E91: SoftBank's $21B+ Vision Fund loss, signals of a bubble, macro picture, Trump raided by FBI

0:00 Bestie intros 3:02 Where Masa and SoftBank went wrong, why VC isn't scaleable, Vision Fund impact 27:59 Metrics that signify a bubble or the top of a market 36:46 US macroeconomic picture 50:45 FBI raids Mar-a-Lago, Trump back in news 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://group.softbank/system/files/pdf/ir/presentations/2022/earnings-presentation_q1fy2022_01_en.pdf https://www.wsj.com/articles/softbank-reports-23-billion-quarterly-loss-as-tech-downturn-hits-11659940047 https://cloudedjudgement.substack.com/p/clouded-judgement-81222 https://www.wsj.com/articles/u-s-housing-affordability-in-june-was-the-worst-since-1989-11660312801 https://fred.stlouisfed.org/series/FIXHAI https://www.newyorkfed.org/microeconomics/hhdc https://twitter.com/AndrewYang/status/1556987104219090945 https://twitter.com/andrewcuomo/status/1556990308424028163 https://twitter.com/elonmusk/status/1546669610509799424 https://twitter.com/michaeljburry/status/1557934401505308672

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

• 0:00Chamath Palihapitiya?

  How mad is Sax gonna get when he sees my button situation today?

• 0:03Jason Calacanis?

  I'm gonna join you. Chamath, how you doing?

• 0:05Chamath Palihapitiya?

  Oh my god, look at the collar situation, look at the button situation, look at that! Oh, this is fantastic.

• 0:12Jason Calacanis?

  Oh, hey, besties. Just got off the lake.

• 0:15Chamath Palihapitiya?

  Where the lake?

• 0:17Jason Calacanis?

  I just got off the lake, yeah. I was just on the lake with the boat.

• 0:19Chamath Palihapitiya?

  Lake Cuomo? Where were you?

• 0:21Jason Calacanis?

  I was doing a little wakeboarding in Tahoe, yeah. I was still wakeboarding, me and Sax.

• 0:24Chamath Palihapitiya?

  Me and that took all five kids and we navigated the entire island of Sardinia for eight days.

• 0:31Jason Calacanis?

  Amazing. And by when you say "we navigated," you mean the crew navigated and you ate seafood? Yeah, it took the village.

• 0:56Jason Calacanis?

  Alright, everybody, welcome to episode 91, episode 91 of the All In Podcast. Yeah, we're still here. Lots of news to discuss this week. With me, of course, to chop it up from his deposition room, the war room, the Rain Man himself, David Sax. How you doing, brother?

• 1:11David Sacks?

  Good.

• 1:11Jason Calacanis?

  Big week for you?

• 1:13David Sacks?

  They're all big weeks.

• 1:14Jason Calacanis?

  They're all big weeks, yeah. You look tired.

• 1:17David Sacks?

  Well, we're recording pretty early today.

• 1:19Jason Calacanis?

  It's a little exhausting.

• 1:20David Sacks?

  You actually look really tired.

• 1:22Jason Calacanis?

  What are you talking about? I just got off the lake. I feel fresh. I was just wakeboarding this morning on Lake Tahoe. I feel refreshed. I'm refreshed. And of course, in front of his $9 clip art that he blew up on easyprince.org, the Sultan of Science himself, David Friedberg, how are you, sir?

• 1:38David Friedberg?

  Always great to be with you, J Cal.

• 1:40Jason Calacanis?

  Are you working?

• 1:41David Friedberg?

  It boosts my self-esteem and my morale to be with you every morning that we get to connect over Zoom.

• 1:47Jason Calacanis?

  Well, I'm glad that your performance has been stratospheric the last three weeks. You're going on a hot streak. Let's see if you can continue it on episode 91. And missing many buttons this week.

• 1:58Jason Calacanis?

  We've got at least a three or four button August going. How are you doing dictator from your island, the remote island? Did you, you invaded an island?

• 2:08Chamath Palihapitiya?

  Markets go up another 5% and one more button comes undone.

• 2:11Jason Calacanis?

  Oh, I love it. So this is 20% up and we could go to 25?

• 2:15David Friedberg?

  That's a bullshit. Daddy's back. The more bullish he gets on the market, the more he unbuttons.

• 2:19Chamath Palihapitiya?

  Daddy's back.

• 2:20Jason Calacanis?

  All the low rise jeans on right now? Or are you wearing shorts? What are you wearing? Show us those stick.

• 2:24Chamath Palihapitiya?

  I'm wearing these beautiful linen shorts.

• 2:27David Friedberg?

  Can you stand up and show us?

• 2:28Jason Calacanis?

  Yeah, come on, give us a 360. Come on, let's see.

• 2:32Chamath Palihapitiya?

  But these are the most beautiful.

• 2:33David Friedberg?

  Oh, inner thigh, inner thigh.

• 2:36Jason Calacanis?

  That's a little too much thigh. That's like a chicken wing.

• 2:38Chamath Palihapitiya?

  You guys like this?

• 2:39David Friedberg?

  They look tight too.

• 2:41Jason Calacanis?

  Very tight. Are you?

• 2:42David Friedberg?

  Yeah, those are definitely yours.

• 2:44Jason Calacanis?

  Are you wearing like a children's size or something? Is that a junior size?

• 2:47Chamath Palihapitiya?

  I like, you know, I like the tighter sizes.

• 2:49Jason Calacanis?

  You do?

• 2:50Chamath Palihapitiya?

  I do like the tighter sizes. I think they, they fit my body type.

• 2:54David Friedberg?

  Accentuate all the little bumps and nodules.

• 2:58Jason Calacanis?

  Too much information. All right. Let's start with, um, there's a lot to talk about this week. I think one of the most interesting things last week, we were talking about it in the group chat that doesn't exist. Vision funds $21 billion investment loss for the quarter. Masayoshi San did a really great YouTube video. I sent it around. Did any of you guys watch the video?

• 3:19David Friedberg?

  Yes.

• 3:19Chamath Palihapitiya?

  No.

• 3:21Jason Calacanis?

  Okay. It's, it's really interesting to watch. We'll put it in the show notes.

• 3:23David Friedberg?

  It's like a six minute interview he put on his earnings page, right? Like right when they put out quarterly earnings, he's like, here's my interview.

• 3:30Jason Calacanis?

  Yeah. He, you know, he comes to a podium and basically talks about the vision fund. Obviously, if people don't know, the vision fund one was $100 billion, largest venture fund ever raised. Um, and SoftBank's current market cap is 66 billion. Here's the quote from the FT article, sunset on Monday, that SoftBank would now subject itself to dramatic cost cutting exercise after a $59 billion investment gain at the two vision funds almost completely reversed over the past six months. They were up almost $60 billion at the peak and it came crashing down. Masa kicked off the presentation showing portraits of Togugawa, Tokugawa, Iyasu.

• 4:09Jason Calacanis?

  This is the founding Shogun of Japan's Tokugawa Shogunate and he ruled Japan for six, I mean, I'm killing this.

• 4:18Chamath Palihapitiya?

  It's such a long intro.

• 4:20Jason Calacanis?

  God, it's so hard. Yeah, I mean, but it was just so great. Let me just play a clip for you. Here's a 68-second clip, and we'll talk about it right after, and then we'll get into what all this means.

• 4:30Speaker 04

  This is a portrait of Tokugawa Yeyasu. He actually made a big loss against Takeda Shingen and came back. In the background of that, Tokugawa Yeyasu had to face Takeda Shingen, which is much, much larger army than theirs. And most of the allies actually said, "This is gonna be the losing battle, so that they should not go for it, but actually it's better to stay at the castle." However, Tokugawa Yeyasu didn't want to lose his face, so that he get out from the castle, had a battle, made a complete loss and suffer, and came back. In that actually learned lesson, he tried to remember and remind his own learnings and put it into this drawing.

• 5:15Speaker 04

  So since the foundation of SoftBank Group, I made two consecutive quarters' loss. So previous quarter and this time quarter consecutively, we made 3 trillion yen level of the loss. So in total, 6 trillion yen loss was made in the past 6 months. So I believe I need to remind that myself.

• 5:39Jason Calacanis?

  Pretty spectacular loss, and then he goes on to take some Q and A. And this is, I guess, the killer quote. "When we were turning out big profits, I became somewhat delirious, and looking back at myself, I am quite embarrassed and remorseful." You remember, of course, and he complained a little bit in this whole thing about how there was a giant bubble, without ever recognizing that he kind of created the bubble with a $4 billion check to WeWork at a $47 billion valuation after a 20-minute meeting with Adam Neumann. This chart is pretty incredible. This is the net income quarterly. Essentially, you can think of SoftBank as like a holding company of a bunch of different assets, including Alibaba, previously Uber, and all of this Vision Fund stuff. 97% decrease in terms of deployment of capital.

• 6:23Jason Calacanis?

  So if you look at capital deployment as well, nobody ever put this much money to work, especially in privates. The second chart, if you look in Q1 of 2021, they put 20 billion into work and then Q1 this year, they're putting 600 million to work. Just quick reflections on this, what we saw here with Masayoshi Son deploying $100 billion at the top of the market into, I mean, it's basically creating the market top. Shama, are there lessons here or takeaways for you?

• 6:53Chamath Palihapitiya?

  I mean, I think that people don't seem to understand that if you're gonna attempt to be great, there are going to be moments where you look the exact opposite of great. You know, the guy that takes the final shot is the same guy that can miss the final shot. And here is a guy over his, you know, 50-year career has had some huge ups and downs. This is also the same guy that found a way to rip in 25 or 30 million dollars and made 125 billion off of Alibaba. That's the same kind of person who has that kind of risk tolerance. He was, for seven minutes or something, the richest person in the world.

• 7:34Jason Calacanis?

  Yep.

• 7:34Chamath Palihapitiya?

  And then lost 99% of his wealth in the dot-com bubble. I have enormous respect for a person like this because I feel like it takes enormous amounts of courage. I've said this before, most people jibber jabber about investing and all of this stuff and when push comes to shove, they crumble like little bitches and run into mummies' coattails. It's hard to put lots of money to work and this is a guy that's done it. So the same person that can make 125 billion, turns out is the same person that can lose 30 billion. And so, one thing is, I would just keep in mind that this is a resilient guy who seems to land on his feet. And the second thing that nobody talks about is how smart Saudi Arabia and Abu Dhabi were

• 8:18Chamath Palihapitiya?

  in how they structured the investment into the Vision Fund because half, more than half their investment is in preferred equity, which is effectively debt that pays a coupon. And you see it now where SoftBank, by the way, who has been pretty smart in how they've managed their Alibaba position, have been using these derivatives and forward swaps to be able to sell and manage their liquidity. So it turns out that, you know, even if the Vision Fund breaks even, Saudi Arabia and Abu Dhabi will have made money because I think they paid a 6% coupon on, you know, 50 billion dollars is a lot of money over six, seven, eight, nine years. It's a lot. SoftBank has found a way to sell down 25% of Alibaba, which is no trivial feat

• 9:01Chamath Palihapitiya?

  for a half a trillion dollar company. And this guy gets to keep swinging. And if he, you know, hits it one more time, he'll end up with half a trillion.

• 9:09Jason Calacanis?

  This chart is pretty great. Sacks, if you look at this, this is the gain and loss on investments at the Vision Fund. You can see the first Vision Fund racing up, then coming down, I think, after that summer of IPOs that we had in the Airbnb, Uber days, and then a huge peak run up in 2021, and then come and crashing down. Apparently, he wasn't selling any portion of this. That, to me, was a big lesson of like, maybe pairing some of these winners. If it sold 10 or 20% on the way up, this could look like a completely different outcome. But I agree with you, Chamoff. He swung from the fences and there was downside protection built in for the LPs into some of these. Sacks, what are your thoughts? Any lessons here in terms of the impact on our overall ecosystem or that you can take

• 9:54Jason Calacanis?

  as a capital allocator yourself?

• 9:55David Sacks?

  Well, Jason, I think Masa did something you could never do, which is admit a mistake.

• 10:02Jason Calacanis?

  Oh, here we go. Wow, personal quick. Well, would I have my first mistake? I'm certainly willing to admit it. I'm waiting.

• 10:11David Sacks?

  Imagine that you ran 100 billion for sovereigns instead of 100,000 for doctors and dentists. And you can kind of put yourself, you can put yourself in Masa's position.

• 10:21David Friedberg?

  Yeah. Oh, I love Sacks in the morning. Sacks in the morning is like an off cuff coffee.

• 10:26Jason Calacanis?

  Don't wake Sacks up early, Ben. It's a big lesson here. You make Sacks go to a 9:00 AM, he's coming in surly.

• 10:31David Friedberg?

  Like a bear has been hibernating and you poke him.

• 10:33Jason Calacanis?

  Wow.

• 10:34David Sacks?

  You know, look, I think that SoftBank obviously made some decisions that were, you know, they were, they were sort of peak decisions. They were, they were a little bit bubbly. They didn't take chips off the table when they probably should have. It's easy to fall into these bubbles because the psychology of it is so powerful. And as, you know, Bill Gurley's pointed out, these bull markets are more like a sawtooth, which is they gradually go up for nine, 10, 11, 12 years. And then when they end, they just, you know, it's like an elevator going down. So, you know, if the market had continued for another couple of years, Masa probably would have made a lot of money. But in any event, look, he took responsibility for the losses. This was a very...

• 11:14David Sacks?

  You sort of culturally Japanese speech. I mean, he didn't commit supuku at the end, but it was kind of the

• 11:21Jason Calacanis?

  It was heading that direction. They might have had to move the camera off. Oh, my God. What is he doing with that sword?

• 11:27David Sacks?

  It was the verbal equivalent, basically. And look, he took responsibility. What else can you do? Now, one thing I would quibble about is the idea that that SoftBank caused this bubble. You know, it wasn't just SoftBank. We had tons of

• 11:41Jason Calacanis?

  Tiger comes to mind.

• 11:42David Sacks?

  Tiger had huge funds. They were deploying very quickly, but there was a lot of so-called tourist money, basically money from crossover funds. Investors who are not primarily VCs came into the ecosystem over the last few years, and a lot of that was driven by sovereigns and by liquidity. So, you know, you can't forget that we had $10 trillion of liquidity pumped into the system over the last couple of years, and many billions of that found its way into the tech ecosystem. And fundamentally, you know, VC is not that scalable. There was an attempt to make it scalable. There's an attempt to push more money into VC.

• 12:18Jason Calacanis?

  Why isn't it scalable? Why isn't it scalable? Because people have tried, right?

• 12:22David Sacks?

  Well, it's a craft business. I mean, What does it mean?

• 12:26Chamath Palihapitiya?

  It is scalable. It's just that if you try to scale it, your returns will go to zero.

• 12:31David Sacks?

  Yeah, well, it's kind of the same thing, right?

• 12:33David Friedberg?

  Like, I want to I want to just critique the strategy for a second because, you know, we're talking about as if market conditions caused these massive write downs, and that is the only reason that these funds have suffered. But, you know, if you read a lot of the stories of Masa's investments in a number of these companies, and the full list is available and how much he invested, there are many, many stories, and I've heard many of them personally from CEOs that have met with Masa and raised money from him. You go into Masa, you tell some, the bigger the story you tell, the more excited he gets, the more of the world you can capture. And you go in, you're raising $100 million, he's like, I'll invest 400 million. You say you're raising 25 million, he's like, I want to give you 150 million.

• 13:13David Friedberg?

  And his motivation was always give you more capital so you can go capture the market. And the problem in that model is that by giving you so much money, capital becomes your primary asset as a business. And capital needs to be the fuel that enables your assets as a business to accelerate. But as soon as capital itself becomes your primary asset, the business is doomed to fail. And that's a really key point. If you, let's say, and let me, let me be very specific about what I mean. Let's say you have a direct-to-consumer business that requires online marketing. And your business grows well, you spend a hundred dollars to acquire a customer. Suddenly, someone says, here's a billion dollars to spend on acquiring customers. As soon as you have to start deploying a billion dollars,

• 13:57David Friedberg?

  your cost of acquisition goes up, the number of customers per dollar spent goes down, and the business itself starts to look upside down and fail. And that's what happened with a number of these businesses that Masayoshi put in, and he put oversized checks in. WeWork is a really well documented example in terms of what happened. When they started to accelerate their growth beyond the natural course of the business because of the amount of capital that they took, it really started to hurt the fundamental profitability and unit economics of the core assets of the business. And this strategy theoretically can work to a degree, but Masayoshi took it to a level that had not been seen before. I think I highlighted for you guys like back in 2011, I think, when Andreessen Horowitz, they pitched me on this idea. I was trying to raise 25 million dollars in my company.

• 14:40David Friedberg?

  Mark was like, we'll give you 40 million dollars, you can accelerate your growth. And he's like, we want you to go capture the market. And Peter Thiel always used these terms, go capture the market.

• 14:47Jason Calacanis?

  And blitzscaling.

• 14:49David Friedberg?

  Blitzscaling, yeah, Reid Hoffman with blitzscaling. And the motivation is, look, we'll give you more money because the core asset of the business works, the core assets of the business work. So the money should be more fuel for the fire. The problem is if you overindulge, if you put too much money in and the asset cannot handle that much capital, the whole thing collapses. And there's so many documented examples of this in his portfolio. And I think that the strategy is worth highlighting that there are some issues with that strategy across all these business categories. It doesn't always work.

• 15:19Jason Calacanis?

  The core issue here, I think, is, and then I'll go to you, Saxon, then Chamath. The core issue here that you're describing is exactly correct. And it really is up to the founder to decide what they're going to do with that capital. The WeWork example is so instructive because they were buying undermarket buildings in the tenderloin and then marking them up to, you know, Class A office space and getting those prices. Once they got the Masa money, he started buying Class A and offering it at Class B prices and flipped the whole business upside down.

• 15:46David Friedberg?

  The rate at which you can deploy capital does not flex, right? And so in all businesses, understanding the rate at which you can deploy capital to grow is critical to understand how much capital you can raise. And then if you raise too much money and you flex beyond what the natural condition of the business is, in terms of capital deployment, the economics fall apart and the business itself looks terrible. And eventually you will have a write down.

• 16:08Jason Calacanis?

  And the distraction on the founder is the key. And look at what Adam Newman, he was easily distracted. He started buying surf machines and companies and starting kindergartens.

• 16:16David Friedberg?

  Because you can't naturally deploy that much capital. So you find unnatural ways to deploy it.

• 16:19David Sacks?

  Let me build on that point. I think there was a belief on the part of SoftBank that they did publicly espouse, which is that they could be the kingmaker.

• 16:25David Friedberg?

  Totally.

• 16:26David Sacks?

  And in fact, you know, we had some startups that were in competitive markets and SoftBank would basically announce that we're going to be anointing, we're going to be picking a winner, anointing a winner and writing them a huge check. And everyone kind of had to play along because if your competitor got that 100 or 500 million dollar check, then you would be presumably way behind. So there was this belief that they could be a kingmaker and make the difference. And I think that what we saw is that for whatever reason, partly because of the dynamics that Friedberg's talking about, that that strategy just didn't really work that well. And what it really goes down to is that VCs can be helpful, but they don't ultimately cause the winning companies to be the winner. So this idea that you could be a kingmaker, I think, was a little bit flawed.

• 17:11David Sacks?

  And I think one way that Tiger actually improved on this model was that they never tried to be a kingmaker. They just, they actually went the other direction, which is we're going to own less your company. They tried to be passive, non-dilutive capital. And they would do high-priced rounds, but with reasonably sized checks. But they didn't try to go for 25, 30% ownership at a late stage. And founders did like that model better. Now, as it turned out, they both had the market timing wrong. But I think this kingmaker aspect was a problem. And one other...

• 17:44David Sacks?

  Aspect of that, I think, is that, and I don't want to beat up on SoftBank too much. I'll say something nice about them in a second. But I think one of the mistakes they made is you'd see them writing multi-hundred-million-dollar checks into companies that were at a very, very early stage.

• 17:59Jason Calacanis?

  Free product market fit.

• 18:00David Sacks?

  Free product market fit. Companies, frankly, that we thought were like seed investments.

• 18:03Jason Calacanis?

  Brandless was the perfect example. It was a company that made like soaps and dishwashers and cereal, but they had no brand on it. It was like Uniqlo of this. And they gave them, I think, $200 million. And I was like, this is a seed-stage company. Makes no sense.

• 18:16David Sacks?

  Right. They were, I mean, look, they wrote like $500 million seed checks into robotics companies, effectively. And it's because that, you know, the SoftBank had a thesis. And I think sometimes, if, again, this goes back to Kingmaker, if you're a VC and you think you're the one with the thesis and you're the one who's going to make the difference, it's actually a seductive fallacy to fall into. It's the founder who has the thesis. And you can't, you can only do so much to help and you can't really force it. And so I think they ended up making some, cutting some really big checks into some companies that were really risky. And, you know, the way that we do growth investing is that, you know, it's milestone-based. We're writing, the size of the check is proportional to the amount of proof that the company has.

• 19:01Jason Calacanis?

  Right.

• 19:02David Sacks?

  And, and look, the nice thing I'll say about SoftBank is recently, we've actually done some SaaS deals with them that I think are some really good deals. And they've written checks that I think are appropriate to the size of the, of the company and the amount of proof they have. And they've been really easy to work with, and I look forward to doing more deals with them. But I think it would behoove them to do more deals like that, where, again, check size is related to proof.

• 19:22Chamath Palihapitiya?

  I think that SoftBank, in hindsight, made one critical, critical error, and only one. And everything else was sort of a fait accompli with that one error, which is that in their fund documents, they made this a 10-year fund. Now, let me explain why is that an error? That is the status quo for all these funds. And the more nuanced part of that decision to make it a 10-year fund is that your investment period is only five years. So you're only allowed to put the money in for the first five. And then you have to basically manage the portfolio because there's an expectation that you're raising a new fund. So if all of a sudden you have a hundred billion dollars

• 20:04Chamath Palihapitiya?

  in a five-year investing life, the math says, oh my gosh, okay, well, I need to put 20 billion out per year. And then you try to look for, I don't know, let's say 50 companies a year, while the mean check size now all of a sudden balloons to 400 million. That was the error. You see afterwards, the very, very smart private equity folks who saw that that was the error, fixed it. So Blackstone, Silver Lake, when they came on the heels of SoftBank, what they did was they raised funds with a 15- and 20-year life. And what that allows them to do, and what it would have allowed Masa to do in this situation, was just slow it way, way down.

• 20:46Jason Calacanis?

  Pace yourself.

• 20:46Chamath Palihapitiya?

  And do fewer deals with much more capital, and then be patient and say, I'm gonna have a 10-year investing life. And I think that that would have saved them. And they would have looked incredible right now, because they would be the kingmaker in a moment where there is no money flowing into venture and early-stage tech. So in my opinion, I think it was just that, it was such an ambitious feat, that when it came time to execute, whoever was really in charge of those details, kind of fucked it up. And they should have realized the math didn't work for a five-year fund life, and they should have made it a 10-year fund life, or 10-year investment life, which would have put a 20-year fund life on the thing, and I think they would have been fine.

• 21:24Jason Calacanis?

  Yeah, I mean, if you look at it as 60 months, maybe you take out August and like the holidays, you got basically 50 months to deploy 100 billion. It's 2 billion a month, 500 billion a week. I mean, how do you even process that many deals? It's impossible.

• 21:37Chamath Palihapitiya?

  The quality of the diligence, by necessity, has to go to zero.

• 21:41Jason Calacanis?

  Yeah, it was a crazy strategy.

• 21:44Chamath Palihapitiya?

  If you can breathe, you get money. If you can get a meeting, you get the money.

• 21:48Jason Calacanis?

  I mean, basically, I mean, and if they had just, I'll say, there was one...

• 21:53Chamath Palihapitiya?

  Sorry, Jason, one last thing. No, and it forces you to have a team that is so broad and large and diffuse. That is not this game. This is another thing I would love to, you know, for us to talk about.

• 22:05Jason Calacanis?

  Correct, correct.

• 22:06Chamath Palihapitiya?

  Investing has never, will never, and is not ever a team sport. Okay?

• 22:14Jason Calacanis?

  Explain.

• 22:15Chamath Palihapitiya?

  It is like basketball. You can be on a team, but you are Steph Curry or you're not Steph Curry. You are Draymond Green or you're not Draymond Green. You are LeBron James or you're not. There are JR Smits on a team. There are Tristan Thompson's on a team. And you come together and the team can win a championship. But there are these exceptional individuals.

• 22:36Jason Calacanis?

  Yes.

• 22:37Chamath Palihapitiya?

  And the firms that have really done well consistently over decades embrace that philosophy. Benchmark, Sequoia, you know, these guys don't try to create this team oriented glad handing approach. But they also don't allow the teams to get so diffuse that there's 500 people running around ripping money in. Because you basically then return the beta of the market. And if the market doesn't look good in that vintage, then all of your returns look pretty crappy.

• 23:03Jason Calacanis?

  The lesson for me in all of this is, I think, we, we talk about riding your winners on the show. That came from, just so people understand, when we said ride your winners and it's famously in the, in the opening song here. What we were talking about was like, don't sell your entire position, like when Sequoia sold their entire Apple position or, or other people have done. But pairing your position would have changed this whole story. If he had paired 10, 20% of some of these names that were breaking out.

• 23:26Chamath Palihapitiya?

  I disagree with that too.

• 23:27Jason Calacanis?

  Along the way. Oh, why? Go ahead. Cause I.

• 23:29Chamath Palihapitiya?

  That's the dumbest idea in the world.

• 23:31Jason Calacanis?

  I think the opposite. He would have had it up.

• 23:32Chamath Palihapitiya?

  A year ago, Sequoia just put out an entire document and a roadmap for becoming an evergreen fund. But, and I read that document. And what I thought to myself is all of this looks incredible unless the market goes down.

• 23:46Jason Calacanis?

  And then a market went down.

• 23:48Chamath Palihapitiya?

  And then the market went way, way down. Why? Because their whole thesis is we're going to park and hold money. Well, okay, but they also allowed a revolving liquidity mechanism for their LPs.

• 23:57Jason Calacanis?

  Every year.

• 23:58Chamath Palihapitiya?

  You know, you're a cancer foundation and you want to fund cancer research and you expect Sequoia to give you back money. You fill out a form and Sequoia basically fronts you the money. Well, excuse me, but you can see how all of a sudden this can very quickly get out of control because then where does Sequoia get that money? They'll have to borrow it.

• 24:15Jason Calacanis?

  Or liquidate some positions.

• 24:16Chamath Palihapitiya?

  But the whole point is to not liquidate positions. This is what they said.

• 24:19Jason Calacanis?

  Yeah.

• 24:20Chamath Palihapitiya?

  So my, my point is, I really think, and David said this before, I think a VC's job is to be a VC. It's hard enough to do that job well. And if you think that you're going to cascade across all asset classes and do better than the market, it's an extremely high bar that creates tremendous pressure and forces you to bring things on like debt and all of these leveraged lines, which when markets go up will work in your favor, but can very quickly turn against you.

• 24:47Jason Calacanis?

  Yeah, I disagree completely because when, if you look at when you're in a private company and you're, you own some private shares, you know, the revenue, you know, the velocity, you know, the management team, you have more insights than everybody. You got a massive information edge because it's all based on insider information before it's public. And pairing your positions in privates can be amazing because you have some overvalued company, because someone like Masor Tiger comes along that overvalues it. So for venture funds, I think when you start hitting these 50, 100 Xs, pairing 10%, pairing 20% along the way, which Masor could have done in these private names especially, would have been brilliant.

• 25:19Chamath Palihapitiya?

  You're saying don't distribute and just hold on and use debt and give people, give your LPs that want liquidity?

• 25:25Jason Calacanis?

  No, no, no. I'm saying if you have the opportunity to sell in secondary, you should pair your position in your winners 10 or 20%, two or three times.

• 25:34Chamath Palihapitiya?

  I'm not saying that.

• 25:35Jason Calacanis?

  I'm saying if SoftBank did that, this would be a different position.

• 25:38Chamath Palihapitiya?

  No, but like you're using soft, you're using Apple and Sequoia as an example. You do remember the trajectory of Apple basically went to a $4 billion market cap for years languishing. I mean, the, the idea that Sequoia would have held those shares because they had some proprietary views ludicrous.

• 25:54Jason Calacanis?

  Why is it ludicrous? What if they just had a philosophy of keeping 20%?

• 25:58Chamath Palihapitiya?

  That company was on death's doorstep. You can see the YouTube videos. When Steve Jobs came back, he said, "We may not make it."

• 26:04Jason Calacanis?

  Yes, but Chamath, that is part of the opportunity. But putting that aside, that's exactly what Sequoia is doing is they're saying, "We want to hold the legendary companies, the legendary brands with the great founders forever."

• 26:16Chamath Palihapitiya?

  That's all easy in hindsight. How do you do it today?

• 26:19Jason Calacanis?

  Well, today...

• 26:20Chamath Palihapitiya?

  Is Unity a legendary company? Or should you have distributed at $165 a share?

• 26:25Jason Calacanis?

  Well, I'm saying...

• 26:26Chamath Palihapitiya?

  That's an extremely hard question.

• 26:28Jason Calacanis?

  And I'm saying you can mitigate that question by pairing your position 10%, 20%. So you have the best of both worlds. Sax, what do you think?

• 26:35David Sacks?

  Well, I think it's hard to pare down a position while the company's still private because the companies don't want you to by and large. But, uh, but once they do become public, then the question is when you distribute, and we talked about this. I think it sounds like SoftBank was sitting on quite a few large public positions and could have distributed. I'm not fully familiar with their structure, but given that they had all this debt, seems like you'd want to pay off all the debt as soon as you could. And missing the chance to do that...

• 27:06Chamath Palihapitiya?

  They had a preferred coupon. They had to pay PIF and ADIA every year. I think it's like $3 or $4 billion. It's well, it's documented, but that's the 6% that they were owed on their $50 billion.

• 27:17David Sacks?

  But did they pay it off last year?

• 27:20Chamath Palihapitiya?

  Well, they have to pay it every year.

• 27:22David Sacks?

  Yeah, okay, so they did it. I mean, look, I would just say these bubble, it's easy, you know, hindsight's 2020. It's really easy to point out these mistakes after the market's cratered. You know, my experience with these bubbles, whether you go back to 1999 or 2021, is when you're in them, they're very powerful psychologically. You know, everyone's talking about how everything's going up. And we, I think, actually had some really good commentary on the show about, back in November, about how it could be the peak, how it could be all liquidity fueled. Uh, we didn't know for sure, but there were some pretty good predictions on this pod. But by and large, it's, it's pretty hard to know whether you're, you know, whether you're in a bubble.

• 28:00Jason Calacanis?

  Is there a grounding metric that you use? I'll open up to Friedberg and then everybody else, when to know that the market is overheated? Do you, Friedberg, is there something you look at and go, "Okay, we've disconnected from reality, price to earnings, price to sales"? Some valuation metrics are the things you look for. So you know that this is overheated and maybe it is time to pair positions. What have you learned over now our third collective down market?

• 28:26David Friedberg?

  Valuation trophy hunting, I would say is a pretty good indicator of things being, things being

• 28:35Jason Calacanis?

  Explain what that is.

• 28:36David Friedberg?

  In a heated market, like if the

• 28:41David Friedberg?

  the businesses, the CEO, the founder, the venture firms, everyone is all about how much you can mark up your investment as opposed to talking about the quality of the business and the quality of the earnings. And then you revert back, as we just recently did, to now people talking about, okay, how strong are the gross margins of this business? How effectively can they deploy capital? What's the return on invested capital? Key metrics around the fundamentals of the business versus the value that the market is willing to pay for the business. And the more heated the market gets, the more everyone focuses on terms like unicorn, decacorn, you know, and that becomes the key metric as opposed to saying this business

• 29:25David Friedberg?

  is so good, for every dollar they spend, they make $3 in gross profit in 12 months. That's what fundamentally says that's a high quality, you know, valuable business over time as opposed to here's what the market is telling me it's worth today. And if the market is telling you it's worth that much today and you're, and that's what you focus on, you inevitably end up in these kind of bubbly moments where you miss out on focusing on core value creation, which will actually pay off much, much more over time.

• 29:57Jason Calacanis?

  Schumacher, you pointed out another signal. Hey, when smart people who have the largest amount of capital in the markets are clearing positions, maybe that's a signal of a top. And then I think is a really good insight by Friedberg, when the conversation, the narrative is about the valuation and the status and vanity metrics as opposed to the quality of the earnings, hey, that's a really good indicator we're in a bubble, maybe you should start clearing positions. What are indications for you that we're either in a bubble or the market is undervalued?

• 30:26Jason Calacanis?

  Because we're really talking about this timing, right? Timing is very important as a capital

• 30:29David Friedberg?

  It's not possible. This is why I think that

• 30:33Chamath Palihapitiya?

  You have to define what game you want to play before you start playing the game.

• 30:37Jason Calacanis?

  Okay.

• 30:39Chamath Palihapitiya?

  This is why I think it's kind of nonsensical. For example, I believe that at best I am an equity investor in technology companies or things that have a technology bias because I can generally understand them. Maybe, you know, a few seconds faster than everybody else, which allows me to make a decision a little bit quicker.

• 31:06Chamath Palihapitiya?

  But if all of a sudden I started investing in debt, you should expect that I'll lose my money. Because I don't know what I'm doing and that's not the game where I had any advantage. So I think the most important thing to do is to not try to do all of this crazy stuff because this is what happens

• 31:24Chamath Palihapitiya?

  in moments where either things are very, very good or things are very, very bad. People try to create all these stupid rules. And the rule, the only rule is there are no rules. So I don't know. I just think it's like stick to your knitting. If you're a product builder, build products. If you're an early stage investor, just do that. It's hard enough to do any one of those things really, really, really well. But this idea that, you know, you're going to come up with like some mosaic and a system, I think it's just highly suspect. And I think the market returns have showed that everybody that tries has failed except for maybe one or two.

• 31:59Jason Calacanis?

  Sax, any thoughts?

• 31:59Chamath Palihapitiya?

  It's just not going to work. What's the point? So I don't know. If you're an early stage investor, make good deals and then give the shares and book the win.

• 32:06Jason Calacanis?

  That's what I do. Yeah, that's my philosophy. Sax, what are your thoughts?

• 32:10David Sacks?

  There's a couple of metrics that I'll be looking at from now on that I wasn't paying a huge amount of attention to before. Uh, one is the price to ARR of the media and public SaaS company. And so like Brad Gerson has these great charts where you saw that. Historically, that number was around six. You know, the median SaaS company was was trading at about six times their next 12 months revenue. And it went all the way to 15 during this sort of COVID bubble in 2021. And for the high growth SaaS companies, which are the ones growing 40% instead of 20%, it went from, you know, like eight to 35. So, um, so I'll definitely be looking at that. And, you know, what you're looking for is just how off the historical mean are we,

• 32:54David Sacks?

  positively or negatively? Because these public valuations are the exit comps for, you know, the private markets. And those valuations do eventually trickle down. And so if there is a bubble in the public markets, it will trickle down to the private markets. So that would be like one metric. I mean, again, it's not something that like affects me daily, but it's something I'd want to periodically keep tabs on. The other is just interest rate policy. I mean, I've never spent so much time in my entire career, like looking at inflation and interest rates than I have this year. Because who knew how much this stuff was affecting us? I thought I was a micro investor. I thought I was just picking companies on a micro level. As it turns out, we were all massively impacted by macroeconomic policy.

• 33:39David Sacks?

  And, you know, it got so we didn't even notice it. The zero, the zero interest rate policy, the ZERP, along with the quantitative easing, these are supposed to be exceptional measures that started back in 2008, but we stopped noticing them. They continued for years and years and years. They continued until our last year. And we, again, we just stopped noticing because we got used to it. We kind of got hooked on, hooked on drugs. So the market did. So I'm just gonna have to pay a little bit more attention to what the Fed is doing now. And, you know, if you go all the way back to the dot com bubble, what's interesting is that the Fed funds rate back in 1999 wasn't low. It was like 4%. It wasn't like it was even today. And we still had a bubble, but what popped the bubble was that interest rates went from

• 34:24David Sacks?

  four to 6% in, from 1999 to 2000. That's what popped the bubble. So, you know, I, I don't, I don't know if we'll ever have a situation again like we had over the last few years with the, with the ZERP. But, um, I mean, that probably looking for that next time is fighting the last battle instead of the next one. But you do probably have to be a little bit more aware of monetary policy and what the Fed is doing.

• 34:48Jason Calacanis?

  Yeah, this chart, Exhibit Six from the Vision Fund, benchmarking against peer funds that Chamath just put into the group chat is absolutely spectacular. It puts Sequoia, Insight and SoftBank, you know, large, large funds against each other. Fund size, 100 billion for SoftBank, 8 billion for Sequoia, 6.3 billion for Insight. And to Chamath's point earlier, the pace is, yeah, really crazy. 130 deals.

• 35:14Chamath Palihapitiya?

  Three and a half deals per month, but then the average check size is 620 million.

• 35:19Jason Calacanis?

  Versus 130 and 70.

• 35:23Jason Calacanis?

  And the deals per month, 3.5 versus 0.6 versus 4.2. So Insight going pretty fast with small checks.

• 35:30Jason Calacanis?

  SoftBank going very fast with huge checks.

• 35:32Chamath Palihapitiya?

  Sequoia data here is really, you know, Sequoia has the benefit of being able to backtest against 40 years of returns. And so if essentially what they're saying is there's really no more than five or six companies a year that are worth investing in, that's a really big signal that's worth thinking about. And so, you know, five or six companies, maybe they can absorb even 600 million dollars each, you know, it still puts you at 3.5, 4 billion dollars. Doesn't put you at 20, which is what you need to put 100 into the ground in five years.

• 36:02Jason Calacanis?

  2 billion a month, I mean, my lord, it's like Brewster's Millions or something. It's like some crazy premise.

• 36:07Chamath Palihapitiya?

  I think in fairness to SoftBank, again, you know, these are the same guys that invested in Yahoo. They invested in all of these, you know, dot com companies and brought them into Japan, including great businesses like Cisco. You know, these guys have been big time serial winners. I think the tactical mistake was not having a 10-year investment life.

• 36:28Jason Calacanis?

  I mean, and we could be sitting here next year, Alibaba could double in value, a couple of their other positions could recover 50%. Okay, but we could be sitting there and they could be, they could have closed the gap massively. Anything's possible. I think actually a good jump off point here, great discussion, gentlemen. Do we want to talk about?

• 36:49Jason Calacanis?

  The markets, we got the inflation print, Saks. I guess depending on what political party you're in, it's either 8.5% or 0%, 0% month over month. If you're a Democrat, if you're a Republican, it's 8.5% in our polarized times. But what does this tell us, Saks, just at least about maybe inflation is tipped over and we're going to be flat for a little bit. That obviously caused the market to rip a little bit and we had this incredible jobs report. We're now at 3.5% unemployment.

• 37:22Jason Calacanis?

  And we have twice as many jobs as we predicted. I mean, it's pretty extraordinary what happened in the last 30 days to the, to these prints.

• 37:29David Sacks?

  Yeah, look, I think that overall the economic data is mixed, but we got a couple of good data points in the last month. So inflation did decrease from 9.1 to 8.5%. Inflation was until now measured on a year-over-year basis, not a month-over-month basis, but since we got the first good month-over-month reading, all of a sudden now it's been redefined to be on a month-over-month basis. Just this is the same thing that happened with the definition of recession, where recession used to mean two quarters of negative GDP growth.

• 38:04David Sacks?

  Of course, that happened. And so all of a sudden, the definition became unknowable. We have to defer to this, this economic board that won't render a decision until next year. By the way, if that were true, how could we ever contemporaneously talk about a recession? You know, if you had to wait until this economics board declares recession a year from now, the press could never have ever reported on a recession.

• 38:25Jason Calacanis?

  I for one, I'm shocked. Yeah, I'm shocked politicians are spinning.

• 38:28David Sacks?

  The politics of this are obvious, which is they keep redefining terms rather than admit that there's any bad data at all.

• 38:34Jason Calacanis?

  That's mixed.

• 38:35David Sacks?

  Now, look, I don't, I don't think the data is catastrophic. I don't, I don't think, I don't think it's in anyone's interest to catastrophize the data, but there's a lot of negative data out here. I mean, look, inflation is still very high, eight and a half percent. If you had told any of us that in August, that inflation would still be half, eight and a half percent at the beginning of this year, we would have said that is horrible. Because remember, the investment banks were all saying it's going to come down to 3% by the end of the year. So inflation is still high, the jobs picture is good, we're technically in a recession. If I were to predict, I think, what's going to happen now, I think, you know, look for a double dip. I wouldn't be surprised at all if in Q3 or Q4, we're back to positive GDP growth.

• 39:16David Sacks?

  But I don't think we're necessarily out of the woods because I think there's a pretty good chance that next year, these rate hikes really kick in. It takes six to nine months for them to ripple through the economy. So if you look at the construction industry, the construction industry has just been devastated. New housing starts, you talk to the builders, they tell you that the construction industry has just been clobbered by these rate hikes. The inventories are piling up and the affordability of, there's a chart today about the affordability of home prices at a 40-year low. And so the construction industry, it's really the bellwether. When a recession starts, they're the ones who are first impacted. But it's probably going to take six to nine months.

• 39:58Jason Calacanis?

  Because the loans are so expensive and cost of capital is expensive.

• 40:02David Sacks?

  Right.

• 40:02Jason Calacanis?

  They can't start new projects, yeah.

• 40:03David Sacks?

  So look, if I had to, I think we're in a shallow, technical recession right now. I bet that we probably bounce out of it in Q3 or Q4. But I think there's a significant risk that we're back in, we're back in it next year. Just my guess.

• 40:17Jason Calacanis?

  Free break, we've been talking about consumer credit a whole bunch. Buy now, pay later. Household debt now totals more than 16 trillion. Credit card balances make up 890 billion of that. Obviously, student loans, mortgages, other things are in there. And the number of credit cards is now at a massive high, 550 million of them issued here in the United States. We added a massive amount of debt. It's still lower, the credit card debt, just to be clear, is still lower than the pre-pandemic level of 930 billion. But consumers seem to be taking out credit, I guess, to deal with inflation or to enjoy their lives because they're not stopping their spending. And we see that in some of the stocks and the earnings reports that are coming out as well.

• 41:01Jason Calacanis?

  So what's your, what's your take on this, you know, conflicting data we have? Or have you made some sense of it? And what is your prediction of Q4?

• 41:09David Friedberg?

  Sorry, are you asking what my take is on the consumer credit?

• 41:13Jason Calacanis?

  Well, basically, the overall macro situation here, we've got consumer credit. You know, people taking on a lot of debt while jobs look great, while inflation is still high. What does that look like, you know, as we go into Q4 and next year? What is this telling you? Is there some signaling you can take from this?

• 41:31Jason Calacanis?

  Sacks said shallow recession thinks we might double dip. I'm kind of getting to your prediction of Q4.

• 41:36David Friedberg?

  I mean, this is a little repetitive. I mean, I've said this, I first said it in May at the All In Summit and I said it again on the show twice.

• 41:44Jason Calacanis?

  Great.

• 41:44David Friedberg?

  Which is, I think that the definition of a recession of negative GDP growth when you're coming off of inflated GDP is, you know, it's not a binary catchall term. I mean, the fact is, we had inflated assets and as a result of inflated assets, we had inflated earnings and we had inflated valuation and we inflated income and, you know, now the capital's coming out and things are going to go down inevitably, but I don't think that this should be deemed that there's something fundamentally negative about the US economy. The biggest risk I still see is this rising consumer credit balance, particularly in a rising rate environment. People are taking on more debt. If you look at the New York Fed, here, I'll just give you the latest.

• 42:29David Friedberg?

  This is the household debt and credit report. They put out household debt rises to $16 trillion in the growth in housing and non-housing balances. And so there are variable rate loans in there in the auto, home and credit card markets. Those variable rates mean that as interest rates climb, the amount to service existing debt will go up each month and the amount of debt that's being taken on is also going up each month. And so the key economic question is, does the income gain that's being experienced or the asset value gain that's being experienced outpace the increase in monthly debt service needed for a large number of consumers? Student loans are also in here, by the way.

• 43:10David Friedberg?

  And so when you put that all together, it's a very technical question, which is technically, where do you start to see defaults rise? And when you have defaults rise, then the money that's owed and the services that are the service payments that are owed on that debt trickles through the economy because bonds start to default, equity start to decline and so on. So, you know, this is why I can speak at a high level from a macro point of view, that the rate at which debt is going up and consumer credit is going up and the rate at which rates are climbing that affect the revolving and variable rate debt that consumers hold.

• 43:49David Friedberg?

  Could outpace the income and the asset value gain, particularly when equities are down, 401ks are down, housing prices are down. And so there's a tipping point. And when that starts to happen, then you start to really hit an economic crunch. And I've mentioned this multiple times now, that it's the thing, you know, I would kind of watch most closely, while there are core elements of the current economy that look strong, there are real concerns around whether consumers can keep up with their debt payments in the months and quarters ahead.

• 44:21Jason Calacanis?

  Chamath, are you following this consumer credit surge? And do you think that this could be a black swan type event? This could be, you know,

• 44:28David Friedberg?

  There's no black swan, because it's right here in front of us. So,

• 44:31Jason Calacanis?

  Okay, well, I would say like a massive contagion where there's massive number of defaults creating a black swan contagion-like event. But yes, so it's not, it's maybe hidden in plain sight. What do you think, Chamath? Is this important data? Or impacting your view on things?

• 44:46Chamath Palihapitiya?

  Yeah, I think it's important. It's part of a mosaic. And I don't, I don't really know. Look, what are we trying to get from this discussion? I don't understand. Like, like, are we trying to predict what's going to happen? I mean, I think David basically said it best, like, if you actually just take a step back and stop overlaying what we want to happen. Look, the reality is, all four of us want things to go up. And we like it when there's money in the system and everything's flush. But if we had said last year that we would open an envelope and, you know, we would show these inflation prints, we would be shocked. And we would have been scared. And quite honestly, you

• 45:27Chamath Palihapitiya?

  know, in the process in November, when I started selling, I would have sold even more violently than I sold. And all I can say is, I saved my ass in November of last year, looking at what's happened in the last six, eight months. So, I don't know, I just think that if you look at the CPI print, and you look at the components, we were saved because energy basically fell off a cliff. And for whatever reason, a bunch of people decided not to travel. And, you know, we didn't import as much oil, and we were able to keep costs contained. And that kept CPI from being really out of control. But again, we're in the summer where we don't have the pressure on energy that we're

• 46:12Chamath Palihapitiya?

  going to have in October, November this year. So I really don't know. I mean, I just think that there is like Friedberg has his pet issue. I have my pet issue. Saks has his pet issue. You ask 100 economists, they'll have their own pet issue, housing affordability, whatever it is. The point is, we have 100 whack-a-mole problems. And the question is, which mousetrap sets off the rest of the mousetraps? I have no idea. And so, you know, I just think that right now, things are a little bit too calm. And that makes me feel very unsettled.

• 46:48Jason Calacanis?

  Another shoe might drop. I mean, the point of the conversation is to try to understand and make better decisions in capital allocation, company formation, and placing bets in the next year. So I think that's the point of the discussion.

• 46:59David Sacks?

  We now have the spectacle of the president saying he's going to pass an inflation reduction act to solve a 0% inflation problem to get us out of a recession that he says doesn't exist. You guys know this, but the politics and the political commentary on this are absurd. I think what we're describing here is simply more honest, which is to say that the data is mixed and we don't exactly know what's going to happen.

• 47:26Jason Calacanis?

  Yeah. I mean, the thing that I think is encouraging is when you look at this jobs data and you look at the debt that consumers are putting on, my theory is, and I could be wrong, that people want to keep spending, they want to keep living their lives, they're taking on a little bit of debt to deal with inflation and to keep spending, but they're also going back to work. And I'm seeing that anecdotally, a lot more people going back to work and the numbers show that, that feels to me, and I said this on previous episodes, that that feels like a possible, you know, very helpful path out here. And I think you brought it up, Saks, as well, which is, hey, if we have increased participation, that's great, increases monetary velocity, increases participation in the economy, that's a possible path out. Do you feel like that's still holding strong?

• 48:07Chamath Palihapitiya?

  We've been in secular decline on that trend for 25 years. So maybe, maybe on the margins, a few folks run out of stimulus and decide to go and get a job. But I don't think, again, it's kind of like, you know, when you're at, when you're at the blackjack table in Vegas. And

• 48:26Jason Calacanis?

  Clapping as a strategy.

• 48:27Chamath Palihapitiya?

  Clapping is not a strategy. I feel like all the, like what we're talking about right now is clapping as a strategy. Maybe this can happen, maybe that can happen. You know what? Maybe it'll start raining gold fucking coins that we can use and just worry about, I mean.

• 48:40David Sacks?

  Yeah, I mean, J Cal.

• 48:42David Friedberg?

  I feel like the last 15 minutes have been like not a good conversation.

• 48:45David Sacks?

  I think it's totally repetitive.

• 48:46Jason Calacanis?

  Great conversation.

• 48:47David Sacks?

  No, listen, I think it's totally repetitive. It's totally repetitive, J Cal, because look, the structure of the problem, I think, is very well defined, which is, we have an inflation problem. Great. It went down from 9.1 to 8.5%. It's still really high. 2% to 3% would be, would be normal. Okay? So that's half the problem is how fast is inflation going to go back down to normal based on interest rate cuts? The other side of the problem is

• 49:11Jason Calacanis?

  Increases.

• 49:12David Sacks?

  Is, sorry, interest rate increases, not cuts. The other side of the problem is how much will the economy be hurt by these rising rates? And those are the two variables. And we see that there is a slowdown. There's still a lot of jobs being filled, which is good. But there is unquestionably an economic slowdown. And those are the two sides of this equation. And we just need to see some economic data. It was going to play out over the next several months.

• 49:35Chamath Palihapitiya?

  You've been asking the same question for three fucking weeks.

• 49:38Jason Calacanis?

  If you guys don't want to talk about the new data, that's fine.

• 49:40Chamath Palihapitiya?

  Hey, who cares? It's like, we just found out from a major market issue. None of us, we don't have an opinion other than we don't know. How many ways can we say we don't know?

• 49:47David Friedberg?

  I don't want to talk about inflation or recession or jobs or any of that shit anymore unless there's something really for us all to say, like something news come out. Like some fucking economic report.

• 49:56Jason Calacanis?

  Was really important. I mean, that was a, that was a massive print.

• 49:59David Friedberg?

  It's not, it's, it's.

• 50:00Jason Calacanis?

  Oh, yeah, twice that is. Twice as many jobs.

• 50:02David Friedberg?

  It's on the track of what we've already said.

• 50:04David Sacks?

  It's one data point. It's one data point.

• 50:05David Friedberg?

  It's on the track.

• 50:06David Sacks?

  And you know what? There were some bad jobs reports before that print.

• 50:10David Friedberg?

  I think we should stop doing the recession inflation chat every week. It honestly is like repetitive.

• 50:14Chamath Palihapitiya?

  You have a better job moderating. Can you not dial it in?

• 50:17Jason Calacanis?

  You got, no, you guys asked to talk about it. You guys put some of these things on the docket.

• 50:20David Friedberg?

  I don't want to talk about it anymore. I think we should cut that shit.

• 50:22Jason Calacanis?

  Let's move on. What do you, okay. What do you want to move on to?

• 50:25David Friedberg?

  I think SoftBank was a great chat. I think, you know, that was a good talk. We should do that kind of shit. We should talk about.

• 50:29Chamath Palihapitiya?

  I want to know what you guys think about the Sequoia Evergreen Fund. Tell me what you guys think about that. Come on, geniuses.

• 50:34David Friedberg?

  The Sequoia, like when they restructured? Are you joking?

• 50:39Jason Calacanis?

  I love, I love when these two go silent. No, no, I always didn't want to interrupt anybody.

• 50:44David Friedberg?

  I don't understand what you're saying.

• 50:45David Sacks?

  I don't understand why you guys are trying so hard to avoid the, the obvious news of this week.

• 50:50Jason Calacanis?

  Was there something else in the news this week?

• 50:52David Friedberg?

  Sax, um, if Trump actually had some material in Mar-a-Lago that was related to the nuclear program and, um, you know, there was an attempt to try and get, recover those documents through normal means and they were not recoverable, what would your course have been if you were the director of the FBI or the president of the US in that condition? Cause I think that seems to be the party line of what's going on here.

• 51:17David Sacks?

  Well, uh, you know.

• 51:18David Friedberg?

  The democratic kind of spin on what's going on here, but like, you know, honestly, in that circumstance, what do you think would have been appropriate? So there's, there's some sort of confidential material related to our nuclear program or nuclear weapons, something's, something there in those materials that were attempted to be recovered or were taken without approval and then they tried to recover it for, you know, assume there's known nefarious intent, what would be the right kind of course here?

• 51:42David Sacks?

  Well, I, so I, I don't know exactly what's going on. I just think that, um, you can't necessarily give the F, sadly, I don't think you can necessarily give the FBI the benefit of the doubt here in light of their history. Um, but let's back up. I mean, first you had this, this raid on Mar-a-Lago where you got 30 FBI agents. They're not wearing suits with holstered sidearms. They're carrying AR-15s, you know, weapons of war, fingers just outside the trigger guard. They're wearing body armor. It looks like a paramilitary raid on Mar-a-Lago. It's utterly unprecedented. And you look at tweets by, um, Andrew Cuomo, for example, or, uh, Andrew Yang. I mean, these guys actually turn out to be pretty, I think intellectually honest Democrats on this point saying this is unprecedented and it's really going to, yeah, I want to

• 52:27David Sacks?

  read this by.

• 52:28Jason Calacanis?

  Why don't you just answer? Why don't you answer Friedberg's question?

• 52:32David Sacks?

  I'm getting there. I know you're gonna cut me off, so I'd like to just read these tweets. So maybe you, because you know, maybe you'll give more credence to Andrew Yang. He said, "I'm no Trump fan. I want him as far away from the White House as possible." But a fundamental part of his appeal has been that it's him against a corrupt government establishment. This raid strengthens that case for millions of Americans who will see this as unjust persecution. You have Andrew Cuomo saying DOJ must immediately explain the reason for its raid. It must be more than a search for inconsequential archives or be viewed as a political tactic and undermine any future credible investigation and legitimacy of January 6 investigations. And let me read one other tweet by Elon that's not directly about this, but he tweeted this on July 11, so a month ago.

• 53:13David Sacks?

  And he said, "I don't hate the man, but it's time for Trump to hang up his hat and seal up the sunset." That was the part that was widely reported. But he also said, "Dem should also call off the attack. Don't make it so that Trump's only way to survive is to regain the presidency." I think there was a lot of wisdom in that. And you know, I'm old enough to remember when the case for Biden getting elected is we have to move past this partisan warfare, this extreme rancor and derangement. And we were told that the media, you know, all these people who had TDS, that their psychosis was due to Trump. And if we could just move past Trump, this, all this sort of partisan warfare would end. And now, and, and I was certainly hoping that would be true.

• 53:58David Sacks?

  And now sadly, it seems like we're right back in this thing. Um, where we're right back with the media being obsessed with TDS portraying this narrative that somehow he's a traitor. And what is this whole thing, hang on, just these two words, nuclear documents? Well, listen, until they actually produce those documents, I'm gonna suspend judgment. Because the FBI, the last time they did this, remember, they manufactured a falsified warrant to the FISA court for this type of investigation. They have that history. So I'm just gonna suspend judgment on what's going on here until they actually produce the documents they're talking about.

• 54:37David Friedberg?

  So Sax, can I ask?

• 54:38David Sacks?

  Right now, this stinks.

• 54:39David Friedberg?

  Do you honestly question the integrity of leadership and agents of the FBI?

• 54:45David Sacks?

  Are you serious? Like, you don't think?

• 54:47David Friedberg?

  Yeah.

• 54:48David Sacks?

  All right, let me read you this tweet from Michael Berry.

• 54:49David Friedberg?

  I don't want to hear the tweet. I want to hear your point of view.

• 54:52David Sacks?

  Well, no, no. Well, I agree with what Michael Berry is saying. So I think sometimes there's a lot of thoughtful commentary about this. And what Berry says is J. Edgar Hoover led the FBI for five decades, denied the mafia existed, fought the civil rights movement, shielded the KKK. Multiple presidents acknowledged fear of him. So what he's saying is that the FBI, since its inception, has political origins and basically meddled politically in the affairs of the country. Then he says, "The FBI lied to the FISA court." This is back in 2016. Totally true. Altered emails, leaked lies to the press to get Trump. Nothing shocking. So, Friedberg, listen, I don't know whether the FBI is telling the truth, but are you honestly going to say that the FBI's leadership has never been political, that has never

• 55:36David Sacks?

  harbored or pursued their own agenda, and that it's never had a desire to go after Trump?

• 55:42David Friedberg?

  I'm not making an opinion.

• 55:43David Sacks?

  We saw, hold on a second. We saw, we saw the text messages from Comey, Strzok, Page, McCabe. I mean, these guys basically took it upon themselves when Trump was elected to be the quote-unquote "insurance policy."

• 55:54David Friedberg?

  Yeah.

• 55:55David Sacks?

  And an FBI lawyer pled guilty to falsifying documents to seek a warrant from the FISA court. So I just think anything's possible here. And now, I'm not saying the FBI is lying about this. I don't know. But the idea that the FBI is automatically entitled to the benefit of the doubt, in light of their proven history of basically pursuing Trump like Ahab pursued the white whale. I mean, these guys have been after him.

• 56:23David Friedberg?

  I'm just going to zoom out for a second. And the reason I'm interrogating Sacks on this is, like, it's just so telling to me that a guy like, like you, Sacks, in your position, are actually questioning the integrity of, like, the highest justice authority and institution in the United States, really says a lot about, kind of, the state of the US citizenry, the state of our society today. I think it speaks a lot to...

• 56:49David Sacks?

  At least a third of Americans.

• 56:51David Friedberg?

  I know, it's incredible. And what Ray Dalio said in his book about how during these periods when the empires begin their decline... And you know, when you're challenged with kind of the economic conditions that the US is challenged by printing lots of money, lots of debt, very hard to service all that debt, and we have a ton of obligations over the next decade or two, that are going to be very hard to meet, given our economic growth and inflation conditions right now, that you start to see these sorts of behaviors historically, it's happened six times in the last 500 years, where large empires like the United States or large, you know, economic powerhouses like the United States start to decline, that the civil war begins, that the institutions get challenged by a minority and then a majority of the citizenry, and

• 57:36David Friedberg?

  it really starts to crumble and challenge the integrity of the institution and its ability to hold itself together.

• 57:41David Sacks?

  Well, I'm not, hold on a second, I'm not, I'm not challenging, hold on a second, I'm not.

• 57:45David Friedberg?

  Well, you're questioning the integrity, you're questioning the integrity of the Department of Justice, right?

• 57:49David Sacks?

  Listen.

• 57:49David Friedberg?

  And by the way, I'm not, I'm not arguing, I'm just pointing out, like, it's, it's an incredible condition for us to find ourselves in.

• 57:55David Sacks?

  Yeah, but I, but, but, but my questioning did not create that condition. There, this lack of trust is earned.

• 58:01David Friedberg?

  I know.

• 58:01David Sacks?

  It's earned by the FBI in light of behaviors they took just a few years ago. Now, listen, I'm not defending Trump per se. I don't know what he did or didn't do, okay? But I think that it, you can't just accept at face value without further proof, these leaked, what are basically leaked comments by the FBI.

• 58:25David Friedberg?

  Yeah.

• 58:25David Sacks?

  I mean, look, I'm not, listen, I'm not a naive child. I mean, the fact of the matter is that power can be corrupt, and power corrupts, okay? And we have seen that the FBI from its earliest days did engage in corruption, and more recently, against Trump himself, had a vendetta against Trump. So I'm simply, so hold on, so all I'm doing is, I'm not going to automatically accept at face value what they're saying until I see some proof. Now, I'm not saying that they're wrong, or they're lying about this, I'm simply saying I'm not going to accept it at face value.

• 58:57David Friedberg?

  Yeah, and remember, Trump was elected on the platform that there is this deep state, that there is institutional corruption, that there is malaise and lethargy in these institutions of the government that are funded on the order of trillions of dollars a year, and that that's what he was intended to go and blow up and repair. And there's a very strong and potentially close to majority percentage of voting Americans that feel that there is this core deep state corruption, institutional lethargy, that is challenging our ability to give everyone the freedom and liberties that they deserve.

• 59:33David Sacks?

  Free bird, these agencies are supposed to be nonpartisan. They're not supposed to have a horse in the race. And what we saw is that when Trump was in office and these texts came out, clearly, the top levels of the FBI, these top agents, I'm not talking about the rank and file, I'm not talking about the field agents, I understand that a lot of them are law and order types who vote Republican, I get it. But I'm talking about the leadership, the highly political leadership in Washington. And it was pretty clear that they had a horse in the race. They did not like Trump, and they were out to get Trump. And, you know, again, Trump is not my preferred candidate for 2024. But what the FBI has done with this raid, quite frankly, I think has polarized the outcomes. They are basically going to send Trump to the big house or the White House. I mean,

• 1:00:17David Sacks?

  because now the Republicans have rallied around Trump. I think he's going to be very, very hard to beat as the nominee in 2024, unless the FBI comes up with ironclad evidence to show that he did something significantly wrong.

• 1:00:31David Friedberg?

  I care less about who did what and what was done wrong. I care more about the fact that this conflict is escalating, and it's creating a real condition of continuing polarization. And it really is the conditioning that, you know, Biden had some historians in the White House, there was a report on this last week, and these historians spoke about how the conditions in the United States are just as they were right before the Civil War. And that there's real concern- Is measured how? That, yeah, well, I mean, you know, they- You can go read the anecdotal reporting that was done on this thing, but that was the general theme of the conversation. And, you know, it really, it really kind of concerns me more that this level of discourse

• 1:01:11David Friedberg?

  is escalating to a point of, you know, there is corruption, this person is a criminal, and that sort of discussion happens, you know, in more dire circumstances and more and economic circumstances than has ever been seen. You know, the US is the largest economy in history, and we're now having these sorts of conversations that typically lead to some degree of conflict, and it's really concerning.

• 1:01:35David Sacks?

  Well, I just think, listen, I think that Trump was out of office. We were told that this partisan rancor would stop once he was out, and it's, you know, they're pulling him back in. And all I can say is that when the, I think we know maybe 1% of the story, okay? I think this leak around nuclear documents is, it feels like a selective leak, it's not certainly the full story here.

• 1:01:57David Friedberg?

  But all sides are inflammatory, all sides are cantankerous.

• 1:02:00David Sacks?

  And I'm suspending judgment. What I'm saying is, though, that when all the information comes out, there better be a very significant there there.

• 1:02:07Chamath Palihapitiya?

  No, no, no, we've made that impossible too, because he, Trump came out and he basically said, hey, listen, if you, if these guys find something, it was planted. And now you're going to have at least, you know, 10 or 15% of the population that believes, okay, this was planted, it wasn't actually there, and, you know, so whatever the outcome is, will not be good. Nobody will be satisfied. And both, both of the extremes in the United States will be even more angry.

• 1:02:35David Friedberg?

  Further inflamed, yeah.

• 1:02:36Chamath Palihapitiya?

  Further inflamed.

• 1:02:37David Sacks?

  Well, that's what I'm saying.

• 1:02:38David Friedberg?

  The inflammatory index has now, has now skyrocketed, yeah.

• 1:02:41Chamath Palihapitiya?

  By the way, this is why I think at some level, maybe the lack of faith in these institutions is well deserved, because where is the, the, you know, the, the prudence of all of this? Like, where is the, the circumspect, thoughtful, methodical thinking about all of the different outcomes that could be possible, so that you exhaust every option and this is the only option left? And then even then... If Merrick Garland was open to basically saying, unseal the warrant, why didn't you do it before and say, we're going to have to serve this guy? Unless he actually gives us these things. There's all kinds of things you could have done.

• 1:03:23David Friedberg?

  Oh, clearly they did that.

• 1:03:24Chamath Palihapitiya?

  To keep the, hold on a second, to keep the temperature of this thing way, way down. And that's what's frustrating.

• 1:03:30David Sacks?

  And to your point, Chamath, they could have let Trump's lawyers watch them do the search so that nobody could claim anything about anything being planted.

• 1:03:37David Friedberg?

  Yeah.

• 1:03:38David Sacks?

  So they didn't let that happen either.

• 1:03:39David Friedberg?

  The inflammatory index is spiking. I think that's my key takeaway on all of this. I, I care less about what Trump did and what the DOJ did and what the FBI did. But like, I'm more concerned about where this takes us because the next step, regardless of the outcomes.

• 1:03:52Chamath Palihapitiya?

  You know where it takes us. You know where it takes us. When you're on tilt at the poker table, what do you do? You cannot think properly.

• 1:03:58David Friedberg?

  That's what, and that's where everyone's at right now. Yeah.

• 1:04:00Chamath Palihapitiya?

  When people are so inflamed with emotion, they start to make very poor decisions. I don't know whether the DOJ and main justice made a poor decision or not. I think this is where we have to hold our breath and hope they didn't. I don't know whether the White House knew anything or not. But the whole point of all of this is that we pulled this guy right back in to the, to the, to the main stage.

• 1:04:24David Sacks?

  Absolutely. I mean, you're, like I said, you've polarized the outcomes. You're either gonna basically send this guy to jail or you're gonna send him to the White House.

• 1:04:31Chamath Palihapitiya?

  No, I think there's very likely, no, I think there's very likely a middle path where nothing happens. But it will further erode what Freebrooke says, which is it's just a little bit less trust in the DOJ and the FBI.

• 1:04:43David Friedberg?

  Institutional integrity is eroding. And when institutional integrity erodes, the, the fabric of what keeps everything working starts to fall apart. And I'm not saying this is some cataclysmic civil war happening, just to be clear. I'm not saying there's some cataclysmic civil war happening next year. But it's an unfortunate decline in everyone's faith and, and, and the stability of the institutions that we all rely on to support and service us because the inflammatory index is gonna go up and everyone's gonna be criticizing everything. And that's a nasty place to be.

• 1:05:11David Sacks?

  This is why I think we really have to ask, was this really necessary? I mean, why did the DOJ and the FBI think this was necessary? These boxes were just in there.

• 1:05:19Chamath Palihapitiya?

  I think that's a reasonable question is like, if these things were actually sitting in a box with a lock that they changed. There must have been something more that was so grievous where you had to do something like this. Now, by the way, David, I just wanna, I read, so I don't know if it's true or not. I think maybe it was in Barry Weiss's Substack or Matt Taibbi's Substack. These folks weren't armed to the teeth. They came in jeans and shorts and T-shirts. In fact, Main Justice told them, like, do it as low

• 1:05:45David Sacks?

  No, I've seen the photos. They, I've seen the photos.

• 1:05:47Chamath Palihapitiya?

  No, no, you saw the photos outside. I'm saying the people inside were there for six or seven hours and only a few people knew about it.

• 1:05:53David Sacks?

  They were there for nine hours. They basically told Trump's people they couldn't be there. They had to leave. They told them to turn the cameras off and they had like highly militarized. There, there were something like 40 people and something like 30 of them were heavily armed. The optics were terrible.

• 1:06:08David Friedberg?

  If there was some nuclear, confidential nuclear material in Mar-a-Lago and through normal means of communication, they had asked several times to have it returned and identified this for him and he had refused, which I think is a very reasonable kind of, you know, conditioning for what may have happened here. And then they said, okay, we gotta go get it. There's no choice. This is like super confidential nuclear material. We gotta get this stuff. The only way to get it is to serve a warrant and go in there and get it. You know, under those circumstances, you know, do you think that this would have been kind of inappropriate? Like, assume all other kind of communication means were exhausted. Like, you know, what would you have done if you were president?

• 1:06:44David Sacks?

  Listen, I think there is information that could still come out to convince me that this raid was warranted. Um, I just haven't seen that information yet and I think the optics of it were terrible. I like the point I was making. I don't know why it wouldn't have been good enough to send in the FBI agents with holstered sidearms. You know, not AR-15 weapons of war, you know, where the fingers were just outside the trigger guard. It looked like a paramilitary raid. So whoever was thinking about the political ramifications of this clearly didn't do a very good job. I also don't know.

• 1:07:15David Friedberg?

  Yeah.

• 1:07:15David Sacks?

  Yeah, I also don't know why you wouldn't give the courtesy to a former president of the United States to give them either more of a heads up or to let his lawyers attend so that just for their own protection, so they can't be accused of planning anything. That would have been smart. And I don't know why they would have said to Trump's people that they couldn't record it. And I don't know why there've been reports that the FBI went through Melania's closet. I mean, seriously, they're like going through Melania's clothes. It's just weird. It's weird. So there's a lot about this that we don't know. I'm not conclusively rendering judgment about it because there are things that absolutely could come out to convince me that it was warranted, but I haven't heard them yet.

• 1:07:56Jason Calacanis?

  OK, everybody, we'll see you on the next episode of the All In Podcast. Love you, besties.

• 1:08:05Jason Calacanis?

  Brain Man David Sack.

• 1:08:09Speaker 05

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

• 1:08:22Speaker 05

  Besties are gone.

• 1:08:25Speaker 05

  That is my dog taking a piss in your driveway.

• 1:08:32Chamath Palihapitiya?

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

• 1:08:40Speaker 05

  What your B.? What your B.? B. What? We need to get merch. Besties are gone.