All-In with Chamath, Jason, Sacks & Friedberg - E118: AI FOMO frenzy, macro update, Fox vs Dominion, US vs China & more with Brad Gerstner

You want to run a marathon at 57 years old. 52 51 to 52. I’ll be

honest, I miss you. Can you come back to the United States,

please? I miss you. I will. I miss you too. I mean, the poker

game can’t by definition be as much fun if I’m not there. It

plays at bigger states, and it’s more challenging, but it’s

not as much fun. There’s not as much laughing. What’s on the

menu tonight for austerity 2023. The amuse bouche is a

Madeline with like a terrain of foie gras. Fantastic. In honor

of Friberg, and then rutabaga rutabaga salad, and then some

duck thing, duck breast, you know, I love duck. And then

and then butterscotch panna cotta. Wow, that is great lineup.

And you know what, I like the idea. We’re doing some poultry

chef Sean is firing on all cylinders these days. If he

feels very like engaged. He was very engaged. Yeah, he’s kind

of going for it. He’s been on Yeah, that was quite nice. The

other day, Brad, because it’s austerity measures. We had this

incredible dish, and we’re eating it. And then he said,

the caviar is on the bottom. And I was like, Oh, so we just we

don’t put the caviar on top. They just put it on the markets

down. That’s chipmunk style austerity. I’m not lying. Am I

lying? Oh my god. No, he did say guys, the caviar is on the

bottom, not the top this week.

All right, Sax is here, everybody. So that means we

have a quorum. Hopefully, the sultan of science, who is on

Wall Street today, taking a company public. So congrats to

our bestie Friedberg. Ding, ding. He couldn’t make it. He’s

at a dinner. So with us, the fifth beetle, as it were, Brad

Gerstner is here to talk all things macro. Welcome back to

the pod. How’s life been? Good to be back a little domo

arigato to Jason as you eat your way through Japan. Yes, I

am on my culinary tour. I’ll be back Sunday. But I am having the

time of my life here. Are you running AdWords on your food

blog? That’s what it’s come back to. I’m back to the web

locks Inc. days. I’m just trying to make $2,600 a day. I

noticed your Tick Tock got 22 likes. Yeah, you know, I’m

trying to figure out Tick Tock. I’m gonna but you know, but

right as they shut it down. That’s when I’ll figure it out.

Will that rev sure buy you another Japanese pancake or no

those pancakes man are next level. The fluffy pancakes here

roof. Everything actually with the exchange rate coming to

Japan is so affordable. It’s nuts. And this is a crazy week

because it’s the it’s the Tokyo Marathon, but everything is so

affordable. The people are amazing. It’s the best country

to visit in the world. I think, for me, it’s Italy, Spain, I

mean, Italy’s right up there, too. But I would say Japan is

like, it’s definitely top two or three. What do you love about

it? Best food. You know, I went there I took the I took because

like five years ago, the older three at the time. But they were

younger. And you know, there’s there’s a negative birth rate

in Japan. And so number one, when you have any kid, but

frankly, multiple kids, the the Japanese embrace you with so

much love because they love seeing these big families. Yeah.

They’re unbelievably kind. We went to Kyoto did the

professor’s walk saw the cherry blossom festival, basically ate

our way through Japan. That was my that was my only vacation

trip I did. I’ve done like 10 or 12 trips for work. Once we I

went with Reid Hoffman. And Reid set up this thing where we went

through all these different parts of Tokyo and ate at the

incredible sushi place. You have to go with somebody who can dial

it in. Yes. And have all the hookups. Brad, you spend much

time in Tokyo and Japan. I haven’t. I’ve been there only

twice. And that was when I was poor. And I stayed in a really

small room and ate really shitty food. All right. So you’re

saying in 20 in 2022, when you became Oregon hotel, we have

rooms. He’s like, is there a hostel? Yeah. All right. And

with us, of course, the next department, what cabinet

position you’re going for sacks, which we should we start

floating here? Oh, my god. Here you are with the

disinformation starting already. It’s a compliment. Secretary of

SAS is with us. to Santa’s had a pretty great article in the

Wall Street Journal. Really? I’m so when they revoked the

special administrative status for Disney, he wrote an article,

I think it was Wednesday, Tuesday or Wednesday in the in

the Wall Street op ed. What was his premise that they was a

corporate or as a culture that woke ism is basically modern

Marxism, and we have to defeat it. This is his language, not

mine, at every turn. And Disney needs to just be business

people and not feed the vocal minorities inside of their

company, like every other company should they should be

subject to shareholder concerns that apply to the majority of

shareholders? Well, I think this is why I think DeSantis is

doing well with the Republican base. And you know, if you see

polling of the Republican primary is he understands that

it’s not good enough just to have this sort of Reagan s

totally hands off government approach, because the radical

left is advancing its agenda, not just legislatively, but

through corporations through ESG, really through taking over

key private sector institutions. And so he’s willing

to use government to push back on that agenda on behalf of

parents or on behalf of, you know, what he sees as the

majority of the country. And so it’s a very different approach

than you know, the Republican Party would have been 30 or 40

years ago. This is why, you know, in the parlance of the

base, he understands what time it is. And what’s required here

is not again, this totally laser fair approach, but rather, a

much more energetic, aggressive approach towards checking these

bad ideas wherever they come from.

It’s not the only one. I don’t know if you saw this week, Bill

Maher went on a bit of a press tour, and he was on with Jake

Tapper. And he made a very interesting, I think, point

about liberalism versus woke ism. And it was quite articulate,

you know, he’s a pretty good observer of culture, he said,

they’re kind of casting out the liberals in the party for this

woke ism and the intolerant nature of the woke movement

versus the liberal movement, specifically, under the lens of

trans rights. But let’s put that aside for now, we got a

full docket before we get into the culture wars and the

presidential elections. Let’s start with, we’ll go private

markets to public markets, because they obviously dovetail

so nicely. Item one on the docket today, there is just a

massive AI FOMO frenzy going on. economists published a piece

this week about the insane fundraising in the generative AI

space. This is stuff like chat GPT, stable diffusion, you’ve

heard these names. And there are now 500 generative AI

startups, according to this report that tracks with what

I’m seeing in the early stage and not counting the open AI 10

Billy from Microsoft investment donation, rev share roundtrip,

whatever that is, they have so far collectively raised more

than $11 billion. The article included this chart, which you

can see if you’re on our YouTube channel, and just tons

of folks working in audio image, and text. So we’re basically

looking at the multimedia, basically revolution of PCs in

the 90s, occurring again, and complete platform platform

shift. Doug Leone from Sequoia, one of the greatest investors in

history of Silicon Valley had this to say, and we will comment

on the other side of this 52nd clip from Doug.

I actually think that AI is the next platform shift, in the

same way that mobile was the one before internet was the one

before. So I think AI is real. But I said earlier, we’re going

to overestimate it in the short term, we’re going to invest in

everything in the same way that in 1999, we invested in

everything. But then Google came out of that, or Facebook came

out of that. So I think you have to have a good head on your

shoulder, where you don’t practice FOMO, where you don’t

chase every company, AI is real, AI is the next platform. But how

do we not invest in everything that walks? How do we make

certain investments based on market maps based on thought

processes that are more rational, and not do every

investment just because every other venture firm is doing

everything best. All right, Chamath, what do you think of

this massive influx? I think it’s important to think about

what the incentives are, as Charlie Munger says, show me the

incentive, and I’ll show you the outcome. I posted it into our

group chat credits, we sent all their private banking customers

an offer, they are now offering 6.5% for a three month T bill

6.5%. And if you go back to what we talked about before, when

the risk free rate is somewhere north of five or five and a half

percent, and banks are willing to give you six and a half

percent in the short term, you have to generate more than three

times that to make an investment makes sense when you’re

investing in the long term. So if three month money is going to

pay you six and a half or seven, if you’re going to invest for

1015 years, which is what you need to do typically for a

startup, you need to get 20 to 25%. So there’s going to be a

lot of pressure for venture investors to put the money to

work. Because otherwise, their LPS, their limited partners, the

people that give them the money will have this attitude that goes

somewhere along the following lines, okay, I’ve committed to

you. Why aren’t you investing? Because otherwise, I can get

paid six and a half percent on the front end. And so this is

becoming very problematic. What am I paying you for? What am I

paying you 2% a year in management fee for? So I think

what happens, unfortunately, is the opposite of what Doug says,

I think good investors will try to follow Doug’s feedback and

advice. And the ones that have a track record of distributions

of DPI can do more of it than not. But I think most people

will be under pressure to deploy the capital. And so the

500 odd companies, Jason, you mentioned, we’ll get a lot of

it, and it’ll get torched, because most of them probably

won’t amount to much of anything in the short term, you

will create way too much correlation, and you will have

zero time diversity, which, as we’ve learned, is a recipe for

terrible returns.

Time diversity being Hey, you deployed all this web to capital

web three capital, sorry, crypto, whatever, in this very

short period of time, you overpaid.

Let it on fire, Brad, when you hear Chamath talk about this 6.5%,

and then you look at private markets, you invest across the

lifecycle of companies, obviously, you’re in some

private companies, we all know very well, famously, snowflake,

I think your biggest win ever, correct me if I’m wrong. And in

terms of a private, how do you look at this? When you’re a

steward of capital, public markets, private markets, and

then just YOLO, just put it into, you know, some charity

bills, or, you know, bonds or whatever.

I mean, first, let’s just frame, right, the chart that you

showed, I think you should, it said, you know, x open AI, I

don’t know, something like 10 or $11 billion has been invested

into some 500 AI companies. I mean, I happen to agree with Doug

that this is a platform shift on the same magnitude as the

internet or mobile itself. In fact, it may be bigger than both

of those. But, you know, when I look at 10 or $11 billion, you

know, let’s put it in context, meta is going to spend 20 billion

in one year alone on AR via. And this is on an entire

platform. So I don’t know, I, I think whenever you have

something as tectonic as mobile or internet, it deserves a lot

of investment. And yes, it’s going to be messy. And yes,

Chamath’s right, the cost of capital, frankly, is limiting

the amount of money going into these businesses already. So we

see a lot of dry powder sitting on the sideline, this chasing

new ideas. I think one way one way to frame it as well is like,

think about in 2000. We all knew that the internet was going to

be big, we may have been lucky enough to conclude that search

was going to be big. But if you invest in in Yahoo, or Infoseek,

or AOL, or Excite, you know, you torque all that money went to

zero. Right. So now think about just these large language

models, right, the foundation models, which are driving and

enabling all of it, OpenAI. You’ve got OpenAI, you got

Anthropic, you got Cohere, you got Character, you got

Stability, you’ve got Lambda. It is almost impossible to know

with any certainty, much like it was with the search engines in

99, 2000, who’s going to emerge where the value capture is going

to be, it may all end up with Microsoft and Google. I mean,

this may end up looking like iOS and Android at the foundation

model level. And so, you know, I think as investors, for example,

on the foundation model side, I think it’s very difficult to

choose just one, particularly when the largest one is,

frankly, captive and a proxy to Microsoft, and they’re capping

your upside return. So like, those are difficult investment

decisions. That doesn’t detract from the fact that I think it is

as big as Doug suggests. And I do think there are going to be

applications and tooling layer to come out of this that’s going

to produce really big winners. I would say that we are spending

an extraordinary amount of time in the space, we haven’t made a

lot of investments, I think you have to study, you have to get

deep. I mean, Chamath, certainly, and I have been

investing in this space for at least a decade, maybe 15 years.

But don’t underestimate that the transformer model really did

change the game here. And we’re now producing impacts much


Saks, last week, you said, lab three and crypto didn’t kind of

stick with you, you didn’t see the use cases. And you in the

first inning here, or first at bat, you rattled off three or

four really compelling use cases from summaries to you know, the

assistant guide on your side concept. Is this akin in your

mind, because Brad just said it could be bigger than mobile,

internet, mobile, AI revolution, if you were to look at those

three, do you think it’s bigger than actually mobile, and then

we’ll get into return profiles of 6.5% on cash versus what our

VC is going to be able to do in this kind of market?

Yeah, I mean, so I agree with Brad and Doug, that this is the

next big platform shift, whether it’s as big as mobile, or it’s

more like social or cloud. I mean, those have been the big

platform shifts over the last decade or two. And I think this

is definitely on par with those, I think Brad’s right, we don’t

know where the value capture is going to be, maybe it just all

ends up accreting to the big companies who can make massive

investments in the space. You know, one difference between the

internet ecosystem today and 20 years ago is you do have these

giant companies who are not totally incompetent, right? I

mean, they are, they do have lots of talented engineers. And,

you know, like 20 years ago, you’d have company, you know,

the big companies would just sit on their hands in the face of a

platform shift, and they’d just be sitting ducks who get

disrupted, they’re not, that’s not going to happen today. That

being said, I do think that any new platform shifts creates

opportunities for startups. And it may not be efficient the way

that these opportunities get pursued in the sense that yeah,

Doug’s right that there’s me a lot of spray and pray. But I

think that it is kind of efficient for the ecosystem as a

whole, right? Because like any smart engineer with a half

decent idea ends up getting funded. And out of all of that,

you get kind of a pre Cambrian explosion where, you know, the

ecosystem evolves a lot of different types of businesses,

most of them don’t work, they get wiped out, they go extinct,

but there’ll be some good things that get funded. So we’re more

like I think, Doug, and how we see it, we don’t want to spray

and pray want to be very selective, we want to put more

money behind fewer opportunities that we think are better. And

Doug Leoni, you know, I think he generally gives good advice of

the tough love variety. And this is of a piece with that. And so

I agree with him. That being said, there is a certain value

to the ecosystem and having all these seed funds to spray and

pray, right? Because this gets a lot of plants, a lot of flowers,

and then you see what blooms,

I would say, yeah, to build on that sax, this is a perfect

inefficiency. You know, you when you see it from the outside,

you’re like, well, this is super inefficient. Why so many

companies, if you free your mind, and just say their

experiments, two or three person experiments, 500k to a million

and a half in that first stage, when I invest right before you

do when you do your series is at five or 10 million. Milestone

based funding is back in the tech industry. And that was

something chamath that we lost for a little while there, people

would just come out and they would raise a series B out of

the gate, no product market fit, etc. Now what we’re seeing is

people are raising that 12 to 18 months, they got their backs up

against the wall. Speaking of tough love, which you reference

sacks, that tough love of Hey, you have to hit the next

milestone. What did you accomplish with the 1.5 million

in order to get the 10 million in order to get the 30 million

that 500 is going to go 10x, there’ll be 5000 of these

startups, but it’ll quickly whittle down when a chamath as

people go through this milestone based funding system in Silicon


we haven’t given enough time for a logical framework of

investing to develop, which also is tied to a logical framework

for entrepreneurship to emerge. We’re just way, way, way too

early. So the thing with all of these language models is that

they are grist for the mill. And we talked about this before,

if it was a highly proprietary asset, you would have never sold

49% of it to Microsoft for $10 billion, because you would

assume that it was worth a trillion dollars. So it’s a huge

tell on the part of open AI, their deep understanding, and

they understand it better than anybody else, that it’s a bit of

a capped upside. So what is uncapped, I guess, is maybe the

better question. Well, if you look at the 1849 gold rush, as

an example, the people panning for gold, in my opinion, are the

people building language models today, they’re going to come and

they’re going to go, but who’s going to win? Well, the pick and

shovel providers one, Levi Strauss one. So what is the

equivalent of that today? I think it’s at the silicon layer,

because you need to really re architect how compute will

actually work in a world of all of these models, those folks

will get paid. If you look at AMD and Nvidia, they’ve been

getting paid for years, they continue to get paid, they

probably will continue to get paid even more. And so folks

that actually take a step into doing something hard and

difficult in AI, like custom silicon could get rewarded. And

then there’s what I call the white truffles. What are these

unique Alba white truffles, these singular sources of data

that when used in reinforcement learning, make your output

just zinc. And that’s where I think Facebook is an obvious

white truffle core as a white truffle, but there are a lot of

startups that could become white truffles, if they gather

enough data. And that’s like a pretty reasonable framework. And

so in that framework, if you apply to today, there’s way few

silicon startups, and there’s way few white truffles. Instead,

it’s everything is the baloney in the middle, which is random

people talking about some random model that’s just going

to again become highly commoditized. You have to

remember, all these models are open source, then none of them

mean anything in the absence of the data you give it to train

on. 100% Brad, hey, okay.

Well, I want to add one other piece of news that we saw this

week, which is open AI announced that its developer AI, they were

cutting the tax on that are basically the metered rate, they

charge to use it by 90%. So I think this is gonna be a game

changer. I think this is based on the chat GPT 3.5 API. And of

course, you’re coming out with 4.0. Later this year, I’ve

already had explained to the audience what an API is and why

this is important. And for those people who don’t know, this

application programming interface, it allows a developer

of some other application to build on top of you. So in other

words, like a developer wouldn’t have to use this chat interface

to get access to the large language model, you could just

submit your request through the API. And so give an example of

what of like a popular app and how they might use it. Yeah. So

so I think like notion actually had a demo that they published

where it was a pretty incredible demo, maybe we can find it and

it would do things they added actions in the demo, like

generate a task list. So you could take like a document or a

meeting summary, and would spit out recommendations for next

steps or tasks, it could, you know, spit out a table. Basically,

it’s the autocomplete for everything that we talked about,

right. So now notion doesn’t need to build their own LLM

expertise, they just built use the API.

So when the notion app, you say, Hey, I’m building a marketing

plan. And you say, Well, okay, give me a list of things that

should be on my marketing plan for my new app. It sends a

signal to the chat GPT API, which will be on Azure

Microsoft’s platform. And then it gives you the data back, you

don’t have to build the language model. Yeah, incredibly

powerful notion has all the content that they need, but

they don’t have the AI expertise. So now they don’t

have to generate your or create AI expertise in house, they just

use the API. I was really powerful. And but just to finish

the thought here, I think that one of the things that’s

probably misleading about these stats around funding and the

data, there’s like almost 600 startups already, there are AI

startups, is that, you know, what happens when there’s a new

wave is that founders are smart, right? And they know how to

market themselves in the way that is most compelling to VCs.

And they know that like VCs, frankly, are a little bit

lemming, like in terms of their migration to the next wave and

wanting to glom on to the next big wave. So VCs are now looking

for AI. If you’re a founder, and you’re you build one feature on

top of the, you know, open AI, API, now, all of a sudden,

you’re going to market yourself as a company, you’re not gonna

market yourself as just a SaaS company. And so that’s valid.

Yeah, I mean, it could be aimed, or it could be like a

great pivot, you know?

Yeah. And it’s not, it’s not totally one or the other. I

mean, it’s just that if you have a plausible connection to AI,

as a founder, you’re going to start marketing yourself as an

AI company. And so that’s how all of a sudden, you can have

600 of these companies, you know, that are all of a sudden

out there in the wake of this sort of chat GPT is I think a

lot of companies are recategorizing themselves.

I literally had this experience not three weeks ago, right

before I went to Japan, serial founder and team that we’ve

backed for that had an exit, said, Can I show you something?

I said, Yeah, got on the zoom showed me a little proof of

concept using chat GPT. And he said, This is my idea. This is

the vertical. And I just said, Okay, what do you want? He said

500k for 10%. I said, Okay, done. Great, let’s learn. And

it’s an easy bet for us to make because we know it’s a serial


For open AI, the way that it could become a trillion dollar

company is actually by cutting the cost to such a low degree

that nobody else can effectively compete with it. And then at

that point, they can become a small, small, small tax, you’d

rather just pay it than try to compete with it. And I think for

open AI, that’s actually a very brilliant strategy. So that’s

how they, they could get to become very, very large

evaluation would be to become so pervasively relied upon, and

where they take such a minuscule take rate of their

participation in you building a company that could be really

effective for them like cloud computing, right? Like we’re

going to just take such a small tax. Yeah, that’s not a small

tax. That’s a large tax.

That’s the picks and shovels play in a way to create the

developer ecosystem for AI. And to your point, I mean, I think

you raise a good point that you know, what was their motivation

to take such a dilutive round, you know, the 10 billion that

was evaluation at 3030. Yeah. And does that imply that they’re

not confident? I mean, that the flip side of it could be maybe

they know, they want to compete on the basis of rapidly, you

know, becoming the developer platform. And so they’re going

to subsidize that developer platform, you know, with

negative gross margins for some period of time. And maybe

that’s why they need a lot of capital.

And they were in kind of a reflexive loop of just cost of

getting better versus the amount of money they had to get

better. And so maybe they were forced to do it. And then in

that point, how would you justify you would say, well, the

other 50% is still hugely valuable. So that’s enough for

us. And I think that that’s, that’s very logical as well.

Brad, you have your finger on the pulse of LPS, limited

partners who back funds like Chamath sacks is mine and yours.

We heard 6.5% on your money for no risk. Well, you in Chamath

position is hey, you have to triple that if you want to be a

private market investor. That’s about 20% 20% rule of 72. That

means every three and a half years, you got to double. If

you’re doing that for a 10 year fund, you’re looking at a five

x fund is kind of table stakes, then I think just back of the

envelope math. What are LPS thinking right now? Are they

looking at this world and saying I should just be all in cash?

Are they saying, yeah, everybody thinks we should be all be in

cash. Therefore, there’s not going to be enough money in

private. Therefore, there’s an opportunity there. We know the

6.5% rate. You know, that’s not going to be here forever. It may

be here for a little while, but we need to we need to keep

investing in venture. Or are they just cutthroat about it?

Like, let’s pause venture investing private market

investing? It’s a great question. First, when I look at

the three year Treasury bill, it’s like 4.7. Not to quibble

here. So I think Chamath’s getting a little goosy, goosy on

this 6.5. But the fact of the matter is these goosy, goosy

you’re super special. You’re VIP JP.

Maybe there’s like some sort of like bond rate that included

corporates or something. Maybe it was 5.2 from Robin Hood on my

Robin Hood account for J trading. So it’s what is in

that what is in that Jason, they probably got some junk bonds

and they’re ripping you off. Whatever it is, I’m getting five

points. It’s so you are until you’re not you are until you’re

not. It’s 100% T bill, parentheses and jump on funds.

Look at the fine print, Jacob. LPS have a 10 year view. They

understand like most people. I mean, listen, if you look out at

the 10 year, the reason the 10 year is, you know that we have

real interest rates at about one and a half percent. So that’s

the 10 year less expect expected inflation. When you look out is

because people expect inflation to come down and they expect

rates to come down. So if you were an LP and you said I’m not

going to invest in venture and the next two vintages, which may

be the best two vintages we’ve seen in a long time because

prices are adjusting, etc. And I’m going to move it all into

some rate bet. First, it’s just very difficult to do they don’t

move their allocations around that quickly. Now a wealthy

family as an LP could move their allocations around really

quickly. But if you’re Texas or your Ohio, or you’re a sovereign

wealth fund, you’re betting on the arc of value creation. I

would say this, the consequence is they’re narrowing their

aperture as to the venture funds they want to allocate capital

Okay, explain that unpack who they are narrowing the aperture

to. We’ve talked a lot on this pod about the power law. And the

truth of the matter is whether we’re talking about AI or

software, or anything else that you know, people are going to be

funding, it’s 10% of the investments that are going to

yield 90% of the returns. And so they’re looking at that and

saying who are the top 10 firms in Silicon Valley, I either want

to get allocation to those firms who are seeing the best

deals converting the best deals and are selective, like sacks

talked about, or we just don’t want to allocate. So I think,

you know, what we saw over the last two years, Jason was an

explosion of new funds, an explosion of new, you know,

first time second time funds, I think subscale small funds with

no DPI, they’re going to find a really, really tough time to

point about DPI raising capital, okay to see the scale player

scale. So part of that is clearing out the inventory from

the last cycle, two news stories this week about companies, you

know, maybe struggling, Sequoia got off the board of citizen, if

you don’t know citizen, that’s that app that tells you where

crimes are happening in your city, very popular in San

Francisco, it’s literally goes off every 90 seconds, it’s

pretty dystopian. That company citizen, which is a pretty cool

app, has raised 130 million to date, Sequoia led the series a

in 2017. They did a pay to play round, if you don’t know what

that is. Basically, if you don’t invest, you get crammed down,

how does the cram down work? Well, your shares in the company

went down 10 to one, and you probably got moved to common

shares as opposed to as opposed to preferred, which has a series

of protections, they get their money out first, yada, yada. But

Sequoia refused to participate. According to this FT story,

again, Sequoia did not comment on this, it’s, it’s kind of

something you don’t do as a VC, when something goes bad at a

company, and you leave the board, you generally don’t want

to say bad things or taint the company any more than leaving

the board does. So a bunch of cram downs happening. And then

dovetailing with that Instacart, according to the Wall Street

Journal had a big q4 as it prepares to go public. Instacart,

if you remember, we talked about it on the show cut its internal

valuation 75% last year from 39 billion to 10 billion. According

to sources, Instacart q4 results, according to the Wall

Street Journal, up more than 50%, even though order volume

grew only 16%. Why they turned advertising on the app, just like

Uber and Amazon, a lot of these commerce folks, folks are

building ad business inside of theirs. So what do you think

about what’s happening as we clear out this private? Anybody

have thoughts on Instacart or the cram down rounds? Go either

way with this, and then we’ll go to

I wouldn’t focus too much on those two companies, I think

we’re going to see in the second half of 23. And all of 24 is a

lot of medicine being taken a lot of down rounds, a lot of

structure is going to be a tale of two cities, the hot area, you

know, AI is going to continue to receive new investment. And all

these companies that, you know, that receive peak valuations in

2021, are going to have a day of reckoning, either, you know,

if they’re lucky, maybe they have a flat round or model

modestly up around, but a lot of them are going to have down

rounds or restructurings. And this is going to be going on for

the next year and a half.

What’s your philosophy sax on leaving a board? This is a

really dicey issue when you give up on a company. What’s the best

practice there? How do you do it without damaging the company?

Obviously, the founder relationships can be hard. What

have you learned about this as a private market investor?

Well, I think, I think that sometimes we like flip board

members internally at craft is because people have different

amounts of capacity. That’s not a statement at all about the way

craft feels about the company. It’s just a reflection of our

individual bandwidths, or whose expertise are needed at a time.

But when the firm itself quits a board, I think there’s no way

to read that other than, you know, a statement of protest.

And I don’t know what happened with that company. But it seems

to me that, you know, again, it could be a sign that the venture

firm isn’t happy with the way that they’re being treated.

The cram down, Chama. That’s, that’s a bitter pill to swallow.

Why would founders do this cram down instead of just adding a

little more to the top? And is there a way to do this without,

you know, going scorched earth or poisoning the well as it

were, we, I mean, again, putting this app and Sequoia aside,

this is happening all over the ecosystem. So is there a way to

do this gracefully? Or is it just going to be messy?

I think it’s going to be really messy. I mean, to state the

obvious, no, no venture capital investor ever quits the board

voluntarily of a great company that’s doing well, that would be

dumb. So as David said, sort of like the proof is in the

pudding there. And at the same time, there are a lot of

companies who don’t want to see the writing on the wall. And

we’ll do all kinds of gymnastics to try to stick a landing on a

contorted financing. And sometimes those things have real

consequences to other investors who just don’t think it’s the

right thing to do. I wouldn’t read too much into this except

that good founders have a responsibility to do what’s

right for themselves and their employees, nobody else. And the

thing to keep in mind investors really, no, I think you I think

you absolutely have to prioritize the people doing the

actual work. And if and if you actually did prioritize them,

what you would probably say to yourself is, Oh, my gosh, there

are people who I work with, who I look in the eye every day,

because investors, you’ll see once a quarter. But I have my

fellow employees that as a founder that I look in the eyes

every day, who’ve been toiling with me for umpteen hours a day

every day for years. And they are now totally underwater. What

is the right thing to do for them? And I think if you just

answer that question, you wouldn’t do all these contorted

things, you would just reset the valuation, you would refresh

the equity pool, you would issue options back out to those

employees, and you would move on. It’s all these other things

that get in the way of answering that simple, simple

question, where people fuck it up.

And I’ve done that before.

Exactly. If you don’t have a team, and you don’t have a

motivated team, you have nothing.

I’ve done that before. I don’t want to rehash one of my more

miserable experiences. But I was dealing with a company that had

a grossly inflated valuation, it was a total problem case. We

voluntarily slashed the valuation in half and reissued

options to the employees to keep them motivated. No big deal.

Yeah, yeah, exactly.

It’s not that it’s no big deal, but it requires some amount of

fortitude. And like, you know, understanding your priorities, I


But you’re about to what do you think, you know, like, first, I

think it’s revealing that we think what happened here is so

out of the ordinary. I mean, you flashback to 2001 to 2004.

Sequoia, I don’t think funded a single loser in their portfolio.

Right? Like, that’s a time where you walked away from the ones

that weren’t winning. And you fed the ones that were, because

you have limited capital, and you don’t know when you’re going

to raise your next capital, this idea that you have unlimited

capital, you can give money to anybody, no matter what they’re

doing with respect to their plan, I think is a function of

the last 10 years. But to Tomas points, the idea of tough talk,

you know, either out of CEOs or out of board members has been in

short supply in Silicon Valley, this idea that saying the truth

just speaking the words about needing to get fit or needing to

lower the valuation, that somehow that is founder unfriendly

is nonsensical. The truth is founder friendly, by definition,

and I think to Tomas point, the less complicated you make this,

right, you reset the valuation, you re up the option pool, and

then everybody has a choice to make. And if the people who are

on the board and backing the company choose not to re up for

whatever reason, they no longer believe in the path forward for

the company that’s incumbent upon the founder to go find

people who will.

That’s not abandonment as it’s being framed in this story. It

is a trade. And I think maybe if you look at public market

investors, Brad, nobody gets upset by a trade trade to trade.

But in the private markets, there’s a lot more emotion

involved a lot more relationship material. And this founder

friendly concept of like, you’re abandoning me. It’s like, no,

the the trade here, it makes no sense for this firm and for this

fund. And for these LPS, right, you

know, sometimes, sometimes the founder needs to have the

courage to look in the mirror and say, what I’m doing is not

working. I had a plan, I missed the plan by 70%. I’m lighting

capital on fire. This is a charity, not a business. It’s

best to say it didn’t work, shut it down and move on and do

something else.

Okay, so of course, you’re referencing Salesforce. So we’ll

pivot to that. It’s not that bad. But I think this is a good

time to maybe talk about the public markets and inflation and

what we’re seeing in macro. So

can I set up a question for Brad, actually?

Sure, go ahead. Yes.

Yeah. So so on a previous podcast, I laid out my theory of

how you could just use the two year bond rate relative to the

Fed funds rate to understand where the bond markets sort of

prediction market about inflation is going. And a month

ago, the two year bond rate was at 4.1%, relative to

4.5% Fed funds rates. In other words, the bond market was

betting that interest rates will go down between now and two

years from now, relative to where the Fed had it. So

therefore, it believed that inflation had been conquered.

Now, fast forward just one month later, and the two year bond

rates at about 4.9%. You know, the Fed funds rates about four

and a half percent. That is a massive swing, basically 80

basis point swing in the I guess the two year bond rate.

And so the market seemed to be saying all of a sudden, not just

that they expect rates to be higher longer, but also that the

Fed needs to keep raising. And that is a big change. So Brad,

what is the basis for that? And what do we now believe about

inflation? I think just a few weeks ago, we were thinking that

this problem was licked and the market took off like a rocket,

it ripped. Now all of a sudden, it seems like investors are

really worried that inflation is not over. So where does this

stand right now? Well, I think when we started the year, you

know, the the 10 year was close to three to an hour closer to

4%. The 10 minus two is as negative as it’s been in the

last, probably 10 years. So the market is clearly saying, you

know, we saw some inflation prints that came in hotter. I

think it’s now consensus, which you guys have been saying on the

pod, that, you know, although the second derivative is slowing

that it’s sticky, right, we’re going to get stuck at this four,

four and a half, three and a half. And it’s the slope of the

curve downward is going to be slower. We’ve gone from thinking

we’re going to have 225 to now thinking we’ll have three or

four. You know, and so I think everybody is now bracing for

more inflation. But remember, when we started the year on

January 1, the consensus wisdom was we were going to retest the

S&P at 3200, we’re going to have an earnings recession, and

that inflation was going to continue to run hotter. The only

surprise in my mind so far this year, is how well the equity

markets have held up in the face of a 10 year that’s gone

parabolic, right? And an actual earnings recession, right? And

you you know, you you posted, you know, in our thread, Chamath

about just quality of earnings, you know, even the earnings

beats are pretty low quality. And so I think, you know, we now

are going to have a couple inflation prints coming up over

the course of the next couple weeks that are going to be

important. My hunch is, you know, everybody has tilted again

on, you know, what we saw in the last couple prints, my

suspicion, if you look at Morgan Stanley and Goldman Sachs, the

consensus view is that we’re still heading in the direction

of 4% faster than I think people emotionally think. So I would

say there’s maximum uncertainty in the world. The fear that in

inflation is uncapped the way Larry Summers was articulate in

November and December is less today than it was. But what’s

emerged is this idea that we’re going to have higher rates for

longer, and we’re going to have higher inflation for longer. Now,

the question I throw back at you is, the market abhors

uncertainty. The market’s done totally fine during periods

where we had 3% inflation and five and a half percent rates,

right? When with the internet boom, that was, you know, 2000

to 2005 rates were a hell of a lot higher than the rates are

today. So I don’t think that higher rates and higher

inflation means that we can’t, you know, invest in venture

backed companies that have huge secular growth, the world

doesn’t end. But what I do think it means is like, if

there’s massive uncertainty in the world, if allocators of

capital don’t know whether rates are going to double again,

whether inflation is going to double again, then everything

just shuts down. And that’s really bad for the economy. I

don’t see that happening right now. But I do think that the

prints over the course of the next eight weeks are going to

be important.

Chamath, you have any macro thoughts here? At the same time

this is happening, we saw rents broke in the last month. So

rents got cheaper. Yeah. A governing principle, I think I

probably said it too many times, but I’ll say it again, rates

are going to be higher than we like, and they’ll stay here

longer than we want. So if you use that as a principle,

whenever the consensus thinks we’re done, it’s been pretty

profitable to be on the other side of consensus. And so I

still kind of maintain that we’re probably going to have a

five and a half percent fed funds rate. Which means that I

don’t know, maybe credit suites will offer me seven and a half

percent soon on three month T-bills, but we’re going to have

higher rates. And I do think Brad’s right, though, in the

sense that as long as we know that then that’s it, and we can

forecast it into the future without it changing too much,

it’ll be okay. But right now, what you’re seeing is a lot of

make believe going on in in the stock market. So Nick, if you

want to just throw up that image. So this is a really

this is the chart of cash flow versus earnings. Yeah. So this

is something that I saw in Bloomberg, which I thought was

really interesting. And if you focus on the period of 2020 to

2024, what you see is the white line, which is net income

adjusted for depreciation amortization. And the blue line

is cash flows from operations. So what does that mean?

And this is for S&P 500 firms,

this is the best 500 companies in the world. Yeah. And the

white line is what you tell Wall Street in terms of what you

make on paper. The blue line is what actually appears in the

bank account. So why could there be a gap between what you

tell somebody you made, I made $1 versus what’s in the bank,

50 cents? Well, the reason is that there’s all kinds of

accounting tricks that you can use accruals, inventories, and

all of these things allow you to present a healthier earnings

report than is actually true. And so right now, we have the

worst earning situation. So the worst gap between what we are

telling people versus what is actually in the bank account

that we’ve had for 30 years since 1990. And so it just

brings into focus the fact that we may be in the last few

innings of trying to make sure this all looks okay. In which

case, one faction of the investing world who thinks that

this earnings recession is actually at hand would be kind

of right. And then what they would say is that once we all

realize that these earnings are fake, and you reset down 15%,

that’s where you get to the mid 3000. In the S&P 500. Right now,

it’s around 4000. I don’t know if that’s true or not. But

there’s more and more evidence that would support that the way

that they see the world could be credible. The other side

says, Hey, listen, this is a bump in the road. We’re getting

a handle on things. And it’s stabilizing. So even though

it’s higher than we’d like, it’s not going to change that

much. So now just think about 1015 years from now. And let’s

go. And those are the folks that want to rip the money into

growth stocks and tech stocks again.

How does the consumer play into all this record low

unemployment, like it’s 1% in Utah, three and a half percent

for the country, two and a half jobs for every American who’s

unemployed. And then these rents coming down. But

consumers have seemed to have burned off all that extra money

they had. So Brad, when you look at the consumer driven economy

that the world lives in,

that’s not true. Because you have to understand, stimulus is

still entering the economy, it’s just harder to measure. So for

example, take Social Security, you have cost of living

adjustments in Social Security, that’s lifting payments by 10

and 15%. Because it’s backdated for what was going on last year.

And remember, last year, we had two, three, four, 5% inflation

rates. So there is more and more money coming into people’s

pockets that we don’t realize. And we’re all on the hook for

that as US taxpayers. So I think it’s very dangerous to kind of

look at one data point and try to pick off what’s happening in

consumer land. Because there’s all kinds of hidden ways in

which money gets back to people.

Brad, you have thoughts on the consumer because, you know, I

test, it does seem like consumers are still spending

money. But the cost of goods in some cases is coming down. I

mean, how do you look at the consumer and try to make sense

of what’s going on here? Because it does seem the United States

is in its own little bubble here world of just over employment.

Still, even though we’re seeing these layoffs in 10.

I would say number one, that the pop we’ve seen in rates,

which impacts consumers by way of higher mortgages, higher

variable expenses on their credit cards was offset over the

last few months by lower energy costs. So their cost of

gasoline went down. Add in the things that Chamath is talking

about, and I’m not sure you took a lot of money out of people’s

pockets. I would say this that again, what we’re talking about

here, retail sales have continued to do really well.

ecommerce sales in January were quite strong. That would all be

consistent with this off landing. But here we are, you

know, again, talking about macro, I think when you spend

this much time talking about macro doing what we do, you

know, like last year, I’ll be the first to raise my hand and

say, you know, like our friend Bill Gurley would say it leads

you in the wrong direction. The fact of the matter is, it’s

totally unknown and unknowable where we’re going to go over the

course of the next three or four months. I think there’s a

better ability to predict maybe over the course of the next

couple years. But the fact is, if you would have told any I was

just with a bunch of investors, you probably represent a trillion

dollars of public market demand 10 or so long only investors,

if you would have told any of them that the 10 year was going

to be at 396, they would have told you that the NASDAQ would

be down 10% to start the year, and it did just the opposite. So

I think you got it, you know, you’re, you have a bunch better

chance, particularly if you’re playing at home, right, than

trying to guess the direction of that find five companies that

you think are going to grow and earn more money, irrespective

of the direction of rates and inflation, own those and enjoy

your life.

I’m looking at the world and going sacks, my Lord, I’m seeing

great founders, great companies, and five to $10 million valuations

and I can buy 510 15% of these companies. This feels like the

best it’s been for me as an angel investor, seed investor

seed fund for a long time. This is fantastic. Great deal flow.

The deals are taking six weeks to close. We’re having very

thoughtful discussions. People are taking a real focused

approach to how they deploy the capital. It is not YOLO, people

are building models, again, people are showing their CAC,

they’re being thoughtful about how they spend the money. They’re

being thoughtful about salaries and hiring. So what what’s your

you seem to think that, you know, what we’re seeing here is

challenging or a problem? What are your thoughts on how it’s

affecting your day to day business as somebody who is a

company builder?

Well, let’s separate two things. So there’s the tech ecosystem,

then there’s the economy as a whole. The fact of the matter is

that tech already had its bubble in 2021. It had its crash in

  1. And now we’re largely on the other side of that. There’s

still a lot of companies like we talked about, they’re going to

need to restructure, who raised during the bubble and may not

have come to grips with that. But if you’re talking about new

investment, new rounds, new companies are starting with a

clean sheet of paper and a blank slate, you’re right, things

seem good and normal, right? People are making intelligent

investments. And obviously, the innovation cycle doesn’t have

anything to do with the macro picture. I mean, technology

wants to evolve, and it’s great engineers and product people who

drive those ideas forward. And they’re not thinking about

interest rates. I never thought about the Fed funds rate at all

when I was a founder running companies. So let’s just put

that aside and acknowledge that great, this great innovation is

going to keep happening, no matter what the macroeconomic

picture looks like. That being said, I mean, just for the

listeners of the show aren’t startup founders, I tend to be a

little bit gloomy about the macro picture right now. Because

yeah, it’s true that what Brad said that we’ve had good

economies with 5% rates before. But I think you also have to

look at the pace of change or the rate at which the the Fed

funds rate has been going up. And if you look at the chart of

rate increases, it is a very steep chart of rate increases.

And I just think that for the last decade or so, we’ve been

operating in this like zero interest rate or ZURP

environment with loss of monetary stimulus. And I think

a lot of companies, a lot of parts of the economy got

addicted to that stimulus, they got hooked on drugs. Now, all

of a sudden, you’re putting them through withdrawal very, very

quickly. And obviously, the withdrawal pangs are going to

be worse, if you can’t taper off slowly. So, it looked like

just a few weeks ago that the Fed was done raising rates. Now

we know that they’re not, we don’t really know when they’re

going to stop. So, I tend to be a little bit gloomy with

respect to the big macro picture, because I just don’t

see how you can change rates this fast. And I mean, you look

at like real estate, for example, we just saw the first

year over year decrease in the housing market in a while. And

again, that’s all driven by rates, the cost of mortgages

going up, and two big defaults in the first two big defaults.

Yeah. So, I think that there’s going to be some pain ahead.

Now, you know, ironically, from the standpoint of the tech

ecosystem, we may have already taken our medicine. And we may

already be on the other side.

Actually, that is a good way to to look at as we took the

medicine, it’s painful.

And Jason, maybe maybe that’s the segue to talking about

Benioff, I would say we haven’t took it, we’re taking it, we’re

starting to take our medicine.

Well, it makes sense that Benioff, with his, you know,

very loving family kind of approach to running the company

might actually, it might take him a little while to become a

big cutthroat. So as everybody knows, Benioff, and Salesforce

have had a lot of turnover, a lot of senior executives have

left voluntary or involuntary. But shares were up 11%. On

Thursday, after reporting their Q4 earnings, they’re up 14% year

over year, small net loss, but the company bought back $2.3

billion worth of its stock, we’re going to see more of that

for sure. And they’re going to be increasing its share buy back

program to $20 billion going forward. And like meta, which

suddenly got fit and got religion. Benioff is now

basically with all these activists, I guess on on his ass,

he says, in this is the quote from the earnings call, we’re

more closely scrutinizing every dollar of investment and

resource and very focused on driving operational excellence

and automation across our business focusing on four key

errors, short, long term expense, restructuring employee

productivity, there it is. product innovation and building

relationships with shareholders. profitability is our truly our

number one strategy. And that’s my number one strategy. That’s

the number one thing we talked about at the start of every

meeting we have in this company, quite a turnaround your

thoughts, Brad,

I don’t think the story is that, you know, that Benioff, you

know, made these cuts, and that activists are around the rim,

what was significant was his comments that he made, and I

tweeted about it today, you know, he said, every CEO in

Silicon Valley has looked at what Elon Musk has done, and

asked themselves, do they need to unleash their own Elon within

them? And, you know, listen, we’ve been talking about this

for nine months. The reality is, if you look at the employee

count at Salesforce, in 2015, they had 19,000 employees. As of

last year, they had 80,000. In seven years, they four x, the

number of employees, they were a mature company. By 2015, their

employees cagored at 23%. You know, we don’t talk about it in

this way. But these large companies, these employee bases,

they’re not unions, but they may as well be.

Right? Why would that be?

I just think there’s, there is, during this age of excess, where

it was just easy for people to hire more people and build more

things not to make tough choices, etc. Right? We just had

an explosion like we’ve never seen in Silicon Valley, in the

number of employees in these businesses, meta went from 10,000

to 80,000 85,000, Google went to 185,000. And at those levels,

it’s very difficult to govern them. And when the CEOs went to

make decisions in the businesses, there would be

protests, revolts, within the business, 30 or 40,000 people

would sign a petition even say, No, we’re not going back to the

office. No, we’re not going to work three days a week. No, you

can’t name our AI bot, what you want to name it because it

offends us. And so to me, what’s more significant is over the

last six months, we’ve seen courage, gain momentum in

Silicon Valley. Right? What’s deeply underappreciated about

meta, and the changes they made, it would be one thing if it was

just window dressing, we cut 10% of the workforce kind of

tighten our belt a little bit. But Zuckerberg got on his call,

and he said, we only have two priorities in 2023. One is

efficiency, and he went into depth about once they started

cutting people, how the company got faster, the product release

cycle sped up, the employees got happier. And now it’s an end in

itself to delay or the business. That’s what we’re hearing out

of Benioff as well. And I think it’s, you know, people can

quibble with how Elon went about the change, which you and you

and David are very familiar with at Twitter. But the reality is,

he lit a fuse in Silicon Valley that is giving courage, whether

it’s private companies, series B companies, pre IPO companies,

public companies, I’ve had that conversation more times than you

can imagine over the course of the last six months. And I think

it’s a really important change, because I think it breathes new

productivity into all these businesses. And importantly, it

unleashes these engineers back into the ecosystem to start the

next wave of companies.

Yeah. So Jason, I mean, you and I got to tag along with Elon

during that transition phase at Twitter. And the thing that I

took away from it was just how much agency, you know, CEOs have

that they’re not using. I mean, Elon went in there, and he

basically changed whatever he saw that he didn’t like, I mean,

unsentimentally and quickly. And, you know, and so you look

at all these other companies, you talk to CEO sometimes, and

they act like they’re prisoners of their companies, like, I can’t

change this, I can’t change syndrome. Yeah, yeah, it’s like,

you know, I’ve got all these employees and all these layers.

And but I can’t, you know, there’s always some reason I’m

afraid of the bad PR, or, you know, whatever it is. And I, you

know, the thing I came away, realizing is just how much

agency, particularly founder CEOs have, that they just don’t

use, you know, they’re always like hemming and hawing and

wringing their hands, and acting like they’re tied down

by this or that. And the reality is, they can do whatever they

want, just about, you know, within the bounds of what’s

what’s legal. And, and I think they’re starting to realize, oh,

wait a second, like, I actually can do that. You know, I can

walk into my company one day. And if there’s a team that’s not

performing, that’s giving me answers that don’t make any

sense, I can start over. I’m just gonna start over. Yeah,

reboot. I mean, if you can’t get it done, then we need to have

somebody who can do it. And it’s, it’s incredible. Like we

were doing an analysis on this week in startups of the, you

know, employees per company and the revenue per employee per

headcount. And I got roasted for having this calm even having

this conversation. And now here we are Chamath, people are

looking at efficiency, we’re looking at, you know, really,

how efficient can these companies be run? Is there a

limit to where this is going? And if we were to look at this

as a process, where are the fangs, the Amazons, the

Googles, Facebook’s, where are they at in terms of percentage

to being at Elon, if you if you were to put Twitter and Elon as

the goal, where are these companies? And I don’t know that

that is the goal. Maybe maybe he’s cut too much. Who knows?

We’ll find out. I think it’s a it’s a it’s a pretty radical

experiment experiment he’s doing there. Yeah,

I don’t think that’s a reasonable or an achievable goal

for a public company. Okay. I mean, I think the thing we have

to keep in mind is Elon is also capable of doing that because he

paid $44 billion of his own money to buy something that he

owns outright, that no longer has revenue pressure to outside

stakeholders, different circumstance revenue went down

70% at Twitter. Well, that only affects him and his ability to

pay whatever he borrowed in order to buy that company. And

as long as he’s willing to fund that somehow, he’s literally

allowed to do whatever he wants. That’s no longer the case

when you’re borrowing money from other people to build your

business, which is what every other capital market

participant does, public market participant does and private

market participants. So I think that that distinction is just a

little bit important, because it probably means that there is a

shadow of what Elon is doing, that’s probably the threshold of

what’s possible. And it’s probably, you know, sort of 50%

headcount reduction, that’s probably the, the bound in which

things break. Because I think the thing to keep in mind is that

over time, this stuff is like collagen in the body, it just

like, it creates these interconnected webs of just very

difficult stuff that you sin you that you cannot tease apart

blockages. So even if you try to go in and cut 50% of a company

like Facebook or Google or Microsoft or Apple or Amazon, it

would be so difficult, because all of a sudden, the

coordination that happens at that scale, I think would get

lost. So I’m not sure if it’s possible, you kind of have to do

what they’re doing, which is cut 5%, then cut 10%, then cut 5%,

then cut 5%. And I know it frustrates people on the outside

looking in, but I think it’s the, it’s probably the only way

it can be done without torpedoing the company.

What does that do on a culture basis, then, because that is the

big critique, hey, you’re creating now this culture of

fear, I guess the opposite of that is you’re creating a

culture of performance and expectation. So how do you think

about it on a culture basis, because that keeps coming up

from founders to David’s point,

it depends, because I think companies when they’re smaller,

I mean, I can tell you, when I was a part of the Facebook

senior management team, we would rank all the employees.

So we had a very good sense of who was the best and the most

performant all the way down to who was not. And we were able to

do that, probably up to two or 3000 employees. That’s not

possible at 50,000. And nor is it fair. So because you don’t

know who these folks are, the real contributors are, you have

to do what Elon did, which is literally go person to person

and say, who is unbelievably performant, or critical? Yeah.

In the absence of doing that, you just don’t know who to let

go. And so you have no choice except to bleed down. The

question that I have, and Brad, maybe there’s a smart analyst on

your team that can do it is right. And it’s more of a

statement as well. Can you imagine the totality of stock

based comp that’s been given out by all these companies since

2015? When they were catering their employee bases by 25% a

year? I bet you it’s a trillion and a half dollars at least. You

think it’s that you think it’s in that order of magnitude?

100% This has been the greatest grift in the history of Silicon

Valley for sure.

Let’s pause for a second. Can you explain what we’re talking

about here? Stock based compensation obviously is the

stock given to employees. It’s generally not counted. Well,

let’s do the accounting, right? Let’s do it this way.

Let’s just say that you believe in capitalism. Okay. Yep. So if

you if you believe in capitalism, let’s say the, the

four of us start a company, and there’s $1 of profit, and we

each own 25% of the company. Got it. Normally, what you would

say is each of us get 25 cents. Right, reasonable, we own 25%

each, there’s $1 profit, we each have 20. So that means that in

four years, right, we each will have made $1 because so let’s

just say it costs $1 to get off the ground or $4 to get off the

ground, all in summit budget, we believe we all would have been

made whole, we all would feel great. And then now every year

afterwards, that 25 cents we get as profit. Now, let’s say that,

Jason, you add a fifth person, and Brad and David and I can’t

say anything about it. Okay. And that fifth person now gets a

fifth of it. Right. And so now all of a sudden, our 25 cents

goes down to 20 cents. Then let’s say you add five more

people now all of a sudden, our 25 cents went to 20. And then

it went to 10 cents. Yeah. And at some point, Brad and David

and I raise our hand and say, Hey, this is not the deal we

signed up for. And you say, well, too bad, because revenue

would not be what it is. And profits would not be what it is

without these extra six people. And that’s effectively what

everybody debates when they own a stock, the shareholders want

that number to be as small as possible. And I think what Brad

is observing is that in Silicon Valley, what has happened is

there’s been poor accountability for what all of those extra

people do. And profits haven’t written risen fast enough to

make the existing three people on the cap table feel okay about

it. And that instead of talking about three people and six, and

$1, you’re talking about trillions of dollars, and

hundreds of 1000s of extra shareholders, Brad, millions of

extra share. And now we have some charts here. So we can do

some fun with numbers. I think taking a step back, I think

it’s very important to realize that stock as a form of

compensation to create alignment, excitement in the

early stage of venture capital, is part of the true magic of

Silicon Valley. You know, you’re starting a company, you

ask somebody to go on this adventure, take a bunch of risk,

they often have to cut their pay, they could get at Google

by half to join your adventure, it’s only fair that you give

them stock in the company, and they share the ups. And if the

company smokes it, they get rich for taking that incremental

risk on their behalf and on their families behalf. What’s

happened over the last 15 years is something totally

different, which is this stock as a form of early stage

compensation, right, continued. And there’s a feature in

Silicon Valley, as companies came public, one way to kind of

hide an expense in a business is to bury it in SBC. So let’s

say Google wanted to hire somebody for $4 million, which

they’re doing today in AI. But instead of paying them 4 million

in cash, which would all count against their operating profit,

they give them 500,000 in cash, and three and a half million

dollars in stock. And let’s say they make all that stock

vestibule immediately, Jason, in this year, it’s obvious to you

and I, that’s just cash, the person turns around and sells it

to real expense of the business, real expense to the

shareholders. But when they report their earnings, and they

report adjusted EBITDA, they adjust out the three and a half

million dollars that they gave by way of SBC.

Why did stock based comp SBC get excluded from accounting? What

is the history of that? And is that going to change now? Are

people going to say and shareholders demand in this new

economy in this new, you know, sort of reality? Hey, you know

what, you can’t play fun with numbers here. Stock based comp

has to come out. What would you like to see Brad?

It’s fairly esoteric, but they’re back in the mid 2000s

2004 2005. There was a, an accountant, there was a big

debate about this. Warren Buffett was famously saying,

listen, it doesn’t matter whether you pay in stock,

whether you pay in cash, whether you pay in cans of beers, like

it all costs the same. He’s right. And so there was a

debate. We had a statement and accounting statement FASB 123.

And in that statement, it said gap EBITDA must include the cost

of stock based compensation. So all of a sudden, if I’m

reporting gap EBITDA, I got to include the cost of stock, which

it does today. But what but what did everybody do? But what

happened? They started adjusting it out. Right? Because

they said, Hey, this is a real expense, right? Because we’re

not it’s not cash. We’re giving out the door solid. Do they

come up with a term for this?

They just call it adjusted EBITDA. And the crime, the crime

here is that when rates fell to zero, and everybody was making

money on tech stocks, nobody wanted to rock this boat. And

everybody just said, you know, like adjusted EBITDA kind of

ignored, I can, I can model it into my future dilution. So we

model up share count over the course of the next three years.

But this literally over the last five years, went parabolic.

Because I just shared with you the number of employees

exploded. The amount of share based compensation exploded. I

think there’s a competition for those employees, we would have

one base, I think just reported SBC, which hold your hat sacks,

was 70% of revenue, not 70% of their earnings, 70% of their

revenue. Just for Coinbase, we’re talking about here. That’s

for Coinbase. And so you know, last week, there was something

that I thought was pretty brave. on their

earnings call, really called this out. And what they said is,

listen, we’ve been playing by the rules. We understand that

stock based comp is cash. And they say every every metric we

report includes the impact of stock based compensation. And if

you look over the last 15 years, if I’m an owner of, I was only diluted by about 5%. If I was an owner

of Salesforce, or Expedia, I was diluted by about 25%. That’s

25% of my ups were given away. Right. But yet, those things

were adjusted out when they reported earnings. And so, you

know, what’s become in vogue today is CFOs get on their

calls. And they said, No, no, no, no, don’t worry, we’re

going to buy back a lot of shares. So we won’t have much

dilution. Okay. But if you take my 2 billion of profits that

Chamath just talked about, and it goes right out the door, just

to buy back the shares you just issued, you’re effectively

round tripping that money, then it just proves the point. It’s

cash. It’s an expense to shareholders. And my biggest

problem with it is it’s led to the bloat. Because if companies

actually had to account for this as cash, right, as opposed to

being able to do it, they wouldn’t hire as many people,

they wouldn’t pay as much in stock comp. And I’ll end with

this because I want to end with the solution. Every comp

committee on every board, frankly, their heads spin when

you start talking about this subject, they bring in a comp

consultant. And the comp consultant, they is really the

CYA for the comp committee, because they want to approve a

comp plan that’s been recommended by the management

team. And they just want to know, is this what everybody

else is doing? Okay, so everybody’s doing it. So the

comp consultant looks around and says, Yeah, all your peers

are doing this. This is why Charlie Munger said, I’d rather

throw a pit viper down the front of my shirt than hire a

comp consultant. Right? What is going on on these comp

committees? If you give bonuses to anybody in your business,

that are that is based on an adjusted EBITDA metric, rather

than free cash flow per share, per share is the key here. It’s

negligence. It’s negligence. So if comp committees just walk in

and they say the gold standard as a public company is 50 basis

points, annual dilution, that’s Apple, that’s visa

mastercard, or even below that, that’s the gold standard once

you’re in the public markets, and we will never incentivize

our employees, our employees on the basis of anything that

excludes stock comp, and it has to be on a per share basis, that

would be a massive leap forward for public company accounts.

It seems reasonable. Anybody have any other thoughts on that

stock based comp? No. All right, Zach, where do you want to go?

You want to go Fox?

I’m going to do Fox.

Yes, let’s do Fox. I mean, Fox is kind of crazy. Okay, so

Rupert Murdoch had been deposed here with this Dominion voting

system lawsuit, they’re suing Fox for 1.6 billion in damages

over claims made on air that we all know, around technology

enabled election fraud. We remember this wild period at the

end of the last election cycle with this incredibly false claim

that the election was stolen, something, you know, both sides

of the aisle said did not happen. However, it seems that

the hosts on Fox knew it wasn’t happening, knew it wasn’t true,

but we’re engaging in entertainment of allowing these

people to come on air and say the election was stolen. So

Murdoch said, I would have liked us to be stronger in denouncing

it in hindsight. And when asked if he could have stopped the

host from highlighting these allegations, these false

allegations on air that were obvious to everybody. He said I

could have but I didn’t. He said the truth. He’s not allowed to

lie in court. Yeah, just on air. But I mean, just I mean,

sacks, to be fair, like, you really care about freedom of

speech. You really care about the libel laws. You really care

about the GOP. Obviously, you bring it up every week here. So

when you looked at and but you were very clear, you were not

happy about the election denial, all that like false claims that

Trump made and these insane people he put around himself. So

how do you look at these Fox hosts and listen, you’ve been on

Tucker and other things, knowingly spreading lies about

something as important as the election, and then doing it in

the most cynical ways we we sit here and every week we roast the

media, the mainstream media, you particularly go after the Dems

and the left and the media elites. How do you feel about

these media elites, who are part of the GOP machine, lying

incessantly about something as important as the election

integrity of the United States of America?

First of all, you’re trying to tee this up as some giant dunk

on me, J. Cal.

No, I’m not. No, I’m not. You said from the beginning, I need

to remind you didn’t believe in this.

Exactly. Let’s go back to November of 2020 on the show,

because there may be a lot of parts of the audience that

weren’t watching back then. I was really clear that I said

Sidney Powell and 100% and Rudy Giuliani, I thought they were

wackos. And this whole idea that the Dominion voting machines

had somehow been rigged, and somehow it involved Hugo Chavez

was a wild conspiracy theory. So I said at the time 100% that I

also said that I thought that once the Supreme Court denied

certiorari to Trump, I said that he had his right to have his day

in court, and to challenge the election in court, but once that

the court threw out his claims, and the Supreme Court denied

certiorari, that that whole thing needed to stop. And it

didn’t stop. And that’s why the Republicans lost that Purdue

runoff seat in Georgia on January 5, and you had January 6.

So, you know, I’ve been warning against this for a long time,

J. Cal. Now with respect to Fox, I think you need to basically

get a little bit more nuanced in what you’re saying there.

Because I think within Fox, there were actually two groups

of hosts. So there is one group of hosts that I think you could

say were Trump loyalists. And they basically not only

platformed the Sidney Powell lies, but also endorsed them and

Rupert Murdoch admitted that they went too far and actually

endorsed. And so you had Hannity and a couple other hosts do

that, even though Hannity had some text messages that

indicated he didn’t believe it. So I think he came across the

worst. However, there were within Fox skeptics of the

Sidney Powell theory. And so I’d put Tucker Carlson in that

camp. I put Laurie Ingram in that camp. And Tucker had

Sidney Powell on his show on I think it was November 19. I

think this was 16 days after the election. It was a 20 minute

interview in which he grilled her and he kept coming back to

what is your evidence? What is your proof? And if you were

paying attention, he demolished her. I mean, I remember that

notable. Yeah, exactly. So I mean, honestly, no one looks

great when all of your text messages come out. And you can

nitpick about this or that text. But the bottom line is I think

Tucker did his job. You know, yes, he platform Sidney Powell,

but he platformed her in order to dismantle her. And you kind

of have to be pretty dopey not to see that she was dismantled

after the appearance of Tucker

Fox be liable for knowingly platforming these people and

endorsing them in some way? Or is it their freedom of speech in

your mind, as an attorney here, or somebody with that, you know,

legal degree? Where does it stand? Like, put aside if this

was if this was CNN doing it, MSNBC will switch what

publication if this was the New York Times, and they knowingly

lied, knowingly platformed some coops with a conspiracy theory,

what should the price they pay for? And then how does that

affect the freedom of speech that we all think I think

universally on this podcast, especially and in Silicon

Valley, or at least we used to, that freedom of speech is

really important. Do you have the freedom to lie and platform

coops like this?

Let me answer you directly, Jason, I think this would be a

better world if Fox were liable. But I don’t think they’re going

to be because that’s not the legal standard. I believe that

if a television network knowingly spreads and endorses

baseless accusations against somebody, which they know, or

should know is basically untrue, I think they should

absolutely be liable for libel or defamation. But that is not

what the law requires under New York Times versus Sullivan,

you’re required to show that that they knowingly spread

misinformation. But in addition, you have to show that they had

actual malice, which is that their intent was malicious. And

I think, you know, Rupert Murdoch is a wily old dog,

because he admitted on the stand everything but the thing that

was most important for the plaintiffs to prove, which is

actual malice. He admitted that they platform things that they,

you know, knew or should have known were false. He admitted

that he should have put a lid on it sooner. He admitted that he

knew it wasn’t true. But he said the reason they did it is

because they’re afraid of their audience or a portion of their

audience going to some rival network. So basically, what he

said is, in not so many words is that his motivation was greed.

And in our system of law, that is a complete defense against

claims of defamation. Now, I think what we need here is to

rewrite the defamation laws, I think the Supreme Court needs to

overturn New York versus Sullivan. Clarence Thomas is

basically intimated that he would support that. I think

that would be a great thing to do. I think actual malice should

not be the requirement for libel. I think if a television

network or a publication puts out information they know is

false, they should absolutely be liable for it. And that is

enough to show. And if we did that, by the way, it wouldn’t

just be Fox in this particular case, it’d be CNN, and MSNBC,

we have to completely revise their coverage. And all of these

tech reporters who do nothing but defame the tech industry,

the entire tech press just about is a slow moving

defamation lawsuit. Elon Musk would probably be the richest

man in the world just based on all the defamation lawsuits he

could bring. If we were to overturn New York Times versus

the richest richer guy. Yeah, because all they do is defame

Elon Musk every week. Yes, for claims that are ridiculous. So

David, let’s revise the whole thing.

Yeah, but hold on. There you go, folks. Very, very intellectually

honest. I like it.

David, so what you’re saying is you expect the Dominion lawsuit

to fail? Can it be appealed all the way to the Supreme Court?

Can this be the case that rewrites New York versus

Sullivan? Good question.

That’s a good question. I’m not sure. I mean, I think that’d be

great if it did. Just to be clear. Listen, I think that if

Fox were somehow found guilty, I think one and a half billion

is a kind of a ridiculous amount of damages. I don’t think

Dominion was damaged to one and a half billion. But do I think

that it would be a good thing if this lawsuit were challenged

all the way to Supreme Court and they overruled New York

Times versus Sullivan?

Let’s fund the lawsuit. Let’s fund the lawsuit. I would fund

that lawsuit.

The next thing I want to do is sue MSNBC and CNN for all the

nonsense they spread every night.

Yeah, just to be clear, I have a couple of things that I would

want to go and get correct.

Clean up. I just want to be clear here, though, Brad. David’s

guy, Tucker, he did the right thing. That’s the most important

part of the story, isn’t it, David? You’re still a sucker for

you’re not being nuanced. You want to throw Tucker under the

bus. I think Tucker did his job. I think the guy who looks a

little worse is Hannity because Hannity in the text admitted he

didn’t believe the story. But as a Trump loyalist, he endorsed

the bullshit theory. That’s no good.

Brad, you know, you come on the show every couple of episodes

and pitch in here as our fifth Beatle. Would you like to touch

the third rail? What are your thoughts? And would you like to

get some incoming email from all your LPs about your position

on Fox News and

just feel like I sat through a University of Chicago law school

class. It was awesome. And I think we have some good issues

here that we still got to tick off on J Cal. Yes. Okay, well,

we got to talk just for a second about China, as it relates to

tick tock, because, because this right, here we go. This Hawley

hearing that’s coming up. So we’ve got a hearing in Congress.

Let’s start with you are a shareholder, a significant

shareholder in ByteDance, the parent company of tick tock. We

have to say that I’m correct. Correct. Correct. And you

you started that I can’t use tick tock. And my kids use reels

and everybody you and I’ve had a spirited debate on. Yes, you’re

a shareholder. Okay, so we’re about this. So I so I haven’t

interested up you want to hold on a second here, like because

just like sacks had to defend himself before he even got

started. Otherwise, my credibility, like the way I have

to do the same thing. I’m a shareholder of meta, who stands

to do incredibly well, if tick tock in the US is banned. So

you have a spreadsheet where you win either way. I’ve got a

hedge on good. Okay. You know, if tick tock in the US gets

banned, but you know, the con the context here is the tick

tock ban debate is heating up. Right. And it’s all in a

march up to the Holly hearing. I think it’s on March 23. And

there’s real like we spent a lot of time at the start of this

pod on inflation. I think a much bigger issue right now. I was

just with all these investors. The main issue on their mind was

global decoupling between China and the United States. We’re

going to see a level of Chinese hate leveled out of out of

Congress both sides. I mean, we heard it come off at dinner at

your place not so long ago, that this hearing is drawing

more demand for speakers from both sides of the aisle than

any such conference in a long time. But there’s a lot of

there’s a lot of heat now around tick tock, should it be

banned. And when I when I look at the situation, if you frame

it for ByteDance, because Chamath talked about this a

couple weeks ago, it’s been reported. ByteDance is revenues

about $120 billion. It’s been reported their profits are

about $25 billion. That is almost identical in size to

meta meta is worth about 450 billion. So 120 billion top

line. It’s also been leaked that in that tick tock is about

14 billion of that. And that us tick tock is three to 4 billion

us tick tock three to 4 billion of 120. And it loses money. So

there’s a lot of debate, should we ban it? Should we not ban it?

Is it going to go public? And what should happen? What do you

think? What do you want to happen as a shareholder?

Listen, I think it’s an American. I think this is a

puppet debate over a much bigger conversation that’s going on.

One of the things I’ve urged the company to do over the course

of the last several years is parental controls. My kids use

tick tock, they use reels. And what I want is to be able to set

effective time limits. And I also want tick tock has

incredible video content in math in science and history, I want

to be able to set a slider and say 20% of the videos that get

shown over this one hour period have to include some of these

math and science videos for my 12 year old, then he can elect

to not watch it all or watch it. They announced those product

changes yesterday. So they’re teeing up those product changes.

I don’t happen to think there’s a nefarious plot. But I also

understand that people might not want this. And so like,

listen, I think we should have a debate. I think that the CEO

tick tock should show up, he should speak the truth at the

Hawley hearing. And if the US Congress wants to ban tick tock

in the US or force a spin or a sale, I think we should do it

and stop debating it. But the much larger conversation is

whether we have a hard or a soft decoupling with China. And I

think this is just canary in the coal mine.

All right. So let me just tee up also, and Chamath, I’ll get

your reaction. On Monday, the White House gave government

agencies 30 days to remove tick tock from all federal devices,

all federal agencies must delete tick tock from phones and

systems and prohibit internet traffic from reaching the

company. This is following moves by Canada and the EU and Taiwan.

And obviously, there is a bigger house committee focused

on China that held its first meeting this week. So there is

the bigger picture. But let’s start with the smaller picture.

Number one, Chamath, do you think it’s a security risk to

have a Chinese company have this kind of access and influence

with tick tock specifically? And what do you think the remedy

should be for that? And then we’ll get big picture. I want to

get sacks involved in this as well. Should it be banned?

Should they have this kind of access to Americans and


Should it be banned? No, because I believe in a free market.

Will it be banned? Yes. Because it’s

the most obvious cultural way to pick a fight with China without

actually picking a fight with China. So yeah, I think it’s

going to be the most obvious victim of all of this. And so I

don’t know my advice to my friends who are shareholders.

Not just Brad, but others is sell, sell it, move on. It’s in

the Warren Buffett, what Warren Buffett calls the too hard


sacks. Do you think that this is a national security issue? Do

you personally believe tick tock should be banned? Or do you like

me believe that we should just do a reciprocation test in order

for tick tock to be allowed here in the United States, then

Twitter, Facebook, Meta, Instagram, LinkedIn, etc. need to

be allowed in China, and you have this many days to

reciprocate or else it’s bad.

I don’t think your mouth is right that tick tock is going to

be GPC roadkill. And GPC stands for great power competition,

you’re going to start hearing that term more and more, it’s

going to become the organizing principle of American foreign

policy. And I just think that tick tock is tick tock is all

caught up in that. And you know, personally, I’d like to

understand what it is exactly that they’re doing with tick

tock. And so there’s having these vague accusations, I’d

actually really like to understand the surveillance

that they might be doing. Yeah, I’d like to know a lot more

about that. But in any event, I just think you’re gonna get

caught up in this this, again, GPC, that’s going to be the

dominant organizing principle of our foreign policy. I think

that people are coming around to realizing that it’s

China, not Russia, that is the central global competitor and

adversary, the United States, it’s the only country in the

world that’s a potential peer competitor to us, this economy

is roughly the same size, the US has got four times the

population, it’s the one that we really need to watch out for.

I think there’s growing realization in Washington, that

the Ukraine war is a little bit of a misdirect. And that we

need to basically get back to doing what we were doing before

the war, which is pivoting to Asia.

And by the way, thinking about that, just for a second. In I

think, David, you’re totally right, because the game theory

now, to me, makes a lot more sense in the frame in the

framing of GPC. So for example, if you think about what the

CHIPS Act does, right? The CHIPS Act basically says we are

going to near shore, or onshore, every capability we need, so

that we can make and manufacture all the critical

semiconductors for all of our interests, technological,

business, military, etc. But what is that really what that

is, is an option to not have to defend Taiwan. And why is that

important? It’s because today, if Taiwan were invaded by China,

we get pulled into a conflagration that we don’t know

how it ends. We don’t know what the beginning, middle of end of

it looks like it’s extremely dangerous and precarious. So

spend a couple trillion dollars create financial incentives,

build a bridge to Korea and to Japan so that they bring onshore

and into Mexico all the capabilities we need with

Western Europe, who are already our allies already, along with

Japan and Korea. And now all of a sudden, we have complete

optionality. And now we can deal with the greater Chinese

hegemony in a much more balanced way. So I think the GPC

framing is shared, by the way, between the Democrats and the

Republicans. So this is why it’s so much bigger than one

single company. That’s why I think I think it talks roadkill

Brad, if we frame it as a competition, we’re not framing

it as a war. We’re in competition. And part of that is

going to be this decoupling is this decoupling helpful to

America? Is it helpful to humanity? Is it better that we

decouple a bit this interdependency maybe got a

little too deep as we saw during COVID with supply chains?

Well, I mean, in a great in a great power struggle, it is what

the words imply. Right. So I don’t, you know, part of the

reason you want to have trade with China, and part of the

reason we don’t want to have a hard hard decoupling is, you

know, a long standing theory that company countries that

trade together are less likely to go to war. So, you know, I

think if you listen to what’s coming out of this, you know,

these select committee this week that held his first hearing

is on the, on the extremes, you hear people saying hard

decoupling, right. And in the middle, you have people saying,

listen, we need to define a circumference around national

security. And we need to decouple as to all things that

are within that circumference. Now, I will tell you that the

debate is about how large is that circle. So it starts off

as, for example, sophisticated computer chips out of Nvidia.

So China, you know, can’t compete with us in the AI arms

race. But it’s quickly emerged into, you know, batteries,

energy, food, supply chains, it, the circumference has now

become almost as large as the economy itself, I would argue

that it’s not just the chips act, it’s also IRA, which is

another trillion dollars of funding for basically onshore

and supply chains, vital materials to build batteries,

etc. You know, so I think it’s a very reasonable policy by

both parties to pursue, it’s clear that we’re going to have

some decoupling. I think it’s a it’s a it’s going to lead to an

interesting question on the part of China, you know, she was

out last week saying, you know, I’m going to make a speech

about peace with Russia. You know, this is more David’s

territory. But my hunch is that there may be, you know, if

China, China thinks there’s going to be a hard decoupling

from an economic perspective. This is bad for global economic

growth. This is bad for China’s growth. I don’t think it’s bad

for growth. I think it’s bad for inflation. Explain? Well,

because I think that we’ll have many versions of everything

everywhere. So we will more redundancy. Yeah, more

redundancy. We’re gonna we’re gonna rely on Central and South

America in a meaningfully bigger way. And what that’ll mean is

that there’ll be more jobs and economic prosperity for those

countries, they’ll feed the United States, China will feed

it less. And as a result, there’ll be more inflation,

because you won’t have the cost advantages. By the way, China is

not just going to sit there and take this lying down. They’ve

already punched back a few times. So for example, in the

middle of the summer, China introduced a tariff and slowing

the export of certain materials and technology to make solar

wafers. Now, why is that critical? Well, again, talked

about this before, but we are going to take the marginal cost

of energy to zero in this country. And the levelized cost

of energy, particularly via solar is the cheapest it’s ever

been. And so what China sees is, oh, my gosh, if the United

States has abundant free energy, now, all of a sudden, a huge

component of what drives costs is gone. Yep. So now the United

States could partner with El Salvador, Mexico, Honduras, you

know, Argentina, Brazil, Vietnam is happening here, too. Yeah.

No, but I’m just saying it’s close by. Yes. Right. And if you

can deliver zero cost energy to those places, now the

manufacturing capability could exist there. My point is, it’s

such a complicated Chesapeake. So China is not taking any of

this line down. But I think that what David’s framing is totally

accurate. This is the beginning of a GPC. And it’s an economic

tit for tat that we’re going to play out. We tax chips, they

tax solar panels, we go after tick tock just as a confusion

maker, right? Yeah, there’s gonna be a lot of

follies back and forth here. I can tell you the the there’s a

very easy test for if China sees tick tock as a strategic asset.

And that’s, it’s going to create more shareholder value, Brad, if

they were to spin it out and make it a publicly traded

American company with American shareholders, it would create

more shareholder value for bite dense. Therefore, if they don’t

spin it out, that means they’re not acting in the interest of

shareholders and shareholder value. They’re acting in the

interest of their national security. Pretty clear

reciprocation and collaboration would be a much better model, I

think for for working with the Chinese and hopefully we can

find some things to collaborate on

Brad raised the the Chinese peace proposal on Ukraine, which

I think is an interesting topic. Can we you guys want to go there

for a minute? Sure. Yeah. All right. Can I take a shot

explaining what the Chinese were doing? I think it was a clever

diplomatic maneuver by the Chinese to try and grab the

moral high ground here. They’re basically saying, Listen, we’re

interested in peace, we’re going to put forward a proposal, the

Americans fell into the trap of basically dismissing it right

away, throwing cold water on it. The US State Department has

done this twice before. Remember, back in March of last

year, enough Tali Bennett from Israel tried to negotiate a

peace deal. And he himself said that it was the West, the

Americans who rejected it, he thought it had a 5050 chance of

succeeding, you then had the peace process in Istanbul,

Turkey, with Erdogan presiding over it, you had the, the

Istanbul communique, which again, they were very close to

having a peace deal, and Blinken in the US through cold water on

it. So what’s happening here is that the US is not playing its

traditional role as peacemaker, where we try to go in and

mediate these conflicts. We’re doing the opposite that we’re

throwing cold water than peace process. Now, why are we not

acting as the mediator? I’ll tell you why. Because we are a

co belligerent. This is an American proxy war that we’re

fighting against Russia. So we have no interest in mediating a

peace process. And moreover, we’re not trusted to mediate a

peace process because we’re one of the effectively one of the

strategy by Xi Jinping is to take the global moral high

ground. I agree with now and I said it on Twitter a couple

weeks ago like this. This is amazing that he’s starting the

peace process. We want regime change. We want to deplete and

we want to ankle Putin. They want to keep him in the game.

The more despots there are, the worse, the better it is for

them. They would like to keep the Legion of Doom going. They

don’t want to change in democracy in Russia. Eventually,

I don’t think that’s how they do it. But listen, Jake, Jake, I

was very close to getting it. But here’s where I would

disagree with you a little bit. Let me explain. Okay, go ahead.

So from the Chinese point of view, the war in Ukraine is like

mana from heaven. Okay, they love this war. Number one, okay,

because it’s interfering with the US’s pivot to Asia. We were

basically in the process of redeploying all of our force,

all of our military to containing them in East Asia.

And now we’re bogged down in Europe. Okay, so that’s number

one. Number two, we are massively depleting our

stockpiles of weapons. We’ve used something like nine years

of stingers and five years of javelins. And we’re running out

of ammunition. I can’t believe we’re running out of artillery.

The Russians actually have a six to one artillery advantage,

which is why they’re actually doing much better in this war

than people are acknowledging, we should come back to that.

The last thing is that the Chinese now are benefiting from

the economic sanctions on Russia, because Russia is now

selling them oil and gas and all their minerals at a big

discount subsidy. So it’s been this has been a wonderful thing

from the Chinese standpoint. So this is the problem with us

thinking in this Marvel movie way of the world in which we’re

the super friends, and we’re against the Legion of Doom,

okay, is because there is no natural alliance in the real

world between China, Russia and Iran. These are three very

different regimes with different types of governments who

naturally would not get along. They would be adversaries,

naturally, they’d be suspicious of each other, as China and

Russia were during the Cold War, but we have pushed them closer

together. This is the problem with having this overly

moralistic view of foreign policy.

Over to you, Jason, what do you think? Tell us your question.

Their question. What’s the question?

Yeah, I mean, you frame it as the Legion of Doom. So just


Well, it’s the axis of evil, the the 50% of

Let me tell you, hold on, I’ll finish my sentence.

Listen, Lex Luthor and Brainiac would not be working together

if it weren’t for us declaring a war on both of them at the

same time. Actually, Pakistan, Iran, and, and China work

together on nuclear technology. So they do when it’s convenient

for them work on things like nuclear bombs. So there is an

affiliation, but you’re correct, they’re, they’re the 50% of the

planet of humans on this planet who live under authoritarians.

And so they, they’re authoritarians, they’re always

going to think in their own interest, they’re always going

to think in their own interest, above their own peoples, let

alone the people of another country, they don’t care, they

don’t care about human rights, they don’t care about the rights

of humans. And they certainly don’t care about the rights of

humans in another country. And the West is on a noble mission

to spread democracy in the world. And that is a noble thing

worth fighting for, and is worth defending free countries from

despots. I know that you are a fan of these folks, sacks,

apparently, and you think they should be able to run amok, I

will take the other side of it. I think the West should act in

unison. The only criticism I have is that we’re not acting

unison. I would like to see the West instead of sending Biden

to Ukraine. Hold on.

I’ve talked enough, you just accused me of somehow being

fans of these people. Where did I ever say that I was a fan of

Xi and China or Putin, or the ayatollahs in Iran? Hold on.

You said we provoked Putin. Putin invaded another country.

Hold on. You said we caused it.

I said, hold on a second. Hold on a second. I am arguing for a

geopolitical strategy that benefits the United States. I’m

on Team America, and your policy of driving these people

into an axis of evil is foolish for the reason I said, which is

we are going to power up the Chinese economy, so they are a

much more formidable enemy to the United States. That is the

last thing we need to do. Now, with respect to, hold on a

second, let me finish. You had a chance. With respect to Ukraine

and Putin there, there’s no question that Putin invaded,

okay? He is the aggressor. However, the question you have

to ask is why? The fact of the matter is that, first of all, we

fomented a coup in Ukraine in 2014. This is your democracy

spreading that you like. It’s all of a sudden we got these

NGOs, and we got Victoria Nuland from the State Department in

there basically fomenting these coups. It doesn’t work out quite

the way you think, Jay Kal. That’s problem number one, okay?

Then we try to run NATO right up to Russia’s border, okay? You

expect them just to accept that because we’re a benevolent

superpower. That’s not the way the real world works. Putin was

tremendously threatened by that, and it wasn’t just him. It was

all Russian elites. Read the Bill Burns Memo from 2008,

he explains that even the liberal elements within Russia

were tremendously threatened by NATO expansion. That is what

basically poisoned diplomatic relations between the United

States and Russia, and it was a major cause of this war. Now,

listen, just because you don’t think it’s provocative doesn’t

mean that the Russians don’t think it’s provocative. You have

to be able to put yourself in the other guy’s shoes for just

one second. The fact of the matter is there were diplomatic

steps that we could have taken to defuse this crisis in this

war, and we didn’t do it. Now, look what’s happened. Hundreds

of thousands of people have been killed, and Ukraine’s been

destroyed. It’s been absolutely destroyed. Let me tell you right

now, it looks like they’re losing this war. I don’t see

where your superhero policy has gotten us except to make China

more powerful and to destroy Ukraine. That is where your

naive idealism has gotten us. Yeah. And I would say, if you if

left to your devices, and you’re not engaging and not presenting

a united front against Putin, he will invade country after

country, the West must fight for democracy, we must fight for

human rights, even if it’s uncomfortable. And you seem to

think we provoked him to invade this country. He’s a murdering

dictator, authoritarian, who has been murdering his own people,

I’m saying other people for his entire career, and he will

continue to clarify, let me clarify, because you’re putting

words in my mouth. Okay. When you say that, I think that we

provoked what I believe, what I believe is that we took actions

that in Russian eyes were provocative. Yeah. I’m saying

that from their subjective point of view, they saw these actions

as provocative. They said, so listen, the Russian, which is

what I said, we provoked it is your position. No, I just

explained this. Hold on his position is that in their eyes,

they were proven. Jason, we’re talking about we’re talking

about and know what you’re like, what you’re doing right now is

like dishonest. I just explained the language that I would use.

Yes. Yes, we provoke them. We took actions that in Russian

eyes were provocative. There’s a difference. provocative,

provoked. Yes, the act of provoking line. Okay, it’s

getting too much. Okay, let’s move on. We’re not we’re never

going to agree on this sacks. Okay. And I mean, I like to

remind the audience that nobody on this podcast is an expert on

foreign policy. sacks is not Henry Kissinger. You know, I’m

not Obama. So last week, show you had come around to my point

of view, you said this war was a mistake. On the show, you said

it was a disaster. And now you’re you’re basically now

you’re backsliding. Hold on. You’re backsliding right back

to your leisure. No, no. I believe the West should present

a united front. And we should hold the line with Russia

invading other countries. That’s my belief. I do not think we

should be doing this solo. I think we should not be sending

Biden, we should be sending 15 leaders of countries to Ukraine,

we should be sending people in and we should be doing a peace

process. And I think the military industrial complex,

largely driven by the GOP is what’s at fault here. They want

to use his weapons, they want to replenish the supply. And

they want to regime change. I don’t think we should be going

for regime change. I think we should be building bridges. So

do you my point is a little more subtle, you’re doing it right

there. You’re basically engaging in this ridiculous rhetoric that

we’ve seen in the media, which is that if you simply want a

more realistic American strategy, because you believe it

benefits America, that you’re automatically accused of somehow

being a Putin sympathizer. You’re doing what the mainstream

media has done. No, I’m not. I just said to you, it should be

the entire West, as a group as a block, negotiating with Putin,

what do you think? It’s fine for Xi Jinping to be part of that. I

welcome Xi Jinping, Germany and the United States and France and

the UK all getting together and trying to get these two parties

to settle. What do you think we’re doing? What do you think

we’re doing right or wrong with China right now? Right or wrong?

What do you think we’re doing right and wrong or right wrong

or I think we should be in discussions with them

consistently. I don’t believe we should be isolating them. I

think we should be looking for areas we can collaborate on the

environment, tech, technology, you agree with the CHIPS Act,

you agree with basically onshoring and nearshoring all

the critical infrastructure we need is I think we should not be

dependent on any foreign we should we should have energy

security. We should have medical technology. Of course, yes. But

I think every country should I think China should have that we

should have it every country should aspire to be resilient

and not be dependent on another country. And being dependent on

a dictator like Germany was on Putin, or we were with China for

medicines or for, you know, medical equipment or chips. We

do not want to be in that position ever.

Let me ask one question just just on Ukraine, just for a

second, Jake out, would you be willing in order to achieve a

peace deal for Ukraine? Would you be willing to agree to two

things? Number one, that Ukraine would be a neutral country

instead of part of NATO? And number two, that we would

recognize for me being part of Russia, would you be willing to

give those two things?

I think that’s up not up to me. I think it’s up to the people of

Ukraine and Russia to sort this out. And it’s up for the West to

set the table for them to do it. And part of setting the table

for them to do it is to make it more painful for them to stay at

this war. So if they are told if you keep fighting over these

things, and you don’t come to a resolution between those two

parties who have to live with that resolution, that is the

uncomfortable thing that will force them. And China, us and

India, all working together, all of us working together to force

those two parties into a solution that works for them.

We have Brad for 10 minutes. I want to move on. I want to show

you guys a tweet about Harvard students. And I want you guys to

react to Draymond’s comments because they’re just fucking

incredible. I don’t know if you guys saw this, but isn’t that

unbelievable? It says there was a study at Harvard that found

that 43% of white students there are legacy athletes, or

related to donors or staff. That’s unbelievable.

Is that public knowledge? Or is that like kind of leaked

information? I wonder this is from Dolores handy. I don’t know

who that is. Maybe we could click on who the source of that

is. legacies gotta go, right? That concept? Should I just go

away? Yeah, is there a valid reason to have legacy? Is there

a valid reason to have legacy? It feels unfair. It feels

un-American that these important institutions give preference to

people who are stupider and achieve less if this is an

achievement based system. It just feels unfair.

Yeah, I mean, well, we know we know that the first class had

zero percent. So we know what the trend line looks like. Yeah.

So at some point, we’re approaching 100%. I think we’re

debating question, right? One of the things I would like to see

Chamath is what’s the relative performance 10 years after

graduation between the legacies and the kids who had to fucking

scratch and fight to get into the place?

Oh, my God. Yeah. I mean, I think we know the answer.

Well, you would think there would be higher performers, the

latter group, but you would also think that if legacy got you

into Harvard, then the legacy is going to get you into other

things, right? You’ll have the end in other places.

They’re the ones who are miserable and walking around,

you know, rich and haven’t achieved anything.

Yeah. Listen, Saks didn’t get into Stanford based on his dad’s

buying a building, right?

That’s for sure.

Okay. So here is a video from Dream Hungry.

What I do want to go back to is Black History Month. This is

actually the first time you’ve seen me in a Black History Month

shirt, all Black History Month. And it’s very intentional.

And I really just threw this shirt on because I didn’t have

another shirt to throw on. But Black History Month, at some

point, can we get rid of it?

Like, at some point, why we got to keep getting the shortest

month to celebrate our history?

You got governors want to take our history out of schools.

And I’m not going to be the fool to go say, yeah, we get

celebrated for 28 days.

So at some point, I’d like to get rid of it.

It’s, you know, we’re making all these changes in the world.

Can’t talk about these people.

Can’t talk about those people.

Can’t say this.

Can’t say that.

At some point, it’s time to get rid of Black History Month.

I get rid of Black History, like they’re trying to do.

But Black History Month?

No, teach my history from January 1st to December 31st.

And then do it again.

And then again.

And then again.

And then again.

That’s what I like to see.



So good.

Love that guy.

He’s the best.

He’s the fucking best.

That was strong.

He’s the best.

You need to clip the last 10 seconds of that.

We all need to tweet that.

Yeah, be relentless.

Chamath, there was a correction we needed to make.

Correction we needed to make about the Stripe chart last week.

Go ahead.

Yeah, so…

You have the floor.

We talked about some Stripe stuff last week.

And my analyst came to me after the show was published.

And there was a couple of miscalcs in the spreadsheet that generated the graphic,

which big up to him for calling it out very quickly.

Anyways, I just wanted to show you the updated one,

just so that we could make sure we get that on the record.

I guess this would be a purple color.

Is that purple?


That’s actually when you calculate net revenue.

And I think what he did was calculated gross revenue, which is in the red.

So we showed this, but it actually should be purple.

So that’s the updated, accurate version of the analysis.

So there you have it, folks.

What does that mean for Stripe versus Adyen in terms of just…

Which is a better business, just to summarize it?

No, I mean, to be honest with you, it doesn’t…

It says what we said before, which is that the previous valuation was very expectation heavy.

And the new valuation is definitely more in line,

but still very rich relative to other companies who have large profitability

and large growth rates.

And I think that’s the key takeaway, which is it’s very hard to both

have huge margins and grow at mediumly high double-digit rates.

And the few that can, Visa, MasterCard, and Adyen,

tend to trade at a very different valuation set than everything else.

And so I think that’s the challenge for Stripe.

If they can do it, they’ll be in that class.


For the sultan of science, doing his SPAC in New York,

having an incredible dinner at Carbone right now.

Can I say, can I say…

Enjoy the vegetarian…

I pre-tilted him.

He texts into our group chat.

Oh, don’t do it. Don’t do that.

And he said, let me know if you want me to dial in and save the episode.

My Insta reply, Gerstner’s on fire, we’re all set.

Why would you do that to him?


It ruined his dinner.

He has to go find a safe place.

He’s irreplaceable.

He’s irreplaceable.

Except, you know, this episode’s pretty good.

Pretty good.

Pretty good episode.

Pretty, pretty, pretty, pretty good.

We love you.

We love you, Sultan.

Oh my God.

It wasn’t a bad episode until J. Cal started ****ing again.

The least you can do him, are you kidding me?

Just like you strike January 6th.

You can’t strike words in English.

That’s, you can’t strike a single word.

You struck my single word last week when I called you out as a Trump voter.

When J. Cal gets under pressure in a debate, he falls back on all the usual virtue-signaling and ****.

Oh yeah. Yeah.

Okay. Who did you vote for in 2016, 2020?

Be honest.

See, like you’re doing right now.

Look at this.

Oh God.

Did you vote for Hillary and Biden?

Legion of Doom.

They’re the Legion of Doom.

They’re pro-Putin.

You know, there’s actually a meme.

There’s a meme on Twitter that anyone who disagrees with me is Russian disinformation

or pro-Putin.

I haven’t seen that one yet.

That’s pretty funny.

That’s basically you.

I don’t think you’re, I don’t think you’re pro-Putin.

I always try to make sure people understand.

During this entire year of Ukraine, Ukraine, Ukraine, I say every time,

to be clear, you’re not saying Putin is right for invading Ukraine.

And you’re like, no, of course not.

You just stopped.

No, no.

Thank you for saying that.

No, thank you for saying that.

I appreciate that.

I always try to say that.

He’s making a correction.

It’s a very nuanced discussion.

It’s a very nuanced discussion.

Like we could, nobody’s in favor of this war.


Nobody’s in favor of it.

Everybody’s trying to resolve it.

I think we just have different views of what resolution looks like.

Did you guys read this crazy article in Bloomberg Businessweek about Praz Michelle,

the founder of, the co-founder of the Fugees and his entanglement with the one MDB scandal?

Did you read this article?

No, I have no idea.

Here’s how the article starts.

I like the culture at the end.

Let’s put the tinfoil hats on and do culture at the end.

His phone rings.

It’s a Chinese woman that says something like,

you know, your cousin wants to meet you.

He goes to the Four Seasons where he gets a note that says,

walk around the building twice to make sure you’re not followed.

Goes back into the Four Seasons, gets a key card,

goes upstairs into a room where they then escort him to a different room in a penthouse,

take all of his phones, and he meets with the vice chairman of security for China

where that guy is asking for an introduction to Trump.

That’s how the article starts.

It is incredible reading.

Incredible, incredible reading.

I encourage all of you to read it.

It’s so spicy.

What is it called?


It’s so juicy.


If you want to read some crazy story, there is a company called Wirecard in Germany,

and there’s a New Yorker article about the biggest fraud in German history.

I highly recommend reading this one.

We didn’t get to it today.

Oh, my God.

If we had a long reads post show, it would be incredible.

I personally don’t think we should promote any stories by the mainstream media.

We have no idea whether they’re true or not.

I’m serious.

We’ll see you soon, Brad.

Thank you so much for filling in.

Love you, Brad.

Thanks, bro.

Pretty good.

Love you guys.

For the Rain Man, David Sacks, the pacifist of peace, the sultan of science, Brad Gershner,

the dictator Chamath, I’m the world’s greatest moderator and speaker at your

corporate event for 50 to 75 times.

Jake out.

Talk to my speaker bureau.

Let’s get this gripped on, people.

We’ll see you next week.


Love you, guys.



Besties are gone.

That’s my dog taking a piss in your driveway.


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 sexual tension that they just need to release somehow.

Wet your feet.

Wet your feet.

We need to get merch.

Besties are gone.

Besties are gone.

Besties are gone.

Besties are gone.

I’m going all in.

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