E135: Wagner rebels, SCOTUS ends AA, AI M&A, startups gone bad, spacetime warps & more

this is going to be a feisty episode is it two of us are on Greenwich Mean Time two of us are in Pacific J Cal still would sleep in his head I'm good actually you good I'm good all right well great to be back welcome to the all conspiracy podcast where we repeat false statements and help spin them into Tales of struggling Against The Establishment the elite and the mainstream media we will deliver to you the people the revolution against the powers that be unless it offends still trying to get my invite for next week we'll also enjoy sharing with you fantastic stories of opulence let's be neutral opulence Leisure and benevolent

greed here we go joining me today are my co-hosts General David sacks commander of the fourth Battalion of the internet tweet Brigade General welcome joining us from a remote location in Moscow has there been like an establishment takeover of the Pod yeah every argument they make against us you're basically just conceding is true I know exactly from his 12th century Mediterranean Castle ill Duce welcome to moth how is the Mediterranean diet treating you uh blue blue and Emperor Nero calcanus ruler over podcasts paid events entrepreneurial universities and dental spvs emperor thank you for letting me sit in your throne today it's good to be here thank

you Dental sbps shout out to my dentists well you say king of STDs she says PVS oh spvs Central spvs yeah that's the thing with certain STDs where once you're working you're going to be king for life [Music] Rain Man David we open source it to the fans and they've just gone crazy [Music] the syndicate.com yeah thank you you've been doing you said five shows a week lately your voice is shot I your voice is starting to go so I asked you if you'd moderate and you thankfully said yes I've got the energy I missed last week I enjoyed listening to you guys with uh BG great episode sorry I

couldn't join but let's kick it off that's funny I still haven't watched the episode that I missed you're not interested he's like I'm not on the show I'm not interested I've got enough time to participate I don't really have time to watch it the truth is sax why don't you admit to everyone that where you're in a show you probably watch it four or five times all right so let's kick this off obviously you guys recorded right before the Wagner group attempted coup or potential coup or theorized coup began last week so sax you kind of sent out a text saying the show is already stale because you know kind of missed that uh

that news cycle by publishing right after it started but you recorded right before so let's do just a quick recap of what happened with Russia Ukraine and particularly it's Wagner Wagner group Rebellion last Friday the Wagner Group which is a Russian paramilitary organization led by Evgeni pregosian launched what seemed like an armed Insurrection against Russia Wagner had occupied portions of rostov vondan a city of over a million people a regional capital and headquarters of Russia's Southern military District before setting off towards Moscow and then abruptly stopping I think about 200 kilometers

before reaching Moscow City at that point there was supposedly a negotiation the president of Belarus got involved and pregosian decided to step down Putin said I'm not going to persecute or I'm not going to prosecute you for these crimes he was given immunity and it was announced that all the members of the Wagner group were given the option of returning home or joining the Russian military and the Wagner group was going to be dissolved sax maybe you can kind of give us your summary of the events that took place and then we'll talk a little bit about the interpretation of what we think this means for the conflict in Ukraine well you're right that this Rebellion took

place just after we dropped our last episode and so everybody both on Twitter and in the comments was dunking on me for my take on last week's episode that the much hyped Ukrainian counter-offensive was was not succeeding that it was in fact failing I think there's abundant evidence for that which hasn't changed even CNN had written an article basically supporting the idea that the counter-offensive was not living up to what had been promised and so everyone was in the comments saying that my take had basically aged like milk and this armed Rebellion or Mutiny by fregosian was evidence that the Russian regime was about to collapse that Russia was

in fact on the verge of Civil War and you saw the exact same people who had oversold the counter-offensive now overselling this Mutiny as something that would bring down the Russian regime and and the war and of course that that did not happen it was certainly a highly unusual event and I've read takes now from every different corner of the internet about what it was and what took place you have people speculating that this is all staged I do not believe that I do believe that it was an Insurrection or Mutiny by progosian I think the trigger for it was the fact that his Wagner organization was being merged in with the ministry of defense and the regular

Russian army and his men were all being made to sign contracts with the ministry of defense that would have resulted in a giant loss of income and status for pregosian simultaneously for months now he's been criticizing the ministry of Defense specifically the the minister of defense shoigu and the Chief general of the general staff gerasimov so he's been vocally critical of them and I think that this basically erupted into a mutiny by him where he basically tried to leverage his position like you said he marched what they now think are about 8 000 men which is about a quarter of Wagner into rostov on Don he then took the ministry headquarters

and sent about three thousand of his men on a convoy to Moscow I think that although this is probably best described as a mutiny I think that it did have coup optionality to it I think that pagosian was seeking to find out how much support Putin had and who might join him and he had put out a number of statements that I think from the Russian regime's point of view could be described as seditious that morning and he there's a lot of evidence that he staged this attack on his base he claimed that there was a missile attack by the ministry of defense and that's what launched this March for justice and in his comments he was careful not to criticize Putin

directly but he had a lot to say about Ministry defense and the overall conduct of the war and it was I think harshly critical indirectly of of Putin and I think he was looking to see who might support him and what happened is that on the way to Moscow during this Convoy nobody supported him in fact all the statements came out from the other generals including sir vegan including all the regional governors of members of the Duma and other important figures in Russian society and there wasn't a single person willing to publicly support for Goshen and that's when Putin went on TV called this basically an act of treason and a stab

in the back and at that point I think progressions options were pretty limited and he basically took a deal that was brokered by lukashenko in which he would go into Exile in Belarus in exchange for basically being allowed to live that was basically the deal that was ultimately cut and so I think where things stand today is that although I think this was an embarrassment and a black eye for the Russian regime it never looks good for regime to have any kind of mutiny or insurrection and I think that it does raise questions that poon's now gonna have to answer to his various allies and supporters about how stable his regime is I think ultimately Putin has ended up in a place

of consolidating Russian Society behind him like I said there were no power centers that supported this Mutiny they all rallied to Putin's defense and the people of Russia even though Ferguson is a popular figure being kind of a war hero from the Battle of bakmut the the Russian Society supported Putin I think he's at something like 80 percent poll numbers so I think where are things well like Lovato Center which is an independent polling Agency for example these are not the Russian regime's own numbers would you say in a poll that you don't support Putin well I don't know how levada Center what their methodology is but these numbers when the numbers are bad are cited by

Western sources but there are other forms of evidence too you may have seen this video that went viral over the past few days of this song that's now the number one chart Buster in in Russia where it's this very patriotic Russian song where they're basically singing I am Russian that's sort of the main chorus Nick can you pull up the song I'd like to see this please coming at you 95.5 I love Russia oh my God this is some serious propaganda wow yeah [Music] yeah I mean that looks like a pretty good party if you look up the the lyrics to the song the English translation of the lyrics the gist of it is I I'm basically proud to be a Russian and I don't care

who doesn't like it that's basically the the lyrics of it how do you get invited to that party I got so many jokes I'm not gonna make them I know you gotta be careful be careful here folks you gotta be careful here why it looks like a fun party it's a catchy song I mean I love to dress up and show up tell me where to show up Putin I think the point here is that Russian Society is United behind the state and wanting to fight this war and I think that part of the reason why Ferguson's Mutiny was so oversold as an imminent coup that would bring about the collapse of the Putin regime and of the Russian war

effort and of their front line is because at least since the beginning of this war we've had this narrative that if we applied enough pressure to Russia that there'd be a palace Intrigue and a palace coup and that liberal forces inside of Russia would rise up and topple the dictator Putin and basically get them out of this war and I think what's happened is fairly predictable but it's the opposite of that which is the Russian people are rallying around the flag and rallying around Putin the war leader and they are a patriotic people just like the ukrainians and I think both these countries that both the Russians and the ukrainians are proud people and I think they're in a fight to

the death and I think that both countries okay regardless as existential and we have basically stuck ourselves in the middle of this fight to the death between these two countries and I don't see this working out very well okay so look I I will make an admission I consider myself a modestly well-read person modestly well-informed I had never heard of the Wagner group or pregosian prior to this coup attempt last week Jay Cal had you guys heard of this person before and the Wagner group yeah yeah oh well maybe I'm an idiot or I'm just not interested I think what was so surprising was like how out of the blue the story seemed to be last week that

there was this disagreement between this person that commanded this paramilitary organization who then turned around against Putin and stood up against him and marched back towards Moscow and it felt to me like it came a little bit out of the blue and was such like a a weird kind of shocking event did it feel kind of like that to you guys that there was surprising instability and the surprising potential Revolution happening locally I think stepping back here and just looking at the news cycle obviously it I don't think many people expected this this was a wild card and so people could be humble in you know

their belief of like how much they actually understand about what's going on there the Russian soldiers are not in favor of this war this is a war that's very unpopular in Russia actually and for the Ukraine having been invaded by Russia they're fighting for their land and they're gonna they are much more motivated I wouldn't believe any of this propaganda but this is a bit of a raw shock test everybody on the left got on Twitter and said this is the end of Putin everybody's gonna rise up in the streets and they overplayed that you know angle of the story and then of course the right or people who are pro-russian or anti the West backing

this war are going to take the other side Freeburg they're going to take the side of you know oh everybody loves Russia 80 of people are voting for this it's ridiculous to think that anybody in Russia is going to answer do you like Putin do you support Putin on a survey can you imagine a Putin's a murderous dictator who kills all of his enemies and he controls through violence nobody's answering a survey correctly this you know top song is complete propaganda Putin has control of the entire media apparatus there with this showed actually if you step back and you look at you go to the party

though if you were invited well I mean are there going to be potential LPS there last week it's just a joke folks but stepping back if you look at modern day dictators they tend to stay in power for about three decades Putin's in his third and uh I think we're gonna see in uh the next 10 years Putin lose power and he's going to be out of power and when we look back on it it's going to be one of two causes it's going to be either cancer which you know the speculation is has had cancer and that's why he disappears from View because he might be getting treatment and we'll look back on us that the end

of his power will be and his control of Russia which he controlling these controlling through violence and fear of violence the threat of violence is exhausting you have to be paranoid and that's why it generally doesn't last that long especially compared to the west where we have a democracy and people last about a half decade he will will look back on his end which will be in the next 10 years either through cancer or through his invasion of Ukraine this is the biggest blunder he's ever made and and this is a really crazy sign that somebody would actually attempt or even float a coup is insane he's murdered every single person who has ever even

challenges Authority in a minor way the fact that his one of his right hand men this is one of his tight Inner Circle the fact that one of the people in his tight Inner Circle would actually start heading towards Moscow is insane so to say this wasn't a big deal and Putin's you know now Consolidated power and everybody's in the street dancing this is just simply not true I never said it wasn't a big deal I wasn't talking about you I was talking about the mids on Twitter I never mentioned your name I think that um your point J Cal at the beginning that this doesn't really seem to change anyone's point of view on the Outlook your point of view sounds like it's the same as it was a

week ago sacked your point of view is probably the same as it was a week ago I think there are a couple of takeaways here first of all they've had polling of opinion in Russia for a long time and like I said when the polls go the way that the Western sources want no one questions their accuracy again I don't know exactly the methodology but levada Center is an independent pollster that Western Publications do trust I hear them repeat it over and over again and you know by their methodology which I assume hasn't changed I think Putin's popularity before the war is around 65 percent now they're showing it at about 83 percent Jason you may not like the war and you

know I certainly don't like them nobody likes the war but I I think it is simply a fact that the Russian people have rallied around the flag and they do support this war and and Putin as the leader now I do think he has egg on his face here from this pagosian Uprising in terms of did I see this coming no I didn't have this on my bingo card I don't think anybody else did either however did I know who provision is certainly I mean I've been tracking progosian statements since around February he's been vocally criticizing the ministry of Defense specifically shoigu and jarasimov in

increasingly insubordinate and you could argue even seditious ways I'm really kind of surprised in a way that he wasn't dealt with before this and I'm sure that the Kremlin is kicking itself for probably not dealing with it sooner but in terms of why he stole alive I think that Putin had a really tough decision to make about you quash this Rebellion completely which would have led to horrific images of you know violence potentially in Moscow or Russians and Russians killing Russians that might have actually led the the Russian front to question itself or collapse so I think he did the expedient thing which is he cut a deal he got lukashenko to help broker and he cut a

deal and I think at the end of the day I think that he made the cool-headed decision that was in his and in Russian interest which was to avoid this to getting to the point of a bloody Insurrection okay any um any point of view shift for you coming out of the pregosian event of the last week on Russia Ukraine I mean I want to know how much he got paid to stop marching towards Moscow yeah I mean it is like I mean it must have been it must have been a lot not bad for a guy that was what Putin's caterer a few years ago right he started a catering business I spent nine years in jail this guy's life been nine years in jail it's like The Sopranos he went

to jail for nine years for selling illegal hot dogs or something and all of a sudden I mean I got just paid billions of dollars to basically stop his paramilitary group from taking over one of the largest countries in the world it's the largest I mean nuclear Arsenal in the world yeah just so you know who this guy is I mean he he really is the street Thug that Putin is always accused of being he was a street dog he did go to jail he was one of these guys who came up in Russia as a businessman when to be a businessman you had to be so tough businessmen were getting murdered left and right by gangsters you almost had to be a gangster yourself apparently he

made some money in the supermarket chain business and that led him to create a catering business which brought him to Putin's attention and he started catering for the Kremlin he's sometimes called Putin's Chef I don't think he was a chef himself he was the guy who owned he owned the business and then from there he was given the license to create this PMC this private uh military corporation Bogner group he wasn't the only founder of it he had a co-founder who was actually the military man behind it but Wagner became this this group of mercenaries who do all sorts of business in Africa mainly where they are working

on behalf of governments there to protect mineral resources or oil wells all sorts of things a Sopranos Captain who would he be like Phil leotardo just like 20 years in jail comes out I think it's sort of like John Gotti going against Michael Corleone yeah I think that Putin is sort of the very cold right rational guy with everything in his head who's very calculated it doesn't reveal much right more like a Michael Corleone whereas I think that is emotional erratic he's been saying these statements for months here which I don't see how they lose constantly Loose Cannon and the crazy thing though is is that what you saw on Twitter and social media was

unrestrained Glee really delirium over the idea that pagosian my topple Putin and become the custodian of Russia's thousands of nuclear weapons yeah and you know so my comment on this whole thing is be careful what you wish for why in the world would Americans want that we'd be jumping out of the frying pan Into the Fire you know I've been saying since the beginning of the war that this fantasy that Putin is going to be toppled by a palace goo and you're getting a replacement with navalny or something like that we're going to get Gorbachev 2.0 I said that was always unrealistic and what you're much more likely to end up with is an even worse dictator or possible or a hardliner and

I think that is what would happen if Ferguson had taken over I think would have been much worse for the West the final point is what's the takeaway from here is I think this is going to put more pressure on Putin to conduct the war in a more violent way I I know that people already think that the war is horrible and violent but Putin has been criticized by hardliners on his right for basically making the war a special military operation instead of an all-out war and progosian I think expected to find more support among the sort of ultra nationalists in Russia and among the military who have been critical of Putin for waging the war in what they consider to be too half-hearted or an

incomplete way they would like to see this declared to be a war they would like to see the full mobilization of Russian society and this is the problem that I see now is that I think Putin already knew but this has to underscore for him that this war is existential for him personally if he loses it's the end of not only his regime but probably his life in Russia and I think he's going to do whatever it takes to win this war and I think you could see now over the next few months a full mobilization in Russia and I think that this could lead us to the next point of escalation in this war

that is if this Ukrainian counteroffensive actually is successful on some level right now it is it is not succeeding so there's no reason there's no reason for Putin to do that but if if this counter offensive succeeds you will see the next level of escalation the fact you did a great job stringing six points together I think my key takeaway is which is now 18 points you've made so you can retire for the rest of the show my key takeaway from your series of statements however is an important one which is to watch the potential escalation driven by Putin here

any wrap up otherwise I'm going to move forward you know go ahead thinking about this like there's a famous Sun Tzu quote the Supreme Art of War is to subdue the enemy without fighting this is a big mistake and we need to make sure that we don't get into a war with Taiwan and China and China over Taiwan so okay we have to avoid these things and then that's what and I are in alignment Sun Tzu calacanus we heard it here first let's uh move forward with peace I can only hope that the conflict ends soon as I've always said I realized over the last week how little I know about the Russian military conflict with Ukraine and I appreciate

Sexes contributions super helpful I went to Cal UC Berkeley 1997 fall in 97 and it was the last year that Cal had affirmative action Admissions and I remember at that time there was a big case a guy named Baki was rejected by the University of California Davis Medical School and he alleged reverse discrimination in 1974 and sued the University of California and eventually it became a landmark U.S Supreme Court case Regents of the University of California versus Baki and in 1995 the UC Regents voted to eliminate affirmative action so the year that I was at Cal I think was the last year of affirmative action Admissions and it's obviously been a

pretty hot topic here in California for the past you know 25 uh 30 years this morning the Supreme Court ruled on two separate cases regarding using race as an admissions criteria in college admissions and the votes were six to three against affirmative action in the University of North Carolina case in six to two against affirmative action in the Harvard case katanji Brown Jackson recused herself because she previously served on Harvard's Board of overseers all the conservative as their you know kind of characterized judges voted to strike down affirmative action and all the as their characterized liberal judges voted

to keep it both of these cases were filed in 2014 by a group called students for fair admissions and effectively the court said that at Harvard at UNC the schools were systematically discriminating against Asian Americans in violation of civil rights laws by using uh their race as a as a system for for profiling excluding and trying to be more inclusive of a more diverse and racially diverse set of applicants so tomorrow I'd love your read I guess on the surprise or this was an accept expected case I think Saxon I mentioned this before but I think we both expected this to happen I think it's probably important to maybe set up a more practical explainer

Friedberg so Nick if you want to just throw up that image that I just sent you we can sort of explain the Genesis of the lawsuit so what you can see here is admit rates into Harvard by race ethnicity but also by academic decile yeah and so what it basically shows in a nutshell is an African-American student in the 40th percentile of the academic index is actually more likely to get in than an Asian student at the 100th percentile and so that at the core is sort of sorry that means that means that the Asian American student had better scores than 99 of other applicants and still didn't get

in right right so you have to go back I think to 2003 when essentially what the Supreme Court said is like look we're going to allow this affirmative action stuff to last roughly for another 25 years but by that point we expect that the work that needed to be done will have been done again this is them saying this not me and so I think what today does is actually quite important not just for what it means for universities but also what it means for private Enterprises so just to take a second on this I think what happens today is the pretty obvious stuff which is that you have to change University

applications you have to change all of the admissions profiling all of the stuff that you would normally do you probably I'm not even sure if you can even have a box where you can declare race maybe you can or cannot I don't even know but all of that changes today so then the question is well what's the first order derivative what changes next and I called someone who's a pretty well known constitutional supreme court lawyer on this and The Next Step is probably going to be around Athletics based and legacy-based admissions so Athletics based admissions are pretty obvious which is you don't really have

great grades but you're really stupendous at a sport that's important to that school so then they let you in because they want to compete inside sport for whatever reason the Legacy one is even more prickly which is not you're kind of a dummy but your parents are rich and or went to the school before and so then they let you in as well and his thought on this is that those things will go away because if you can't use race-based admissions to kind of balance the scales then it'll become pretty quick where somebody launches a legacy-based lawsuit or an athletic based bias lawsuit and wins that as well

so that's the first order derivative so you know the thought are those because those aren't constitutionally protected whereas equality based on race but it becomes a huge headache for these schools right and so you're going to be fighting these admission standards constantly changing and so if you're not going to let you know a bunch of poor minority black and brown kids in but you're letting in the Sons and Daughters of Rich important people I think that that's going to paint that school in a very bad light so I think that's so important white typically white typically white although one would

say the great thing over the last couple of decades is there have been a lot of minorities that have gotten into these very elite schools which means this their kids would be the first generation that's eligible for legacy but you're gonna wipe that away so I think from a just a social stigma perspective and I have a solution for this which I'll get to at the end for those people but so I think that's the first order derivative the second order derivative is now what lawsuits get launched and what are the implications for private companies right so right now this affects any institution that receives Federal funding and that includes all the universities so there's no private or

public university really except for a handful that don't take this money so they'll all have to do this but the really important question after that will be what happens to companies like apple or Facebook or Exxon who have race-based programs to try to attract African-American Engineers or Hispanic chemists whatever whatever the program is that you want to come up with will those get challenged and will those companies have to change and my friends thoughts on that were that yes that those would also change and that's going to have a really important impact on private Enterprise and how they approach this stuff and how Dei stuff works and frankly Downstream how ESG works because

all these ESG check boxes now some of them will actually become illegal right so I think the importance of decision can't be really understated it's going to the changes will be slow and then they'll be fast they'll first touch higher ed but then I think they'll touch private Enterprise and so I think it was a it was a very important decision in America that just happened what is what is the right ethics and and values I mean what do you guys I guess we could just do this around the table Jacob maybe you kick it off should we I mean from your point of view do you think that values should include

racial diversity in Admissions and universities yeah this is like the ultimate or is the values about equality of opportunity for everyone regardless of race right you're asking the exact right question I think that's the world's greatest moderator but yeah doing a solid job so far and this creates a lot of cognitive dissonance for people right because you you really want to believe that the world is a meritocracy and uh you know if you were to take other Pursuits in the world you'd never say like we should let race gender age affect people's performance in the 100 yard dash or their their compensation at a company right all of

that should be based on achievement and so there is a question on what achievements should be taken into account when you apply to a school and it's pretty obvious the Legacy thing you know is you know a back door into these schools but we want to feel like we're also making progress because listen the world has been unfair the world was built on slavery and our country has you know it's only 150 years past that and Civil Rights Act was what 1964 or 65 like we've we've we really want to see everybody achieve here so I think you have to pause for a second and say well if the goal is you want to see

you know black Americans perform better and I think that's the the underlying concern here and it is based on the legacy of America well how do you do that and I think we're looking way too far down in the educational pipeline the solution here is really Child Care the solution here is Nursery schools pre-k elementary school education and those things need competition and that's where people fall behind to be looking at this at the end of the academic journey is I think crazy so you know when I'm president I'm going to have 365 day a year you know child care and

Pre-K and that's where we should if we really want to try to make up for some wrongs in the history of this country and try to have better outcomes we need competition in schools which means probably breaking some of these unions and giving people vouchers and choice and then we have to invest more in the earliest stages of Education and I think everybody wants to see a better system here Dei to chamat's point is it is illegal to hire people based on race gender any of those criteria obviously and the Dai programs are trying to fill more applicants so their goal typically in the way they don't break the law is to just try to in their

best cases find more applicants and but even that does feel like there's many times in life when um people will say things in Corporate America like we have too many white guys in this these positions we need we cannot hire another white guy so the reality of Dei that I've seen up close and personal when I was at AOL I've told the story before somebody said to me there's no way for us to make you an EVP you have to stay at SVP and I said why is that like I'm doing all this EVP level work and they said because you're a white guy and the entire company is white guys at EVP and we cannot add another white guy there but we'll just give you the same

bonus compensation so don't worry about it and so there's all kinds of games being played here but I think it's great that we're having this conversation right it's a hard conversation for America to have for me the I've talked about this in the past I've always had concern when we make the shift away from equality of opportunity to a quality of outcome because we all have this objective that we want to see everyone have equal rights to success in some way in the United States the question is at what point do you move Beyond opportunity where everyone is given an equal opportunity in this country

to invest themselves in transforming their own lives versus a quality of outcome where regardless of how much you do how much effort or your trials you were given the same as everyone else and that ends up looking a lot like socialism and it's very concerning because I think it limits progress and opportunity for everyone the real challenge with this particular topic is college admissions about outcome or is about opportunity it's outcome in the sense that you spend 12 years going to elementary school and high school and working hard to get yourself into college so it's the outcome of all of that

effort and some people aren't given the opportunity to have success during those 12 years and you know and it is an outcome what do you think we should do and it's an opportunity because it's about going to college because without having a great College cycle you may have a more tougher time getting into a into the workforce so it that is why it's a hard value question for me I I don't have a great answer on this but I'm just pointing out it's a lot like the abortion argument where both sides have some value-oriented point of view that feels like it's negating the other person's point of view

but at the end of the day they're both coming from either this is an opportunity or it's an outcome decision and that's what makes it so challenging the National Bureau of economic research did a study in 2019 that they published and what they found was that 43 so 4 3 43 of white students admitted to Harvard were athletes or Legacy students or children of faculty and staff or had a relative that were donors to the school 43 wait it's rigged and then they found on top of that that 75 of those white students admitted from those four categories would have been rejected if they had been treated as a normal

applicant so I think for all the people that are looking at all the black and brown kids that may not get into a place like Harvard if you don't look at these other categories it is a it's a bit of a gross Injustice quite honestly so I think that these institutions have to evolve and if you're going to be forced to be meritocratic then actually be meritocratic and by the way I actually am fine with legacies and donors but I think what should happen is you should just publish a rate card and you should make it hyper transparent and so I love it for the rich guy who's got an idiot son or daughter let's just be upfront and honest with everybody it costs 50

million dollars to get into Stanford it costs 80 million dollars to get into Harvard we all know these numbers so we should just publish them you should pay the price and be done with it and for Harvard and Stanford and Yale and all these schools having an extra 10 or 20 dummies but an extra two or three billion may be a reasonable trade-off but at least it would be transparent and fair right this is an important free market question as well because these are private institutions they're privately funded not if they take federal dollars or not agreed yes but if they take federal dollars they're not and then it becomes a government processing it's government

influence it's a state school all those is there a separate category here just like country clubs or any private membership club where the members of the club get to decide who they want to admit to the club and is that Un-American and should the Supreme Court and should our Constitution have a role in defining how private institutions make decisions about who gets it no Harvard could absolutely return all the federal funding the billions of dollars a year they get that's totally reasonable then they even decide to just focus on Legacy admits that's totally reasonable it's within their rights sacks like we got it I know that I know

that you used up your quote your speaking quota already well yeah I didn't want to I didn't want to butt in it give him four on my points you get four of Jake house minutes go ahead so yeah two points I guess so on the Legacy thing I agree with jamas that we should get rid of it it's not meritocratic I think that if they did publish a rate card that would be more honest but they would be too embarrassed and ashamed to do that but I think making that argument exposes the hypocrisy of it I've already told my kids I'm not helping them get into college so they're going to do it on their own and so look

I think by the way that's the best gift you can give kids yeah that that perspective sorry go ahead sex so that's that's Point number one fully agreed on on the Legacy thing with respect to the decision itself that I'm sorry can I just clarify that do you believe that the Legacy thing should be like in federal law I mean is that a government thing or do you think that that's how those institutions should behave because those are different I mean I'm asking are you suggesting that the law should be involved that the government should be involved I don't know if it's a legal thing because I don't know how to implement that law but um I think it's something they should stop doing one way

or another maybe it should be a law but I think it should stop so I think that's important Legacy thing for privacy for private membership so just let me just double click on that do you think that should extend to private membership clubs like country clubs as well that they shouldn't be allowed to decide who they let in and don't let in what makes it different that it's Harvard is it because it's education versus any other private membership because it takes Federal funding for some person to be able to get into a school they don't deserve to get into just because their parent went there or just because their parents wrote a check

that's unreasonable and if they don't take Federal funding these schools take so much Federal funding that they're quasi-public institutions even the private ones so that's the distinction that's the distinction for you just to be clear yeah and also there is a strong meritocracy opportunity argument on this and I think it's why that whole parents College admissions Scandal was was such a big deal is that for a lot of people in this country the ability to have your kids Advance themselves by being the first to get into college or going to college or going to a better college that is a big part of creating opportunity in this country so for

people to try and defraud that I think create a huge backlash so look I think that the Legacy thing just needs to end one way or another I don't know exactly what the right legal implementation is I have two questions for the panel number one should you be able to say by geography Hey listen we're Harvard over Stanford we want to have a representation of people from around the world so we're gonna you know have the top three students from each country or you know or by population however you do it you know mathematically come in so a little bit of geography because I did hear from one of these coaches that cost like six figures to get your kids into the college they said

the best thing you can do is like move to Kentucky you know and then Harvard and Stafford are looking to get a certain number of students from each state I don't know how true that is but they said that's like one of the the top ways to do it and then well do you remember Jason just to build on your point I don't know if you guys remember but a few years ago the the in fashion thing to do was to learn to play squash and I remember all these parents telling me that and they had kids that were older than my kids and they were they were hiring full-time squash coaches because apparently squash was like yeah it was all angle shots yeah I think like stop with the angle

shooting guys yes the gun should go off you should run the race and your time is your time and you should go to whatever the best school is that you deserve to get into based on your academic ability now going back the big problem and I think Jason you really nailed it on the head trying to fix it with affirmative action at the University is still quite unfair in the sense that there are so many black and brown kids I think with tons of potential that don't even get there and so the real question is what are you doing at the grade school and at the

high school and at the preschool so that you actually get more of these kids to the starting line because fixing it when they're 18 I think is a little too late yeah right fixing it for 300 three four and five years old that's when they deserve and need all the help in the world to yourself that's why we need school choice we need Charter Schools we need to break the Monopoly that the unions have over the schools running it running for their own benefit if you Define institutional racism as conditions that trap people on conditions of poverty across Generations I'd say the abysmal quality of our public schools are number one number one two and three and the reason is because

there's no competition and the unions run it for their own benefit how long do they shut down these schools for in California because they didn't want to work because they're afraid don't know don't see the c word we just got a label enabled for the benefit of kids and it wasn't even medically necessary that was a benefit they saw for themselves yeah Jacob you come you come from a family yep that were members of unions because they worked for fire for police yeah um is that right yeah we speak negatively about the effects of the teachers unions on our public education system and it I I think it's absolutely correct

but how do you share the point of view from the other side if you're a teacher and you're a member of the union and the union takes care of you what's the argument yeah sure to say this Union is damaging public education and the teacher that's working in the union and a member of the union says this is necessary for my livelihood to protect me for my benefit help us share the point of view because we all have the strongly held point of view that the unions are destroying and eroding public education people have the right to form unions but what we all do is we are forced to be consumers of one educational product

because of how we pay taxes we pay taxes in yeah I think in my in California we each pay sixteen thousand dollars into the educational system and so if you're a parent you should get that 16k back and be able to choose what you do with it so there's competition so the unions can have protection but there still should be competition for these services and I I think there are two separate issues yeah there's one other thing which is I just want to give a shout out to a non-profit that I support called smash Academy smash.org it's done by Mitch and Freda Kapoor the Mitch Kapoor founded Lotus one two three if you're uh under the age of 40 you might not know

and what they do is they realize that a lot of the students who do get into good colleges it turns out a lot of the black and brown students they get accepted and they're behind in math and so what smash has done is they have a three-year program and I go speak at it sometimes and I donate money to it and I encourage you to do the same they have this intensive summer program so before you go to college tomorrow if you were one of those students you know you might get into college and then they drop out or even worse they switch from a stem degree to a non-stem

degree because they're two years behind on stem or a year behind on stem and so the Kapoor has found this like little opportunity to kind of catch people up and I think that's what we have to do we have to address this much earlier and not put a Band-Aid on it yeah in the system the ivy league system um you know needs to well it's not societies right I'm sure it's not just pick on Harvard but it's like it's like the elite institutions which we talk about institutions okay all institutions that receive federal funding they need to take a deep look in the mirror and say are we doing the best thing for society the second question I had for the panel was well I'm not getting the

feeling by the way but yeah but our Pure academics the best way to accept people into a college or should there be some blend of it like putting Sports aside because that's an obvious one but you know is there's academics but then there's also creativity you know if you you might be terrible on your SATs test and you might be an incredible virtuoso pianist so I think what is the criteria and making that criteria fair is what we all want and it feels tremendously unfair my point of view is if the government is funding these schools then the government certainly has to have a point of view on what's the reasonable model for admissions the government's

not funding the schools I Love A diversity in a Marketplace I love having different schools having different admissions criteria that allow different people to find their path through different institutions to your point Juilliard does not care perhaps as much what you did on you know your sat and chemistry and art schools do not care as much how well you did in math and stem schools don't care whether or not you want an art competition and I think that that's the important thing that we need to preserve we need to preserve optionality for institutions to Define what sorts of

individuals they want to try and recruit and progress and train and get ready for the workforce and the path in life that they then choose versus trying to create a cookie cutter model for what the government says it's fair for everyone and as much as we can take Government funding out of these institutions and out of these systems and give them the freedom to set their own admissions criteria and create differential Educational Systems I think that's going to create the best diversity of a Workforce and I'm I would kind of be more excited about that sort of an Institutional system than one that is

standardized by the government you know why that'll never happen because the profit motive of these universities is really to be Shadow organizations for their endowments and the thing with endowments is that the people that work there very much want to get paid and behave like profit generating organizations and I think the issue is that if their sole job was to really fund the operational expenses of the University then the endowments would be run very differently right like take again I just looked up on the internet but Harvard has about the operating expenses are roughly five and a half billion dollars a year

but the revenues are about five and a half billion dollars a year right so if instead you had to basically fund you know there was essentially no Revenue per se right there's there is very little tuition and you didn't take any federal funding you'd have to come up with five billion dollars a year so you just basically take that as a draw from your endowment the endowment would be run very differently it would be a don't lose money endowment that would generate very low Vol returns I think the problem with that is that that's not how the endowment at Harvard works they wouldn't necessarily make risk seeking investments in things like

private equity and hedge funds and Venture Capital into the extent they did they would just make much much fewer much much smaller or both so I think what you're saying could be possible but the problem are probably the endowments at these universities okay well 53 billion dollars moving Harvard's endowment now so yeah it would be ten percent can anyone tell me who the largest real estate owner is in San Francisco you're not working on the internet oh no I know I know it's that Art Institute The Academy of Art University I knew this because they uh kept buying things and using them I think she used all the profit over the years to buy more real

estate and she accumulated the largest real estate portfolio yeah yeah yeah sorry who is she the founder I forgot her name this is a for-profit university or a private or I mean a non-profit University yeah there's a lot of artists that come out of Academy Art and they work in a lot of different Industries including industrial design including animation is what I'm saying is it like RISD or is it like actually an art school oh no it's a great art school yeah Academy of Art anyway let's keep going so look speaking of stem making a big pivot away from art to AI a couple big news items you know the AI frenzy continues here in Silicon Valley all the way from early to growth

stage funding through to M A events we saw this week data Brits which is a privately held data infrastructure company announced that they were acquiring Mosaic ml for 1.3 billion dollars that headline number is based on a cash and stock purchase price where the value of the stock that was being used to acquire Mosaic ml was based off of the last round's valuation for data bricks which was 38 billion dollars from a fundraising that they did in 2021 so arguably the valuation should be lower and the overall purchase price could be considered lower but that's besides the point Mosaic ml as you guys may remember

is a company I mentioned a number of episodes ago led by the founder of Nirvana which was an early AI business that was acquired by Intel and then he started Mosaic ML and he offers open source models and I shared the performance data of their most recent announcement on the show a few weeks ago you know there's rumors I don't have any confirmed reports but there's rumors that Mosaic ml saw their ARR grow from 1 million to 20 million dollars since January there was other rumors that said they were only at 6 million of Revenue regardless databricks is paying a pretty hefty

premium and I think it begs the question what do data infrastructure database companies end up looking like in the future if AI has to become part of the core infrastructure of every Enterprise and this is creating a big shift so Saks as our Enterprise software investor expert maybe you can share with us what this means for the sector does this buoy excitement for AI infrastructure startups does this change the investing landscape is it just reinforcing what folks are already doing I think it's a reinforcement I mean the space is probably the hottest Spate where you're talking about like AI infrastructure for Enterprises I think

it's probably the hottest space right now in in Venture Land we actually looked at this deal we had a small allocation in our next round they had a term sheet for a series B emergence was actually an elite it and this is Mosaic ml yeah yeah I don't know if I'm supposed to be telling you all this but yeah it's not great this is why people see it in breaking news that a term sheet from emergence to raise 50 million at 400 posts wow and we yeah and we were gonna have a small allocation in that and as I recall the valuation was somewhere around 30 to 35 times ARR which actually is not that

insane for a very fast scoring company in a hot space so that implies about 10 million of ARR I don't remember the exact figure but I think that's sort of the ballpark but growing very very quickly I mean up from like one or two at the beginning of the year right so I actually understand why someone would want to acquire or invest in this company like I said I think we wanted to invest and while we were sort of you know trying our best you didn't say anything when I talked about him on the show a few weeks ago you were just sitting there mum's a word or actually I knew that this deal was was basically in the works because the founder called us

up and he had already promised us a small allocation around Naveen did and he called up and said actually I've got this deal so we're putting the round on hold and so I didn't think I should say anything because obviously it was still ongoing but yeah we knew about this deal that was kind of coming down the pipe I didn't know for sure that it would happen but but yeah we we heard it was in the ballpark of this like 1.2 1.3 billion dollar number which like you said because databricks is a private stock maybe it's only 10 or 750 or something like that who knows it's still a great deal but you know a lot of people are saying it's a

crazy deal I don't think it's a crazy deal because before this happened after Naveen signed the term sheet for the series B an investor came over the top to invest at a 700 million dollar valuation wow so people were kind of going crazy now I don't think that's necessarily a rational Behavior I think that's more of evidence of a Mania going on but I think that what he got offered is obviously a fantastic deal and I think what it's evidence of is that these big Enterprise infra companies are going to try and build an end-to-end tool chain here and I think Mosaic ml had a very very important part of the tool set which is training up these models basically maximizing GPU

efficiency because gpus are basically the scarce item right now we have a GPU shortage and it's probably not going to get better for a year or two if that so this is a very important part of the of the stack and I think it's probably a smart acquisition for both yeah I mean remember snow snowflake which competes with data breaks also acquired Neva which was founded by one of my colleagues a guy I work with uh and a new really great guy sweetheart for 150 million dollars last month that deal was announced and the pattern recognition that seems to emerge here is that if you're in the data infrastructure business it seems like it's becoming critical to level up that it's not just

about storing and moving and manipulating data but the interpretation of data through models and the tooling to build those models becomes a critical component think of all of these toolkits that these software companies have to provide to their by software companies and it's a big leveling up that's necessary which seems to me there's other companies out there like them that are also going to need to strap on tools like this to make themselves competitive in this marketscape which means that there are more Acquisitions still to come yeah Jacob you guys agree or have a different point of view looking at it it's a it's

a big number the headline number but I agree with Saks that the actual numbers half the number so if it was you know if you look at the number of Engineers they had based on LinkedIn data and pitchbook data probably 60 70 employees 80 employees and then 40 50 of them are Engineers so that puts it at 30 million dollars per engineer and that's one way to look at these acquisitions and I think you know probably three to ten million dollars per engineer for like really high-end Engineers is more the going price but if this is half that amount because they bought it with Monopoly money in other words they're 2021 price for their company it's great

and then they get nailed it um Freeburg what's happening is this layer of uh natural language on top of any service whether it's something as simple as Yelp or something as complicated as a giant financial company with tons of transaction data being able to talk to it and understand it and then have your machine learning team build tools so business owners don't have to hire data scientists the actual Business Leaders can talk to the data and get back answers or just say hey tell me about our customers how have they changed over the year and then hey that's pretty interesting tell me more about our customers and you know how are

they reacting to these three new products and you will get back in intelligence that previously was unable to be accessed and so I was uh I was just at Sequoia yesterday with uh or two days ago with the latest seven graduates from our accelerator we bring them to meet with sax and his team and bring them to meet with Sequoia and when we were at Sequoia I realized that of the seven companies four of them would not have been possible before these machine learning apis were available and open AI is but one there are now in the companies I'm talking to they're they're trialing Freeburg on average six seven eight language models before they pick one and

they're not picking open AI every time putting that aside these businesses were not possible before this technology was introduced and available via API in the last six to 12 months and I think there's a bunch of businesses that economically would not work that now work I can give one example there are countless meetings that are recorded over uh Zoom right think like a local school board well nobody could ever make a database of all the discussions going on at local school boards and then analyze all that but now because all of those are saved uh on zoom and they occur on zoom and they're available for public record you

can ingest every single one of those and then build a Bloomberg terminal of every discussion happening at every school board everywhere in the United States and do that with chat GPT or any of the language models and then get really great insights from it that would be too costly to transcribe at you know a hundred dollars every hour to a normalize let alone to analyze and so I'm looking at businesses as an investor what I'm looking at right now is businesses that were previously not economically viable before this technology and then that are now economically viable if that makes sense and um I'm just looking at each

company under that lens right now and I'm finding a lot of interesting startups they seem to have that in common similar news supporting this very quick Evolution further up the value stack so we were just talking about these companies that are providing effectively tooling as infrastructure a little bit more up the value stack is inflection AI which was started by Mustafa Suleiman and Reed Hoffman uh who was a co-founder while mistafa was working with him as a Venture partner at Greylock but Mustafa as you guys know was the co-founder of deepmind which Google bought for 400 million dollars really created the core of Google's AI capability and is

considered one of the kind of preeminent thought leaders and entrepreneurs built that has built in this space he started inflection and the business just announced today that they've just closed a 1.3 billion dollar funding round LED by Microsoft Reed Hoffman Bill Gates Eric Schmidt Nvidia uh with an intention of building the largest AI cluster in the world 22 000 Nvidia h100s as part of the build out but I think you've shared chamoth historically that these big funding rounds for these AI businesses that haven't necessarily been launched the product yet don't make sense is this still you know

kind of reinforce your point and you know what's your read on on the inflection funding well the list price of an h100 is about 30 odd thousand but the street price so it's very hard to get it so if you go to the if you go to like eBay and try to buy an h100 it's like 40 or 45 000. so if you have a 22 000 cluster of h100s that's about 900 million dollars of capex just that and then you know all the sundry stuff around it call it roughly plus or minus a billion dollars and so of the one and a half billion they've raised let's say a billion goes into building this 22 000 node cluster you have 500 million for SG a and so

what that leaves behind is basically two and a half billion of Enterprise value for their chatbot so I don't know I mean I've never used Pi has anybody any of you guys used it do you guys know if it's good Jason I'm sure you've experimented with it have you experimented with it or not really which one pie that's what they're that's what their chat bot is called pipe yeah I think it's like api.com or something I think I did try it once and it was not memorable Oh you mean po no not po no no no no personal one where you talk to it and I say hey how are you doing and their concept is like you have this one relationship so it's like one chat

thread it's not kind of how I like to work with the I use threads and I share threads with my team so I'm not a fan of this like you have one relationship with one assistant I think the thing is it's interesting to note that very rarely when you invest money in the billions of dollars does the capex or purchase of one specific form of equipment take up literally 25 of the Enterprise Value that's atypical at least for a startup if you're if you're buying a fixed plant of a slow cash flow generating business then maybe you know a bunch of that has some value so that's what stood out to me and all of these things Freeburg is

again increasingly this is all just a pass through to Nvidia it's probably in some ways a pass through to the big cloud providers so whenever I see a chip maker and a cloud provider come together to put in a lot of money it's essentially round-tripping cash they're giving the money which then they use to buy their services and then you know you just you're just pumping Revenue so I hope it works wishing the best but you know that's the that's what we just talked about where the infrastructure companies that are increasingly looking like more commodity service providers if they don't up level with AI

tooling acquiring Mosaic ML and acquiring Neva do you think that that's an indication of more emana to come and if so doesn't that justify The increased funding The increased valuation and the activity that we're seeing in the early stage with some of these businesses I think for sure there's going to be more M A and I think the valuations will be high not because these companies have a lot of Revenue yet but because it's very strategic for these big infra companies to assemble the end to end tool chain I think we should explain to folks what that means enterprise software companies provide software to businesses that are not traditionally

technology companies they also provide software to other businesses to help them build new tools to help them build out their business so an Enterprise software company can sell to United Airlines or consult a Visa or consult a Ford and that software can then be used by that company to build tools that are powered by the database or powered by the data analytics or increasingly powered by AI tools and so they can build AI applications and AI capabilities into their business whether it's United Airlines or Expedia or Visa or whomever and that's why this these companies are so critical in terms of enabling the transformation of

Industries with AI tooling and and why you know getting AI tooling into their capability set is so critical right now it's important to note though guys that whenever you have the emergence of a new sector Sox I think you are right that M A goes up but it tends to be that the valuations go down Peak M A froth happens at the beginning of the cycle when hype is at maximum and facts are at the minimum and that's okay you know that's good for the startup it's marginally negative for the existing shareholder of a large company and then over time it gets itself sorted out when the facts are

more obvious so yeah it's kind of like you guys remember when the optical networking craze oh my God had these multi-billion dollar Acquisitions and where did they go they went they went nowhere they just disappeared we actually have like a market map that we did that I think can explain this concept of a end-to-end tool chain so this is a slide that our growth team shout out to Mike Robinson and chemical Borough they put this together in preparation and part of the investment memo for Mosaic and I think to explain the point you were kind of making Freeburg like why do Enterprises need the services one really simple way of thinking about it right now is that

every Enterprise would like to roll out its own chat GPT they would all like to have their own internal version of chat GPT where their employees for example could ask questions and get answers that's where all the action is right now every Enterprise would buy that tomorrow if it existed in the way sex yeah give an example the idea would be that you know any employee in the company could ask questions to the AI model the way you can ask chat GPT questions and it would have all the Enterprises data and it would also understand their permissions and have all the security settings so that only there I feel could get the right information that's the kind of

intelligence they want to unlock I mean there are lots of other use cases but that's a really simple one a corporate Oracle so I can if I'm in HR I can ask hey tell me about our you know composition yeah totally co-pilot for the CEO I think there's gonna be lots of these I think the sales team is gonna have their own co-pilot I think the marketing team's gonna have their own co-pilot and customer support has it already yeah this customer support will have it there's gonna be a lot of these but I think Enterprises want one at the level of the call it the company intranet where employees could just ask it questions and but they do not want to

share their data with open AI That's like very clear they want to roll out their own models so the question is well how do you roll out your own model and what this shows here is the different pieces of the stack that you have to have so first you capture all of your data you got to label it to be classified right for the model you've got to store it somewhere then you need to get one of these open source AI models off the shelf and there's a probably the most prominent site for this called a hugging face which already has something like I think a two billion dollar valuation that's another like really crazy valuation to ARR multiple but hugging face has kind

of all the open source models it's very active and so people grab the latest open source model that's the best fit for them and then they need to train that model and that's really where Mosaic played and there's a ton of activity right now in this last mile problem of how do you customize a model to make it suitable for your use whether you're an Enterprise whether you're a customer service team whether you're a SAS app that wants to incorporate AI capabilities into your app that's where all the action is right now is customizing these open source models models that then leads to basically being able to get the right inferences and there's sort of a separate category

around Hardware that is you know we don't play there but this is kind of the end-to-end tool chain and I think these big tech companies are going to be racing to put this whole thing together to fill it out yeah yeah and that's so there'll be more M A is your prediction which means more startup valuation booming more Capital deploying there was a uh a couple of Articles this week and tomorrow this is your red meat as much as Ukraine is Saks is because you've talked about this at length social messaging startup IRL is shutting down after a board investigation found 95 percent of its claimed 20 million users were actually fake this is a company that in June of

2021 raised 170 million dollar series C at evaluation of over a billion dollars making it one of the many proclaimed unicorns of Silicon Valley led by softbanks Vision fund the investor who was sitting on the board said that they didn't know if we've ever given an investment term sheet to a startup faster than SoftBank gave to IRL at the time at the same time different story but in the same week a company called baiju which you have talked about in the past was once valued at 22 billion dollars and claimed to be India's most valuable startup is in turmoil as shareholders and creditors are seeking to dilute the founder and he's rushing to find Capital and raise a billion

dollars to try and buoy the company process one of the investors Mark the company's valuation down to 5.1 billion so down 75 percent I guess the question is overall are we still seeing this kind of turmoil in Silicon Valley from the zerp era funding of startups in Stark juxtaposition to the excitement and the frenzy around AI it's a characteristic of the exact same thing meaning if you replaced AI with crypto it's the exact same thing if you're placed AI with co-working if you replaced AI with I don't know synthetic biology if you replaced AI with SAS this has all happened before I think it's important

to identify what this is what this is is that there aren't enough checks and balances and there are fundamentally people who are deeply inexperienced who are in the wrong job and in the few key moments where the venture capitalist is supposed to add value that person is ill-equipped and unprepared why because they were the VP of X Y and Z at some startup and they got hired through no fault of their own into a dynamic because these Venture funds wanted to raise larger and larger amounts of money so what happens you don't even know how to ask the basic questions or even more

insidiously you don't have the courage to say the hard thing and so these things happen that are frankly inexcusable right so in the case of one of these companies and I've mentioned this before they approached us for financing and when we asked for a data room we got a Google doc link to a spreadsheet now there's no reasonable World in which a company is that unsophisticated when it comes to understanding their business right a data room should include an enormous amount of operational and financial metrics that you can use to come to your own conclusion so that you can present it transparently to the investor

the idea that boards wouldn't even hold these companies accountable is just a sign that the board members themselves are pretty fundamentally inexperienced people and I think the thing that we do which is a mistake is we say oh well X Y and Z firm LED this deal yeah that may be true but really what it means is that firm in a grab to get the money hired some person that checked some boxes put them in the job that person LED around and there just wasn't any infrastructure to either teach that person or then that person to have the courage to hold the founder responsible that will play out in AI as well it's

just that we're at the beginning of the hype cycle right because we replace AI again as I said with any of these other things we sat here a little bit hand-wringing when we saw these crazy valuations for these nft projects where are those now right so you name it zero this is about fundamentally inexperienced people doing a job that seems pretty easy from the outside but in Practical reality there are only a few Legends in our business most people and I think it was shy Goldman that did the math on this most people do not know how to run these businesses well Nick will find that tweet you can

show I think it's like two and a half percent of all of the funds that are in pitchbook so over 800 of them have ever generated more than 3x and two funds so this is a hard business it turns out you can't just wake up and be an investor it turns out and that's what we're finding so I don't know it's not very surprising in the end none of this is surprising had a really good point in the middle there is that there is a generation of venture capitalists who were added during the boom who were operators but they've never been taught to have the discipline of capital allocators and one of those key pieces of discipline is asking uncomfortable questions and doing

uncomfortable diligence and you can trust people but you need to verify that is a key part of the job you can trust the founders but you have to verify that the data you have is correct the fact that SoftBank did is that incredible valuation and the person who did this deal never checked that the customers were real is uh makes you unfit to serve in the job and I will do diligence and during that time period Freeburg I had many Founders say to me you're asking for more diligence than the lead and this deal is closing and we are over subscribed and I said okay and they said okay so you're not gonna you're not

going to require assistance I said oh no we require this diligence we want to see your you know very basic stuff your bank statements your p l we want to talk to why don't you give us a list of your first thousand give us a list of 500 customers from last month we'll give you five numbers we're going to talk to five random customers like people did not want to do this stuff we do that this work at our firm when we start to own five ten percent of this and we train our Founders to do to be ready for proper diligence all that diligence is happening now now in the early stages there's not much to go on but you can check stuff

during this period people Founders used the hot Market to not participate in the due diligence process and when you look at companies a lot of times people will suspend disbelief you know this company uh buy you I don't know a ton about it but it seems to have you know like an educational app like a company brilliant.org that chamoth and I are um early investors in and Jama incubated great great business um and but then their business and their revenue seems to be based on a series of like Kumon like in-person instruction oh that's not a high gross margin business

sorry if you have to have a storefront you're not a software business anymore and so people started giving valuations and this is the second part and I'll just wrap on this people started giving valuations to these companies that were real world businesses that were low margin businesses direct to Consumer whatever it was they suspended disbelief and they gave them valuations for high growth high gross margin businesses and that was another mistake and you put those two things together not doing diligence and then just misvaluing of actual assets that's the cleanup work that's been that's going on right now and it takes years I mean it

took decades for them to pinch Bernie Madoff it can take 10 years for these frauds to come out there was a guy who kept telling the SEC about Bernie Madoff I think he was like nine years since the first time he he let them know that the you know perfect returns were just not possible statistically so it it takes time but they're they're picking these uh Folks up everywhere dokwan got picked up at Montenegro you know the guy from Luna and it's going to take a decade to clean up all of the fraud in our space I think this was sort of mentioned by chamoth but I think it needs to be a bigger point which is the influence of fund

size on these decisions I mean crash funds are in the six to seven hundred million range so when we write a check it's usually 10 15 20 million dollar check in a series a company that's like a big check for us we're really going to sweat that decision for SoftBank at 10 to 20 million dollar check in a hundred billion dollar fund which is what they had it doesn't even make sense it's a waste of their time it's not even a rounding error for them to basically make a ten thousand dollar check for you yeah exactly so for them they had to write 200 million dollar checks if to justify their time managing 100 billion dollars and so the mistake when they make a

mistake is 20 times bigger than it should be that should have been maybe a 10 million mistake not a 200 million dollar mistake but their Fun Size force them to basically write these gigantic checks and they're writing them into companies that were effectively seed stage or series a companies if it was into a growth stage company I think that's fine there's a lot more data and there's a lot more customer references that you can check at a later Stage Company by the way the number one part of diligence I'd say for us other than looking at metrics which is anyone can do is the offsheet references talking to customers from a list that you figured out yourself not from the company itself

is probably the single most important qualitative part of of diligence so I don't know what happened here but it's not stated explicitly but I think it's important David you have credibility So when you say something sucks people listen because you have Bona fides that are undeniable same thing with jcal same thing with you Freeburg I think you know and this may sound mean but it's like most of these people are just XYZ mid-level VPS from a startup and that's a great thing but it's not necessarily going to give you the gravitas especially if that's not what you were forced to do to help build that company and when push comes

to shove inside of a boardroom or in the middle of diligence there has to be conflict I think it's a necessary feature of good decisions and that conflict arises internally within your investment team but it also has to come externally with the executives of the startup and with the CEO themselves because when you're Prosecuting a good decision it's unbelievable that you agree on 100 of things and there has to be certain things that are controversial otherwise by definition that company isn't really even pushing the boundary so I just think that these are all skills that are poorly taught while you are building a business it is not the reason why you should have been

in charge of allocating 50 and 100 million dollar checks into companies that is just crazy town I love your point sacks though about Fun Size Dynamics Fun Size Dynamics our destiny right it really is and and the optimal Fun Size for Venture is somewhere between 250 and 600 million according to everybody who's been doing this for you know more than a decade or two and who's successful whether it's when the costs are coming down so as the input costs come down whether it's for engineers and co-pilots and and hardware and abstraction layers then theoretically greater outcomes should be generated with fewer dollars in which would again

tell you that fund sizes should actually go down not up that the reason they go up is because you get paid an annual management fee and so obviously the way to wait the way to make more money is to get two percent on a larger fixed number every year versus two percent on a smaller number or you know for example what we did was we were like we're gonna go and hit grand slams and so I traded off management fee in return for 30 carry and that turned out to be literally a multi-billion dollar smart decision because I gave up tens of millions of dollars up front for back end now the back end could have gone to zero and maybe it still can so who knows

but you know most folks wouldn't do that most folks take the sort of risk-adjusted bet and say you know what I'll just take the two percent and I'll raise a 200 million then a 500 million then a billion then a two billion dollars yeah and they stack them all and they get the two percent and all of a sudden the profits don't matter which means the outcomes don't matter which means the diligence is perfunctory and it becomes a theatrical expose that you can use you know this sort of thin fig Leaf you can point to LPS and say we did our work here give us more money for this next fund that's the rat race that the

Venture Community is in and it's going to get played out in companies like IRL and baijus and a lot of these AI companies quite honestly well and it the chickens have come home tours for all the questions is not different is I think what I'm trying to say this time is not different did you guys see there was some article that reported that fundraising for late stage funds is just like cratered dead so Insight was trying to raise a 10 billion dollar fund and they've only been able to raise two according to this article no no it was it was 22 down to 10 and of which they've raised two okay so 10 and then tiger was trying to raise 12 they cut it

to six and then they can only raise two makes sense yeah so basically that's like a whatever uh 80 to 90 reduction in the size of these funds yeah meanwhile the sovereigns where they were going for this money or buying sports teams they're like you know what instead of tech let's just buy sports teams and they're buying series a and they're buying Manchester United and they're buying distressed portfolios yeah and the but there's a sovereign crunch there's a huge we've talked about it before but there's a huge crunch in late stage financing it's only going to get worse over the next 18 months I asked Brad last week like how many of these zombie courts do you think there are

these are the 1400 he said 30 to 40 percent yeah I think he might be you know it could be look out of 1400 I think it could be 700 or zombie coins I think it's at least 700 I think I think it's probably 60 yeah it's and then the other 40 let's say how many of them have a Down Round coming I think 60 go to zero of the remaining 40 half of them probably return money and then of the remaining half half of those maybe get one and a half X and then you get a geometric distribution from there which means the Blended return of that entire stream of unicorns will be about 1.1 x but it'll be very massively distributed I think

that is exactly right tomorrow I I would yeah everybody's getting their money back except if you don't have diversification yeah it's it's the I think the market is sending a very clear message which is these are usage everybody's getting no no no most people won't get their money most people get their money back but on average it's going to be one extra turn yeah so it's not going to be evenly distributed correct well I'm glad that the term zombie corn has held guys um we are coming up on our time do you guys want to do science corner or do you want to um yeah the three of us need to use the

bathroom break so go ahead and just if you could just go do it we're gonna go and take a leak and we'll come back and make a Uranus joke so look it's been great it's been great being your host we crashed yourself give us the science quitter give us you don't hug me you don't embrace me you know you're gonna love my contribution free book I actually I posted a clip of RFK talking about vaccines I'd love for you to listen to it and actually give us the critique yes I will that's going viral right now he did such a good job explaining his position on that he did such a good job yeah look do you guys read the offit piece I forward

it to you and I said please read this if you guys read that piece I'll watch his clip and let's talk about it next week is that cool yeah he is a vaccine scientist who RFK Jr references often as someone that he met with and spoke with and says I caught him in a lie and often basically said here's exactly what happened here's the conversation here's the data here's the fact here's the science and I would really really encourage you guys to read that please and then I'll watch his clip and like let's have a real kind of analytical conversation about statements that are good questions to ask and good things to interrogate and things that are being

said that maybe aren't factually correct and I think that we need to kind of really as a service to ourselves and to people that listen to us really do that work so let's do that and come back and talk about it next week if that's cool but I'd encourage everyone to read often he put it on substack Nick we'll put the link in the the notes Here continue dialogue continue exactly I think that's the most important you want to talk about that certain Senator that all of a sudden just basically gave us the Heisman no we've had a lot of those by the way so let me just be clear that's not the only Heisman we've received on the all in Summit I will say that the

speaker list for the all-in summit it's looking fantastic we're gonna have a great time and I'm really excited for the conversation but you're saying some folks Heisman does because of our support of RFK that did happen and specifically the fact that that's really open-minded yeah and then there were other folks who were insulted by things or said about them by people on the show So Soft you guys want to hear about the the nanograph release that came out yesterday okay I'll cover this one real quick what about this like

slow Hummer that we're all getting what is that that's it it's a slow Hummer exactly okay are you talking about like the new H3 EV but it only goes up to 50 miles per hour what is that the new Hummer the new HV you know they have an EV they're coming out with an EV event oh you're kidding it's hilarious yeah it's like a great troll I remember when Schwarzenegger got the Hummer back in the 90s and everyone's like oh my God it's amazing and then the Hummer was the coolest car to drive yeah Okay so yesterday a paper was published by an international um scientific Consortium this group is called nanograph and they've been using a series of

instruments to measure pulsars including a 500 meter radio telescope array um which allows them to see what's so funny no I just had like three Uranus jumps one sentence and I had to stop myself the nanograph data that was released is 15 years of data from pulsars and pulsars are neutron stars which are stars that have collapsed on themselves and are basically super dense and start spinning and then these pulsars you know you basically like a lighthouse you can see the light so it looks like a almost like a strobe light and we can see thousands of these Across the Universe and we can observe them and the rate at which the pulsing is coming out of these

pulsars tells us a lot about what is happening in the space between Earth and those pulsars and when you collect enough data over a long enough period of time which is what these folks have just released as 15 years worth of this data you can start to see really interesting patterns in the data that support the theory that space time itself is slowly vibrating being stretched being compressed being pulled apart being pushed back together because of very large gravitational events happening around the universe and what that means is you guys have all seen you know that kind of two-dimensional image of a black hole and Nick if you

could find one online and pull it up where it looks like hey at the middle of a black hole space itself collapses in and it collapses down and what happens is space and time gets significantly elongated when they're really close to gravity gravity actually pulls space sucks it in sucks in time and it becomes distorted and so when you have large black holes around the universe spinning and running past each other they're actually pulling and stretching space time itself and that sends out ripples throughout the Universe ripples that are slowly undulating space and time itself so by observing all of these pulsars around the universe and the rate at which these pulsars are pulsing and

seeing slight variations we can start to measure and actually see those waves those very slow waves of space time itself undulating and being pushed and compressed and so it supports Einstein's general theory of relativity which indicated that space-time itself can be warped by gravity and it provides a really interesting picture on the universe itself that all around us we have large masses that are many many millions or billions of light years away that are creating waves in space and time itself that we as humans will never kind of observe realize or feel ourselves but as part of the fabric and the underlying nature of our universe with space and time being slowly warped

and slowly elongated slowly compressed and it's a really fascinating picture of the universe over time as scientists gather more and more of this data it will provide insights into where in the universe these massive black hole events May Be occurring and also provide insights into the early picture and the large-scale structure of the universe which helps us better understand how everything started and where we're all coming from so it was a really fascinating data release I think it's a really kind of profound thing if you take a little time and think about it it's super exciting it's getting a lot of press coverage today and

encourage us all to pull our heads out of the Ukraine war and Silicon Valley and money and all this stuff and realize that there are things of extraordinary scale and structure that are that are happening around us let me ask you two questions number one why does it matter and number two any theories here of what we might discover you know if this you know goes 10x or 100x in terms of the the information we're getting many years ago it was theorized that there's what's called a cosmic microwave background radiation the CMB and what that is it's the leftover heat from the formation of the Universe from the universe when the Big Bang happened yep and these

scientists figured out how to create really sensitive radio telescopes and um put them in the the uh in orbit and they started to observe the background radiation and what that showed us was the fingerprint of the universe the original structure of the universe that created ultimately all the galaxies super galaxies and then ultimately all the stars and then the planets and everything that that came from that this could be the beginning of seeing a gravitational background of the universe where we could actually start to see perhaps the fingerprint of the space-time of the whole universe of what the actual structure of space itself and time

itself looks like throughout the Universe with the perturbations being driven by some very large massive supermassive black holes there was a black hole discovered this week that's 30 billion times the mass of our sun there are these massive objects out there that are actively distorting space-time and we're going to start to get a fingerprint of that with this sort of data and over time that just gives us a better sense of what the overall structure of the universe looks like not just from the heat energy that we're collecting but also the gravitational waves that we're now able to observe through the inference of this data

collection let's just make deepens our understanding of the universe but there's no structure of the universe yeah which is amazing and interesting but and and it validates and proves the general theory of relativity which if you think about the application of that down the road that may lead to things like close to or as fast as like travel or things related to time travel or you know there's a lot of things that people have theorized for decades about you know black holes and the warping of space-time itself I'm not saying that any of this stuff is did you see the three body problem trailer oh yeah it looks amazing it looks

amazing it's amazing what a great what a great can't believe we have to wait so long I hate it when they put out trailers so how long when is it coming out next year oh wow yeah oh I still haven't seen your movie the guys your movie that you wanted me to see which one better try oh everything everywhere all at once I got a better movie for you I got a great pull for you uh it's on Pay-per-view right now the movie call about BlackBerry it tells the story of black oh I heard it's like an independent film it is awesome I just reviewed it on this week in startups it's called just on his BlackBerry called Blackberry yeah I

think okay well guys this has been episodes amazing 135 of the all-in Pod I really appreciate it are oh my God my time together just enough time to get you back to your Nirvana concert Leo what's the background on this one is that a rival what is that what's that background what movie that's a black hole that's a black hole just a black hole okay no I think that that's from might be event might be a matter with Sax's hair because he looks like did you get it cut sacks he got a cut did you cut it no you broke I got a mild sloughing shower show us the floor let's go let's see just keep growing it out man Jacob you

want to take us out you do a better outro all right everybody for David sacks the architect coming at you Z100 boarding Zoo for Tuesdays Tears for Fears coming up and free bird with the science project all right traveling back in time with David Friedberg two for Tuesday Jackson Browne the lowdown here we go the greatest moderator I'm the world's greatest modern I can do my MPR voice if you like dude all right closing us out here episode 135 pcrw 92.3 The Sound of Santa Monica this Sunday at the Venice uh Farmers Market two for one on the organic milk go check it out and uh we'll see you all later on

the politics of culture David sacks uh coming in on the Republican GOP position which we did consider Friedberg deeply going into science on wealth disparity for everybody I am your host here at KCRW is the world's most moderate moderator we'll see you next time KCRW I can do any of these radio bits love you guys we'll let your winners ride [Music] besties [Music] it's like this like sexual tension that we just need to release somehow [Music] [Music] I'm going all in