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i literally don't want to talk about getting guys though only because it's getting crazy and i had to like mod my stuff so start the recording please
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start the recording i'm going to strike it by brigades do you mean like maga brigades all right listen it no i'm serious do
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you think because i can call him off hold on hey donny hey donny yeah jkl said he's being brigaded by magga yeah
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yeah yeah he can't handle it he's tapping out all right it's all good it's all good they're talking it's it's over they're not gonna they're not gonna bring anymore the psyop is
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over thank you thank you it was getting pretty it was getting pretty acute yeah it's done don't worry about it
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[Music] [Music] all right everybody welcome to episode 96 of the all-in podcast we had a bomb drop just yesterday uh
00:01:08
with adobe agreeing to acquire figma the design tool we'll get into that in a minute what it actually does for 20
00:01:14
billion dollars this is just astounding for this to happen period full stop it's the largest
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private company purchase i believe in history this company if you don't know it helps
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you design web apps or user interfaces so if you're a designer we used to make mock-ups we'd
00:01:33
send them around in the industry as images or pdfs and then like google docs where you can put comments on somebody else's words and you can collaborate in real time we call it multiplayer mode figma is multiplayer
00:01:45
mode the company is just a juggernaut if you work in startups you get figma designs all day
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and [Music] adobe stock got crushed because of this was down as much as 18 on thursday figma's most recent valuation was 10 billion dollars in june of 2021 their series e so peak market they had raised
00:02:04
200 million at that time there's a lot of details to get into here but you know listen let's uh ask
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the sultan of sas here what you think of this because it's double what was an incredible uh market last year that was overheated so what does this say about the market
00:02:22
figma you know figma itself or maybe adobe's you know jumping the fence or being
00:02:28
skittish how do we reconcile this sax well if you judge adobe stock price the other day
00:02:34
the market hated the deal i mean the uh adobe stock price went down like 15 percent and it's 150 billion dollar
00:02:40
company roughly so they lost almost the entire purchase price in the market capitalization of figma
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i think that's that's basically an overreaction i you know i know all the news is basically on
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how adobe is paying 50 times and that's no longer the multiple the multiple is more like you know eight nine ten times for
00:03:02
high growth sas companies there is truth to that but but i think it misses some important details about how fast figma is growing can we actually throw up on the the
00:03:14
screen the ar history of this company so and for people who know the multiple is
00:03:20
the multiple times top line revenue so really so okay so explain that to folks yeah well arr is just the annually recurring revenue it's subscription revenue sometimes people will look at
00:03:32
next 12 months revenue which is a similar concept not quite the same but sort of in the ballpark
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so you know what's interesting about this company i think it was founded 2011 2012. it had a very long wilderness
00:03:44
period that's when i call the period where the founders are trying to figure out what the product's going to be
00:03:50
uh really for almost five years they finally launched a private beta in 2015 they then opened it up to public launch in 2016 and they didn't turn on monetization
00:04:00
until 2017 so five years into the company they hadn't made a dime so you know it's roughly a ten-year-old company and for the first five years didn't make any money and then they started to make money five years ago
00:04:12
and then in 2018 i think they turned on the enterprise tier uh and then it's been kind of off to the
00:04:18
races that's incredible look at this yeah what i can tell you looking at these numbers by the way so i don't know if these numbers are perfectly correct
00:04:24
this is sort of i would call the scuttlebutt numbers these are numbers that um i believe
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to be true but it's not like these are numbers that the company's confirmed or anything like that this is just me
00:04:35
gathering you know intelligence from talking to people in silicon valley so this is what i believe can you read the numbers for people that
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aren't on youtube watching this yeah so in 2017 again the first year they monetized they did 700 000 they ended
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the year 700 000 of ar remember that arr is kind of a point in time metric it's the amount of subscription revenue your annual run rate subscription revenue at that time so
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they ended 2017 with 700 000 2018 they ended with 4 million 2019 they ended with 23 million 2020 they ended with 77 million 2021 210
00:05:11
million and then the estimated number for this year is 450. so you've seen in the press i think it has been publicly
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reported a 400 million dollar ar number is currently where they're at i've heard
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that they're going to end with something more like 450 this year and then the their forecast for next year
00:05:29
is or was at some point in time when somebody heard this 800 million you know forecast for 2023.
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so my point is i've seen a lot of sas metrics and i can tell you this ar ramp is phenomenal you know i'm sure people have kind of heard about the triple triple double
00:05:47
double that's kind of what vc's want you to do they want you to triple two years in a row then they want you to double two years in a row and so forth this
00:05:53
company did way better than that i mean 700k to 4 million is a really fast ramp and then 4 million to 23 million is incredible that's like you know over a 5x and then they did over
00:06:06
a 3x going from 23 to 77 million i can tell you that is super hard i think most companies even the ones that hit you
00:06:14
know low 20s tripling year over year they tend to decelerate to two and a half times or something like that this
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company was still growing over 3x then they roughly tripled again to get to 210 and then since they got a question yeah so now they're double that do you think the triple in 2020 was a coveted pull
00:06:33
forward or do you think that that was a natural like a zoom or not that's what i was going to i mean
00:06:39
it's possible but um if people were collaborating i'm not i don't see i mean so far in the numbers i don't see a huge
00:06:45
slowdown here i mean look once the numbers get into the hundreds of millions it's really hard to maintain the same growth rate
00:06:51
you're compounding off such a large base that it's just inevitable you can't keep growing 3x year over year once you're at
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you know 200 million of ar but the fact they got first from 23 to 77 and then 77
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to 210 and now 210 they're at let's say they're at 400 now and they're gonna be at 450 by the end of the year plus
00:07:11
it's um it's pretty amazing and so okay so yeah so adobe's paying 50 times current arr but if you believe this they're only paying divide by two
00:07:22
they're paying 25 times end of next year so like 18 months from now and then you figure you know within say two years after that
00:07:32
they're gonna be you know at somewhere between one and a half and two billion yeah of arr and
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then as you guys know there just aren't that many sas companies that even get to a billion of ar so so i i don't think adobe's making a bad
00:07:44
deal here i think there's a question about is there any point at which this product hits some sort of market
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saturation but adobe's in a good position to know that because they understand this market
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they are in this market it feels to me like i don't know i've been using adobe photoshop right around when it first
00:08:01
came out like 1992. and this product i've used it was built web first it was built for collaborative use and photoshop over the years they've really
00:08:13
tried to take what is a desktop installed software application and then try and create cloud-based
00:08:18
features and it's a terrible terrible user experience at least from my perspective having grown up on using
00:08:24
adobe photoshop but what's most important i think is a lot of people think about this on is it
00:08:30
the right price to pay for the company but at the end of the day the right price to pay for the company is what
00:08:35
adobe views to be the risk and reward for their business and they effectively paid roughly 12 dilution of their company to do this deal so they're
00:08:47
saying let's take 12 percent of our company and effectively de-risk the biggest risk to our business take out
00:08:54
the biggest threat to our business for 12 percent of our company not 12 was it 12
00:09:00
you have to factor in the actual drawdown of the stock as well so it's about 33 they
00:09:05
they effectively well i'm talking about like assume take take the price of the stock aside the number of shares they're
00:09:11
they're issuing because this by the way the deal value went down with the stock so i read the the merger terms last
00:09:17
night and there's a couple billion of cash and then a good chunk of it is in stock and
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it's a it's 10 billion of cash and it's 10 billion of shares at the price when the deal was announced and to your point so it's a fixed number of shares the stock it's a fixed number of shares it's
00:09:33
not a fixed it's not a fixed monetary value so it's down 20 from the deal announcement so that 10 billion of stock
00:09:40
is now actually 8 billion of stock so no the whole deal is now 18 billion not was it 10 billion
00:09:46
of cash to month the 10 billion cash yeah and then there's two billion there's two billion of deferred uh rsus
00:09:52
and stock-based compensation but they're but i mean if you think about it at the time of the merger they're they're
00:09:57
either you know i think they have they're gonna use some term loan that they have to get the cash
00:10:03
but they're effectively issuing you know 10 divided by their total share count which is roughly
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six percent of their total shares outstanding so you know they're kind of taking six percent or let's just aggregate the two
00:10:15
together and say they're taking roughly 12 dilution sure that the value of the stock goes down
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so look i think like this deal is really interesting so first let's just give huge kudos to
00:10:27
the ceo and the team and the investors what an enormous win for all those folks that's awesome it keeps silicon valley
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kind of going right and that's just awesome to see these kind of big wins i read this incredible profile about the
00:10:40
founder and he sounded like such a fascinating person he basically and it with the profile basically said that he was spending months and months going from office to office all around
00:10:51
the world meeting customers sitting with customers reading trouble tickets that's what he
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would do you know reading help desk tickets about the product on vacation whenever you see a a ceo that is so
00:11:03
customer obsessed typically there's good outcomes and so this is just another validating point on that theme
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now let's just put figma aside and let's just talk about adobe for a second what is so incredible is
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you have a company yes they spent 20 billion or whatever 18 billion now but the way that they did it is really interesting if you go back to zendesk and surveymonkey when those guys
00:11:30
announced that merger it was above a threshold of stock where you had to go to a shareholder vote
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and because there was so much turbulence in the market whether the industrial logic of that deal made sense or not
00:11:44
didn't matter as much to shareholders when it came time to vote and they voted it down right so interestingly adobe was very clever
00:11:51
they said i'm going to do half cash half stock so that i'm below the threshold we are below the threshold where it goes to
00:11:57
a shareholder vote okay interesting but then you have to factor in the dilution uh not just the dilution of the stock but then the re-rating of the stock and this is where you know you lose 20 of
00:12:08
your market cap and then you tack on this you're talking about you know a 40 30 40 billion dollar price tag to
00:12:16
get the deal done and i think that's where the head scratcher was in the public markets
00:12:21
where folks basically rebuilt their model and said hold on a second you know you've been telling me that this problem
00:12:27
is a solved problem but when you pay such a premium not only does it mean that this product is clearly materially growing and disrupting but the existing revenue base that i was
00:12:39
counting on in my model must be wrong as well and that's the actual flywheel that now
00:12:45
adobe is in where people are trying to really figure out how under pressure are those existing cash flows and then if you compound that with something else which is nothing
00:12:56
specific to adobe but to the whole market which is now interest rates are going up behind the scenes
00:13:02
you have this sort of parade of terribles for adobe that they're going to have to navigate right they have a very large portion of cash they have a
00:13:09
large portion of stock they have decaying earnings in their core business that they now have to
00:13:14
explain and then they don't really have a lot of earnings i think chantinew said that it's going to be year three before it's
00:13:20
secretive which is is typically a way of saying we're going to lose money and then in
00:13:26
year three we'll make at least a penny that's what a creative means doesn't mean you're going to make billions necessarily and so these guys have to find a way for
00:13:32
figma to drop about a billion and a half dollars of free cash flow into the business for this to kind of make sense
00:13:37
in the short term so i think those are all the mechanics that's sort of putting a lot of pressure on the adobe stock but it just goes to
00:13:43
show you the amount of disruption that happens this movement to the cloud or the movement to collaboration oh yeah
00:13:50
monolithic products are just sort of very much you know that is the key i think you guys did a
00:13:55
great job of summering it summarizing it this is an absolutely great deal for adobe it's a transformative deal in the same
00:14:01
way the whatsapp deal was for facebook it removes one of the two existential threats to adobe and it turns adobe i guess into a growth story now as pointed out adobe's product
00:14:14
was single player mode and adobe grows at about 12 or 13 quarter right now and now you have a company
00:14:20
that doubles and they really have been facing three paradigm shifts in the last five or so
00:14:26
years obviously you pointed out one desktop software downloading it versus cloud-based uh software well here they
00:14:33
go now they've got experts in cloud and then the second one yeah but they have a thing called creative cloud and you know
00:14:39
they are slowly trying to figure that out it's a paradigm shift inside the company they've really struggled so now they
00:14:44
have somebody who's cloud first trim off do you guys ever use those products but hold on let me finish here there's three paradigm shifts here for feature if they look very similar
00:14:55
no so these these three paradigm shifts the one is the desktop versus the the web the other one is subscription so adobe
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was charging a thousand dollars a year for the creative cloud now they charge 25 bucks a month for it they successfully did that
00:15:07
now they've successfully i think have figured out collaboration software what are they one thing that they have not done which i think is the real reason they had to buy figma
00:15:18
adobe see this is the problem with these big public companies adobe and all of their investors got
00:15:24
very addicted to the free cash flow generation of that stock and it's been an incredible performer and let's just be honest shantanu is one of the best
00:15:31
ceos of the last few decades in the public markets period end of story okay since 2007 he has just run a masterful playbook at the tail end of that though you know
00:15:43
in 2022 this is a company that has i think six or seven maybe i think maybe eight billion dollars of free cash flow
00:15:48
it is a gargantuan money-making business and so they refused in creative cloud to
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go to that free tier that figma has and if you look at all of the stories around figma one of the most powerful
00:16:02
things they did was basically allow people to use this for free effectively forever yeah bottom
00:16:08
up sass yeah and and the problem with adobe is like that's a business model disruption that they could not afford in
00:16:14
the public markets because if you condition a set of institutional investors to be expecting seven to eight
00:16:20
billion dollars of annual free cash flow and all of a sudden you're willing to torch it to take a quarter of that and
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make it free that is probably the biggest reason why they had to buy this thing which was that they needed to tuck it in and
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they're like how can i do it well i just have to do it by diluting the stock one time that was one time
00:16:38
stock insurance yeah it was a one but you know twelve percent diluted they're still and then they're it's it's one and done it's one more by the way the point
00:16:46
the point you guys are making is more broad which is it's not just about adobe this is the classic innovator's dilemma right like any big company that reaches maturity in their market and has scale
00:16:58
and has cash flows you have a different shareholder base you move over from growth to value and once you've got
00:17:04
value shareholders i mean i've been to these institutional meetings when i was on the exec team at monsanto
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and you know they wanted dividends and they wanted stock buybacks and they they're like it's nice to see growth but
00:17:16
at the end of the day i want to know where is my dividend going to be and what's my stock buyback target going to be and then to say hey i got to go
00:17:22
invest in innovating my way out of my corner because you know in this case cloud is reinventing my marketplace it is a very hard place for a manager of a business of that scale to be by the way
00:17:35
every industry by the way i think there's another takeaway that's really interesting here which is that if you
00:17:40
look at big tech companies i think you almost have to sort them into two buckets at least in the
00:17:46
enterprise and sacks you can tell me if you disagree but there's one type of enterprise company which makes basically
00:17:52
a single linear monolithic product or a handful of those monolithic products right think workday think adobe et
00:17:59
cetera but then there's this other type of company which are more platform level businesses that have this you know
00:18:05
mixture of things that they do relatively well integrated maybe each product is not so great but together
00:18:11
they're pretty decent and you have distribution leverage and you have pricing power think microsoft and the
00:18:17
totality of those products so what's interesting to me is you cannot effectively compete as it
00:18:22
turns out against microsoft at any point product and slack i think is the best example where you know microsoft teams
00:18:29
was fundamentally cannibalizing this business which is what drove slack into the arms of salesforce and you know you
00:18:35
could say that teams was not as great of a product i would have i would make that claim but what microsoft had was distribution
00:18:42
scale and pricing power where you could discount and effectively give it away for free adobe isn't in that situation right they
00:18:49
can't do that kind of stuff and so when you compete against those kinds of businesses you have a better chance of
00:18:54
winning the takeaway i think for the entrepreneur is when you're thinking about the next enterprise business to start
00:19:01
i would try to bucket these companies that you want to compete with and say if i'm going to build a newer version of x
00:19:07
make sure that version of x is going after a company like adobe versus a company like microsoft because it's much
00:19:12
much much easier to build value when you're competing against a monolithic product company
00:19:18
versus an entangled platform company sacs would you bundle if you were the ceo of figma which you now i'm sorry ceo
00:19:26
of adobe would you bundle figma into the creative cloud and then just make it one subscription
00:19:32
would you microsoft teams it yeah maybe i don't know i'm not sure about that i i do think that microsoft
00:19:38
is a little bit unique in its ability to bundle so what so tremendous right about the
00:19:44
power of the bundling what they do is i think it's called the e5 bundle they have all these products that virtually
00:19:50
all enterprises use from office to you know active directory to you know there's like a whole long list of them and so what they've done is they've created one price for all of those
00:20:01
products they sell as a bundle under a wall-to-wall enterprise license and what they do is when they see a new
00:20:07
competitor come along whether it's slack or zoom or or octa is they'll basically just clone
00:20:14
it create a worse version of that product and throw it into the bundle and so now every single enterprise is
00:20:20
getting the slack clone or the zoom clone or whatever for free and that has a huge material impact on
00:20:28
you know it pulls the rug out from under those startups so now that's not to say that microsoft's product is anywhere near as
00:20:35
good as those those competitors but you know now all of a sudden the the microsoft product is on a
00:20:41
marginal basis free but then what microsoft does is you know every year or two they go raise the
00:20:46
price of the bundle so basically you know they get you hooked on the bundle they then use it to systematically kill
00:20:53
or undermine a competitor and then they know you're stuck and then they raise the price they basically have inflation
00:20:59
of the price of the whole bundle i think it's very anti-competitive actually i think it's um it's akin to dumping
00:21:07
um i'm not sure what the logical stopping point of it is like i don't know if we can have a healthy
00:21:12
sas market if microsoft is allowed to keep doing this forever because think about it i mean they will just every
00:21:18
year they will take the hot sas company du jour clone it it'll be a shitty version they'll throw it into their
00:21:24
bundle and now they're dumping they're dumping the product in the market it's basically free it's free until they
00:21:31
basically drive they drive out the competitor or destroy it or basically undermine its market cap to the point
00:21:37
where it can no longer make the kinds of investments it needs to pose a real threat to the microsoft larger entity
00:21:44
right so think about how any competitiveness is and you don't hear a word about this from lena khan or washington they're
00:21:51
only focused on social networks no it's it's so funny it's like she's more focused on you know making sure amazon
00:21:56
doesn't buy roomba that you know this stuff doesn't buy one vr app it's not very sophisticated approach you're right this is the kind of stuff that actually really matters i really think you nailed it on the headsacks
00:22:08
it's a it's an impossible strategy to defend against the the other thing that is interesting by the way about all of
00:22:14
this is you know if you think that the valuation the takeout premium was basically 2x post to post
00:22:22
what that means is that if figma was last valued at 10 is now worth 20. you know does that mean that canva which was
00:22:27
last priced at 40 is worth 80. well potentially two well potentially to adobe right and if you add those two together now you know what you really have is basically the the entire totality of the
00:22:39
creative cloud for adobe is basically embedded now in these two businesses at in
00:22:45
an extreme premium and so it makes it very difficult now i think as well for adobe to execute a strategy here without it being forced to do some more
00:22:56
expensive um dilutive m a well and the other problem chamoth is this is going to ring
00:23:02
bell so when i said before there were two existential threats canva is the other one and that is the other paradigm shift that's occurred in computing is
00:23:08
that making things radically simple you talked about a freeberg photoshop is complex and it's single player canva
00:23:15
is how people create you know any kind of marketing materials today and they don't hire a designer anymore the job of
00:23:20
graphic designer is now everybody's job everybody can make something on canva but then i think saks or or freiburg
00:23:26
maybe you have thoughts on this if you're a lena khan and they do make a run at canva adobe
00:23:32
now are you saying like hey wait a second you now run the table on all design tools you can't buy it
00:23:37
it's a weird classification it's only called design tools because it was sold to someone that was called a designer before and that's not the case anymore now it's a tool
00:23:49
that anyone can use in the enterprise setting or in a small small business setting or in an individual setting
00:23:55
to create stuff and that wasn't the case with photoshop and i think that's what makes this
00:24:01
arguably a very different business a bigger business a more transformative business and a farther reaching business
00:24:07
and i don't think that there's necessarily a speaking of the figma deal right um a case to be made here
00:24:14
that they're preventing the uh extinction of their monopoly they're buying what looks like a very different business and and it's really additive it's uh it's a business that can turn anyone into a creator it's
00:24:26
really cool yeah but you're kind of you're kind of speaking out of both sides of your mouth now because on the one hand you're saying it's a different business but on the other hand you said
00:24:32
that this is basically protecting them against an existential disruption to their core business so if it's an
00:24:38
existential disruption to their core business how could it not be in the same market of course it's in the
00:24:43
same market well there are new entrants competitors there are new entrants and there are you know different underlying
00:24:50
you know technology trends this is all about cloud but nonetheless i don't see how these things aren't
00:24:56
competitors with each other to some degree so i don't know how this doesn't get seriously reviewed yeah by antitrust
00:25:02
authorities it feels so similar to facebook instagram and google youtube and by the way it's similar in both
00:25:07
those examples in a number of ways both um facebook instagram was not competing in the same product as facebook at the time with the news feed or whatever it was a photo sharing service
00:25:18
that clearly created a broader addressable market that got more people to use a social network
00:25:24
and um youtube people thought they were overpaying right and then youtube everyone thought it was crazy they paid
00:25:29
a billion six for that business and it's probably the greatest acquisition of all time it's been the greatest managed acquisition of all time i should say um
00:25:36
and that business similarly i think google recognized that people were going to move to video content as
00:25:42
an alternative to text-based web content and that it was a bigger picture opportunity than what they were pursuing
00:25:49
and in the lane that they operated in at that time and they were right and in both cases it was more about paying
00:25:54
whatever it took to get the deal done then you know hey how many users do you have how much revenue how much ebitda
00:25:59
what's your arr all that stuff goes out the window when you're sitting in that strategic driver seat at that big
00:26:05
company and you're saying this is a bigger market these guys are transforming the market and ultimately
00:26:10
over time that will eclipse us and you can say hey you're protecting your business but really you're protecting
00:26:16
your market i mean the market is going to go away is what the vision is like the market that you exist in today isn't going to exist in
00:26:22
the same way in 5-10 years and that's what you're trying to buy your way into i have a question and a statement the
00:26:28
statement is i think canva should absolutely go public versus sell because it seems like
00:26:35
they'll have a much easier time competing against whomever that they compete with
00:26:41
i do think that david you're right that there is a lot here for regulatory review because
00:26:48
if you go back and think about visa plaid you know it's not dissimilar meaning you have a young startup that has this
00:26:54
really credible and viable technology potentially being acquired by in that case it was you know one of a duopoly but here you could make a very credible claim that it's in a market where it's
00:27:05
roughly a monopoly because there aren't really that that many meaningful alternatives so i think
00:27:11
saks is right that there's that there's some you know oh there's a case here yeah there's a
00:27:16
case here where it just depends whether that was how about how about that uh vr game that facebook before like that was a tiny acquisition
00:27:29
that maybe had a million users look and see they're just exactly they are being computer but i think i think it's taking
00:27:35
favorites well it seems like what the antitrust authorities are doing right now in washington is they've got a list of
00:27:42
companies that they think are putatively suspect and our job is to stop these companies from accumulating more power and it's really about seeing everything through this lens of power but that's
00:27:53
not what the competition authorities are supposed to do they're supposed to ensure competition it's about anticipation
00:27:58
right and the problem with just approaching things in this way of of the punitive way we just have to stop these companies is it
00:28:05
creates a chilling effect on on reasonable exits in silicon valley there aren't that many great exits and we want
00:28:12
them to go through now i think if monopolies need to be reined in there are other tools to use besides just
00:28:19
saying that those companies can't acquire other companies no matter how unobjectionable they are i mean
00:28:26
let's do things like allow side loading let's basically what explain what that is well that's that's basically a way to
00:28:31
say that i think google the android already does it but ios does not where you would be able to basically install
00:28:38
an app or download an app without going through the apple app store you could enable competitive app stores basically
00:28:44
you know i think i think it's a real issue that you have operating system monopolies i mean google android and ios
00:28:50
with apple and then amazon with sort of you know white label products those are all operating systems that are competing with apps on their own platform and
00:29:00
there have to be some constraints and rules around that otherwise the operating system will eventually
00:29:05
dominate and replace any app they want to on the platform we saw that's what the whole microsoft thing was about
00:29:11
microsoft netscape was a 100 about that so i think if you can show that somebody has an operating system monopoly there
00:29:17
absolutely should be rules of constraints around that does it mean the company should never be able to buy anything no i mean i think all that does
00:29:23
stifle innovation without really getting to the crux of what the issue is i think you nailed it a good first step would be
00:29:29
allow other app stores so google's app store could be on ios ios app store could be on another platform et cetera
00:29:35
and i mean the other issue here is lena kahn's been pretty clear her entire thesis in taking the job was well i want
00:29:42
to prevent uh downstream competitive issues so future competition there's no better example of
00:29:49
a future competitive issue and future consumer harm i think is how she phrases it then this acquisition if you're going
00:29:55
to do it through the lens of future consumer harm this creates future cons consumer harm because figma
00:30:01
is not going to compete with adobe you're saying that it does it does massively massively i mean it this is the the the the dissonance here it is great for consumers because they will bundle it
00:30:12
they'll bundle the two things together and it'll it'll make it more valuable and reduce churn and it'll make it
00:30:18
simple to buy so that's good for consumers right you get more free stuff but future harm and a future competitive
00:30:24
harm here is the marketplace will be less competitive if there's one less independent strong company in it
00:30:31
that's and if you if they buy canva that's the definition of downstream competitive harm it'll be a
00:30:36
less competitive marketplace with these two companies together full stop so jacob do you if you're lena
00:30:42
kahn [Music] you actually pay attention to this adobe figma thing in like a serious way or are you still more focused on amazon and you know uh
00:30:55
facebook i would hope that they would do multiple things you should say what would you do
00:31:00
if i was her i would create a a rule book and apply the rule book evenly and fairly and this is the problem this
00:31:07
feels very political it feels like they're going after facebook because of the downstream political issues facebook
00:31:12
causes and they're ignoring the microsoft issue and they're ignoring issues like this it just feels like they have their thumb
00:31:18
on the scale if you look at what happened to the visa plat thing it was an enormous blessing in disguise because you know the the thing went away and
00:31:25
that was i think like a five billion dollar acquisition and then platt turned around and raised money and it's like a you know multiple teens billion and it's
00:31:31
going to be a wonderful independent company to your point jason that will now you know uh create more competition in a
00:31:39
space that desperately needed now in that case that was sort of like financial payments and rails and visa mastercard blah blah blah but that that
00:31:47
that could also be you know if there is a lot of attention paid to the deal and it doesn't end up being
00:31:52
consummated that could be the positive outcome but uh if you wanted future competition
00:31:57
i if you asked me if i was a betting man i think this thing is going to close i think it closes yeah yeah but i mean
00:32:03
it closes it closes because it doesn't intrude on the hot buttons of washington not because the merits of the antitrust or superior to the roomba deal
00:32:15
or to that vr deal that facebook wants to have this is all about political and cultural hot buttons
00:32:20
so it's it's so weird yeah but i think we all understand what's really going on it's all political but hey jason i go back to
00:32:27
your question i think it was a really good question i've had more chance to think about about should adobe change
00:32:32
the pricing of figma should they basically bundle it i've spoken about the merits of what microsoft does i don't think that figma should do that here now that i've had a chance to think about it the reason is this that
00:32:45
you have to think of pricing as not an element by itself but as sort of the most important element of a go-to-market
00:32:50
strategy and there's no way that you can basically reprice figma completely as part of some other bundle and expect not to create massive disruption to your go-to-market organization so for example
00:33:03
you've got now a whole huge sales team at figma including enterprise sales they are commissioned based on their the quotas that they close and that's based on the ecv of the
00:33:14
deals and so on if all of a sudden you price this as being free because as part of some bundle that
00:33:20
enterprises get because they're buying old adobe now all of a sudden those sales people can't earn commission on
00:33:25
that sale they can't be incentivized to take that product to market the same way the marketing team is tasked with
00:33:31
feeding the sales team so now all of a sudden they're like wait a second can we spend money to basically promote this product when
00:33:38
it's going to lead to a deal that's priced at zero because the enterprise already has an ela with adobe so you
00:33:44
can't just look at a pricing change in isolation you have to look at it as the tip of the spear of the whole go to
00:33:50
market i can tell you what's going to happen because i kind of experienced this with with yammer when microsoft bought my company 10 years ago and by
00:33:56
the way i'm not critical of microsoft at all they were an extremely high quality acquirer that lived up to all their
00:34:02
promises and did everything they said they were going to do i think if you ever get an offer from microsoft you
00:34:07
should take it really seriously i think like i said i think they're a great company great acquirer but i can tell you what happened is that once yammer
00:34:14
was folded in to the office suite and didn't have its own independent pricing it didn't have its own independent sales
00:34:20
team it just disappeared i mean the promotion of it to stop because nobody had an incentive to basically go sell it
00:34:27
and nobody incentive to go market and promote it and it just kind of disappeared and that is why you remember
00:34:33
a couple of years after we sold it slack kind of came out of nowhere and there was no one to really oppose them because
00:34:39
you know all the promotional activity we had done around yammer just ended because again we weren't we we didn't have the incentive that was
00:34:46
created by the sales organization just to explain um the pricing thing david i think that the way this decision will
00:34:52
get made and i'm not saying it's right or wrong but it will get made not by the sales
00:34:57
teams and not by the product teams but it will get made by the ceo and the cfo in talking to their largest
00:35:04
shareholders and the reason is because there is an implied cost of capital that adobe has in fact right now if you look at like all of the models that all the analysts use is roughly around nine
00:35:16
percent and so you know they're going to have to achieve a return on top of that cost of
00:35:22
capital what that means is that they're going to be forced to find a way in short order to make this accretive and to start generating incremental cash
00:35:34
flow and i think that they will be hard pressed not to bundle and not to do these creative packaging strategies because otherwise i think that there's a risk that this free
00:35:46
cash flow machine that folks have become very addicted to at adobe starts to shrink and that will have huge
00:35:54
ramifications i think to the stock and to the executives and to the morale and so i think that they're going to do
00:35:59
whatever it takes and by the way you've seen that you've seen that in other companies
00:36:05
who've gone into this phase of their growth oracle being the best example you know they have consistently
00:36:11
found ways to package to bundle to cross-sell to upsell and they have incrementally walked free cash flow generation up if they do that they're taking a huge risk because here's what's
00:36:22
going to happen is so i agree with you about what may happen this may be decided by the ceo
00:36:28
and the board but i think if they do this they could blow it i mean the the um you know dylan field the founder in
00:36:34
his blog post on this said that adobe's committed to letting them run independently well you can't run
00:36:39
independently if you don't have your own independent pricing you just can't because how long is the question how long does it look like two years four
00:36:46
years and if all of a sudden adobe sales people can sell this product and include it in their bundle and the marginal
00:36:51
price is basically free because it's part of some bundle that means the sale has been taken away
00:36:57
from whoever the dedicated sales people are on the figma side of the house i can tell you
00:37:02
that will create irrationality in the sales organization and very soon there'll be pressure to consolidate
00:37:08
the figma sales organization with the larger adobe sales organization they'll be moved in they may become product
00:37:14
specialists or experts but the go to market efforts will be consolidated and then dylan's going to end up running
00:37:21
a a quote standalone version of figma that doesn't have its own go to market organization and then you don't get the
00:37:26
feedback into product from your sales and marketing team so all of a sudden you're running a product and engineering
00:37:32
team but you don't have eyes and ears in the market i hear all of that i think that the facebook whatsapp merger is
00:37:39
probably pretty instructive which is jan had two years roughly where he was left
00:37:44
alone to kind of like run independently and then slowly and slowly it was absorbed back into the mothership and
00:37:50
you know that was a product with zero monetization um but there was a lot of strategic touch points within whatsapp
00:37:56
and and you know core facebook app and everything else that they were doing and i think that you have to do that
00:38:01
because when you're spending tens of billions of dollars on something there needs to be an industrial logic
00:38:07
that is beyond just let me just buy this thing and stick it on the shelf and let it be on its own
00:38:13
so i i think that you know that dye is sort of cast i think we're just debating the timeline in which it
00:38:18
happens let's talk about it yeah you know you're probably right and that's what usually happens is is when they promise the founder
00:38:25
that you'll be left alone that usually lasts two years coincidentally that's coincidentally
00:38:30
usually the length of the the earn out or the the golden handcuffs that's how long my golden handcuffs were
00:38:36
yeah and they left us alone for one year by the way our er tripled that year but then once they got serious about integration the organization started emerging and really
00:38:47
i was just running a product organization which is fine but that's not running an independent company because like i said you lose your eyes
00:38:54
and ears you lose the pulse of the market when you're not selling into the market fredberg how did youtube do it so
00:39:00
well it was a very different situation they were yes google basically took a team of
00:39:06
you know two dozen people and their infrastructure was terrible and they basically rebuilt the entire company so it was the complete opposite they think about them taking the the
00:39:19
front end shell of youtube and then they rebuilt everything underneath it ran it and then they actually put their
00:39:26
own people in to optimize the front end they put their own ad sales team on top of it i mean they just bought a skeleton
00:39:32
of a growth engine and they built everything um and so it was a very different story
00:39:38
and the one thing that youtube the one thing that google did so well with that acquisition was the conviction bet that they made on the business and they made billions and billions of
00:39:50
dollars of investments into that business for years before it started to make money
00:39:56
um and that is a very hard thing to do because the chimops point you often have this question of where your free cash
00:40:02
flows where's your dividends where's your buybacks as the business gets to a certain point of maturity but what google had that many businesses of that
00:40:08
scale have never had before is their extraordinary growth rate that continued even as they were of that
00:40:14
scale so the um the leeway that google's executives and board were given by shareholders was
00:40:21
extraordinary not to mention the dual voting where larry and sergey could decide to do whatever the heck they wanted
00:40:27
but they really were able to take advantage of their high growth rate to take all this cash they were generating
00:40:33
and reinvest it into this youtube platform as well as many other things many of which haven't worked out but
00:40:38
when they do work out you have a business that i think youtube's probably worth what 300 400 500 billion dollars
00:40:44
at this point and and it's really paid back multiple so youtube's really a one-off because
00:40:50
it's a one-off acquirer and it was a one-off kind of acquisition integration scenario that we haven't seen before
00:40:55
what google in effect got when they acquired youtube was a flywheel i mean it was a brand and it was a network
00:41:00
effect yeah the network effect was massive it was off to the races and i remember google had google videos but they just
00:41:07
couldn't come close to catching youtube because the flywheel of creators wanted to be where all the viewers were and viewers wanting to be where the most content was it was just impossible to
00:41:17
catch but that organization was relatively tiny at the time it was acquired and it didn't have any monetization
00:41:23
and it was being deluged it was being deluged by legal problems that that google legal could solve very unique
00:41:28
situation yeah that was one of the bold acquisitions of all time but what was incredible is right after the
00:41:33
acquisition and google started to scale this thing most of the content being watched on
00:41:38
youtube was copyright content and i was at a conference and i remember philippe damon the ceo of viacom stood up and
00:41:45
larry page and eric or larry and sergey or someone was on stage with and he yelled at them and he was like you guys
00:41:52
are making all this money and growing this youtube business off of the back of our content and you know the dmca the
00:41:58
digital millennium copyright act says that um someone can file a takedown notice and then the platform has a
00:42:04
period of time to respond and to deal with it and the amount of time it was taking them to deal with it new content
00:42:10
was being uploaded and then they'd have to file another takedown notice so it created this insurmountable you know copyright copyright thing and
00:42:17
um and then what did google do that youtube would have never been able to do to sax's point they built an engine that
00:42:23
could automatically recognize copyright content and pull it down before it was made publicly available without ruining
00:42:30
the user experience of instant upload and availability of content from the fingerprint system was even more nuanced
00:42:35
than that the fingerprint system not only told them hey this is an snl skit or this is a music video from prince it
00:42:40
said what would you like to do and it put the power in their hands and said turn it off claim it and we get the
00:42:46
money from it and then it was like well we're telling you before you even know about it and what all these people did
00:42:53
was they say okay yeah you can make a remix of my prince song or this episode of a tv show we'll collect the money and
00:42:59
that was just yeah the revenue share was the brilliant part about it because it put the power in the copyright holders names this just speaks to how singularly
00:43:06
how singular and unique that deal was because i don't think any other company at that time maybe microsoft would have
00:43:11
been able to develop technology to do this and do it at the scale and do it with this low latency and high speed for
00:43:17
users and so on uh it really was a singular transaction which free break i think speaks to their accumulation of talent especially in their early years where they were just like hire smart people we'll figure out what to do with
00:43:29
them later they actually had those people sitting around who could just go jump on the youtube channel oh my god solar common gar went and ran youtube
00:43:36
and absolutely crushed it probably one of the best ceo runs that's never talked about in the history of tech he stepped
00:43:41
in and he ran youtube and now susan runs it you know another incredible run of monetizing that thing since but i mean
00:43:47
and these are people by the way both solar and susan were um sub 30 employee people at google so yeah good point nick
00:43:55
can we throw up the slide contrasting valuation to ar this is actually more interesting than
00:44:00
just who made all the money so i actually created a plot arr is the red chart and the it's the right access so as we talked about they're at around 400 450 million of ar right now and then
00:44:13
the left access is expected value basically this was their uh valuation and it's it's in purple and it obviously it goes up to the 20 billion or 22 billion
00:44:24
that adobe just paid you could see e was the last round they did in 2021 where they were valued at 10 billion before
00:44:31
that they were valued at 2 billion in 2020 and then you know the series c i think
00:44:37
they were valued at like 440 million or something like that and then i think the b they were valued at like
00:44:43
125 million and then the a they were valued at like 50-ish million you know and then there
00:44:49
was seed and so forth i think what you see here is that is how um efficient in a way venture capital is where it's tracking just
00:45:00
slightly ahead of arr it is predicting where the hockey stick is going so first of all look at arr it is as close to a
00:45:06
pure hockey stick as i've ever seen in sas kudos to them i mean the crazy thing is just how long it took for the hockey stick to get going normally why didn't you invest in this company did you see it well no we didn't see it also look at
00:45:20
what a late bloomer this thing is you know like that you have to kind of see it like look look like hockey stick
00:45:25
didn't really start inflecting until 2018 2019 right so it's more that you're your table is more striking where these guys for yours were toiling away and then all of a sudden this thing just
00:45:36
took off right it's really this was such a late bloomer and for anyone who's doing a sas company and you're in it
00:45:41
five years and you still have zero revenue and like that doesn't mean you're dead i mean they basically were a
00:45:47
zero crying for five years exactly absolutely nothing and now it's a 20 billion dollar exit five years
00:45:53
later i think the only hard round to invest in this company would have been if you were
00:45:58
going to invest in i think the 2014 time period 2015 because you were investing in a company that hadn't even launched yet that had been grinding for three or four years with by the way the
00:46:10
founder was like 19 when he started this he was a teal fellow he was one of the first you know 20 under 20 teal fellows
00:46:17
yeah yeah yeah and he dropped out of school to do this and you know and they spent several
00:46:22
years in the wilderness i think that's when it would have been hard to invest this maybe not the first seed round because you could tell this guy was
00:46:28
brilliant he had a really specific idea moving design tools to the cloud was i think like a very clear
00:46:36
and um sensible vision clear you know why now underlying trend i always say my my three biggest
00:46:42
traits for entrepreneurial success one of them is grit i mean you you know if you have a high index on grit you're
00:46:49
you're able to to to grind your way there it's really that's a really incredible this chart is brilliant because you know what we see in the seed
00:46:56
stage is right before that series a is where most people give up sacks you know you get three or four years in
00:47:02
people aren't paying for the products you're under resourced and they don't get the a and they got you know that 2013 14 15 period they were probably
00:47:09
trying to get an a it might have taken him two years to get the a uh and then somebody finally did it so easy for a
00:47:14
young person to give up and go get a freaking job at google or go back to school
00:47:20
and to to grind it out to have the grit and the persistence and commit to your vision he didn't pivot away
00:47:26
he persisted and he executed he clarified he clarified right yeah but he but he didn't he didn't go five steps away and say i'm gonna do a new startup and you know there was no rate in his
00:47:37
business right and there's no pivot here yeah dylan field by the way is the founder i had him on the pod back in the day and
00:47:43
really the you know ultimate customer focus customer like you said yeah you need to just have your pulse on what your customers are saying constantly because the answer is there
00:47:56
you just have to develop it and give it to them by the way also in this chart that's i think very interesting sax i'm interested in your position on this if
00:48:02
you look at this chart one more time they could have turned on monetization i think a year or two before they did
00:48:08
so they purposely didn't charge for it to get the network effects going i would love to see in here the number of users
00:48:13
as a third vector you know um as a third line on here because i think they started getting a lot of users in 2014 2015
00:48:20
2016. that's when that's why they got the seed but they purposely did not charge to let the network refer yeah
00:48:26
2015 was a private beta i don't think they were even had a product in 2014 that was usable yet 2015 was private
00:48:32
beta 2016 was public launch and then they turned on monetization in 2017 and then they turned on enterprise pricing
00:48:38
in 2018 so i think that's a pretty sound progression i i'm not i mean to be honest i'm not a
00:48:44
big fan of taking three or four years in the wilderness to build your product i think you need to get to market sooner
00:48:49
but i do think it is a little different in a existing industry where the table stakes are high so you know adobe is not
00:48:57
a cloud-based product but those were very rich client products and so to get to the point where you could even compete with them with the classic clay christensen innovators dilemma
00:49:07
lightweight version of the product there were significant table stakes there and it was a significant technical challenge
00:49:14
to move design tools into the browser they had to do a lot of cutting edge browser tech the browser wasn't ready for it yeah this chart is going to be call in in a
00:49:25
few years now that i'm doing after all in 48 hours after it i think that's correct
00:49:31
uh come join me with your questions spax are back i don't know if you saw in the news but freeburg launched a spec
00:49:38
no no he he he announced a target and a merger agreement incredible so now he goes into the dspac process now we have
00:49:45
two out of four besties have spacked uh freeburg you want to tell us about uh what you expect well i mean we announced
00:49:50
that we're merging uh the production board spec which is uh tpb acquisition corp with lavoro which is the largest
00:49:59
agricultural inputs retailer in brazil and operates across latin america you know we've got a good slide in the presentation that i think echoes some of the points i've talked about on our
00:50:12
podcast here about the importance of having resiliency and redundancy in global food
00:50:18
supply chains and increasing famine risk so we've got a slide that shows for about 30 years you know we've reduced the number of people globally that have been undernourished
00:50:29
down to about 600 million as of about three or four years ago and in the last three years we've seen that number spike
00:50:35
back up to 800 million which we thought we were done with global famine and now here we are facing these issues again
00:50:41
climate change the lockdown supply chain disruption the ukraine war and all the other
00:50:46
geopolitical tension issues so that's been a big thesis of mine individually you guys know we've talked offline about
00:50:52
some investments i've made and my strong interests in the area brazil and latin america is the largest ag export market
00:50:59
in the world so they produce calories for the rest of the world and farmers there largely lag in terms of technology
00:51:06
adoption i've got a nice brazilian farm as my background today but technology adoption doesn't look like it does in
00:51:12
the u.s there's a huge opportunity to influence and drive productivity up in that region
00:51:17
and so we partnered with the largest ag retailer ag retail is the local locations that work with farmers they
00:51:22
have these teams called agronomists they meet with the farmers typically weekly help them make decisions about what products to use what to do how to do it
00:51:30
and so with the footprint and the reach that they have i think we can really drive up productivity per acre
00:51:37
across the region increase total global calorie production and that's why i'm so excited about it fundamentally it's also a great business
00:51:43
it's all the financials are presented in the um in the investor presentation and will be
00:51:48
published with the sec here in the next couple days but uh it's a it's a scaled business
00:51:54
it's a profitable business and it's growing pretty significantly so it's got great tailwinds it's a great base
00:51:59
business but for me there's huge opportunity to continue to drive with their drive technology
00:52:04
through the platform that they've built uh and that's why um you know we're also making a hundred million dollar
00:52:09
investment off our balance sheet into the company so that's big skin in the game
00:52:15
we put two thirds of our these founder promote shares they're you know they only vest if we can hit the stock price of
00:52:21
1250 and 15 over the next three years otherwise we lose them so we've really tried to align ourselves with
00:52:27
shareholders and really put our money where our mouth is on this and show people that you know that this is a real
00:52:33
strategic partnership for us it's not just you know an investment that we intend to kind of
00:52:39
you know hold for a short period of time this is a key platform for me for our for our tpb business and for many of the
00:52:46
companies that we operate at tpb so i'm super excited it's been a long time coming it's been a very hard process as uh
00:52:52
chamath can attest and as we all talk about capital markets are very difficult right now uh getting a transaction
00:52:58
announced is is the first step now there's a bigger step of getting it closed but uh yeah a lot of work but i'm i'm i'm super excited about this yeah thanks for letting me talk about it
00:53:09
yeah well and the other thing i just want to double click on there chamoth this idea that two there's of
00:53:15
this the sponsor promote have to hit certain hurdles i think that's probably a pretty good thing
00:53:21
for folks who maybe want to invest to just say hey yeah this is great we're the there's some alignment in how these
00:53:27
shares get distributed yes i mean i think it's a good feature um i think that the thing with spax in
00:53:34
general in a moment like this is that it's um it actually performs better in periods
00:53:39
of high volatility and the reason is because you know you have this uh redemption feature which
00:53:46
essentially allows you to get back your your basis and so meanwhile while you know freedberg was hunting for a deal or whatever that cash you know
00:53:58
that you've contributed into this back sits in a savings account that then actually is generating some you know reasonable interest as rates go up so
00:54:05
the whole combination of all of this stuff actually makes back a pretty good risk-adjusted vehicle when the markets
00:54:10
are highly volatile because if at any point you don't like how you feel even if you love the deal
00:54:15
you just vote to redeem get your ten dollars back and effectively win the market right let's say the market goes down
00:54:20
thirty percent from here to march of next year when freedberg's deal closes well an investor
00:54:27
could theoretically just say you know what i just want my ten dollars back now all of a sudden they've gotten zero they've felt zero percentage of that
00:54:33
drawdown and that's what's so interesting about this structure in a moment like this so
00:54:38
i think there's a lot of really interesting features that that spax in the future i think will have to incorporate in
00:54:44
order to in order to be a successful tool in the toolbox one thing i learned from i guess the pattern ag company that
00:54:51
i think you incubated as well or was that yeah a cup yeah you're incompetent as well yeah and you you guys invested
00:54:56
through the through your launch platform yeah right so we invested in the syndicate is that the way this retail works is you have farmers but then there
00:55:04
are these retailers or these sales reps i guess they call them in the industry that service the farmers
00:55:10
and so that's where yeah yeah that's exactly don't have this technology yeah that's right they don't they don't know
00:55:17
how else is a farmer supposed to know what to buy and what to do so ag retail the local retail store the people that work there are called agronomists and so the agronomists are like technical sales
00:55:28
people they understand the science and the technology of farming they understand what the farmers have done in
00:55:33
the past and then they partner with them to help them decide what to do going forward what products to buy how to use them how
00:55:39
to get the most out of their land and so when new technology when new ag technology comes to market it's the
00:55:46
retailer that can influence the farmer to make a decision on making a switch or using a new tool or using some software
00:55:53
uh you know to drive that decision and so that's why ag retail is so important and why it's critical for any new technology to get adopted in farming it has to go through retail you know
00:56:05
there's the big ag input companies they're the seed companies and the chemistry companies and the protection companies and the software companies
00:56:10
they all don't sell direct to farmers typically they're going through these retailers and so yeah is there a version of lavoro
00:56:18
that's been that's an american company that's public or not yeah it's called nutrient and so nutrient
00:56:24
uh owns cps which is the largest retail chain in the u.s ag retail chain in the u.s um about i think uh 70 80 of nutrients business is actually
00:56:36
fertilizer production and then the rest is the retail business you know that's the key comp that we actually show in
00:56:41
our financial presentation that we published yesterday how is nutrient done just as a public market do
00:56:47
people understand sort of the value that it creates in the marketplace yeah um so in the last year as we've talked about on the show companies that are in the fertilizer business are making money hand over fist
00:57:01
because of the um the issues with the supply chain for natural gas potash and phosphates
00:57:09
and so if you have access to supply like nutrient does and and various other fertilizer companies do
00:57:15
you are absolutely minting money this year and so they're having record earnings right now
00:57:21
and uh you know people are kind of estimating that the fertilizer market will kind of reset and as a result these
00:57:27
companies are over earning right now which means that they're getting low forward multiples but generally speaking uh yeah these
00:57:35
businesses have done very well and one of the you know i would say the us is about 15 years ahead of latin america
00:57:42
and remember latin america produces and exports more calories than the u.s um and they're all and corn farmers in
00:57:49
brazil for example are only getting half the yield of corn farmers in america or a little more than half
00:57:54
per acre yield per acre and the reason is the retailers in the us are so sophisticated that they're introducing services and they make a bunch of money selling services now that wasn't the case 20 years ago so now they're
00:58:06
offering farmers advice using software and and other kind of custom you know soil testing services and whatnot and
00:58:12
that's really changed agriculture it's given farmers data that they didn't have before and helped them make better
00:58:17
decisions using that data that didn't exist before and that's really you know i would say concentrated in the u.s that
00:58:24
kind of sophisticated behavior i think it's really important we see it happen around the world now um because we need
00:58:29
to grow more food and we need to do it without expanding land and acreage and so on and we need to do it more
00:58:34
sustainably which is another kind of key part of this did you worry a lot about like the fx risk of
00:58:42
you know all these inputs coming into brazil having to deal in local currency then having to kind of get the revenues out in into u.s dollars and all of that
00:58:50
stuff how did you think about that yeah it's a good question so when um all ag commodities around the
00:58:57
world most commodities right they trade in dollars and so um you know if the dollar
00:59:03
strengthens against the local currency the rei the farmers actually make more money and
00:59:09
the input companies charge more money in local currency so basically the entire ag market and around the world commodity
00:59:15
markets generally speaking inputs and outputs trade in dollars and so if you're a a local business you actually make more money when your local currency goes down and you're
00:59:26
willing to spend more money and so businesses in a commodity cyclical business generally are are currency hedged because of that
00:59:38
because they're they're selling stuff in dollars and then as a result the places that they're buying stuff from charge
00:59:43
them more in their local currency and they can still make a good spread so you know there may be fluctuations in
00:59:49
fx risk but generally speaking i think we see um and i'm just speaking generally here not
00:59:55
about this particular transaction we generally see and we saw this at monsanto so that's a good example all ag input companies
01:00:02
uh when the local currencies devalue in a market that they're selling into they charge more and the farmers can afford
01:00:09
to pay more because they're making more selling their product into the markets i am i think this
01:00:14
company is super interesting so i'm i'm i'm rooting for you it looks it looks really really cool and it seems like a
01:00:19
very good entry valuation good margin to safety too yeah 1.2 billion 1.2 billion valuation if i'm reading correctly here so yeah congratulations it's hard to get
01:00:31
a deal done at this time for people don't know fx foreign exchange just trading one dollar or one currency for
01:00:37
another did you guys see that there was a title vi lawsuit filed against pfizer for some
01:00:45
um you know in the in the civil rights act there's something called title vi which means that if you take federal funds of any
01:00:52
kind you can't discriminate and pfizer has a program to recruit african-american and latino people into
01:00:57
the company and they're not being sued because you know pfizer takes nih grants they you
01:01:04
know work with the us government they work with medicare they work with medicaid and so as a result of that um
01:01:09
it's it's really happening one month before something else that we talked about which is there's the affirmative
01:01:15
action case uh that's going to the supreme court where i think it's harvard actually
01:01:21
you know push people pushing back on harvard's ability to have some form of race-based admissions
01:01:28
so i just don't know if you guys were monitoring this for me i just took a step back and i thought look at what has
01:01:34
happened legislatively in 2022 we basically repealed roe v wade the supreme court also went after a concealed carry in new york and said
01:01:47
that new york cannot legislate against concealed carry which had pretty big ramifications with respect to gun laws
01:01:53
the consensus opinion is that we're going to repeal affirmative action in the next month or the supreme court is
01:01:59
going to do that these are three pieces of an enormous change in the united states
01:02:05
civil society that that has happened in a really small condensed period of time so i have these thoughts on affirmative action but my other thought is like it's
01:02:16
incredible how conservatives have been able to organize and how disorganized you know progressive have been in order
01:02:21
to create a counter maneuver against them because this has been a systematic effort since karl rove literally wrote
01:02:28
about it in the mid-2000s said here's what we're going to do we're going to raise a bunch of money we're going to redistrict everything we're going to get
01:02:34
the state legislators on our side we're going to basically you know fund the federalist society we're going to and they did it
01:02:41
uh and in 20 years they've created an enormous amount of change that i'm not sure all americans agree with
01:02:46
meanwhile the progressives are just kind of like naval gazing at each other i mean and then you left off this past
01:02:52
week uh chamath that um it seems like the gay marriage bill is going to be put to a vote
01:02:58
and that they're not going to be able to find i didn't see that what yeah yeah and ted cruz said he's not going to vote for it because it's attacking religious freedom so we had talked on a previous
01:03:09
episode and i think zach you said you didn't think gay marriage would come up and well no if i had to guess what the political gamesmanship is here because
01:03:16
they think it's not going to pass they want to bring it up for a vote because it preserves the issue it intensifies the wedge issue when it looked like they
01:03:22
had enough votes they weren't going to put it up for a vote so i don't know i think it's a lot of gamesmanship here look i think enough republicans should
01:03:28
vote for this just to pass it i don't why wouldn't they yeah well i think there i think there's some issues
01:03:34
with the way the bill is written in terms of maybe requiring religious organizations
01:03:40
to perform gay marriages i think that somebody should just make an amendment to clarify that's not the case to solve
01:03:46
this religious freedom issue i think if that happened then you get more republicans on board or at least they wouldn't have an excuse but yeah look i would like to see enough republicans vote for this to take it off
01:03:58
the issue i don't think gay marriage is in at any risk of being overturned by the supreme court remember it was gorsuch who wrote that opinion
01:04:09
so i think this is a scare tactic that progressives are able to use to fundraise off you know their their base
01:04:17
nonetheless it'd be nice if enough republicans would vote to canonize you know marriage equality so that they wouldn't be able to do that that's the smart play here for republicans yeah it looks like by the way breaking
01:04:30
news um in the washington post democrats have postponed the same sex marriage vote until after the midterms so but i
01:04:36
mean you can understand why people are going to be nervous about this after um maybe they're doing that because they
01:04:42
want to they want to run on it that's an issue they want to have that as an issue yeah i mean force it the 70 of people are in favor
01:04:48
right 80 percent look if republicans want to be smart find 10 republicans in the senate who can support this announce
01:04:55
now that you're going to support it come on republicans have a brain don't let them change the issue from
01:05:03
this economy that's spiraling out of control i mean the republicans are clueless
01:05:08
what do you guys think is going on there oh right yeah so fedex stock has dropped 25 as much as 25
01:05:14
as we're taping this this friday after the ceo um after a little i don't know if you saw the video i sent to the group
01:05:20
chat but kramer jim cramer was kind of pushing him do you think there's a recession during the session he finally said yes i
01:05:26
think there's a global recession they missed on uh revenue and they have cut their
01:05:33
predictions for next year severely uh and the stocks weigh down i think based on what i heard on cnbc from and reading
01:05:40
some stories right before this breaking news is happening some people think this is 60 40 market versus management but
01:05:46
either way i think the fed's interest rates are doing their job and less packages are
01:05:52
being shipped because people are chamath you would think spending less money and that was the whole point of this
01:05:58
exercise was to slow the economy down freeburg i think this was a little bit of a head
01:06:03
scratcher this is a new ceo so i think the game theory on this is that it made a lot of sense for him to reset expectations i get that and i think that that's a that's a reasonably smart thing to do
01:06:14
when you're incoming you know leader of a very complicated organization that really is at the end of the bullwhip so to speak on on consumer demand
01:06:26
the problem is there's just so much conflicting data um you know retail sales was pretty reasonable
01:06:31
you know china actually looked a little bit stronger than people expected just this past week on some data that came out there
01:06:38
it looks like europe is going to really draw a hard line and make sure that they spend whatever it takes to have enough
01:06:44
energy so that their productivity doesn't fall off a cliff all of those signals would say that you
01:06:49
know we're not at the precipice of this kind of like cratering of demand and then you have powell basically saying yeah we're going to go another 75 and you know we're going to take rates to probably somewhere between four and
01:07:01
five percent so the the fedex data point was pretty starkly in contrast with at least some
01:07:08
of the data that we've seen over the last few weeks so i don't know it was a bit of a head
01:07:13
scratcher they got three things working against them number one amazon just continues to build out local
01:07:21
delivery infrastructure at an incredible pace at the end of 2020 amazon was already up
01:07:28
to 25 market share um which put them ahead of both fedex and ups and fedex has seen their market share decline for the past eight or nine years now
01:07:40
um so that's kind of you know a key point number two is people are just shipping less stuff doing more stuff
01:07:45
digitally and number three is this recession impact where they obviously have key economic
01:07:51
indicators that allow them to do a better job forecasting deliveries than most companies i would imagine and so
01:07:58
they can see order volume and trading volume and use that as a predictor for um you know for what volume for
01:08:04
shipping is going to be in the future and i would guess that all three continue to work against them it's not like they have a lot of diversified
01:08:10
diversification in the business and other ways to expand out into so you've got a key vertically integrated player
01:08:16
namely amazon that is investing heavily to replace whatever they use you for i think as of a few years ago amazon was only like two percent or three percent of fedex's revenue anyway
01:08:28
but still i would imagine amazon is playing a key role here your first your first comment to me is is now that
01:08:35
sounds like the most credible explanation and you know to blame a recession is sort of a little bit of hiding the cheese it's probably fair to say that their lunch is getting eaten by amazon
01:08:45
so i can understand why fedex is under a lot of pressure because of that but if you just compare it to just all
01:08:51
the other data it doesn't seem like this whole thing makes any sense what you just said about competition makes to
01:08:57
me a lot more sense and yeah competition with digital and amazon i mean digital like how much do
01:09:02
you guys sign letters today versus e-sign i mean there's just a lot and you know i'm giving an example maybe that's
01:09:08
a one percent impact and there's probably a few more things and these things all layer up well they could be losing market share while still growing
01:09:14
because e-commerce is growing so violently in the world but saks what do you think
01:09:21
i think what's going on here is that whatever the issues of fedex and no matter how overstated these warnings
01:09:27
may have been i think they're directly correct he's saying that the world's headed for a global recession and directionally he
01:09:34
appears to be right i mean things look really grim we just had this inflation report that was much worse than what
01:09:40
people were expecting it was inflation was supposed to go down to uh 8.0 percent and actually it was 8.3 that's why the stock market
01:09:53
cratered uh a few days ago it's like the worst day in the stock market i think maybe all year or certainly since june
01:10:00
we're almost towards the june lows uh now this uh fedex executive is saying we're headed for global recession so it seems to me that that the economic news is just pretty grim here and we're in a
01:10:12
we're in stagflation the fed has to keep raising interest rates at the same time that we have persistent high
01:10:17
chronic inflation and you have to wonder you know i tweeted a few months ago that the white house economic advisor brian
01:10:24
deese he said that in this interview with cnn that the buying administration was willing to endure a global recession in order to keep russia from controlling the donbass
01:10:36
region ukraine well mission accomplished it looks like it's getting its wish the administration has made some
01:10:41
progress in the dawn pass but we are also having a global recession so what percentage of
01:10:46
this what percent of the recession and inflation has to do with the russian invasion of ukraine i think it's
01:10:52
meaningful it's not useful we know it's a huge exacerbator of all these listen i don't think the economy is going to get better with the risk of war three hanging over our heads how does that work yeah but what percent of the
01:11:06
economic issue do you think is percentage-wise impacting i don't think we're going to work maybe you answer yeah i don't think we're in a recession
01:11:12
yet um you know retail sales is still quite strong there's just a lot of signals that tell us that people
01:11:18
are still consuming a lot of things and and that gdp is pretty reasonable and that jobs and wages you know are pretty much you know quite full so i think saks you are right
01:11:29
that we will be there because you can only bring rates up so high until you break things do you see there's a tweet
01:11:34
by i think a charles schwab analyst today about that issue of wages and she was tweeting off to find it that for the second year in a row we now have uh because of inflation we now have uh real
01:11:48
wage decreases so you may be right about like where things stand today but this is about the
01:11:53
trajectory right now of the economy and the trajectory is not good inflation is not coming down as fast as people were
01:12:00
anticipating it's worse than expected um you have the situation in ukraine where
01:12:06
listen we can all cheer on the ukrainians for this counter-offensive that appear to be successful but we are
01:12:11
playing with fire over there i mean i i don't recall a time during the cold war where we did anything remotely this
01:12:18
risky you have america listen we have american generals american generals we're taking credit for this counter-offensive do you see this new york times story where they talk about the inside moment of this ukraine
01:12:28
counter-offensive so you now have america america is now giving ukraine more and more advanced weapons
01:12:35
okay this sort of the the long-range artillery they're telling them where to point the weapons they're giving them
01:12:41
the intelligence for it um they're training them on how to use it they've got commanders on the ground there
01:12:47
and um and they actually are hand correcting the battle plans the ukrainians had a counter-offensive plan
01:12:52
the americans said that's not good enough and they rewrote it so the americans are now doing everything in
01:12:58
this war except pulling the triggers and taking the bullets and i don't want to minimize
01:13:03
the sacrifice the ukrainians are making because they are dying in huge numbers and
01:13:08
you know we can all respect and admire the sacrifice they're making for their own country but this is
01:13:14
a very risky strategy for the united states america to be pursuing i mean we are we are basically playing with fire
01:13:22
and we are you know this close to being at war with a nuclear armed russia and we never came close to this type of
01:13:28
behavior during the cold war and i don't understand what's changed so much that we have to take this kind of risk now at
01:13:33
the beginning of this conflict i said that i was open to arming the ukrainians under cold war rules cold war rules
01:13:40
meaning covertly like we did in afghanistan we now have multiple examples the administration boasting and
01:13:46
taking credit taking credit for the counter-offensive for the sinking of the mosfet for killing russian generals this
01:13:52
seems very risky to me so sex um a court premise of the discussions we've had here is that the
01:13:59
united states screwed up the negotiation uh with putin by not taking nato off the table reuters
01:14:05
reported that putin rejected a ukrainian peace deal at the start of the war uh at the start of the war russian chief envoy
01:14:12
on ukraine told putin that a provisional deal with uh kiev had been struck dale would have satisfied russia's demand that ukraine stay out of nato uh two of three sources said the push to get a
01:14:23
deal finalized occurred immediately after russia's february 24th invasion does that change any of your thinking on uh what's happened here and putin's
01:14:34
culpability i think it's a data point you know but then let me explain why i don't
01:14:39
think it's this positive and by the way i saw the article every neocon on twitter was basically tweeting this trying to prove that this yeah i would
01:14:46
see it on everybody's food shimer analysis let me tell you why it doesn't okay first of all if you read
01:14:51
the article closely this offer did not come until after the invasion started okay and we already
01:14:58
knew zelinski was publicly saying in the early weeks of the war that they were willing to take ukraine off the nato off the table so
01:15:04
this isn't that much news it happened after the other key point here is that not only did it happen
01:15:10
too late but also the offer did not come from the americans this is a really important point to understand about the
01:15:17
russian position on this and i'm just saying this based on all their public pronouncements the russians made an
01:15:23
ultimatum in december and then lavrov negotiated with lincoln in january they were absolutely insistent that they
01:15:29
would accept nothing less but a written guarantee from washington why is that well the written guarantee was necessary
01:15:37
because they've always claimed that james baker eukard gorbachev over you know german reunification and not one inch eastward so they've always demanded a written assurance from the americans
01:15:48
and the reason they wanted from america and not europe is because they know that europe are america's poodles and ukraine
01:15:55
is a client state of america so listen they wanted a written guarantee from america before the war started they
01:16:02
never got that now if your point is did putin do everything he could to avoid this war absolutely not i will
01:16:08
absolutely grant you that but we already knew that the question is did the u.s state department do everything they
01:16:13
could to avoid this war and my point is absolutely not they should have taken this ukraine issue off the table in
01:16:20
writing before the invasion got it okay and afraid broken about ukraine no no i just
01:16:26
uh it was major news and we have an obligation i think too i'm glad yeah that people take this one article and they're like see there's nothing to this this is giving you the opportunity sex
01:16:46
now let me ask you a question for free burke freeburg the other follow-up people would like us to have made here
01:16:51
is we predicted famine uh and massive disruption in food we debated that here you were pretty clear that this was going to be or could be disastrous it hasn't turned out to be
01:17:02
disastrous yet what's the update on you know fertilizer is shipping not shipping are we gonna have global famine
01:17:09
are we not gonna have global family what's the update there based on this conflict yeah we have a massive
01:17:14
starvation problem the un told um told everyone i mean no one writes about this stuff because it's seemingly not interesting in mainstream media which i don't freaking understand but the un
01:17:26
thinks that 345 million people now are incrementally marching towards starvation and so i think they did this at their meeting
01:17:40
yesterday because of the war in the ukraine um so david beasley whom who i know well he's
01:17:47
the executive director of the un world food program he told the u.n security council yesterday that 345 million people are
01:17:53
now facing acute food insecurity in 82 countries where the u.n operates which is two and a half times the number of acutely food insecure people that existed before the pandemic hit and so
01:18:05
this is creating like we talked about these rippling effects in terms of initially it was fertilizer cost which means less food is being produced
01:18:12
locally then there was the acute crisis of getting food out of the ukraine and now it's less planted acres and less
01:18:18
yield getting out of those acres which i you know we said was going to start to happen in the back half of this year
01:18:24
and if you look at the price you know a good proxy for this is the price for corn uh we're at near record highs um you
01:18:31
know for the last couple of years in terms of corn pricing the 2023 futures pricing for next december for corn is at 620 a bushel
01:18:41
you know and it kind of peaked out right around the middle part of the the ukraine crisis in um
01:18:49
april at 673 so we're getting right back to that high point and so this is a major problem that's brewing and as i highlighted at the beginning of our talk today
01:19:00
which i show in the presentation for the the levoro transaction i talked about earlier
01:19:05
we have done an incredible job building a resilient food supply and excellent global supply
01:19:13
chains to feed people around the world going back 30 years and we've been able to steadily decrease the number of
01:19:19
people that are food insecure or facing famine and famine in the u.n definition is less than 1200 calories per day on average for a year and so we went from
01:19:30
like a billion people around the world facing famine about 30 years ago and got that number
01:19:35
all the way down to 600 million and then in the last two and a half three years it's shot back up to 800 million and now
01:19:42
the un thinks it's going to shoot up even more so we may even be retracing our way all the way back 30 years
01:19:47
because of the crises that have enveloped the the region around ukraine and the resulting impact on fertilizer availability fertilizer pricing and so on and as i mentioned a few weeks ago
01:20:00
many ammonia fertilizer plants which is nitrogen fertilizer the main kind of component of fertilizer in europe are being shut down because they run on natural gas and so government agencies
01:20:12
and the local producers are turning those plants off to make more natural gas available for heating would you
01:20:18
describe this freeberg as because we we are seeing uh the eu you know they remember they made that uh this is why
01:20:24
this is why south america is so important but sorry go ahead yeah no it makes real sense would you describe this though because the eu was also at the
01:20:30
same time the un was uh you know highlighting these concerns the eu was also praising the massive progress we
01:20:36
made from the the russia and the ukraine and russia and ukraine uh allowing fertilizer allowing exports and this
01:20:42
resiliency so we got wheat moving and then we got some fertilizer exports moving right so
01:20:48
two steps forward one step back would be how you describe this maybe yeah that gas prices are still elevated right and
01:20:54
and that gas availability in europe is obviously significantly restricted we get through
01:20:59
it will we get through it do you think we can we can manage this yeah look i don't know how many look there's some number of people some number of tens of
01:21:06
millions maybe hundreds of millions of people who are going to starve between here and there that otherwise weren't going to be starving by the way there's
01:21:11
always you know some hundreds of millions as i mentioned of people around the world that are starving under 1200
01:21:17
calories a day and that number climbing some incremental amount that's an incremental
01:21:23
300 400 million people that didn't need to starve and that's a condition we're now going
01:21:28
to be facing and so people like hey yeah people are still eating you know there's still food around the world
01:21:34
we don't pay much attention to these third world countries we don't pay much attention to these underdeveloped nations because we don't
01:21:40
have press coverage there and and when people are on the streets and unable to eat it doesn't seem to make everyday
01:21:46
mainstream media coverage but it is happening and statistically it is a massive problem yeah we're doing we're
01:21:52
doing a great job of covering kanye and kim but yeah we maybe get some reporters to to cover the people we've covered and
01:21:57
i appreciate you guys giving me a chance to talk about it because i think it's super important so yeah i mean you know i think when this show is at its best i think
01:22:04
we're highlighting things that other people are ignoring i just want to say on this ukraine situation and this applies to this episode as well as all
01:22:09
the previous ones i don't want to be right about this issue just like i'm sure freeberg doesn't want to be right about famine coming true we don't want
01:22:16
these things to happen okay if i could choose an outcome right now i would say be great if the russian
01:22:22
army collapsed because of its morale problem tucked its tail between its legs went back to moscow and then the
01:22:28
ukrainians had the good sense to respect the rights of the russian speakers living in the donbass and
01:22:33
crimea and this whole thing basically tamped down and basically was over okay but look i think there's an
01:22:40
equal and opposite chance that that doesn't happen that certainly could happen okay but i think there's an equal
01:22:46
and opposite chance that instead what happens is that we climb the escalatory ladder that putin i think we are backing
01:22:53
him into a corner everybody says that he cannot survive the loss of this war and yet we're not willing to give him an
01:22:58
off-ramp so what choice does he have but to escalate so what does that mean it could mean a full mobilization of that
01:23:04
country it could mean they resort they if they can't achieve their aims by conventional weapons maybe they resort
01:23:10
to unconventional weapons we don't know this seems like a highly volatile risky situation and i just think that
01:23:18
you know we the united states of america need to be thinking very clearly about what is in our interest because all i
01:23:25
see is a identification we're so interested in helping and identifying with ukrainians that we've lost sight of an american interest that's separate and independent
01:23:37
of ukraine's desire for self-determination i can understand and respect their nationalism and their
01:23:42
patriotism but we are a different nation we better think really carefully about our interests here i i yeah and i think
01:23:48
david sometimes you're misinterpreted as this is a partisan issue for you you're a duff you're david the dove
01:23:55
david not a hawk you want peace listen i believe that if america is going to risk war with a nuclear armed power there better be a vital interest at stake otherwise
01:24:06
we should find every diplomatic off-ramp we can so do you feel uh optimistic about our ability to
01:24:12
navigate chamath the ukraine situation uh the war in ukraine famine supply disruption energy do you think we'll get through all this are you optimistic i think that rates are going to go
01:24:24
somewhere between four and a half to five percent i think stan drucker miller is right um and i've said this i i don't know i now at nauseam so i'll just keep saying it but i think everybody has
01:24:37
consistently been wrong and they have wanted inflation to be a transitory phenomenon that goes away and they've been consistently wrong even in our group chat we see these forecasts
01:24:50
they've been utterly consistently wrong so rates are going to go higher than people expect it'll stay around longer than people want this will have an impact to the economy
01:25:03
uh that that impact in 2024 2025 will not be that great so that's one thing if you want to focus on ukraine for a second there's something that i
01:25:15
think we should focus on which i read this interesting article about russian mothers and you know in the
01:25:21
1980s when russia was at war with afghanistan there were these uh bodies that were sent home to russia and these mothers
01:25:28
got very very upset and they protested and then um in uh you know 2000 early 2000s i think there was um there was a nuclear submarine that
01:25:40
basically sank got shot and sank and then russian mothers protested in the chechen war
01:25:46
they are a group of individuals in russia that have enormous organizing power it turns out and they
01:25:57
um you know they they really can tell um what the real temperature is on the ground
01:26:03
what putin has done so far is that he's largely recruited people from you know the spartan communities inside
01:26:10
of central russia and used third-party contractors so he's minimized the risk of the real cohort of the russian
01:26:16
population who will really stand you know fervently against what's going on so until you see that happening those
01:26:24
guys have a long way to go and i think that this thing is going to drag on for a really long time so it's a paid army
01:26:30
therefore it's obscuring the impact on actual citizens in russia it's half paid but the other half are from places where
01:26:36
their organizing power is limited and i think that that was putin's you know calculation seeing what has happened
01:26:42
before again sort of like the tip of the spear these russian mothers and we're not seeing that so um
01:26:49
that means that the ability for him to manage perception inside of russia is pretty definitely pretty um greater than people expected yeah greater than people expected so this is
01:27:02
going to go on for as long uh for much longer than people think so uh i would just
01:27:09
prepare for this inevitable outcome and just kind of you know manage another year of slogging it through
01:27:15
a choppy waters might be one way to look at this and i think that's a very good way i think we're in a very volley
01:27:21
choppy market for the foreseeable future yeah and that therein lies some opportunities um and also maybe some discipline in various markets one thing to just keep in mind where most people
01:27:33
feel these rate hikes is in the 30-year fixed mortgage right this is where most americans are going to feel it and if
01:27:38
you look at the chart you know like this is a big jump up from our absolutely free money environment that
01:27:45
most americans were feeling uh doing you know um you know what what do they call it when
01:27:50
you take out equity on your mortgage like a second mortgage or a credit line credit line yeah most people have credit
01:27:57
yeah people were you know experiencing a lot of free money and upgrading their kitchens and taking money out of their homes yada yada but when you look at it
01:28:03
historically uh you know even at six percent or even if it goes to seven percent for mortgages
01:28:08
um it's a lot less than we our parents experienced and we experienced for the first half of our adult lives so i think
01:28:15
it's surmountable and this number you don't think is going to get up to above 10 right the 30 year fixed you don't see that happening so i think it's
01:28:21
manageable which is going to be choppy all right listen sax didn't get to promote it but he has a wonderful film
01:28:27
at the toronto toronto film festival about dolly and he is doing an awesome dolly experience with the ai that paints pictures and so we're just going to insert into the end of the
01:28:38
program the beautiful work he's doing there and his dolly film is supposed to be excellent it's the second film david is producing after thank you for smoking
01:28:44
so congratulations to our own little scorsese uh for the sultan of science the dictator and uh the david the dove i'm the world's greatest moderator jason
01:28:56
calacanis and we'll see you next time bye bye love you guys bye-bye all right so i'm at the dali land exhibit here at the saint regis the st regis hotel was a very important hotel
01:29:08
in dali's life he actually lived in the penthouse of the same regions of new york and the st regis hotel has very
01:29:14
graciously agreed to host this exhibition for us and this exhibition is it's basically a rendering of uh dolly studio or what dolly studio might have looked like and those works
01:29:27
of art are actually generated by gpt-3 the so-called dial e engine so thanks to the open ai team and sam altman for giving us access to doll e
01:29:41
d-a-l-l-e and so fans can just come here and they can use these tablets to enter you know what art they want to create they can just enter terms and the
01:29:53
you know the engine will spit out art that is made not obviously by salvador dali but it's in the style of salvador dali so i thought it's a very cool way to
01:30:04
commemorate the film we are premiering at the toronto international film festival this weekend this is an
01:30:10
independent movie i've had in development for something like over a decade and uh the great actor academy award-winning actor ben kingsley plays dolly
01:30:21
and gives a phenomenal performance so we're excited to premiere this movie show it to the world
01:30:27
for the first time this weekend all right thanks for watching bye let your [Music]
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and they've just gone crazy with it [Music] besties [Music] your feet we need to get mercy's
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