All-In with Chamath, Jason, Sacks & Friedberg - E101: Ye acquires Parler, Snap drops 30%, macro outlook, VC metrics, valuing stocks & more

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Welcome everybody to Episode 101. David Sachs is on vacation sitting in Brad Gershner from Altimeter

Group. Welcome back to the pod. Brad, how you doing? Good to be back. Good to be back. I mean,

first you first you guys, you know, tilted Friedberg and now a little bit on Sachs is

getting attacked on Twitter. And so you roll me back in when Yeah, we got a little problem.

Whenever the Brigadoons come out, Brad Gershner.

I think Sachs will be okay. But shout out to Sachs, you know, who probably hates the term

Brigadoons. The nitwits that are in the Brigadoons. The Brigadoons. It’s all going to

end at some point. Because I think the Brigadoons. New ownership at Twitter is going to change like

the whole span. That’s a Rodgers and Hammerstein musical, right? Brigadoon. Yeah. Yeah. But now I

think Brigadoons could stick. I don’t I’ve never heard anybody use that for the Brigadiers.

Calling the Twitter mob the Brigadoons is a good new thing. I like it. It’s pejorative. It’s funny.

It softens everything a little bit tones it down. I like it. It feels goofy. It completely

disempowers them. They really want to be taken seriously. But they’re just a Brigadoon.

I mean, to be a Brigadoon, though, you have to have four or more accounts. And you have to reply

to each of those accounts as if it’s an actual conversation. So low Brigadoon. Yeah, when you

retweet something as a social justice warrior, as an example, you’re trying to join the Brigadoon.

Ah, got it. It’s just a different Brigadoon. It’s a Brigadoon. Jekyll,

are you’re sometimes a Brigadoon, right? You’re part of Brigadoons, Jekyll. No,

I’m not part of any Brigadoon. You’re totally Brigadoon. Come on. I do not know.

Brigadoon. I never I’ve never done. I mean, I may have done once or twice for my burner.

We open source it to the fans and they’ve just gone crazy.

Well, anyway, Kanye West can’t leave an amazing career alone, and he is going to buy Parler,

which apparently Candace Owens’ husband, George Farmer, had created. So he’s going to buy his own

social network. If you don’t remember, Parler is like a really shitty version of

Twitter that never seems to have worked or been stable. It crashed the first 10 times I used it.

Miraculously, this steaming pile of garbage had raised 56 million in funding.

And Kanye is on a social media slash media tour saying horrific anti-Semitic stuff. He seems to

be having a mental breakdown again. There’s a big discussion now, I guess. Should people be

platforming them to the point that he’s doing three, four or five hour interviews with people?

And it does seem like it’s acute mental illness slash breakdown. I don’t want to like,

diagnose anybody from afar here. And I’m not qualified.

But you just did.

Well, I mean, he has been public about his struggles with mental illness.

It’s not a huge leap for any of us that have had family members.

Have manic episodes. I mean, this is clearly a manic.

Pretty much right out of the textbook.

So my question for you guys is what you have somebody with great wealth, great creativity,

he’s obviously a savant in so many different categories. With a huge social media following

plus money plus fame. And then you add social media to the mix, which is an accelerant. And

then all of these, you know, Tucker Carlson and every other publication, every podcast using this

moment, I think in a way to kind of, I don’t know, get ratings off of this trainwreck. I find

it abhorrent to interview somebody when they’re in a manic episode like this. I’ll be totally

honest, I wouldn’t do it. What is your take on this?

I have a family member, a blood relative that is in severe mental health crisis.

If the emails and the text messages that this person sent were public,

you I read these things, and they’ve severely, severely impacted me

to the point now where I have like a rule that when they’re in a manic episode,

I just kind of harvest them and archive them just in case something bad happens.

But I can’t even take the effort to read it and because it takes such a toll. And then I feel

really guilty because I think maybe there’s a something in there where I could be missing

something. So this is what when you’re in the middle of a of a severe episode, this is what

the family and the loved ones of that person is also dealing with. So I have I have no idea what’s

happening with Kanye. But what I would tell you is, when you’re in a manic episode, the more the

thing that you need is for the people around you to try to step in to help you. And it’s really

freaking hard. And I can tell you that in I’ve seen this person in my family say and say things

and do things that are just so beyond the pale. Yeah. And it’s part of when they’re in that

moment. And the whole goal is to try to get them out, get them back on their meds,

get them rebalanced. It’s a really, really complicated thing to deal with.

Well, look, I mean, the guy, the guy’s buying a social media platform.

I think it continues to support the point that I’ve made a few times, which is I don’t think

that anyone has a monopoly in social media networks. We’ve seen every couple of years,

competitors emerge, people proclaim monopoly, those monopolies get destroyed by the next thing,

you know, from Friendster to Myspace, to Facebook, to Instagram, to Snapchat, to TikTok.

And I think that the reality is the users of those platforms ultimately coalesce around a set

of standards they want to see happen on that platform. And those standards become kind of

the editorialized or produced model for how that platform should operate. Because that’s what the

users say. They don’t want anti semitism, they don’t want what they would call kind of challenging

an institution, they don’t want fake news, whatever the classification is, there is an

editor or an editorial board that editorializes what is and isn’t allowed to be said on that

platform. And ultimately, there is a fringe voice or a voice that feels unheard or feels like it

cannot speak on that platform. And what we’re seeing now with I think Elon acquiring Twitter

and Kanye acquiring Parler, and generally a number of kind of emerging networks, like what’s it

called rumbler as an alternative to YouTube is a really good indication. Maybe what’s it called

rumble? I think rumble? Yeah, there’s no, I think it’s a really clear supporting fact that

there are going to be alternatives. And that these what we thought were monopolies and what

kind of became digital town squares, and almost infrastructure are really just application layers,

they’re editorialized, and there are going to be competitors. And I think there are folks that want

to have a voice that feel like they’ve been editorialized out of the existing networks,

like Kanye, like Trump, like Elon to some degree. And they’re, you know, those that have resources

are changing that. And I think that speaks to a really healthy, competitive market. So having

folks like Kanye step in and try and create a new platform that has alternative voices.

Long term, I believe in freedom of speech, I believe that we should have alternative voices.

But I also believe that consumers and customers should be able to choose what platform they want

to be on, based on the editorialization that happens on those platforms. And I do believe

that the owners of those platforms should have their own rules, because it creates a different

differentiated product. Jason, is that what you were hoping to get comment on? Or this idea of

the media frenzy, feeding on Kanye’s mental breakdown? Yeah, I was talking about the media

frenzy. That’s the thing that I think is pretty important here. In fact, YouTube just pulled a

bunch of the interviews he did recently, because there’s so much anti semitic stuff in it. And,

you know, when somebody is in a mental breakdown like this, which I think it’s pretty clear he’s in,

you know, they do this behavior. And of course, it’s hurting them. It’s to your point, you know,

I’m sure it’s hurting his kids or ex wives, or ex wife. And, you know, can I ask? What’s that?

Can I ask who do you think is to decide that? Because he’s done interviews where he said,

I have episodes and those episodes actually provide me with creativity and brilliance.

Yeah, I think it’s up to the person, the person who is the host of that show,

who has to make an editorial decision. And so Tucker Carlson is going for ratings,

where if somebody else does it, and they want the ratings, because Kanye is a big name.

That’s, you know, I get it. He’s a he’s a great get right. And if you’re somebody who likes to

interview people, that’s like a lifetime get that could be the get that you know, makes people learn

about your podcast. I just think it’s unethical to do that when somebody is suffering like that,

to then feature them and to platform them in order to get your own ratings. That’s a personal

decision. I mean, let me ask you a different question, though. So I wouldn’t do it. Would you

hold them accountable for what he said? Well, this and this is the nuance, you know,

and I think we do have to think about that because anti semitism exists in the world,

he’s got a big fan base. That means if he’s got people in his fan base, who are also having a

manic episode, they could then be inspired by what he’s saying to do something horrific and

cause real world harm. And this is where, you know, the accelerant of social media, I think

is particularly dangerous to mouth, you know, in the old days, if somebody said this stuff on a

talk show, maybe they don’t air it, where they say it, it’s in the newspapers. But when he can

have a continuing dialogue across many podcasts a week, he’s done like 10 podcasts in the last week,

he’ll go on air with anybody. And then he has whatever 10s of millions of followers,

he’s reaching hundreds of millions of people, all you need is one person who’s mentally ill,

to then go do some horrible thing in the world that we’ve seen happen many times. And that’s what

I’m concerned about. You have to understand your that it’s the law of big numbers. Basically,

tomorrow, there’s a large number of people, you know, just to give you a sense of it, you know,

when this family member of mine, you know, we’ve had, we’ve had to have interventions, we’ve had

police, we’ve had the government get involved in Canada, we had had their driver’s license taken

away, then I mean, it is an unbelievably complicated set of interventions. And I am so

thankful that she doesn’t have massive social media awareness, because it would just be chaos.

And I would hate that, you know, because of their association to me that this person gets

more attention than they should in a moment where what they really need is help.

And I think that that is should be the governing principle in moments like this,

where if a bunch of your family members or your healthcare providers or whatever,

can raise their hand and say, Hey, hold on a second, this is completely off the rails.

You know, freeberg to your point, I don’t think that editorial freedom matters. In that point,

I think there’s just a more humane idea around, get this person off the airwaves and like,

allow themselves to get out of get out of that loop.

Settle down.

Yeah, yeah.

And and typically, what happens is that, you know, these folks, and again, and just in my experience,

will have titrated a medicine well, and then when that titration fails,

their ability to regulate their emotions fail. And this is the loop that they enter. And,

you know, you really have to find a way of like taking all of these mechanisms off the table,

so that they can re regulate themselves. And I think that as a society, we have to sort of move

towards that so that if, you know, family members can call Twitter or Facebook or Instagram or

whatever, and say, Listen, you’re the doctor, you know, here’s a here’s the doctor’s note, like,

you have to be able to shut this stuff down, because you have to mute all of these other

things. So that this person can then get back into a mode where they re regulate,

that should be the priority.

Yeah, compassion for the person. Yeah.

It’s not it’s not forgiving what they say. But it is having maybe a little bit more

compassion that moment to get them back to their, to their true self.

This one’s a little easy to say, Hey, Kanye is having a mental breakdown,

because he’s talked about mental illness in the past, it’s a lot harder to make these,

you know, supposed determinations as a reporter or podcast host. If someone says something crazy,

and then it’s easy to raise your hand and say, Hey, they’re crazy, cut it out.

Or there’s some mental health issue going on here.

But Freeberg, if he’s not, if he’s not having a mental issue right now,

then he is a horrible human being who is an anti Semite, who is spreading just the most

vitriolic, horrible things you can tropes you could ever imagine, at a time when you know,

there’s enough division in the country and somebody could get hurt, you know.

So either in either case, his accounts have to get paused if he’s going to say

anti Semitic stuff on them.

I mean, that’s the I mean, there’s there’s really clear guidelines across all these

platforms on what’s inappropriate. And certainly, I think folks will start to adhere to it.

I guess if I had anything to contribute, I mean, I think Chema said this well,

about a mental health angle. But what I would say is, I actually think that the social platforms

have done a reasonably good job. The fact that he’s buying parlor, I think, is evidence of the

fact that there actually is an editorial layer. Yeah, that’s doing a reasonable job. It’s a tough

decision. There’s always going to be a long tail a podcast, somebody will, you know, somebody will

go grift off of, you know, an episode or whatever. But I think, you know, a few years ago, we were

talking about no editorial standards. And I think today, you know, across these platforms, obviously,

there’s a tension, there’s a tension that’s existed for 100 years plus around free speech.

On these platforms, I get that tension. But I think a little credit where credits do we’re

seeing, we’re not seeing these memes spread like wildfire, in part, because the platforms with the

most reach are doing their job, snaps down 30%. Today, you guys see this, I think it’s it’s related

in the sense that everyone historically talked about social networks as being these, you know,

the network effect where, you know, multiple people get on and they link up with you with each

other, it’s harder and harder to break the network, and it gets bigger and more valuable

and can generate more revenue. Clearly not happened over the years with Twitter, to the degree that

people thought it should have. And now clearly, it’s not happening with snap. I think it also

speaks to this idea of fragmentation. I don’t know if you guys want to talk about snap, but

pretty significant decline from, well, here’s the 160, they were 160 billion market cap.

And today, they’re trading at 12. They’re down 91% from peak to track 91%.

Yeah, here’s the important thing to note, which is that if you look at the

ma you growth of snap, it’s actually been extremely steady. And they’ve had an incredible

march forward. And I think that they’re roughly around 350 million. Nick, I’ll send you the

da yes, right. I’ll send you the link. Yeah, I think it’s like the Dow is

count is incredible. It’s incredible. So it’s, yeah, it’s a service that is incrementally

every day more relied upon than the day before. And it’s a service that’s providing a set of

features that is incrementally more important to a larger and larger group of people. So how do you

then square that with its stock performance? And in my opinion, I’ll just be really honest

with you. And I don’t know, Evan Spiegel, and I’ve never trafficked in Snapchat at all, okay.

But it is the most glaring example of corporate misgovernance that has ever happened on the

internet. And the reason is, when you look at what happened in the IPO, it basically created

a governance structure where the common shareholder had all voting power taken away.

So 100% effectively, the de facto voting power stayed with the class that was held by the

founders. And so you you do not have a normal check and balance. And it was egregious. Other

companies would have voting programs where it was 20 to one. And you would sometimes say, Oh,

it’s only should be 10 to one, or it should be 50 to one, this was like 100 to zero.

And what you have now is no real feedback loop, because there is no person who can own enough

equity with enough say, to sit across the table from that CEO and say, here’s what you’re not

seeing. And here’s what you’re getting wrong. And I think you’re always better off by having those

kinds of people be able to get a meeting with you in the first place, and have a vested interest

where you take them seriously. But how would you receive a meeting? When you’re sitting across the

table from somebody in the back of mind, you’re like, wow, this person has literally no say in

what I do after this meeting ends, literally none, you can’t vote even to even different than alphabet

and meta at 10 to one, because they I think they both have dual class, right? Yeah, Brad.

I think zero is, in my opinion, a deep sign of disrespect.

I think you can, I think you can agree. You know, that there is a separation between, you know, the

voice of the common shareholder in these companies and and the direction of the companies, but I

think it obscures what’s going on. Chamath, I totally agree with you. If you look at usage,

the number of customers walking into the store, snaps gone from 265 to 360 million da use Twitter

190 to 240 meta from 1.8 to two over the course of the last three years, they’re all growing,

more people are walking into the store and using the service. The story here is all about pricing.

How much is each of those users worth? I mean, Apple is the apex predator of this entire market,

we wouldn’t be having this conversation. But for the fact that Apple’s changes with IDFA,

literally pickpocketed the industry $2 billion this year, under the auspices of privacy. And so

if you look at these companies usage up, pricing or are poo down. Okay, recently,

Apple’s come under a bunch of pressure. So now they’re out with scab four, which is their update

to the ad policy post IDFA, that allows you to target advertisers or individuals with 10,000

attributes instead of 100 attributes. So we’re going to see some realignment, I expect that

the real question is what happens to our poo next year. But to me, the story here is that

the usage and the health of these core platforms is remarkably sticky. Yeah, for all the things we

say about Instagram, I mean, tick tock has had explosive growth, 30% growth each of the last

three years. But even the incumbent platforms are really sticky usage. This is about how they’re

monetizing those users. And the real story is Apple. Yeah. And if you for people don’t know,

IDFA is the identifier for advertisers. Some people refer to it as made mobile ID,

ad ID, I’m sorry. And so what that does is it lets you track a user anonymously,

of course, have you ever have you ever owned any clicks to a sale? Right? Have you ever owned

Snapchat stock? No. Why not? I’m certainly governance is a key component of it. But the

second thing is, do you have do you have any belief that you could even get a meeting with

the CEO and management where they would listen to you appropriately? We’ve certainly got meetings

with management before. So yes, I believe we could, whether or not that impacts, you know,

how they build product, how they how they run the business, you know, the influence, etc.

But again, I think that’s not really the problem here. But the point I would

totally agree with you on Shama. We’ve had 10 years of where the cost of capital was zero,

10 years of hyper growth for these social networks. Right? In each of the last five years,

Facebook has hired more people in each of the last five years than they had 10 years after the

company was founded. Okay, so as we’ve seen this growth begin to turn over, I have seen the

companies really slow to react to right size their behavior that they had over the course of the last

decade, to put themselves in a position to compete for the next decade. So it’s one thing just to

throw your hands in the air and say, Well, this is all Apple, we couldn’t do anything about it.

But we we really haven’t seen leadership in terms of cost control. We really have we all know these

companies could run with you. Yeah, of the of the major companies, Brad snap did do a 20% riff that

had 6000 employees or so and they cut 20%. Facebook is the one that’s perplexing because

they seem to be massively over set up staffed, as you talked about, and they have been massively

they’ve had a massive decline in their stock price, and they are the one who is affected most by

what Apple did in terms of app tracking transparency is, I think that there’s a perception

though, I mean, I’m still stuck on this issue. I really think that stock prices tend to ebb and

flow based on sort of like friction or momentum. And when there’s momentum, more and more people

can easily underwrite it. And when there’s friction, fewer and fewer people can underwrite

it. And so I think that if you are a CEO of a public company, you have to think about how many

headwinds do I have? And how many tailwinds do I have all the time, and some of them are in your

control, and some of them are not, at least in the case of meta. As with Apple and Google,

they meta is forced to copy the best decisions of these bigger companies. Why? Because they were one

of those biggest now they may have been the smallest of the biggest, but it’s going to be

very hard for meta eventually to not converge on those same set of decisions. And the most important

one is what Brad just alluded to, which is that there was a point in 2016 and 2017, where you

literally could not give away Apple stock. And the big turn of the dial, and you know, some say it

was Carl Icahn, who knows, was this, theoretically, this famous dinner that Carl Icahn had with Tim

Cook, where he laid out a plan. And it’s like, listen, you need to start managing costs better,

managing opex better, return a ton of cash, buy back the stock, and you’ll be a darling. And Tim

Cook was rewarded. And he’s, he’s been rewarded with an incredibly performant company. And so,

you know, Google is slowly inching towards that plan. Microsoft is in that plan. And so the only

big four horsemen that hasn’t really gotten the script yet is meta, but they will, it’s just we’re

just debating when. And so there’s a perception that, you know, meta will copy what the rest of

these big guys do. But these other long tail companies, the headwinds are just greater.

And so when you, you know, don’t have a company that can be broadly owned by intelligent,

thoughtful investors, that’s a headwind, right? When you give nobody votes, that’s a headwind.

And so that’s why you see a company that’s continuing to grow impact, not being able to

translate that into economics. And if I were the board of that company, that should be a wake up

call, because eventually that will flow into the morale of the employees and the ability to retain,

and then the ability to invest in the future. And I think the simple answer is enough with all these,

you know, gymnastics around control. You know, if you looked at Elon, the most incredible thing

from day one was, there’s common stock, you know, and his whole thing was like, I’m just going to

do the best. And you know what, if I’m not the best, I’m going to be out. He literally said he

is you guys want to ever vote me out, vote me out. He’s never ever played these games. So in this

funny way, control is a symbol of a lack of ability to run the business. masterful mastery of

a business, you can translate that to being I’m just going to have common stock. Well, I mean,

historical argument, by the way, I’m tracking back to the high voting class for founders was

that they would be challenged by the investors in the market. And you can see the things that

Carl Icahn and others asked for. They say, we want to see you cut op ex, we want to see you

pay dividends, we want to see you buy back stock. And we want to see you grow. And so the trade off

then in the mind of a founder that that started this business and scaled it to billions in revenue

is well, that means I’ve got to make short term decisions over long term decisions. I’ve got to

make the I got to give up some of my long term opportunities to trade for my short term

opportunities. That’s the that that was the argument I think originally, for the voting

class. And you can read this in Google’s founders letter as well. Does that not apply any founders

at Google don’t even show up at the company? Why do they have to have super voting control,

they don’t probably even know what’s going on inside the company. It might be an argument like

I just want to hit on Zuck’s point, because Zuck has said, Look, you know, this, this VR,

AR metaverse stuff in the future is everything. This is where I want to invest our resources.

But look what happened. They made a missive. They said, we’re going in this direction.

Investors really smart, thoughtful, supportive investors, including Brad, were like,

hold on, we’re gonna check your roll. And they capitulated. Now, to your point,

did super voting control come into play there? No, of course, he could have said, you know what,

guys, pound sand, I’m going to do what I want. Instead, he’s like, I’m a smart guy. These guys

are smart guys. So I’m going to make the smart decision. So in my opinion, all of these things

are red herrings. These are indirections. Right? So this idea of I’m just going to take my toys

out of the sandbox like a crying baby is what super voting control means to me as a shareholder.

Brad, I think the era of super voting control for founders taking companies public is over.

Nope. Should it be? You know, I think it’s, again, when Facebook was doing really great,

and Snapchat was doing great, nobody complained about super voting stock. Okay. So I think that,

you know, my preference would be that I partner with a company where I know the founder,

whether irrespective of their votes, right, listens, cares, and has the mental flexibility

to make course corrections. Right. And the reality what I’m trying to point to,

we have lived through a decade of excess, everybody knows all these companies could do

exactly the same revenue. David, this is the pushback to your point, unlike what the Google

argument was exactly the same revenue, with vastly less investment in terms of people,

etc. Right. A 20% riff at meta would literally only take them back to where their

personnel expense was in 2021. Yeah, nobody argued in 2021. And they said they were going to do this

to Brad, right. And just hasn’t happened yet. This is this is part of the problem. J. Cal,

everybody. So why 10%? Why 10%? You’ve doubled the number of people working in the business over

the last few years. Right. There’s nothing magical about 10%. The real question is,

what is the optimal number of employees to produce the best outcome for our customers

and our advertisers? And what Bill Gurley has pounded on, and we’ve all talked a lot about,

there has been in a zero cost of capital world, a unilateral march to more, more of everything,

invest in everything, hire more people. Silicon Valley would do itself a favor. These big

companies vacuumed up every single engineer in Silicon Valley, they ought to return that pool

to the startups that are actually inventing the future. They don’t need this money in place. I

mean, last night, I read a report came across Bloomberg that the Elon’s talking about 75%

reduction at Twitter. Yeah. So that would leave Twitter just to give people some context here.

That was that originated in the Washington Post that would take them from around 7500 workers to

maybe 2000 1800. So he’s starting from first principles, how many people do I need to build

the next generation of Twitter? That’s the question. Start with a blank sheet of paper

and ask that question. You’ll come up with very different answers.

Back to the governance question. I think that you can correlate these kinds of governance

overreaches with zero interest rates. That dog doesn’t hunt when rates are at four or 5%. I don’t

care who you think you are. But when you try to go public in over the next four or five years,

if rates are sustained, you know, three, four or 5%, that will be the check on all of these people’s

overreach because you will have, you know, liquid alternatives that on a risk adjusted basis seem

better. And when rates are zero, and everybody was forced to own tech, we all gave up our

standards. We all stopped saying, you know, oh, you know, the things that we used to think were

important before, like one person, one vote, you know, a check between the board and the CEO,

a check between the executives and the shareholders, they’d all went out the window,

no discipline, no hygiene, right? Because when interest rates are at zero percent,

you have to remember, right, how does the structural basics of the financial markets work?

It is meant to make money on behalf of every single entity and person and thing in the world,

from a pension fund to a university to a research lab to a government to an individual. But in that

ability to make money, when we took interest rates to zero, 40% of what we all used to own

bonds yielded nothing. And so we just completely whipsaw to the other side and said we need to own

anything that grows. So tech got a disproportionate amount of attention. But in that we lost our

standards. And we are now going to go through the hangover of dealing with it. And so, you know,

snap will be an example of where investors are going to abandon that company. Because, because

it’s just there’s no point, there’s no governance, there’s no ability to have a conversation. It’s

in the too hard bucket. So people will just leave it, it’ll be stranded, and it’ll be a refugee in

the public markets. I think meta will be fine eventually, because I think that they will revert

to the mean. And the mean is Microsoft, Google and Apple. And we already know what that playbook

looks like. So I think what Brad predicts is more likely than unlikely. And I think in the future,

to David Friedberg’s point, I think it’ll be very hard to justify these things. You know,

bankers will be able to push back, because the buy side, ultimately, guys like us who have to

buy the stock when these things go public will say, Nope, you want to have these? You want to

have these dumb governance games? Nope, not for me. I’ll just go buy something else. I’ll go buy

more Tesla, where it’s one person, one vote. Why, you know, so it’s, it’s hard when the best CEO in

the world is like, judge me, keep me fire me on an equal basis. And everybody else is like, I’m

smarter than this guy. And so you know what, let me make sure that whenever I feel like it, I can

throw a temper tantrum and take my toys out of the sandbox. And let’s use it. There’s an analogy

here doesn’t work. Look at look at Steve Jobs ousted from his own company. Company made a huge

mistake asking him some people argue was a learning experience for Steve to get better at his job, he

comes back, and he absolutely turns the company around. So there’s an example. Thus far, you’ve

proven that the two most impactful and important CEOs of the last 50 years had the courage to

basically say, let my performance do the talking, not my protective nanny control. Correct. And

Steve’s performance was light in that first period, he had some problems, and he learned,

and he still won. But this is what the greats do the greats know how to perform not, you know,

use some no trade clause to make sure that you can just sit there and underperform forever.

Do we think Brad, when we get to the sort of macro look at this, let’s assume we’re in this

four or five or 345% interest rate for some extended period of time, let’s call it a decade.

What does the tech industry look like? Because it does seem if Elon does with Twitter, what

seems to have been leaked here correctly, according to all reports. And there’s a 20%

riff at Facebook, and we start to see people take the medicine. Is that the ultimate setup for now?

Hey, these companies are being run to throw off cash. And we have some way out of this,

what people think is going to be a very hard landing?

Well, I mean, you know, first, just let’s talk about, you know, where rates are, you know, today,

you know, we’re at four, three on the on the 10 year, I mean, technologies performed incredibly

well for a long period of time with rates in this, in this range. So the adjustment period

is very difficult. Right. And so when you when you look at the convexity,

and going from 0% interest rates to four and a half, like that has been a shock to the system,

it has been destabilizing to multiples, multiples were basically infinite last year. And now

multiples have come back to reality. And so I don’t question In fact, I actually think

free capital was a weapon of economic destruction. Right? free capital hurt good companies from being

great companies. They hired too many people, their margins were too low, you know, SoftBank funding,

all of these rideshare companies around the world to compete with Uber meant that Uber,

even though they’re a market leader, did not have market leadership economics. And so the

ringing out of the system of that excess, that grift, that stupidity, that’s going to be good

for the fundamentals of these business. But the transition from, you know, that low rate environment

to the high rate of our it’s dislocating for investors. It’s dislocating for management at

these companies, and it’s going to be just what this is not, you know, a six month phenomenon,

we’re going to have two years of ringing out, right? Because there’s no bailout here by the

Fed. There’s no v shape recovery for these companies. This is now going to be I heard

somebody say this week, if the last 10 years was about beta, the next 10 years is about alpha.

Not all companies are going to do well, not all companies are going to bounce back.

This is going to be about what companies have the courage to build great products and to drive a

great business model that allows them to compete and continue to invest at high rates in the next

wave of innovation, whether it’s AI, etc. And so, you know, to me, the markets J Cal have largely

put in a box at this point, inflation and rates, right rates have come up 65%. And, you know,

from 2.7 to four, three in the last 60 days, and the market’s basically sideways, it’s down five

to 10%. rates are up another 10% in the last two weeks, and Google and Apple are up. That tells me

that the market’s gotten, you know, gotten its arms around rates and inflation, what the market

really is worried about now are two things. Number one is earnings. And number two is the long tail

of risk. On earnings, there’s kind of a conventional wisdom emerging from from many folks that 3200

the bottom or maybe 2700 the bottom that we’re going to go from 225. And in S&P earnings back

to 200. That seems to me to be, you know, again, a lot of people making that bet. I don’t see any

evidence in q3 earnings, United Healthcare, United Airlines, Schlumberger, Tesla, etc. Their earnings

are up on a year over year basis. They’ve guided now to q4, their earnings are going to be up on a

year over year basis. And the consensus expectations in q1 are that earnings are going to be up on a

year over year basis to go from 225 down to 200. We it can’t just be a slowing of the rate of growth

of earnings, you have to reverse course entirely. So we have to see something we’re not seeing yet.

So on an earnings growth, that’s where the market there’s some tension in the market.

Then finally, what I would say is there are a lot of big brains in the world who look at this

level of dislocation rates going on the two year or on the front end of the curve from zero to four

and a half. And Druckenmiller or Soros would say negative reflexivity. Shit breaks when you have

this much volatility in the world, the world is not equipped to deal with these exponential moves.

And so there’s a lot of concern in the world, whether it’s about Ukraine, Taiwan, UK bonds,

the Japanese yen, nobody knows what it will be. But they’re just saying demand a higher margin

of safety, because the propensity, the likelihood that shit breaks when you have this much dislocation

is higher. So the preferable black swan could come any minute, and another downdraft.

But last year, we were all sitting here and said asymmetry to the downside,

multiples at all time high interest rates at all time low, we saw that starting to roll over,

we saw smart people, Elon basis, etc, start to sell into it. As I sit here today, yes,

we’re going to have harder times ahead economically, but it feels to me like a lot

of it is priced in. I don’t think we have huge asymmetry and skewed to the downside. I think

that’s like fighting the last battle. It’s not to say in this distribution of probabilities,

one of those events can’t occur. But from my vantage when stocks, the average stock down 20%,

stocks like Meta down 50 to 60%, a lot of stocks down 70, 80, 90. That doesn’t seem like the time

to call the big short. That seems like a time to be like neutral to positive.

Should we go to TV pi dpi and talk about the privates? I just want to say one thing about

your prior question, which kind of ties into some of what Brad said, but you asked the question

about does this mean that these companies are now going to kind of cut costs and start spitting out

cash? I think there is certainly a market incentive to do that to keep share prices up.

And the companies that can do that are certainly taking action with the headcount reduction

across some of the big guys. What I think is going to be interesting and what a lot of people

are watching is how many of the small and mid cap guys can actually do that. And those that can’t,

will it will become pretty evident pretty fast. And they’re going to end up in the shitter.

You’re talking to a palatine or something like that.

Doesn’t matter across SAS across consumer across DTC across hardware. Everyone is now saying can

you actually earn and at this point, you should have enough scale that you should be able to earn

and if you cannot, the market will punish you for it. And that’s certainly what seems to be the

incentive and the pressure in the on the buy side to the executives across all these organizations

today. So I think that’s a big trend of what’s happening right now is everyone’s going through

their portfolio, spending time with management and asking, can you earn? Can you actually get

this business to generate cash? What is the path? Show it to me, prove it to me in the quarterly

results. And if you can’t, then you’re not fitting in a bucket that I can own you.

The only irony there, Friedberg, is that that comes as a surprise. God forbid,

we should actually expect companies to prove unit economics and to make profit.

Yeah, but when you when when your interest rate zero, you divide by zero, you get infinity. So

you know, you were able to kind of explain everything away into the future. Now you

actually have an interest rate at 5%. I got to be you know, making I’m not going to pay a lot more

than 20 times earnings. And I want to see that that’s really my earnings. You know, I want to

see that you can actually earn there was a person at Brad’s investor day who Brad interviewed. And

I won’t say his name, but he’s a star of stars. He’s a bit of a goat. And he had I’ll just say

the generalized version of believe it out. And said the following, which is so true. It’s like

we’ve gone through an entire decade of under training an entire generation of people in

Silicon Valley. You know, we have under under trained and under mentored the product managers,

the engineers, the senior executive management, the CEOs, many of these people, unfortunately,

are not they don’t have the skill set to execute at a high level at any point in the cycle, except

when rates were zero, like many business models. And now that rates are not at zero, these people

are turning out to be extremely underdeveloped and unable to run these businesses. And when he

said that it really struck a chord because he’s right. And you know, he was also saying it just

got even more exacerbated in this era of remote work. Because now there is even less opportunity

to mentor and to coach and to talk one on one. And people think, you know, that this is a boon,

and it’s not. So, you know, we’re going to deal with also the aftermath of an entire generation

of highly underskilled companies. Because the executive and senior leadership and CEO ranks of

many of these companies are not in a position to win. If I may, there was an interesting moment

this week when we talk about this discipline that has been lacking the last couple years

$101 million funding led by CO2 Lightspeed Venture Partners at a $1 billion valuation

for stability AI. This is a for profit company built off the backs of the open source

project, stable diffusion, they have no revenue, they have no product, they’ve

been around for, you know, a millisecond. Any thoughts on this type of funding happening pre

product pre revenue on an open source project? And there’s still there’s always going to be

Yeah, pretty well. It’s not my money is going to be these, these asymmetric bets that people

think if it works, it’s worth 100. And they’ll price it as they price it. I think that I think

what we were just talking about is a little different, which is how do public markets

rationalize evaluation. These businesses need to start earning for the public investors to be able

to represent to their investors, that they’re doing their job and making sure that they’re

holding management accountable to demonstrating earnings potential. But these early stage bets,

you can see valuations range depending on the asymmetric outcome potential of the and you know

what the upper and you know what the upper bound is, the upper bound is that when rates were zero,

and governments were printing money more than they could get their hands on,

the top five tech companies represented a quarter of the S&P 500. But there was a pretty steep

fall off. And everybody else represented the next, you know, about 10% of the market cap.

So the point is that we had bounded outcomes. When rates were zero, the average market cap

of a successful company was around three or $4 billion. So I’m not going to judge this company

at all. And those investors are very smart investors, Lightspeed and CO2. What I will say

is at the end of the day, there’s a terminal buyer of these companies. And we had a period of time

that we can look back on to understand that when the party is absolutely rip roaring,

the alcohol is free, you know, everything, everything is going well. Yeah, we know what

the upper bound is, which is the average company, if you were able to get out would be worth about

three to $4 billion. And then there was a very, very steep dispersion, where then there was four

companies that were, you know, a quarter of the market cap and a few in between. So if you do a

deal at a billion, the overwhelming odds is that the terminal exit multiple is going to be somewhere

between a 3x and a 4x x of dilution, and x of all of the other capital that comes in and all of

those features that may be attached. So I think everybody should be allowed to make different

kinds of bets. And you’ll see over time, which kind of deal can generate which kind of return,

Brad, it’ll be it, this will be a really interesting data point.

The common thinking was, these kind of deals were not going to happen

in this kind of a market. So when you saw this kind of deal happen, or some other that we’ve

talked about privately, what do you think is happening in terms of discipline, private markets,

I think, I think, I think maybe you should tee this up with Brad, because I think that

what I have to say follows on, okay, with him, but there’s a there’s a there’s a macro view of

the venture industry, that, again, it’s like, everybody wants to never look at the past.

Everybody wants to assume that this time is different. And there’s some work that he did,

which is really instructive, J Cal, to help answer this question, I think. So maybe you

should ask him, and then I’ll jump in afterwards. This is the TV, TV pi study. Yeah. So I mean,

Brad, in relation to my stable diffusion, and yeah, DPI, maybe you can tell you know,

we shared this with our investors at our investor day that you guys are at this week,

and there’s a modern industry, it’s only been around since the mid 90s. Right? So the history

of venture, you know, is, you got to look at when you look at returns, it’s to say,

by the way, what an incredible chart you guys put, this is so good.

Yeah, let’s describe the chart for people who the truth hurts.

So break down, let’s go ahead, J Cal, do you want to just so if just for people who know we on

Spotify, and on YouTube, you can search for all in episode 101. And you could see this chart,

if you’re watching the video, if you’re listening, the video describes 1997 to 2020,

there’s an orange line across it with the DPI average. So why don’t you define DPI?

What we did is we took the top quartile data from Cambridge Associates, who

invest in all across the entire venture industry is widely used as kind of industry data. And we

just asked a simple question of the top quartile top 25% of venture capital firms, right? What were

in those vintage years of the funds, so funds raised in 97 9899? What were the average

cash on cash returns, right? TVPI is what your mark is, that’s where you’re carrying

the marks total value to paid in capital.

So this could be just so we’re clear, because it’s a little confusing to people,

you have a company on your books that on paper is worth 10 billion, you had put in at a billion.

And on paper, you’ve got this 10x return, right?

Correct. DPI is actually cash distributed to your investors. So that’s cash on the barrelhead.

So the reason if you look on this chart,

sorry, just to just to build just to be very clear for everybody, the whole goal is to be

able to convert your TVPI. So what your theoretical book is worth into DPI, which is here’s money back

to my investors. And what you want on this chart is the blue line to catch up to the gray line.

So you want the gray line to be as high as possible. And eventually, over time,

you want the blue line to come up. Correct, right. So the blue line here,

if we’re looking at 2010, just for one example, you have a four x for the TVPI,

you four x everybody’s money, but the blue line only got up to it looks like 3.5 x,

maybe or something in that right. Let me just point out because that’s

an interesting year, Jason. Yeah, we were coming out of the 2008 2009

period. Everybody was despondent. They said, I’m sure they said what you just said about stable

diffusion. Don’t invest in anything. Everybody’s stupid. But there were incredible companies

that were invested out of that vintage, right? Snowflake and Mongo out of our vintage shortly

thereafter. So maintaining this duality that, yes, the world sucks, but the secular curve of

innovation continues. So that is a vintage where people actually got things sold, got them public,

distributed the cash back to investors. The real question is this. On the vintages between 2011,

2012, and now. How how much of those gray lines, how much of those marks? Look,

those are historical marks. Marks have never been this high. How much of those marks will

actually return turn into cash on the barrelhead? And how much of those will actually just be mean

reversion? It’ll all get marked down and the returns at the top quartile will look much like

the returns did in the period between 2000 and 2007. My hunch is that by the time the cash is

actually distributed, the returns are going to revert to that orange line mean, which means

there are hundreds of billions of dollars in markdowns sitting in LP’s and GP’s portfolios

that are likely to come because nobody really thinks that the deals done in 1516 1718 are going

to be that far above the mean return. And so people also understand this. These are vintage

years. So these are funds formed in that year. And so this trails a venture fund takes about 10 years,

they’re formed without concept in mind to become realized. So if you’re looking at you know, the

year 2016 and 17. These are but five year old funds at this point, right? Correct. Yeah. So

they do need time for these companies to grow. How much of this Chamath and Freeberg do you think is

attributable to entry price? Because entry price during 2017 1819 20 is going to be extraordinarily

high entry price, ie the value of the company when investors invested in 28 2008 to 2011 when I had a

lot of my hits was pretty low. I invested in Uber, thumbtack. And you invest in Uber calm.

Those three were $15 million combined revaluations. Yeah, you you invest in Uber?

I yeah, maybe third or fourth investor. I can’t remember.

I did get in there. I got in there slightly before you did like maybe you should years

you you should write a book on angel invest. I should. Yeah. You should call it an angel.

You should call it a very good, very good. But let’s talk about entry price because entry price

does matter, Brad, or maybe Chamath you want to take entry price for freeberg?

Well, look, there’s this, I think I think what that setup is, that’s probably a chart that most

VC organizations don’t even look at. Because if you looked at that chart, you’d have to take a

real investing approach to things. So if you were looking at that chart as a GP, there are two

takeaways. The first takeaway is, Oh, my gosh, what is the sum of the invested dollars above

this orange line since 2012? 2011? Right? Because all of that stuff could just get basically get

whacked if we mean revert. And the answer is about five or $600 billion of paid in capital.

So then you would say, Oh, my gosh, well, if there’s five or $600 billion of impairment,

coming down the pipe, maybe more, maybe it’s going to be 750 million. Because the other thing

to keep in mind is, over time, the the orange line has a tendency to go down, not up, right?

Because as you add more and more of these things, and some slight performers,

you have a general decay function in every asset class as it scales in size.

So this this orange line theoretically goes down, which means more of those gray bars get destroyed.

Okay, so there’s, let’s just call it 600 billion or 700 billion. The most important thing you would

want to do is now look inside your portfolio and try to answer the question. Oh, how likely am I

to see that impairment? And Jason, this is a proxy of answering your question,

the important question for a venture fund, which then has a downstream implication to the to the

entrepreneur is, now, what do I do knowing that all of these gray bars could get destroyed? And

Nick, go to the next chart? Well, I calculated it for you guys. So I’ll give you the answer.

Here’s a simple thing. And you know, this is publicly available data.

Now, why did I do this? Because when Brad showed me that chart, my immediate mind went to how do I

make sure I’m not susceptible to losing a ton of money? Well, what happens in markets is that when

things go down, the things that are highly correlated go down the most. Because they are

the things that are the most highly trafficked, which means that they are the things that have

the most investors, which means that in an up market, they have the propensity to have the

highest prices. So we put we, you know, pulled all this data from PitchBook. And we just started to I

just took a smattering of firms here. And recent index, Greylock, benchmark, Sequoia, GC, Founders

Fund, Tiger, Excel, Kleiner, Koestler, and us, you could pick anybody because this data is publicly

available. And I started to calculate the overlap coefficient. So how, how correlated are you with

other people’s portfolios, trying to estimate at the upper bound and at the lower bound, what will

happen? So Jason, this is a proxy of answering your question. What about entry price? Well,

if you have a very low correlation, which touch wood, we have, you’re less, you’re less exposed

to bad entry price, because it wouldn’t have been a bidding war to get into these companies.

Exactly. You picked your right spot, you went into areas that were earlier, so you were able to risk

manage a little bit better. But if you have a highly correlated portfolio, now your marks become

very susceptible. So my guess is, if you take the $700 billion, and you calculate it for all the VCs,

and you look at their correlations, and their overlaps, you can probably guesstimate where that

$700 billion of impairment will come to. And you can you can lay it out across any organization that

you’re interested in trying to find a solution for by just stack ranking them. And by looking at the

at the at these correlations. And this is, by the way, to be clear, nothing about the quality of the

organization or the people. But this is just simple portfolio mathematics and how portfolios tend to

play itself out in moments like this. Well, and there’s some interesting data in here as well.

Freeberg, you probably are aware of, where some fund like let’s say, Founders Fund and Koestler

have a close relationship because Keith Reboy was at Koestler and then he moved to Founders Fund. So

you see that nice dark purple there where they have a high correlation investments. Interestingly,

index seems to just follow benchmark and Bill Gurley’s investments and plow into them. That seems

to be the highest correlation. Here’s the thing, if you had to steel man the defense of that strategy,

Jason, I would say in an up market, benchmark is a $500 million fund where I get no allocation. If

I was a smart LP, and I did this work, I’d be immediately knocking on indexes door saying,

can I put money in you? Because in the back of my mind, it’s basically getting leverage on

benchmarks portfolio. Yeah, you figured out how to follow them. Yeah, yeah. But when the cycle

reverts, you know, you’re not the only one that wants to copy benchmarks portfolio, everybody does.

And if these correlations are too high, and the overlaps are too high, then you start to get into

a cycle where you put yourself in a position to actually suffer from the market beta much more,

even when you can benefit from the market beta and upcycle.

Freeberg, you want to analyze this chart and Chamath’s thinking here his theory?

I don’t know. I mean, I just think this has become a pretty competitive market and a lot

of the value has been competed away. Well, I mean, I think for a for a layperson, please.

Yeah, the long term value creation of technology of new technology is going to remain high,

the market’s going to pay for that. So you know, new market value creation,

new market cap is going to continue to be built every year. What’s happening when venture has a

low multiple is that number one, the good companies end up the founders end up owning more

of the company. And they end up, you know, having a higher percentage ownership when the company

ultimately gets sold or goes public, because they were able to get VCs to compete against one

another. And as a result, pay a higher valuation and as a result, buy less of the company.

And then number two is that because the VCs that couldn’t get into that company still had a bunch

of money to manage, they wouldn’t put money into crappy companies. So you know, it’s a lucrative

business. You guys, everyone’s in that business, because it’s a lucrative business. And that

certainly it takes a decade to realize whether or not you’re good at it. So you know, you have this

period of time as Brad shows that maybe a decade before the LP market learns who is and who isn’t

bad. And meanwhile, those folks who got competed out of the good deals, you know, they don’t look

very good. And the folks that are left in the good deals own less of the company, and their

returns get diminished. And, you know, I think ultimately, this market is probably going to end

up being a multi decade cycle of capital in and capital out, we’re probably at peak capital being

managed in venture funds right now, and will likely decline for the next decade.

Brad, how would Yeah, Brad, how would LPS look at

Chamath analysis there? And how do they look at the clubby nature and overlap,

you know, writ large in our industry, and then whatever other insights you have?

Yeah, no, I mean, I think I very much disagree with David that all the returns are getting

competed away. The huge difference between the venture market and the private equity market or

the public market is that the venture market is unquestionably a power law market. Okay,

90% of the gross profits and the returns go to 10% of the deals and 10% of the investors,

right. So we just show the average of the top quartile. But if we show benchmark one or two,

or benchmark six or seven, it’s ridiculous, right? The cash on cash returns over 20.

On those funds. Let’s just pause and explain that to folks.

Most venture firms here are getting two x on average, that’s the average. And is that average

for the top quartile or all VC firms? It’s the top quartile of VC firms,

their average is two x. Yeah, this is the upper 20 to 25%. So if you were to include the 75 bottom,

what would the trash? Brad, let me ask you a question. What if instead of looking at the top

quartile, you just looked at the top 10 venture firms? Yeah, because the number of venture firms

has exploded over the last decade and a half. But so I think the point that you’re not getting is

the top 10 changes every vintage. And the problem is if you are aping the wrong portfolio in that

vintage, you’ll get run over. Right. And so the real goal of this, and I also tend to disagree

freebrook with what you say, I don’t think the returns are getting competed away. I actually

think it’s more alpha than ever. Correct. And you got to be a good picker. And if you’re a momentum

investor, you just need to be aware on the way in that you are going to put your portfolio under

tremendous pressure in drawdowns. I think the other thing the other thing it does.

This idea of the industrialization of venture, the soft banks, the tigers, like, like, it’s a myth.

You can’t industrialize that you can industry, you can build an index fund to the public market,

because you can buy every company, you might even be able to build an index like fund in

private equity, because everybody can go bid for every company. But in venture, the founder chooses

you. That early GP chooses you. And so if you try to build an index fund that misses the best deals,

and I think there’s adverse selection, the bigger you get, the less likely you’re to convert the

best deals. Now you’re really in trouble. Brad, do you think an index of first time

VCs outperforms kind of that, you know, top quartile index. So you know, there’s some LPs

that select in to just solo GP, first time fund manager, first time fund, or, you know,

maybe second time, but solo GP, but it’s kind of like, you know, first into the market before you

really scale up. That’s where so many of the returns are found a lot of funds like MIT.

They look for emerging managers, because you tend to be younger, hungrier, you have experience,

you’ve got a lot on the line. But certainly, if you look at the hundreds of startups in VC land

over the course of the last several years, 99% of them are probably garbage and will fail and

won’t work. So the all stars will be all stars and the rest won’t. Somebody asked me, I use this

analog. They said hundreds of new people have come into venture. And I said, Yeah, it’s like,

it’s kind of like a marathon. You’re right. We had 500 runners, and now we have 1000 runners.

But from my vantage, it’s the same five to 10 runners competing for the podium

week in and week out. In that top 10 in that power law, it doesn’t change a lot. Yes,

there have been people break in. We know how hard it is to break in to Silicon Valley. Nobody invited

altimeter to the dance. Nobody invited social capital to the dance. Nobody invited Jason

Calacanis to the dance. It was the opposite. They lock the doors. Trust me, because it’s a highly

lucrative business, dominated by some incumbents that had huge brands, they didn’t want to share

the fruits of that we showed up, we worked hard, we build incredible teams, we had conviction.

Right. And we were we also had good fortune. Right? Yes, we were smart. We were we play some

good bets. But you also have to get lucky in this business. We were lucky to be born at this point

in time lucky to start when we did in Silicon Valley. I’m going to finish just with this one

point. This whole experiment of venture capital is less than 30 years old. The modern age of

venture capital is 30 less than 30 years old. We’re going through this period where everybody

wants to shit all over the industry, you know, TVP is going to come down all this other stuff.

I think that venture my dad when he went to start a business had to borrow money mortgage the house.

Think about the friction for somebody with a young family. If the cost of failure was losing your

house, putting your family in harm’s way, versus some young startup in Silicon Valley today, where

the consequence of failure, particularly if you if you conduct yourself with integrity, is that

you learn a lot. Right? There’s no losing a house, there’s no cataclysmic outcome for your family.

So to me, when you look at the economic unlock that we have in this country, by reducing friction

to invention, by reducing friction to experimentation, I am incredibly bullish on the

future of venture. I think founders are the engine that drives the world forward. Right? That’s where

we get electric cars. That’s where we get rockets that land themselves. That’s where we get mRNA

vaccines. And so there will be cyclicality, there will be industrialization, there will be big funds

and small funds. But the reality is that this ecosystem is a massive competitive advantage for

this country. I think when we look forward at the information age over the next 30 years, the power

of this ecosystem is more strategic advantage to this country, even the natural resources.

I’ll say I’ll say something orthogonal to this, which is in order for that to happen.

Just to build on the point, Brad, of your guests that you’re saying, we have an entire generation

of financially innumerate general partners at venture firms. And venture needs to be a pillar

of growth in society. And I think people need to have more financial tools and underpinnings to

do their job. Why? Because over these next 10 years, when maybe you have 500 to three quarters

of a trillion dollars of value destruction, and it’s because you didn’t think about portfolio

construction properly, that entrepreneur that needs your money, you will have to say no to them,

or renege on a deal, or let them down. And the reason is that you didn’t think about that on

the way in. And so these are practical skills that every other part of the financial asset

infrastructure has to learn, we are taught the hard way. You know, we are taught in the public

markets how to think about dispersion, correlation, alpha, beta, you’re taught in private equity,

how to do it, you’re taught in every other asset class, and we romanticize venture to think that

none of that matters. But in a moment like this, you will see how much or how much it doesn’t

matter. And if you’re going to live up to the to the actual commitment you make to an entrepreneur,

you better get financially smarter is what I would say.

All right, let’s move on. Do you want to go to stock picking or lift versus Newsom on this prop

30? I want to hear that Freebird diatribe. Let’s talk. You do? Okay, I want to hear it.

Well, anyway, there’s a bunch of people talking about index funds versus buying individual shares

and being a stock picker. Elon and Cathie Wood got into this on Twitter. And we all know the

arguments for passive versus active. And there’s large active funds out there that are just

programmatically buying and Elon and many think that active would be better for society or a bit

more active. Freebird, what’s your take? A business is a over time. It’s supposed to be a machine that

takes money in and puts money out. And then there’s money left in the machine. It’s like a box

money comes in money goes out. And over time, the objective of the money coming in, which is sales or

revenue exceeds the money going out and the box grows, right, the assets grow. And the best way

to look at that is in the financial statements of that business, you know, the income statement,

the balance sheet, the cash flow statement. But we and then there’s this narrative that can be

layered on top of those metrics, that measurement of how well that business is performing over time.

And that narrative is what drives a lot of investment decisions. Today, right, I see whether

it’s an analyst, writing an analyst report, or portfolio manager, or an individual picking a

stock, everyone’s got a reason why they’re buying the stock. And they say, here’s my thesis. And

what happens is everyone looks at that box, looks at that business looks at that thesis from a

different angle. And there’s always something you’re missing. So there you know, there’s some

element that is driven by imperfect information. And in some cases, it’s just heavy bias. You know,

you look at a stock, you’re like, hey, I really like Disney Plus, I really like the subscriber

growth. But the question fundamentally is over time, what is the revenue generation and the

profit generation potential of that one thing you’re looking at? And what are the 100 other

things that are going to contribute to that business, that box, taking in more money or

spending more money? Is that box going to run into a regulatory problem? Is it going to run

into a customer problem? Is it going to run into a content problem? Is it going to run into

competition? The number of issues and opportunities that any one of these businesses can and will face

is infinite. And every participant in a market is looking at some different set of those opportunities

or threats. And every participant in that market is making a different value judgment.

And so very often, people will buy a stock because they see their sliver, they convince

themselves that based on the sliver of the perspective that they have, that this is something

I want to own. They don’t do the work on what’s the income statement balance sheet cash flow

going to tell me over time about the quality of that business. And they don’t do the work on what

the valuation of the business is relative to comparables relative to future earning potential.

And I just wanted to have this diatribe because I see so many individuals doing stock picking.

And over time, because of this myriad of things that could go wrong and will go wrong,

or may go right or won’t go right, or the regulatory thing or the market thing,

or whatever interest rate thing hits that stock and the stock price goes down.

Eventually, everyone gets hit on the head. And everyone reverts to mean or below mean,

meaning the average of the index over time, or underperforms that index over time.

And so, I mean, for me, I spent two years, I know, we all went through some sort of

investment banking training, I spent two years out of college without a I had no finance econ

or business background. I worked in investment banking, learned how to read an income statement

balance sheet cash flow, learn to understand how business performance ultimately translates into

financial outcomes, and spent a lot of time on valuation. And figuring out just because you like

the story of a stock, you like the story that the CEO is telling you doesn’t necessarily mean that

you’re paying a fair price. So if you if everything they do goes right, this price could still drop.

And I think that this is a really important set of lessons for people that are individuals that

are doing stock picking, which is the number one message and this diatribe is specifically

targeted towards day traders retail, correct? I don’t know if it’s just them. I think it’s just

generally like make sure you understand how to read an income statement balance sheet and cash

flow statement. Number two, make sure you know how to assess valuation. Make sure you know that when

you’re buying a stock, you know what the total value of the company is based on the price you’re

paying. And how do you justify that that total value makes sense relative to your model of the

future outcomes for that business. And then number three, recognize and be cognizant of the fact

that whatever one thing you’re seeing that you think you’ve got some edge or some advantage on

because no one else is seeing it. There’s 99 other things that you’re not seeing.

And this is where everyone learns this lesson over time, and everyone gets bonked on the head

at some point in making these decisions. And it’s why every stock picker or nearly every we can talk

about the greats at some point here, and where alpha can be generated and so on. But generally,

most stock pickers over time, underperform the index. And it’s just particularly with the retail

movement over the last couple of years, I see a lot of thesis, here’s my reason for buying the

stock that excludes understanding the financials, understanding the valuation metrics, and also

excludes the whole litany of things and all the diligence that goes into thinking about all the

other angles you might be missing. So that was my bottle or feedback generally, it turns out that

it’s hard to be good at anything. Insert the blank takes 10s of 1000s of years of practice.

In investing, I think what I have learned is that it’s very easy to get caught up in the mania.

I’ve also learned in the last decade that, you know, we really benefited from zero interest rates,

it was a tide that lifted all boats. And I have learned how to think about correlation,

and the difference between alpha and beta, and how to construct portfolios that I think can

be all weather portfolios. To Friedberg’s point, those are nuanced, long tail skills that you’ll

only take up if you’re really passionate about the craft. It’s not dissimilar to a person,

I’m just going to use golf as an example, who learns how to hit a fade versus a draw and who

learns how to really manipulate, you know, their wedges in very specific ways. And these are all

long tail skills that come in when you decide you want to master something.

And it’s just important to note that that mastery is required to be really good.

Because otherwise, there’ll be times where you’ll go out on the golf course, and you’ll crush it.

But then, you know, there’ll be other times and most other times where you can go and get run

over because it’s hard. So that’s my only comment is that this is like everything else. It’s not

nearly as easy as it looks like Brad, you pick stocks for a living should retail, how involved

should retail investors be? Should they just buy an index? I don’t think it’s fair to say retail,

what I think my point was really about. No, his point is everybody. Okay, sure, everybody.

My point is saying a thesis, and excluding all these other factors that are critical in making

a decision about what you’re buying and whether you’re paying the right price means that you have

to make sure that you’re expanding your point of view on whether or not a stock is worth buying

at the market price today. And I think having that broader perspective is what I see missing

in 99% of the chatter on Twitter, 99% of, you know, folks talking about what thing to buy,

they’re buying it. And I think it’s critically important. You’re saying that most investing

that you see, is very narrative driven. And that narrative can sometimes be so powerful,

that it overpowers all the other elements that one should be doing to get a full picture of why you

should be buying something is that I think that’s a fair summary to math. Yeah, yeah. And I think

it’s, you know, it’s, it’s, it’s just about how so much of what goes on on CNBC, on a lot of Reddit

boards, not all of them, there’s some very sophisticated folks, they’re doing very sophisticated

financial analysis and looking at all the angles of a stock assessing the valuation. But so much

of these conversations exclude what you’re paying and what you’re getting, and exclude the broader

context of all the things that could and may not happen with a particular business. And as a result,

at some point, one of those things bonks you on the head, you lose 50%. And you’re like, Oh, my gosh,

my sometimes. And sometimes if you try to inject that logic into those channels, you’ll get

brigadooned. It’ll be absolutely brigadooned. Brad, what do you what do you think, in terms of

people’s access to markets, I guess would be another way to look at this and people’s propensity

to just, you know, gamble, let’s call it or maybe not make thoughtful decisions. I kind of think if

our friend Bill Gurley was here, he’d be like, this is a five minute conversation about the

statement of the fucking obvious. Yeah, you know, this is stock picking is hard. Really? Is that the

theme of this section? Yeah. Stock picking is hard. Very little alpha has ever been generated

in a sustainable way, even by the greatest people of all time. I think, you know, maybe something

that is a little bit useful to add two things. Not all good companies are good investments.

Price of entry matters. Okay, so I hear a lot of people saying, well, I’m gonna buy that because

it’s a good company that I don’t even know what that means. Right? Exactly. Right. Good, good,

good relative to the price of entry. But the second thing is the single greatest power

we have as investors, the greatest single source of alpha, right? Other than stock selection. So

choosing the right company, time arbitrage. Okay, so do you have the ability to own something that

is a growing asset over a long period of time so that if you got number one wrong, you bought it

at the wrong time, shit happened in the world, they miss a quarter, et cetera, that you’re not

forced to lock in those losses because you over allocated to that. So this idea around portfolio

management is a principal component of overall stock picking is just absolutely critical.

So I think, you know, I don’t really, I love the fact I put myself through college,

I put myself through law school, through business school, day trading stocks out of the back of the

classroom. I’m grateful I live in a country that let me feel like I had some alpha and that I

could do that. And I could go read the newspaper and sort it out. And I wasn’t building sophisticated

financial models. So like, you know, I think there are ways that folks can do this. There are a lot

more ways to lose money than there are to make money in a sustainable and durable way. Right.

And so as an investor, what we try to do, you know, we’ve got 90% of our portfolio in our top

five or 10 companies. I’m not an index. And the deal I have with our LPs is I’m very transparent

with them. They know that we’re going to own companies in size. And it’s that portfolio

concentration and our time arbitrage, holding companies for three years or longer, that is a

strategy they choose to believe in and sign up to. But I know a lot of greats who would never

subscribe to that strategy. So know your strategy, execute it, allocate a reasonable amount of

capital. So when all of these unknowns that Freeberg talks about come along, you can react

accordingly. And the final thing is, if it’s not fun for you, right, like, if you’re actually not

passionate and curious about like studying this stuff and learning about it, not everybody is,

then don’t do it. Right, then don’t do it, then just put your money in.

You’re not gonna be good at it.

The analytical depth and rigor that the greats employ to be successful at picking stocks and

picking businesses and investing in them, and selling them at the right time over time,

is does not make for good TikTok content. It does not make for good short form content.

And I think that’s why we’ve seen this dumbing down and this kind of short form thesis driven

narrative approach to content creation around markets and stocks, that ends up causing a lot

of people a lot of harm. You know, you watch the Jim Cramers of the world, I don’t mean to

disparage any one individual, but that sort of content that’s like, this is a great company,

we should buy it, like, let’s go. And the depth and rigor takes a lot of time and a lot of effort

to really do right. And then you get hit in the head, you know, when we and that’s, that’s what

I’ve observed lately, and in a really kind of flurried way, particularly across social media,

and so on. That’s, that’s why I just wanted to talk about this topic today.

Just to build on top of what you’re saying, Warren Buffett made this very famous bet in 2000.

It was him versus a bunch of hedge fund managers, and they were able to pick a basket of hedge funds.

And he said, I’m not even gonna pick myself, I’m going to pick the S&P 500. And the low cost ETF,

the Vanguard ETF, and he said, we’ll check in like 20 years later. Anyways, you know, the punchline

of the story, Buffett one, he won like a million bucks that he donated to charity, and these hedge

fund folks lost. And so to build on your point, Jason, time and time again, the smartest investors

in the world, ie guys like him have shown us that the most predictable way to make money,

if that is your goal is to own the S&P 500, which is, you know, a dynamic index of the 500 best

companies in the world. So there are these people doing all the hard work for you. And they have

very strict criteria of who’s an S&P 500 company or not. Now, yes, if you cherry pick other companies

that are not, or you concentrate in some, will you generate better returns? Absolutely. But

systematically, over time, that thing has lurched forward at 8% a year, you know, 9% a year,

if you invest dividends, you can approach 10% a year. And so if, if you really want to just grow

your wealth, that’s a very simple, steady, eddy way to do it. And to take a small amount and then

go and, you know, experiment with it to learn makes sense. But I think it’s important to make

sure you’re going there eyes wide open to try to actually learn. Buffett, of course, says the index

works really well. But then he’s got 50% of his public portfolio in Apple over the last few years.

So he clearly believes in alpha as well. But you know, back to Friedberg’s point, since we brought

up Buffett, you know, somebody asked Munger, why can’t why can’t people just copy what Buffett does?

And he said, because nobody likes to get rich slow. Nobody likes to get rich slow. If you want

to what it is 0% rate environment remind us all over the course of the last few years,

everybody had a grift, everybody had to get rich quick scheme. I don’t care whether it was NFT

crypto flipping, or whether it was house flipping, or whatever it was, everybody thought, you know,

this was easy. And frankly, looked at guys like us, oftentimes, I said, you’re the dumb ones.

You’re playing the game that’s really hard. Why don’t you just, you know, flip some crypto. And

I think we’re back to a world that if you really want to, you know, by the way, yourself,

how dumb did you feel? I felt so stupid, all these tokens, minting, minting, billionaire,

billionaire, billionaire, billionaire, billionaire. And I just, I just sat on the sideline.

To your point, right? It just made you it made me feel so stupid.

I felt super nice. It’s like, I what who’s the customer? And how much do you charge him? And

when you can’t get that basic answer of who the customer is, and how much it costs for them to

buy the product or service, it was like Brad’s the Brad’s point, I think the punchline is,

and then you know, at the 11th hour, it’s like, there’s a tendency to just capitulate and say,

okay, forget it, I’m in. And that’s when all the money gets torched real quick.

There’s a proposition here in California, where we vote on specific ballot measures. Not every

state has this, but we have prop 30 coming out, this is a 1.75% tax on income earned incomes

earned over 2 million for the next 20 years in California, which by the way, had $100 billion

surplus that would go towards clean energy. This was proposed originally by environmental groups,

but Newsom has come out to battle against this, which would seem counter intuitive,

because he’s so pro environment, what this would do is spend about 80% of this 100 billion in new

tax revenue over the next 20 years, 80% would go towards charging stations for EVs and motivating

customers to buy EVs 20% would go tour to combat the crazy amount of wildfires we’re having here.

He Gavin Newsom that is called this a cynical scheme devised by a single corporation lift

to funnel state income tax revenue to their company lift has provided almost all of the 40

almost 48 million in funding for this prop 30. And the reason is because California is going to

require 90% of ride sharing miles to be traveled by zero emission vehicles in 2030. You know,

on top of that, that California is going to not let you sell anything other than EVs in 2035.

If this continues, now you’ve got a bunch of people on the other side of this doing anti prop

30, including the California Teachers Association because they want the money.

Reed Hastings over at Netflix, Moritz over at Sequoia, Sam Altman over at open AI.

Well, what do you think of this? Freeberg? I’m curious. Sorry, what side are they on Jacob?

The side of lift Altman? No, they’re they’re saying don’t do this because they are trying

to control taxes in Carolina. They’re on Newsom side, Newsom side. Hey, this is a grift by lift,

because lift is concerned that they’re going to have to, you know, bear the brunt of 90%

of miles. So I guess the I don’t know if it’s original sin, but the the one of the levers here

is lift is got the majority of their rides are in California. Uber has stayed out of this because

they don’t have as much exposure because the number of rides in California is a smaller

percentage of their overall revenue. Brad, Brad, you have some thoughts to hear. I think

it’s a free burger, Brad. I’m just looking at the board of directors and left and thinking to

myself, good God, what are these people thinking? Spending 40 to 50 million dollars on this. It

just seems that they’ve totally lost the script. The company has way bigger problems, way bigger

problems to focus on. Right. Then, you know, this measure have a little faith in the system that

if we don’t get to a place where this is reasonably practical over the next 10 years,

then I’m sure we will evolve. Right. The legislation around this, you know, kudos to

Dar and the team at Uber for not running scared on this. Right. For not trying to push this through

these corporate governance initiatives guised as referendums in this state. I mean, this is just

bad politics, bad policy. I mean, we got Valerie Jarrett on the board of this company. You got

political sophistication on the board of this company. I want to be I wish I was a fly on the

wall. I want to know the conversation that went down and who raised their hand and said this is

the highest and best use of $40 million of our money. Crazy. Yeah, right. It makes no sense.

Freeberg have thoughts on if I mean, you’ve talked before about how you think the free

market should solve. What is the what is the governance structure at lift guys?

I knew that was coming. I knew it was coming.

Did they have super voting shares? Anybody look? I don’t know the answer to that.

So I think that the tax rate in California is high enough now that we all have friends,

friends in our poker group who have left for the state of Texas or the state of Florida,

where there are lower tax rates and where they feel like they’re getting more value

for their tax dollars. There’s certainly a calculus going on with Newsom, I believe in,

you know, the impact that having higher tax rates would have on what is clearly not just a

theoretical, but an actual evidenced, you know, exodus from the state of wealthy and high income

earners. This could be like, you know, at some point, there’s a tipping point that looks a lot

like France, where you raise the rates high enough enough wealthy people leave and the net

tax dollars actually go down, like what happened in France when they introduced their wealth tax,

then they reversed it and everyone came back. I will say I don’t more important long term point,

I don’t see a world where we don’t have over 60% tax rates on the wealthiest people in this country

at a federal level. If you look at if you assume a 5% long range, call it 1520 year horizon for

for interest rates, even 4% on $30 trillion of outstanding debt. And you assume that the

voter base will never vote to reduce Social Security or Medicare entitlement programs.

And obviously, the defense budget won’t get cut, we are not going to see a situation in this

country on a federal basis, where we can actually meet all of our fiscal obligations

without incremental tax revenue. And I think it is much more likely that you know, look,

whatever happens with the state initiative happens. But I think it’s very likely that over

time, the only way for the United States to bridge its fiscal gap is going to be to raise income

to increase the tax rates. I don’t see another solution because I don’t think that the federal

government or in our kind of democratically elected Congress, we’re going to see a system

that’s going to say, hey, let’s go for austerity measures, let’s reduce entitlement programs,

both sides will say that it’s just not going to happen. So tax rates, higher tax rates,

I think are coming. Well, you know, maybe California will skip over this particular

generation. But I don’t see how the United States continues to thrive over the next 15 to 20 years

without tax rates that will today seem exorbitant. Well, in the last 20 years, we blew through

a debt to GDP that was I think, 57%. And it basically doubled. And so David, to your point,

when we wanted to feel prosperous, what we did was we financed it. We went out and we, you know,

put out a ton of debt in order to make sure that our entitlement spending or defense spending or

whatever the things were that we needed as a population to feel like we were growing and

moving forward as a society we had. So that is the practical nature of what happens. And look,

a lot of people think that there is some upper bound to debt to GDP. And I’m actually of the

opposite view, which is I think that, you know, the quote unquote, invisible hand justifies us

moving debt to GDP to higher and higher rates. So the first time the United States went past 100%,

we thought it was the end of the world, it turned out it wasn’t. We’ll eventually go past 200,

somebody will clamor and, you know, be anxiety riddled, but they’ll take some SSRIs,

they’ll be okay, we’ll keep moving forward. Then we’ll get to 300%, we’ll keep moving forward. So

we are in a debt spiral that is a feature, not a bug of how democratic societies work.

As a companion to that, I do agree with you that taxation kind of is a pendulum, it,

it ebbs and flows. And you know, we’re in the part where it’s going to go higher before it goes

lower. But I want to tell you a story, which is that in the beginning of this summer, or sorry,

this fall, I was in the Middle East, and then I was in Asia. And they have very different

taxation schemes, right. And many of them have zero corporate gains tax, and, you know, sometimes

zero income tax. But then the opportunities for them to be able to invest and drive returns

is also commensurately lower, meaning there’s not as much alpha in most of the opportunities that

they see. Whereas if you go to California, you have to pay 60% tax, but then you know,

you could be an angel investor in Uber, you know, and all of a sudden take 25,000 and turn it into

100 million, which is un ungodly, it’s incredible. So I think that, in my opinion, actually, like

there’s actually this beautiful symmetry where even if taxes are high, your earnings potential

is commensurately higher, such that the net that you’re left with is the same as if you were in

another place where taxes may be zero, but you’re just not going to get exposed to the same ways to

make money. And I think obviously, there’s corner cases where that’s not true. But I don’t think

sweating taxes is a really important waste. It’s important way to spend somebody’s time. I just

think it doesn’t matter. Brad funnel work, I would just say, the beautiful thing about federalism

is we get to a B test in real time, different points of view. And so we’re seeing the biggest

AB test, maybe in the history of federalism between the state of California, the state of

Texas and the state of Florida. And it’s not just tax rates, right? When when Elon leaves to go to

Texas, we have the head of the California General Assembly, right changing her Twitter profile to

say good riddance and flipping the book flipping the bird to Elon, right? There is a hostility

toward business that has emerged in California that I think is commensurate and related to the

tax rate, but also separate. At the same time, we have the mayor of Miami texting us,

asking us to come down for a visit. We have friends in Texas who are literally politicians

who are marketing their state to people in California. And we’re going to be able to

political scientists will look back in five or 10 years. And they’ll be able to answer those

questions for you. But I suspect that that makes us a much stronger place for experimentation

than countries like France, where it’s all or none.

And just to give people an idea to transport about point about debt to GDP. Here’s the chart

early part of our lifetimes 50% 1990s 6070% after the Great Recession, the pandemic 120%

Japan’s at 200%, I think. So there’s obviously doesn’t, it doesn’t mean anything. I know that

your payments might at some point, yeah, I really don’t think so. Because I think what will happen

is you’ll just move the yield, you know, the yield to maturity will move out. And, you know,

we’ll issue again, you know, this is the funny thing. We talked about this last night at poker,

like, you know, Trump’s ideas, some of them were actually very brilliant. They were just packaged

through this lens of being a total goofball. So you could take it seriously. But 100 year

bonds, when rates were zero, now looks like, oh my god, what a brilliant move.

I mean, if you could take a 50 year worldview about climate about nuclear energy about semis,

we didn’t get to semiconductors again this week, we got so much good stuff. But, you know, we do

need to take very long multi decade looks at investment. And so why not make a 25 or 50 year

bond for semiconductors? Can I actually just do a small PSA? Sure, quickly. Public Service

announcement from trauma, the more you know, go, I went to blue bottle coffee today, and I asked

for a latte. And they gave me a latte with oat milk. That’s their default, which is disgusting.

And I find out, I find out that is now their default and brutal. And I said,

there’s a lot of normal people that don’t want to ingest that chemical spew into their body.

And so this is just a shout out, like just a comment to blue bottle, like,

can you please realize that a lot of us are normal, we want to come to your store,

and then you know, not have to ask for the long tail alternative. Can you just serve the thing

that’s first you’re signaling it most of the people drink coffee shop? Yeah, most of the

people still drink milk. Okay, I’m not trying to bring a doing you blue bottle, but I’m not going

to go to you anymore as a customer because I find this stuff really dumb. Like, can you just have

milk so that I can ask for the oat milk if I want to versus giving me chemical stuff that I don’t

want? I don’t want that. Yeah, that’s and and complaining about oat milk. Is that what’s going

on? No, it’s this is where this is where we are moment. It’s just like, I just want milk. I want

a latte. I mean, I want to go and support you guys. I want to maybe maybe the cow doesn’t want

to make that milk for you after its baby was ripped away from it. Oh, boy, here we go. You

know, here we go. It’s a we and we survive 90 minutes. And here it comes point. You know,

did the cow agree to be in service to you to make your milk? You think I need to have a verbal

contract with cows? I mean, well, yeah, I mean, are we going to do the olive fed beef next week

or not? Let’s just get down to translator of the cow human protocol. Who is it? You people? Is it

one of your friends? Like what? I don’t know. Actually, I am working on a neural link. I’m not

sure that the default assumption that the cow should be there to do whatever you want it to do

is a fair assumption. I think that’ll change over time, but it’ll take some time.

I think that that’s completely fair and reasonable. But what I’m saying is right

now while there’s an entire, you know, he said that economy of my well, there’s an entire entire

economy of people that shouldn’t get rolled over because you want to impute the emotions of cows.

I’m allowing you your freedom to want to impute those emotions of cows. Well, I would like to

support the dairy industry and buy milk. So can I please do that? No, I want to impute the freedom

and rights of the cows. But that’s going to take some time. But sure, go ahead, have your milk for

now. And you’re allowed but I right now will take the side of the dairy farmer. I just want to get

your chick Karen outrage your trim off Karen outrage or Karen on tape. Is this trending on

Tick Tock yet? When you admonished the barista? It’s not his fault. I just think it’s I didn’t

make a scene or anything. I just got I tasted because I just said, Can I please have a latte,

assuming that it would come with milk like most most normal places? Yes. And now I have to actually

ask for milk because they think that this chemical composite stuff that’s called Oh, have you looked

at the ingredients? And we had this conversation? Yes, we as anybody listen, we didn’t even get to

MailChimp CEO, Ben chestnut, who is, you know, like one of the kind great CEOs of our generation.

Getting Yeah, his memo. Is his last name really chestnut? I believe it is. Yeah, it’s just there’s

a tennis chess. That’s a great guy. I met him so many times incredible human and he’s been ousted.

Should we do outros? Because you didn’t do intros? Jekyll? Did you have? All right,

so here’s the actual Yeah, for for the Sultan of science, the Queen of quinoa himself,

climbing the stray cat leaderboard as we speak. David Friedberg, follow him on his Twitter handle

where you can get all kinds of hot takes from science to Ukraine. At Friedberg is talking about

I never tweet. I know that’s the joke. Also with with us again, the anchor he’ll be doing a Twitch

streaming where he translates the emotions I’m actually doing various animals, my cooking show,

which has a base of oat milk. It’s my oat milk top 10 beverages tonight on Twitch. Just follow

stray Friedberg. Get it. I don’t want to get brigadooned by the oat milk lovers. But they’re

coming. Milk stands are coming for you, man. You listen, I don’t want that chemical stuff in my

body. But I’m not going to stop you from doing it. I’ll do a diatribe on chemicals in oat milk next

week. What should we drink? If you did have a choice? Friedberg? If you didn’t want to drink

the chemicals and only what would you drink? What would you what do you drink? Soy milk,

oat milk, whatever. Okay. But you Okay, but you’re okay. And bringing that namaste tasted milk.

I drink the beautiful glass jar. No, I’m asking Friedberg stuff. Straw milk. Yes.

$3 returns for each glass bottle. I return them. I get them good. Have you tried? Have you tried?

I’ll tell you what is going to happen in the next he’s never had milk in the next 10 to 15 years.

Most of the milk you buy at the store will be identical to cow’s milk, same protein composition,

it will be built in a slurry. I mean, you can make fun of it. But you do work in the tech industry.

But yeah, I mean, precision fermentation is the future of making animal proteins. And it is how

we’re gonna hide you Friedberg. I like it. It’s telling you there is an economic model that will

work where we’re gonna that’s great. You know, but I’m saying, but wait, between now and then

can I just two things. Number one is, there’s a taste and a flavor profile I’ve grown up with

that I would like and I don’t think I’m a bad person. So I just like to have that and not be

made to feel guilty about it. Okay. And, and and number two, I don’t want to put chemicals in my

body. Okay. So if I can find a natural thing that I like, can I please just drink that? Can I just

please blue bottle have that in my coffee without having to explicitly ask for it? Yes, you will

get that. And number two bottles are short is owned by Nestle. And they’re the largest dairy

but Chamath has still has a short on Oatly. So let’s just keep this going for just two more

weeks. Okay, let me ask you an ethical moral question. It’s not joking. He does not have a

short I don’t even know if at least public. I’d rather you ask me an ethical moral question than

a political one. So I’m going to Yeah, I mean, we got a break from Ukraine this week. Would you

have if the synthetic version of milk or steak was made? Like and is a protein that is exactly

the same to a cow? Would you have a problem morally with eating and or drinking it?

No. So the objective of what’s called precision fermentation, or some people call it

biomanufacturing, you take the DNA from the cow, or from the chicken, you put it in a yeast cell,

or a bacterial cell, and you put in a fermenter tank, you put sugar water in the tank,

and the yeast cell or bacterial cell eats that sugar water, and it spits out that protein.

Yeah, you’ve programmed that organism to make that protein. And instead of growing a whole cow

or growing a whole friggin chicken, you’re growing the protein. No moral issue. No moral issue. No,

because no animal died in the making of the process. You know, you’re not king.

Can I quote Dave Chappelle here? Go ahead. Yuck.

All right. It’s gonna it’s it’s identical to the protein you’d be eating. Otherwise,

it tastes the same. It’s the exact same compound. There’s nothing about it that’s different.

Thanks to the dictator. Thanks to the salt of science. And for the fifth bestie coming in and

doing a great job today on behalf of our friend, the Sasol David Sachs, who is busy in a secret

clandestine peace-making junket to Ukraine. I am the world’s greatest moderator, Jason

Kalkanis. We’ll see you next time on All In. Love you, boys.

Besties are gone.

That’s my dog taking a notice in your driveway.

No, no, no.

Oh, man.

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 somehow.

What? You’re a B.

What? You’re a B.

You’re a B.

Besties are gone.

I’m going all in.

I’m going all in.