E146: Did the Fed break the VC model? Plus IPOs, M&A, revaluing unicorns & more

(0:00) Bestie intros! (3:05) GOP Primary update: polling, acceptable candidates, tentpole issues (11:56) All-In Summit 2023 recap (24:12) IPOs and M&A heat up: Arm, Instacart, and Klaviyo go public, Cisco acquires Splunk for $28B, but did the "great reopening" fall short? (42:34) Did the Fed break the VC model? How LPs will evaluate fund managers going forward (50:45) Breaking down Instacart and Klaviyo's businesses (1:01:12) Revaluing Airtable and the path forward for ZIRP-era unicorns (1:13:14) Fed pauses rate hikes, but says rates will stay higher for longer, plus: what breaks next in the economy? (1:32:51) Science Corner: new "inverse-vaccine" treatment is a potential game changer for autoimmune diseases 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://projects.fivethirtyeight.com/polls/president-primary-r/2024/new-hampshire https://youtu.be/yjj1QjZlQMM https://www.bloomberg.com/news/articles/2023-09-21/cisco-to-buy-splunk-for-157-a-share-in-28billion-deal https://twitter.com/pitdesi/status/1704874017357025499 https://www.google.com/finance/quote/ARM:NASDAQ?comparison=NASDAQ%3ACART%2CNYSE%3AKVYO&window=5D https://www.google.com/finance/quote/ARM:NASDAQ?comparison=NASDAQ%3ACART%2CNYSE%3AKVYO&window=5D https://twitter.com/aswathdamodaran/status/1704246090198036914 https://cloudedjudgement.substack.com/p/clouded-judgement-81823-q2-earnings https://www.lendingtree.com/content/uploads/2023/08/ccs-chart-3-3.jpg https://fred.stlouisfed.org/series/MORTGAGE30US https://www.ey.com/en_gl/ipo/trends https://stockanalysis.com/ipos/statistics https://www.google.com/finance/quote/COIN:NASDAQ https://www.google.com/finance/quote/EXPE:NASDAQ https://www.axios.com/2023/09/19/instacarts-ipo-venture-capital https://www.sec.gov/Archives/edgar/data/1579091/000119312523221345/d55348ds1.htm https://influencermarketinghub.com/amazon-ad-revenue https://twitter.com/jasonlk/status/1704212644402540573 https://www.saastr.com/5-interesting-learnings-from-klaviyo-at-650000000-in-arr https://twitter.com/DavidSacks/status/1078755080478715904 https://i.insider.com/4dd4d1cf4bd7c8c90f000000 https://twitter.com/asanwal/status/1703492397739516068 https://www.cnbc.com/2023/09/20/fed-rate-decision-september-2023-.html https://tradingeconomics.com/commodity/crude-oil https://kalshi.com/markets/fed/fed-interest-rates#fed-23nov https://www.popularmechanics.com/cars/hybrid-electric/a42558850/tesla-price-cuts-worth-buying https://hellometer.io https://www.nature.com/articles/s41551-023-01086-2

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

• 0:00Chamath Palihapitiya?

  Did you just finish a good cry? Cause you have this wetness right here on your eye.

• 0:04Jason Calacanis?

  Oh, sorry. I just got out of my cold plunge in my sauna. Cause you know, I hit a new record low weight 169 this week.

• 0:09Chamath Palihapitiya?

  Oh, hold on again. What's your temperature on?

• 0:13Jason Calacanis?

  Oh, I don't want to say it's embarrassing. It's embarrassing. I don't want to say.

• 0:16Chamath Palihapitiya?

  No, what is it?

• 0:17Jason Calacanis?

  I've been doing like 56, 58, but it's great. It's okay. I mean, I, all these lunatics, like, I don't know, they're at 45 degrees, 48 degrees. I think it's unnecessary. You get the same value, I think, at 58.

• 0:28Chamath Palihapitiya?

  My two-year-old does 56. It's good. It's really impressive.

• 0:32David Sacks?

  I consider an 80-degree pool to be a cold plunge.

• 0:36David Sacks?

  I don't get in unless it's like 85.

• 0:39Jason Calacanis?

  That's actually, I've been to pool parties at Sax's house. There's no difference between the hot tub and the pool.

• 0:46Chamath Palihapitiya?

  It's a full-size schwitz.

• 0:47Jason Calacanis?

  It's a schwitz.

• 0:48David Sacks?

  If it's not the temperature of bath water, I don't get in.

• 1:08Jason Calacanis?

  Yeah, it's a schwitz. It's crazy. And then I went in my infrared sauna. So now I've been going in.

• 1:13Chamath Palihapitiya?

  You do the cold, then the warm? I think you're supposed to do warm, then cold, no?

• 1:17Jason Calacanis?

  They say end on cold. And so I've been ending on cold. But I just do like a cycle now.

• 1:22Chamath Palihapitiya?

  So you do cold, warm, cold.

• 1:24Jason Calacanis?

  Cold, warm, cold. Yes.

• 1:25Chamath Palihapitiya?

  And what are you doing? Like two minutes, 10 minutes, two minutes? Or what do you do?

• 1:29Jason Calacanis?

  Yeah, exactly. Like one or two minutes cold plunge, four minutes, you warm up, you get back to it and then you jump back in. You know, it works pretty good, you know? I have to say my energy level goes way up.

• 1:39David Friedberg?

  Have you been tracking your blood pressure?

• 1:42Jason Calacanis?

  I have not, uh, but I have this, uh, executive health coach that I'm using. And so that's where I got those ridiculous glasses, the blue lights and my sleep's better. I got some, I've taken some supplements. Uh, I'm eating.

• 1:56David Sacks?

  Estrogen?

• 2:00Jason Calacanis?

  Are you taking more estrogen, bro? No, estrogen bubbles are at an all time high for hanging out with you guys. It just oozes on to me. No, it turns out, you know, even at 52, my testosterone is very high. So that's

• 2:13Chamath Palihapitiya?

  What is your free testosterone?

• 2:14Jason Calacanis?

  I don't have the number here, but they said it's the, the high end of normal. So I was like, should I be shooting up testosterone? They're like, no, you're good. You're good. Just we'll send it over to Friedberg. I was like, all right, great. Send it over to Friedberg. It's all good.

• 2:26Chamath Palihapitiya?

  A lot of people take testosterone in their 50s and 60s. And I've had a couple of my friends in their early 60s start H, is it HGH?

• 2:36Jason Calacanis?

  Human growth, yeah.

• 2:37Chamath Palihapitiya?

  Is that right?

• 2:38Jason Calacanis?

  Not a good idea. Seems like a really bad idea. That off menu stuff, I don't think it's a good idea. I think you gotta be careful with the off menu items.

• 2:46Chamath Palihapitiya?

  No, I think you can get a prescription for it.

• 2:48Jason Calacanis?

  Is that right?

• 2:49Chamath Palihapitiya?

  Yeah.

• 2:49Jason Calacanis?

  I know there's a lot of off menu items available to affluent people with the right doctors. And I don't think it's a good idea.

• 2:56Chamath Palihapitiya?

  I mean, you guys see Bezos, he's jacked.

• 2:59Jason Calacanis?

  I didn't bring up anybody specifically, but he looks great. I think that's just all weights. Is he gonna be president?

• 3:08Jason Calacanis?

  I mean, if you had your choice right now between Bezos And Bob Iger, who would you pick? And Biden. I think we know who you'd pick. I mean, listen, I was talking to some affluent people and everybody's going Vivek. Talking to some affluent people. I don't want to say who, but Vivek is now people are starting to talk Vivek. I think he's hitting the right chords, man.

• 3:30Chamath Palihapitiya?

  Vivek is about to pass DeSantis. He will be, I think, if you look at the polling right now.

• 3:36Jason Calacanis?

  New Hampshire.

• 3:37Chamath Palihapitiya?

  He'll be the clear number two in about four, between four and eight weeks from now.

• 3:44Jason Calacanis?

  That's crazy.

• 3:45Chamath Palihapitiya?

  That's crazy. And so I think if he becomes a clear number two, the, the, think of this, it's like, then all of a sudden, all these MAGA supporters. Are given Trump and then Trump with some small feature improvements that are actually pretty meaningful.

• 4:01David Friedberg?

  Right.

• 4:02Chamath Palihapitiya?

  And then they're like, well, do I want the 80 year old Trump or do I want the 38 year old Trump?

• 4:07David Friedberg?

  Super upgrade.

• 4:08Chamath Palihapitiya?

  With like the super features, you know?

• 4:10David Friedberg?

  I can forgive all of his other issues when he tells me that he's going to cut the government, the federal government by 75%.

• 4:16Chamath Palihapitiya?

  75%. My gosh.

• 4:18David Friedberg?

  Sold.

• 4:19Chamath Palihapitiya?

  So you're on, so you're on team Vivek?

• 4:20David Friedberg?

  I want to continue to gather a little data. There's no rush to make a declaration right now. Give me a little bit of time. Chumap, are you with Vivek?

• 4:27Chamath Palihapitiya?

  Yes, I, and, and the reason is I would love for it to be RFK and Biden in a debate and then Trump and Vivek in a debate so that I could really figure out between RFK and Vivek, who I would like to vote for. But I think it's been pretty clear that the Democrats have chosen to railroad RFK's candidacy. It's unfortunate because I don't think we're given a real fair shake in really being able to evaluate him.

• 4:53David Friedberg?

  Yeah.

• 4:53Chamath Palihapitiya?

  Even the, the tractors like Friedberg, you have some pretty significant things that you dislike about RFK, which I think are fair. They're never going to get a chance to get aired out because you're never going to get a chance to be put on a national platform where there will be really enough debate. And I think that's where America loses. So yeah, in that context, I would say that Vivek has done more in the last month to convince me that he is fiscally responsible. And that he has some intuitions that I think RFK and Trump and a lot of people in America share, which is just about the usefulness of the blob.

• 5:36Chamath Palihapitiya?

  And, you know, that there maybe needs to be a grand experiment where we deconstruct the blob and I'm for that experiment, to be totally honest with you, to see what happens.

• 5:46David Friedberg?

  Sax, where are you at?

• 5:48Jason Calacanis?

  He's unhappy.

• 5:49David Sacks?

  What I would say, I think it's too early in the process to say definitively, okay, this person has to be the person. For me, I'm viewing candidates as either being acceptable or unacceptable. And Vivek is acceptable to me. I think DeSantis is too. The ones who are unacceptable to me are the ones who would escalate this Ukraine war. Because I think that avoiding World War III is, to me, the central issue of the campaign. So, for me, it's just a litmus test issue. I can only support a candidate who would work to end this war, not one who had escalated.

• 6:19David Friedberg?

  Where does our fiscal emergency sit for you in terms of priorities? So, no World War III priority one is the fiscal emergency that we're facing priority two? Or is it overstated by me, do you think, or others?

• 6:30David Sacks?

  No, I think it's important, but the problem is this, is that in order to do something about that problem, you really need bipartisan support.

• 6:39David Friedberg?

  Yeah.

• 6:40David Sacks?

  Because it would be suicide for one party to try and do all the heavy lifting without the support of the other. And I just don't see, in the near to midterm, that you're going to get that kind of bipartisan support, no matter who is president, whether it's a Democrat or a Republican. The only issue that for sure, the American president has unilateral discretion over, is our foreign policy. And so, for me, making sure that the next president pursues a foreign policy that doesn't result in the destruction of the United States, that to me is the overwhelming issue. It doesn't mean these other issues aren't important, but they're just a factor.

• 7:15Jason Calacanis?

  Look at how stunning these numbers are. Let me show you this poll for a second, just so we level set with the audience. Poll ending September 18th, 2023, for those of you not watching on YouTube. Trump, 39%, is that, or 38? Then Vivek, 13%, Haley, 12%, Christie, 11%, DeSantis, 10%. That is a stunning turnaround.

• 7:35David Sacks?

  Yeah, that's probably because it's New Hampshire, Jake Allen, but...

• 7:37Jason Calacanis?

  You know, no, I know, it's just, but that's a very critical state, right?

• 7:40David Friedberg?

  Sax, what do you think about what Dalio said onstage about the need to have a Manhattan Project-style effort here that is bipartisan, comes to the center and tries to resolve this as that scale of an emergency? Is that realistic to kind of frame this? As we are in a fiscal emergency, we have to get a Manhattan Project style effort underway to try and engineer a solution.

• 8:03David Sacks?

  Well, let's back up. First of all, I think you asked the right question to him, which is, is our decline a matter of physics? You know, due to forces we can't control, or is it something we still have control over? And I think that that's a really good framing. I think if you're in the bucket that we can do something about it, I mean, I believe that we can. The question is how? And I think his view was that somehow you get all these elites together and you get them on the same page. I don't think that's how our system works. I think what happens is you have elections, people compete against each other, and then voters decide who's right. And so one side has to defeat the other. And I think until we get some clarity from voters on the direction they want to go, I don't think there's going to be a resolution.

• 8:46David Friedberg?

  But to your point, there's no solution without bipartisan bipartisanship here. So what is the path to bipartisanship when it comes to the fiscal crisis?

• 8:54David Sacks?

  I'm not sure.

• 8:55Jason Calacanis?

  Wouldn't the obvious thing be if one party wins? With that as part of their platform, then it becomes part of the winning platform and the winning formula? Or are we just saying that's not even possible because it's too unpopular to tell people that they don't get free money?

• 9:07David Sacks?

  I think it's political suicide for one party to engage in deep cuts, deep government cuts, deep cuts of programs, especially popular programs. You probably cut the unpopular ones at the margins, but it's political suicide to cut anything important without having the other party on board. There's been a couple of times where we've been able to have this type of consensus. I mean, the one that always gets mentioned is when Reagan and Tip O'Neill cut a deal. And they were able to reform entitlements and make some changes to those programs, and they kind of did it arm in arm. And that worked. And then the other time where it kind of happened, not through agreement, but almost through lack of agreement was when we had the sequester.

• 9:48David Sacks?

  Remember when Obama was president and what happened is the Democrats and the Republicans worked out a deal where if they couldn't agree, you would get equal cuts in both military spending and social spending. The idea being that Republicans wanted the military spending, the Democrats wanted the social spending. And that's ultimately what happened is that they couldn't agree, and so you got the sequester and we had some spending restraint for a short period of time. The problem now is that both Republicans and Democrats want more military spending. I don't hear anybody really argue for cutting military spending, except for maybe Ro Khanna at our event, but. The Democrats are completely on board with war now. And then on the social spending, I don't think either party really wants to cut social spending either,

• 10:32David Sacks?

  or do entitlement reform. So there is no constituency out there for reining in the biggest sectors of government spending. So I don't see how it's going to happen, no matter who the president is.

• 10:45David Friedberg?

  Well, the forcing function will be the debt service costs, which has just crossed a trillion dollars a year just to pay the interest. And it's mounting, right? Thirty percent of our debt, I think, is coming up for refinancing in the next 12 months. And it's going to refinance at a 5% rate. That's where the markets are at.

• 10:59Jason Calacanis?

  Just like consumers can ignore it, Friedberg, and put their fingers in their ears and say, la, la, la, la, la. I don't have to worry about my payments. Then the payments show up and you got to worry about them. Same thing's going to happen here in the US, right?

• 11:10David Friedberg?

  The federal budget will get naturally constrained at some point here, but.

• 11:13Jason Calacanis?

  Yeah.

• 11:13David Sacks?

  As the economist Herb Stein once said, if something can't go on forever, it won't. So I think, I think you're right, Friedberg, that this will not go on. It's not Yogi Berra, it's Herb Stein, I think. Yeah, if something can't go on forever, it won't. I think that that's where we're headed is we're going to have restraint imposed on us from the outside. It's not going to come from inside Washington.

• 11:34Jason Calacanis?

  People stop buying the bonds, people stop buying treasuries.

• 11:36David Sacks?

  Interest rates just have to go up to a point that.

• 11:38Jason Calacanis?

  What's happening in Japan, right? I mean, their bond auctions have been very lukewarm. And supposedly, a lot of the money in Japan is coming west, looking for opportunities to get alpha. So we have an example that we can look to. All right, let's get, we can get started here. We've got so much to talk about. I think we got to give some flowers here. Last year, the Sultan of Science, the Prince of Panic Attacks, the Queen of Kinwa was an absolute terror when I did the All In Summit 2022. And then this year, he was an absolute all-star in delight. What an amazing job you did on the content. People are saying the content at All In Summit 2023 is the best conference ever had. Bill Gurley got a four-minute ovation. And that talk is on YouTube.

• 12:23Jason Calacanis?

  Elon Musk, star LinkedIn from 40,000 feet. He crushed it. Toby was fantastic. Ray Dalio, Larry Summers, Mr. Beast, Gwyneth Paltrow, the Botez sisters, which we did a pretty good showing, I have to say. A great job to Sacks and Friedberg, who, who held the line with the Botez sisters in our group chess.

• 12:48Jason Calacanis?

  Brian Armstrong, who am I missing here? I mean, what an incredible lineup.

• 12:52David Friedberg?

  The fusion panel, Nicole Polk, Rob Henderson, Jenny Just, Rob Henderson.

• 12:58Jason Calacanis?

  I mean, extraordinary. Let me just go around the horn. Chamath, your, what, what, what discussion? Or moment, pick, pick your choice there for you was the most intellectually engaging and important at the summit? You can mention two or three if you like.

• 13:17Chamath Palihapitiya?

  I thought number one were my outfits.

• 13:21Jason Calacanis?

  Pretty great. I mean, you did do an outfit change twice a day, so congrats on that. I liked the

• 13:25Chamath Palihapitiya?

  I thought I did a really good job with that. I do agree. I agree.

• 13:29David Sacks?

  Did you guys get the special shoes from Laura Piano?

• 13:32Jason Calacanis?

  Oh my God.

• 13:33Chamath Palihapitiya?

  The King's cashmere loafers? Yeah, those are ridiculous. I'm wearing them as we speak, actually.

• 13:37Jason Calacanis?

  I wore them the other night and I came into

• 13:40Chamath Palihapitiya?

  Did you wear them yet?

• 13:41David Sacks?

  Yeah, yeah.

• 13:42Jason Calacanis?

  They are like walking on clouds.

• 13:45Chamath Palihapitiya?

  They're the most incredible shoes.

• 13:46David Sacks?

  10 pairs or something and

• 13:48Jason Calacanis?

  Yeah.

• 13:48Chamath Palihapitiya?

  And we got four of them.

• 13:49David Sacks?

  They're special for us. Yeah.

• 13:50Jason Calacanis?

  Then I get back to the Beverly Hills Hotel, the suite that Friedberg booked me a beautiful suite. Thank you, Friedberg. And there is a Laura Piano box.

• 13:59Chamath Palihapitiya?

  Friedberg chaffed me on my room.

• 14:01David Friedberg?

  What?

• 14:01Jason Calacanis?

  What?

• 14:02Chamath Palihapitiya?

  Yeah, I

• 14:03Jason Calacanis?

  Oh, he put you by the garage?

• 14:04Chamath Palihapitiya?

  No, I got a room that was, well, it's very appropriate that these rooms exist, but it's handicap accessible, which totally fine, except the problem is the, the closet and everything is set for wheelchair height.

• 14:17David Friedberg?

  Why didn't you change your room, dude?

• 14:19Chamath Palihapitiya?

  And so all my, and so I thought, oh, he just fucked me on purpose. He just tried to

• 14:22Jason Calacanis?

  He trolled you?

• 14:23Chamath Palihapitiya?

  Little passive aggressive name check. So

• 14:25Jason Calacanis?

  You guys got some work to do in the group therapy chat.

• 14:29Chamath Palihapitiya?

  I would never do that to you guys. Don't worry. When I, when I organize a summit, I'll make sure these details are perfect.

• 14:33David Friedberg?

  I fly on Chamath's plane. He has gluten free Nutella crepes handmade in the morning and I stick him in a handicap accessible room where he can't even put his bag in the closet.

• 14:41Chamath Palihapitiya?

  And I can't put my clothes except without it touching the ground. So then I had to lay them on the bed and then I had to lay them on the sofa.

• 14:47Jason Calacanis?

  Talk about first world problems. Yeah. The audience right now is just triggered by the suffering that you went through at the Beverly Hills Hotel.

• 14:55Chamath Palihapitiya?

  My honest reaction was I thought the content was really inspiring. I guess it's kind of like I knew what I was going to get upfront with so many of the folks because I knew them. But then where I still came away where they exceeded my expectations, number one, probably was Graham Allison.

• 15:10Jason Calacanis?

  Oh.

• 15:11Chamath Palihapitiya?

  I could literally talk to him for eight hours a day, I feel like. And I don't know him well, so I felt like I was scratching the surface of the things that he knew. I could do an entire dinner, I think, where he could just walk through the Cuban Missile Crisis and I could just sit there listening. So I thought he was unbelievably intellectually stimulating for me. Every time I sit down with Toby, I'm just like in awe of how smart and different Toby Lutke is.

• 15:42Chamath Palihapitiya?

  And so I always kind of like walk away thinking this is really one of the very special entrepreneurs of our generation, just in terms of his mindset.

• 15:51Jason Calacanis?

  Underrated.

• 15:52Chamath Palihapitiya?

  I thought Larry had the line of the summit, Larry Summers, where he said, self-esteem should come from achievement and not the opposite, which is that achievement should come from self-esteem. And he was talking about woke-ism and sort of like the entire philosophy around that stuff right now. And I thought that that was really insightful. Those are probably the three moments. I thought Girlie's obviously presentation was superb. But again, it's kind of like saying the obvious because it was just so masterclass. But from what I expected to what I got, those were the three that I thought were the most inspiring and net new positive for me.

• 16:30Jason Calacanis?

  Fantastic. Sax, did you have any moments aside from Gwyneth Paltrow saying she was your favorite bestie? Other than that being the clear number one for you and crushing, soul crushing for us.

• 16:42David Sacks?

  Well, I never even heard that because of the sound issues. We had technical issues during her interview and it got really hard to hear her at various points. And I don't think you guys heard that either, right?

• 16:55Jason Calacanis?

  I heard it. I tried to ignore it. I tried to block it out.

• 16:57David Sacks?

  I couldn't, I couldn't hear it. So I didn't know that.

• 16:59Jason Calacanis?

  Yeah. Well, congratulations.

• 17:00David Sacks?

  Do we have that? Do we, uh?

• 17:01Jason Calacanis?

  Can we queue that up right here? No, we're not doing victory laps on the pod. We talked about this on the chat. No, I mean, That's awesome. Go, go for it. I want to hear it.

• 17:09Speaker 04

  Yeah, my husband, but we have a little bonus concession is he thinks I'm in love with David Sacks. We're planning to do it. So it's, it's okay.

• 17:18Jason Calacanis?

  Oh my God, she said it. She's in love with David Sacks? No, that his, her husband thinks that she is in love.

• 17:24Speaker 04

  My husband, but we have a little bonus concession is he thinks I'm in love with David Sacks. We're planning to do it. So it's, it's okay.

• 17:31Jason Calacanis?

  Uh oh. This is not good. Uh oh. David is incredible. The husband's jealous. And that's not a good situation. We use that. After that, what did you like, Sacks? Be honest. You, I, I want to also give credit to David Sacks, who, um, showed up for every talk. And Friedberg said, uh, J Cal, I have an issue. I said, well, anything I can help? He said, oh, well, actually, uh, the issue is I asked David Sacks to show up at eight forty-five for the run through and the, um, he won't respond to me. Can you, can you get in touch with him? I said, let me tell you what's going to happen with David Sacks. Program's gonna start at nine. He'll be here at eight fifty-six. And if you get him on stage for two out of three talks, you did better than I did.

• 18:13Jason Calacanis?

  And Friedberg's team, which God bless the production board team. They did an amazing job. These Wolverines are incredible. Shout out to Laura, Rachel and everybody on the team there. They did a fantastic job. And sure enough, Sacks shows up at eight fifty-six, goes on stage and he crushes it. So, great job, uh, getting him on stage. But congrats on showing up for us.

• 18:34David Sacks?

  Well, they wanted me, I mean, I asked, when's the first speaker going on stage?

• 18:38Jason Calacanis?

  Yeah.

• 18:38David Sacks?

  I actually think it was ten AM, right?

• 18:40Jason Calacanis?

  Ten AM. I'm sorry, ten. Ten AM.

• 18:41David Sacks?

  Ten. So I'm like, okay, in my head, I'm thinking, okay, I'll be there at nine fifty-nine. And I'm like, what time do you, yeah. And then they're like,

• 18:47Jason Calacanis?

  And you were there at nine fifty-five and I was like, let's get a cup of coffee.

• 18:49David Sacks?

  You need to be there at eight thirty for a sound check. And I'm like,

• 18:53Jason Calacanis?

  Does Mick Jagger come for the sound checks? What?

• 18:58Jason Calacanis?

  I'm sorry, does Jimmy Page like check or? What are we talking about here? Does Madonna come check? Okay, let's start, can we start the show? Can we, have we done self-aggrandizing ourselves?

• 19:08David Sacks?

  Look, I thought the conference was amazing. It exceeded my expectations.

• 19:13David Sacks?

  Your conference exceeded my expectations too, Jake Al, but I think Free Bird took it to another level.

• 19:16Jason Calacanis?

  Yes, he did.

• 19:17David Sacks?

  Exceeded my, my already high expectations.

• 19:20Jason Calacanis?

  Yeah.

• 19:20David Sacks?

  You know, highlights, I mean, I think starting with Ray Dalio as the first speaker was really interesting. I think we only got to go for what 30, 40 minutes with him. I felt like we could have gone for two hours. I'll have to bring it back on the pod and, you know, drill into that topic more.

• 19:34Jason Calacanis?

  Two hours with Dalio would be amazing.

• 19:37David Sacks?

  Cause I think what's really interesting is the way that he's looking at the grand sweep of history, right? He's thinking about not just a 10 year business cycle or a 75 year debt cycle. He's looking at a 250 year empire cycle. I think this is really interesting that he thinks in that really big way. I agree, Graham Allison, really interesting. We could have spent two hours with him. Larry Summers, these are all people I think we should bring back on the pod for a long form conversation.

• 20:04David Sacks?

  I agree that Bill Gurley's talk was one of those great Ted style talks that I think should go viral, I think.

• 20:11Jason Calacanis?

  It has, I think it has.

• 20:12David Sacks?

  20 million people should watch that.

• 20:13Jason Calacanis?

  Yeah. I mean, the people retweeting it are incredible. And I was at a dinner party last night and everybody was talking about it. So it's, it's spread into our industry and it's starting to tip over into other industries already.

• 20:24David Sacks?

  The chess was really fun. I am a game day player that way. You know, I, I brought it and managed to win the game.

• 20:32David Sacks?

  What else? I don't know. There were a lot of great moments. I'm sure forgetting about things.

• 20:36Jason Calacanis?

  I love that. I love that.

• 20:38David Friedberg?

  The parties were incredible.

• 20:40David Sacks?

  The parties were great, yeah.

• 20:42David Friedberg?

  The parties were absolutely incredible. We missed both of you guys at the Grimes DJ set. That was amazing, by the way.

• 20:47Jason Calacanis?

  I think Chamath was there for that. Weren't you there?

• 20:49David Friedberg?

  No, I, I left right at 10 to fly back to the Bay Area.

• 20:53Jason Calacanis?

  Early night, yeah. I got it. Yeah, Sheep Grimes. Thank you to Grimes for doing that for me, a personal favor. Uh, the audience lost their minds. Santa Monica.

• 21:01David Friedberg?

  She was incredible. She's such a performer. It's incredible.

• 21:04Jason Calacanis?

  Yeah, people were losing their minds. For you, Friedberg, best moments onstage?

• 21:09David Friedberg?

  It was just great to be with everyone and go through it. I mean, honestly, I didn't source all these speakers you guys did, and so I don't want to take credit for that. I think it was what I had hoped. You know, I went to TED for 12 years. I started going to TED, I think, 2007, and I felt pretty disappointed over the last couple of years. And I actually spoke to the CEO of TED and said, I'm not going to go anymore, because so much of the talks became kind of social justice-type talks.

• 21:35Jason Calacanis?

  Woke nonsense.

• 21:36David Friedberg?

  That I wouldn't, I don't want to use that term, because I do think it's all very well-intentioned. And I think it just became overwhelming that you would go to TED and you would basically feel bad about yourself. And that it kind of missed the element of the world is an amazing place. We should have a great degree of optimism with technology and where it's taking us. We should observe the greater cycle and the bigger perspective of things that are happening in the world, not kind of go into a whodunit and who's to blame and us versus them kind of mentality, which I think so much of the stuff turned into at TED. And I was really hoping we could capture some of that. And so I'm really glad we got a lot of the speakers we did and had a couple hours to be able to share, you know, those sorts of perspectives. So it was fun. I really enjoyed.

• 22:21Jason Calacanis?

  What you did with the conference in terms of the editorial direction was great. You leveled it up, certainly from last year, as Trumah pointed out correctly. And it had a great amount of optimism, realism, and we didn't talk about superfluous virtue signaling, social justice, woke nonsense, that really is, should not be at the top of the agenda in my mind. I'm not saying that these issues are not important to some people, but I think prioritizing what's important in the world is what I got out of the conference. You know, when you have people on this level, speaking for, for, you know, very long periods, and not long enough, but, you know, Larry Summers and, and, you know.

• 23:04Jason Calacanis?

  Ray Dalio in some of these talks, they really gave you a sense of this is what's important in the world right now. This is the priority. And I came away from it so intellectually stimulated. It made me just say, hey, you know, I want to travel more. I want to read more. I want to have more conversations. And I have been basking in that like afterglow. So I just want to say, you know, once again, what an extraordinary amount of teamwork, just as the moderator of our quartet. Felt everybody did a great job moving the ball around. I think everybody was on their game. Everybody, you know, I'm talking about the three of you guys. Very focused on just knowing exactly when to insert a great question. So I felt like we were playing basketball, like the Warriors when they play prime basketball. Ball moved

• 23:48Jason Calacanis?

  really well. Great questions. People picking up on themes, threading themes from one talk to the other. And it just made me really excited for next year. So I just want to say a great job to each of you. Thank you. Back at you. Yeah, back at you. Listen, we could talk about ourselves all day, but people hate that. Let's talk about what's going on in the markets.

• 24:08David Friedberg?

  Yeah, we only did it for 40 minutes. Perfect.

• 24:10Jason Calacanis?

  Okay, yeah, exactly. IPOs and M and A on fire. We've had a ridiculous week. Six quarters of down market has suddenly turned into a bunch of green shoots. On the M and A front, Cisco announced it acquired Splunk for $28 billion in an all cash deal, if the notes are correct here. It's about 10% of Cisco's market value. Somebody did a trade where they bought a bunch of options. And so that looked a little fugazi. Congratulations to Nancy Pelosi on that trade, possibly.

• 24:46David Sacks?

  Allegedly. Don't forget your favorite word, allegedly.

• 24:49Jason Calacanis?

  Allegedly, allegedly, perhaps. I don't know. She's good at trades. So if somebody's going to make money on that trade, or somebody's going to jail. So congrats to Scrully. Instacart, Klavio, and Arm, all IPOed in the past week.

• 25:05Jason Calacanis?

  And you know, they've fallen back to earth. Just crazy stat. 21 months since the last significant venture-backed company went public. I'll leave out like the Middle Eastern food company, was it Kava that went public? And then the vacuum company that went public. But that's just in the past seven days. So we talked about this on the program. We discussed, hey, we'll know when the markets are back. If some of these companies are forced to walk the plank slash get public, you know, and fix their cap tables. And sure enough, Instacart really kind of represents that most. Most of the late-stage investors in Instacart are underwater. The early-stage folks absolutely crushed it. Chamath, listen, you're a market expert here.

• 25:49Jason Calacanis?

  You've taken a lot of companies public. What do you think the last week means for the greater technology industry?

• 25:56Chamath Palihapitiya?

  I don't think that this was the great reopening that we all were hoping for. I think it's important to understand the dynamics of bank-led traditional IPOs in America. And the best way to understand them is to contrast and compare to how that same company would go public in Europe or Asia, because it'll explain what happened. And I think unfortunately, what has happened is not good for the market. So typically what happens is when you construct an IPO, you're selling 15% to 20% of the company. And when you do that, you go and you call hedge funds and you call these mutual funds, what are called long-only's, right?

• 26:38Chamath Palihapitiya?

  Meaning they don't short, they just go long, these big mutual fund companies. And you try to find a handful of people to anchor the IPO. So they take a huge piece of that 15% to 20%. And in Europe and Asia, the securities law says that when you get such a big allocation, you have to hold it for six months, which means you're treated exactly the same as the employees, who are typically locked up in an IPO for at least six months.

• 27:07Chamath Palihapitiya?

  And so what happens is these firms do all kinds of diligence. And when they buy something, it's because they really believe in it. And then they go long it for, you know, what is at least half a year. So it's a, it's a non-trivial amount of time. So that's what happens in Europe and Asia. Fifteen to 20% of the company is sold. A handful of people anchor and you're locked up for six months. Now you need to look at how American IPOs are done. Which is why people have experimented with direct listings. We've experimented with Sacks. It's because the fundamental architecture of IPOs are broken. They're set up in a dynamic where it's a heads I win, tails you lose situation for the bankers that run the IPO. Now, what happened in these three IPOs?

• 27:52Chamath Palihapitiya?

  Number one, it was less than 10% of the float. So highly, highly, highly concentrated, small amount of the, of the company was made available for sale. Number two, there really weren't anchors. What happened was the allocation of that less than 10% was smeared across 50 or 60 different organizations. And then number three, there was no lockup, which meant that people could sell right away. And so what you saw with all of these companies was the exact same dynamic, which was it opened. Because there was such a small amount of supply, it traded up. And the minute that retail, which typically tends to be late to the game because they don't have access to these things, right? When they started buying,

• 28:37Chamath Palihapitiya?

  what was unique this time around is all of the mutual funds just dumped everything.

• 28:43Chamath Palihapitiya?

  And the hedge funds were like, well, we don't have a real allocation. Our friend said in the group chat, he got a five or $10 million allocation in these IPOs. These are 20 and 30 billion dollar hedge funds. Five and 10 million dollar allocations don't move the needle. So the hedge funds sold right away and got on the sidelines and said, I don't care about this. The long on these bought just enough to make the stock go up because of such a small supply. Then when retail stepped in, they just dumped it all. And so unfortunately, what's happened is all three IPOs within a few days have breached their issue price. Now, they're at the same issue price, maybe slightly higher, but that is an unsuccessful dynamic. What could have been different? The banks could have forced

• 29:26Chamath Palihapitiya?

  these companies to sell up to 20%. The banks could have found a few anchor buyers. The banks could have created a lockup structure for these anchor buyers. They did none of it. And so the result is a lot of downward pressure in a moment where the overhang of rates have come back and are forcing all of us to realize, and we'll talk about it in a second, that these rates are going to be higher for longer, which completely changes how you value these tech companies. So net-net, very poor IPO construction by the banks, and the grand reopening was a grand closing, I think.

• 30:03Jason Calacanis?

  Okay, so just to put some numbers on that, Instacart's float was 6.7%, and Klavius float 7.6%. Arm's float almost hit the 10%, 9.4%, but certainly less than the 20% that you would expect. So then I guess the follow-up question here at Saks is, why did these companies go out? And will we see the other big ones go out, the Stripes and some of the other backed-up inventory? What's the back channel in our industry about the viability of other IPOs? Is this going to push a lot more people out to get liquidity, even at discounted prices, even with the headwinds that Chamath points out? Or is this going to have a chilling effect, and people are going to say, you know what, let me wait till 2025?

• 30:43David Sacks?

  So I think they went out because investors and others need liquidity. And there's no point holding on and waiting for a valuation that's never going to come back. I mean, so you take Instacart, for example, their last private round was at 39 billion. What's the market cap now? Around 10?

• 30:58Chamath Palihapitiya?

  Nine.

• 30:59David Sacks?

  Nine. So it's great that they got out. I think that is-

• 31:02Chamath Palihapitiya?

  No, it's at eight today.

• 31:03David Sacks?

  It's at eight. I mean, look, it's sort of a green shoot that they got out, but we're never going back to the valuation levels that we had a couple of years ago during a giant Zerp-created asset bubble. So I just think there's no reason to wait. And you look at SoftBank, they needed the liquidity from the Arm IPO.

• 31:21Chamath Palihapitiya?

  Yeah.

• 31:22David Sacks?

  So I think that's why these companies are going out, is we're kind of getting back to business as usual. Just to broaden out the question a little bit- What I think is interesting is that for the past year or so, we've been in a software recession. It really started in the first half of 2022. The markets cratered, especially for growth stocks. There's a huge correction in valuations that happened in, especially the first half of 2022. But then about a year ago, starting in mid 22 and continuing through Q2 of this year, you saw a reduction in growth forecasts. Everybody started forecasting down. There wasn't a single board meeting that I was in, in private companies, that wasn't missing their numbers and reforecasting down.

• 32:04David Sacks?

  And you saw it in the public companies as well. I think Jeremy Ball's Substack showed that the average growth forecast for SaaS companies for next 12 months have been cut roughly in half. So for the last year, year and a half, we've been in a software recession. You could say a B2B recession. We saw companies like Meta, Google, and so on, cut thousands of jobs. Tens of thousands. Tens of thousands of jobs, you know, get much more efficient. Yeah. Each. That meant they were buying a lot less software on a per seat basis. So I think we've been through, call it a B2B or enterprise recession. But the thing that's held up stronger than I think people might have expected over the past year has been the consumer.

• 32:47David Sacks?

  Consumer spending has kept the economy afloat. So the B2C part of the economy has been strong, whereas B2B has been very weak. What I wonder about next is whether that's going to flip. I wonder if the consumer is on their last legs here. You see that credit card debt is at an all time high. Interest payments on credit card debt, all time high. Mortgages, the rate now is approaching 8%. So no one can afford to sell their house, which has a 3% mortgage, and then buy a new one at 8%. So real estate transactions have cratered. The commercial real estate industry is, you know, on its last legs. I think they're starting to throw the keys back to the bank and start forfeiting buildings because they can't refi at an attractive rate.

• 33:32David Sacks?

  So I just wonder if the consumer now is about to go through the type of pain and restructuring of their. Balance sheets, the way that the enterprise segment of the economy did over the past year.

• 33:44Jason Calacanis?

  Friedberg, your thoughts on what we're seeing here in terms of the IPO window, companies getting out? And the impact that'll have maybe on how limited partners look at venture funds? That's been frozen for 18 months, limited partners. And I'm raising a fund right now publicly under 506C, so I can talk about it. And it's going great, but man, it's a lot of meetings. And I'd say two thirds of the meetings I'm having, people are saying, we're not adding managers. We're cutting managers and we're cutting commitments to managers. But we'd love to meet, you know, just to start the relationship, you know? So what do you think this means overall for the limited partner GPs and the startup market?

• 34:28Jason Calacanis?

  Start of a turnaround or maybe just sideways for more?

• 34:31David Friedberg?

  I guess we should just put the volume in context. If you look at the slide, this is from Ernst & Young showing the IPO activity by year. And this was through June 30th. So if you assume kind of a steady state, you probably are going to come in at a volume that's less than 22 and perhaps even less than going back all the way to 2019 with less than 1,200 IPOs during the year compared to the peak of 2,400, which happened in 2021. If you go to the next slide and just look at the total dollar volume raised. So the IPO proceeds thus far through June 30th of this year is just around 60 billion.

• 35:12David Friedberg?

  Compare that to a total of about 180 billion all of last year, 450 billion in 2021. And the IPOs we're talking about today, Instacart, Clavio,

• 35:28David Friedberg?

  are in total raised about five and a half billion dollars. So, you know, that kind of doesn't have a huge consequence on this dollar volume for the year. And then if you look at what's in the pipeline right now, in terms of what's publicly filed as S1s, there's basically nothing right now. So I think everyone's kind of sitting around waiting to see how these transactions go before they decide to put other stuff. I think the big mistake is that we continue to treat IPOs as this big yardstick.

• 36:00David Friedberg?

  The real yardstick for a business is the performance of the business. And the valuation you get when you raise capital at some point in time is largely driven by market conditions, not necessarily by the performance of the business and the value of the business over time, the market will do its job and rightly value that company. We've talked at length about how much value has accrued as a public company for Apple, for Microsoft, for Google. 99.9% of their total market value was realized post-IPO. So the IPO transaction, I think it's a little too much weight and gets a little too much attention in terms of determining success or failure of a business and success or failure of the investors in that business.

• 36:42David Friedberg?

  So I really hate this whole thing about does the IPO price go up on a day? It's this really weirdly engineered thing that they try and do to drive psychology and marketing by banks to go out and...

• 36:53Chamath Palihapitiya?

  Who's they?

• 36:54David Friedberg?

  The banks to try and get people to give them more capital or to give them more deals in the future.

• 36:58Chamath Palihapitiya?

  Do you think that the IPO market would be better served if banks were forced to be locked or the allocations were forced to be six-month locked like the employees?

• 37:06David Friedberg?

  Of course.

• 37:09Chamath Palihapitiya?

  Maybe longer. What if they were locked for seven months? What do you think?

• 37:13David Friedberg?

  Well, where would the float come from on day one?

• 37:17Chamath Palihapitiya?

  Well, why do you need a float?

• 37:18David Friedberg?

  Yeah, I mean, that's a good point. I believe the direct listing should be the way that you do this and then you do a follow-on offering once your shares are traded.

• 37:26Chamath Palihapitiya?

  The problem with the direct listing, as I've found as a seller, because I went through a handful of direct listings, I went through Slack and I went through Coinbase.

• 37:36David Friedberg?

  Coinbase, right?

• 37:37Chamath Palihapitiya?

  And in the Slack direct listing, I only sold a small portion on day one and it turned out to be a mistake. And the reason was because the pricing of a direct listing forces you to find the absolute highest price at the open.

• 37:55Chamath Palihapitiya?

  Now, we learned that, so then going into the Coinbase IPO, what all the venture investors did was distributed literally the day before and the day of the direct listing, so that you would get delivered your stock at the highest price so that you could sell. I'm not sure that that serves anybody any better, you know what I mean? Because then you get a lot of price volatility and the price just goes straight down. So, I don't exactly know what the answer is. I suspect though that getting companies to float at least 15 to 20% and doing a better job of allocation so that,

• 38:34Chamath Palihapitiya?

  you're right David, removing the psychology of like it has to go up 100% on day one is success, is the thing that actually catches these companies off guard. Now, we haven't even talked for a minute about whether any of us thinks the quality of Instacart and Clavio and Arm are good businesses. And this is part of it as well.

• 38:53David Friedberg?

  Exactly.

• 38:54Chamath Palihapitiya?

  We just spent 15 or 20 minutes debating the stock price that is completely divorced from the reality of these businesses. And that's a bunch of distraction that the banks create as well, that is totally unnecessary. I mean, what do you guys think about these businesses? Yeah, let's double click on Instagram for a second.

• 39:08David Friedberg?

  Let me just respond to the direct listing point. I just want to also point out Spotify went public via direct listing. The stock actually traded up after the direct listing. It went down a little bit after, but it continued to trade up, you know, into the 2021 era. And today it's trading at or above what it was trading at during the direct listing. So

• 39:25Chamath Palihapitiya?

  Can I tell you why though?

• 39:26David Friedberg?

  The performance of that business fundamentally drove interest from investors.

• 39:30Chamath Palihapitiya?

  The thing with the Spotify IPO was that it was still a very new vehicle. And so that direct listing was, we were all learning as we went along. And at the end of the day, there was one bank that kind of not cornered the market, but really became an expert on it. And they use Spotify as the example. So by the time Slack and then Coinbase came along, the playbook was so tight that everybody knew how to play the game. So I think a lot of the Spotify post-IPO behavior was a bunch of people figuring out what a direct listing meant. By the time that we actually DL'd Slack and specifically when we DL'd Coinbase, the bank was so sophisticated in telling us, here's what's going to happen. Here's what you should do. What do you want to do? And obviously we wanted to do the thing that maximized returns for our LPs.

• 40:17Chamath Palihapitiya?

  So I'm not sure that the Spotify example will ever repeat in a direct listing. I think that the Slack and Coinbase particularly will be the example going forward. You'll top tick day one and then the thing will spear down, find a bottom and then rebuild.

• 40:31David Friedberg?

  Why does that matter? Why, isn't it ultimately about finding the real market value for the company?

• 40:35Chamath Palihapitiya?

  Yeah.

• 40:35David Friedberg?

  And that it doesn't matter, it doesn't matter that the price goes down or goes up, that ultimately the buyers that want to pay a certain price will step in and buy. And the folks that want to sell because they think the price is higher than their mark will want to sell.

• 40:45Chamath Palihapitiya?

  I agree with you. I do think that it's really about business fundamentals, but there's a lot of people that

• 40:52Chamath Palihapitiya?

  get caught up in the price as what the quality of the business is. Now, those people are maybe not the most sophisticated people in the world, but they make a lot of noise for not knowing what's going on. And so they can be a real distraction to a CEO trying to run a business.

• 41:06David Friedberg?

  I remember in 2008, I think I've told you guys this story. It was like November of 2008. Expedia was trading down to seven bucks and I saw Dara at some event in March. Yeah, March. And he said, hey, our stock's at seven bucks. I can't believe it. I mean, like, everyone should be buying our stock. And that was well off of the price that it had been trading at in oh three, oh four, oh five. And sure enough, if you had bought that stock, you know, you would have made 15X from there to where we sit today and even more if you sold at the top tick in 2021. So, you know, these, yeah, that's a, that's a good chart. So look at where Expedia was in, in March of oh nine, it was right around seven bucks.

• 41:48David Friedberg?

  And I think that that was for me, like the first example where I really understood that the price where the market trades a stock shouldn't matter as much as the fundamental value of the business, if you're willing to be a long-term holder, if you're willing to say, you know what?

• 42:02Chamath Palihapitiya?

  And you're willing to do the work and you have to do the work.

• 42:04David Friedberg?

  Yeah.

• 42:05Chamath Palihapitiya?

  Most people are not willing to do the work. They want to look at a price and then they want to imbue all of their own psychological desires into it versus what are the actual ones and zeros of a spreadsheet tell you?

• 42:17David Friedberg?

  Yeah, but I'm like a pure efficient market guy. I feel like the, you know, whatever shares should be, people want to sell, they should be able to sell. Whatever people want to buy should buy the market. And if the stock gets too cheap, there's plenty of capital out there to step in and buy the stock if they think that it's too cheap and the market will find itself, so.

• 42:33Chamath Palihapitiya?

  Let's do the underwriting of Instacart then.

• 42:34David Friedberg?

  Were any of you guys investors in Instacart?

• 42:36Chamath Palihapitiya?

  No.

• 42:37David Friedberg?

  There are any?

• 42:38Chamath Palihapitiya?

  I am in a fund that's in Instacart.

• 42:41Jason Calacanis?

  From the seed round, so I will do, I think, very well because of that. Uh, let's bleep that out. Thank you. Uh, that's, that will be a, that'll be a yum yum for J Cal. But let's just talk about revenue.

• 42:55David Sacks?

  Yeah, but actually, Jake, when it trickles down all the way to you as an LP, what's the real multiple?

• 43:01Jason Calacanis?

  I guess, you know, if you take out the carry, 25 or 30% less than, uh, what looks like to be, I'll tell you the game.

• 43:09David Sacks?

  Pay back the whole fund first, so.

• 43:11Jason Calacanis?

  Yeah, that, that fund's been paid back many times over already, so that. Do you know what the multiple is on that fund for you? Yeah, it'll, it was 8 million invested and, uh.

• 43:21David Sacks?

  No, that's their investment. That's not your investment.

• 43:24Jason Calacanis?

  Yeah, what, if, if you look at your, if you look at your investment, what multiple have you gotten back? That investment's gonna be, uh, 200X, 100 or 200X, somewhere, somewhere in that range. I'll, I will report back, but I think the seed round investors are gonna be.

• 43:36David Sacks?

  Hold on. So, so you're saying 8 million will become 1.6 billion?

• 43:40Jason Calacanis?

  I think it's over a billion. We, we can actually have a chart here. Let's take a look at.

• 43:44David Sacks?

  Let's, let's assume it's a billion. 1.6 seems a little high. Let's say a billion. But let's say the fund was what, 500, 600 million? So, for the LP, it's like a 2X. I'm just saying that, yeah, for the fund, it was 100X, but for the LP, it's a 2X.

• 44:00Jason Calacanis?

  I think that's.

• 44:00David Sacks?

  There's a big difference, right?

• 44:01Jason Calacanis?

  Funds already in the block, so mitigating factor.

• 44:04David Sacks?

  Okay, so it's 2X returns of your investment.

• 44:07Jason Calacanis?

  Uh, meaning if it was a 4X, Jason, he's saying that it'll become a 6X. Yeah.

• 44:13Jason Calacanis?

  Yeah, something like that. Yeah.

• 44:14David Sacks?

  I mean, it's a good fund. I'm not disparaging it, but I just, I'm just trying to set things and put things in proportion.

• 44:19Jason Calacanis?

  I think, I, I think at this point, that fund's at 21X right now. Something in that range. So, it's a pretty great fund in, in terms of total. So it'll go to 23X, something to that effect, yes. Uh, it's gonna be pretty amazing.

• 44:33David Sacks?

  What else was in there?

• 44:34Jason Calacanis?

  I think that was Instagram and WhatsApp were also in the fund either before or with it. So there were It's a pretty good fund. There were two funds. I wouldn't say which firm this is. What 12 and 24X, I believe is the last time I checked the number.

• 44:53David Sacks?

  WhatsApp was a monster. That was a really

• 44:55Jason Calacanis?

  Well, everybody learned from WhatsApp. And, you know, shout out to the Sequoia team, Doug Leoni, I think. And they did every round. Jim Gatz did that one. Yeah. They did every round. So it was an internal round for, I think, four rounds in a row. So they just made preemptive offers.

• 45:12David Sacks?

  The reason WhatsApp was a home run is because it was so capital efficient. They didn't burn that much. They didn't raise that much. So there's very little dilution

• 45:22Jason Calacanis?

  Yep.

• 45:22David Sacks?

  For everybody.

• 45:24Jason Calacanis?

  I mean, and that is

• 45:25David Sacks?

  And I think that's the problem with Instacart is how many billions did they have to raise?

• 45:28Jason Calacanis?

  Let's pull up this chart here. This is super telling to pull up, you know, who made money. And I think this shows you what happens in a CERP environment when people do not look at entry price. The Series C underwater, no, no, Series C not underwater. Everybody from F on is kind of underwater. And everybody from the Series C is underwater compared to the S and P 500 to your point of free free bird.

• 45:52David Sacks?

  Series F broke even. And then everybody who invested in 2020 and 2021 actually lost money.

• 45:58Jason Calacanis?

  General Catos, DST, D1, TRO, Fidelity, all the late stage folks, even Sequoia was in that late stage, that Series I in 2021, when it was worth 39 billion. So, but

• 46:09David Sacks?

  But that whole environment, not only was it bad for all the late stage investors who invested at too high a price, I would argue that it was bad for the companies and even their early stage investors because these companies got so inefficient.

• 46:22Jason Calacanis?

  The dilution is ridiculous. Yeah. The dilution was ridiculous.

• 46:26Chamath Palihapitiya?

  I also think you have to think about this in the context of what your alternative returns are. I think that we always look at these numbers and we think we try to make judgments, but if you put yourself into the mindset of an investor. It's actually the alternative of what you could have gotten. And it's the spread between the two that's really important. So Nick, you want to just throw up this image that I just sent you? This is an example that I saw in Axios. I thought that this visualization, by the way, I want to try to use this visualization in the future. Because it tries to really, it just paints a very clear picture. This is wonderful. Let's, let's sports. But what this picture shows is essentially, and this uses Instacart as an example, but you could use it for any company.

• 47:06Chamath Palihapitiya?

  But it just basically shows you at every point in which you could have invested money in Instacart. What would the equivalent return have been had you just invested that same amount of money in the S and P 500? And the difference between that is what you would call the alpha. Right? Because the S and P 500 is the beta, meaning it is what the market's going to do. It'll be up 10%, it'll be down 4%, whatever. And so by owning the market, you get that. If you decide to not own the market and make an explicit decision like owning Instacart, then you get a different return stream. And if you compare the two, you know how much better or worse you would have been. So what this chart shows, for example, is the Series F investor in 2018.

• 47:48Chamath Palihapitiya?

  If you had taken a dollar and put it into Instacart, would have gotten 13%. But if you had put a dollar into the S and P 500, you would have gotten 68%. In the Series C in 2015, had you invested a dollar in Instacart, you would have made 153%. But the S and P would have returned 121. The difference means that the Series C investor generated about 32% alpha. Now then, the decision you have to make is that 32% of incremental gain over the last seven years or eight years, was it worth it? You're not liquid. And because you have to then solve for illiquidity and other things.

• 48:32Chamath Palihapitiya?

  And this is the math that I think all of the LPs will be engaged in. They'll be doing these calculations. It just goes back to what Sacks's point said, which is, "Our business frankly did very well in moments where we had zero interest rates."

• 48:47Chamath Palihapitiya?

  Our business now, when prevailing rates are at 5% or 6%, and you can own those things, or you can own structured credit for 11% to 13%, our business unfortunately does not look so good. And when people do the calculations on what the true alpha of venture capital is, they're going to come back with answers like this, which is, "It's not that great." And I do think it will impact how limited partners have an appetite to give all of us, or you guys, folks that are accepting LP checks, more money. Because the alternative universe is more liquid, it's less volatile, and it has roughly the same amount of return.

• 49:27Jason Calacanis?

  I can tell you what they're saying, because I'm doing about a dozen LP meetings a week, and I've got 50 more on the calendar till the end of the year. So I'm going to hit 100 of these meetings. They're really saying two things. One, we want to go earlier, we don't want to go later, as that chart proves. They're suddenly fascinated with the seed and Series A rounds, and they're looking for distinctly different strategies. They're looking for some sort of edge. So the first two questions are, how early are you getting in and securing a 10% position in this company? And then, what's your edge? And literally, the start of my pitch deck now, when I walk people through it is, I have two podcasts. One of them gets 50 million listens a year, the other one gets over 50 million listens a year.

• 50:10Jason Calacanis?

  Those 100 million listens result in 20,000 applications. I have larger deal flow than anybody, with the only exception being Y Combinator. And that resonates with folks. But if you're somebody who's got a new fund, and you're like, "What's your edge?" I go to, you know, some demo days, that's not an edge. You have to have a massive competitive edge, and a differentiation. You have to be differentiated in some very credible, believable way. And they're telling me the same thing. They're cutting two funds out of their 20, and then they're cutting their commitments to the weaker ones of the other 18.

• 50:45Chamath Palihapitiya?

  I have a question for all of you guys. You had a wonderful question, which we never touched. Guys, what do you guys think about the ARM business model, or the Clavio business model?

• 50:52Jason Calacanis?

  Let's go to Instacart first.

• 50:53Chamath Palihapitiya?

  Have you guys had a chance to look at any of those companies and think about that?

• 50:56Jason Calacanis?

  Yeah, let me tee up the facts, and then you guys respond. The revenue is up 15% year-over-year, 716 million. Ad revenue is 206 million. That's on pace to make up 28% of their revenue. This is just the last quarter. I'm talking about it right here, ended June 30th. Net income, 114 million. They have 600,000 Instacart shoppers. Those are like the drivers. You can think of them like DoorDashers or Uber drivers. 7.7 million monthly active orders. The red flags is that their gross transaction volume, which is the value of all of the groceries in the bags, is flat. But ad revenue is growing. This means ad revenue is just a massively larger percentage of the total revenue. They think they can, you know, they're on track for 800 million in ad revenue. So this is starting to look not like a e-commerce business,

• 51:41Jason Calacanis?

  but more like a, an advertising business. Your thoughts, Free Burger or Saks, on the actual core business?

• 51:47David Sacks?

  Amazon, by the way, has that dynamic too now. Have you seen the charts showing advertising on Amazon compared to the entire internet?

• 51:54Chamath Palihapitiya?

  Yes, it's huge.

• 51:55Jason Calacanis?

  And also Uber's blown past a billion, I believe.

• 51:58Chamath Palihapitiya?

  Here's what we know. We know that advertising multiples, broadly speaking, have contracted. Right? So I think that the market in general doesn't love that revenue quality because it's too levered to interest rates and the economy. So when the economy does well, more companies advertise. When the economy doesn't do well, companies advertise less. That's number one. And number two, the ones that can systematically drive advertising more broadly, the Facebooks and the Googles of the world, tend to get an increasing share. So advertising as a revenue stream, I think, is, is good and complementary. Unfortunately, the markets don't necessarily love it. And then the second thing, generally speaking, for these businesses that drive huge GTVs, gross transaction values, is

• 52:43Chamath Palihapitiya?

  I think most people, when they try to find what they're worth, are very sensitive to the take rate. And what they typically do is they assume a falling take rate, which means what percentage of the transaction can you get? And the reason why most people do that is that history has shown that these kinds of businesses cannot defend take rate for a very long period of time. Whether it's for competitive pressure or whether it's because their suppliers actually develop more pricing power, take rate tends to decay. So said in, you know, in grocery land, I think it's because Walmart and Amazon.

• 53:23Chamath Palihapitiya?

  Will try to do it for much, much cheaper and or charge just be more aggressive in how much they they want to keep, which means it's less that you can maybe necessarily pass through. I don't know the Instacart business at all, but if I were starting to look at it, that's where I would focus is what are the assumptions on take rate? And if the take rate is going up, it would be a little bit of a head scratcher. I think that you have to model the health of the business with a declining take rate and growing share.

• 53:51Jason Calacanis?

  Yeah, I can actually build on that pretty easily, having spent a long time in the advertising market. If this was very profitable advertising, Chamath, it would get a 25x multiple on earnings. Let's take that 800 million. You put it at 400 million in profits, like if the other business didn't exist, so you have 400 million in profits of advertising, times that by 20, you get 8 billion. That's exactly there, market cap. So perhaps what you're saying is exactly what the market is, is actually penciling out Google, which obviously has a lot of other technologies, I think a 28x PE and Facebook has crushed it at like a 35 PE, but these are much different scale and scale matters.

• 54:35Jason Calacanis?

  This is not one or two billion in, you know, a little extra revenue on top of your business. That's the entirety, 90, 95% of their revenue.

• 54:43Chamath Palihapitiya?

  I think what's working in favor of Instacart is that if you compare it to probably Uber and DoorDash or Airbnb at least, Airbnb dash, I'm going to guess that it looks pretty cheap. Now, I think of all the three businesses, Dash probably has the biggest upside, quite just like again, arm's length. I don't, I don't own any of these three stocks. I'm just saying business model quality, Dash seems infinitely scalable. Airbnb, I think probably has long-term issues with take because of this exact reason, because just competitive dynamics and pressure, regulatory capture, you're seeing that in New York for Airbnb. And then the question is, what is the business outside the United States look like for Instacart?

• 55:26Chamath Palihapitiya?

  I don't know, but if I had to figure out what to pay for, that's how I would kind of try to break the problem down.

• 55:32Jason Calacanis?

  Sacks, any of your thoughts on the, on the actual business here, or do you want to jump over to Klaviyo?

• 55:36David Sacks?

  Yeah, I think Klaviyo is the really interesting one, at least from my standpoint, because it's a software business. I think Jason Lemkin had the take here. He said that Klaviyo's IPO will be the ultimate yardstick for SaaS in 23 and 24. Top growth, top margins, top founders, going to cruise past a billion in ARR. Whatever multiple they end up trading at, you're almost certainly worth less. I think it's trading at about 12 times forward revenue. So just.

• 56:04Jason Calacanis?

  Revenue or ARR? Last quarter, they did 165 billion, sorry, 65 million, sorry.

• 56:09David Sacks?

  Yeah, so they're at 650 million in ARR, growing 56%. That's amazing. So.

• 56:16Jason Calacanis?

  Year over year, 51%.

• 56:17David Sacks?

  Year over year. So, you know, project that forward, they're probably going to be at a billion in ARR next year. 119% NRR, which is very good, especially considering that is from SMBs.

• 56:28Jason Calacanis?

  Folks.

• 56:29David Sacks?

  It's not revenue retention. It's, the way to think about that is if you just look at your existing customers, going into next year, what percent of that subscription base is going to be there? And if it was 80%, it would be 20% of your customers are churning away. If it's 119%, it means you have expansion from your customer base. In other words, your customers are buying more. And there, there will be some who churn, but the ones who are expanding more than make up for that. And then they've been very capital efficient. Apparently they've only burned 15 million to date. That does not mean they've only raised 15 million. They've raised several hundred million in various growth rounds, but they've still got that money in the bank. So I assume they raised it as a cushion in case they missed their forecast or something like that.

• 57:15Jason Calacanis?

  Yeah, it seems like a pretty strong business.

• 57:17David Sacks?

  But I think his point is right, is that they're kind of the ceiling, you know? So I think founders still have maybe unrealistic expectations from the days when SaaS businesses were being valued at 100x ARR.

• 57:29Jason Calacanis?

  Have you had this conversation, Sax, with folks coming in for funding who have great businesses, or let's call them good to great businesses, somewhere in that zone, they're seven, eight, nine businesses, but their valuations are way off? And do you bring up, hey, here's what your company would be worth publicly, this is what your last round is, and then trying to negotiate in between those two numbers? Because it does seem like founders are bringing that up proactively in some meetings with me. They're actually aware of public comps now, and they're kind of admitting, hey, I get it, kind of situation.

• 58:04David Sacks?

  Yeah, I think founder expectations have adjusted on this.

• 58:06Jason Calacanis?

  Yeah, which is healthy.

• 58:08David Sacks?

  When you're in a hot market, there's definitely a lot of sharing among founders of what's happening and where valuations are at. And I think the same thing is probably happening in the down market as well. So, yeah, I think everyone's getting more realistic.

• 58:21Chamath Palihapitiya?

  Yeah. Just to finish on Klaviyo, I just want to give a shout out to Toby Lukie. The best thing that I saw about that was that Shopify actually owns like 11% of this company, which I think like, if you look at the corporations, again, just doing an incredible job of building an ecosystem, not only does Toby support these companies, but Shopify ends up owning a huge non-trivial portion. I think Shopify owns like 11 or 12% of Klaviyo.

• 58:45Jason Calacanis?

  Amazing.

• 58:46Chamath Palihapitiya?

  I think with the sale of the Flexport, Deliverer back to Flexport, they own 13 or 14% of it. I suspect they probably own a non-trivial share of Stripe. I'd say it's incredible.

• 58:57David Sacks?

  You're right.

• 58:58Chamath Palihapitiya?

  And by the way, if you do some of the parts on Shopify, their cash and cash equivalents are only valued at like 2 or 3 billion. So I feel like there's a ton of upside there, just for free. Again, I don't own it, I haven't done the work, but I'm just saying, seems like, seems like he's a great.

• 59:11Jason Calacanis?

  Same thing Travis.

• 59:13David Sacks?

  So I think that brings up a really interesting point, which is the only vulnerability or negative, I think about Klaviyo's business is the fact that 70% of it is on Shopify. So that's a platform dependency. And whenever 70% of your business is on one platform, you always have to be afraid of getting the rug pulled out from under you. By the way, that was PayPal's problem back in the day, 20 years ago. 70% of our business was on eBay. eBay had a competitor. We were constantly worried that they were going to pull the rug out from under us. If we could have made a business deal with eBay, we would never have had to sell the company. It would have been ideal. I think Klaviyo was really smart, creating alignment with Shopify by letting them invest, giving them equity, doing a rev share agreement.

• 59:55David Sacks?

  And they would be smart to continue that rev share agreement into the future to take this risk off the table. Because investors do not like existential risk. You could have a perfect business, but if there's some hard to quantify risk of the whole thing basically getting rug pulled, then how do you discount that?

• 1:00:11Jason Calacanis?

  David, as an investor, you look at that and you're like, okay, I then price this company as a function of Shopify?

• 1:00:17David Sacks?

  That's a good point. I mean, 70% of the business is Shopify. The way I would look at it is I would price it as a SaaS business because Shopify is more of a transactional, well, they're a transactional slash SaaS business. Klaviyo is a pure SaaS business. I'd price it as a SaaS business, but I would have to create some sort of discount for the chance that, you know, that the...

• 1:00:39Jason Calacanis?

  Well, Shopify adds the features.

• 1:00:41David Sacks?

  How do you figure that out? That's a really complicated thing to figure out.

• 1:00:44Jason Calacanis?

  Yeah, I agree.

• 1:00:45David Sacks?

  But I think that Klaviyo mitigates the risk, except they do this like rev share agreement.

• 1:00:50Jason Calacanis?

  It's a really savvy move for people who have insights into the market to own pieces of emerging companies and lock in that partnership. Uh, this was Emile Michael, a shout out at Uber, and Travis did this with all of the Grabs, D Ds, et cetera. And then Dara just slowly sold those positions and they were incredible cash accretive to that stock and into running that business. Let's talk about Airtable for a second. Um, this also trended on Twitter with the tweet storm. If you don't know what Airtable is, it's kind of like...

• 1:01:20David Sacks?

  What is it?

• 1:01:21Jason Calacanis?

  It's like Excel meets a database and it's more programmable. So if you wanted to have a bunch of data...

• 1:01:26David Sacks?

  Who uses it?

• 1:01:27Chamath Palihapitiya?

  A lot of small businesses use it, medium sized businesses, and they use it to, let's say, instead of hiring somebody to build a database system.

• 1:01:37David Friedberg?

  It's like Google Sheets on steroids. It's actually a really good product.

• 1:01:40Chamath Palihapitiya?

  It's a really sick product, yeah.

• 1:01:42David Friedberg?

  I've seen it used like 10 different ways. Some people use it for tracking product feature requests and, you know, task lists. Some people use it for contact database. Some people use it for complex project management. It's super extensible, super easy to use, and a great collaborative tool.

• 1:01:59David Sacks?

  Think about it, like it's like a spreadsheet for words instead of numbers.

• 1:02:03Chamath Palihapitiya?

  Yeah, but you could also do numbers.

• 1:02:05David Friedberg?

  Yeah, with a lot of great features that you can do really dynamic things within the spreadsheet.

• 1:02:09Chamath Palihapitiya?

  Do you guys believe in this Swiss Army knife approach of building these kinds of things? Or do you believe that it's just cheaper and simpler to build best in class versions of each of those use cases, Freebird, that you just mentioned?

• 1:02:20David Friedberg?

  I think it allows certain businesses to have a very specific, tunable version of what they need from, call it a project management tool. So if you use a traditional project management tool, it may be too overbuilt, or it may be too specific, whereas this tool allows you to build something unique for your platform. So that's where I've seen a lot of teams use it instead of other tools like Jira or whatever for tracking.

• 1:02:42Chamath Palihapitiya?

  Well, this is the point. I just wonder that you get these small, non-scalable use cases, because then if a company is successful, don't they then just migrate to Jira, for example?

• 1:02:54David Friedberg?

  No, I do it a lot like spreadsheets. Basically, the reason people use spreadsheets for so many different things is because everyone's got their own representation of data and utilization of a spreadsheet. And I think this is just an extension of that. It's a cult. Think about it as a more feature-rich spreadsheet tool.

• 1:03:08David Sacks?

  I actually think that Chamath's question is an excellent one. I tweeted many years ago that the way I saw Excel was the long tail of use cases that hadn't moved into a dedicated SaaS app yet.

• 1:03:20David Friedberg?

  That's interesting, yeah.

• 1:03:21David Sacks?

  And that the way that if you wanted to be a SaaS founder, you're trying to come up with ideas, find some really complicated Excel spreadsheet that's used across many different businesses. And just figure out if you can move that into a SaaS app. So for example, think about Harda. You know, before Carta, people just use a spreadsheet for the cap table.

• 1:03:39Jason Calacanis?

  Totally.

• 1:03:39David Sacks?

  And every company.

• 1:03:41Jason Calacanis?

  Totally.

• 1:03:41David Sacks?

  Had a cap table spreadsheet.

• 1:03:43Jason Calacanis?

  Totally.

• 1:03:43David Sacks?

  But they just moved that into a specific SaaS app. So I think there's a lot of that. And so.

• 1:03:48David Friedberg?

  And all a spreadsheet is, it's a visual representation of a database with some relational logic that you build into the cells of the spreadsheet.

• 1:03:55Jason Calacanis?

  And this, this pattern of breaking apart, breaking apart a major product was the playbook for Craigslist. People looked at Craigslist and said, oh, there's couch surfing, make that Airbnb. Oh, there's a ride sharing. I'm going to LA. I have two extra seats. That became like Uber. So people, this playbook has existed.

• 1:04:13David Sacks?

  Visual of that too, where every category on Craigslist became its own dedicated marketplace.

• 1:04:18Jason Calacanis?

  Yeah, yeah. TechRabbit was one. Well, you know, so everybody uses, Free Break, everybody uses something different. It's interesting that it comes to you. That's the one that comes first.

• 1:04:27David Friedberg?

  Craigslist was a huge dating product before dating apps came around.

• 1:04:30Jason Calacanis?

  It was casual encounters or missed, what was it called? Missed connections. Missed connections. Missed connections was hilarious to read. It was like me, you, the number four train.

• 1:04:39Chamath Palihapitiya?

  The point, I think the point, though, the question that I was asking is exactly this, which is, you have these beefed up workflow things that happen in Excel. But then eventually you go to these systems of record that are purpose built to solve the use case. And if the use case is important enough, it just seems like that's what's happened. I don't have a view because I've never used the product, but I wonder whether part of this valuation reset doesn't reflect that dynamic.

• 1:05:07Jason Calacanis?

  It is a dynamic. The two companies or, yeah, two or three companies that represented best is there's a product called Coda, uh, which is part Wiki, part Airtable, part database, and it's programmable and Notion. And now people are making templates in Notion and then they're adding. Things like project management. So I asked my team to do project management for events. And they tried Basecamp. They were looking at Asana. And then somebody was like, you know what? I just added it to Notion. It's good enough. It's not as good as those other two products, but it's good enough. And we don't have to. And the reason they didn't want to do it is not because we're cheap. I don't want to spend money on another SaaS product. We don't want to have to teach everybody a new SaaS product. We don't have to want to do the logins for that.

• 1:05:52Jason Calacanis?

  So I think it is a natural tension and people are doing both. Some people like the best of breed. But you're also seeing it. I don't know if you saw this past week Slack added, I think during Dreamforce, the ability to give you an AI summary of everything you missed. And then Zoom added AI summaries of calls. So that feature that I guess Otter and some other people were doing, that feature is now built into Zoom. You get a transcript from Zoom for free and now you get a summary of the call for free. That is work that was done by somebody on the meeting, right? Somebody was responsible for being the note taker. Sometimes somebody was. So those are jobs that are gone. And I think it speaks to the bigger economy. I had the CEO of Kayak on this

• 1:06:34Jason Calacanis?

  week and startups this week. It'll come out next week. He's really great. And I asked him about hiring and the size of the company. He said, I'm not hiring anybody in the next year or two, because all my developers are 30 or 40% better. I got junior developers that are acting like senior developers. I got senior developers who are turning into 10x developers. We're not hiring. We're just going to have increased margin. So what happened to Airtable? Airtable had a massive valuation. Here's the tweet storm that somebody from CB Insights, this guy Anand, who I think I follow him. Oh, so did something happen or nothing? Well, they're most recently valued 11.7 billion in December, their 2021 Series F. His thesis, not only is Airtable worth less than 11.7 billion, it's likely worth

• 1:07:15Jason Calacanis?

  less than the 1.4 billion in funding it has raised. Friedberg's been bringing this point up over and over about the overfunding and cash in is less than the valuation.

• 1:07:24David Friedberg?

  I think most, yeah, most of these unicorns are worth less than their total press stack. And this is a good example. I've just been through this this week. I went, I saw there's a company I was an investor in that I saw this happen.

• 1:07:34David Sacks?

  Their big problem is, I mean, they're doing over 100 million of ARR. It's a great product and 150 million of ARR, that's no small feat. The problem is the growth rate, I think, is only 15%.

• 1:07:48David Friedberg?

  What do you do with the founders, Sax? Because this was my point earlier. Is in these circumstances, it's still a good business. Investors are going to want to own these shares at some price. Someone will buy new shares at some price. But to do this transaction, given that the preference in the company, which is effectively debt, is greater than the value of the company. The founders and the employees get their ownership stakes wiped out. So if you want to keep the employee, you know.

• 1:08:10David Sacks?

  I think their only hope is to go public because that wipes out the pref stack and everyone basically just owns their percentage of the company. If they don't go public.

• 1:08:18David Friedberg?

  And why would a private investor do that? Why would a preferred investor allow that to happen?

• 1:08:22David Sacks?

  Well, this is going to be the huge tension on the board is that if you're a common holder or if you're one of the early investors of the company, you want to go public. If you're a late-stage investor, you don't want to give up your preference.

• 1:08:33Jason Calacanis?

  But those late-stage peoples, Sax, did not have blocker rights in many cases because the market was so hot, they just put the money in without a blocker.

• 1:08:41David Sacks?

  Yeah, I mean, unless they had a ratchet into the IPO, but yeah.

• 1:08:43David Friedberg?

  Yeah, but in many cases, but that's not a universal truth, right? It in almost, in the majority of these cases, the preferred shareholders do have significant representation on the board. They do have the ability to influence whether or not the company is going to go public. And there's likely some middle ground that every company ends up having to meet at, which is we're going to recap the company in a way that we're going to give some shares, newly issued shares to founders.

• 1:09:05Jason Calacanis?

  What we saw with DoorDash, DoorDash, they got dragged along. Yeah, in DoorDash, I think they all just got dragged out. They didn't have a choice. My understanding of some of these late rounds during peak Zerp, 2020, 21, from talking to Bill Gurley, was people did not negotiate those rights, those rights, the blocker rights weren't available. And if the majority of common says we're going public, you're going public. And that's the, that's the end of the story. Here's, here's the punchline to the airtable. If you look at the Ford price to sales multiple, 78 X for an $11.7 billion valuation at 150 million ARR, and you compare it to the trailing price to sales multiples. In the project management space, Mondays at 12 x plus, Asana 6.6x and Smart Sheets at

• 1:09:50Jason Calacanis?

  just around 8x. So it's a challenge.

• 1:09:53David Sacks?

  Yeah, well, to Friedberg's point, one of the downsides of taking all this excessive capital at these ridiculous valuations is that it produces a dynamic in your boardroom where your board members are at war with each other. The late-stage investors are going to be at war with the early-stage investors and the founders. And who knows who comes out on top of that thing.

• 1:10:12David Friedberg?

  I've been seeing this. I don't know. I don't know if you guys have, but I've got like so many anecdotes over the last couple of months on this exact scenario playing out.

• 1:10:20Jason Calacanis?

  Well, take us through an amalgamation of those, you know, without talking about specific ones, but you know, you can make an amalgamation. What is the dynamic and how does it work itself out?

• 1:10:29David Friedberg?

  Investor invested a multi-billion dollar valuation. The company is now worth 20% of that valuation. And the investors have more money in the company than it is worth. And the company needs more cash. They can't go public at this rate because the markets are shut down. No one's going to buy new shares. They can't raise cash by going public. So they have to raise cash in the private markets. So then the tough question is, okay, what's the value of the company? In almost all of these cases, the CEO has been replaced. Or there was some professional CEOs. There's a new option pool created, equal to 10 to 15% of the company. New options are issued and a round is done at a significant discount and there's a huge recap and a pay to play and all this other sort of stuff starts to

• 1:11:10David Friedberg?

  play out that the original founders in the company get wiped out. Most of the management team leaves because their options are now worthless. And the investors who historically have been totally passive, late-stage investors have had to step in and try and take action in rebuilding a management team, which guess what? They're not necessarily good at. And so it ends up becoming this really nasty unwinding of the business because everyone thinks, oh, well, I deserve to get a fair deal because I put money in and I have a preference in this company. Founders don't want to see their ownership go down from 20% to 2%. They're like, why would I keep working for 2%? I'm fully vested. I'm going to leave. The management team's like, wait a second, I'm getting offers left and right to go join other companies. And so it's a real kind of nasty unwinding. And I think that's the scary scenario that's likely going to play out. Not all

• 1:11:54David Friedberg?

  But a good chunk of these companies that are there are still businesses. They have decent value to their business, but they just raised too much capital relative to the valuation of the business today.

• 1:12:02Jason Calacanis?

  If you looked at it on a blank piece of paper, these businesses would look incredible at whatever the true valuation is today. But if you have the psychological hindsight bias of what the price was two years ago, you just can't see that.

• 1:12:17David Friedberg?

  Can't get it. Totally.

• 1:12:18Jason Calacanis?

  Can't get it.

• 1:12:19David Friedberg?

  By the way, I will say.

• 1:12:19David Sacks?

  And their structure, there's like legacy structure in the cap table from.

• 1:12:24David Friedberg?

  Yeah.

• 1:12:25David Sacks?

  Yeah. Meaning there's like this prof stack.

• 1:12:26David Friedberg?

  I will say that the terms are so crazy good for the recap that investors are clawing their way into the recap round.

• 1:12:34Jason Calacanis?

  Well, that means nature markets are healing. That's means we're in the end game, right?

• 1:12:39David Sacks?

  That's part of what's happening. Part of what's happening is they bring it. It's totally predatory. Totally predatory.

• 1:12:45Jason Calacanis?

  It's predatory, but that means.

• 1:12:47David Sacks?

  When you have.

• 1:12:48Jason Calacanis?

  They're going to be able to go public again.

• 1:12:49David Sacks?

  I think that when there's a recap and the founder is still running the company, there's a chance of it being fair. But when they bring in a new CEO who then does a recap.

• 1:12:59Jason Calacanis?

  Oh yeah, they don't care.

• 1:13:00David Sacks?

  They don't care. They don't care about their investors. They don't care. Exactly. And all these recaps turn into a disaster.

• 1:13:06Jason Calacanis?

  Yeah. Well, it's recap or you're going to go out of business. So, I mean, this is a force and function and everybody party too hard. I think it's time for everybody's favorite part of the show, which is to give Chamath his flowers. Here we go. Chamath, the Fed spoke this week and it's time for Chamath to take his victory lap. Here he goes, everybody.

• 1:13:40Jason Calacanis?

  Chamath.

• 1:13:41David Friedberg?

  Is this?

• 1:13:41Jason Calacanis?

  Holly Hoppeteen.

• 1:13:42David Friedberg?

  This is Vangelis. Yes.

• 1:13:44Jason Calacanis?

  Vangelis doing chariots of fire. This week, the Fed said, to quote Chamath.

• 1:13:53Chamath Palihapitiya?

  Well, this is like I paid in this is this is but this is about having connections to the deep state. For longer. There he is. There's Shama, leading the pack. I sent my I sent my talking points from six months ago to my deeps to our friend deep state. Deep state sent the note. And deep state sent it to the Fed and the Fed just cut and pasted it into the. Rates will stay higher for longer.

• 1:14:18David Sacks?

  Are we gonna get a copyright on this?

• 1:14:20Chamath Palihapitiya?

  Absolutely. We don't care. Who cares?

• 1:14:22David Sacks?

  I don't think anyone understands what it is that Shama said that he's taking the victory lap on. Why don't you set that up, Jacob?

• 1:14:26Chamath Palihapitiya?

  That rates will stay higher for longer. And now he takes his victory lap. All right, enough of this shenanigans. Shama said rates will stay higher for longer. The Fed said rates will stay higher for longer. The end. Congratulations, Shama. You got it right. Thanks. Okay. Well, that's actually. Every week, we're gonna give our chariots a fire. Oh, look, Shama receiving a medal. Here he is. Shama can give himself a medal in the group chat.

• 1:14:55Chamath Palihapitiya?

  This is Obama. This is when Obama, who is Obama giving the medal to? What's the real picture here? It's Obama? Is he giving it to Biden?

• 1:15:02David Sacks?

  Giving the medal to Obama. To Biden.

• 1:15:03Chamath Palihapitiya?

  But I think he's giving it to Biden. It was so. Oh, Shama giving a medal to Shama. So I think what happened this week is actually pretty important because I think the markets were really trying to force Jerome Powell to start the cutting cycle. And now they had to move the date at which they could expect cuts out by a year. And I think that we're only starting to see the reverberations of that. You're gonna have to reprice a lot of risk assets. So if you put it all together,

• 1:15:44Chamath Palihapitiya?

  oil is creeping back up. So commodity prices essentially are trending up.

• 1:15:51Chamath Palihapitiya?

  I don't think that's going to have a big impact on inflation because of the way that owner equivalent rents and core CPI is calculated because it's calculated on this six month lag, this dumb nonsense of just how arcane our system works, but that's going to spike down. So basically the Fed's like saying, we know all of this is happening. We're sitting on our hands. But the problem is that if you add another 100 basis points to your discount rate for an unprofitable SaaS company, my gosh, guys, you're taking like another turn and a half of market cap out of the business. Like if you thought

• 1:16:29Chamath Palihapitiya?

  it was worth eight times, it's now worth six and a half, six times. So unfortunately, that's going to hurt everything that's not the top seven tech companies. And everything else is just gonna just kind of meander along for a much longer time. So it's really good for the magnificent seven. I think it's really bad for everything else. And we're going to be in a holding pattern for a while.

• 1:16:58Jason Calacanis?

  Crude oil is at, let's see, $89 a barrel. Yeah, it's getting back up there.

• 1:17:06Chamath Palihapitiya?

  You know, I told, remember, remember this conversation? I told my CEOs, guys, let's get enough cash to last through the middle of 25.

• 1:17:13Jason Calacanis?

  Sure.

• 1:17:14Chamath Palihapitiya?

  Remember, I was pretty clear about that to folks. I mean, get to, get to default alive, but if you can't, please have enough money to the mid of 25. I think that that was wrong. I think now you got to be Q1 of 26 and maybe even mid 26. So now I have to go back to all these CEOs and redo an entire justification for why they need to cut even more people, cut even more expense, cut more burn.

• 1:17:42Chamath Palihapitiya?

  I don't know where we're going to find another year of burn in most of these businesses. So I was wrong by at least a year, Jason, because of this. I think I got the words right, but I got the timing wrong.

• 1:17:52David Sacks?

  Yeah, just to just to further translate this. Okay, so the markets right now are definitely taking a bath. The growth stocks are off significantly.

• 1:18:01Chamath Palihapitiya?

  Expect them to be off more.

• 1:18:02David Sacks?

  Yeah, and the reason is because the market had started to price in rate cuts next year. And now the Fed is saying that because inflation ticked up a little bit, it's not coming down as much. We have higher energy prices. We may not get those rate cuts. I think the Fed still maintains that we'll get 50 basis points of rate cuts next year. But the market was pricing in more, and I think people are starting to wonder if we'll even get the 50. So as a result of that, interest rates are going to stay higher longer, which means that risk capital will be less available. So valuations are going to go down, or at least they're not going to be racing back up like they used to.

• 1:18:38Chamath Palihapitiya?

  When I was saying mid 25 Saks, that was because the forward curve started showing cuts in early 23. You know what I mean? So I was like, okay, let's assume they're wrong by 18 months. It turns out that that initial data point in early 22, my God, we were wrong by three years. It's not a year and a half. It's brutal.

• 1:19:00David Sacks?

  And I think the X factor here is that we're running almost $2 trillion deficits in peacetime. Well, I mean, we're not in a direct war, we're in a proxy war, but in relative peacetime and in a relatively decent economy. So what happens if either of those things change? And what happens to long-term rates as all of these debt issuances have to get raised? As the Fed has to keep selling more treasuries to fund our deficit and debt at these higher rates? Do long-term rates keep going up based on the debt financing needs of the federal government?

• 1:19:37Chamath Palihapitiya?

  And this is again where, you know, we made a huge mistake by politicizing this idea of raising money beyond 30 years. We made that mistake under the Trump presidency because people reacted to Trump saying it. But it was the smartest thing we could have done to give our kids and our grandkids a reasonable economy. And Friedberg has been right all along about just like our spending is just going up and up and up. And now short-term rates are.

• 1:20:05Chamath Palihapitiya?

  Really high, maybe we'll have enough political will to just get out of the Fed's way and the Fed can actually look at raising in durations past 30 years. Because if you believe that we're going to start an aggressive cutting cycle at some point, and you believe we'll get back to like a 2% terminal rate, you could theoretically justify 50, 60-year bonds at much lower than the 30-year, but I don't see it happening.

• 1:20:32Jason Calacanis?

  Here's a really good way to look at this. There are prediction markets. This one, Kalshi, is the one I use, K-A-L-S-H-I. Chances of a rate cut by May of 2024, 29% chance, and these are people actually making bets on these things. And so it has gotten pushed out, and I guess 74% chance by the fourth quarter, third, fourth quarter of next year, people think there'll be a rate cut. So we're a year away from a rate cut. Everybody needs to just take that off the table, which means the translation for founders, for GPs, is performance has to go up. You got to beat 5, 6, 7%, or whatever people are going to

• 1:21:15Jason Calacanis?

  get on those other instruments, corporate debt, you know, 10, 11, 12%. You got a really hard bogey to beat here.

• 1:21:21David Friedberg?

  The alternative to that statement is that total capital has to go down in order for the capital remaining to have its return multiple increase, given that there's a generally set number of companies that are going to generally create a certain amount of value over the next couple of years.

• 1:21:40Jason Calacanis?

  And the way to create that value is?

• 1:21:41David Friedberg?

  So if that's true, well, I'm saying if there's a bunch of startups that are going to make $100 billion of market value over the next five to seven years, you need to have less capital going into those companies in order for that capital to generate a higher return.

• 1:21:53Jason Calacanis?

  Which on your day-to-day basis means what, Friedberg? Explain on a day-to-day basis.

• 1:21:57David Friedberg?

  On a day-to-day basis, it means there's going to be less companies that are going to get funded, but more importantly, there's going to be less LP money going into venture, and there's going to be less capital available to fund startups in aggregate by a significant amount.

• 1:22:08Jason Calacanis?

  Which means on a daily basis, you need to do more with less as a founder, you need to delight customers with less resources, spend less money on marketing, spend less money on teams, and get to profitability. You've got to be a stronger founder. I'm seeing it across the board in the seed stage, two, three, four founders raising 250 to a million instead of raising three to five.

• 1:22:28Chamath Palihapitiya?

  I got to be honest, Jekyll, I thought it was much easier.

• 1:22:33Chamath Palihapitiya?

  To kind of say the sky was falling this time last year.

• 1:22:38Jason Calacanis?

  Sure.

• 1:22:38Chamath Palihapitiya?

  Than right now. And I think that people are a little bit, again, exhausted about hearing this message constantly of like, cut more. It's like, I think that they're exhausted. And I see a lot of founders that are exhausted and.

• 1:22:51Jason Calacanis?

  And giving up. There's a lot of giving up.

• 1:22:53Chamath Palihapitiya?

  They're like, they're like, I can't cut anymore. And now I do think we have to go back to them and say, if we're doing our jobs right. Okay, even look, our now, our strategic view was right. But the timescale of our analysis was wrong. And I think now you got a plan to mid 26. I don't even know where to start, to be honest with that conversation.

• 1:23:17Jason Calacanis?

  Actually, what I'm seeing is people are merging companies and M and As picking up because, hey, you got two companies doing five million each, but they're burning two million each a year. Cut half the team, put one team with the other, and I think you're going to just see some of that portfolio consolidation happen. Go ahead, Sex.

• 1:23:33David Sacks?

  I think one way to put it is that we've had a regime change. Those are the words that we've been using for a while. And specifically, we've gone from a regime of capital abundance to a regime of capital scarcity. And I think a lot of people are holding out hope that there's going to be a quick bounce back because we'd cut these interest rates and capital would start flowing again in a big way. And I think that the Fed here has dumped a bucket of cold water on the markets, basically saying, we're not bouncing back to capital abundance anytime soon. We're going to be in this environment of more capital scarcity. And that's what I think just founders and VCs now have to take into account is this shift could be permanent or it could, it could last a while.

• 1:24:16Jason Calacanis?

  Could last five, 10 years, sure. And we're seeing a lot of.

• 1:24:19David Sacks?

  The big question I have is just, what do you guys think is going to happen to the consumer? Because I, I actually think that even though founders in many cases could cut more and they could have acted faster. I actually think that the B two B economy has kind of taken its licks. I mean, for the last year, we've been in this software recession. Companies have been sharpening their pencils. They've been cutting costs and getting more efficient. Yes, you could say maybe they haven't done enough, but the consumer has still been strong. But what is the consumer going to do now that credit card rates and interest payments are at all time highs?

• 1:24:49Jason Calacanis?

  They're going to.

• 1:24:50David Sacks?

  They can't sell their house.

• 1:24:51Jason Calacanis?

  No, here's what they're gonna do. They're gonna skip an iPhone cycle instead of going from, you know, thirteen to fourteen or fourteen to fifteen, they're gonna go thirteen to sixteen, fourteen to seventeen. They'll just skip, which I did for the first time. I don't need to skip it, but I was just like, this thirteen's good enough. They're gonna skip upgrading their car. You're gonna keep your car for an extra two or three years. And if you were thinking about moving your house, you're gonna say, you know what, I'm gonna make this house work. We're gonna put two of the kids in a room.

• 1:25:18Chamath Palihapitiya?

  Hundred percent right. I think that is, that is, I think that's very, I think that's very well said. And, and the, the other side of it is that some of these industries where you have these large ticket purchases that drive consumer consumption, their backs are against the wall. Look at the automakers. That, the deals that, that the unions have proposed to the automakers will cause them from, I thought, I saw an, an analysis of Ford where Ford would go, if you just did a pro forma and went back the last couple of years, they would have gone from like, you know, thirty billion of profits to minus seventeen billion of losses. So that's a forty-seven billion dollar swing in the Ford P and L. The only way they overcome that is with more expensive cars, which Jason, to your point, means that

• 1:26:00Chamath Palihapitiya?

  those cars are not going to get sold. I do think that you're gonna just have a little bit of belt tightening in the, in the consumer.

• 1:26:07David Sacks?

  I think this is interesting. I think, you know, Tramath, you're right, that at the same time that the auto companies are facing what you'd expect to be reduced demand because no one can afford a car payment at these higher interest rates, the unions are going on strike, demanding-

• 1:26:22Chamath Palihapitiya?

  Oh, I think this is existential.

• 1:26:23David Sacks?

  Higher wages for a four-day work week. How does this work?

• 1:26:27Jason Calacanis?

  Four-day work week.

• 1:26:27Chamath Palihapitiya?

  I think that the, the labor deal is an existential risk to the unionized auto industry in America. And I'm not opining on whether this deal should or should not happen. I'm just making an observation. If the deal as announced happens and you sensitize Stellantis, GM and Ford's P and L to these new terms, and then you compare that against non-unionized, highly automated organizations like Tesla and Rivian.

• 1:26:58Jason Calacanis?

  It's going to be very difficult for the established auto industry to survive.

• 1:27:02David Sacks?

  Right.

• 1:27:03Jason Calacanis?

  And then if you'd layer on top of it, seven, eight, nine percent consumer lending rates for new cars, forget about it.

• 1:27:10David Sacks?

  And yet, the Fed forecast, at the same meaning they were being hawkish about rates, they also said that they were expecting unemployment next year to be 4.1% down from their previous expectation of 4.5%, and they forecasted economic growth would be higher. So I just don't understand how these countervailing forces aren't going to create so much stress in the economy that something breaks.

• 1:27:33Jason Calacanis?

  And these idiot unions, honestly, their timing is so dumb, whether it's the ones, you know, in Hollywood or this car strike, while they're shutting down their plans.

• 1:27:44Chamath Palihapitiya?

  Well, it's great. It's great for Tesla. I mean, it's giving Tesla the entire US auto market.

• 1:27:47Jason Calacanis?

  Yeah, Tesla is lowering the price. When I bought my Model Y Long Range, I think I paid 72 for it. The old price on this chart says 66. That car is now 53. That's down 20%, a $13,000 save. The Model Y Long Range, I think, is the greatest vehicle ever made.

• 1:28:07Chamath Palihapitiya?

  I paid 57, I think, for my Model Y Long Range.

• 1:28:10Jason Calacanis?

  Uh huh.

• 1:28:11Chamath Palihapitiya?

  Oh, no, no, I think, sorry, I paid 57. I paid this price for the Model Y Performance.

• 1:28:16Jason Calacanis?

  Uh huh.

• 1:28:16Chamath Palihapitiya?

  The best car. And yeah, that'll be a $40,000 car in the next three years.

• 1:28:20Jason Calacanis?

  Well, you know, and I looked at it, and I, speaking of austerity measures, I was like, I have a Model X. Do I get another Model X? I think I'll just go with the Model Y, because the Model X is, I don't know, 50% more, and I just prefer the Model Y.

• 1:28:32Chamath Palihapitiya?

  I think, I think this labor deal is going to put tremendous pressure on these established auto OEMs.

• 1:28:38Jason Calacanis?

  China is now the world's largest exporter, from what I understand. That just happened. They work, I looked it up, 58 to 64 hours a week, factory workers. The US factory workers want to work 32 hours a week. They want a four-day work week. I mean, I don't understand the timing of these unions. I mean, they're just going to move these factories to Mexico or...

• 1:28:59Chamath Palihapitiya?

  I think it's reasonable for the unions to ask for as much as possible on behalf of their members. That's like, obvious and good, because, meaning, if you're collecting fees from those folks and you're doing a good job on their behalf, your job is to ask for as much as possible. I get that.

• 1:29:16Chamath Palihapitiya?

  Where I see the breakdown is that it just doesn't seem like there's enough numeracy between them and the companies that they're negotiating against to really sit down and look at what the impact of this is because you may get a short-term labor deal that you can celebrate, but it may actually destroy that union member's pension. Yes, it may destroy the company. And this is my concern is that then that has to get bailed out by the US taxpayer. And once it happens in one industry, it's going to be very difficult to actually not do it in other industries. And the thing that needs to be understood is the risk that it puts on those kinds of tail outcomes. And I think that that's not well discussed.

• 1:29:57Chamath Palihapitiya?

  Nobody in the media is really talking about it. They make it a moral issue of like, what is the CEO pay versus what is the ratio? The multiple, yeah. And yeah, sure. Look, that's an important issue at some level. But if you, for example, like you have US senators blathering on about how they'll wear a suit and not look like a homeless bum if this deal happens and that. And it's like, well, that's not what you should be saying. What you should be saying is, my team has done a financial analysis and here's what it shows.

• 1:30:27David Sacks?

  Right.

• 1:30:27Chamath Palihapitiya?

  And they're not saying that. This is crazy.

• 1:30:29David Sacks?

  What you're saying is that the negotiation and also the political dimension of this have become completely untethered from economic realities.

• 1:30:38Chamath Palihapitiya?

  Yes. They are negotiating in the Riviera. They basically talked about whatever billions of dollars in profits the company's previously had during the ZIRP environment during the heyday. And yeah, it's just timing's off.

• 1:30:50David Sacks?

  Just add it to the list of latent problems in this economy. It just feels to me like something is about to break, but who knows?

• 1:30:57Chamath Palihapitiya?

  I mean, if the, to your point, Saks, you keep bringing up like what happens with the consumer. I think they just slow their roll, you know, staycation instead of European vacation.

• 1:31:06David Sacks?

  Remember what Larry Summers said at the summit? He said that soft landings are like second marriages, the triumph of hope over experience.

• 1:31:15Chamath Palihapitiya?

  Yes.

• 1:31:16David Sacks?

  Meaning everyone's talking about a soft landing. Everyone's banking on a soft landing. But soft landings are actually exceedingly rare. When you have very fast rate tightening cycles, it generally has a very predictable effect on the economy. There's a lag, but the effect is very predictable, which is it causes recessions.

• 1:31:33Jason Calacanis?

  And then

• 1:31:34David Sacks?

  I would argue we've already been in a B to B recession. We're starting to come out of that, but I think the consumer hasn't been hit yet. And maybe that has to do with all the stimulus they pushed through.

• 1:31:43Jason Calacanis?

  Yeah.

• 1:31:44David Sacks?

  And that created some amount of cushion for the consumer. But I just wonder if that cushions run out now. We're about to enter a new phase.

• 1:31:54Jason Calacanis?

  And what all of these strikes you, if you overplay your hand, Chamath, is automation. So this happened in New York just over 10 years ago. The fast food workers wanted, you know, I think it was 15, 20 bucks an hour. Okay, seems reasonable. And they replaced every cashier. You go to McDonald's now, you're ordering on the app or you're ordering on a kiosk in the space. And we have an investment in a company called Hello Meter. What this company does is pretty simple. They just study what's going on inside fast restaurants. And then they just increase the speed at which people are getting served. And they're crushing it. Why? People can't hire people. There's not enough immigrants in the country anymore. We have an anti-immigration thing going on here.

• 1:32:38Jason Calacanis?

  So unemployment's too low. And the, the, the salaries are too high. It's not working. A lot of restaurants are breaking because a $30 or $40 dishwasher is the difference between a, you know, a restaurant being profitable or not. All right, listen, there's apparently some potential major breakthrough in autoimmune disease treatment with this new inverse vaccine. Let's go to our science correspondent. The Sultan of Science himself for Science Corner.

• 1:33:07David Friedberg?

  Did Sax

• 1:33:07Jason Calacanis?

  Sax just turns his camera off.

• 1:33:11Jason Calacanis?

  Sax, Sax. Wow, Sax is going to take a dump. He'll be back. Oh, he's back.

• 1:33:16David Sacks?

  I'm here, I'm here. Geez, you wouldn't even let me get away with that.

• 1:33:20Jason Calacanis?

  Nope.

• 1:33:20David Friedberg?

  Where are you trying to go, Sax?

• 1:33:22Chamath Palihapitiya?

  Uh, we were Zoom shaming you. Do not leave.

• 1:33:25Jason Calacanis?

  You could learn something, Sax.

• 1:33:29Jason Calacanis?

  Free burger. I just wanted to give you a shout out. My super gut. I just had my super gut chocolate. Oh, so good. I just got my super gut protein and the weight loss continues.

• 1:33:39David Friedberg?

  Health boosting.

• 1:33:40Chamath Palihapitiya?

  My gut, so good.

• 1:33:43David Friedberg?

  There was a paper published in the journal Nature this week, which I thought was worth highlighting. Sax, you're going to be quizzed afterwards on exactly what I say during this and the implications for it. We've all heard of and know folks that have autoimmune conditions and some of us may suffer from them. An autoimmune condition is when our immune system mounts an attack against a protein that exists in our body, that is natively part of our body. Our immune system kind of mistakes that protein for being a foreign antigen. So the term antigen refers to proteins that the immune system views as invading and it needs to go in and attack. So when the immune system messes up and it sees a protein in our body as being a foreign antigen and starts attacking it, you get these autoimmune conditions.

• 1:34:24David Friedberg?

  And autoimmune conditions, as you know, are very debilitating costs on the health system, on people's lives. The top 10 autoimmune diseases include lupus.

• 1:34:32Chamath Palihapitiya?

  Crohn's, rheumatoid arthritis.

• 1:34:35David Friedberg?

  Even type 1 diabetes, multiple sclerosis, irritable bowel, chagrin's, Hashimoto's thyroiditis. These are all pretty, in different ways, damaging diseases. So this team at University of Chicago in 2019 published a paper where they actually took an antigen and glycosylated it, so basically attached some sugar molecules and carbohydrate molecules to it and presented it in the liver. So they put it into the blood and it showed up in the liver and they were able to cause type 1 diabetes to not develop in an animal model that was supposed to get type 1 diabetes. So they did an extension of that work and the team has gotten broader and they just published this week a much more substantive paper that highlights a pretty incredible technique

• 1:35:20David Friedberg?

  that may potentially address a long list of autoimmune conditions. So they take the antigen, the protein that is called.

• 1:35:30Chamath Palihapitiya?

  Sorry, are you saying, sorry, in the type 1 example, are you saying like the beta cells didn't get destroyed? Like it just stopped, it just stopped everything on a dime?

• 1:35:37David Friedberg?

  Yeah. So the immune system has a bunch of ways for self-regulating. There are T cells in our body called T reg cells, the regulatory T cells. Their job is to go find the T cells and the antibodies that are attacking our own protein. That's their job. And when they don't do their job, the antibodies and the T cells go and attack our own body. So T reg cells kind of, when they're turned off, they're not doing their job.

• 1:36:02David Friedberg?

  It turns out that when a protein is presented in the liver, in this particular part of the liver, the immune system recognizes that protein as being a safe protein. And there's a regulatory process that gets kicked off that causes the immune system to start to see that protein as being safe. It should not be attacked. And T reg cells start to develop and other systems start to develop that tell the whole immune system, "Stop attacking this protein. This is a safe protein. This is our body. You should not be attacking this."

• 1:36:32Jason Calacanis?

  So no more friend... This is like friendly fire, right? Like, "Do not..."

• 1:36:35David Friedberg?

  It's like friendly fire. "Do not attack this protein." So what they did is they took several antigens, proteins, and glycosylated them, meaning they put some molecules on them, put them in the blood, just with an IV hookup. They go into the liver. And once they're in the liver, the immune system sees them and is like, "Whoa, these are totally safe now." And they found, by analyzing all the different T cells, the regulatory pathway that emerged that caused the body to stop attacking that protein. And they were able to end MS using this induced system in animals. So basically, we have a known model for making multiple sclerosis show up in animals. And they were able to stop MS in the animals by taking this particular protein that they use for MS and they put it in the liver through an IV.

• 1:37:20David Friedberg?

  They did the same with an egg allergy and they did the same with several other antigens. This represents a very novel and seemingly super impactful and powerful way to think about eliminating autoimmune disease going forward, is that we can take the antigen, and we now know the antigen or the protein that causes almost all of these autoimmune conditions, from thyroiditis to lupus to RA to MS. And we can take that protein, glycosylate it, put it in an IV, ends up in our liver, gets presented, and our immune system realizes, "I shouldn't be attacking this anymore," and resolves it. So it opens up a whole new category of therapeutic pathways for addressing all autoimmune conditions. It's a totally new modality. It's a very interesting approach.

• 1:38:04David Friedberg?

  It'll be studied more deeply. Folks will take this paper and try and start to develop very specific therapeutics. For very specific autoimmune conditions using this approach. And hopefully, over the next couple of years, we see some of these things have success, gain traction, and go to market.

• 1:38:19Jason Calacanis?

  These autoimmune diseases are typically some combination of genetic and environmental. So this is not attacking them on that basis. It's attacking them in a different modality.

• 1:38:28David Friedberg?

  You know, there's two ways that we address autoimmune conditions today. The first one is by presenting the antigen to the immune system before you develop autoimmunity. This is like, you know, when they give little bits of peanuts to kids and that's how you present, prevent peanut allergies. In most autoimmune conditions, we're past that point. The immune system has already developed T cells and antibodies to go and attack. So that doesn't work. The second way is immune suppression, and that's terrible. Globally suppressing, meaning on the whole body, turning off the immune system is not healthy in a lot of ways. And that's the current, you know, kind of best in class way we address autoimmune conditions. So this is a new approach, which is we can actually re-regulate the immune system to not attack itself, to not attack our own proteins by introducing that protein with what's called

• 1:39:12David Friedberg?

  glycosylation, getting it into the liver, and boom, this magic starts to happen. And we'll see what the side effects are as they start to try this on humans. We see, we'll see what conditions are more effective than others.

• 1:39:24Jason Calacanis?

  Sorry for the stupid basic question, but how is the, how is it different when we put these into, say, like, you said these were monkeys or chimpanzees. So how are their anuses different than your anus?

• 1:39:38David Friedberg?

  What?

• 1:39:38Jason Calacanis?

  Sorry. Anyway, let's keep going here. Great science corner.

• 1:39:41David Sacks?

  I'm laughing at how contorted that.

• 1:39:45Jason Calacanis?

  You punch it up. You and I do these workshops. I'm just workshop.

• 1:39:48David Sacks?

  Let me work on.

• 1:39:50Jason Calacanis?

  Work on punching it up. We'll try to get a better your anus.

• 1:39:53David Friedberg?

  Anyway, it's super cool. Autoimmune conditions.

• 1:39:56Jason Calacanis?

  The world's getting better.

• 1:39:58David Friedberg?

  The term modality refers to, refers to an approach to a therapeutic, and this modality is a new modality. So it's a super exciting, new kind of universe to be explored now on how we might be able to treat autoimmune conditions, ranging from.

• 1:40:11David Sacks?

  Okay, let me try. Hold on.

• 1:40:12Jason Calacanis?

  You're good. Sax, your thoughts on the science one?

• 1:40:16David Sacks?

  Friedberg, what part of the body do you think is going to be most impacted by these discoveries?

• 1:40:21David Friedberg?

  No. The immune system. No, no, no, that's not good.

• 1:40:24Jason Calacanis?

  Okay.

• 1:40:25David Friedberg?

  Let me try, let me try.

• 1:40:26Jason Calacanis?

  Okay.

• 1:40:27David Friedberg?

  Here we go.

• 1:40:27Jason Calacanis?

  You guys are just so dumb about science. Okay. All right, here we go.

• 1:40:34Chamath Palihapitiya?

  Friedberg, I thought the only solution to MS was fecal transplantation through Uranus.

• 1:40:40Jason Calacanis?

  Yeah.

• 1:40:40Chamath Palihapitiya?

  How is that gonna be effective?

• 1:40:42Jason Calacanis?

  There's your winner.

• 1:40:43Chamath Palihapitiya?

  I like a fecal transplant.

• 1:40:44Jason Calacanis?

  Because you kind of did a little misdirection there with the fecal transplant. And then we came back to his anus. Yes, because that would be the way to get that done. We're gonna wrap here. Thanks to everybody who came. Brian Armstrong also did a great job. Elon did a great job. Thanks to everybody who showed up for us. And if you want to watch all the talks, all the talks are being released exclusively on YouTube and X. So go to X and look at the All In Podcast Twitter handle and type All In Podcast on YouTube and you get to see all these talks available now. And Ray from the unofficial All In Podcast meetups is doing 150th meetup for the fans in all different cities around the world. So just do a Google search for that.

• 1:41:27Jason Calacanis?

  For the Sultan of Science and the world's greatest conference producer, the dictator in the arena, making it happen. And for Wenit Pausros, favorite bestie, David Sacks. And me and those guys, moderator, we'll see you next time. Bye bye.

• 1:41:45Speaker 05

  We'll let your winners ride. Rain Man David Sacks.

• 1:41:52Speaker 05

  And it said, we open source it to the fans and they've just gone crazy with it. Love you, Westside. Queen of Kinoah.

• 1:42:05Speaker 05

  Besties are gone. That is my dog thinking, I miss your driveway sex.

• 1:42:12Speaker 05

  Oh, man.

• 1:42:15Chamath Palihapitiya?

  We should all just get a room and just have one big Hugh Georgie because they're all just, it's like this sexual tension, but they just need to release somehow.

• 1:42:23Speaker 05

  What your B. What your B. What your B. We need to get merch. Besties are back.