00:00:29
he's a robot don't quit your day job
00:00:31
jamath that's all i can say bro you
00:00:33
don't remember baby shark i mean how
00:00:35
many no he doesn't know his kids first
00:00:37
names for birthdays how does he know
00:00:38
baby
00:00:40
sharks ride
00:00:41
[Music]
00:00:51
[Music]
00:00:55
hey everybody welcome to episode 55 of
00:00:58
the all in podcast with us again this
00:01:00
week the dictator himself jamal paulie
00:01:02
hoppetea the queen of quinoa david
00:01:06
friedberg and
00:01:08
coming back from portugal and the solana
00:01:11
conference riding his where heroin and
00:01:14
prostitution are legal
00:01:16
david said we were gonna we were gonna
00:01:18
double click on that but you jumped the
00:01:19
gun here on the docket so david how was
00:01:22
the heroin in portugal
00:01:25
great
00:01:26
great okay there you have it folks i was
00:01:28
i was fully drinking the kool-aid at the
00:01:30
salana conference it wasn't heroin it
00:01:32
was kool-aid it was it was literally
00:01:35
kool-aid
00:01:37
how many people were at the solana
00:01:38
conference in portugal why is it in
00:01:40
portugal what happens at a solana
00:01:44
crypto conference
00:01:46
i think there were thousands of people
00:01:47
there and it was
00:01:48
i mean easily and i mean it was kind of
00:01:51
a mad house and people were trying to
00:01:53
get in last minute nobody could get in
00:01:55
because the conference was like totally
00:01:56
sold out it was a lot of crypto
00:01:58
developers a lot of people with projects
00:02:01
and why portugal i think because
00:02:05
there's a lot of conferences happening
00:02:06
in portugal right now because they are
00:02:08
easier on the covet restrictions and a
00:02:10
lot of other countries so you can
00:02:11
actually get in there
00:02:13
and host a conference what was which
00:02:15
stores with no masks
00:02:18
um
00:02:19
um i can't remember if like maps were
00:02:21
required or not i did see people wearing
00:02:23
masks indoors so were you required to be
00:02:25
vaccinated do they do i did so i think i
00:02:28
did show a vaccine pass at one point
00:02:29
when i checked in i just did my booster
00:02:33
i'm going to do my booster kind of it
00:02:34
kind of uh it was a little i would say
00:02:37
the same kind of
00:02:39
shitty feeling as the second one
00:02:41
where's that
00:02:43
i just got fi i mean i had the first two
00:02:44
were pfizer so i took pfizer she was the
00:02:47
the nurse actually gave me a choice
00:02:48
she's like you can do whatever you want
00:02:50
physio madonna or j j i just i didn't
00:02:52
know any better i texted my doctor
00:02:55
so i just took um pfizer although the
00:02:57
interesting thing is modern is the only
00:02:59
one that's dose regulated for the third
00:03:00
dose so there's a
00:03:02
they they actually give you less
00:03:04
specifically but pfizer is the same for
00:03:05
all i think we talked about this on the
00:03:07
pod there's one theory which they told
00:03:09
you get whatever one you can get was the
00:03:11
instructions because it's more important
00:03:12
to just get one than which one you get
00:03:15
but they said there's a swiss cheese
00:03:16
theory which is if you took two slices
00:03:18
of swiss cheese from two different
00:03:19
bricks of it the holes would not be the
00:03:21
same and therefore you overlap them so
00:03:23
whichever deficiencies each one had
00:03:26
maybe the other one doesn't so i should
00:03:27
have gotten modern is what you're saying
00:03:28
that would be i if you believe in the
00:03:30
swiss cheese there i don't know fredberg
00:03:31
you're a science guy i should ask aaron
00:03:33
rodgers what he thinks
00:03:35
i mean he's just straight up lied about
00:03:37
being vaccinated huh
00:03:38
i think so and i think the nfl's not
00:03:40
doing anything about it yeah
00:03:42
that's not cool i why would you lie
00:03:45
about it i mean
00:03:46
he's not he would have still been
00:03:47
allowed to play so there was no reason
00:03:49
to lie about it i i'm not totally up on
00:03:51
that story
00:03:53
the rumor is that kyrie is going to be
00:03:54
playing basketball soon
00:03:56
because eric adams is going to lift the
00:03:58
vaccine restrictions
00:04:00
uh you will not need to be show a
00:04:02
vaccine card or
00:04:04
wear a mask bro i don't work maybe i'll
00:04:06
just get a pcr test every day i i don't
00:04:08
think it's going to matter because the
00:04:09
warriors are shooting the lights out and
00:04:12
clay hasn't even come back yet and so
00:04:14
that gary
00:04:15
uh the second you see gary did you see
00:04:18
gary payton yeah junior uh these clips
00:04:21
oh the second i mean i mean he's like
00:04:23
living above the rim oh my gosh
00:04:26
his wise men back and then uh wiggins is
00:04:28
playing great basketball i mean the
00:04:30
warriors are gonna win this year i don't
00:04:31
know steph is otherworldly right now
00:04:35
yeah i think steph's got something to
00:04:36
prove um even though he doesn't but he's
00:04:38
playing like he's got something to prove
00:04:40
okay so um
00:04:43
do we want to just cover um the elephant
00:04:45
in the room there
00:04:46
the last episode i think we should get
00:04:48
out of the way because it relates to
00:04:49
solana there was
00:04:51
we took something out of the last
00:04:52
podcast so people understand we have an
00:04:54
agreement between the four of us if
00:04:56
there's something that somebody uh
00:04:59
doesn't want on the pod after we record
00:05:00
it we'll take it out because we don't
00:05:01
want anybody
00:05:03
i mean i think the philosophy haven't
00:05:04
said this out loud is we don't want
00:05:07
anybody to
00:05:08
say something they regret that could
00:05:10
cause damage to other people or to
00:05:11
themselves so
00:05:12
if they want to take something out that
00:05:14
they said that's fine with all of us and
00:05:17
um basically each of us has veto right
00:05:19
on something so last week two people
00:05:20
took their veto right on something and
00:05:22
we took something out you want to
00:05:23
explain our thinking on that sax and why
00:05:26
we're reversing yeah okay so a few weeks
00:05:29
weeks ago on the pod there was an
00:05:30
oblique reference between me and chamath
00:05:33
regarding solana and so and so some
00:05:37
internet theorists that claimed that we
00:05:38
were trying to engineer a pump and dump
00:05:40
in solana which if you actually listen
00:05:43
to what we said
00:05:44
um it certainly is not a pump let me
00:05:46
explain what it was
00:05:48
so
00:05:50
craft is the beneficiary because we
00:05:52
invest we're the first investors in
00:05:53
multi-coin we were kind of like their
00:05:55
seed investor invested in their we put
00:05:56
in
00:05:57
something like 40 of the money for their
00:05:59
special opportunity fund
00:06:01
they were one of the first investors in
00:06:02
solana so we are the beneficiary of
00:06:04
about a billion dollars of solana so
00:06:06
thank you multicoin
00:06:09
at some point well so so they have
00:06:11
started doing distributions by the time
00:06:13
i texted chamoth they hadn't really
00:06:16
started doing distributions i didn't
00:06:17
know how deep and liquid the market for
00:06:19
solana was i just asked jamath like i'd
00:06:22
heard that tremont may have said
00:06:24
something that he was long salon and
00:06:26
wanted to accumulate so i sent him a
00:06:28
text saying hey are you interested you
00:06:30
know i thought maybe we could do an otc
00:06:32
transaction at some point we get our
00:06:34
solana he basically
00:06:36
you know we had a brief exchange about
00:06:38
that and then he mentioned on the pod
00:06:39
that was the extent of it what i didn't
00:06:41
know at the time but learned
00:06:42
subsequently is that the market for
00:06:43
solana is very deep about three and a
00:06:45
half billion notional is traded every
00:06:48
day so there's no need even if we wanted
00:06:51
to fully get out of barcelona position
00:06:53
which by the way we don't even have
00:06:55
you know multi-coin still has most of it
00:06:57
we it's not necessary to do an otc
00:07:00
transaction we could just sell it
00:07:01
explain what otc transaction is it just
00:07:03
means over the counter it just means
00:07:04
that instead of going to like uh an
00:07:06
exchange you would deal with like a
00:07:08
trading desk or it could just be direct
00:07:10
like for me to chem off so that was
00:07:12
basically the exchange it
00:07:15
chamath and i talked about it for maybe
00:07:16
two minutes and then it came up on the
00:07:18
pod for 20 seconds so then some internet
00:07:21
theorists basically clipped it and try
00:07:23
to accuse us of organizing a pump and
00:07:25
dump well obviously if you're talking
00:07:26
about selling something it's not a pump
00:07:29
it's also not a dump either so
00:07:32
anyway the reason why we said cut it out
00:07:34
last week is because we didn't want to
00:07:36
give oxygen to this stupid like
00:07:38
conspiracy theory that somebody had
00:07:40
invented on the internet with like no
00:07:43
basis whatsoever
00:07:44
um because you could spend all day
00:07:46
trying to like shoot the stuff down but
00:07:48
then
00:07:49
at the solana conference enough told me
00:07:51
enough people told me that this was
00:07:53
becoming a meme that i thought was worth
00:07:54
addressing and what and look what you
00:07:56
understand with crypto is that for every
00:07:59
cryptocurrency like solana there are
00:08:00
haters because they're invested in
00:08:03
tribal or everybody's talking up their
00:08:05
books there's pump and dumps and there
00:08:08
are armies of anonymous twitter accounts
00:08:11
that will
00:08:13
coordinate attacks and or memes etc
00:08:15
right so they're trying to spread the
00:08:17
rumor that like vcs are big holders and
00:08:19
solana and are going to dump it the
00:08:20
reality is that multi-coin has a large
00:08:23
position but they have lps they are
00:08:25
slowly distributing
00:08:27
their positions to lps
00:08:29
in the forms of the tokens they're not
00:08:31
selling them and giving you cash they're
00:08:32
giving you the tokens you just decide
00:08:33
what you do yes and by the way that's
00:08:35
what we would like to do as well we're
00:08:36
currently working through those
00:08:37
mechanics because it's actually
00:08:39
complicated for a pc firm
00:08:41
to distribute you know in kind through
00:08:43
tokens but well you had to give them to
00:08:45
your lp so that's what i would like to
00:08:47
do exactly so people are doing that with
00:08:49
coinbase so coinbase is providing that
00:08:51
as a service now from my understanding
00:08:52
right so we're so we have to work
00:08:54
through with rops that's what we're
00:08:55
going to try to do is distribute it in
00:08:57
kind so everyone can make their own
00:08:58
decision
00:08:59
i um i have a couple things to say so
00:09:02
i've only been a buyer i've never um i
00:09:04
haven't sold a single
00:09:08
solana token
00:09:10
and so we are you know net buyers and
00:09:14
we're buying a bunch of stuff
00:09:16
but i hate acknowledging that and this
00:09:18
is why you know my tone was more
00:09:22
non-committal when we did the pod is
00:09:24
that i really don't like this culture
00:09:27
that's emerged via twitter mostly
00:09:31
where
00:09:33
you all of a sudden have to be this
00:09:35
maximalist that basically falls on their
00:09:37
sword and never sells in order to be
00:09:39
legitimate
00:09:40
and i think that that's a really
00:09:41
dangerous place to be so you know look
00:09:43
if i take a watch that dangerous well if
00:09:46
i take a much much bigger step back
00:09:48
let me put solana in the context of
00:09:50
crypto and let me put crypto in the
00:09:52
context of the markets and where we are
00:09:54
today at the end of the week after you
00:09:56
know uh qt earnings
00:09:59
uh in november of 2021 we have
00:10:02
the stock market at absolute all-time
00:10:05
highs
00:10:06
ripping we have crypto at absolute
00:10:09
all-time highs
00:10:10
ripping we have the art markets i don't
00:10:12
know if you guys saw phillips and
00:10:13
christie's and sotheby's this past week
00:10:15
at absolute all-time highs sold another
00:10:17
people for 25 million we have inflation
00:10:20
at a 30-year high
00:10:22
we have 10-year break-evens at a 25-year
00:10:24
high
00:10:26
we have you know one point somewhat
00:10:28
trillion dollars that we just approved
00:10:30
last week and we're still horse trading
00:10:32
on another three you know 1.8 trillion
00:10:34
dollars of stimulus that we're going to
00:10:36
put in
00:10:37
and so when you
00:10:39
and then you have i and i think the the
00:10:41
most important thing which is
00:10:43
the two most important founders of our
00:10:45
generation the two smartest people who
00:10:47
have really consistently won elon musk
00:10:50
and jeff bezos have collectively sold
00:10:51
more than 11 billion dollars of their
00:10:53
holdings this year alone
00:10:55
and if you can't take all of that
00:10:58
and decide for yourself what's right for
00:11:00
you and your family you're doing
00:11:01
yourself a disservice
00:11:03
i think it's important for me to never
00:11:04
sort of like you know be forced to tell
00:11:07
folks whether i'm buying or selling
00:11:08
although i'm willing to do it in moments
00:11:10
where i think it's important
00:11:13
but i think it's really important to
00:11:15
understand the context and so i think
00:11:16
like these folks that like think
00:11:18
derisively about individuals who are
00:11:20
managing risk i think it's really naive
00:11:23
and i think it's um
00:11:24
it creates a lot of missed opportunity
00:11:26
for them as well if the smartest people
00:11:29
in the world
00:11:30
are now selling their core holdings that
00:11:33
they told you they would never sell
00:11:35
and you are not
00:11:37
reconsidering your position on things
00:11:41
you're either
00:11:42
much smarter than them
00:11:44
or you're being really really reckless
00:11:48
all right there you have it
00:11:51
yeah you know i we just people also know
00:11:54
inside baseball we have a docket of
00:11:56
stories that we talk about on our group
00:11:57
chat that make up the docket for the
00:11:59
show but i'll bring stuff up and i
00:12:01
didn't bring that up in some way
00:12:03
to cause trouble or anything i thought
00:12:04
you guys would want to clear the air
00:12:06
about it and i understand chimao's
00:12:07
position of
00:12:08
hey you don't want to give these things
00:12:09
oxygen or whatever but i think so i
00:12:11
didn't even know that we needed to clear
00:12:13
the air until you know i went to the
00:12:15
conference and enough people mentioned
00:12:16
it so but what's so funny is half the
00:12:18
people on twitter spend all their time
00:12:20
in crypto lens saying things like never
00:12:22
going to make it have fun staying poor
00:12:24
they're extremely jason as you said
00:12:26
tribal i'm not sure that they're doing
00:12:28
first principles analysis of these
00:12:30
things they've gone they've got time
00:12:32
exceptionally lucky
00:12:34
yeah some of them are exceptionally good
00:12:36
but many people broadly speaking have
00:12:38
gotten exceptionally lucky and i think a
00:12:40
little bit of it is getting to their
00:12:41
head where they become you know very
00:12:44
virulent against people that they think
00:12:46
you know whose perspectives may actually
00:12:47
be negatively affecting their position
00:12:49
without actually understanding what
00:12:50
david said which is these are incredibly
00:12:52
deep liquid markets and one person's
00:12:54
opinion is can't do much of anything
00:12:57
right i mean that's a really good point
00:12:59
i mean i'd like to give my opinion on
00:13:01
solana but the thing or just crypto in
00:13:03
general the thing that's like hard about
00:13:04
it is that it's hard to talk about the
00:13:06
benefits of say the salon of blockchain
00:13:08
without being seen as a pumper of soul
00:13:11
or a dumper of eth or whatever because
00:13:13
all these things are so intrinsically
00:13:14
connected i mean i learned a lot of
00:13:16
really bullish things about solana you
00:13:19
know at this conference
00:13:20
uh i mean the biggest thing is i mean
00:13:22
there's basically a a battle for the
00:13:24
hearts and minds of developers going on
00:13:26
right now between salon and ethereum
00:13:27
that's why solana has raced up to you
00:13:31
know over 200 i don't know what like
00:13:33
seven thousand percent increase or some
00:13:35
something incredible like that the
00:13:36
reason is because solana as a blockchain
00:13:39
gives confirmations back in something
00:13:40
like 400 milliseconds whereas ethereum
00:13:43
takes you know minutes and you know a
00:13:45
transaction that might cost tens of
00:13:47
dollars 10 20 30 50
00:13:50
of gas on ethereum cost pennies on
00:13:53
solana and so that's the advantage yeah
00:13:55
yeah exactly it's also you know a lot of
00:13:57
developers feel like the tools the
00:13:58
developer tools that they've created are
00:14:00
easier than building on solidity the
00:14:03
thing that solana gives up the trade-off
00:14:04
that it makes is decentralization
00:14:07
there's basically that transactions are
00:14:09
processed by 20 validators and they're a
00:14:12
top 20
00:14:14
based on holdings of souls so it's kind
00:14:16
of like this proof-of-stake model so
00:14:18
anyway there's some trade-offs there i
00:14:20
can tell you that
00:14:21
you know it's the view of you know our
00:14:23
friends at multicoin and you know i
00:14:26
heard a lot of this views at the
00:14:27
conference although obviously you have
00:14:28
to take it with a grain of salt because
00:14:30
these are the biggest believers but
00:14:31
their view
00:14:32
is that solana over the next year will
00:14:35
flip ethereum based on developer
00:14:37
activity that there's real
00:14:39
companies
00:14:40
we spend a lot of time actually before
00:14:42
we do anything is that's the only thing
00:14:44
we've been looking at you know and
00:14:47
syndica
00:14:48
fractal
00:14:50
a lot of the stuff that we've done deso
00:14:52
is purely driven by developer interest
00:14:54
when we see developers
00:14:56
in the open source ecosystem building
00:14:58
things on top of this stuff making stuff
00:14:59
that's composable and usable by other
00:15:01
people and building infrastructure
00:15:04
you know we don't really second-guess
00:15:05
that because
00:15:06
they are spending their the most
00:15:08
important currency which is not monetary
00:15:11
capital but human capital yeah
00:15:13
and there's the time and their skill and
00:15:14
they can apply for another project yeah
00:15:16
and so when enough developers so i i've
00:15:19
always thought you just followed the
00:15:20
developers and as more and more projects
00:15:22
get started
00:15:23
you just have to unemotionally support
00:15:25
that i think the writing is on the wall
00:15:27
which is bitcoin is gold ethereum looks
00:15:30
like it's trending to be silver and
00:15:32
solana could be the first but there will
00:15:34
be others that come after it of real
00:15:37
developer ecosystems that can be built
00:15:38
on top of it the other the other thing
00:15:40
that i would offer up to people for them
00:15:42
to think about is
00:15:44
before you blindly go and rush into
00:15:45
crypto
00:15:47
one way in which i try to think about
00:15:49
these things is in the following way you
00:15:51
see these projects get started all the
00:15:53
time
00:15:54
and
00:15:55
i would view each of these projects as a
00:15:57
mini economy and really try to think
00:16:00
what is the economic value of what's
00:16:02
happening under the hood so simple
00:16:03
example you know helium is an
00:16:05
interesting project that's trying to
00:16:06
build a completely decentralized you
00:16:08
know 5g infrastructure right render is a
00:16:11
really interesting project that's trying
00:16:13
to build a completely decentralized you
00:16:15
know graphical processing infrastructure
00:16:17
right gpus essentially
00:16:19
in both of those things you can
00:16:21
quantifiably economically measure
00:16:24
what the value is that people get right
00:16:26
in the case of render you're basically
00:16:29
displacing an aws instance and so um
00:16:33
that has a price and a value and so you
00:16:35
know for render to be valuable there's
00:16:37
an economic value that it replaces
00:16:40
if you're joining a hotspot that has an
00:16:42
economic value where you hadn't
00:16:43
necessarily have to pay you know to get
00:16:45
internet connectivity if you all of a
00:16:47
sudden are on the helium network that
00:16:49
displaces a measurable economic quantum
00:16:52
understanding that is probably and
00:16:54
taking the absolute value of that is the
00:16:56
best way of really understanding which
00:16:58
projects have potential so if you take
00:16:59
those two ideas and marry them together
00:17:01
where is their developer interest and
00:17:03
where is their measurable economic
00:17:05
activity at the intersection of those i
00:17:07
think are the really compelling projects
00:17:08
that can win well the thing that
00:17:10
complicates all of this is that the
00:17:11
developers are not just picking based on
00:17:13
which language or technology or stack
00:17:15
they think has the most potential they
00:17:17
also have acquired economic stakes in it
00:17:20
so a developer who might be objective
00:17:22
and say hey this new platform is better
00:17:24
than ethereum
00:17:26
might be sitting on millions of dollars
00:17:28
in ethereum and they're like
00:17:30
i want to keep my bet going here
00:17:32
um and i'm going to keep talking my book
00:17:34
possibly but i but i do think that
00:17:36
developers in general will choose the
00:17:38
platform that's easiest and cheapest and
00:17:41
fastest for them to develop on which
00:17:43
would mean the list on coin market cap
00:17:45
of market cap ones that has been static
00:17:47
for a decade of crypto almost you know
00:17:50
or largely the top 10 doesn't change
00:17:51
that much it's xrp at stellar ethereum
00:17:54
bitcoin tether that could be up for
00:17:56
grabs that whole thing could change now
00:17:58
that people are actually building
00:17:59
projects and
00:18:00
the the projects are getting competitive
00:18:02
with each other and that's that flipping
00:18:04
we're talking about correct sex
00:18:06
yeah i think what's tricky here again is
00:18:08
i never want to give anyone investment
00:18:11
advice i mean that's just not my job and
00:18:14
if there's anyone out there listening to
00:18:16
the show because they're trying to get
00:18:17
like tips or tricks whatever for
00:18:19
investment
00:18:20
like i'm not really comfortable telling
00:18:21
people what to do um sure so you know
00:18:24
everyone just has to understand that i
00:18:26
did i do feel like what i saw at this
00:18:29
conference over the past week in terms
00:18:30
of developer enthusiasm activity was
00:18:32
very bullish actually it was a lot like
00:18:34
i went to
00:18:35
the um ethereum conference i think was
00:18:37
back in 2017 several years ago and it
00:18:39
felt a little bit like that although i
00:18:41
would say that this time it felt less
00:18:43
academic like several years ago it felt
00:18:45
more like white papers now it actually
00:18:47
feels like
00:18:48
real projects and businesses that people
00:18:50
are trying to create still
00:18:50
infrastructure and less applications or
00:18:53
more applications
00:18:55
mentioned a couple of them um so there's
00:18:57
helium which is creating a decentralized
00:18:59
network for wi-fi there's uh render
00:19:01
which is creating a decentralized
00:19:02
network for gpu there's one called hive
00:19:05
mapper i met the founder it's a
00:19:07
decentralized network for people to map
00:19:09
the world you can think of you know the
00:19:10
concept of a minor that bitcoin invented
00:19:12
think of them more as like a resource
00:19:14
provider to a network so with bitcoin
00:19:17
you know we call them miners but they're
00:19:19
the validators of transactions and we're
00:19:20
trying to incentivize them through block
00:19:22
rewards basically through small bits of
00:19:25
uh bitcoin that get released
00:19:27
to uh to provide these valuable
00:19:29
computing resources to the network and
00:19:31
so people are figuring out now how to
00:19:33
create massively decentralized networks
00:19:35
where you have you know thousands or
00:19:36
millions of resource providers provide a
00:19:38
little bit of something to the network
00:19:40
for everyone's benefit in exchange they
00:19:42
get some coin that's like a really
00:19:44
interesting model that couldn't exist
00:19:46
before crypto
00:19:47
and so yeah i mean i think it's very
00:19:50
interesting but you know in order for
00:19:51
that to work you have to have
00:19:53
like very you need fast efficient
00:19:56
scalable blockchains and
00:19:58
the feeling as i mean i'll give credit
00:20:00
here to to tushar um
00:20:02
who's one of the gps of multicoin
00:20:04
his view is that this was the iphone
00:20:07
moment for blockchain that that what
00:20:09
salon has built because it's massively
00:20:11
scalable and also very cheap i mean
00:20:12
again you can run a lot of transactions
00:20:14
for pennies now
00:20:16
all of that is obviously very bullish
00:20:18
for solana the thing i wrestle with is
00:20:20
and jamal kind of allude to this is i
00:20:22
think everything's kind of in a bubble
00:20:23
right now because of monetary and fiscal
00:20:25
policy and so you know i guess i you
00:20:29
could say that i'm long solana versus
00:20:31
eth but i do kind of worry that the
00:20:33
whole world right now is very bubbly and
00:20:35
so as a gp you're like what do you do
00:20:37
about that i can tell you right now
00:20:39
like this second we are sitting on
00:20:41
solana that we have not sold so you know
00:20:44
i am long in that sense however sometime
00:20:46
over the next whatever number of years
00:20:48
we will distribute out our position of
00:20:50
solana to illinois and the lps will make
00:20:52
their decisions and then they will make
00:20:54
their decisions might specialize in
00:20:55
crypto and want to keep it other ones
00:20:57
might not want to hold assets and need
00:20:59
that money to fund their endowment to
00:21:00
give scholarships to students or
00:21:02
whatever your lp's right particularly
00:21:05
well yeah i mean and so i guess
00:21:07
to the issue of hey we're not giving
00:21:09
investment advice here we are all
00:21:11
capital allocators and
00:21:13
startup creators so we're talking about
00:21:15
our day-to-day lives here nobody should
00:21:17
interpret this as investment advice and
00:21:20
especially not in a world now i don't
00:21:21
know if you guys saw what happened with
00:21:22
rivian this week i don't know how we
00:21:24
don't talk about a company with
00:21:27
essentially
00:21:29
no public sales they've sold 148 cars to
00:21:31
their employees it's worth 120
00:21:35
billion dollars any at freiburg did you
00:21:37
see this ipo any thoughts on it
00:21:39
um it seems like
00:21:41
you have investment advice for the
00:21:42
audience that you'd like to give tell me
00:21:44
what rivian does
00:21:46
wait can you play that video that you
00:21:49
found that you shared with everyone you
00:21:50
have that video you know okay well i we
00:21:53
we do have it i can we could queue it up
00:21:54
did you see this yet who is this guy no
00:21:56
i haven't oh that yeah yeah well but
00:21:58
just so i don't want to beat this point
00:22:00
to death but i just think it's so
00:22:00
important for the audience that what
00:22:02
they should be getting out of the show
00:22:03
if they're fans is maybe like advice on
00:22:06
how to think yeah what a critical thing
00:22:07
critical thinking
00:22:09
how we think about investments
00:22:11
tips exactly so look if you want to
00:22:13
invest in crypto first of all like go
00:22:16
understand like what all these different
00:22:18
projects or blockchains do and figure
00:22:20
out what is the purpose of the token in
00:22:22
that system what are the token economics
00:22:25
yeah does it even make sense or is it
00:22:27
just a scam then if it's a if it's
00:22:29
something like a blockchain go research
00:22:31
how many projects
00:22:32
are have developers on them and how much
00:22:34
code is being checked in and maybe open
00:22:36
a wallet and buy some nfts and buy some
00:22:38
eath and transfer it and learn just how
00:22:41
to set up your
00:22:42
internet connection right right this was
00:22:44
1995. right exactly and then on top of
00:22:47
all that you got to consider macro
00:22:48
forces because i mean and i think you
00:22:50
know
00:22:51
my friends at multi-coin would fully
00:22:52
concede this that
00:22:54
you know it could be the case that if
00:22:56
there's a crypto bust over the next year
00:22:59
and this thing you know crypto has gone
00:23:00
through boom and bus cycles for many
00:23:01
many years
00:23:03
it's the standard so you could have a
00:23:04
situation in which for example solana
00:23:07
flips eth and yet still goes down in
00:23:09
value because there's an overall bust
00:23:10
cycle so you know you have to consider
00:23:12
the macroeconomic factors
00:23:14
as well so there's a lot of things to
00:23:15
consider here and then you also have to
00:23:17
consider your own risk tolerance and you
00:23:19
know what is appropriate for your
00:23:21
portfolio and i mean when do you need
00:23:23
your money are you a 25 year old
00:23:24
everything is at all time highs and the
00:23:27
two smartest men in the world are
00:23:28
selling
00:23:30
not just not just them by the way
00:23:32
there are other guys that are heavily on
00:23:34
the other side waiting for this whole
00:23:35
thing to go like drunken miller has been
00:23:37
very vocal about this
00:23:39
um and he's uh he's been the best macro
00:23:41
trader in the last 30 years
00:23:43
so
00:23:44
his position is what exactly
00:23:46
that we're printing too much money and
00:23:48
we're in a lot of trouble so you know
00:23:50
look i mean generally there is um
00:23:53
i think a good point of view being
00:23:54
shared here
00:23:56
uh which is you know understanding
00:23:58
how to think about what you're investing
00:24:00
in and what your uh your expectations
00:24:02
are versus relying on someone's advice
00:24:04
or opinion on what to do
00:24:06
if you have to rely on someone else's
00:24:08
advice or opinion on what to do you're
00:24:10
gonna eventually lose money you should
00:24:12
not be in that investigation you should
00:24:14
not be in the market because guess what
00:24:15
anyone that's giving you advice or
00:24:16
opinions is gonna make money if you do
00:24:18
what they tell you to do if you do what
00:24:20
they tell you to do end of story
00:24:22
so at some point they're gonna all make
00:24:24
money and you're gonna end up losing
00:24:26
money
00:24:27
and it's a it's you know it's it's it's
00:24:29
a better game to play
00:24:31
to learn how to kind of be thoughtful
00:24:32
about where's your money going what are
00:24:34
you investing in and it takes a lot of
00:24:35
time and a lot of money i've been
00:24:36
sitting here silently
00:24:38
as you guys have been talking deeply
00:24:39
about solana and ethereum and bitcoin
00:24:42
and the crypto markets because i
00:24:44
realized
00:24:45
so much of um
00:24:47
you know what's needed to be successful
00:24:49
in entering this market is a depth of
00:24:50
understanding a depth of knowledge my
00:24:52
time is highly limited i have spent no
00:24:54
time on understanding crypto markets
00:24:56
because it's so deep and it's so fluid
00:24:58
it's changing every day it's changing
00:25:00
every week so if i can't get smart
00:25:02
enough to feel confident about the
00:25:03
opinions and decisions that i would be
00:25:05
making as an investor i decide not to
00:25:07
invest and i stay out and so i'm not an
00:25:09
active crypto investor you're a
00:25:10
specialist and you're on the razor's
00:25:13
edge on synthetic biology and and so
00:25:15
many other whatever it is there are
00:25:16
there are other areas where it's better
00:25:18
for me to spend my time and my energy
00:25:20
and i've chosen to do that versus being
00:25:21
drawn into what view what feels like a
00:25:23
very exciting kind of you know turbulent
00:25:26
time
00:25:27
there are other areas that i kind of
00:25:28
spend my time on i just kind of try to
00:25:29
recognize that maybe i don't know what
00:25:31
i'm doing if i were to try and get
00:25:33
involved here and so i'd rather stay out
00:25:34
and i think that's council forever for
00:25:36
anyone you know if you're going to make
00:25:37
an investment it's important to feel
00:25:39
confident about the knowledge and the
00:25:41
depth needed to kind of be different
00:25:43
than the rest i'll build on your point
00:25:45
like when i when i started doing
00:25:47
my spax i
00:25:49
um started to write these one pagers and
00:25:51
those one pages were artifacts for me to
00:25:53
hold myself accountable for how i saw
00:25:56
something in a moment in time and then
00:25:58
to be able to see whether it was
00:26:02
tracking to that and then also to share
00:26:04
it to other people a starting point as
00:26:05
david said a journey where they should
00:26:07
then if they're curious go and do their
00:26:09
own work it turned out not enough people
00:26:10
were doing the work so then i had to
00:26:12
start adding disclaimers to these things
00:26:13
saying hey guys uh i'm not telling you
00:26:16
to buy this please be abundantly clear
00:26:19
these next backs that i will eventually
00:26:22
launch you're to see an entire like in
00:26:25
red block letters like please don't buy
00:26:28
this
00:26:28
right because to your point it doesn't
00:26:30
matter what you say people want a lazy
00:26:33
easy way out and so i just want to
00:26:35
reiterate what all of you guys said none
00:26:36
of us are dispensing advice we are not
00:26:40
telling you to do anything
00:26:41
please do your own work and please come
00:26:43
to your conclusion
00:26:45
it is your responsibility and if you're
00:26:47
not sure go and look at your children in
00:26:49
the face or your significant other in
00:26:51
the face you are responsible to them
00:26:54
and so do your own work i'll say one
00:26:57
more um
00:26:59
point on where i sit as an investor um i
00:27:02
i choose
00:27:04
uh to only participate in investing in
00:27:07
what i call productive assets
00:27:09
that is you put some money into
00:27:11
something and whatever that thing is is
00:27:13
generating money in some way or is
00:27:15
trying to generate value through a set
00:27:16
of activities
00:27:18
uh like a business um or owning an
00:27:21
apartment building where you're making
00:27:22
rent you know anything that or you know
00:27:25
a group of people that are trying to
00:27:26
have some breakthrough or some discovery
00:27:28
those are productive assets there's a
00:27:30
lot of what's going on now
00:27:32
that is what i would call speculative
00:27:34
assets which is the only way you make
00:27:36
money is if someone else pays more in
00:27:38
the future versus what you're paying and
00:27:41
there isn't an underlying productive
00:27:43
asset to what you're putting money into
00:27:45
are you're describing every ico or every
00:27:48
ico every nft and the art market right
00:27:50
these are these are examples of
00:27:52
unproductive assets they're speculative
00:27:54
assets in the sense that you're
00:27:55
speculating that at some point the price
00:27:57
of them are going to go up and someone
00:27:58
somebody wants that nft
00:28:00
more than someone down the road will pay
00:28:02
more for that asset than what you paid
00:28:04
but that underlying asset that capital
00:28:05
that you just put in didn't go in to
00:28:07
build something it because nobody wanted
00:28:09
a new generation there was no ip you
00:28:11
went into someone else's pocket that
00:28:13
sold that asset to you and you're
00:28:14
eventually going to try and sell it to
00:28:16
someone else and so you know there
00:28:18
there's a there's a real attraction here
00:28:20
because what we just talked about is
00:28:22
really hard to do having fundamental
00:28:23
analysis and understanding of businesses
00:28:25
and a fundamental understanding of
00:28:27
what's working and what's not and when
00:28:28
to shift and oh my gosh you know are
00:28:30
things different or are they not
00:28:32
to do that is really hard
00:28:34
so people end up relying on opinions of
00:28:36
others or they end up running into
00:28:37
speculative markets and the speculative
00:28:39
markets are easy to understand someone
00:28:41
just paid more for x than the other
00:28:43
person did therefore there's a trend
00:28:44
line it's going up it's like playing
00:28:46
roulette and you know black keeps coming
00:28:48
up and you're like okay it's gonna be
00:28:49
black again it has to be black there
00:28:50
were seven correct there were seven
00:28:51
blacks and so i i think that that's a
00:28:53
really important kind of takeaway for
00:28:55
for for folks that might be new as
00:28:57
investors we're all susceptible we're
00:28:59
all susceptible to this like i was just
00:29:00
looking
00:29:01
you know at
00:29:03
my own performance coming into the end
00:29:05
of this year and
00:29:07
you know um
00:29:08
i did a lot of specs this year but i
00:29:10
also did these pipes which are these
00:29:13
third-party deals private investment in
00:29:15
public entities exactly other people's
00:29:17
deals that they were bringing to the
00:29:19
market where they said chmath do you
00:29:20
want to be a part of it
00:29:22
and um you know and i did and part of it
00:29:24
was i was
00:29:27
looking at these things
00:29:28
and
00:29:29
you know freebird doing my work but in
00:29:32
the end it turned out i didn't do nearly
00:29:33
as much as i probably should have
00:29:35
because i ended up sitting on top of
00:29:37
other people's work versus the original
00:29:39
or underwriting that i would do if it
00:29:40
was my own deal itself right anyways the
00:29:43
net net of it all is like you know
00:29:45
that was very inefficient capital
00:29:47
deployment and as i look at it now it's
00:29:48
like you know i'm down well i'm i'm
00:29:51
technically up 19 but that's really
00:29:53
because of one deal if i take that one
00:29:55
deal out which is a total outlier i'm
00:29:56
down 17 on about 200 million dollars of
00:29:59
investment when you are a fast follower
00:30:00
not the originator it wasn't your idea
00:30:02
this is critically important there are
00:30:04
many different ways to make money but
00:30:05
you have to specialize and you have to
00:30:07
first and your knowledge i trusted
00:30:10
other people
00:30:11
i did the same thing that i that i'm
00:30:12
saying to other people about to do do
00:30:14
not just copy other people you have to
00:30:16
do your own principle work and even when
00:30:18
you do your own principle work it may
00:30:20
not be enough and you have to be willing
00:30:22
to basically see the forest from the
00:30:23
trees and walk away and so all these
00:30:25
pipes i'm in the midst of sort of
00:30:26
cleaning up and selling down and they've
00:30:29
been just a kind of a disaster for me
00:30:31
you know
00:30:31
hold on i'm gonna build on this for a
00:30:33
second because i think it's critically
00:30:34
important what you said as well
00:30:36
friedberg you have to be comfortable
00:30:37
with the investment you're making i look
00:30:39
at these companies and i look at the
00:30:40
underlying customer the product you know
00:30:43
and what kind of revenue it's going to
00:30:44
generate and people thought i was
00:30:45
dunking on rivian yesterday and i said
00:30:47
listen
00:30:48
you know when tesla went public people
00:30:49
forget their valuation was 1.5 billion
00:30:52
1.7 one point okay so 1.7 billion uh
00:30:55
when they went public now they already
00:30:57
had
00:30:58
thousands of roadsters and they had
00:31:00
already had the no they had 93 93
00:31:02
million of revenue in year one
00:31:04
so this was
00:31:06
dramatically different than what riven
00:31:08
had riven is being valued at you know
00:31:09
whatever that is 120 billion i think
00:31:11
yesterday rivien has 17 billion in cash
00:31:13
somebody asked me at the poker game last
00:31:15
night what i value driving at i said
00:31:19
17 plus three 17 million in cash plus
00:31:21
three billion
00:31:23
double roughly what tesla's was the
00:31:25
market's hotter right now whatever but i
00:31:27
put them at 20 billion and people were
00:31:28
giving a hard time about i said i think
00:31:29
that's actually the realistic valuation
00:31:30
for this company and we are in a very
00:31:33
dangerous moment in time right now where
00:31:35
i think people are whether it's meme
00:31:37
stocks or crypto or nfts suspending
00:31:40
disbelief in some cases spax because
00:31:42
they're not all created equal and
00:31:43
certainly in private companies we're
00:31:44
seeing this where people are giving
00:31:46
people
00:31:48
an amount of credit which makes no
00:31:50
logical sense and is getting further and
00:31:52
further disconnected in from reality so
00:31:54
as an investor you have a choice either
00:31:56
you have your fundamentals which i'm not
00:31:58
going to change my fundamentals i'm
00:32:00
going to focus on the fundamentals that
00:32:01
got me where i am
00:32:02
and i'm not going to
00:32:04
be involved in a 100 billion dollar
00:32:05
market cap company that hasn't launched
00:32:07
a product yet let alone 120 billion one
00:32:10
i'll stay focused on startups but what
00:32:12
you're saying is also important because
00:32:14
you're
00:32:15
highlighting
00:32:17
how you value that company you
00:32:19
individually said i think that company's
00:32:21
worth some multiple of how many cars
00:32:23
have been sold in the past elon sold you
00:32:25
know thousands of cars he was worth 1.7
00:32:28
billion these guys have sold and other
00:32:29
people are coming in and looking at this
00:32:31
company and saying they've built
00:32:32
facilities they've built assembly lines
00:32:34
and they've got pre-orders and bookings
00:32:36
for lots and lots of cars down in the
00:32:37
future and clearly they've gone in and
00:32:39
you know some people have gone in and
00:32:40
seen these plants and seen these cars
00:32:42
actually working so you know it's really
00:32:44
important to take note that your point
00:32:46
of view is one point of view in a very
00:32:48
diverse market with many points of view
00:32:50
and everyone's going to come into this
00:32:51
market and that's why unless you
00:32:53
individually as an investor have a
00:32:55
strong point of view and can show that
00:32:56
you can apply your unique insights to
00:32:59
consistently beat the market making
00:33:01
decisions investment decisions like that
00:33:03
you're eventually going to lose because
00:33:04
those other points of view will be a
00:33:05
bigger
00:33:06
view of the truth and you'll lose money
00:33:08
and that's why that and that by the way
00:33:10
that's why picking stocks
00:33:12
is ultimately a loser's game unless you
00:33:14
have some unique ability and insight for
00:33:16
most people historically and in an
00:33:17
enough market
00:33:20
right you need to have an edge and the
00:33:21
public markets are hard to say that
00:33:22
there's
00:33:26
i mean if we double click on what you
00:33:28
just said as the things that would be
00:33:29
reasons to in bet on rivian
00:33:31
number one they have 48 000 orders of
00:33:34
pickup trucks
00:33:35
against the f-150 which is now electric
00:33:38
from ford and a million i don't know why
00:33:40
i don't know why you're arguing this
00:33:41
right like you're just making a point
00:33:42
that we don't have someone on the on the
00:33:44
on the panel right now but someone else
00:33:45
could come in and argue okay
00:33:47
and
00:33:48
i would just say
00:33:50
this is the part of the conversation to
00:33:51
be honest jason to give you feedback i
00:33:53
don't like because
00:33:55
rivian just in defense of rivian for a
00:33:57
second
00:33:58
what i have heard is that it's a it's a
00:34:01
well-engineered car or truck rather
00:34:04
they've done a very smart path to market
00:34:07
which is essentially to you know build
00:34:09
these delivery trucks for amazon that
00:34:11
allowed them to even frankly you know be
00:34:13
default alive
00:34:15
sure versus you know to use the paul
00:34:16
graham term instead of default dead
00:34:19
i think the point that's more important
00:34:21
here is that
00:34:22
it doesn't affect you so let rivean do
00:34:24
well you know and this is part of the
00:34:27
so
00:34:28
i shouldn't have an opinion publicly no
00:34:29
no no i'm just saying this is the part
00:34:31
of the cycle that i don't understand
00:34:32
where people legitimately
00:34:37
have these
00:34:39
zero sum points of view about companies
00:34:42
um and this is where i think uh free
00:34:44
burke is more right than anybody else
00:34:46
which is there are the market is the sum
00:34:49
of all these collective points of view
00:34:51
sure and i think it's fine
00:34:52
i think it's fine to have one
00:34:55
i think it's a little superficial your
00:34:57
point of view because it's not really
00:34:58
you know sitting on top of a model or
00:35:00
anything else and i think it's the same
00:35:01
kind of superficiality that the tesla
00:35:03
cute guys had about tesla for many years
00:35:05
as well
00:35:07
it takes a long time has somebody that
00:35:09
does this every day and i just want to
00:35:11
point this out it takes an enormous
00:35:12
amount of time
00:35:14
an enormous amount of work to be 55
00:35:17
350 companies i meet with you in the
00:35:19
public markets jason it's different my
00:35:21
companies are going public now so i take
00:35:23
exception to what you're saying i know a
00:35:24
fraud when i see it i've seen them
00:35:26
before that's a really big statement
00:35:29
no but the distance between the
00:35:31
valuation and reality is in the 50
00:35:34
capabilities
00:35:36
that's not in control of that's not in
00:35:38
their control okay that's in a bunch of
00:35:40
external market participants control so
00:35:43
you can't pin that on them my point is
00:35:46
the market right now seems dysfunctional
00:35:48
and jason properly measured
00:35:51
that you then you should throw shade at
00:35:53
t row fidelity all these people that are
00:35:56
bidding up your companies by the way
00:35:57
because they are the ones that are
00:35:58
taking review into 120 billion it's not
00:36:00
rivien's fault and jason what's really
00:36:02
going on in the market was public
00:36:04
speculators no what's really going on
00:36:05
it's not you can't sell 16 billion
00:36:08
dollars of uh in an ipo to
00:36:10
speculators these are much lower prices
00:36:14
these are institutionally placed uh
00:36:15
trade orders but regardless the market
00:36:17
is clearly right now in in productive
00:36:20
assets businesses the market is looking
00:36:22
at a time horizon that it has never
00:36:24
looked at before which is making bets
00:36:26
that are 10 15 20 years in the future
00:36:29
and that's because of the condition that
00:36:30
we're in right now from a monetary
00:36:32
policy point of view interest rates are
00:36:33
so low there's nowhere to get yield in
00:36:35
other assets so you have to look further
00:36:37
and further out to find value so the
00:36:39
market the market is betting is making
00:36:41
10-year bets which is like a vc times
00:36:43
more than a 10-year map yeah and jason
00:36:45
sorry can i just can i just finish my
00:36:47
last point because before you interrupt
00:36:48
me
00:36:49
my issue jason is i think you are an
00:36:51
exceptional angel investor but just the
00:36:53
same way you derided a bunch of late
00:36:55
stage guys remember last night at poker
00:36:57
when we were talking about late stage
00:36:58
folks entering into the angel market
00:37:01
and the er series a you were extremely
00:37:04
dismissive because you know
00:37:06
what the job is to be done to do that
00:37:08
job well and they have a different skill
00:37:10
set similarly what i would just offer
00:37:12
for you to think about is the people
00:37:14
that really underwrite public market
00:37:15
stocks well
00:37:17
do things and have a skill set that is
00:37:19
extremely specific and it is well
00:37:21
trained as well
00:37:22
and i think that
00:37:24
okay all right no i accept i'm gonna
00:37:26
i'll just let me i'll let me jump into
00:37:27
that since you want to defend me and
00:37:29
that's the people are in shock right now
00:37:32
way to get yourself back in the game
00:37:41
okay so here's where i think jake also i
00:37:43
don't know anything about the derivation
00:37:44
company but where i think jkl's right is
00:37:46
we've seen over and over again that when
00:37:48
a company
00:37:50
gets when a startup gets a billion
00:37:52
dollar plus valuation without a product
00:37:55
invariably it ends up somewhere between
00:37:58
a disappointment and outright fraud
00:38:00
whether you know it was
00:38:02
theranose or magic leap or quibby or
00:38:06
whatever i'm not saying they're all
00:38:08
frauds i mean i think just theranose
00:38:10
frauds trading arts whatever so
00:38:13
i think it's reasonable for any let's
00:38:15
say seed or early venture investor to
00:38:17
develop the heuristic then i'm not going
00:38:20
to invest in anything with a billion
00:38:22
dollar with basically a unicorn
00:38:23
valuation without seeing the product
00:38:25
first because we've learned we've got
00:38:27
our hands burned so many times from
00:38:29
these overhyped companies and here's why
00:38:32
i agree if i can't see and use the
00:38:33
product i'm not investing i'll invest in
00:38:35
a seed stage but i will not invest in a
00:38:37
unicorn stage no way
00:38:39
i i agree with that but what i'm saying
00:38:40
is when a company is going public like
00:38:42
that there is
00:38:44
demonstrable proof of concept there okay
00:38:46
the only market in which that's not true
00:38:48
is in biotechnology well i would say for
00:38:50
fisker and nicola two related companies
00:38:52
those ones seem very very shaky you can
00:38:55
debate about the scalability of these
00:38:56
things and you can debate that people
00:38:58
didn't do the diligence but they had to
00:38:59
at least put a proof of concept out
00:39:01
there for you to judge if people don't
00:39:03
do the work i agree with you like if
00:39:04
you're rolling a truck down a hill sure
00:39:07
outright fraud no but my point is if you
00:39:09
were there and you did your work you
00:39:10
would have seen what you needed to see
00:39:12
what i have heard from people who were
00:39:14
investors in both lucid and rivien is
00:39:16
that they have sat in the cars they've
00:39:18
driven the cars they've spent time with
00:39:20
them they've seen the factories
00:39:22
and it's very much real now what they're
00:39:25
debating is ramp and velocity and scale
00:39:27
i don't know i don't have a position in
00:39:29
either neither do i have the bigger
00:39:31
macro point of view which is important
00:39:33
to me which is
00:39:34
it's it just because these things are in
00:39:36
the public markets i think people think
00:39:38
it's easy to judge and i think actually
00:39:40
modeling them and making good decisions
00:39:42
is just as hard as it is for private we
00:39:44
need to roll this clip because there is
00:39:45
somebody who is giving exceptional
00:39:47
advice on cnbc
00:39:50
let's roll the clip yeah so well up
00:39:52
starts up about 25 just in four days
00:39:55
since we since we bought it we bought it
00:39:56
on uh about four days ago uh so that's
00:39:59
actually made a nice little move in the
00:40:01
uh short term probably a little extended
00:40:03
right now but longer term uh that that's
00:40:05
a that's a good looking uh name a very
00:40:08
powerful very strong earnings these
00:40:10
stocks are actually they do not know
00:40:12
what do they do
00:40:14
uh excuse me what does upstart do
00:40:17
uh well
00:40:19
i'm
00:40:20
i'm sorry what kind of company is it
00:40:29
[ __ ] god brutal
00:40:31
who is this guy who is he i have no idea
00:40:34
jake how's that is that is that like
00:40:35
your uncle or something who's that guy i
00:40:37
listened yeah
00:40:38
i i i mean what do you want cnbc
00:40:42
well you know
00:40:43
the guy's been on many times but doesn't
00:40:45
this prove what we were saying which is
00:40:46
that exactly you've got to do your own
00:40:48
principle work here that that is why we
00:40:50
wanted to play here's a talking head
00:40:51
who's probably getting paid for selling
00:40:53
some books and giving advice who knows
00:40:54
nothing about what he's telling you you
00:40:56
can join his membership club for one
00:40:58
thousand a month yeah i'm sure he's
00:40:59
publishing lots of papers that show that
00:41:02
he's a highly successful profitable
00:41:03
investor and look how smart he is he
00:41:05
doesn't even know the company he just
00:41:06
promoted on cnbc it's incredible
00:41:09
on a um mechanical basis here chamoth
00:41:12
you and i have been on cnbc many times
00:41:14
in that moment
00:41:16
uh
00:41:17
what is going on what do you think is
00:41:19
going on in the host's mind
00:41:22
and the the producer who has to dump
00:41:24
this call because they're watching this
00:41:26
let's move on i just the breakdown where
00:41:28
he says i'm sorry i i have no idea uh
00:41:31
what do they do i think the point's been
00:41:33
made i think the point's been made oh my
00:41:34
lord everybody should do their own work
00:41:36
yeah do you
00:41:38
work
00:41:39
just actually look like you want to say
00:41:41
something
00:41:42
i mean i just chose the agenda yeah look
00:41:44
i mean there is a massive agenda in
00:41:47
corporate journalism there's an agenda
00:41:49
by the people on these shows to promote
00:41:51
positions there's an agenda by the
00:41:54
reporters themselves uh and on and on
00:41:56
and on it goes so to jamaa's point
00:41:58
if you just take them at face value
00:42:01
you're and you don't do your own work
00:42:02
then you're buying into someone else's
00:42:04
agenda trust yourself okay uh one thing
00:42:07
that we are trying to all understand uh
00:42:09
is inflation
00:42:12
the cpi uh has gone up 6.2 in october
00:42:16
highest jump in 31 years since 1990
00:42:19
according to the wall street journal
00:42:20
fifth largest straight month
00:42:22
fifth straight month of inflation above
00:42:24
five percent
00:42:27
you know somebody tweeted out we'll pull
00:42:28
it up here uh denver bitcoin
00:42:31
put out a year-over-year commodity chart
00:42:33
uh we can throw up on the screen
00:42:35
and then uh i think friedberg you shared
00:42:39
in the chat the average weekly retail
00:42:41
prices
00:42:43
around fertilizer
00:42:45
what are our thoughts
00:42:47
uh on
00:42:48
the nature of inflation and how that
00:42:51
affects our
00:42:53
investment i i think it's persistent and
00:42:56
the reason i think it's persistent is
00:42:57
that
00:42:58
there's a the all of these things are
00:43:00
intertwined and so you know if you want
00:43:02
to just bear with me for a second like
00:43:04
when when this let's just go to the
00:43:06
the entry-level economic job right so
00:43:09
you're a barista at starbucks or you
00:43:10
work at mcdonald's and you're making 17
00:43:12
to 20 dollars an hour
00:43:14
what that does is it shifts labor
00:43:17
and eventually there are other people
00:43:19
that are entering the workforce or you
00:43:21
know may shift jobs
00:43:23
and essentially it just causes this
00:43:24
leaky bucket effect where everybody else
00:43:26
has to then accommodate itself
00:43:28
so you know you have a guy like uh you
00:43:30
know you have a company like amazon
00:43:32
which is now going to pay 25 or 30
00:43:34
dollars to keep folks right because
00:43:36
otherwise they may say oh you know if i
00:43:37
make 15 or 16 an hour i'd rather work at
00:43:40
mcdonald's it's simple
00:43:41
it's not back breaking work blah blah so
00:43:43
then they start to um increase the
00:43:45
amount that they pay they increase their
00:43:47
benefits and the like
00:43:49
didn't i saw this thing this week
00:43:51
there's a crazy thing that's happening
00:43:53
though which is it's now pulling
00:43:55
people from non-traditional job classes
00:43:58
into those jobs there are teachers
00:44:00
that are leaving teaching to go work at
00:44:02
an amazon warehouse there are
00:44:04
firefighters that are quitting being a
00:44:06
firefighter to go work at an amazon
00:44:08
warehouse because
00:44:10
you make the same or more
00:44:12
plus you have all of these other
00:44:13
benefits and the job is structurally a
00:44:15
lot easier and so people are making
00:44:18
different optimizations and to that
00:44:20
point
00:44:21
i think we talked about this in nick you
00:44:22
can put it in the group chat
00:44:25
in reddit as an example there is more
00:44:28
engagement
00:44:30
in the subreddit around having a simple
00:44:33
work life than there is now in wall
00:44:35
street bets
00:44:36
right so there's been a structural
00:44:38
cultural change where people need to get
00:44:40
paid more to do the same amount of work
00:44:42
and then at the same time you have all
00:44:44
of the all of the supply side getting
00:44:46
more expensive fertilizer makes corn
00:44:49
more expensive lumber makes house prices
00:44:51
more expensive chip prices makes the
00:44:53
iphone and cars more expensive or
00:44:55
completely backlogged you know yesterday
00:44:57
at poker sonny was showing us he bought
00:44:59
a tesla
00:45:00
and the delivery period
00:45:03
october of 2022.
00:45:05
yeah it's great it's freaking crazy
00:45:08
so i i think that it's a it's this is
00:45:10
the beginning of a persistence i think
00:45:12
those are all like really valid points
00:45:13
the thing i'm seeing now is i think
00:45:15
we've moved into um what i'll call a
00:45:17
contagion
00:45:19
phase of inflation which is people are
00:45:22
hearing about inflation they're seeing
00:45:23
it in some places my gas went up a
00:45:25
little bit my milk went up a little bit
00:45:26
whatever and they're saying well i guess
00:45:28
if everybody's raising prices i need to
00:45:31
raise the prices as well of whatever i
00:45:33
provide in the world so
00:45:35
i can just keep up with everybody else
00:45:37
and they're not looking at their inputs
00:45:38
necessary and saying i need to charge
00:45:40
more or that's the best business
00:45:41
decision they're just saying
00:45:42
everything's going up around me and so
00:45:44
they raise prices i've literally had
00:45:45
this happen three or four times and i
00:45:48
went to buy a car
00:45:49
and they wanted 15k oversticker and i
00:45:51
didn't buy it based on principal but i'm
00:45:52
sitting here going like maybe i'm an
00:45:53
idiot maybe i should just pay the 15k
00:45:55
overstick what do you thought stacks on
00:45:56
inflation and the contact
00:45:58
my thoughts are i told you guys like six
00:46:00
months ago about this yeah can we just
00:46:02
replay what i said on episode 32. it's
00:46:05
got his researchers in the background
00:46:07
giving him you've written down what you
00:46:09
said on her episode no this guy's in the
00:46:11
[ __ ] debate club stanford debate club
00:46:13
over some of us when we make predictions
00:46:15
take them seriously so you know is that
00:46:17
a dig that professor ice cold takes
00:46:20
i'll give you guys a link to a
00:46:21
prediction that was made here's oh i
00:46:23
mean i just want to replay the 20
00:46:24
seconds
00:46:26
here we go the two david's dueling again
00:46:28
just like in the group chat
00:46:30
here's freedberg january 1st 2021 if you
00:46:33
don't think inflation is already here
00:46:34
you missed what happened to the stock
00:46:36
market companies aren't performing
00:46:37
better we're just inflating everything
00:46:39
financial assets first everything else
00:46:40
will follow that was a good one just
00:46:42
make your point just make your point
00:46:44
just add the clip
00:46:46
i'm beginning to wonder if biden's going
00:46:47
to be a jimmy carter here because
00:46:49
frankly all he had to do was leave
00:46:52
things well enough alone covid was
00:46:54
winding down we had a vaccine all they
00:46:56
had to do was distribute it to as many
00:46:58
people as possible and covet let the
00:47:01
recovery take shape and instead they
00:47:03
pushed this insane 10 trillion dollar
00:47:06
agenda he's gonna backfire massively
00:47:08
look if the economy turns we were set
00:47:11
for a post coveted boom and right now
00:47:13
that is all at risk because mouth like
00:47:15
you're saying they're keeping the
00:47:17
economy closed or parts of it way too
00:47:19
long they then over compensate for that
00:47:22
by printing a ton of money and then they
00:47:23
overcome say for that by raising taxes
00:47:25
too much just just to build on that so
00:47:27
that second step of their
00:47:29
overcompensating
00:47:31
their inability to open with money is so
00:47:34
true
00:47:35
because then what happens is your labor
00:47:37
force stays impaired because people make
00:47:39
enough money by not working
00:47:42
it was true when i said in may it's even
00:47:43
more true now
00:47:44
he said it was there was inflation okay
00:47:46
so there's inflation okay so now great
00:47:48
good job somebody makes a prediction
00:47:51
yeah i made one in january that said the
00:47:53
same thing now look you can do three
00:47:55
things to
00:47:56
you can do three things to curb
00:47:57
inflation
00:47:58
raise rates right when you raise
00:48:00
interest rates you slow spending
00:48:02
prices come down inflation slows but the
00:48:05
issue
00:48:06
when you raise rates is obviously you
00:48:08
see things like job loss and economic
00:48:09
growth declines and it can very quickly
00:48:11
spiral the other way this is the big
00:48:13
challenge of fed tapering
00:48:16
the other option as we've seen a
00:48:18
significant attempt at lately is to
00:48:19
raise revenue right so increased tax
00:48:22
rates uh tax a broader swath of people
00:48:24
at a higher rate or broader spot of
00:48:25
business at a higher rate so it's very
00:48:27
likely that you know tax revenue could
00:48:30
kind of present itself again
00:48:32
as a driver if inflation continues to
00:48:34
spiral up and the third which is the
00:48:36
least likely is cut spending right the
00:48:38
the federal government spending the way
00:48:41
it does right now makes a very
00:48:42
inefficient way of kind of putting
00:48:44
capital into the system and inflating
00:48:46
we've seen historically that anything
00:48:47
the federal government spends money on
00:48:48
like health care and education the costs
00:48:51
very quickly spiral out of control super
00:48:53
inefficient why not just give that money
00:48:55
to the free market to make decisions on
00:48:56
how to spend it it would be more
00:48:57
efficient etcetera and the market would
00:48:59
effectively find balance where buyers
00:49:00
and sellers are equivalent as opposed to
00:49:03
having the federal government driving
00:49:04
the price of everything up
00:49:06
the fourth option that people don't talk
00:49:07
about
00:49:09
which i think may end up becoming an
00:49:11
important option
00:49:13
not kind of oblique option but more kind
00:49:15
of backdrop is to start a war
00:49:18
and you know when you start a war dog
00:49:21
the dog yeah when you start a war you
00:49:23
stimulate the economy without needing to
00:49:25
pump additional capital in so you can
00:49:27
increase growth and avoid the risk of
00:49:29
stagflation
00:49:30
and you can source resources that
00:49:32
otherwise wouldn't be kind of flowing in
00:49:33
the trade
00:49:35
or basically in a land grab type
00:49:37
situation
00:49:38
but it doesn't necessarily mean that
00:49:40
policymakers would say hey let's go
00:49:41
start a war to decrease inflation taiwan
00:49:45
but the premise that conflict
00:49:48
can improve the economy is a important
00:49:52
backdrop that starts to play into policy
00:49:54
decisions that might get made over the
00:49:56
next couple of months and quarters and
00:49:58
that's really important whether or not
00:50:00
the posturing is one of partnership and
00:50:03
and reducing the tension with foreign
00:50:05
nations
00:50:06
or one of increasing the tension it's
00:50:08
more likely that we would want to
00:50:09
increase the tension when we're in an
00:50:11
inflationary environment so that's quite
00:50:13
a conspiracy there so what do you think
00:50:14
sex okay let me we gotta go back first
00:50:16
principles on this thing we're not gonna
00:50:18
start a war to tame inflation okay but
00:50:20
let me just explain what inflation is
00:50:22
because i'm not sure people like fully
00:50:24
understand like how this works
00:50:26
inflation's very simple it's too much
00:50:28
money chasing too few goods okay and we
00:50:31
have both sides of the equation going on
00:50:33
right now on the supply side
00:50:36
on the good side we've got shortages
00:50:38
we've got the ports backed up we've got
00:50:40
paying people not to work we still have
00:50:42
the 2 trillion of coveted relief passed
00:50:44
earlier this year which was responding
00:50:46
to a problem that was largely winding
00:50:48
down so we have these labor short we
00:50:50
have people dropping out of the the
00:50:52
workforce in record numbers in the
00:50:54
number that just came out showed in more
00:50:56
people quitting their jobs than ever
00:50:57
before
00:50:58
so we have a shortage in terms of the
00:51:01
production
00:51:02
of goods and services that people want
00:51:04
the same time we have this monetary and
00:51:07
fiscal expansion coming out of
00:51:09
washington you've got
00:51:11
you know again they did the 1.9 trillion
00:51:13
of coveted relief they did 1.2 trillion
00:51:15
of infrastructure buying still talking
00:51:17
about another 2 trillion of social
00:51:19
welfare you have the fed still printing
00:51:21
money with qe so you've got this massive
00:51:24
expansion in the amount of money so look
00:51:26
too much money chasing too too few goods
00:51:28
creates this problem
00:51:30
and it was very predictable and so what
00:51:32
i said back in may that's what i was
00:51:34
warning about and it goes back to the
00:51:36
druckenmiller clip that we that we were
00:51:37
talking about all the way back in may he
00:51:39
said the same thing that we had a
00:51:41
reckless fiscal and monetary
00:51:43
expansionary policy coming out of
00:51:44
washington at a time we didn't need it
00:51:46
because if you looked at like retail
00:51:48
spending back in may it was back to
00:51:50
above trend
00:51:51
so you know in other words like there
00:51:53
was no demand problem the economy was
00:51:55
back
00:51:56
and they've just been pumping and
00:51:57
pumping out of washington
00:51:59
we made a we had a we had good intent we
00:52:01
wanted to make people not suffer we
00:52:02
wanted to get the economy on
00:52:04
tap we may have just
00:52:05
made a bigger bet than we needed to we
00:52:07
overdid it we overdid it clearly but
00:52:09
look who wants to be the politician
00:52:11
quite frankly yeah he's not going to get
00:52:13
you who is the who ends the eviction
00:52:15
moratorium right the gravy
00:52:18
nobody wants to be the politician who
00:52:20
says okay now you suddenly have to pay
00:52:21
your rent but obviously people have to
00:52:23
pay their rent and we're taking away
00:52:24
your bonus unemployment i mean people
00:52:26
have to go back to work at some point
00:52:28
when there's 10 million jobs open just
00:52:31
as a
00:52:32
uh i've been watching the taiwan
00:52:34
situation like a hawk and i don't know
00:52:36
if you saw this this week to go off on
00:52:38
another tangent but the us is testing
00:52:40
israelis iron dome and guam as a defense
00:52:42
against chinese cruise missiles
00:52:46
obviously um
00:52:48
for possible deployment in taiwan
00:52:52
and i don't know if you're watching and
00:52:53
it's cancer in the nba uh but he has
00:52:55
been going on cnn and stuff like that
00:52:57
now talking about
00:52:59
china
00:53:00
pretty amazing
00:53:02
i i predict escalating global conflict
00:53:04
that'll be my prediction to mark the q4
00:53:07
well i i think that's i think actually
00:53:09
that's a pretty valid
00:53:10
prediction but i just think it's a
00:53:12
little bit separate than inflation like
00:53:14
i said it's not an explicit decision but
00:53:16
i do think that in the backdrop of an
00:53:18
inflationary environment where you have
00:53:19
something that can temper the condition
00:53:21
at home
00:53:22
that at the same time you know might
00:53:23
sell politically
00:53:25
but we don't need but it's not going to
00:53:27
solve anything politically okay i mean
00:53:28
world war ii you know famously got us
00:53:30
out of the great depression because that
00:53:32
did stimulate demand but in a situation
00:53:34
we're in today we have too much demand
00:53:36
we have retail is trending way above
00:53:39
curve what we have is a supply shortage
00:53:41
and devoting resources taking them away
00:53:43
from the productive economy to go to war
00:53:45
would only exacerbate the problem and
00:53:47
make it even worse what we need right
00:53:48
now actually is for washington to back
00:53:51
off to stop pumping demand with this
00:53:55
with you know now they're still talking
00:53:56
about this two trillion dollar machine
00:53:57
so the money printing that's what we've
00:53:59
got to get out of the way and to um
00:54:02
to stop these disincentives for
00:54:04
production and work
00:54:06
so you have ma i mean mansion was
00:54:07
exactly right about this okay do you
00:54:09
remember when manchin when he was
00:54:11
resisting this two trillion dollar
00:54:13
social welfare bill i mean the things he
00:54:15
said are already coming true i mean he
00:54:18
said this months ago he said that we
00:54:20
should take a strategic pause because he
00:54:22
said this is a quote by all accounts the
00:54:24
threat posed by record inflation to the
00:54:26
american people is not transitory and is
00:54:29
instead getting worse from the grocery
00:54:31
store to the gas pump americans know
00:54:33
that the inflation tax is real and dc
00:54:35
can no longer ignore the economic pain
00:54:37
americans feel every day that's what he
00:54:39
was saying this past summer several
00:54:41
months ago and they rolled right over
00:54:43
him the psychology of this could be
00:54:45
could be self-fulfilling as well because
00:54:47
what's going to happen is you're going
00:54:49
to have everybody raise prices because
00:54:50
it's now become an escalation you know
00:54:52
your hairdresser your
00:54:54
you know whatever you know services
00:54:56
you're using whatever product you're
00:54:58
buying whatever restaurant you're going
00:54:59
to is going to put two dollars on every
00:55:01
appetizer and five bucks on every entree
00:55:02
everything is just going to keep going
00:55:03
up and then what happens is people who
00:55:06
in the middle class
00:55:08
or you know who are consumers of
00:55:09
products in a large way will say you
00:55:10
know what i'm going to put off buying a
00:55:12
car
00:55:12
then we're going to be driving all this
00:55:14
supply up and then people are going to
00:55:15
say you know what [ __ ] it i'll just
00:55:17
drive this one for two more years that's
00:55:19
going to cause stagnation
00:55:21
and this is called
00:55:22
it's what we have in the 1970s and
00:55:24
you're right it's called an inflationary
00:55:25
spiral which is the future expectations
00:55:28
of increasing prices means that people
00:55:30
start increasing them now and that feeds
00:55:32
on itself yes and that's what we had in
00:55:34
the late 1970s and the thing that broke
00:55:36
that was paul volcker jacking up
00:55:38
interest rates it was very painful it
00:55:39
caused a very severe recession in the
00:55:41
early 1980s but then the economy came
00:55:44
roaring out of that by 83 it got reagan
00:55:46
elected in 84 and you had 30 straight
00:55:49
years of declining interest rates and
00:55:51
that led to a stock market boom so the
00:55:53
problem we have now okay here's the
00:55:55
problem we have is there's going to be
00:55:57
no paul volcker why we can't afford to
00:55:59
jack up rates because the federal
00:56:01
government's debt is so much bigger than
00:56:04
it is we are not on a fixed rate we're
00:56:06
on a variable rate all of the debt we
00:56:08
take the average maturity of government
00:56:09
debt right now is five years okay so
00:56:11
that i mean that means the whole debt
00:56:13
rolls over within five years so if they
00:56:15
jack up interest rates we have almost 30
00:56:17
trillion of us federal debt right now so
00:56:20
every one percent that they increase
00:56:22
interest rates that means another 300
00:56:25
billion a year of debt service payments
00:56:28
yeah
00:56:30
exactly so there's going to be enormous
00:56:31
pressure
00:56:32
on the fed not to raise rates you
00:56:34
already are hearing biden
00:56:36
rattling the sabers saying that powell
00:56:38
may not be his choice for a second term
00:56:40
by the way powell is very dovish he's
00:56:42
basically saying we can't raise rates
00:56:44
right now because of this and that so
00:56:47
and abide in the administration nobody
00:56:49
in washington ever wants rates to go up
00:56:51
right they want to keep these low rates
00:56:52
forever this is the problem is look at
00:56:54
the end of the day i don't know what the
00:56:56
inflation picture is going to look like
00:56:58
next year but what concerns me is we
00:57:01
don't have effective tools to fight it
00:57:02
anymore because we've given up our
00:57:04
ability to raise rates because it would
00:57:06
it would increase the cost of the debt
00:57:08
so much and i mean so with just one
00:57:10
article just to share with you guys
00:57:12
is this again my one of my favorite
00:57:14
sources of economic information is the
00:57:16
the fred blog which is from blogs right
00:57:18
from the st louis fed okay
00:57:21
talking about two tales of federal debt
00:57:23
okay
00:57:24
and the article is about here's why
00:57:25
there's so much disagreement on whether
00:57:27
the federal government debt is too high
00:57:28
so the first chart shows debt to gdp
00:57:30
this is always the way of looking at
00:57:32
government debt was simply looking at
00:57:34
the ratio of debt to gdp it's now
00:57:36
something like 125 percent in peace time
00:57:39
i don't think we've had a higher
00:57:40
peacetime ratio that would tell you
00:57:42
things are out of control but for the
00:57:43
last decade while it's been going on you
00:57:45
had this whole school of thought the mmt
00:57:48
modern monetary theory all these
00:57:49
economists and experts and politicians
00:57:51
in the media were eager to buy in
00:57:53
because they want to spend the money
00:57:55
okay and what they said is no it's not
00:57:56
debt to gdp you should look at debt
00:57:58
service to gdp this is the second chart
00:58:01
on that blog and so debt service to gdp
00:58:04
was was staying constant or even going
00:58:07
down as
00:58:08
the debt to gdp was going up why because
00:58:10
interest rates were so low the problem
00:58:12
is what was so foolish about this point
00:58:14
of view is it is assumed that interest
00:58:16
rates were going to last forever well if
00:58:18
that was your point of view why didn't
00:58:20
you do what trump actually suggested
00:58:22
several years ago when he suggested
00:58:23
having 100 year t bills they should have
00:58:25
locked in
00:58:26
much much longer duration maturities on
00:58:29
the federal debt and instead and yellen
00:58:31
rejected this okay and so you've got a
00:58:34
five year average duration which means
00:58:36
that if interest rates go back up the
00:58:39
debt service cost is going to explode
00:58:41
yeah
00:58:42
so in 1980 we changed the goal posts for
00:58:45
cpi so even as a measurement to know
00:58:47
what we look at and i think jack dorsey
00:58:49
tweeted this out so nick you may be able
00:58:50
to find this tweet but
00:58:52
you know we changed the measurement of
00:58:54
how cpi measures and so if you go back
00:58:56
to the original measurement
00:58:58
uh it looks like inflation in cpi is uh
00:59:01
much more pernicious than we would
00:59:03
otherwise think it if we just look at
00:59:05
the the new cpi that we
00:59:07
that we started to look at as of 1980 so
00:59:10
um that's another sort of like point we
00:59:12
did this we did the same thing with i
00:59:13
just go back to what i said early on had
00:59:16
given up looking for two smartest people
00:59:18
that we both know
00:59:19
are net sellers
00:59:22
well they're selling some yeah i mean
00:59:24
they're not selling i'm just saying the
00:59:25
two smartest people we know
00:59:27
i mean we don't get financial advice
00:59:29
here but should everybody be moving to
00:59:31
cash no where do you put your money i
00:59:33
don't know
00:59:34
i'm totally confused this is i think the
00:59:36
admission just buy productive assets
00:59:39
great businesses that have durability
00:59:41
and let them ride for 20 years
00:59:44
i i like your answer
00:59:45
the fact is we're all confounded as to
00:59:47
what to do at this moment in time we're
00:59:49
all trying to figure this out and we do
00:59:51
this for a living but then you're
00:59:52
trading the market like everyone else
00:59:53
all the time like you know why trade the
00:59:55
market where you can just buy great
00:59:56
businesses own stakes in them and let it
00:59:58
rest no i'm just talking about this
01:00:01
i mean my practical issue is that i
01:00:03
don't have infinite money and so in
01:00:04
order to put my money into productive
01:00:06
assets i have to sell other productive
01:00:07
assets
01:00:09
well if you've got other productive
01:00:10
assets leave them in
01:00:11
why sell
01:00:12
well then it's like then i'm basically
01:00:14
you know doubling down on a world view
01:00:16
that may be old and dated right so if
01:00:18
i'm along a bunch of software companies
01:00:20
and i really want to do something in
01:00:21
climate science or biotech what am i
01:00:23
supposed to do don't try don't try and
01:00:25
time the market shift your assets right
01:00:26
why do you care what the no no i'm not
01:00:27
trying to tax this i'm not trying trying
01:00:29
to time the market i'm just saying if if
01:00:31
my world view shifts to really want to
01:00:33
double down on climate science or
01:00:34
alternative finance or biotech i have to
01:00:36
raise capital to do that
01:00:39
you have to raise capital is what you're
01:00:40
saying
01:00:41
right but but for me i'm not raising it
01:00:42
from other people i'm raising it for
01:00:44
myself so
01:00:45
to me the best place to be right now is
01:00:50
in the company formation space
01:00:52
because when you create a company um
01:00:55
like friedberg does every three months
01:00:58
there is so much value being created at
01:01:00
that moment in time and so much further
01:01:02
capital getting poured into it
01:01:04
that if you are the originator of the
01:01:05
company and you get some big slice of
01:01:07
the cap table for doing that which is
01:01:09
completely valid you originated the
01:01:11
company whether it's unique or call in
01:01:13
or whatever it is
01:01:14
man that is a great moment of creation
01:01:16
of wealth creation
01:01:18
and when you're the person putting the
01:01:19
money in at the billion dollar
01:01:20
evaluation before the company whatever
01:01:22
call in i'm sorry clubhouse went from
01:01:25
100 million to 4 billion
01:01:27
with no revenue i don't know what's
01:01:29
happening in the world but
01:01:31
pretty crazy do you want to go on to um
01:01:34
xi jinping and his he's going to be
01:01:36
speaking with biden on monday it's done
01:01:38
he had he got it done before his his
01:01:40
video his zoom with biden
01:01:42
oh yeah so they're doing this now the
01:01:44
supreme leading hasn't left china the
01:01:46
supreme court
01:01:47
explain what this means uh from the
01:01:50
story um i mean i think the basic the
01:01:52
basic takeaway is that they've been
01:01:53
working inside the body politic inside
01:01:55
of china
01:01:56
to basically reflect g on the same level
01:01:59
as mao and
01:02:00
um and effectively what this means is
01:02:02
that it it allows him
01:02:04
[Music]
01:02:05
to remain um the leader of china
01:02:08
indefinitely
01:02:09
and so um there is no transition of
01:02:12
power typically what had happened
01:02:14
was these there were these ten-year
01:02:16
windows and you know you you you go
01:02:18
uh zhang
01:02:20
you know 10 year cycles and then they
01:02:21
pass the baton
01:02:23
but it now looks like we'll be living
01:02:25
with xi jinping until um
01:02:27
until you know he he joins the after
01:02:29
world so uh he's a ruler for life of
01:02:32
china basically crazy
01:02:34
i don't think that's exactly right what
01:02:36
an incredible feat of political
01:02:39
maneuvering without judging it just to
01:02:41
say
01:02:42
how what a complicated byzantine
01:02:44
political infrastructure he must have
01:02:46
had to navigate i don't know how he
01:02:47
played this three-dimensional chess with
01:02:49
all these people the slow systematic
01:02:51
dismantling of the old guard placing all
01:02:54
of his people in then slowly moving
01:02:56
towards this
01:02:57
this kind of recognition he's
01:03:00
admiring
01:03:01
yeah no the dictator got his name for a
01:03:03
reason somewhere
01:03:05
donald trump and steve bannon are like
01:03:07
what did we do wrong we were so close
01:03:09
january 6 we almost if pence would have
01:03:12
just played ball sacks you'd still be in
01:03:14
power huh your guys dropped the ball and
01:03:17
we wouldn't have inflationary
01:03:19
just think trump was leader for life you
01:03:21
know jason given how accurate my
01:03:24
predictions have been you should have a
01:03:25
little bit more respect for my uh
01:03:27
political
01:03:28
positions what do you guys think happens
01:03:31
now that g basically is ruler for life
01:03:34
you know he i think the chinese term for
01:03:36
it is historic figure which is yeah
01:03:38
saying you know you're you're basically
01:03:40
um you're a maid man basically you can't
01:03:43
get whacked nobody can touch you you're
01:03:45
good for life
01:03:47
the end nobody can question you i mean
01:03:49
can you imagine mao zedong then you know
01:03:51
deng xiaoping and now
01:03:53
xi jinping incredible like he is at that
01:03:55
level
01:03:57
well it means if you start a war and a
01:03:59
serious military conflict that nobody
01:04:01
can question you right you're the
01:04:03
supreme leader so
01:04:04
it's sort of like putin and mbs like mbs
01:04:07
can go
01:04:08
kill a journalist and
01:04:10
he's got nobody to answer to it means he
01:04:12
has nobody
01:04:13
dong initiated the revolution
01:04:16
and you know deng xiaoping was really
01:04:18
the architect of free markets that has
01:04:20
made china the
01:04:21
economic powerhouse that it is today
01:04:24
their internal reflection is xi jinping
01:04:26
is on the same scale of that now i mean
01:04:28
i can't claim
01:04:30
for the future
01:04:31
yeah what is the accomplishment that's
01:04:33
going to really put him in that league
01:04:34
and and you'd have to say it's the
01:04:35
annexation of taiwan i mean that's the
01:04:38
thing that he must be looking to do
01:04:40
before you know his time to reunify
01:04:44
china that's the thing that could put
01:04:45
him in that league and so that that is
01:04:48
the
01:04:49
trip wire
01:04:50
that to friberg's point that could lead
01:04:52
to you know a conflict i i think they
01:04:55
you know i hate to say that freeberg
01:04:58
is wrong uh because like i don't think
01:05:00
in this case i can i do think that there
01:05:02
is some left tail risk
01:05:05
for like a crazy wag the dog moment in
01:05:07
taiwan it would be really scary
01:05:10
really scary
01:05:11
right now if i was looking at the sizes
01:05:13
of the navy's people don't know this
01:05:14
japan actually has a very large
01:05:16
defensive navy
01:05:18
the uk and the united states obviously
01:05:20
have very large ones china's is large
01:05:22
but not on a tonnage basis they have a
01:05:24
lot of ships
01:05:25
but together i don't know if you saw the
01:05:26
military exercises going on but
01:05:29
new zealand australia the united states
01:05:31
uk and japan
01:05:33
uh were basically i think south korea
01:05:36
would were basically driving their ships
01:05:38
around the south china sea this is going
01:05:40
to be
01:05:40
i think yeah so you know i did i did a
01:05:42
really interesting interview with um the
01:05:44
historian and commentator neil ferguson
01:05:47
yeah who is also a pretty avid china
01:05:50
watcher and i did an interview with him
01:05:52
actually on on my app
01:05:54
uh
01:05:55
you don't want me to say the name shall
01:05:56
not be yeah but anyway so he he had a
01:05:59
really great line which is he said that
01:06:02
the that type the issue of taiwan it's
01:06:04
basically like
01:06:06
the issue of
01:06:09
cuba and berlin and the persian gulf all
01:06:12
rolled into one so it's like cuba and
01:06:14
the cuban missile crisis because it's
01:06:16
right there off the shore of china it's
01:06:19
like berlin
01:06:20
you know because that was basically the
01:06:23
dividing line between freedom and you
01:06:26
know totalitarianism you know where
01:06:28
where the berlin wall got built and it's
01:06:30
like the persian gulf because the new
01:06:32
oil are the semiconductors the chips
01:06:34
that are fabbed in taiwan at tsmc and so
01:06:38
all the resources that we're dependent
01:06:40
on for the new economy are all right
01:06:42
there so super smart framing yeah it's i
01:06:45
thought it was a clever line the thing
01:06:47
we have to remember about g is that his
01:06:49
father was um
01:06:50
was a commander uh for mao and was in a
01:06:54
vice premier and so you know his
01:06:56
historical he is the original princeling
01:06:58
right remember you know there's this
01:06:59
context of these chinese princelings
01:07:02
but he is he is one of these
01:07:03
originalists and so his motivation will
01:07:06
be
01:07:07
it seems at least
01:07:09
to bring china back into that
01:07:13
spectrum of power which is really about
01:07:15
a consolidated country
01:07:17
um and a single nation state and that
01:07:18
has to include taiwan it can't it can't
01:07:20
not so to your point david it's almost
01:07:22
more motivation for him to go off on
01:07:24
some crazy adventure and try to reclaim
01:07:26
it
01:07:29
it's really interesting to look at the
01:07:31
tonnage of ships and the number of ships
01:07:32
the united states has over 6 000 tons of
01:07:34
ships 949 according to
01:07:37
globalsecurity.org china has to only 2
01:07:39
000 tons and a thousand ships they have
01:07:41
a lot of smaller ships uh and then
01:07:43
russia uk india japan france indonesia
01:07:45
turkey germany illinois warships jason
01:07:47
or yeah this is their their navy
01:07:49
warships um and so they're fighting uh
01:07:51
but japan has a very large one i wasn't
01:07:53
aware of this because i thought they
01:07:55
were not doing military buildup but they
01:07:57
have what's called a defensive navy uh
01:07:58
which can't do offensive stuff so
01:08:01
this is um
01:08:02
i think this is really problematic how
01:08:04
many of these ships are smaller than
01:08:05
sax's yacht that he rented this year
01:08:08
yeah saxis tonnage would kind of put the
01:08:10
united states over the top i think in
01:08:12
this gross cottage of sax's yachts is
01:08:14
going to be donating his new yeah
01:08:16
no for sure it's bigger than indonesia i
01:08:18
see indonesia on this list turkey i mean
01:08:20
how big
01:08:21
in my defense it was a starter yacht
01:08:24
it wasn't
01:08:25
my indefensible next stop next one next
01:08:28
one will be bigger yeah solana is going
01:08:30
to make sure of that right yeah you can
01:08:31
buy yachts with solana all right i think
01:08:33
we covered enough
01:08:35
uh ge and toshiba can't run their
01:08:36
businesses so they're each separating
01:08:38
into three separate let's talk about
01:08:39
that that's interesting actually and
01:08:41
johnson and johnson yeah
01:08:43
today all right so on tuesday g
01:08:45
announced they were splitting into three
01:08:46
separate companies aviation healthcare
01:08:48
and energy
01:08:49
toshiba reported a similar plan johnson
01:08:52
johnson today johnson johnson was today
01:08:55
this is um in direct uh conflict with
01:08:58
the consolidation and the creation of
01:09:00
conglomerates and
01:09:01
it's not good
01:09:02
i think this is an important point jkl
01:09:04
um you know in the 80s and 90s it was
01:09:06
cool to create conglomerates meaning you
01:09:08
would kind of stick businesses together
01:09:10
that were rjr somewhat disparate
01:09:13
um because you could financially
01:09:14
engineer a way to do it that would juice
01:09:16
shareholder returns right you could
01:09:18
borrow money add lots of scale the cost
01:09:21
of debt goes down you could increase
01:09:22
your debt load et cetera
01:09:24
um and you know the challenge is like
01:09:26
when you're scaling a business you
01:09:28
either need to grow your revenue
01:09:29
organically or you need to acquire
01:09:31
and when you're acquiring you're either
01:09:33
acquiring horizontally or you're
01:09:35
acquiring vertically meaning you're kind
01:09:36
of integrating your supply chain
01:09:38
or you're integrating um or you're
01:09:40
adding ancillary businesses that you can
01:09:42
cross-sell so you're either reducing
01:09:43
your costs or increasing your
01:09:44
cross-selling ability so there's some
01:09:46
inherent synergy in the acquisition
01:09:48
the problem with conglomerates is there
01:09:50
is very little synergy meaning like when
01:09:52
you acquire a new business like an
01:09:53
aviation business it doesn't create
01:09:55
synergy for your healthcare business
01:09:57
and um you know there was always a
01:09:58
rationalization that these managers of
01:10:00
these big conglomerates had which was
01:10:02
like oh well we could do this and we
01:10:03
could do that at the end of the day it
01:10:04
was financial engineering where they
01:10:06
simply kind of used debt to reduce
01:10:08
um
01:10:09
you know the cost of capital and
01:10:10
increase the shareholder returns and now
01:10:13
everyone's kind of waking up to the fact
01:10:15
that you're actually decreasing value
01:10:17
because an investor that wants to own an
01:10:19
aviation company doesn't also want to
01:10:20
own a healthcare company so the investor
01:10:22
doesn't buy those shares and the
01:10:23
investor that wants to own the
01:10:24
healthcare company doesn't own the
01:10:25
aviation company so they don't buy those
01:10:27
shares so the way to increase
01:10:28
shareholder value is to actually split
01:10:30
those businesses up and then the
01:10:31
investors that want to own the aviation
01:10:33
business will pay more and the investors
01:10:34
that want to own the healthcare business
01:10:35
will pay more and the overall value of
01:10:37
those two businesses goes up by having
01:10:39
them be separate and that's what the
01:10:41
market's kind of waking up to and this
01:10:43
is kind of a trend that's been going on
01:10:44
for years now you know going back to
01:10:46
kind of 2013-14
01:10:49
where the market started to kind of
01:10:50
rationalize some of these silly
01:10:52
conglomerate business ideas and break
01:10:54
them apart into more kind of you know
01:10:56
targeted businesses that can actually
01:10:58
spin out or or yeah or break off
01:11:00
breakups yeah that can basically
01:11:02
attract shareholders to bid on each one
01:11:04
of those businesses individually and
01:11:06
drive value up you know we saw one
01:11:08
business i was close to that i saw this
01:11:09
with was dow dupont where they you know
01:11:11
down merged with dupont and then they
01:11:13
split into several businesses that each
01:11:15
were focused on a particular vertical
01:11:17
and it made a lot of sense to drive
01:11:19
value for uh for for the for the overall
01:11:21
shareholders so at the end of the day
01:11:23
you know these conglomerates are about
01:11:24
kind of driving economic outcomes and
01:11:26
the only folks that you see doing this
01:11:28
well are folks like warren buffett where
01:11:30
the job is really about capital
01:11:32
allocation where you know you can
01:11:34
allocate capital to the best business
01:11:36
and that business on its own will grow
01:11:38
organically versus taking a bunch of
01:11:40
crappy low growth no growth businesses
01:11:42
levering them up to kind of juice the
01:11:44
returns on each other and we're seeing
01:11:45
this slow unwinding happening so i think
01:11:47
it'll it'll continue to and you can
01:11:49
probably go and pick a bunch of these
01:11:50
conglomerates and you'll see the
01:11:51
activist shareholders doing this they'll
01:11:53
they'll buy a bunch of shares they'll
01:11:55
instigate and say hey you guys should
01:11:56
break up the share price will go up by
01:11:58
20 30 percent so if you want a stock tip
01:12:00
of the day
01:12:01
you know go find the next set of
01:12:02
conglomerates that are going to get
01:12:03
attacked and broken up it's interesting
01:12:06
and you know
01:12:07
with public markets dell is spinning out
01:12:10
uh vmware and that's going to
01:12:12
create a massive amount of cash and
01:12:15
shareholder value they're doing a huge
01:12:16
dividend so i guess my question to you
01:12:18
chamath is when do we start to see this
01:12:21
hit
01:12:22
not from a point of weakness but from
01:12:24
companies that are strong and see this
01:12:27
as hey this is a way to just unlock
01:12:29
shareholder value will we see an amazon
01:12:31
spin at aws a youtube or an instagram
01:12:35
come out of their parent companies
01:12:37
i think it's very rare that these things
01:12:39
happen on the offensive foot i think
01:12:41
it's typically a defensive maneuver
01:12:42
that's driven by
01:12:44
really poor returns over long periods of
01:12:46
time or activist investors
01:12:53
totally i was about to bring that up i
01:12:55
mean do you remember how hard that ebay
01:12:57
i remember like john donahoe was the ceo
01:12:59
he like fought that so hard i remember
01:13:02
getting a phone call from him asking if
01:13:04
i would support them he had rounded up
01:13:06
read off and other people support ebay
01:13:08
and i'm like no i can't wait wait wait
01:13:09
no do you remember this we were in vegas
01:13:11
and donahoe called and we were working
01:13:13
on a plan and then you went and walked
01:13:15
on through the plan
01:13:17
do you remember this thing we were
01:13:19
no what happened we were in vegas we
01:13:21
were going to try to we were in vegas
01:13:24
i can't i can't no no donahoe either
01:13:26
called you or called me and i said you
01:13:28
should talk to sax
01:13:29
and you sketched out a plan for what
01:13:31
paypal should do remember
01:13:33
oh yeah yeah i do remember that but yeah
01:13:35
like on saturday afternoon we sketched
01:13:37
out this plan yeah yeah so i told john
01:13:40
no i'm sorry i can't support you because
01:13:41
i believe it should be spun out and so
01:13:43
in the only two the only two people from
01:13:45
the original paypal team who said that
01:13:47
publicly were me and elon and we said
01:13:49
that
01:13:50
if you could get paypal out from under
01:13:53
you know this you know this sort of ebay
01:13:56
bureaucracy it could be a 100 billion
01:13:58
dollar plus company the bar for
01:13:59
acquisitions is extremely high like i
01:14:01
think the the last really two
01:14:03
acquisitions that were really done well
01:14:04
was zuck's acquisition of
01:14:06
what's happened instagram but since then
01:14:08
the bar is extremely high for these
01:14:10
conglomerates so as an example paypal
01:14:12
was rumored to be buying pinterest
01:14:14
and
01:14:16
you know it there was such an incredible
01:14:18
shareholder revolt that they had to put
01:14:20
out a press release saying we have
01:14:21
absolutely no interest
01:14:23
in acquiring pinterest but what that all
01:14:25
that did was just you know
01:14:27
accelerate the bleeding because then
01:14:28
people were saying wait a minute how
01:14:30
strategically lost must you be
01:14:33
totally that you would want to buy
01:14:34
pinterest as and so then it and as a
01:14:37
result the the paypal stock price has
01:14:38
gotten absolutely yeah it was over 30
01:14:40
billion dollar company now it lost the
01:14:42
entire value of pinterest basically
01:14:45
here's the big issue that i think we
01:14:46
have in american
01:14:49
economics and company building
01:14:51
you know we've gone through 20 or 30
01:14:52
years of really under investing in r d
01:14:56
at the sake of
01:14:58
share buybacks
01:15:00
um at the sake of you know market
01:15:02
consolidation dividend
01:15:04
private equity you know
01:15:06
driven take privates
01:15:08
and so all of this capital misallocation
01:15:11
has really put us on the wrong foot and
01:15:13
the pandemic basically showed that we
01:15:14
were really ill position
01:15:16
so a lot of these um conglomerates it
01:15:19
doesn't make sense today because we've
01:15:20
proven that the compensation schemes for
01:15:23
ceos
01:15:24
the incentives for
01:15:26
executive management are way too
01:15:28
perverted and they just create
01:15:32
horrible outcomes a different example i
01:15:34
saw
01:15:35
in the last i think 15 or 20 years ibm's
01:15:39
market cap has gone down to 113 billion
01:15:42
in the meantime they've bought back 132
01:15:45
billion dollars of stock what could you
01:15:47
imagine the kind of r d that ibm could
01:15:50
have affected with that 132 billion and
01:15:53
where they could be
01:15:55
so
01:15:56
we have they're not they're not good
01:15:57
capital allocators well we have horrible
01:15:59
capital misallocation so
01:16:01
well look at apple i mean i don't think
01:16:02
they know how to spend the money in the
01:16:03
r d yeah they're not they're not good at
01:16:05
it they're not good at it they're better
01:16:07
off they're better off taking those
01:16:08
massive they're better off taking those
01:16:10
massive r d budgets and putting it into
01:16:12
m a budgets not for like a 50 billion
01:16:15
dollar pinterest acquisition that
01:16:17
doesn't make any sense has no synergies
01:16:18
but on smaller acquisitions of teams
01:16:20
that have built really interesting
01:16:21
technologies ibm ibm could have bought a
01:16:23
lot of different things
01:16:24
to innovate or operate those guys don't
01:16:27
seem to know how to do anything so like
01:16:30
my point is now we're in the cycle where
01:16:32
these conglomerates will get ripped
01:16:33
apart so that
01:16:35
a brighter fresher
01:16:37
and probably younger
01:16:39
group of executive management
01:16:42
can take a different the spin on these
01:16:44
companies and actually do some so for
01:16:46
example like the j and j spin out is
01:16:48
really exciting because you take med
01:16:50
devices in pharma and you separate it
01:16:51
from a really struggling complicated
01:16:53
consumer goods you know package business
01:16:56
you know the shampoo the q-tips the
01:16:57
listerine get all that off-balance sheet
01:17:00
now you can actually you know make drugs
01:17:01
and med devices and that's a really
01:17:03
interesting business that the right ceo
01:17:04
can really do a lot of interesting
01:17:06
things with i heard an interview with us
01:17:08
then ceo of ge i think culp who was
01:17:10
putting forward this plan
01:17:12
the line that i remember that kind of
01:17:13
resonated with me he said the benefits
01:17:15
of focus are immediate the benefits of
01:17:17
synergy is are hypothetical
01:17:20
and i think that's really the key point
01:17:23
here and that's what's going to fuel all
01:17:24
this sort of deconglomeration is that
01:17:27
the benefits of focus to a company are
01:17:29
so huge
01:17:30
that you know that but but the reason
01:17:33
why it doesn't happen is because of this
01:17:35
instinct
01:17:36
that all these managers have for empire
01:17:38
building right so when times are good
01:17:40
they can keep building their empires and
01:17:42
then something bad has to happen to
01:17:44
force them to focus
01:17:46
yes
01:17:48
the motivation they're not they're not
01:17:49
owners they're typically not founders
01:17:52
and so what you end up seeing is their
01:17:53
comp goes up linearly with market cap so
01:17:56
the
01:17:56
biggest right and this is just just to
01:17:59
close the thought out on that whole ebay
01:18:00
paypal thing i mean it was so obvious
01:18:03
that ebay should spin out paypal but for
01:18:05
the manager history the management
01:18:08
resisted it and it took an activist
01:18:09
shareholder i think icon came in this
01:18:12
icon yeah it was icon who came here when
01:18:13
the carolinas it's in the lobby you're
01:18:15
[ __ ] well but but icon shouldn't have
01:18:17
to come in there the reason why there's
01:18:19
opportunities
01:18:20
the managers won't do the right thing he
01:18:22
unlocked a quarter trillion dollars of
01:18:23
value he was incredible no i mean they
01:18:25
spelled that out for 40 or 50 billion
01:18:27
now it's worth five times that amount
01:18:28
it's a quarter of a trillion dollars
01:18:30
yeah it's crazy and just to to put this
01:18:32
all in perspective the stock buybacks
01:18:34
that are going on right now apple did
01:18:35
almost 20 billion dollars less square
01:18:37
they've done 77 billion in last year and
01:18:39
you want to talk about the impact of tax
01:18:41
policy on innovation
01:18:43
well you've got on one hand here
01:18:45
apple is is looking at well i'm gonna
01:18:47
have to pay all these taxes i might as
01:18:49
well just increase the amount i'm buying
01:18:51
back and be neutral why would i want to
01:18:52
show any kind of a profit here i'll just
01:18:54
buy back as many shares as possible the
01:18:56
company will eventually be private i
01:18:58
mean this is you got to be really
01:19:00
careful with
01:19:01
how you do this because
01:19:02
there's no incentive for people now to
01:19:04
put money into r d or other stuff that
01:19:06
just buy back the stock might be the
01:19:07
most efficient thing to do correct in
01:19:09
terms of like the shareholders you don't
01:19:10
know how to spend the money it's the
01:19:11
dumbest thing to do it basically shows
01:19:13
you're an idiot well it shows you got
01:19:14
nothing better to spend the money on so
01:19:16
maybe maybe that's maybe buying back the
01:19:18
stocks better than furring it away but
01:19:20
yeah it means you're out of ideas it
01:19:22
means you're not here
01:19:23
or you or or a combination of my god
01:19:26
this core business is throwing off so
01:19:28
much money that we can't come up with
01:19:30
enough ideas
01:19:31
at that time i think that's no it just
01:19:33
means you're not ambitious enough i mean
01:19:35
what would you spend 20 billion on i
01:19:37
mean zuck is having a hard time spending
01:19:38
10 billion on creating the metaverse a
01:19:41
year i mean you're talking about 80
01:19:43
billion a year what would you put that
01:19:44
towards what should apple
01:19:46
put it towards
01:19:47
no apple apple could even more
01:19:49
aggressively double down to enter the
01:19:51
car market they could have done it much
01:19:53
sooner than they have they could spend
01:19:54
20 a year on that sure you're right you
01:19:56
know easily um they could actually enter
01:19:59
i don't know power they could uh yeah i
01:20:02
mean but they're but they're you know
01:20:03
apple
01:20:04
their their culture is to have very few
01:20:06
products as a company they're always
01:20:07
very proud of that it's the steve jobs
01:20:08
focus thing i mean i think it's worked
01:20:10
pretty well for them i know you're
01:20:11
second guessing it the thing that i hear
01:20:14
i just don't like buybacks because i
01:20:15
think it comes at the sake of r d for
01:20:17
most companies i think it's going to be
01:20:19
easy choice no the big tech companies
01:20:21
are different but everybody else what
01:20:23
you see is r d is like one or two
01:20:25
percent of of of their you know
01:20:27
but it's it's a shame look apple could
01:20:29
definitely be more aggressive but i
01:20:30
wouldn't judge the tim cook era until we
01:20:32
see what happens with glasses because
01:20:33
this is the product that i hear is
01:20:35
coming is going to be their you know
01:20:37
their ar glass glasses and that's going
01:20:39
to be a new computing platform that they
01:20:41
open up to developers and i guess cook's
01:20:43
been there for what a decade but i think
01:20:45
he doesn't want to retire until this
01:20:47
comes out and he can see this is going
01:20:49
to be his signature product i think but
01:20:51
i'll tell you just the other thoughts
01:20:53
that just went through my head as i saw
01:20:54
this news about ge it really was kind of
01:20:56
the end of an era you got to remember
01:20:57
that back in the 80s 90s i think even as
01:20:59
late as 2000 ge was the number one
01:21:01
company in america by market cap it was
01:21:03
the top of the s p 500 it later
01:21:06
subsequently got kicked out of the the
01:21:07
dow jones but the thing that went
01:21:09
through my head is you know when i was a
01:21:11
kid growing up the only two business
01:21:13
names that i even knew were jack welsh
01:21:16
and then lee iacocca you know that was
01:21:18
it
01:21:19
had their posters on your watch ge and
01:21:21
chrysler
01:21:22
in between the two of them it was big
01:21:24
jacket well shania and now you don't
01:21:26
even know the name of the the ge guy i
01:21:28
mean like i know it because i watched
01:21:30
some interview and i saw him up there
01:21:31
but
01:21:32
i mean
01:21:33
you can't think of a business leader
01:21:34
today who's not in tech and and really a
01:21:38
tech founder or somebody who's handed
01:21:40
the ball by the tech founder so we know
01:21:42
tim cook because steve jobs handed him
01:21:44
the ball but otherwise it's all tech all
01:21:46
tech founders you don't hear about any
01:21:48
of these old like dow jones type type
01:21:50
companies anymore is this the the
01:21:53
business
01:21:54
the business environment the the economy
01:21:56
has changed so much
01:21:58
since the 80s and 90s it's all totally
01:22:00
dominated by tech now but i would argue
01:22:03
that the disruptive business and the
01:22:04
disruptive business leader are always
01:22:06
the icons back in the day the chemical
01:22:09
companies were the icons and everyone
01:22:10
knew the chemical companies and the guys
01:22:12
running them then it was the industrial
01:22:13
companies you know then it was kind of
01:22:15
the financial you know then it were
01:22:16
these guys in the 80s and 90s
01:22:19
weren't founders you know but they were
01:22:21
in different
01:22:22
ways on r d spending top two companies
01:22:26
without looking on r d in the world
01:22:28
yeah global in the world number one
01:22:30
number two give me number one number two
01:22:32
uh i would say microsoft
01:22:33
no it depends on classification but i
01:22:35
would say saudi
01:22:36
aramco freeburg what do you got
01:22:39
yeah i would probably put exxon up there
01:22:42
you guys need to think about who was
01:22:44
been some of the most innovative leaders
01:22:46
uh amazon 42 billion in 2020. but jason
01:22:49
that's an accounting thing if you're
01:22:50
saying in the world saudi arabia their
01:22:53
exploration their enp budget is probably
01:22:55
200 billion dollars a year
01:22:57
okay i i
01:22:58
i guess maybe because that's not that's
01:23:00
a is that is that a corporate entity
01:23:02
technically it wouldn't be on the list
01:23:03
it's a public company yeah so google
01:23:15
no this is all companies samsung
01:23:17
facebook some of this is just accounting
01:23:19
categorization
01:23:21
anyone who because the engineering
01:23:23
budget is is basically what goes into
01:23:25
rnd so the more engineers you have on
01:23:27
staff the bigger you are
01:23:29
doesn't mean you're producing anything
01:23:30
by the way bigger industrial companies
01:23:32
traditional companies that list things
01:23:34
as r d you know most of those dollars
01:23:36
flow out to third-party companies like
01:23:38
enterprise software companies services
01:23:40
businesses so it doesn't end up it gets
01:23:43
accounted for it's quote unquote r d
01:23:44
because they get to capitalize it but
01:23:46
that spend is typically um
01:23:49
uh not paying in-house salaries to
01:23:51
engineers and that's the distinction
01:23:53
between true tech companies and other
01:23:56
companies that are quote-unquote going
01:23:57
through a digital transformation or you
01:23:59
know have a quote-unquote r d budget
01:24:02
they're outsourcing r d and typically
01:24:04
paying three times as much and typically
01:24:06
getting one temp in the return um and i
01:24:08
think that's the maybe a good heuristic
01:24:10
for how you might kind of want to look
01:24:11
at what differentiates detect a true
01:24:12
test depending depending on accounting
01:24:14
saudi aramco spends 37 and a half
01:24:17
billion to 50 billion depending on
01:24:18
height all right so that puts them at
01:24:20
you know probably tied with amazon for
01:24:21
all intents and that just means i was
01:24:22
right jason that's what i care about
01:24:24
well i mean i'm wondering well you know
01:24:26
what the reason i think that you this
01:24:27
might be obvious
01:24:35
putting it aside i think the issue might
01:24:37
be that they're recently public right so
01:24:39
maybe they're uh you know they've only
01:24:41
been filing public for two years or
01:24:42
something
01:24:44
all right i think that's everything uh
01:24:46
how's everybody doing otherwise how's
01:24:47
everybody's personal life are people
01:24:48
losing their mind what's people's plans
01:24:51
um
01:24:52
for the end of kovid i'm gonna go have
01:24:54
beer and pizza on the beach
01:24:56
nicely done so i'm ready to get out of
01:24:57
here nice yeah i mean i'm exhausted are
01:25:00
you guys exhausted and this has been a
01:25:01
[ __ ] crazy run
01:25:03
i don't know what day it is anymore i'm
01:25:05
like i'm ready to wind the year down i
01:25:07
am so exhausted i mean this has been the
01:25:09
craziest pace i've ever experienced in
01:25:11
my life the number of deals going on
01:25:14
the amount of inbound oh my god i tell
01:25:16
you at that conference um every single
01:25:19
so i have all these founders come up to
01:25:20
me and pitch me what they're doing a
01:25:22
couple of them like that sounds really
01:25:23
interesting can we participate in that
01:25:24
he's like no no the rounds are
01:25:25
subscribed i'm like why'd you come up to
01:25:27
me and pitch me this though how dare you
01:25:29
like yeah so rule number one i tweeted i
01:25:31
tweeted a new terms of service if this
01:25:33
is only if i'm at a conference okay if
01:25:35
you set up an appointment in my office
01:25:36
it's fine that's like an opt-in but like
01:25:39
if you come to me to pitch me your idea
01:25:40
at a conference
01:25:42
then and i say okay i want to invest
01:25:44
like give me an allocation like don't
01:25:46
come to me and pitch me if you're not
01:25:47
going to give me an analogy no that's
01:25:48
not cool that's like being like oh my
01:25:49
god i know the best restaurant in the
01:25:50
world it's open tonight they've got the
01:25:52
greatest steak and they're like chasing
01:25:55
no reservations guys tell saks about the
01:25:57
white truffles from yesterday
01:25:58
yeah we we had dinner at jamaat's house
01:26:00
last night it was incredible he got
01:26:02
these white truffles from us
01:26:04
i've had in a year i mean it was really
01:26:05
incredible i really appreciated it it
01:26:06
was amazing and 2000 like it was 1996
01:26:10
white burgundy uh
01:26:11
leroy
01:26:15
i'm not a wine drinker i'm not saying
01:26:17
that your guy your chef beat saxis from
01:26:20
two weeks ago sax is wasn't sax's chef
01:26:23
um your old chef
01:26:26
uh
01:26:27
i think one of his sessions
01:26:32
david lives in the stratosphere
01:26:34
he lives in a stratosphere burn that's
01:26:35
just at a different he's next level
01:26:38
are you eating my sloppy seconds
01:26:40
over there
01:26:41
no no i think we gotta beat that one i
01:26:43
don't know that term means what you
01:26:44
think it means anymore sex but by the
01:26:46
way there was a there was they were
01:26:48
gonna get
01:26:49
there was a dinner conversation last
01:26:51
night tax to your point
01:26:53
jamal it's up to you to decide if you
01:26:55
want to disclose the dinner conversation
01:26:56
guess but um this guy said that there
01:26:58
was a
01:26:59
a guy that applied to y combinator
01:27:01
that had 750 million dollars in crypto
01:27:04
and so he's like applying to y
01:27:06
combinator with his 750k
01:27:09
for 150k to give up some percent of his
01:27:11
company
01:27:12
there's like all these stories of these
01:27:13
guys they're like i will pre-fund my own
01:27:15
series a with 15 million dollars to
01:27:18
create this business inside of the yc
01:27:20
machine that was incredible there was
01:27:21
such an incredible like unexplicable
01:27:24
inexplicable
01:27:25
undescribed i think in the in the
01:27:27
mainstream media story of crypto wealth
01:27:30
creation that's been going on and these
01:27:32
crypto um these crypto 100 millionaires
01:27:35
billionaires are emerging and doing
01:27:37
their own kind of innovation completely
01:27:39
under the radar right the smartest
01:27:41
people that we know are selling right
01:27:43
now
01:27:47
yeah and i think they changed their
01:27:48
conversions um for the yc safe they're
01:27:52
now getting preferred shares they used
01:27:53
to do common
01:27:55
and um
01:27:57
they now i think it happens post
01:27:59
conversion so they want their seven
01:28:00
percent
01:28:01
fixed you know after your next round of
01:28:03
funding is my understanding i don't know
01:28:04
if that's but yeah so they got it more
01:28:06
aggressive but that's brutal
01:28:09
it's you know what's happening is like
01:28:10
the accelerators have to move earlier
01:28:13
back to incubators so
01:28:14
the idea of somebody
01:28:16
you know grin or some of the other
01:28:18
companies we funded coming to the
01:28:19
accelerator with 20 000 and or 50 000 in
01:28:22
revenue in some cases they may be able
01:28:24
to raise money
01:28:25
without and certainly the crypto
01:28:26
companies are raising 25 million dollars
01:28:28
they're outpacing regular companies
01:28:30
regular startups non-crypto startups and
01:28:32
they raise it in 10 seconds from a bunch
01:28:34
of eth for buying tokens they've created
01:28:36
a whole shadow economy yeah that doesn't
01:28:39
have to play by any of the do you really
01:28:41
need adventure anymore like well if you
01:28:43
want to obey the law i guess you do but
01:28:45
in a lot of these cases like
01:28:48
i did this um
01:28:50
this whole new economy could emerge
01:28:51
completely offline right completely off
01:28:53
the
01:28:54
current do want to get this thing
01:28:57
tightened up they don't want people
01:28:59
doing this
01:29:00
20 i think it was 2015 i presented
01:29:03
amazon at iris own
01:29:05
and one of the things that i did was we
01:29:07
calculated what bezos's investment track
01:29:09
record was right because he basically
01:29:11
took all his free cash flow and
01:29:12
reinvested it in the business and you
01:29:14
could measure
01:29:15
what his return on uh invested capital
01:29:17
was and it was like 42 percent and on a
01:29:20
really big number on 10 percent
01:29:22
on the money amazon deployed in r d
01:29:24
projects like the kindle or
01:29:27
42 percent over like a multi-decade
01:29:29
period and double what a venture firm
01:29:31
would do or top down i mean he's in a
01:29:34
class by itself but um
01:29:36
my takeaway in that moment was wow this
01:29:38
is the
01:29:40
you know smartest investor of our
01:29:42
generation that's what i said at bazel's
01:29:43
at the time
01:29:44
and you know baze has had a track record
01:29:46
of selling roughly a billion dollars of
01:29:48
amazon stock every year and this year he
01:29:50
you know snap sold 6.6 billion
01:29:54
which you know when we talk about the
01:29:55
percentage you're selling we're talking
01:29:57
about selling five percent 10 so
01:29:59
you know they're not diluting their
01:30:00
whole positions but these are big
01:30:01
numbers you're right i think it's a
01:30:02
signal jkl you got to close this out all
01:30:05
right everybody it's been another
01:30:06
amazing episode episode 55 of the all-in
01:30:09
podcast
01:30:10
from
01:30:11
uh yeah whatever where you know where
01:30:13
people are coming from uh the all-in
01:30:15
summit we'll be in the spring at some
01:30:17
point i'm gonna go to miami and look at
01:30:18
the locations march 11th through 15th i
01:30:20
can't because i'm playing poker yes okay
01:30:23
you got your poker train in an
01:30:24
undisclosed location big time if i can
01:30:26
go listen is there anywhere
01:30:28
poker big boys you need to have a funny
01:30:30
guy there i mean i'm not a great dealer
01:30:32
but can i be a waiter or something i
01:30:33
mean i think the game starts at two
01:30:35
thousand four thousand but it could get
01:30:36
a little spicier free spicy
01:30:39
you got a good year maybe you should go
01:30:41
yeah maybe you should have solana play
01:30:42
because let's get the solana chips oh he
01:30:44
can play davidson
01:30:47
[Applause]
01:30:52
you put it in an llc and then you buy
01:30:54
into the game and then that may not be
01:30:55
enough that may not be enough all right
01:30:57
20 whatever 20 is enough for the queen
01:31:00
of quinoa the dictator and rain man
01:31:03
david sachs i'm jcal we'll see you next
01:31:05
time on the olympics subscribe to the
01:31:07
channel
01:31:09
[Music]
01:31:39
we should all just get a room and just
01:31:40
have one big huge orgy because they're
01:31:42
all just useless
01:31:43
like
01:31:44
[Music]
01:31:57
[Music]
01:32:02
i'm going home
01:32:04
[Music]
