E19: Breaking down Robinhood's GameStop decision: Why did it happen and how can it be prevented in the future?

Follow the crew: 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/MikeSylvan Referenced in the show: David Sacks on Bloomberg https://www.youtube.com/watch?v=K2lJg4sxl2U Chamath for Governor https://www.chamathforca.com DeepFuckingValue's Reddit page https://www.reddit.com/user/DeepFuckingValue Show Notes: 0:26 Besties intro 2:11 Chamath breaks down the entire WallStreetBets/GameStop saga 15:38 Jason responds, debating Robinhood's liquidity crisis, Citadel's potential involvement & more 39:18 How can this be prevented in the future? Restructuring capital gains tax, censorship, where Robinhood can go from here 53:02 Major learnings from this week's events, risks of decentralization, do stocks need to be reflexive of the underlying business? GameStop's endgame 1:15:01 Chamath for Governor of California, Friedberg on leaders vs. managers & the problem with career politicians

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

• 0:26Jason Calacanis?

  Hey everybody, welcome to the All In Podcast. It was a slow news week, so we decided we'd give you a special episode. We're gonna go around the horn with our special picks. We're each gonna pick three picks, everybody. We're gonna pick our favorite recipe, our favorite new hobby, and our favorite streaming guilty pleasure, because there was no news. With us today, the dictator Chamath Palihapitiya, Rain Man David Sacks with his new track from Young Spielberg, just ripping across the charts. Young Spielberg at it again, this time with a track focused on the Rain Man himself, and the queen of quinoa, who everybody says we should upgrade to the king of quinoa.

• 1:08Chamath Palihapitiya?

  That's so sexist. Why is that an upgrade? The queen of quinoa is better.

• 1:11Jason Calacanis?

  I don't know. People just felt I was being... I don't know how people could say that anointing him as queen would be derogatory. I think these people are not woke and they need to be canceled.

• 1:26David Sacks?

  Jason, here you go again, making a lot of assumptions about people's pronouns.

• 1:30David Friedberg?

  Yeah.

• 1:32Jason Calacanis?

  They, they queen of quinoa?

• 1:34David Friedberg?

  I take no offense to your insults to me. And today I'm having the emotion of excitement, and I am ready for the conversation.

• 1:42Jason Calacanis?

  Good. We got the firmware upgraded. Alright, so I think we might as well start with, I don't know if you guys caught this, but there's a subreddit called Wall Street Bets. And what they do on Wall Street Bets is they find angles and a thesis, and then they bet on a stock. The stock they picked for the past couple of months has been GameStop. And, boy, did they-

• 2:06Chamath Palihapitiya?

  Actually, Jason, hold on a second.

• 2:08Jason Calacanis?

  Ram and gem.

• 2:09Chamath Palihapitiya?

  That's not true. So, I had actually a guy on my team put together two really important documents, and I'm just gonna read them, because it's full of so much interesting shit. And then we can talk about-

• 2:26Jason Calacanis?

  Where are these documents from? You're saying from the Wall Street Bets?

• 2:29Chamath Palihapitiya?

  No, no, no, I had a guy go in, one of my team members, one of my colleagues and go and summarize the entire saga from the beginning. And then we can talk about the corporatist scumbags at Robinhood and other fucking people over. So let's, let's do that in that order. Okay.

• 2:44David Friedberg?

  This is why they call him the dictator.

• 2:47Chamath Palihapitiya?

  Let's, uh, let's start with the-

• 2:48Jason Calacanis?

  Okay, go ahead. Read your biased and, uh-

• 2:50Chamath Palihapitiya?

  No, no, shut up, Jason.

• 2:51Jason Calacanis?

  boring, uh, document. Go.

• 2:53Chamath Palihapitiya?

  You're, you're an idiot because you, you just want to defend people because you blindly stumbled into a fucking trade that actually made a little money. Lo and behold, you actually invested in a company that literally they got on television yesterday and they fucking lied to Americans right to their face. This is a company that was insolvent because now let's just put a pin in the following data point, which I believe to be true. I know more about this than you do because I live in these markets. Okay. So I understand what it means to be putting on trades, to being short, to being gamma squeezed, to have longs, to do all of this risk management. You're an early stage investor. So I know the intricacies of this stuff and what's happening in here. This company was insolvent.

• 3:34Chamath Palihapitiya?

  They did not have the capital requirements to post the margin that was being asked of them by their partners. And so this was a platform level decision to ban and block people from trading securities. It cost individuals hundreds of millions, probably billions, maybe even tens of billions, and these motherfuckers should go to jail. Now let me give you the timeline before we get into that. June 2019. In June of 2019, a Wall Street Bets user named Deep Fucking Value began buying long dated January 21 calls. What that means is in June of 19, this person was

• 4:14Chamath Palihapitiya?

  betting that the stock would go up by January of 2021. He spent $50,000, um, which by the way, today is worth about $25 million.

• 4:23David Friedberg?

  By the way, Chavat, we should just highlight that there are forums where individuals that are trading stocks talk to each other and share tips and promote things to one another. That's where this was taking place.

• 4:33Chamath Palihapitiya?

  Yeah. And by the way, those forums exist, uh, in the professional organized world too. Amongst hedge funds, you know, I've been invited to idea dinners where we all get together and we talk about the ideas that we have and we're all expected to do fundamental analysis. Uh, but some of those ideas are actually momentum driven ideas and a lot of the biggest dislocations in the market, just as a setup here. Have been because of momentum driven trading by organized capital. Okay, so we've, we've been stuck with this for a while. So, so this guy deep fucking value posts this and every month since he's posted a screenshot of his position and he's titled it GME YOLO update. August 22nd of 2019, Michael Burry, who is this guy famous from the big short, who's the guy that

• 5:18Chamath Palihapitiya?

  caught the mortgage thing, he discloses a 3% position in the company. And he highlights that 90%, 9 0% of GameStop's 5,700 stores are free cash flow positive. That's like pretty good. He urges a buyback and he notes that the company was trading at or near net cash levels. So he's making a deep value oriented fundamental thesis as well.

• 5:44David Friedberg?

  Chuma, I think also it's worth saying what GameStop is because even my wife asked me what the hell is GameStop last night? GameStop is a retail store where people buy video games. I used to go to the mall all the time and buy video games there and consoles and headphones and other stuff.

• 5:56Chamath Palihapitiya?

  And they'll buy back your old games.

• 5:57David Friedberg?

  And so the stock got beat up over the last couple of years as people stopped going to malls and stopped buying stuff in stores and everyone thought the company was going to die. And so these guys observed that maybe there's real value in this company and it's making money.

• 6:08Chamath Palihapitiya?

  And digital downloads are now the standard.

• 6:10David Friedberg?

  No one buys DVD ROMs anymore or anything like that, so.

• 6:13David Sacks?

  And, and the Chewy founder, who is very successful at e-commerce came in to run the company.

• 6:20David Friedberg?

  Yeah, that's, that's the best part of the story.

• 6:22Chamath Palihapitiya?

  So June 19 was the original post, August 22nd of 19, Michael Burry comes in and says I'm long. Then a year later, August 31st of 2020, Ryan Cohen, who's the founder of Chewy, takes an almost 10% position in GameStop. About two or three weeks later, on September 19th of last year, a member of Wall Street Bets writes a post on GameStop and he notes that GameStop has 120% short interest, which I'll get to in a second. So hold on, what, what does that mean 120% short interest? And he defends the company as a result of a few things. He says, number one, there's a new console cycle coming, just as Jason mentioned.

• 7:05Chamath Palihapitiya?

  Number two, consoles are are not going all digital immediately. GameStop loyalty programs have 55 million users. They have a strong balance sheet. Ryan Cohen just bought a stake. And the shorts were underwater and would be forced to cover if the stock ran up. He predicted the convergence of all these factors would lead to a big squeeze. Now, November 16th of 2020, Ryan Cohen writes a letter to the GameStop board, and he urges the company to conduct a strategic review and share a credible plan to capture market share in the gaming industry. He said that they need to evolve into a technology company that delights gamers and delivers exceptional digital experiences, I'm just quoting here,

• 7:48Chamath Palihapitiya?

  not remain a video game retailer that over prioritizes its brick and mortar footprint and stumbles around the online ecosystem.

• 7:56Chamath Palihapitiya?

  November of 2020, someone in Wall Street Bets highlights that a hedge fund called Melvin Capital was going long GameStop puts. What does that mean? That they are synthetically shorting the stock by buying the right to sell it at a different price in the future. Okay.

• 8:16Chamath Palihapitiya?

  And that they had been long that position for more than four years. So all the way going back to 2016.

• 8:24Chamath Palihapitiya?

  Fast forward to now, 2021 of this year, January of 2021, GameStop strikes an agreement with Ryan Cohen and adds him to the board of directors and gives two of his affiliates, his former COO and CFO of Chui, also two board seats. They collectively, you know, bring their experience in e-commerce, online marketing, finance and strap planning. The stock goes up 13% on that day and closes at about 20 bucks a share. One day later.

• 8:54Chamath Palihapitiya?

  And then over the next day after that, so for January 12th and 13th of 2021, there's a ton of activity around GameStop in Wall Street Bets, and now in Discord and in stock twits claiming that Ryan Cohen is going to be the savior. And then by January 14th, so three days later, the stock closes at 40 bucks. So now it's up 125%. So now comes the setup, the pros versus the joes. From January 12th to today, there has basically been a battle by institutional investors on one side, shorting GameStop, and retail investors on the other buying the stock and also buying the right to buy the stock,

• 9:39Chamath Palihapitiya?

  or what's called call options. And this is what has created this crazy nonsense we've seen. So on the institutional side, after, you know, retail drives the stock up, the institutional guys are like, hey, wait a minute, you know, Ryan Cohen's an idiot. You know, this company is fucked. Fuck these guys. They have too many, you know, cyclical and secular tailwinds. And they become so massively short that the infrastructure that's supposed to even count all the shares can't keep up. And now they are short more than the actual number of shares that actually exist. So now they're 140% short.

• 10:17Chamath Palihapitiya?

  The joes, retail, they start to aggressively purchase all these call options. And on January 13th and 14th, um, this price keeps ticking up. Then a bunch of quant funds and momentum hedge funds notice all this activity, and they also participate on the long side. And then over the past seven trading days, we have traded over $100 billion of stock in GameStop, which is well in excess of what retail can support. So here's what's crazy to realize. A bunch of value-oriented, non-computerized, non-quantitative hedge funds short. Retail notices a dislocation, initially fundamentally, but then momentum-oriented buys.

• 11:00Chamath Palihapitiya?

  Other hedge funds realize, also buy, and this is what's created this massive short squeeze. On January 19th, Citrin Research, a research firm that basically tries to, you know, find shorts in the market, announces that they were short GameStop, and they gave five reasons why it should go to 20 bucks. The stock was at 3550 on January 19th. Then over the next two days, GameStop calls hit an all-time high, and it runs a two-day rally of almost 70%. And this is what really starts what's called a gamma squeeze. Okay, which is what we saw in the first part of this week. So January 25th, Ken Griffin, Stevie Cohen, they inject almost $3 billion into Melvin Capital, the firm that was short.

• 11:45Chamath Palihapitiya?

  $2 billion from Citadel and 750 from Stevie Cohen. Stevie Cohen had a billion in it from before. And then now, all of a sudden, the squeeze keeps happening. The squeeze keeps happening. And then it starts to spill over to the rest of the market. Now, all these hedge funds, these original hedge funds, they are getting called by the banks saying, hey, wait a minute, you've run over your collateral limits. You need to post more collateral. We need more money in your bank accounts. So now, not only do they have to cover GameStop, they have to cover all their other shorts, so those go crazy. And they have to sell their longs. So now they're selling, you know, Facebook, Netflix, Alibaba. And so those things are going down. That accordion is what's been happening in the market in the last couple of days.

• 12:29Chamath Palihapitiya?

  And then the coup de grace is what happened on January 28th of 2021. Brokerage firms, and this is where, Jason, we should talk about this, like Robinhood and Interactive Brokers, because in fairness, it wasn't just Robinhood, prevented their users from buying GameStop and a handful of other stocks. They were only able to sell, which resulted in such a one-way pressure, it caused a 44% sell-off yesterday. Now, that's been reversed today. And so what it speaks to is a bunch of questions. There are questions as to whether or not this was mandated by the platforms or the regulators. Given the fact that it didn't impact all the brokerage accounts, it was a platform-level decision.

• 13:12Chamath Palihapitiya?

  So some organizations like Robinhood banned it, some organizations did not. And it could be that some of these platforms that banned it is likely because, and this is where we get to the insolvency question, didn't have enough margin. And so they knew that if they opened the doors, there would be a run on the bank, and there would be a run on Robinhood. And that's why they basically, I believe, had to stop allowing people to trade. And it just shows how fragile.

• 13:46Chamath Palihapitiya?

  The whole system is, the last thing I'll say and then we can talk about this is, uh, how does Robinhood make money? Which I think is also important to understand this. Robinhood makes money through a mechanism that's called payment for order flow. So they don't make money from consumers, right? What they do is they watch and monitor your orders. They create a data file about that and they give it to these prime brokerage, prime brokerage institutions like Citadel, milliseconds before you do the trade. What that allows Citadel to do is if they see a lot of people buying, milliseconds before you buy, they can buy. And that allows them to make money. So to be clear, Citadel is responsible for 47%

• 14:31Chamath Palihapitiya?

  of all the payment for order flow volume. They paid Robinhood almost $60 million in the third quarter. Okay, um, plus another, I think, you know, seven and a half million for S and P 500 stocks and 31 million for non S and P 500 stocks. They paid them almost $100 million in the quarter or a $400 million run rate. So if we had to summarize all of this in a nutshell, that's what we know. We know that it started out as people debating the true fundamental value of GameStop. And it morphed into a momentum trade where a bunch of folks got dogmatic about a short.

• 15:13Chamath Palihapitiya?

  A bunch of folks got dogmatic about being long and the long's won. And in the middle, what happened was a bunch of firms basically decided at some point to gate the ability for people to transact in all of this, which I think caused a lot of economic disruption. And that was because they didn't have the margin requirements. And I think it's because they were insolvent, i.e. Robinhood.

• 15:37Chamath Palihapitiya?

  Jason, over to you.

• 15:39Jason Calacanis?

  Okay, I think we probably agree on a lot of things here. Thank you for the concise overview. We agree that Wall Street Bets and retail investors are incredibly powerful now, and we agree that that's a good thing. We also probably agree that there are shenanigans going on with shorting of stocks, i.e. 120% or 130% short. And we agree, I think, that some of these hedge funds do manipulate the markets with these. We also agree that it's unfortunate that, in order to stay solvent, Robinhood, apparently, if this is the information, we don't have complete information right now. So the thing I do think that you're being tremendously unfair about, and I'll try not to make it personal, Chumap,

• 16:23Jason Calacanis?

  is that you've been uncouth and you're attacking people with partial information. I'll let you respond to that in a minute. And I think we agree that Robinhood is responsible. Robinhood is responsible for this revolution in retail trading. They created the platform and they created the innovation that got millennials to en masse embrace trading stocks. How did they do it? They figured out a clever innovation of how to make it free and friction free. They did that because they did this selling of the data and the order flow. Okay, we can debate whether that is fair or not. But Facebook did the same thing. They created a data business. They provided amazing products and services that you yourself built for five years and made a billion dollars off of

• 17:07Jason Calacanis?

  in order to make it free for consumers. Now, there are unintended consequences of any company at scale, whether it's Uber, Robinhood, Tesla, etc. And they all have to weather these storms. And I think that there are pieces of information that you do not have, Chumap, and for you to say that they're criminal and for you to say they're scumbags and to act this way is, I think, unprofessional and does you a disservice and does your argument a disservice. And you did this as well with Uber, another one of my investments. And that company weathered the storm and they've done great things in the world. And I'm very proud of that investment.

• 17:41Chamath Palihapitiya?

  No, no, no, no, no.

• 17:41Jason Calacanis?

  And I will be very proud of what I believe that Robinhood will do.

• 17:45Chamath Palihapitiya?

  Uber fired their CEO and they brought in Dara, who cleaned it up.

• 17:47Jason Calacanis?

  Agreed, agreed, but they got there.

• 17:51Jason Calacanis?

  And so I believe

• 17:52Chamath Palihapitiya?

  So what do you know that I don't know?

• 17:55Jason Calacanis?

  Well, I haven't talked to Vlad. I saw what he said.

• 17:58Chamath Palihapitiya?

  Who cares about Vlad? He lied on television.

• 18:00Jason Calacanis?

  I don't believe he lied.

• 18:01Chamath Palihapitiya?

  He lied on CNN. He lied on Fox. Where did he not lie yesterday?

• 18:05Jason Calacanis?

  What is the lie?

• 18:06David Sacks?

  Well, Jason, let me

• 18:07Chamath Palihapitiya?

  Jason, he was confronted. He was confronted about whether there was a liquidity crisis and he said to their face, "No, that is not true."

• 18:15Jason Calacanis?

  I think this is being misinterpreted and there'll be a clarification that'll occur. I think because they were able to draw down 600 million and because they were able to take down a billion dollar investment from the top investors in the world, that they resolved their liquidity problem. Nobody in history has ever created this many retail investors than Robinhood. They are responsible for the movement. When they pitched me the company, they wanted to create this revolution. It is paradoxical that they are now the enemies of the revolution because they actually created and enabled this. And they have been number one in the App Store since this whole fiasco started.

• 18:59Chamath Palihapitiya?

  Nothing you're saying convinces me. This is the, they are the Lehman Brothers or Bear Stearns of 2008 to me.

• 19:05Jason Calacanis?

  They will not be. They will get through this. And this is an unprecedented black swan event. I think we would all agree. Nobody has ever

• 19:14Chamath Palihapitiya?

  That's exactly what Lehman and Bear said. That is exactly what they said.

• 19:18Jason Calacanis?

  And this, and they will, I believe Robinhood will ride it out because they throttled the number of people coming to platform. Las Vegas is not designed for everybody in America to come to Las Vegas in the same weekend and that's what's happened.

• 19:31Chamath Palihapitiya?

  Will you admit that the tens of millions of people that had their hard earned money inside of Robinhood was prevented from participating in trades that could have been executed other places because of an arbitrary decision by Robinhood that they added a minimum?

• 19:47Jason Calacanis?

  It was an arbitrary, they had to stay insolvent. How is that, how is that an arbitrary decision? Do you think they wanted to make that decision?

• 19:54Chamath Palihapitiya?

  Jason, that's me telling you that they were insolvent. That's not them saying it. This is what I'm saying right now.

• 19:59Jason Calacanis?

  The communication was not perfect. I'll agree. The communication was not perfect. They should have just said, "We had no choice but to stop this, or we would have been insolvent. We cannot take this many trades."

• 20:07Chamath Palihapitiya?

  Is that, but is that what we call lies when people's money gets fucked over? Just it's inconvenient?

• 20:12David Friedberg?

  Let me just say one thing. I'm going to interject your vigorous debate. The important thing I think to note is Robin Hood makes money effectively, as Chamath pointed out, through arbitrage of pricing in the markets and by providing leverage to their clients. So the clients can trade beyond their means. I used to be an investor in a Forex trading company. It was the largest Forex trading platform in the world for retail investors. And 60% of those accounts went bankrupt over time. So there was a lifetime value on an account because the customer would come in, they'd trade foreign exchange rates up and down, they would ultimately just get burnt up and that was it. Robin Hood makes money

• 20:54David Friedberg?

  when the market is non-volatile, when there isn't a lot of swings. Suddenly, when there is a swing, and that's how they're able to provide their free pricing to people, they're making a spread. But suddenly, when there is a swing and the spreads start to widen, they are actually exposed to losing money. So Jason, it's true what Chamath is saying, like, they did face a liquidity crisis to some extent. That's why they had to draw that additional capital.

• 21:16Jason Calacanis?

  We all agree, yeah.

• 21:17David Friedberg?

  But it was a function of their business model, right? Their business model provides great benefit and value in some extent during good times, but when times get bad, it's like, oh shit, things are at risk. And that's very similar to kind of the Lehman and, you know, their stage model.

• 21:32Jason Calacanis?

  I don't disagree. I think this is an unprecedented situation with the number of participants. It reminds me of surge pricing with Uber during snowstorms. And that also was an unintended thing that, you know, who knew that it would go up to $400 to take a ride? And that's something that companies will be faced with, and they will have to then adjust and then make it work. And I think, you know, in the case of Robin Hood, they should have just came up on Wednesday and said, "We can't take any more orders. We can't take any more new customers. We're pausing signups. You'll be on a waitlist because we will be insolvent if you guys make any more trades." And that would have, I don't know if you believe that would have...

• 22:08Chamath Palihapitiya?

  I agree with that. So Jason, let me just explain the mechanic.

• 22:11Jason Calacanis?

  So then it's poor communication from a rookie founder.

• 22:12Chamath Palihapitiya?

  It's not. Jason, it's beyond poor communication. People were blocked out of their accounts like there was hundreds of million incalculable amounts of economic loss.

• 22:22Jason Calacanis?

  I don't know if that's gonna wind up being true because all these trades are occurring now and the stock is rock is a rocket ship. Who's to say that?

• 22:28David Sacks?

  No, no. I mean, look, I mean, Jason.

• 22:31Jason Calacanis?

  And aren't the shorts all covered by now? That's what they've been saying on CNBC.

• 22:34Chamath Palihapitiya?

  No.

• 22:35Jason Calacanis?

  There are still people. How do you know how many people are short right now and how many shares?

• 22:39Chamath Palihapitiya?

  Because it's the primes put the data together and they send it to us.

• 22:42Jason Calacanis?

  Do you have it handy? Because I've been looking for it online and they said 10 times the number of shares short have traded hands in the last 10 days or five days.

• 22:49Chamath Palihapitiya?

  Jason, I don't have it literally in front of me, but I could get it in the next hour.

• 22:52Jason Calacanis?

  Yeah, just text one of your people. You've got all these researchers there. Go ahead, Zach.

• 22:57David Sacks?

  Okay, look, I'm gonna try and thread the needle here. I think J Cal is right that we shouldn't impugn people's motives without having all the information. And furthermore, you know, building these rapidly scaling startups is really tough and it could have just been, you know, a function of, you know, not knowing how to deal with unprecedented growing pains. So I don't think, I don't want to be too judgmental about what happened.

• 23:23Chamath Palihapitiya?

  Can I just stop you there?

• 23:24David Sacks?

  Yeah, yeah.

• 23:24Chamath Palihapitiya?

  No, but that's not, no, but David, that's not, but you guys are not being accurate. They have known for decades, for years, sorry, dears, how this business worked. When somebody buys a call option, they are legally obligated when they send that order through, they have to post margin on behalf of that person. So they saw this building. This happened in March of 2020. They went through this liquidity crisis. They've had to draw credit lines before. They saw it building in the system. So this was nothing except negligence.

• 23:57David Sacks?

  Yeah, so, so I was about to, I hadn't gotten to the part where I was about to agree with you, Chamath. I mean, look, all I'm saying is even if it was negligence, I'm not sure I would impugn all the motives to them. That's all I'm saying. I'm trying to find some common ground with J Cal on that point. But where I totally agree with you, Chamath, is with respect to the effects of their decision. I mean, the effects of that decision they made to stop trading and specifically, they didn't stop people from selling. They only stopped people from buying. So they shut down one side of the trade and the effect of that was we had these hedge funds from Wall Street. They were on the ropes, right? I mean, let's discuss who these guys are. These are the apex predators of Wall Street.

• 24:38David Sacks?

  They are in the business of shorting companies to destroy them. I mean, that is their business model and they are not academic traders, okay? Who are just speculating on outcome. They engineer the outcome, right? Look at their tactics, just watch the show Billions, right? They hire PR people, they hire private investigators. They're participating on these message boards, uh, spreading disinformation. Look at the, the year of hell that Elon went, went through, right? They tried to destroy Tesla. Yeah, exactly. They tried to destroy, uh, companies to engineer that outcome. They create nothing. They're in the business of, of, of destruction. Now, the beautiful thing is you had these Reddit kids, these pirates who published this manifesto, right?

• 25:21David Sacks?

  On Reddit, basically being the heirs to occupy Wall Street. They recognized, look, occupying like, uh, uh, like a physical space does nothing to these guys. We are going to hurt them where it counts in their pocketbook. We are going to get together and we're going to basically create a trade mob that's even bigger than their cartel. And they did, they got 2.7 million people taking the other side of this trade. And then when the hedge funds doubled down, they said, fuck you, we're going to double, we're going to triple down. And the guy on Reddit said, listen, he, uh, paraphrasing John Maynard Keynes said, we can be retarded longer than you can be solvent. And they were winning, that was what they said, right? And they were winning the trade, okay? And Melvin was dead busted and Citron was on its way to being dead busted.

• 26:04David Sacks?

  And they had to go to Big Papa Stevie Cohn, okay? And Ken Griffin to get, to get their rebis, to buy their rebis to get back into the game, okay?

• 26:16David Sacks?

  And then they had these guys on the ropes, they had them felted, okay? And then what happens? Just at the moment where they're going to like, basically bust them out of the game for good. Robinhood shuts down the buy side of the trade. And so what does that do? It gives these hedge funds time to regroup, to unspool the trade, to reposition and save themselves. And to get out of the trade if they want to get out of the trade. You can never take that 24 hour time period back, no matter what Robinhood does now. And so I agree with Chamath, this was like,

• 26:46Jason Calacanis?

  Don't you think, David, on that point, I think it's, I am in agreement that the hedge funds deserve to get their asses kicked 100%. I also, as I said, we don't have complete information of why, um, you know, Robinhood had to pause trading and the other platforms. And it was like five platforms, by the way, that had to stop or else they would be insolvent. Because nothing like this has ever happened before. This is a run that nobody's ever seen. And now we're back in the game. And don't you think all this attention then drives more people to buy GameStop? Which is what's happening today? And that they're still going to get crushed because they're still going to have to cover. I mean,

• 27:22David Sacks?

  Look, I, I, I don't like, like I said, look, where I agree with you is I think the consequences of this decision by Robinhood were, I mean, they were really bad, right? I mean, we finally had these shorts on the ropes where they deserved to be. Finally, they're getting a taste of their own medicine.

• 27:38Jason Calacanis?

  Yes.

• 27:38David Sacks?

  And it was really bad to pull the plug on, on the,

• 27:41Jason Calacanis?

  I wish, and they wish they didn't have to, I'm sure.

• 27:43David Sacks?

  Okay, exactly. And I don't know what went into that decision. But here's the thing that I think kind of stinks about it is the point that Chamath is making about who is doing the, the trade execution for Robinhood? Those trades are flowing to Citadel.

• 28:01Jason Calacanis?

  Well, that's part of it.

• 28:03David Sacks?

  That's part of it, but 40, 47%. But who is now on the short side of the trade? Citadel went in and bailed out Melvin and Citron. And so they're on both sides of this trade. Now, how does that make sense?

• 28:15David Friedberg?

  Well, Citadel, yeah, but I mean,

• 28:17David Sacks?

  What, what, what I would like to know specifically, okay? Is did anybody from Citadel reach out and touch Robinhood? Did anybody at Citadel put in the fix and say to Robinhood,

• 28:31Jason Calacanis?

  Of course, that's a valid question.

• 28:32David Sacks?

  We're gonna, we're gonna cut you off, you know, unless you freeze out the buy. Now, look, ninety-nine percent chance that didn't happen. I don't know, but that is a legitimate question we need to know.

• 28:41Chamath Palihapitiya?

  Actually, can I, can I just tell you, the, the question is important, but the way that you phrase it is you call them and you basically say, listen, uh, you need to post five hundred million dollars of margin. Why? Oh, well, these trades, uh, you know, we're going to arbitrarily change the margin requirements. Okay. Oh, eight, you need to raise, uh, you need to post. So then what they did was they pulled all the credit lines. Okay? They post margin. Trades are still happening like crazy, right? All these people are buying GameStop calls. They have to go because, look, when you buy a call, when you as a user, when David Friedberg, Kenwa buys a call, Robinhood becomes synthetically shorted, right? Robinhood doesn't have the share to sell you, but it's giving it to you. So they're technically short. They gotta go buy it. Okay?

• 29:26Chamath Palihapitiya?

  So this is what creates this dynamic where Robinhood knew, they knew every second of every moment, what was happening and more importantly, what could happen. At a minimum, it's negligence and at a maximum, it's the fix.

• 29:42David Friedberg?

  Well, it was, it was, it was fine to do it before the market started to swing volatile, right? And, and so when the market wasn't high volume and when it wasn't volatile, it didn't matter because they had appropriate levels of surplus capital or statutory capital or whatever the definition is in this market, uh, to be able to cover the quote unquote VAR or the value at risk of their portfolio of their customers' worst case outcome. But as soon as that spiked, as soon as the VAR spiked, they had to go get more capital. And so what do you do if you're the manager of Robinhood in that situation where your clients, who've been making you a bunch of money by trading stocks over the last couple of years,

• 30:21David Friedberg?

  suddenly they all get themselves in a bind where the VAR on the portfolio is more than the cash Robinhood has to clear, assuming all these people go bankrupt, that's where Robinhood had to scramble. And so in that circumstance, they drew down debt and they had to go get a billion dollars of equity. But if you guys were running that business, and I'm not speaking for Robinhood's, uh, I'm not making the case for Robinhood, but what would you guys have done in that circumstance? You know, suddenly all your, and by the way, I'm saying they, they created. Problem for themselves because they allowed people to trade on margin with low bank with low account balances and volatile stocks prior to this. It got away from them in this week.

• 30:56Chamath Palihapitiya?

  You can't, you cannot run a business like that and be selective and arbitrary. You can't say some stocks on certain days, some stocks on other days, some options over here, some puts over there. That means you're a fucking moron.

• 31:10David Friedberg?

  But what do you do on Tuesday or Wednesday when all of a sudden your exposure?

• 31:13Chamath Palihapitiya?

  It's not Tuesday or Wednesday. This, if you were a reasonable manager of a business like this, this conversation would have been happening at a board meeting. I, no, I just. Hold on a second. Let me finish, please. Okay. It, it needs to happen quarters ago and in quarters ago, what they would have said is, hey, guys, we've run some scenario analyses. We've done some sensitivity analyses. Here's what happens if all of these things can go against us. That's a typical stress test that a bank has to do. Right? When you're a structurally important bank, you have legislation. That forces you to be under these conditions where you have to make sure that, that you can understand some of these scenarios and then you have to have.

• 31:49David Friedberg?

  Same with any, any trading entity or insurance company. They all have to have that analysis of what's the worst case scenario and how do you plan for it?

• 31:56Chamath Palihapitiya?

  And you have to, you, and by the way, coming out of 2008, we actually legislated that we needed to have these two and three sigma. You know, event scenario planning and you needed to have proper credit. So here's what happened really. Number one, it was under equitized, right? At a minimum, the business was massively under equitized.

• 32:13David Friedberg?

  Relative to what they were letting their customers do.

• 32:16Chamath Palihapitiya?

  Exactly.

• 32:16David Friedberg?

  And that, that's really important because the point is they let people trade with high margin and they let people trade in volatile stocks. And it was working until the volatile.

• 32:24Chamath Palihapitiya?

  Not just stocks, but options, which is what, which is what creates the real spin up.

• 32:28David Friedberg?

  The, the feedback loop that blows this whole thing up.

• 32:31Chamath Palihapitiya?

  And then, and then number two is they don't know what they're doing.

• 32:36David Friedberg?

  I think one thing that's really important, I, I just want to say this. We should stop pretending that trading in stocks is investing in businesses. And this is something we've said for a long time on Wall Street. But stocks, shorting, margin, and derivatives. Those four things no longer look like what the capital markets were originally set up for, which was to help capitalize businesses and allow people to exit their investment and helping to capitalize that business to another investor that wants to come along. It has effectively become a synthetic casino or a synthetic gambling model that lets people trade things up and down. And this has been the mainstay of Wall Street for the last couple of decades.

• 33:19David Friedberg?

  And as you pointed out, Sax, it really is a leech on the system. Because the amount of money that trading firms and traders and hedge funds make doing this ultimately is taking away from capital that could be invested in actual businesses that could drive job growth, drive economic prosperity, drive innovation. And the volatility that I think we've seen is the ultimate feedback loop that emerges from when you allow a casino to operate that sits under the guise of being business capital and investing in businesses. It's not. I'll give you guys a statistic. I downloaded the data from CBOE that analyzes how much volume was traded across all the equity markets last year in the US.

• 34:04David Friedberg?

  Stocks traded a total volume last year, are you guys ready for this? $121 trillion of notional across 2.7 trillion trades. Do you think that $121 trillion of notional equity value trading provided capital to businesses anywhere close to 1% of that total amount of trading volume? It really is a synthetic instrument that allows people to participate in, I bet that something is going to go up and I bet that something is going to go down with other people of a similar ilk. And one person makes money and one person loses money. And at the end of the day, the underlying business entity doesn't benefit whatsoever. And you see it when shorts go against businesses, like happened with Elon and Tesla. And you see it when derivatives...

• 34:49David Friedberg?

  Derivatives like CDOs blow up the fucking housing market. Where people basically trade these derivatives that sit on top of housing and that capital did not find its way into homes to help people. Buy homes, it ultimately led to the uh collapse of the uh.

• 35:02Chamath Palihapitiya?

  The only, the only reason that Lehman and Bear Stearns was shut down was in two thousand and seven and eight when they were in a liquidity crunch and the same thing and they basically had all these trades blowing up against them. And they couldn't collateralize them was that the people on the other side were hedge funds. And that's why, you know, they were put into the Fed and that's why we were able to basically like, you know, come out relatively unscathed and but I mean by relatively unscathed is like a global calamity. Um, the, the tragedy of this is that this is the tragedy of the commons. It's like, you know, there is no organization of people that can say, hey, listen, I'm really rich and wealthy. And what happened here was wrong, even though it's probably on the same scale.

• 35:43Chamath Palihapitiya?

  Um, and so everybody that was a participant in it is, in, in my opinion, I think is guilty of all of this. They were, they were complicit in the robbing of America.

• 35:52David Friedberg?

  Do you think calls and puts um should and shorting should be allowed? Should those markets exist?

• 35:57Chamath Palihapitiya?

  I, I, I do have a sense of common sense solutions and let me uh, let me kind of give you them and then you can tell me what you think. So the first. Is we need to use modern technology. Let's just start with that, right? To ensure that, you know, one share of stock. Right? Isn't loaned out multiple times so that you can't have a scenario where you have more than a hundred percent.

• 36:16David Friedberg?

  That's a no brainer, right?

• 36:17Chamath Palihapitiya?

  That's a no brainer.

• 36:18David Friedberg?

  So you still support shorting them up?

• 36:20Chamath Palihapitiya?

  Yeah, let me, let me just go through the list and then you can tell me what you think. If, if high frequency firms can trade tens of millions of shares per day, there's no reason why we can't reconcile. Who the beneficial owner of every share is. So maybe that's a, you know, now maybe we found the first obvious use case for a blockchain. Right? Um, like you can't borrow a share unless you can prove beneficial ownership in a, in a, in a, you know, nanosecond, which can only be done on a, you know, decentralized ledger. But the point is, number one is, we need to rebuild. This infrastructure, you can't have a hundred and thirty-six percent of a company be short. That makes no sense. The second, what we've learned is that, again, the, it's like, are we gonna basically have these blowups every ten years before we actually address the elephant in the room, which is leverage?

• 37:05Chamath Palihapitiya?

  Like you need to have leverage limits. So for example, banks. Coming out of 08 have super strict oversight and leverage limits because they're dubbed systematically important. We don't do that for hedge funds and I think we need to. And I think that we need to have the ability to realize that these guys can cause systemic risk, right? So just on this example, I don't know if you guys have ever heard about long-term capital management?

• 37:31David Friedberg?

  Yeah.

• 37:31Chamath Palihapitiya?

  LTCM, this guy John Meriwether.

• 37:33David Friedberg?

  The Asian currency crisis, the whole thing collapsed. There's a good book on it.

• 37:38Chamath Palihapitiya?

  Well, so it's funny, but if you guys think this is the second financial calamity, it's not. It's the third because the first one happened in 1998. So in 1998.

• 37:47David Friedberg?

  Yeah, it was the whole economic system was going to collapse if the bailout didn't happen.

• 37:53Chamath Palihapitiya?

  So listen to what these guys did. Long-term capital management borrowed. They had $4.8 billion of capital that limited partners and investors gave them, okay? These fucking crooks were able to then borrow $125 billion. 125 billion on the 4.8 billion of notional. So they were able to lever themselves up 26 times.

• 38:19David Friedberg?

  By the way, synthetic margin, right? No actual capital was allocated to this transaction set. It was all synthetic. Like no money moved accounts when these trades happened. So it was literally just writing stuff against debt that couldn't have existed.

• 38:33Chamath Palihapitiya?

  Yeah, so they built 60,000 trading positions and those individual positions represented, again, 1.4 trillion US dollars. So you took, these guys in a room took 4.8 billion, got knucklehead over here to give them 125 and then got these knuckleheads to sell them positions. And all of a sudden, 4.8 billion equaled 1.4 trillion. And so then US regulators had to step in. They had to orchestrate a bailout from a consortium of banks because they were concerned that if LTCM collapsed, the whole system would collapse because they didn't understand.

• 39:17David Friedberg?

  Right.

• 39:18Chamath Palihapitiya?

  So we have to, we have to put leverage limits on top of hedge funds. The third is, we need to improve disclosure. The, the, the rules at the SEC right now is to discourage disclosure. That doesn't make any sense. We should force everybody to publish what they own on a weekly or monthly basis. You have the ability to do it. The technology is simple. So you need to improve disclosure because then watchdogs and other people can basically be looking at it all day and identifying these risks faster, not slower.

• 39:53Chamath Palihapitiya?

  The third is, we need to do something around open trading. Like, why is it that you're, you know, people are allowed to go to casinos? Why can you, uh, you know, buy lottery tickets? But all of a sudden, like, we're going to decide who's financially literate. A platform like Robinhood can decide what's bought and what's sold. I don't think that's fair. And then, uh, the, the last thing is, I think that we should have a short-term trading tax.

• 40:18Chamath Palihapitiya?

  We tried to pass one in 2018, 10 basis points. If you had passed this 10 basis point tax in 2018 on short-term trading, it would have created a trillion dollars almost.

• 40:27David Friedberg?

  I did the math on this because I actually, uh, the reason I ran all the equity numbers was to figure this number out. So in the U.S., um, we generated $160 billion in capital gains tax last year. And if you look at the volume I described earlier in terms of notional traded of equities and number of shares traded, if you charged 0.1% every time someone sold a share on the value of the share they sold, it would equal the capital gains tax. So what you could do is you could charge 0.1% on every trade. It would reduce all of this high-frequency nonsense where people trade in and out of stocks. It would force people to trade for the longer term or basically invest in companies. And you could get rid of the capital gains tax. Think about that.

• 41:08David Friedberg?

  If we didn't have to pay capital gains tax and we were only taxed when we traded out of a stock 0.1%, you could see an incredible amount of capital making its way into businesses. And this would fuel economic growth and jobs and prosperity. And so I think if you could pull that off, put the two together, a 0.1% sales tax on every share sold and get rid of capital gains tax, it would be incredibly powerful.

• 41:31Chamath Palihapitiya?

  The lobbyists got to that bill, but that 10 basis point tax on high-frequency trading, it just means like, look, if you're going to trade a whole bunch of shit every eight seconds, you just have to pay 10 basis points in and out. $777 billion of incremental revenue to the federal government, and it was lobbied out. And I agree with you. And by the way, the

• 41:49David Friedberg?

  More money goes in, more money makes its way into companies, right? And that's the best. You stop all the nonsense where people are basically trading to bet that something will go up in the short term, and you get people to make investments in the business as opposed to the momentum.

• 42:01Chamath Palihapitiya?

  The lowering the capital gains rate is genius, because I think that if you are a retail investor, and you could, for every year you hold, if you can decrease your cap gains rate by 20%, by the fifth year, now all of a sudden, retail folks aren't necessarily gambling, they're owning, and their cap gains rate would be zero after five years. That would be amazing.

• 42:21Jason Calacanis?

  I have a basic question. I'm interested in your position, Sacks, and maybe even around the Horn. What happens to the, if the short positions get covered, which they're going to be at some point in GameStop, I would think, or some large amount of them, and the short squeeze is off, what happens to the people who are buying in, you know, to the meme stock as a retail investor, let's say, over the next 10 days? Are they going to be left holding the bags? Is there any way this company could be worth 20 billion or 25 billion? Because as Friedberg points out, people are not buying GameStop. They're trying to destroy a hedge fund who made a stupid manipulative bet. Great, we all love

• 43:00Jason Calacanis?

  the Robin Hood story of that. Not Robin Hood TM, but the generic term, Robin Hood. But what happens to those people? Are they going to be the last people holding the bag?

• 43:10David Sacks?

  Probably. This is not going to end well. There's no question about that. I totally agree with you that people engaging in this kind of speculation and buying at these prices, it's not going to end well. Now, I do think that the Redditors actually had a brilliant strategy, right? When they noticed that these hedge funds were over short, overexposed, and they seized on that vulnerability, they did to the hedge funds what the hedge funds usually do to everybody else, which is find the Achilles heel, right? And pile in. So I think the strategy started brilliant. Now, anyone who's piling into it, I'd be real careful because I think the hedge funds have regrouped. You know, and you know, the idea that you're going to beat them at their own game, you know, when, look, I mean Citadel is executing your trades.

• 43:54David Sacks?

  I mean, right? That the trades are, the order flow is going from Robinhood to Citadel. They're not going to be caught flat footed. They're on the other side of this trade. And so, you know, I just think the house always wins. I'd be real careful about getting into it at this point.

• 44:08Chamath Palihapitiya?

  I think, just you guys know, Robinhood just tweeted that now the list of restricted names is now up to almost 35 or 40.

• 44:18David Friedberg?

  I think it's worth, um.

• 44:20Chamath Palihapitiya?

  They're randomly picking companies, guys. RLX? What is RLX? I think that's Ralph Lauren. Nope, you're not allowed to trade that. SNDL, I don't know what that is, but you can only buy 10 shares.

• 44:31Jason Calacanis?

  Would a better solution, Chamath, be for them if they can't handle this and they have the risk of ruin? To just say, we're not adding any more accounts until we can digest all this and raise enough capital to float all this? And do you think there's a chance the SEC is telling them, you got to pump the brakes on this because we can't have a market crash? Two questions, Chamath.

• 44:50Chamath Palihapitiya?

  I think that the issue isn't Robinhood's ability to grow. It's that they don't have their ability to run their business. And so their incompetence is going to cause them to, I think, have to deal with.

• 45:02Jason Calacanis?

  If they had 20, well, if they had $20 billion in cash right now, this would not be an issue, right?

• 45:07Chamath Palihapitiya?

  I think you're right.

• 45:08Jason Calacanis?

  Okay. So assuming they can line that up, because that's probably what's going on right now is a $10 billion investment is going to go into this company pre-IPO so that they can actually take advantage of this situation and grow. So despite the fact that you have an axe to grind with them because you have SoFi, a competitor that's very far behind them, that had its own colossal problems. Let's put that aside for a second. You're talking your own book without even mentioning it. Do you think that if they had that $10 billion, they would just open up all the doors? Or do you think maybe they should say, hey, we're not going to add anybody else?

• 45:38Chamath Palihapitiya?

  I think that what's gonna happen is they're gonna get sued into oblivion. I think that the class action lawsuits here, when people talk about the implied losses that they had over the last 24 hours, David Sacks is right, you can't undo it. The thing is, like, in all of these other situations, like in the Uber fiasco, you know, you can't claim much damage, right? Because you can't measure it. You could have taken a bus, you could have taken a taxi, you know? You could have taken a Lyft, maybe you could have walked, who knows what it is? But the point is that the economic impacts, I think, were much less than maybe the psychological impact, right? Like, you were angry. Here, it's the exact opposite, which is that you prevented people from transacting in an open market. And when people signed up to use the service, that's what they thought they were signing up for.

• 46:24Chamath Palihapitiya?

  And they thought that the risk on the back end would be managed. You have to remember, it's not that the individuals did anything wrong by buying or selling. It's that Robin Hood did something wrong by not being able to manage their business accurately. And then that then impacted the users to the tune of tens of billions of dollars. That has to get adjudicated. And so, yeah, I think the right thing to do is to stop the business, hit the pause button, allow people to elegantly transfer their money out. Do we have to remember, on the back end of this, whenever that you have one of these market failures, the clearinghouses are allowed to instantaneously close your account and transfer it to another broker.

• 47:03Chamath Palihapitiya?

  Instantaneously, you have that right. And so, the market does understand the systemic risk at some level, they just didn't push it all the way through to the end of retail. And so, we're gonna have to unwind this and unscramble this egg, because it's a really, it's a really big problem. Yeah. Growing, growing willy-nilly, because everybody's infatuated with valuations and blah, blah, blah. And you move into a regulated market, where you needed to understand capital constraints, you needed to understand modeling, you needed to understand three and four sigma events. It just means you're underprepared, which means at a minimum, you can't be doing business until you get that shit under control.

• 47:42Jason Calacanis?

  Yeah, I actually think we're almost in sync on this. You have a little bit of an axe to grind because of your other portfolio company, I think, but you still won't recognize that you have a

• 47:52Chamath Palihapitiya?

  No, wait, let's talk about

• 47:52Jason Calacanis?

  A horse in the race.

• 47:53Chamath Palihapitiya?

  Wait, let's

• 47:54Jason Calacanis?

  Because so far, I just did they, did they finish resolving all of their harassment lawsuits? Is that all resolved now, or is that still open?

• 48:02Chamath Palihapitiya?

  Yeah, we've, we

• 48:03Jason Calacanis?

  And then you took them public, so did, did you work all that out before you took them public?

• 48:06Chamath Palihapitiya?

  Yeah, Jason, we, we transitioned the CEO, we completely hired a new team.

• 48:10Jason Calacanis?

  Great.

• 48:11Chamath Palihapitiya?

  I mean, it's incredible.

• 48:13Jason Calacanis?

  Great. So you, so your company that you took public can resolve issues and you can give them time, and then you can in fact become their mentor and you can become their savior to get them public and save that company.

• 48:25David Friedberg?

  Jason, you should not

• 48:25Jason Calacanis?

  But Robin Hood can't?

• 48:26David Friedberg?

  Chamath

• 48:27Jason Calacanis?

  Robin Hood can't?

• 48:28David Friedberg?

  Chamath can't talk about his company that's going public right now. So just as his lawyer, I'm gonna step in and

• 48:33Jason Calacanis?

  Okay, no, no problem. I just want to point out

• 48:35David Friedberg?

  Make sure you don't goad him into saying something he shouldn't say.

• 48:37Jason Calacanis?

  All of our companies, all of our companies, and I don't mean to create a lot of collateral damage here, but Sacks had a company that had challenges, Chamath's had companies that had challenges, we all had companies that had challenges. And I think focusing on what is the role of an investor when your company faces challenges? I think the role of the investor should be, and I take umbrage to you Chamath trying to dunk on me because I'm supporting an investment, I think it's a low blow, and I take it personally, I'll be totally honest. I am trying to work with the company to help them resolve the issues, and I need to be loyal to my founders. And I need to say, hey, how do we resolve this? How did we get here and work with them? And I'm sorry that I'm ride or die, but that's how I approach this, is I should be trying to be helpful as a shareholder.

• 49:19David Friedberg?

  Could you make the argument?

• 49:20Jason Calacanis?

  Which I think you try to be too.

• 49:20David Friedberg?

  But could you make the argument that someone dunking on your company is the equivalent of a hedge fund shorting a company?

• 49:26Jason Calacanis?

  I'm talking about my personal relationship with Chamath, which, you know, it's different than, you know, the, the public markets, right?

• 49:32David Friedberg?

  I know, but I, what I'm saying is like, I think in the private markets, we hear a lot about venture investors, you know, often speaking good about their own companies. Where people really get irritated is when venture investors speak bad about other companies. It's the equivalent of the hedge fund short. And, you know,

• 49:49Jason Calacanis?

  Yeah, I mean, it is dunking.

• 49:50David Sacks?

  J Cal, I mean, Chamath may be dunking on Robinhood. I don't hear him dunking on you. I mean, not really.

• 49:55Jason Calacanis?

  Well, he just said I stumbled into the investment at the opening.

• 49:58David Sacks?

  Well, you stumbled into Vlad in a bar. I mean,

• 50:01Chamath Palihapitiya?

  That's, you told, Jason, you told the story. Jason, you told the story.

• 50:05Jason Calacanis?

  Vlad recognized me in a bar and came up and pitched me a startup.

• 50:08Chamath Palihapitiya?

  But you told the story flippantly on television that you ran into Manantonio's nut house. What do you want us to think? You didn't tell us, hey, listen, I had, I had systematic scouts reach out based on traffic growth. I sat down.

• 50:19Jason Calacanis?

  That's not my, that's not how I get deal flow. I get deal flow by doing a podcast.

• 50:23Chamath Palihapitiya?

  So Jason, then J Cal, if you want me to apologize for saying,

• 50:26Jason Calacanis?

  Your deal flow is through this podcast.

• 50:27Chamath Palihapitiya?

  But Jason, if you want me to apologize for saying that you stumbled into it based on your public description on television, then I'm sorry.

• 50:35David Sacks?

  Yeah.

• 50:36Chamath Palihapitiya?

  But it doesn't, but it doesn't take away from what we have. I, I think the investors' responsibility, this is what I think is fundamentally wrong with Silicon Valley. We are people that basically do this like hero worship around founders and it's stupid. I think we have a job as fiduciaries to the users and to the employees and to everybody else that doesn't have a voice. And most investors are incapable of actually pushing people to do the right thing.

• 51:00Jason Calacanis?

  Oh, I'm pushing to do the right thing and I always have.

• 51:01Chamath Palihapitiya?

  I've learned the hard way. And in this example, what I'm saying is this problem should have been solved three and four quarters ago. And that's a governance failure.

• 51:10David Sacks?

  Yeah, I mean, look, yeah. So Chamath, you're, you're right about that. But I mean, just to give J Cal a little support here. I mean, the reality is, you know, we've all been on the inside of these hyper growth companies. And, you know, like mistakes happen all the time because you're moving so fast. And yes, it should have, it should have been fixed, you know, but, but, you know, stuff happens. Now, the question is, when bad stuff happens, is it an integrity issue or is it negligence? Or is it just people running too fast? And I don't think we know that this was an integrity problem. I mean, it could have just been people running too fast.

• 51:43Chamath Palihapitiya?

  But David,

• 51:43Jason Calacanis?

  That's what I think.

• 51:44Chamath Palihapitiya?

  You knew what the rules were, meaning I, I don't think, I think it is an integrity issue. The rules were not like all of a sudden in a crystal ball and all, there's a magic eight ball that spits out a rule. When you do a deal with DTCC, when you did a deal with your holding company for clearing.

• 52:00Jason Calacanis?

  You sign contracts. Those contracts should have been modelable. This is an Excel problem. This is not like a-

• 52:06David Sacks?

  I, I, I, I hear what you're saying and I'm saying I don't completely know. I want to get to the bottom of the relationship between Citadel and Robinhood and I want to understand if there was any undue influence there, okay? Or whether this was just a case of hypergrowth catching a company by surprise. I'm not defending them. I'm just saying I don't know and therefore I think it's a little bit premature to be talking about giving this company the best policy.

• 52:30Jason Calacanis?

  And I also don't think, is there even a possibility that this has ever happened in the history of the stock market or the modern stock market? That 10 million new, well, hold on, I didn't even say what it is. 10 million new retail investors came into a stock, you know, or millions of them a day and that the stock traded in 10, I don't think that we've ever had social media collide with finance like this. And it's very reminiscent of our discussions with democracy and journalism, censorship and, and politics. We, we are having weird behaviors because of virality.

• 53:00David Friedberg?

  And I think, I think this, I think, this is the most important learning from this experience. Forget about the fiduciary and the governance responsibility of these companies, whether they were good or bad will be resolved over the next couple of weeks and months, I'm sure, as more information comes to light. But what's super interesting about what happened this week, and I think is the most impactful societally over time, is that we're seeing this phenomena where individuals in aggregate can believe something to be true and make it true. And we saw this with Tesla and I, I don't think Tesla got this level of notoriety because it was such a, a, a longer play out cycle. But Elon, you know, was not hitting numbers that people thought he was going to hit, margins,

• 53:43David Friedberg?

  production volume, et cetera. People were shorting the stock, but enough people believed in the story that Elon told about what he wanted the future to look like, that they bought the stock and that gave him the ability to do shelf offerings, raise additional capital, and ultimately build the business and make it manifest in reality that he said would happen. And the same is true of Bitcoin. And the same is true of Trump. And the same is true of storming the Capitol.

• 54:10David Friedberg?

  Cases, there was a belief in something and there was an aggregation of individuals using social media as a mechanism for sharing and talking and engaging and creating a collective outcome that wouldn't have happened through a centralized system or a centralized process and wouldn't have happened in the traditional way where history defines the future. And I think that is what's so powerful about what's happening right now. And we're seeing it in financial markets, but we're also seeing it play out in politics and we're seeing it play out in the real world in a remarkable way. And it goes back to this notion that like a stock is worth the underlying value of the company and that's not true. People can dream a stock to be anything as they did with Tesla. At the time that people were buying Tesla stock,

• 54:55David Friedberg?

  the historical performance of that business was not what hedge funds considered to be a, you know, a profitable, good business. It shouldn't be worth anything, but the belief in what it could be is what drove the value of that stock and ultimately that value enabled that business to become true. And it's just, it's amazing to see it happening. And I think the counter, which is really what makes this so striking, is the centralized institutions that are trying to block this from happening. And the shutting down of Parler and the shutting down of Robinhood trading are equivalent, from my point of view, or at least equivalent, I think will be perceived to be equivalent broadly, which is if a group of people get together and try and use an online service to make a change in the world

• 55:39David Friedberg?

  by sharing and talking with one another and communicating a belief, a collective belief, and that gets yanked away from them, the institution that has the ability to yank it away from them is evil and it will force people to decentralize and it will enable new ways of trading, new ways of communicating, new ways of building. And that's the profound change that I think this decade is going to realize and we're just seeing it start now.

• 56:00David Sacks?

  I agree that Parler or Wall Street Bets is Parler 2.0, right? And what happened? As soon as Wall Street Bets started, which is the Reddit kids, they started threatening and they wounded these powerful insiders, these rich, you know, hedge fund magnates. What happened? They started getting banned off of Discord. They got Discord as a tech company to kick them off. How did that happen? They've been talking on there for months and all of a sudden just magically, right at the critical moment where they're also not allowed to trade, their free speech gets cut off? That's a, that, that was deliberate. Now, I'll tell you how it happens is I guarantee you what these hedge funds did is they went through

• 56:42David Sacks?

  the Discord room and they screenshotted, you know, any post that they could plausibly characterize as, you know, hate speech or what have you. And, you know, and, and by the way, I mean, those, there's a lot of raunchiness in these rooms, but it's not hate speech and it's not organized for the purpose of hate. It's organized for the purpose of trades. But what they do is they weaponize the censorship rules and they go in and they screenshot and then they give it to Discord and they get these guys kicked off. And this is exactly what I've been talking about with censorship. It starts with something you like and then becomes something you don't. How many of the people who support these, you know, Reddit kids were in favor of deplatforming Trump and Parler? And now they can see where it goes.

• 57:24David Sacks?

  This is slippery slope and we've only had to wait three weeks to see where it goes. It goes to the same place, which is when the people in power get threatened, they use these rules, they weaponize these rules to shut down the outsiders and the upstarts. That is the problem with censorship. That is why you cannot let the beast get started.

• 57:41Chamath Palihapitiya?

  I completely agree. And I think this is exactly why how, I think where we came out was, you know, the deplatforming of Trump made no sense. I think the, the economic censorship of Robinhood makes no sense.

• 57:54David Friedberg?

  Yeah. And you can argue it's the right thing to do with a narrow context. But when you take the broader point of view of the implications, that's where this becomes really shaky and really scary. And I think really enables a decentralized movement that is going to be a lot broader um, than, than folks are really realizing at this point. You know, folks don't want to be trading um, on a system that tells them how to trade and folks don't want to be communicating on a system that tells them how to communicate.

• 58:20Jason Calacanis?

  If I gave, if I was running Robinhood and I said, uh, we're going to have two options. There's going to be a Robinhood diamond membership. And you pay by the trade and, you know, you get these special features and then the Robinhood free, you know, you, you get, uh, your data is sold or however it works. Would that be a possible solution, I think, to the optics issue here where consumers could basically pick, just like if Facebook or Instagram woke up one day and said, "For $9.95 a month, you can have none of your data, no advertising, ad-free," like Hulu does? You can get Hulu Premium.

• 58:54Chamath Palihapitiya?

  I would. So here's the thing, Jake Al. I hope your Robinhood investment is successful. I just think that there are now three moments in Robinhood's life. There is pre-this-week, and it is what it is. It's an $11 billion unicorn. God bless them. Then there was this week, where we have to frankly, hold people accountable for the economic damage that they created this week, because it is measurable. Okay, it's not like missing, you know, it's not like, you know, surge pricing in Uber. It's not, you know, Facebook growing too fast and allowing, you know, pictures of breasts getting posted and I'll have to catch up. It's not that. Okay, it's not a bunch of like, disinformation that we can't really

• 59:37Chamath Palihapitiya?

  judge. This is very discreetly judgeable. And so in this week, Robinhood existed as a different company, and I think that there's an implication for that. Then, to your point, honestly, I agree with you. It's what happens from here. And they should survive, but they have to learn. And I think what they have to learn is you have to stop the account growth, you have to massively shore up the balance sheet, take the dilution, get the capital you need, because, let's be honest, I'm sorry, but nobody's going to show up with $5 or $10 billion at $11 billion pre. They'll show up with $5 or $10 billion at $3 billion pre, and they should take the money, and then they should allow the platform to work as intended, or at least as perceived to be intended, to their users, and then they should reopen to everybody.

• 1:00:17Jason Calacanis?

  What would you do, David, if you were in charge? And then let's move on to our next topic.

• 1:00:21David Sacks?

  Well, I mean, I feel like we've probably talked about Robinhood enough, and I kind of want to go back to the point that Friedberg was making, just kind of up-leveling this a minute, which is, I definitely think this is part of this ongoing populism versus the elites war. And social media is now the tool that the people use to organize themselves against these powerful elites. It's why we cannot allow censorship, because it always comes down...

• 1:00:50David Sacks?

  To benefit the powerful, the elites against the people who are trying to organize against them. That was, to me, one of the biggest takeaways from this week. And, and look, the reason why people are organizing is they're asking the question, what is the societal benefit of these big hedge funds in relation to the enormous sums of money they make every year? You go to like the Forbes Rich List or whatever, and every year, these guys are taking down the most money. They're not creating companies, you know? And Chamath is right, we can't have founder worship because they make mistakes too. But at least founders are creating things, right? They're taking big risks. They're not providing risk capital like what we do, okay?

• 1:01:28David Sacks?

  We're investors, but we're funding people's, you know, we're, we're, we're taking the risk of writing checks to, to start the guy who's got nothing, right?

• 1:01:37Jason Calacanis?

  Or gal.

• 1:01:38David Sacks?

  Or gal.

• 1:01:39Jason Calacanis?

  Yep.

• 1:01:39David Sacks?

  You know, they, them, it's all, all good.

• 1:01:41Jason Calacanis?

  All of them.

• 1:01:43David Sacks?

  All of them. So, so.

• 1:01:45Jason Calacanis?

  Trying to keep you from getting canceled here.

• 1:01:47David Sacks?

  But, but, but, but, but what, what exactly is the societal value of these hedge funds? Now, I know that they provide some price discovery and they provide greater liquidity to markets, but is that really worth them really being the richest players in the game? It doesn't make any sense. And then when they lose, like in 2008, they get bailed out.

• 1:02:06Jason Calacanis?

  It makes no sense.

• 1:02:07David Sacks?

  It makes no sense, something is wrong here. Now, is this a right wing view, a left wing view? It feels to me like there's a political realignment happening here, where the left and the right, we're all getting on board with this idea and it's gotta get fixed.

• 1:02:20Jason Calacanis?

  Yeah, this, this might be the legacy of Trump and away Sacks, that he created so much disruption over those four years, that now we're actually finding out where the actual breaking points are in society, and this is one of them, and the healthcare system is one of them, and freedom of speech is one of them, and we need to address each of these, and they're complex, but there is common ground. I mean, when AOC and Ted Cruz are both agreeing on the same issue, with some things going on here, like, I think we have to fight the real enemy. Chamath and I should not be fighting over this because I can tell you if Chamath did the Series A on this, he would be backing up Robinhood like this. To the end of the, end of earth. And that's totally fine. And I agree with that position.

• 1:02:58Chamath Palihapitiya?

  Jason, I just, I just want you to know, number one, I love you with all my heart and I, and I hope you make, I hope you, I hope you make

• 1:03:03Jason Calacanis?

  Ditto.

• 1:03:03Chamath Palihapitiya?

  Hundreds and hundreds of millions of dollars, but there's a, it's just like, you know, you were, you just got upset with me because you thought I was kind of saying that you stumbled into it. I didn't mean it that way. I was just repeating the way that I heard the story. But something that touches me equally ferociously is this idea of like the little guy getting run over by some like, you know, objective thing over here that makes a decision that's arbitrary.

• 1:03:27Jason Calacanis?

  I would a hundred percent agree with you.

• 1:03:29Chamath Palihapitiya?

  And so like the idea that like, you know, somebody who's on an app, all of a sudden gets censored. Somebody that, you know, makes a post gets canceled. Somebody that all tries to make a trade can't.

• 1:03:41Jason Calacanis?

  It feels unfair.

• 1:03:42Chamath Palihapitiya?

  It feels that each individual is suffering some pretty deep inequity.

• 1:03:47Jason Calacanis?

  Yes, agreed.

• 1:03:48Chamath Palihapitiya?

  And I can't, I just can't stand that. It really just touches me in a way that tilts me.

• 1:03:53Jason Calacanis?

  And I get very, and you know what? It's interesting. I think the reason I made the Robin Hood investment is because my belief in the underdog and my belief in people's ability to come up from being poor or middle class to middle class or affluent. Friedberg, you haven't chimed in yet, as we wrap here and then move on to our second topic.

• 1:04:10David Friedberg?

  I think

• 1:04:11Jason Calacanis?

  We're at an hour.

• 1:04:12David Friedberg?

  So it's, um, so I just want to say, um, you know, we talked about decentralization and, you know, we all feel the emotional response to the little guy getting screwed by the big guy that controls the system. And we want to fight the system. That's the basis of every great movie. Um, it, the, it's worth highlighting though, that decentralization and what I would kind of characterize as swarming behavior, uncontrolled swarming behavior can actually have negative consequences and there's a reason systems exist. You know, um, when you put a bunch of people in a room, let's say you put a hundred people in a room and every time and someone says the word "door", and every time you hear the word "door", you're supposed to repeat it.

• 1:04:53David Friedberg?

  Within thirty seconds, the entire room will be like deafening with everyone screaming "door", "door, door, ahh", and suddenly everyone will be screaming it. That's a feedback loop that occurs in an uncontrolled social system. And that's what's occurred with GameStop and it's what occurred with Bitcoin. So there are, as we've seen, remarkable outcomes when you allow systems to operate without centralized control and without centralized brake pads that kind of slow them down or put in place some rules and some obligations to how that system operates. The problem with decentralization and this swarming approach to resolution where lots of people basically work together individually is you end up with things like cancel culture,

• 1:05:33David Friedberg?

  where before a judge and jury determines whether or not someone did something wrong, the community decides that person should be punished and shuts them down in the real world and their career and their life is ended and ruined. And we saw the same, and we saw the same with the Capitol riots. You know, people basically died because of the swarm that occurred where this idea that there was fraud in the election became an echoing, deafening noise for these people and they swarmed and killed people. And the system by which you can actually have vigorous debate and the system by which you can actually have controls and processes and judges and juries and trials is what needs to be improved for this to work.

• 1:06:16David Friedberg?

  Otherwise, people will go to decentralization and you will have a Lord of the Flies moment that engulfs civil society because the tools are there today. And so centralized systems can work, but they have to adapt and adapt quickly to be fair and to enable and to not discriminate. Otherwise, we're gonna see Lord of the Flies and we're gonna see decentralization being the solution to getting out of the system that's inhibiting us and we're gonna end up having really fucking ugly outcomes.

• 1:06:43Jason Calacanis?

  There's a psychological term for what you're describing. It's the diffusion of responsibility. And also known as mob behavior. When a group of people collectively do something, their individual morality can evaporate. And the larger the group and the more intense the behavior, the less responsibility each person takes for it. So five people on the steps of the Capitol, you know, one person breaks a window, maybe somebody breaks it. But once you have 500 or 5,000 and one person breaks a window, now you've got a much higher percentage of people start breaking windows. And that's when tragedies happen. Of course, World War II was the diffusion of responsibility with the Nazis. Completely agree. Yeah, you're totally right. You're totally.

• 1:07:20David Sacks?

  Just one quick point and then we can just move on.

• 1:07:23Jason Calacanis?

  Yeah.

• 1:07:23David Sacks?

  So I think these like viral tools, these social networks, they enable two things. They enable mobs, but they also enable movements. I think the mobs are bad and the movements are good, or they can be good depending on what their manifesto, what their mission is. And so I think we want to enable the movements, but we want to be really careful about the mobs. And you know, one of the things that's kind of disturbing about Twitter is I generally find that like the tweets that seem to go the most viral are the ones that are full of rage and anger. And the ones that are trying to make more nuanced points just kind of get lost. And so there is something a little bit disturbing about the mob behavior, but but the movement, the enabling of these new movements, I think is really powerful. And that's what Wall Street Bets was, at least in the early stage. And they did not deserve to get shut down like that.

• 1:08:06David Friedberg?

  Social, social networks are a collective amygdala. They are not a collective cerebral cortex. And I think if someone can solve that problem and get people to think about the rational, objective outcomes in a social way, in its engaging a fashion as it is to kind of be excited by the negative shit that excites the amygdala. You know, it could be really powerful, but that's probably.

• 1:08:27Jason Calacanis?

  We're going to need politicians who, we're going to need some level of politician who has some integrity and some expertise. If only.

• 1:08:34Chamath Palihapitiya?

  Well, don't you think, don't you think, Jake Al...

• 1:08:36Jason Calacanis?

  Politicians with experience.

• 1:08:37David Friedberg?

  He's making a transition for each of us.

• 1:08:39Chamath Palihapitiya?

  Wait, I was gonna say, don't you guys think that what this means is that entrepreneurs now can really think about decentralization as the key feature? Like, in many of these markets or these systems where we have these centralized authority, we have to move to a much more decentralized, democratized way of doing things, whether it's stock trading, or whether it's healthcare records, or whether it's, you know, education systems and degrees and accreditation. There has to be a way where you can't be canceled.

• 1:09:06David Friedberg?

  Yeah, but with morally and ethically inclined and/or legally inclined systems that ensure that the behavior of that system doesn't run amok. And, you know, that's really where things can go awry, as we've seen lately. But it's a hard problem to solve. I don't think we're gonna solve it here today.

• 1:09:26Jason Calacanis?

  Just a final update. I don't know if this is exactly correct, but I just asked on Twitter how many shares of GameStop are still short. Apparently, they're still 55 million shares are so short of the 70 million or so total shares and 47 million in the float. So, something very bad could still happen here. I mean, these shorts have not been covered. So, this is going to be an ongoing saga where I think every single platform, if consumers keep buying these shares, what is the end... Does anybody have an idea or a prediction on the end game here and then we'll move on? What is the end game if another 5 million people buy the shares, or 10 million people buy it and it goes to 1,000 or 2,000? What happens if GameStop is worth $100 billion?

• 1:10:09Chamath Palihapitiya?

  It's such a great...

• 1:10:10Jason Calacanis?

  It could happen!

• 1:10:11Chamath Palihapitiya?

  It's a great question. Well, can I tell you, Jason, what that means? There's a great article in The Information which Sam Lessin wrote, I don't know if you guys read it, but it basically said, "Why did Tesla win?" Now, this is not accurate, but I think his framing is relatively accurate, which is... People were buying Elon like they would buy a trading card.

• 1:10:29David Friedberg?

  That's right.

• 1:10:30Chamath Palihapitiya?

  And Tesla is a manifestation of Elon.

• 1:10:33David Friedberg?

  That's right.

• 1:10:33Chamath Palihapitiya?

  And it actually is so visually, it makes a ton of sense to me. Like then I think, you know, why have like Richard Branson's businesses worked? Or why is the Jordan Brand work? Or all the, you know, at a smaller level, yeah, at a smaller level. Cause we're brands and we have these values and people can imbue their, their collective decision-making and support to the person versus the institution.

• 1:10:57David Friedberg?

  It's a belief. It's a belief in what that person represents too. You know, I can, uh, why did, uh, MBS buy that frigging painting that wasn't even a Leonardo painting for a billion dollars? You know, there was some belief there. You know, is it really worth a billion dollars? It doesn't matter. At the end of the day, most assets are, most assets are purchased under the premise that I believe the price will be higher tomorrow than it is today. And if we all believe that, then we will all buy it today and we will all find more people buying it tomorrow. That's what Bitcoin is.

• 1:11:29Chamath Palihapitiya?

  Do you all agree though, that GameStop is not Tesla?

• 1:11:32David Friedberg?

  I don't agree with your premise. I don't think that stocks necessarily need to be reflective of the underlying business. And that's what so, but, but no, just think about it. That's what's so shocking about this week because we've all been taught in these frigging economics books and these financial analysis books, oh, the stock is worth X dollars, discounted cash flow. What company has ever paid out dividends that equal the amount that you paid to buy the frigging stock unless you lived in 1926? It hasn't happened. So everything we've been taught about DCFs and future cash flows and everything is nonsense. At the end of the day, every stock trades based on the assumption that someone will pay more for it than I am paying for it today. That is it. That is entirely what a stock is. And so if everyone's belief is completely uncoupled from the underlying asset that

• 1:12:17David Friedberg?

  that stock is meant to represent, it doesn't frigging matter. And it highlights what's really going on. Trading stocks is not investing in businesses.

• 1:12:25Chamath Palihapitiya?

  Can I say, can I say something else on top of this? Jason, what was the name of the, remember when we were talking about censorship? What was the name of the, the, the left podcast that got canceled on Twitter?

• 1:12:35David Sacks?

  Red Scare.

• 1:12:36Chamath Palihapitiya?

  Red Scare. Red Scare. Is GameStop Red Scare or at the real Donald Trump? And my point is, who the hell are we to decide?

• 1:12:46David Friedberg?

  Right.

• 1:12:47Jason Calacanis?

  How does it unwind?

• 1:12:48Chamath Palihapitiya?

  All three got canceled. All three got canceled.

• 1:12:51Jason Calacanis?

  Sax, what's your prediction? We're sitting here a year from now, full year out. What does GameStop January 2022 look like? What does the stock price look like? What does the business look like? What, how does this all resolve itself?

• 1:13:03David Sacks?

  You know, I'm not a public stock market trader. I'm just not, I just feel like it's, I'm not a day trader. I don't, I don't buy public stocks. It's just kind of like, to me, it's a distraction.

• 1:13:14David Friedberg?

  What do you buy?

• 1:13:14Jason Calacanis?

  Where will this end?

• 1:13:15David Sacks?

  I, you know, just buy Vanguard funds. Like guys, if you're listening to this program and you're wondering where to put your money, just buy Vanguard funds and stop worrying about it.

• 1:13:24Jason Calacanis?

  Index, low fees.

• 1:13:25David Sacks?

  Index, yeah.

• 1:13:26David Friedberg?

  Low fee index.

• 1:13:27Jason Calacanis?

  Yeah, I mean, if you want to bet specific companies because you get enjoyment out of it, do it, but yeah. Okay, so nobody has any idea what happens if it hits 100 billion or how this ends. So I think that's, that's illustrative of my point is that for somewhat intelligent people who have some degree of expertise in this area, we have no idea how this ends.

• 1:13:46David Friedberg?

  But this is the point. No, but this is the point. It is a, it is a collective Ouija board moment. Everyone's got their hand on the Ouija board and they're going to craft the sentence. Any one of us individually cannot predict what a collective group of 3 million plus people are going to do. And we've, you know, we, we try and struggle and think about the underlying value of a business, which is what these hedge funds have done historically. But at the end of the day, this thing is going to be worth what the market tells you it's worth and what the market chooses to do, we wouldn't know because we are not the collective 3 million.

• 1:14:14David Sacks?

  Jason, yeah, yeah. So, so look, Jason, there's two questions, right? There's always this question of like, what should the price be? And then who gets to decide? And look, do I personally think GameStop is overvalued? Yes, of course, I think it's going to end very badly. But the question is who gets to decide? And is the game going to be rigged by powerful insiders against outsiders? Just, it's just like the same question with Parler, okay? Which is who gets, it's not about which, look, we, we can say that there's certain views that are bad, okay? But the question is who gets the power to decide that? And it's, and, and that's what, that's the thing we have to ask is that second order question of who has the power to decide.

• 1:14:54Jason Calacanis?

  Is there any outcome?

• 1:14:55Chamath Palihapitiya?

  Amazon got to decide and Robinhood got to decide and the victims were Parler and GameStop.

• 1:15:01Jason Calacanis?

  Okay, so this would be a good segue to move on. Apparently, we had a discussion on the last episode about running for governor. And I bought the domain name governorchamath.com. I had governorjason.com. I got governorsaxx and governorfriedberg.com. And I redirected them and you guys owned them and they're redirected to your Twitter handles. And lo and behold, we wake up one day and Chamath4ca is live. Chamath, everybody wants to know.

• 1:15:33David Friedberg?

  Jump the gun. We were going to have a vigorous debate and decide which one of them.

• 1:15:36Jason Calacanis?

  Yeah, who was gonna run, but somebody jumped in. And I'm not saying other besties might not jump in. Other besties could jump in. They have domains.

• 1:15:44David Friedberg?

  DVD, stay tuned, stay tuned.

• 1:15:47David Sacks?

  Jason, we do not want to split the bestie vote. I think we got all the besties. This is, this is the four musketeers. We're all behind Chamath now. We do not want to split the bestie vote. So Chamath, it's on you. Tell us what's going to happen now.

• 1:16:01Jason Calacanis?

  What's going to happen?

• 1:16:03David Friedberg?

  It's the Twitter week on the podcast, right?

• 1:16:07Chamath Palihapitiya?

  Yes, we actually, actually, this is, we are going to do an emergency pod and talk about exactly that. So if folks want to know, they're going to have to tune in midweek. But.

• 1:16:17Jason Calacanis?

  Midweek, we have to do another pod for right now. Well, let's talk about the website you put out.

• 1:16:21Chamath Palihapitiya?

  Coming up.

• 1:16:21Jason Calacanis?

  With it, well, we'll wrap on this, the website. You put out a platform. What's the reaction been? And is the reaction been positive enough to make you want to?

• 1:16:28Chamath Palihapitiya?

  Guys, I want to be, I want to be very clear. Midweek, midweek. But I'll just tell the quick story is three young people, these three amazing guys just built, they built it. And I just retweeted it. I can say that tens of thousands of people have signed up for updates. I know that much. All these three guys though, here's the, can I just, if I can tell, a shout out to these guys. Rahul, Samir and Aman, all these three guys, they don't live in California. Two did, but had to leave. One wants to move, but can't because he can't afford it. And it's just such a microcosm of like how beautiful California as a place is.

• 1:17:10Chamath Palihapitiya?

  And just what people think about when they think about the state is just so, it's so lovely. So for another time, but anyway, shout out to those guys for building the website. Thank you.

• 1:17:19Jason Calacanis?

  So essentially, the entire market has now been driven by a group of all in, of the all in army built a website, you retweeted it. And that's what this is all about. So there has been no paperwork filed. There is no action committee. However, it has traction. So it makes one wonder.

• 1:17:39Chamath Palihapitiya?

  And you know, I mean, there may be a shadow cabinet meeting.

• 1:17:42Jason Calacanis?

  Maybe not. There may or may not be.

• 1:17:43Chamath Palihapitiya?

  There may be a shadow cabinet meeting.

• 1:17:46Jason Calacanis?

  What is the chances?

• 1:17:47David Sacks?

  Well, I think Chamath by publishing that website just went down the escalator.

• 1:17:53Jason Calacanis?

  Wow, it was the golden escalator? Golden escalator moment.

• 1:17:58David Sacks?

  He's gone down the escalator and who knows what could happen now. I'll tell you this, I went on, uh, I'll, I'll do a plug. I went on Bloomberg.

• 1:18:05Chamath Palihapitiya?

  Amazing hit. Amazing hit. Great hit.

• 1:18:08David Sacks?

  It's on YouTube. We can put the link in the show notes. Yeah. Put, put the link in the show notes, Nick. People need to watch that. I went through all the, the, the ways in which California is hurting. Newsom hasn't done a very good job and I made my case for Chamath. So that's a prelude to what we'll talk about on the next pod. But the, the, the amazing thing is the outpouring. I mean, the number of people who have texted me, emailed me and Chamath and all of us, like there's a ground swell happening now.

• 1:18:35Jason Calacanis?

  A hundred percent.

• 1:18:36David Sacks?

  So you know, I would say all the fans of the pod who are now behind this, you guys are making it real.

• 1:18:43Jason Calacanis?

  Uh, Friedberg, Manifest Destiny here. What's going on? Is this another wisdom of the crowds or a mob or a movement?

• 1:18:52David Friedberg?

  Who am I to say?

• 1:18:54Jason Calacanis?

  Are you, are you all in as chief science officer? Will you be our Dr. Fauci?

• 1:19:00David Friedberg?

  You know, here, I, I think we should have a good debate on our next pod and hear the platform and discuss the platform and, um, you know, uh, make sure that we all feel like this is, uh, uh, this is where we should be. Um, and I think this is going to take a little bit of time, uh, to, uh, to build. Um, and I think, you know, the more we kind of build towards it, the more likely we are to have that ground swell that we're going to need.

• 1:19:25Jason Calacanis?

  Well, let's give the all in. Let's give the all in.

• 1:19:27David Friedberg?

  I will tell you, it seems pretty likely that this, uh, recall effort is going to get the, uh, signatures it needs. So we can kind of put that in the sand that it's very likely we're going to end up seeing a recall election.

• 1:19:40Jason Calacanis?

  Okay, so if people want to participate in recall Gavin Newsom, what do they do? Because that is the first step.

• 1:19:45David Sacks?

  Yes, absolutely.

• 1:19:46Jason Calacanis?

  Towards a Chamath governorship.

• 1:19:48David Sacks?

  You gotta go, you gotta go to rescueCalifornia.org. RescueCalifornia.org. Go to that website, sign the petition. That is the first step. We are very, we only need a few hundred thousand more signatures. We have 1.2 million, we need 1.5 million. Go there, sign up and then go to Chamath's website, which is chamath4ca.com. And sign first man list.

• 1:20:11David Friedberg?

  Jason, I'll make one more point. And I think, and I made this the other day on that clubhouse that Saxon and I did. I think we, I made it before you joined. If you think about the difference between a leader and a manager, a manager is someone who typically delegates responsibility and authority. A leader is effective at synthesizing multiple people's points of view and creates an opportunity, defines a vision, defines an objective. That is the synthesis of all the people that, that report to him and, and for which, for whom he is responsible or she. And I think what we've seen in California in particular, and, and really across leadership positions or governing positions across the country during this pandemic is a failure of leadership.

• 1:20:56David Friedberg?

  Because when times are predictable, if A, then B, it is easy to manage and it is easy to look successful. I delegate down to the person who knows best and they are responsible for the outcome and they do it well, great. All I'm doing is pointing to the right person to run something. The pandemic is difficult and it is unpredictable. It requires a synthesis of economic information, social information and health information. And more often than not, a person who typically acts like a manager points to the person they think should be in charge under the circumstance to make a decision. And that person is not equipped to synthesize the economic and social ramifications of the decision. So what we have seen during the pandemic is most often people in a governing position

• 1:21:40David Friedberg?

  have pointed to the health officer or the medical person and said, you make the decision. And that person does not necessarily account for the social and economic ramifications of the decision they're making. A health person knows how to save lives. The best way to save lives is shut everything down. And so the test of leadership during this pandemic has been a test of synthesis and recommending an action that's associated with the understanding of the social, economic, and health implications of what's going on. And that's really where so many governing bodies and individuals have fallen apart during this pandemic, is an inability to do that effectively. And I think that is what is needed going forward. It is a moment of test.

• 1:22:23David Friedberg?

  It is a moment of truth about the difference between a manager and a leader. And we're seeing across the nation who is what. And I think it is highlighting why some folks may not be best suited to do this. The second thing I'll say, and I know I'm on a little bit of a diatribe, but the second thing I'll say is career politicians-

• 1:22:40Chamath Palihapitiya?

  We've been waiting for your diatribe, by the way. It took 19 episodes, go.

• 1:22:43David Friedberg?

  Career politicians, I think, simply should not exist. If you go back to the origins of this country, right? Having your place in government, and we talked about this over email, having your place in government was meant to be something that everyone was supposed to take their turn doing. And the people that were sitting in political seats, it was supposed to be the merchant and the local farmer and the banker, and we were all supposed to take our turn representing our communities, representing our people in government. And what we've seen is people who have made a career out of being a politician. And the result of that is that their job depends on them getting reelected. In order to remain in their career, they have to get reelected, and they ultimately end up making trade-offs that don't necessarily represent the best long-term interest of their community. And this is broadly true across nations, across centuries.

• 1:23:28David Friedberg?

  But it's particularly acute in the United States, where we've seen such wealth creation over the last 250 years. And what's happened is when you have career politicians sitting in these seats for so long in an environment of severe wealth creation, you end up having governments that are ineffective and creating systems that fail us. And here we are. And what we need is to have someone go in that's not dependent on the traditional folks that get people elected and fund elections and result in reelections. We need someone that can go in as an outsider and make a change. And so my advocacy for what's needed in California, and I think nationally, and that's a longer conversation, is to find those types of folks to come in and lead and be politicians that can take a leadership role, synthesize information, and not be worried about the reelection

• 1:24:12David Friedberg?

  cycle and not have anything to lose related to a career in politics. So I'm done.

• 1:24:17Chamath Palihapitiya?

  On that note, I want to say I love all of you. And- Let's do our emergency pod on Tuesday.

• 1:24:27Chamath Palihapitiya?

  Do you guys want to play poker tonight?

• 1:24:30Jason Calacanis?

  I'm still in town. I was playing that original graduation.

• 1:24:33David Friedberg?

  My mom's in town.

• 1:24:36Jason Calacanis?

  My parents got vaccinated.

• 1:24:40David Sacks?

  Yeah, I can play. I can.

• 1:24:41Jason Calacanis?

  Oh, here we go. I'll see you guys at.

• 1:24:44Chamath Palihapitiya?

  Wants to play.

• 1:24:46Jason Calacanis?

  Just one note, one note, if you do fill out, if you take, if you go to rescueCalifornia.org, is that the name?

• 1:24:52David Sacks?

  Yes, yes.

• 1:24:53Jason Calacanis?

  If you go there, you print out the petition and you hold it up and take a selfie with your signature on it. And you at the besties, we will like it, possibly retweet it and possibly follow you. So go ahead and take a picture of your printout with your name on it. And that proves that you're part of the all in army and we will like it. We might follow you and we might even retweet you. You could get even four besties. Love you and we'll see you all next time on the all in.

• 1:25:21Jason Calacanis?

  See you at Couples Therapy tomorrow.

• 1:25:23David Sacks?

  Hey, everyone. Hey, everyone. Welcome to the all in.

• 1:25:33David Sacks?

  A billion here, a billion there. Pretty soon you're talking about real money.

• 1:25:41David Friedberg?

  I love you, Sax.

• 1:25:45David Sacks?

  These are really big numbers.

• 1:25:48David Sacks?

  It's spread the opportunity that that technology represents.

• 1:25:56David Sacks?

  We're probably going to have four Kardashians on there. So four besties on there.