E108: Doxing debate, Nuclear fusion breakthrough, state of the markets & more

Captain calacanus is here reporting for Duty with us Spirit Airlines cup absolutely Spirit Airlines I just want to say all in podcast now sponsored by Montclair and Spirit Airlines or now sponsored by the Village People [Music] wow are you a pilot or a flight attendant Jayco he's a flight attendant I don't think he's thin enough to be a flight attendant are you fat shaming me are you body shaking you can't do that nowadays that'll get you canceled get exact canceled at this point like fat shaming would be number 72 on the list he can't get canceled because all the libs have left Twitter there's nobody to there's no Home monitors left they all pretend

no they quit every week yeah it's like all the Lives who said they moved to Canada when Trump got elected yeah Canada immigration go ahead [Music] let your winners ride [Music] [Music] a hacker figured out a way to take all this data and track you know people's Yachts people's planes obviously one of those people was Elon Elon had a security issue this is all public information so the larger issue at stake here is the fact that the law allows for people to do this persistent tracking of planes which then becomes persistent tracking of a person and what really is at stake here is how we Define the term doxing

for people who don't know the term doxing it means giving a person's location that could be your home that could also be you're at a location for some period of time you're at a hotel you know for a basketball game uh and it's pretty clear you can take a picture of a celebrity say there's a celebrity here oh Lady Gaga's at the farmer's market what I object to here uh we all understand doxing is dangerous and it in fact is against the law to just get people's addresses and stuff like that um the issue here is a new type of doxing which I'll call you know persistent coordinated doxing where dozens of times a month you're giving a person's

location it may not be against the the First Amendment sacs I think you would agree but we have to ask ourselves do we want to live in a world where whether a person's on an electric bicycle or an airplane or any device in between somebody should be releasing dozens of times a month a specific dedicated feed of their location it is terrorizing as a parent when this happens I've had doxing people on the call here have had various security concerns we don't want to live in a world with de facto doxing what these sites were doing was de facto doxy I think it was a bad decision and I think that it um uh represented on the least generous statement would be

that it represents deep hypocrisy in that not just a few weeks ago did he say he would never delete that account but he also said he was buying Twitter to enable freedom of speech and freedom of expression and that he wouldn't come in and do the same sort of content moderation that was done by the old regime and then he came in and did exactly what the old regime did which is that he took the rules and he took the quote moderation policies and he found a way to use them to make some editorialized decisions that he thought was appropriate now the more generous thing is what you guys are saying which I don't think is necessarily wrong which

is that he's trying to protect people where there's some loophole or some law that doesn't seem right morally but it is the law and it is what it is in those cases I think you run into the exact same issue that the Old Guard at Twitter had that the moderators and the executives at YouTube have dealt with and that the executives at Google have dealt with and that we sit here and we criticize until you're on that side of the table and you're forced to make these moderation decisions you're forced to make these policy decisions and you're forced to implement these policy decisions because of some moral framework that you now think is appropriate and guess what some people

will say that's not freedom of expression that's not freedom of speech you're taking that away from some people you're taking this particular case away from a 15 or 16 year old kid who's built a a Twitter feed and so I think what it shows is just how hard it is to moderate these sites these platforms and that there is no simple easy idealistic ideologue of hey all these things are open all these things can be used by anyone all the time because as soon as one of these edge cases start to happen you want to come in and do something about it what do you think what should happen going forward so I I have had

these issues happen to me multiple times times I'm not nearly as important as Elon is but it feels the same when you're in the middle of it it feels pretty terrorizing that being said I think the real decision for somebody like me is that if if it's too much is frankly just to get rid of it and you know to find a different mode of transportation that's a little bit more Anonymous and your practice about it and the reason I say that is that I just think that you you would have to go and get the government to basically change the law which they're not going to do and so then as a result your reaction will seem somewhat

contrived and deeply personal and in that I think you lose credibility let me just summarize this and be the first one to just State this I think that if there's any person in the world that can figure out Twitter it's probably Elon but man has he taken on just a gargantuan battle and increasingly I am not a fan of this battle and I'll tell you why this is a man who is essentially proven that he can bend the laws of physics on behalf of humanity he's done it twice once in electric cars and once in rocketry the problem is that the realm of decision making at Twitter has nothing to do with the laws of physics and is

governed by emotions and psychology in which there is no canonically right answer and so he's quickly finding out that half the population will always find fault with him no matter what he does and now the implication of that becomes very important we saw yesterday that he had to sell another 3.8 billion dollars of Tesla stock why is that it's because this transaction which was you know very tight to get done probably required lots of margin you know there I look I have a margin loan at credit Suite so I know how these things work and you can very quickly get Margin Call you have to sell down things that you own in order to maintain your collateral limits we've

talked about this before he's had to do this twice now in the last few weeks and that's because again not because of the demand that Tesla as far as we can tell but because people believe he's distracted and so people are anticipating weakness at Tesla people are now shorting the stock anyways it's causing this downward spiral and can he fix it I think so can he pull it all out sure is it just putting himself under an enormous amount of pressure that he could have avoided somewhat yes and I think that this is sort of where we're at um six weeks in my gosh I mean I was saying this guy learned in six weeks

What it Took YouTube seven years to learn how hard it is to moderate content and you know I think the thing is that's what I disagree is okay you're attributing so much good faith to these content moderators at YouTube and Twitter when the Twitter files reveal that they made no effort to suppress their bias in fact they were like pretty much dancing in the streets every time they booted off someone they didn't like fair enough before you react to What Friedberg just said at the end that Coda can you respond to what I just said isn't it true like it's like well look I mean if you define what Elon is you know

doing there as you know acting as a judge arbitrating on every little content moderation decision is that a great use of his time relative to what he could be building at Tesla SpaceX and doing on behalf of humanity then no clearly not but if you define what he's doing in the larger sense as restoring free speech to the most important Town Square social network hopefully thereby inspiring other tech companies to move in the direction of opening things up then I actually think it's a pretty good use for his time so look I think we can quibble about this or that decision that he makes or this or that tweet but I think the overall thrust of what he's

doing is very important for the country and for Humanity so I get where you're coming from hopefully he'll find some people at Twitter who he can Empower and Trust to make these content moderation decisions so he's not drawn into every single little battle right we do want him focused on the highest priority problems my point is just that I get that I just think that what he's learning and what we're living and seeing in real time is that there is no canonically right decision ever in this space there's only a decision where some percentage will support and some percentage will always be against because that's my point correct he did say when he took over he

knew that would be the case he said you will know I'm doing the good job when both sides are equally upset just to to put a pin in it I think it's important for people to understand what the new policy is so I'm just going to quickly read it just hang on sorry hang on one sec before you get to because I think the the philosophical Point rather than the specific one is it's an important one and I just want to respond to what your mom said and and have sax respond to this in the case of the the points you make around the Twitter files and by the way I don't agree with any of the moderation decisions personally so I don't think that someone should be suspended for posting public information

I don't think someone should be suspended for saying controversial things that's my personal opinion just so I'm clear on that because I know that you know describe yourself as a strong Free Speech yeah libertariance okay sure and um and so in this particular case I think what really irked me I was trying to identify why it made me so angry yesterday it triggered me it really did and I think the reason was that in the case of the Twitter file points um it was a minority it was a minority that was affected it was one person that was affected did because the majority wanted to do that thing to that person and I think in this case it's that the minority wants to affect the majority in

the sense that Elon has aggregated this control and this power over moderation and he's benefiting himself and a few people that have private planes and he's shutting down hundreds of twit feeds Twitter feeds that are using publicly available information and so it feels even more onerous of a um a use of power and influence because he's taking um he's doing something that benefits a small number and affecting a large larger number whereas the alt where's the other one was affecting a small number that benefited a large number because that's what a lot of people wanted to see happen a lot of people wanted to see Trump suspended and

it wasn't right either okay I don't know if that if that makes sense yeah we understand your position completely I just want to add to that in this policy I think it's very important to understand what he is saying about this accounts dedicated to sharing someone else's live location are going to be suspended going forward you can still share your own location obviously content required uh you know content for public engagements you know the president is speaking somewhere whatever you just really can't be persistently consistently tracking an individual Otherwise Known and you know stalking but Jason if NPR is live

tweeting sure Jerome Powell's speech perfect XYZ location not a problem if they do Jerome Powell's location for the next year for the next year 10 times a week on his off duty on duty that's the same thing we're talking about I'm just saying like let's just say he gives a speech every week is that illegal no if you totally fine if you're giving a speech at a public place where you've announced that you're going to be appearing at a certain time and place you've already made the public where you're getting a problem what we're talking about is and what what Elon jet was showing was a live stream

of precision GPS coordinates over a sustained period of time yes and not to be too dramatic about it but if you look at like the weapons that are so successfully being used in Ukraine right now they're all Precision GPS guided now right now you have to be a state actor to get a hold of those weapons but you could imagine over the next decade that having someone's precise GPS coordinates over a sustained period of time it would be pretty easy to Target them for and not to be dramatic here but for assassination yo that is a security risk there's no way around that I brought this up with Palmer lucky man I'm scared that dude could come at me anytime when

I get my jet I don't want farmer lucky taking me out yo Palmer I'm sorry dude do not take me out I'm gonna get my jet I'll be on my first flight and he's just gonna to send a drone in but look let's talk about hypocrisy for a second okay because here we go let's let's talk about CNN's hypocrisy and the media's hypocrisy because earlier in the week they were saying that any criticism of yoel Roth who is Twitter's former head of trust and safety amounted to a threat to his safety and they had this like theatrical tweet where they claimed you as having to flee his house which a lot of people found uh pretty Preposterous they were basically saying that public criticism

of someone who has put themselves out there to engage in a public debate who's writing op-ed's New York Times that is a threat to safety however publishing someone's real-time location on a continuous basis so they could be taught not intellectually consistent it's not intellectual consensus safety that is not sorry if if one of those two things is a threat to safety it's the real-time doxing of somebody yes I think we Now understand why Elon did what he did he basically had an incident in LA in which the safety of his kid was threatened because he's got stalkers coming after him so his safety is a real issue it's not like a made-up issue yeah why should his personal

experience affect the usage of the service that hundreds of millions of people use and that's the big issue the decision should not be based on what affects him personally there needs to be a possible basis there needs to be a principal basis for any decision moderation or censorship maybe in the first few hours of that decision it wasn't handled perfectly because there wasn't a principal basis but since then one has been put in place the principal basis is what jaycal showed and this applies to everybody and so you know now it's a debate about whether that policy makes sense now is Elon just as arbitrary and capricious as the former uh Executives who are running trust and

safety at Twitter I don't think so for two reasons number one he's promised transparency he said that when we ban or Shadow ban an account there has to be a reason for it and you have to be alerted to it in other words none of the Shadow stuff no should be informed you've got your speeding ticket you get your ticket it's there right no more shadow that is different and then the second thing is that and again I think you could say they didn't do this perfectly in the first few hours but there needs to be a principal basis for a censorship decision and it needs to be applied to everyone equally and so far we haven't seen any basis for

believing that he's not applying this principle equally I mean still very early whereas the former rulers at Twitter were indulging their personal bias and personal preferences and who were they were Banning there were two standards of Justice if you were someone who has allied with them it was almost impossible to get censored no matter how hateful your tweets were but if you were somebody on the other side of the political debate they were eager to suppress you and I think that at least so far Elon has not shown that type of selectivity he's selected against someone that put him at personal risk he I think yes if that's where the decision had stayed

yeah then I would agree with you but I think that since then they've put in place they've undergirded that decision with a personal policy I think those sites are I think those tweet um streams are cool I think there's some cool tweets streams that some of these people run and there are hundreds of them and they're actually kind of cool you can see where these different you're in favor of people tracking people's planes like where Air Force One is they show all these different planes it look and whether or not the FAA should be publishing this data as a separate question but it's on the open internet it is already there it's like turning off the RSS feed from the open internet

to protect himself okay that's why it feels owner so here's the part I agree with which is I think this policy with regard to playing specifically is going to be futile yeah it's going to be at best harm reduction because as long as there's many ways to publish this information on Facebook so listen I think this whole I think this whole policy on Twitter is a little bit of a red herring I think the real issue issue the real underlying issue is that the FAA is publishing these iCal numbers thereby making every plane personally identifiable I don't think there's I haven't I have a counter to explain why if that's necessary I have a counter to it actually sex if I

may what we saw whether you agree with it or not with the mass Banning of certain individuals did actually silence them and take them out of the Public Square one of the reasons in fact Elon wanted to buy Twitter so if you look at certain individuals whether it's Milo Alex Jones Trump himself right on down the line when they got banned across all systems it was dramatic in terms of the reach of the that information so because of the size and scale of YouTube Facebook Twitter Etc when they act in coordination they can have a dramatic impact not a perfect impact but a dramatic which is

why we have this issue of hey should 230 be rethought because when they act on mass it is extraordinary what they can do to an individual they took Alex Joe who how do you consume Alex Jones you have to seek that out in a major way it's distinctly different last word and then we're moving on to what could be the greatest science Corner ever in the history of all in pod final words I think this is this is a great transition we're about to talk about nuclear fusion and my point is I don't care about any of this stuff like I said yeah like this is my point is like the if you if you take like an average person okay you know we are let's say awake 16 hours

a day and you know if you take out the time with our family David the family is people that are related to you um can we DM sax those people one more time we'll send you their names um but if you take that out and you take out you know exercising and you know can we also explain that to sax that's when you uh crease your heart rate and sweat sex the point is that you have let's just call it 12 hours you know a functional executive time that you can apply to a problem and you can break that down into these blocks right I would really love what is basically the smartest human and the most

productive human of Our Generation to be feeling those blocks with things that sort of like really transcend and increasingly and I agree that freedom of speech is important increasingly those buckets are being filled with things that are very low level and Hyper tactical and are distractions at best to the to the path of free speech and so I think that hopefully he gets all this [ __ ] under control over there he finds a good executive team I would like to see him get back to Landing rockets on barges getting to Mars finish self-driving we're almost there moth definitely has a point but I just

say one of the reasons why we don't care that much about this issue is because I think something to understand that's important is there are different kinds of speech and different kinds of speech deserve different levels of protection the fact of the matter is like business advertising is not as protected as political speech porn is not as protected as political speech political speech speech criticizing the people on power is the most protected category of speech because the founders of the country understood that the people in power will always try to insulate themselves from accountability by limiting that kind of speech but that is

precisely the kind of speech that the former rulers of Twitter suppress the most and showed the least sensitivity to so listen I mean is Elon going to be the perfect content moderator no I mean nobody is nobody is but I do not believe that puts him in the same category as you know vijayagati or yoel Roth who showed no sensitivity for political speech he has indicated a desire to restore freedom of speech and I think they ultimately ended up in a place I want him to get us let's move on to Twitter best science Corner ever so according to sources scientists work for the U.S government have achieved a net energy gain in a fusion reaction no for the first time not net energy gain

get it right we had ignition energy which is very different from that energy gain okay hold on I know that you're in the anti-camp please let the science nerd have you you have to you have to say it correctly so that people understand what you're talking about let me just make it even simpler then explain to us what Fusion is Dr Friedberg and explain to us why this could potentially change everything we did this on a on a show once before but I'll kind of do a quick kind of summary again basically if you take Atomic nuclei which are made of protons and neutrons and uh they repel one another right

because protons are positively charged so they want to push apart from each other so with enough energy and enough density meaning that they're moving fast enough and they're close enough they'll overcome their repulsion and and jam into each other when that happens some energy is released because the total mass of the fusion of those those nuclei is actually less than those nuclei when they're on their own and so some energy is released and that energy drives a a chain reaction and so Fusion is this concept that is fundamental to physics and fundamental to the energy driver of our

universe so the star in our uh in our sky uh the sun is driven by fusion and only about 15 of the mass of the Sun at the center is dense enough to actually drive Fusion so the big challenge with Fusion is how do you get these these Atomic nuclei close enough together and moving fast enough that they'll actually fuse and release energy and that's super hard the reason it happens in the sun is because the sun has so much mass that the gravity pulls all those particles together they get close enough they get hot enough they move fast enough and fusion happens boom all this energy comes out and every day we're warm now to do it on Earth is very difficult but

if we can do it what happens when you fuse nuclei together is you don't release any this isn't like a radioactive fission reaction you release energy that can be harnessed to drive our systems our technology how is it done yeah so in the 1950s you know this was theorized hey we could do Fusion on Earth we got to get a really really dense plasma meaning the atomic nuclei and the electrons have kind of gone off the atoms and it's just the nuclei spinning apart you got to get them to move super fast like tens of millions of degrees Celsius and you got to get them really close together so how the heck can you do this so there's a couple of um Concepts to do this one of

which is called inertial confinement which is where you basically create a little pellet of the uh the material you're going to try and get diffused and you put a ton of energy on the outside you can press it really hard really fast and when you compress it really hard really fast and you can get it to be done in a perfect sphere and you can get it to collapse on itself very quickly without you know kind of shooting all over the place enough of those particles will come close enough together fast enough hot enough and they will start to fuse another way is through magnetic confinement where you use magnet genetic fields to create a really hot plasma get

it to spin around or to move and then the magnet brings that super hot plasma closer and closer and closer together until all those particles are moving fast and they're dense enough that they start to fuse so you know one is called magnetic confinement the other one's a neutral confinement and so what we saw happen this week is at the national ignition facility which is a facility that was built starting in 1997 and they've spent about three and a half billion dollars to date they demonstrated a net energy output from the fusion reaction Governor neutral confinement system and what that means is they took a little pellet and that pellet was made up of deuterium and

tritium the atomic nuclei that they use the particles that they use are deuterium which is a proton and a neutron stuck together and then tritium which is a proton and two neutrons stuck together and the reason they use those two combinations is of all the different ways you could fuse nuclei together this has the best energy output of any kind of reaction Freebird yeah what actually happened this time that made this work for what apparently only three billion dollars you said you didn't say three trillion said three billion three yeah about a third of what Sam bankman fraud stole we have done something here

yeah allegedly so what actually happened that is so dramatic that we have a press conference everybody's losing their mind so yeah I just want to highlight one more thing about why this is so hard you have to get such an incredible density you have to get an incredible energy so high temperature and high density that confining those atoms and not letting them escape and and you know um basically dissolve before they fuse is super difficult it requires so much energy in such a controlled way in such a perfect and precise way that all of the digital technology the magnets all the measurement systems all the software it's taken us decades to get everything

that allows us to to do this today and now we're at the point that we may be able to start to realize production scale Opera kind of versions of this so what they did is they had a small deuterium and tritium pellet and they've shown 192 lasers onto this container that held that little fuel those 192 lasers the whole thing happened in a billionth of a second the laser is pulsed boom here's an image of it and as they did that they you know basically x-rays kind of Hit the sphere this little BB if you will uh BB kind of thing and compressed it and it compressed so quickly and with such heat and it didn't dissipate because it was done so precisely all the lasers hit at

the exact Right Time Boom this thing compressed and then energy came out and the energy that came out that was measured was one and a half times the energy that kind of went into that reaction and here's a chart that that I'll show you from the national ignition facility which shows just how inefficient the system still is and this isn't even speaking to um to chemov's point but basically these guys um lose 90 percent of the energy that they put into the the center of the system only 10 is actually used to drive the compression the rest of it is lost and there's a lot of ways to improve the efficiency of the system from here but basically they put two megajoules in

they got three Mega joules out and so it was the first proof Point production proof point in the 70 years that we've been theorizing about nuclear fusion here on planet Earth that this is possible and it's real now this is these kind of inertial confinement systems there are 33 private technology companies today that have raised about three to four billion dollars so far this year to pursue several other Technologies besides what the national ignition facility is showing to try and build production-ready versions of nuclear fusion and so these 33 companies are using a bunch of different types of tools one of which is the Tokamak if you

show the image I'll show you this one there it is yeah tokamac this is what we talked about that is the magnetic spinning thing that looks like Iron Man's uh Arc Reactor which I think this one based it on yeah yeah you create a plasma you basically speed up the hydrogen nuclei super super fast these deuterium and tritium nuclei super super fast and then you use magnets and the magnetic field has to precisely squeeze the plasma squeezing it squeezing it squeezing it and if it's slightly off and even the tiniest way think about a balloon right if you put a pinhole in a balloon everything escapes from the balloon yeah you gotta do it that's how technically hard this is you're

basically trying to create a balloon with a magnetic field and you're trying to keep the gas and you're trying to make it smaller and smaller and smaller and if any tiny hole emerges the entire plasma is that what happens in Uranus like when you're trying to hold in the wagyu anyway uh let me ask this question then um about the consistency of this and then we'll go to YouTube off can they do it consistently or do you think this is like they got lucky once uh or are we going to be sitting here a year from now and they're like we put in two when we got out six so and we did it five times yeah so so now we've proven that humans can do this okay which is

look I mean I want to give you guys some uh and I know kind of some of chemov's concerns which is how much can recreate the sun is what we this comes down to no yeah but no because no I I want to just say one like if not even close I want to say one important thing from a historical context all breakthrough technology starts out seeming impossibly large impossibly expensive and impossibly slow the Human Genome Project 20 years ago cost a hundred million dollars to sequence the human genome today we can do it in a couple of minutes for a hundred dollars okay incredible the first computer the Antioch computer had 500 flops of

compute capacity it filled a room it cost eight million dollars to build 20 years later we had a Mainframe no this is all this emotional [ __ ] you're using the wrong examples okay let them finish then you got your mom good finish your sentence Freeburg and then we go and today we have an iPhone that can do 2 trillion flops of compute in your pocket I think that what we're seeing with Fusion today is similar to what we saw with the eniac computer in the 1950s which is the demonstration that compute is possible and now we're seeing a demonstration that Fusion is possible okay and a lot of folks have anticipated this moment and they've invested ahead of this now I don't know

if any of these companies that are currently kind of being built are going to be production ready anytime soon my estimate is that we will see production demonstration confusion here we go 23rd in the 2030s so call it eight years from now plus and then you'll see grid scale scale up in the 2040s so this isn't something that's going to happen next year or two years it's already happening what are you talking about okay now tremath your rebuttal oh my God knowing you're a huge fan of solar this is the most Naval gazing hit up your ass scientific [ __ ] okay couple points let's start with the basics the first is that there was no previous technical change

like why are you angry at me I'm not angry I find this so tiring hearing this it's all seriously he's right yeah it's not like I don't get it because I don't find this intellectually honest okay let me finish let me finish okay when you talk about sequencing the genome there was no alternative so you're right it was an enormous technical Leap Forward when we built a computer there was no analog it was an enormous technical leap and so you're right we have a cost curve we don't understand and then we iterate as rapidly as possible and all these Innovations where we've built an entire infrastructure to ride down the cost curve the thing is Fusion Energy exists

today it's called the sun we actually know how to capture it had virtually no cost right now so according to the iaea today you can capture grid level solar energy for about three cents a kilowatt hour that's as close to zero as we've ever been and over the next 10 years their forecast is it's going to get to one and a half cents if you then want to store it and you layer in storage costs we'll be at a whopping three cents a kilowatt hour that's where we are today and so I think that Fusion does exist I do think that this is an incredible technical leap to replicate something that exists and I think that's where the

intellectual dishonesty is it it does exist it has been captured it can be harnessed and there is a positive energy equation just in a different modality that doesn't speak to these technically minded individuals a couple of other points about what I saw I think it's incredible what happened okay but just to make sure we're clear this is 192 lasers the size of three football fields that consumed 322 megajoules of energy which then ultimately delivered two megajoules to a Target which then released three so this is why I'm saying we had positive what's called Ignition energy we did not have positive electrical energy captured so yeah could

we figure this out absolutely can we then shrink the three football fields down to something that looks the size of a laptop we possibly could will it take 20 or 30 years possibly but in the meanwhile if the goal is unlimited Costless energy you're on that cost curve already yeah but why can't it be both so you said I was being intellectually dishonest dishonest yeah you're comparing what you're saying is right yes you can get which seem to be in agreement like yeah I I just think that I think that you're trying to say that this is an entirely new thing no it's a different approach to a thing we've already beaten and and basically captured let me bring what I

would argue to mop and I think this is important future on say a football field sized facility from solar is you know a tiny fraction of the energy you could generate from a football field size Fusion reactor and that's why the argument would be like hey you know when we were developing computers hey we have abacuses we shouldn't be developing computers and I think that's that's the analogy I would use here this is why the cost per kilowatt hour is what the uh the levelized cost of energy tries to do it tries to to normalize that argument away because everybody would say that hey hold on a second you're going to need plain fulls of this or boatloads of

that and people said no what's the levelized cost of energy how what is the cost per kilowatt hour to generate energy and what I'm saying is that is an absolute scale and free is zero and we're at 1.5 cents here's what I would say once check out one sec okay the opportunity here is not necessarily about cost reduction it is about scalability and if hydrogen is abundant which it is on this planet it is nearly infinitely abundant we can take that hydrogen and we can scale up energy and electricity production in a way that is unimaginable compared to solar and I don't think that solar should be excluded solar is key today and should be scaled up and I'm 100 agreement with

you but the scalability to go 100x if we want to make a hundred times more electricity I think we need fusion and I think that it's feasible so I think we have uh reached a good settlement here chamath you're saying Hey listen we're getting solar down so cheap we can solve this problem all forms of energy okay great we are solving that so for our needs today and then what Friedberg is saying but what if you had unlimited a thing that we can't even imagine beautiful now watch as I get sacks involved in a science conversation he has zero interest in Mr David sacks if in fact there was one hundred percent more free electricity available in this

time frame the next 10 days 100x the available energy in other words supply of energy just becomes flooded and it's free essentially what would be the geopolitical reaction on planet Earth in terms of uh this incredible rivalry rivalry we have with China and for Humanity on a political basis such a good question Jacob go ahead that's a good question here we go thank you world's greatest moderate ATM while we let Freeburg answer it no no but you're the politics guy get in there what um I already has thought about this let's I want to hear his answer I actually want to hear your answer unless you know in in a world where you know energy becomes more abundant hasn't been paying

attention guys this is what he's trying to say I'll call your intellectual dishonesty and raise you a steel man good go ahead I love you I love you you know I do have a great night out Monday night a Sunday night let's talk later I just wanted to go together last week he called me Petty too here's what I want to be clear I think that I'm just glad you guys are fighting not mean sex guys please let me finish okay I think Memphis breakthrough is really valuable I think it's interesting to see that these kinds of scientific breakthroughs continue to happen in government-sponsored facilities and not private companies um and I think that that's probably

where a lot of these Innovations will continue to come from because look at the scale of what had to be built three football fields and 322 megajoules of energy and 192 lasers this is really complicated expensive stuff I'm an enormous fan of these kinds of scientific breakthroughs I want to be clear I think that where I struggle is translating this into actually an investable area and I worry that this is going to consume lots of money by folks that could otherwise put money to work in things that will actually pull forward our energy Independence and energy abundance sooner and faster so for example you know there are all kinds of things that we could do to secondary

ternary third and fourth and fifth generation batteries that aren't happening today there are a bunch of things that we could do to actually create an infrastructure of green hydrogen and the the simplistic answer is we could do it all but the reality is money is finite and we can't and all I'm observing is I do think that more practical things that do have geopolitical ramifications sooner are not going to get funded because people do get enraptured by this and my skepticism is that this is still in the realm of government-sponsored research and is not really an area that for-profit private companies can tackle and so I would rather those for-profit

companies for example why combinator just today put out something where they were you know call to action a request for startups in climate and when you look at that list those are really practical investable areas and I just want to make sure that the capital allocators that listen to this weigh those equally I am glad I'm glad that the U.S government did this I hope they do more of this but if you're asking me quite honestly I would rather the next 10 billion dollars go into Energy Efficiency HVAC then Fusion because a fusion exists and B I think it's going to happen at an Innovative bench scale level by the government and not by a

particle let me let me just respond to that real quick I think that the idea of allocating our resources as a society should be done on kind of you know on a portfolio basis eighty percent on the pragmatic near term 15 on the kind of next gen and five percent on the moonshot and this maybe starts to shift from the five percent to the 15 maybe it's still in the five percent but I don't see kind of overfunding happening so I'll tell you guys there was a survey done there's 33 private companies in Fusion that are kind of fusion companies today uh VC back eight new this year so the numbers kind of increased by 33 this year and um

so far this year those companies have raised around three to four billion dollars which by the way is a fraction of what was done by 15 minute delivery companies exactly my point and and by the way the biggest funding is happening in iCare which is the largest construction project in Europe and this is a 30 billion dollar production scale Fusion demonstration system that should be online by the end of the 2020s government sponsored government sponsored yeah and so this is my point I'm a huge fan of government-sponsored research how we get finally the first science Corner Everybody Breaks themselves it's the first science corner where David sacks has it about the

Cherry sacks here we go come on you're coming in you can do it again your question was a little bit was was not a let me rephrase okay what's the geopolitical impact if this does happen 100x energy is fantastic for the United States if it actually happens and the reason is if you look across the world there's this thing in politics known as resource curse where the worst governments the most despotic governments tend to be in the countries that have the biggest natural resources ironically so the countries that have huge amounts of petroleum or other kinds of minerals they tend to have pretty corrupt governments and the reason for that is that if you're sitting on a

giant oil Reserve you don't need to make anything else work you just fight over who gets to control that oil reserve and that's what politics ends up being you don't need to create policies that Foster Innovation or attract knowledge workers right you just basically mine that oil so if all of a sudden you're talking about turning energy into a software problem or an innovation problem that looks a lot more like the software industry that's an area where the United States has a huge advantage and yeah I think it would pull the rug out from under many countries all over the world in favor of the United States I mean it's a big if because where I agree with chamoth is this stuff still

seems pretty far off and it's still pretty unproven from a commercial standpoint but I agree with Freeburg why not try investing in it and cultivating it and see where it goes okay fantastic this was a fantastic science corner where we actually engaged David Sachs which country uh did you have anything to disagree with there Jacob all right take it easy this I just want to let people know that I think you you like that answer right well I I love all of your intellectual enough for you or was it I love your intellectually I love Turtles I was a steel person it felt so fresh it felt silver so romantic but I love when

you're intellectually honest silver personing yeah it's just over vaying you're super thing was that platinum gold or silver you're you're in Platinum with some diamond dust um can I just say spent a couple nights together this past week has really really does the mood of the show I mean when you guys go out and drink together and have fun hilarious you guys are sax and I laughed our asses off Sunday night can I just say we Saks and I had the best 48 hours together in a decade this is Sunday night it turns out Chris Rock and Chappelle are playing at the chase Center where um Shabbat used to own a piece of the Warriors right

and this incredible Arena has this incredible show and you know me and sax and some friends we'll leave it at that go to the show our bestie Draymond is at the show so I text Dre and I'm like hey you going to see Chris Rock by chance tonight with uh Chappelle you say yes sir I said hey I'm gonna go with a couple friends maybe we roll together hang out after the show we go and after the game after the show which was incredible we go backstage and I'm sorry to the to the practice court and we're hanging out with Draymond in the practice court with Dave Chappelle Dave Chappelle and I start shooting hoops

David sacks is talking to Chris Rock about free speech Steph Curry comes out and starts giving Dave Chappelle and Jay cow uh shooting lessons where Chappelle and I are bricking like old men you know you know uh on a concrete court all of a sudden Steph says hey Jacob you got it and by the way he's a fan of the show he says you're short every time and uh just you know hit the backboard you got to go long then he tells Chappelle you got to change this all of a sudden we start hitting shots like you know we're on rainy threes you're reigning threes it was literally like cut into here over these mid-range jumpers or threes I was

a free throw line extended free throw line extended cut into here Rain Man and rain dance from Along Came Polly rain dance Raymond let it ride Rain Dance Let It Ride Let It Rain I was hitting brick after brick rest in peace Philip Sumer Hoffman so then we're chilling and uh sax and I are talking to Dave Chappelle Joe lakum owner of the Warriors are there the majority owner uh you know as opposed to you being a minority owner the only person who draws more names is Phil Hellmuth I mean absolutely I'm trying to catch up anymore so we I kid you not Chappelle comes over and says chica sex you guys want to go to uh

after to do it go go see me do a show at like 1am at this like local comedy club with 70 seats I said word yes we go at 1am Chappelle sits on stage smoking cigarettes and doing 90 second pauses and then having a beer and interacting with the audience and does a two hour set after doing this set with Chris Rock at the chase Center me and sax and Draymond hilariously laughing the the stuff Chappelle is a genius and when you see his show and Chris Rock by the way he puts a tight set together

I mean Chappelle's got this storytelling thing where he kind of meanders a little bit and then he hits you with it but Chris Rock is just bang bang bang bang bang extraordinary just two Incredible Minds at the top of their game artists artists at the top of their game doing what Society needs but more importantly doing what David Saxon I needed which was to laugh our asses off together and remember our friendship so it was a great night out I want to say to bestie Draymond Dave Chappelle and Chris Rock thank you the David sacks Jake house bestie friendship

has never been stronger I don't know about Freeburg and Tremont that seems to be on the Rocks yeah it's weird we'll be in there we'll be vacationing together next week so we'll I love it I love feedback yeah well well we are going to be whatever whatever's going on we'll take a walk and figure it out well I just want to say the alliances amongst the besties I'll be honest I got mad at Friedberg when he edited that Google bit to say the exact opposite of what he actually said yeah just beep that but yes that is the thing that bothered me I have to be honest that's you playing to the crowd versus you being honest and telling what

you think if put that in the form of question Freeburg has your Fame as the Sultan of science because listen you nobody knew who you were outside of Silicon Valley before this look has it impacted your ability to speak no no not my standard look I I'll be I'll be honest and I'll speak openly about this I had said that there could probably be a significant head count reduction of like 75 at Google and the business could keep operating and I took it out and I took it out because I have a lot of friends that work at Google Google's a close partner of mine they're an investor of mine and um frankly I just want to be careful

about that it's not something I commonly do you know as you guys know I usually speak my mind pretty clearly but I was just trying to be respectful and that's the reason I did it you know I think that that was fine what I'm saying is not that it's just that the part that you edited in actually made it seem like you were not saying that at all but the opposite I think if you would cut the whole thing it would have been more honest so to keep that other thing in actually led the perception of the opposite so you were triggered by that no no I don't have triggered I'm saying but I think you should have a principle very often like yeah I know I think that we should just

have a principle to not play to what the perception of what we say should be especially if it means we could be saying the opposite of what we actually mean that's all intellectual honesty is it bestie tenant it's a bestie tenant I think so absolutely bestie always and the other bestie besties always come back together if we have a fight we always come back together sax can I I'm still mad at you a little bit I'm just kidding okay we're just talking about hypocrisy I mean so how great was Sunday night gets up there and he gets like right out of the gate he's attacking woke right out of the gate swinging Came Out Swinging like Will

Smith Shooks Matthew Smith he took down Will Smith I mean the Will Smith takedown which you will see in this special is so complete it is just chef's kiss but how great was his scent let's say just give Chris Rock his flowers did he fillet and fricassee he he did but I thought the more important part of the set was the he came right out like calling out all this you know you know older than thou woke stuff yeah and and there was that undercurrent to Chappelle's set as well and also he said listen words can't hurt you unless you write them on a piece of paper from time to a brick we these uh a bigger point right now and

this does tie into our first story is I think comedians look at Twitter as a place to get canceled not a place to be part of the discourse and that's a huge loss that's indicative of our society being broken and it's incredibly important that these comedians be allowed to Mock and to speak and to step over the line and challenge us as Citizens in a free Society and we should cherish them and we should not even try to cancel them let them cross the line let them say things that make us uncomfortable so that we can understand ourselves and our society better and I just want to say why can't you include Elizabeth's Tick Tock in

that oh do we want to have a discussion about it I can't watch the next conversation about it what's the next time okay with mocking I just don't start you guys you did so well come on let's go here we go cut it out all right well we have two more science Corners to get all right well if you don't I mean I just want to talk about the Koopa deal and sex this is right up your alley have you ever had this attention to it to be honest oh really the thing you guys asked is like you know what signal will Elon moves at Twitter uh be for the rest of uh the tech industry I think the biggest wake-up call is to actually PE companies so if you played this out and

you think that Koopa is you know explain please Koopa is a is a software as a service company that does revenue management I guess or expense forecasting or some something in the financial realm I don't particularly know to be honest but anyways this is a company that you know was off 70 or 80 from the high like a lot of SAS companies were when rates started to go up and they got this offer from from Toma Bravo but here's what's so interesting about this deal if you think that you know these guys bought a company I'm just going to make up a number at 20 times ebitda right and and you see Elon at Twitter and you think well wait maybe we can't cut 75

but maybe we can cut 50 a headcount and the company can still do well and you know you take half of the expenses out of the business all of a sudden you know if you keep it to doubles you're actually buying it at 10 times so I think the thing that is the that is the real insight here is twofold private Equity can still put out a lot of private credit to fund these deals and SAS companies are perfect because they have huge free cash flow right so instead of funding it based on earnings they can fund it based on ACV and ARR so private Equity will be super active and two all these Rifts basically show what the efficient Frontier is for the

number of employees you need to run a company and if you can cut 50 of the headcount private Equity folks will do that and so I think Koopa is like the canary in the coal mine it is the beginning of what I suspect is a tidal wave of PE sponsor deals in tech companies largely SAS but may go into other Realms yeah recurring Revenue that can take advantage of these two things top private credit markets and finance it based on ARR and then fire 50 of the team and double earnings capacity Saks are those so on on Koopa I thought the most interesting thing was just the we got a public comp well we got a comp

on what private Equity is paying for public companies right now so the deal happened at an eight billion dollar valuation that was a 31 premium to the public price it was 8.4 times next 12 months uh revenue and on a trailing basis it was about uh 10.4 times the last 12 months revenue and by the way all the comments were around how what a rich price Tomar Bravo was paying people generally thought they were paying a premium to the valuation it was 77 premium uh before the rumors came out that this was happening so it's a pretty good premium yeah and there was and there was a there was a bidding war with Vista and so it was uh it was a really rich

kind of deal that got done here right so so my my point is that people thought this was a really rich deal and yet the valuation of multiples are so much lower than what private company Founders expect so remember last year at you know the peak Founders were thinking a hundred times the AR was normal a hundred times and you know you could roughly say you know ARR is is roughly equivalent to the next 12 months Revenue it's not perfect but it's roughly the case so these Founders were expecting evaluation uh multiple 10 times what the public markets are paying and the public more and and actually the public markets are are half of where tomorrow Bravo was in

this particular deal so the public markets right now are valuing uh the median SAS company at about five and a half times and a high growth that'd be for like a 20 year rear growing company and they're valuing the high growth companies that maybe eight times you know until Bravo did this at 10 times so that gives you a sense of what the ballpark is and these are companies that are already public they're at scale they're doing roughly a billion dollars of ARR they have already kind of won their category to some degree whereas private companies are subscale they're you know typically you're talking about companies with 1 5 10 usually under 20 million dollars of

ARR they are they're not de-risk they're still a ton of risk we've seen many many SAS companies fizzle out and Plateau at 20 million of ARR never get to 100 million never mind a billion and yet these Founders think that they're entitled to you know even in this market 30 to 40 times ARR no way I mean like it's getting to the point now where you know maybe it should be 10 times 20 times like Max for and that would be for a company that's growing two and a half three x year over year so I still think that like so I think basically what we're seeing here is even a good scenario like a coupe acquisition

that was done at a premium like it's still a wake-up call to the private markets that the valuations are still completely and utterly out of whack yeah let me ask you a question Zach so this company was growing 45 last year they're growing 35 this year and they got this multiple why is it not worth a significantly higher multiple if a company's growing two and a half to three x which is 250 300 percent and these guys are only growing 35 sure I mean it it is um and that's what you're paying a premium for but so the so the the here's the theory of it is that if you can invest in a private company that's say tripling year over year and they can do

that for another five years or whatever then you're paying for that you're paying for that outcome in a couple years right yeah basically well think about it you're getting a discount to the outcome in a couple years well if you're paying 30 times today and it triples next year you're only paying 10 times next year you're only paying three times so if that keeps going that's where your Arbitrage is but here's the thing you have to weigh against that is that these early stage private companies many things go wrong and they hit a plateau they fizzle out or their growth rate starts to the bigger they get the harder it is so they should be priced at a discount not a premium because there's

risk there's more risk they're growing faster but there's more risk but also it's very hard once you get to a bigger number of ARR 50 100 million of ARR it's extremely difficult to be doubling or tripling over a year let me just point one thing out so I looked at the numbers on Koopa I think they had about 170 million of stock based comp expense in the last nine months so those are employees that are getting 170 million dollars in compensation in the form of shares so they get those shares they can then sell those shares and get cash for them on the public market and then on the public markets and pay their bills so when a company like this goes private for those

employees to just remain at their Baseline comp that stock based comp needs to be replaced with something else or else they're seeing their salaries reduced so you know there's this balancing game when these companies go private in terms of how do you give them the comp that they're earning to keep them engaged in the business the answer is you don't versus no but that's quick because you want to do a riff anyway right so I mean do you but for the people that stay right so so there's a balance because it's not just hey cut the Opex you have to cut the Opex including stock base comp and this company generated about a hundred million dollars sorry

210 million dollars of free cash flow or operating cash flow in the last 12 months so if you if you take out the stock based comp these guys are actually Break Even or losing money roughly um yeah right so yeah yeah Break Even roughly so there's a real question mark on this business and businesses like this that go private where if you actually cut the op-x and you cut the salaries and you cut the head count but you have to find new ways to pay people because you've been paying them with stock in the past how do you kind of bridge that Gap and I think that's probably a little bit of the balance and the Art of what these guys do well chamoth if I may can you explain to the

audience uh what a private Equity firm's expectation is in terms of return when they buy a company like this and then sax I saw your tweet that you want to feature and you'll go next month well I think it's changed over time and this is what's so powerful about the private Equity industry um look you have to think about what their incentive is because it kind of guides the outs um early on they were very much like Venture capitalists they were out in the you know edges of risk taking um doing all kinds of very difficult gnarly deals so if you look back in the history of private Equity you know these

huge crazy deals like RJR Nabisco or TWA Airlines were the first of the industry and they reaped enormous returns but there was a lot of risk and it required very heavy-handed management oftentimes what that meant was firing a lot of people over time private Equity has gotten institutionalized and they don't generally feature themselves as a place to get the best necessarily returns but they are places where you can put enormous amounts of money where the the likelihood of loss is extremely zero and you generate very good rates of return now again this depends on whether you

want to look at irr or DPI right so a lot of people will Market irr which you know I think is kind of like a gameable metric but you know those irrs can be 20 25 if you look at DPI which is really how much cash you get back you know private Equity firms can generate one and a half to two x of the money you give them um but they do it consistently and they very rarely lose money so all of that is important into understanding what's going to happen in this cycle these folks are going to buy a ton of these private software companies I think that they are going to fire lots of people I think they are going to make

these companies run hyper efficiently and they will make sure that they generate that 1.2 to 1.7 x that has been historical very rarely will they lose money in these things by the way that's going to mean that a lot of these other companies will have to reset valuation so you saw yesterday checkout.com went from a 40 billion dollar valuation down to 11. you're seeing some companies only go down 10 or 15 percent but it's a process isn't it your mouth isn't this just like what happens in real estate where beginning of this process yes because in in real estate my understanding having lifted these boob muscle Cycles is the person living in the home still believes they're always

worth you know this incredible evaluation and then the people who want to buy it are like that doesn't match reality and then the real estate brokers go back and forth trying to get people to you know go through this messy middle and come to True price Discovery a private company it's hard to get true price Discovery until they're on the brink of insolvency they don't have the money right well we just got some data on that actually can we bring this Coulee data let's do it yeah so Cooley looked at a law firm in Silicon Valley yeah there are prominent Silicon Valley Law Firm they looked at a thousand deals over the last three quarters of this year and what they saw is that your the

later the stage the bigger the valuation Corrections the series D rounds went from three and a half billion to 527 million that's an easy one seven percent oh yeah that's an 85 drop series C went from 502 million to 130 million 274 drop series B went from 164 to 90. that's a 45 drop and then series a went from 58 to 45 that's only a 22 drop there's just less room to compress there but the point is that series B roughly a 50 drop series C roughly a three-quarters drop and series D roughly a um 85 yeah one seventh drop so I think Founders right now are they're just like a little bit delusional about this money they raised last year they're

still way too anchored on last year's valuation and if only they would think in terms of this Capital they raised last year in terms of of its real dilution in terms of what the company is worth now I think they'd be treating it more more precious so for example for example hold on it's like they won the lottery and they don't want to they don't realize they won the lottery I had this conversation with the founder this is the only money they're ever going to see is the bottom line and they're spending it like they're going to win the lottery every year so for example we're a company yeah let's say you take a company that raised 200 million last

year at 2 billion so it was 10 dilution so in their heads they're thinking oh well this isn't that expensive like 10 dilution surrounding era but really probably the company is worth maybe 400 million now right because it's gone down 80 percent this 200 million of your 400 million is half the value of the company yes and you're squandering it you're squandering it at a rate of 100 million a year so you're basically burning up 25 of the value your company this year and then next year and then by the way you're going to be in crisis after that because you're probably like a lottery winner buying like a giant super yacht I had an observation that a lot of the

investors that sit on the boards of these companies they have an incentive to not see those valuations come down too quickly do they not and so there is this sort of like interest in hey I don't want you to have to go reprice the company or do a Down Round because then my portfolio gets written down and then I'm in the middle everyone's always in the middle of a fundraising cycle with LPS and then I'm going to have a tough conversation with melp it's about my my value so do you not see vces and investors playing an active role in trying to keep the valuations propped up to some extent particularly where they have big markups hundreds either by extending Bridge

rounds or doing other sorts of you know uh look nobody nobody likes to go through a Down Round and that includes Founders and existing investors in the company that being said we're not talking here about new financing conversations what we're talking about is advice that is happening in board meetings and you know maybe other VCS aren't pushing as hard as we are but the advice I'm giving in board meetings is what I'm telling you probably quickly today which is this is the last money you'll be able to raise on attractive terms if at all you need to treat it much more preciously the world has fundamentally changed and by the way we haven't even gotten into what's coming

the demand contraction that's coming next year explain what demand contract construction is for the audience please thank you okay look there's going to be three major sources of slowdown for software companies next year number one new business is going to dry up companies are just going to be spending a lot less money next year because they're all cutting costs so you should expect your new business to be roughly 50 of what it was next year it'll be 50 of what it was last year that's my rule of thumb for most companies new business down 50 number two churn is going to be higher we haven't seen that much logo churn yet but next year a lot of

companies are going to start going out of business and it's going to happen over the next two years so you're simply going to see logo churn rates say among small businesses go from like a historical enormous fifteen percent to maybe 25 or 30. in other words your customer the logo yes that's what a logo means yes yes logo churn means the entity doesn't exist then you've got seat contraction which is these companies are not hiring as fast in fact they're doing layoffs so they're simply not going to buy as many seats of your software as you need to in the past for the last decade we've had a Tailwind an

enormous Tailwind for software companies of seed expansion which is every year your existing customers would buy more seats of your product for their new employees now they're actually going to have fewer employees or maybe headcount freezes so they're actually buying by the way if you if you take all those three things the deal of the century was figma selling to Adobe for 20 billion because if you take those three things I mean oh my God they just absolutely top ticked before any of this stuff was no totally so today Adobe could probably buy this thing for like seven billion instead of 20 billion so does that mean they try to do a breakup fee and get out

of the deal I don't know if I was figma I'd try to close this thing ASAP and get that money yeah yeah yeah you're right about that and by the way what I'm seeing from Founders is that they still want to grow 100 plus over the next year the problem is that the headwinds are going to be intense so if if you're applying a plane and the headwinds are extremely intense and you try to maintain your speed you're going to burn an enormous amount of fuel you're going to be incredibly head efficient it's better to basically just moderate your speed let the headwinds basically pass we're going to have major economic headwinds for the next four to six quarters call a year

and a half it's okay to have a slower growth rate preserve your cash don't burn up your fuel bunker down so what we're trying to do down the hatches we're trying to give permission to our Founders to grow at a slower rate because they feel this enormous pressure from their VCS to grow at at insane rates can I build on this I think Friedberg said it very well the scan in venture capital is demonstrated in the following chart this is using Cambridge and our friend Brad gerstner helped put this together so what is this this goes back all the way to 1997 and the gray bar is what Venture capitalists share with their

limited partners as to how well they are doing what's the top quartile of interest and this is the top 25 okay so this is this is a venture capitalist and you know our our returns have been consistently top quartile so instead of cherry picking anybody else I'll just use us but it could be Sequoia Benchmark you name it we will go back we're in there launch you would go back to folkscraft we'll go back to folks and say hey guys the total value of our portfolio is three times your money in 1997's vintage okay it it was uh four times your money in the 2010 vintage feels really good but again the job of the venture capitalist

is to convert the gray bar into the purple bar and historically there's been a Decay so for every dollar of gray bar that you show you typically only get 73 cents actually returned to people okay the valuations that you get when you sell your company or goes public end up being 73 of what you've marked at the peak what you said they were exactly right exactly right and the actual value of this purple bar going back you know 30 years is 1.7 x so just to put numerical numbers on this if you were a venture capitalist you would raise a hundred dollar fund at the peak you would actually show that that hundred dollars became 200 and about 28

dollars but when when push came to shove and when it was all said and done you would return 170 dollars back to your investors that's the rough equation so what's the problem well the problem as you can see in this church is right around 2015. which is all of a sudden you know what we've started to see are these continually elevated gray bars yes this stuff is worth seven times six times five times but we have not seen the purple bars catch up now some people will say well yeah but you have to give it time and you know this is and all you need to do is do what's

called a regression and you need to regress these things to the mean and make the following assumption assume for a second that this time is not different assume that these historical averages 2.2 x 1.7 x holds well that's what the the black line here shows you can calculate the area above the curve as the value at risk right the amount of money we will destroy because of all these shenanigans that Friedberg just talked about propping up marks not willing to look at actual market clearing prices well if you do the math the sum of the area above this black line is almost a

trillion dollars around the world and it is about 600 billion dollars for U.S Venture capitalists this is the dynamic that the private Equity industry is going to prey on so if you saw Tomo Bravo just close to 32 billion round you know Vista is raising a 20 billion dollar round everybody's stepping into Tech they are going to destroy those gray bars would you describe that as bottom feeding no no they are they are the rational actor yeah okay who is finding the true market cleaner and I will say this I think the private Equity industry is unbelievably precise and talented in being dispassionate and telling us what these

things are they're Cut Throat they're logical no no it's not hot they're just opportunity for the private Equity industry is going to be created by profligate Founders and look you could blame VCS for the high marks last year as well they were profligated too but look if you're a Founder if you don't start acting in a more Capital efficient way and preserve your cash your company is ultimately going to be owned by a private Equity Firm and they're going to make all the money well here's another because because when you sell to them at a low price price all you're going to end up doing is paying back the liquidation preference and then that private Equity Firm that was willing to

do or less but that private Equity Firm will be willing to do what you were not willing to do which was simply act cut your burn cut your costs and act in a more Capital efficient way and they will end up making all the upside for your decade of hard work because you got basically addicted to venture capital and the high evaluations and refused to again adjust to the regime I'll give you an alternative I'll give you an alternative the alternative is that the majority of Acquisitions made by private Equity firms are not actually peer Acquisitions they're bolt-on Acquisitions meaning that these are companies that are added to existing platforms that they own so this

acquisition they're doing of Koopa I think it's very likely over the next couple of years you will see like the Playbook and private Equity includes not just cost cutting but also Synergy building and they typically do bolt-ons and add-ons and this happens across all private Equity platform deals of new products and services that can be be sold through the existing sales channel the existing customer base and as an add-on to the existing service or product that's already offered so one of the fee one of the things that I think you may see in Silicon Valley over the next couple of years is a rationalization away from funding feature companies and thinking much more

carefully about what can be true Standalone product companies sure and many of these companies that have raised a ton of capital and have gotten crazy valuations at the end of the day they're more likely better equipped to be a feature of another platform than they are to be a standalone platform company of their own and that's where the majority of these Acquisitions will likely end up going in in the private Equity landscape and they will be vacuumed up and attached to existing platforms that these private Equity guys are building out and by the way just look as an example at what Oracle did over the years what Salesforce did over the years what Google did so many of

these companies sold on acquisitions by bolt-on acquisitions by building a second Channel building a platform and then um adding on top of that and I think that's a lot of these guys are going to try and mimic two critical points number one what about the bottom 75 percent of VCS oh wait if you show that chart just for one more second I just want to remind everybody that is the absolute cream of the crop VCS are the best these are folks I mean again I'll just say uh Sequoia Benchmark we've consistently thank you launchcraft these are these are top returns thank the Lord what about the bottom 75 they're not gonna be able to raise funds man it's

over a lot of these people who raise first time funds in the last three or four years also it's also the companies because like like it's like the the today is the most now is the moment for the sober founder and the sober venture capitalist to sit and say what is the real valuation what do we need to do to make sure that this company has a chance because what Zach said is so true otherwise all these profit dollars will be made by the private Equity Fleet in order to win today you're gonna have to grind you're gonna have to work 50 60 hours a week you're gonna have to be absolutely embrace the age of austerity and you're gonna have to focus on your customer your product and your bottom

line the Age of Excess is over if you're not working 50 60 70 hours a week you're not going to cut it in Silicon Valley also key second Point profligate extravagant or wasteful in the use of resources just so we get the word of the day from David sacks that's David Sax's word of the day after a very powerful bull that went Craig did you see the Tremont Boulevard well we've all went uh we went viral this is I think elon's biggest uh non-obvious impact In This Moment Jay towel here's your uh one answer to your question about what happens to the the

bottom 75 percent of venture firms it's equivalent to what happens with the you know kind of this is the bottom of the top the slide that I just shared it's the one we looked at a few weeks ago and I keep referring to it because it's just such a staggering like demonstration of what people call the power law which is how you know kind of excess returns accumulate to minority of Investments so just a few Investments make up the bulk of value that the you know market cap of 43 percent of companies that have gone public since 2020 is 750 billion dollars the market cap of 300 the other 300 is only 26 billion dollars and the cash that went

in to the 750 billion dollars is 136 and the cash yet went into the 26 is 107. and so the cash that went in to generate that 26 billion that 107 that's your bottom 50 percent and the top 50 percent put in 136 to make 750 and I think it gets even narrower As you move further up to that top quartile so you know it's just I can tell you what LPS are saying because it's a hard business this is this is the companies that went public so this is also of the top company of the top funds and the top companies that were actually able to IPO and so it highlights how much of a power law actually plays through and so the majority of these companies as in chamac even in your chart you show the top

quartile the bottom uh 75 percent or the bottom 50 I've looked at this data as well of those various vintages or below 1.0 they lose money for their LPS consistently and it's just it's a cycle and so what ends up happening is the next Generation comes through nlps they make a portfolio of bets and they hope that they make enough bets in the right VCS that their portfolio generates greater than you know market returns greater than College fifteen twenty percent Target fifteen percent Target um but they're gonna expect that the majority units I have an LP of report I'm I'm out there raising launch fund four right now and I moved from like the accrediteds the individual investors say

that oh yeah because you're yeah yeah so I'm I'm publicly erasing it and I've moved on from Individual investors 45 million dollars in commits after five webinars amazing now I'm talking to you no it was amazing it's just 506c is going to change the entire industry letting the the you know the masses have some access to this capital and this opportunity accredited cubis is going to change the world I believe do you have to do deal with everyone one of them or is it easy to administer it's incredibly complex because you have a large number of people and they all want to talk to me so I did webinars five webinars and

it resulted in 100 commits hundreds of commits for 45 million dollars you'll be able to get all those Capital commitments drawn down when you need to like you have to go ping a couple hundred people and get them all the wire money you'd have more operations people and we only do four we we let them one thing one thing you may want to do is like for for these smaller slugs is you can pre-wire you can set up an escrow account where you pre-wire 100 of the capital yes and then you also don't have to you take it down when you're going to deploy it so you keep your irr correct so we're actually looking into those Solutions I'll talk to you offline but I

just did my first two meetings with endowment since cetera fund of funds the entire discussions right now are around what is your secondary strategy how are you getting in earlier not later and how are you building a larger position it is and even like some of the QPS who are sophisticated and are you know are in over 10 Venture funds the entire discussion governance of these companies are you taking board seats or not how early are you getting in and building a larger position over 10 percent and what is your secondary strategy when are you going to start taking some chips off the table so the and and I gotta say if

you're an LP who didn't sell into the up Market at all uh and you're on your first fund you know and you had all these great marks and they're getting they're coming crashing down they're not going to deal with you they just have too many options of top phones in the course I don't think they've they've started to come down yet I don't think we know what the top quartile is really going to look like over these last few years I think that's going to take four or five years to really sort out yeah of course yeah um so I think explain why chamoth just so people understand yeah well I think I think that there are lots of valuations um that have supported huge tvpis

these you know paper gains that have allowed Venture funds to raise enormous amounts of incremental capital and new funds and so they are going to try to wait as long as possible before they're held accountable for that and the best way to do that is to not change the valuation and so it will happen slowly it'll be a trickle of these things um and I think that takes probably four or five years for it to really sort itself out but in the meantime companies will still need to get financed companies will still need to get built that's why I think like the public markets I think what Sac says is true giving us a signal of what these true

market clearing prices are will eventually slip into these you know series D or E companies because the Venture capitalists who has now taken some big write Downs in one part of their portfolio I suspect will now be very open to selling to private equity for another part of their portfolio so that they can return Capital totally totally agree yeah it's going to be rough out there you guys uh watched White Lotus yeah it's just started season one I'm uh it's a third episode in okay what a treat we wouldn't say anything but how great was a season two uh oh the rap was awesome it's just incredible the last the last two episodes are extraordinary yeah

just finished watching all of handmaid's still which is that is a [ __ ] stressful show uh it's like it's like you're putting in work when you're done those episodes you're like oh emotional labor you know when they said this emotional labor watching that show is like oh my God it could could it could not be more sadistic and insane uh it is brutal uh but you can't look away incredibly well done uh all right listen this has been an amazing episode and this is news for the other besties Friedberg and I have been secretly collaborating no we have come to a plan we're working on a joint plan for all in Summit 2023 because we are both helping

each other out on secret projects I'm ready to tip guys I love it the tip we don't need you I'm a permanent no perfect that's all that's fine we know that I love that I have sex as my anchor on this one I can always float back that way this thing could flip but Friedberg and I I'm like octopus in this case but power and influence Friedberg had so much of a good time at all in Summit 2022 that his hatred of my producer fate is less than his Joy from the event and we are collaborating on yeah super gut yeah I have made up for my producer's faith by using super gut and becoming a big problem I've used the promo codes

he paid you for that that's the quid pro club oh yes yes no conflict no interest the only the only person that you've been taking money from is SPF I mean pretty much anybody else oh by the way can I point out on the most loathsome person in Tech [Music] I only want the bracket do not mention the pockets we're not giving them any just black out that uh in post I want you to black out I don't want to give these guys any credit so here we go the worst person in techs we wouldn't say it's a b podcast that's run by literal socialists oh well look Jamal's got a very tough draw I mean of course to SPF yeah

versus in the most hated person inside by one percent that's [ __ ] who Andy Jesse is he is a complete gentleman Andy jassy is delightful human compared to Andrew Jackson just inspires that is I want a recount I want to recap this is election interference union busting this is election interference something you're a specialist in I guess is worse to be a union busting Amazon CEO than a reactionary conservative investor yeah I don't get it this is ridiculous I just want to point out that the biggest travesty here is that I did not make the list there are things you know what these guys are

trolling me these guys shout out to producer Nick who just retreated this but basically you basically picked the what is it the 30 most relatively well-known people in Tech that's what tilts Jake Cal the most this is terrible worst person in Tech I don't make the list I'm gonna double down this year I'm constantly kowtowing to the media you're you're right you're right I need to be horrible I need to be a worse human like you sex I'm gonna try my best this year to work against humanity and society and be more loathsome than you I'm really going to redouble my efforts obviously I can't catch up with Jamal you buy into all

their phones you're too kind I got a big heart I care I have empathy I know my empathy but here's the problem these guys left me off on purpose between Andreessen and Bill Gates oh wait driesen that's a lock that's interesting of course oh interesting questions a16 co-founder and man of terrible teams Market treason is a world-class [ __ ] poster Bill Gates is hiding somewhere nobody Bill Gates is doesn't tweet Marcus recent blocks unblocks he [ __ ] posts with the best of them he's up there I mean that guy's a dark meme Lord any other I mean I really I really sympathize with each month that you got your ass handed to you there that's just

that's like going up against the Dream Team hold on hold on slow down bro you're not even letting us read these things all right okay Twitter former idiot CEO versus Airbnb CEO making oh my God that's so well written Ryan hold on this weekend he's a great guy guy who really tried to make us believe web3 was going to happen versus World coin and open of course Chris Dixon wins much more loathsome than Sam Altman right okay guys listen Freeburg you didn't even come I want to just congratulate freeberg on an amazing the best science Corner ever an amazing product in super gut that has helped me lose weight I feel great and four uh you know recovering

from whatever illness you had all right everybody I love you Besties shout out to uh David sacks love you guys and we'll see you all next time on the all in podcast love you besties love you guys bye [Music] we open source it to the fans and they've just gone crazy [Music] besties [Music] it's like this like sexual tension that they just need to release somehow where did you get Mercies [Music]