know that because
they understand this market.
They are in this market.
It feels to me like, I don’t know,
I’ve been using Adobe Photoshop
right around when it first came out,
like 1992.
And this product I’ve used,
it was built web first,
it was built for collaborative use
and Photoshop over the years,
they’ve really tried to take
what is a desktop installed
software application
and then try and create cloud based
features. And it’s a terrible,
terrible user experience,
at least from my perspective,
having grown up on using Adobe Photoshop.
But what’s most important,
I think, is a lot of people
think about this on
is it the right price to pay for the company?
But at the end of the day,
the right price to pay for the company
is what Adobe views to be
the risk and reward for their business.
And they effectively paid roughly
12% dilution of their company
to do this deal.
So they’re saying, let’s take 12%
of our company and effectively de-risk
the biggest risk to our business,
take out the biggest threat
to our business for 12% of our company.
Not 12%.
Wasn’t it 12%?
You have to factor in the actual
drawdown of the stock as well.
So it’s about 33%.
They they they effectively.
Well, I’m talking about like assume
take take the price of the stock aside
the number of shares they’re issuing
because by the way,
the deal value went down with the stock.
So I read the the merger terms last night
and there’s a couple billion of cash
and then a good chunk of it is in stock.
And it’s a it’s 10 billion of cash
and it’s 10 billion of shares
at the price when the deal was announced
and to your point.
So it’s a fixed number of shares.
The stock, it’s a fixed number of shares.
It’s not a fixed.
It’s not a fixed monetary value.
So it’s down 20%
from the deal announcement.
So that 10 billion of stock
is now actually 8 billion of stock.
So no, the whole deal is now 18 billion,
not 10 billion of cash to month
the 10 billion cash.
Yeah.
And then there’s there’s 2 billion
of deferred RSUs and stock based
compensation.
But there but I mean,
if you think about it
at the time of the merger,
they’re they’re either, you know,
I think they have
they’re going to use some term loan
that they have to get the cash.
But they’re effectively issuing,
you know, 10 divided
by their total share count,
which is roughly 6%
of their total shares outstanding.
So, you know, they’re kind of taking 6%.
Or let’s just aggregate
the two together and say
they’re taking roughly 12% dilution.
Sure, the value of the stock goes down.
So look, I think like this deal
is really interesting.
So first, let’s just give huge kudos
to the CEO and the team and the investors.
What an enormous win
for all those folks.
That’s awesome.
It keeps Silicon Valley
kind of going right.
And that’s just awesome
to see these kind of big wins.
I read this incredible profile
about the founder.
And he sounded like
such a fascinating person,
he basically said
that the profile basically said
that he was spending months and months
going from office to office
all around the world,
meeting customers,
sitting with customers,
reading trouble tickets.
That’s what he would do.
You know, reading help desk tickets
about the product on vacation.
Whenever you see a CEO
that is so customer obsessed,
typically there’s good outcome.
And so this is just another
validating point on that theme.
Now, let’s just put Figma aside
and let’s just talk
about Adobe for a second.
What is so incredible is
you have a company.
Yes, they spent.
Twenty billion dollars
or whatever, 18 billion now.
But the way that they did it
is really interesting.
If you go back to Zendesk
and SurveyMonkey,
when those guys announced that merger.
It was above a threshold of stock
where you had to go
to a shareholder vote.
And because there was so much
turbulence in the market,
whether the industrial logic
of that deal made sense or not,
didn’t matter as much to shareholders
when it came time to vote
and they voted it down.
Right.
So interestingly,
Adobe was very clever.
They said, I’m going to do
half cash, half stock
so that I’m below the threshold.
We are below the threshold
where it goes to a shareholder vote.
OK, interesting.
But then you have to factor
in the dilution,
not just the dilution of the stock,
but then the rewriting of the stock.
And this is where, you know,
you lose 20 percent of your market cap
and then you tack on this.
You’re talking about, you know,
a 40, 30, 40 billion dollar
price tag to get the deal done.
And I think that’s where
the head scratcher
was in the public markets,
where folks basically
rebuilt their model and said,
hold on a second.
You know, you’ve been telling me
that this problem is a solved problem.
But when you pay such a premium,
not only does it mean
that this product
is clearly materially
growing and disrupting,
but the existing revenue
base that I was counting on in my model
must be wrong as well.
And that’s the actual flywheel
that now Adobe is in,
where people are trying
to really figure out
how under pressure
are those existing cash flows.
And then if you compound
that with something else,
which is nothing specific to Adobe,
but to the whole market,
which is now interest rates
are going up behind the scenes.
You have this sort of parade
of terribles for Adobe
that they’re going to have to navigate.
Right.
They have a very large portion of cash.
They have a large portion of stock.
They have decaying earnings
in their core business
that they now have to explain.
And then they don’t really
have a lot of earnings.
I think Shantanu said
that it’s going to be year three
before it’s accretive,
which is typically a way of saying
we’re going to lose money
and then in year three
we’ll make at least a penny.
That’s what accretive means.
Doesn’t mean you’re going to make
billions necessarily.
And so these guys have to find a way
for Figma to drop
about a billion and a half dollars
of free cash flow into the business
for this to kind of make sense
in the short term.
So I think those are all the mechanics
that’s sort of putting a lot of pressure
on the Adobe stock,
but it just goes to show you
the amount of disruption that happens,
this movement to the cloud
or the movement to collaboration.
Oh, yeah.
Monolithic products
are just sort of very much DOA, you know?
That is the key.
I think you guys did a great job
of summarizing it.
This is an absolutely great deal for Adobe.
It’s a transformative deal
in the same way the WhatsApp deal
was for Facebook.
It removes one of the two
existential threats to Adobe.
And it turns Adobe, I guess,
into a growth story now,
as pointed out, Adobe’s product
was single player mode
and Adobe grows at about 12 or 13 percent
quarter right now.
And now you have a company that doubles
and they really have been facing
three paradigm shifts
in the last five or so years.
Obviously, you pointed out one, Friedberg,
desktop software downloading it
versus cloud based software.
Well, here they go.
Now they’ve got experts in cloud.
And then the second one.
Yeah, but they have a thing
called Creative Cloud.
And they are slowly
trying to figure that out.
It’s a paradigm shift inside the company.
And they’ve really struggled.
So now they have somebody
who’s cloud first.
Do you guys ever use those products?
Those Adobe products?
We have.
But hold on, let me finish here.
There’s three paradigm shifts here.
Feature for feature.
They look very similar.
No.
So these these three paradigm shifts,
the one is the desktop versus the web.
The other one is subscription.
So Adobe was charging
$1,000 a year for the creative cloud.
Now they charge 25 bucks a month for it.
They successfully did that.
Now they’ve successfully.
I think have figured out
collaboration software.
But Adobe has one thing
that they have not done,
which I think is the real reason
they had to buy Figma Adobe.
See, this is the problem
with these big public companies.
Adobe and all of their investors
got very addicted
to the free cash flow
generation of that stock,
and it’s been an incredible performer.
And let’s just be honest,
Shantanu is one of the best CEOs
of the last few decades
in the public markets.
Period. End of story.
OK, since 2007,
he has just run a masterful playbook.
At the tail end of that, though,
you know, in 2022,
this is a company that has,
I think, six or seven, maybe
I think maybe $8 billion
of free cash flow.
It is a gargantuan
money making business.
And so they refused in Creative Cloud
to go to that free tier that Figma has.
And if you look at all of the stories
around Figma,
one of the most powerful things they did
was basically allow people to use this
for free, effectively forever.
Yeah. Bottom up sass.
Yeah. And the problem with Adobe
is like that’s a business model
disruption that they could not afford
in the public markets,
because if you condition
a set of institutional investors
to be expecting seven to $8 billion
of annual free cash flow
and all of a sudden
you’re willing to torch it
to take a quarter of that
and take it free.
That is probably the biggest reason
why they had to buy this thing,
which was that they needed to tuck it in.
And they’re like, how can I do it?
Well, I just have to do it
by diluting the stock.
One time, that was one time
stock issuance.
Yeah, that was it.
It was a one time 12% diluted.
They’re still in there.
It’s one and done.
It’s one more to go.
The point the point
you guys are making is more
broad, which is it’s
not just about Adobe.
This is the classic innovator’s dilemma.
Right. Like any big company
that reaches maturity in their market,
and has scale and has cash flows,
you have a different shareholder base.
You move over from growth to value.
And once you’ve got value shareholders,
I mean, I’ve been to these
institutional meetings
when I was on the exec team at Monsanto.
And, you know, they wanted dividends
and they wanted stock buybacks.
And they’re like,
it’s nice to see growth.
But at the end of the day,
I want to know where’s my dividend
going to be and what’s my stock
buyback target going to be.
And then to say, hey,
I got to go invest in
innovating my way out of my corner
because, you know, in this case,
cloud is reinventing my marketplace.
It is a very hard place
for a manager of a business
of that scale to be, by the way.
I think there’s another
every industry, by the way.
I think there’s another takeaway
that’s really interesting here,
which is that if you look
at big tech companies,
I think you almost have to sort them
into two buckets,
at least in the enterprise.
And that sucks.
You can tell me if you disagree.
But there’s one type
of enterprise company
which makes basically a single
linear monolithic product
or a handful of those
monolithic products.
Right. Think Workday,
think Adobe, et cetera.
But then there’s this
other type of company
which are more platform
level businesses that have this,
you know, mixture of things
that they do relatively well integrated.
Maybe each product is not so great,
but together they’re pretty decent.
And you have distribution leverage
and you have pricing power.
Think Microsoft and the totality
of those products.
So what’s interesting to me is
you cannot effectively compete,
as it turns out, against Microsoft
at any point product.
And Slack, I think, is the best example
where, you know, Microsoft Teams
was fundamentally
cannibalizing this business,
which is what drove Slack
into the arms of Salesforce.
And, you know, you could say that
Teams was not as great of a product.
I would have I would make that claim.
But what Microsoft had
was distribution scale and pricing
power where you could discount
and effectively give it away for free.
Adobe isn’t in that situation.
Right. They can’t do
that kind of stuff.
And so when you compete
against those kinds of businesses,
you have a better chance of winning.
The takeaway, I think,
for the entrepreneur
is when you’re thinking about
the next enterprise business to start,
I would try to bucket these companies
that you want to compete with and say,
if I’m going to build
a newer version of X,
make sure that version of X
is going after a company like Adobe
versus a company like Microsoft,
because it’s much, much, much easier
to build value when you’re competing
against a monolithic product company
versus an entangled platform company.
Saks, would you bundle
if you were the CEO of Figma
would you now, I’m sorry, CEO of Adobe,
would you bundle Figma
into the creative cloud
and then just make it one subscription?
Would you Microsoft teams that?
Yeah, maybe.
I don’t know.
I’m not sure about that.
I do think that Microsoft
is a little bit unique
in its ability to bundle.
So what so is right
about the power of the bundling.
What they do is I think
it’s called the E5 bundle.
They have all these products
that virtually all enterprises
use from office to,
you know, Active Directory to,
you know, there’s like
a whole long list of them.
And so what they’ve done
is they’ve created one price
for all of those products.
They sold a bundle
under a wall to wall enterprise license.
And what they do is
when they see a new competitor
come along, whether it’s Slack or
Zoom or or Okta,
is they’ll basically just clone it,
create a worse version of that product
and throw it into the bundle.
And so now every single enterprise
is getting the Slack clone
or the Zoom clone or whatever for free.
And that has a huge material impact on,
you know, it pulls the rug out
from under those startups.
So now that’s not to say
that Microsoft’s product
is anywhere near as good
as those those competitors.
But, you know, now all of a sudden
the Microsoft product
is on a marginal basis free.
But then what Microsoft does is,
you know, every year or two,
they go raise the price of the bundle.
So basically, you know,
they get you hooked on the bundle.
They then use it to systematically kill
or undermine a competitor.
And then they know you’re stuck
and then they raise the price.
They basically have inflation
of the price of the whole bundle.
I think it’s very anti-competitive,
actually.
I think it’s it’s akin to dumping.
I’m not sure what the logical
stopping point of it is.
Like, I don’t know if we can have
a healthy SaaS market
if Microsoft is allowed
to keep doing this forever.
Because think about it.
I mean, they will just every year
they will take the hot SaaS company
in du jour, clone it.
It’ll be a shitty version.
They’ll throw it into their bundle.
And now they’re dumping
they’re dumping the product in the market.
It’s basically free.
It’s free until they basically drive
and they drive out the competitor
or destroy it or basically
undermine this market cap
to the point where it can no longer
make the kinds of investments
it needs to pose a real threat
to the Microsoft larger entity.
Right. So think about
how anti-competitive this is.
And you don’t hear a word about this
from Lena Khan or Washington.
They’re only focused on social networks.
No, it’s so funny.
It’s like she’s more focused on,
you know, making sure
Amazon doesn’t buy Roomba
that, you know, this stuff
that’s happening.
Facebook doesn’t buy one VR app.
Yeah, it’s not very
sophisticated approach.
This is the kind of stuff
that actually really matters.
I really think you nailed it
on the headsacks.
It’s a it’s an impossible strategy
to defend against.
The the other thing
that is interesting, by the way,
about all of this is,
you know, if you think
that the valuation,
the takeout premium
was basically two X post to post.
What that means is that if Figma
was last valued at 10
is now worth 20,
you know, does that mean that Canva,
which was last priced at 40,
is worth 80?
Well, potentially to
potentially to Adobe.
Right. And if you add
those two together now,
you know, what you really have
is basically the the entire totality
of the creative cloud for Adobe
is basically embedded now
in these two businesses
at an extreme premium.
And so it makes it very difficult
now, I think, as well
for Adobe to execute a strategy here
without it being forced
to do some more expensive
dilutive M&A.
Well, and the other problem, Chamath,
is this is going to ring bells.
So when I said before,
there were two existential threats.
Canva is the other one.
And that is the other paradigm
shift that’s occurred in computing
is that making things radically simple.
You talked about a free bird.
Photoshop is complex
and it’s single player.
Canva is how people create,
you know, any kind of
marketing materials today.
And they don’t hire a designer anymore.
The job of graphic designer
is now everybody’s job.
Everybody can make something on Canva.
But then I think Sachs or Freiburg,
maybe you have thoughts on this.
If you’re Alina Khan
and they do make a run at Canva, Adobe,
now are you saying like, hey, wait a second.
You now run the table on all design tools.
You can’t buy it.
It’s a weird classification.
It’s only called design tools
because it was sold to someone
that was called a designer before.
And that’s not the case anymore.
Now it’s a tool
that anyone can use
in the enterprise setting
or in a small, small business setting
or in an individual setting
to create stuff.
And that wasn’t the case with Photoshop.
And I think that’s what makes this
arguably a very different business,
a bigger business,
a more transformative business
and a farther reaching business.
And I don’t think that there’s necessarily
a speaking of the Figma deal, right?
A case to be made here
that they’re preventing
the extinction of their monopoly.
They’re buying what looks
like a very different business.
And it’s really additive.
It’s it’s a business
that can turn anyone into a creator.
That’s really cool.
Yeah, but you’re kind of
you’re kind of speaking
out of both sides of your mouth now,
because on the one hand,
you’re saying it’s a different business.
But on the other hand,
you said that this is
basically protecting them
against an existential disruption
to their core business.
So if it’s an existential disruption
to their core business,
how could it not be in the same market?
Of course, it’s in the same market.
Well, there are new
entrance competitors.
Yeah, there are new entrants.
And there are, you know,
different underlying,
you know, technology trends.
This is all about cloud.
But nonetheless, I don’t see
how these things aren’t competitors
with each other to some degree.
So I don’t know how this doesn’t
get seriously reviewed.
Yeah, I trust authorities.
It feels so similar to Facebook,
Instagram and Google, YouTube.
And by the way, it’s similar
in both those examples
in a number of ways.
Both Facebook, Instagram
was not competing in the same product
as Facebook at the time
with the newsfeed or whatever.
It was a photo sharing service
that clearly created
a broader addressable market
that got more people
to use a social network.
And YouTube people
thought they were overpaying.
Right. And then YouTube,
everyone thought it was crazy.
They paid a billion six
for that business.
And it’s probably the greatest
acquisition of all time.
It’s been the greatest managed
acquisition of all time, I should say.
And that business, similarly,
I think Google recognized
that people were going to move
to video content
as an alternative
to text based web content
and that it was a bigger
picture opportunity
than what they were pursuing
and in the lane that they operated
in at that time.
And they were right.
And in both cases,
it was more about paying
whatever it took to get the deal done
than, you know, hey,
how many users do you have?
How much revenue?
How much EBITDA?
What’s your ARR?
All that stuff goes out the window
when you’re sitting
in that strategic driver’s seat
at that big company.
And you’re saying
this is a bigger market.
These guys are transforming the market.
And ultimately, over time,
that will eclipse us.
And you can say, hey,
you’re protecting your business,
but really you’re protecting your market.
I mean, the market is going to go away
is what the vision is
like the market that you exist in today
isn’t going to exist in the same way
in five, 10 years.
And that’s what you’re trying
to buy your way into.
I have a question and a statement.
The statement is.
I think Canva should absolutely go
public versus sell,
because it seems like they’ll have
a much easier time
competing against whomever
that they compete with.
I do think that, David, you’re right,
that there is.
A lot here for regulatory review,
because if you go back
and think about visa plaid,
you know, it’s not dissimilar,
meaning you have a young startup
that has this really credible
and viable technology
potentially being acquired by in that case,
it was one of a duopoly.
But here you could make
a very credible claim
that it’s in a market
where it’s roughly a monopoly
because there aren’t really that
that many meaningful alternatives.
So I think Saks is right,
that there’s that there’s some,
you know, oh, there’s a case here.
Yeah, there’s a case here
where it just depends
whether that was literally my question
or this.
Well, not just Roomba.
How about how about that
VR game that Facebook was before?
Like that was a tiny acquisition
that maybe have a million users.
Look, it’s just exactly
they are being punitive.
I think I think it seems like.
Yeah, well, it seems like
what the antitrust authorities
are doing right now in Washington
is they’ve got a list of companies
that they think are punitively suspect.
And our job is to stop these companies
from accumulating more power.
And it’s really about seeing everything
through this lens of power.
But that’s not
what the competition
authorities are supposed to do.
They’re supposed to ensure competition.
It’s about it should be a rule book, right?
And the problem with just approaching
things in this way of the punitive way,
we just have to stop these companies.
Is it creates a chilling effect
on on reasonable exits in Silicon Valley?
There aren’t that many great exits
and we want them to go through.
Now, I think if monopolies
need to be reined in,
there are other tools to use besides
just saying that those companies
can’t acquire other companies,
no matter how unobjectionable they are.
I mean, let’s do things
like allow sideloading.
Let’s basically.
What explain what that is?
Well, that’s basically a way to say that
I think Google, the Android
already does it, but iOS does not,
where you would be able
to basically install an app
or download an app
without going through the Apple App Store.
You could enable competitive app stores.
Basically, you know, I think
I think it’s a real issue
that you have operating system monopolies.
I mean, Google, Android and iOS with Apple
and then Amazon with sort of.
You know, white label products,
those are all operating systems
that are competing
with apps on their own platform,
and there have to be some constraints
and rules around that.
Otherwise, the operating system
will eventually dominate
and replace any app
they want to on the platform.
We saw that’s what the whole
Microsoft thing was about.
Microsoft Netscape was 100% about that.
So I think if you can show
that somebody has an operating
system monopoly,
there absolutely should be rules
of constraints around that.
Does it mean the company
should never be able to buy anything?
No.
I mean, I think all that does
is stifle innovation
without really getting to the crux
of what the issue is.
I think you nailed it.
A good first step would be
allow other app stores.
So Google’s app store could be on iOS.
iOS app store could be
on another platform, et cetera.
And I mean, the other issue here
is Lena Khan’s been pretty clear.
Her entire thesis in taking the job was,
well, I want to prevent
downstream competitive issues.
So future competition.
There’s no better example
of a future competitive issue
and future consumer harm.
I think it’s how she phrases it.
Then this acquisition,
if you’re going to do it
through the lens of future consumer harm,
this creates future consumer harm
because Figma is not going
to compete with Adobe.
You’re saying that it does.
It does massively, massively.
I mean, this is the the dissonance here.
It is great for consumers
because they will bundle it.
They’ll bundle the two things together
and it’ll it’ll make it more valuable
and reduce churn
and it’ll make it simple to buy.
So that’s good for consumers, right?
You get more free stuff.
But future harm
and a future competitive harm
here is the marketplace
will be less competitive
if there is one less
independent, strong company in it.
That’s and if you if they buy Canva,
that’s the definition
of downstream competitive harm.
It’ll be a less competitive marketplace
with these two companies together.
Full stop.
So, Jake, do you if you’re Lena Khan?
You actually pay attention
to this Adobe Figma thing
in like a serious way,
or are you still more focused on Amazon
and, you know, Facebook?
And I would hope that
they would do multiple things.
I’m saying, what would you do
if I was her?
I would create a rulebook
and apply the rulebook
evenly and fairly.
And this is the problem.
This feels very political.
It feels like they’re
going after Facebook
because of the downstream
political issues Facebook causes.
And they’re ignoring the Microsoft issue
and they’re ignoring issues like this.
You know, it just feels like
they have their thumb on the scale.
If you look at what happened
to the Visa Platt thing,
it was an enormous blessing in disguise
because, you know,
the the thing went away
and that was, I think,
like a five billion dollar acquisition.
And then Platt turned around
to raise money.
And it’s like, you know,
multiple teens billion.
It’s going to be a wonderful
independent company.
To your point, Jason, that will now,
you know, create more competition
in a space that desperately needed.
Now, in that case,
that was sort of like
financial payments and rails
and Visa, MasterCard, blah, blah, blah.
But that that that could also be,
you know, if there is a lot of attention
paid to the deal
and it doesn’t end up being consummated,
that could be the positive outcome.
But if you want a future competition,
if you ask me if I was a betting man,
I think this thing is going to close.
I think it closes.
Yeah. Yeah.
I mean, it closes.
It closes because it doesn’t intrude
on the hot buttons of Washington,
not because the merits
of the antitrust are superior
to the Roomba deal or to that deal
that Facebook wants to have.
This is all about political
and cultural hot buttons.
So it’s so weird.
Yeah, but I think we all understand
what’s really going on.
It’s all political.
But I just can’t go back to your question.
I think it was a really good question.
And I’ve had more chance
to think about about should Adobe
change the pricing of Figma?
Should they basically bundle it?
I’ve spoken about the merits
of what Microsoft does.
I don’t think that Figma
should do that here.
Now that I’ve had a chance
to think about it,
and the reason is this, that
you have to think of pricing
as not an element by itself,
but as sort of the most important
element of a go to market strategy.
And there’s no way
that you can basically reprice
Figma completely as part
of some other bundle
and expect not to create
massive disruption
to your go to market organization.
So, for example, you’ve got now
a whole huge sales team at Figma,
including enterprise sales.
They are commissioned
based on their the quotas
that they close.
And that’s based on the ACV
of the deals and so on.
If all of a sudden you price
this as being free
because it’s part of some bundle
that enterprises get
because they’re buying old Adobe.
Now, all of a sudden,
those salespeople can’t earn
commission on that sale.
They can’t be incentivized
to take that product
to market the same way.
The marketing team is tasked
with feeding the sales team.
So now all of a sudden
they’re like, well, wait a second.
Can we spend money
to basically promote this product
when it’s going to lead to a deal
that’s priced at zero
because the enterprise already has
an ELA with Adobe?
So you can’t just look at a pricing
change in isolation.
You have to look at it
as the tip of the spear
of the whole go to market.
I can tell you what’s going to happen
because I kind of experience
this with with Yammer
when Microsoft bought
my company 10 years ago.
And by the way, I’m not critical
of Microsoft at all.
They were an extremely
high quality acquirer
that lived up to all their promises
and did everything
they said they were going to do.
I think if you ever get an offer
from Microsoft,
you should take it really seriously.
I think like I said,
I think they’re a great company,
great acquirer.
But I can tell you what happened
is that once Yammer was folded
in to the office suite
and didn’t have its own
independent pricing
and didn’t have its own
independent sales team,
it just disappeared.
I mean, the promotion of it to stop
because nobody had an incentive
to basically go sell it.
And nobody had an incentive
to go market and promote it.
And it just kind of disappeared.
And that is why you remember
a couple of years after we sold it,
Slack kind of came out of nowhere
and there was no one
to really oppose them
because, you know,
all the promotional activity
we had done around Yammer just ended
because, again, we weren’t
we didn’t have the incentive
that was created
by the sales organization.
Just to explain the pricing thing, David,
I think that the way
this decision will get made
and I’m not saying it’s right or wrong.
But it will get made
not by the sales teams
and not by the product teams,
but it will get made by the CEO
and the CFO in talking
to their largest shareholders.
And the reason is because
there is an implied cost of capital
that Adobe has.
In fact, right now,
if you look at like all of the models
that all of the analysts use
is roughly around 9%.
And so, you know,
they’re going to have to achieve a return
on top of that cost of capital.
What that means is that
they’re going to be forced
to find a way in short order
to make this accretive
and to start generating
incremental cash flow.
And I think that they will be hard
pressed not.
To bundle and not to do
these creative packaging strategies,
because otherwise I think that
there is a risk
that this free cash flow machine
that folks have become
very addicted to it,
Adobe starts to shrink
and that will have huge ramifications,
I think, to the stock
and to the executives and to the morale.
And so I think that they’re going
to do whatever it takes.
And by the way, you see that
you’ve seen that in other companies
who’ve gone into this
phase of their growth,
Oracle being the best example.
You know, they have consistently
found ways to package, to bundle,
to cross sell, to upsell.
And they have incrementally
walked free cash flow generation up.
If they do that,
they’re taking a huge risk
because here’s what’s going to happen is.
So I agree with you
about what may happen.
This may be decided
by the CEO and the board,
but I think if they do this,
they could blow it.
I mean, the Dylan Field,
the founder in his blog post on this
said that Adobe is committed
to letting them run independently.
Well, you can’t run independently
if you don’t have
your own independent pricing.
You just can’t.
For how long is the question?
How long does it take to be independent?
Two years? Four years?
If all of a sudden Adobe salespeople
can sell this product
and include it in their bundle
and the marginal price
is basically free
because it’s part of some bundle,
that means the sale
has been taken away
from whoever the dedicated
salespeople are
on the Figma side of the house.
I can tell you
that will create irrationality
in the sales organization.
And very soon there’ll be pressure
to consolidate
the Figma sales organization
with a larger Adobe sales organization.
They will be moved in.
They may become product
specialists or experts,
but the go to market
efforts will be consolidated.
And then Dylan’s going to end up running
a quote, standalone version of Figma
that doesn’t have its own
go to market organization.
And then you don’t get the feedback
into product from your sales
and marketing team.
So all of a sudden you’re running
a product and engineering team,
but you don’t have eyes
and ears in the market.
I hear all of that.
I think that the Facebook
WhatsApp merger
is probably pretty instructive,
which is Jan had two years roughly
where he was left alone
to kind of like run independently
and then slowly and slowly
it was absorbed back into the mothership.
And, you know, that was a product
with zero monetization.
But there was a lot of strategic
touch points within WhatsApp
and, you know, core Facebook app
and everything else that they were doing.
And I think that you have to do that,
because when you’re spending
tens of billions of dollars
on something,
there needs to be an industrial logic
that is beyond just let me
just buy this thing
and stick it on the shelf
and let it be on its own.
So I think that, you know,
that die is sort of cast.
I think we’re just debating
the timeline in which it happens.
Let’s talk about, you know,
you’re probably right.
And that’s what usually happens
is when they promise the founder
that you’ll be left alone.
That usually last two years.
That coincidentally,
that’s coincidentally
usually the length of the earn out
or the golden handcuffs.
That’s how long my golden handcuffs were.
And they left us alone for one year.
By the way, our error
are tripled that year.
But then once they got
serious about integration,
the organization started merging.
And really, I was just running
a product organization, which is fine,
but that’s not running
an independent company.
Because like I said,
you lose your eyes and ears.
You lose the pulse of the market
when you’re not selling into the market.
Freeberg, how did YouTube do it so well?
It was a very different situation.
They were. Yes.
Google basically took a team of,
you know, two dozen people
and their infrastructure was terrible.
And they basically
rebuilt the entire company,
so it was the complete opposite.
Think about them
taking the front end shell of YouTube
and then they rebuilt
everything underneath it, ran it.
And then they actually put
their own people in
to optimize the front end.
They put their own ad
sales team on top of it.
I mean, they just bought
a skeleton of a growth engine
and they built everything.
And so it was a very different story.
And the one thing that YouTube,
the one thing that Google did so well
with that acquisition
was the conviction bet
that they made on the business.
And they made billions
and billions of dollars
of investments into that business
for years before it started to make money.
And that is a very hard thing to do,
because to Chamath’s point,
you often have this question
of where your free cash flows,
where’s your dividends,
where’s your buybacks
as a business gets to
a certain point of maturity.
But what Google had,
that many businesses of that scale
have never had before
is their extraordinary growth rate
that continued even as
they were of that scale.
So the the leeway
that Google’s executives
and board were given by shareholders
was extraordinary,
not to mention the dual voting
where Larry and Sergei could decide
to do whatever the heck they wanted.
But they really were able
to take advantage
of their high growth rate
to take all this cash
they were generating and reinvest it
into this YouTube platform,
as well as many other things,
many of which haven’t worked out.
But when they do work out,
you have a business
that I think YouTube’s
probably worth what?
Three hundred, four hundred,
five hundred billion dollars
at this point.
And and it’s really paid back multiple.
So YouTube’s really a one off
because it’s a one off acquirer
and it was a one off
kind of acquisition integration
scenario that we haven’t seen before.
What Google, in effect,
got when they acquired
YouTube was a flywheel.
I mean, it was a brand
and it was a network effect
that the network effect was massive.
It was off to the races.
And I remember Google had Google videos,
but they just couldn’t come close
to catching YouTube
because the flywheel of creators
wanted to be where all the viewers were
and viewers wanted to be
where the most content was.
It was just impossible to catch.
But that organization
was relatively tiny
at the time it was acquired
and it didn’t have any monetization
and it was being deluged.
It was being deluged by legal problems
that that Google legal could solve.
Very unique situation.
Yeah, that was one of the bold
acquisitions of all time.
But what was incredible
is right after the acquisition
and Google started to scale this thing,
most of the content being watched
on YouTube was copyright content.
And I was at a conference
and I remember Philippe Daumon,
the CEO of Viacom, stood up
and Larry Page and Eric
or Larry and Sergey
or someone was on stage
and he yelled at them
and he was like,
you guys are making all this money
and growing this YouTube business
off of the back of our content.
And, you know, the DMCA,
the Digital Millennium Copyright Act
says that someone can file
a takedown notice
and then the platform
has a period of time
to respond and to deal with it.
And the amount of time
it was taking them to deal with it,
new content was being uploaded
and then they’d have to file
another takedown notice.
So it created this insurmountable
you know, copyright, copyright thing.
And and then what did Google do
that YouTube would have
never been able to do?
To Sax’s point,
they built an engine
that could automatically
recognize copyright content
and pull it down
before it was made publicly available
finger without ruining
the user experience
of instant upload
and availability of content
for the fingerprint system
was even more nuanced than that.
The fingerprint system
not only told him, hey,
this is an SNL skit
or this is a music video from Prince.
It said, what would you like to do?
And it put the power in their hands
and said, turn it off, claim it,
and we get the money from it.
And then it was like, well,
we’re telling you
before you even know about it.
And what all these people did
was they say, OK, yeah,
you can make a remix of my Prince
song or this episode of a TV show.
We’ll collect the money.
And that was just, yeah,
the revenue share
was the brilliant part about it
because you put the power
in the copyright holders names.
This just speaks to how singularly
how singular and unique that deal was,
because I don’t think
any other company at that time,
maybe Microsoft
would have been able
to develop technology
to do this and do it at the scale
and do it with this low latency
and high speed for users and so on.
It really was.
A singular transaction,
which Friberg, I think,
speaks to their accumulation of talent,
especially in those early years
where they were just like
hire smart people,
we’ll figure out
what to do with them later.
They actually had those people
sitting around
who could just go jump on the YouTube team.
Oh, my God.
Salt Salar Comongar
went and ran YouTube
and absolutely crushed it.
Probably one of the best CEO runs
that’s never talked about
in the history of tech.
He stepped in and he ran YouTube.
And now Susan runs it.
You know, another incredible run
and monetizing that thing since.
But I mean, and these are people,
by the way, both Salar and Susan
were sub 30 employee people at Google.
So, yeah, good point.
Nick, can we throw up the slide
contrasting valuation to ARR?
This is actually more interesting
than just who made all the money.
So I actually created a plot.
ARR is the red chart
and it’s the right axis.
So as we talked about,
they’re at around 400,
450 million of ARR right now.
And then the left axis
is expected value.
Basically, this was their valuation
and it’s in purple.
And it obviously it goes up
to the 20 billion or 22 billion
that Adobe just paid.
You can see E was the last round
they did in 2021
where they were valued at 10 billion.
Before that, they were valued
at two billion in 2020.
And then, you know, the series C,
I think they were valued at like
440 million or something like that.
And then I think the B,
they were valued at like 125 million.
And then the A, they were valued
at like 50 ish million, you know.
And then there were seed and so forth.
I think what you see here is that
is how efficient in a way
venture capital is,
where it’s tracking
just slightly ahead of ARR.
It is predicting
where the hockey stick is.
So first of all, look at ARR.
It is as close to a pure hockey stick
as I’ve ever seen in SAS.
Kudos to them.
I mean, the crazy thing
is just how long it took
for the hockey stick to get going.
Why didn’t you invest in this company?
Did you see it?
Well, no, we didn’t see it.
Also, look at what a late
bloomer this thing is, you know.
Like that’s incredible.
I see it like look, look
like hockey stick
didn’t really start inflecting
until 2018, 2019, right?
So it’s more that your
table is more striking
where these guys for years
were toiling away.
And then all of a sudden
this thing just took off, right?
It’s really this was such a late bloomer.
And for anyone
who’s doing a SAS company
and you’re in it five years
and you still have zero revenue
and like that doesn’t mean you’re dead.
I mean, they basically
were a zero for five years.
I’m doing exactly absolutely nothing.
And now it’s a $20 billion exit
five years later.
I actually think
I think the only hard round
to invest in this company
would have been
if you were going to invest in.
I think the 2014.
Time period 2015
because you were investing
in a company that hadn’t
even launched yet
that had been grinding
for three or four years
with, by the way,
the founder was like 19
when he started this.
He was a teal fellow.
He was one of the first,
you know, 20 under 20 teal fellows.
Yeah, yeah.
And he dropped out of school to do this.
And, you know, and they spent
several years in the wilderness.
I think that’s when
it would have been hard to invest
is maybe not the first seed round,
because you could tell
this guy was brilliant.
He had a really specific idea.
Moving design tools to the cloud was,
I think, like a very clear
and sensible vision, clear.
You know, why now underlying trend?
I always say my three biggest traits
for entrepreneurial success.
One of them is grit.
I mean, you know,
if you have a high index on grit,
you’re you’re able
to grind your way there.
It’s really that’s a really incredible.
This chart is brilliant
because, you know,
what we see in the seed stage
is right before that series
that is where most people give up sacks.
You know, you get three or four years in.
People aren’t paying for the products.
You’re under resourced
and they don’t get the A
and they got, you know,
that 2013, 14, 15 period.
They were probably trying to get an A.
But it take them two years to get the A.
And then somebody finally decided
easy for a young person to give up
and go get a friggin job at Google
or go back to school
and to to grind it out,
to have the grit and the persistence
and commit to your vision.
He didn’t pivot away.
He persisted and he executed.
He clarified.
He clarified. Right. Yeah.
But he but he didn’t
he didn’t go five steps away and say,
I’m going to do a new startup.
And, you know,
there was no his business, right?
And there’s no pivot here.
Yeah. Dylan Field, by the way,
is the founder.
I had him on the pod back in the day
and really the, you know,
ultimate customer focus,
customer obsession.
Like I said, that wins.
You need to just have your pulse
on what your customers are saying
constantly, because the answer is there.
You just have to develop it
and give it to them.
By the way, also in this chart,
that’s, I think, very interesting.
Saks, I’m interested
in your position on this.
If you look at the chart one more time,
they could have turned on monetization,
I think, a year or two before they did.
So they purposely didn’t charge for it
to get the network effects going.
I would love to see and hear
the number of users as a third vector,
you know, as a third line on here,
because I think they started
getting a lot of users in 2014, 2015, 2016.
That’s when that’s why they got the seed.
But they purposely did not charge
to let the network.
Yeah, 2015 was a private beta.
I don’t think they were even
had a product in 2014
that was usable yet.
2015 was private beta.
2016 was public launch.
And then they turned on monetization in 2017.
And then they turned on
enterprise pricing in 2018.
So I think that’s a pretty
sound progression.
I, I’m not, I mean, to be honest,
I’m not a big fan of taking three
or four years in the wilderness
to build your product.
I think you need to get to market sooner.
But I do think it is a little different
in an existing industry
where the table stakes are high.
So, you know, Adobe
is not a cloud based product,
but those were very rich client products.
And so to get to the point
where you could even compete with them
with the classic Clay Christensen
Innovator’s Dilemma
lightweight version of the product,
there were significant
table stakes there.
And it was a significant
technical challenge to move
design tools into the browser.
They had to do a lot of
cutting edge browser tech.
The browser wasn’t ready for it.
Yeah, this chart is going to be
calling in a few years.
Now that I’m doing after all in
48 hours after it,
I think that’s correct.
Come join me with your questions.
SPACs are back.
I don’t know if you saw on the news,
but Freeberg launched a SPAC.
Freeberg, no, no, no.
He he he announced a target
and a merger agreement.
Incredible.
So now he goes into the D-SPAC process.
Now we have two out of four
besties have SPAC’d.
Freeberg, you want to tell us
about what you SPAC’d?
Well, I mean, we announced
that we’re merging
the production board SPAC,
which is TPB Acquisition Corp.
with Lavoro, which is the largest
agricultural inputs retailer
in Brazil
and operates across Latin America.
You know, we’ve got a good slide
in the presentation
that I think echoes
some of the points I’ve talked about
on our podcast here
about the importance of having
resiliency and redundancy
in global food supply chains
and increasing famine risk.
So we’ve got a slide that shows
for about 30 years,
you know, we’ve reduced
the number of people globally
that have been undernourished
down to about 600 million
as of about three or four years ago.
And in the last three years,
we’ve seen that number spike
back up to 800 million,
which we thought we were done
with global famine.
And now here we are
facing these issues again.
Climate change, the lockdown,
supply chain disruption,
the Ukraine war
and all the other geopolitical
tension issues.
So that’s been a big thesis
of mine individually.
You guys know we’ve talked offline
about some investments I’ve made
and my strong interest in the area.
Brazil and Latin America
is the largest ag export
market in the world.
So they produce calories
for the rest of the world.
And farmers there largely lag
in terms of technology adoption.
I’ve got a nice Brazilian farm
as my background today.
But technology adoption
doesn’t look like it does in the US.
There’s a huge opportunity
to influence and drive
productivity up in that region.
And so we partnered
with the largest ag retailer,
ag retailers, the local locations
that work with farmers.
They have these teams
called agronomists.
They meet with the farmers
typically weekly,
help them make decisions
about what products to use,
what to do, how to do it.
And so with the footprint
and the reach that they have,
I think we can really drive up
productivity per acre
across the region,
increased total
global calorie production.
And that’s why I’m so excited about it.
Fundamentally, it’s also
a great business.
It’s all the financials
are presented in the
in the investor presentation
and will be published
with the SEC here
in the next couple of days.
But it’s a it’s a scaled business,
it’s a profitable business
and it’s growing
pretty significantly.
So it’s got great tailwinds.
It’s a great base business.
But for me, there’s huge opportunity
to continue to drive
what their drive technology
through the platform
that they’ve built.
And that’s why, you know,
we’re also making
100 million dollar investment
of our balance sheet into the company.
So that’s big skin in the game.
Big skin in the game.
And, you know, we put two thirds
of our these founder promote shares.
They’re, you know, the only vest
if we can hit the stock
price of 1250 and 15
over the next three years.
Otherwise, we lose them.
So we’ve really tried to align
ourselves with shareholders
and really put our money
where our mouth is on this
and show people that,
you know, that this is a real
strategic partnership for us.
It’s not just, you know,
an investment that we intend to kind of.
You know, hold for
a short period of time,
this is a key platform for me,
for our for our TPB business
and for many of the companies
that we operate at TPB.
So I’m super excited.
It’s been a long time coming.
It’s been a very hard process.
As Chamath can attest
and as we all talk about,
capital markets are very
difficult right now.
Getting a transaction announced
is the first step.
Now there’s a bigger step
of getting it closed.
But yeah, a lot of work,
but I’m super excited about this.
And thanks for letting me
talk about it. Yeah.
Well, and the other thing I just want
to double click on there, Chamath,
this idea that two thirds
of the sponsor promote
have to hit certain hurdles.
I think that’s probably
a pretty good thing
for folks who maybe want to invest
to just say, hey, yeah, this is great.
Where there’s some alignment
in how these shares get distributed.
Yes.
I mean, I think it’s a good feature.
I think that the thing with SPACs
in general in a moment like this
is that it’s it actually performs
better in periods of high volatility.
And the reason is because,
you know, you have this redemption
feature which essentially allows you
to get back your your basis.
And so meanwhile, while, you know,
Friedberg was hunting
for a deal or whatever,
that cash, you know,
that you’ve contributed into this back
sits in a savings account
that then actually is generating some,
you know, reasonable interest as rates go up.
So the whole combination
of all of this stuff
actually makes back a pretty good
risk adjusted vehicle
when the markets are highly volatile,
because if at any point
you don’t like how you feel,
even if you love the deal,
you just vote to redeem,
get your ten dollars back
and effectively win the market.
Right. Let’s say the market
goes down 30 percent from here
to March of next year
when Friedberg’s deal closes.
Well, an investor could theoretically
just say, you know what?
I just want my ten dollars back.
Now, all of a sudden
they’ve gotten zero.
They felt zero percentage
of that drawdown.
And that’s what’s so interesting
about the structure
in a moment like this.
So I think there’s a lot
of really interesting features
that that SPACs in the future,
I think, will have to incorporate
in order to in order to be a successful
tool in the toolbox.
One thing I learned from,
I guess, the Pattern AG company
that I think you incubated as well,
or was that a company?
Yeah, you incubated as well.
Yeah. And you guys invested
through your launch platform.
Yeah. So we invested in this syndicate.
Is that the way this retail works
is we have farmers,
but then there are these retailers
or these sales reps,
I guess they call them in the industry
that service the farmers.
And so that’s what this.
Yeah. Yeah.
That’s exactly how this technology.
Yeah, that’s right.
They don’t they don’t know
how else is a farmer supposed to know
what to buy and what to do?
So ag retail, the local retail store,
the people that work there
are called agronomists.
And so the agronomists are like
technical salespeople.
They understand the science
and the technology of farming.
They understand
what the farmers have done in the past.
And then they partner with them
to help them decide
what to do going forward,
what products to buy, how to use them,
how to get the most out of their land.
And so when new technology,
when new ag technology comes to market,
it’s the retailer
that can influence the farmer
to make a decision on making a switch
or using a new tool
or using some software,
you know, to drive that decision.
And so that’s why ag retail is so important.
And why it’s critical
for any new technology
to get adopted in farming,
it has to go through retail.
You know, there’s the big ag input companies.
They’re the seed companies
and the chemistry companies
and the protection companies
and the software companies.
They all don’t sell direct to farmers.
Typically, they’re going
through these retailers.
And so is there a version of Lavoro
that’s been that’s an American company
that’s public or not?
Yeah, it’s called Nutrien.
And so Nutrien own CPS,
which is the largest retail
chain in the US ag retail chain in the US
about, I think,
70, 80 percent of Nutrien’s business
is actually fertilizer production.
And then the rest is the retail business.
You know, that’s the key comp
that we actually show
in our financial presentation
that we published yesterday.
How is Nutrien done
just as a public market?
Do people understand sort of the value
that it creates in the marketplace?
Yeah.
So in the last year,
as we’ve talked about on the show,
companies that are in the fertilizer
business are making money hand over fist
because of the
the issues with the supply chain
for natural gas, potash and phosphates.
And so if you have access to supply
like Nutrien does
and various other fertilizer companies,
do you are absolutely
minting money this year.
And so they’re having record
earnings right now.
And, you know, people are kind of
estimating that the fertilizer market
will kind of reset.
And as a result,
these companies are over earning right now,
which means that they’re getting
low forward multiples.
But generally speaking,
yeah, these businesses
have done very well.
And one of the you know,
I would say the US is about 15 years
ahead of Latin America.
And remember, Latin America produces
and exports more calories than the US.
And they’re all and corn farmers
in Brazil, for example,
are only getting half the yield
of corn farmers in America
or a little more than half
per acre yield per acre.
And the reason is the retailers
in the US are so sophisticated
that they’re introducing services
and they make a bunch of money
selling services now.
That wasn’t the case 20 years ago.
So now they’re offering farmers
advice using software
and and other kind of custom
soil testing services and whatnot.
And that’s really changed agriculture.
It’s given farmers data
that they didn’t have before
and help them make better decisions
using that data that didn’t exist before.
And that’s really,
you know, I would say
concentrated in the US
that kind of sophisticated behavior.
I think it’s really important.
We see it happen around the world now
because we need to grow more food
and we need to do it
without expanding land and acreage
and so on.
And we need to do it more sustainably.
Which is another kind of key part of this.
Did you worry a lot about
like the FX risk of?
You know, all these inputs
coming into Brazil,
having to deal in local currency,
then having to kind of get the revenues
out in US dollars
and all of that stuff.
How did you think about that?
Yeah, it’s a good question.
So when all ag commodities
around the world,
most commodities, right?
They trade in dollars.
And so, you know,
if the dollar strengthens
against the local currency, the AI,
the farmers actually make more money
and the input companies
charge more money in local currency.
So basically, the entire ag market
and around the world,
commodity markets, generally speaking,
inputs and outputs trade in dollars.
And so if you’re a local business,
you actually make more money
when your local currency goes down
and you’re willing to spend more money.
And so businesses in a commodity
cyclical business
generally are currency
hedged because of that,
because they’re selling stuff in dollars.
And then as a result,
the places that they’re buying stuff
from charge them more
in their local currency
and they can still make a good spread.
So, you know, there may be fluctuations
in FX risk.
But generally speaking, I think we see
and I’m just speaking generally here,
not about this particular transaction.
We generally see
and we saw this at Monsanto.
So that’s a good example.
All ag input companies,
when the local currencies devalue
in a market that they’re selling into,
they charge more
and the farmers can afford to pay more
because they’re making more
selling their product
into the market.
I am.
I think this company is super interesting.
So I’m I’m rooting for you.
It looks it looks really cool.
And it seems like a very good
entry valuation, good margin of safety to.
Yeah, one point two billion dollar
one point two billion dollar valuation,
if I’m reading correctly here.
So, yeah, congratulations.
Hard to get a deal done at this time
for people don’t know FX
foreign exchange just.
Trading one dollar
or one currency for another.
Did you guys see that
there was a Title six lawsuit?
Filed against Pfizer for some,
you know, in the in the Civil Rights Act,
there’s something called Title six,
which means that
if you take federal funds of any kind,
you can’t discriminate.
And Pfizer has a program
to recruit African-American
and Latino people into the company.
And they’re not being sued
because, you know,
Pfizer takes NIH grants,
they, you know,
work with the US government,
they work with Medicare,
they work with Medicaid.
And so as a result of that,
it’s really happening
one month before something else
that we talked about, which is
there’s the affirmative action case
that’s going to the Supreme Court, where
I think it’s Harvard, actually.
You know, push people
pushing back on Harvard’s ability to
have some form of race based admissions.
So I just don’t know if you guys
were monitoring this for me.
I just took a step back.
And I thought, look at what has happened
legislatively in 2022.
We basically repealed Roe v. Wade.
The Supreme Court also went after
concealed carry in New York
and said that New York cannot legislate
against concealed carry,
which had pretty big ramifications
with respect to gun laws.
The consensus opinion
is that we’re going to repeal
affirmative action in the next month
or the Supreme Court is going to do that.
These are three pieces
of an enormous change
in the United States
civil society that
that has happened
in a really small,
condensed period of time.
So I have these thoughts
on affirmative action.
But my other thought is like
it’s incredible how conservatives
have been able to organize
and how disorganized,
you know, progressive have been
in order to create
a countermaneuver against them.
Because this has been a systematic
effort since Karl Rove
literally wrote about it
in the mid 2000s and said,
here’s what we’re going to do.
We’re going to raise a bunch of money.
We’re going to redistrict everything.
We’re going to get the state
legislators on our side.
We’re going to basically,
you know, fund the federalist society.
We’re going to and they did it.
And in 20 years, they’ve created
an enormous amount of change
that I’m not sure all Americans
agree with.
Meanwhile, the progressives
are just kind of like
navel gazing at each other.
I mean, and then you left off
this past week, Chamath,
that it seems like
the gay marriage bill
is going to be put to a vote
and that they’re not
going to be able to find
I didn’t see that. What?
Yeah. Yeah.
And Ted Cruz said he’s not
going to vote for it
because it’s attacking
religious freedom.
So we had talked on a previous episode
and I think you said
you didn’t think gay marriage
would come up.
And well, no, if I had to guess
what the political gamesmanship
is here, because they think
it’s not going to pass,
they want to bring it up for a vote
because it preserves the issue.
It intensifies the wedge issue.
When it looked like
they had enough votes,
they weren’t going to put it up
for a vote.
So I don’t know.
I think it’s a lot of gamesmanship
here. Look, I think enough
Republicans should vote for this
just to pass it.
I don’t know.
Why wouldn’t they?
Yeah, well, I think there
I think there’s some issues
with the way the bill is written
in terms of maybe requiring
religious organizations
to perform gay marriages.
I think that somebody should just
make an amendment to clarify
that’s not the case to solve
this religious freedom issue.
I think if that happened,
then you get more Republicans on board
or at least it wouldn’t have an excuse.
But yeah, look, I would like to see
enough Republicans vote for this
to take it off the issue.
I don’t think that
gay marriage is at any risk of being
overturned by the Supreme Court.
Remember, it was Gorsuch
who wrote that opinion.
So I think this is a scare tactic
that progressives are able to use
to fundraise off their base.
Nonetheless, it’d be nice
if enough Republicans would vote
to canonize
marriage equality so that
they wouldn’t be able to do that.
That’s the smart play here
for Republicans.
Yeah, it looks like, by the way,
breaking news in The Washington Post,
Democrats have postponed
the same sex marriage vote
until after the midterms.
So, but I mean, you can understand
why people are going to be
nervous about this after
Roe v. Wade.
They’re doing that because they want to
they want to run on it as an issue.
They want to have that as an issue.
Yeah, I mean,
force it, though.
70 percent of people are in favor, right?
80 percent.
Look, if Republicans want to be smart,
find 10 Republicans in the Senate
who can support this.
Announce now that you’re
going to support it.
Come on, Republicans have a brain.
Don’t let them change the issue from
this economy that’s spiraling out of
control.
I mean, the Republicans are clueless.
What do you guys think
is going on there?
Oh, yeah.
So FedEx stock has dropped
as much as 25 percent
as we’re taping this Friday
after the CEO,
after a little I don’t know if you saw
the video I sent to the group chat, but.
Kramer, Jim Kramer was kind of pushing
him, do you think this recession
do you think he finally said, yes,
I think there’s a global recession.
They missed on revenue and they have
cut their.
Predictions for next year severely
and the stock’s way down, I think
based on what I heard on CNBC from
and reading some stories right before
this breaking news is happening, some
people think this is 60 40 market
versus management.
But either way, I think
the Fed’s interest rates are doing
their job and less packages
are being shipped because people are
Chamath, you would think spending
less money.
And that was the whole point of this
exercise was to slow the economy down.
Freeberg.
I think this is a little bit of a
scratcher. This is a new CEO.
So I think the game
theory on this is that it made a lot
of sense for him to reset expectations.
I get that. And I think that that’s a
that’s a reasonably smart thing to do
when you’re incoming,
you know, leader of a very complicated
organization.
That really is at the end of the
bullwhip, so to speak, on
on consumer demand.
The problem is, there’s just so much
conflicting data.
You know, retail sales was pretty
reasonable.
You know, China actually looked a
little bit stronger than people
expected just this past week on some
data that came out there.
It looks like Europe is going to
really draw a hard line and make sure
that they spend whatever it takes to
have enough energy so that their
productivity doesn’t fall off a cliff.
All of those signals would say that,
you know, we’re not at the precipice
of this kind of like cratering of
demand.
And then you have Powell basically
saying, yeah, we’re going to go
another seventy five and, you know,
we’re going to take rates to
probably somewhere between four and
five percent.
So the FedEx data point
was pretty starkly in contrast
with at least some of the data that
we’ve seen over the last few weeks.
So I don’t know, it was a bit of a
head scratcher.
They got three things working
against them.
Number one,
Amazon just continues
to build out local delivery
infrastructure at an incredible
pace.
At the end of 2020,
Amazon was already up to 25 percent
market share,
which put them ahead of both FedEx
and UPS.
And FedEx has seen their market
share decline for the past
eight or nine years now.
So that’s kind of a key
point. Number two is people are just
shipping less stuff, doing more
stuff digitally.
And number three is this recession
impact where
they obviously have key economic
indicators that allow them to do a
better job forecasting deliveries
than most companies, I would imagine.
And so they can see order volume and
trading volume and use that as a
predictor for
what volume for shipping is going to
be in the future.
And I would guess that all three
continue to work against them.
It’s not like they have a lot of
diversification in the business
and other ways to expand out into.
So you’ve got a key vertically
integrated player, namely Amazon,
that is investing heavily
to replace whatever they use you for.
I think as of a few years ago, Amazon
was only like two percent or three
percent of FedEx’s revenue anyway.
But still, I would imagine Amazon is
playing a key role here.
Your first your first comment to me
is is now that sounds like the
most credible explanation.
And to blame a recession
is sort of a little bit of hiding the
cheese.
It’s probably fair to say that their
lunches get eaten by Amazon.
So I can understand why FedEx is
under a lot of pressure because of
that.
But if you just compare it to just
all the other data, it doesn’t seem
like this whole thing
makes any sense.
What you just said about competition
makes to me a lot more sense.
And yeah, competition with digital
and Amazon.
I mean, digital, like how much do you
guys sign letters today versus
e-sign?
I mean, there’s just a lot and, you
know, I’m giving an example.
Maybe that’s a one percent impact.
And there’s probably a few more
things.
And these things all layer up.
Well, they could be losing market
share while still growing because
e-commerce is growing so violently
in the world. But Saks, what do you
think?
I think what’s going on here is that
whatever the issues of FedEx and
no matter how overstated
these warnings may have been, I think
they’re directionally correct.
He’s saying that the world’s headed
for a global recession and
directionally, he appears to be
right. I mean, things look really
grim.
We just had this inflation report
that was much worse than what people
were expecting.
It was inflation was supposed to go
down to
8.0 percent.
And actually, it was 8.3
percent. That’s why the stock market
cratered a few days ago.
It’s like the worst day in the stock
market.
I think maybe all year or certainly
since June, we’re almost towards
the June lows.
Now, this FedEx executive
is saying we’re headed for global
recession.
So it seems to me that the economic
news is just pretty grim here.
And we’re in a we’re in
stagflation. The Fed has to keep
raising interest rates at the same
time that we have persistent, high
chronic inflation.
And you have to wonder, you know, I
tweeted a few months ago that the
White House economic adviser,
Brian Deese, he said
that in this interview with
CNN, that the Biden
administration was willing to endure
a global recession in order to
keep Russia from controlling the
Donbass region in Ukraine.
Well, mission accomplished.
It looks like it’s getting its wish.
The administration has made some
progress in the Donbass,
but we are also having a global
recession.
So what percentage of this, what
percent of the recession and
inflation has to do with the
Russian invasion of Ukraine?
I think it’s meaningful.
It’s meaningful.
We know it’s a huge exacerbator
of all these problems.
If you were going to put a number on
it.
Listen, I don’t think the economy is
going to get better with the risk of
war three hanging over our heads.
How does that work?
Yeah. But what percent of the
economic issue do you think is
percentage wise impact?
I don’t think we’re in a recession.
Maybe you answer.
I don’t think we’re in a recession
yet.
You know, retail sales are still
quite strong.
There’s just a lot of signals that
tell us that people
are still consuming a lot of
things and jobs, too.
And that GDP is pretty reasonable
and that jobs and wages, you
know, are pretty much, you know,
quite full. So I think, Sax,
you are right that we
will be there because you can only
bring rates up so high until you
break things.
Do you see there’s a tweet by, I
think, a Charles Schwab analyst
today about that issue of
wages.
And she was tweeting off
to find it that for the second year
in a row, we now have
because of inflation, we now have
real wage decreases.
So you may be right about like where
things stand today.
But this is about the trajectory
right now of the economy.
And the trajectory is not good.
Inflation is not coming down as
fast as people were anticipating.
It’s worse than expected.
You have the situation in Ukraine
where, listen, we can all cheer on
Ukrainians for this counteroffensive
that appear to be successful.
But we are playing with fire over
there. I mean, I
don’t recall a time during the Cold
War where we did anything remotely
this risky.
You have, listen, we have American
generals, American generals
were taking credit for this
counteroffensive.
Do you see this New York Times story
where they talk about the inside
moment of this Ukraine
counteroffensive?
So you now have America.
America is now giving Ukraine
more and more advanced weapons.
OK, this sort of the the
long range artillery, they’re
telling them where to point the
weapons or giving them the
intelligence for it.
They’re training them on how to use
it. They’ve got commanders on the
ground there and
and they actually are hand
correcting the battle plans.
The Ukrainians had a
counteroffensive plan.
The Americans said that’s not good
enough and they rewrote it.
So the Americans are now doing
everything in this war except
pulling the triggers and taking the
bullets. And I don’t want to
minimize the sacrifice
the Ukrainians are making because
they are dying in huge numbers.
And, you know, we can all
respect and admire the sacrifice
they’re making for their own
country.
But this is a very risky strategy
for the United States of America to
be pursuing.
I mean, we are we are basically
playing with fire and
we are, you know, this close to
being at war with a nuclear
armed Russia.
And we never came close to this
type of behavior during the Cold
War. And I don’t understand what’s
changed so much that we have to
take this kind of risk.
Now, at the beginning of this
conflict, I said that I was open
to arming the Ukrainians under
Cold War rules, Cold War
rules, meaning covertly, like
we did in Afghanistan.
We now have multiple examples of
the administration boasting and
taking credit, taking credit for
the counteroffensive, for the
sinking of the Moskva, for
killing Russian generals.
This seems very risky to me.
So, Saxon, a court
premise of the discussions we’ve
had here is that the United
States screwed up the negotiation
with Putin by not taking NATO off
the table. Reuters
reported that Putin rejected a
Ukrainian peace deal at the start
of the war, at the start of
the war, Russian chief envoy on
Ukraine told Putin that a
provisional deal with Kiev had
been struck, deal would have
satisfied Russia’s demand that
Ukraine stay out of NATO.
Two of three sources said the
push to get a deal finalized
occurred immediately after
Russia’s February 24th invasion.
Does that change any of your
thinking on
what’s happened here and Putin’s
culpability?
I think it’s a data point, you
know.
But let me explain why I don’t
think it’s just positive.
And by the way, I saw the
article, every neocon on Twitter
was basically tweeting this,
trying to prove that this
yeah, I would see it on
everybody’s seeing your
Shimer analysis.
Let me tell you why it doesn’t.
OK, first of all, if you read the
article closely, this offer
did not come until after the
invasion started.
OK, and we already knew Zelensky
was publicly saying in the early
weeks of the war that they were
willing to take Ukraine off the
NATO off the table.
So this isn’t that much
news. It happened after.
The other key point here is I
know it didn’t happen too late,
but also the offer did
not come from the Americans.
This is a really important point
to understand about the Russian
position on this.
And I’m just saying this based on
all their public pronouncements.
The Russians made an ultimatum
in December and then Lavrov
negotiated with Blinken in
January.
They were absolutely insistent
that they would accept nothing
less but a written guarantee
from Washington.
Why is that?
Well, the written guarantee was
necessary because they’ve
always claimed that James
Baker, Uyghur Gorbachev
over, you know, German
reunification and not one inch
eastward. So they’ve always
demanded a written assurance from
the Americans.
And the reason they wanted from
America and not Europe
is because they know that Europe
are America’s poodles
and Ukraine is a client state of
America. So listen, they wanted
a written guarantee from America
before the war started.
They never got that.
Now, if your point is to Putin,
do everything he could to avoid
this war. Absolutely not.
I will absolutely grant you that.
But we already knew that.
The question is, did the U.S.
State Department do everything
they could to avoid this war?
And my point is absolutely not.
They should have taken this
Ukraine issue off the table
in writing before the invasion.
Got it. OK, and you’re talking
about Ukraine.
No, I just it
was major news.
And we have an obligation, I think,
to close the loop on it.
I’m glad we have an obligation
to listen.
People are taking this one article
on this one day.
There I think it’s going to talk
about it, because, listen, I’ve
seen all over Twitter that people
take this one article and they’re
like, see, there’s nothing to
this. We’re giving you the
opportunity, Saks.
Now, let me ask another question
for Freeberg. Freeberg.
The other follow up people would
like us to have made here is
we predicted famine
and massive disruption in food.
We debated that here.
You were pretty clear that this was
going to be or could be disastrous.
It hasn’t turned out to be
disastrous yet.
What’s the update on, you know,
fertilizer is shipping, not
shipping? Are we going to have
global famine? Are we not going
to have global famine? What’s the
update there based on this
conflict?
Yeah, we have a massive
starvation problem.
The U.N.
told
told everyone.
I mean, no one writes about this
stuff because it’s seemingly not
interesting in mainstream media,
which I don’t friggin understand.
But the U.N.
thinks that three hundred and
forty five million people
now are incrementally
marching towards starvation.
And so I think they did this
at their meeting.
Yesterday, because
of the war in the Ukraine,
so David Beasley, whom who
I know well, he’s the executive
director of the U.N.
World Food Program.
He told the U.N.
Security Council yesterday that
three hundred and forty five
million people are now facing
acute food insecurity
in 82 countries where the U.N.
operates, which is two and a
half times the number of acutely
food insecure people that existed
before the pandemic hit.
And so this is creating, like we
talked about, these rippling
effects in terms of initially it
was fertilizer cost, which means
less food is being produced
locally.
Then there was the acute crisis of
getting food out of the Ukraine.
And now it’s less planted acres
and less yield getting out of
those acres, which
we said was going to start to
happen in the back half of this
year.
And if you look at the price,
you know, a good proxy for this is
the price for corn.
We’re at near record highs
for the last couple of years in
terms of corn pricing.
The twenty twenty three futures
pricing for next December for corn
is at six twenty a bushel.
You know, and it kind of
peaked out right around the
middle part of the the Ukraine
crisis in
April at six seventy three.
So we’re getting right back to that
high point.
And so this is a major
problem that’s brewing.
And as I highlighted at the
beginning of our talk today,
which I show in the presentation
for the Lavoro transaction
I talked about earlier.
We have done an incredible job
building a resilient.
A food supply and
excellent global supply chains
to feed people around the world
going back 30 years,
and we’ve been able to steadily
decrease the number of people that
are food insecure or facing
famine and famine in the UN
definition is less than twelve
hundred calories per day on
average for a year.
And so we went from like a billion
people around the world facing
famine about 30 years
ago and got that number all the way
down to 600 million.
And then in the last two and a half,
three years, it’s shot back up
to 800 million.
And now the UN thinks it’s going to
shoot up even more.
So we may even be retracing our way
all the way back 30 years
because of the crises that have
enveloped.
The region around Ukraine
and the resulting impact on
fertilizer availability, fertilizer
pricing and so on.
And as I mentioned a few weeks ago,
many ammonia fertilizer
plants, which is nitrogen fertilizer,
the main kind of component
of fertilizer in Europe are being
shut down because they run on
natural gas.
And so government agencies
and the local producers are
turning those plants off to make
more natural gas available for
heating.
Would you describe this, Freiburg,
as because we are seeing
the EU, you know, they remember they
made that decision.
This is why South America is so
important. But sorry, go ahead.
Yeah, no, it makes no sense.
Would you describe this, though,
because the EU was also at the
same time the UN was,
you know, highlighting these
concerns, the EU was also praising
the massive progress we made from
the Russia and the Ukraine,
Russia and Ukraine, allowing
fertilizer, allowing exports and
this resiliency being we got we
got wheat moving.
And then we got some fertilizer
exports moving.
So two steps forward, one step
back would be how you describe this
maybe.
Yeah, nat gas prices are still
elevated. Right.
And nat gas availability in Europe
is obviously significantly
restricted. Will we get through it?
Will we get through it?
Do you think we can we can manage
this? Yeah, look, I don’t know how
many look at this. There’s some
number of people, some number of
10s of millions, maybe hundreds of
millions of people who are going to
starve between here and there that
otherwise weren’t going to be
starving. By the way, there’s always,
you know, some hundreds of millions,
as I mentioned, of people around the
world that are starving under 1200
calories a day.
And that number climbing some
incremental amount, that’s an
incremental 300, 400 million
people that didn’t need to starve.
And that’s a condition we’re now
going to be facing.
And so people like, hey, yeah,
people are still eating.
You know, there’s still food around
the world.
We don’t pay much attention
to these third world countries, we
don’t pay much attention to these
underdeveloped nations because we
don’t have press coverage there.
And when people are on the streets
and unable to eat, it doesn’t
seem to make everyday mainstream
media coverage.
But it is happening.
And statistically, it is a massive
problem.
Yeah, well, we’re doing we’re doing
a great job of covering Kanye and
Kim, but yeah, we maybe get some
reporters to cover the people
starving.
We’ve covered and I appreciate you
guys giving me a chance to talk
about it, because I think it’s
super important.
So, yeah, I mean, you know, I think
that’s part of this show is
at its best. I think we’re
highlighting things that other
people are ignoring.
Listen, I just want to say on this
Ukraine situation, and this applies
to this episode as well as all the
previous ones. I don’t want to be
right about this issue, just like
I’m sure Freeberg doesn’t want to be
right about famine coming true.
We don’t want these things to
happen.
OK, if I could choose an outcome
right now, I would say be great
if the Russian army collapsed
because of its morale problem,
tucked its tail between its legs,
went back to Moscow.
And then the Ukrainians had the
good sense to
respect the rights of the Russian
speakers living in the Donbass and
Crimea. And this whole thing
basically tamped down
and basically was over.
OK, but look, I think there’s
an equal and opposite chance that
that doesn’t happen.
That certainly could happen.
OK, but I think there’s an equal
and opposite chance that instead
what happens is that we climb
the escalatory ladder that
Putin, I think we are backing him
into a corner.
Everybody says that he cannot
survive the loss of this war.
And yet we’re not willing to give
him an off ramp.
So what choice does he have but
to escalate?
So what does that mean?
It could mean a full mobilization
of that country.
It could mean they resort, if
they can’t achieve their aims
by conventional weapons, maybe they
resort to unconventional weapons.
We don’t know.
This seems like a highly volatile,
risky situation.
And I just think that,
you know, we, the United States of
America, need to be thinking very
clearly about what is in
our interest, because all I see
is an identification.
We’re so interested in helping
and identifying with the Ukrainians
that we’ve lost sight of an American
interest that’s separate and
independent of Ukraine’s desire
for self-determination.
I can understand and respect
their nationalism and their
patriotism, but we are a different
nation. We better think really
carefully about our interests here.
Yeah, and I think, David, sometimes
you’re misinterpreted as this is a
partisan issue for you.
You’re a dove.
You’re David the Dove.
I have dubbed you David the Dove.
You are a dove, not a hawk.
You want peace.
Listen, I believe that if America
is going to risk war
with a nuclear-armed power, there
better be a vital interest at stake.
Otherwise, we should find every
diplomatic off-ramp we can.
So do you feel optimistic
about our ability to navigate,
Chamath, the Ukraine situation,
the war in Ukraine, famine,
supply disruption, energy?
Do you think we’ll get through all
this? Are you optimistic?
I think that rates are going to go
somewhere between four and a half
to five percent.
I think Stan Druckenmiller is
right.
And I’ve said this, I don’t know,
I’m now ad nauseum, so I’ll just
keep saying it.
But I think everybody has
consistently been wrong
and they have wanted inflation
to be a transitory
phenomenon that goes away.
And they’ve been consistently wrong.
Even in our group chat, we see
these forecasts.
They’ve been utterly consistently
wrong.
So rates are going to go higher
than people expect.
It’ll stay around longer
than people want.
This will have an impact to the
economy.
That impact in 2024,
2025 will not be that great.
So that’s one thing.
If you want to focus on Ukraine for
a second, there’s something that I
think we should focus on, which
I read this interesting article
about Russian mothers.
And, you know, in the 1980s,
when Russia was at war with
Afghanistan, there
were these bodies that were sent
home to Russia.
And these mothers got very, very
upset and they protested.
And then.
In 2000,
early 2000s, I think there was
there was a nuclear submarine
that basically sank, got shot
and sank.
And then Russian mothers protested
in the Chechen war.
They are a
group of individuals
in Russia that.
Have enormous
organizing power, it turns out.
And they, you know,
they they really can tell
what the real temperature is on
the ground.
What Putin has done so far
is that he’s largely recruited
people from, you know,
the Spartan communities inside
of central Russia and used
third party contractors.
So he’s minimized the risk of
the real cohort of the Russian
population who really stand,
you know, fervently against what’s
going on.
So until you see that happening,
those guys have a long way
to go. And I think that this thing
is going to drag on for a really
long time.
So it’s a paid army.
Therefore, it’s obscuring the
impact on actual citizens in
Russia.
It’s half paid, but the other half
are from places where their
organizing power is limited.
And I think that that was Putin’s,
you know, calculation
seeing what has happened before.
Again, sort of like the tip of the
spear of these Russian mothers.
And we’re not seeing that.
So
that means that the ability for
him to
manage perception inside
of Russia.
Is pretty apparently pretty
greater than people expected.
Yeah, greater than people expected.
So this is going to go on for as
long for much longer
than people think.
So I would just.
Prepare for this inevitable
outcome and just kind of, you know,
manage another year of slogging it
through a choppy waters might
be one way to look at this.
And I think that’s a very good way.
I think we’re in a very volley
choppy market for the foreseeable
future.
Yeah.
And therein lies some
opportunities and
also maybe some discipline in
various markets.
One thing to just keep in mind where
most people feel these rate hikes
is in the 30 year fixed mortgage.
Right. This is where most Americans
are going to feel it.
And if you look at the chart,
you know, like this is a big jump up
from our absolutely free
money environment that most Americans
were feeling doing,
you know,
you know, what do they call it when
you take out equity on your mortgage,
like a second mortgage or a
credit line, credit line,
most people have credit.
Yeah.
People were, you know, experiencing a
lot of free money and upgrading their
kitchens and taking money out of their
homes, yada yada.
But when you look at it historically,
you know, even at 6% or even if it
goes to 7% for mortgages,
it’s a lot less than we our parents
experienced and we experienced for the
first half of our adult lives.
So I think it’s surmountable.
And this number you don’t think is
going to get up to above 10%.
Right. The 30 year fixed.
You don’t see that happening.
So I think it’s manageable, which is
going to be choppy.
All right. Listen, Saks didn’t get to
promote it, but he has a wonderful film
at the Toronto Toronto Film Festival
about Dolly.
And he is doing an awesome
Dolly experience with the
AI that paints pictures.
And so we’re just going to insert into
the end of the program, the beautiful
work he’s doing there and his Dolly
film is supposed to be excellent.
It’s the second film David is
producing after Thank You for Smoking.
So congratulations to our
own little Scorsese
for the sultan of science, the
dictator and
the David the Dove.
I’m the world’s greatest moderator,
Jason Calacanis, and we’ll see you
next time.
Bye bye.
Love you guys. Bye bye.
All right, so I’m at the Dolly Land
exhibit here at the St.
Regis. The St.
Regis Hotel was a very important
hotel in Dolly’s life.
He actually lived in the penthouse
of the St. Regis in New York.
And the St.
Regis Hotel has very graciously
agreed to host this exhibition for
us. And this exhibition
is it’s basically a
rendering of
Dolly’s studio or what Dolly’s
studio might look like.
And those works of art are actually
generated by GPT-3,
the so-called Dolly Engine.
So thanks to the OpenAI team
and Sam Altman for giving us access
to Dolly, D-A-L-L-E.
And so fans can just come
here and they can use these
tablets to enter, you know,
what art they want to create.
They can just enter terms and
the, you know, the engine
will spit out art that
is made not obviously by Salvador
Dali, but it’s in the style
of Salvador Dali.
So I thought it’s a very cool way to
commemorate the film.
We are premiering at the Toronto
International Film Festival.
This weekend, this is an independent
movie I’ve had in development for
something like over a decade.
And the great
actor, Academy Award winning actor
Ben Kingsley plays Dolly
and gives a phenomenal performance.
So we’re excited to
premiere this movie, show it to the
world for the first time this
weekend.
All right. Thanks for watching.
Bye.
And instead, we open source it to
the fans and they’ve just gone
crazy with it.
Love you, Wes.
I’m queen of Kinwab.
Besties are gone.
That’s my dog taking a
notice in your driveway.
We should all just get a room and
just have one big huge orgy
because they’re all just useless.
It’s like this like sexual tension
that they just need to release.
What you’re about to be
what you’re about to be.
What you’re about to be.
What you’re about to be.
We need to get merch.
Besties are gone.