All-In with Chamath, Jason, Sacks & Friedberg - E104: FTX collapse with Coinbase CEO Brian Armstrong + election results, macro update & more

Saks, the United States is maybe not going to send weapons to

Ukraine indefinitely. And they’re asking them to sit down

and negotiate something that people on the left started to do

and got a got smashed for something you’ve been pushing

for. So I guess mini victory lap for you, Saks. What’s the end

game here?

Well, yeah, I mean, I’ve been talking common sense about this

for months to saying that we need to be open to diplomacy

because total defeat for Russia also means a good a maximum risk

of nuclear war. I mean, these things go hand in hand. That’s

the paradox of this war is that if Russia faces the prospect of

a total defeat, that’s when they’re most likely to escalate

this conflict into something much, much worse. So therefore,

we need to be open to diplomacy. But it was good to hear

administration officials over the past week say things that

I’ve been saying for months, and that I’ve been accused of being

like a Putin sympathizer for. So apparently, there’s a bunch of

Putin sympathizers in the administration. And just to read

you some of these remarks, actually, I want to play like a

fun game with you guys, instead of just Oh, really? Yeah, it’s

just mentioning these quotes. I want to get a game called Millie

or Saks. So I want you guys to guess, okay, whether it was

General Millie, who said the quote, or whether I said the

quote, okay, does that sound like a fair, fair game? Yes.

Fair game. Let’s put some game show music here.

Millie or Saks.

I’m gonna read you like four or five quotes. And you guys are

gonna say whether it was Millie or Saks who said it

first quote, who said it? General Millie, or Saks?

One of the lessons that should have been learned from World War

One is that European powers refusal to negotiate compounded

the human suffering and led to millions more dead. Millie or


Saks. I’m going Saks. I’m going Saks. It’s a very historic

Millie said, Oh, next one. Next one. Go, go, go.

Okay. A regional war turned into the First World War because all

parties made maximalist demands and assumed others were bluffing

it can happen again. Saks. Millie or Saks?

I’m going Saks because of bluffing. You said bluffing that

bluffing is a word that you would use.

All right. That was Saks.

That was Saks. Maximalist. Yes. Okay.

The general would never say maximalist.

Yes. He would never say bluffing. Yeah, go ahead.

Where there’s an opportunity to negotiate when peace can be

achieved. Seize it.

Millie. Millie or Saks?

Millie. Millie. It’s very pithy. It’s pithy like Millie.

All right. That was Millie.

Yes. I’m two and one. Two and one. Me and you. Two for one.

It’s deeply irresponsible not to try for diplomacy when the

stakes are so high.

Saks. Saks. That’s an emotional statement. I go Millie.

It was Saks.

It was Saks. Damn it. Two and two. Three and one for Chamath.

There has to be a mutual recognition that military

victory is probably in the true sense of the word may not be

achievable through military means and therefore you need to

turn to other means.

That’s Millie. It’s a word salad. I go Millie word salad.

Hold on. Hold on. It’s a Millie word salad. It’s too too

convoluted for Saks.


I go Millie. I go Millie.

I think it’s Millie.

That’s Millie.

Yeah. Word salad Millie. That’s it. I caught up. Now I’m three

and two. Tied with Chamath.

Last one.

Last one. Okay.

It must be our objective now to help achieve a ceasefire and

negotiated peace rather than protract the conflict.

Hmm. Wow. It’s so formal.


So formal. It feels like somebody said that on the steps

of like a building outside. It’s very formal. It’s well spoken.

It’s crisp. Can we hear it one more time? May we hear it one

more time?

It must be our objective now to help achieve a ceasefire and

negotiated peace rather than protract the conflict.

Millie. It’s a little too formal for a podcast. But in a tweet,

it wouldn’t be so it could be a sex tweet, but I’m thinking so

pocket. I gotta go Millie. I gotta go Millie.


You can’t tell Millie from Saks is what we’ve learned. What a

great game. Right now we’re gonna play the next game. This

is called Bernie Madoff or SP. Bernie Madoff or SP.

All right, everybody, welcome to the all in pod. With us again,

the dictator in a beautiful purple sweater, sweater, Karen,

man, it’s the fall season. So I want you to notice the inside

the inside of this is suede. Oh, very nice. Very nice. So

multiple animals killed for your pleasure. Yeah. All right.

What animal do they kill to make suede? Is that like a type of

leather? Or what is that?

I hope it’s an endangered one. Actually, that version of suede

that he’s wearing is from a white rhino. So they just take

the hide and they throw everything else away. Oh my

god. So

can we take this out of the show? These are ivory buttons.

I think it’s baby seal fur around the

how many baby seals were killed to make your outfit?

Right. Also with us is the Sultan of Science, David

Friberg racing from the airport. How was that JetBlue

mint? I heard you upgraded to mint. No comment.

Well, you don’t want to talk about the $1200 upgrade you did

to your JetBlue ticket.

You don’t want to talk about JetBlue mint. Why? Are you

embarrassed to fly commercial? What did you eat?

Are you embarrassed to fly J Cal?


I’m the president. I’m like, hold on mint coming through. And

then I start spreading out.

I think J Cal class is like the seat by the bathroom.

In the back.

Hey, do you think you save 150 bucks each way? What is is

JetBlue mint the name of like JetBlue mint is their first

class. Coast to coast. It is so delightful.

What is that JetBlue mint?

They just have figured out a way to make like sleeper seats, you

know, that are very nice. And upgraded service where they they

put like a little wall between you and everybody else. It’s

kind of like having a private plane if you didn’t and sax is

here. The whole crew is here. Basically, we’ll have a surprise

bestie guestie jumping in in the middle of this. I’m not gonna

tell you who will

because nothing’s going on this way. Nothing is going on this

week. I mean, there’s so much to talk about. Let’s just start

with the elections.

And then we have to start with my mayor culpa.

Usually this is like throwing red meat to sacks. But I mean,

at this point, alright, so DeSantis won by double digits in

Florida, he got a huge amount of the vote, but all the Trump

high profile Trump back candidates seem to have lost Dr.

Oz, Dan Cox, just, it was a shellacking, I guess, or the red

wave became like a puddle, or like an eyedropper or something.

But some of the Trump back candidates did win some of the

Peter Thiel collection, JD Vance one. So I guess that’s a big

win for

that wasn’t a Trump candidate, though, because if you remember

when Trump went to stump for JD Vance, he forgot his name.

Wrong. So, so

on your side, you don’t need friends.

Anybody that Trump actually cared about turned out to be

just a complete dud and lost. And everybody that kind of, you

know, had to keep him somewhat around just so that he didn’t

throw bombs actually did decently. But I mean, Trump is

just a weight on the neck of the Republican Party. And it’s time

to just get rid of him.

Saks, what happened to your red wave?

Yeah, listen, I got this wrong. I think there’s a few reasons

for it. So I think when you get an election wrong, you have to

admit it and figure out what you’ve what you what your

mistake was. Otherwise, you’re not going to improve. I mean,

number one, I was looking at, you know, the RCP polling this

real clear politics where they take an average of all the

different polls, they were adding a factor to it, they were

showing, by the way, plus three or plus four in the Senate for

Republicans, but they were adding a factor to it based on

the underweighting that the pollsters did in the last

election cycle. And it turns out that the pollsters I think did a

pretty decent job correcting their polls. And so the RCP

overweight turned out to be just basically completely wrong. The

other thing that I got wrong was I was looking at the

fundamentals. I mean, three quarters of Americans think

we’re on the wrong track. And we’re in a recession. So based

on that, you would think that this would be a great year for

Republicans. And in fact, the out of power party usually wins

in a midterm and Biden’s popularity is at historic lows

of like 41 42%. So everything was teed up for the Republicans.

So what went wrong, I think a couple of things. Number one,

two days before the election, Trump basically comes out and

pre announces that he’s running. Oh, yeah. You know, this

basically plays into the narrative that Biden has

already created that this is a, this is not a referendum on

Biden, it’s a referendum on democracy. And basically, Trump

made it into a choice election, who do you like better Biden or

Trump. And the fact of the matter is, if you look at the

exit polling, as unpopular as Biden is, Trump is even more

unpopular. So that did absolutely nothing to help the

Republicans. And I think it really hurt them at the margins.

The other thing that turned out, I think the other big thing that

helped Democrats was Dobbs. And I never thought that it wouldn’t

be a factor. But if you looked at the polling before the

election, 15% of likely voters said that it was their number

one issue. If you looked at exit polling, after the election, it

was 28%. So Dobbs turned out to be twice as significant as what

the early polling was showing. And if you remember, Jason, go

back to the episode we did on abortion. I said the shrewd play

for Republicans here was the Roberts compromise. What did

Roberts want to do, he basically was going to allow the 15 week

restriction on abortion, but not have the headline of Roe v.

Wade overturned. And that basically is what to Santa’s

implemented in Florida, he basically restricted abortion

after 15 weeks. It’s the purple state compromise. It’s where I

think the purple states and where most of the country is

going to end up. And the sooner Republicans get their heads

wrapped around that fact that better, they’re going to be

long term.

Yes, you one question there, sex, who stacked the Supreme

Court deliberately to turn over Roe v. Wade?

Listen, I mean, there, this was a long term priority of

Republicans. That’s not a question.

Well, no, I mean, we do have to recognize that Trump said he

would do that. He did it. So this is doubly Trump’s fault.

Every party nominates justices that align with their values and

it cycles.

And he’s going Trump said he would specifically do it in

order to know, but the president doesn’t choose who dies in the

Supreme Court and when? Yeah, right.

Yeah, it’s also more complicated than that. Because what this

Dobbs decision did is throw the issue back to the states. And

the fact of the matter is that now it’s up to each of these

states to determine where they’re going to come out on

this issue. So if you look at there were ballot initiatives in

red states like Kansas, and like Kentucky, Kentucky, that’s

right. That’s what I’m saying is there are pro life ballot

initiatives in red states that lost. And so you can see all

over the country that the Republicans tried to go too far,

or they do try to go too far when they try to impose a total

ban. Yeah, but it seems to be popular. Is this what I’m saying

is the purple state compromise. It’s what DeSantis did in

Florida. It seems like most of the country we talked about this

on that episode. Yeah, most of the countries in the messy

middle, they want abortion to be safe, legal, rare and early.

They’re willing to support it in say, the first 15 weeks. But

then after that, there needs to be some restrictions that I’m

saying most of the country supports that. Now, it’s also

the case that Democrats, though, are staking out a

pretty extreme position, too, because most of the Democrats

were taking the position that abortion should be legal up into

the ninth month, which is not even that’s more radical than

even row, row said that you can restrict it after 23 weeks. So

you know, what we said on that podcast, Jason was the party

that gets the middle first on this issue is the one that’s

going to do well, just this issue. Yeah. And I think yes, I

think it’s true on this. And I think it’s true on other things.

So look, I think the Republicans can correct you’re pretty

easily. If they listen to folks like DeSantis and young Ken and

Kemp, people who understand that they have there’s a compromise

here. And the ones who basically insist on pushing a total ban

are going to go down in flames.

There’s a couple of things I think that are worth looking at

now that we have all the exit polling and the results. The

Democrats strategy of helping to promote these extremist MAGA

candidates in the primaries turned out to be a huge winning

strategy, because every single one that they helped put up

against the Democrat, the Democrats won. But number two,

so what that shows is the extreme right cannot field a

winning candidate. But on the other side, all of these extreme

left leaning Democrats also did not do very well either. And so

you’re back to David, what you said, which is we have been

saying for a while, the winning strategy is that messy middle.

It’s the moderate person that kind of like tax to the center.

And this is what you see everywhere around the country,

all of the battle ballot initiatives, every time you had

an extremist ballot initiative, whether it was a complete ban on

abortion in a red state, or whether it was a tax, the rich

policy in a blue state, they failed. And so I think the

message that you have to take away is the extreme left doesn’t

work. The extreme right doesn’t work. Right. If you look at, for

example, like Kathy Hochul almost lost in New in New York

State, because of who because of like AOC and all of that

extremist progressive rank and file of that party. So people

need to really understand and look at the data on the ground.

If you want to win in 24, you got to be in the middle and you

got to clean up all of this extremist rhetoric.

Freeberg. Any thoughts?

I think the Georgia Senate runoff race that we had in the

2020 election cost the US $10 trillion. And I think it because

if you’ll remember, that was the race that when the Democrats

won, tipped the power in Senate to the Democrats, and all this

legislation for the last two years was passed, including a

lot of the fiscal stimulus and spending that very likely may

have faced significantly more opposition than could have been

faced, where the Democrats have the White House, and the Senate

and the House. And so that single seat, and the loss of

that seat in the runoff to the Democrat Party, I think ended up

allowing a lot of loose behavior over the last two years, that’s

going to cost this country for a very long time. And in part,

perhaps we could argue a lot of the inflationary pressure, and

now the debt load, the US debt load increasing by $10 trillion

in the last two years since that election, by the way. And so I

think one of the most important things that perhaps people don’t

cognizantly recognize, but feel in some way, is that having a

balance of power is really important in this country. And

so to some degree, while there may be issues that folks can

argue about disagree about, there may be candidates that are

vile to us, I think ultimately, folks are recognizing the

benefit and the value and having a good legislative debate and a

good check and balance in this country. And so I think there’s

a lot of what Saks is saying that ties into that kind of

emotional conditioning that’s probably underway.

Okay, Saks, Trump said he was going to announce he went after

to Santa’s called him to sanctimonious. Obviously, the

Trump endorsements here didn’t help. Roe v. Wade didn’t help

the situation. What is going to happen here? Is the Republican

Party finally going to cut ties? Because they want to start

winning? Or is Trump going to just announce next week and

cause massive chaos? What’s going to happen in the

Republican Party in the coming weeks? Because we’re 14 months

away from Iowa, right? I mean, this is so now the next issue,

the question comes down to do Republicans want to start

winning elections? Yes or no. And Freeberg brought up the

right point in the last election cycle. He’s right that the

reason why we got $10 trillion of unnecessary spending is

because of that Georgia runoff seat, we’re about to have

another one where Purdue won that seat on election night. And

then Warnock won in the runoff. Why did things go against

Purdue? Because Trump had a six week hissy fit. After the

election, the Georgia runoff happened on January 5, and then

all culminated in the ride on January 6. So the fact of the

matter is, Trump has been having this extended hissy fit and

living in denial since the loss in 2020. And as a result of

that, we lost the Georgia runoff, I think we did worse

than we had to in this midterm, I think we’re going to lose the

Georgia runoff again, if Trump continues with these antics. And

so it really comes down to Republicans, do you want to win?

And look, I know that there’s call it 40% of the country

passionately loves Trump. But here’s the problem. He’s capped

at 40%. Independents and moderates centrists will not

give the guy another look. And so you cannot win a major

national election in this country with 40% of the vote, no

matter how passionate that 40% is, you know what 40% is 40% is

Charlie Crist, the guy who distances beat who wiped out in

Florida, that was a 6040 election. That is what a 40% of

the electorate looks like. landslide. It’s a landslide.

Exactly. So the bottom line is that who your messenger is in

politics is incredibly important. And Trump just gives

his enemies way too much to work with. Now, if he weren’t a

Republican, it might be different. Take Fetterman, for

example, okay, this guy, Fetterman, okay, he’s being

portrayed as this man of the people, he’s got the goatee and

the, the tattoos and the hoodie or whatever. Who is he really,

he’s a trust fund kid who never had a job until his mid 40s. But

the press completely gives him a pass on that they would never do

that for Republican and federal were Republican, the press would

expose them in two seconds. Now, that’s a complaint. But the fact

of the matter is Republicans have to accept it. These are the

rules of the game. If you’re a Republican candidate for office,

you have to be perfect. You have to be focused, you have to

be disciplined, you have to be to Santa’s, you cannot give your

opponents something unnecessary to work with every fight to

Santa’s picks has been a smart fight that he’s won. And same

thing with Glenn Youngkin as well. He doesn’t give his

opponents things to work with. And unless Republicans realize

that these are the kinds of candidates we need to nominate

in this media environment, we’re going to keep losing elections.


Jamal, any final thoughts here? As we wrap up election, I’m going

to DC next week doing the rounds high five and slapping.

Yeah, just to finish the thought one other quote from New

Hampshire Governor Kristen Nuno, who’s kind of a, he’s a

Republican who’s been in spas with Trump. He said, Listen, the

message of this election is first fix crazy, then fix

policy. If you’re coming across like you’re crazy, their voters

will reject you. Now, that doesn’t mean you can’t stand for

principle. Ron DeSantis says that Florida is where woke goes

to die. He says we will fight woke in the boardrooms will

fight in the classrooms. This is certainly not a liberal

position. These are pretty conservative positions he’s

taking, but he does it in a calculated disciplined way.

I’ll say this right now. He is a winning candidate. And the scale

of Reagan, if the Democrats also don’t figure out how to clean up

their act, because the other message that’s so interesting

that I took away is the legislative agenda that works is

actually what Biden has always believed. The problem is that

Biden seems to get distracted or confused or hijacked by the left

wing of his party. And they introduced all these unbelievably

crazy iterations of progressive policy that just are not

popular, even in blue states, just look at the number of bills

that fail. So he also has to fix what he’s doing, by the way,

because he doesn’t think that could fail the US judge in

Texas. I’m not sure you can tell me if this is legit or, or


No, they stayed that what we should talk about that in the

context of the economy, actually,

that was predictable. That was predictable that the college

loans are thrown out is completely unconstitutional for

a president to spend half a trillion dollars without

Congress’s approval capital on Jamal’s point here to Santa’s

one Miami Dade County, which went for Hillary by 30 points.

Okay. He showed that a competent executive a an energetic youthful

operator who actually runs the state well, okay, can win over

moderates and independents and Democrats. Now he’s a winner that

these are the types of candidates Republicans are. Yeah,

he’s a winner. He’s a winner. We got a we got a call breaking in

here. We have a special bestie guest. You know, it’s been a big

news week. It’s not just the elections, FTX, crypto exchange

went belly up. And we thought, well, let’s bring somebody in

who’s super credible in crypto. And that’s friend of the pod.

He’s credible because he’s wearing a tie. Yeah. Hey, Brian

Armstrong. How are you doing, Brian Armstrong? You look

fantastic. What are you testifying today? I’m doing

great. It’s not it’s not Moncler. And it’s not Laura

Piana. You know, normally, I just I just wear the black t

shirt and the hoodie. But you know, when times like this, I

got to go talk to media policymakers, regulators, and

it’s a it’s a good time to, you know, spruce up the image. This

is a week to break out the tie. Yeah. Hey, listen, men’s

warehouse. It never looked better. You look great. Thank

you. I see a red tie and I think fiscally responsible.

I guess Brian just to kick it off. FTX in spectacular fashion

blew up this week. And it’s pretty gnarly. You run an

exchange as well. What’s your take on what happened with FTX?

And then what is your position in terms of making sure your

customers understand that Coinbase is not going to have a

similar fate to all the other exchanges that seem to be

blowing up every couple of months? Yeah. Well, first of

all, I mean, I think we were all shocked that somebody like Sam

who seemingly is so smart and and capable ended up in this

really the situation where he appears to have done something

quite unethical and illegal. So you know, my job right now this

week has been to go out there and just help people understand

that Coinbase is not like that we’ve been pursuing a different

strategy for the last 10 years. We’re a public company, we’re

we’re regulated, our financial statements are audited, they can

show that, you know, customer funds are segregated, they’re

backed one to one, we’re not investing customer assets

without their explicit direction. And so that’s been

the first step is just to make sure people understand that. But

then after that, we need to kind of think about how we go forward

as an industry here and both take a long term perspective,

make sure the good companies in the space aren’t allowing one or

two bad actors to kind of mess it up for everybody else. And it

feeds into the whole regulatory story too, because companies

like Coinbase are already regulated, but we’re regulated

like a traditional financial service business. But we don’t

have clarity about the crypto specific regulations, like

what’s a commodity, what’s the security, and that lack of

regulatory clarity, I believe, has pushed a lot of this

business offshore to these less regulated exchanges. That’s part

of what caused the blow up today. They were based in the

Bahamas, you know, and they just there’s not sophisticated

financial regulators overseeing what they were doing.

Brian, there’s a lot to unpack. But maybe we can just take a

step back and for the uninitiated, or for the person

who’s only been just following this very superficially, can you

just, in a nutshell, explain what happened?

Yeah, so my understanding is, and again, this is from people

I’ve talked to, and I spoke with Sam and CVC briefly during this,

but I didn’t get details from them. I got it from other

people. You spoke to them this week. Yeah, I mean, this was all

going down. I mean, I spoke to Sam about, you know, he was

trying to raise emergency financing and things like that.

And I spoke to CZ about why he was considering buying the

asset. I thought it was a bad idea.

But my understanding of what happened at this point, and

again, I don’t have all the facts. This is just my

understanding is that, you know, FTX was in a position where they

had this market maker Alameda that was investing in risky

things. And that’s fine, like market makers, hedge funds,

they’re designed to take more risk. It appears at this point

that back during the last shakeup in the crypto industry

where you know, Terra Luna and Voyager and Celsius and three

arrows went under, it appears that Alameda took a big loss at

that time as well. They may have even been underwater. And

instead of just saying, Hey, you know, this hedge funds gonna

blow up to which would have been unfortunate people would, you

know, Sam would have lost money. It’s embarrassing, but it’s not

illegal for a hedge fund to blow up. It happens with some

regularity. Instead of just letting it blow up. It seems

like at this point, he took customer funds,

but you have to explain he also he owns both. That’s for the

people that may not understand that. Right. So it’s a related

party. He owns his own exchange called FTX. And he owns his own

hedge fund called Alameda,

which operates inside of FTX, as well as in other places, right.

But again, Alameda seems to have blown up. Sorry, Brian, back to

you. Yeah, so it seems that they had this solvency issue. And

instead of just letting it blow up, Sam basically said, Hey, we

have a bunch of customer assets over here at FTX, or he somehow

basically made a loan from FTX into Alameda to try to prop it

up. I don’t know why he did that. I mean, that that’s the

moment in my mind where he crossed the line into probably

committing fraud. And I think he probably lied to users lied to

investors. And he went around and tried to bail out these

different companies like like Voyager and BlockFi and to sort

of prop up this thing. And maybe he thought he could trade his

way out of it or something. I’m not sure. But that seems to be

where the mistake was made.

Brian, can I ask one question, which I which I think will help

frame the contagion risk set of questions that everyone’s

having. When people have an asset, we all talk about

customer deposits and customer assets held at these exchanges.

But those assets and those deposits are very often some

form of coin, I have some amount of Bitcoin, some amount of

ether, some amount of something else. Is it the case that there

is an assumption of total asset value that’s held in a in a

portfolio of coins that doesn’t necessarily match the individual

users accounts. And then when one coin goes down in value

nominally to dollars, that the whole value of the portfolio

goes down, and now you can’t actually make the customers

whole. So in the statements that have been made by these guys and

other exchanges, that we have enough liquidity to cover

customers accounts, that the assumption might be we have

enough liquidity, if you assume the current market price for a

whole bunch of different coins. But then if one coin tanks, the

total liquidity tanks, and they don’t actually have it matched

up correctly, because now the customer account value didn’t go

down as much as the exchange of the total asset value. Does that

make sense? And is that part of the contagion risk that’s going

on here is that they’re not matched truly between customer

accounts, and the exchanges, you know, holding of coins, so not

exactly. Okay, so if you’re a regulated financial service

business, that’s but you’re not a bank, you know, we’re

regulated as a trust company, a money transmitter, etc. You’re

required to hold customer assets, one for one, and

denominated in the the asset. So in other words, if you say the

customer has one Bitcoin, you have to hold one Bitcoin, if

they say they have $100, you have to hold $100. And so that’s

the case with Coinbase, you don’t have to take our word for

it, by the way, you can look at our audited public financial

statements as a public company, with an independent, you know,

big four accounting firm who went to go verify all of that.

And that’s what various custodians and exchanges, that’s

what they all should be doing. If, by the way, if you’re

regulated as a bank, you can actually go invest some of

those, but there’s very strict regulation around that and

capital requirements and whatnot, and we’re not a bank.

So we hold one to one. Now, if you’re an investment fund, or a

hedge fund, or something like that, then you can try to take

positions in different coins and different assets, and they could

go up and they could go down, you know, you may you may lose

your investors money, but there’s no such thing as the

customer assets being involved in that there needs to be clear

segregation of those customer funds. And from from what an

investment fund would be or corporate funds. And that’s

where they got in trouble. They basically co mingled customer

funds with their hedge fund.

Classic. Can you explain the contagion, by the way, just so

we can, because everyone’s been talking about the contagion and

understanding what’s next. So that’s what I just want to Yeah,

because I think people are gonna be asking that a lot this


Yeah, so I do think there’s, there is some contagion risk

here. I think there’s other firms that had, first of all,

there’s firms that had money just sitting in FTX. And that’s

now going through bankruptcy court. So that’s been bad. I

mean, multi coin came out publicly and said that they had

10% of their portfolio sorted on FTX. There’s other firms that

Alameda may have had loans with. And those firms are probably

struggling. I, you know, I don’t want to say who, but we have

received a couple of inbound calls from other people trying

to get emergency financing. There’s people who may have just

totally different from FTX and Alameda, they may have just had

their own portfolio that they took margin or leverage on to

buy crypto. And now as the prices have come down a little

bit, they’re getting stopped out. So that’s all been very

challenging. And I, again, just for the sake of clarity, I

should say that Coinbase did not have any material exposure to

Alameda, FTX or FTT token.

Can we just talk about this issue of customer deposits,

because this is really the crux of the issue from a legal

standpoint, right? I mean, I remember when I was doing PayPal

like 22 years ago, and the company was like six months away

from running out of money. I remember the lawyers told us

really clearly, you cannot use customer deposits to fund the

operating expenses of your business. In other words, if

this business ends up going bankrupt, you’ll still have all

the customer money there and they’ll be able to get it back.

And you know, it was really clear, like, hey, if you use

customer funds to pay for the burn of the business to operate

the business, that is a do not pass go go directly to jail type

offense. And so like, that’s really the heart of this. Now, I

read in some articles covering this, that the way it worked, is

that Alameda had a bunch of these FTT, or these FTX FTF

calls FTT. And they basically use that as like a marker as

collateral. So they basically borrowed, what is it like 6

billion of customer funds from FTX, and then they use their own

token to then as collateral. So stop it. Yeah, exactly. And then

what happened is apparently like CZ got wind of this. And he

owned a whole bunch of these tokens. And he signaled that he

was going to dump it and the price basically went down. And

so now all of a sudden, the collateral for the customer

loans was insufficient. And then there was a run on the bank. And

by the way, this has happened. This happens in the public

markets a lot as well. So like when you see heavily shorted

names, or when you know that certain hedge funds are on the

brink, other hedge funds will go in and essentially force a

margin call and a stop out because then it’s what causes

all of these runs. And if you look actually inside a GameStop,

the reason why you got all this gamification in the GameStock

equity and a bunch of these other names was in part because

of this dynamic folks that are highly levered, folks that don’t

have the right matching of risk. And what happens is they’re

solvent, but a liquid. And then if you run the instrument into

the ground, they both become insolvent and illiquid all at

the same time. And the whole thing explodes. So Brian, the

question is, now that we know what happened, which is all of

these crazy inner party related transactions, and, you know, all

of this stuff seems very illegal. There was a bankruptcy

filing today. And up until today, it seemed like this issue

was really about FTX International and Alameda and it

didn’t touch FTX us, which for a lot, a long time tried to

position itself as, you know, well run and regulated as coin

based to be, you know, they tried to say that. But now, if

you look inside the Wall Street Journal, all the articles say

that this is actually FTX group. So the whole thing seems to be

imperiled. Can you just help us explain that? Because there now

that’s a lot of us people that were following the rules

thinking that this thing was matched one to one that may be

also affected? Yeah. So look, I don’t know who inside FTX is and

its orbit of companies actually knew that the fraud had been

taking place. I, it would not surprise me. I have no idea, to

be honest, but it would not surprise me if FTX us people and

employees had no idea that this was happening. I’m imagining if

Sam was doing when he when he started doing this, he probably

wanted to keep it to a very small group. Otherwise, this is

the kind of thing that leaks and the whole thing blows up. Now

that being said, I don’t necessarily think FTX us is

worth anything as a business right now because of the brand

being so tainted. And there probably was not great

separation of these entities in the sense of, you know, like,

did they have truly separate boards and beneficial owners and

governance and it Sam seems to have, you know, it appears that

they didn’t FTX didn’t really have a CFO or maybe even like a

real board or anything like that. And so it’s hard to

we found on Reddit, there was an article that appeared that said

that the head of compliance at FTX was also the head of

compliance at a poker site called ultimate bet, which in

the 2010s, did this exact thing, apparently some version of this

where they went in and they looked at whole cards of poker

players. And then a few employees inside the business

would basically play against these folks knowing what the

whole cards were, ran this cheat stole millions of dollars.

Somehow, that person found a way to be head of compliance at

FTX. Yeah, 10 years later, which is incredible. But back to this

question. So, so now what happens now is you have the

international business, and the US business and Alameda research

all rolled up into this one frozen entity, right? With now

regulators having to so do you know what happens in a process

like this? Like, is it that the the DOJ and the SEC get

priority? Or is there some international monetary like who

who’s who unwinds all of this? How do people get their money

back, if at all?

Yeah, so I’m not an expert at this. But my high level

understanding is that the bankruptcy courts will

essentially, and I believe they filed bankruptcy in the US,

which is an interesting thing. I didn’t know why they did that

versus Bahamas. But anyway, the bankruptcy court will basically

go through and try to find any assets of value. So I mean, they

must they still have some tokens and value, they have a venture

portfolio, they, you know, I think Sam owns 9% of Robin Hood,

there’s various things that they may own. And then they’ll kind

of auction those off to various bidders on distressed assets,

and then try to distribute those funds to the customers. I don’t

know the exact process beyond that, though.

I mean, if you remember, the Madoff wind down took many

years. And for years, he was trying to find assets, and then

he found a market sold them. There’s this the trustee, I

think he’s still active. And then, you know, it’s tried to

redistribute the funds, obviously, so many more

customers here than there was with Madoff. But it can be a

very long and winding process to identify all the assets, then

run the market sale process on them, then figure out who gets

what first, and then distribute.

There was an interesting thing that Larry Summers did, I think

for Bloomberg, where he was asked whether this was Lehman or

Enron. And he said, it seems more like an Enron than it is a

Lehman. And Brian, I’m just curious how you think about it.

Like, is this sort of a fraud perpetuated by a group of

executives to essentially take advantage of a situation? Or do

you think that this is more like a Lehman situation, which is a

well run business, I guess that just, you know, got caught in a

liquidity trap?

I think it’s my guess is it’s a little more like Enron in the

sense that I mean, yes, they were over levered and that kind

of thing. But the minute that they moved customer funds in

some way, shape or form, to backstop the hedge fund that

that was, in my mind, fraud. And, you know, that’s more like


Do you think now that we have to open the gates on regulation,

like the whole point of crypto in some ways was, you know, trust

nobody. And, you know, decentralization is the key. But

here, what we see is a lot of people were tricked into

trusting FTX and having their deposits there. And it was a

centralized exchange, which caused all these problems. So

it’s like, it almost violates the principles of what the whole

product market fit was supposed to be. So what what should sort

of the observer expect? And what do you expect as a business in

terms of how governments now react to all of this?

Yeah, I think it’s really important to distinguish between

the centralized players in crypto, which are custodians,

exchanges, etc. Coinbase has a big business there. And the

decentralized players, which are, you know, self custodial

wallets, DeFi protocols, web three, that whole world. So the

centralized players should be regulated. And today, they’re

regulated already, like, like kind of traditional financial

service businesses, but they don’t have the regulation clear

when it comes to the crypto aspects. So for instance, in the

US, we actually don’t still have clarity about what is a

commodity, what’s the security should, which one should CFTC

regulator versus SEC, that kind of thing. And that lack of

regulatory clarity, and frankly, the the climate of regulation by

enforcement, the negative rhetoric from, you know, chair

Gensler, in particular, has created this sort of chilling

effect in the US that has pushed a lot of that centralized

actors activity offshore. In fact, 95% of the trading volume

in crypto is now outside the United States. And it’s come

down a lot since the beginning of this year, even. Now, the

decentralized players, self custodial wallets, DeFi web

three, this is where crypto really has an opportunity to

make a more fair and free and transparent system because you

can go look at any smart contract to see exactly what

it’s doing. Anybody can audit the code. If you have a self

custodial wallet, you can just trust yourself, you don’t have

to trust any other intermediary out there. And that’s where you

get true decentralization. And I think that’s actually now those

areas still have a couple of their own challenges. You know,

sometimes people will lose their password or their phone, and

they’ll lose their own money. So if you’re if you’re trusting

yourself, you still have the you have trust, you know, that you’re

going to do that piece correctly. But there’s a lot of

good things we can do there around making social recovery

mechanisms and NPC wallets and things like that.

We remember just a couple of months ago, Gary Gensler started

saying, Hey, these things are all securities. And you went and

visit the SEC a couple years ago, or you try to they wouldn’t

meet with you. You were very public, you did a tweetstorm. We

talked about this on my other pod, that, hey, like, we want to

meet, we want to talk about that. Now, we’re still in a

position where the SEC is position is these are all

securities, which means the anything that’s trading, it

would have to be limited to accredited investors, etc. What

should the United States do here? And how close are we to

getting clarity? Because I know you’re trying to talk to the SEC

directly about can we just get some clarity here? Can people

buy these tokens or not? What is the status of are they tokens?

Are they securities? Or are they not here in the United States?

Yeah. So luckily, since then, we have had a lot of productive

dialogue with both the SEC and the CFTC and Treasury and all

kinds of people in Congress. And I do think the US is making some

steps in the right direction. There was actually there was a

bill going through Congress recently called the DC CPA, or

the staff now Bozeman bill, although it’s having some

challenges now, frankly, due to this FTX blow up, because SPF

was one of the people sort of pushing that bill forward. But

regardless of that, the sort of system that we should have is

there should be a clear designation between what is a

crypto commodity, and that can be regulated by the CFTC. And

what is a crypto security? Now, this is one of those legal, by

the way, what is also a stable coin and artwork and other

things that are not any of those things. The challenge lies

in that there’s kind of a fuzzy line between what is a commodity

and what is a security. And a lot of this law is based around

the Howie test, which says a security is an investment in a

common enterprise with an expectation of profit. And so

it’s basically a point based system. And in the absence of

really getting a clear list between the CFTC and the SEC or

in this turf battle, I would love it if you know, they could

basically put out a list, get their heads together and put out

a list, hey, CFTC is going to do these SEC is going to do these a

bunch maybe are in the middle, let’s let the courts figure that

out or whatever. But that just hasn’t happened. And it’s a it’s

a missed opportunity in the US.

So if the Howie test is not perfect, given the dynamic

nature of cryptocurrencies and all the innovation, if Brian

Armstrong was going to say, Hey, this is in the best interest of

Americans, balancing, you know, some amount of security and

safety for people making bets on this currency, and allowing

innovation, what would you say is the best definition, the best

way for us to regulate crypto coins, putting NFTs aside,

putting downside just specifically,

actually, hold on, hold on, let me just tweak your question.

Sure, build on it, because we because we should switch to SPF

as well and just talk about the person. But to me, it seems the

whole issue if you come back, like what is the first string

that you pulled that unraveled the sweater was the fact that

these tokens were created out of thin air, they had no meaningful

value, somebody prescribed a value and all of a sudden,

everybody else in the economy all of a sudden said, Yeah, I’ll

take that as collateral. Look, you cannot do that in the

regular world. I can’t call JP Morgan and say, I’ve invented

this thing. It’s called a share in XYZ. And I’d like you to

margin loan, you know, give me a loan against it. So Brian,

explain like there’s a ton of these tokens that have been

engineered, right? And there’s been a ton of these tokens that

have been sold. So what should people do that own these things

thinking that there was going to be some safety or value or, you

know, like, how do you think about all of these tokens that

are that that could be as basically as as fragile and

shitty and worthless as FTT?

Yeah, well, there there is this concept of like an exchange

token. And there’s a couple other firms out there that have

them. And that’s something we haven’t done. And I do. I think

I think you’re right. Like, the actual utility of those things

is a little questionable. And so if someone’s going to sort of

mark those up on a low supply, and then a low float, and then

somehow leverage that, that that’s going to get yourself

into trouble. But look, I don’t want to throw out the entire

concept of people creating tokens, I think there’s actually

a lot of good stuff there. And it comes down to this idea of if

you’re trying to raise money for your company, and a token through

a token, that’s fine, that should be a security. And there

should be a regulated way to do that in the US, like go register

it with the SEC, you know, let it trade on broker dealers.

That’s, that’s what we’ve been wanting to do for a long time.

And the SEC is taking their time getting there. They don’t, you

know, Gensler, to be honest, he doesn’t seem that excited about

the idea of this whole industry existing. And so anyway, but it

should it should exist, and it should be happening in a

regulated way. So if people want to issue a token that’s raising

money for a company, let’s regulate it as a security. If

they want to issue a token that’s truly on a decentralized

protocol, or has some other purpose, like voting in a DAO,

or rewards or something like that, then that’s probably not a

security. And let’s be honest about that and allow those

things to trade in a different environment, a different

regulator under the CFTC,

we’re probably running out of time with you, because you said

you had a hard stop. So let’s ask the million dollar question,

tell us about SPF. Like, what’s, who is this character? When did

you first suspect? Yeah, what’s your read on the psychology that

this wasn’t legit? Do you think that it was his altruistic

intent, that allowed himself to convince himself to do this? Or

do you think this was like malicious the whole way? Or

what’s your sense of the guy?

So again, I’m speculating here. I mean, I’ve spent time with

I’ve met him a bunch of times. And I have to say, I did not see

this coming. Like he, he appeared to me to be a very

bright, credible, competent person, perhaps a bit young,

perhaps, you know, a bit reckless at times, but not

unethical and not not committing fraud. I definitely did not see

that. You know, if I look back to see, were there any warning

signs that I should have thought twice about it? You know, one of

the things I noticed was that in 2021, you know, Coinbase had a

good year, we did 7 billion in revenue for a billion of

positive EBITDA, we went, we became public as a company. At

that time, FTX did about 1 billion in revenue. And I knew

how much money we had for our venture budget, and just like,

different investments we wanted to make. And I knew their

revenue. And I had to scratch my head a bunch of times. And I was

like, where is this guy getting all this liquidity? Because he

was like buying 9% of Robin Hood, he was putting like a

billion dollars into this, he was donating to all these

politicians. And I was like, I it did not make sense to me

where he was getting all this cash, people would just kept

telling me, oh, his market maker Alameda is just printing cash.

I guess like, okay, I guess, you know, it seems like a conflict

of interest to own an exchange to market maker. That’s why we

haven’t done it. But more power to him, I guess. And so I was

surprised I didn’t speak up. I cannot I can’t explain the

psychology of it at this point, whether he’s a pathological

liar, or if he’s started off good, and somehow under the

pressure of this whole thing went bad. But the minute you can

you can go watch the interviews, he’s, he’s, he’s lying to people

about why he’s, he’s, you know, a bailing out Voyager and

BlockFi. And he’s, and he knew at that time that most likely he

knew at that at that time that they were not solvent Alameda

was not solvent. And so that’s where he crossed a major line in

my book.

And we see it time and time again, Elizabeth Holmes, Bernie

Madoff. I mean, once the lie gets too big, you can’t get out

of it anymore. If that’s the case, really incredible.

And the most important thing at this point, Brian is that the

United States makes a decision on do we want to be in crypto?

Do we want to have a say in this and create a regulatory framework

that entrepreneurs like yourself can deal with that is the most

important thing to happen in the next year. But you’re saying the

SEC is not motivated. I guess why are they not motivated?

They’re just CYA one. Oh, they’re motivated. Now. This is

a political issue now. So they but let’s hear Brian’s answer

here. What do you find out who did SPF give all this money to

because he was touted as one of the future biggest donors, the

Democratic Party, Democratic Party wants signals. So if you

want signals, I would say there was a pretty big signals here.

Number one, he says going to donate $1 billion Democratic

Party. And he kept touting this like effective altruism,

whatever the saving the world stuff. Now, why do you need to

do that? Unless your reputation laundering and trying to buy

political protection? Okay, you don’t think that was a little

bit of a signal?

Right here. I’ll tell you, I’ll tell you an even more explicit

signal. We he pitched us in that $17 billion round. And I did a

zoom with him. And after the zoom, I’m like, this doesn’t

make much sense. But I’ll have my team do some work. We did

some work. And we sent him a two page deck. And we said, here

are our recommendations for taking the next step. One was

the formation of a board. The second was the creation of dual

class stock. The third was some reps and warranties around

affiliated transactions and related party transactions. And

the person that worked there, called us back and literally,

I’m not I’m not kidding, you said, go fuck yourself, was

quote, unquote, the response to us. We’re like, okay. So that

was the easy decision. But message receives message

received. But I still thought, okay, I’ll just put that in the

bucket of these guys are unbelievably arrogant and smug.

But Brian, I thought what you thought, which is, maybe it’s

because they’ve printed, they’ve created some moneymaking machine

in the Bahamas. And so they have that level of confidence. You

know, I, but then to see this thing to the extent of which is

now we’re only scratching the surface, guys, you know, that

we’re going to find out stuff every day.

The postmortem is gonna be crazy. But Brian, to the

question I asked before about the SEC, and what should happen,

you said, I want to pick up on what you said, which is the SEC

doesn’t seem motivated. Why is the SEC in your mind not


Well, I think you’re right that I hope that they use this as a

moment to come together and help, you know, local companies

in the US being built here to end up in a better place. And I

do believe, you know, David, I think said, it’s, it’s right, it

is a political issue. At this point, there’s going to be a

major impetus to get the clarity here in the US and

hopefully to help build the companies here in the US that

are going to serve the rest of the world, and in every major

financial hub. So we’re committed to building that

together with all the regulators around the world. And crypto is

here to stay. This is a temporary setback. But I’m here

to keep building and make this thing happen.

All right, we really appreciate you taking the time.

Thanks. Yeah.

I mean, story after story here about, you know, SPF was going

to create this billion dollar philanthropy to, you know, save

the world improve humanities, long term prospects, number two

donor to the entire Democratic Party, and on and on and on. And

like, quite frankly, what this shows is you want to know what

effective altruism means. It means that you steal other

people’s money, while bragging about saving the world while

taking a big chunk for yourself. That’s what it means.

There was a research paper in 2011. And this research team

looked at drug addicts and drug abusers 4000 people. And they

found that the biggest addicts had the highest intelligence,

that you were twice as likely to become an abuser and addict. If

you were any kind of intelligent quintile quintile that they were

measuring. And someone explained this to me at the time, that the

smarter you are, the more you can convince yourself that when

you’re doing bad things, you’re actually doing good things. Even

if you’re doing bad things to yourself or bad things to other

people that you really may actually care about, you can

convince yourself that there’s some reason to keep doing it. He

seems like a brilliant guy. I think that to some extent, he

may actually, I don’t know the guy, but he may actually believe

that the, you know, the ends did justify the means and he thought

that he was doing good for the world. And this was something

that had to be done in some way. And oh, it just got a little bit

away from me. But it’s, it’s still

I think the problem is bigger than FTX. And I’ll say the

uncomfortable part out loud, and nobody needs to necessarily

comment if you don’t want to. But there were an enormous

number of venture firms that hawk their their way into just

completely doing zero work here. I mean, and the the tip of the

spear is this thing? Well, who’s the guy that works at

founders on bulgar bull jars? zebul jar zebul?

Delhi? Thank you. Yeah, that tweet that he had where he

basically took the snapshot of the Sequoia transcript was one

of the funniest things that I’ve ever seen. I mean, this was a

$215 million decision. And Sequoia documented it and put it

on their own website. And I think that’s an example of

something that was happening, which is people just look the

other way and didn’t even want to do the layer of work.

Come on, let me just string together a couple of things

we’ve talked about over the past few episodes. And I think you’ll

agree with this point. But generally speaking, there seems

to be a very heavy lack of governance in investing given

the amount of capital and the velocity of capital in Silicon

Valley, particularly in private markets of late. And a lot of

the stuff that’s been talked about, where last week, we

talked about super voting shares, and the founder does

whatever they want. And there’s no governance. And there’s no

board. And there’s no oversight. And particularly with this FDX

situation, where clearly there wasn’t a board that was, you

know, getting the necessary information that had the

necessary influence that had the necessary controls, the meta

conversation, but all of these threads tie together the concept

that maybe there’s not a lot of governance and not a lot of

diligence going on. And the amount of money that’s flowed

into Silicon Valley has allowed a lot of this Lucy. I’ll say

either. I agree with you. Let’s thank Brian Armstrong for

joining us. And it was very busy day. And what a great,

candid, insightful.

Thank you. And an insightful finisher that month.

I just want to say the second uncomfortable thing out loud,

which is there was a lot of venture firms in Silicon Valley

in this period of both not doing any work or diligence who also

took the extra step and actually created classes and would teach

teams how to create these tokens. Okay, and those

artifacts, those video links and artifacts are sometimes on

their website, they’re still on YouTube, they’re inside of

Twitter. And what these folks would do, and we talked about

this, the game that they played was they would get a team, they

would create a token, they would also buy equity at some crazy

valuation, the equity was locked up, but the tokens were not. And

then they would put them on an exchange and sell them to

unsuspecting people, and they would be able to dump these

tokens. And if you look inside of that trend, what you’re going

to see, and Brian just mentioned this, those were the sale of

securities, except it was done in a completely unregulated way.

So if the SEC is really and the DOJ is really going to take this

FTT token issue seriously, and what happened to FTX, they’re

going to start to look at a bunch of other tokens, and token

sales, and you’re going to end up looking at some very well

known venture firms inside of Silicon Valley.

This is going to be super gnarly. And we talked about it

before on this pod, there are people who knew better. So you

get a bunch of kids who are living in the Bahamas in a

house, and they’re, you know, winging this thing, that’s one

level of responsibility, and they’ll go to jail. But when we

talk about venture capitals, capital allocators who’ve been

at it for decades, to Chamath’s point, and they’re teaching

people how to do this, and they’re hiring attorneys and

creating offshore, Panama, you know, BVI, whatever places to

put these coins, and then teaching people how to do it,

and then flipping them, potentially, this is we’re just

peeling back the onion on this, I have a feeling that this is

going to be the turning point and all that

token guys, let’s be honest, is not the only token that has been

engineered by Silicon Valley venture firms. And it is also

not the only token that’s gone to zero that was engineered by

Silicon Valley venture firms.

Well, I mean, who knows engineered by but yeah, Jason

to at the very least,

Jason, Jason, there’s videos today on some of the most well

known venture firm sites on how to do this.

Oh, wow, I’m gonna have to see those. Yeah, so they’re basically

your point Chamath is they’re instructing people on how to do

this. And that is our ability. It’s what it’s what it’s what

they it’s what they did.

Can I ask your guys a point of view on just one big

macro philosophical question? I’m obviously not big in the

crypto world and haven’t been but so much of the positioning

has been that these networks get decentralized through the

cryptographic verification systems that obviously enable

you know, them to operate effectively and truthfully and

correctly and without centralized control or

manipulation. But ultimately, while these networks themselves

may be decentralized, the user’s point of access often ends up

being centralized as a point on the network. And it is that

point on the network that accrues the same level of

influence, power control and value as what we saw in the

prior centralized network model. You know, we had biology on last

year. And you know, I tried to get to this point with him, we

had to cut the thing cut the conversation short. But I’ve

still not heard from anyone. And I’ve spoken with Brian separately

about this point. And the concept I use is like, look,

media, if you put all the YouTube videos on a

decentralized network, and anyone can access them, and

they’re distributed everywhere, you still need to have a really

good application. And whoever makes the best application is

going to get all the usage. And then all the users will use that

application. And that becomes effectively the point of control

and influence and value once again. And so it seems to me

like in this case, the exchange was being used as a centralized

wallet, certainly you can do that, you know, exchange through

the exchange. But But mechanistically, these guys were

storing their coins, their cryptocurrency inside of FT x’s

wallets. And so FT x had control over their assets. And so the

network centralized. And so does the decentralized model? It’s a

question I’d love to just ask you guys in your point of view

on does this decentralized model actually ever manifest where

everyone has their own wallet? And I know there’s all these new

protocols and these distributed wallets and defy things, but I

don’t know enough. Yeah, I don’t know.

Better, but

this points out to me, just you basically recreate an exchange

without a regulator. And of course, someone ripped you off

and blew up like I mean, how’s it any different than what we

had in version 1.0? And is there really a model where

decentralized works are ultimately because of the

network effects and the and the economy? Okay, answer. Yeah, we

got the question.

No, I mean, I haven’t I have I don’t know the answer to free

bird question because I don’t I don’t know this space well

enough. I mean, you know, I, my, my biggest purchase ever

was Bitcoin in 2011. You know, I’ve bought a bunch of these

tokens that have massively depreciated in value. I think

lots of investors have, you know, I kind of fell into it as

well. Like I thought, wow, this is incredible. I get to buy

these tokens, they do all of this cool stuff, they represent

all this value. And my experience has been the opposite

of that. I’ve lost a lot of money in these things. And so

you know, I really hope that regulators, not just obviously,

I hope that regulators do their do the best they can to get

investors money back in FTX. But I really also hope they figure

out all these other tokens as well, because you can just rank

them in terms of market cap, start at the top and work your

way down. And you will see that these were unregulated

securities, Jason that were manufactured and sold by our


people who understand the law around accredited investors and

this stuff very well. Yeah, they understand it implicitly.

Yeah. Do you guys think crypto investing is dead? Or what do

you think? How do you think people think about that risk

profile now inside of

I think investing in the tokens is going to end investing in the

corporation is going to begin and any of the tokens are going

to be super regulated building on what you said Chamath about

the ultimate bet. Is it possible that Alameda the trading hedge

fund was looking at the FTX data, which they had insights

into. And essentially, that’s the same as seeing the whole

cards and the ultimate bet. And so they’re making their trades

based on what they see the consumers are making their

trades, front running their trades or otherwise, that’s not

illegal. You know, Citadel does this in the regulated market.

That’s what payment for order flow is. It’s right. It’s the

ability to front run retail volume. And so, you know, in

dark pools, that is legal by the law in the United States. And

that’s what allows Citadel and, you know, I think Jane Street

and Susquehanna, you know, all these folks basically run these

dark pool exchanges for regulated securities, like

options and bonds and, and stocks. And they get this order

flow, and they front run it by a millisecond, and they just take

small big, but they can’t print the FTT tokens and otherwise

manipulate the market to the level that I think SPL could, I

just think that there’s there’s, there’s these really strict

walls and segregation, as you heard Brian talk about, when you

have those businesses in these regulated markets, the problem

here is that this is totally wild west, unregulated, wild,

wild west. So who knows what’s going on really?

And we’re pushing the business sacks off of the shores of the

United States, as he said, 95% of this happened offshore. What

do you think should happen regulatory wise sacks in terms

of America and competitiveness? Or do we not to be need to be

competitive in this?

No, I think we should be. I mean, what if what if crypto and

defy is the future of finance? I mean, it’s an important

technology that I think we should enable through some sort

of constructive regulatory framework. I think, I think the

regulators should listen to Brian and help come up with a

appropriate framework. But to be clear, look, what Sam did is way

worse than people going on an exchange and speculating. I

mean, look, I think that people who speculated in the buying and

selling these tokens, they’re, they were using it like a

casino. Okay, like, that’s different than a customer

putting their money on FTX and having their money get stolen.

That’s a big difference. So I think there’s levels here. Now,

Jamal, to your point about who’s minting these tokens, you’re

right, maybe that’s like another category. But I do think

that the reason why this is on a different level is because it

wasn’t Sam’s money to give away.

There is such an easy solution.

I’m just I agree with you on that point. But I think don’t

underplay when there’s an organized process to create an

illegal security with special rules for them. That allows the

liquidity for one class of asset and not liquidity for

Yeah, you’re right. So that’s a separate bucket. I don’t think

it’s the same as what Sam did. And I don’t think I agree. I

agree. No, I’m saying

grift, that’s something that needs to be looked at. And we

need a constructive regulatory framework for that.

There is such a simple silver bullet for all of this, which is

these things need to be there needs to be proper governance,

people have to have skin in the game insurance, people signing

off on the taxes boards, not onshore here in the United

States. And then we need to have and I’ll keep saying this, a way

for Americans to become sophisticated investors, only 6%

of this country fall into the qualified purchaser and

accredited if you want to trade in these things, or you want to

trade in NFTs or private companies, we should have a

driver’s license like test a firearm. I are on the sophisticated

test and the problem opt into it with an education.

The problem is when you have guys like this, it sets that

desire back by a decade, if not more. Okay, because it sucks. I

agree. Because every single frustrating every single person

inside of Washington right now, who’s anywhere near this from a

regulatory perspective, or a policy perspective is meeting on

Monday morning. And the meeting topic is how do we defend the

mom and pop folks that lost money here? Yes, the only thing

so we took this out of you know, because I remember I remember I

texted into the group chat, hey, guys, what what what do we

think the legal ramifications are that drive prosecution, and

one of our friends said legal ramifications. These are

political ramifications. Yeah, which means that this is going

to go to the utmost level, and it’s going to have the most

scrutiny. And they’re going to act really quickly. It is going

to drop a hammer instead of having a path to accreditation.

I agree with you, they’re going to drop the hammer, because

their constituents, some grandma and grandpa or some people put

their college education to some lost everything. We just need

a test. Let people prove they’re sophisticated and let

them participate. Well, first and only if they get a license,

haven’t you been a proponent for letting people invest in

startups that are just moms and pops and democratizing access?

I’m only allowed to do that with accredited investors. I would

like there to be a test and I actually teach a course Angel

University six times a year for charity. I do it for charity.

It’s a four hour course where you learn about diversification

you learn about the asset class you learn about 70 80% go to

zero, we teach you about the power law, I try to teach people

about this stuff, so that they can participate intelligently,

it would it would be the equivalent freeberg. And thank

you for asking the question. The it would be equivalent if we had

a poker test and to play in the world series of poker, you had

to go to a five hour seminar, and you had to take a practical

test. And you had to say, you know, a flush beats a straight

and you had to just prove that you had some level of knowledge

of how to play the game. It’s such an obvious path to removing

these problems while staying competitive as a country. And

instead, we’re letting people do this offshore like CZ with no

rules, or whatever rules he chooses. It’s just infuriating.

It’s so stupid. Our politicians in Washington are so can I just

say something? I think the challenge is there’s always a

spectrum of understanding. And you’ll always end up seeing the

people on the wrong end of the spectrum getting taken advantage

of there’s this notion of adverse selection. distributions

are not equal. People will end up, you know, kind of opting in

to spend money on things, or making investments that they

think are good investments, but they’re actually getting taken

advantage of, because they’re not savvy enough, or they miss an

important angle or important perspective about the person or

the thing that they’re giving their money to. And there will

always be some number of those. And the way that regulation has

worked historically, is not by first saying, hey, let’s figure

out the right way to create a framework for operating. It’s

that some sort of people got advantaged. That story then

becomes the regulatory framework. And that story has

repeated itself for 500 years across capital markets,

we’re talking about a multi layered thing here, we want to

see crypto have a framework, we want it to blossom here in the

United States. And then there’s multiple level of people who are

causing chaos in this ecosystem in this very promising

technology with their goddamn grifts, whether it’s VCs,

grifting, or SPF, or incompetence, we just need to

clean this framework up. If people sometimes people I

understand in DC listen to this podcast, if they’re listening,

it’s essential that America be competitive here, it’s essential

that everybody participate in risk capital and get educated.

Let’s clean it up and make a framework that allows all

Americans to participate, and educates them, and then stops

these grifters from doing stupid things. If people were educated,

that’s the first step. And it’s the best talk about the economy.

Sure, you want to talk about Facebook with 11,000, you want

to talk about the market popping at the beginning of October.

Yeah, I think what we basically said, kind of generally speaking

is markets up, right markets went from nibbling to being

constructively positive and basically being positioned long.

Here’s this really interesting setup. We have a bunch of very

positive news that I think we all have to process. First

positive news was that inflation ticked down. Now, here’s what

I’ll tell you, there’s a caveat here, I talked to a bunch of

pretty smart sharps on Wall Street. And oh, two things.

Number one is they all gave credit to David Sachs. And they

said Sachs is totally right, double dip recession is coming.

But then they said, tell Sachs, that we think that these are the

sharps, we think that there’s a double hump in inflation coming,

which means it’s coming down to come back up. And there’s a

bunch of reporting vagaries that may cause that. So keep that in

the back of your mind. But positive news. Number one is

inflation ticking down. Number two, Jason, we talked about

this, a federal judge basically stayed Biden’s attempt at giving

student loan relief. Now, that would have been a $500 billion

transfer payment from the government into the hands of

individuals. It is deflationary to not put give that money to

people, it’s effectively taking stimulus away from folks. Number

three, it looks like we’re headed towards a split

government, which means that we are not probably going to see

any more stimulus over the next two years. Number four, Ukraine

wins in Curzon. I hope I’m pronouncing that right. Number

five, the United States announced yesterday through the

Wall Street Journal, that they had essentially said no to

Ukraine’s request for advanced drones. And they said to Ukraine,

essentially, you need to go and negotiate an endgame here. And

number six, China has started to relax as COVID policies and G is

pivoting to economy first. So if you took all the way, take

seven, don’t forget seven, Facebook, which would not take

the medicine, they refuse Brad Gerson’s letter, cut 11,000

people 48 hours ago. I don’t think Facebook matters that

much, to be honest. Well, but it matters that big tech is and

they’re taking matters to us. But it doesn’t matter to the

economy, to be completely honest. I think it does if

people are going to start cutting jobs, but okay, keep

going. My point point is, these seven things are macro level

things that affect everybody. Yep. And I think if you take them

together, what it says is that, wow, there’s there’s the

potential for a lot of great positive developments over the

next six or nine months. And I don’t think that that was

adequately priced in the market. But here’s the problem. And this

is what’s why we’ve been rallying. The problem is that

most of this rallying has been because of a bunch of short

covering by folks that who are pretty pessimistic and negative

after the last few inflation prints. So this is not really

net new buying that we saw over the last couple days. So you

take it all together, I’m like, it’s still going to probably

trend up a little bit. But then again, you know, we talked about

this, Jason, when the VIX gets into the low 20s, or the high

teens, that’s probably the short term top, and then it turns

around. And unfortunately, we’re the low 20s, high teens. So

that’s kind of my thought on things right now.

Okay, freeberg, any thoughts on the inflation print?

Yeah, so I think there’s two things, one of which I’ll give

credit to a guy named Carl Chu. I hope I pronounced Carl’s name

right. He’s from William Blair, he puts out these excellent

research reports. And we used one of his graphics a few weeks

ago. So I put it up here. And basically, he showed that with

the the NASDAQ move that we saw this week, so you can see this

here, he basically tracked the move in the 10 year Treasury

against the one day move in the NASDAQ. And he said that it

really indicates a unique sentiment shift, whereas in

other times, you’ve seen big moves in the NASDAQ that weren’t

really seeing significant moves in in the Treasury rate at the

same on the same trading day. And that this is such an

outlier, what happened this week, the only other time that

we’ve seen anything like it was when the Bank of England issue

happened back at the end of September, in the last, you

know, 20 times that we’ve seen this big of a move in the NASDAQ

in a single day. And so we saw 31 basis point move in 10 year

Treasuries in a single day, the same time that we saw what a

seven point move in the NASDAQ. So he said, because you don’t

normally see the bond market and the equity market trade in this

way together, it really speaks to a big shift in sentiment. Now,

at the same time, what is that shift in sentiment, that there

is going to be less of a driver for the Fed to raise interest

rates at this point, because it seems like the inflation print

indicates that inflation is coming under control faster than

what folks had otherwise anticipated. And so there may

not be as many rate hikes as quickly as folks were

anticipating, which will, you know, benefit, benefit equities

and the bond market traded that that with that perspective as

well. Now the counter narrative, which I just put a tweet by a

guy who I’ve never heard of before. But someone shared this

with me. His name is Gordon Johnson. And he said, the CPI

surprise may actually be due to a technical print that within

the CPI, one of the biggest indicators is health insurance

cost. And, you know, the health insurance cost plunged by 4%

October to September, but healthcare costs didn’t

actually magically collapse, there was just an accounting

difference in how they’re shifting how they’re accounting

for healthcare costs that took place during the month. And if

you did not, if you assume that that was flat, month over month,

you would end up actually with a 6.7% year over year print, which

was higher than expected. So there is a counter narrative

going on in the market. I don’t know how significant this guy

is, or how much of a voice he has. But I don’t know if we’re

out of the woods yet. But some folks are saying that the market

is saying, we’re feeling a lot better. But there are still

analysts that are indicating that maybe there is still risk

to be had ahead of us.

I think the sharps tend to be on that second, second perspective.

And by the way, I’ll say this week, I heard five and a half

points, even after that print. So it is where we’re going to

get to, I think consensus we have here is, is that we’re in

the end game now, maybe what two quarters, three quarters, four

quarters of choppiness. Chamath, what would your gut tell you if

you I’ve been telling all of our startups that you need to

plan to have money through the first quarter of 2025? You must?

Yeah, absolutely must. And the way that I have cash, okay, the

way that I framed that out to them is nine. Yeah, eight or nine

quarters of cash. Ideally, nine. And the reason is that we have

all of this positive news in the offing. But But the but the

problem is, again, there is still a lot of risk to the

downside, we haven’t seen David’s second, you know, dip in

the recession, right. So that double dip is going to be

expensive. And again, the sharps think that inflation will come

back at some point in the next six months. That will keep the

feds foot on the gas. Maybe it’s two or three more 50 basis point

hikes. The point is, Jason, you could be at five and a half.

Again, we said this last week, we’re going to get to a point

that’s probably higher than what people expect. That’s

probably around five and a half. And we’ll stay there longer than

people want. That’s probably through the middle part of 24.

And if you don’t prepare for that worst case scenario, you’re

doing yourself a disservice. I think the market can start to

rebound in the second half of 24. But if you’re a company, you

need to balance and plan for the first quarter of 25. Because,

you know, again, most venture investors are going to want to

see six months of data on the ground that things are better

before their sentiment changes. Yeah. And we’re just starting to

see the drawdowns. We’re just starting to see the impacts in

people’s portfolios. That will drive behavior change. I mean,

this SPF thing is the tip of the iceberg in terms of the money at

risk. You know, I went in, by the way, I did it in analysis, I

shared it in the group chat. Hopefully, we can show this up.

Brad has a little chart, Nick, maybe you can throw up the, the

historic drawdowns. So for people that care about early

stage technology, since 2018, through 2021. And including an

estimate for 2022, we have injected $1 trillion into

venture capital. And if you look at historically, how money has

been lost in periods like this, and you layer that into 2018 to

now, what it basically tells you is about $500 billion of

that trillion from 1819 2021 and 22 is going to be destroyed. We

haven’t even started to see that yet, right. And then if you

factor in another 100 billion or so from older vintages, we’re

talking about a 600 or 700 billion dollar destruction of

paid in capital. So there’s still for all the good news,

there’s still a bunch of these unfortunate pieces of bad news

that have to work its way through the system.

Yeah. And for people who are looking at the chart right now,

and you can see the charts on Spotify, or if you search for

all in on YouTube, we have a video version there. You just

take a look at 1997, the peak TV pi was, you know, seven and a

half x seven and a half times, you know, cash on cash money.

And what actually got realized was five x, right. So what paper

said and what got distributed were two different things.

Anecdotally, what I’m seeing in the startup world Chamath is

people are taking the medicine and a lot of people are shutting

their companies down. They’re giving up on raising money, and

then asking me which portfolio company can I get a job at

because I on my personal balance sheet have been, you know,

taking a 5k draw a month and I have two kids, I need a job, can

you get me a job at Amazon or another portfolio company. And a

lot of acquirers have started to happen. And so what’s happening

is the consolidation of talent, people who would be a great

number three or four person, but maybe they weren’t suited to be

the number one person are now consolidating into startups. With

these layoffs at meta and other corporations, we’re starting to

see very talented people who had peak comp of 300 700k a year are

going to go to startups or smaller companies. And that is

also positive, more consolidation of talent,

stronger companies.

Did you guys hear the story yesterday that, Nick, if you

could just be about the name, told about his friend, his

friend basically makes $140,000 working for a tech startup, and

then also makes $280,000 working for meta. And so and he’s been

working at both of those companies virtually, for the

last two years, the guy makes 400 $450,000 a year, and nobody

knows. And he says he works about 2022 hours a week,

on both combined. So the 80 hours and remember, when we

started in startups in the late 90s, and into the turn of the

century. The number of hours that was expected at a startup

was what sacks when you were at 60 hours a week, I would say 60

60 day I was expecting a baseline. Yeah, 60 baseline.

Yeah. Baseline 10 hours a day plus come in on the weekend for

a couple hours. Yes. Yeah, for sure. Easily. He probably more

early days of Facebook, our executive management meetings

wouldn’t start till 9pm.

Yeah, it’s, this is, I think, Ilan is going to be a trailblazer

in a lot of ways on this Twitter thing. You know, first,

he did the big headcount reduction, but then he also just

this past week, everyone needs to come to the office. And if

you don’t come to the office, you don’t come to the office,

you’re a good excuse. If you’re an exceptional performer, and

you’ve got a good reason, they don’t have to, but the baseline

is everyone comes to the office.

By the way, just to put this point into focus, Nick, can you

just throw up this chart for these guys to see because I

think it’s just ridiculous. So this is basically what we’re

dealing with, which is like, if you look at and these are just a

couple of examples, but this is Meta, Amazon, Snowflake, Datadog

versus Gilead, Raytheon, and Exxon. What is the point of

this? The point of this is just to show you that we have had a

massive rotation away from our industry is the point, right?

Where normally, the things that we would work on were just so

well received by so many different kinds of investors

that unfortunately, just isn’t the case anymore. And I think it

just goes to show you that the reason why this is happening is

because people are hedging their bets about how long the

economic pain lasts. That’s why, you know, they’d rather be long

healthcare stocks, you know, industrial defense companies,

and oil companies, because at the end of the day, they’re

banking on oil and war, and sickness, you know, versus

social media and e commerce, and SaaS software. And if we look at

this chart, just no matter how good by the way, this is not an

indictment on these companies go watch the prediction episode

from last year. I think that was your prediction episode.

Yeah, we you and I nailed it on crypto. We both said crypto was

going to crater these four horsemen here data dog meta

Amazon snowflake down 23 to 27%. And then the Gilead Raytheon

Exxon cohort, eight to 28%. Up. I think Chamath what this says

also is, we don’t think your management style and how you’re

running these businesses is appropriate for this moment in

time, please consider some austerity measures and some

thoughtfulness in how you treat shareholders. These are well, I

mean, it’s just watching the number, you know, how people are

running companies. I think we took it too far in Silicon

Valley, we took it too far, whether it’s

a cow, I know that I know it’s sort of a pet issue of ours,

because we have to deal with some incredible hubris and

arrogance sometimes on the boards of these companies,

because folks don’t want to listen to reasonable advice, and

we come off as wet blankets. But that chart, to be honest, is

is because of what we explained last week, which is the when

rates go up, the value of $1 that you earn today is just

meaningly, meaningfully more worthwhile than $1 that you may

earn even two or three years in the future. That’s why that

chart looks the way that it does. And if you believe that

David’s forecast of a double dip recession is accurate, which

again, most of the sharps do. And then you also layer in this

idea that inflation could come back, you have to be really

defensively positioned, you know, you can’t take a lot of

risk, which is why startups have to expect that if that’s the

dynamic, and $600 billion is going to get destroyed in

venture capital portfolios, how open our VC is going to be for

business, they’re probably not going to be that open. And so

you have to plan, I think, for the middle for the early part of


If Amazon and how do you get incremental dollars in these

tech companies, Amazon does a riff, some austerity measures,

they raise prices a little bit if they can, you know, maybe you

see more incremental dollars coming today. And maybe that

incentivizes people look what happened. We were at $89 for

Facebook shares last week tomorrow. When he made the riff

107, he went up like 15 $20. What does that tell you?

I mean, I think it tells you that a lot of people were short

going into that, and they were probably cut off side a little

bit by the magnitude of it. I think that that’s good. The the

issue that a lot of these companies have, even in the face

of riffs is that you have to reset expectations now on

earnings. And if you do that, the problem is that when you

flow that through to what people think the S&P will look like in

a year, there’s some real issues. So this is not free, you

know, it’s really hard treading. And I just I would I would just

encourage people, it feels wonderful to have a few days of

like, it’s like a respite in the middle of a huge storm, right?

It feels like we’ve been getting whipsawed back and forth, and it

the sun came out, and the wind came out, I would just really

encourage people in this moment to reset your energy, which I

think is good. But you got to go back into that office, and you

got to find the money and the wherewithal, I think to last

through 24. If possible, it’s grind time, Facebook, by the

way, 27 months, 27, at least two years, two years, it 24 months.

Yeah. Eight quarters is the new six quarters. And by the way,

you know, the thing that employees need to do now in this

moment is to hold the management teams of your companies

accountable, because in those q&a is, hopefully, you’re not

just glad handing talking about bullshit, you actually go and

ask the question, how much money do we have? What decisions

are you going to make to get this company to be, you know, in

a position to survive? That is really what’s at stake here for

the venture capital industry is just survival of as many of

these companies as possible. Through these next two years,

the conversation has to shift from like culture and features

to like the bottom line, and grinding it out and just proving

it to Wall Street and to the investment community that your

business is worthy of investment. As you’re saying

the dollars today matter. All right. It’s been a crazy week.

Thank you to David Friedberg for showing up. Unfortunately, no

time for science corner. apologies to the Friedberg

stands who are many and we’ll see you in the YouTube comments

for the dictator himself to my poly hoppity with just a

wonderful sweater going into the strong November strong showing

for November with that purple sweater. I don’t know if it’s

mauve or purple, whatever you got going there looks

wonderful. Thank you for team Montclair. Sasso himself. David

sacks people don’t understand what you’re saying when you say

that Jason. Oh, they know you’re an asshole. They they’re no,

that’s what you’re saying. They don’t know. They don’t know

that we’re adding the SAS to it. Yes. So David also is a great

executive in software as a service in addition to being an

asshole. So you put the two together and you get fast. I’m

just joking. David’s a wonderful person. People are really

excited that you and I are friends again. It’s an amazing

moment. That was your chance to make a joke. So actually missed

it. Throw it up there for you. I threw up the softball for you

to say you’re not right. We’ll see you all next time. Bye bye.

Let your winners ride. Rain Man David.

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

it. Love you.

What your winners ride. What your winners ride.

Besties are gone.

That’s my dog taking a piss in your driveway.

We should all just get a room and just have one big huge orgy

because they’re all just useless. It’s like this like

sexual tension that they just need to release somehow.

What you’re about to be.

We need to get Merchies.

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