E158: Global trade disrupted, Adobe/Figma canceled, realtors sued, Trump blocked

(0:00) Bestie intros: Jason comes in hot, All-In's new Chairman Dictator, Holiday party recap, and more (7:54) Understanding the trade disruption in the Red Sea: Houthis, global impact on trade, the dicey geopolitical situation, and how this compares to COVID freight prices with Flexport's Ryan Petersen (35:55) Major M&A deals called off, downstream impacts of a hawkish regulatory environment (54:15) The new era of startup building: less capital raised, less overhead costs, more profitable, smaller exits with higher founder/employee ownership percentages (1:17:01) Bombshell class action lawsuits against the NAR and other real estate brokerages, how this could change residential real estate in the US (1:31:58) Colorado bans Trump from primary ballots Follow the besties: https://twitter.com/chamath https://twitter.com/Jason https://twitter.com/DavidSacks https://twitter.com/friedberg Follow Ryan: https://twitter.com/typesfast 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.flexport.com https://www.wionews.com/world/wont-stop-fighting-netanyahu-rules-out-ceasefire-until-hamas-elimination-671867 https://www.figma.com/blog/figma-adobe-abandon-proposed-merger https://www.reuters.com/markets/deals/illumina-divest-cancer-test-maker-grail-2023-12-17 https://www.google.com/finance/quote/ADBE:NASDAQ https://www.saasgrid.com https://www.housingwire.com/articles/missouri-jury-finds-nar-brokerages-guilty-of-conspiring-to-inflate-commissions https://www.wsj.com/personal-finance/real-estate-buying-home-charts-6dc40caa https://www.msn.com/en-us/money/realestate/real-estate-commissions-could-be-the-next-fee-on-the-chopping-block/ar-AA1irqIV https://www.redfin.com/guides/how-to-sell-your-home-without-an-agent-fsbo https://apnews.com/article/trump-insurrection-14th-amendment-2024-colorado-d16dd8f354eeaf450558378c65fd79a2 https://www.nytimes.com/2022/04/02/us/politics/merrick-garland-biden-trump.html https://cafe.com/cafe-insider-feed https://www.lawfaremedia.org/podcasts-multimedia/podcast/the-lawfare-podcast

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

• 0:00Jason Calacanis?

  Do I care? I'm coming in hot. My quick time. I told you seven times. You don't work for me. Good luck working for Chama. Do not attack my employees, Jason. You guys are gonna billionaire me and that's gonna be the greatest revenge of all. You wanna run the show in year four? Go in ahead, Chairman. You guys won the vote. Guess what J. Cal's gonna do? I'm gonna ski and you're gonna make my 25% worth 500 million. Get to work, bitches. Deal. Let's go. Deal.

• 0:27David Sacks?

  Chama's title's been upgraded from dictator to chairman.

• 0:30Jason Calacanis?

  Chairman dictator. That is very funny, Chairman dictator.

• 0:33David Sacks?

  Chairman dictator.

• 0:34Jason Calacanis?

  He's got the super voting. I have no say in anything. I built this entire empire and I have nothing. I built the empire. I came up with the name of the show. I came up with the format. I invited you miserable pricks. Make me rich bitch. Let's go. Distribution checks. Daddy needs new skis. Three, two. All right, everybody. Welcome back to the All In Podcast, if you can believe it. We're almost at four years of this meshugana. Episode 158 today. And we've got a full docket. I'm at half speed. I got a little bit of the sniffles, but we're gonna power through the docket. With me again today.

• 1:13David Sacks?

  The sniffles?

• 1:14Jason Calacanis?

  I got a little bit.

• 1:15David Sacks?

  Can I get you a tissue?

• 1:16Jason Calacanis?

  Give me a little tissue and some juicy juice box.

• 1:20David Sacks?

  Some coffee drops?

• 1:22Jason Calacanis?

  I'll be fine. I'll be fine.

• 1:23David Sacks?

  You'll tough it out. You'll tough it out.

• 1:25Jason Calacanis?

  Well, listen, I just wanna say.

• 1:27David Sacks?

  You can make it through this pod.

• 1:28Jason Calacanis?

  Of course, of course. I'm a professional. With me again today, the king of beep. Can't say what he's working on.

• 1:35David Sacks?

  It's a crop. I don't think people understand that, like what the beep. There were so many beeps last time that people couldn't even understand it.

• 1:42Jason Calacanis?

  The beep out of the show.

• 1:43David Sacks?

  It was crazy. It's some crop. He's genetically engineering, right?

• 1:47Jason Calacanis?

  But it's top secret. Which one is gonna?

• 1:50David Sacks?

  They already figured it out in the comments, by the way.

• 1:53Jason Calacanis?

  Oh, the comments just figured everything out.

• 1:54David Sacks?

  I don't know what's so secret. They already figured it out.

• 1:58Jason Calacanis?

  So can we say what it is?

• 1:59David Sacks?

  The horse out of the barn, Free Bird.

• 2:00Jason Calacanis?

  Can we get through introductions? Go ahead. Keep going. And Chairman dictator, Chamath Poli-Hapatia is with us. Welcome back to the program.

• 2:09Chamath Palihapitiya?

  Thank you. By the way, I was feeling pretty bad about your sore throat, so I was, I went on Google and I found something that may be the cause of it. Nick, can you just throw up this article?

• 2:22Jason Calacanis?

  Pre-strike.

• 2:24Speaker 03

  You can't pre-strike.

• 2:26David Friedberg?

  Let him land the joke. Come on. Jesus. This isn't a Tom Cruise movie. You can't pre-strike. Go ahead.

• 2:33Chamath Palihapitiya?

  I found an article that made the ethics source of your sword, bro.

• 2:45Chamath Palihapitiya?

  Oh, no.

• 2:47Ryan Petersen?

  I'm gonna get cancelled.

• 3:05Chamath Palihapitiya?

  I am your BIPOC chairman and I'm here to do the best job I can.

• 3:08Jason Calacanis?

  Wait, what do you mean BIPOC chairman? Explain to the audience what these two words mean.

• 3:12Chamath Palihapitiya?

  Person of color, bro.

• 3:13David Sacks?

  Billionaire person of color.

• 3:15Jason Calacanis?

  Oh, is that what it is? Yeah. So according to D, we checked the DEI manifesto and it said we needed to make a chairman of the organization. So Saks is leading the All In DEI group and they voted Chamath to be the first chairman of All In as we get our CEO ready to come on board. And so you did a diversity token candidate, Saks. Explain the process.

• 3:39David Sacks?

  Well, it's more like, you know, Chamath was getting a little bit touchy about being called dictator all the time. And you were kind of playing the Biden role of needlessly offending him. He's kind of playing the she's an everything role. So we've elected him chairman so that you can stop calling him dictator.

• 3:54Jason Calacanis?

  Right. Cause you want to soften it.

• 3:56David Sacks?

  More sensitive.

• 3:57Jason Calacanis?

  Yeah, I think it's great. I'm all about the diplomatic. Listen, he's.

• 4:00David Friedberg?

  There was a Politburo. There was a process. It was meritocratic.

• 4:04Jason Calacanis?

  Smoke came from the chimney and now for year one.

• 4:08David Sacks?

  There's a Politburo consisting of me, Friedberg and Chamath. And the Politburo has selected Chamath as chairman.

• 4:15Jason Calacanis?

  Get to work, get to work. Let's make my 25% worth a billion dollars, please. And of course, with us, Hot Off is hosting of the absolute best party of the season. Well, top two. You're a distant two, man.

• 4:31Chamath Palihapitiya?

  It was a top meat protein party.

• 4:33Jason Calacanis?

  Mmm. Chamath and I went to Saks's.

• 4:35David Sacks?

  I hope you got enough food.

• 4:37Jason Calacanis?

  I did. It was good. Yeah, I mean, I. That dessert table was crazy.

• 4:40Chamath Palihapitiya?

  No, the dessert table, I had to, I was like, I found myself beside it. And I was like, why am I near this dessert table after the fiasco at Friedberg's? So I had to go to, I had to go to the other side.

• 4:50Jason Calacanis?

  Well, here's what Chamath and I did. We got in there and we sniffed out the caviar. And this was top shelf caviar on potato chips. Creme fraiche and also on bellinis. And we parked it there.

• 5:03David Sacks?

  On Pringles. That actually is a great way to, you know, the, those bellinis are too like bready. I don't think it's a good combination with caviar, but.

• 5:11Jason Calacanis?

  Say more about your caviar.

• 5:13David Sacks?

  Chip?

• 5:13Jason Calacanis?

  Ah. High and low. They call it high and low in the business.

• 5:17David Sacks?

  Caviar should always be served on Pringles.

• 5:19Jason Calacanis?

  The most important thing, Nick, I'm sure you have it queued up, is our annual awkward hug. This is a tradition amongst the all in. Every year, to celebrate the holiday seasons, we engage in the awkward all in hug. Let me explain how the hug went down. We're at the caviar. And Chamath is on his eighth Pringle. I'm, I'm about 15 in. I've eaten half the tin of caviar at this point. I'm getting my money's worth. Uh, for coming all the way up, uh, to the city and risking my life. And then here it is. We gotta break this down. First, Chamath is in a loving embrace with Saks. What you see there from Saks is not a cry of joy.

• 5:58Chamath Palihapitiya?

  Fear.

• 5:58Jason Calacanis?

  It's, it's absolute fear. Abstract fear.

• 6:03David Sacks?

  It was going on a little bit too long. That was my link.

• 6:06Jason Calacanis?

  Chamath refused to let go.

• 6:08David Sacks?

  For a while. That's what you guys don't, are missing.

• 6:10Chamath Palihapitiya?

  Because if you look at the studies and Friedberg can attest to this, when men hug for two minutes, there's a release of oxytocin and it's an incredible anti-inflammatory, anti-anxiety. So I was, I was giving you therapy. That's like a therapeutic hug. It's a gift.

• 6:27Jason Calacanis?

  That was, that was your Christmas gift. Saks, tell us what you're feeling here. We see this blood curdling scream and or cry of joy. What, what were you, what was going through your mind when you got to minute two of the hug?

• 6:40Jason Calacanis?

  Take us to the moment.

• 6:40David Sacks?

  I'll show you what I was thinking of here. Hold on.

• 6:43Jason Calacanis?

  Okay. Because you can see here, also, if we break this down, Friedberg comes in with an Asperger's side hug. I don't know if you can see that there in the photo. But let's see the, because you know, he, he got to zoom over to the left. Friedberg, looking at his shoes, is like, "I'm going to express joy and love with my three besties through a man hug." And he, he gets enough of the shoulder in there that he doesn't have to have. He's technically part of the hug, but he's not really.

• 7:11David Friedberg?

  Cannot make eye contact.

• 7:12Jason Calacanis?

  And he says, "I have to." Now, me, I'm like, "This is hilarious." So I just jump and I grab all three guys and I just said, "That's just me, pure joy." Hilarious. Friendship is great. Good to have good friends. Friendship is great. I love you guys. I love you guys too. Yeah.

• 7:28David Friedberg?

  Back at you.

• 7:28David Sacks?

  This is what I was thinking. This is what it reminded me of.

• 7:31Jason Calacanis?

  This is Saks's personal Vietnam.

• 7:33David Sacks?

  This is.

• 7:34David Friedberg?

  It's a great scene. Great scene.

• 7:36Chamath Palihapitiya?

  It's a great scene. That's a great scene.

• 7:39Jason Calacanis?

  From Fight Club. That's Meatloaf, right?

• 7:41David Sacks?

  Yeah.

• 7:41Chamath Palihapitiya?

  Is that Meatloaf?

• 7:42David Friedberg?

  A great scene. That's a great movie. He's on estrogen therapy in the scene and he grows man boobs and then he stuffs Edward Norton into his man boobs. It's a great scene.

• 7:51David Sacks?

  We're men. Men is what we are.

• 7:54Jason Calacanis?

  Let's get to work. We got a full docket here and the world continues to spin into chaos, apparently. Members of the Houthis movement have been attacking commercial ships in the Red Sea with drones and with missiles. This is largely under-reported in the mainstream press, so we thought we would tackle it here. They are calling this revenge for Israel's military campaign in Gaza. The Houthis say they will only stop once Israel begins allowing food and medicine to freely enter Gaza, like something we would all like to see. Critics suggest this is a power play for more legitimacy and the reason.

• 8:34Jason Calacanis?

  US allies, including the UK, Canada, France, are reportedly preparing to deploy naval vessels to the region to deter more strikes. Obviously, there's a lot of geopolitics here.

• 8:46Jason Calacanis?

  And this is a business story. We can link this back because the attacks have interrupted one of the world's busiest trade routes. As you know, all five of the world's largest shipping conglomerates have paused transfers through the Red Sea. And that means they've got to go around Cape Horn, they got to go around South Africa to get things to Europe from Asia, thousands of extra miles, from what I understand. And this has caused oil and gas prices to rise. And if this becomes acute, it could be really, really impactful to the economy on a global basis. So in order to understand what's happening, of course, we go to our foreign war correspondent. Yes, he's got his military cap on. He's now at

• 9:29Jason Calacanis?

  a total of zero tours of duty. Sax, can you please, with your infinite wisdom and experience in the field, tell us what is happening in this matchbox situation?

• 9:42David Sacks?

  Yeah, what's happening is, gee, what's happening?

• 9:46Jason Calacanis?

  Come on, you're an expert.

• 9:47David Sacks?

  Yeah, I'm really, I'm really struggling with this one, J Cal. Can I use a Lifeline? I'd like to phone a friend, phone a friend to answer this one.

• 9:56Jason Calacanis?

  For the first time, Sax is unable to give us a competent answer. He's chosen to phone a friend, which we allow here on the All In Podcast. Who would you like to phone? Have you thought about that? Who are you going to phone?

• 10:08David Sacks?

  Since this is involving impact on global trade?

• 10:11Jason Calacanis?

  Steve Bannon? Zuckerberg?

• 10:12David Sacks?

  No, I'd like to phone Ryan Peterson, the founder of Flexport.

• 10:16Jason Calacanis?

  All right, here we go. We're going to the AT&T phone call, phone a friend, Zoom. We're going to click through on Zoom. And can we get Ryan Peterson for Flexport? Ryan Peterson, you're here. It's Jason Calacanis from the All In Podcast. It's your boy, J Cal. Let's go skiing soon.

• 10:37David Sacks?

  Are we live? Is this recording?

• 10:40Jason Calacanis?

  We're live. We're live. You're on the All In Podcast live. We've got an official phone a friend moment here. You, you understand what's going on there better than anybody. Ryan, obviously, runs Flexport, and he is in the business of shipping containers. So, Sax, you want to ask him for some help?

• 10:55David Sacks?

  What is the impact on global trade here from what's happening in the Red Sea?

• 11:02Ryan Petersen?

  Well, it's massive. About 30% of all ocean container traffic flows through the flows through the Suez and through the Red Sea. Most of that is going Asia to Europe. So like the biggest impact here is going to be felt on those two areas. It's going to make Chinese manufacturing that much more challenging. You have to go around the southern tip of Africa. It's adding about 20%, 20 to 25% longer journey. And now in a network business, a longer journey means less capacity. So you're talking about a 20, 25% cut in shipping capacity on the 30% of all containers.

• 11:38David Sacks?

  So that's containers. I also understand that about 12% of global oil goes through and about 8% of liquefied natural gas. And just to explain what we're talking about there, can we zoom in? There's a very narrow strait there called the Bab al-Mandeb Strait. I hope I didn't massacre that pronunciation. So you go around the Gulf of Aden through that Bab al-Mandeb Strait into the Red Sea. And then from there, you can go through the Suez Canal into the Mediterranean.

• 12:03Ryan Petersen?

  Yeah. And so it's a maritime choke point. By the way, this is going back. It always has been. You know, there's, there's documentation. Caesar Augustus invaded Yemen in like 63 B, I forget, 63 AD. No, I forgot the dates, but it was during the reign of Caesar Augustus. So it would have been right around the the birth of Jesus Christ. And you're talking about thousands of years of this being a really important choke point. Even the Egyptians actually built a canal. The ancient Egyptians had a canal that connected the Nile River. So this has always been the place to connect east and west. An incredibly important maritime choke point. And the rebel forces in Yemen have been firing missiles at ships. And what that does is spike the insurance cost. Obviously,

• 12:44Ryan Petersen?

  it puts the crew's lives in danger, which they can't tolerate. But it also really spikes the insurance cost. If you sail a ship into a region that's got missiles being fired, the insurers just won't cover it. And so you can't, you can't operate a ship without insurance because if it sinks, you go out, you are bankrupt. And so they're just taking the long way around, which as I said, is a 20% reduction in capacity. What we've seen, remember with COVID, you had all those ships off the port. You guys brought me on to the show. The last time I think was when that happened. That was about a 20% reduction in capacity. But at the same, what happened during COVID was there was also a 20% increase in demand. So this time, there's not an increase of demand. So I don't think it's as impactful

• 13:27Ryan Petersen?

  as what we saw to shipping prices during COVID, where you had like a 10x run up in price. But you're already seeing prices are coming out now for January freight, for ocean freight, Asia to Europe. You're seeing about a 3x increase in the price of ocean freight versus where we were a month or two ago, which was very, very cheap a month or two ago. So I wouldn't read too much into this. And frankly, the Suez Canal is too valuable, in my opinion, too valuable to civilization, to the modern world, to believe that, you know, a group of rebels, no matter how well funded they may be, is going to be able to disrupt that for any long period of time. I think there's too many interests aligned here to say, to keep this thing flowing.

• 14:09David Sacks?

  Well, okay, two points on that. So we call them a rebel group, and I guess they are. It's a Shia group in Yemen that rose up in 2014 and deposed the monarch there. And they basically control a large swaths of the country, but they're not internationally recognized. So that's why they're called rebels. But make no mistake, they basically control the vast majority of Yemen. It's a Shia group. They're, you could say, sponsored by Iran, but I'm not sure they're controlled by Iran. People call them proxies, and that's true to some degree, but they also have agency. Like you said, J Cal, they are doing this, they say, in solidarity with the Palestinians. When the invasion of Gaza first began, they

• 14:51David Sacks?

  were firing rockets at Israel, but they had to go all the way over Saudi Arabia. They didn't make it. So now they've started firing on ships that are going through the strait. They started mining the strait. And so like Ryan's saying, this has basically put a damper on commerce, unless you're a country that the Houthis like. Apparently, Russia's been able to move its ships through still. They claim they're only targeting ships that are transacting with Israel, but that's not true. I mean, a lot of ships have been targeted that don't have a relationship with Israel. So let's just say broadly speaking for Western ships, they can't get through. Now, what the US has done in response to Ryan's point is that we've announced this

• 15:32David Sacks?

  Operation Prosperity Guardian, which is to restore the flow of trade through, you know, the Red Sea. But the question is what that's going to involve. And I think we are bracing now for the US to start taking military action against the Houthis. The problem is, I think, Ryan, when you're saying this is going to be resolved maybe quickly, is that the US was already backing the Saudis in a war against the Houthis that started in 2015. It only got sort of resolved with a ceasefire that's still pretty fragile last year. And so the Houthis have already survived almost a decade of Western-sponsored attacks on them. It's not clear what we have to do to basically stop them from taking these actions. And

• 16:17David Sacks?

  I think if the US starts a war basically against the Houthis in Yemen, we're talking about an expansion of this conflict in the Middle East from, you know, beyond what's happening in Gaza to now another front that directly involves the US. Moreover, this is, I think, very underreported, but there've been almost 80 attacks on US bases in Syria and Iraq by Shia militias, again, sponsored by Iran, over the last couple of months. So this whole region is a powder keg. And it's not clear to me that if the US attacks the Houthis, that this is going to lead to a quick resolution. So I guess my question back to Ryan is, let's say there is a war here. Let's say the Houthis don't stop. I don't think

• 17:00David Sacks?

  they will. And let's say the US gets in a war there, but isn't really able to bring it to a decisive conclusion. And let's say that this blockade of the Red Sea continues for all of 2024. What does that do to global prices? Because I think right now the market is pricing in rate cuts next year on the theory that inflation is coming down as a solved problem.

• 17:27Ryan Petersen?

  It's the right question. It'll be a big impact. And if you listen to like retailer earning call earnings calls, they're all talking about, hey, we've had six, 12 months of deflationary environment. Prices are coming down a lot of what they cite is the lower ocean freight prices. And if, and if that goes back and it, if it goes back anywhere near, I mean, we're already seeing a three X, but even that three X is sort of, well, is this going to last? So I need to price it all in. Do I need to, uh, and it hasn't really taken hold of like, that's not a true market dynamic of what is the supply and what is the demand? Freight is very inelastic. Like you're going to ship the product regardless of the price of freight. You know, unless your business model has the tiniest of margins, the price of freight goes up, it doesn't impact how many products you ship.

• 18:10Ryan Petersen?

  You're going to go sell as many products as you can. Does it impact America as much as it impacts Europe? Absolutely not. Now, this is the, the fastest route for many parts of Asia to the East Coast of the United States, and especially with the Panama Canal is also congested at the same moment right now because of, they say it's because of a drought, but actually they built a bigger canal and it's just draining the lake faster. And that's my hypothesis, but I'd like to look into it a little further, but the Panama Canal is only going at about two thirds capacity. So if you're going Asia to the East Coast, those are your options, but it to go around the southern tip of Africa, around the Cape of Good Hope to get to the East Coast, it's like an eight percent increase in transit time versus 20 to Europe.

• 18:55Ryan Petersen?

  And there's alternatives, so definitely impacts Europe much more. It impacts China like the reason I think. That this, there's so many people lined up here, like, this is not good for China. China wants to be able to ship stuff quickly to Europe and get it to market. So to the extent that they have any impact, I think they're going to be clearly on the same side as the United States here. Europe obviously has it. And the other thing that I haven't heard anyone talk about is like, if you look at that map, they're blockading not just the Suez, but they're blockading Saudi Arabia. The Saudis' biggest port is in Jeddah, right up there. Well, I don't think they're going to tolerate being cut off from the world.

• 19:30Chamath Palihapitiya?

  Yemen taking on Saudi seems like an unwise idea.

• 19:34Ryan Petersen?

  Well, they've been at war in the past, as David pointed out, so, and I'm not, I'm certainly no expert. By the way, I find this ship to be amazing. It's since, it's since transited, but this is one of the ships that was there yesterday, just going for it. And if you look at the destination, it says armed guard onboard. They set that in the AIS GPS transponder, so that if anyone comes after them, you know what you're going to get.

• 19:56Chamath Palihapitiya?

  I have two comments. When I looked at this in the last couple of days, that was sort of my takeaway, which is that the, the really significant impacts are downstream to Europe, consumer prices. So I think like European inflation has more chance of upticking again than America does. Because I think the practical reality is what you said, Ryan, they'll just, the need to ship is inelastic, and so they'll just pay 8% more, and they'll just go to the East Coast in a more, in a longer way through the Cape of Good Hope or whatever. The second comment, I think, to me is a little bit more macro in nature, which is, if you

• 20:37Chamath Palihapitiya?

  look at what's happening now, there's a hot war in Israel and Gaza, and theoretically now there's a hot war in Yemen. I think the positive take on this is that it actually puts the Middle East in a position to resolve all of these things. And what I mean is the following. If you're Saudi Arabia, or if you're the UAE, or if you're Qatar, what you really want to do is build for the next 30 to 40 years. They've said it as much. They want to pull trillions of dollars of oil and not gas out of the ground. They want to monetize it, and then they want to invest in their people. The last thing they need is to be bookended by two hot wars, largely propagated by a third-party actor in Iran.

• 21:20Chamath Palihapitiya?

  And so I think if there was not resolve for them to get aligned, I think that the resolve now really amps up. Saudi Arabia doesn't want to be in the middle of this nonsense.

• 21:31Chamath Palihapitiya?

  Qatar doesn't want to be in the middle of this nonsense, UAE does not. And then the fact that Canada, America, Britain, France are now all of a sudden pulled in. And China, as you said, Ryan, I didn't even think about the implications to China as a supplier of record for most of these goods. All roads, I think, lead, in my opinion, to a coming together of folks to say, okay, let's use this as a definitive moment to just clean the decks here. And I think that that'll put a lot of pressure on Iran, a lot of pressure on the money flows. I suspect that both of these two hot wars get resolved quickly because the larger multi-decade implications for the Middle East are too big to let it be subsumed by the Houthis rebels or Hamas.

• 22:13Ryan Petersen?

  It's interesting here, how you see, like, Israel's a relatively small economy in the world and, you know, you start to see, in the same way that Ukraine is not a big economy, Russia's not that big, but it has a massive, the war there has just a massive impact via the commodities markets because Russia is such an important supplier of commodities. And now you see what, you know, Israel and Gaza are relatively small, potentially a small regional conflict, big global implications because of everything that goes behind it. But now you see this spread to something that really could impact, if this is an extension of that conflict, now you're seeing, wow, this actually has the ability to extend to global markets in a way that's similar to what happened in Russia and Ukraine where all of a sudden commodity markets are impacted and you're seeing that inflation.

• 22:57Ryan Petersen?

  But I don't know, Tom, if your view is, hey, we're gonna have progress because progress is good or something, I don't know that that's necessarily the direction that the world follows, like, you could have terrible stuff.

• 23:08Chamath Palihapitiya?

  I think if you're sitting in Dubai or Saudi or Qatar, you're thinking, this is the last thing we need.

• 23:11Ryan Petersen?

  For sure.

• 23:12David Sacks?

  Well, I think that's definitely true.

• 23:14Chamath Palihapitiya?

  Multi-decade, multi-trillion dollar investment plans and we're gonna let the Houthis rebels derail that?

• 23:20Ryan Petersen?

  And literally on ports, like Saudi's trying to build a big port as part of the NEOM project there in the northwest of the country on the Red Sea, which would be cut off, I mean, it's not gonna fly.

• 23:30David Sacks?

  Yeah, look Saudi Arabia is in a really tough spot here because what happened is after the Houthis deposed the monarch there in 2014 Saudi Arabia started fighting a war to restore the leader in 2015 and that war went on for almost a decade created a huge humanitarian crisis really underreported compared to other crises there were hundreds of thousands of civilians who were killed millions of people displaced when hungry finally that war again got paused by a fragile ceasefire that was negotiated I guess in the last year or so and then simultaneous to that there was a reproach mob between Saudi Arabia and Iran that was brokered by China and so the last thing Saudi Arabia wants to do is get involved

• 24:15David Sacks?

  in restarting this war or restarting hostile relations with Iran I mean they would like to move beyond that which is why they're not participating in this operation prosperity guardian the problem they have is that the Houthis aren't going to stop doing what they're doing until Israel's war in Gaza stops and Netanyahu just the last 24 hours made it clear that Israel won't stop fighting they will not agree to another ceasefire until Hamas is eliminated so Chamath I think you're right that if there were a ceasefire that this situation would go away very very quickly and shipping normal shipping would be restored however I'm not sure you're going to get the parties to agree to a ceasefire anytime soon I mean

• 24:58David Sacks?

  the Israelis seem pretty determined not to agree to a ceasefire I think the Biden administration clearly would like that I think they would like this problem to be over but with the continuation of hostilities in Gaza you continue to have the potential for the second order effects these kind of knock on effects and like I mentioned one is the Houthis another are all these American bases that are under attack right now by these Shia militias so I think this has the potential to be a black swan in 2024 meaning that somehow the Israel Hamas war spirals into a larger regional war that pulls the US in I'm not saying that's gonna happen but I think the potential is there the longer this goes on and I think that if that does happen there could be the potential for an oil shock by the way the

• 25:43David Sacks?

  Houthis have said That if the US attacks Yemen, they will light the Saudi oil fields on fire. Now, I'm not sure they have the potential to do that. I mean, presumably if they had the potential to do it, they would have done it during their long war. So that probably is just, you know, hyperbolic rhetoric. But there's so many ways for this to somehow turn into a larger Middle Eastern war.

• 26:04Jason Calacanis?

  To your point, Shama, I think, you know, I've been meeting with folks in Doha and Riyadh and Abu Dhabi and Dubai for the last six months. And I was talking to people this past weekend. You're absolutely right. There are a group of people with an agenda, uh, which is to modernize the economies there, to move off Petro and to move into technology and to move into hospitality with the Neon Project, uh, as you pointed out, Ryan. And that's not going to get derailed. And those are the most powerful, you know, deep-pocketed, uh, influential forces there. And so, yeah, they're working with the United States and I, and any of these rebels, et cetera, I think they're going to be dealt with because people want prosperity and they want to keep evolving these societies and moving them.

• 26:49Jason Calacanis?

  And normalization. Normalization, yeah. I mean, have you ever, have you got, who's been to Riyadh here? I have. Yeah, I think Freiburg or Saks, have you been to Riyadh? No. Freiburg? Or, I mean. No, it's beautiful. And it's changing rapidly, massively. And, and obviously Dubai's already been changing and then Doha and.

• 27:11David Sacks?

  I'm not arguing that.

• 27:13Jason Calacanis?

  Yeah.

• 27:15David Sacks?

  Saudi Arabia isn't a great place and, and they want to do the right thing here, but you're acting like the Houthis can just be dealt with. What, what does that mean to you?

• 27:21Jason Calacanis?

  Well, I, I think that the larger forces are united in wanting to have prosperity for their people, education for their people, uh, and to build deep ties with the West and the East to do commerce. And so I think those forces are greater than maybe some of the traditional forces that are at work. And, and these longer term conflicts maybe are not as important to the leaders and the citizens of these countries as prosperity is. And so when I say dealt with, I think they're going to just focus on developing their economies over, you know, these skirmishes.

• 27:55David Sacks?

  So are you saying there's going to be a diplomatic solution here? Cause I don't see it. I mean, here's the problem. Israel's not stopping its war in Gaza. The Houthis aren't going to stop until Israel stops. So how do you make them stop?

• 28:06Jason Calacanis?

  That's a great question. Containing these conflicts is probably the likely scenario. And I've asked that same question to the people who are in those regions. And when I spoke to them, they're all about containment. They don't think there's a resolution, like we might think about it here in the West, that, you know, there's not going to be a conflict between Palestinians and Israelis. They just think containing it and having it not be an all out war is success. What do you think is going to happen? I mean, at some point, the US isn't going to support-

• 28:35David Sacks?

  We have two sides who are implacably resolved. Israelis to continuing their fight against Hamas, and the Houthis to continuing to lash out at Israel, or the West in general, until that stops.

• 28:49Jason Calacanis?

  The likely scenario is that Netanyahu is losing support. That's what every Israeli and every person in the region says, is that Netanyahu is not going to last long term. So, what have you heard, Sacks? What do you think the resolution-

• 29:01David Sacks?

  Well, I think it's interesting. If you look at Israeli domestic politics, it's true that Netanyahu is unpopular, but something like 90% of the Israeli public favors the continuation of this war until Hamas is eliminated. I mean, the Israeli people are really, I think, hardened on this question. Those tapes of Hamas atrocities on October 7th were compiled into a film. They were recorded by the Hamas fighters' own GoPros. And the Israeli people have watched all those things, and they are resolved to destroy Hamas. Now, you can argue with their tactics, and I'm just stating the fact, okay? I'm not judging it. And the point is just whether Netanyahu survives

• 29:44David Sacks?

  or not, I think the Israeli public wants to eliminate Hamas. So I think they are resolved, I think the Houthis are resolved, and the Houthis control this choke point, so they can stop or interfere with global trade. And I think, look, there could be a ceasefire. I mean, I think Biden clearly would like there to be a ceasefire, certainly before the election. And that would bring all this to a rapid end. But if there's not a ceasefire, I don't understand how you just stop the Houthis. I mean, the only way to stop them is if you want to go to war with them. That's what we're talking about. So we're talking about the US using its naval assets to go get the Houthis.

• 30:21Jason Calacanis?

  Or the regions Chabot mentioned could use diplomacy and or financial measures. And so those are other options on the table.

• 30:27David Sacks?

  That's not going to work with the Houthis.

• 30:29Jason Calacanis?

  Well, no easy solutions here. Ryan, thanks for jumping on the pod with us once again. One question, how much more resilient post COVID, if at all, are supply chains? Because you talked about wanting to make them more resilient, and that was a major focus for Flexport. Is it better now post COVID? Have we done any work?

• 30:48Ryan Petersen?

  At the physical infrastructure layer, nothing's really changed. I don't think, you know, the bottlenecks have gone away just because demand went back down. The US had like a 20% increase in container volume. It created all these bottlenecks. We couldn't process that many containers in our ports. And then the containers now are back at 2019 levels and everything's flowing normally. But I wouldn't say that makes us more resilient. It's the same as before. And situations like this, you learn just how amazing and resilient the global trading network is, the global logistics infrastructure, but also it's pretty fragile. If a small group of rebels can fire missiles and you go, well, even the US Navy, what are we going to do? I mean, it's kind of an asymmetric warfare type thing. They shoot a $20,000 drone and we need a $2 million missile to shoot it down.

• 31:32Ryan Petersen?

  Like, it's not a, it's not a great setup. And it's not clear that firing missiles back is going to open it back up. And so, yeah, I think, I think it's much more fragile than we realize as civilization always has been. You know, it takes, takes 100 years to develop a civilization and an afternoon to go back to barbarisms.

• 31:50Jason Calacanis?

  And air freight you had talked about previously, that's still four or five times more expensive than sea freight. Is that about right, that multiple?

• 31:58Ryan Petersen?

  In general, that's a reasonable assumption is about four times. The air freight networks are very small in proportion. To give you a sense, like, one of these container ships that flows through the Ever Given is the world's most famous container ship that got stuck in the Suez Canal a few years ago. That one holds about 10,000 40-foot containers. 747, this is basically the biggest cargo plane out there, can hold seven 40-foot containers. And so if you have a diversion of global ocean freight will rapidly flow over to it doesn't take a lot of freight going, hey, I'm going to ship this by air instead to suddenly have the air freight markets get impacted. So it hasn't yet. The airlines are a little bit less connected to this market and haven't instantly said, hey, we're raising prices in January, but I suspect if this lasts another week or two, you're going to see

• 32:43Ryan Petersen?

  big run ups in air freight prices. And these are global markets. The price of freight from Asia to the US gets impacted because they're pulling ships off, the supply gets redirected, the planes get rerouted. It is a global market. So an impact here will affect prices of shipping Asia to US as well.

• 32:59Jason Calacanis?

  Thanks so much for coming back on the program, Ryan Peterson. Great to have you here. And oh, congratulations on being CEO of the company you founded, Flexport again. We didn't get a chance to talk about all the craziness with the CEO and turnover, but you're back, you're back in the home.

• 33:13Ryan Petersen?

  I'm back. It's amazing. It's amazing. Having the time of my life back here and work at the Flexport office every day.

• 33:19Jason Calacanis?

  All right. We'll see you soon. And thanks for coming on as Saks is Lifeline. Well done.

• 33:24Ryan Petersen?

  All right, guys. Take care.

• 33:25David Sacks?

  Ryan did bring up a really interesting point there that you don't hear enough, which was the asymmetry of the warfare that the Houthis can launch a drone or a cheap missile that costs thousands of dollars and it costs us millions of dollars to shoot it down.

• 33:39Ryan Petersen?

  Yep.

• 33:39David Sacks?

  That is just not sustainable for the US. We see this happening in Ukraine as well. All these, you know, multimillion dollar expensive tanks get taken out by a landmine or by a cheap, you know, RPG or something like that, that costs a few thousand dollars.

• 33:55David Friedberg?

  It's also the fact that if you send a drone and it blows up on a ship and it costs you a couple thousand bucks to do that, the lack of risk tolerance, the fact that the insurance companies won't insure the ship anymore means that now that ship can't travel and that's tens of millions of dollars of, you know, commerce that gets shut down off of a few thousand dollar investment. So there's, there's a deep asymmetry in the sensitivity we also have to loss. We, you know, we won't take, hey, well, maybe one in 10 ships can blow up. Let's keep going. It's the fact that there's no margin for loss. There's no allowance for loss. As a result, any sort of threat of loss means that the whole system shuts down. I'm not advocating that we should, but it's just the condition we're in. I also think the other point I didn't make, I would imagine

• 34:39David Friedberg?

  that this behavior with the Houthis is driven in part by the Emboldenment that arises following October 7th and the praise that Hamas has received globally. And if you believe that to be true, there are many other groups like this that may get emboldened and you start to see more activity in other regions as well. That you can have these kind of outsized impacts and folks suddenly, you know, start to take action, but.

• 35:08David Sacks?

  I think that's why we're between a rock and a hard place here is that on the one hand, if we don't do anything, then you're emboldening that behavior. And if you do do something, you're escalating the war.

• 35:19David Friedberg?

  Yeah, and to your point, you know, saying like, hey, the US is going to enter the war, I, I think that there may be this moment where it's not even an option, that the US is being provoked in a way that you can't say no, you have to, you know, maybe they end up having to act.

• 35:32Jason Calacanis?

  The guerrilla warfare aspect of this is super fascinating because you can really do incredible damage to very expensive airplanes with hypersonic missiles that go incredibly fast or like Mach 5 or something insane, and they're cheap. So $100 million or $20 million fighter jet can just be annihilated by a couple of hundred thousand dollars in, you know, hypersonic missiles. All right, there's been a ton of M&A activity and M&A deals that have been canceled. Adobe Figma has been called off and Illumina and Grail has been unwound as well. The big headline is that after a 15-month review process, Adobe and Figma called off their merger. We talked about it here multiple times.

• 36:16Jason Calacanis?

  It was a $20 billion cash and stock merger that was agreed to back in September of 2022. And there's tons to unpack here, shareholders, employees, a startup ecosystem, and of course, limited partners who were expecting huge paydays from Figma being sold to Adobe are now back to a waiting game of figuring out if this company can go public, et cetera. Schumoth, you had tons of thoughts on this and maybe you could educate everybody on the Illumina Grail deal, since I don't think people understand that.

• 36:50Chamath Palihapitiya?

  Yeah, I think there are three deals or almost deals that got essentially called off or canceled or never consummated in the last few weeks, which show a pretty interesting trend. So the first, as you said, Jason, was Adobe Figma. The second was Cigna and Humana. They were proposing a multi-deck a billion dollar merger. And it was very clear that the FTC was going to have a huge fit around it. So they said that we're not even going to do it. And then Cigna just said they'll do a $10 billion buyback instead. And then in the craziest example, Illumina and Grail. So Illumina makes these gene sequencing machines and Grail makes

• 37:36Chamath Palihapitiya?

  one of the leading tests for free DNA cancer detection. And at the time Illumina owned almost half the company. They bought the other half. They merged it in, even though the regulators said, hey, hold on, we have an issue with this. And now they're being forced to unwind the merger. So to to pull this company back out and divest it. I think the point of this is two things. One is that there is no viable M and A path for early stage venture capital businesses. So if you can't have a $20 billion merger or a $40 billion merger or a $15 or $20 billion M and A with a high degree of confidence,

• 38:19Chamath Palihapitiya?

  then the path to liquidity through M and A is less than 20% of the outcomes. Which means that the overwhelming path to get liquid is what you said, Jason, which is IPO. But the problem is the second part, which is that the capital markets in the United States are not ready. We're not in a position to support all this IPO liquidity. Why? The banks won't underwrite.

• 38:40Chamath Palihapitiya?

  There aren't enough researchers, research analysts that'll cover these stocks.

• 38:46Chamath Palihapitiya?

  The ways in which the banks make money have become so constrained. And so I'm kind of left pondering to myself, how do you go back to a world of like the 90s? Where startups, four and five years old would go public to raise capital.

• 39:01Chamath Palihapitiya?

  I don't think that that's going to happen. So I don't know exactly what happens to us, except that we'll have companies gestating for 15 and 20 years. And I think that just has a chilling effect because it's like, what investor wants to put money away locked up in highly liquid stuff for 20 years? What rate of return do you need to give them that makes them want to do that? So something has to change because if the M and A market can't exist, then we need to change the rules of the capital market so that there's incentives for these banks to underwrite these companies to go public.

• 39:29Jason Calacanis?

  Well, I guess there's two things, Sax, that could change this dramatically. One is if we put in more conservative, republican, libertarian, et cetera, less regulatory regime in Washington, that could open up M and A, you know, as soon as 2025, perhaps. And then the second is direct listings, dare I say Sacks and alternative ways to get companies public. It may not be the gold standard as a traditional IPO, but at least if we get those liquidity started. And I guess third, Sax, and I'll get your thoughts on this, for private investors and their LPs. Everybody seems to be focused on building strong, stable,

• 40:12Jason Calacanis?

  cash flowing businesses. And we've seen all the companies that went public, whether it's Airbnb or Uber, are now focused on ringing the cash register and being profitable. So ultimately, maybe this logjam and M and A blockage makes everybody focused on sustainable, profitable companies? And that's a good thing long term? What do you think, Sax?

• 40:29David Sacks?

  Look, like I said last week in relation to the Figma Adobe deal, the fact that regulators took 15 months to analyze the deal only to come to the conclusion that they basically weren't going to allow it, and then Adobe finally killed it, is going to have a chilling effect on M and A in Silicon Valley. I mean, if acquirers and targets can't have confidence that the deal will be approved, and in fact, they're going to be left in limbo for over a year, waiting for speculative approval, they're going to be less likely to do deals in the first place. And I'm sure Adobe's not happy about the fact they got to pay a billion dollar breakup fee, which by the way, was a really smart thing for Figma to negotiate. I mean, if you're, if you're a company that started that's going to get acquired, you'd need a pretty big breakup fee now as insurance on the deal, because

• 41:11David Sacks?

  there's a very good chance that regulators aren't going to allow it. So, yeah, absolutely. The fact that... Regulators got in the way of the Adobe deal and moreover, the way that they did it with this protracted delay is absolutely going to have a chilling effect on M&A in Silicon Valley. And look, there are only two good outcomes for a startup. You can either IPO or you can get acquired. That's it. The third is basically you go out of business. That's the third outcome. So when you take half the potential exits off the table, you're absolutely making it tougher for VCs and founders to get a good return. It's that simple. And that is going to have a depressing effect on, you know, the investing of risk capital in Silicon Valley. I don't think it's a good thing for anyone. And by the

• 41:54David Sacks?

  way, even if the US sort of fixes this, even if we get a regime that's more friendly towards M&A, you still have the EU to worry about. And you also have the UK to worry about because they're not part of the EU thanks to Brexit. The UK, like I said last week, they're like the Chihuahua who's leading the pack. They're the smallest market, but they're the most aggressive on antitrust enforcement.

• 42:15Jason Calacanis?

  Sax, they may just be the beard for the US and the Europeans.

• 42:18David Sacks?

  It's possible. But in any event, now you've got three regulators to worry about, not just one. And, you know, like I said last week, I think if you're a startup and you're trying to consider where to put your Europe office, I would not choose the UK anymore. I used to think that the UK was number one because it was so easy, but you don't want to create that nexus if you can help it. It might subject you to a competition authority you don't want to deal with later when you get acquired.

• 42:42Jason Calacanis?

  Yeah, I would have just opted out of the UK. I would have called their bluff, as I said last week. Friedberg, any solutions here, you think, to solving this problem in VC land? Or do we just have to build stronger, more profitable companies and be more patient about taking them public since M&A is not on the table?

• 42:58David Friedberg?

  I don't know if I'd take the antitrust regime as being the core driver of M&A not being on the table. I mean, there's a couple of these examples, but I don't think there's a predominance of this. Going on, I think that there's a lot of smaller deals that still end up being good outcomes. I mean, we've, we've also talked a lot about the lower cost of capital in starting software businesses and the era of AI type tools. And that leads to, you know, being able to hit a hundred X. If you put, you know, small enough amount of capital in and have a decent outcome, where you're not building the market monopoly in some particular market. It doesn't feel to

• 43:39David Friedberg?

  me like that's the biggest driver of concern here. The biggest driver of concern is just all the return on capital metrics that the big buyers are having to face, you know, return on vested capital is becoming more important than it's ever been, because we're talking about trillion dollar market cap buyers. And so that's how they're measured. And so they have to be really thoughtful about how they're deploying capital. In a high interest rate environment, that's, there's a greater sensitivity to a faster path to cash returns than there has been historically. So it feels to me like that's, and I would imagine if I'm Adobe and I'm looking at this Figma deal, do I keep fighting it? Or at this point, paying a billion dollars is probably net accretive to them. I think the stock price went up when they called the deal off, which highlights that it was probably a better investment for them to say, I'm going to pay

• 44:24David Friedberg?

  a billion dollars to actually get out of this deal at this point. And I think we see more of that happening, which is this rationalization of, you know, timelines to ROIC in a high interest rate environment.

• 44:34Jason Calacanis?

  Shabat, deals do get done.

• 44:35David Friedberg?

  There's a lot more tolerance for smaller deals, obviously.

• 44:38Jason Calacanis?

  Yeah, I mean, Salesforce was able to acquire Slack. That was 2020. Amazon was able to acquire Whole Foods, Walt Disney, 21st Century Fox with the X-Men. So

• 44:47Chamath Palihapitiya?

  Those are a different era. I really think that the large

• 44:50Jason Calacanis?

  These are all 2016 to 2020. You're right.

• 44:51Chamath Palihapitiya?

  Yeah, but those are a very different era. I don't think that that's what you can expect anymore. I don't think you can underwrite to get a $20 billion deal done in any industry.

• 45:01David Sacks?

  Yeah. Remember Meta or Facebook buying WhatsApp for, was it 17 billion? I mean, that was one of the biggest venture returns ever. Yeah.

• 45:09Chamath Palihapitiya?

  Today, that could never happen.

• 45:10David Sacks?

  Never happen.

• 45:10Chamath Palihapitiya?

  Today, that could never happen.

• 45:11David Sacks?

  And that, that Figma Adobe deal, it was a $20 billion deal. But with the rise in Adobe stock, it's really a $30 billion deal if it would have been consummated. Because half the consideration was in Adobe stock and that has basically doubled. So all of those investors and employees were looking at a $30 billion exit. And look, Figma is going to do great. I think the numbers that came out about Figma, where they're going to do about 700 million of ARR, growing 40%. So I don't know, they'll be able to IPO anytime based on that. But what's the multiple they're going to get? Probably 12 to 15 times. So.

• 45:49Chamath Palihapitiya?

  Eight to 10.

• 45:50David Sacks?

  Maybe it's like a $10 billion company in the public markets. I mean, growing nicely, but it's just not as good an exit. I mean, it's a big, big haircut.

• 45:58Jason Calacanis?

  The positive to this is consumers or retail investors haven't been able to buy IPOs and get in our companies earlier. So if people build stronger companies that aren't, that are more capital efficient, then companies can go public earlier. As you alluded to, Chamath, where Microsoft, Apple, a lot of these companies back in the PCR, they used to go public in under a decade and now it's always over a decade. So maybe this will make stronger companies that go public. And then if there's a regime change and maybe people feel more frisky, they still have to get through Europe.

• 46:27Chamath Palihapitiya?

  But. You know, biotech is the only market that's always viewed going public as a transitory capital raising moment. Right? Every biotech company that goes public in America at least are startups. They're pure startups. It's pure risk capital. But the, the technology side has viewed it very differently. It used to be the same. Right? But, and then it went to like, oh, we must be mature. And then it has to be growing really fast and it has to be profitable. There were so many ands, ands, ands that the, that at the end of all of that, there were just very few companies that qualified. And then by the time they did go public, they're 12, 13, 14, 15 years in, they're so long in the tooth that their best growth periods are beyond them.

• 47:10Chamath Palihapitiya?

  Now, a couple of companies have bucked that trend, but by and large, that's, that's the case. And I don't think that's to, to support what David, what Sachs said, is that's just unsustainable. You cannot, you will not have risk capital flow into the United States if this is going to continue.

• 47:29Jason Calacanis?

  Yeah, this is going to be super challenging for founders. You gotta build companies that are sustainable and can go public because that's really the only path right now.

• 47:37Chamath Palihapitiya?

  And it's exacerbated by what Friedberg said, which is then that that family office or that endowment, who can rip in a check as an LP to a fund can still get five, six, seven percent, can get corporate bond at corporate yields at like eight, nine, 10%. Why take on 15-year illiquidity for oftentimes funds that return less than the S and P? Which is the dirty little secret of Silicon Valley. It makes no sense.

• 48:07Jason Calacanis?

  It is going to be a challenged environment for some time to come, I think, as we work this out. I mean, the thing that I find super interesting with the Sacks was like, you got to invest in some companies that were very early and speculative like Joby. Now, how could a consumer ever make that kind of bet your mouth to bet on? And that wasn't one of yours, I know, but it was one of these like incredible moments where you could bet on flying cars, literally as a consumer, and I think they're actually going to figure it out. I was tempted to buy it and I've been tracking the stock and I'm like, wow, if they actually make air taxis work. And it's kind of cool that the public can participate in that. And that's what they were saying when there weren't enough IPOs and we had half the number of public companies. So I don't know if you have thoughts on it.

• 48:50Chamath Palihapitiya?

  The number of public companies, I think, has halved in the last 20 years. So are more public companies better than less? I don't know. I think that's kind of like a random statement. I think what is true is that the public markets used to be used for raising risk capital. But the public markets at the time also had a ton of research analysts. There would be a lot more coverage of these companies. There would be a lot more visibility, a lot more checks and balances, because people would be meeting with management on a regular basis, writing thoughtful research reports. All of that is constrained as the as the business of being on Wall Street has changed. So it's not enough to just all of a sudden have a bunch of companies go public

• 49:34Chamath Palihapitiya?

  if all of that supporting infrastructure isn't there. So this is what I mean by it's a catch 22. On the one hand, there's not, there's, there's no M and A, so you need to have more IPOs. But the banks will need to hire more people. That comes at a cost, which means that they're going to have to generate more revenue somehow. That comes at a cost to somebody else. And until that's figured out, you're not going to solve this problem. And instead, what's going to happen is folks will be less motivated to invest in the innovation economy because there'll be no path to liquidity. And when you do invest, you'll invest much smaller amounts of money and you'll make it as part of your risk allocation, a smaller piece of the overall pie.

• 50:17Chamath Palihapitiya?

  What it also means is that if you're an entrepreneur and you haven't started a company yet, you may want to seriously consider raising a friends and family round, using these AI tools and trying to build a very different kind of business, slow and steady, profitable from day one. And that's never been rewarded by Silicon Valley VCs. But if the reward for VCs don't exist, then the VCs themselves won't exist. And so you may want to start thinking about different ways to capitalize your business.

• 50:51Jason Calacanis?

  And it's an interesting point you make. That is very subtle, so I just want to restate it here. The analysts who are covering companies like, say, Joby, I'm just picking this air taxi company because I'm obsessed with it. If there's not an infrastructure, those analysts act in a way as a backstop or a bit of pressure on management, I think is what you're saying, to, hey, perform and we're checking on you and we're meeting with you. So without that, there's just a company sitting out there and nobody is asking them hard questions and then making decisions to put a buy or a sell rating on it. Is that correct? Maybe you could expand on that missing piece.

• 51:27Chamath Palihapitiya?

  There is an evolution in the public market. So, look, the public markets back in the 90s was a bit of a rigged game where you could call a CEO if you had his or her number and they could tell you things that they didn't tell everybody else. And when you look at the folks in their 60s and 70s and 80s who really turned it, I'm sorry, folks, but they profited massively from that information arbitrage. And that changed when there was a regulation called Reg FD that got passed in America, which said, regulation, full disclosure, what you tell one, you have to tell everybody, right? And that was an attempt by the SEC to level the playing field. It was a very smart piece of legislation. But what that did was it constrained the touchpoints.

• 52:12Chamath Palihapitiya?

  That a company would have with the public markets to a few organized events, right? Analyst conferences, research days, actually, banks are allowed to organize formal company dinners. And you'll get all these people together, analysts across the entire spectrum from Fidelity to Goldman Sachs to Morgan Stanley. And the company has to perform to them and those folks will write both internal and external reports that say buy, neutral, or sell, right? That became the only check and balance to make sure that management was held accountable to the large swath of public shareholders. Because otherwise, it's not Jason, you as a shareholder of Joby, quite honestly, have any say, right?

• 52:53Chamath Palihapitiya?

  You exert your pressure through the analyst who then represents the ability to influence your buying and selling decision. But if those analysts don't even exist, there is no feedback loop between management and the people that own the stock. And that's the problem we have today. There's not enough research coverage. There's not enough analysts. There's no organized way to keep companies held accountable. And so if you have a bunch more companies that go public without that infrastructure, it's very difficult.

• 53:22Jason Calacanis?

  Seems like there's an opportunity somewhere in there.

• 53:24Chamath Palihapitiya?

  You know, the big opportunity that I that I that I think should happen is that a bunch of these banks should actually use these AI tools, Jason, to be crawling all these 8Ks and 10Ks and all these filings and generate statistical measurements of all of these public companies that they make free and available to everybody. These things should be a bunch of dashboards and charts that are just out there for anybody to subscribe to. So that you can just do the initial work of having to parse through all of these filings, have it done by an AI, by an agent from a bank who can train it properly. I think that would be an immense value to all shareholders. And I don't think it costs that much money. And I think it would be goodwill.

• 54:08Chamath Palihapitiya?

  Robin Hood could do this. It would be great goodwill to build a lot of trust and credibility with investors.

• 54:15Jason Calacanis?

  So now that you're CEO of a company, how do you look long term at potential exits going public? What is the the thoughts you have on this as you architect the company, Friedberg, as the CEO?

• 54:27Chamath Palihapitiya?

  Do not care about exits.

• 54:29Jason Calacanis?

  Don't care about expand on that. Yeah, explain.

• 54:31David Friedberg?

  I just want to build a great business that makes great products for our customers. That's it. So if you do that, all these discussions around, you know, giving shareholders liquidity, I'm the, I'm the main shareholder. So I don't need liquidity. I just want to build the business.

• 54:48Jason Calacanis?

  So how do you think about profitability then? Because if you have to fund it or funding might be harder to come by. How do you think about funding over the next decade, this vision you have?

• 54:58David Friedberg?

  It freaks me out. You got to keep businesses capitalized. So there's definitely across businesses I'm on the board of or involved in universally a bias towards profitability. I've seen a couple of decisions we've made at some companies to shift from making longer time cycle investments that may not pay off for many years where you have the luxury of doing that in a zerp environment. And you could always get capital to fund anything that's multiple years away from realizing any sort of return

• 55:37David Friedberg?

  to shifting towards a bias towards making things that can generate real revenue and real profitability in the near term, keeping costs low and building from there. So it's definitely, I'd say, been a flip flop in the environment. It's why the biotech landscape is largely kind of dried up. The funding landscape has dried up significantly because most of the investment opportunities are those multi-year out before you know if you have a return on your investment kind of investment cycles. And so the ones that do get funded are those that have a nearer path to profitability and where you can build some sort of cash generative service in the near term on the path to building a bigger product down the road.

• 56:14Jason Calacanis?

  So as you're strategizing, you're thinking, how can we get to cash flow positive, break even, whatever quicker? You're not strategizing, how do I get a huge multiple and get some dumb tiger money, whatever. No, no addicted tiger, but they paid the highest prices at the end of the cycle.

• 56:29David Friedberg?

  I've got enough wisdom at this point to tell you that if you don't have to raise venture capital, you're better off.

• 56:34Jason Calacanis?

  Shama, you also became a CEO. You have the, I think it's hustle is your company and that's profitable. And you're running it, I'm assuming for growth, but maybe profit first, then growth. How do you think about those two dials? How much growth? How much profits?

• 56:50Chamath Palihapitiya?

  We have the same belief that Freebrooke has, which is our job is just to make really great products for our customers. When I took over the business, we had to go through a difficult layoff and a rebasing of the business. But it's a business that's growing kind of forty five percent a year and it's profitable. And, and what I talked to the team is that, you know, we will reinvest our profits. And so we have an ambitious plan. And as long as we meet that, we'll take some percentage of that profit and reinvest it. But I, like Friedberg, also have no plans for liquidity. I just want to build this thing to be as big as possible. And I don't want one single shred of pressure that isn't defined by our customers.

• 57:34Chamath Palihapitiya?

  And so by being profitable, we have complete control of the cap table. We can do whatever we want. And the people that benefit frankly are the employees because they can get paid. And our ability to hire people without being subject to like pressure to raise a new round and set a new random valuation. So no unnatural acts, just customer profits. And so By the way, if I can grow for ten years, if we can grow for ten years at forty percent a year, this will be a ginormous business. So they're trying to three X and do it unnaturally.

• 58:01David Friedberg?

  Jason, just, just to chime back on the, the question you asked a couple of minutes ago, I, number one, if you can avoid raising capital, you're better off because then you don't have any shareholder pressure to get liquid. And that can create contortions in what you do and how you operate the business. And second is if you're going to raise capital,

• 58:23David Friedberg?

  if you set too high evaluation, if that becomes the bogey, you set yourself up for challenges because now you've got to have a multiple on that valuation to satisfy investor return hurdles. And the higher the valuation, the, and you apply a multiple to that, the higher the exit has to be. And suddenly all the options start to fade away. You can no longer have a modest exit that can do really well for employees and the founders and early investors. And it becomes a necessity that you have a massive outcome. And by the way, we see this now in this post Zerp environment that a lot of businesses that raised a lot of capital at a very high valuation. And then you have this multiple compression that's just happened in the last two years. Their valuation effectively, if they were to go public today or get sold, is less than the capital they've raised.

• 59:09David Friedberg?

  And that's the most extreme scenario where, you know, suddenly all the common shareholders get wiped out in terms of their return.

• 59:15Chamath Palihapitiya?

  It's such a great point. Like the thing that people used to say was, oh, it's a tech company, so we need to give it a premium. The problem is now everything's a tech company. To say you're a tech company is a meaningless statement that means nothing.

• 59:27Jason Calacanis?

  You're a company.

• 59:28Chamath Palihapitiya?

  So that you're a company. So then there's no premium for being a company.

• 59:32Jason Calacanis?

  No, there's a premium for profits.

• 59:34David Sacks?

  Well, there's a premium based on quality of revenue, which has to do with gross margins. I mean, obviously.

• 59:39Jason Calacanis?

  And unit economics.

• 59:40David Sacks?

  And unit economics, obviously, a company that has 80% gross margins is different than a company that has 20% gross margins.

• 59:46Chamath Palihapitiya?

  Not if it's unprofitable.

• 59:47David Sacks?

  Well, no, no, I totally get that. I'm just saying that you can normalize based on gross margin as opposed to the type of company it is. Sometimes we'll see a company that markets itself as a tech company and only has 20% gross margins. That's an indication that something is wrong usually, or it's not truly a software company.

• 1:00:04Chamath Palihapitiya?

  It's just a company.

• 1:00:05David Sacks?

  It's just a company.

• 1:00:06Jason Calacanis?

  Yeah, I think that's the way to look at it. High gross margin versus lower gross margin.

• 1:00:10David Sacks?

  Just to go back and answer your question, Jay Cal, about how do you decide how much money to put into growth versus being profitable? I think the right answer to that is not to say there's some absolute amount of money you should burn, given your round. It's to look at growth on an ROI basis or unit economics basis. What is the return on the growth dollars you're spending? And probably the best way to do that is to look at the payback on customer acquisition. How long does it take you to pay back your customer acquisition costs? And I think a lot of people don't do that analysis correctly because they just look at the revenue they make from that customer. But you actually have to look at the marginal profit. So this is how the gross margin ties in.

• 1:00:51Jason Calacanis?

  Easy example is something like Spotify. Spotify, it costs a hundred dollars a year and they would acquire somebody for a hundred dollars a year. Hey, they get to year two, it looks like you made a hundred dollars. Except Spotify has to pay a massive amount to the record label, so their margin isn't as high as maybe a SaaS company. And that's where the devil's in the details.

• 1:01:07Chamath Palihapitiya?

  And overhead, and overhead.

• 1:01:09David Sacks?

  You've got to look at churn as well. So if that customer only lasts two years and. Half the margin goes to the record companies. Well, you can't count 100% of revenue. Now you're looking at, I don't know what's that's like you're dividing by two twice. So it's effectively, you know, a quarter.

• 1:01:26Jason Calacanis?

  Fifty bucks of the 200, let's say.

• 1:01:28Chamath Palihapitiya?

  Jake, what are you, what are you seeing in your, in the companies you're funding? You're seeing profitable companies or revenue generating companies? What like, are you telling folks you've got to grow and raise a big series A? Are you telling folks, hey, take your time and?

• 1:01:39Jason Calacanis?

  Yeah, it's a great question. We invested in 100 companies this year. It's more than I've ever done. That's the same amount I did in the first seven years of my career. And 100% of the time, they are not expecting to raise like some giant seed or series A. They're raising just the amount of money they need and they're keeping their expenses absurdly low. The biggest trend I'm seeing is outsourcing of talent. And so Americans, and I'm not going to make this like a huge anti-American thing, but the level of entitlement and the effort Americans are putting into jobs expecting 150K, let's say, and then offshoring a developer, Latin America, Portugal, keeps coming up, Canada. They're all looking for what's the most efficient way for me to build a 10 person team?

• 1:02:22Jason Calacanis?

  And then I'll see a burn rate of $30,000 with 10 people. I mean, how is that possible? Like, oh, our developers cost 22,000 or, you know, SDRs are 10. I mean, how is that possible? Oh, we have two people in Manila, et cetera. Long way of saying efficiency, efficiency, efficiency. Though we have to get to break even with the money we just got. We're not expecting a second round of funding and a lot of them are raising but 500K to 1.5 million. And if this was 2020, it would be three to 10.

• 1:02:47Chamath Palihapitiya?

  We talk about like AI as like a big disruptor to like the big companies and this and that. But AI may be the biggest disruptor to VC.

• 1:02:54Jason Calacanis?

  Big time.

• 1:02:54Chamath Palihapitiya?

  In the end.

• 1:02:55Jason Calacanis?

  Explain what you mean. I know what you mean, but I want the audience to understand.

• 1:02:57Chamath Palihapitiya?

  Let's just say you raise a $2 million seed round. In, in the past, what you would do to your point, Jason, is you would hire seven people at $200,000 each, right? So now you have a $1.4 million burn. So you basically have, and let's just say you co-work someplace, you have a year and a half. And so you're pedal to the metal, right? You're basically trying to throw as much spaghetti against the wall as possible. See what sticks, buy as many ads, do whatever it takes. The money basically goes to AWS and Facebook and a couple of other companies to Google. And then you hope that there's enough traction where somebody then writes you a 10 or 15 million dollar Series A check.

• 1:03:39Chamath Palihapitiya?

  Now, if you take that same 2 million dollars, you could have a three-person team, four-person team, half of them offshore, where they also use things like Copilot, which is like a 2 to 3x lever. Now, all of a sudden, they have the same 10-person team and it costs $40,000.

• 1:03:59Jason Calacanis?

  Exactly.

• 1:04:00Chamath Palihapitiya?

  And so now, all of a sudden, they have four years. So why wouldn't they do that where they would still own 80% of that company? And all of a sudden, there is a potential to exit it for 50 million or 100 million, and they've made more money than in a traditional outcome if you sold it for 2 billion.

• 1:04:17Jason Calacanis?

  Precisely the case. This is literally what founders are modeling right now. They previously wanted to beat the record of the person in their cohort who had, who raised the most money at the highest valuation. Now, they're just like, how do I get to profitability? And how do I own as much of my company as possible? So Sacks, you've got over a billion dollars under management. You've been one of the most successful new venture firms in Silicon Valley in the last decade. You've got a lot of cash you could deploy. How do you deploy it intelligently, given the circumstance of people maybe raising less or being more efficient? And what do you think of the AI's impact on venture?

• 1:04:55David Sacks?

  Well, the most important thing is to have opportunities to invest in. And the fact is that before this AI wave, the whole cloud, social, mobile wave had kind of petered out. I mean, the pond of opportunities had kind of been fished out. And AI is great because it restocks the pond. I mean, there is a lot of new ways for founders to use these advancements to solve problems that they weren't addressing before. So I think you guys are being a little too gloomy. I mean, I think that the impact on capital efficiency will take some time to play out. But I think that for the first time in a number of years, it feels, everything's feeling fresh again.

• 1:05:36David Sacks?

  And there's just, I think, a lot more opportunities for founders to go after now. It's like this at the beginning of any big new tech wave, right? Is this a new platform opportunity? Same thing was true. With the App Store, when the iPhone launched, same thing was true when the internet launched. Now, I understand a lot of these opportunities are going to be taken by big companies that already exist. But there's always going to be an opportunity for founders when you have a big disruption.

• 1:06:01Chamath Palihapitiya?

  David, I agree with you. My comment is less about the pond. I agree with you that the pond is getting restocked. My comment is that the economic impact of AI is so massively deflationary. It may be an order or two orders of magnitude more deflationary than AWS was. And that was massively accretive to the startup economy. So if this is a 10x-ing or 100x-ing of that economic impact, my only point is that the break even threshold for a founder will have gone way down. And then as a result, it's only a matter of time until they can put two and two together in an Excel spreadsheet

• 1:06:41Chamath Palihapitiya?

  to figure out that owning 50% of a $100 million company is greater than owning 18% of, you know, some other company when you're massively diluted, or 8% or whatever. It's just like, that's all I'm saying is like the effective break even goes way down in a world where AI proliferates. And I think that's positive for Sex. It's just positive for founders.

• 1:07:04David Sacks?

  If you look at what founders do with the money when we invest in a series A or B, the number one thing is go to market, right? So they want to basically triple their sales. Let's say they want to grow from 5 million of ARR to 15 million of ARR. They have to staff up the quota capacity to hit that number. And, you know, for every AE, you're going to need some number of FDR, some sort of management. You're going to need some sort of operations overhead. So you've got to hire all of that. And then they want there to be a cushion in case they miss their numbers, right? Because there's no guarantee you're going to hit that. So, you know, founders still need to raise the money to staff up to go after that opportunity. Now, does sales become more efficient over time because of AI or does Legion?

• 1:07:48David Sacks?

  Yeah, I think that's possible, but in order for that to happen, you're going to need to see a rise in quota capacity. Right? I mean, that's what we're talking about is that that same AE can now hit. You know, a greater level of sales because they have better tooling. We're just not there yet. Maybe that happens over time. But I think, you know, your typical

• 1:08:09Chamath Palihapitiya?

  It's inevitable.

• 1:08:10David Sacks?

  Maybe it's inevitable, but I just think your typical SaaS start right now is spending the money on more prosaic things.

• 1:08:16Chamath Palihapitiya?

  Yeah, yeah, yeah. No, I think you're right. All I'm saying is I think what it means is that the $200 million fund today becomes 50. The $500 million fund needs to be 100 and the billion dollar fund needs to be 200. It's basically back to the future. It's like back to the 1990s style.

• 1:08:33Jason Calacanis?

  2012.

• 1:08:34Chamath Palihapitiya?

  By the way, I'll show you a table here. Nick, I need you to blur out the names. Okay? I just think it's super interesting. I watched Friedberg through this, but this was like a list of all these funds that I've invested in.

• 1:08:44Jason Calacanis?

  These are venture funds you've invested.

• 1:08:46Chamath Palihapitiya?

  These are all the venture funds I've invested in. If you look at this, what do you notice about like the mega funds that just clock out DPI? Look, this is a $100 million fund, right? Look at, look at clocked it. This was a $220 million fund. My point in all of this is like, if I look at my returns as an LP, I've never had success when I've invested in big funds. I've only had success in small funds.

• 1:09:13David Sacks?

  It's true that smaller funds do perform better and larger funds become more of an index and achieve more average returns. When you got a multi-billion dollar fund, it's way harder to achieve a, you know, outsized return. So, yeah, I agree with you. I think this dynamic would be healthy. I mean, our funds actually are not that big in the grand scheme of things.

• 1:09:31Jason Calacanis?

  It's definitely the game is changing dynamically and this podcast is going to be great in 2024 because we went from four capital allocators to two capital allocators, myself and Sacks, to two in the arena CEOs. So we're going to be having this discussion, I think, in a very granular way. Now that we got two players on the field, Sacks, that we can watch what they're doing.

• 1:09:49David Sacks?

  Well, I've got a new incubation that's going to be launching soon.

• 1:09:53Chamath Palihapitiya?

  Oh.

• 1:09:54David Sacks?

  But I'm not going to be CEO of it, but you know, I'm kind of executive chairman.

• 1:09:59Chamath Palihapitiya?

  Oh.

• 1:10:00Jason Calacanis?

  Is it a SaaS company?

• 1:10:01David Sacks?

  Yeah, it's a SaaS company.

• 1:10:03David Friedberg?

  What kind of company is SaaS?

• 1:10:04David Sacks?

  It's basically Yammer.

• 1:10:05Jason Calacanis?

  You have our attention.

• 1:10:08Chamath Palihapitiya?

  Wait, you say Yammer 2.0?

• 1:10:09David Sacks?

  Yeah.

• 1:10:10Chamath Palihapitiya?

  I thought that was Slack. So this would be.

• 1:10:12David Sacks?

  You gotta say Yammer 3.0.

• 1:10:14Chamath Palihapitiya?

  Yeah, yeah, yeah. Yammer 3.0. Okay, let's go. Let's get a, we'll get a little, uh, yeah, we, I think we had a push on call in. So now we need to get our 50x on Yammer 3.0.

• 1:10:25David Sacks?

  Yeah.

• 1:10:25Chamath Palihapitiya?

  Give us a little tasty poo for your besties.

• 1:10:27David Sacks?

  We sold call in, so now, you know, we've cleared the decks and I can't work on multiple incubations. I can only work on one at a time.

• 1:10:34Chamath Palihapitiya?

  Can you have your person that runs that Sasgrid thing email me? Cause I want to onboard my company into Sasgrid.

• 1:10:40David Sacks?

  Yeah, dude, it's so good. Well, by the way, that was the last one. So I've done, I guess, three of these now. There's call in Sasgrid. So Sasgrid is now spun out completely of Kraft. And the, the founder of Sasgrid was our VP of Analytics at Kraft. And now he's going full time to Sasgrid. So I think it's going to be very successful.

• 1:11:00Chamath Palihapitiya?

  But can I get on boarded and can I get a friends and family discount?

• 1:11:04David Sacks?

  Yeah.

• 1:11:04Jason Calacanis?

  Let's explain this concept to the audience. It's, it's unique in the world and we should maybe double click on the economics, not on a specific company, Saks, but just generally why VCs are doing this. You're incubating a company, you're a former founder, you have that itch, you have ideas. So instead of investing in a company, you say, hey, let's all get to the office. I have an idea, let's make this ourselves as Kraft. And then we'll put some of Kraft's LP's money into it. And then there's some slug of capital saved for the new team that comes. So how does the economics on something like this work? And why do LPs love it or do they love it? And then why is it good for your internal team or for you to incubate a company as opposed to just find them?

• 1:11:47David Sacks?

  Well, when I first set up Kraft, we actually wrote into our LPA that we had the ability to incubate companies. And we had a pre-arranged economic deal with our LPs on those incubations. Cause I didn't want it to come up later. And then there's some conflict of interest between the management company and the LP. So it's a predetermined deal. And we don't do a lot of these. Like I said, I guess there's been three, there's been Sasgrid, call in and now this Yammer 3.0 we're talking about. But really, I gotta give the credit for SaaS grid to our VP of Analytics, who really, I think, pushed this idea. And it started with a simple way for us to analyze deals and dashboard deals. It started as a spreadsheet that we would give founders that would crank out their charts. And then we turned it into a website that was free. And then

• 1:12:31Jason Calacanis?

  You needed it as an investor, right? You needed it as an investor.

• 1:12:34David Sacks?

  This is an investor. And then what happened is that we saw founders started using SaaS grid as their dashboard to manage their companies between funding rounds. And we're like, oh, okay. That's a big aha moment. So basically, there was no dedicated, verticalized business intelligence tool or dashboarding tool just for SaaS companies. And the advantages of verticalizing are massive because when you know what kind of company it is, you can just give them all the dashboards out of the box. And all the formulas can be calculated exactly the right way. There's gonna be less room for error.

• 1:13:08Jason Calacanis?

  They don't have to reinvent the wheel.

• 1:13:09David Sacks?

  Yeah.

• 1:13:10Jason Calacanis?

  Every time.

• 1:13:10David Sacks?

  You use like Tableau or Looker or whatever, you're reinventing the wheel. You're writing all the formulas yourself. It doesn't make any sense.

• 1:13:16Jason Calacanis?

  Back to the deal.

• 1:13:17David Sacks?

  Yeah.

• 1:13:17Jason Calacanis?

  You pre did the deal, so LPs wouldn't be surprised. That's awesome. So the management, there's a predetermined valuation, I guess, at that seed stage. A certain amount of money goes in and your holding company gets some equity, which is like a nice little extra icing on the cake for incubating it. And then the LPs get a sweetheart deal or a better deal. Is that why they would be in favor of it?

• 1:13:37David Sacks?

  Yeah, the LPs get like basically a vig in the startup.

• 1:13:41Jason Calacanis?

  Got it.

• 1:13:41David Sacks?

  We kind of modeled it after YC's original deal, right? Where YC got, was it 7% for $100,000?

• 1:13:48Jason Calacanis?

  Yeah.

• 1:13:49David Sacks?

  And then on top of that, the fund can invest in the seed round at the market valuation, whatever the market.

• 1:13:55Jason Calacanis?

  Ah, okay. So they get basically 7% for free or something in that range.

• 1:13:58David Sacks?

  7% for $100,000, then plus whatever the seed round's gonna be.

• 1:14:02Jason Calacanis?

  Brilliant. Yeah.

• 1:14:03David Sacks?

  Yeah, I think it's a good deal for them and

• 1:14:05Jason Calacanis?

  And also it's good for you because you have to want to come to work every day. And this keeps you mentally engaged. Like Chamath said, he felt like he was becoming a talking head and just not, I don't know how you phrase it exactly in your newsletter, but

• 1:14:16David Sacks?

  Well, like you said, scratch is an itch. It's nice to be able to, if you have an idea for a product, you can work creatively on it.

• 1:14:23Jason Calacanis?

  Yeah.

• 1:14:23David Sacks?

  I don't want to run companies anymore. I don't have any desire to be CEO, but it is fun to work on products if you have an idea.

• 1:14:30Jason Calacanis?

  Chama, how's it been for the first couple of months now? Are you really feeling more intellectually curious and challenged? Is it annoying to deal with employees and, you know, customers and all that kind of stuff? What's it been like? I think you've been at six months, I think.

• 1:14:46Chamath Palihapitiya?

  It's been really challenging.

• 1:14:49Chamath Palihapitiya?

  The first part of it was quite honestly, we had to

• 1:14:54Chamath Palihapitiya?

  rebase the the cost basis of the company and get costs under control. That's hard. And you had to, we had to lay some good people off.

• 1:15:04Chamath Palihapitiya?

  And then we had to kind of like reset the strategy, right? Goals, get our values kind of in a good place.

• 1:15:11Chamath Palihapitiya?

  Reorient the organizational design, like who will do what, right? All of these things require just enormous amounts of time that where you don't see necessarily the obvious impact in a metric or a dashboard right away. And so you just have to commit to this process and really follow through in it. You have to find the people that have this real potential, elevate them, make decisions quickly, find out you made some wrong, undo them, find out you made some right, double down on them. So it's been a real learning process. The thing, and then on top of all that, I've tried to start coding again. Sunny helped me a lot. I built a couple of models.

• 1:15:50Jason Calacanis?

  Repair programming.

• 1:15:51Chamath Palihapitiya?

  Yeah. And then, but then I did that to go back into our all hands, which we do every week. And I wanted to demo some stuff, mostly just to set the values that we're all grinding here, you know, and I'm here grinding and learning this stuff like anybody else. And it's embarrassing because like it's janky code, it doesn't work and blah, blah, blah. It was, but it's been really, I think in the long run, it's, I think the company is a lovely business and I, and I want them to be successful because I think they deserve to be successful. And for me, it's been a great outlet to just get back to the basics of like, what really matters in running a company in 2023? I don't think I really knew the details.

• 1:16:31Jason Calacanis?

  Hmm. That's good.

• 1:16:33Chamath Palihapitiya?

  And I'm finding it.

• 1:16:33Jason Calacanis?

  A little humbling, perhaps a little humbling to get in there and be in the cockpit.

• 1:16:37Chamath Palihapitiya?

  Really, really humbling.

• 1:16:38Jason Calacanis?

  Yeah, it's good.

• 1:16:38Chamath Palihapitiya?

  Yesterday, we were sitting there in E-Team, which is our executive team, and we're in the middle of a big deal. And the seven of us were redlining a contract back. And I know that may sound like really tactical stuff, but it was, for me, it was amazing. I'm like, this is great work. And I felt like I accomplished something when it was done. And maybe the deal gets closed today, the team is on the call. And I just think it's wonderful. I get a real

• 1:17:00Jason Calacanis?

  That's awesome. Yeah. All right. Listen, there's another story that is under reported. We try to find these under reported stories, things people are talking about in their group chats, but maybe not reading about or hearing about in the mainstream media or even on social media. There are a couple of unbelievable bombshell class action lawsuits that are dropping in the United States regarding our real estate industry. In October, a federal jury in Missouri found the NAR, that's the National Association of Realtors, and several of the brokerages that have those brokers working for them guilty of conspiring to artificially inflate commissions for home sales.

• 1:17:39Jason Calacanis?

  They now have to pay at least $1.8 billion in damages to sellers of more than 260,000 homes between 2015 and 2022. This could bankrupt the NAR. And if you don't know what a racket this is, people selling homes in the United States pay 6% commissions on average, 3% for the seller. That's if you own the home and you're selling it, you give them 3% of the sale. And then the buyer, you also give them 3%. And there have been a number of companies like Redfin who have tried to change this. I actually used Renfitt on a transaction and tried to use them on sale. And I was faced with brokers who, I kid you not, literally said, I'm not going to show your home

• 1:18:20Jason Calacanis?

  because it's a lower commission rate. And they have been working in unison to try to stop this kind of innovation. But the 6% is a tradition. It's not a rule. You can actually negotiate it. And now, since this case got won, another couple of cases have been dropped. And these new class action lawsuits all put together could be $13 billion in damages.

• 1:18:45Jason Calacanis?

  I don't know who's been following this in the group, but I have a lot to say about it.

• 1:18:49David Friedberg?

  Yeah, I mean, I spent. Friedberg. I spent a bunch of time looking at this because I've done several no broker real estate transactions.

• 1:18:58Jason Calacanis?

  Oh, just lawyers.

• 1:19:01David Friedberg?

  Yeah, just lawyers. And then in California, I don't know if you guys know this thing called MLS, the Multiple Listing Service.

• 1:19:08Jason Calacanis?

  Yes.

• 1:19:09David Friedberg?

  Which feeds the data into Redfin and Zillow. And in order to list a property on MLS, you have to have one of these real estate licenses and be a member of National Association of Realtors. Part of the monopolistic racket that goes on is that you have to be a licensed broker in order to list your home on the service that is the monopoly in the listing of homes, which everyone looks at. So there's a bunch of folks who have set up a listing service where you can list your home directly on MLS. And basically, it's a guy who has a brokerage license, and you pay him a hundred bucks, and he just has a website set up, and then you'll list it. And so you can kind of just list your own home, post the photos and all the docs. And then, when the agent asks for disclosures, every disclosure they want to see on a National

• 1:19:53David Friedberg?

  Association of Realtors form, and the NAR forms are only available if you're a member. So there's a whole bunch of ways that they've tied up the market and made it impossible for the system to operate without the NAR members being a key principle in the transaction process. When, at the end of the day, having gone through this a number of times myself, there's just all these templates and data that flows into this. There's no reason why you necessarily need to have an individual that needs to be involved here. But if you did, it's actually a data entry service. The process of entering this data could probably reduce down to a fixed fee of, call it, a couple thousand bucks per home, rather than a percentage of the home value. And by the way, think about the craziness around this.

• 1:20:38David Friedberg?

  If you buy a home. And you sell it, in most parts of the United States, you actually have a tax that you have to pay that's a percentage of the gross. And most people have most of their net worth tied up in their real estate. So it's one of the few places where you will actually see a large chunk of your net worth actually taxed on a gross basis and taken away from you if you end up selling it, rather than on a net basis, meaning net of the profit you make. And then the brokers want to get paid a percentage of the gross as well. These are the commissions they get paid. From a first principles perspective, it doesn't make sense that we're paying a percentage of the gross to agencies to transact this volume. The total volume in the US is an incredible number. It's $100 billion a year in residential real estate commissions. And there's 1.6 million folks who are real estate agents that are licensed, making their living doing this.

• 1:21:20David Friedberg?

  So it's not an inconsequential industry and it's not an inconsequential verdict. Nick, if you could pull up that chart of the different countries, here's a good comparison. So in the US, we pay about 5.5% brokerage commission, split between the buyer and the seller's broker. And again, legally, you don't need a buyer's broker, you don't need a seller's broker. You're allowed to sell your home without a broker. There's nothing in the law that prevents you from doing that. So this is just an industry that's popped up to service this need, and their pricing model is to take a percentage of the gross. And that's just the way the market's developed. But in a competitive market, that should be competed away. And it hasn't been because of this behavior that's gone on with institutions like the NAR.

• 1:22:03David Friedberg?

  And you can see across different countries, different pricing systems. As a percentage of gross, in the UK, you only pay about 1.3% total brokerage commission on buy side and sell side. In China, 2.5%. In Russia, 3.5%. Some countries like Japan and Argentina are comparable to the US at 6%. France is at 5%. Germany's at 4.5%.

• 1:22:23Chamath Palihapitiya?

  Can I ask a question for you, Bert?

• 1:22:25David Friedberg?

  Yeah.

• 1:22:26Chamath Palihapitiya?

  I only own one house, so I don't, I've never gone through this experience, really, that I can remember, because that was more than a decade ago. But today, if I wanted to sell a home...

• 1:22:36Chamath Palihapitiya?

  Okay, I could sell it to you, right? But if you have a broker, do I have to pay you 3% as well?

• 1:22:43David Friedberg?

  No, you could sell your home to me. And then if I have signed-

• 1:22:47Chamath Palihapitiya?

  Who pays your broker's 3%?

• 1:22:49Jason Calacanis?

  The seller pays the buyer's broker, but they don't have to.

• 1:22:53David Friedberg?

  Yeah, no, here, it's really important to understand this. If you're gonna go buy a home, you're typically not signing a contract with an agent when you go home hunting. The seller has an agent, and in the agent listing, they say, "Hey, if you're a buyer's agent and you show up, we'll give you 3% commission." And so the buyer's agents, who don't actually have a contract with the buyer, are like, "Well, let me show you around homes, let me show you around homes." And then they get to a home, and they're like, "Okay, this home's listed, let's buy it." And they're gonna make a 3% commission. Which, by the way, I just want to point out the disincentive there. They're not looking out for my best interest as a buyer. They're looking out for their commission.

• 1:23:32Jason Calacanis?

  And the higher the price they get you to pay, the more they make.

• 1:23:34David Friedberg?

  The more money they make.

• 1:23:35Chamath Palihapitiya?

  But I want to understand those. If I'm gonna sell my house to you guys, and you guys have a buyer's agent, and I just refuse, can I just refuse to pay the 3%?

• 1:23:42David Friedberg?

  No one gets paid, because the buyer's agent has no contract with anyone.

• 1:23:45Jason Calacanis?

  Yeah, you can just refuse.

• 1:23:47David Friedberg?

  And you don't have a contract with anyone. The place where you end up paying a commission as a seller is if you sign a seller agent listing. And where you sign a contract that sells to the seller's agent, "I'll pay you 3%, and I'm also gonna pay a buyer 3% if they show up with an agent."

• 1:24:00Chamath Palihapitiya?

  And how do I list my house on MLS without a seller's agent?

• 1:24:03David Friedberg?

  You cannot. In California, I mentioned, I just, I recently went through this. I paid $99, I did it all myself, and I listed it on MLS without an agent. I've done a bunch of person-to-person sales of real estate, where I haven't had any agents involved, but I knew the people on both sides, and we just did a transaction, so-

• 1:24:18Jason Calacanis?

  What was your legal cost per transaction?

• 1:24:21David Friedberg?

  Oh, like 15 grand, you know, to do that?

• 1:24:23Jason Calacanis?

  That was my exact number, it was 15,000. So, just to give you a comparison, here, Chamath, if you were to have a million-dollar house, that would be 6%, it'd be $60,000. So that's 15,000 in legal costs for you to sell it, right? If I wanted to sell it to you directly. And that's what happened. My friend owned a really nice house. We did it off market and now all the brokers in my neighborhood hate me. Like they are really upset about it. Imagine it was a $5 million house or a 10 million or a $20 million house.

• 1:24:52Chamath Palihapitiya?

  Is it true for commercial real estate as well? This is this how it works?

• 1:24:55Jason Calacanis?

  I don't know.

• 1:24:55Chamath Palihapitiya?

  Commercial.

• 1:24:56David Friedberg?

  Commercial real estate is the same situation. So there's an agent that represents the building, the landlord. It's actually gonna talk about this. Then the buy side agent.

• 1:25:04Chamath Palihapitiya?

  So what is Buffett? Buffett owns Berkshire Realty. What is that? That's just basically.

• 1:25:09David Friedberg?

  It's a residential broker, just like Coldwell Banker 24, just like all these other.

• 1:25:13Chamath Palihapitiya?

  So it's sweeping up this 6% vig.

• 1:25:15David Friedberg?

  Yep, they were part of the lawsuit.

• 1:25:18Jason Calacanis?

  They were named, yeah.

• 1:25:19David Friedberg?

  They were named. And if you look at, listen to Buffett's earnings reports, he often talks about how many sides of a transaction they were on. And that's kind of the key measure of revenue in the, in that piece of the business. And he was super ecstatic, I think in 2020 or 21, when real estate boomed. And he's like, we got this many sides of the business. It's a great business, you know, it's cash generative, such a great business. But that's the business. You want to be on, you want to get as many sides as you can. You want to get on a sell side and buy side in the market. And you just get 3% depending on which side you're on.

• 1:25:49Chamath Palihapitiya?

  But now the courts basically said, hey, this is illegal.

• 1:25:51David Sacks?

  Here's how you'll know that the monopoly has ended is when the buy side commission goes away.

• 1:25:57David Friedberg?

  Yeah.

• 1:25:57David Sacks?

  Yeah. I mean, the sell side 3% may be excessive, but I do think that the sell side brokers do work in terms of having to market the property. Whereas on the buy side, the vast majority of the value is created by MLS, like you're saying, Friedberg.

• 1:26:11David Friedberg?

  I think it's flipped, but in terms of where the value is. But anyway, go ahead.

• 1:26:14Chamath Palihapitiya?

  No, you have to stage the house, take pictures.

• 1:26:17David Friedberg?

  Yeah, as a buyer, I just want someone to look out for me and make sure I'm not like, all the diligence that goes into researching a home and reading all the disclosures and going through them. I don't know if you guys have gone through this, it's hundreds of pages.

• 1:26:27David Sacks?

  I have gone through it, but I use a lawyer for that stuff, who I pay by the hour.

• 1:26:31David Friedberg?

  Right.

• 1:26:31Jason Calacanis?

  That's what I do.

• 1:26:32David Sacks?

  I'm not saying that the buy side broker does nothing, but I'm saying that most of what they do is to schedule appointments for tours for you after you've gone through MLS yourself and picked out what you want to see.

• 1:26:44Jason Calacanis?

  You give them the list and then they just put it on your calendar.

• 1:26:47David Sacks?

  You know what I would analogize it to is travel agents. I don't know if you remember, like, I mean, most people watch this show probably don't remember, but in order to book an airline ticket a long time ago before the internet, you call up a travel agent because they have proprietary access.

• 1:27:01Jason Calacanis?

  Bring it to your house.

• 1:27:01David Sacks?

  They have proprietary access to Sabre, which is the online ticketing system.

• 1:27:04David Friedberg?

  Totally, totally.

• 1:27:05David Sacks?

  Then what happened is with the internet, you had sites like Expedia just give you direct access to Sabre. And so you could book the ticket yourself. There's no reason to have a travel agent.

• 1:27:13Jason Calacanis?

  Yeah.

• 1:27:13David Sacks?

  Same thing has happened with MLS. It used to be proprietary access by the brokers to MLS. You couldn't even see it. Then you had sites like Zillow, basically give you direct access to MLS. So you can just go on there and find what you're looking for. And again, the main thing that the buy side brokers do is to schedule the appointments because you can't get a tour typically unless you're represented. And if you're not represented and you reach out, then the seller's agent will try to basically enlist you.

• 1:27:42Jason Calacanis?

  Have you done a direct transaction tax? I'm curious.

• 1:27:45David Sacks?

  You can, I don't think you can residentially. I mean, it's very, very hard.

• 1:27:49Jason Calacanis?

  Yeah.

• 1:27:49David Sacks?

  I mean, if you know, if you happen to already have pre-identified the buyer, then yeah, I guess you could do it.

• 1:27:55Jason Calacanis?

  Well, basically it happened in our case, in your February, I'm curious how yours went down. I had told the person, or my wife had told the person, we love your home. If you ever sell, let us know. And then they let us know and then we bought it with them off market. And they said, we don't want to use brokers. We don't want to pay this huge commission, which would have been hundreds of thousands of dollars. And would you agree to this price? And we're like, yes. And then done. How did yours come about, Friedberg? How did you find a buyer if you were on the sell side?

• 1:28:21David Friedberg?

  This is all like relationship driven people that I know and that kind of stuff. So it's like, hey.

• 1:28:26Jason Calacanis?

  I think this is the future. If two of the four people here have done it, I think this is the future.

• 1:28:30David Friedberg?

  I don't know if that's, I don't know if that's the common model. I don't, I don't think that's true. I do think most, I think. You need a marketplace. I do agree with that.

• 1:28:36David Sacks?

  And the brokers control the marketplace. It's a one-off. It's a fluke when you actually happen to know your buyer.

• 1:28:41David Friedberg?

  The MLS is the de facto market because I mean, ask anyone in the country who's bought a home in the last year, five years. Almost everyone, I'm sure, went on Zillow or Redfin or Trulia and looked at homes. And the place that those, you know, marketplaces get their data is from MLS. They sweep the MLS. So the real kind of, you know, monopolistic breaking is can you break that marketplace? Can you break MLS? And can you get some other alternative listing services going that, you know, enable this brokerage commission to get competed away? Because it's currently locked up in the monopoly they have on the MLS.

• 1:29:20David Sacks?

  What's so perverse, here's where the monopoly comes from, is that if the buyer had to pay the 3% directly to the buyer's agent, and that was a choice you could make, nobody would pay that much.

• 1:29:31David Friedberg?

  Of course.

• 1:29:32David Sacks?

  I'm not saying that the buyer's agent doesn't provide some value, but there's no way you pay 3%. But the reason they get it is because the brokers tell you, well, you're not paying that, the seller's paying that. But of course, you're indirectly paying that because the transaction fees are so much higher. And when the seller goes to list their house, if you tell your seller's agent, hey, I don't want to pay the buyer's agent 3%, make it half a percent, they won't do it. You know, they will always make it equal. So this is the game, this is where the locking comes from, is the buyer doesn't have a choice and the seller doesn't really have a choice either.

• 1:30:03Jason Calacanis?

  As we wrap here, just real quick, pull up that link, Nick, and go to number five. So that is the key issue. I don't have a horse in this race, I don't own Redfin stock or anything, but here's Redfin explaining exactly what you talked about. It's FSBO, For Sale By Owner, and there's now these third-party sites and they kind of allude to it there.

• 1:30:19David Friedberg?

  But you know what those are? Those FSBO sites are actual real estate agents that are registered in the state and are members of NAR, and so they have a right to list on MLS. So what they're doing is they've basically set up a super simple website, and then they're posting your listing on MLS for you.

• 1:30:36Jason Calacanis?

  For a flat fee.

• 1:30:38David Friedberg?

  For a flat fee, rather than getting a commission on the sale.

• 1:30:41Jason Calacanis?

  Awesome, yeah.

• 1:30:42David Friedberg?

  And that's, you know, that's kind of interesting, but for most people, they're like, well, I don't know. Now, I don't want to disparage the value of folks that are in this industry. There's obviously a lot of value for agents and brokers in this industry. But the real point is that if the monopoly breaks on the marketplace, then the business model will get competed away and there will start to be a change here. And I think that this lawsuit and the settlement ultimately leads to a change, a shift in the industry. That would certainly benefit consumers, but could have a negative economic impact because of the number of people that depend on brokerage fees as their, as their job.

• 1:31:14Jason Calacanis?

  The settlement is likely to be that when you hire a broker, they will give you a form and you'll pick what percentage you want to pay. I'll pay you 2% and I'll pay the buyer's agent 1.5. I'll pay you 1.5, I'll pay the buyer's agent 2. Or they should be caps on it, right? Or you should have, because of the incentives, it doesn't matter if I sell my home, if it's a $5 million home. It may matter to me, 5 million, 5.5 or 6. It doesn't matter to the broker, their commission, they just want to sell it as quick as possible. If it sells for 4.5, 5.5, it's relatively the same commission. So it really should be based upon a flat rate up to a number and then a percentage above that number to align interests. Anyway, keep an eye on this one, folks, because it's going to have a massive impact.

• 1:31:58Jason Calacanis?

  All right, Colorado Supreme Court has removed Trump from the state's presidential primary ballot. This was decided in a split 4 to 3 decision by the court. It's worth noting that all of the justices were appointed by Democratic governance, it's a Democratic state. The court based its decision on Section 3 of the 14th Amendment. This bars anyone from joining Congress, the military, or any federal state offices if they have previously taken an oath to support the Constitution, then engaged in insurrection against the US. This is the first time in US history that the 14th Amendment has been used to legally disqualify a presidential candidate. The 14th Amendment was originally passed after the Civil War and was aimed at former Confederates.

• 1:32:43Chamath Palihapitiya?

  I'll say a couple of things. The first is that I thought that the Democrats were going out of their way to give Trump the election with the documents case. But now I think that they've basically made his winning the Republican nomination a foregone conclusion. And he is the overwhelming favorite to win the presidency after this. And the reason is pretty simple, which is if you take Donald Trump out of this... The idea that you haven't been convicted of a crime, but now a government agency or a government court in this case can deprive you of what really

• 1:33:26Chamath Palihapitiya?

  is like a pretty momentous sign of liberty and freedom, which is to run for president of the United States, to deprive an American citizen unconvicted of that crime, of that right, I think is really a bad step in the wrong direction. And so there, there just needed to be a lot more prudence and thought about this. And I think that it will do nothing except embolden the base. It'll get Republicans out to vote. I think it creates a deep wave of momentum in the direction of, of Donald Trump. And so this to me was just an absolute complete head scratcher that makes no sense.

• 1:34:10Chamath Palihapitiya?

  And I think will, is surely to get overturned in the Supreme Court.

• 1:34:14Jason Calacanis?

  Friedberg, your thoughts?

• 1:34:18Jason Calacanis?

  Okay, for those of you not watching, Friedberg put both hands up in the air, gave a shrug, like a shrug emoji. So if you want to understand Friedberg's position on Trump, it is shrug emoji.

• 1:34:29Jason Calacanis?

  Coming around the horn, sacks red meat. What are your thoughts on the Colorado Supreme Court banning Trump from the ballot?

• 1:34:38David Sacks?

  I agree with what Chamath said. Democracy now means the right of the people to vote for candidates approved by liberal judges. And yes, J Cal, all these judges were democratic appointments. I think this case makes clear that the point of all of this lawfare against Trump is to keep him off the ballot. Until now, they've been pretending it's about something else. And I think this decision rips the mask of all the legalistic bullshit that we've heard throughout 2023. I mean, Democrats don't really give a damn whether he paid off a porn star or kept classified documents or supposedly led a racketeering conspiracy. They just don't want him standing for a vote, that he might win. And I feel like all of the time we spent on this pod earnestly debating the details

• 1:35:21David Sacks?

  and legalities of the documents case, it was a total sucker's game. That's the narrative they want us engaging in. It never had anything to do with documents. They just want to keep him off the ballot. And I think that. By being so naked about this, by ripping the mask off what they're trying to do, the Colorado Supreme Court has really done us all a favor. I mean, the Supreme Court of the United States is surely going to reject this decision. But the lasting impact is going to be in revealing liberalism's true face. They are the real authoritarians. And while restricting the right of the people to vote for the candidate who is leading the polls right now, they proclaim that they're saving democracy. I

• 1:36:02David Sacks?

  mean, they self glorify and engage in this self righteous rhetoric that they're saving democracy. I mean, the rest of the country, any normal person is looking at this and saying, these people have completely lost touch with reality, completely lost touch.

• 1:36:18Chamath Palihapitiya?

  The other unfortunate outcome of this is that there will be a wave where people will talk about the big steal as this. And what people will say is that there was an attempt by the Democrats to really roadblock Trump's ability to be voted up and down by the American people. And that's disenfranchising the the ability for people to vote. And I think that that's really unfortunate. And I wish that the Democrats would have thought about that in their calculus before engaging in what is really a deeply partisan thing to do that that this will this will get overturned.

• 1:36:54Chamath Palihapitiya?

  But the damage will be long lasting, unfortunately. That's a shame.

• 1:36:59David Sacks?

  Totally. And I Matt Taibbi had a good line. He said that only people who live in a bubble, within a bubble, within a bubble, could ever think a decision like this is a good idea. Here are the three bubbles. Number one, all of these judges were Democratic appointments because that's living within the Democratic Party is the first bubble. The second bubble was the fact that they all went to Ivy League schools. This was actually a four three decision. The four justices who went to the Ivy Leagues all voted for it. They thought this was a good idea. The three that went to Denver Law School, the non Ivy League school, were all against it and wrote scathing dissents against it. So that tells you the second bubble is the Ivy League. The third bubble is people who've been totally marinating in the mainstream media and their coverage of this because

• 1:37:43David Sacks?

  they think that they can just conclude that Trump is guilty of an insurrection because it's just a fact according to the media they listen to. Trump has never been convicted of that crime. He's never even been charged with it.

• 1:37:55David Friedberg?

  Right. So I think that's a an important distinction that, you know, the 14th Amendment. Which my understanding came about to keep members of the Confederate Army out of Congress because they had rebelled against the government. And so the whole point was this amendment was passed to keep anyone who'd

• 1:38:15David Sacks?

  No, that's right.

• 1:38:16David Friedberg?

  Who engaged in insurrection or rebellion, or given aid or comfort to the enemies thereof. He may not be elected a member of Senate, Congress, or President or Vice President. So Sax, if that's the case, that is still the 14th Amendment. That's the claim being made here. It doesn't define whether or not there needs to have been a conviction of a charge of insurrection. Is that what will ultimately be the Supreme Court decision, do you think? Is that he was or wasn't actually found in a court of law to have been guilty of insurrection?

• 1:38:48Chamath Palihapitiya?

  No, it's that the actual Article 3 of the 14th Amendment doesn't, doesn't even define the presidency as applying in terms of where this applies. So even before you get to that legal threshold of the fact that he's never been tried for this thing, there is a simpler threshold, which is most legal scholars say it doesn't even point to the fact that you can actually hold the President to that standard. So there's like all these layers in which-

• 1:39:14David Friedberg?

  What do you mean? It says no person shall be blah, blah, blah.

• 1:39:17David Sacks?

  It's unclear if officers of the United States includes the presidency. I think that's one way you could overturn this. Another way is to point out that there was no due process. The dissents really harped on this issue of due process. You had a district court decide after a five day hearing in which Trump was not allowed to subpoena, no subpoena power, no calling of witnesses, no cross examination. They basically just looked at tape of the January 6 hearing, which was itself biased because Republicans didn't even get a chance to cross examine. So basically they just looked at MSNBC coverage. And this district court concluded on that basis that Trump was guilty of an insurrection. Again, that is a crime for which he's never been convicted and he's never even been charged with, and he's never even had the chance to answer those charges in court.

• 1:40:01Chamath Palihapitiya?

  And there was a special counsel at the federal level that declined to prosecute.

• 1:40:05David Sacks?

  That's right. That's exactly right.

• 1:40:07David Friedberg?

  So, Sac, if a prosecutor had taken up the case and he had been convicted, would you support him being disqualified from the state ballots for being the nominee for a party for president?

• 1:40:18David Sacks?

  Well, there was a very simple way to disqualify Trump from running again, which was to impeach him, was to convict him in the impeachment trial. Remember, the second impeachment was all about January 6.

• 1:40:28David Friedberg?

  I'm just talking about the courts.

• 1:40:29David Sacks?

  He was exonerated. That was the time to do it. Now, I don't know if, you know, if a conviction for incitement to insurrection would hold up in that way, Friedberg, I don't know. But the point is, they didn't even try. And the reason is because when Merrick Garland first came in, they actually did an analysis of January 6, and there was a memo written, and it said that if we, the DOJ, try to prosecute Trump for either incitement or for insurrection, we will lose that case. And so Merrick Garland didn't bring those charges. Then there was a story in the New York Times saying that Biden reacted really negatively to that, and he told his inner circle that Garland needed to stop acting like a ponderous judge, this is the New York Times words, and that he needed to take decisive action.

• 1:41:15David Sacks?

  And Biden made clear to his inner circle, I'm going to provide the receipt on this, that he thought Trump should be prosecuted. So all of this lawfare ultimately flows from that. It flows from the top. Biden is the most vindictive president we've ever had. I cannot think of another time in American history where a president incited his own aides and advisors to basically go prosecute the leading alternative for the presidency that he's likely to face in four years. That is what happened. By the way, we've seen this behavior before. Remember, this is also the president who said, "We need to go look at this guy," meaning Elon. I mean, I can't believe that this behavior is just accepted by so many Americans. This is petty vindictive, un-American behavior, and it's anti-democratic.

• 1:42:00David Sacks?

  And the people who are engaging in it the most, again, are glorifying themselves as somehow standing up for democracy. This is a joke. And I think the average American is going to rebel against this. And I said, I think it was like last year, that all of this lawfare, all these tactics and shenanigans that the Democrats were trying, it's either going to put Trump in the big house or the White House. And I think he's headed for the White House on this basis right now.

• 1:42:23Chamath Palihapitiya?

  I agree.

• 1:42:23David Friedberg?

  You would say that it's reasonable that if he got convicted in a court of law for in charge of insurrection, that he should not be allowed on the ballot?

• 1:42:31David Sacks?

  If the Supreme Court then decided that that's what the Fourteenth Amendment meant, sure, but that's not what happened here. There's zero due process.

• 1:42:39David Friedberg?

  I get it. I'm just trying to understand where your threshold is. So you think he'll certainly, this will certainly go to the Supreme Court and they'll adjudicate what the Fourteenth Amendment really means, because it's never been tried, the Fourteenth Amendment.

• 1:42:49David Sacks?

  Well, again, it was written, think about why that statute came about. Chamath is right. It was written for the Confederacy.

• 1:42:54David Friedberg?

  Right.

• 1:42:55Chamath Palihapitiya?

  The only other time it was used was in 1919 against one person that was about to enter Congress, who was, who had given comfort to the Germans in World War I. That's the only time we've actually invoked Article Three, Section Three of the Fourteenth Amendment.

• 1:43:08David Friedberg?

  Were they allowed to run?

• 1:43:09Chamath Palihapitiya?

  No. They were not allowed, they were not allowed to take the seat. Now, that's at the federal level, and at the, and at the state level, it's been used a couple of times. The, the point of this is, for me, again, take Trump out of it. You do not, I think, I'm pretty sure, we do not want to find ourselves in a country

• 1:43:28David Friedberg?

  No, of course.

• 1:43:30Chamath Palihapitiya?

  where you can, all of a sudden, be deprived, your liberty and your rights, for random acts, where somebody believes that you are a threat to them, and that person is in a position of power to affect your liberty. That can't happen.

• 1:43:50Chamath Palihapitiya?

  Vote the man up or down?

• 1:43:51David Sacks?

  Yeah, and I agree with that. And I would say that, I mean, what you're speaking to is due process. These judges basically believe that because the mainstream media says something is the case, that we don't need to go through a legitimate court procedure to determine that as a legal finding. They just declare that, okay, he's guilty of insurrection. That was never proven.

• 1:44:11Chamath Palihapitiya?

  People don't realize, you can, this thing can go the opposite direction so quickly. Imagine that there's a Democratic candidate that is running against a Republican incumbent. Is this the standard we want to create? Where there's this political warfare that happens? Where each party is trying to essentially

• 1:44:31Chamath Palihapitiya?

  prevent the leading candidate of the other party from running in every election from here on out? Because that's the precedent that is being created. That's why, that's why I have such an allergic reaction to this.

• 1:44:43David Sacks?

  That's totally true.

• 1:44:44Chamath Palihapitiya?

  Why wouldn't every president from here try to do this?

• 1:44:47David Sacks?

  I mean, it's already the case that every president that loses Congress is probably going to face an impeachment hearing. I mean, that's happening too. And now we're going to have a situation where every presidential candidate can be potentially excluded from the ballot based on, you know, a local court's findings.

• 1:45:06Chamath Palihapitiya?

  From the Democrats' point of view, this was deeply short sighted, and I think it has a very high chance of blowing up in their face.

• 1:45:12David Sacks?

  We haven't heard from J. Cal.

• 1:45:13Jason Calacanis?

  I get my information from two really good sources. The first one I recommend for our listeners is cafe.com. It's a podcast by Preet Bharara. Fantastic. He does really deep dives on these cases against Trump. Yeah, cafe.com is his podcast.

• 1:45:27Chamath Palihapitiya?

  Cafe.com.

• 1:45:27Jason Calacanis?

  It's, it's a paid podcast, but it's really detailed. And then there's actually, speaking of lawfare, there's a lawfare podcast. And so I listen to those and it's, they're, they're covering this, but, and also the two other cases that are of note, the federal election interference case and the Georgia case. Highly recommend that our listeners go to those experts and get a really well balanced view of the cases against the 45th president.

• 1:45:49Chamath Palihapitiya?

  All right, for Chairman, Chamath Palihapitiya, the new chairman of the All In LLC.

• 1:45:54Jason Calacanis?

  I like Chairman Dictator. I don't want to lose.

• 1:45:55Chamath Palihapitiya?

  Chairman Dictator Authoritarian.

• 1:45:59Jason Calacanis?

  Nope, nope, J. Cal.

• 1:45:59Chamath Palihapitiya?

  BIPOC. Chairman BIPOC.

• 1:46:02David Sacks?

  Chairman of the Politburo, dictator of the All In Pod.

• 1:46:05Chamath Palihapitiya?

  You have my proxy vote too. All hail the Chairman Dictator. And for the King of

• 1:46:13Jason Calacanis?

  And Rain Man himself, "I am the world's greatest moderator." Love you boys, and we'll see you next time!

• 1:46:22Speaker 03

  We'll let your winners ride.

• 1:46:25Speaker 03

  Rain Man David Sack.

• 1:46:29Speaker 03

  And it said, "We open source it to the fans and they've just gone crazy with it." Love you, West Coast. I'm the queen of Kinoah! We'll let your winners ride. Let, let your winners ride. I'm going all in. Besties are back!

• 1:46:45Speaker 03

  That is my dog taking a piss in your driveway. No, no, no!

• 1:46:50Speaker 03

  Oh, man!

• 1:46:51Chamath Palihapitiya?

  My haberdasher will meet me at the place. 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.

• 1:47:00Speaker 03

  What? You're the bee! What? You're the bee! What? You're a bee? Bee! What? That's gonna be... We need to get merch! Besties are back!