E88: First principle politics, China chaos & outlook, state of private/public markets & more

0:00 Bestie intros 1:45 First principle politics, analyzing each party's cynicism 48:07 Chaos in China: bank protests, housing protests, slowing economic and population growth, future outlook 1:09:21 Automation and the impact of the information economy 1:16:31 BlackRock loses $1.7T of investor money during H1 2021, state of private and public markets 1:36:36 Amazon acquires One Medical Follow the besties: https://twitter.com/chamath https://linktr.ee/calacanis https://twitter.com/DavidSacks https://twitter.com/friedberg Follow the pod: https://twitter.com/theallinpod https://linktr.ee/allinpodcast Intro Music Credit: https://rb.gy/tppkzl https://twitter.com/yung_spielburg Intro Video Credit: https://twitter.com/TheZachEffect Referenced in the show: https://twitter.com/pelositracker_/status/1549535561718714368 https://www.politico.com/news/2022/07/20/biden-pelosi-trip-taiwan-china-military-00047031 https://www.wsj.com/articles/nancy-pelosis-taiwan-education-china-taipei-military-defense-11658265311 https://www.reuters.com/world/us/china-warns-forceful-measures-if-us-house-speaker-pelosi-visits-taiwan-2022-07-19/ https://www.tesla.com/blog/tesla-repays-department-energy-loan-nine-years-early https://housestockwatcher.com/summary_by_rep/Hon.%20Nancy%20Pelosi https://www.thedailybeast.com/democrats-quietly-try-to-jam-nancy-pelosi-on-stock-trading-ban https://poll.qu.edu/poll-release?releaseid=3852 https://www.nytimes.com/2022/07/19/opinion/democrats-far-right-midterms.html https://www.washingtonpost.com/politics/2022/07/19/trailer-desantis-beats-trump-democrats-bet-maga-more-lessons-latest-fundraising-quarter/ https://www.reuters.com/article/obama-abortion/obama-says-abortion-rights-law-not-a-top-priority-idUKN2946642020090430 https://twitter.com/micsolana/status/1549868945640914951 https://www.washingtonpost.com/opinions/2022/07/18/spanish-language-media-disinformation/ https://www.nytimes.com/2022/07/19/world/asia/china-bank-scandal-protest.html https://twitter.com/WallStreetSilv/status/1549790086656581640 https://www.nytimes.com/interactive/2019/01/17/world/asia/china-population-crisis.html https://www.ft.com/content/91441aca-1665-4660-843f-9cf7222becff https://datacommons.org/place/country/CHN https://www.bloomberg.com/news/articles/2022-06-22/china-housing-market-slowdown-drags-economy https://www.wsj.com/articles/chinas-economic-distress-deepens-as-lockdowns-drag-on-11652703162 https://www.bbc.com/future/article/20220531-why-chinas-population-is-shrinking https://data.worldbank.org/indicator/sp.dyn.tfrt.in?locations=cn https://www.wsj.com/articles/xi-jinping-aims-to-rein-in-chinese-capitalism-hew-to-maos-socialist-vision-11632150725 https://www.thinkadvisor.com/2022/07/20/how-blackrock-lost-1-7t-of-clients-money/ https://www.nytimes.com/2022/07/21/business/amazon-one-medical-deal.html https://www.bloomberg.com/news/articles/2022-07-21/ex-coinbase-manager-arrested-in-us-crypto-insider-trading-case

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Chamath Palihapitiya?

  Two days ago.

• 0:01Jason Calacanis?

  Oh, here we go.

• 0:03Chamath Palihapitiya?

  In the piazza, I got into a fight.

• 0:06Jason Calacanis?

  You got into a fight?

• 0:07Chamath Palihapitiya?

  I got into a fight.

• 0:08Jason Calacanis?

  Like a physical altercation?

• 0:10Chamath Palihapitiya?

  The physical altercation.

• 0:11Jason Calacanis?

  Really?

• 0:12Chamath Palihapitiya?

  This chick shows up, wearing a white wife beater, talking all kinds of shit. And I said, "Listen lady, you zip it." And she just kept jawing and jawing, and here she is again, she's back for more. And so I was like, "Listen!" Now, have you ever seen...

• 0:30Jason Calacanis?

  Ah, there she is.

• 0:31Chamath Palihapitiya?

  Have you ever seen a onesie wife beater?

• 0:34Jason Calacanis?

  Look at that little sweetie, aw.

• 0:35Chamath Palihapitiya?

  And you just sit there, and then you just sit there. And then look.

• 0:40Jason Calacanis?

  There's your cold open, everybody. That's the good stuff, right there.

• 0:43Chamath Palihapitiya?

  Say hi to everybody. I know I'm not a beagle, I know I'm not a beagle, but I'm even better, I have my own thoughts.

• 0:49Jason Calacanis?

  Sax, what you're seeing here is called affection between a parent and a child.

• 0:54David Sacks?

  Just let me know when it's over.

• 1:00David Sacks?

  You're the worst human being in the world. I don't need to watch Jamath boost his Q rating by using his kids as props, okay?

• 1:10Jason Calacanis?

  Oh, Friedberg, where's your puppy that you saved from being tortured with Kim Kardashian's lip gloss?

• 1:18David Friedberg?

  Nick, we gotta get this guy in, because he hasn't been in the show in a while. There he is, there he is.

• 1:23Jason Calacanis?

  Aw, Monty, aw, your belly rub.

• 1:25David Sacks?

  Get the props out of the shot.

• 1:45David Friedberg?

  Sax, what's up with JD Vance in Ohio? Is he gonna pull this thing off, or is he getting beat up? I read an article about him.

• 1:52David Friedberg?

  Getting beat up with the Peter Keel connection being

• 1:55Jason Calacanis?

  He got physically beat up?

• 1:57David Friedberg?

  No, no, no, like in the

• 1:58David Sacks?

  No, no, no, no. No, I think JD should win.

• 2:00David Friedberg?

  He's gonna win, right?

• 2:01David Sacks?

  Yeah, I think so.

• 2:02Jason Calacanis?

  And what about Blake Masters? These are the two guys that TL is backing.

• 2:06David Friedberg?

  Should we start the show?

• 2:07Jason Calacanis?

  We kinda did, yeah.

• 2:08Chamath Palihapitiya?

  Can I just ask you a question? If any of us entered porn, wouldn't one of our names be Blake Masters? Like, it's just, wouldn't it be on the list? Like, doesn't it sound like a great? Isn't it a great name for porn?

• 2:22Jason Calacanis?

  It's a great name, Blake Masters.

• 2:23Chamath Palihapitiya?

  It's a great name.

• 2:25Jason Calacanis?

  And JD Steele, I'm sorry, Vance. Yeah, go ahead. Explain what's going on with this mentoring candidate.

• 2:30David Sacks?

  Would you accuse him of without any evidence?

• 2:33Jason Calacanis?

  I'm not accusing anybody of anything. I'm just saying, tell us about your mentoring candidates. Go ahead.

• 2:39David Sacks?

  Well, so JD's already won the primaries and I expect he will win. I mean, it's gonna be, I think, a red wave in November. And Ohio is a pretty red state these days.

• 2:52David Sacks?

  Blake's supposed to win the primary in Arizona. It's a little bit more of a toss up, but I think he'll do well.

• 2:57Jason Calacanis?

  All right. Well, I had a follow up question, but I'm not allowed to mention the T word. So let's just get started.

• 3:01David Sacks?

  Why is it such a big deal that like Peter supports candidates? You got all these like crazy left wing radicals like Soros gives unlimited amounts of money to, you know, crazy progressives like Gascon in LA and a zillion others. I mean, why is it such an obsession that we have to focus on who Peter supports?

• 3:17Jason Calacanis?

  No, no, I just think it's fascinating that he

• 3:19David Friedberg?

  Peter's articulated his rationale for supporting these candidates and his objective for, you know, changing government in a way that he thinks would benefit the country.

• 3:27Chamath Palihapitiya?

  And Peter's been generally right.

• 3:29Jason Calacanis?

  What is the thesis, Reberg?

• 3:30David Friedberg?

  I think a part of, if you watch his speech from the RNC during the last Trump cycle, I think he did a good job kind of articulating that there's a lot of inefficiencies in government and there's a lot of, call it accumulated fat. And we need someone to go in and we need people to go in and really cut this up. Because so much of politics is driven by what else I'm gonna give you, not about what I'm gonna fix that's already being spent in an inefficient way. And as a result, we see debt climb, we see taxes climb, we see efficiency continue to decline of every dollar invested by the government. And I think that's a really important thesis to see someone actually try and execute against. Because no one's in the position, very few people are in the position that he's in to actually be able to like make that sort of statement. Everyone wants something more from their government versus trying to fix the government.

• 4:15Chamath Palihapitiya?

  I think his views are more extreme than that. I think his views are more that orthodoxy is ruining in America. And so you need forms of heterodoxy to basically reset

• 4:24David Sacks?

  Totally fair.

• 4:25Chamath Palihapitiya?

  The status quo. And I, and I think that's what he believes more than what you just said. I think that you, you need a wholesale reset. And in order to have a wholesale reset, you need to have these very disruptive candidates that basically start to change the norms. I mean, if you, if you think about what Trump did in one election cycle is he's completely sucked an entire cohort of people, Hispanics and, you know, moderates and now, um, you know, a lot of immigrants towards the right because the Democrats have vacated all of that space in having this massive Trump derangement syndrome and tacking extremely to the left. And even if Peter, we'll never know, believed in Trump or didn't believe in Trump, it didn't

• 5:10Chamath Palihapitiya?

  matter, but the process of him getting that candidate elected over the long arc of history may actually serve to pull America back to the center. Pretty good outcome.

• 5:19David Sacks?

  Yeah, and look, the, the reason why I support JD and Blake for that matter is they are, they represent this more populist, a working class wing of the Republican Party and they're dragging the Republican Party in a more working class direction. I think that's the future of the party. I think that's the opportunity for the party to Chamath point, the Democrats have ceded all the sort of this working class territory by becoming this elite progressive party. And the face of the party right now, the Democratic Party is Paul Pelosi. You know, let's talk about this. It's blatant and out in the open. He's trading on chip stocks like Nvidia and Intel and so forth. Like the week before, the House is going to vote on a $52 billion subsidy for chip companies.

• 5:59Chamath Palihapitiya?

  No, no, be more precise. The week before his wife decides when critical legislation goes to the floor of the House to be voted upon. So you have the Speaker of the House, who's the third most important person in government, introducing legislation on her timetable. Her husband trades in those specific equities, days, and maybe even the same day

• 6:24David Sacks?

  So gross.

• 6:25Chamath Palihapitiya?

  of that, they make three times her annual salary just in one day.

• 6:33Chamath Palihapitiya?

  And then she and her husband decide to then fly, not asked by the United States government or the State Department, to Taiwan to then talk about god knows what, which would have created an international uproar. The Biden administration and Tony Blinken had to basically call her and say, "Stand down. You should not go. We are not asking you to go. It is not on the United States' agenda for you to go." And all that would have happened is an entire process in loop where she controls the legislative agenda, her husband controls their private stock account, and he traffics in the names, and then they go to Taiwan to whip up the furor, which would have actually positively

• 7:15Chamath Palihapitiya?

  impacted those same names even more. It's inexcusable, that kind of behavior. I mean, after 40 years, she is so past the line and she doesn't realize it. And by the way, sorry, let me just wait, hold on. And then on top of that, Jason, the mainstream media doesn't say shit. Now, by the way, I'm not a Trump supporter, I think he's a complete goofball, but if Trump had tried to pull this stuff in 2016, or 2017, or 2018, could you imagine how much media coverage there would be? And today, how much of that is covered by the mainstream media? Zero. Was it mentioned on MSNBC? Nope. Was it mentioned in any of the press? Nope.

• 7:52Jason Calacanis?

  Let me just set the stage so people don't know what we're talking about. So, on Tuesday, the Senate advanced a slimmed-down version of the original CHIPS bill, if you don't know what that is. It's basically a bill that's going to provide $52 billion in subsidies to move chip manufacturing here to the United States, something we really need to do. It's a bipartisan bill, everybody kind of agrees on this. But this is being kind of stuck in committee for a little bit. It comes a year after the Senate first approved the $250 billion bill to reinforce US chip making to compete with China.

• 8:23David Sacks?

  The reason why this is strategically important is because we have a huge chip dependency on Taiwan, which is under threat from China. So, if chips are the new oil, you know, Taiwan is the new Middle East, or the new Persian Gulf, and it is a very dangerous situation for us to be completely dependent on Taiwan. Well, not completely, but like for over half our chips. So, onshoring... Advanced chip manufacturing makes sense, but I think this is an example of how you start with a legitimate objective in Washington and very rapidly it turns into corporate welfare and graft by politicians. I mean,

• 8:58Chamath Palihapitiya?

  Yeah, it's gross.

• 8:59David Sacks?

  Yeah, I mean, just because we need to onshore manufacturing doesn't mean that you give Intel and Nvidia giant handouts. And then you got Paul Pelosi making millions trading Nvidia options.

• 9:08Chamath Palihapitiya?

  Yeah.

• 9:08David Sacks?

  It's ridiculous.

• 9:09Chamath Palihapitiya?

  And this is something that is happening.

• 9:11David Friedberg?

  What would you have done, Sacks, to support onshoring of semiconductor manufacturing? Who would you give the money to and how would it be kind of dolled out and what would the terms of it be?

• 9:19David Sacks?

  I don't know that you just give these companies money. I mean, I think maybe what you do is you give them tax breaks or various kinds of breaks, but I, you know, I don't like that.

• 9:28David Friedberg?

  They need capital to support that investment because, you know, if you look at the kind of ROIC on these companies, I would, I haven't looked, but I'm guessing they're in the high teens or something, mid to high teens. And they're not going to be able to invest in some new fangled, you know, fab project that may or may not actually have customers at the end of the day. Their board would never approve that on an independent basis. They need capital.

• 9:50Chamath Palihapitiya?

  Define ROIC, Friedberg.

• 9:51David Friedberg?

  Return on invested capital. So if you're a big industrial business, you know, one of the key metrics that your shareholders look at is the, the ultimate kind of profit, profits that are generated from a big investment you might make. And so, you know, you kind of look at that over time, you look at the invested money over time and the cash returned over time, you come up with this metric. And so it's a key metric for particularly capital intensive businesses. And so a business like Intel or Nvidia, I would imagine is going to have a pretty tough time selling their board on some speculative onshoring fab project. There really does need to be capital, an acceleration of capital.

• 10:26Chamath Palihapitiya?

  Friedberg, who, who feeds you this bullshit propaganda? Intel in 2020 approved a share purchase plan where these guys had a hold of $110 billion and have spent all of it except for 7.2 billion. They have 6 billion left on the balance sheet.

• 10:44David Friedberg?

  I get it, but they're not going to put that money at risk, right? Like, like, Timothée, imagine you're on the board of Intel. And they're like, hey, we want to...

• 10:50Chamath Palihapitiya?

  Okay, so basically, hold on. I make a ton of money.

• 10:53David Friedberg?

  Yeah, this is where it all comes from, right?

• 10:55Chamath Palihapitiya?

  I make a ton of money. I have no better ideas of how to do it, including theoretically, building a chip factory. So I'm going to go to the government for a handout. Meanwhile, I'm going to take all the money that I had, which I could have used to fund this thing, and I'm going to give it away to people who I don't know what they're going to do with it.

• 11:11David Friedberg?

  I would reframe it. I would say that the government wants to see our industry onshore semiconductor manufacturing. And they are going to the companies, not the companies going to the government, they're saying, "We want you to onshore semiconductor manufacturing. Do that for us now." Like, in World War II, we went to the automobile manufacturers and said, the government said, "We want you to make airplanes. Here's a bunch of money, make airplanes." And that's, and so the question then is, who does that money go? Who else would you give that money to besides the two best chipmakers in the world?

• 11:40Chamath Palihapitiya?

  David's right. If you just give us a CapEx subsidy, that's a one-time effect that helps you in a moment. It doesn't help your business. Any reasonable investor who can actually use a simple calculator sees through that nonsense. So what David's right is if you had given them sustained tax breaks for being able to build the business line that then supplies things for the duration, you know, tens of years, you're absolutely right. Investors would lot it. It would make a ton of sense. They would be over-earning over a long enough period of time where people would have to bake that into their cash flow estimates, where when you discounted it back, it would make the enterprise of Intel and Nvidia worth more, and then people would then want to own that stock more.

• 12:25Chamath Palihapitiya?

  Giving a CapEx subsidy is a meaningless way in which you basically hand out good money to organizations who have otherwise misallocated the money that they've already had.

• 12:36David Friedberg?

  Yeah, there is a much simpler solution to Sax's point of like, how do you do this? And giving free money is not the way to do it. The best way to do it is to give it incredibly low...

• 12:46Jason Calacanis?

  Interest rate loan, like a 30, 40, 50 year loan that maybe has some warrants in it, just like a Silicon Valley Bank or a Comerica might give in a venture debt loan, where the government actually could make money from this, and then you incent them with something that is just too good not to take. A 50 year loan of $5 billion to build factories, you have to use it for that, so it's use it or lose it. And then you slowly pay the government back, and then maybe we get some warrants in Intel or whoever we give the money to. This is something that Obama did with Solyndra, which didn't work out, but he also did it with Tesla, and Tesla paid all that money back early. So these loans that the Department of Energy did, really did, and you gotta give Barack Obama a lot of credit for this, it really did help

• 13:30Jason Calacanis?

  drive, even though it wasn't perfect, it did drive a lot of EV adoption. It did really help Tesla become the company it is today.

• 13:39David Friedberg?

  Sorry, let me just respond, because I don't know how much we've gone through the details of the bill, but there are several components to this bill, including, and I just want to highlight, if I'm on the board of Intel, I'm not going to make a $10 billion fab investment, because there may or may not be profits down the road to justify that size of an investment. So if the government comes along and says, "We will support, we will cover X percent of that investment," I can take on more risk, and I am more willing to make that investment. And theoretically, I can afford to pay people a higher wage or a higher salary, because I now have more capital freed up to support to do that. And so there is an effect that arises by having the government

• 14:20David Friedberg?

  come in, put some money into these projects, accelerate their outcomes, and it gives the business more freedom.

• 14:26Jason Calacanis?

  But should it be free money or in the form of a loan? So what should the financial device be, I think is the question that you asked Sacks, if I'm interpreting correctly?

• 14:34David Friedberg?

  Yeah, I'm not sure that the loan, because the loan doesn't resolve the fact that they're having to put up money, right? And so they're not necessarily going to make this onshoring investment. The rational capitalist decision is to offshore manufacturing for Intel. It is irrational for them, from a business perspective, from a board perspective, from a fiduciary perspective, to onshore manufacturing. So the reason they're going to do it is not because they're getting a loan where the interest rate is low. That doesn't really solve the problem. It's the government saying, "We're going to put a $10 billion facility. We want you to build it and manage it for us." And that's effectively what's happening. And now by building this $10 billion facility, we've created security for the rest of the US industry. It's worth it to the government to put that money up and create security.

• 15:14Jason Calacanis?

  For our economy.

• 15:16Chamath Palihapitiya?

  No, it won't.

• 15:17Jason Calacanis?

  Why wouldn't it create security if we have more onshoring of chips?

• 15:20David Friedberg?

  And by the way, there's, and sorry, I'll say one more thing. There's also an investment tax credit built into this bill, Sax, which does provide over time, a bunch of incentives to continue to support and drive the onshoring work that's proposed in the bill.

• 15:32Chamath Palihapitiya?

  If you want the United States.

• 15:33David Sacks?

  Point of personal privilege, can I request that Chamath add just one button to his shirt?

• 15:38Jason Calacanis?

  Yeah.

• 15:41David Friedberg?

  Is it too distracting for you?

• 15:44Jason Calacanis?

  You can take your own idea. You can bladier your, oh geez.

• 15:49David Sacks?

  First I had to watch Jason do the gun show. Now I gotta watch Chamath, you know?

• 15:53Jason Calacanis?

  Show us your guns. Come on, pull up that sleeve and show us what you old man army got.

• 15:57David Sacks?

  Let's move on.

• 15:58David Friedberg?

  I want to say one more thing about the Pelosi stuff. So here's the data. I don't know if you guys have looked at the full history of the Pelosi trading data. Here's the link. This is all the trading that's happened over the last couple of years. And over the past year, he has bought Nvidia four different times, each time in the same kind of volume range. So the timing certainly may appear suspect and it's certainly a terrible kind of thing to see. He's also bought Apple in the last month. Microsoft, sorry, he sold Apple. He bought Microsoft. He bought Alliance Bernstein earlier in the year. He's made a few trades this year, but Nvidia, he's actually bought on four different occasions over the past 12 months. For whatever that's worth, right? I'm not trying to defend it, but I think we should be intellectually honest about the fact that this guy,

• 16:40David Friedberg?

  you know, does take points of view in certain companies. He trades in a handful of companies.

• 16:44Chamath Palihapitiya?

  Are we, are we willing to be intellectually honest enough to think that a husband talks to his wife? And vice versa?

• 16:51Jason Calacanis?

  Yeah.

• 16:51Chamath Palihapitiya?

  Or does that not happen anymore?

• 16:53David Friedberg?

  Depends on the husband and wife, but yeah.

• 16:55David Sacks?

  I think this is blatant and out in the open. I mean, it looks really, at a minimum, the appearance is of graft and corruption.

• 17:02Jason Calacanis?

  Yeah. The appearance of impropriety is impropriety. They shouldn't be allowed to trade. They should have to put their stuff into blind trusts or they should maybe trade once a year. And they should have to announce their trades before the trades happen. Hey, here's what I'm planning on doing, just like a CEO is planning on doing this stuff. It's ridiculous that they can do this and if you want to.

• 17:19Chamath Palihapitiya?

  Why doesn't the mainstream media cover this?

• 17:22Chamath Palihapitiya?

  They have. And Jason, do you think that if Trump, if this had happened during Trump, it would have a lot more coverage than this Pelosi incident?

• 17:29David Sacks?

  I do remember a lot of coverage on Trump. It really doesn't get covered. I mean, if you just search for it today, you'll see basically the only media outlets covering it are like Fox News and then Zero Hedge. You know, that's it. I mean, that's how I found out about it is like the Zero Hedge tweets about it.

• 17:45Chamath Palihapitiya?

  Me too.

• 17:45Jason Calacanis?

  So Daily Beast, you know, headline seven hours ago, Dems quietly tried to jam Pelosi on stock trading ban. But if you're asking me, you asked me a question, Chamath, is the media largely biased against Trump and gives a free pass to the Dems? Yes, I would say that that is the trend. Yes.

• 18:02Chamath Palihapitiya?

  I think that is intellectually honest of you.

• 18:05Jason Calacanis?

  Well, no, I mean, I think the media is bankrupt. They're just going for clicks. And I think, you know, we've talked about this before. They saw Trump as an existential risk and they just did whatever it took to get him out of office, even putting up Biden as a candidate.

• 18:17Chamath Palihapitiya?

  But in doing so, they completely burned all of their credibility.

• 18:19Jason Calacanis?

  Absolutely. They lost a lot of credibility.

• 18:21Chamath Palihapitiya?

  And now the Dems are starting to become increasingly detached and out of touch and maybe hated. But then the result is that the mainstream media is just no longer trusted.

• 18:29David Sacks?

  The media and the Democratic Party both have the same problem, which is they suffer from what the Democratic political scientist Roy Tucher has called professional class hegemony. I mean, they are populated by college graduates with degrees who basically have this very elitist progressive agenda. And that is what is causing the Democratic, the working class to defect from the Democratic Party, their historical base in droves. Look at Hispanics. Well, first of all, if you go to the latest Biden polling numbers, he's down to 31% approval, 60% disapprove. Okay, so the trend is getting worse there. But you look at Hispanics, it's down to 19% approval, 70% disapproval. It's an even more intense

• 19:13David Sacks?

  version of the same problem. You had Myra Flores get elected in that Texas seat. This is a district that went, it's basically a predominantly Mexican-American district. They went for Biden by 18 points just, you know, two years ago. And now they're voting for her by over 10 points. So you're Republicans winning that seat for the first time. So you have these huge defections. Now, why is that happening? Because the Democrats are appealing to the donor class on issues like border, on issues like crime, and on issues like CRT in schools. I mean, you know, the- Working class people in this country, they don't want open borders. They want crime to be prosecuted and cracked down on.

• 19:57Chamath Palihapitiya?

  Yep.

• 19:57David Sacks?

  And they do not want ideological education for their kids. Okay, it's very simple, but that basically is why the Democratic Party is losing, losing votes. Now, let me give you a couple of other examples of the Democrats cynically appealing to this sort of donor class. So recently, there's an article about the Democrats have spent forty-four million dollars this election cycle, basically running ads in favor of the crazy MAGA candidate in primaries. There's been a bunch of reports of this where in competitive Republican primaries, the Democrats will actually spend money on behalf of the sort of the more perceived crazy Republican, the MAGA candidate.

• 20:36Chamath Palihapitiya?

  Crazy Trump, the MAGA candidate.

• 20:37David Sacks?

  The election denier and so forth.

• 20:38Chamath Palihapitiya?

  Yeah.

• 20:38David Sacks?

  Because of the perception that they'll be easier to beat in the general. But I think this is a case to be careful what you wish for because, you know, if we have a red wave in November, you're going to end up with more of these candidates basically winning. So it's a very cynical strategy. The other example, I think, of a very cynical strategy is you saw there was a vote in the House this past week on gay marriage. And the House voted to repeal DOMA, the Defense of Marriage Act, in support, basically codify Obergefell, right, the Supreme Court's decision on, on gay marriage. Something like, you know, sixty Republicans voted for it. Look, I would have liked to have seen more Republicans vote for this. I think it should be like, you know, majority of the Republican Party should be voting for this.

• 21:23David Sacks?

  But the point is that is there any intention of the Democrats to bring this up in the Senate and pass it and codify Obergefell when they have a chance? I think the answer is no. Why? Because the Democrats would rather fundraise off this issue. The same thing was true about Roe. The Democrats had super majorities in the Senate under Obama. They could have codified Roe. They never took the chance. Why? Because they would rather fundraise off this issue from progressive elites, the donor class in California and New York. So this is why they're not going to codify Obergefell.

• 21:54Chamath Palihapitiya?

  You really think that's the case?

• 21:55David Sacks?

  Absolutely.

• 21:55Chamath Palihapitiya?

  Obama said it on, on the record. Obama was asked, why will you not? He campaigned on codifying Roe v. Wade. And then very quickly into it, he was asked, when he had the super majority in both the House and the Senate, will you act on Roe v. Wade? He goes, no, it is not a priority anymore. That's a quote.

• 22:12David Sacks?

  It absolutely could have been codified, just like abortion could be codified tomorrow. The Senate could have been, look, there are, there are 10 Republican votes. There are 10 Republican votes at least for this in the Senate. You have a filibuster proof, super majority in the Senate who would support this. The same Republicans who supported the gun restriction bill that Biden just signed, and that supported the infrastructure bill.

• 22:34David Friedberg?

  You think they could codify abortion rights in this country right now if they wanted to?

• 22:37David Sacks?

  No, no, no, no, no, that, that moment has passed. That moment's passed. I'm not saying-

• 22:40David Friedberg?

  Republicans would never give women the right now.

• 22:42David Sacks?

  No, no, no, look, there's not a super majority in the Senate anymore for, uh, for codifying Roe. There is a super majority right now for codifying abortion. They could do that right now, and they're not.

• 22:52David Friedberg?

  Chamath, you've been a donor to the Democratic Party. Do you believe that, yeah, do you, do you believe that the, um, the abortion issue drove you and others to put more money in and that maybe not-

• 23:04Chamath Palihapitiya?

  No, because, because the leadership of the Democratic Party focused on, uh, Trump in the last big cycle. It was all Trump, Trump, Trump, Trump, Trump. Do I think that more grassroots fundraising focuses on that or gun rights or abortion?

• 23:21David Friedberg?

  Do you think what Sacks is saying is true, that they actually held off on trying to codify Roe so that they could continue to support fundraising?

• 23:26Chamath Palihapitiya?

  Again, I'm just, I'm just gonna give you the quote because it, there's, there's no opinion needed, okay? April 29th of 2009, President Barack Obama says on Wednesday, "He favored abortion rights for women, but that passing a law guaranteeing these rights were not his top priority. I believe that women should have the right to choose," Obama told a Newt Conference marking his first 100 days in office, again, when he had super majorities in both the House and the Senate. "But I think that the most important thing we can do to tamp down some of the anger surrounding this issue is to focus on those areas we can agree on." So, you make a promise, you get into the seat of power, you have the decision on what your legislative agenda should be, and he made that calculation, and David is right,

• 24:10Chamath Palihapitiya?

  sadly, that it was in a moment where we had a clear line of sight to codifying many of these rights.

• 24:17Jason Calacanis?

  Yeah, but the question, that's not the question that Friedberg is asking. He's saying, do you think that they specifically did this to keep it as an open issue to raise money off it? I don't think that's believable.

• 24:28David Sacks?

  Oh, yeah, absolutely.

• 24:28Jason Calacanis?

  No way, no way.

• 24:29David Sacks?

  Absolutely.

• 24:30Jason Calacanis?

  If you want to talk about cynicism, Sax, the truly cynical move was, you know, Trump saying, I am going to get this evangelical vote to win the primaries, to get those 20% who want to take away the right for women to have an abortion, and I'm going to stack the Supreme Court to actually achieve that goal.

• 24:48David Sacks?

  No, no, hold on a second. Let's define terms.

• 24:50Jason Calacanis?

  That's the most cynical of all of this political stuff.

• 24:51David Sacks?

  Okay, let's define terms.

• 24:52Jason Calacanis?

  You want to go political and cynical.

• 24:53David Sacks?

  Hold on a second, hold on a second. Let's define terms. So you may be opposed to what Trump did, but that wasn't cynical. He stated what he was going to do when he ran for office, and then he did it. He lived up to his promise.

• 25:04Jason Calacanis?

  Yeah, but somebody who, he did not believe in that. He did not believe in that. He did it specifically to get those votes. We all know he didn't believe in it. We all know he believes in a woman's right to choose.

• 25:13Chamath Palihapitiya?

  Jason, he created a platform to get elected.

• 25:16Jason Calacanis?

  Yes, that's what I'm saying.

• 25:17Chamath Palihapitiya?

  And then when he was elected, he executed on that platform. I think what David Sacks is saying is Obama had a platform to get him elected, and when Obama had the choice, he chose to not execute on the platform. And that is also true. And all I'm just saying is, we owe it to ourselves to be intellectually honest about what happened. That is what happened, okay? Both of these two guys made claims, hold on one second.

• 25:39Jason Calacanis?

  Yeah, but cynicism is acting in your own self-interest.

• 25:43Chamath Palihapitiya?

  Okay, I understand, but Jason, please, I want this on the record. Both of these two guys made claims to become president. It turns out that Trump actually did execute on most of his claims, as abhorrent as they were to some.

• 25:54Jason Calacanis?

  Yeah.

• 25:55Chamath Palihapitiya?

  And Obama, on some of the most important issues of our time, did not.

• 25:58David Sacks?

  Look, what Trump did was just simple coalition politics. He thought it was important to win the religious right. He basically appealed to them. He said that if you vote for me, I will nominate these judges.

• 26:08Jason Calacanis?

  And then he represented their interests.

• 26:09David Sacks?

  He delivered, he delivered.

• 26:10Jason Calacanis?

  And he didn't believe in it himself, right? So that's what I'm talking about.

• 26:13David Sacks?

  It doesn't matter. At a certain point, it doesn't matter. That's not cynical.

• 26:16Jason Calacanis?

  It matters to me, I believe people should have, appreciate principles.

• 26:17David Sacks?

  Okay, look, you're objecting.

• 26:18Jason Calacanis?

  So I know it doesn't matter to you that he doesn't have principles, but it matters to me that people have principles.

• 26:21Chamath Palihapitiya?

  Okay, but Jason, what does it mean to have the principle of saying that he's going to pass and codify Roe v. Wade and not do it? What is that, then?

• 26:29Jason Calacanis?

  I think he, well, listen, I, I, the quote you gave doesn't give why he didn't do it. He didn't make it a priority. It could also, hold on, let me finish. It could also be that he believed that it would not get overturned, so he should spend his time on Obamacare and other things. I'm saying cynicism is when you believe one thing and then you do something to act in your own self-interest, and that's what I think, and that's what I think Trump did.

• 26:50David Sacks?

  Hold on a second, we don't need to go back all the way to the Obama administration, because the issue I'm talking about today is that in the past week, they had a vote codifying Obergefell on gay marriage and repealing DOMA, okay? So, now, listen, I actually think there were so many Republican votes in the House, even though I would have liked to have seen more, there were enough that this might shame Schumer into bringing up the vote, because it's going to be so obvious, if he doesn't, that he is doing this for a reason, right? Because they have the votes, they can pass this, just like they passed the gun bill a few weeks ago, right? Just like they passed the infrastructure bill. So if Schumer doesn't bring this up, it's a very cynical move.

• 27:29Jason Calacanis?

  You think it's strategically to have that as an issue to phrase funding? I, I, I get it.

• 27:34David Sacks?

  Of course, of course, and it's really proof, listen.

• 27:36Jason Calacanis?

  Do you think both sides are cynical?

• 27:38David Sacks?

  Of course, and both sides engage in politics, however, however, what I'm talking about is the type of cynicism. So, I think that there's a lot of issues on which the Democrats would rather appeal to the donor class, basically, that lives on the coast, New York, California, and be able to keep fundraising on that issue and basically scaremonger on that issue, instead of just winning the issue. They can just win this issue right now.

• 28:02David Friedberg?

  Kamala, do you have less interest in supporting the Democratic Party based on the principle you stated, that in the past, there have been kind of promises and capital raised against, you know, codifying Roe and then it not happening?

• 28:15Chamath Palihapitiya?

  Well, they never made those promises to me, so I never felt like they lied to me. I want to be very clear, so then, nobody, and I never asked for that to be a precondition of my donation. Again, my capital was focused on one thing, which is, I thought that President Trump was not the right person to lead this country, and I thought very clearly that the bright Democrat could do a much, much better job. And I am glad that Biden won, and I'm glad that the money that I put in, maybe in no, in any small way, but hopefully in some reasonable, non-trivial way, helped, and I'm glad that that money helped even out the Senate. I'm glad all of those things happened. And so I want to be clear, they've never made those kinds of promises to me, nor have I ever asked.

• 28:58Chamath Palihapitiya?

  I make a high level decision on who I think the best candidate should be, and support the party that will get that best candidate effective. What I was just trying to make clear to you guys is that sometimes, even a Democrat, it's important for us to be intellectually honest about what has happened. It's very easy to look at the other guy and find all the ways in which they screwed up, or tried to screw you, or, you know, is, is, you know, lacks empathy, or lacks sympathy, all of these things. It's much harder oftentimes to look at your own team and say, wait a minute, why didn't X, Y, and Z happen? And the reason I'm bringing up what happened in 2009 is I think David is right. We have a moment in time where the leadership of the Democratic Party

• 29:42Chamath Palihapitiya?

  can codify rights that should be codified.

• 29:46Jason Calacanis?

  And they should have. In hindsight, they should have done it. And just to be clear-

• 29:49Chamath Palihapitiya?

  No, no, no, no, it is still open. We can do it-

• 29:52Jason Calacanis?

  Well, I'm talking about Roe v. Wade. And yes, and for the, for the issue we're talking about now, it should be codified, absolutely. And just to be clear, I'm an independent. I would vote for a Republican who was socially progressive and fiscally conservative. As long as they're for gay marriage, as long as they're pro-women's right to choose, and they were fiscally conservative, I would vote for a Republican. I'm a moderate independent. I want to see less government and more efficient government, and I want people, I want the government out of people's personal lives. And I think that's where Sax and I are exactly the same. We both want, I mean Sax, do you want the government involved in people's personal lives? You're a classic Republican.

• 30:23David Friedberg?

  By the way, according to the Monmouth poll from a few weeks ago, you represent 4% of the voting base.

• 30:31Jason Calacanis?

  I do.

• 30:31David Friedberg?

  That's an extreme, yeah, that's an extreme minority, that the, the lowest self-identifying quadrant of fiscal conservative versus kind of fiscal liberal, social conservative, social liberal, is the fiscal conservative, social liberal.

• 30:45Jason Calacanis?

  What do we all hear? We're, I think we all fit this profile. Fiscally, we want the government to be run conservatively, you know, and with less government, and we want progressive social change, right? I mean, I think we all feel that way.

• 30:57David Friedberg?

  Don't put me in a quadrant.

• 30:58Jason Calacanis?

  Government out of people's personal-

• 30:59David Sacks?

  Well, I don't, I don't, I don't-

• 31:00Jason Calacanis?

  I'm just asking, I'm asking you guys if we're all insane.

• 31:02David Sacks?

  I wouldn't define my culture- Positions as progressive social change because the change that progressives are trying to argue right now is radical. What I favor is social tolerance. I think we need to be tolerant. I think we need to be a tolerant society. America is a very broad diverse country. We need to find ways to live together and find accommodation on issues that are very contentious. So that includes tolerance for gay marriage. So, look, I'm on board with that, but you know, this radical progressive agenda of social change, which includes upending the criminal justice system in favor of not prostitution. What's happening in the schools with CRT and the sort of hyper ideologized education. Look, they should just be teaching the basics.

• 31:44David Sacks?

  Reading, math, that kind of stuff. Yeah, exactly. And so on down the line.

• 31:48Jason Calacanis?

  Well, maybe progressive is the wrong term because that that now has been co-opted. Less government involved in your personal life and tolerance. I think we all agree on that and I think Tolerance is a great word. Everybody agrees with tolerance.

• 31:59David Friedberg?

  It's a privileged position to want to have less government involved in your life, right? I mean, many people in the United States have been able to thrive and survive because of the role that government has played in their lives and there's obviously on one end of the spectrum, extreme grift. And on the other end of the spectrum, extreme need that is being met by the wealthiest government in the world. And it is a, you know, it is in that middle where all of the

• 32:26Jason Calacanis?

  Where do you stand, Free Bird? How would you describe your politics in these two dynamics, right? Are you also in this 4%?

• 32:39Jason Calacanis?

  Free Bird?

• 32:40David Friedberg?

  Yeah, yeah, yeah. No, I'm here. Um, I'm trying to be thoughtful about this because

• 32:45Jason Calacanis?

  Yeah, no, I think it's the idea, yeah.

• 32:47David Friedberg?

  I think that the government's role is to support those in need, not those in want. And I think that the government should be held accountable for performing that role. And I think that those of us who can, that are sitting in privileged positions and seats, should enable the government to perform that role well. And we should be positive.

• 33:09David Friedberg?

  Actors, meaning we should support, we should pay taxes, and we should help people and institutions in need and that are, you know, kind of for the greater good. And then we should be holding ourselves, our government, and our politicians to account for inefficiencies. And the biggest concern I have is less about are the people in need, needs being met as much as are we holding our government to account for the performance of its services and duties to the American people?

• 33:36Jason Calacanis?

  I really like this want, I like this want need concept here. Can you give an example of where the government, like, people need something, but then there's another group that wants something, and maybe we're overstretching and, you know, giving into wants when we should be focused on needs and efficiency?

• 33:52David Friedberg?

  Yeah, I'll give you a pretty, um, example I know reasonably well, which is the Farm Bill passes every four years. And the Farm Bill, in order to get it passed in both the House and the Senate, it has components that serve both farmers and support the Food Stamp Program. So the Food Stamp Program obviously supports millions of Americans that are in need of food, can't afford food. They get EBT cards, they get support in buying food, and there's a lot of programs and access that are enabled by that program. But in order, but that mostly services the needs of urban areas, of cities. So it passes, that, that, that element of the bill is attractive and appealing to the representatives of cities found in the House. On the other side, in order to get it passed in the Senate,

• 34:35David Friedberg?

  where the majority of senators come from rural states, which are, have significant farming populations, the farming subsidies are planted in that same bill. And as a result, because everyone's getting something, that bill as a whole has now grown to a multi-hundred-billion-dollar bill that gets passed every few years. Because in order for the Senate to pass it, the House says, "Okay, we'll give you all these farm subsidies." In order for the House to pass it, the Senate says, well, sorry, and vice versa, right? "We'll give you all these food stamps." But, but both of them now have incredible, what do they call it? Pork or fat or whatever?

• 35:08Jason Calacanis?

  Yeah.

• 35:08David Friedberg?

  The amount of money that's wasted that isn't actually servicing the original intention and need of either of the parties that are represented by that bill is extraordinary. And I've spent a lot of time in the Farm Bill. I actually went with lobbyists years ago to DC, and I actually met with the Senate and House ad committees. I've gone very deep into the bill and some of the programs in that bill. And it's just shocking to me, in the same way that Palmer Lucky shared in our All In Summit, how shocking it is, how defense spending works in this country. It's shocking to me how some of the... The programs work in the farm bill. How much money and how much waste there is and how much grift there is. And so, yes, we are meeting the needs of populations in need in this country. But so much more of the bill now is about people wanting more in order to pass the bill. And it's bloated. And who's going to come in and fix it?

• 35:53David Friedberg?

  Because where's the incentive for anyone to come in and cut that bill up? Where's the incentive to fix it?

• 35:57Jason Calacanis?

  If both sides are barbelling the grift, then there's no incentive. They're in a dance to maximize the grift. So Chamath, where do you stand now? If we were to sort of look at politics without the Biden and Trump derangement syndrome, without the tribalism, just in terms of first principles? I think what we're seeing here is we all want to see radical competence in the government, social issues, and fiscally, how we run the country. Where do you stand? How would you describe yourself now?

• 36:26Chamath Palihapitiya?

  Look, I mean, I think of things in terms of risk.

• 36:31Chamath Palihapitiya?

  Here's what I see. I see that there are a handful of issues that remain in terms of social policy that just need to get codified.

• 36:47Chamath Palihapitiya?

  Gay marriage is an example of one. Abortion rights is an example of the other. Then, and I think like those are like really, to my perspective, speak about human individual liberty, which I think should trump everything. So, everybody should be allowed to kind of pursue the best version of themselves. However that manifests in the person you marry to, in the gender you express, not, these are like things where what you do to be happy, you should be allowed to do. Period, end of story. Then there are issues where I think are much thornier. And as I get older, I become increasingly ambivalent, or confused, actually, is a better word.

• 37:33Chamath Palihapitiya?

  And gun control is a perfect example of that. Where I don't know what my right is to go and adjudicate a change to the constitution that's been there since the founding of this country. That's a much more complicated issue. And so I think we have to basically devolve that right to the states, where individual states will have very different laws. And part of how you choose to express where you live will be defined by some of those rules. So that's the social side. Extreme tolerance is really how I would sum it up.

• 38:06Chamath Palihapitiya?

  Economically, so, but, but I think that the risk to America

• 38:12Chamath Palihapitiya?

  imploding, quote unquote, because of an issue in that surface area, in my opinion, is extremely limited. If I look on the economic lens, however, I think there are enormous risks to American leadership and exceptionalism. And we need a wholesale reset of how we create incentives, of how government should work, of how regulatory capture should work, of how the capital markets work. These rules are way too perverted. And it's creating enormous stress in a system.

• 38:49Chamath Palihapitiya?

  And again, I go back to the example I used last episode.

• 38:54Chamath Palihapitiya?

  The thing that if you look, for example, like, you know, in that example of Sri Lanka, Singapore, Jamaica, and how there were these three completely different outcomes. Underneath, the most successful outcome was an incredibly clear, transparent, and simple financial framework.

• 39:12Chamath Palihapitiya?

  You cannot spend more than you have. You need to invest in long-term programs like education and healthcare. You need to make them broadly available. And then you need to have an absolute free market that gets the best ideas to the top of the funnel.

• 39:27Chamath Palihapitiya?

  And if you can just incorporate those things, the tax law could be four pages, you know? The, the, the number of regulations could be 50 pages. You know, the simple rule that says to the Federal Reserve, "You can't just print free money ad hoc." So I'm, I'm much more concerned about the fiscal future of America. Got it. I, I think that there's so much movement and progress on the social side, including the freedom of movement of people to different states. It, it is an important set of issues, but in terms of what drives the outcome and future success for our kids and our kids' kids, people should not sleep on the economy, because if we get this wrong, that will be the tinderbox that lights everything on fire.

• 40:13Jason Calacanis?

  Sacks, when you hear, you know, everybody sort of explain their basic belief system, how far apart do you think we all are on this podcast? Because I think that's been an issue we see a lot of the fans discussing, you and I discussing. It feels like on most of these issues, and I think that's people ask me how I'm friends with you all the time, and I'm sure you get that question as well.

• 40:33Jason Calacanis?

  Yeah, and I love you like a brother, and I know I love Sacks like a brother, and anytime we talk about basic issues, we're very much in sync, and then when we talk about politics, it feels like we're super, you know, you know, opposed, you know, and in opposition to each other. When you hear that we all have essentially the same stack of fundamental beliefs, how do you interpret this in terms of politics and America writ large, and how do we get consensus in this country to be more effective in running the country for the citizens?

• 41:04David Sacks?

  I think the media drives a lot of polarization, right? Because they're feeding us a bunch of bogus narratives. You look at the polling around the trust in the traditional media has absolutely plummeted through the floor. I mean, they basically have, instead of just reporting objectively the facts, they, I think the audience has recognized that they are activists, they are basically pushing an agenda, and they're pushing a bunch of bogus narratives, and I think it does drive the polarization. So that's part of it. To go back to, you know, what are the core issues that motivate me and like who I support? Look, I think we could probably agree on a lot of stuff. I want us to pursue more of an internationally cautious, you know, agenda, less interventionist, because it really hasn't worked out for us very well over the last 20 years with all these wars that failed.

• 41:49David Sacks?

  I want us to be fiscally responsible and promote a healthy economy, to what Jamal said, and then third, I'd like us to be socially tolerant. Now, why does that lead me in this current environment to support Republicans? Well, on international, on sort of foreign policy, neither party is really very good. Both parties are sort of pushing some version of Bush doctrine light, where we're basically over-involving ourselves in all these countries all over the world. But the Republicans at least have a faction that's in favor of realism and restraint. So I'm trying to help kind of push that direction within the party. The Democrats just are still very much in this liberal interventionist mode.

• 42:29David Sacks?

  On fiscal issues, both parties are guilty of overspending and creating this ruinous federal debt and deficits that we have. However, There's no way to avoid the fact that the Democrats are just worse. I mean Biden wanted an extra four trillion of spending on this whole Build Back Better on top of the four trillion he had. So listen, I know the Republicans don't have clean hands on this issue, but the progressives are just worse. As long as the progressives are calling the shots, the Democratic Party, they're just worse on spending. And then you got social tolerance. Listen, on the issues, on these sort of key rights issues that have been the kind of the old social issue the last 50 years, by and large, not on all these things, by and large, I'm with you guys, that I'm in favor of sort of the socially tolerant

• 43:13David Sacks?

  position. But look at who is pushing social intolerance today. I mean, the progressives are the most intolerant group in America. They're the ones pushing cancel culture. They're the ones trying to shove their positions down the throats of ordinary Americans. This is what's creating the backlash. You look at issues today like CRT, like the progressive approach on crime, on borders, the progressives are trying to promote, I think, a social policy that is fundamentally intolerant and doesn't accord any respect or room for traditional Americans to live their lives the way they want to. And you have to be tolerant of them as well. We're not going to have peace in our society without some tolerance of traditionalists.

• 43:51Chamath Palihapitiya?

  Okay, let's wrap on this, Chamath, and then move to China. I sent you guys a, this is a quote by Mike Solana, a tweet from Mike Solana. The caption is, I've been wondering how they were going to spin this. And this builds exactly on what David just said here. When the Quinnipiac poll came out and about approve, disapprove, about President Biden, you know, the big outlier was the Hispanic population. 19% approve, 70% disapprove. And the article in the Washington Post, which tries to kind of, sort of like, clean this all up and whitewash it, says fake news speaks many languages,

• 44:33Chamath Palihapitiya?

  but it's particularly fond of Spanish. Essentially saying that, you know, the fake news problem in the Spanish language has basically gotten so bad that, you know, this sort of explains why Hispanics have moved in droves. And it's like a whole race-baiting, cheap-shot article. But the point of all of this is just to show that the left, this is what really does kind of bum me out. They are, they are probably more intolerant than they've ever been.

• 45:03Jason Calacanis?

  There's an intellectual dishonesty. Like if Rachel Maddow really wanted to increase her standing and position, she would just start the next program with Nancy Pelosi's trades and say, listen, we all know, let's call this what it is. It's not cool. And here's how it should change.

• 45:17Chamath Palihapitiya?

  She'll never do it.

• 45:18Jason Calacanis?

  I know. And I think that's the disappointing part about all this. Okay, so let's shift now. I think we.

• 45:22David Sacks?

  Well, just, just, what can I say? One final thing about this whole thing that we can move on is, I think, I think if you are sort of purple and centrist, I think the first two years of the Biden administration were really a missed opportunity because I think there's sort of this conventional wisdom that the parties are so polarized, they can't get anything done. I think we saw actually, there's enough Republican votes, or there were in the, in the previous Congress, this, this current Congress, they got the infrastructure bill done, they got the gun bill done, you know, with the red flag laws and so forth that we talked about. They can get codification of gay marriage done if they want to. They could have gotten the Electoral Count Act reform. So if Biden hadn't gone all the way with his progressive voting rights agenda and just focused on reforming the Electoral

• 46:05David Sacks?

  Count Act, then you could have prevented a situation like we had on January 6th, that, that what was happening inside the Capitol, not outside. So there was a lot of stuff they could have passed and they didn't. Why? Because the, in the, in the first half of his administration, Biden's been completely captive to the progressives. There's another thing as well. You could get a child tax credit passed. You could get Romney would basically be the floor leader on that in the Senate. They could pass a child tax credit. That's the most popular part of BBB. Why don't they peel that off and vote on it?

• 46:38Jason Calacanis?

  Yeah, because they went for the whole thing.

• 46:39David Sacks?

  That's right. The progressives are holding it hostage, saying that we're not going to give that to you unless you do the whole enchilada. And of course, there's no votes for that. So I think there's, and, and, and so who ultimately is the culprit for allowing the staff and well, partly Biden, but also Ron Klain, the chief of staff. I mean, they've made a, instead of triangulating to the center, they should have realized, hey, we're a 50 50 president, right? I mean, we have a 50 50 Senate, we should be triangulating, we should be building a centrist coalition. Ron Klain has been letting the progressives ride the train.

• 47:08Jason Calacanis?

  Biden had a clear path to go right to the center, pull everybody in, pull the working class in. That's been his supporting base, his working class. And so he is. And he blew it by going too far to the left. If he wants to save this presidency, he should go straight to the middle and get all the working class behind him.

• 47:25Chamath Palihapitiya?

  Biden isn't the guy that went to some elite. You know, uh, east coast liberal art school where he got a masters in, you know, fine arts and his 400,000 in debt. That's not Joe Biden, but he's let all these people run over the White House.

• 47:43David Sacks?

  And it's too late now because I think what's gonna happen is that, well, the Republicans are gonna win the House.

• 47:48Chamath Palihapitiya?

  How much time, how much time did we spend talking about canceling student debt for who?

• 47:53Jason Calacanis?

  Yeah, no, for a bunch of elite, uh, people with graduate degrees from, yeah, it's a league, even listen, there's crypters on both sides. It's disgusting and we need to get to a version of politics that maybe is more like our conversations here. But let's, let's pivot to another society that we thought was gonna roll over ours, but, um, and that we were in, uh, we were behind on in terms of competition. China's in chaos right now, apparently, um, in terms of slowing economic growth, bank protests, mortgage protests, exactly what I predicted last year when you guys were talking about China was gonna dunk on us. And I said, you know, it's very hard to run these authoritarian countries and, uh, the citizens like to protest when they get the short end of the, uh, the stick. And here we go.

• 48:36Jason Calacanis?

  Chinese economy is, is growing very slowly. They were gonna do five and a half percent this year. They were only 0.4% in Q2. Covid has a lot to do with this, but there's been a series of bank protests and, uh, the media has been trying to figure out exactly what's going on here. To just set the stage here, rural banks in China, uh, in a couple of provinces froze a bunch of people's, uh, withdrawals in April. Okay. Sounds like the crypto, uh, contagion in many ways. They had been offering unusually high interest rates, also sounding like the DeFi, uh, grift going on here.

• 49:07David Sacks?

  No, no, I think it's, I think it's more like 2008, Jason. I think the financial, I think it's more like the financial crisis in 2008 that was driven by the real estate bubble.

• 49:14Jason Calacanis?

  Yes.

• 49:14David Sacks?

  They've got their own real estate bubble, which is collapsing there.

• 49:17Jason Calacanis?

  Correct. And so there's, there's multiple things going on at once. The authorities haven't said how much money is frozen. Uh, protesters claim it's billions of, uh, won, but it's hundreds of millions in the U.S. After weeks without a resolution, customers have been, began protesting. Plainclothes thugs have been hitting and kicking the protesters. And as of Wednesday, a video went viral of the CCP bringing in tanks to protect the banks. Very, uh, evocative of Tiananmen Square.

• 49:45Chamath Palihapitiya?

  Take off. I have a question.

• 49:47Jason Calacanis?

  So, go ahead. Yep.

• 49:48Chamath Palihapitiya?

  So China has a very explicit zero tolerance policy on Covid. Why do you guys think? They are so extreme in that policy. Like, any, any ideas? Like, have they explained why it has to be zero tolerance?

• 50:05Jason Calacanis?

  They have not explained that. And if you believe that they're the origin of COVID, maybe they have some insider information about long haul COVID. And that was something I want to talk to Friedberg about if he thinks this, you know, long-term COVID stuff is a really acute issue. But Friedberg, what do you think?

• 50:22David Friedberg?

  Yeah, I don't, let me, I don't want to answer that question.

• 50:26David Sacks?

  Can I answer that if you don't want to?

• 50:28David Friedberg?

  Yeah, go ahead.

• 50:28David Sacks?

  Listen, I, I think the answer is very simple.

• 50:30Jason Calacanis?

  But I do want to talk about the Chinese economy.

• 50:33David Sacks?

  Oh, yeah, yeah.

• 50:34Jason Calacanis?

  We got two more parts to turn over to. Yeah, this is a complex issue.

• 50:37David Sacks?

  There's a lot more going on there. So on, on zero COVID, I think this is coming directly from Xi. This is his policy. And I think that earlier in the pandemic, they were hailing their response, which they saw as orderly and effective at controlling COVID. And they were contrasting that with a chaotic Western response. And so I think that the credibility of the CCP and Xi himself got tied up in this idea of stopping COVID entirely of zero COVID. And so I think this is coming directly from the top, and it's having a huge impact on their economy. And I think this is one of the dangerous aspects of a autocratic system is you got one guy at the top making the decisions. And if he's wrong, there's not really a great feedback.

• 51:22Jason Calacanis?

  And nobody can question him. Yeah.

• 51:23David Sacks?

  Yeah, exactly.

• 51:24Jason Calacanis?

  There's no questioning the god king. Yeah.

• 51:26David Sacks?

  You know, it sort of recalls a situation in China. I think this is about 500 years ago. There was a Chinese emperor who banned shipbuilding and banning having a navy. And because of that, China shut itself off from global trade, and it fell well behind the West, which then explored and captured the new world. There's this question about, you know, the Chinese, Chinese culture and civilization was much more advanced than the West, than Europe 1,000 years ago. But basically, it fell behind. And a big reason is because this unilateral decision by one emperor to basically close themselves off from the rest of the world. So you have to wonder, does this autocratic move by Xi basically doom their economy to a recession? It seems like they're not learning. From our experience,

• 52:09David Sacks?

  these lockdowns didn't work. I mean, you can't stop the virus. It's eventually going to get out. Even I saw Biden. Got the virus this week. I mean, it's out, right?

• 52:18Jason Calacanis?

  It's out, of course. Everybody's gonna get it is basically what's happening.

• 52:21David Sacks?

  You've been making a bunch of heavy-handed decisions like this. So you had, besides lockdowns, it was, it's also the crackdowns. It's the crackdown on the tech industry.

• 52:29Jason Calacanis?

  Yeah, the venture funding has plummeted. And so has, so LPs are no longer investing in funds there, with the exception of Sequoias, which seems to be struggling, but is still able to raise some money. And then additionally, founders can't raise money. And founders are questioning when they meet with VCs, if they can actually, if the VCs are just meeting with them theatrically. The story that came out this week in the FT. If they're just meeting with them theatrically, because they want to still hold out hope that there'll be a venture capital industry, but there may not be a VC industry in China anymore. Let me just give you the housing stuff. And then Friedberg, I know you want to chime in on this. So there's also mortgage boycotts happening at the same time as this fugazi bank stuff happened. The bank stuff seems to be not the national banks.

• 53:14Jason Calacanis?

  These are local banks that apparently could have been running some kind of grift where people deposited the money and they ran away with it.

• 53:20David Friedberg?

  It looks a lot like the savings and loan kind of behavior in the 90s in the US.

• 53:25Jason Calacanis?

  And these are regional banks, to be clear. This isn't the national banks. And so at the same time, the mortgage boycotts are happening in three, at 301 unfinished developments in 91 cities. Homeowners are accusing developers of failing to deliver the apartments they've already paid for. According to Bloomberg, 70% of household wealth in China is tied up in property, much higher than the US.

• 53:42David Sacks?

  This is downstream of the whole Evergrande thing, right? You got Evergrande, Evergrande basically defaulted. And there were a whole bunch of people who prepaid for their homes. And so they're already paying mortgage, but Evergrande never finished the homes. And now they're rising up because they're saying, why should we pay for a home that was never delivered?

• 53:57David Friedberg?

  Right. I just want to like take a zoom out because I think it's worth, you know, we can focus on any one of these particular things that are happening and try and diagnose them and dissect them. But if you zoom out a little bit, I think it paints a more interesting picture. Over the last 30 years, right? The Chinese economy grew from 318 billion to, in 1990, to 10 and a half trillion in 2020, right? Incredible growth, GDP per capita.

• 54:24David Friedberg?

  You know, grew kind of in a similar ratio, right? Now, from 318 bucks per person to $12,500 in 30 years. I mean, really unprecedented in the history of humanity. China now accounts for 20% of global GDP from less than 2% in 1990. Now, if you look at historically what drove that growth, we all talk about manufacturing, right? Manufacturing accounts for about a third of the economy. And manufacturing as a sector was growing in China 25% year over year in 2008, and then only grew 6% in 2022. It's like, basically, you know, kind of reaching an all-time low in recent years. So that's historically been the driver for growth of this economy. And so much of the, you know, the bargain between the people and the Chinese Communist

• 55:09David Friedberg?

  Party has been, keep giving us a better life, keep growing our economy, keep giving us more housing, more stuff, more food, more safety, more security, we'll support the CCP. And the challenge that the CCP is having is that a lot of that growth, the core growth engine, is starting to slow. So manufacturing is slowing, then real estate was growing. And so, real estate accounts for 7% of the Chinese economy. And I've got a good stat for you guys here. In 2005, 250 million square meters of real estate was sold in China. In 2021, 1.5 billion was sold. Every year, it's been incrementing. So the amount of real estate that's being produced and sold was increasing like crazy. This year, it's collapsed. So it's all, it's down like, you know, forecast to be about 1.25 billion now.

• 55:53David Friedberg?

  So the first decline in real estate building and sales. So that part of the driver of the economy in China is now collapsing. And then the financial services sector accounts for 8% of the economy. And that's been growing because it's leveraged off manufacturing and real estate and all the capital that's flown in, all of which is slowing down and stopping. You know, there's $58 trillion of assets in China, generating about $700 billion of annual profits for the financial services industry, insurance, banking, lending, and so on. So a lot of the conflict and the things that are starting to fall apart, which may just be the tip of the iceberg, is a function of a fundamentally slowing economy and the forecast and the outlook for an economy that doesn't have the drivers it had historically. And things are starting to come off, the wheels are starting to come off a bit.

• 56:38David Friedberg?

  And so, you know, look, the advantage they have is central planning, long-term investments, being able to kind of be thoughtful about this. But in order to do that, there's certainly going to be a need for the CCP to keep people in line, as some of the long-term bets hopefully play out for them, as they would say. In order to do that, they're going to have lockdowns and other sorts of mechanisms of regulatory control over the people. But really, this could be the beginning of some of the unwinding and real concern about, you know, is there a core economic growth engine in China that can save them? And what will it be?

• 57:10Jason Calacanis?

  I think all of this, if we look at what's happening in the economy writ large, Chamath, you know, the global slowdown plus inflation is now causing a stress test on every country. Sri Lanka's stress test, you know, showed us what's happening with their farming issues and with corruption. And here in China, the stress test, I think you would agree, is showing what's going on in terms of, you know, banking, mortgages, real estate, and obviously this surging middle class and what their expectations of life are. So what's your take on what's happening in China? And are they, you know, how does this add up in terms of our rivalry with them as our contemporary?

• 57:50Chamath Palihapitiya?

  At a very macro level, China has one massive, massive, massive problem, which is one of population. It's hard to get an accurate count, but it is an aggressively aging population, which was the result of the one child, the one child policy for a very long time. China has sort of been on their heels trying to adapt that policy. But really, the last data I saw, I tweeted this out, it was a little while ago, Nick, so maybe hard for you to find in my Twitter feed, but it was a projection of China's population, which essentially showed it contracting by almost 50% by 2100. So, and

• 58:31Chamath Palihapitiya?

  then, so that's a really, really bad situation. Now, when you have a slowing population, then the economy has to morph. Why is that? When you have a young population, so for example, take what China was 20 years ago when it entered the WTO, or what India is today, when you have lots of thoughts of young people, you can on-ramp them into economically productive activities like manufacturing. The problem when those folks accumulate middle-class income and wealth is that they age out of those kinds of jobs, like they did in America. And what we seek are services and service-level jobs. And you spend more money, you spend it in a different way.

• 59:14Chamath Palihapitiya?

  So as populations age, your economy has to turn over, unless you have a large bulwark of young people that is constantly growing to take up more of the slack, the economic slack, to pay for these folks who have different lifestyles, more savings, and different needs, specifically healthcare. That's China's enormously big problem. So when you see them talking about 6% GDP targets, and you think, "How does a country that big even grow at 6%?" It's because they're reverse-engineering for what they need to create economic vibrancy in that country. And so when you start to look at 2%, which in America you'd say, "2% is great!

• 59:56Chamath Palihapitiya?

  We would like high-fiving each other for 2%." That's not a sustainable level of growth for what's happening inside that country. It does not create enough of expansion economically to cover all these folks. That is a really, really big issue. So as that happens, I think what we need to do is figure out how to be competitive. Now, this goes all the way back to our first conversation. Subsidies don't make us more competitive. Things that governments can do to make us more competitive are long-term, drawn-out tax incentives that change the earnings capacity of companies. Why? Because in the capital markets, reward those businesses. Jason, you just mentioned it.

• 1:00:40Chamath Palihapitiya?

  Why is the Chinese capital markets in difficulty?

• 1:00:44Chamath Palihapitiya?

  Nobody knows what the long-term earnings are. How do you forecast it? It's not simple anymore. It's not a model. It's not an interest rate. It's not a discounted set of cash flows. Right? And so that's how they need to refactor themselves. They need to have a much larger population. If you don't have that, you have to figure out how to do it with immigration. If you don't have that, what China has done is they've tried to go to Southeast Asia and to Africa. And they've tried to create that synthetic form of a growing pyramid. Right? Now, that can work as long as the balance sheet of the country supports that because ultimately you're still talking about moving money offshore. Okay? So I think they're in a little bit of a, they're, they're in a pretty difficult spot.

• 1:01:29Jason Calacanis?

  The most difficult spot is the one they, that she put them in. If you get rid of entrepreneurship, if you get rid of high-growth companies that create the opportunity on a global scale and then you, you know, take DD off the public markets, you don't let education companies become public or you, you basically get rid of their little co-opting of capitalism and venture capital, their whole, their whole society is going to become slow growth. And slow growth in a country that doesn't have safety nets is really dangerous. Sax, your thoughts in terms of competition versus America?

• 1:02:00David Sacks?

  Yeah, okay. Let me get to the, the competition in a second, just to build on what Chumma said. The, the birth rate or the fertility rate in China slipped to just 1.15 in 2021. So last year. It takes 2.1 just to maintain your population or replacement level. So, and this is lower than even Japan, which is also shrinking as a, Japan's at about 1.3. The US and Australia are at 1.6, but we get above 2.1 because of immigration and China doesn't have that. So they've got a huge demographic problem, to Chumma's point. It's going to be something like, well, the population is shrinking by 40% with every generation. That's what these numbers imply.

• 1:02:38Chamath Palihapitiya?

  Insane.

• 1:02:39David Sacks?

  The numbers are, it's going to be under 600 million by the year 2100, but I would, I don't understand how it wouldn't even be less than that if it keeps going at this rate. So there, and the, the commentator, Peter Zihan has, or I don't know if that's the right way to pronounce his name, Peter Zihan or something. Anyway, he's pointed out that China is facing demographic collapse in the next decade or so. On top of that, like you're saying, Jason, that you've got Xi emphasizing Maoist economics. He basically says he, he thinks that the Chinese economy, again, he stresses the need for Socialist characteristics and he seems to be bringing back that sort of communist ideology to their economy and they've basically really cracked down on entrepreneurship and venture capital.

• 1:03:24David Sacks?

  It's really a self-owned, I mean, they've moved away from the policies that have made them so successful economically over the last 40 years. And then on top of that, you've got this debt crisis and this housing crisis. So it really looks like the deck is stacked against all of them and you're asking, what does this mean for us? Well, I think it depends on whether you look at it economically or geopolitically. I think if you look at it economically, you'd say that it's bad for us because our two economies are economically linked, there's a lot of dependency, they've evolved together for a long period of time. And if China has a collapse, then that, they're so big now that that's going to have, I think, global repercussions. There's going to be contagion. But the truth is, if you look at it geopolitically, and geopolitics is more of a, the balance

• 1:04:08David Sacks?

  of power is a zero-sum game. Economics can be a positive-sum game, but, but the balance of power is definitely not a positive-sum game. You'd have to say it's good for us because the reason why China has become such a threat is because of its growing economy over the last 40 years.

• 1:04:23Jason Calacanis?

  Yep.

• 1:04:24David Sacks?

  And look, I mean, what they've done and what they've been doing over the last decade or so is translating their economic might into military might. And that has given them the capability to now threaten their neighbors, to become more belligerent, to basically rattle the saber against Taiwan. And if their growth, if their impressive economic growth continues for the next couple of decades as it has until now, there's no question that they will, they will basically try to assert their hegemony over East Asia. And Taiwan will be a huge flashpoint, but there's also flashpoints in the East China Sea with Japan over the.

• 1:05:02Jason Calacanis?

  But they're going to need a bankroll to do that. So if they don't, if their economy's not growing, they don't have the bankroll to do it, they're going to have to look inward and say, hey, we've got to fix these domestic problems, we've got to get people to stop protesting in the streets. We need to, this middle class is demanding of jobs. The great news for what's happened in China, and I think this is why the people there are very happy, is the number of people. People living in poverty has plummeted. You know, when they started tracking this data in the eighties, you know, high ninety percent of people were living in extreme poverty or poverty. Ninety-nine percent of people were in poverty on the on the global definition of it. And now, you know, it's just plummeted to, you know, a couple of hundred million people. So a couple of charts for you here, but just and the data is obviously it's very hard to understand what's going in China because a lot of it is opaque.

• 1:05:46Jason Calacanis?

  But just the number of people on a percentage basis living in poverty has gone. And now the number of people who are in the middle class has surged. That creates another dynamic. Those people want to have a great life. They want better jobs. They don't want to work in factories. They want to have a more information based economy and a better job than sixty hours a week in a factory. That's why they're moving their factories to Africa and other places.

• 1:06:07David Friedberg?

  I mean, I don't know if that's absolutely true. I think that China's manufacturing sector is is aiming to evolve. So, you know, China has about three million factories or manufacturing facilities throughout the country, employing about one hundred and twelve million people. The U.S. has about three hundred thousand factories employing about twelve and a half million people. The output of our factories is about seventy percent of the output of of China's factories in aggregate, sorry, the total production output of all the factories. So we have very high value outputs coming out of our factories and high leverage.

• 1:06:50David Friedberg?

  China is observing and obviously recognizes that there's an opportunity probably to evolve their manufacturing capacity to be higher leverage, higher value output. And so there is going to be, you know, from the long range perspective, planning and investment in technology that allows those factories to become much more sophisticated and create much more higher value products, moving up from what is effectively just cheap labor, putting things together in an assembly plant, to being things like additive manufacturing, three D printing, automated manufacturing, bio manufacturing, et cetera. And I think this is particularly going to be realized because China announced that they're building four hundred nuclear power plants.

• 1:07:33David Friedberg?

  That drops the cost of electricity to under five cents a kilowatt hour. In the US, manufacturing electricity typically costs around 11 cents per kilowatt hour, 12 cents per kilowatt hour, in that range. So if factories become much more automated, they start to become a function of the price of electricity in terms of what they can output. China's going to have a huge advantage as these nuclear power plants come online over the next couple of decades and these facilities get upgraded. So there is a plan, right? Remember, this is just like-

• 1:08:02Jason Calacanis?

  They do have a plan, and the reason they have that plan-

• 1:08:04David Friedberg?

  And there is a question of, do they get there fast enough to drive economic growth that actually supports all these other industries like real estate and finance that they've become critically dependent on? Because those industries only work if there's a core economic driver, a core economic engine that's working here. So this energy infrastructure, this new manufacturing infrastructure, these are things that, by the way, they can do really effectively because they're not working on four-year and six-year political cycles. They can take a five, 10, and 30-year outlook and make a plan and invest against it. It's what they did from night to day. So I wouldn't count them out, but there's certainly a lot of challenges they're facing right now. It's a big question mark right now, what's going to happen?

• 1:08:44Jason Calacanis?

  Well, and to your point, factories in China are, you know, factory workers getting paid over six bucks an hour now. In Vietnam, three. In India, even less. And that's why you're seeing a lot of folks, I don't know if you're seeing it in your portfolios, but we've seen a lot of folks looking at India, Vietnam, and moving factories there. And obviously, Japan has been incentivizing people to move out of there.

• 1:09:06David Friedberg?

  China's not going to just lose their manufacturing edge. They're not just going to say, hey, we give up, let everyone go to Vietnam. They're going to try and upgrade the capability of those factories and say, hey, instead of just putting together, you know, parts with $6 an hour of human labor, let's start to do the more sophisticated stuff.

• 1:09:20Jason Calacanis?

  So then, free bird, the next card that turns is, well, what happens to those factory workers if they've been automated out? What do you do with hundreds of millions of people working in factories who now have been turned into robots? And then, if they're going to be in an, the answer is information economy. If it's going to be an information economy, you need venture capital and you need new companies to create those jobs, and they just killed that. So I don't know what strategy she is pursuing here, but it seems like a bad one.

• 1:09:43David Friedberg?

  We could talk about this one at length, but we were going to bring this up, but, you know, generally speaking, technology drives productivity gains, but it's deflationary.

• 1:09:53Jason Calacanis?

  Explain what that means in like a practical sense, maybe, you know, that the technology.

• 1:09:59David Friedberg?

  So let's say, let's say that you have to pay a bunch of people to make a T-shirt, and then a machine is built that makes the T-shirt. The cost of the T-shirt goes down, because one machine can just print out 100 T-shirts an hour, whereas it would take five people, you know, 10 hours to make those 100 T-shirts, or whatever it is, right? So a technology kind of emerges, and those people are now theoretically out of jobs. But what ends up happening is those people transition into new jobs that didn't exist before, and we end up seeing higher-order work take place. Think about the world 200 years ago. Do you think we would have had any concept of people being Uber drivers, or people, you know, creating crafts and selling them on Etsy?

• 1:10:40Jason Calacanis?

  Youtubers, content creators.

• 1:10:42David Friedberg?

  Or people being yoga teachers, or yoga, or yeah, yoga teachers, or psychotherapists?

• 1:10:47Jason Calacanis?

  OnlyFans.

• 1:10:48David Friedberg?

  Or dog walkers, or all of these, these service businesses, or, you know, industries that simply did not exist before. And so the labor that those, that that percentage of the population was involved in historically has gone away, because it's been automated. As that automation has happened, it's allowed higher-order services, jobs to emerge, and that will be the progression of humanity forever. I will tell you guys, I was gonna mention this, have you guys played with Dolly 2?

• 1:11:18Jason Calacanis?

  Yeah.

• 1:11:18David Friedberg?

  The other day?

• 1:11:19Jason Calacanis?

  Yeah, sure.

• 1:11:20David Friedberg?

  I got the login, my brother-in-law was visiting, we were playing with Dolly 2, and making funny kind of photo things.

• 1:11:25Jason Calacanis?

  Explain what it is, yep.

• 1:11:26David Friedberg?

  So Dolly 2 is developed by OpenAI. We all know Sam Altman, he's been leading that organization to great effect over the last couple of years. And what they're doing is, they basically scan the web for images, tag them, and then apply, you know, machine learning to, you know, to basically allow natural language creation of images from scratch. So the AI can generate an image. And you can go to, you know, the internet and look at a bunch of these, but the imagery is incredible. I mean, the creative output, what feels like creative output from the system, where you just say, hey, you know, Make me an image of four guys doing a podcast on Zoom in the style of Van Gogh.

• 1:12:08David Friedberg?

  And it creates this image that is unique, has never been created or seen on Earth before. And is a function of the, um, the learning that's been done in these neural networks. To, to develop this AI that can, that can create novel stuff is really amazing. And I started to think about like, what are the implications for this over time? Think about, you know, the original movie Ben Hur in today's dollars would have cost a billion dollars to make. They had thousands of people, I think tens of thousands of people on that set. It took years to make, they built giant sets, they could only, you know, make one film. It was an incredible feat and an effort. That's what movie making is, you know, um, still today, there's, there's teams of people. Now, what if you could speak to the AI and say, make photorealistic, you know, Jason and Chamath having a, a battle on a field in the middle of nowhere.

• 1:12:53David Friedberg?

  And now an airplane flies over and you can instruct the AI and the AI can generate photorealistic visuals. Audio, the AI can even generate scripts and narrative for you. Um, it's really starts to change the role of the creator, the director. The director is no longer doing this thing where they have to get it just right. Make the perfect 90 minutes and then line up all the money and all the people to do that work on that plan, on that program. They can be much more iterative and they can be much more creative on the fly. They can create a two hour movie by speaking to the AI and then edit the movie by speaking to the AI. Change the actors, change the color, change the voices, change the music, just speaking to AI to generate creative output. And people will consume that output. And I think it's amazing to think about what creators will end up doing 10 years from now.

• 1:13:37David Friedberg?

  As AI and these tools proliferate and you see version 12 of this, which is version two. And what version 12 might enable. And so the role, um, the number of people that can do that job goes from Steven Spielberg and Bob Zemeckis and a few other people to suddenly thousands or tens of thousands of people around the world. Making incredible movies.

• 1:13:55Jason Calacanis?

  Well, here's Dolly's image, uh, let's pull it up of four guys doing a podcast. So I, we have a ways to go, but, uh, yeah, that is four guys doing a podcast.

• 1:14:04David Friedberg?

  That's awesome.

• 1:14:05Jason Calacanis?

  Yeah, that's awesome. I mean, and to your point, like, you know, this is gonna, we're on.

• 1:14:08David Friedberg?

  So yeah, this is, this is gonna, so a lot of people are like, oh, is this gonna wipe out graphic designers? Is it gonna wipe? The creative industry, but the reality is the roles that those people are in today will absolutely be gone, but they will emerge and evolve into new roles that we never even thought imaginable.

• 1:14:22Jason Calacanis?

  They'll have.

• 1:14:22David Friedberg?

  Really transform that industry and society. And this is going to be true across everywhere that AI touches.

• 1:14:27Jason Calacanis?

  Yeah.

• 1:14:27David Friedberg?

  And I think you'll see this in China.

• 1:14:29Jason Calacanis?

  Go ahead, Chamath.

• 1:14:29David Friedberg?

  As China steps up their technology in manufacturing, you'll see those, you know, new markets evolve. Sorry, Chamath, go ahead.

• 1:14:35Chamath Palihapitiya?

  Designers will have less leverage to ask for all these stupid snacks in offices of startups.

• 1:14:41Jason Calacanis?

  Well, I mean, you need only look.

• 1:14:42Chamath Palihapitiya?

  The designers are the worst. My God.

• 1:14:45Jason Calacanis?

  Oh, they're the best. I love them. But anyway, um, in the 1940s, I mean, we, there were literally hundreds of thousands of telephone operators. It was.

• 1:14:53David Friedberg?

  Totally.

• 1:14:54Jason Calacanis?

  And they're all gone now. And not only that.

• 1:14:57Chamath Palihapitiya?

  Have you ever met a designer that didn't take themselves incredibly seriously? That didn't have like, you know, tea that they would steep.

• 1:15:03Jason Calacanis?

  Only the bad ones.

• 1:15:04Chamath Palihapitiya?

  You know, loose leaf tea that they would steep. They'd have like steel straws.

• 1:15:09David Friedberg?

  Video game designers are a little different.

• 1:15:10Jason Calacanis?

  I'm sorry. What did you say about the steel straws?

• 1:15:12Chamath Palihapitiya?

  That was a.

• 1:15:13David Friedberg?

  Yeah.

• 1:15:13Jason Calacanis?

  Oh, there it is. I have.

• 1:15:15David Friedberg?

  By the way, on video game.

• 1:15:17Jason Calacanis?

  Eliminating waste in my life.

• 1:15:18David Friedberg?

  I mentioned to you guys last year, this video game I played over Christmas by Annapurna Pictures. And the guy that, um, runs the studio sent me a DM. He loves the pod.

• 1:15:29Jason Calacanis?

  Oh, that's nice.

• 1:15:30David Friedberg?

  And they just launched a new video game, which I, uh, started playing a couple of nights ago called Stray. And you literally, you, you play the game as a cat lost in some crazy world. You're literally a cat.

• 1:15:41Chamath Palihapitiya?

  That's awesome.

• 1:15:43David Friedberg?

  The, the imagery on this thing is unbelievable.

• 1:15:45Jason Calacanis?

  Yeah, actually, my favorite game right now, Sax, is I play a cat and I'm a stray cat and it's really amazing. And the, the AI, I, you know, finding mice is really hard.

• 1:15:55David Friedberg?

  You should go play the game.

• 1:15:56Jason Calacanis?

  Yeah, I'm going to take a hard pass on that.

• 1:15:57Chamath Palihapitiya?

  I like to play a game where I'm a stray dog and I meet another dog and then we eat a bowl of pasta. But this long string of pasta, we each come closer and closer. Then we end up kissing.

• 1:16:08Jason Calacanis?

  Let's, uh, move on to, do we want to go? BlackRock has lost 1.7 trillion dollars in six months. Uh, VC funding is down or Amazon acquires one medical for 3.9 billion. Which, which one do we want to go to next? Anybody have a favorite here? Sax, you've been a little quiet. You got one you want to go to?

• 1:16:29David Sacks?

  Uh, we can talk about the BlackRock thing.

• 1:16:31Jason Calacanis?

  This is the largest amount of money lost by a single firm over a six-month period in history. BlackRock is the world's largest asset manager, and it was the first firm to break $10 trillion in AUM, assets under management. Right now, they're at 8.4 trillion. 2022 ranks as the worst start in 50 years for both stocks and bonds. Chairman and chief executive officer Larry Fink said on his earnings call at the end of June, only about a quarter of its assets were actively managed to beat a benchmark rather than track it seamlessly, as passive strategies are designed to do. Firm's passive equity holdings are now 10 times larger than its active holdings, although it does operate some active multi-asset and alternative strategies that narrow the gap. Collapse in bond markets this year has shaken money out of active fixed income funds.

• 1:17:16David Sacks?

  Listen, I think there's less than meets the eye here with this. I think this was a headline that was trying to grab attention by saying biggest loss ever. Look, the reason why it was the biggest loss ever is because BlackRock is so big. I mean, and what is BlackRock? It's basically, at this point, their index funds. Their ETFs are index funds. They just represent market indices. So, you know, the reason why it went down 1.7 trillion is because it started with 10 trillion. So, the average index is down 17%. That's all it means. We know this. The S&P 500 is down 20%, 22% for the year. The Dow Jones is down 15-ish. The Nasdaq is down like 30. So, this is just reflecting what we already know, which is that the stock market is down this year.

• 1:17:58David Friedberg?

  Do you think it's another data point to support the idea that active managers, generally speaking, and maybe holistically speaking over time, cannot beat the, you know, the market cannot beat indices? I mean, do you have a point of view on that as an investor, Sax?

• 1:18:15David Sacks?

  Well, I think, you know, you're talking about public market investors. I think it's very hard to beat, I think it's very hard to beat the public markets over a long period of time consistently. I just think it is. Now, you know, the contradiction, though, is that if you have no active managers...

• 1:18:34David Sacks?

  Then the indices won't be efficient anymore. So you need the participation of the active managers to help drive the indices and make corrections to it. So, and the fewer active strategies you have, the more inefficient the markets will become thereby inviting active strategies. So, you know, I think it's a good question. I think there are some managers who are, who can probably do it, but I think it's a very tough thing to do.

• 1:18:58David Friedberg?

  Timothée, what do you think? You're a public investor, active selector of investments.

• 1:19:05Chamath Palihapitiya?

  Here's what I, here's what I, I've been thinking a lot about this. I think that I have disproportionately benefited from being at the right place at the right time, backed by enormous amounts of central bank money. And so I think we all have been. I think it is very difficult to be a public market individual stock picker in a world where the central banks are constantly meddling. Because when they do, the best thing that you can do is belong the market beta. And the more concentrated you are, the better returns you would have delivered since 2008,

• 1:19:48Chamath Palihapitiya?

  when the central banks started to get very aggressively involved. When individual stock pickers reigned the, the universe was when central banks were largely on the sidelines. And so there was all kinds of dispersion, right? Dispersion, meaning good outcomes, bad outcomes, lots of alpha, right? Meaning your performance was independent of the market. But since 2008, it's largely been beta that's driven the market. And the folks that have done exceedingly well were those in tech because we delivered the best beta. And every time we confuse alpha and beta, we get over our ski tips and there's always some big out, you know, blow up.

• 1:20:35Chamath Palihapitiya?

  So I think my general takeaway is that if the central banks stay on the sidelines, individual stock picking reigns and active management can win. If they continue to be involved and do quantitative easing and all of this other stuff, index funds that are long concentrated market beta will always outperform in the long run.

• 1:20:59Jason Calacanis?

  I was watching Warren Buffett answer some questions and one of the questions, and this goes to the law of big numbers like BlackRock, he was saying, listen, the reason I did better earlier in my career than later in my career on a percentage basis is because I was placing, I had a smaller amount of capital and I was placing it on smaller bets, smaller ideas and themes. And then as I had a bigger chip sack, I had to find bigger ideas to put more money to work and therefore more people were looking at those and so those assets were not undervalued. And so I found that very insightful in terms of when you participate in the market.

• 1:21:38Jason Calacanis?

  If you're trying to pick between very large bets like COTU and TPG and Tiger were doing in the growth space Saks, like now everybody knows that these companies, everybody knows Stripe's a winner, everybody knew Airbnb and Uber were winners, you know, in the late stage of the private, everybody knew Facebook was a winner in the late stage private market. If you're battling that out, you know, Yuri Milner is going to come over the top and pay $2 billion more than you, or Masayoshi Son's going to pay $5 or $10 billion more than you, where is the alpha there, you know, where is the gain?

• 1:22:09Chamath Palihapitiya?

  The alpha's in the fees.

• 1:22:10Jason Calacanis?

  Okay, there you go. And so they were playing a different game and that's, you know, I started trading this past two weeks because I've never traded public stocks and I wanted to add it as a skill set. So I put a couple million bucks into an account and I'm just trying to actively figure out how does value work there and, you know, I'm just starting to make trades that I want to hold for 10 or 20 years and we'll see if I can beat the market. That's the other thing is what do you want to spend your life doing? If the index, if you can put money in a passive index and not do any work, well, you know, that's attractive as well. So Sax, what do you think in terms of active management? You know, in these public markets and the size of the bets that have to be

• 1:22:51David Sacks?

  Like I said, I think it's very hard to beat the market consistently. I think it's a very tough profession. I'm sure there are people who can do it, but I don't know if it's easy to predict who those people are. So, look, I, you know, I think it's something that can be done, but I just think it's a tough, tough game. I mean, what we do as private investors is a little different, right? Because not everybody is in a position to buy shares, right?

• 1:23:16Jason Calacanis?

  Yeah, you're not available to you. You don't even know the company.

• 1:23:19David Sacks?

  Access is limited and information is limited. And in exchange for that sort of preferential access that we get, we actually have to do work.

• 1:23:28Jason Calacanis?

  A lot of work.

• 1:23:29David Sacks?

  So when you're, yeah, when you're a public investor in a company, Disney or whatever, you don't do any work. You're not involved at all. We do a lot of work for the companies and that's why they choose us. And so it's not, you know, it's, you're not competing against the whole world. I think the public markets are just so competitive.

• 1:23:43Jason Calacanis?

  Are you tempted though, looking at these prices? And because I was looking at a company that was trading at 50 times revenue last year. They're raising again. They double their revenue. So now they're at 20, 25 times revenue. They're raising at last year's valuation. And then I looked at the public market comps and they're trading at six times. So now I'm like, wait a second. And obviously

• 1:24:01David Sacks?

  Well, you gotta look at the growth rate. You gotta look at the growth rate.

• 1:24:04Jason Calacanis?

  Yeah, the growth rate was three, the growth rate in this example was three times fat greater than the public market comp. So how would you assess that then?

• 1:24:11David Sacks?

  Well, what we're seeing right now is that pretty good SaaS companies that are growing, you know, maybe on a trailing basis. They grew three X and you know, prospectively they're growing, call it two and a half X. Um, they're trading right now, not trading, but basically deals are getting done at 20 times ARR, 20 ish.

• 1:24:28Jason Calacanis?

  Which ARR, this year's current run rate?

• 1:24:30David Sacks?

  Yeah, the current ARR.

• 1:24:31Jason Calacanis?

  You're not getting that like bonus, like here's your projected next year. We're going to give it based on that. This is current.

• 1:24:36David Sacks?

  No, no, current ARR is about 20, 22, 23 times ARR.

• 1:24:41Jason Calacanis?

  Down from what last year, 100?

• 1:24:43David Sacks?

  It was like 100 times was the rule of thumb. So now there are some where their, you know, deals are getting done in the high twenties, I'd say, or even 30. If they're, if you believe that by the end of the year, it'll be more like 20. So, but I, I think the new Levels are landing at 20, 20 something times ARR. Now, why does that make sense relative to the public SaaS companies? Well, like you said, the SaaS index is trading at roughly six times, but that's only 20% average growth.

• 1:25:12Jason Calacanis?

  Right.

• 1:25:13David Sacks?

  And so, you know,

• 1:25:14Jason Calacanis?

  You're talking about 10x the growth, right?

• 1:25:17David Sacks?

  Right. And the high growth SaaS companies are trading at like seven times. That's for like a 40% grower. We've talked about this before. So, listen, if you're tripling year over year and you pay 20 times, that'll be a seven times next year. But if you're growing two, two and a half, three X next year, that's way faster. So, I think there's actually an arbitrage there. I mean, this is why we like doing private SaaS investing right now.

• 1:25:40Jason Calacanis?

  Deals are getting done. I will say that. The people who I'm seeing who are really struggling, Friedberg, are the people who didn't turn on, I'm talking about in the very early stage, they didn't turn on revenue. They were making progress in team building and culture and features, but they just weren't focused on the revenue side. And my lord, people got a lot of credit. I mean, 50 million, 100 million dollar evaluations without the revenue turned on. And that, now they're faced with not being able to raise money full stop. What are you seeing on your side, Friedberg, in terms of deal flow in the private markets?

• 1:26:15David Friedberg?

  Yeah, it's

• 1:26:16Jason Calacanis?

  And raising money. Yeah, because you have to raise money for your companies.

• 1:26:19David Friedberg?

  It's not easy.

• 1:26:21Jason Calacanis?

  Okay, unpack it. What's not easy?

• 1:26:24David Friedberg?

  Well,

• 1:26:25Jason Calacanis?

  What are the conversations like? Give us the anecdotal information.

• 1:26:28David Friedberg?

  I mean, I've seen a number of term sheets get pulled. So, I think

• 1:26:32Jason Calacanis?

  Oh, really?

• 1:26:32David Friedberg?

  Yeah, we've heard a lot about companies that kind of during the Q1, early Q2 timeframe, had term sheets, weren't closing, got delayed out. And there's a number of

• 1:26:48David Friedberg?

  Kind of examples of repricing where the investors come back, markets have changed, let's reprice the thing, or hey, we're not going to do this deal anymore, we're going to sit on the sidelines and wait till the market settles, or our LPs actually aren't going to let us fund new stuff.

• 1:27:04Jason Calacanis?

  Oh.

• 1:27:05David Friedberg?

  So there's a lot of those sorts of shenanigans.

• 1:27:07Jason Calacanis?

  Unpack that last one for people, what does that mean?

• 1:27:09David Friedberg?

  Yeah, investor, you know, investors have LPs, they have investors themselves, and their LPs are coming to them and saying, do not put more money out right now, we are telling you, we are not going to wire our money to you, we need you to wait until the market settles.

• 1:27:22Jason Calacanis?

  Even though they're contractually obligated to, they're telling you, don't ask.

• 1:27:24David Friedberg?

  Theoretically, they may or may not be contractually obligated to, but obviously, these are long-term partnerships, and so when an LP, you know, or a group of LPs says, guys, we're not comfortable with you deploying money right now, you know, you're in a 10-year partnership, 15-year partnership with them, you're gonna, as an investor, as a fund, you're gonna say, okay, I'm gonna kind of listen to that right now. Now, the bigger issues in Series B, C, and D, where companies, you know, have some traction, have some performance, have raised a bunch of capital, have done a bunch of work, investors don't know what they're worth. They're like, hey, is this thing worth 25 million, or 125 million, or 500 million? Last year, you could have raised money at 500 million. I mean, look at what happened with one of those crypto things, those crypto trading

• 1:28:05David Friedberg?

  platforms, they raised $500 million last July, and they just sold the business for a reported $25 million after being valued at $5 billion a year ago.

• 1:28:14Jason Calacanis?

  Yeah.

• 1:28:15David Friedberg?

  So the whole thing got wiped out.

• 1:28:16Jason Calacanis?

  And the truth might have been more like 275 million, some news that got left.

• 1:28:20David Friedberg?

  Yeah, and, and so, but, but Series A, people seem to be pretty active again.

• 1:28:24Jason Calacanis?

  Active again, but the prices now for seed rounds.

• 1:28:27David Friedberg?

  Yeah.

• 1:28:28Jason Calacanis?

  Seed rounds happening 6 to 15, Series A is happening 15 to 25.

• 1:28:32David Friedberg?

  It's a lot easier to get a deal done in a Series A, because people say, hey, look, I'm gonna give you this, you say, okay, I'll take it, I need the money. Series B, C, and D is where there's this whole fight, because there's existing investors, existing shareholders, who are saying, I don't want to take a 50% write-down, a 70% write-down, a 30% write-down over the last round, and fighting, and then doing inside rounds and bridge notes, and all sorts of other shenanigans, to not have to take a negative mark on their book.

• 1:28:56Jason Calacanis?

  Getting complicated.

• 1:28:57David Friedberg?

  Yeah.

• 1:28:58David Sacks?

  Well, one thing that's interesting here is that you think about like where the opportunity is in the market right now. And I think one of the things that happened in the boom is that everyone got pushed to go earlier and earlier because deals were so competitive. And so, you know, in the SaaS business, normally one million of ARR was considered the rule of thumb for getting a series, for basically graduating to a series A, that you're ready to go from C to series A when you had a million of ARR. As we know, during the boom last year, that number kept going down, you know,

• 1:29:27Jason Calacanis?

  Yeah, five hundred K.

• 1:29:28David Sacks?

  Three hundred thousand. And then you would see crazy deals get done that were pre-revenue with price at a hundred plus. We never did any of those kinds of deals because we just thought they were too crazy, but they definitely happened. Well, think about the dynamic now, which is, let's say that that SaaS startup that has a million of ARR, they can do a series A at fifty, or we can just wait until they get to five million of ARR, and then pay twenty times and do it at a hundred pre. Which of those is the better risk-adjusted return? Let me tell you, there's a lot of risk in going from one million ARR to five million ARR.

• 1:30:00Jason Calacanis?

  That's hard.

• 1:30:00David Sacks?

  It's hard. There's a lot of things that go off the rails.

• 1:30:03Jason Calacanis?

  You're just, you're not doing it through the founders, selling the product.

• 1:30:06David Sacks?

  Yeah, you need to start scaling a team. You need a real sales capacity. But also, a lot of startups that could sort of hack together and cobble together one million of ARR, based on non-scalable techniques that various startup incubators teach, like, you know, don't be scalable.

• 1:30:22Jason Calacanis?

  Do things that don't scale. Program's at it. It's okay to do that from zero to one, but not one to ten.

• 1:30:27David Sacks?

  Right. Well, or it's not that it's not okay, it's just that it doesn't work, right? Like, you're not going to be able to cobble together five million of ARR. You can cobble together one million of ARR, you can use the cheat code to get there. So what I'm saying is, there's a lot of risk in going from one to five. You find out whether the product's really scalable. So what is the better deal?

• 1:30:44Jason Calacanis?

  Wait till a hundred.

• 1:30:46David Sacks?

  Wait till it's priced at a hundred or a hundred and twenty million pre, or doing the deal at forty to fifty. Now, if you love the, if you love the company, you want to get in as early as possible. But I think you're going to start seeing a dynamic where, in the same way that last year, everyone went earlier and earlier, you're going to see VCs start to sit back and go a little later and later.

• 1:31:04Jason Calacanis?

  Prove it to us. A dead man's zone.

• 1:31:07Chamath Palihapitiya?

  Nobody should be putting money into deals right now. What is it? Why?

• 1:31:11Chamath Palihapitiya?

  What does it do unless unless you're in the business unless you're in the business of running a fee generating machine if you're really trying to generate alpha you have to have a sense of what's actually happening in the world right now if you're just trying to deliver the market beta and run an index then yeah you're right you should ignore this idea that there could be more price adjustments but if you look at the public markets which is again the ultimate terminal buyer they have more cash than they ever had since 2008 which means that there is no reason to buy

• 1:31:46Jason Calacanis?

  You're talking about private companies.

• 1:31:48Chamath Palihapitiya?

  It all ultimately ends up in the public markets and so if the public markets are saying there is no reason to buy this stuff it trickles down so then the crossover investor who has a public private business says you know what on the public side I'm completely de-risked and in cash and so on the private side I'll just be a little bit more circumspect and wait as David said I'll just wait six months and put even more money in later I'll actually have a better IRR and I'll make the same profit dollars so then the series B and C firm who used to feed those deals to the crossover folks are like oh well if you're waiting I don't want to have to write a check to support these folks my whole point was to have you mark up the deal so I could raise a new fund

• 1:32:32Chamath Palihapitiya?

  they slowed down and then that goes back to the series A person who's like well wait a minute you know the reason I paid it at 50 pre was because I thought you'd step in and buy it at 100 and so then they slow down so all I'm saying is I think that we are at the point of the cycle where constipation is setting in and this is why you're seeing such a downtick in deal velocity and dollars put to work.

• 1:32:57Jason Calacanis?

  This is a great advice I want everybody to take I'm going to take the opposite advice and I'm going to do twice as many deals in the seed stage as everybody else but I encourage every venture capitalist and seed fund to take Chamath's advice I'm doing the opposite because a five-person company.

• 1:33:11Chamath Palihapitiya?

  This isn't advice this is just a market observation I'm just telling you what flows tell you.

• 1:33:15Jason Calacanis?

  I hope everybody takes that as the truth because what I'm seeing is the founders Who are raising and who have real businesses are so sharp right now and so focused on costs and profits and what matters and they have eliminated all the shit that doesn't. There's a whole contingent. I don't know if you're seeing it, Sacks. I'd say it's one out of five, one out of four that are like, I understand what's happening here and I'm going to take advantage of this moment in time and I'm going to just drive revenue and profits.

• 1:33:41Chamath Palihapitiya?

  But what happens to the $250 billion that's been put to work in the last two years that need to get up rounds?

• 1:33:47Jason Calacanis?

  Yeah, it doesn't matter to me. All I care about is meeting young companies that are growing with revenue, but I think they're, they're screwed.

• 1:33:52Chamath Palihapitiya?

  I'm just trying to have, I'm trying to have a conversation.

• 1:33:54Jason Calacanis?

  Yeah, yeah. No, that's, that's a lot of indigestion. Yeah, they're gonna have to cut their staffs by half and get to profitability.

• 1:34:01David Sacks?

  Ultimately, the way that valuations matter or price levels matter is there's an entry price and an exit price. And ideally, if you can time it right, you want to invest when valuation levels are low. And you want to exit when valuation levels are high. If you were a VC last year, you should have been realizing as much as you can because valuation levels are really high. There was a good tweet by one of Brad Gerstner's colleagues at Altimeter, basically saying, she was talking to LPs and asking what they care about. And what she reported LPs is saying is that if you're a fund that's more than five years old and you didn't distribute during the best

• 1:34:38Jason Calacanis?

  Yep.

• 1:34:38David Sacks?

  window ever, which was 2018 to 2021, it's a hard no. You know, we're not going to be re-upping with you.

• 1:34:44Chamath Palihapitiya?

  I'll say it even more. If you're, if you're a venture investor who took a longitudinal view on public market stocks and then have now seen 60 to 70% write downs of those same stocks that you could have distributed. You should still have something to answer to. That makes no sense. It turns out that the skill of private market investing and the skill of public market investing are different, even if all you're doing is delivering the market beta. It's still different enough.

• 1:35:11Jason Calacanis?

  We had this discussion last year. Remember I was saying, should I distribute the shares of Robinhood? Should I hold them? What should I be doing?

• 1:35:17Chamath Palihapitiya?

  We told you to distribute.

• 1:35:18Jason Calacanis?

  And I distributed. I distributed everything, you know, and, and in terms of secondary, I feel particularly smart.

• 1:35:23Chamath Palihapitiya?

  Do you feel like a genius now because your LP should say, thank you, Jason?

• 1:35:26Jason Calacanis?

  No, I mean, some of them are saying that. What I feel smart about, I'll be honest, is we We had, and I think, let's just say, I'm making up a number here, four out of five times, we were offered the opportunity to trim our positions in secondary with our winners from people who wanted to buy secondary shares. I did it probably four out of five times. And I'm just kicking myself, I didn't do it the fifth, or I didn't ask if they would take more. Because my God, we were able to clear some positions at very high valuations that are now lower than that in the private markets and send cash to our LPs and get our, you know, get over our hurdles in our first two funds. Which, you know, I feel smart about.

• 1:36:00Chamath Palihapitiya?

  I think that you should feel so, so good about that. That is, that is really hard, what you did, and I think people underestimate how hard it is. It is really hard to actually return more money than you have taken in.

• 1:36:13Jason Calacanis?

  Yeah, I mean, that's what I'm focused on.

• 1:36:15Chamath Palihapitiya?

  Just that simple statement. And, and by the way, it was hard in the last 10 years where we've had basically a massive up market and the four of us frankly benefited from the extraordinary luck of being in tech.

• 1:36:30Jason Calacanis?

  Yeah, no, it's super lucky. I think the big thing that's going to happen right now, I'm seeing it all over the place, is M and A, I think is going to start ticking up. Just today, Amazon acquired One Medical for 3.9 billion. One Medical operates a network of clinics, if you don't know.

• 1:36:41Chamath Palihapitiya?

  3.9 billion dollar enterprise value for 182 franchises, which is 21 billion a franchise.

• 1:36:47David Friedberg?

  Look at what happened to their, um, look at what happened to their stock price.

• 1:36:50Chamath Palihapitiya?

  No, I know, it went from 60 in the peak in February of 2021 to, uh, seven in May.

• 1:36:57David Friedberg?

  And they bought it, they basically bought it at the same price it was trading at in January.

• 1:37:00Chamath Palihapitiya?

  No, my point is, you could buy a McDonald's franchise for 2 million, or you could buy the company that fixes the people that needed McDonald's for 21 million. That's why they got such a good deal.

• 1:37:08David Friedberg?

  By the way, at McDonald's, you can't make money selling pharmaceuticals and upselling, you know, other stuff that Amazon's gonna certainly.

• 1:37:16David Sacks?

  I think it's super interesting that, I think it's super interesting that Amazon's getting into this business. Wow, I mean, that is really interesting.

• 1:37:23David Friedberg?

  They clearly have a, an economic model that shows some significant synergy.

• 1:37:29Chamath Palihapitiya?

  And retail footprint.

• 1:37:30David Friedberg?

  Well, yeah, and there may also be kind of a supplement pharmaceutical kind of upgrade opportunity. There's synergy in this business.

• 1:37:37Chamath Palihapitiya?

  And think about the synergy between not Whole Foods.

• 1:37:40David Friedberg?

  What they're getting is also not just the physical locations, but a network of doctors that can do telehealth. I don't know if you guys have ever used One Medical, but they do really, you know, easy Zoom telehealth services. And so you could hop on, get a prescription, have it fulfilled by Amazon and shows up at your doorstep in under an hour.

• 1:37:56Chamath Palihapitiya?

  Genius.

• 1:37:56David Friedberg?

  It'll be an incredible synergy for that business and probably a real value driver, not just at the core units, but with respect to other things they're going to sell through.

• 1:38:05Chamath Palihapitiya?

  Your one medical doctor will provision a blood test. He or she will analyze those blood tests over a telehealth. They will prescribe a better diet. That will be sent to Whole Foods, who will then, no, I'm sorry, I'm serious.

• 1:38:19David Friedberg?

  No, no, no, it's a synergy. You're right.

• 1:38:21Jason Calacanis?

  Preventing medicine is eating at Whole Foods, right?

• 1:38:23Chamath Palihapitiya?

  It makes so much sense for Amazon to expand into built out retail footprints. Because that business model now gets more and more complete by the day where you become so ingrained and enmeshed in this.

• 1:38:37Jason Calacanis?

  Yeah, this is, what this is really about at the end of the day is the subscription business. Amazon Prime is the driver of Amazon's business.

• 1:38:44David Friedberg?

  That's going to be the entry point.

• 1:38:45Jason Calacanis?

  Yet another Amazon Prime lock-in. So you're, I know it sounds silly, but two day delivery, two hour delivery, it's all about your subscription.

• 1:38:52David Friedberg?

  But I will bet you guys, I will bet you guys a dollar that within a year after closing the deal, they're going to massively expand the telehealth footprint of what One Medical is doing. Because One Medical had to go out and do customer acquisition to go and acquire customers to make money doing telehealth services. And they're spending a thousand dollars probably CPA to acquire these customers.

• 1:39:13Chamath Palihapitiya?

  Google wanted to do this. Why didn't Google do this?

• 1:39:15David Friedberg?

  Amazon's already got the, Amazon's already got the customers.

• 1:39:18Chamath Palihapitiya?

  I know, but Google's got everybody too.

• 1:39:20David Friedberg?

  By the way, I think another thing.

• 1:39:22David Sacks?

  Google doesn't know how to do messy things in the physical world. They don't know how to do service. I mean, Amazon's been working warehouses.

• 1:39:29Jason Calacanis?

  Okay, what about Apple? Apple knows how to do stores.

• 1:39:31David Sacks?

  No, Apple knows how to do four products in a beautifully designed showroom.

• 1:39:36Jason Calacanis?

  Forty billion dollar services business now.

• 1:39:37David Sacks?

  No, Amazon knows how to get in the nitty gritty and the nuts and bolts of operations and do messy things.

• 1:39:42David Friedberg?

  Yeah, real world stuff. The other thing that's really interesting about this Amazon deal is that it was done with Bezos not at the helm. And I think it really, you know, begs the question and begs an answer around, are these guys going to continue to innovate like this? And I think right now the jury's saying yes, they are going to continue to push the synergies they can drive from this business by expanding into ancillary services and industry. And it's really impressive to see them doing this without Bezos running the day to day. As a shareholder, I feel that. So really great to see.

• 1:40:11Jason Calacanis?

  Yeah, I mean, this is where like they could buy DoorDash, Uber, Lyft, those kind of real world services.

• 1:40:17David Friedberg?

  They're buying a cheap asset. They're buying it just like they did with Whole Foods. They're buying an asset that they're going to be a tremendous leverage and synergy out of very cheap. They're buying this company at the same price it was trading at a few months ago.

• 1:40:27Jason Calacanis?

  Yeah, no, no.

• 1:40:28David Sacks?

  And they have a great, they have a great CEO at One Medical, who's a friend of mine, Amir Rubin. Congrats. Shout out.

• 1:40:33Jason Calacanis?

  Congrats. Yeah.

• 1:40:33David Friedberg?

  All right, everybody. Did you want your beak, Sucks?

• 1:40:36David Sacks?

  No, I never, I never let my beak in this deal.

• 1:40:38Jason Calacanis?

  Oh, dry beak syndrome.

• 1:40:40David Sacks?

  No, I would, I would disclose it.

• 1:40:42Jason Calacanis?

  Are you suffering from DBS?

• 1:40:43David Sacks?

  I'd be taking a victory lap right now if I was in that company. I missed it.

• 1:40:48Chamath Palihapitiya?

  I'm shocked we haven't seen the J Cal victory lap. He goes on some podcast, tells Bloomberg that VCs are going to get pinched for insider trading all these tokens. And lo and behold, on the Wall Street Journal, three guys, I guess a guy at Coinbase, got pinched for basically insider trading these token sales, front running it by buying them in his wallet and stuff. And so, but where's your victory lap, J Cal?

• 1:41:12David Sacks?

  Got arrested?

• 1:41:12David Friedberg?

  Oh, no, no.

• 1:41:14Jason Calacanis?

  That would be a recurring joke.

• 1:41:20Chamath Palihapitiya?

  Jake, how much your victory lap? Do you want to take your victory lap?

• 1:41:24Jason Calacanis?

  Well, no, I mean, I told everybody like if it's a if it smells like a security and people are buying it for that reason for it to appreciate, don't be surprised if the SEC, you know, starts having tips dropped on them that different VC firms in cahoots with law firms in cahoots with everybody were liquidating their positions. We talked about liquidating positions as being the goal of venture capital. They created a shadow economy next to securities law and said, we're going to just start liquidating these things. But under what they made the rules up under which they could liquidate them. I'm not picking on any firm or anybody. We'll see over time who gets pinched. But, you know, if you decide you're going to talk yourself into this is not a security, even though it kind of feels like one, that's on you. That's on you as the person buying the

• 1:42:07Jason Calacanis?

  tokens, issuing the tokens, giving the legal briefs on the tokens. I think people suspended disbelief and talked themselves into thinking that they weren't trading securities. And I think the SEC, now that everybody's lost their money, is going to just tick off one firm after another. And it's going to be massive settlements. It's going to be three or four years of litigation. So it's not a victory lap. It's just it was such an obvious observation. We all saw it. I mean, how do you liquidate your shares in a company that has no product in the world? Like, come on, come on. People knew what they were doing. If they get the book thrown at them, they deserve it. All right, everybody. This has been another amazing episode, even though Sax is going to say it's the worst one. Sax, you like my background?

• 1:42:49David Sacks?

  I like it.

• 1:42:50Jason Calacanis?

  I do. That's a lake.

• 1:42:51David Sacks?

  Is that real?

• 1:42:52Jason Calacanis?

  That's lakefront. Is that a Zoom background? Can I get that in the Zoom pack?

• 1:42:56David Sacks?

  Take a photo so we can all use it.

• 1:42:58Chamath Palihapitiya?

  Love you, boys.

• 1:42:59Jason Calacanis?

  Love you, besties. All right, we're back in the groove. Back at you.

• 1:43:20Speaker 04

  Besties are gone.

• 1:43:26Speaker 04

  That's my dog taking a notice in your driveway.

• 1:43:34Chamath Palihapitiya?

  We should all just get a room and just have one big U-Jourgy because they're all just... It's like this sexual tension that we just need to release somehow.

• 1:43:42Speaker 04

  What? You're the bee. What? You're the bee. What? You're a bee. Bee? What? We need to get merch. Besties are back.