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Jason, you are the unique person that is at the intersection of both the and the
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SPLC files. Do you have a comment? >> Do you have a comment? >> I'm not in the SPLC file.
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>> Yes, you are. You're >> adjacent. SPLC adjacent. And you're
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>> What does that mean in the ven diagram? >> Thank you though for putting me in the
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crosshairs of all the got a really good way to select. >> There's a reason why I'm carrying this
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guys because the people >> What the is going on? THERE'S A REASON WHY I CARRY a stiletto and a P35.
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>> What the [ __ ] are you doing? >> There's a reason. If you want to jump
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the fence, feel free. Shake is ready. >> Let your winners ride. >> Rainman David.
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>> We open source it to the fans and they've just gone crazy with it. Love
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you, Queen of all. >> All right, everybody. Welcome back to the greatest podcast in the universe,
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episode 270 of the All-In Podcast, your podcasters's favorite podcast. With me
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again, your Sultan of Science, David Freeberg, the Dick Tater, Shamont Poly Hopetia, and yeah, the Rainman is back.
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Yeah, it's definitely David David Sachs. He's definitely in DC with a with Pus.
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Yeah, POTUS lets him drive in the driveway. Uh, Sax, what's going on? You you pushed back. You uh bigshotted the
00:01:34
entire crew and pushed the show back an hour. >> Simple text. He's like with POTUS
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started. >> It's unfelable. >> Start later. >> Okay, we'll just
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>> Okay. Okay, Daddy. Look at him. All right. All right. Big shot. What's going
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on? No, look, I was in DC today and I was at the White House and I just asked if the president had time and he made
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time and we we did have a little meeting and so we did push back the pod for that. One thing I just want to say is
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just what a pleasure he is to deal with. You know, when I read in the media, they're always describing him in a
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certain way that, you know, he's yelling at people or he's moody or or something
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like that. And that's never ever been my experience with him. He's always
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pleasant to be with. He's always genial. >> He ask questions. He's interested in the
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subject matter. >> It's just a completely different portrayal. I don't get where the media
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is coming from at all on this. >> He's charming AF. Let's just call it
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what it is. He's >> charming. >> I mean, maybe if you double crossed him,
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maybe. I don't know. But I've just never seen any evidence of of how they
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describe him at all. And I think on our issues of AI, I think we're really lucky
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that he's the president who's in the White House when this AI revolution is
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happening. >> I mean, do an old history, Sax, what would happen if Kamla Ding-Dong was in
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right now and we'd have like no data centers? >> We'd have no data centers and they'd be
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using AI to censor us and they'd be promoting DEI values through AI. That was in the Biden executive order.
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President Trump just wants the country to win and be successful and he doesn't
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have these like doomer neurosis about it. That's not to say we don't support
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any regulation at all, but we should have specific solutions for specific problems as opposed to being cowering in
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fear over this and just trying to halt all progress. And I think a really good example of that was his idea around data
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centers where he said over a year ago before data centers even became a hot political topic that we should let our
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AI companies stand up their own power generation behind the meter. And that's
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a much better approach than the Bernie Sanders approach of just shutting everything down. So I don't know I think
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we're like very fortunate that he's the president during this critical time and
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development of this technology. And like I said he's always been interested in
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it. He talks to a lot of business leaders. I'm always actually very impressed with what he already knows. He
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listens to like all the top guys in the industry and he synthesizes what he hears. I think he's very good at that.
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>> He was talking about the anthropic guys and he was like these are brilliant guys
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and he was like giving the flowers to them and how genius they were and that they were working on a deal. Any
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insights there about the relationship between the White House and Anthropic. >> I thought what he said was very balanced
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and accurate. Like you said he said that they were very smart guys. They do have
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a great product. I've certainly acknowledged that. He also said that they were very leftwing, but that was
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something we could work through. >> Didn't have to be a deal killer. He said
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they tried to tell the Pentagon what to do, which the Pentagon didn't like. But
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in any event, I mean, look, he wants American companies to be successful. And he he I think genuinely really does like
00:04:34
high IQ people. I mean, he says it all the time and people think he's joking,
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but I actually think it's like one of his core convictions is he just really
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likes smart people. He likes being around smart people. Loyal people, smart people, people who are good on camera
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seem to be the three circles. And hey, Sachs, you fall into two of the three. Uh, all right. Let the audience figure
00:04:53
that out. Uh, topic one, SpaceX has signed a huge deal with Cursor. You know, Cursor, that's the AI coding
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startup. Really, the the they defined the category. XAI and Cursor are building and collaborating on a new AI
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coding model that would quote be the world's best coding and knowledge work AI. Here's the deal. As it's been
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explained, SpaceX will either buy Cursor by the end of 2026 for 60 billion, that's 10 billion more than they were
00:05:22
rumored to be raising at, or they will pay Cursor 10 billion for their collaboration together. Bloomberg says
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you can think of that $10 billion essentially as a breakup fee. So I think it's fate a calm plea that this deal is
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going to get done. Curser's run rate 2 billion at the end of February. This is
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a money printing machine. They expect to end 2026 with a $6 billion run rate. They're going to triple it. SpaceX
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projected revenue between 22 and 24 billion in 2026. So this is quite accretive to the revenue story at SpaceX
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at the IPO of SpaceX which is now targeting a valuation of 2 trillion which would be trading at roughly 80
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times topline revenue which is a you know people would say it's a high valuation but also measure it with the
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opportunity cursor's valuation would be 30x so this is a good deal I think for
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everybody at the end of the day cursor started I think built off of uh anthropics LLM you could use any LLM
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previously on it, but in March, Curser released the second version of their proprietary model, Composer 2. And uh
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here it is. It's it's ranked pretty high right now. It's between uh GPT4 5.4 and
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Opus 4.6 as you can see on the screen. The key part of the story here is that Elon has 550,000
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GPUs in Colossus. He's scaling up to 1 million and then of course he's going to
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bring it to space. So if you believe that infrastructure matters and it's pretty clear it does this is incredible
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for cursor who has been compute constrained. So this is peanut butter and chocolate. If you put these two
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together I predict that this is going to move space xxx AI and cursor to the front of the coding
00:07:10
leaderboard within 12 months. That's my prediction. Chimoth shareholder in SpaceX via the acquisition of the
00:07:19
Starlink company that you were a backer of. What are your thoughts? >> The acquisition was essentially
00:07:24
negotiated and the way that it's structured is so that the S1 doesn't go
00:07:29
stale. So I think the way that it was announced has more to do with the fact that they don't want to slow down and
00:07:35
have to rewrite parts of the S1, have to redo the disclosures, um have to redo the risks. And so I think what you're
00:07:44
going to see is that this will get done. In fact, the deal is effectively done. But what's so smart is that where is
00:07:51
SpaceX today? Let's call it a trillion. Where could it be, just for the purpose
00:07:58
of this argument, let's say two trillion? So when the deal gets done on a stock- forstock basis, it's going to
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be if again if it's 60 billion in tomorrow dollars, effectively Elon's gotten a 50%
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discount. And what has he bought? He can issue $60 billion of stock at a $2 trillion valuation and get a model and a
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service that I think is extremely compelling in coding, which is where we know all of the immediate and short-term
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revenue gains are. It's also patterns that are hard fought and are really valuable in reinforcement learning. He
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gets all of that and then he gets a very cracked team, which you know, we've
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known for a while that the cursor team is absolutely excellent. If you look at the Grock usage, it shows why he had
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this excess capacity. There was a moment where Grock had a very steep and very aggressive discount on their output
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tokens and in that moment there was just a lot of experimentation and usage and over time that sort of went away. So
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there was a lot of capacity and a relatively low utilization I think inside of Colossus that he was able to
00:09:05
turn around Jujitsu moved the whole thing and basically acquire the most interesting and valuable third party
00:09:12
rapper service in AI right now. So uh and the fact is that they got it effectively I think at this price for 30
00:09:18
billion. So I think it was a really good deal really smart deal. sacks your thoughts if you want to unpack it a bit
00:09:24
under the framing I think is be interesting for you if we were sitting here three years ago the uh Biden
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administration didn't invite Elon to the EV summit and the SEC and other organizations Delaware they were
00:09:41
explicitly involved in lawfare they were trying to put Elon in prison and here we
00:09:44
are the most important company in the history of uh the United States Space XXXAI and Tesla now on the verge of just
00:09:55
creating the greatest products in the history of humanity between SpaceX clusters in space and Optimus. Your
00:10:01
thoughts? >> Well, you're right. I do remember a press conference where Biden said, "We
00:10:04
got to look at this guy." And so on the heels of that, the DOJ brought a a lawsuit attacking the company for not
00:10:11
hiring enough. Remember that? >> Exactly. SpaceX, which they can't under
00:10:16
It Aar. >> They couldn't exactly under It Aar. Anyway, that's all ancient history. So
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let's let's put that behind us. Look, I I agree with your guys' analysis on
00:10:25
this. I think these two companies are are very complimentary. Cursor obviously is very strong in coding. That's what it
00:10:32
brings to XAI. XAI brings compute and they bring a foundation model. And the problem that cursor had is that even
00:10:41
though coding is kind of like the white hot area of AI right now, when it got started, it was really competing against
00:10:49
generalists in the form of open AI and anthropic. But now those generalists have decided to vertically integrate in
00:10:55
this area of coding, right? And so cursor is now competing against cloud code and open AAI's codeex. And so they
00:11:02
were dependent on foundation model companies that were getting in the business of competing with them which
00:11:07
was just not a good place to be. Right? So now they have this new alliance with a different foundation model company
00:11:12
which also brings the compute just makes a lot of sense. And then they bring cursor brings to XAI the training data a
00:11:20
lot of enterprise clients and the experience in coding and I think this will accelerate XAI in this area.
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>> Sax you think they're going to dump Kimmy K2.6 six cuz I think Herser composer 2 uses
00:11:35
the moonshot model. There's no reasonable way that Elon's going to pay $60 billion and not run on top of Grock.
00:11:40
I got to think >> it seems like it. >> Yeah, >> likely, but I don't know.
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>> I think it might be tough depending on the the users. One of the things that
00:11:47
makes Cursor so good. >> Wait, wait, say more on that. What do you mean? >> So, I think that the different
00:11:52
developers want to have choice in that sense. There's a toggle. So one of the
00:11:56
things that's really good about cursor is they've got this very well-built out
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IDE this application layer that puts them probably from a UX perspective meaning developers are using the tool
00:12:07
above codecs above clawed above anything else you can use a third party IDE and integrate the models or integrate
00:12:17
whatever other third party service you're using but I would imagine that the developers are going to want to
00:12:23
continue to have at least some choice on what's actually writing the code for
00:12:26
them. The thing that people are waking up to in the last 120 days is just how much of the value of AI is being
00:12:35
realized by writing software. And we've kind of got this rapper term, we call it
00:12:40
agents. But agents are fundamentally just quickly spun up applications. But for all of them, as we're realizing very
00:12:47
quickly, you end up making too many agents. They end up being super inefficient. They need to be engineered.
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And you still need to have a strong software engineering. capability and competency to fix all the agents to
00:12:58
build all the harnesses to make everything work well together and that's why having a strong developer
00:13:02
environment a strong IDE actually solves that biggest problem. So eventually all
00:13:07
the enterprises that are getting hot and heavy on agents are going to be like, "Whoa, wait a second. We've actually got
00:13:12
to fix how this is all being done." As we saw this week in that story with Amazon where there's like a million
00:13:16
agents being spun up inside and everything's wasting resources, redundant data creation, redundant data
00:13:22
stores, redundant API calls, etc. Tons of money being wasted. So you have to centralize still. You have to have good
00:13:28
software engineering talent that's making good infrastructure and good use of these agents. And that ultimately
00:13:33
will require an integration of the AI tooling with a standard software engineering front end which is the IDE
00:13:40
that cursor has. So I think that that's probably where everyone's waking up to
00:13:44
the fact that having the uh the software engineers may end up winning you the arms race here and seems pretty smart
00:13:51
for Elon to buy cursor. >> One other piece of it you mentioned Kimmy uh K2.6. Yeah.
00:13:56
>> Yeah. I mean, so I think that one of the things that's going to become a priority
00:13:59
over the next several months is this idea of optimizing because enterprises token bills are going through the roof
00:14:06
right now. I mean, just month over month, they're spending increasingly large amounts because their employees
00:14:12
are just building more and more software, but I'm not sure that anyone's
00:14:16
been incentivized yet to be efficient about it. And it really only makes sense to go to a frontier model for a frontier
00:14:23
task. But more mundane things could be done using an open source model or a less expensive model.
00:14:28
>> And I think like you're saying, whether it's the IDE or something else, there
00:14:32
needs to be some sort of middleware that determines which model you go to and how
00:14:36
much you're willing to spend and what the most efficient way of getting the tokens is going to be. I am deep in
00:14:42
playing with uh XAI's suite of products and I would predict we're going to be
00:14:48
sitting here in 6 to 12 months and they are going to be dramatically dramatically improved.
00:14:53
>> Let me just flag one other area that I think is maybe the white hot center
00:14:58
within this redot area of coding which is cyber. And I think mythos has kind of woken everybody up to the potential of
00:15:07
frontier models to be a weapon that can be used by either cyber offense or cyber
00:15:14
defense. Now the issue with mythos is that it's very large and expensive. It's
00:15:19
something like a 10 trillion perimeter model. And there's a lot of reports that
00:15:22
Anthropic just doesn't have enough compute to be able to serve it. I'm not
00:15:25
sure it was ever built to be a commercial model to be honest because I just think it's so big and expensive.
00:15:30
But I think what'll happen is these companies will start training dedicated cyber models.
00:15:36
>> Let's say mythos comparable models but with a lower token cost. And I think
00:15:42
there's a real race on right now to get those products to market because I think
00:15:46
IT departments and CISOs are very worried about the risk of hacks right now AI powered hackers. So this is
00:15:54
something I think over the next 3 to 6 months will be again this maybe the hottest part of the market.
00:16:00
>> Poly market says all of this is faked complete. SpaceX acquiring cursor 74%
00:16:06
chance SpaceX IPO by the end of August 80% chance. So this is happening folks. All right let's keep
00:16:14
>> by the way I think that deal structure is smart because I mean to point yeah it
00:16:18
prevents the IPO process from being disrupted. Also, it kind of gives a huge motivation to these cursor guys to bust
00:16:25
their ass and make it work over the next, I don't know, 6 months. Yeah, they
00:16:28
have a $10 billion breakup fee, but I'm sure they want the deal to be successful.
00:16:31
>> Well, the $10 billion breakout fee will go back to SpaceX anyways because if
00:16:35
they actually run the compute and they're not owned by SpaceX, they're going to have to pay for it. That is not
00:16:40
cheap. >> I mean, we saw a bunch of these XAI co-founders leave after the acquisition
00:16:45
by SpaceX. I don't know if that was the reason why, but you all of a sudden they're sitting on SpaceX stock and they
00:16:51
may have felt like they had it made, you know. >> Yeah. >> Well, which is always a problem. It's
00:16:55
always a problem with with M&A. >> This cursor thing came about pretty
00:16:59
quickly because >> Okay, let's just say friends of ours who were supposed to wire into that round
00:17:05
were like, "Where's the wiring instructions?" It all just evaporated.
00:17:09
>> Here's a tweet from Elon. We don't have to um speculate too much here. Sachs, he
00:17:14
was very clear that uh XAI wasn't uh built right the first time around. The quote XAI was not built right first time
00:17:22
around. So is being rebuilt from the foundations up. Same thing happened with Tesla. And uh that tweet is from about 5
00:17:30
weeks ago. How crazy is it that when he tweets he gets 50.8 million views? It takes the four of us 7 months to get 50.
00:17:39
>> I mean that's probably our collective. It's unbelievable the distribution he
00:17:44
has. >> Well, also, how many CEOs would just fess up like that and say, "Yeah, that
00:17:47
we didn't do it right the first time. Now we're rebuilding it." I mean, most
00:17:51
willing to say that. >> He's a magnet for talent. He's a magnet for the right kind of talent. And the
00:17:55
SpaceX talent has his philosophy. He inherited, I think, uh, a lot of, you know, maybe people for XAI or for
00:18:04
Twitter that were not in his mold and they're clearly getting aligned. And it's also going to make his day-to-day
00:18:10
life much easier when all of these things are occurring in the same building with the same team. The
00:18:15
continuity of not having to t switch between companies is going to be great. We talked a little bit about the
00:18:20
possibility of Tesla and SpaceX merging. >> Even Walter Isacson now is on the Tesla
00:18:25
SpaceX merger train. >> There you go. >> He just did a pod. Everybody's confirmed
00:18:30
it. It's going to happen. We called it here first. >> Okay. Topic two. Is there a SAS debt
00:18:35
bomb in private equity? Toma Bravo, we had Orlando Bravo at the fourth all-in summit uh last year, is
00:18:43
nearing a deal to hand its portfolio company Medallia over to its creditors. This is a SAS for customer experience
00:18:52
company. TB acquired them in 2021 for 6.4 billion all cash at the top of the market. As part of the deal, they
00:19:02
incurred 3 billion in debt. And for background, in 2021, this company had 470 million in revenue, growing 20% a
00:19:10
year. Earlier this month, Bloomberg reported that TB's debt servicing costs for Medallia were about to triple from
00:19:18
100 million a year to 300 million a year. Blackstone and other firms refused to extend a lifeline to the company, to
00:19:26
the SAS company. So, it looks like Toma Bravo just handed the keys back and wiped out 5.1 billion in equity.
00:19:33
Shimath, your thoughts. We've been talking about the SAS headwinds for a bit. You've been quite vocal about it.
00:19:38
>> Well, first of all, I think Toma Bravo is an unbelievably well-run organization. Their returns are bonkers
00:19:45
and Orlando is uh really, really, really good investor. So, what do I think happened?
00:19:53
I suspect that they probably got enough of their equity, if not all of their equity. There's probably a decent chance
00:20:01
that they did at least one or two dividend recaps in the last five years. And if I had to guess, I suspect that
00:20:07
they are positive return. It may not be the return that they would want. And so turning the keys over becomes easier
00:20:14
because you have to remember in private equity, the entire playbook is for transformations of assets that are at
00:20:22
some point not working, right? It's very rarely that they're buying the same
00:20:27
kinds of businesses that the four of us would buy, which is just sort of this, you know, clean white sheet denovo grow
00:20:33
at all costs kind of business. So they have operating partners and all of these other people waiting in the wings to
00:20:39
unfuck [ __ ] situations. That's the whole playbook. M >> so to turn it over I suspect means that
00:20:46
there is a core rot that people couldn't fix combined with the fact that they
00:20:53
have probably gotten enough downside protection that it's not a huge thing for them. Now this is an issue for the
00:20:59
bond holders and then that'll maybe flow through to the borrowing cost that Tom
00:21:03
Bravo has to pay maybe for a subsequent deal. I don't know but I doubt that they
00:21:08
would just walk away from a business. So I suspect they probably got most of their money out. I don't know if that's
00:21:13
true. There was someone that published some internal data showing that the sales team was like 18% a target at
00:21:20
Medallia. Do you guys know what this company does? Medalia >> customer support uh is the general arena
00:21:27
and customer experience management. I don't know. >> I don't know what that means.
00:21:32
>> Yeah. They'll basically send like you go on Caribbean cruise ships and you get a
00:21:35
survey afterwards and then they use that survey data to provide management insights and operational insights to the
00:21:41
leadership team and the operating team on how to improve the quality of their product or their service. So it's sort
00:21:45
of like this feedback surveying loop. So if I were to tell you guys, hey, you want to build a feedback surveying loop
00:21:51
to run your business better, are you gonna buy SAS today or are you gonna ask your AI to spin up an agent for you to
00:21:57
do that? And I think that's a big part of what's happened is all these sorts of
00:22:01
companies where the alternative to buying a SAS product is to spin something up internally and it's much
00:22:07
cheaper and easier to spin it up internally. You get a custom workflow. >> No, no, I agree with that. I'm just
00:22:11
saying in the last 5 years you think they sat on their hands and didn't take
00:22:14
a dollar out. They're not that dumb. >> Maybe they took cash out, maybe they
00:22:18
didn't. But there was still a big debt overhang and the debt's clearly >> um gotten impaired, which means equity.
00:22:24
>> The debt holders the debt holders are clearly screwed here. Yeah, >> the question is is TOMA Bravo screwed?
00:22:29
And I would say if you sat around for 5 years, they're that's not their style.
00:22:32
They generate too much money. They're too good. >> So they may have taken cash out and
00:22:36
covered some of their their costs, but the equity got fully impaired and then the debt is clearly impaired because you
00:22:41
can see how the debt and the CLOS's are trading, which indicates that this business is just not doing well. And
00:22:47
then someone else on Twitter posted some internal information from Adalia saying
00:22:52
the sales team is just not hitting their targets. they're like way way off their
00:22:55
sales targets which I think speaks to the underlying problem here. >> Yes.
00:23:00
>> Which is that >> unpack that. Yeah. Please. >> Yeah. So the underlying problem is that
00:23:04
these businesses in the SAS space where you're driven by net new sales every
00:23:08
year. How many new customers are you signing up and then you're trying to manage retention and you're trying to
00:23:13
increase sell through and retain customers? They're just having a really hard time sourcing new customers and
00:23:18
there's probably higher than modeled attrition. That's right. And when you
00:23:20
have a very kind of typically historically predictable business where you can say, "Hey, I've got a net
00:23:25
revenue retention of 118% or what have you, meaning I'm I'm selling into my
00:23:30
install base by 18% over what I'm making last year and then I'm signing up new
00:23:34
customers, you can lever that business, right? You can borrow money against those cash
00:23:39
flows because it becomes predictable." And what's happened in the last year in
00:23:43
particular is agents have become so good and so fast and so cheap that many enterprises can simply spin up an
00:23:50
alternative to a vertical SAS solution and that's crushing the sales team's
00:23:54
ability to sell in. That's who you're competing against. Now I want to make
00:23:57
one point and just link this with something else that happened this week and that's Kevin Worsh's hearing for Fed
00:24:02
Reserve chair. Kevin Warch went and talked a lot about the deflationary effect of AI and I actually think we all
00:24:09
talk about the SAS apocalypse as if it's this sort of like isolated business
00:24:14
phenomenon where these SAS companies are getting blown up. I think another lens to look at what's going on is the
00:24:19
incredible deflation of how much it costs to successfully run a business and you don't have to pay a premium price
00:24:27
for SAS products anymore. Meaning that that piece of the business can suddenly get much cheaper. that AI is delivering
00:24:34
on its deflationary promise. I'll just say one thing about what WarCH said. Warch spoke a lot about the deflationary
00:24:41
evolution promised by AI and that he expects that it will drive productivity growth like we've never seen before. But
00:24:47
he said I don't know what that's going to do to the job market that there may
00:24:50
be a dislocation between that productivity growth being realized and how the labor markets are going to be
00:24:56
able to respond to those things. But fundamentally, he's saying that we're
00:25:00
going to see economic deflation. The problem with economic deflation is that when it occurs, it means some business
00:25:07
is seeing their revenue go down. And if that segment of the economy is levered, if they have debt sitting on top of that
00:25:14
piece of the economy where it's supposed to always, always grow like a SAS company's top line is always supposed to
00:25:19
grow. Suddenly that debt gets impaired and that can have an economic ripple effect that is adverse. But what he's
00:25:25
pointing out is that as a result of deflation because it's not coming from some cost cutting or economic
00:25:32
contraction. What he's saying is that the deflationary forces ultimately lead
00:25:35
to economic expansion because other parts of the economy will now grow. So if I can suddenly cut, you know, call it
00:25:42
50% of my SAS budget and I can reinvest that capital in other ways of growing my
00:25:47
business instead of managing my expenses all of a sudden my enterprise will grow
00:25:52
and the economy will grow. He also said, just as an aside, and I want to make sure I cover this so so that we're
00:25:58
really clear. He said, "The way that we've been measuring inflation is wrong,
00:26:01
and that he doesn't agree with the way the Fed has been measuring inflation because you can do a survey of any
00:26:05
household and they'll tell you, my god, everything's so expensive. So all of the
00:26:09
indices and [ __ ] that are being used to calculate an inflation index is completely misrepresenting what the
00:26:14
average American is actually feeling." And so he wants to rethink how the Fed
00:26:18
is addressing inflation from an interest rate perspective. But he does think that
00:26:22
the overall kind of economic picture is one of deflationary pressure and productivity gains coming out of AI.
00:26:28
>> Sax, I I'll drop this off to you. I think it's pretty clear what's happening
00:26:32
here is that the loss SAS's loss is the token dealers, right? And startups are
00:26:38
now and we always see the they're the tip of the spear. They're writing their
00:26:42
own tools. They're making their own dashboards. I see that every day. And if
00:26:46
you look at the SAS product index, here it is. Salesforce down 32% uh in the past six months. Shout out to Bestie
00:26:54
Beni off. Best guest we've had, huh? Saxs at the summit. Service now down 54%, Snowflake down 43%, Adobe down 33%,
00:27:02
Figma, which had a huge IPO pop and is now down 67%. So what is the role of venture capital
00:27:11
and then private equity in addressing the software market? Software was eating the world. Now tokens are eating uh the
00:27:19
SAS business and the software business. Yeah. >> Well, I'm of two minds about this. I'm
00:27:23
going to talk about the opportunity for private equity. Let me just say backing up that historically we only had two
00:27:31
good exits for software businesses. One was to IPO, the other was M&A. And then
00:27:36
these big private equity shops came along and gave us a third potential exit, which is you would sell to them
00:27:42
and then they would raise the capital based on I don't know 1/3 equity and 2/3s debt. So it was debt finance
00:27:47
buyouts which is something that's been around in let's call it the non- tech
00:27:51
part of the economy for a long time but was a relatively new entrant into the world of technology. And the reason for
00:27:57
that is that if you're going to debt finance a purchase you need to have very
00:28:00
stable cash flows because if you miss if your cash flows miss and you can't pay
00:28:05
your interest on the debt then you're going to lose all your equity because the debt holders will foreclose. So in
00:28:11
order to do a debt financing of any kind, you have to have very predictable cash flows. And it was believed for a
00:28:17
long time that software did have those predictable cash flows, at least for the mature businesses, the ones that were at
00:28:24
the stage where they could IPO as a potential alternative. So it was a very attractive thing. I like I said, I think
00:28:30
it was great to have that third option. I I'm of two minds about where the private equity business is today. On the
00:28:36
one hand, the pricing now has got to be super attractive for them. I mean, we're
00:28:42
seeing public SAS companies that are doing a billion >> ARR 20% growth rates, 80% gross margins, and
00:28:51
they're trading at three times AR. >> Yeah. >> You know, you can buy a dollar for 50
00:28:55
cents. >> So, is is that an opportunity, Saxs, you think? Uh, hit rock bottom, you should
00:29:00
do a rollup. Well, on the one hand, I do think that the pricing has never been more attractive if you're a private
00:29:07
equity shop looking at a business like that. I mean, those companies used to be valued at 13 times ARR. Now, it's three.
00:29:12
Uh, I'm talking about like a category leader. Now, the downside of that, >> by the way, Salesforce is off 9% today.
00:29:19
I don't know if you guys saw this, but the market's absolutely tanking today
00:29:22
after the Medallia uh announcement came out. >> Right. Okay. So, so that would be like
00:29:27
you I said I'm of two minds about it. So, I would be bullish for private equity just based on pricing. But the
00:29:32
bearish part is that in order for their business model to work, you have to have
00:29:36
predictable cash flows. You can't have a SAS company go from, I don't know, 120%
00:29:41
net dollar retention one quarter to 80% net dollar retention 6 months or a year later because a big part of their
00:29:48
customer base is attred to using tokens, right? Or to basically creating some bespoke software. You just said the
00:29:54
absolute critical thing in all of this, which is you have to have predictable cash flows. I think what happens is when
00:30:00
you're a startup, you typically have to figure out how to disruptively price to
00:30:05
enter the market. So you're like, okay, if I deliver $10 of value, I'm going to
00:30:09
charge a dollar. And that's that's the normal playbook, like a 10% ratio,
00:30:13
right, of price to value. The problem is when you start to stack venture capital
00:30:18
into it and you then you stack growth equity into it, what you're effectively
00:30:23
creating in in the preference stack of your company is that you are creating a higher return hurdle, right? You got to
00:30:32
clear 300 million, 500 million, a billion of pre and then you have to return 15 or 20% on top of that. So what
00:30:39
do people do as they raise more money? They increase price. But the problem is at some point when you increase price
00:30:48
you engender a ton of competition and you put a huge target on your back. Private equity is the last stop because
00:30:54
when they come in and they layer in billions and billions of dollars of not just equity but also debt and that has
00:31:02
to then be completely predictable and paid back. Their only lever is to raise price. They can never cut price to take
00:31:09
share. They don't they can't underwrite that to pay back their debt holders. And
00:31:12
so Saxs, part of the big problem here and why nobody wants to touch these companies is that they are overpriced.
00:31:19
Yes, they're making a billion dollars of ARR, but the unit cost has gotten out of
00:31:23
control. It used to be 10% of value. It's probably now 30% of value. And everybody's looking at their contracts
00:31:31
thinking, well, when it comes time to a renewal, I'm going to just cut this in
00:31:35
half, or I'm going to cut this by 2/3, or I'm going to cut this by 75%. because
00:31:40
the value isn't there anymore >> or they can threaten to and negotiate a
00:31:44
better deal. >> And it becomes even worse because the minute you make these products headless,
00:31:49
right, and you say, "I'm just going to communicate with these products via MCP
00:31:52
and with agents, you can't charge on a per seat basis." What do you do then?
00:31:57
Freeberg doesn't need 50 seats of, you know, workday. He needs two seats because the agents act as the way to
00:32:06
write in and out of workday. So, he wants to pay for two seats, not 50. And then if you multiply that by a million
00:32:11
companies, that's what gets us to this place where it just feels like a falling
00:32:15
knife. And I think it comes down to these unit costs. The unit costs and the price to value of these products are out
00:32:22
of whack with what the market needs and wants. And until they reset that or you find new products that can do it
00:32:28
cheaper, we're not going to get a cleansing and a clearing here. >> Yeah. Yeah, I think
00:32:31
>> by the way, Salesforce today is down 9%. >> 140 billion enterprise value on 15
00:32:38
billion of free cash flow. This thing is trading at less than 10 times free cash
00:32:42
flow. It's unbelievable. >> I think it might be a bargain to be honest.
00:32:46
>> Yeah, it sounds like bargain hunting. And what if Beni off the king of acquisitions? What if he just starts
00:32:52
cleaning up? >> Well, he's been buying his own stock. >> Yeah. And we didn't put this on the
00:32:56
docket, but did you guys see his kind of headless product announcement? >> Yeah. Do you see this? It's actually
00:33:02
very >> It's very smart. >> Yeah. I mean, >> I think it's very smart.
00:33:05
>> There's ways that that business can maneuver, right? And I think they're
00:33:08
>> pretty unique. It may be that of all the businesses in the scape like that you
00:33:13
know the ones that have that scale that have that multi-product platform that have a lot of your data there's a lot of
00:33:19
opportunity for them to you know maneuver their way into an evolution the first one and because like if you look
00:33:25
at it and you compare it for example to other companies I think the workday response was to say you can't have an AI
00:33:31
interact with us without paying some kind of like toll >> you're exactly right that's
00:33:35
>> whereas Ben was the exact opposite which is he's like okay we're going to go
00:33:38
headless for the whole thing which is brilliant. >> You're exactly right. You're exactly
00:33:41
right. I think that's that's going to be the distinction of the winners here and
00:33:44
the losers and are you on the wrong side of this? >> The problem is that we have to figure
00:33:49
out what is the bottom clearing price and that has nothing to do with business quality and so is Salesforce a goodbye
00:33:57
at 10 times free cash flow? Historical artifacts would tell us a screaming yes. The problem is that if you cut
00:34:04
everybody's cash flows off at year five or six or seven, then all of a sudden I
00:34:10
think you see the natural compression to between three and five times free cash flow. And that has nothing,
00:34:15
>> dude. That's that's crazy. >> That has nothing to do with business
00:34:17
quality. That just says you you literally mathematically take years 7 through n of the future and you discount
00:34:24
it to zero. >> And having free cash flow in a war chest gives massive optionality. We've seen
00:34:30
this with Salesforce. We've seen it with Apple. We've seen it with Meta, with
00:34:34
Google, with Uber. Just having massive free cash flow when you've got tens of
00:34:37
billions of dollars. You can put it to work and you can weather these stoms. >> Jal, I think another way to think about
00:34:44
this is, >> you know, to the question about maneuverability and who has the gumption
00:34:49
to make the hard choices right now. >> Yeah. >> Look at Ben off. He's the founder of the
00:34:54
company. He's run this thing since its founding decades ago. He is willing to
00:34:59
bet it all. He's willing to make the change. And it may be that the index you
00:35:03
buy in this era of AI transformation is the index of founders. That the founders
00:35:08
who are still running their businesses are going to be the ones who are most likely to see the future.
00:35:11
>> The boats. >> They'll burn the boats. They'll maneuver. They'll make the changes. And
00:35:15
all of the guys who have hired managers to run the business are going to do the things that Chim's talking about, which
00:35:20
is try and charge fees and try and maintain the old way of doing things as opposed to reinvent for the new future.
00:35:25
If you look at the 10ks, if we could figure out what the unit price cost and the trend and the inflation is of a per
00:35:32
seat license for these products, I will point to the ones that are going to die first.
00:35:37
>> Can I make two quick points? So, >> yeah, wrap us up. >> Yeah.
00:35:39
>> One is yes, I would like fully endorse what what you said about Beni off. He's
00:35:42
made every previous wave work to his benefit, whether it was social, whether it was mobile, whether it was big data,
00:35:50
all that kind of stuff. What are the odds he's going to make AI work to his benefit? I'd say pretty good. So, his
00:35:56
stock might be a bargain right now. So, that just be point number one. Just on I
00:36:00
want to say just a quick thing about venture debt, which is I I look I think it's fine when private equity guys use
00:36:06
it because they know what they're doing, but I've always hated when founders take
00:36:09
on venture debt. And I know Jacob, you agree with me. Part of it is that founders forget that they have to pay it
00:36:14
back. They treat it like venture capital and they forget about that and then they
00:36:17
get surprised. But the other thing I've never liked about it is it makes you
00:36:21
more fragile. It basically subjects you to a bunch of business covenants and it makes it harder for you to do an abrupt
00:36:29
shift in your business because now you've got a bank looking over your shoulder and they want to make sure they
00:36:33
get paid and they have to review your financials and all the rest of it. And to your point, Jal, the companies that
00:36:38
have free cash flow right now are the ones that have the most maneuverability. I hate taking away maneuverability from
00:36:45
founders and that is what debt does because it subjects you to a fixed schedule of payments. And so this is
00:36:52
always a thing to remember whether you're a business or you're an individual. You know, when you put on
00:36:58
that debt, it makes you more vulnerable to big disruptions in the market. >> Yeah. It just you become incredibly
00:37:05
brittle. And founders who are listening, when you get that in in peak markets, peak zer, you're going to have venture
00:37:11
debt people offer you tons of cash. And then the problem Dave and I saw up close
00:37:15
and personal, many different companies where founders would look at it as like, oh, I'm extending my runway. Well, if
00:37:20
you're a hot startup, there's always more venture capital. There's always
00:37:23
more people who want to own equity. The equity sale gives you optionality. And you have more people on your team, more
00:37:29
people rooting for you and aligned with equity interest as opposed to now you have a debt instrument. They have a
00:37:36
different goal. They have different downside. They're trying. >> No bank wants to be your last 3 to six
00:37:42
months of runway because that means that in a high percentage of cases, they're
00:37:47
going to lose their money. >> Yeah. >> So, they're I've never seen I have never
00:37:52
seen venture debt work well to improve the quality of a business never only only ever seen venture debt cracks that
00:38:01
damage companies and if you get the venture debt you can never actually use it. So the venture debt investors that
00:38:07
ultimately make money it's because they put money in a company and the company
00:38:10
never actually used the money they gave them. I hate this business. I think venture debt's like the worst
00:38:15
vulture-like business in Silicon Valley. It's terrible. If you get down, if if
00:38:19
the last money in the bank is the debt you owe to the bank, they're going to
00:38:23
rug you. That's when you get rugged >> 100%. >> You think they can afford to lose 100%
00:38:29
of their money when they're getting an 8% return or something like that? No way. That's not how it works. VCs can
00:38:36
afford that because we have the opportunity for a 10x or 100x or,000x for that moonshot. So, we can accept a
00:38:43
bunch of zeros. The bank can't accept a bunch of zeros. Well, and then when they
00:38:46
when they do get scared and when they do think they're going to lose their money,
00:38:50
wait till you see what they extract in terms of value, what they ask for. They will ask they'll double the interest
00:38:56
rate. They'll ask for warrants. It's basically like being in debt in prison.
00:39:01
Chim, you can talk a little bit about your experience when you were uh in debt. In prison, it's not going to be
00:39:07
pleasant. I've been in debt. I mean, I've had a $420 million credit line,
00:39:13
>> and I had a moment where it was reflexively kind of collapsing inward because the assets that I was using to
00:39:19
secure it shrank in value in a moment of market disruption. I was scrambling and
00:39:25
then at the same time there was a risk. It was the worst moment of my professional working life. I had like a
00:39:32
couple hundred million dollars sitting at Credit Swiss and they were about to implode. And so on a weekend, I was
00:39:37
trying to figure out whether my money was still there. I had always had this rule, don't have debt, and then I
00:39:43
violated it to try to run the number up. I almost got run over. I almost lost everything. I will never do it again.
00:39:51
And if I ever do it again, if you guys ever hear me do it again, please just come and punch me in the face.
00:39:56
>> We will. We've been waiting for an excuse. >> Can we punch you in the face for other
00:40:00
things, too? Buffett has this line about this is how smart guys go bankrupt is they take on debt.
00:40:06
>> Debt equals prison [ __ ] Keep it in your mind guys. You will be a [ __ ]
00:40:10
>> Unless you socialize the debt then everyone thinks it's okay which is what
00:40:13
we do with governments. And that's the problem with government. Don't get
00:40:16
>> start going off. >> Don't push the button. All right. Listen. We got to talk about
00:40:20
>> another just just a quick aside on that. In the 1950s, all the corporations in
00:40:25
America had pension plans where you would get some guaranteed payout at the end when you retire. And they were all
00:40:30
like, "We're all going to go bankrupt because a pension plan is either significantly overfunded or underfunded.
00:40:35
If it's underfunded, you're bankrupt. If it's overfunded, you've wasted all this
00:40:38
money. You can't do anything with it." So, they all moved to 401ks and everything got moved to defined
00:40:42
contribution plans except except >> governments. And that's because the
00:40:47
government employees formed government public employee unions and they're like,
00:40:51
"We want to keep the pension plans and now the pension plans, it turns out 70
00:40:54
years later are going to bankrupt all the governments in the United States."
00:40:59
>> By the way, a guy Spencer Pratt who's running for mayor, he started uncovering
00:41:02
all of the salaries of the union folks and their pensions in Southern California. It's bonkers. They're making
00:41:10
$4500,000 a year right before they go on pension. then they double their overtime and they
00:41:15
get two/3 or a half. The pension doesn't work. You got to go super annutation
00:41:19
fund. I don't know how many times we've talked about it here, but >> you don't need autation fund. You just
00:41:24
need a 401k. Let people have a have an account. They got their money in their account.
00:41:27
>> Yeah. But it's just a way to force people to contribute to it. So a forced
00:41:31
401k is different than a 401k. You got to force people and it's you're not
00:41:34
allowed to force people into their 401k as you know. Yeah. >> As we've seen in California, everything
00:41:40
related to the government is a giant grift. It's a giant scam. There's tons
00:41:43
of fraud going on. Uh we've talked about the homeless industrial complex, 12
00:41:48
billion a year to homelessness, but the number of homeless keeps going up. There's a million examples like that.
00:41:52
>> The racism industrial complex. We'll get >> a good time. Let's shift to SPLC because
00:41:57
I think it's a good example. >> Well, we'll get to it. We'll get to it.
00:41:59
Um yeah, but you know what's even better is you can just pass a law like the Nick
00:42:02
Shirley Act and you can put your fingers in your ear, cover your eyes, and say la
00:42:06
and just pretend the fraud's not happening, which is their reaction in California. Hey,
00:42:10
>> how much fraud has Nick Shirley uncovered? So far in California where he should be a billionaire,
00:42:18
>> you know, he should be doing it privately and then getting the whistleblower awards. I think that
00:42:22
actually would be a better strategy for him. >> We told him that was the we told him
00:42:26
that business model, remember? >> Yeah. No, he I think he's addicted to
00:42:29
the views, but I mean he could literally raise money on >> concept. He's making thousands when he
00:42:35
could be making billions to be free. No. >> Well, but it's better it's better for
00:42:39
the public that he's doing what he's doing. Thank God for Nick Shirley. >> So thank you, Nick Shirley. Whether you
00:42:44
could be making more money or not, what you're doing is >> You know what he also did? He shamed the
00:42:50
mainstream media who's forgotten about investigative journalism, who forgot the
00:42:54
ability to knock on a door and just ask a basic question. And now Bari Weiss with CBS has deputized one of her
00:43:01
reporters and she's doing the exact same playbook and meeting him punch for punch. Where's CNN? Anderson Cooper
00:43:09
should have a Nick Shirley on his team. The New York Times should have a Nick Shirley. The LA Times should have a Nick
00:43:14
Shirley. Why don't they? That should be >> hide. You're talking You're talking
00:43:17
about old media that does things one way. And the point about Nick Shirley is it's new media. It's citizen journalism.
00:43:23
It's people on the street distributing factf finding, distributing information
00:43:27
gathering. And old media in order to survive became an opinion organization. >> Didn't the media used to care that the
00:43:32
Pentagon was paying $900 for a hammer or what have you? I mean, like 60 Minutes used to do things. Now it's like the
00:43:38
media just wants to protect the waste fraud abuse no matter how egregious it is. Remember,
00:43:46
>> do you remember that guy Dennis Kuzlowski, the CEO of Tao, who went to jail and they like had just a field day
00:43:53
stand? >> Umbrella stand the $6,000 umbrella stand >> made out of like Ivory from like no
00:44:00
elephant. I know you bought that, didn't you? >> Sax, you're so right. People really used
00:44:05
to care except when it was their team and then the minute that it was their team, they're like, "Oh, no. Let's just
00:44:10
look the other way." >> You're right. If it's a CEO, if a CEO
00:44:14
basically engages in some misbehavior, and I'm not defending it, the press will
00:44:17
be all over that. But when the government does it, they don't do anything. And in fact, we had one of the
00:44:23
most successful, probably the most successful entrepreneur of our generation donating his time to the
00:44:28
government to find waste. And the media basically drove him out. >> They vilified him and drove him out.
00:44:35
Yeah. They made it untenable. Well, this is whoever comes up with a way to eliminate waste, fraud, and abuse like
00:44:41
Doge did and they productize that and make them make that their platform. That's the way to win in 2028 and going
00:44:49
forward is to convince the public that they don't need to have their taxes raised. They could have their taxes
00:44:55
reduced just by eliminating the minimum of 20 or 30% of waste for abuse there is
00:45:00
in the system. Uh, we'll get to Tim Cook stepping down in just a moment, but I
00:45:05
want to remind everybody liquidity sold out. I'm sorry we added a couple of tickets. We we we burned through them
00:45:11
immediately, but you can still get into the All-InSummit. This is our fifth edition in Los Angeles, September 13th,
00:45:16
14th, and 15th. >> Allin.com/events to apply. Please apply and then don't come to us 60 days out
00:45:23
and say, "I didn't get a ticket. >> I'm a bestie. Get me in." Just buy your
00:45:27
damn ticket and don't get left out. >> I have a liquidity announcement.
00:45:31
>> Oh, yum, yum. We are going to do one political panel, >> okay? >> And it's going to be Dave McCormack and
00:45:40
John Federman, the two sitting senators from Pennsylvania on stage with us talking about all topics from a left and
00:45:48
right perspective. >> Amazing. So Federman's coming, which means the dress code is now sandals, uh,
00:45:55
shorts, and a t-shirt. That's great. Construction sheet. Get your Timberlands
00:45:59
out. your trim in that one. I mean, is he really going to show up looking like a hobo? I love his hobo style. It's
00:46:06
great. >> McCormack's very fit and handsome, so like he he'll he'll balance him out. So,
00:46:10
>> we should that's what we should program it as. Like, he should wear his best
00:46:14
Brion suit versus the Old Navy from Betterman who wore it better. All right, listen. Just rapid fire here on the Tim
00:46:22
Cook uh resignation and moving on. This guy, John Turnis, is a 25-y year vet. He
00:46:30
did lots of hardware, worked on iPad, AirPods, and he was the favorite on Poly Market since day one. He's a bold
00:46:38
decision maker according to reports. And unlike Tim Cook, Cook, Tim Cook did a great job of squeezing every last nickel
00:46:45
out of Steve Jobs's product line, which lasted for a decade. iPhone, Apple TV,
00:46:50
watch, I don't need to repeat them, but here we are. We got a product person in
00:46:55
the seat which is what we all know they needed because hey these tools are getting a little bit stale. Siri
00:47:01
descriad Airpods discretad the whole uh system is not built on innovation anymore. It's built Freeberg I think you
00:47:10
would agree on just ringing more profits more profits. What's your hope here?
00:47:16
Because man they missed so many great swings at bat. They didn't get the Oculus, you know, Ray-B bands that Meta
00:47:23
did. They cancelled their self-driving car. What would you hope that this new CEO of Apple focuses on Freeberg in
00:47:31
terms of innovation? They don't have a problem selling phones still. They don't
00:47:34
have a problem selling laptops and making a ton of money. But if you were in the seat, if you were on the board of
00:47:38
Apple, which wouldn't be a bad idea for them if I'm being honest, what would you
00:47:41
tell the new CEO to focus on? David Freeber. >> I mean, I don't know. The software layer
00:47:46
of the future is not the software layer of the past. So, >> okay, >> it's pretty obvious. I don't know if how
00:47:52
much there is to talk about, but you just need the Siri equivalent that's ubiquitous in all of your devices. Knows
00:47:57
who you are, personalized to you, sees your email, sees your calendar entries, knows what kind of music you like, has
00:48:03
connection to your home, basically build that AI layer for your life and make it
00:48:09
ubiquitous in all of your Apple devices that no matter what device you're using,
00:48:12
it knows who you are. You can engage with it using kind of a natural language method. And it's, you know, it's it's
00:48:18
pretty obvious. >> Yeah, they should buy Whisper Flow. Yeah. I mean, that would be
00:48:22
>> I don't know how they're I don't know how they're running the business, but
00:48:24
>> Well, they're running it for profits, obviously. Sachs. Uh I would say buy
00:48:28
Whisper Flow and just replace the Siri team with that because Siri has been just The fact that Siri can't spell
00:48:33
Polyhapatia or Calacanis after 20 years of us giving them $20,000 for iPhones is
00:48:39
just disgraceful. Sax, if you were on the board of Apple, again, not a bad idea. What would be your hope for the
00:48:46
company? What would be your sage advice for the new CEO? >> Well, I mean, everybody is going to be
00:48:52
asking the same question, which is what are you going to do about AI? I don't
00:48:56
know that they needed to be on the bleeding edge of it, but they are going to need an answer at some point. And
00:49:00
Siri is going to need to be AI empowered. Probably the way it should work is that you get to choose your
00:49:06
model. I mean, I don't know that they need to pick just one model provider. It
00:49:09
could be a setting where you go in and you set up your account with whatever chat GPT or Grock or Claude or what have
00:49:16
you and you can choose your own model provider and then you'll have more customization and more ability to
00:49:22
control your your storage. Let me just say just on Tim Cook's retirement, he
00:49:28
had an incredible run as CEO of of Apple, I mean he ran it very effectively for 15 years. The market cap of the
00:49:36
company went up by over 10x. the revenue grew from roughly 100 billion a year to
00:49:40
over 400 billion a year. He also improved the quality of revenue by moving the mix into services which is
00:49:47
partly why it got why it got a higher valuation and you know people say that well they never did any innovation under
00:49:55
Tim Cook but you know I've seen people tweet lists of products that were released under him and there were a lot
00:50:00
of them now it's true nothing as big as the iPhone but they did release a lot of
00:50:05
products under Tim Cook and then just finally I mean you you look back over the last 15 years and there really
00:50:11
weren't any public snafuss or scandals or brogleos with with Apple. It's one of
00:50:18
the few tech brands that is still I think beloved by the population. I think a major part of that was Tim Cook's
00:50:26
dedication to privacy and keeping the company on the right side of that which I think users do appreciate. And you
00:50:32
know he even Tim Cook even got praise from the president. And I think it was just unsolicited where the president
00:50:39
talked about how Tim Cook didn't call him up that often, but when he did it was something important and therefore
00:50:44
the president tried to help them out. Seems like he nurtured a good relationship with the president over
00:50:48
over the last decade or so. So you just have to say that he navigated what could
00:50:53
have been a turbulent period with a great deal of grace and appl. Clearly uh Chimath he was a great steward of the
00:51:01
brand even though that list of products were all developed under Steve Jobs and they were just executed well but he
00:51:10
didn't bring in a lot of new products or services. Any final take >> actually let me ask you a question. What
00:51:17
do you think >> other than AI you know AI powered Siri let's say what do you think he missed? I
00:51:24
mean, what should Apple have done that they didn't do? >> They would have out by now a pair of
00:51:30
glasses that weren't 17 pounds like the Apple Vision Pro. They would have gotten
00:51:36
glasses that pair perfectly with your phone, take videos for kids, and they're
00:51:39
coming out with it. It's just on a really broken timeline. They would have had a killer Siri. They would have had a
00:51:46
search engineish perplexity-l like product. They would have had a self-driving car. When you went to the
00:51:51
Apple store, you would have been buying two or three very important products. Glasses, a car, and probably a
00:51:58
television set. If you look at actually what they did innovative under Tim Cook,
00:52:02
I think the they have great taste and Apple TV produced a lot of great programming. I he was working on a
00:52:09
television set, not Apple TV clunked onto the back. I think those three products would have been four products,
00:52:15
Siri, glasses, car, television set. Those would have been extraordinary. And who knows what he would have come up
00:52:21
with when they lost Johnny IV uh and obviously Steve Jobs passed away. They lost the soul of the company. They lost
00:52:27
the innovative groundbreaking soul of the company and they just went into profit and iteration mode. But no
00:52:35
acquisitions of note, nothing important was acquired and nothing important was released. Vision Pro, you can give them
00:52:43
like maybe that's like the sixth best product or something, but it obviously
00:52:47
hasn't hit the mainstream. Chimab, any final thoughts from you? >> Yeah, I have um
00:52:52
three specific things to say. The first is that he had honestly like an impossible job. It's sort of like you
00:53:00
play basketball with Michael Jordan and then you're asked to be Michael Jordan. And I
00:53:07
think that that's an impossible task. And on that dimension, I think he has done just an incredible job. He has been
00:53:13
an incredible steward of the business. Sax is right. no major snafuss. I think he did a really smart thing around
00:53:21
doubling down on privacy and just as a practical matter of being a great CEO like if you I think you can categorize
00:53:29
CEOs in two buckets. One is the innovator, the person that's pushing the envelope and then the second is just a
00:53:37
great steward. He's at the top of the top of that second category. Um, I sent
00:53:43
you a couple of charts to to show this and he found a lane that allowed him to separate himself from Steve Jobs. So,
00:53:51
you know, as an example, like what does it mean to be a steward? Well, when you're a steward, you're allocating
00:53:57
resources. And the two most important resources you control is capital and people. And I think on that dimension,
00:54:05
what Tim did, if you just look at this, is he was able to invest appropriately in R&D. They completely divested their
00:54:13
need of Intel. They spun their entire new line of silicon. That silicon, it turns out, and this will be important in
00:54:20
the future, is very useful in AI with all of this open cloth stuff. And you know, some of you guys are completely
00:54:27
addicted to it. And they've kept the acquisitions light. So, he was very capital efficient. If you look at the
00:54:34
the next chart, what's so interesting is like it is the exact opposite of what
00:54:38
Steve Jobs did. Look at the amount of money that Steve Jobs returned to shareholders in his tenure at Apple.
00:54:44
It's easy to count. It was zero. He loved to keep that money on the balance sheet and he probably or maybe I'm
00:54:51
guessing would have directed that at some huge shot on goal. In the Tim Cook era, it was very different. He shrank
00:54:57
the share count by almost 50%. I think it's like 44%. >> That's insane. Is there any correlary to
00:55:03
that, Chim? No, he's he's been a prolific shareholder friendly CEO, finding ways
00:55:10
to give us money back, which I think everyone who's owned the stock has very
00:55:14
deeply appreciated. The last thing I'll say though is what is the future for
00:55:18
John Turnis, and I think it's in this final chart. We talked about the problematic nature of increasing per
00:55:26
unit pricing in SAS and what I would say is if you look at the iPhone the unit price has gone up and people
00:55:35
would say yes but the capabilities have gone up in turn and I acknowledge that but the problem with the per unit
00:55:42
pricing being as high as it is is what Freeberg says is going to happen. AI rips open the canvas of the devices that
00:55:50
we will use to interact with information and knowledge. We are going to live in a much more
00:55:56
heterogeneous world in the future. It's not going to be two devices and two different operating systems that get you
00:56:02
to knowledge. There's going to be all kinds of stuff, pens, orbs, who knows,
00:56:08
Jason, your glasses, whatever. And so the problem is if you get too addicted to a single thing that has an
00:56:15
incredibly juicy profit margin and great stickiness and the ability to raise price, it's a hard drug to get off of.
00:56:24
So I think really what John Turnis has to do is figure out how to move to this world where everybody will be launching
00:56:32
devices via MCP or otherwise. All of these services will be open. It'll be aentically talking to everything. I
00:56:41
think the most decay and I think if that happens that's problematic if you're too reliant on a
00:56:48
single thing to kind of keep it going. >> Yeah. And just expanding on what you
00:56:52
said like wearables is where they really uh made some good inroads in terms of getting people to use them whether it's
00:56:59
AirPods or the watch. And the next wearable this is a plaude pin that I use to record. You can put it here and put
00:57:05
it on your wrist. That AI synchronicity of having your eyes, having your ears, having your watch, having your phone,
00:57:13
your desktop all synced together with AI could be a huge product line. I'll also
00:57:18
add a fifth robotics. You know, the I think t I think Steve Jobs, if you were alive today, would have been looking at
00:57:25
Roomba. He would have been looking at Optimus and he would have said, hm, consumer robotics in addition to a
00:57:31
consumer car. Those are two things I think he would have absolutely uh executed on at a high level. Okay,
00:57:39
let's keep moving here. Uh >> just come come make one last >> and we'd love to have you on the pod,
00:57:42
John. So, just come on the pod when you're ready. Uh we'll have you come sit
00:57:45
in. Go ahead. S get the final word. >> Just one last point on this is that I
00:57:49
think the succession at Apple is reminiscent a little bit of the succession at Disney. And apparently
00:57:58
Steve Jobs and Tim Cook had this conversation back when Steve was alive. and and Steve told Tim don't do what
00:58:05
Disney did where basically after Walt Disney died the company kind of languished because it felt so beholden
00:58:12
to Walt's vision that they never really iterated. Now when Walt died his brother
00:58:18
Roy took over and Roy was already in the business he was sort of like the business co-founder. He was a COO type a
00:58:24
little bit like Tim Cook and he kept the magic going for about 5 years and then he himself died. I think it was around
00:58:29
1971 and then you had this string of CEOs who took over kind of uninspired and it wasn't until Eisner came in in
00:58:36
1984 that he sort of revitalized the business and so as I understand it Steve and Tim had this conversation and Steve
00:58:43
told him don't be too beholdened to my vision you need to figure out your own
00:58:47
and extend it. I think that, you know, you could argue that Tim in a way was like the Roy figure here. Very effective
00:58:55
business partner of Steve. He got a 15-year run. Roy only got five. And I think again, he added a zero to the
00:59:05
value of the company. The market cap went up over 10x. So, you'd have to say
00:59:09
fantastically successful run >> as CEO. I think the question now for John Turnis is okay, you're now past,
00:59:17
let's say, the the Walt Disney and Roy Disney part of the business. Is it going
00:59:21
to be like the 1970s Disney or is it going to be more like the 1980s? Do you figure out way to
00:59:26
revitalize it or do you have to go through kind of a funk first? >> Yeah. And if I I think it's like really
00:59:34
illustrative of this discussion, Eisner and Iger because Eisner's innovation was
00:59:40
he realized that Disney was uh I think he called it the vault strategy. He would and we probably remember this from
00:59:47
our childhoods. He would re-release all into theaters all of their IP every seven years. You couldn't get some of
00:59:54
those Bambies, whatever, Snow White and the Seven Dwarfs. You couldn't get those
00:59:59
products except in theaters. and he figured out a cadence to keep publishing. But then I came in and said,
01:00:04
"Hey, what if we use this balance sheet and we use this distribution at the
01:00:09
parks uh and you know with their brand to buy Pixar, Marvel uh and Star Wars. And so there's multiple ways to do it.
01:00:18
There might be something there in terms of acquisitions. bold acquisitions with the Apple balance sheet could be super
01:00:25
accreative to shareholders as opposed to lowering the share count and just distributing a ton of cash. All right,
01:00:32
listen. We're going to talk about the Southern Poverty Law Center. >> Racism Corner. Let's go to race fake
01:00:38
fake racism corner. I want to know how the SPLC managed to accumulate $822 million in offshore bank accounts.
01:00:46
>> Yeah, this is incredible. These are big numbers. Okay, SPLC. How is that
01:00:50
possible? What is going on? All right, let me tee it up here for the team. >> This is like one of the biggest griffs
01:00:55
of all time. Anyway, Jake, >> this is a big one. SPLC has been indicted. Indicted, not found guilty
01:01:01
yet, on 11 counts of wire fraud and money laundering. Keep that in the back of your head. Wire fraud and money
01:01:07
laundering. Here's the core allegation. Between 2014 and 2023, the Southern Poverty Law Center used hidden bank
01:01:14
accounts to funnel 3 million in donor money to paid informants. Like these are confidential informants like the police
01:01:21
or FBI might use. They use these as a nonprofit NGO to infiltrate hate groups. And so the official mission of the SPLC
01:01:33
is quote to be a catalyst for racial justice in the South and beyond, working in partnership with communities to
01:01:39
dismantle white supremacy, strengthen intersectional movements, and advance the human rights of all people. Okay,
01:01:45
sounds great on paper. Examples of organizations they were trying to infiltrate, KKK, Aryan Nation, neo-Nazi
01:01:52
groups, and the Unite the Right organizers, Proud Boys, labeled as a hate group by the SPLC. Oathkeepers, not
01:01:59
listed as a hate group, but part of the militia movement. My friend Sam Harris, he was not listed as a hate group, but
01:02:05
he was also pinned by the SPLC as like hate adjacent in their hate watch headlines. And this is something that I
01:02:13
had a major problem with this organization on, which is they would just very loosely label people as hate
01:02:19
speech and try to get them cancelled. All of this kind of uh came to a head. revenue before Charlottesville. You
01:02:26
remember the incorrectly clipped uh Charlottesville hoax where they said Trump said both good people on both
01:02:32
sides, but they didn't give his full quote. Very unfair to President Trump. Uh we found out later and that was the
01:02:38
reason Biden of course ran. He said the Charlottesville both sides thing was his
01:02:42
inspiration. 58 million in 2026 to your point Shimoth doubled and spiked to 136 million more than double and it's
01:02:50
remained elevated ever since. Here are some, you know, images for the indictment. And I'll wrap on this and
01:02:56
then get everybody's uh feedback. They had F37 as one of their confidential informants. He was a member, and this is
01:03:05
according to the indictment, quote, member of the online leadership chat group that planned the 2017 Unite the
01:03:11
Right event in Charlottesville, Virginia, and attended the event at the direction of the SPLC.
01:03:19
F-37 made racist postings under the supervision of the SPLC and helped coordinate transportation to the event
01:03:25
for several attendees between 2015 and 2023. The SPLC secretly paid F-37 more than $270,000.
01:03:33
That's the legal case here. Let me pause there. >> Can I add one thing?
01:03:37
>> Sure. Keep adding. There's a lot of detail to this case. Yeah. >> Yeah. So, you're right that the SPLC
01:03:41
allegedly did fund $270,000 to help plan Charlottesville. In addition to that, they secretly funneled more than $3
01:03:49
million to a bunch of violent racist extremist groups, including the Ku Klux Clan, the
01:03:57
American Nazi Party, Aryan Nation, United Clans of America, and it goes on from there. So, I think don't forget
01:04:06
about the 3 million bucks. So this group that was supposed to be fighting racism
01:04:09
in fact was fermenting racism by paying these groups to basically organize protests that SPLC could then point to
01:04:19
and say that America has a huge racism problem donate to us. And that's basically what happened after
01:04:24
Charlottesville. They increased the amount of money that they were able to fund raise by $81 million. So that
01:04:32
$270,000 investment led to an $81 million return. pretty good. But this is kind of the whole point of the story is
01:04:38
that these guys are basically running a grift. And one of the ways that you know
01:04:42
this is a grift is because according to the indictment that they opened bank accounts under fictitious entities to
01:04:51
conceal the payments that they were making from their own donors because if their donors knew that they were funding
01:04:58
the KKK, they wouldn't be getting all these contributions from Hollywood celebrities
01:05:04
and all the rest of it. So, it's really just this unbelievable story. >> Uh, it really boggles the mind.
01:05:11
>> And just to clean up a little bit there, these are allegations. They haven't made
01:05:14
the jump from planning these events. And the SPLC claims they were not planning these
01:05:22
things. They were monitoring. So, that's going to be their argument on the side.
01:05:25
I'm not saying I agree with that. I'm not saying you're right that the SPLC's
01:05:29
cover story is that they were simply paying informants. That's what they've
01:05:33
claimed. But there's two problems with that story. Number one is they were paying the actual leaders of these
01:05:39
groups, not just sort of moles who were infiltrating the groups. And second, these leaders, they weren't paid to
01:05:46
inform. They were paid to ferment the activities. So I'm just saying that's
01:05:51
the the flaw. I understand they have this cover story that they were just paying informants. I'm just saying in my
01:05:56
view that does not hold up. And again, if they were just paying informants, why the extraordinary efforts to conceal the
01:06:02
payments from their own donors? If they were proud of these efforts to infiltrate these groups, they should
01:06:08
have basically informed their donors what they were doing. In fact, they hid it.
01:06:12
>> And well, here's the reason uh that it was hidden according to them. Again, I'm
01:06:16
not taking this side. SPLC is not an organization I'm endorsing in any way. Their version of this is we didn't plan
01:06:23
any of this. If we put SPLC bank accounts together for informants, that would be like the FBI sending a
01:06:31
check to an informant from an FBI account. That's their explanation of it. >> They're not a law enforcement agency.
01:06:36
>> Well, that's actually the question I had about all this is like what is a
01:06:39
nonprofit doing hiring confidential informants, Chimoth, to infiltrate these organizations? To what end? And then if
01:06:46
you show me an incentive, you're going to you're going to see an outcome. And
01:06:49
the outcome here is, hey, we'll get more donations if there's more racism.
01:06:54
uh your thoughts just generally speaking here Chimath again all of this is alleged
01:06:58
>> these NOS's have completely run a muck they're are cosplaying as these
01:07:04
overlords and power brokers in our lives and it needs to get stopped they should
01:07:09
all be dismantled the people that donated to the SPLC should sue them rip open all of the documentation get their
01:07:16
money back because just so you guys know if you are listening or watching and you
01:07:20
have donated there is 822 million dollar of your money sitting in an offshore bank account waiting for you to get it
01:07:27
back. Okay? And then separately, if you are thinking of donating to any of these
01:07:31
organizations in the future, unless there is a full transparent auditing of it, you actually may be doing the
01:07:39
opposite of what you thought. If you are against racism, you may be supporting racism. If you are against
01:07:45
discrimination for gays, this could be actually promoting discrimination for gays. If you are supportive of trans
01:07:51
rights, this may be pushing back against trans rights because the playbook seems
01:07:55
to be do the opposite to create the narrative, give it to your friends in the media who will look the other way
01:08:01
and just amplify it, tell the lie, create the craziness, and then raise a bunch of money, make a bunch of stink,
01:08:08
and try to curate power. Freeberg, do you think this is uh in your estimation or your gut tell you this is arsonist
01:08:16
firefighters? are lighting things on fire so that they can go put it out or do you think this is like um lawfare as
01:08:24
some people are claiming because there hasn't been to Chimat's point it's they
01:08:29
don't have donors taking this action they're being accused of wire fraud on
01:08:33
behalf of donors who haven't shown up yet to do you know a legal action what's
01:08:36
your take on all of this Freedberg >> the IRS definition of what a 501c3 nonprofit organization is meant to be
01:08:45
doing is to engage engage in exempt activities. The definition of exempt activities is charitable,
01:08:53
religious, educational, scientific, literacy, public safety, or fostering amateur
01:09:02
sports competition or preventing cruelty to children or animals. You tell me how
01:09:07
the 90% of what we call nonprofits today fall under that definition. We have completely closed our eyes to the fact
01:09:17
that organizations regardless of political affiliation, social interest, have fundamental commercial and probably
01:09:24
not aligned interests with the definition of a 501c3. And we've allowed them all to get away with it for far too
01:09:31
long. I don't think that this is a blue or red thing. I think that this is a
01:09:35
thing where we let these organizations make it easy to get money, to hide the money, and to do whatever the hell they
01:09:40
want with the money. and we need to stop it. And I think that it's an amazing
01:09:44
opportunity right now for everyone to kind of reset the decks by cleaning all this [ __ ] up and getting all of these
01:09:51
organizations flushed and make sure that any organization that wants to do whatever [ __ ] nefarious things they
01:09:56
want to do, by all means do it. But it's not a nonprofit and you shouldn't get a
01:10:01
charitable donation deduction and the government should not be putting money into these sorts of things. This is an
01:10:07
entirely different sort of activity in the social order. And as a libertarian, I'm all for it. But I don't think that
01:10:14
they should be taxexempt. And I don't think they should be getting government
01:10:17
money. And I don't think that individuals should be benefiting from giving them money. And if we could fix
01:10:21
all that [ __ ] up, I think a lot of these problems are going to go away. And I think this is a major problem. I think
01:10:25
the theme of this episode is audit everything. Whether it's government waste and abuse or it's these NOS's or
01:10:32
it's people like Dao making these chemicals that 30 years later, you know, perhaps are correlated with cancer. We
01:10:41
need to audit everything. We need to take a fresh look at this because it's not red versus green. Red, this is not
01:10:46
red versus blue, it's green. This is clearly a monetary incentive and it is incredibly disruptive for society to not
01:10:52
know the truth about what's going on with race in this country. I got absolutely, you guys might not know
01:11:00
this, but in this is part of the cancel culture moment in time where they tried to take people having reasonable
01:11:06
discussions about race in this country and tried to cancel them. They tried to do this to me in 2014 very famously. You
01:11:13
guys may not know this, but I have won a couple of awards in my career. most offensive tweet ever by Vice in 2014 was
01:11:20
my alleged racist tweet where I said, "Hey, if you want to get into uh blogging and journalism, there's no
01:11:27
racism in check journalism. All you have to do is publish for a couple of years a
01:11:30
blog post. Nobody can stop you and there'll be a ton of jobs available to you." And then what they did was they
01:11:35
tried to cancel me and tried to cancel all my media properties, my investing. And this stuff had like a modest impact
01:11:41
on me maybe for a year. And then now it's obviously all being >> Wait, wait. I'm not sure I understand,
01:11:47
Jake. You're saying the SPLC put you on a cancellation list? >> No, they put Sam Harris on it. Vice put
01:11:52
me on a cancellation list. I It didn't get picked up by the SPLC, but I experienced the same thing, which was
01:11:58
they said because I said, you know, race does race doesn't play a role in hiring.
01:12:04
>> You're so careful about your virtue signaling. I'm just shocked that anyone
01:12:07
would try to cancel you. >> Well, that's what's shocking about it is
01:12:09
like I know I was very clear. I said in journalism like a very vertical thing and I have a lot of experience.
01:12:16
>> You're a very skilled virtue signature. So >> I mean they tried to cancel me guys. I
01:12:20
don't you know it's they tried to cancel you too. >> Jason go ahead. You have a question for
01:12:24
me. >> I'm uncancellable. >> Yes. >> We all are. That's what we found out
01:12:28
through all this. >> You care about what all these idiots think. >> No, I don't. I never have.
01:12:34
>> Jason, I have a question for you. Go ahead. What percentage odds now do you
01:12:37
keep in the back of your mind that your petite little illustrious human rights watch is actually creating human rights
01:12:44
abuses to try to >> This is actually a very good point. You know a lot of the human rights
01:12:49
organizations from back in the day. >> What is the organization that you were
01:12:52
what is it called? >> Amnesty International. >> When I worked at Amnesty International,
01:12:55
a very fine >> mandate. The mandate was human rights abuses as described in the Universal
01:13:01
Declaration of Human Rights created by Eleanor Roosevelt and the U. >> This is like Science Corner. This is
01:13:07
done. >> No, but it was torture. It was people being put in jail and being tortured. It
01:13:12
was people being censored because of freedom of speech and and that's what I
01:13:17
worked on when I was at Amnesty International. These groups went a drift in order to get money, Human Rights
01:13:23
Watch included. And then they started taking on things like, you know, uh, transgender rights, this rights, that
01:13:30
rights, and censoring people. They went after Sam Harris because he had Charles from the bell curve.
01:13:37
>> Stop with all this [ __ ] I'm asking 5050 chance that all these organizations
01:13:41
are involved in >> So you think 50 5050 chance >> depending on the organization, I'm going
01:13:45
to guess 95%. Yeah. Amnesty International, you think is 50/50 that they're engaging in nefarious [ __ ]
01:13:52
to try to whip up people's belief that there are human rights abuses happening
01:13:56
that are not happening. You're saying it's a coin flip? >> I think it's probably a coin flip. Yeah,
01:14:00
that's what I would say today because these organizations all got co-opted. SPLC might have had a great origin
01:14:05
story, but now >> I admire your intellectual honesty and I appreciate you saying that.
01:14:10
>> Well, I mean, just based on facts. So, let's see what this legal case brings
01:14:15
about. >> Well, let's be clear. This is not them investigating SPLC 100%.
01:14:20
>> When you bring a grand jury indictment, you've already previewed the evidence.
01:14:24
This is not like some guy's trying to whip up lawfare. >> Okay. >> Um, actually, you don't have to bring
01:14:29
all the evidence, but that's a side thing. And and they're very frisky about
01:14:33
allowing you to indict somebody as we experienced with Trump. >> Grand juries are a whole different
01:14:38
animal. >> Yeah, they they will indict a ham sandwich is the line. Um, so we'll see.
01:14:42
Let's give them their day in court is always my position. Well, I mean, regardless of what happens in court, if
01:14:47
it's true that the SPLC is funding the Klux Clan and the American Nazi, just so
01:14:52
we're clear, they stop using confidential informants. Say it out loud, it's insane.
01:14:58
>> It's good enough for me. Listen, here's here's the systemic problem with
01:15:03
nonprofits and NOS's is, and let me just contrast it with business. In business,
01:15:08
you set up a company. The company has to make revenue. It has to make profits. And if it doesn't, it's going to go out
01:15:13
of business, right? Because it'll lose money. So, there's a feedback mechanism
01:15:17
from the market. The company has to create products that people are willing to buy, and those products have to make
01:15:22
money. With an NGO, nonprofit, what have you, they raise money. They don't sell
01:15:27
things. They fund raise from donors in order to engage in an activity. But what happens over time is the actual
01:15:34
activities may stop mattering. And all that really matters is they're able to
01:15:38
keep fundraising, right? Because they're just trying to figure out a justification to keep going back to
01:15:43
donors to get more and more money out of them. That's what perpetuates the organization
01:15:46
>> and they're trying to keep their job. >> Exactly. And then if it's an NGO that
01:15:50
gets money from the government, then it's even worse because all they do from
01:15:54
that point forward is try to lobby the government to get more money. And it doesn't really matter whether the
01:16:01
program is working or not. All that matters is whether they can spin it as working. Why wouldn't the Southern
01:16:06
Poverty Law Center focus on southern poverty, which is an issue that actually still exists? It's
01:16:12
>> got be a better thing. I mean, and why do you call it one thing, focus on
01:16:17
racism, and then all of a sudden whip up? >> I'll tell you why. Here's my theory.
01:16:21
Here's my theory on it. Is I do think that at one time in this country, civil
01:16:25
rights was a noble cause, a very legitimate cause. We had the the legacy of segregation and Jim Crow and there
01:16:33
were groups that were set up to basically >> change that and they succeeded.
01:16:39
>> But again, no one in an NGO or a nonprofit ever declares victory. >> Exactly.
01:16:44
>> They're never going to say, you know what, like we we addressed this problem.
01:16:47
We solved it. You know, I always thought that in 2008 when >> fire me, fire me. My job's done.
01:16:52
>> Yeah. When when Obama got elected in 2008, I thought that regardless of
01:16:56
whether you liked Obama or not or agree with his politics, I thought that at that point most people could see that
01:17:01
this was not a racist country. >> Whatever else you could say, the fact that the highest office in the land was
01:17:08
not denied to anybody showed that this country was not holding people back based on their skin color. And instead
01:17:16
of just basically packing up shop and saying, "Okay, we've achieved our goal,"
01:17:19
the goalposts all got moved. Remember that's when the whole anti-racism thing
01:17:23
started was was around Obama's second term. And what anti-racism was, it said
01:17:28
that it's not good enough not to be just not to be racist. You actually had to be
01:17:33
anti-racist. But what anti-racism meant was was basically that all the distributions had to match the
01:17:40
population. Basically, it meant equality of outcomes, not equality of opportunity. So effectively, this whole
01:17:46
goalpost was moved from equality of opportunity to equality of results. Once you see it, you can't unsee it. It's
01:17:52
like they sat around and they said, "Now what?" >> And one person was like, "I got an
01:17:56
idea." >> Well, and make racism again. Exactly. >> Right. But if they just said, if they
01:18:02
just said at that time, you know what? We're going to move the goalpost from
01:18:06
equality of opportunity to equality of results. We're going to basically make
01:18:09
everyone equal at the finish line, which is to say, I guess, communism or or some
01:18:13
sort of identity socialism. People would have said, "Ah, no, we're not on board
01:18:17
for that." So instead, they created this whole new terminology to justify it. And
01:18:22
it's taken us years to unpack that and realize what's really going on. >> Gosh, I don't want to put myself in a
01:18:27
position of defending the SPLC. They were partners with the FBI for a long time. To your point, Chamath, or or
01:18:32
Sax's point, rather, there was probably a time when it was important to infiltrate the KKK and the Nazi groups.
01:18:40
>> It's not 2025. It's not in 2026 like I think necessary to be doing this work. I
01:18:46
think can handle it uh in 20. >> Okay, I'm going to give you guys a news
01:18:51
flash. I just got this just hit the wire. Um this is really important. >> Breaking news here.
01:18:56
>> America is profoundly less racist than you think. Okay, >> there we go. Okay, breaking news.
01:19:02
>> Wake up. >> Freedberg wanted to do a surprise science corner. This is the first. We
01:19:08
don't know what he's about to talk about, but David looks like he's been
01:19:11
working really hard and he needs a nap. So, Freeberg, you have the microphone. Let's go. This was not science.
01:19:17
>> Yeah, this is not necessarily a big surprise, but there was a really interesting paper published this week on
01:19:24
trying to elucidate the underlying cause or predictor of colorctal cancer. So, I
01:19:31
don't know if you guys know any young friends, but colurectal cancer, Nick, if
01:19:35
you could just pull up this first image or colon cancer has become now the third
01:19:40
leading cancer. Over the last 20 years or so, there's been a scary rise in the
01:19:46
number of young people, people generally under 50 years old that are getting colon cancer. That number has climbed by
01:19:53
over 80% in just the last two decades. Historically, it's been an age related
01:19:59
disease. So, as you get older, over 70 years old, your probability of getting colon cancer shoots through the roof.
01:20:04
But this rise in young people getting colon cancer has been pretty alarming. And there's been a real question mark on
01:20:10
what is causing it. what's the underlying trigger? So, this research team out of Barcelona in Spain did an
01:20:18
amazing study where they looked at the difference in the epiggenome or the gene expression
01:20:26
in tumor cells of patients that are under 50 years old and those that are over 70 years old. the sort of data will
01:20:35
show you what different environmental triggers are associated with those changes in gene expression. So whenever
01:20:43
we're exposed to something in the environment, whether it's some food or
01:20:47
some drink or whatever else it is, some chemical in the environment, the cells in our body that are exposed to that
01:20:54
chemistry or exposed to that environmental trigger, have genes that get switched on and off. And you can see
01:21:01
which genes are on and off by looking at the RNA of those genes, which tells you
01:21:06
that those genes are expressing RNA to make protein or not make protein. And you can look at that gene expression to
01:21:13
determine what is changing when a cell is exposed to a particular environmental trigger. And so they were able to get
01:21:20
these samples of colon edinocinomas from the cancer genome atlas, which is funded by the federal government. And
01:21:28
they were then able to take a look at these cancer cells from colon cancer in patients that are under 50 and patients
01:21:35
that are over 70 and look at the difference in the gene expression profile and what um environmental
01:21:42
triggers are associated with that gene expression profile. So that will tell you, hey, these environmental triggers
01:21:48
are more likely the cause or an underlying driver of the risk of getting this colon cancer. And one thing rose to
01:21:56
the top. So they looked at a whole bunch of things. They looked at lifestyle factors. They look at eating index, how
01:22:02
much you ate, how overweight you were, alcohol, birth weight. They adjusted for gender. They adjusted for all these
01:22:08
different things. And as you look down this list, you'll see this is the difference between people that got colon
01:22:14
cancer that were over 70 when you typically have a very high chance of getting it and people that are under 50
01:22:19
when you don't. And what is going on with people under 50. And you can see there's this one row here that's all
01:22:26
orange. That row is a pesticide called piclorum. Plorum is a pesticide that was developed
01:22:34
by the DAO Chemical Company in 1963. This is the chemical formula for that pesticide. It's related to oxin, which
01:22:43
are these hormones that plants make. And in the 1960s, there was this big rush to
01:22:48
try and make synthetic plant hormones that you would then apply to a plant. It would cause the plant to overgrow and
01:22:54
the plant would quickly die. And piclorum became a very widely used herbicide in our environment. It's used to manage
01:23:03
weeds in rangeand and pasture land where cattle graze. It's used to control weeds
01:23:08
near roads and near railroads on industrial sites to clear weeds away from highways and utility corridors. And
01:23:16
the problem with piclorum, one of the the things that's been known about it is
01:23:18
it's very persistent. It doesn't biodegrade very well. Plorum sticks around for well over a year. It stays in
01:23:25
the water. It moves into groundwater and it's persistently in the environment
01:23:29
after it's been used for some period of time. I went back and looked at the EPA
01:23:34
data on this chemical. The last time there was an EPA safety study done was in 1995.
01:23:40
And so this was before we had this capacity to do epigenomic studies like what was just done to elucidate that
01:23:47
even though a chemical might not be causing cancer immediately and you can't
01:23:50
apply it to a cell and see it trigger a cancer, the long-term use or exposure to
01:23:56
certain chemicals in our environment causes a change in the epiggenome, which means that these genes are being turned
01:24:01
on and off. And when certain genes are turned on or off in the wrong way, it can trigger cells in the tissue to start
01:24:07
to malfunction and go haywire and ultimately lead to cancer. And I think that this paper shows a pretty strong
01:24:14
effect of piclorum in driving colon cancer in young people. It will very likely lead and it should lead to an EPA
01:24:21
review on whether this should be legally allowed. But it should also lead to a new mechanism by which we assess
01:24:27
chemistry that we're using in our food supply, in our environment, in our industrial applications because we can
01:24:33
now look at all of this sort of epigenomic data to try and figure out what are these chemicals doing to us
01:24:38
before we see them cause the problem. So I thought this was like an amazing paper
01:24:42
done by this team. They did a lot of work to try and make sure that the statistics were sound in the studies
01:24:47
that they did. It really uh I think elucidated something pretty scary. Is this like a Monsanto thing where like
01:24:53
one company makes it or piclorum is broadly available? >> It's off patent now and so I'm pretty
01:25:00
sure my guess I haven't looked into this but my guess is most of this is made
01:25:03
generically in China and then it's probably packaged up with lots of different brands in the US and all over
01:25:08
the world. So it's one of these chemicals that's just become ubiquitous in our use that just shows up
01:25:13
everywhere. But I think it really speaks to the fact that historically, think about 1995. You can look at what the
01:25:20
immediate chemical application of something does to a rat or a human cell and you can say like, "Oh, it didn't
01:25:26
cause cancer. It's good to go. Let's go." You know, didn't didn't cause quote
01:25:30
toxicity. >> Can I ask a question? In that study, are you exposed to piclorum based on where
01:25:35
you live? Because like >> Yeah. Sorry, that's a that's a great question, Shimat. So, I was going to
01:25:38
talk about this. Thank you for asking that. They then took that piclorum exposure and then they looked at all the
01:25:44
counties across the United States. They were able to gather data where there's
01:25:47
enough data in California, Connecticut, Georgia, Iowa, New Mexico, Utah, Washington and they were able to look at
01:25:53
pllorum use estimates from the pesticide national synthesis project and try and deduce in places where piclorum was
01:26:00
highly used and not highly used. And once again it elucidated signal which is that when pllorum was used in the
01:26:06
environment in the counties more frequently there was a much higher frequency of colon cancer in those
01:26:10
counties >> and that R squar is weak or it's strong >> reasonably strong the odds ratio is like
01:26:15
3x it's very strong this is accomplished freeberg from a combination of big data
01:26:22
>> and this uh science to study these increased testing as well right so you
01:26:28
have this confluence of increased testing increased data, you know, knowing where
01:26:34
these instances are occurring. And if you add a layer of AI onto this freeberg, this is like a really positive
01:26:40
use, going back and looking at all these compounds and figuring out which ones we
01:26:44
need to eliminate. Yeah. >> Yeah. So, I'll I'll put my PCAST hat on.
01:26:47
Thank you, David Saxs, for the role. And I think this speaks to one of the important roles that government has in
01:26:54
doing fundamental science and fundamental research. So the the National Cancer Institute and the
01:26:58
federal government stood up this genome atlas with $100 million a couple years ago. They spend only a few million
01:27:04
dollars a year now to maintain it to get cancer tissue samples and then create the availability to scientists to use
01:27:11
those cancer tissue samples to do the sort of epigenomic analysis and study supported by you know government grants
01:27:17
or in this case supported by a foreign university getting funding to do it. And so there's there's an important role
01:27:24
that fundamental science still has in elucidating this that we would have otherwise not been able to see if we
01:27:30
didn't have this resource available to us from the federal government and federal funding of scientific programs
01:27:34
like this. And that leads to this discovery. You don't need fancy AI for this. To be frank, JCL, there's an
01:27:40
incredible amount of data that's available or or resources that are available. What's happened in the last
01:27:45
couple years is what's called RNA sequencing where you can actually look at which genes are on or off. not just
01:27:50
what's the DNA but in the DNA. Remember we've talked a lot about the epiggenome
01:27:54
what genes are on or off and how that changes when you have different cancers or when you have different chemicals and
01:28:00
when you have a certain chemical like pllorum your colorctal cancer goes through the roof and you can see that
01:28:06
relationship in those tissues and then you can put all the data together and say oh my gosh there's a lot of evidence
01:28:11
here that points to this connection very powerful I think it's important that it
01:28:15
opens up the window that this shouldn't just be a one-off research project conducted by a team in Spain but maybe
01:28:21
should be a fundamental role that some of the government agencies play, which is to stop Americans and the world from
01:28:26
getting faking cancer. Let's figure out the things that we got wrong in industry
01:28:31
and go back and delete them out of our food supply and out of our industrial supply. Um, and I think this is a really
01:28:36
good example of that. >> So, Exa, how does Freberg's focus on Uranus uh, you know, inform your
01:28:43
co-leading of PCAST here? Are you going to go deep into this colon research? How
01:28:48
deep do you plan on going? And how will you get through eight of these presentations a day at Pest?
01:28:55
>> I It's all good. This is why we hired Freeberg. >> Yes. By the way, did you guys
01:28:58
>> He's going to handle uh Mars, Neptune, and Uranus. >> Absolutely. He's going to go deep into
01:29:04
Uranus and clean it up. We need to clean up Uranus. >> Uh great work, Freeberg. Great. Great
01:29:10
work. >> Anyway, I think I think this is important and I don't think there's any
01:29:13
news attention on this since it came out a couple days ago. So, I thought it would be worth bringing up on the show.
01:29:17
Absolutely. Making people aware. >> All right. >> But thank you guys for sitting through
01:29:20
it. >> Well, no, I think it's it's great work you're doing there.
01:29:23
>> I just read the paper, but >> yeah. >> All right, everybody. That's it for
01:29:27
episode 270 of the world's greatest podcast. I am your world's greatest moderator. Thank you, Chimoff Hatia,
01:29:34
David Saxs, and David Freeberg for the episode. To your friends, your neighbors, and we'll see you all next
01:29:39
time. Bye-bye. >> Love you boys. Bye-bye. >> Let your winners ride. Rainman David
01:29:50
and it said >> we open sourced it to the fans and they've just gone crazy with it.
01:29:55
>> Queen of besties are my dog taking a notice in your driveway. >> Oh man, my appetizer will meet me up. We
01:30:13
should all just get a room and just have like one big huge orgy because they're
01:30:16
all just useless. It's like this like sexual tension that they just need to release somehow.
01:30:24
>> Your feet. >> We need to get merch. >> I'm going all in.