E84: Markets update, crypto collapse, Russia/Ukraine endgame, state of the podcast

0:00 Besties discuss the one-month hiatus 7:03 Markets update: Fed decisions, goals, macro factors, root causes 32:19 Earnings estimate skepticism, labor force, job openings 47:17 How startups should think about the next 18-36 months 56:20 Crypto collapse, next shoe(s) to drop 1:08:41 Russia/Ukraine endgame, escalation, scrutinizing US alliances, sanctions failing 1:33:12 Will 2024 be Biden vs. Trump? Could it be DeSantis vs. Newsom? Follow the besties: https://twitter.com/chamath https://linktr.ee/calacanis https://twitter.com/DavidSacks https://twitter.com/friedberg Follow the pod: https://twitter.com/theallinpod https://linktr.ee/allinpodcast Intro Music Credit: https://rb.gy/tppkzl https://twitter.com/yung_spielburg Intro Video Credit: https://twitter.com/TheZachEffect Referenced in the show: https://www.google.com/finance/quote/SPY:NYSEARCA https://www.google.com/finance/quote/. DJI:INDEXDJX https://www.cnbc.com/2022/06/10/consumer-price-index-may-2022.html https://www.longtermtrends.net/home-price-median-annual-income-ratio https://www.cnbc.com/2021/06/09/tc-energy-terminates-keystone-xl-pipeline-project.html https://www.reuters.com/business/energy/us-talks-with-allies-russian-oil-price-cap-says-yellen-2022-06-20/ https://www.xe.com/currencycharts/?from=RUB&to=USD&view=1Y https://www.xe.com/currencycharts/?from=RUB&to=USD&view=1Y https://www.wsj.com/articles/inflation-bls-price-checkers-who-determine-cpi-11652132333 https://www.chicagofed.org/research/dual-mandate/dual-mandate https://data.oecd.org/leadind/consumer-confidence-index-cci.htm https://www.rasmussenreports.com/public_content/politics/top_stories/right_direction_wrong_track_jun20 https://thehill.com/policy/finance/3525909-56-percent-in-new-poll-believe-us-is-in-recession/ https://www.linkedin.com/pulse/reducing-inflation-come-great-cost-stagflation-ray-dalio https://fred.stlouisfed.org/series/CIVPART https://tradingeconomics.com/united-states/job-offers https://www.socialcapital.com/ideas/2021-annual-letter https://techcrunch.com/2022/05/10/tiger-global-hit-by-17b-hedge-fund-losses-has-nearly-depleted-its-latest-vc-fund https://www.coinbase.com/price/bitcoin https://www.coinbase.com/price/ethereum https://www.coindesk.com/business/2022/06/17/three-arrows-capitalconfirms-heavy-losses-from-lunas-collapse-exploring-potential-options-report https://www.ft.com/content/19c27ae1-ae72-4668-b3a9-162adc27dffc https://decrypt.co/103489/solend-whale-108m-loan-nearly-crashed-solana https://www.justice.gov/usao-sdny/pr/former-employee-nft-marketplace-charged-first-ever-digital-asset-insider-trading-scheme https://www.ft.com/content/4e211784-83eb-49a2-ba39-8976345a88d5 https://www.washingtonpost.com/world/2022/06/10/ukraine-ammunition-donbas-russia/ https://www.americanpurpose.com/blog/fukuyama/why-ukraine-will-win/ https://www.bloomberg.com/news/articles/2022-03-02/london-listed-russian-stocks-erase-570-billion-in-two-weeks https://www.bloomberg.com/news/articles/2022-06-20/ruble-soars-to-seven-year-high-in-challenge-to-bank-of-russia https://www.cnbc.com/2022/06/23/russias-ruble-is-at-strongest-level-in-7-years-despite-sanctions.html https://www.wsj.com/articles/u-s-push-for-exceptions-in-europes-sanctions-on-russian-oil-gains-traction-11655913796 https://abcnews.go.com/International/wireStory/correction-germany-nuclear-shutdown-story-82051054 https://www.bloomberg.com/news/articles/2022-06-23/catl-unveils-ev-battery-with-one-charge-range-of-1-000-kms https://nymag.com/intelligencer/2022/06/why-ron-desantis-can-beat-trump-in-2024.html

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

• 0:00Jason Calacanis?

  J Cal, you look a little grifty. You feel okay?

• 0:02David Friedberg?

  Yeah.

• 0:03Jason Calacanis?

  Me? I'm great. I'm great.

• 0:04David Friedberg?

  You look half a Millie richer today. What's it like to be half a Millie richer?

• 0:09Jason Calacanis?

  J Cal, you look like a failed hostage taker. Laugh it up, boys. Laugh it up, boys. Laugh it up, boys. When you see my other projects drop, you're gonna be crying again, okay?

• 0:21David Friedberg?

  I can't wait.

• 0:22David Sacks?

  Why don't you take yes for an answer, J Cal?

• 0:24Jason Calacanis?

  I've taken yes for an answer. Welcome to the All In Podcast with three miserable rich bastards who pull up the ladder behind them.

• 0:32David Sacks?

  Do you want to explain why it took us a month to produce a new episode, J Cal?

• 0:36Jason Calacanis?

  What about the... Hold on a second. Attorney.

• 0:40David Friedberg?

  Let me give you guys the TLDR.

• 0:43David Friedberg?

  J Cal thought the All In Pod was his, and then he realized it wasn't.

• 0:49Jason Calacanis?

  No. If you guys want to go, there we go. There, I'm totally transparent. I requested, I requested to own 6% more of the All In Podcast.

• 0:57David Friedberg?

  No, no, no. Back up to the summit. Back up to when you wanted to kick me off the show. Back up before that, where we...

• 1:02Jason Calacanis?

  Oh my God, are we really doing this?

• 1:04David Friedberg?

  Yeah, we're gonna do it.

• 1:05Jason Calacanis?

  Okay, if you want to do it, we do it.

• 1:07David Friedberg?

  We can't talk about this for 45 minutes, because what happened then...

• 1:09Jason Calacanis?

  It's so boring. So boring.

• 1:12David Friedberg?

  We planned the summit. J Cal doesn't like how I was concerned about the summit, and I bitched at him, and, you know, I was negative to him. Finished the summit. J Cal wants to kick me off the show.

• 1:21David Sacks?

  Yes.

• 1:22David Friedberg?

  Brad Gersner, Bill Gurley would have higher ratings.

• 1:25Jason Calacanis?

  Here comes the bullying.

• 1:26David Sacks?

  People think it was me and J Cal getting into it. It wasn't. It was actually, it started with Friedberg and J Cal getting into it.

• 1:31David Friedberg?

  J Cal wanted me off the show.

• 1:33Jason Calacanis?

  All right. I'll... Do I get to explain the series of events or no?

• 1:36David Friedberg?

  He wanted me off the show.

• 1:39David Sacks?

  True or false, J Cal?

• 1:41Jason Calacanis?

  I felt that if Friedberg, if Friedberg wasn't enjoying his time here, and was going to constantly complain every week about every detail why the show's not good, there was always the option for him to maybe do half the shows and have Brad Gersner do half the shows, or have Bill Gurley or rotate in. And so if he was going to be miserable all the time and worried about the show, I gave him the option to have somebody else take his spot.

• 2:10David Friedberg?

  Did you or did you not say that this is your show? You're the leader and you wanted me off the show?

• 2:14Jason Calacanis?

  I never said that. Nor would I say that. I don't need to say that.

• 2:17David Sacks?

  You said you could summarily replace any of us. Effectively, you acted like we all work for you. It's your show.

• 2:22Jason Calacanis?

  Sax, I don't think Shemat's replaceable, just for the record, so.

• 2:25David Friedberg?

  That's true. He does think that.

• 2:28Jason Calacanis?

  I do not think Tremont's replaceable. Friedberg, I do think, I mean, I could pull up the Brad Gerson episodes. I think they have slightly more views. So, but people love you, so we keep you.

• 2:36David Friedberg?

  My mom and my wife that he thought I was replaceable on the show.

• 2:39Chamath Palihapitiya?

  Guys, I would like to jump in by just summarizing this so that we can move on. So basically, what happened was, we had an agreement that it was 25% each. There was a moment where J Cal believed that he deserved more. We had to sort through a lot of the underlying issues that caused them to believe that. We got to a good consensus. We now have a signed agreement that governs how the show and other things around the show and offshoots of the show will work. We are 25% equal partners. And now we can move on. So enough for the bitching. Let's go.

• 3:10David Friedberg?

  All good. And I love you all.

• 3:12Chamath Palihapitiya?

  I love you all too.

• 3:13Jason Calacanis?

  I love you all too. To be clear, my position, I do feel like this needs to be out here was, if we're going to make it into a media company, my request was, listen, I think I own, I should have 10% more equity, and I'll go to work every day and do the work, and you guys can just show up. You guys agreed to that. And then you guys have said, you don't want to do it. And I said, okay, fine. So here we are, we're back at square one. So let's just get to work.

• 3:34David Friedberg?

  We just want to do a pod, and we just want to talk.

• 3:36Jason Calacanis?

  There's not going to be any more summits. There's not going to be any business here. It's just a pod. I have other events I do. I have other pods I do. If I want to get paid, I'll do them over there. And here, it's just a pod that you see every week. So let's get into it. Everybody wants to talk about markets. Oh, by the way, if you guys want your intros, that's 1% each.

• 3:52Chamath Palihapitiya?

  Intros, go do it.

• 3:53Jason Calacanis?

  Okay, good. Those are 1% each. So when you guys are willing to pay me my 1% additional equity, you get the intros. And when you want the all in summit 2023, that's another 1%.

• 4:01David Friedberg?

  We're gonna get an invoice each week from J Cal now.

• 4:03Jason Calacanis?

  You're gonna get, it's gonna be prorated monthly. It's gonna be 0.8% equity per month vested.

• 4:08David Sacks?

  I just think it's so fascinating that we went through all of this, you know, I don't know, Sturman drawing or whatever, this, this like, you know, a month of non-taping. And, you know, and this, like, all this turmoil in our relationship, so you could get an extra 1% from us.

• 4:25Jason Calacanis?

  2% each, 31%. I believe I should, just so you know, I do this for a living. And if I do extra work, I believe I should, uh, and if you want me to be the, the de facto CEO of this, then I should get a little extra.

• 4:38David Sacks?

  Yeah, we don't want that.

• 4:38Jason Calacanis?

  And you don't want that, so that's fine. That's fine. This is just gonna be a project. We do it every week. And then all your grifts, whatever, you know, you're spinning out from the production board, or whatever copycat app you're making, you can fucking do.

• 4:55Jason Calacanis?

  As a side grift. Here we go.

• 4:57David Friedberg?

  Do the intros.

• 4:57Chamath Palihapitiya?

  Let's get going. Come on.

• 4:58Jason Calacanis?

  Let's go. I'm not, no, there's no, zero intros. No intros. Intros are out.

• 5:02David Friedberg?

  Wait, what about, hey, everybody? Hey, everybody?

• 5:04Jason Calacanis?

  I'll, I'll do a, hey, everybody. Hey, everybody on the house. Hey, everybody. Hey, everybody. Welcome to a, is that a freebie for you? Hey, Frank, it's free for you.

• 5:29Jason Calacanis?

  Hey, everybody. Welcome to another episode of the All In Podcast. We're back for episode 84. With me, of course, the Sultan of Science, the Prince of Panic Attacks, the Queen of Kinwa himself, David Friedberg. How you doing, buddy?

• 5:41David Friedberg?

  Great to be here.

• 5:42Jason Calacanis?

  Great to be here. All right.

• 5:43David Friedberg?

  I missed you.

• 5:44David Sacks?

  Can you feel the tension? There's still a lot of tension.

• 5:47Jason Calacanis?

  There's a little tension. A little tension there.

• 5:49David Friedberg?

  Jake Hell and I will be hanging out tomorrow night.

• 5:51Jason Calacanis?

  We'll, we'll make it.

• 5:52David Sacks?

  Have you guys resolved it?

• 5:54Jason Calacanis?

  I'm cool with, I'm cool with Friedberg.

• 5:55David Friedberg?

  I'm here. I bought him dinner.

• 5:57Jason Calacanis?

  I think we're, he did buy me a wonderful dinner. Oh, my Lord. After the Warriors game. Shout out to the Warriors. All right. And of course, with us is the Rain Man himself, David Sacks. How you doing, buddy?

• 6:08David Sacks?

  Good.

• 6:09Jason Calacanis?

  You ready to go?

• 6:10David Sacks?

  Don't try and deflect this thing onto me. I was only tangentially involved.

• 6:14Jason Calacanis?

  Says the guy who spent 72 hours on.

• 6:17David Sacks?

  The contract. I wrote a very fair contract so that we can move forward.

• 6:21Jason Calacanis?

  Yeah. And then you proceeded to break it in the first 15 minutes by slandering me and disparaging me. But okay.

• 6:25David Sacks?

  Oh, come on. That was good for ratings.

• 6:27Jason Calacanis?

  Good for ratings. Yes. I thought your meme was pretty great. He did the meme. The two buttons of the superhero trying to pick.

• 6:33David Friedberg?

  That was good.

• 6:33Jason Calacanis?

  And I was like, Jason.

• 6:35David Friedberg?

  That was good.

• 6:36Jason Calacanis?

  Making jokes, breaking the, breaking the non-disparaging clause. And then, of course, the dictator himself, from some undisclosed location in a European city.

• 6:47Jason Calacanis?

  I don't know if I'm allowed to say that, Chamath Palihapitiya, welcome back, boys. Episode 84.

• 6:51Chamath Palihapitiya?

  What's up, boys?

• 6:52Jason Calacanis?

  All right, well, since we last convened.

• 6:54Chamath Palihapitiya?

  Let's get it on.

• 6:56Jason Calacanis?

  Yes, the All In Summit is finished, all the episodes have been released, including Palmer Lucky yesterday, and here we go, the markets are in complete turmoil, Spy down 21% year-to-date, Dow's down 17% year-to-date, as Sacks has pointed out, that is not representative of what happened to growth stocks at the same time, and the May CPI went up, and it was at 8.6, we also got the 75 basis point rate hike. Who wants to start here? Chamath, I mean, it's markets, so maybe I'll just dump it to you first, and then we'll go around the horn to Sacks and then Friedberg.

• 7:32Chamath Palihapitiya?

  Well, there's a lot to say, so bear with me for a second, but the thing that you have to do before you talk about what is happening now, I think it's probably useful to go back, and you have to really start at the end of the great financial crisis, and the reason is, there was a bunch of people coming out of the GFC who confused what the US government and some European governments were doing. At the time, there was the risk of a huge financial contagion, and so the US stepped in, and the Federal Reserve started to use their balance sheet to buy toxic assets, right? And the ECB did that, and I think Japan did that as well, anyways, a bunch of banks did it, I mean, a bunch of governments did it.

• 8:17Chamath Palihapitiya?

  And then there was this body of pseudoscientist, scientific economists who coined this thing called modern monetary theory, which basically said, hey, you can keep printing money, and introducing it into the economy to smooth things out and to actually drive long-term growth.

• 8:38Chamath Palihapitiya?

  And it turns out that a bunch of government officials fell for it. And if you fast forward to 2022, so 14 years later, you know, governments around the world had printed something to the tune of about 30, 35 odd trillion dollars of money into the economy that should have never been there.

• 8:59Chamath Palihapitiya?

  So the thing to remember is like, we have not necessarily just been obfuscating true supply demand in the last six or eight months when we've been talking about a recession or inflation. We've been actually doing it since 2008. It's just that it's been building up in the system. So one of the things that we have to realize is that all of that money somehow needs to get destroyed in some way, shape or form if the true economic equilibrium is meant to be found. What is true supply? What is true demand in the absence of governments sloshing money around, trying to prop up things that should not be propped up or buying votes or all the grifts that these folks have engaged in in the last, you know, decade and a half have to get undone.

• 9:45Chamath Palihapitiya?

  So that's the backdrop. So if you think about taking 30 trillion dollars out of the global economy, you know, you're talking about almost, you know, I think it's 85 trillion is the world GDP. So like, you know, it's, it's, it's almost half of an entire year's worth of global GDP. It's going to take three years probably of the slow meticulous, you know, running off of money, you know, not reintroducing new money. So it seems like we're at the beginning of the beginning of something that's going to be long and drawn out. Now that's separate from, and that's separate from whether we're in a recession or not. That's just the bear market that we're in. Right? And so you have to look at asset prices today

• 10:25Chamath Palihapitiya?

  as a microcosm of a much larger trend that has to be about fake money pushing asset prices up. And now taking all that fake money out and finding out what the real price of something is. And I just don't think that takes six months. So for all the people that were, you know, fingers crossed, hoping that this would be the end of it. Fed raises 75, we're done with this, they're going to raise 75 more. I just think that's not how it's probably going to be. It's going to take, you know, 24, 36 months, that may mean the bottom doesn't happen for another 18 months. So I think it's a, we're in for a lot of choppy market action.

• 11:04Jason Calacanis?

  Sacks, three asset bubbles, clearly all, you know, being impacted. We had stocks, looks like that story was pretty violent. Then we had crypto, this last two or three weeks have been absolutely insane in terms of that asset bubble. And now, uh, record high inventories for homes, record, um, sales are now dipping below the average of the last 20 years. And, um, we're seeing, uh, mortgage origination just absolutely get crushed. 6% mortgages, just a couple of months ago, it was 2 point X, uh, for some folks. So when you look at those three asset bubbles, do you buy Chamath's, hey, we're going to

• 11:46Jason Calacanis?

  see even more deprecation in these for another 18 months possibly? Or do you think we've taken such crazy action, this has come down so violently that we're now bouncing along the bottom? Bouncing along the bottom or 18 months of more pain?

• 11:58David Sacks?

  Well, the, the stock market, especially growth stocks, may have taken the majority of the carnage. But you're right, there are other asset classes, and I think we're going to see the carnage start to rotate into those. Um, so you're right, if you look at residential real estate now, the prices are at the highest they've been relative to median income since something like 2006, 2007, before that sort of great real estate crash that precipitated the greater session of 2008. Um, so I think there are going to be more, more shoes to drop. I just want to build on Chamath's point about root causes here. Milton Friedman once said that there's nothing quite so permanent as a temporary government program. The temporary government program was quantitative easing. We had this great recession of 2008 that could have turned into a depression.

• 12:43David Sacks?

  They broke the glass in case of emergency. They started this QE, which is basically the government intervening to buy bonds in the market. They had never done that before, and they loaded up their balance sheet. The crazy thing is that program was still continuing until last year. Why? I mean, it was like on cruise control. And so last year...

• 13:01Jason Calacanis?

  No, no, no, it was, it was...

• 13:02Chamath Palihapitiya?

  Continue until last month and countries like Europe are still doing it. Nine percent inflation in Europe and they're still buying bonds.

• 13:10David Sacks?

  Right. So you go back to last year, the Fed bought fifty four percent of the government's debt despite the fact that the economy was growing at like five percent GDP, that it was bouncing back really strongly from COVID, that you had the stock market at all time highs, and yet they were still intervening with this massive QE. And then when we got the the surprise five point one percent inflation print last summer, they didn't stop QE till the end of Q one. So you're right, they kept basically printing money. And it's still going on and that's created massive distortions in the economy now. So the Fed, I would say, is the number one culprit here and Jay Powell is the number one culprit. But the number two culprit is the Biden administration, and I think Biden did three things very early on

• 13:53David Sacks?

  in the first few months of his presidency to effectively tank his presidency. Number one, he canceled our energy independence on his first day in office, canceling the Keystone Pipeline and making it much harder to drill. And of course, energy inflation is the one factor in this sort of overall inflation. Number two, he pushed through that last two trillion of stimulus on straight party lines, the ARP, the American Rescue Plan, after Larry Summers said, economists in his own party said, this is going to create inflation, don't do it. And then the third thing is, and no one really talks about this, is that Biden could have used diplomacy in twenty twenty one to basically find an off ramp to this Ukraine crisis before it turned into a full fledged war.

• 14:35David Sacks?

  And if you listen to the economists, the international development economists like Jeffrey Sachs, he basically says that Biden pulled his cabinet and said, listen, should we negotiate and compromise with the Russians? They all said no, and Biden handed down the order, we will not compromise with the Russians. So now we have this massive war in Ukraine that's fueling food and energy inflation. It's going to tank his presidency, and I don't even think there was any debate in his cabinet about this.

• 15:03Chamath Palihapitiya?

  We may not be negotiating against Russia, but we're enabling them to print enormous surpluses, meaning, I don't know if you guys saw, but there was an article today, Janet Yellen is traveling around. Basically convincing folks to not include Russian oil from a bunch of import bans. So that these Russian oil tankers can be insured. Why? So that they can sell this oil to places like China and India, etc.

• 15:33David Sacks?

  The ruble's at a five-time, five-year-high. The ruble's at a five-year-high.

• 15:36Chamath Palihapitiya?

  We push for all these sanctions. Europe gets on board and says, we're going to do it and we're going to take the lumps. And then we go around Europe and basically say, well, we kind of want to fight this proxy war, but at the same time, we want to try to fix inflation and we didn't mean to cause this. And it's completely disorganized what's happening.

• 15:53Jason Calacanis?

  Okay, so if you had six minutes in the pool for when Sacks would blame Biden for the economy, you win.

• 15:59David Sacks?

  Well, who do you blame? Of course, the president's responsible.

• 16:02Jason Calacanis?

  We talked about quantitative easing, starting in 2008. So that goes over a couple of presidents. And I guess the question I would have for you, Sacks, is how much of the spending, the free-willing spending, you know, was from the previous administration?

• 16:14David Sacks?

  Expenditure is a bipartisan problem. There's no question about it.

• 16:17Jason Calacanis?

  I just want to make sure that we point that out, yeah.

• 16:19David Sacks?

  For sure. And Republicans only seem to find their principles on spending where there's a Democrat in the White House. I totally get it. And I would like to see more fiscal responsibility, regardless of which party is in power. And I'd like to see the Republicans be less hypocritical in their principles on this. But look, here's the thing. The economy was bouncing back strongly last year. And Biden still pushed for this last $2 trillion of spending and then $1.2 trillion more in infrastructure. And then, remember, the $4 trillion to Build Back Better, where Manchin saved them from themselves. Exactly.

• 16:49Jason Calacanis?

  I mean, what would if, what would that have looked like? Friedberg, you haven't spoken yet. Thoughts on, you know, this, these asset bubbles, I guess? And then the buying of the bonds seemed completely unnecessary for some period of time. If we are acting as the 50% plus buyer of bonds, what kind of distortion does that create in the market? Because if the government's competing against other people in the marketplace to buy those bonds, how could they possibly be priced correctly?

• 17:17David Friedberg?

  Let's just be very careful about our framing. There's the US Treasury, which issues bonds and raises capital on behalf of the US government for spending programs. Then there's the central bank, the Federal Reserve. And our central bank's job... Is to, number one, maintain liquidity in the capital markets so that businesses can invest in growing their products and growing their businesses and the economy grows while not providing too much liquidity that you end up with inflationary effects. And inflationary effects means that there's too much money in the market and you see that money find its way into escalating prices on different, you know, assets.

• 18:00David Friedberg?

  And the Fed's long-term goal, remember, is to provide, a stated goal of Jerome Powell in particular right now, this changes over time, but generally the intention of the Federal Reserve is to make liquidity, to make cash available to banks who ultimately make it available to businesses in such a way that there's enough cash in the system that the businesses grow and that people have capital to invest in growth while keeping inflation at 2%. So their long-term target is 2% inflation.

• 18:31Jason Calacanis?

  And it's also, correct me if I'm wrong, Freiber-

• 18:34David Friedberg?

  And making sure that there's enough cash to support economic growth. So remember, last year, you'll remember Stan Druckenmiller was very public about how insane it was that the Federal Reserve was still buying bonds. And so there's one way to introduce cash into the system is to make cash available as a loan to banks and then those, you know, banks use that money to loan to businesses and it makes its way through the economy. Another way is for the Federal Reserve to step in and actually buy bonds, freeing up the money that other people would be otherwise using to buy bonds to go and invest in other things. So they're effectively forcing liquidity into the market by taking bonds out of the market. And last summer, or Q2 of last year, Druckenmiller was pounding the table saying, guys, the

• 19:15David Friedberg?

  economic indicators on how quickly the markets, or how quickly the economy is growing relative to how much inflation there is, indicates that we should stop buying bonds and we should stop injecting liquidity into the markets. This makes no sense. It is nonsensical. And there was no strong point of view from the Fed at the time, other than there was uncertainty about the bounce back of the, from the recession from COVID, there was uncertainty about what else was happening in the economy and yada yada, but the- Numbers, the economic indicators were showing very clearly. The economy is growing at a robust pace, low unemployment, and inflation is starting to pick up. Holy crap, it's time to cool it off. And the Fed made a judgment call, and their judgment call really kind of was to keep going.

• 19:58David Friedberg?

  And then we end up in this massive runaway inflationary problem, where if you keep too much liquidity in the system for too long, you have inflation, even if you have economic growth. And now, by pulling the money out of the system super, super fast, we reduce the inflationary effects potentially, but we take the economy. Because now, all this money coming out of the market means people are spending less and buying less, and businesses have less to borrow. Right. The borrowing costs are high. And then that's the big vacuum.

• 20:22Jason Calacanis?

  Okay, hold on, let me go to Chamath and then Sax.

• 20:24David Friedberg?

  I just want to say one thing. The rate at which we pull the money out, which has had to be really, really fast over the last few weeks, can cause a recession. And that's the biggest concern right now, is will that actually trigger a massive recession or not that everyone's watching?

• 20:36Jason Calacanis?

  So Chamath, I guess, one of the things we need to clarify here is the actual mandate of the Fed. I was under the understanding that the Fed really was there to make sure of maximum employment and that, you know, low-interest loans were available and price stability. These were the stated goals for a long time.

• 20:53David Friedberg?

  Not low-interest rates. Capital is available for the economy to grow without exceeding inflation of 2%. That's the goal.

• 21:01Jason Calacanis?

  Okay, so maximum employment, price stability was also in there.

• 21:05David Friedberg?

  Max GDP growth. Because remember, we can't ever pay our debt if our GDP is not growing.

• 21:08Jason Calacanis?

  Okay.

• 21:09David Friedberg?

  While keeping inflation below 2%.

• 21:12Jason Calacanis?

  Chamath, whatever point you want to make, feel free to make. But also, I just wanted to know from you, where did the Fed go wrong with their mandate, if at all, here? Because we do have maximum employment right now, but we have out-of-control price stability.

• 21:24Chamath Palihapitiya?

  Look, here's the thing. I think we have to also be sensitive to the fact that the Fed operates on a certain class of data. And that data in the 21st century is pretty pathetic. Nick, you can probably find this, but there was an article, I think it was in the New York Times, that really walked through how CPI is calculated. And it's a bunch of people that work for the government that walk around with iPads, building relationships with local businesses in all these random places all around the country, and asking them to, you know, chit-chat for 15 minutes and do these surveys. Now, you would have thought that in 2023 or 2022...

• 22:02Chamath Palihapitiya?

  What the government would have said to, you know, Visa, MasterCard, American Express, all the payment rails, the banks and Stripe is, "Send me a feed in the following structured way so that I can actually have an absolute precise sense of inflation," because inflation really only occurs when a good or a service trades hands for money, right? And you calculate, what did that thing trade at the day before and what is it trade for today? So you could get an absolute precise sense of it. Instead, we do this random sampling thing and it's

• 22:31David Friedberg?

  Subjective, humans, etc.

• 22:33Chamath Palihapitiya?

  So if you read this article, your takeaway will be, "Oh my God, this is very rickety and it drives an enormous hammer that we use to try to manage the economy." That's the first thing. I think you need to buckle your seatbelt because the next three, four, five months of CPI will probably be very, very bad. Seven, eight, nine percent. Why? There are a handful of components that have gotten completely runaway. Number one, the biggest one is rent. And so rent works on a three-month lag. We're going to reintroduce what the true owner's equivalent rent is into CPI. So we can already forecast that CPI going up. Oil is at 105 bucks a barrel.

• 23:14Chamath Palihapitiya?

  Russia is basically trying to break the bank of Europe by now messing with their nat gas supplies. The German energy minister yesterday said that if that happens, it could be a contagion equivalent to Lehman Brothers with respect to energy. When you play all of these things out, what you have is unfortunately rampant runaway costs that really have no mechanism to get back in check in the absence of some real governmental changes, our policy on this Ukraine-Russia war, you know, how we intend to sort of work or cooperate or fight with China. All of these things have to get solved. So in the absence of that, prices are going to continue to go up. And so what does the Fed do?

• 23:59Chamath Palihapitiya?

  How does it throw away what little credibility it has left when there's eight and nine percent inflation prints and saying, "We think we're done for right now"? You can't do that. So they will overcorrect because there is just going to be so much pressure for them to act. All roads, I think, lead to lower equity prices. And I think what David said astutely is, we've seen the first wave, but now it has to touch all these other areas. For example, we have gotten totally drunk on debt as a country. One of the most obvious places where we've been serving alcohol far too late into the night

• 24:43Chamath Palihapitiya?

  is in the financing of all these private equity leverage buyouts.

• 24:48David Friedberg?

  Leverage is dangerous.

• 24:50Chamath Palihapitiya?

  These are sketchy companies that are sort of like, you know, teetering on insolvency at times where private equity comes in, levers up the balance sheet with debt. They price it right to the edge of what's legally allowed or what's financeable, and then they go do it. But that's all assuming the economy continues to grow. And so if all of a sudden you have some recessionary forces or prices go up and earnings don't, you'll have, you know, a contagion in the debt markets. You could have a contagion in the commodity market. So we're dealing with some really tough boundary conditions.

• 25:24David Friedberg?

  I mean, most Americans have most of their net worth tied up in real estate. And if we see a 30%, correction in real estate, it could be a real problem, particularly with rising interest rates, inability to refinance.

• 25:35Jason Calacanis?

  Sacks, the dual mandate is, hey, keep inflation 2% and then keep the unemployment rate reasonable. The unemployment rate's amazing with still so many jobs out there, even with these layoffs. In fact, one might argue we made too many jobs available to the point at which people maybe aren't working as much or just, you know, underworking and not taking advantage of these amazing jobs out there. Where do you see this going, Sacks, now that we can't seem to get inflation under control? And people are looking at their 401Ks. They feel a lot poorer, but is the demand side gone yet? Have consumers decided, I'm not going to buy the next house? I'm not going on this vacation. $6 gas makes no sense. $7 gas makes no sense.

• 26:19Jason Calacanis?

  I'm not going to go on this weekend excursion. I'm staying home.

• 26:22David Sacks?

  Yeah, I mean, look, consumer confidence just had the biggest drop, I think, in forty or fifty years. If you look at like right track, wrong track polling for the country, only something like twenty-four percent believes that the country is on the right track right now. If you poll people, are we in a recession? And they don't look at like, you know, the quarter-over-quarter growth, they just look at what they're feeling. Fifty-six percent of the country says we're already in recession. It's about seventy percent Republicans, about fifty percent Democrats. So the country is already hurting, people are already feeling it, and this is gonna-

• 26:55Jason Calacanis?

  Is it psychological sex, or are they actually making decisions now to spend less?

• 27:00David Sacks?

  Well, I think it's both. I mean, you start with the real inflation, and people feel it, and they also hear about it in the media, and then they start to adjust their decisions. And this is the problem with fixing, yeah, this is the problem with fixing an inflation problem, is that it's based on expectations. So once people start to expect inflation, then businesses have to start operating as if there's gonna be an inflation rate next year, so they have to start raising prices. And it's actually very hard to put the horse back in the barn. And this is why I think the Fed is probably more likely to overshoot on raising rates, is because if they really want to stop inflation now, they really have to slam on the brakes, and then that's gonna lead to a recession. And if they don't, then

• 27:40David Sacks?

  we end up with like a chronic sort of stagflationary situation, where you get lower growth and inflation persists. So it's a bunch of bad options right now. And I think, to the point Friedberg was making earlier, you know, this Ray Dalio piece that he just published as a blog on LinkedIn, he said, look, what you want is a Fed that is alert at the wheel and gently applies the accelerator or the brakes based on what's happening. And instead, what we had is the Fed was asleep at the wheel. They should have started reacting gently to inflation last summer. Instead, they waited nine months, and now they're slamming on the brakes. And this is a bunch of bad options. I think, you know, we are gonna have a recession.

• 28:21David Friedberg?

  The way this unravels- Can I just make one suggestion? I want to put this out there, because I sent it on our text, and I, anyone that's listening- In DC, please think about how we can change the way the Federal Reserve operates. But it doesn't make sense to have humans with subjectivity applying their subjectivity to a set of, as Chamath pointed out, infrequent data that comes in chunks and comes in spurts, and only having a mechanism of changing rates by 25% each month, or sorry, 25 basis points once a month. We should have continuous, real-time monitoring of economic data, and software, or AI, or

• 29:02David Friedberg?

  some sort of informed set of models should then predict what inflation and economic growth rates will be as that data comes in, react in real time, and on a daily basis, we should be adjusting the overnight rate in a one-basis-point increment. So we can have the ability to more quickly, more efficiently, and in a higher resolution way. And smooth, yeah, smooth it out. A smoother way, in a higher resolution way, make these adjustments. It's silly that we're still operating the way we did in a pre-digital age, as it is with a lot of industries and a lot of bureaucracy. But in this case, it's particularly prudent, and it's becoming particularly important and relevant, as we're seeing right now with the stagflation risk that we're facing, where we're going to have massive inflation and recession at the same time. Because if we had made smaller adjustments every day for a period of time, as these economic

• 29:47David Friedberg?

  data indicated that we should be making them more quickly, we would not be in this problem. And I don't think that having humans and their judgment should necessarily be the way that we drive this thing.

• 29:56David Sacks?

  Yeah, but listen, we don't need them making daily adjustments. I don't think the Fed can fine-tune an outcome like that. I just think that they can't be asleep at the wheel for nine months.

• 30:04David Friedberg?

  Software could. I mean, we should have AI running this friggin' thing. I mean, what's like...

• 30:07David Sacks?

  Listen, I actually don't think, when you said that, you know, Congress needs to somehow change the way the Fed does business, I actually think that the Fed has the correct mandate, which is the dual mandate of considering inflation and unemployment. We shouldn't be basically junking that up by adding a bunch of mandates. And actually, the administration has been trying to add mandates. They basically gave the Fed a mandate around climate change, they gave them a mandate around equity.

• 30:32David Friedberg?

  Yeah, no, I agree. Don't change the mandate. Don't change the mandate. It just can't be multi-variable. This would get too complex. The tools, the tools should change.

• 30:39David Sacks?

  Yeah. Right. We really want a focused Fed, and I think the administration has been politicizing the Fed by giving them a bunch of mandates. Totally. Look, if you want to pursue those policies, do it at HACS, do it in the Interior Department. Don't basically confuse the Fed and make them pursue climate change or equity or what have you. I mean, that is just bad policy. That is not their remit, right? Their remit is controlling inflation. I really think this just comes down to the fact that for nine months, they sat on their hands and ignored the inflation evidence. Remember this word, transitory? You know, we heard so much last year about inflation being transitory. How'd they know that? You know, why didn't they start rethinking this quantitative easing?

• 31:18Chamath Palihapitiya?

  The headline from the Wall Street Journal says it all. How the inflation rate is measured? 477 government workers at grocery stores.

• 31:25David Friedberg?

  Yeah. Software should be taking data from different feeds and software can learn what are the indicators and what are the predictors of inflation and what are the predictors of growth and make a recommendation.

• 31:37Chamath Palihapitiya?

  I don't agree with you that it needs to be real time. In fact, I think it would do more harm than good. But I do think that we can know these things without sampling in such a porous way. And, you know, you can work with private companies to give you the feed of data to allow you to do it. And now, you know, we're going to, look, we've had a system of over-correcting and under-correcting for years. The problem is the stakes get higher and higher as the economy grows and becomes more complicated and intertwined with other companies.

• 32:06David Friedberg?

  And we have more leverage, and we have more industries that are leveraged and more asset classes that are leveraged, like housing. Because if you're off by even a few points, you could tank everything.

• 32:17Chamath Palihapitiya?

  I also want to tell you guys a quick story. One of the most interesting canaries in the coal mine of all of this was two days ago and what happened to Facebook. And this sort of ties a lot of this stuff together in terms of like economics, inflation, asset prices, equities, tech, we should, then we can try to talk about non, sort of, you know, big tech. But the, everybody was saying, oh, gosh, the market's going to rip on the open. You know, we were closed for Juneteenth. And then on Tuesday, the market, you know, the S and P was up like 250 basis points, 2.5%. And the NASDAQ was also up, you know, call it maybe 300 basis points, roughly. But Facebook was down like 400 points, right?

• 33:02Chamath Palihapitiya?

  So it's a big spread. And why is that? And I was like, this makes no sense to me. What is going on with this price action? Everything was up. Apple was up. Google was up. And so I called around and, you know, I was like, why is this happening? And this is the best explanation I got.

• 33:18Chamath Palihapitiya?

  When you look at who the incremental buyer is in the stock market, it tends to give you a sense of whether prices can go up or will continue to go down. And the poorest informed buyer tends to be retail. And the most informed buyer tends to be these very large institutional hedge funds. Right? So there's a spectrum. And Facebook is an example of one of the, of big tech that is poorly owned by retail. So it's mostly owned by smart money. And the case that smart money makes for owning Facebook is that it's got an extremely cheap price to earnings ratio. So you must own it. And what they said was that they, you know,

• 34:03Chamath Palihapitiya?

  looking at the tea leaves of consumer demand, what they actually re-underwrote was that actually, it's not that the price to earnings was cheap. It's that the E in PE was just wrong. And if they pass through all of these increases in inflation and, you know, their earnings expectations into Facebook, it's actually more like fair value at a lower price. That's why they sold it so much on a day where the market was up. Now, why is that important? Well, eventually you're going to touch all these other stocks as well that are going to go through earnings revisions in this recession. This is where I think Wall Street has done a very poor job on behalf of retail. If you look at the average estimates of earnings, you will be shocked to hear that Wall Street actually has,

• 34:46Chamath Palihapitiya?

  this year being record earnings, next year earnings continuing to go up.

• 34:52Chamath Palihapitiya?

  How is that even possible? How is that? How is that? If you're sitting here, how do you see? How do you see earnings continuing to go up into these prints like this? When you cannot pass through? You know, eighty, ninety percent increases in energy and cogs and whatnot. How does that happen?

• 35:09Jason Calacanis?

  I think the, what people would say is maybe they're going to lower their costs. And so with layoffs and lowering salaries and lowering spend on advertising, you know, the E could go up if people start belt tightening. And then we start having companies that are being run, you know, just more for the bottom line.

• 35:29Chamath Palihapitiya?

  You'll have to sell fewer things because there'll be fewer people with jobs to buy things.

• 35:34Jason Calacanis?

  But we have 10 million job openings. So this is the weird thing about this recession is because we haven't let a lot of people immigrate into the country.

• 35:40Chamath Palihapitiya?

  But is that what you think? Is that what you think the consensus view on Wall Street is that basically a bunch of people get fired? And so that's why earnings continue to go up?

• 35:49Jason Calacanis?

  Well, they stopped hiring for two years in advance, right? Facebook said they were hiring for like 2024. Their hiring plans were looking out two years. So now if they go on a hiring freeze, maybe there's, you know, and that's their number one cost. I'm just putting out a theory.

• 36:02Chamath Palihapitiya?

  I'll give you the counterfactual. I think Wall Street's wrong.

• 36:05Jason Calacanis?

  Okay.

• 36:05Chamath Palihapitiya?

  And I think that earnings are going to go down this year and will definitely go down in 23. And so I think what probably happens is the entire world of equities needs to get repriced at a lower price. And in that, it's going to put enormous pressure on these cash burning, non-profitable tech companies.

• 36:25Jason Calacanis?

  Well, that's for sure. But in the ones that are profitable, Chamath, they're aware of this. Facebook just canceled like two of their prototypes they were working on to save money. So that whole $10 billion into, you know, VR, I think they're trying to make that number look smaller. Sax, what do you think?

• 36:40David Sacks?

  Well, I think you're bringing up a really interesting point with this, the 10 million, you know, job openings. And now that, that number is coming down really fast as companies close open racks and they basically freeze hiring. So that number is going to come down very, very fast. But one of the major contributors to inflation is that the labor force participation has been very low. Millions of people left the labor force during COVID as a result of the stimulus checks and the freezing of rent and evictions. I mean, look, rent's the number one expense. If they don't have to pay rent for a couple of years. A lot of them may not work or may not work as much. So we've had this problem where we really need about 2 million people to re-enter the labor force.

• 37:23David Sacks?

  And if you describe inflation as too much money chasing too few goods, we need to increase production and productive capacity. And when you have millions of people dropping out of the labor force, you've got less goods and services being produced that people want. So just reducing the money supply is not gonna get us out of this mess. We also need to improve productive capacity.

• 37:46Jason Calacanis?

  Just to put a number on that, we peaked in the 1999 era at 67% of participational labor force. And then it's been down in this low 60s, 61, 62, and it continues to be low. But that is the solution here. We get that 7%, that gap.

• 38:02David Sacks?

  You can't just fix the demand side, because if all you do is fix the demand side, what you're doing is you're killing the economy to reduce demand in order to bring it down prices. That's very painful. It's all pain. But what you also have to do is fix the supply side. You have to increase the availability of all the critical inputs into the economy. So labor obviously is one of them, but also critical resources like energy, you know, oil, natural gas and so on. And that goes back to fixing the supply chain, hopefully getting a resolution of the situation in Ukraine, the war. So if we could fix those things, it's a way to improve the economy without creating more pain.

• 38:40Jason Calacanis?

  Friedberg, if the prices of just daily living, of which transportation and housing and healthcare are now the top three, I believe. Groceries and healthcare, I think, have flip-flopped a couple of times in the last decade in terms of costs. If those things go up, would that make people want to go back to work to pay for those things? Or does it create capitulation where people say, I'm moving in with my cousin? I'm gonna lower my balance sheet. What is your prediction there? Are more people gonna go to work? Or do we still have this, you know, call it 10 million people in the country who just don't want to go to work?

• 39:10David Friedberg?

  I've mentioned this in the past, but I think there's more.

• 39:14David Friedberg?

  There's another kind of interesting outcome of this. We've had several months in a row of pretty significant increase in consumer credit. And I think the reason is, things are getting more expensive. People generally do not like to reduce their spend on stuff, or their lifestyle. Once you get used to a lifestyle, like going out to dinner once a week, or going to the movies every week, and you create a budget, you create a life experience around that, a model around that, it's very hard to say, okay, I gotta cut budget now, and I gotta reduce my life. I would rather say, I'm gonna keep doing that, or at least there's some inertia, or some momentum, to keep spending on the things that you've been spending on. And the way you do that in a model where you don't have as much income, or you have

• 39:57David Friedberg?

  less income and things are getting more expensive, is you take on more debt. And so there is a little bit of a nervousness that I have had, that people's response, generally, the consumer response to inflation, and to a kind of a shifting income environment like this, is not necessarily to cut as quickly, but take on more debt and keep buying. And so I am a little nervous about that, but I do think, obviously, at some point, everyone has to figure out ways to generate income. There have been a lot of these kind of ancillary markets that are typically the first to go, these extra services markets, where people, you know, have found other ways to make money,

• 40:40David Friedberg?

  side hustles and whatnot, that may or may not be as robust as they have been historically. And so people may need to go back for more secure, stable income, and these jobs get filled. Look, I mean, as we all know, there's an opportunity, and this is the whole concept, I think, behind Build Back Better. It's not super thoughtful in terms of the approach, I think, based on my understanding of where that money's supposed to go, because it doesn't create long-term jobs. But there is an opportunity to build new manufacturing and new infrastructure jobs in the US right now, that could enable a healthy transition here. But that legislation needs to be done smart. It can't be done with this, like, hey, let's build a bunch of bridges, and then a bunch

• 41:23David Friedberg?

  of contractors make a bunch of money, and no one has any long-term jobs out of it. We've gotta find ways to spend money on creating long-term, sustainable, you know, new industry here.

• 41:33Jason Calacanis?

  Yeah, and job openings 11.4. It's come down about 6 or 7%. So, you know, it's going to be trailing, but it's for sure. We're seeing it in our industry with the hiring freezes that, you know, we're going to work through those open jobs. What are the chances that inflation gets under control in the next year? And should the Fed go for like the 1% slam on the brakes? There was some talk about that. Obviously, they went from 50 to 75.

• 41:58David Friedberg?

  Remember, a lot of the elements that we were kind of saying, oh, my gosh, I can't believe the climate prices. So, you know, wheat is down, I think, 30%. Lumber is down 50%. Gas prices are coming down. So, you know, there are some of these, you know, commodity spikes that we've experienced over the past couple of quarters, particularly recently, that are really, that have had a significant part of the fueling effect on the inflationary trickle down into ultimately end products and whatnot. And those are coming down. You know, there's a real question of how quickly that flows through the economy and flows through to the price of goods that consumers ultimately end up paying for. The gas prices right now

• 42:43David Friedberg?

  are the biggest concern, right? Like, unless you can get gas prices under control, that always, always has a massive impact on spending, on consumer spending, which drives a recessionary cycle. And so, if I'm the Biden administration, I'm first and foremost, I don't care about the general inflationary indicators as much as I care about getting the price of gas down. That is a super, super critical number to fix.

• 43:05Jason Calacanis?

  Is this, are these gas prices going to change how Americans look at what car they buy? Because this is what happened the last time we had that.

• 43:13Chamath Palihapitiya?

  They're going to get worse.

• 43:13Jason Calacanis?

  People started looking at not buying SUVs.

• 43:16Chamath Palihapitiya?

  We could have $7 gas.

• 43:18Jason Calacanis?

  Oh, I said, there was a picture, actually. I tweeted, in California, there was a $7.11 gas.

• 43:24Chamath Palihapitiya?

  Broadly, broadly. We could have $7 gas all throughout the country.

• 43:27David Friedberg?

  But J Cal, the, you know, remember, the average automobile in the US lasts for 12 years. That's how often people change out their cars. So, that's 8% of the fleet being changed per year.

• 43:38Jason Calacanis?

  Yep.

• 43:38David Friedberg?

  And the interest rates for auto loans have spiked like crazy now with this change in the Fed rates. And as a result, the delinquency on auto loan portfolios has spiked like crazy. And so, you know, yes, sure, theoretically, people will think about buying an electric car, but most people aren't thinking about that on average for five or six years from now, because that's the average of a 12-year cycle, right? Five years from now.

• 43:59Chamath Palihapitiya?

  Wait till all these Peloton bikes need to get repossessed.

• 44:02Jason Calacanis?

  Well, all these, actually, the wait for cars and the overpricing of cars has ended in the last two months. And there are multiple cars now on the market, 25, 30K for a 50-plus mile per gallon car. I think this actually, one of the silver linings coming out of this is people might actually stop buying as many SUVs or, you know, I think our average is in the low twenties right now and Europe's is in the high forties.

• 44:23Chamath Palihapitiya?

  The problem is like, you know, every other

• 44:25Jason Calacanis?

  For miles per gallon.

• 44:26Chamath Palihapitiya?

  Part of the government acknowledges that you have to really ring fence and protect consumers, right? Like, if you look at the securities laws, they're meant to protect them at all costs. And Jason, you've, you know, you've been frustrated by some of the rules that haven't changed and when they change, they change so slowly. But the reason is because sometimes that you want people to make good decisions and if you, you know, give them a bunch of firepower, they're just going to spend it. And, you know, what we really did was we gave folks just a ton of money. And what did they do? They acted rationally. They spent it. And now we have to take it all back. And that's, I don't think that's going to be as easy or as simple as people think.

• 45:12Jason Calacanis?

  What percentage of the money supply do you think is in excess right now in the United States?

• 45:17Chamath Palihapitiya?

  Well, look, I told you this because I wrote this in my annual letter, but it's stunning that, you know, the reason the stock market went up dollar for dollar was actually tied to the growth in the M2 money supply. The correlation was 0.92. So for every dollar that the Fed printed, the stock market went up by 92 cents. So, you know, it stands to reason that if the Fed is going to take three to five trillion dollars of value out, then we have to rerate the equity markets by three to five trillion dollars at a minimum. And then you have to rerate and rebase line for earnings. And so that's probably another 20 or 30%.

• 45:52Jason Calacanis?

  Let's, yeah, let's talk about the end game here. The rates go up, people stop buying homes, people go back to work. And, uh, energy prices come back down because people are not buying as much of it. Spending goes down and people rebalance and that takes a year.

• 46:09Chamath Palihapitiya?

  The job openings could also disappear, by the way, I mean, like

• 46:12Jason Calacanis?

  They're going down 400,000 a month is

• 46:14Chamath Palihapitiya?

  Yeah, you're assuming that all of a sudden like demand is stable, but it's not necessarily stable and in a demand, and in a demand contraction, yes, people get fired, but then also new job openings change, right? There's fewer of them, they're, they're more specific in the way that people

• 46:29Jason Calacanis?

  Salaries go down, right? That's the next piece.

• 46:31Chamath Palihapitiya?

  Salaries go down.

• 46:32Jason Calacanis?

  That's the piece I'm waiting for that to me, that would be, I don't know if you guys have early warning signs, but the two early warning signs I have in my, you know, uh, job of investing in early stage companies is when people

• 46:43Chamath Palihapitiya?

  Well, what's the average salary for an engineer? If that hasn't gone down by now, then it's

• 46:46David Sacks?

  That's a lagging indicator, right?

• 46:48Jason Calacanis?

  Well, that would be to me capitulation. Salaries go down or people, instead of laying people off sacked, they do salary cuts at a company. That is really hard to do, right? That's

• 46:58David Sacks?

  Yeah, I don't, I don't think they do.

• 46:59Jason Calacanis?

  Or liquidation preferences in deals.

• 47:01David Sacks?

  Right, I think the way the salaries come down is that startups freeze their hiring plans where they lay people off and now all of a sudden the war for talent subsides, easier to hire people. And so there's no need to keep raising up salaries.

• 47:13Jason Calacanis?

  Are you seeing that?

• 47:14David Sacks?

  Yeah, I think we're seeing the beginning of it, but I gotta tell you, I mean, I think that startups have not fully embraced or realized what's, what's happening. I just got back from the COTU summit over the past couple of days. This was an event that was hosted by COTU, um, you know, whose founders are, um, Philippe and Thomas LaFonte, very smart guys, very smart investors who've been public market sort of hedge fund investors for a long time, but also have a large venture fund to do growth stage investing. Some of the takeaways from that conference, uh, some of the more vivid lines that stuck with me is that one of the speakers said that He said that when it comes to runway for startups, three to four years is the new two years.

• 47:57David Sacks?

  Because if you just have two years of runway, you're going to need to raise in a year. And in a year from now, we're going to be in the middle of a recession. They're predicting, they're forecasting that capital availability is going to decline about 75%. The amount of money that's venture money that's available to the ecosystem downs by three quarters. So if you try to raise in that environment, either you're not going to be able to, or investors are going to, you know, have all the leverage. You're not going to get terms that you like. So they were recommending three to four years of runway. So that is not what I think a lot of companies are planning for.

• 48:30Jason Calacanis?

  That's just not even possible.

• 48:31David Sacks?

  Right. The other thing, that the other really vivid takeaway is that they did some polling of the startup founders who are in attendance, okay? And what the numbers basically showed is a, is a contradiction. On the one hand, the founders sort of understood that intellectually that we're headed into a downturn, we're headed to a recession. And so the polling reflected that. On the other hand, if you ask the founders how they're going to react to it, what are you going to do about it? You going to cut headcount? Or are you going to accelerate your business to beat competitors? Everybody said, oh, we're going to out accelerate our competitors. So everybody thought that they're the exception. In other words, everyone understood we're headed for this massive recession, it's going to be really bad, but we're going to be the one company that doesn't need to cut, we're actually going to grow, we're going to accelerate during the downturn.

• 49:14David Sacks?

  So there was a real contradiction in how founders are interpreting this advice. And I have to tell you, when I talk to founders in our own portfolio, what I see is, you know, we've now done multiple meetings where we lay out what's happening in the economy, and they get it, they understand it. And when we do a board meeting, they're like, okay, we're going to go look at our plan, and we're going to reevaluate, and we're going to make major cuts, we're going to bring our burn multiple down to, you know, where it should be. But then, you know, when you're checking with them a couple of months later, and you're like, where are you on the plan?

• 49:44Jason Calacanis?

  Haven't taken the medicine.

• 49:45David Sacks?

  It's, or, or the medicine is like a 10% cut. And I'm like, guys, like 10% is a performance review.

• 49:50Jason Calacanis?

  Yeah.

• 49:51David Sacks?

  Like 10%.

• 49:52Jason Calacanis?

  That's what you should be doing every year anyway.

• 49:53David Sacks?

  Yeah, you get rid of the, the bottom, the C performers, you promote the As and Bs, and you get rid of the C. So. No one really wants to take the medicine yet. And, you know, it's a problem. I mean, Sequoia has this great chart called Survival of the Quickest that we should put up on the screen. And it shows two lines. One company is the one that takes the medicine right away, brings their burn down to where it should be. And then they're able to grow from there. And they really will out accelerate the competitors. But then there's the company that basically delays and waits. And what happens is by the time they finally get religion to make the cuts, it's too late because even after they make the cuts, they don't have enough runway on the other side.

• 50:31Jason Calacanis?

  They burn the capital, yeah.

• 50:32David Sacks?

  They burn the capital and then they're in a death spiral. So I think, you know, what companies need to think about is this is a 75% reduction. Imagine if you did $100 million round last year, right? If you go try to raise next year in the middle of recession, that $100 million round might look like a $25 million round. So imagine if you're burning an extra 25 to 50 million more than you should be according to your burn multiple. You're basically burning the next round. Forget about the fact that the last round gave you all this cushion. Think about how much of the next round you're burning. And if you reorient your thinking around that, it could lead to a change in behavior.

• 51:09Jason Calacanis?

  Anecdotally, I'm seeing people come back from rounds where they were expecting 40 or 50 million dollars. In some cases, like with 250K in revenue, 500K in revenue, they were living in a 200, 300 times revenue kind of world. It was just insane. And, you know, they're now coming back with $10 million caps, $15 million caps on their notes.

• 51:34Chamath Palihapitiya?

  I was offered $100 million of [BLEEP] at a 50% discount. And I said, call me when you get to 65.

• 51:40David Sacks?

  And that's the best company.

• 51:42Jason Calacanis?

  That's literally the best company.

• 51:43Chamath Palihapitiya?

  That's the best.

• 51:44Jason Calacanis?

  And the best founders to bet on, right? Of probably most private companies is them.

• 51:48David Friedberg?

  You don't like that valuation, Shama? What is that valuation, 40 at 50% off?

• 51:53Chamath Palihapitiya?

  I, it's less of a judgment on [BLEEP], but it's just more an observation that we're at the beginning of the beginning. And again, we're at the beginning of the beginning. Okay, for all of us that lived through the 2000, this was four years of sheer hell and a grind. Now we have $30 trillion that we have to work through the economy, a recession we have to overcome, a war we need to end. And people all of a sudden assume that two or three rate hikes and five or six months of headlines are enough. And on the margin, maybe they're right. But from my perspective, you know, it's less a judgment on but it's just an observation that we're at the beginning of something that just fundamentally

• 52:36Chamath Palihapitiya?

  has to take some amount of time to work its way through the system. And so I don't understand why anybody would give up their liquidity in this moment right now. Why would you? Why would I? Why would I give up $100 million of cash in my bank account? I would not do that right now.

• 52:50David Sacks?

  Because the cash, the caps, the cash gives you so much optionality. It's basically

• 52:54Chamath Palihapitiya?

  So much optionality.

• 52:55David Sacks?

  So you're going to be looking for distress. And this is the thing. So you have a huge amount of capital leaving the ecosystem. Like we know Tiger is basically out. I mean, they were the basically the default provider of growth stage capital over the last couple of years. So you have a lot of liquidity leaving the system and then the liquidity that's in the system is waiting for distress. So you're right.

• 53:15David Friedberg?

  There's a quarter, I mean, like we talked about, there's a quarter trillion dollars of quote unquote, dry powder. I mean, I know Chamath thinks that people are going to give that money back, but there's never been as much

• 53:24David Sacks?

  There's not, there's not that much. A lot of that's deployed.

• 53:27Chamath Palihapitiya?

  They're not going to give it back.

• 53:28David Friedberg?

  Giving a lot that's deployed.

• 53:29David Sacks?

  Yeah, look at that. That Tiger fund, Tiger raised a new $12 billion fund that was announced in March and TechCrunch, we covered it on the show a month ago.

• 53:37David Friedberg?

  Yeah.

• 53:37David Sacks?

  TechCrunch had an article saying it was already deployed in six months. So

• 53:41David Friedberg?

  I wasn't on that show.

• 53:42David Sacks?

  Oh, that was the one where Jake, I'll try to replace you with Brad Gerson.

• 53:45Chamath Palihapitiya?

  We should, we should do the show weekly going forward instead of monthly. It might be better to keep up with these trends. Okay.

• 53:50David Sacks?

  Jake, you made a good point there. Could we just go back to this for a second? You said the founders were, they're still anchored on this world of 200 to 300 times ARR valuations. Let me just tell you where the new valuation levels are. And this is obviously in flux, but I'm pretty sure the valuation levels are at 20 to 30 times ARR. That's for a company that's growing 3X year over year. 3X year over year. That's the best of the best. The reason how you get there.

• 54:13David Friedberg?

  That's 10X next year's ARR, basically.

• 54:15David Sacks?

  Yes, exactly. And the way that you get there is that if you look at like the multiples for like the best public SaaS companies that are like, say, a 40% grower, like a snowflake, they're at 8X. So, you know, so basically

• 54:28David Friedberg?

  You're giving more credit for the higher growth rate.

• 54:32David Sacks?

  Yeah, right. But they really have to have that 3X growth. So, you know, if you're a founder, think about the fact that when you try to go raise next year, assuming you're the best of the best, you'll get 20 to 30 times ARR. Now think about your spending not last round's money, you're spending the next round's money. If you could just reorient your thinking that way, you'd burn a lot less money.

• 54:54Chamath Palihapitiya?

  Yeah.

• 54:54Jason Calacanis?

  The, the, I literally had a deal, you know, in the 30 and 40 range and, and angel investors who'd never, early stage angel investors, seed funds that did not look at multiples are now asking me, because when I send a deal memo to 10,000 people from my syndicate, people hit reply. People are hitting reply now and saying, I did the math on this. This is the multiple. This is this. This is the burn multiple. They're actually doing the math. So we all of a sudden have discipline that I have not seen in this investor class in the 10 years I've been doing it. So that is to me, one of the great silver linings here. I think people are going to do a better job with their personal balance sheets. They're going to invest less in speculative stuff and they're going to invest more in the actual

• 55:39Jason Calacanis?

  builders who have discipline. So we're going to see this massive swing to discipline and we're going to flush out all the people who don't have product market fit.

• 55:47Chamath Palihapitiya?

  Think about all those folks, like what's happened in the last six months. It's like, they've been long unprofitable tech. It's got smoked by 75 to 85%. They've been long crypto. That's gotten spoke by 65%.

• 56:00Jason Calacanis?

  More, yeah.

• 56:01Chamath Palihapitiya?

  I mean, if they weren't using a calculator then, they sure as hell should be using a calculator now to figure out.

• 56:06Jason Calacanis?

  No, I mean, people, well, you think about it. There's a whole group of investors who have only known the up market. There's a whole group of founders who only know the growth market. If you're under 40 years old, you don't understand what you're about to experience. And here we are. Let's, that's a perfect time to segue into crypto. Bitcoin's price is down 71% from the all time high, 69K in November of 2021, bottomed out at 17,000 or so on June 18th. Ethereum's price down 78%. And if you look at the craziness, since the last all in episode, you know, this 3AC, 3 Arrow Capital, they're a crypto hedge fund that was letting people basically loan out their crypto. They are basically

• 56:50Jason Calacanis?

  closing a $10 billion crypto hedge fund at its peak. They're insolvent, according to the reports. Terra Luna collapsed. The founders and employees at that company are not being allowed to leave South Korea. Doesn't mean they're guilty, but it's certainly not looking good. And there is a whole situation with Solana and a company built on top of it, Solend, which is not Solana. It's an application built on top of it. I talked to Vinny Lingam, our friend, earlier this week about it. They had a whale who had tried to loan out 100 million and they had to freeze their account because they thought the downward pressure, since there's not many buyers in crypto right now, could collapse a lot. So thoughts on crypto writ large, what is this going to look like, Sax?

• 57:35David Sacks?

  I mean, it's like the dot com crash all over again. I mean, basically, you had an extremely promising technology. I mean, it is a promising technology.

• 57:43Jason Calacanis?

  Of course.

• 57:44David Sacks?

  And it is a future, you know, technology platform, but the price action got totally decoupled from the level of progress in the space. And people were not valuing these things based on real customers, real usage and real use cases, but it was became, you know, very speculative. And again, all of this was fueled by the excess liquidity that was pumped into the system. So, you know, we've said it before that crypto is like a liquidity sponge. It sucks up when there's a lot of excess liquidity, it sucks up that liquidity, but now that sponge is getting wrung out. And, you know, and part of the problem is with interest rates going up, you know, it's one thing when you have negative real interest rates and, and, and you can't earn a return on your money, then you start to get, you basically people start to push the envelope and invest in more and more

• 58:29David Sacks?

  speculative things. But as you can get a real return in, like they'll say, there's like a real risk-free rate, now there's alternatives for all that cash. And then you've got the problem of leverage as well, which I think over the last few weeks, the crypto space was heavily over levered and a lot of people got margin called and wiped out.

• 58:46Jason Calacanis?

  That's the contagion that's occurred. And people were levered up five, 10 times their Bitcoin on these rogue.

• 58:52Chamath Palihapitiya?

  Wait till these token sale things get litigated. I mean, the amount of

• 58:56Jason Calacanis?

  Oh my god.

• 58:57Chamath Palihapitiya?

  The amount of grift by so many of these venture firms in running these sketchy deals where they would put in some amount of money. This is my understanding of the scam because it was explained to me. You put in a little bit of equity at some crazy price. And then you get these tokens and apparently there's no like you can just sell these tokens day one. And so what happens is like you you price the equity, but it's meaningless because really what you're getting is the right to get some amount of these tokens. The price is crazy. You sell it and then you just kind of walk away. And apparently, you know, you do these deals where you just rinse and repeat this thing.

• 59:32Jason Calacanis?

  Well,

• 59:33Chamath Palihapitiya?

  Wait, wait till that gets exposed.

• 59:35Jason Calacanis?

  I mean,

• 59:35Chamath Palihapitiya?

  That seems like a total.

• 59:36Jason Calacanis?

  The firm that did this the most is Andreessen Horowitz. Chris Dixon, I think, was considered like the best investor last year or the year before because of all these token returns. I I gotta wonder when they go now that this people are losing money, that's when people start suing. I mean, what is it going to look like if they were, what what do you think their marks look like last year versus right now? I mean, and all these coins, like, looking back in the review mirror and saying, hey, you bought all these coins, you flipped some number of coins. I mean, to your point, Chamath, like, what is the litigation path and the the the shadow economy that was created? What is that going to look like?

• 1:00:18Chamath Palihapitiya?

  There's an article, I think it was in Bloomberg about folks trying to figure out how to get

• 1:00:25Chamath Palihapitiya?

  a lawsuit filed against Binance. And the problem was that they didn't even know what entity to sue.

• 1:00:33Chamath Palihapitiya?

  It's not clear who owns what and, you know, what owns the other and who the ultimate look through ownership structure is and and it doesn't mean that Binance is guilty of anything, but the article was just, you know, showing how there was a US investor who lost 1.2 million dollars, who wanted to file a lawsuit, and they have every right to do that. Couldn't even find the corporate entity to to actually file this lawsuit against. So if that's what's happening in a trillion dollar market, there's

• 1:01:01Jason Calacanis?

  It's gonna be a lot of pain.

• 1:01:02Chamath Palihapitiya?

  It's it's a lot of oversight that's that's that

• 1:01:04Jason Calacanis?

  Friedberg, what is this going to do to regulation in crypto at this point? Because crypto regulators now are going to, or regulators are going to just be looking at this going, wow, look at all the pain and suffering and when a local DA

• 1:01:17Chamath Palihapitiya?

  Gets, you know, five or six of their people complaining they lost money in Terra Luna, or whatever it is. This is like the perfect opportunity for them to collect a pelt and get some crypto kid and, you know, hold them responsible and get some great headlines. I mean, what do you, what do you think happens from this point forward in the crypto land?

• 1:01:35David Friedberg?

  What you just said.

• 1:01:36Chamath Palihapitiya?

  Okay, there you have it, folks. But what about regulation? I guess that's the next piece, because all of these entities have taken a very-

• 1:01:43David Friedberg?

  The SEC last July or August published this kind of initial opinion letter, but remember, there's also the CFTC. There's a bunch of regulatory authorities in the United States that have a longer process than governments ex-US that have had a much more kind of stringent point of view, that there's a lot of casino-like gambling going on with these things, and that's it. There's no functional utility. There's not a, it's not, is it a security if there's no underlying business? If it's not a security, then it's just a bet on something. If it's a bet on something, it's gambling. It's, you know, obvious that-

• 1:02:14Chamath Palihapitiya?

  If it's a security, it has to be governed by the SEC. If it's a future or commodity, it's the CFTC. And the problem is, we need Congress to pass some legislative framework that puts the puck in one side of the, of the arena, a rink or the other.

• 1:02:29David Friedberg?

  Yeah.

• 1:02:30Chamath Palihapitiya?

  And otherwise, otherwise, all this gray is going to exist for a long time. And people, you know, if, if, if governments really hate it when retail investors lose money, well, watch out, because they just had $2 trillion of money-

• 1:02:42David Friedberg?

  In the US, we have a lot of other regulators that can prosecute cases, like the DFS in New York. Uh, this is the Department of Financial Services. They are a pretty litigious prosecutorial group. I mean, they go after scams and, uh, people preying on consumers and retail investors in a very aggressive way, uh, often outside of the purview of the SEC. They often coordinate with the DOJ or the SEC in evaluating enforcement, um, decisions, but they, they will prosecute. And, um, and I think that there's a, um- You know, as you said, a lot of opportunity when people have been grifted out of their money for politically motivated and, you know, people that generally have kind of the right

• 1:03:26David Friedberg?

  point of view that are in a position to prosecute to go after the offenders. So you're right, there will be, there will be a lot of action on this over the next couple of years. And then Chamath is right, the way it gets resolved is a congressional act. But by the way, I'll just point out, in the year 2000, Congress passed what was called the Commodity Futures Modernization Act. And that CFMA was really meant to kind of quote, "bring commodities and futures into the digital age." And they started working on it in 1996. It took four years to get it done. Within four years, it was already out of date. And a lot of what was going on with respect to how exchanges operate and the types of contracts are being created, it was already missed. So, you know, the problem we have here is that by legislating

• 1:04:07David Friedberg?

  the state of the market today, without creating enough flexibility in how enforcement action can be pursued and how things can be interpreted in the future, you could end up in a similar situation where people just find N run arounds and the whole thing repeats itself in the next few years. Because guess what? People will always want to gamble and grifters will always want to grift. And so there will always be a way to try and scam people out of their money.

• 1:04:28Jason Calacanis?

  Yeah. And that's just [bleep]. Heyo. Heyo.

• 1:04:32David Sacks?

  Jake Al's always gonna want a J Cal.

• 1:04:35Jason Calacanis?

  Oh, get out of here with your Colin. Everybody download Colin, you can get the after gin podcast. Before we pivot, if you want a perfect example of this, and this is just a lesson to founders out there, if you feel like you're in a gray area, you probably are. People are like, oh, NFTs, you know, they're just trading cards, yada, yada. And it's not a big deal that somebody at OpenSea decided to front run the market, or they just bought a trading card ahead of everybody else. Who cares? Well, you know who cares? Turns out the Southern District of New York cares, and they are a pretty serious group of people. Former employee of NFT Marketplace, OpenSea was charged in the first several digital asset

• 1:05:16Jason Calacanis?

  insider trading scheme. So just because insider trading didn't exist as a concept for NFTs before, congratulations.

• 1:05:25Chamath Palihapitiya?

  It doesn't exist in crypto. I mean, if they want to really find the honeypots here, I mean, it's the worst kept secret in crypto, how much Insider trading is going on amongst the organizations that run the exchanges and their side pockets that they use to to manage liquidity. I mean, this is the it's the biggest thing that's been happening in crypto.

• 1:05:47Jason Calacanis?

  If you're wondering why people were spending hundreds of thousands of dollars on a Bored Ape or whatever, like, there might have been some shenanigans going on here.

• 1:05:56Chamath Palihapitiya?

  And I mean, no, but Jason, it's not it's not illegal. This is my understanding, though. It's not illegal to front run crypto trade. So most of these organizations that that run an exchange, right, compete for order flow, and they're able to just look at that order flow, and then they front run the trade, and they're on the other side of that. So they're always making money. And so they were making tens of billions of dollars. All these exchanges were.

• 1:06:19Jason Calacanis?

  Yeah. And then I guess the question becomes, Sax, you know, in terms of, since you're an attorney, like, how you interpret this stuff. There may not be a law on the books about front running NFTs, but there are laws on the books about fraud and NFT and conspiracy to, you know, grift people out of their money. So this is all going to come crashing down, and the discovery is going to be next level.

• 1:06:40Chamath Palihapitiya?

  If the Southern District of New York actually subpoenaed any of these exchanges, all hell would break loose.

• 1:06:44Jason Calacanis?

  Oh, no, they are. You can be sure that's in process. If they go after one NFT flipper, they

• 1:06:49Chamath Palihapitiya?

  No, no, forget NFTs. I'm saying coins, crypto. That's the huge market.

• 1:06:55Jason Calacanis?

  And they will, they're turning over these cards, because you know how they like to work. They like to flip their way up to the top person. But we're not talking about January 6 here. We're talking about gas in the Ukraine next.

• 1:07:05Chamath Palihapitiya?

  Heyo.

• 1:07:06Jason Calacanis?

  Hey ho. That's a little reference for you all.

• 1:07:10Chamath Palihapitiya?

  Listen, now that we're now that we're an hour and ten in, and we've we've kind of like, broken the ice, and we're friends again.

• 1:07:15Jason Calacanis?

  I feel good. I feel like we're playing as a team again.

• 1:07:17Chamath Palihapitiya?

  You you want to redo our intros, so you're not being such a bitch?

• 1:07:22Jason Calacanis?

  I don't care. I don't care. Can we just move forward? I think we all understand.

• 1:07:27Chamath Palihapitiya?

  I thought you wrote an intro. You said you said that you were workshopping an intro. So do you want to do your intros at the end of this or not?

• 1:07:34Jason Calacanis?

  I'm not doing the intros. No, I'm not striking on intros. No, I didn't.

• 1:07:36David Friedberg?

  They were mean, is what it was.

• 1:07:38Jason Calacanis?

  I wanted to.

• 1:07:39David Sacks?

  He needs an extra point. He needs an extra point.

• 1:07:41Jason Calacanis?

  No, it's not about the point. That was a joke. I wanted to do intros. I didn't know coming into this, how sensitive people would be. And then Sax is like, I need to have in the contract a non-disparaging NDA. And I'm scared about the things I said. So spiked content needs to be.

• 1:07:58David Sacks?

  I actually took that out.

• 1:07:59Jason Calacanis?

  You were the spiked content guy. You're the most concerned about spiked content.

• 1:08:02David Sacks?

  No, we haven't agreed around that.

• 1:08:04David Friedberg?

  Is a good rule. Non-disparagement. He didn't want to have in there.

• 1:08:07Jason Calacanis?

  I under- oh, he didn't want non-disparagement.

• 1:08:09David Friedberg?

  He wants to have free reign to disparage you day and night. I mean, he's ready to go.

• 1:08:12David Sacks?

  To be honest, I took it out because I thought you would be more sensitive about accusing others of disparaging you.

• 1:08:18Jason Calacanis?

  I- this whole show is you disparaging me, Sax.

• 1:08:21Chamath Palihapitiya?

  Do you have an intro or not for the intros?

• 1:08:23Jason Calacanis?

  I don't have intros prepared. No, I'll do intros next episode. I promise everybody. I wanted to take the temperature of my besties. I don't know if people are sensitive right now. You want me to make a joke about Brad Gersner?

• 1:08:32David Sacks?

  Look, we got real shit to talk about. Can we talk about Ukraine and World War III?

• 1:08:35Jason Calacanis?

  It's not all about our narcissistic nonsense as four teenage boys running amok. Go ahead, Sax.

• 1:08:42David Sacks?

  Something happened in the last week that I think is pretty disconcerting. I mean, just intellectually speaking, we all know that wars that go on and on have a tendency to escalate. And there was an example of how this could happen over the past week. Lithuania is now essentially stopping the flow of goods from the Russian mainland to another part of Russia called Kaliningrad, which is called an oblast. It's a little area, but it's outside the Russian mainland. It's basically between Poland and Lithuania. And so goods go by rail from the Russian mainland to Kaliningrad. And they've been stopping these goods because they say they're under EU sanction.

• 1:09:22David Sacks?

  The problem is, listen, when you think about a sanction, a sanction is me not buying goods from you because I don't like what you're doing. That's fair game. Everyone has a choice over who they want to buy from. But this is not that. This is Lithuania deciding to stop goods going from Russia to Russia. And so the Russians say this is a blockade, I think with some justification. And blockades are understood to be an act of war. So you've got Lithuania basically engaging in this act of escalation against Russia.

• 1:09:54David Friedberg?

  We always thought it would be Poland. But it's Lithuania.

• 1:09:56David Sacks?

  Exactly. And remember Lithuania is a member of NATO, so they have an Article V guarantee. Now, think about the upside versus downside of this action. In terms of from the Western point of view, the upside is this has absolutely no impact on the outcome of the war. This is not going to help anyone in Ukraine to blockade Kaliningrad and prevent coal and building materials and steel from reaching Kaliningrad. It's not going to have any impact on the war. So there's zero upside to this from a military standpoint. But the downside is that you now have Lithuania and Russia getting into it. And if they get into a war, then we are instantly pulled in under Article V or in Middle War III.

• 1:10:39David Sacks?

  So this is the kind of dangerous escalatory act that has no upside, only downside for us. And my view on it is that we have to tell, we have to instruct frankly, our treaty allies not to engage in these types of dangerous acts because there's a huge externality. We could be pulled in. This is very dangerous. And I just wonder if the administration is on top of this. Did they give the green light to the Lithuanians to do this or were they caught by surprise? And what is their reaction to acts like this? Uh, you know, what I worry is that we're conducting foreign policy by virtue signaling, where we just say, who are the good guys and who are the bad guys? And, you know, if the Russians are the bad guys, Lithuanians are the good guys, so therefore this is okay.

• 1:11:23David Sacks?

  It's like playing cops and robbers on a global stage. I think we need to be asking the question, is this smart or is it dumb? Is this prudential or is it reckless? Is this in our interests or is it not in our interests? And, um, you know, I really got to wonder about who's mining the store on this.

• 1:11:41Jason Calacanis?

  Day 120, um, and it feels like this is just doesn't have an end in sight. Is there an end in sight here?

• 1:11:48David Sacks?

  What's the end? I mean, the, the end is a negotiation.

• 1:11:51Jason Calacanis?

  What do the two parties want at this point? I mean, the people in Russia are suffering during this. The people in the Ukraine are being murdered, uh, in Ukraine are being murdered. I mean, how does it end? The problem is that Biden, um, engaged the United States in a proxy war.

• 1:12:07Chamath Palihapitiya?

  Without our real explicit discussion, number one. And then number two is then we pulled and we pressured Europe to really draw a hard line, but then now are kind of working around it so that the countries that suffer the most are Europe. Now, I think you're starting to see the tea leaves, though. Last week, there was a group of European leaders, I think it was Macron, Draghi, and I can't remember if it was the German Chancellor or not, and one other person, who went to Ukraine. And if I had to bet, I think the message was kind of like, all right, listen, like, we need to find an organized detente here.

• 1:12:49Chamath Palihapitiya?

  Because there is, you know, according to Europe, a Lehman-like situation in terms of economic contagion that could manifest over the next months. So I think that the end game is probably some organized negotiated detente and ceasefire. I don't think anybody will be happy with it, but I think by and large Russia is and has won. You know, meaning they've won economically. They're selling oil like it's not, you know, like it's going out of style. It's just not selling it to Europe and to America. You know, they're selling it to China, they're selling it to Africa, they're selling it to India. India is fine with it, though they'll take some.

• 1:13:30David Sacks?

  Well, also, Tramath, they've won, they're winning on the battlefield. There was an article in the Washington Post. There was an article in the Washington Post in the last week or so. And the Washington Post is basically the house organ of the Washington establishment and the blob, basically saying that hopes are dimming for Ukraine on the battlefield. The Russians have now won 20 to 25% of the country. They've won that eastern, that Donbass region. They've done it with the help of Russian separatists in Ukraine. And the amazing thing in this article was that they were saying that the Ukrainians were days away from running out of ammunition, despite the 40 billion that we just appropriated to them. Where did that money go?

• 1:14:07Chamath Palihapitiya?

  And conversely, they're saying Russia is having just unbelievable casualties and they're running out of weapons and they are obviously out of Kyiv now and they're in the Donbass mostly, so.

• 1:14:18David Sacks?

  No, I don't think the Russians are running out of anything. The Russians, so listen, I said on this pod.

• 1:14:24Chamath Palihapitiya?

  Well, they said they're out of tanks, right? And then the troops are waiting.

• 1:14:27David Sacks?

  Well, they've adjusted their strategy and they're learning, they're adapting to this new kind of warfare, this asymmetric warfare, where you can take out a tank with a drone, you know?

• 1:14:37Chamath Palihapitiya?

  Yeah.

• 1:14:38David Sacks?

  But, but look, you know, remember on this pod, three weeks into the war, everybody who was in favor of this proxy war was saying how great it was and they were saying it was going to lead to a new birth of freedom in the West, that it was strengthening our alliances. You had Francis Fukuyama predicting that we were going to win the war and it would lead to this rebirth of freedom in the West. We should have known at that moment, everything that Fukuyama basically predicts, the opposite comes true.

• 1:15:01Chamath Palihapitiya?

  He's always wrong. He's always wrong.

• 1:15:03David Sacks?

  It's like negative one correlation.

• 1:15:04Chamath Palihapitiya?

  Yeah.

• 1:15:05David Sacks?

  And remember, I said three weeks in that we were potentially, I think Putin made the mistake in the first three weeks of thinking this would be a cakewalk, but that we were making the mistake of thinking the next phase would be a cakewalk. And sure enough, here we are. Russia has now won the eastern part of the country.

• 1:15:18Chamath Palihapitiya?

  By the way, just to build on what you said, you know, we engage in economic sanctions and I was the first one to say, hey, this could really work and this could be a roadmap for how to do it. And it turned out, this is the roadmap for how not to do it. You can't on the front door say, here are these sanctions and then walk around the back door and basically open the door for them. These sanctions were so porous as to be like Swiss cheese. We focused on virtue signaling acts like confiscating a plane or a boat or a house, but we didn't focus on the structural things we needed to actually, you know, make the mandate that we believed to be just to come to life. And so Russia's completely worked around it. Their economy effectively, you know, is thriving.

• 1:16:02David Friedberg?

  So what have we gained?

• 1:16:03Jason Calacanis?

  How is it thriving? I mean, I don't know that thriving is how they would describe their economy right now.

• 1:16:08David Friedberg?

  I mentioned this in... Jason, they're printing record surpluses.

• 1:16:12David Sacks?

  The ruble's at a five-year high, Jason.

• 1:16:13David Friedberg?

  They're selling gas, they're selling phosphate, they're actually making a market, and the prices have doubled and tripled in those commodities because the flow has been restricted. It was the exact opposite of what we tried to do. And by the way, I'll point, I'll point out something that I pointed out in February, which was the biggest concern for me at the time. When we stopped allowing trading in the securities of Russian companies, we yanked away $400 billion of market cap that was held primarily by pension funds and retirement funds in the US and Europe and gave that value to Russia for free. We basically said, here you go, here are all these securities, we're no longer allowed to trade in them, so guess what? You guys can trade in them. You can have them. And they got, they got all of their gas and energy and nickel and mining companies for free.

• 1:16:58David Sacks?

  I think it's such a good point.

• 1:17:00David Friedberg?

  For zero, they paid zero dollars for these companies. It's unbelievable. We gave them, we ripped the stock out of retirement funds and we gave it to the Russians and said, here you go, Putin, take all of these securities for free, enjoy. Oh, and by the way, because of our idiotic sanctions and the way we're employing them, the commodity prices are going to double and triple and all these companies are going to have record profits this year. Happy fucking birthday, the ruble's up 5X.

• 1:17:21Jason Calacanis?

  It's not up 5X, but yeah, okay.

• 1:17:23David Sacks?

  It's a great point because if Putin had retaliated against the West by nationalizing 400 billion of Western assets in Russia, everyone would have been up in arms.

• 1:17:32David Friedberg?

  Totally.

• 1:17:32David Sacks?

  But he didn't even have to do that because we just gave him the 400 billion.

• 1:17:35David Friedberg?

  Totally.

• 1:17:36David Sacks?

  I mean, how did this policy make sense? It's this policy of conducting...

• 1:17:39David Friedberg?

  You cannot trade in Russian securities. I'm a, I'm frigging BlackRock, I own a billion dollars of Russian securities. The US government just took it out of my portfolio that my clients own stakes in and gave it to the Russians for free. They're gone, poof. Crazy.

• 1:17:55David Sacks?

  I think, listen, I think we've got like a two level problem on this Ukraine war. One is that our policy hasn't made sense. We should have been using diplomacy last year to avoid it. This, we had all these false hopes around strengthening the West and the Western alliance by allowing this war to happen. We then, instead of trying to shut it down through a negotiated settlement, we tried to use as a proxy war to weaken Putin. Instead, it's done the opposite. So there's a whole series of policy failures here, but there's another deeper level to the failure, which is the personnel who are implementing these policies, the Washington establishment, the blob, who've been of both parties, the, the sort of uni-party, who've been implementing these policies. There has been no dissent within the Washington establishment.

• 1:18:38David Sacks?

  The only guy who really spoke up in a decisive way was John Mearsheimer, the professor of international relations from the University of Chicago. And he was treated as a pariah by the blob and the Washington establishment. Everything he predicted has come true.

• 1:18:52David Friedberg?

  Yeah, he predicted this years ago, years ago.

• 1:18:54David Sacks?

  He predicted the US was leading Ukraine down the primrose path and the result was that Ukraine was gonna get wrecked. And so it has.

• 1:19:01Chamath Palihapitiya?

  Can I just read the first paragraph of this Bloomberg article that I just posted? Russia's current account surplus more than tripled in the first four months of the year to ninety-five point eight billion. The central bank said, as prices surged towards oil and gas imports and imports plunged under the weight of sanctions. Well, you know, if you're Putin and you're looking at this, you're like, wow, maybe I should be under sanctions more often.

• 1:19:24David Friedberg?

  Totally.

• 1:19:24Chamath Palihapitiya?

  You know, what country should I invade next?

• 1:19:26David Friedberg?

  All that sanctions, all that sanctions were, was a restriction on the free market. And when you restricted the free market, you basically created a spike in price, but the market, his market could still operate with a narrower set of trading partners. He is selling energy to certain trading partners, he's selling phosphates, he's making money, they are exporting product and they're making more because certain people can't buy and they've got to go drive the price up elsewhere.

• 1:19:48Chamath Palihapitiya?

  So not, not only did our sanctions package not work and not only is the treasury, treasurer, treasury, sorry, flailing around now trying to find even more backdoors, we actually opened a very dangerous precedent, which is now we allowed oil to settle in currencies that are not just the United States dollar. And now Russia and China are trading and settling in CNY. That's not good for us. This is not how you preserve the integrity of the reserve currency of America.

• 1:20:15Jason Calacanis?

  I, I don't understand the EU of cutting all of their energy and then becoming dependent on Russia. Then creating a ban and sanctions, but then they made a carve out that oil delivered by pipeline.

• 1:20:28Chamath Palihapitiya?

  Janet Yellen has been negotiating this carve out. We have been enabling Russia to sell.

• 1:20:33Jason Calacanis?

  Oh, no, the EU passed this legislation.

• 1:20:35Chamath Palihapitiya?

  Jason, look, look in the Wall Street Journal today. The article is there.

• 1:20:37Jason Calacanis?

  I'm reading the CNBC right now about it. Like, the EU passed this landmark sanctions package in May, but they also allowed the stuff that's coming by pipeline, for some reason, to be a carve out. If the EU wants to contain Putin from invading countries on their doorstep, they got to actually become energy independent. That's the, the beginning and end of this.

• 1:20:57David Friedberg?

  It is not popular. And this is the problem with populism.

• 1:21:00Jason Calacanis?

  It's not popular.

• 1:21:01David Friedberg?

  It's not popular to continue to have, to, to, to have energy independence. Nuclear was not popular. And so the politicians, the legislators responded in a short sighted way to the popular opinion of the day. And this is the challenge.

• 1:21:14Jason Calacanis?

  Absolutely. Yeah. Huge mistake on Germany's part. They closed three nuclear reactors.

• 1:21:18David Sacks?

  The popular sentiment in Europe got highly affected by these environmental groups.

• 1:21:21David Friedberg?

  Exactly. That's my point.

• 1:21:22David Sacks?

  But in the US, I think the people of the country want us to be energy independent. And, and it's elite opinion that bought into these foolish ideas that basically we should cancel energy independence, we should cancel the Keystone Pipeline.

• 1:21:37Jason Calacanis?

  Job number one.

• 1:21:38David Sacks?

  We should cancel new drilling. America should be a net energy exporter.

• 1:21:41Jason Calacanis?

  Hundred percent. Job number one is to be energy independent. And job number two is to move to renewables.

• 1:21:47David Sacks?

  But look at Biden now. There's another piece to this, right?

• 1:21:50Jason Calacanis?

  You got to do this in sequence.

• 1:21:51David Sacks?

  So when he came in, he said that he was going to make the Saudis a pariah on the world stage. Remember this? Now he's going hat in hand to them to try and get them to produce more oil and lower the price. So what was the point of this foreign policy? It, it was contradictory. He cancels their energy independence. He basically insults the Saudi, the Saudis, on which were even more dependent for oil. And then he basically refuses to engage in diplomacy on Ukraine. These policies are contradictory. Even if your goal was to basically isolate the Russians, you would then want to improve our relationship with Saudi. And you'd want to produce more of our own oil.

• 1:22:28Jason Calacanis?

  Hundred percent. Yeah. You, you, he overplayed his hand for sure. I mean, you can't. Not have heat in the winter in Germany and the Germans are completely idiots.

• 1:22:39David Sacks?

  That's coming, by the way. That's coming. You think things are bad right now, wait until winter.

• 1:22:44Jason Calacanis?

  Ah, it's gonna be disastrous.

• 1:22:45David Sacks?

  And then, that's only gonna increase Putin's leverage. And that's when you're gonna see a real fracture in the Western alliance. This idea that Ukraine strengthened the Western alliance, I think you will start to see the fractures from this winter.

• 1:22:54David Friedberg?

  Nationalism, Germany's gotta put those nukes back online. The slow march of nationalism will continue and this will be another catalyzing event.

• 1:23:01Jason Calacanis?

  Turn your nukes back on, Germany.

• 1:23:02David Sacks?

  And I also think that, you know, in thinking about the Western alliance, I think that, you know, countries like Germany and France are really gonna question US leadership when they have basically a huge economic recession and they're wondering how they're gonna heat their homes in the winter. But I think in the US, it's time to reevaluate some of the alliances that we've gotten ourselves in. Again, with this Lithuania situation, do you really think that Lithuania would be basically poking that big Russian bear if they didn't have the US standing behind them as a bodyguard? No way. They would be much more circumspect and prudential. And the fact of the matter is that these Eastern European countries, the Baltic countries and Poland, they have enmities, they have

• 1:23:43David Sacks?

  friction with Russia going back hundreds of years. And these guys, basically, they have very provocative attitudes towards Russia and our alliance with them can draw us in. So we have to really keep a close lid on that. We do not want them making moves on their own, because we could get drawn into a world war here.

• 1:24:06David Friedberg?

  Yeah. And by the way, to your point, Sax, also, you know, there continues to be escalating issues with debt and concerns about debt repayment across the EU. And while Germany is, you know, looking to the US for support and worried about energy prices, they're gonna end up having to foot the bill to support a bunch of these EU member nations that are facing debt crises and will continue to face significant debt crises over the years ahead. I mean, Greece made a payment recently, but Greece's debt to GDP is still over 200%. Italy's at 155%. Portugal's at 134%. I mean, the numbers are pretty significant as rates climb.

• 1:24:47Chamath Palihapitiya?

  You saw it today. You know, it was...

• 1:24:48David Friedberg?

  Yeah, the spread on Italian debt has spiked over the last couple of weeks.

• 1:24:53Chamath Palihapitiya?

  Spiked. Bridgewater basically is big and short.

• 1:24:55David Friedberg?

  Germany's got another friggin' crisis to fight now. And I think you're right. The Western alliance is more than just military at this point. There's this, you know, do I really want to be the economic savior over and over again of my smaller member states? And guess who's going to benefit in all of this? China. They're going to look at this fracturing and they're going to be like, great.

• 1:25:17Chamath Palihapitiya?

  By the way, just speaking of China for a second, you know, we talk and we bloviate about our desire for energy independence and, you know, we exclude Tesla from, you know, any sort of major meaningful legislation. We trumpet, you know, these companies that are just completely woefully behind in building energy independence. We think about like a gas tax holiday, but as like kind of like a, you know, something that still needs an act of Congress to pass, even though Congress has said they have absolutely no intention of passing it.

• 1:25:50Chamath Palihapitiya?

  Meanwhile, we keep losing our footing to China. Just today, CATL, which is one of the largest battery manufacturers, announced a pretty meaningful improvement in their, you know, 3.0 battery design. These guys are now building batteries that can go 1,000 kilometers in both of the major, you know, compositions that really matter, NMC and LFP. And I just look at these things and I'm like, wow, we cannot actually get capacity funded to build domestic battery capability because we're too busy kind of basically virtue signaling on things that don't matter. And in return, nothing happens. China continues to lap us. We, it's really, it's a really bad state of affairs.

• 1:26:35Chamath Palihapitiya?

  We are, we are in a very odd period in terms of government effectiveness.

• 1:26:41David Sacks?

  If you think about China's foreign policy, how have they lost out by not being part of all of these conflicts? How have they lost out?

• 1:26:49Chamath Palihapitiya?

  They have, they have, they're buying prices of oil. That were nine months ago to 18 months ago. And so there not only has Russia's output price been capped, but that's okay. China's input cost has been capped. And so they don't suffer the same rate of inflation that the rest of us do. So to your point, David, you know, our quote unquote, you know, exclusionary sanctions were ineffective. They were porous and we allowed our largest competitive frenemy, if you will, to basically be able to, you know, drive their entire economy at 30 to 40% of the, a discount to what we have to pay to do the same.

• 1:27:28David Sacks?

  Right. When, when, when China goes abroad, they go abroad in search of economic resources and economic development. That's the point of Belt and Road. They don't insert themselves in these, middle of these conflicts that they don't understand. They were never involved in the Middle East. They were never involved in like policing, you know, all these different countries. That has cost us a fortune. And now the bill is finally coming due in the form of this inflation. We are going to have some form or another of austerity in this country. And it's partly because of this highly militarized foreign policy in which we have sent ourselves abroad to be the world's policemen. We can no longer afford to do that.

• 1:28:05Chamath Palihapitiya?

  Can I make a generalization, Sax? You react and tell me if this is true or not. If you have a country that has existed in some way, shape or form, you know, the, the borders could be blurry, but roughly for hundreds and hundreds of years, and in some cases, thousands of years, where internally the population of that country views themselves, you know, in a great way. They, they, they don't feel like their country is a meaningless, nothing country. Any attempt to economically humiliate such a country tends to have failed in the past and will continue to fail. And there tends to be

• 1:28:46Chamath Palihapitiya?

  Other countries who view it as one of these things where, well, if them, then why not us? And then they sort of, you know, in a, in a backhanded way, support everybody. So we end up in this odd situation where we are picking fights we cannot win.

• 1:29:00David Sacks?

  Totally.

• 1:29:00Chamath Palihapitiya?

  And, and the consequences for us are economically really damaging.

• 1:29:05David Sacks?

  Right, absolutely.

• 1:29:06Chamath Palihapitiya?

  And then the consequences for everybody else to stay on the sidelines is like economic prosperity. That doesn't make any sense.

• 1:29:13David Sacks?

  Right.

• 1:29:13Jason Calacanis?

  Unless you're in Europe and you're afraid that Russia is going to roll over more countries and that you have this existential risk that this dictator is going to attack more countries. So if you're living in Eastern Europe, you might have a different view of it. You know, you might very much accept and want some help from, you know, NATO and other folks who...

• 1:29:32Chamath Palihapitiya?

  But you're not getting that help. That's the problem with that. That's the sad part about all of this.

• 1:29:35Jason Calacanis?

  I mean, if it's poorly executed, it's not working at this point in time. Yeah, I mean, it's a valid criticism.

• 1:29:40David Sacks?

  If you look at the EU, okay, as an entity, they have almost the same GDP and output as the US. And if you compare them to Russia, their economy, their, their GDP is 10 times greater than Russia. They are rich. They can afford to allocate a few percent of their GDP, of their government budget to defense. They should be able to defend themselves. They really should. And so this idea that we have to go over to Europe and bankrupt ourselves to defend rich Europeans, they should be picking up 100% of the cost of that, 100%. I don't know why we're paying for rich Europeans when our country is massively in debt. Why aren't we passing the bill to them for that?

• 1:30:21Jason Calacanis?

  Yeah, yeah, we're absolutely, um, yeah. Do we have to spend that much money to, to do that? No. And then obviously the wars in the Middle East were disastrous.

• 1:30:34David Sacks?

  Policeman idea. What kind of policing works the best? Community policing, when the policemen are from the neighborhood and they know all the players. They understand the subtlety of the, of the area. Exactly. The US has made itself the world's policeman. We parachute into areas that we don't understand. We did in the Middle East. It was very ineffective. What we should do is let the regions deal with the problems themselves first, and we should be the policemen of last resort, not first resort. Let the Europeans take the lead. They should be paying for their own defense. We could still have NATO, but they should be paying for it. They should be the first responders. And if they can't handle it, then we can back them up. But this idea that we need to be on the bleeding edge of all these conflicts, bankrupting ourselves,

• 1:31:19David Sacks?

  it's a foolish idea.

• 1:31:21Jason Calacanis?

  Energy independence is the solution to all of this. We wouldn't have to deal with these death spots if we didn't, if we had energy independence.

• 1:31:28Chamath Palihapitiya?

  We're getting, we're getting circles run around us by China, Jason, on the innovations front.

• 1:31:34Jason Calacanis?

  Circles run around us by China on the innovation front. Example?

• 1:31:39Chamath Palihapitiya?

  I just told you, the CATL battery that they just announced today. It's incredible.

• 1:31:44Jason Calacanis?

  Yeah, I mean, battery technology is, we have a lot going on there as well. I mean, it seems like the battery technology issue has been solved for EVs for some time now. I mean, if an EV can go 200 miles and we can build them at scale, which seems like we're on the precipice of, we're going to be good. You don't need more than 200 miles on average. It's just a luxury every mile after that, given how fast superchargers are working. So, just practically speaking, 95% of Americans will do just fine with a electric car that does 200 mile range, and the other 5% can do a hybrid or can still burn oil. We just need to get more, we have to be more serious about the miles per gallon. Right now, we are just absolutely abhorrent in our use of fuel in this country.

• 1:32:28Jason Calacanis?

  It's just crazy that we have low 20 miles per gallon as our average, when other countries are 30, 40, 50, you know, or 30 and 40.

• 1:32:36Chamath Palihapitiya?

  Because we like our, you know, seven-seat Suburbans.

• 1:32:40Jason Calacanis?

  Which is ridiculous, because 99 out of 100 missions in that Suburban are done with one or two people in it. The fact that our Ubers, you know, and our Lifts or whatever are coming with giant Suburbans with one person in it is just ridiculous.

• 1:32:52Chamath Palihapitiya?

  I have a Fiat E500 here, like a little mini.

• 1:32:55Jason Calacanis?

  Oh, it's incredible. Yeah.

• 1:32:56Chamath Palihapitiya?

  It's incredible.

• 1:32:57Jason Calacanis?

  Yeah, I mean, this is why, I mean, this is the path. If we can just, if you just think about it, if we were to double our miles per gallon, there are cars right now that are doing 50, 55 miles per gallon. We really have to be more punitive in terms of taxation on the SUVs.

• 1:33:12Chamath Palihapitiya?

  Give me the forecast, J. Cal. What's gonna happen with Biden?

• 1:33:16Jason Calacanis?

  Oh, okay. So I guess.

• 1:33:17Chamath Palihapitiya?

  Give me your scorecard. Give me your grade. How's he doing?

• 1:33:20Jason Calacanis?

  For Biden? Oh, it's disastrous. I mean, I think the only thing more disastrous than Biden would be having Trump do a second, third, and fourth term. Hundred percent.

• 1:33:30Chamath Palihapitiya?

  So play it out. Play it out.

• 1:33:32Jason Calacanis?

  Well, I don't think he's gonna run again. I think they're gonna have to put another candidate.

• 1:33:35David Friedberg?

  Biden's gonna run again?

• 1:33:36Jason Calacanis?

  I think there, I think between then and now, if the economy keeps going the way it's going, he would be a lame duck and impossible. And I think he might say, you know what? I'm gonna retire to spend time with my kids in my golden years. And they might convince him that him running again is a really bad idea. And Kamala Harris is a disaster as well. She hasn't proven anything in the first few years.

• 1:33:54David Friedberg?

  Yeah. Who would the Dems put up? J. Cal, J. Cal, as a Democrat, who would you want to have put up?

• 1:33:58David Sacks?

  I think it's gonna be DeSantis versus Newsom in 24.

• 1:34:02Jason Calacanis?

  I, yeah, I, um.

• 1:34:03Chamath Palihapitiya?

  But, sorry, explain that.

• 1:34:05David Sacks?

  Okay. So, but which part of it? Newsom or DeSantis?

• 1:34:08David Friedberg?

  Newsom. How does Newsom get the nod?

• 1:34:10David Sacks?

  Okay, here. So Newsom has a very weak challenger in California. It's a plus 30 Dem state.

• 1:34:15David Friedberg?

  Can he win?

• 1:34:16David Sacks?

  Hold on. So he's gonna handily win reelection in California. He's already, no, he's not even campaigning for reelection in California. He's already campaigning to be president. The thing that he did that was politically smart, and I say this, not as a fan of Newsom, but just as someone who's analyzing the politics of it, is that he went on true social. And he, to basically counter your Republican lies. And so he's positioning himself as a fighter for progressive values. And the reason why that's gonna be flattering to the Democratic base is that when the Democrats lose big in November, they're gonna have, there's gonna be a reckoning. And they're gonna have to understand why they lost. And the fact of the matter is that ideologues never blame themselves or their agenda.

• 1:34:57David Sacks?

  They're gonna say that it was not communicated well, and that we needed a, basically, a better communicator who was a fighter. And so they will basically pin the blame even more on Biden. And so Newsom is positioning himself as that sort of Democratic progressive fighter. If you go back, remember when Michael Avenatti, like, they were, you know, progressives were talking about him as a presidential candidate for a brief minute. They swooned over him. Why?

• 1:35:20Chamath Palihapitiya?

  Did he go to jail?

• 1:35:21David Sacks?

  Yes, he's in jail right now.

• 1:35:22David Friedberg?

  He's a total grifter scumbag.

• 1:35:24David Sacks?

  A total grifter scumbag. But you gotta remember, CNN had him on there every day because he was a fighter.

• 1:35:31Chamath Palihapitiya?

  J. Cal says his name in the funniest way possible. I remember at a poker game when, like, Hellmuth said he had no numbers on it. J. Cal, what's this guy's name? Say his name.

• 1:35:37Jason Calacanis?

  Michael Avenatti.

• 1:35:40Jason Calacanis?

  I don't know how to pronounce it. I never met the guy.

• 1:35:42David Sacks?

  Bada bing bada boom, I'm Michael Avenatti, right?

• 1:35:44Jason Calacanis?

  Uh, he's a disaster. Uh, it's an interesting concept, yeah.

• 1:35:49David Friedberg?

  Zach, can you, giving the Dems will give Newsom the nod, can he actually win in some of these, um, these, uh, middle states?

• 1:35:56David Sacks?

  Well, y- y- you gotta remember, and this is true for both parties, that the general electorate does not pick the candidates. The parties pick the candidates and the base of the party picks the candidates.

• 1:36:06David Friedberg?

  They want someone that can win Pennsylvania. They want someone that can win Florida.

• 1:36:08David Sacks?

  Yeah, but y- yes and no. So if you remember, when, when, when Bill Clinton pulled the Democratic Party back to the center in 1992, and you had the whole Democratic Leadership Council, and they really remade the Democratic Party at that time as a more centrist party. They had just come off three disastrous presidential elections. So Reagan in 80 and 84, and then Herbert Walker Bush in, uh, in 88. So, you know, it took three big losses for them to rethink. I don't think progressives are gonna rethink their agenda, you know, based on one midterm loss, even though I think it's gonna be gargantuan, uh, later this year. So I think they need more losses to really reevaluate their agenda. I mean, look, the activists in the party are deeply invested

• 1:36:53David Sacks?

  in their agenda. They're just not gonna give it up. They're gonna blame it on a communication problem. They're gonna say, let's find a new messenger. And Newsom will seem like a younger, fresh face.

• 1:37:05David Sacks?

  So I think that's how it could happen. And if you look at the Democratic bench, who else they got?

• 1:37:08Jason Calacanis?

  Can he also, who else they got is the issue?

• 1:37:10David Sacks?

  Who else they got? You're gonna need to be Elizabeth Warren?

• 1:37:13Jason Calacanis?

  Well, I'd be, uh, Buttigieg and AOC, if they wanna go full, like, crazy left, would be, and then if they wanna go more moderate, Gavin.

• 1:37:20David Friedberg?

  That doesn't win an election. You gotta find someone that can win the election, so.

• 1:37:23Jason Calacanis?

  I agree, I agree, but it's gonna be about turnout.

• 1:37:25David Sacks?

  Governor of a big state, he, which is, as of now.

• 1:37:28Jason Calacanis?

  And the hundred million, hundred billion dollar surplus looks good for him. So, yeah, I mean, Gavin.

• 1:37:35David Sacks?

  It's a scenario. It's a scenario. But look, I think.

• 1:37:37Jason Calacanis?

  The big question is, will Republicans field Trump after January 6th?

• 1:37:42David Sacks?

  And I think the answer is no. And.

• 1:37:45Jason Calacanis?

  It's too shameful, right, to do that?

• 1:37:47David Sacks?

  I think that, look, I think Trump's problem is he won't stop talking about the last election. And I think elections are always about the future. And the Republicans ultimately going to nominate a candidate who represents the future.

• 1:37:58Jason Calacanis?

  No Republicans want him as going out there trying to steal an election again.

• 1:38:03David Sacks?

  Look, if you look at, if you look at, if you look at straw polls, okay? If you look at straw polling, DeSantis now is beating Trump in straw polls in the Republican Party. Jonathan Chait, who is a pretty smart liberal, definitely not a Republican, but he's a, sometimes has very smart observations. Remember the whole zero COVID thing? Anyway, he has an article just today talking about how DeSantis has now eclipsed Trump within the Republican base. And if you look at the numbers within, if you, if you poll Fox News viewers and likely Republican primary voters, DeSantis is up a couple of points in the straw polls, but among Fox News viewers, he's up like 10 to 14 points.

• 1:38:41David Sacks?

  So in other words, the Republican base, the activists who are the influencers, they already have moved from Trump to DeSantis.

• 1:38:49Jason Calacanis?

  No, they love him. Yeah, yeah.

• 1:38:50David Sacks?

  So I think the field.

• 1:38:51Chamath Palihapitiya?

  If DeSantis runs, he's gonna run, he's gonna win a landslide.

• 1:38:57David Sacks?

  This is why I say it's DeSantis versus Newsom, I think. But look, it could be DeSantis versus Biden. It could even be Trump versus Newsom. I think the configurations that win for the Republicans, I think if Biden's on the ticket, I think any Republican wins. I think if it's DeSantis versus Newsom, I think DeSantis wins. I think, however, and this is sort of the nightmare scenario, I think if it's something like a Newsom versus Trump, I think Republicans could lose that just because, you know, the people, people, people think about the future. They, they, they want, they don't want to be reminded of the past. And so I think there's risk there.

• 1:39:32Chamath Palihapitiya?

  No more octogenarians.

• 1:39:34Jason Calacanis?

  Insane and deranged.

• 1:39:35Chamath Palihapitiya?

  You can't, you can't have two 80 year olds running for president.

• 1:39:39Jason Calacanis?

  That would be great, yeah. I think, all right.

• 1:39:42Chamath Palihapitiya?

  Nothing against octogenarians.

• 1:39:43Jason Calacanis?

  75 years old would be good for me.

• 1:39:45David Friedberg?

  All right, this has been a, this has been a very long episode.

• 1:39:47Jason Calacanis?

  Well, yeah, well, considering how much Saks is going to spike, we'll get it back down to 45 minutes. All right, everybody, it's an amazing episode.

• 1:39:54Chamath Palihapitiya?

  I love you guys. It's really nice to be back.

• 1:39:56Jason Calacanis?

  We're not going anywhere. Everybody relax.

• 1:39:58David Sacks?

  We're back.

• 1:39:59Jason Calacanis?

  I'm not going anywhere. You're gonna need a wrecking ball to take me out of here.

• 1:40:03David Sacks?

  We just wanted to get rid of you, J Cal.

• 1:40:05Chamath Palihapitiya?

  J Cal, we don't want to get rid of you, but now all we need is three out of four votes, so.

• 1:40:09Jason Calacanis?

  Alright, good luck. Vote me off.

• 1:40:10David Sacks?

  We never wanted to get rid of you, J Cal, but we knew we had to do certain things to get you to act right.

• 1:40:15Chamath Palihapitiya?

  Oh my gosh.

• 1:40:17Jason Calacanis?

  Oh boy, hair cut.

• 1:40:17Chamath Palihapitiya?

  J Cal brought a knife to a gunfight. He came to negotiate.

• 1:40:23Jason Calacanis?

  You guys don't want any Australia. You're too cheap to give me two points. That's fine.

• 1:40:28Chamath Palihapitiya?

  J Cal came to negotiate the Treaty of Westphalia and he left with half a Snickers bar.

• 1:40:32Jason Calacanis?

  It's fine. It's fine. You guys don't get... No more intros for you.

• 1:40:35David Sacks?

  He actually lost ground.

• 1:40:36Jason Calacanis?

  No more All-In Summit, no more intros.

• 1:40:38David Friedberg?

  We're gonna hold back our payment. By the way, I'm about to get on a call with our lawyers. We're gonna get the account set up. Get all the money transferred from your Summit grant.

• 1:40:44Jason Calacanis?

  Good luck with that.

• 1:40:45David Sacks?

  Yum yum.

• 1:40:45David Friedberg?

  Invoices.

• 1:40:46Jason Calacanis?

  Good luck with that money. That's long gone. I put that on the Warriors. I tripled it. We're good. Alright, everybody. We'll see you next time on the All-In.

• 1:40:55Chamath Palihapitiya?

  Love you, boys.

• 1:40:55Jason Calacanis?

  Bye bye.

• 1:40:56Chamath Palihapitiya?

  Love you, besties. Bye bye.

• 1:40:59David Sacks?

  We'll let your winners ride.

• 1:41:02Speaker 04

  Rain Man David Sack.

• 1:41:07David Sacks?

  And instead, we open source it to the fans and they've just gone crazy with it.

• 1:41:11Jason Calacanis?

  Love you, besties.

• 1:41:11Speaker 04

  The queen of Kinnaw.

• 1:41:19Speaker 04

  Besties are back. That's my dog taking a piss in your driveway.

• 1:41:27Speaker 04

  Oh, man.

• 1:41:30Chamath Palihapitiya?

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

• 1:41:38Speaker 04

  What? You're the bee. What? You're a bee. We need to get merch.