00:00:00
you want to run a marathon at 57 years
00:00:02
old 52 50 1 2 52. I'll be honest I miss
00:00:08
you can you come back to the United
00:00:09
States please I miss you I will I miss
00:00:11
you too I mean the poker game can't by
00:00:13
definition be as much fun if I'm not
00:00:15
there it plays at bigger States and it's
00:00:17
more challenging but it's not as much
00:00:19
fun there's not as much laughing what's
00:00:21
on the menu tonight for austerity 2023
00:00:23
the amuse bush is a madeleine with like
00:00:26
a terrina foie gras fantastic an honor
00:00:29
of Freeburg and then rutabaga rutabaga
00:00:31
salad and then some duck thing duck
00:00:34
breast you know I loved her and then and
00:00:36
then butterscotch panna cotta wow that
00:00:39
is great lineup and it you know what I
00:00:41
like the idea we're doing some poultry
00:00:42
Chef Sean is firing on all cylinders
00:00:44
these days if he feels very like uh
00:00:46
engaged he was very engaged yeah he's
00:00:49
kind of going for it he's been on yeah
00:00:51
that was quite nice the other day Brad
00:00:53
because it's austerity measures we had
00:00:56
this incredible dish and we're eating it
00:00:59
and then he said yours on the bottom
00:01:01
bottom and I was like oh
00:01:02
so we just we don't put the caviar in
00:01:05
time
00:01:07
the Market's down
00:01:10
let's check my style austerity
00:01:13
I'm not lying oh my God no he did say
00:01:16
guys the caviar is on the bottom not the
00:01:18
top this week
00:01:19
[Music]
00:01:20
let your winner
00:01:21
[Music]
00:01:23
of Rain Man Davidson
00:01:27
we open source it to the fans and
00:01:30
they've just gone crazy with them
00:01:32
[Music]
00:01:35
all right sax is here everybody so that
00:01:37
means we have a quorum
00:01:39
hopefully the Sultan of science who is
00:01:43
on Wall Street today uh taking a company
00:01:46
public so congrats to our bestie
00:01:48
Friedberg
00:01:50
he couldn't make it he's at a dinner so
00:01:52
with us the fifth Beetle as it were Brad
00:01:55
gerstner is here to talk all things
00:01:57
macro welcome back to the Pod how's life
00:01:59
been good to be back a little domar
00:02:02
agato to you Jason as you eat your way
00:02:05
through Japan yes I am on my culinary
00:02:08
tour I'll be back
00:02:09
Sunday but I am having the time of my
00:02:12
life here are you running AdWords on
00:02:14
your food blog
00:02:15
that's what it's come back to back to
00:02:17
the weblogs Inc days I'm just trying to
00:02:18
make
00:02:19
twenty six hundred dollars a day I
00:02:21
noticed your Tick Tock got 22 likes yeah
00:02:23
you know I'm trying to figure out Tick
00:02:25
Tock I'm gonna but you know but right as
00:02:27
they shut it down that's when I'll
00:02:29
figure it out well that rev sure buy you
00:02:31
another Japanese pancake or no those
00:02:32
pancakes man our next level the fluffy
00:02:35
pancakes here everything actually with
00:02:38
the exchange rate coming to Japan is so
00:02:41
affordable it's nuts and this is a crazy
00:02:43
week because it's a Tokyo Marathon but
00:02:45
everything is so affordable the people
00:02:47
are amazing it's the best country to
00:02:49
visit in the world I think for me it's
00:02:51
Italy
00:02:53
but I would say Japan is like it's
00:02:56
definitely top two or three what do you
00:02:57
love about it best food you know I went
00:03:00
there I took the I took because like
00:03:02
five years ago uh the older three at the
00:03:04
time
00:03:05
but they were younger and you know
00:03:07
there's there's a negative birth rate in
00:03:09
Japan and so number one when you have
00:03:11
any kid but frankly multiple kids the
00:03:14
the Japanese embrace you with so much
00:03:17
love because they love seeing these big
00:03:19
families yeah they're unbelievably kind
00:03:22
we went to Kyoto did the professors walk
00:03:24
saw the Cherry Blossom Festival
00:03:26
basically ate our way through Japan
00:03:29
that was my that was my only vacation
00:03:31
trip I've done like 10 or 12 trips for
00:03:34
work
00:03:35
once we I went with Reed Hoffman and
00:03:37
Reid set up this thing where we went
00:03:39
through all these different parts of
00:03:40
Tokyo and ate at this incredible sushi
00:03:44
place you have to go with somebody who
00:03:46
can dial it in yes and have all the
00:03:48
hookups Brad you spend much time in
00:03:49
Tokyo and Japan
00:03:52
um I haven't I've uh been there only
00:03:53
twice
00:03:55
and that was when I was poor and I
00:03:56
stayed in a really small room and ate
00:03:58
really shitty food
00:03:59
oh all right so uh you're saying in 20
00:04:01
in 2022 when you became Oregon
00:04:10
all right and with us of course the next
00:04:13
Department uh what what cabinet position
00:04:16
you're going for sacks which should we
00:04:18
start floating here
00:04:19
oh my God here you are with the
00:04:21
disinformation starting already it's a
00:04:23
compliment Secretary of sash is with us
00:04:26
DeSantis had a pretty great article on
00:04:28
the Wall Street Journal oh really I
00:04:30
missed I wanted it uh when they revoked
00:04:32
the special administrative status for
00:04:34
Disney he wrote an article I think it
00:04:35
was Wednesday Tuesday or Wednesday in
00:04:38
the in the Wall Street op-ed what was
00:04:40
his uh premise that they was it
00:04:42
corporate or is it culture that wokism
00:04:43
is basically modern Marxism and we have
00:04:46
to defeat it this is his language not
00:04:49
mine at every turn and
00:04:52
Disney needs to just be business people
00:04:55
and not feed the vocal minorities inside
00:04:58
of their company like every other
00:04:59
company should they should be subject to
00:05:01
shareholder concerns that apply to the
00:05:04
majority of shareholders well I think
00:05:06
this is why I think DeSantis is doing
00:05:08
well with the Republican base and you
00:05:11
know if you see polling if the
00:05:12
Republican primary is he understands
00:05:14
that it's not good enough just to have
00:05:16
this sort of reagan-ass totally
00:05:18
hands-off government approach because
00:05:20
the radical left is advancing its agenda
00:05:22
not just legislatively but through
00:05:25
corporations through ESG
00:05:27
really through taking over key private
00:05:30
sector institutions and so he's willing
00:05:32
to use government to push back on that
00:05:35
agenda on behalf of parents or on behalf
00:05:38
of you know
00:05:40
what he sees as the majority of the
00:05:42
country and so it's a very different
00:05:44
approach than you know the Republican
00:05:45
Party would have been 30 or 40 years ago
00:05:47
this is why you know in the parlance of
00:05:50
the base he understands what time it is
00:05:53
and what's required here is not again
00:05:55
this totally laser Fair approach but
00:05:58
rather a much more energetic aggressive
00:06:01
approach towards checking
00:06:03
these bad ideas wherever they come from
00:06:05
yeah it's not the only one I don't know
00:06:07
if you saw this week Bill Maher went on
00:06:08
a bit of a press tour and he was on with
00:06:10
Jake Tapper and uh he made a very
00:06:13
interesting I think point about
00:06:15
liberalism versus wokism and it was
00:06:18
quite articulate you know he's a pretty
00:06:20
good Observer of culture he said they're
00:06:22
kind of casting out the Liberals in the
00:06:24
party for this wokism and the intolerant
00:06:26
nature of the woke movement versus the
00:06:29
liberal movement specifically under the
00:06:31
lens of trans rights
00:06:33
but let's put that aside for now we got
00:06:35
a full docket before we get into the
00:06:37
culture wars and the presidential
00:06:38
elections let's start
00:06:41
with uh we'll go private markets to
00:06:43
public markets
00:06:44
because they obviously dovetail so
00:06:46
nicely
00:06:47
item one on the DACA today there is just
00:06:50
a massive AI fomo frenzy going on
00:06:52
economists publish a piece this week
00:06:54
about the insane fundraising in the
00:06:57
generative AI space this is stuff like
00:07:00
Chachi BT stable diffusion you've heard
00:07:03
these names and there are now 500
00:07:06
generative AI startups according to this
00:07:08
report that tracks with what I'm seeing
00:07:10
in the early stage and not counting the
00:07:12
open AI 10 Billy from Microsoft
00:07:14
investment donation rev share round trip
00:07:18
whatever that is
00:07:19
they have so far collectively raised
00:07:21
more than 11 billion dollars the article
00:07:24
included this chart uh which you can see
00:07:26
if you're on our YouTube channel
00:07:27
and just
00:07:29
tons of folks working in audio image and
00:07:33
text so we're basically looking at the
00:07:35
multimedia basically revolution of PCS
00:07:38
in the 90s occurring again
00:07:41
and a complete platform platform shift
00:07:43
Doug Leone from Sequoia one of the
00:07:46
greatest investors in history of Silicon
00:07:48
Valley had this to say and we will
00:07:50
comment on the other side of this 50
00:07:52
second clip from Doug I actually think
00:07:55
that AI is the next platform shift in
00:07:59
the same way that mobile was the one
00:08:01
before internet was the one before so I
00:08:03
think AI is real but I said earlier
00:08:05
we're going to overestimate it in a
00:08:07
short term we're going to invest in
00:08:09
everything in the same way that in 1999
00:08:11
we invested in everything but then
00:08:14
Google came out of that or Facebook came
00:08:17
out of that so I think you have to have
00:08:19
a good head on your shoulder where you
00:08:22
don't practice fomo where you don't
00:08:24
chase every company AI is real AI is the
00:08:28
next platform but how do we not invest
00:08:31
in everything that walks how do we make
00:08:33
certain Investments based on Market Maps
00:08:36
based on thought processes that are more
00:08:40
rational
00:08:40
and not do every investment just because
00:08:43
every other Venture firm is doing
00:08:44
everything best all right shamath what
00:08:46
do you think of this massive influx I
00:08:48
think it's important to think about what
00:08:51
the incentives are as Charlie Munger
00:08:53
says show me the incentive and I'll show
00:08:55
you the outcome I posted it into our
00:08:57
group chat Credit Suisse sent all their
00:08:59
private banking customers an offer they
00:09:02
are now offering 6.5 for a three-month
00:09:05
t-bill
00:09:07
6.5 percent
00:09:10
and if you go back to what we talked
00:09:12
about before
00:09:13
when the risk-free rate is somewhere
00:09:18
north of five or five and a half percent
00:09:20
and banks are willing to give you six
00:09:23
and a half percent in the short term
00:09:26
you have to generate more than three
00:09:27
times that to make an investment make
00:09:30
sense when you're investing in the long
00:09:31
term so if three month money is going to
00:09:33
pay you six and a half or seven if
00:09:35
you're going to invest for 10 15 years
00:09:37
which is what you need to do typically
00:09:39
for a startup
00:09:40
you need to get 20 to 25 percent
00:09:45
so there's going to be a lot of pressure
00:09:48
for Venture investors to put the money
00:09:50
to work
00:09:51
because otherwise they're LPS they're
00:09:54
limited partners the people that give
00:09:55
them the money
00:09:56
will have this attitude that goes
00:09:59
somewhere along the following lines okay
00:10:00
I've committed to you why aren't you
00:10:03
investing because otherwise I can get
00:10:05
paid six and a half percent on the front
00:10:06
end and so this is becoming very
00:10:08
problematic what am I paying you for
00:10:10
what am I paying you two percent a year
00:10:12
in management fee for so I think what
00:10:16
happens
00:10:17
unfortunately is the opposite of what
00:10:19
Doug says I think good investors will
00:10:21
try to follow Doug's feedback and advice
00:10:24
and the ones that have a track record of
00:10:26
distributions of DPI
00:10:28
can do more of it than not
00:10:30
but I think most people will be under
00:10:32
pressure to deploy the capital and so
00:10:34
the 500 odd companies Jason you
00:10:36
mentioned
00:10:37
we'll get a lot of it and it'll get
00:10:38
torched because most of them probably
00:10:40
won't amount to much of anything in the
00:10:42
short term you will create
00:10:44
way too much correlation and you will
00:10:46
have zero time diversity which as we've
00:10:48
learned is a recipe for terrible returns
00:10:51
time diversity being hey you deployed
00:10:54
all this web 2 Capital web 3 Capital
00:10:56
sorry crypto whatever in this very short
00:10:57
period of time you overpaid
00:11:00
Brad uh when you hear chamoth talk about
00:11:03
the 6.5 and then you look at private
00:11:05
markets you uh invest across the life
00:11:08
cycle of companies obviously you're in
00:11:09
some private companies we all know very
00:11:11
well famously snowflake I think your
00:11:13
biggest win ever correct me if I'm wrong
00:11:15
uh in terms of a private how do you look
00:11:18
at this when you're a steward of capital
00:11:22
public markets
00:11:23
private markets and then just YOLO just
00:11:27
put it into you know some T bells or
00:11:29
yeah bonds or whatever
00:11:31
I mean first let's just frame right the
00:11:34
chart that you showed I think you should
00:11:36
it said you know X open AI I don't know
00:11:38
something like 10 or 11 billion dollars
00:11:40
have has been invested into some 500 AI
00:11:43
companies I mean I happen to agree with
00:11:45
Doug that this is a platform shift on
00:11:47
the same magnitude as the internet or
00:11:49
mobile itself in fact it may be bigger
00:11:52
than both of those
00:11:54
but you know when I look at 10 or 11
00:11:57
billion dollars
00:11:59
you know let's put it in context meta is
00:12:02
going to spend 20 billion in one year
00:12:04
alone on AR VR
00:12:06
and this is on an entire platform
00:12:10
so I I don't know I I I I think whenever
00:12:14
you have something as tectonic as mobile
00:12:16
or Internet it deserves a lot of
00:12:18
investment and yes it's going to be
00:12:20
messy and yes chamat's right the cost of
00:12:23
capital frankly is limiting the amount
00:12:26
of money going into these businesses
00:12:28
already so we see a lot of dry powder
00:12:31
sitting on the sideline that's chasing
00:12:33
new ideas
00:12:35
I think one way one way to frame it as
00:12:37
well is to think about in 2000
00:12:39
we all knew that the internet was going
00:12:41
to be big we may have been lucky enough
00:12:43
to conclude that search was going to be
00:12:45
big
00:12:46
but if you invest in in Yahoo or info
00:12:48
seat or AOL or excitement
00:12:51
you tore all that money went to zero
00:12:54
right so now think about just these
00:12:57
large language models right the
00:12:59
foundation models which are driving and
00:13:01
enabling all of it open AI you've got
00:13:03
open AI you gotta drop it you got cohere
00:13:06
you've got character you got stability
00:13:08
you've got Lambda
00:13:11
it is almost impossible to know within
00:13:14
the certainty much like it was with the
00:13:15
search engines in 99 2000 who's going to
00:13:18
emerge where the value capture is going
00:13:20
to be it may all end up with Microsoft
00:13:22
and Google I mean this may end up
00:13:23
looking like IOS and Android at the
00:13:25
foundation model level and so you know I
00:13:28
think as investors for example on the
00:13:31
foundation model side I think it's very
00:13:33
difficult to choose just one
00:13:35
particularly with the largest one is
00:13:37
frankly captive and a proxy to Microsoft
00:13:40
and they're capping your upside return
00:13:42
so like those are difficult investment
00:13:44
decisions that doesn't detract from the
00:13:48
fact that I think it is as big as Doug
00:13:50
suggests
00:13:51
and I do think they're going to be
00:13:53
applications and tooling layer to come
00:13:55
out of this that's going to produce
00:13:56
really big Winners I would say that we
00:13:59
are spending an extraordinary amount of
00:14:01
time
00:14:02
in the space we haven't made a lot of
00:14:04
Investments I think you have to study
00:14:06
you have to get deep I mean
00:14:08
certainly and I have been investing in
00:14:10
this space for at least a decade maybe
00:14:12
15 years
00:14:13
but don't underestimate
00:14:17
that the Transformer model really did
00:14:19
change the game here and we're now
00:14:22
producing impacts much larger sax uh
00:14:26
last week you said we'll have three and
00:14:28
crypto didn't kind of stick with you you
00:14:30
didn't see the use cases and you in the
00:14:33
first inning here or
00:14:35
first at bat you rattled off three or
00:14:38
four really compelling use cases from
00:14:40
summaries to you know the the assistant
00:14:42
uh guide on your side concept
00:14:44
is this Akin in your mind because Brad
00:14:48
just said it could be bigger than mobile
00:14:49
internet mobile
00:14:51
AI Revolution if you were to look at
00:14:53
those three do you think it's bigger
00:14:55
than actually mobile and then we'll get
00:14:57
into return profiles of 6.5 on cash
00:15:00
versus whatever VC is going to be able
00:15:02
to do in this kind of Market yeah I mean
00:15:04
so I agree with Brad and and Doug that
00:15:06
this is the next big platform shift
00:15:08
whether it's as big as mobile or it's
00:15:10
more like social or Cloud I mean those
00:15:12
have been the big platform shifts over
00:15:14
the last decade or two and I think this
00:15:16
is definitely on par with those I think
00:15:19
Brad's right we don't know where the
00:15:21
value capture is going to be maybe it
00:15:22
just all ends up accreting to the big
00:15:24
companies who can make massive
00:15:26
investments in this space you know one
00:15:28
difference between the internet
00:15:30
ecosystem today and 20 years ago is you
00:15:32
do have these giant companies who are
00:15:35
not totally incompetent right I mean
00:15:36
they are they do have lots of talents
00:15:38
and engineers and you know like 20 years
00:15:41
ago you'd have company you know the big
00:15:42
companies would just sit on their hands
00:15:44
in the face of a platform shift and then
00:15:46
just be seeing Ducks who get disrupted
00:15:48
that's not going to happen today that
00:15:50
being said I do think that any new
00:15:52
platform shifts creates opportunities
00:15:53
for startups and it may not be efficient
00:15:57
the way that these opportunities get
00:15:59
pursued in the sense that yeah Doug's
00:16:01
right that this will be a lot of spray
00:16:03
and pray but I think that it is kind of
00:16:07
efficient for the ecosystem as a whole
00:16:09
right because like any smart engineer
00:16:12
with a half decent idea ends up getting
00:16:14
funded and out of all of that you get
00:16:16
kind of a
00:16:17
pre-cambrian explosion where you know
00:16:20
the ecosystem evolves a lot of different
00:16:22
types of businesses most of them don't
00:16:24
work they get wiped out they go extinct
00:16:26
but there'll be some good things that
00:16:27
get funded so we're more like I think
00:16:30
Doug and how we see it we don't want to
00:16:31
spray and pray one be very selective we
00:16:33
want to put more money behind fewer
00:16:36
opportunities that we think are are
00:16:38
better and Doug Leone you know I think
00:16:41
he generally gives good advice of the
00:16:42
tough love variety and this is of a
00:16:44
piece with that and so I I agree with
00:16:46
him
00:16:47
that being said there is a certain value
00:16:49
to the ecosystem and having all these
00:16:51
seed funds to spray and pray right
00:16:53
because this gets a lot it plants a lot
00:16:55
of flowers and then you see what blooms
00:16:57
I would say yeah to build on that sax
00:16:59
this is a perfect inefficiency
00:17:02
you know when you see it from the
00:17:03
outside you're like well this is super
00:17:04
inefficient why so many companies if you
00:17:07
free your mind and just say their
00:17:08
experiments two or three person
00:17:09
experiments 500k to a million and a half
00:17:12
in that first stage when I invest right
00:17:13
before you do when you do your series a
00:17:15
is at five or ten million
00:17:17
Milestone based funding is back in the
00:17:20
tech industry and that was something
00:17:22
chemath that we lost for a little while
00:17:24
there people would just come out and
00:17:25
they would raise a series B out of the
00:17:27
gate no product Market fit et cetera now
00:17:30
what we're seeing is people are raising
00:17:31
that 12 to 18 months they got their
00:17:33
backs up against the wall speaking of
00:17:35
tough love which you reference acts that
00:17:38
tough love of hey you have to hit the
00:17:40
next Milestone what did you accomplish
00:17:42
with the 1.5 million in order to get the
00:17:44
10 million in order to get the 30
00:17:46
million that 500 is going to go 10x
00:17:49
they'll be 5 000 of these startups but
00:17:50
it'll quickly Whittle down winner
00:17:52
chamata's people go through this
00:17:53
Milestone based funding system in
00:17:57
Silicon Valley we haven't given enough
00:17:58
time for a logical framework of
00:18:00
investing to develop which also is tied
00:18:02
to a logical framework for
00:18:05
entrepreneurship to emerge we're just
00:18:07
way way way too early so the thing with
00:18:10
all of these language models is that
00:18:12
they are Grist for the mill
00:18:14
and we talked about this before if it
00:18:17
was a highly proprietary asset
00:18:20
you would have never sold 49 of it to
00:18:22
Microsoft for 10 billion dollars because
00:18:24
you would assume that it was worth a
00:18:26
trillion dollars so it's a huge tell
00:18:29
on the part of open AI their deep
00:18:31
understanding and they understand it
00:18:33
better than anybody else
00:18:34
that it's a bit of a capped upside so
00:18:37
what is uncapped I guess is maybe the
00:18:39
better question well if you look at the
00:18:42
1849 Gold Rush as an example
00:18:44
the people panning for gold in my
00:18:46
opinion are the people building language
00:18:48
models today
00:18:50
they're going to come and they're going
00:18:51
to go but who's going to win well the
00:18:53
pick and shovel providers won Levi
00:18:56
Strauss one so what is the equivalent of
00:18:58
that today
00:18:59
I think it's at the Silicon layer
00:19:01
because you need to really re-architect
00:19:03
how compute will actually work in a
00:19:06
world of all of these models those folks
00:19:07
will get paid if you look at AMD and
00:19:09
Nvidia they've been getting paid for
00:19:11
years
00:19:12
they continue to get paid they probably
00:19:15
will continue to get paid even more and
00:19:17
so folks that actually
00:19:20
take a step into doing something hard
00:19:21
and difficult in AI like custom silicon
00:19:24
could get rewarded
00:19:26
and then there's what I call the white
00:19:27
truffles what are these unique Alba
00:19:31
white truffles these singular
00:19:34
sources of data that when used in
00:19:37
reinforcement learning
00:19:39
make your output just zing
00:19:43
and that's where I think
00:19:46
Facebook is an obvious white truffle
00:19:48
Cora is a white truffle but there are a
00:19:50
lot of startups that could become white
00:19:52
truffles if they gather enough data and
00:19:55
that's like a pretty reasonable
00:19:57
framework and so in that framework if
00:19:59
you apply to today there's
00:20:02
way few silicon startups and there's way
00:20:04
few white truffles instead it's
00:20:06
everything is the bologna in the middle
00:20:07
which is random people talking about
00:20:09
some random model that's just gonna
00:20:10
again become highly commoditized you
00:20:12
have to remember all these models are
00:20:14
open source and none of them mean
00:20:15
anything in the absence of the data you
00:20:18
give it to train on 100 Brad hey okay
00:20:21
well I want to add one other piece of
00:20:24
news that we saw this week which is open
00:20:26
AI announced that it's developer AI they
00:20:28
were cutting the tax on that or
00:20:30
basically the metered rate they charge
00:20:32
to use it by 90 percent
00:20:34
so I think this is going to be a game
00:20:37
changer I think this is based on the
00:20:40
chat GPT 3.5 API and of course they're
00:20:43
coming out with 4.0 later this year I've
00:20:46
already had explained to the audience
00:20:47
what an API is and why this is important
00:20:49
for those people who don't know just
00:20:51
application programming interface it
00:20:53
allows a developer of some other
00:20:55
application to build on top of you so in
00:20:57
other words like a developer wouldn't
00:20:59
have to use this chat interface to get
00:21:02
access to the large language model you
00:21:04
could just submit your request through
00:21:06
the API and so give an example
00:21:09
of what of like a popular app and how
00:21:11
they might use it yeah API so I think
00:21:14
like notion actually had a demo that
00:21:16
they published where incredible it was a
00:21:18
pretty incredible demo maybe we can find
00:21:19
it and it would do things they added
00:21:22
actions in the demo like generate a task
00:21:26
list so you could take like a document
00:21:29
or a meeting summary and would spit out
00:21:31
recommendations for next steps or tasks
00:21:34
it could you know spit out a table
00:21:37
basically it's the autocomplete for
00:21:38
everything that we talked about right so
00:21:40
now notion doesn't need to build their
00:21:42
own llm expertise they just don't use
00:21:44
the API and then the notion app you say
00:21:47
hey I'm building a marketing plan and
00:21:49
you say well okay give me a list of
00:21:51
things that should be on my marketing
00:21:52
plan for my new app it sends a signal to
00:21:56
the chat GPT API which will be on Azure
00:21:58
Microsoft's platform and then it gives
00:21:59
you the data back you don't have to
00:22:00
build the language model yeah incredibly
00:22:02
powerful notion has all the content that
00:22:05
they need but they don't have the AI
00:22:07
expertise so now they don't have to
00:22:08
generate your or create AI expertise
00:22:11
in-house they just use the API it's
00:22:13
really powerful and but just to finish
00:22:15
the thought here I think that one of the
00:22:17
things that's probably misleading about
00:22:18
these stats around funding and the
00:22:21
there's like almost 600 startups already
00:22:23
there are AI startups is that you know
00:22:26
what happens when there's a new wave is
00:22:28
that Founders are smart right and they
00:22:29
know how to Market themselves in the way
00:22:32
that is most compelling to VCS and they
00:22:34
know that like VCS frankly are a little
00:22:36
bit limiting in terms of their migration
00:22:38
to the next wave and wanting to glom on
00:22:40
to the next big wave so VCS are now
00:22:43
looking for AI if you're a founder and
00:22:46
you're you build one feature on top of
00:22:48
the you know open AI API now all of a
00:22:52
sudden you're going to Market yourself
00:22:53
as a AI company you're not going to
00:22:55
Market yourself as just a SAS company
00:22:57
and so that's valid yeah I mean it could
00:23:00
be named or it could be like a great
00:23:01
pivot you know yeah and it's not it's
00:23:03
not totally one or the other I mean it's
00:23:05
just that if you have a plausible
00:23:07
connection to AI as a Founder you're
00:23:10
going to start marketing yourself as an
00:23:11
AI company and so that's how all of a
00:23:14
sudden you can have 600 of these
00:23:16
companies
00:23:18
you know that are all of a sudden out
00:23:20
there in the wake of of this sort of uh
00:23:22
chat GPT is I think a lot of companies
00:23:24
are recategorizing themselves I
00:23:26
literally had this experience not three
00:23:28
weeks ago right before I went to Japan
00:23:29
serial founder and team that we've
00:23:32
backed for that had an exit said can I
00:23:34
show you something I said yep got on the
00:23:36
zoom showed me a little proof of concept
00:23:39
using chat apt and he said this is my
00:23:43
idea this is the vertical and I just
00:23:45
said okay what do you want he said 500k
00:23:47
for 10 I said okay done
00:23:49
great let's learn and it's easy bet for
00:23:51
us to make because we know it's a Serial
00:23:53
team for open AI the way that it could
00:23:55
become a trillion dollar company is
00:23:57
actually by cutting the cost
00:23:59
to such a low degree that nobody else
00:24:01
can effectively compete with it and then
00:24:02
at that point they can become a small
00:24:04
small tax you'd rather just pay it than
00:24:07
try to compete with it and I think for
00:24:08
open AI that's actually a very brilliant
00:24:10
strategy so that's how they they could
00:24:12
get to become very very large in
00:24:15
valuation would be to become so
00:24:17
pervasively relied upon and where they
00:24:19
take such a minuscule take rate of their
00:24:22
participation in you building a company
00:24:25
that could be really effective for them
00:24:26
like cloud computing right like we're
00:24:27
going to just take such a small tax yeah
00:24:29
well that's not a small tax that's a
00:24:31
large tax that's the picks and shovels
00:24:32
play in a way to create the developer
00:24:34
ecosystem for AI and it's about to your
00:24:37
point I mean I think you raise a good
00:24:39
point that you know what was their
00:24:40
motivation to take such a dilutive round
00:24:42
you know the 10 billion that was
00:24:44
evaluation at 30 30. yeah and does that
00:24:47
imply that they're not confident I mean
00:24:49
the flip side of it could be maybe they
00:24:51
know they want to compete on the basis
00:24:53
of rapidly you know becoming the
00:24:56
developer platform and so they're going
00:24:57
to subsidize that developer platform you
00:25:00
know with negative gross margins for
00:25:02
some period of time and maybe that's why
00:25:04
they need a lot of capital and they were
00:25:05
in kind of a reflexive Loop of just cost
00:25:08
of getting better versus the amount of
00:25:09
money they had to get better and so
00:25:11
maybe they were forced to do it and then
00:25:13
in that point
00:25:14
how would you justify you would say well
00:25:16
the other 50 is still hugely valuable so
00:25:18
that's enough for us and I think that
00:25:20
that's that's very logical as well Brad
00:25:22
you have your finger on the pulse of LPS
00:25:24
uh limited partners who back funds like
00:25:27
Jamal's sax is mine and yours
00:25:30
we heard 6.5 on your money for no risk
00:25:34
well you in tremont's position is hey
00:25:37
you have to Triple that if you want to
00:25:38
be a private Market investor
00:25:40
that's about 20 20 Rule of 72 that means
00:25:44
every three and a half years you got to
00:25:45
double if you're doing that for a
00:25:47
10-year fund you're looking at a 5x fund
00:25:50
because kind of table Stakes then I
00:25:52
think just back in the envelope math
00:25:53
what are LPS thinking right now are they
00:25:56
looking at this world and saying I
00:25:57
should just be all in cash or are they
00:25:59
saying yeah everybody thinks we should
00:26:01
be all being cash therefore there's not
00:26:03
going to be enough money in private
00:26:04
therefore there's an opportunity there
00:26:05
we know the 6.5 rate
00:26:09
you know that's not going to be here
00:26:10
forever it may be here for a little
00:26:11
while but we need to we need to keep
00:26:13
investing in Venture uh or are they just
00:26:16
Cutthroat about it like let's pause
00:26:17
Venture investing private Market
00:26:18
investing uh it's a it's a great
00:26:19
question first when I look at the
00:26:21
three-year treasury bill it's like 4.7
00:26:23
not to quibble here so I think Chamas
00:26:25
getting a little goozy Goosey on the 6.5
00:26:29
but the the fact of the matter is what
00:26:32
does that means
00:26:35
you're super special your VIP
00:26:40
maybe there's like some sort of like uh
00:26:42
bond rate that included corporates or
00:26:43
something maybe it was I'm getting my
00:26:44
5.2 from Robin Hood on my Robinhood
00:26:46
account for Jay training so it's right
00:26:48
what is in that what is in that Jason
00:26:50
they probably got some junk bonds and
00:26:52
they're ripping you off whatever
00:26:53
whatever it is I'm getting Five Points
00:26:56
until you're not you are until you're
00:26:58
not it's a 100 t-built parentheses and
00:27:01
junk bond funds
00:27:04
look at the fine print Jacob uh LPS have
00:27:08
a 10-year View
00:27:09
they understand like most people I mean
00:27:12
listen if you look out at the tenure the
00:27:15
reason the tenure is you know that we
00:27:18
have real interest rates at about one
00:27:21
and a half percent so that's the 10-year
00:27:23
less expected inflation
00:27:26
when you look out is because it people
00:27:28
expect inflation to come down and they
00:27:30
expect rates to come down so if you were
00:27:32
an LP and you said I'm not going to
00:27:33
invest in Venture and the next two
00:27:35
vintages which may be the best two
00:27:36
vintages
00:27:37
we've seen in a long time because prices
00:27:39
are adjusting Etc and I'm going to move
00:27:41
it all into some rate bet
00:27:43
first it's just very difficult to do
00:27:46
they don't move their allocations around
00:27:48
that quickly now a wealthy family as an
00:27:51
LP could move their allocations around
00:27:53
really quickly but if you're Texas or
00:27:55
you're Ohio or you're a sovereign wealth
00:27:57
fund you're betting on the Arc of value
00:27:59
creation I would say this the
00:28:01
consequence is they're narrowing their
00:28:04
aperture as to the Venture funds they
00:28:06
want to allocate capital okay explain
00:28:08
that unpack who they are narrowing the
00:28:10
aperture term two we've talked a lot on
00:28:12
this pod about uh the power law and the
00:28:16
truth of the matter is whether we're
00:28:17
talking about AI or software
00:28:19
or anything else that you know people
00:28:22
are are going to be funding it's 10 of
00:28:25
the Investments that are going to yield
00:28:26
90 percent of the returns and so
00:28:30
they're looking at that and saying who
00:28:32
are the top 10 firms in Silicon Valley I
00:28:34
either want to get allocation to those
00:28:36
firms who are seeing the best deals
00:28:38
converting the best deals and are
00:28:39
selective like Saks talked about or we
00:28:42
just don't want to allocate and so I
00:28:43
think you know what we saw over the last
00:28:45
two years Jason was an explosion of new
00:28:47
funds an explosion of new uh you know
00:28:50
first time second time funds
00:28:52
I think subscale small funds with no DPI
00:28:57
uh they're going to find a really really
00:28:59
tough time
00:29:01
to Chamas point about DPI raising
00:29:03
capital and you're going to see the
00:29:05
scale player scale so part of that uh is
00:29:08
clearing out the inventory from the last
00:29:10
cycle two new stories this week about
00:29:13
companies
00:29:15
you know maybe struggling Sequoia got
00:29:17
off the board of Citizen if you don't
00:29:19
know citizen that's that app that tells
00:29:21
you where crimes are happening in your
00:29:22
city very popular in San Francisco uh
00:29:24
it's literally goes off every 90 seconds
00:29:27
it's pretty dystopian that company
00:29:29
citizen which is a pretty cool app uh
00:29:32
has raised 130 million today Sequoia led
00:29:34
the series a in 2017. uh they did a pay
00:29:37
to play around if you don't know what
00:29:38
that is
00:29:40
um basically if you don't invest you get
00:29:41
crammed down how does the cram down work
00:29:43
well your shares in the company went
00:29:45
down ten to one
00:29:47
and you probably got moved to uh common
00:29:50
shares as opposed to as opposed to
00:29:51
Preferred which has a series of
00:29:53
protections they get their money out
00:29:54
first yada yada
00:29:55
but Sequoia refused to participate
00:29:58
according to this ft story again Sequoia
00:30:01
did not
00:30:02
comment on this it's it's kind of
00:30:05
something you don't do as a VEC when
00:30:07
something goes bad at a company and you
00:30:09
leave the board you generally don't want
00:30:11
to say uh bad things or taint the
00:30:13
company uh any more than leaving the
00:30:15
board does
00:30:16
so a bunch of cram Downs happening and
00:30:19
then dovetailing with that instacart
00:30:21
according to the Wall Street Journal had
00:30:22
a big Q4 As It prepares to go public
00:30:25
instacart if you remember we talked
00:30:28
about it on the show cut its internal
00:30:29
evaluation 75 percent last year from 39
00:30:33
billion to 10 billion according to
00:30:36
sources
00:30:37
instacart's Q4 results uh according to
00:30:40
the Wall Street Journal up more than 50
00:30:42
even though order volume grew only 16
00:30:44
percent why they turned advertising on
00:30:47
the app just like uber and Amazon a lot
00:30:49
of these Commerce folks folks are
00:30:51
building
00:30:52
add business inside of theirs so what do
00:30:56
you think about what's happening as we
00:30:59
clear out this private anybody have
00:31:01
thoughts on instacart or the cram down
00:31:03
rounds go either way with this and then
00:31:05
we'll go to I wouldn't Focus too much on
00:31:06
those two companies I think we're going
00:31:08
to see in the second half of 23 and all
00:31:10
of 24 is a lot of medicine being taken a
00:31:13
lot of down rounds a lot of structure is
00:31:16
going to be A Tale of Two Cities the hot
00:31:17
area you know AI is going to continue to
00:31:20
receive new investment and all these
00:31:22
companies that you know that receive
00:31:25
peak valuations in 2021 are gonna have a
00:31:28
Day of Reckoning either you know if
00:31:30
they're lucky maybe they have a flat
00:31:32
round or modestly up round but a lot of
00:31:34
them are going to have down rounds or
00:31:35
restructurings and this is going to be
00:31:38
going on for the next year and a half
00:31:39
what's your philosophy Saxon leaving a
00:31:41
board this is a really dicey issue when
00:31:43
you give up on a company what's the best
00:31:46
practice there how do you do it without
00:31:47
damaging the company obviously the
00:31:49
founder relationship is going to be hard
00:31:50
what have you learned about this as a
00:31:53
private Market investor well I think I
00:31:55
think that sometimes we like flip uh
00:31:58
board members internally at craft just
00:32:00
because people have different amounts of
00:32:01
capacity that's not a statement at all
00:32:02
about the way craft feels about the
00:32:04
company it's just a reflection of our
00:32:06
individual bandwidth or whose expertise
00:32:08
are needed at that time but when the
00:32:11
firm itself quits a board I think
00:32:14
there's no way to read that of and you
00:32:16
know a statement of protest and I don't
00:32:18
know what happened with that company but
00:32:19
it seems to me that you know again it
00:32:23
could be a sign that the Venture firm
00:32:26
isn't happy with the way that they're
00:32:27
being treated
00:32:28
the cram down uh Chama that's that's a
00:32:31
bitter pill to swallow why would
00:32:33
Founders do this cram down instead of
00:32:35
just adding a little more to the top and
00:32:38
is there a way to do this without
00:32:41
you know going scorched Earth or
00:32:43
poisoning the well as it were
00:32:45
we I mean again putting this app and
00:32:47
Sequoia aside this is happening all over
00:32:50
the ecosystem so is there a way to do
00:32:52
this gracefully or is it just going to
00:32:53
be messy
00:32:55
I think it's going to be really messy I
00:32:57
mean to State the obvious no
00:33:00
no Venture Capital investor ever quits
00:33:03
the board voluntarily of a great company
00:33:05
that's doing well that would be dumb
00:33:09
so as David said sort of like the proof
00:33:11
is in the pudding there
00:33:14
and at the same time there are a lot of
00:33:16
in companies who don't want to
00:33:21
see the writing on the wall
00:33:23
and we'll do all kinds of gymnastics
00:33:27
to try to stick a landing on a contorted
00:33:29
financing
00:33:31
and sometimes those things have
00:33:34
real consequences to other investors who
00:33:36
just don't think it's the right thing to
00:33:37
do I wouldn't read too much into this
00:33:39
except that
00:33:42
good Founders have a responsibility to
00:33:45
do what's right for themselves and their
00:33:46
employees
00:33:48
nobody else and the thing to keep in
00:33:50
mind not the investors really no and I
00:33:52
think you I think you absolutely have to
00:33:53
prioritize the people doing the actual
00:33:56
work and if and if you actually did
00:33:58
prioritize them what you would probably
00:34:01
say to yourself is oh my gosh there are
00:34:03
people who I work with who I look in the
00:34:04
eye every day because investors you'll
00:34:06
see once a quarter but I have my fellow
00:34:08
employees as a Founder that I look in
00:34:11
the eyes every day who've been toiling
00:34:13
with me
00:34:14
for umpteen hours a day every day for
00:34:16
years
00:34:17
and they are now totally underwater what
00:34:22
is the right thing to do for them and I
00:34:24
think if you just answer that question
00:34:26
you wouldn't do all these contorted
00:34:28
things you would just reset the
00:34:30
valuation you would refresh the equity
00:34:32
pool you would issue options back out to
00:34:35
those employees and you would move on
00:34:38
it's all these other things that get in
00:34:40
the way of answering that simple simple
00:34:42
question where people it up I've
00:34:45
and I've done that before you sex if you
00:34:47
don't have a team and you don't have a
00:34:49
motivated team you have nothing I've
00:34:51
done that before I don't want to rehash
00:34:52
one of my more miserable experiences but
00:34:54
I was dealing with a company that had a
00:34:56
grossly inflated evaluation it was a
00:34:58
total problem case we voluntarily
00:35:01
slashed the valuation in half and
00:35:02
reissued options to the employees to
00:35:04
keep him motivated no big deal yeah yeah
00:35:06
exactly and it's not that it's no big
00:35:08
deal but it requires some amount of
00:35:10
fortitude and like
00:35:13
you know understanding your priorities I
00:35:16
guess what do you think you know like
00:35:19
first I think it's revealing that we
00:35:22
think what happened here is so out of
00:35:24
the ordinary
00:35:25
I mean you flash back to 2001 to 2004.
00:35:28
Sequoia I don't think funded a single
00:35:31
loser in their portfolio
00:35:33
right like that's a time where you
00:35:35
walked away from the ones that weren't
00:35:36
winning and you fed the ones that were
00:35:39
because you have limited capital and you
00:35:42
don't know when you're going to raise
00:35:43
your next Capital this idea that you
00:35:45
have unlimited Capital you can give
00:35:46
money to anybody no matter what they're
00:35:48
doing with respect to their plan
00:35:50
I think is a function of the last 10
00:35:52
years but to jamas points the idea of
00:35:56
tough talk you know either out of CEOs
00:35:59
or out of board members has been in
00:36:01
short supply in Silicon Valley this idea
00:36:04
that saying the truth just speaking the
00:36:06
words about needing to get fit or
00:36:08
needing to lower the valuation that
00:36:10
somehow that is found or unfriendly is
00:36:12
nonsensical the truth is founder
00:36:15
friendly
00:36:16
by definition and I think to Chamas
00:36:19
point the less complicated you make this
00:36:22
right you reset the valuation you re-up
00:36:25
the option pool and then everybody has a
00:36:27
choice to make and if the people who are
00:36:29
on the board and backing the company
00:36:30
choose not to re-up for whatever reason
00:36:33
they no longer believe in the path
00:36:34
forward for the company that's incumbent
00:36:36
upon the founder to go find people who
00:36:37
will that's not abandonment as it's
00:36:40
Being Framed in this story it is a trade
00:36:42
and I think maybe if you look at Public
00:36:44
Market investors Brad nobody gets upset
00:36:47
by a trade trades a trade but in the
00:36:50
private markets there's a lot more
00:36:51
emotion involved a lot more relationship
00:36:54
material and this founder friendly
00:36:56
concept of like you're abandoning me
00:36:58
it's like no the the trade here it makes
00:37:00
no sense for this firm and for this fund
00:37:02
and for these LPS right well sometimes
00:37:05
sometimes the founder needs to have the
00:37:08
courage to look in the mirror and say
00:37:10
what I'm doing is not working I had a
00:37:13
plan I missed the plan by 70 I'm
00:37:15
lighting capital on fire this is a
00:37:17
charity not a business it's best to say
00:37:20
it didn't work shut it down and move on
00:37:22
and do something else okay so of course
00:37:24
you're referencing Salesforce so we'll
00:37:25
pivot to that I'm joking uh it's not
00:37:27
that bad uh but I think this is a good
00:37:29
time to maybe talk about the public
00:37:31
markets and inflation and what we're
00:37:34
seeing in macro so can I set up a
00:37:36
question for Brad actually sure go ahead
00:37:38
yes yes so so on a previous podcast I
00:37:41
laid out my theory of how you could just
00:37:43
use the two-year bond rate relative to
00:37:46
the FED funds rate to understand
00:37:49
where the bond markets sort of
00:37:51
prediction Market about inflation is
00:37:53
going and a month ago the the two-year
00:37:57
bond rate was at 4.1 percent relative to
00:37:59
4.5 percent fed funds rates in other
00:38:01
words the bond market was betting that
00:38:04
interest rates would go down between now
00:38:07
and two years from now relative to where
00:38:08
the FED had it so therefore it believed
00:38:11
that inflation had been conquered now
00:38:14
fast forward just one month later and
00:38:17
the two-year bond rate said about 4.9
00:38:19
percent you know the FED funds rates
00:38:21
about four and a half percent that is a
00:38:24
massive swing basically 80 basis points
00:38:26
swing in the I guess the tier bond rate
00:38:30
and so the market seemed to be saying
00:38:33
all of a sudden not just that they
00:38:35
expect rates to be higher longer but
00:38:37
also that the FED needs to keep raising
00:38:40
and that is a big change so Brad what is
00:38:43
the basis for that and what do we now
00:38:46
believe about inflation I think just a
00:38:48
few weeks ago
00:38:49
we were thinking that this problem was
00:38:51
licked and the market took off like a
00:38:53
rocket it ripped now all of a sudden it
00:38:56
seems like investors are really worried
00:38:57
that inflation is not over so where does
00:39:01
this stand right now well I think when
00:39:03
we started the year you know the the
00:39:06
tenure was close to 3-2 we're now we're
00:39:08
closer to four percent
00:39:10
the 10 minus 2 is is negative as it's
00:39:13
been in the last uh probably 10 years
00:39:16
so the market is clearly saying you know
00:39:18
we saw some inflation prints that came
00:39:19
in hotter I think it's now consensus
00:39:22
which you guys have been saying on the
00:39:23
Pod that you know although the second
00:39:26
derivative is slowing that we're it's
00:39:28
sticky right we're going to get stock at
00:39:30
this four or four and a half three and a
00:39:32
half
00:39:33
and it's the slope of the curve down
00:39:35
where it is going to be slower um we've
00:39:37
gone from thinking we're going to have
00:39:38
225s to now thinking we'll have three or
00:39:41
four
00:39:42
you know and so I think everybody is now
00:39:45
bracing for more inflation but remember
00:39:47
when we started here on January 1st the
00:39:49
consensus wisdom was we were going to
00:39:51
retest the s p at 3200 we're going to
00:39:54
have an earnings recession and that
00:39:55
inflation was going to continue to run
00:39:57
hotter the only surprise in my mind so
00:40:00
far this year is how well the equity
00:40:02
markets have held up in the face of a
00:40:04
tenure that's gone parabolic right and a
00:40:08
natural earnings recession right and you
00:40:10
you know you you posted you know in our
00:40:12
Thread shamath about just quality of
00:40:14
earnings you know even the earning
00:40:15
speeds are pretty low quality and so I
00:40:18
think you know we now are going to have
00:40:22
a couple inflation prints coming up over
00:40:23
the course of the next couple weeks that
00:40:25
are going to be important
00:40:27
my hunch is you know everybody has
00:40:30
tilted again on you know what we saw in
00:40:32
the last couple prints my suspicion if
00:40:35
you look at Morgan Stanley and Goldman
00:40:36
Sachs the consensus view is that we're
00:40:39
still heading in the direction of four
00:40:41
percent faster than I think people
00:40:43
emotionally think so I would say there's
00:40:47
maximum uncertainty in the world the
00:40:50
fear that inflation is uncapped the way
00:40:52
Larry Summers was articulate in November
00:40:54
and December is less today than it was
00:40:56
but what's emerged is this idea that
00:40:59
we're going to have higher rates for
00:41:01
longer and we're going to have higher
00:41:03
inflation for longer now the the
00:41:04
question I'd throw back at you
00:41:07
is the market abhors uncertainty the
00:41:11
Market's done totally fine during
00:41:13
periods where we had three percent
00:41:14
inflation and five and a half percent
00:41:16
rates right when when the internet boom
00:41:19
that was you know 2000 to 2005 rates
00:41:23
were a hell of a lot higher than the
00:41:24
rates are today so I don't think that
00:41:28
higher rates and higher inflation means
00:41:31
that we can't you know invest in
00:41:32
venture-backed companies that have huge
00:41:34
secular growth the world doesn't end but
00:41:37
what I do think it means is like if
00:41:39
there's massive uncertainty in the world
00:41:41
if allocators of capital don't know
00:41:44
whether rates are going to double again
00:41:46
whether inflation is going to double
00:41:48
again then everything just shuts down
00:41:49
and that's really bad for the economy I
00:41:52
don't see that happening right now but I
00:41:54
do think that the prince over the course
00:41:55
of the next eight weeks are going to be
00:41:57
important
00:41:58
Tremonti have any macro that's here at
00:42:01
the same time this is happening we saw
00:42:02
rents broke in the last month so rents
00:42:05
got cheaper yeah a governing principle I
00:42:08
think I probably said it too many times
00:42:09
but I'll say it again rates are going to
00:42:11
be higher than we like and they'll stay
00:42:14
here longer than we want so if you use
00:42:17
that as a principal
00:42:19
whenever the consensus thinks we're done
00:42:22
it's been pretty profitable to be on the
00:42:24
other side of consensus
00:42:27
and so I still kind of maintain that
00:42:29
we're probably going to have a five and
00:42:31
a half percent fed funds rate
00:42:34
which means that I don't know maybe
00:42:35
Credit Suisse will offer me seven and a
00:42:37
half percent soon on three month T bills
00:42:38
but we're going to have higher rates and
00:42:41
I do think Brad's right though in the
00:42:42
sense that as long as we know that then
00:42:44
that's it and we can forecast it into
00:42:48
the future without it changing too much
00:42:50
it'll be okay
00:42:52
but right now what you're seeing is a
00:42:55
lot of Make-Believe going on in in the
00:42:58
stock market so Nick if you want to just
00:43:00
throw up that image so
00:43:03
this is a really this is the chart of uh
00:43:06
Cash Flow versus earnings yeah
00:43:08
so this is something that I saw in
00:43:10
Bloomberg which I thought was really
00:43:11
interesting and if you focus on the
00:43:12
period of 2020 to 2024 what you see is
00:43:16
the white line which is net income
00:43:18
adjusted for depreciation and
00:43:19
amortization and the blue line is cash
00:43:22
flows from operation so what does that
00:43:23
mean
00:43:24
and this is for uh S P 500 firms this is
00:43:28
the best 500 companies in the world yeah
00:43:30
and the white line is what you tell Wall
00:43:33
Street in terms of what you make on
00:43:36
paper
00:43:37
the blue line is what actually appears
00:43:40
in the bank account so why could there
00:43:43
be a gap between what you tell somebody
00:43:45
you made I made a dollar versus what's
00:43:47
in the bank 50 cents well the reason is
00:43:50
that there's all kinds of accounting
00:43:52
tricks that you can use accruals
00:43:54
inventories
00:43:56
and all of these things allow you to
00:43:59
present a healthier earnings report than
00:44:02
is actually true and so right now we
00:44:06
have the worst earning situation so the
00:44:08
worst Gap
00:44:10
between what we are telling people
00:44:12
versus what is actually in the bank
00:44:14
account that we've had for 30 years
00:44:16
since 1990. and so it just brings into
00:44:20
Focus the fact that we may be in the
00:44:22
last few innings
00:44:24
of trying to make sure this all looks
00:44:27
okay
00:44:28
in which case one faction of the
00:44:31
investing world who thinks that
00:44:34
this earnings recession is actually at
00:44:36
hand would be kind of right and then
00:44:38
what they would say is that once we all
00:44:41
realize that these earnings are fake and
00:44:43
you reset down 15 that's where you get
00:44:46
to the mid 3000 in in the S P 500 right
00:44:49
now it's around four thousand
00:44:51
I don't know if that's true or not but
00:44:53
there's more and more evidence that
00:44:56
would support
00:44:58
that the way that they see the world
00:44:59
could be credible
00:45:01
the other side says Hey listen this is a
00:45:04
bump in the road we're getting a handle
00:45:06
on things and it's stabilizing so even
00:45:09
though it's higher than we'd like it's
00:45:10
not going to change that much so now
00:45:12
just think about 10 15 years from now
00:45:13
and let's go and those are the folks
00:45:16
that want to rip the money into growth
00:45:17
stocks and tech stocks again how does
00:45:19
the consumer play into all this record
00:45:21
low unemployment like it's one percent
00:45:23
in Utah three and a half percent for the
00:45:25
country two and a half jobs for every
00:45:26
American who's unemployed
00:45:28
and then these rents coming down
00:45:31
but consumers have seemed to have burned
00:45:33
off all that extra money they had so
00:45:35
Brad when you look at the
00:45:37
consumer-driven economy that the world
00:45:39
lives in that's not true because you
00:45:41
have to understand stimulus is still
00:45:43
entering the economy it's just harder to
00:45:44
measure so for example take Social
00:45:46
Security you have cost of living
00:45:48
adjustments in Social Security that's
00:45:50
lifting payments by 10 and 15 percent
00:45:52
because it's backdated for what was
00:45:53
going on last year and remember last
00:45:56
year we had
00:45:57
two three four five percent inflation
00:45:59
rates so there is more and more money
00:46:01
coming into people's pockets that we
00:46:03
don't realize and we're all on the hook
00:46:05
for that as U.S taxpayers so I think
00:46:08
it's very dangerous to kind of look at
00:46:11
one data point and try to pick off
00:46:12
what's happening in consumer land
00:46:14
because there's all kinds of hidden ways
00:46:16
in which money gets back to people
00:46:18
Brad you have thoughts on the consumer
00:46:20
because
00:46:21
you know I test it does seem like
00:46:23
consumers are still spending money
00:46:26
but the cost of goods in some cases is
00:46:29
coming down I mean how do you look at
00:46:30
the consumer and try to make sense of
00:46:32
what's going on here because it does
00:46:33
seem the United States is in its own
00:46:35
little bubble here world of just over
00:46:38
employment
00:46:39
still even though we're seeing these
00:46:41
layoffs in town well I would say number
00:46:44
one uh that the pop we've seen in rates
00:46:46
which impacts consumers by way of higher
00:46:48
mortgages higher variable expenses on
00:46:51
their credit cards was offset over the
00:46:52
last few months by lower energy costs so
00:46:54
their cost of gasoline went down add in
00:46:57
the things that chamat's talking about
00:46:59
and I'm not sure you took a lot of money
00:47:00
out of people's pockets I would say this
00:47:03
that again what we're talking about here
00:47:05
retail sales have continued to do really
00:47:07
well e-commerce sales in January were
00:47:10
quite strong
00:47:12
that would all be consistent with this
00:47:14
off Landing but here we are you know
00:47:17
again talking about macro I think when
00:47:19
you spend this much time talking about
00:47:20
macro doing what we do you know like
00:47:23
last year I'll be the first to raise my
00:47:25
hand and say you know like our friend
00:47:27
Bill Gurley would say it leads you in
00:47:29
the wrong direction the fact that the
00:47:30
matter is it's totally unknown and
00:47:32
unknowable where we're going to go over
00:47:34
the course of the next three or four
00:47:35
months I think there's a better ability
00:47:37
to predict maybe over the course of the
00:47:39
next couple years
00:47:40
um but the fact is if you would have
00:47:42
told any I was just with a bunch of uh
00:47:45
investors you probably represent a
00:47:46
trillion dollars of public market demand
00:47:48
10 uh or so long only investors if you
00:47:51
would have told any of them that the
00:47:52
tenure was going to be at 396 they would
00:47:54
have told you that the NASDAQ would be
00:47:56
down 10 to start the year and it did
00:47:58
just the opposite so I think you got it
00:48:01
you know you're you have a much better
00:48:03
chance particularly if you're playing at
00:48:04
home right than trying to to guess the
00:48:07
direction of that find five companies
00:48:08
that you think are going to grow uh and
00:48:11
earn more money irrespective of the
00:48:13
direction of rates and inflation own
00:48:14
those and enjoy your life
00:48:17
I'm looking at the world and going sax
00:48:20
my Lord I'm seeing great Founders great
00:48:22
companies and five to ten million dollar
00:48:24
valuations and I can buy five ten
00:48:27
fifteen percent of these companies uh
00:48:28
this feels like the best uh it's been
00:48:31
for me as an angel investor seed
00:48:33
investor or seed fund for a long time
00:48:35
this is fantastic uh great deal flow the
00:48:39
deals are taking six weeks to close
00:48:41
we're having very thoughtful discussions
00:48:42
people are taking a real focused
00:48:45
approach to how they deploy the capital
00:48:47
it is not YOLO people are building
00:48:49
models again people are showing their
00:48:51
CAC they're being thoughtful about how
00:48:53
they spend the money they're being
00:48:55
thoughtful about salaries and hiring so
00:48:58
what what's your you seem to think that
00:49:01
you know what we're seeing here is
00:49:03
challenging or a problem
00:49:05
what are your thoughts on how it's
00:49:07
affecting your day-to-day business as
00:49:10
somebody who's a company Builder well
00:49:12
let's separate two things so there's the
00:49:14
tech ecosystem and then there's the
00:49:15
economy as a whole the fact of the
00:49:17
matter is that Tech already had its
00:49:19
bubble in 2021 it had its crash in 2022
00:49:23
and now we're largely on the other side
00:49:25
of that there's still a lot of companies
00:49:26
like we talked about that are going to
00:49:28
need to restructure who raised during
00:49:30
the bubble and may not have come to
00:49:31
grips with that but if you're talking
00:49:33
about new investment new rounds new
00:49:35
companies are starting with a clean
00:49:37
sheet of paper and a blank slate you're
00:49:39
right things seem good and normal right
00:49:41
people are making intelligent
00:49:43
Investments and obviously the Innovation
00:49:46
cycle doesn't have anything to do with
00:49:47
the macro picture I mean technology
00:49:50
wants to evolve and it's great engineers
00:49:54
and product people who drive those ideas
00:49:56
forward and they're not thinking about
00:49:58
interest rates I never thought about the
00:50:00
FED funds rate at all when I was a
00:50:02
Founder Running Company so let's just
00:50:04
put that aside and acknowledge that
00:50:06
great Innovation is going to keep
00:50:08
happening no matter what the
00:50:10
macroeconomic picture looks like that
00:50:13
being said I mean just for the you know
00:50:15
listeners of the show who aren't startup
00:50:17
Founders I tend to be a little bit
00:50:19
gloomy about the macro picture right now
00:50:22
because yeah it's true that what Brad
00:50:24
said that we've had good economies with
00:50:26
five percent rates before but I think
00:50:28
you also have to look at the pace of
00:50:30
change or the rate at which the the FED
00:50:33
funds rate has been going up and if you
00:50:35
look at the chart of rate increases
00:50:39
it is a very steep chart of rate
00:50:42
increases and I just think that for the
00:50:44
last decade or so we've been operating
00:50:46
in this like zero interest rate or
00:50:48
Reserve environment with loss of
00:50:49
monetary stimulus and I think a lot of
00:50:54
companies a lot of parts of the economy
00:50:56
got addicted to that stimulus they got
00:50:59
hooked on drugs now all of a sudden
00:51:01
you're putting them through withdrawal
00:51:04
very very quickly and obviously the
00:51:06
withdrawal pangs are going to be worse
00:51:07
if you can't taper off slowly so it
00:51:11
looked like just a few weeks ago that
00:51:13
the Fed was done raising rates now we
00:51:14
know that they're not we don't really
00:51:16
know when they're going to stop so I
00:51:19
tend to be a little bit gloomy with
00:51:22
respect to the the big macro picture
00:51:24
because I just don't see how you can
00:51:28
change rates this fast and I mean you
00:51:30
look at like real estate for example we
00:51:32
just saw the first year over year
00:51:33
decrease in the housing market in a
00:51:36
while and again that's all driven by
00:51:39
rates the cost of mortgages going up and
00:51:41
two big defaults in the first two big
00:51:43
defaults yeah so I I think that there's
00:51:45
going to be
00:51:47
some pain ahead now you know ironically
00:51:49
from the standpoint of the tech
00:51:51
ecosystem we may have already taken our
00:51:53
medicine and we may already be on the
00:51:55
other side actually that is a good way
00:51:56
to to look at as we took the medicine
00:51:58
it's painful and
00:52:00
here Jason maybe maybe that's the segue
00:52:03
to uh talking about benioff I would say
00:52:06
we haven't took it we're taking it we're
00:52:08
starting to take our medicine well that
00:52:10
makes sense that Benny off with his you
00:52:13
know very
00:52:15
loving family kind of approach to
00:52:18
running the company might actually it
00:52:21
might take them a little while to become
00:52:22
a bit Cutthroat so
00:52:25
as everybody knows Benny off and
00:52:28
Salesforce have had a lot of turnover a
00:52:30
lot of senior Executives have left
00:52:32
voluntary or involuntary
00:52:35
but shares were up 11 on Thursday after
00:52:38
reporting their Q4 earnings they're up
00:52:41
14 year over year
00:52:43
small net loss but the company bought
00:52:45
back 2.3 billion dollars worth of its
00:52:48
stock we're going to see more of that
00:52:49
for sure and they're going to be
00:52:51
increasing its share buyback program to
00:52:54
20 billion dollars going forward and
00:52:57
like meta which suddenly got fit and got
00:53:00
religion
00:53:01
benioff is now basically with all these
00:53:05
activists I guess on
00:53:08
on his ass he says uh and this is the
00:53:11
quote from the earnings call we're more
00:53:13
closely scrutinizing every dollar of
00:53:15
investment in resource and very focused
00:53:17
on driving operational excellence and
00:53:19
automation across our business focusing
00:53:21
on 4K eras stronger moves expense for
00:53:23
structuring employee productivity uh
00:53:25
there it is
00:53:26
product Innovation and building
00:53:28
relationships with shareholders
00:53:30
profitability is are truly our number
00:53:33
one strategy and that's my number one
00:53:35
strategy that's the number one thing we
00:53:36
talked about at the start of every
00:53:38
meeting we have in this company quite a
00:53:41
turnaround your thoughts Brad I don't
00:53:44
think the story is that you know that
00:53:46
benioff
00:53:47
you know made these cuts and that
00:53:49
activists are around the rim what was
00:53:50
significant was his comments uh that he
00:53:54
made and I tweeted about it today you
00:53:56
know
00:53:56
he said every CEO in Silicon Valley has
00:53:59
looked at what Elon Musk has done and
00:54:01
asked themselves do they need to unleash
00:54:04
their own Elon within them and you know
00:54:08
listen we've been talking about this for
00:54:10
nine months
00:54:11
the reality is if you look at the
00:54:13
employee count at Salesforce in 2015
00:54:16
they had 19 000 employees as of last
00:54:20
year they had 80 000.
00:54:22
in seven years they 4X the number of
00:54:25
employees they were a mature Company by
00:54:28
2015 their employees catered at 23
00:54:31
percent you know we don't talk about it
00:54:34
in this way but these large companies
00:54:35
these employee bases they're not unions
00:54:38
but they may as well be
00:54:44
there is
00:54:46
during this Age of Excess where it was
00:54:49
just easy for people to hire more people
00:54:51
and build more things not to make tough
00:54:53
choices Etc right we just had an
00:54:56
explosion like we've never seen in
00:54:58
Silicon Valley in the number of
00:55:00
employees in these businesses Meadow
00:55:02
went from 10 000 to 80 85 000 Google
00:55:06
went to 185 000 and at those levels it's
00:55:10
very difficult to govern them and when
00:55:13
the CEOs went to make decisions into
00:55:16
businesses there would be protests
00:55:19
revolts within the business 30 or 40 000
00:55:22
people with scientific
00:55:24
back to the office no we're not going to
00:55:27
work three days a week no you can't name
00:55:29
our AI bot uh what you want to name it
00:55:32
because it offends us and so to me
00:55:35
what's more significant
00:55:37
is over the last six months we've seen
00:55:40
courage gain momentum in Silicon Valley
00:55:43
right what's deeply under-appreciated
00:55:46
about meta and the changes they made it
00:55:49
would be one thing if it was just window
00:55:50
dressing we cut 10 percent of the
00:55:52
workforce kind of tighten our belt a
00:55:54
little bit but Zuckerberg got on his
00:55:57
call and he said we only have two
00:55:58
priorities in 2023. one is efficiency
00:56:01
and he went into depth about once they
00:56:05
started cutting people how the company
00:56:06
got faster the product release cycle
00:56:09
sped up the employees got happier and
00:56:12
now it's an end in itself to delayer the
00:56:15
business that's what we're hearing out
00:56:17
of benioff as well and I think
00:56:20
it's you know people can quibble with
00:56:23
how Elon went about the change which you
00:56:26
and you and uh David are very familiar
00:56:29
with at Twitter but the reality is he
00:56:32
lit a fuse in Silicon Valley that is
00:56:34
giving courage whether it's private
00:56:36
companies series B companies pre-ipo
00:56:40
companies public companies I've had that
00:56:42
conversation more times uh than you can
00:56:45
imagine over the course of the last six
00:56:47
months and I think it's a really
00:56:48
important change because I think it
00:56:50
breathes new productivity into all these
00:56:52
businesses and importantly it unleashes
00:56:55
these Engineers back into the ecosystem
00:56:58
to start the next wave of companies yeah
00:57:00
so Jason I mean you and I got to tag
00:57:02
along with Elon during that transition
00:57:04
phase at Twitter and
00:57:06
the thing that I took away from it was
00:57:09
just how much agency you know CEOs have
00:57:12
that they're not using I mean Elon went
00:57:15
in there and he basically changed
00:57:18
whatever he saw that he didn't like I
00:57:20
mean unsentimentally and quickly and you
00:57:24
know and so you look at all these other
00:57:26
companies you talk to CEOs sometimes and
00:57:29
they act like they're prisoners of their
00:57:31
companies like I can't change this I
00:57:33
can't change Stockholm syndrome yeah
00:57:35
yeah it's like you know I've got all
00:57:36
these employees and all these layers and
00:57:39
but I can't you know there's always some
00:57:40
reason I'm afraid of the bad PR or you
00:57:43
know whatever it is and I you know the
00:57:45
thing I came away realizing is just how
00:57:48
much agency particularly founder CEOs
00:57:51
have that they just don't use you know
00:57:53
they're always like hemming and hawing
00:57:55
and ringing their hands and acting like
00:57:57
they're tied down by this or that and
00:57:59
the reality is they can do whatever they
00:58:00
want just about
00:58:02
um you know within the bounds of what's
00:58:04
what's legal and
00:58:06
and I think they're starting to realize
00:58:08
oh wait a second like I actually can do
00:58:10
that you know I can walk into my company
00:58:11
one day and if there's a team that's not
00:58:13
performing that's giving me answers that
00:58:15
don't make any sense I could start over
00:58:17
wait I'm just going to start over yeah I
00:58:20
mean if you can't get it done then we
00:58:22
need to have somebody who can do it and
00:58:25
it's it's incredible like we were doing
00:58:27
an analysis on this week in startups of
00:58:30
the you know employees per company and
00:58:33
the revenue per employee per head count
00:58:35
and I got roasted for having this com
00:58:38
even having this conversation and now
00:58:40
here we are chamoth people are looking
00:58:42
at efficiency we're looking at you know
00:58:45
really uh how efficient can these
00:58:47
companies uh be run is there a limit to
00:58:51
where this is going and and if we were
00:58:53
to look at this as a process where are
00:58:55
the Fangs the Amazons the Googles
00:58:57
Facebooks where are they at in terms of
00:58:59
percentage to being
00:59:04
at Elon if you if you were to put
00:59:06
Twitter and Elon as the the goal where
00:59:09
are these companies and I don't know
00:59:10
that that is the goal maybe maybe he's
00:59:11
cut too much who knows we'll find out I
00:59:13
think it's a it's a it's a pretty
00:59:15
radical experiment he's doing there yeah
00:59:16
yeah I don't think that's a
00:59:19
reasonable or an achievable goal for a
00:59:22
public company okay I mean I think the
00:59:24
thing we have to keep in mind is elon's
00:59:26
also capable of doing that because he
00:59:28
paid 44 billion dollars of his own money
00:59:30
to buy something that he owns alt right
00:59:32
that no longer has Revenue pressure
00:59:35
to outside stakeholders different
00:59:37
circumstance Revenue went down 70 at
00:59:39
Twitter well that only affects him and
00:59:41
and his ability to pay
00:59:43
whatever he borrowed in order to buy
00:59:45
that company and as long as he's willing
00:59:46
to fund that somehow he's literally
00:59:49
allowed to do whatever he wants that's
00:59:50
no longer the case when you're borrowing
00:59:53
money from other people to build your
00:59:55
business which is what every other
00:59:56
Capital Market
00:59:58
participant does public market
00:59:59
participant does and private Market
01:00:01
participants so I think that that
01:00:03
distinction is just a little bit
01:00:04
important because it probably means that
01:00:07
there is a shadow of what Elon is doing
01:00:10
that's probably the threshold of what's
01:00:12
possible
01:00:13
and it's probably you know sort of 50
01:00:16
percent head count reduction that's
01:00:18
probably the the Bound in which
01:00:21
things break because I think the thing
01:00:24
to keep in mind is that
01:00:26
over time this stuff is like collagen in
01:00:29
the body it's just like it creates these
01:00:32
interconnected webs of just very
01:00:34
difficult stuff that you send you that
01:00:37
you cannot tease apart
01:00:38
so even if you try to go in
01:00:42
and cut 50 of a company like Facebook or
01:00:45
Google or Microsoft or apple or Amazon
01:00:48
it would be so difficult because all of
01:00:51
a sudden the coordination that happens
01:00:52
at that scale I think would get lost
01:00:55
so I'm not sure if it's possible you
01:00:57
kind of have to do what they're doing
01:00:58
which is cut five percent then cut ten
01:01:01
percent then cut five percent then cut
01:01:03
five percent and I know it frustrates
01:01:05
people on the outside looking in but I
01:01:06
think it's the it's probably the only
01:01:08
way it can be done without torpedoing
01:01:11
the company what does that do on a
01:01:13
culture basis then because that is the
01:01:15
big critique hey you're creating now
01:01:16
this culture of fear I guess the
01:01:18
opposite of that is your grand and
01:01:19
culture of performance and expectation
01:01:20
so how do you think about it on a
01:01:22
culture basis because that keeps coming
01:01:23
up from Founders to David's point it
01:01:26
depends because I think companies when
01:01:27
they're smaller I mean I can tell you
01:01:30
when I was a part of the Facebook senior
01:01:33
management team we would rank all the
01:01:36
employees
01:01:37
so we had a very good sense of who was
01:01:40
the best and the most performant all the
01:01:41
way down to who was not and we were able
01:01:43
to do that
01:01:44
probably up to two or three thousand
01:01:46
employees that's not possible at fifty
01:01:48
thousand and nor is it fair
01:01:50
so because you don't know who these
01:01:52
folks are the real contributors are you
01:01:55
have to do what Elon did which is
01:01:57
literally go person to person and say
01:01:58
who is unbelievably performant or
01:02:02
critical yeah
01:02:05
in the absence of doing that you just
01:02:06
don't know who to let go and so you have
01:02:08
no choice except to bleed down the
01:02:10
question that I have and Brad maybe
01:02:11
there's a smart analyst on your team
01:02:14
that can do it is right and it's more of
01:02:15
a statement as well can you imagine the
01:02:19
totality of stock based comp that's been
01:02:21
given out by all these companies since
01:02:23
2015 when they were catering their
01:02:26
employee bases by 25 a year I bet you
01:02:29
it's
01:02:31
a trillion and a half dollars at least
01:02:33
you think it's that you think it's in
01:02:35
that order magnitude 100 this has been
01:02:38
the greatest grift in the history of
01:02:40
Silicon Valley for sure let's pause for
01:02:42
a second can you explain what we're
01:02:44
talking about here stock based
01:02:45
compensation obviously is the stock
01:02:47
given to employees it's generally not
01:02:49
counted well let's do it right let's do
01:02:52
it this way
01:02:53
let's just say that you believe in
01:02:55
capitalism okay yep so if you if you
01:02:57
believe in capitalism let's say the the
01:03:00
four of us start a company
01:03:02
and there's a dollar of profit and we
01:03:04
each own 25 of the company got it
01:03:08
normally what you would say is each of
01:03:11
us get 25 cents
01:03:13
right reasonable we own 25 each there's
01:03:16
a dollar profit we each have 20. so that
01:03:18
means that in four years right we each
01:03:20
will have made a dollar because so let's
01:03:21
just say it cost a dollar to get off the
01:03:23
ground or four dollars to get off the
01:03:24
ground all in Summit budget We believe
01:03:26
We all would have been made whole we all
01:03:28
would feel great and then now every year
01:03:30
afterwards that 25 cents we get is
01:03:32
profit now let's say that Jason you add
01:03:36
a fifth person and Brad and David and I
01:03:39
can't say anything about it okay and
01:03:41
that fifth person now gets a fifth of it
01:03:43
right
01:03:45
and so now all of a sudden our 25 cents
01:03:47
goes down to 20 cents
01:03:49
then let's say you add five more people
01:03:51
now all of a sudden our 25 cents went to
01:03:54
20.
01:03:55
and then it went to 10 10. yeah and at
01:03:59
some point Brad and David and I raise
01:04:01
our hand and say hey this is not the
01:04:03
deal we signed up for and you say well
01:04:05
too bad because Revenue would not be
01:04:08
what it is and profits would not be what
01:04:10
it is without these extra six people
01:04:14
and that's effectively what everybody
01:04:16
debates when they own a stock the
01:04:18
shareholders
01:04:19
want that number to be as small as
01:04:21
possible
01:04:22
and I think what Brad is observing is
01:04:26
that in Silicon Valley what has happened
01:04:28
is there's been poor accountability for
01:04:31
what all of those extra people do
01:04:33
and profits haven't written risen fast
01:04:35
enough
01:04:36
to make the existing three people on the
01:04:38
cap table feel okay about it and that
01:04:41
instead of talking about three people
01:04:43
and six and a dollar you're talking
01:04:46
about trillions of dollars and hundreds
01:04:48
of thousands of extra shareholders
01:04:51
I know we have some charts here so we
01:04:54
can do some fun with numbers I think
01:04:56
taking a step back I think it's very
01:04:58
important to realize
01:05:00
that stock as a form of compensation to
01:05:03
create alignment excitement in the early
01:05:05
stage of venture capital is part of the
01:05:08
true magic of Silicon Valley
01:05:10
you know you're starting a company you
01:05:12
ask somebody to go on this adventure
01:05:14
take a bunch of risk they often have to
01:05:16
cut their pay they could get at Google
01:05:18
by half
01:05:19
to join your adventure it's only fair
01:05:21
that you give them stock in the company
01:05:22
and they share in the ups and if the
01:05:24
company smokes it uh they get rich for
01:05:27
taking that incremental risk on their
01:05:29
behalf and on their family's behalf
01:05:32
what's happened over the last 15 years
01:05:34
is something totally different
01:05:37
which is this stock as a form of early
01:05:39
stage compensation right continued
01:05:44
and there's a feature in Silicon Valley
01:05:47
as companies came public one way to kind
01:05:51
of hide an expense in a business is to
01:05:55
bury it in SBC so let's say Google
01:05:57
wanted to hire somebody for four million
01:05:59
dollars which they're doing today in AI
01:06:02
but instead of paying them 4 million in
01:06:04
cash which would all count against their
01:06:06
operating profit they give them 500 000
01:06:09
in cash and three and a half million
01:06:12
dollars in stock and let's say they make
01:06:13
all that stock vegetable immediately
01:06:15
Jason in this year it's obvious to you
01:06:18
and I that's just cash the person turns
01:06:20
around and sells it it's a real expense
01:06:22
of the business real expense to the
01:06:24
shareholders but when they report their
01:06:25
earnings and they report adjusted ebitda
01:06:28
they adjust out the three and a half
01:06:30
million dollars that they gave by way of
01:06:33
SBC why did stock based comp SBC get
01:06:36
excluded from accounting what is the
01:06:39
history of that and is that going to
01:06:41
change now are people going to say and
01:06:43
shareholders demand in this new economy
01:06:46
in this new you know sort of reality hey
01:06:48
you know what you can't play fun with
01:06:50
numbers here stock base comp has to come
01:06:52
out what would you like to see Brad it's
01:06:55
fairly esoteric but they're back in the
01:06:57
mid 2000s 2004 2005 there was a and a
01:07:01
county there's a big debate about this
01:07:02
Warren Buffett was famously saying
01:07:05
listen it doesn't matter whether you pay
01:07:07
in stock whether you're paying cash
01:07:09
whether you're paying cans of beers like
01:07:11
it all costs the same he's right and so
01:07:14
there was a debate we had a statement an
01:07:17
accounting statement fasbi 123
01:07:20
and in that statement it said Gap ebitda
01:07:24
must include the cost a stock uh based
01:07:27
compensation so all of a sudden if I'm
01:07:29
reporting Gap ebitda I got to include
01:07:31
the cost of stock comp which it does
01:07:33
today but what but but but
01:07:36
what did everybody do
01:07:39
but what happened they started adjusting
01:07:41
it out right because they said hey this
01:07:45
is a real expense right because we're
01:07:47
not it's not cash we're giving out what
01:07:49
are they solid do they come up with a
01:07:50
term for this
01:07:53
adjustments
01:07:57
the crime here
01:07:59
is that when rates fell to zero and
01:08:03
everybody was making money on tech
01:08:05
stocks nobody wanted to rock this boat
01:08:07
and everybody just said you know like
01:08:10
adjustedy but uh kind of ignored I can I
01:08:12
can model it into my future dilution so
01:08:14
we Model A Share account uh over the
01:08:17
course of the next three years but this
01:08:19
literally over the last five years went
01:08:22
parabolic
01:08:23
because I just shared with you the
01:08:25
number of employees exploded
01:08:27
the amount of share-based compensation
01:08:30
exploded because of competition for
01:08:32
those employees coinbase I think just
01:08:35
reported SBC which hold your hat sax was
01:08:40
70 of Revenue
01:08:42
not 70 of their earnings 70 of their
01:08:47
revenue just for coinbase we're talking
01:08:49
about here that's for coinbase and so
01:08:51
you know last week there was something
01:08:53
that I thought was pretty brave
01:08:56
booking.com on their earnings call
01:08:59
really called this out and what they
01:09:01
said is listen we've been playing by the
01:09:05
rules we understand that stock based
01:09:09
comp is cash
01:09:11
and they say every every metric we
01:09:13
report includes the impact of stock
01:09:15
based compensation and if you look over
01:09:17
the last 15 years if I'm an owner of
01:09:20
booking.com I was only deluded by about
01:09:23
five percent
01:09:25
if I was an owner of Salesforce or
01:09:28
Expedia I was deluded by about 25
01:09:30
percent
01:09:31
that's 25 of percent of my ups were
01:09:35
given away
01:09:36
right but yet those things were adjusted
01:09:39
out when they reported earnings and so
01:09:41
you know what's become in Vogue today is
01:09:44
CFOs get on their calls and they say no
01:09:46
no no don't worry we're gonna buy back a
01:09:49
lot of shares so we won't have much
01:09:51
dilution okay but if you take my two
01:09:54
billion of profits that jamacha's talked
01:09:57
about and it goes right out the door
01:09:58
just to buy back the shares you just
01:10:01
issued you're effectively round tripping
01:10:03
that money then it just proves the point
01:10:05
it's cash it's an expense to
01:10:08
shareholders and my biggest problem with
01:10:10
it is it's led to the bloat because if
01:10:15
companies actually had to account for
01:10:17
this as cash
01:10:22
they wouldn't hire as many people they
01:10:25
wouldn't pay as much in stock comp and
01:10:27
I'll end with this because I want to end
01:10:29
with a solution
01:10:32
every comp committee on every board
01:10:34
frankly their heads spin when you start
01:10:37
talking about this subject they bring in
01:10:39
a comp consultant and the comp
01:10:42
consultant they is really the cya for
01:10:45
the comp committee because they want to
01:10:47
approve a comp plan that's been
01:10:49
recommended by the management team and
01:10:51
they just want to know is this what
01:10:52
everybody else is doing okay so
01:10:55
everybody's doing it so the comp
01:10:57
consultant looks around and says yeah
01:10:58
all your peers are doing this this is
01:11:00
why Charlie Munger said I'd rather throw
01:11:02
a pit viper down the front of my shirt
01:11:04
than hire a comp consultant right what
01:11:07
is going on on these comp committees if
01:11:10
you give bonuses to anybody in your
01:11:12
business
01:11:13
that are that is based on an adjusted
01:11:16
ebitometric rather than free cash flow
01:11:20
per share per share is the key here it's
01:11:23
negligence
01:11:24
it's negligence so if comp committees
01:11:27
just walk in and they say the gold
01:11:28
standard as a public company is 50 basis
01:11:32
points annual dilution that's Apple
01:11:34
that's booking.com Visa Mastercard or
01:11:37
even below that that's the gold standard
01:11:39
once you're in the public market and we
01:11:41
will never
01:11:42
instead of is our employ our employees
01:11:45
on the basis of anything that excludes
01:11:48
.com and it has to be on a per share
01:11:50
basis that would be a massive Leap
01:11:52
Forward for public company account seems
01:11:55
reasonable anybody have any other
01:11:56
thoughts on that stock base comp no all
01:11:59
right sax where do you want to go you
01:12:00
want to go Fox I'm willing to do foxes I
01:12:03
mean Fox is kind of crazy uh okay so
01:12:05
Rupert Murdoch had been uh deposed here
01:12:08
with this Dominion voting system lawsuit
01:12:11
they're suing Fox for 1.6 billion in
01:12:14
Damages over claims made on air that we
01:12:17
all know around
01:12:19
technology-enabled election fraud we
01:12:21
remember this wild period at the end of
01:12:24
the last election cycle with this
01:12:26
incredibly false claim that the election
01:12:28
was stolen
01:12:29
something
01:12:31
you know both sides of the aisle said
01:12:32
did not happen
01:12:34
however
01:12:36
it seems that the hosts on Fox knew it
01:12:39
wasn't happening it knew it wasn't true
01:12:40
but were engaging uh in entertainment of
01:12:44
allowing these people to come on air and
01:12:46
say the election was stolen so Murdoch
01:12:48
said
01:12:49
I would have liked us to be stronger in
01:12:52
denouncing it in hindsight
01:12:55
and when asked if he could have stopped
01:12:57
the host from highlighting these
01:12:58
allegations these false allegations on
01:13:00
air that were obvious to everybody he
01:13:02
said I could have but it didn't he said
01:13:03
the truth he's not allowed to lie in
01:13:05
court yeah just on air I mean uh sax to
01:13:09
be fair like um you uh really care about
01:13:12
freedom of speech you really care about
01:13:14
the libel laws you really care about the
01:13:17
GOP obviously you bring it up every week
01:13:19
here so when you looked at and but you
01:13:22
were very clear you were not happy about
01:13:25
the election denial all that like false
01:13:27
claims that Trump made and these insane
01:13:29
people he put around himself so how do
01:13:31
you look at
01:13:33
these foxhoes and listen you've been on
01:13:34
Tucker and other things knowingly
01:13:36
spreading lies about
01:13:40
something as important as the election
01:13:42
and then doing it in the most cynical
01:13:44
ways we we sit here and every week we
01:13:47
roast the media the mainstream media you
01:13:49
particularly go after the Dems and the
01:13:50
left and the media Elites how do you
01:13:52
feel about these media Elites who are
01:13:54
part of the GOP machine lying
01:13:57
incessantly about something as important
01:14:00
as the election Integrity of the United
01:14:03
States of America first of all you're
01:14:05
trying to tee this up as some giant dunk
01:14:07
on me Jay Cal I am not no I'm not you
01:14:09
said from the beginning
01:14:11
you didn't believe in this exactly let's
01:14:14
go back to December of 2020 on this show
01:14:16
because there may be a lot of
01:14:18
parts of the audience that weren't
01:14:19
watching back then I was really clear
01:14:21
that I said Sydney Powell and 100 and
01:14:25
Rudy Giuliani I thought they were wackos
01:14:28
and this whole idea that the Dominion
01:14:31
voting machines have somehow been rigged
01:14:33
and somehow it involved Hugo Chavez was
01:14:35
a wild conspiracy theory so I said at
01:14:38
the time 100 and I also said that I
01:14:40
thought that once the Supreme Court
01:14:43
denied certiorio Trump yeah I said that
01:14:45
he had his right to have his day in
01:14:48
court and to challenge the election in
01:14:50
court but once that the court threw out
01:14:52
his claims and the Supreme Court denied
01:14:55
sir shiori that that whole thing needs
01:14:57
to stop and it didn't stop and that's
01:14:59
why the Republicans lost that uh Purdue
01:15:01
runoff seat in Georgia on January 5th
01:15:03
and you had January 6th so you know I've
01:15:06
been warning against this for a long
01:15:07
time Jake owl now with respect to to Fox
01:15:10
I think you need to basically get a
01:15:12
little bit more nuanced in what you're
01:15:13
saying there because I think within Fox
01:15:15
there were actually two groups of hosts
01:15:18
so there is one group of hosts that I
01:15:20
think you could say were Trump Loyalists
01:15:22
and they basically not only platformed
01:15:25
the Sydney Powell lies but also endorsed
01:15:29
them and Rupert Murdoch admitted that
01:15:30
they went too far and actually endorsed
01:15:33
and so you had Hannity and a couple
01:15:34
other hosts do that even though Hannity
01:15:36
had some text messages that indicated he
01:15:39
didn't believe it so I think he came
01:15:40
across the worst however there were
01:15:42
within Fox Skeptics of the Sydney pal
01:15:45
Theory and so I put Tucker Carlson in
01:15:48
that camp I put Laurie Ingram in that
01:15:49
camp and Tucker had Sydney Powell on his
01:15:53
show on I think it was November 19th I
01:15:56
think this was 16 days after the
01:15:57
election it was a 20-minute interview in
01:15:59
which he grilled her and he kept coming
01:16:01
back to what is your evidence what is
01:16:03
your proof and if you were paying
01:16:05
attention he demolished her I mean I
01:16:07
remember that notable yeah exactly so I
01:16:09
mean honestly no one looks great when
01:16:11
all of your text messages come out and
01:16:13
you can nitpick about this or that text
01:16:15
but the bottom line is I think Tucker
01:16:16
did his job you know yes he platforms
01:16:19
Sydney Powell but he platformed her in
01:16:21
order to dismantle her and you kind of
01:16:23
have to be pretty Dopey not just to see
01:16:25
that she was dismantled after the
01:16:27
appearance be liable
01:16:30
for knowingly
01:16:32
platforming these people and endorsing
01:16:34
them in some way or is it their freedom
01:16:37
of speech in your mind as an attorney
01:16:39
here uh or
01:16:42
somebody with that uh you know legal
01:16:44
degree
01:16:45
where does it stand like put aside if
01:16:46
this was if this was CNN doing it MSNBC
01:16:49
we'll switch what publication if this
01:16:50
was the New York Times and they
01:16:52
knowingly lied knowingly platformed some
01:16:55
Kooks with a conspiracy theory what
01:16:58
should the price they pay for and then
01:16:59
how does that affect the freedom of
01:17:01
speech that we all think I think
01:17:03
universally on this podcast especially
01:17:05
and in Silicon Valley or at least we
01:17:07
used to that freedom of speech is really
01:17:09
important do you have the freedom to lie
01:17:11
and platform Kooks like this let me
01:17:13
answer you directly Jason I think this
01:17:15
would be a better world if Fox reliable
01:17:16
but I don't think they're going to be
01:17:18
because that's not the legal standard I
01:17:20
believe that if a television network
01:17:21
knowingly
01:17:23
spreads and endorses baseless
01:17:27
accusations against somebody which they
01:17:29
know or should know is basically untrue
01:17:31
I think they should absolutely be liable
01:17:33
for libel or defamation but that is not
01:17:35
what the law requires under New York
01:17:37
Times versus Sullivan you're required to
01:17:39
show that that they knowingly spread
01:17:41
misinformation but in addition you have
01:17:43
to show that they had actual malice
01:17:45
which is that their intent was malicious
01:17:48
and I think you know Rupert Murdoch is a
01:17:51
Wily old dog because he admitted on the
01:17:53
stand everything but the thing that was
01:17:56
most important for the plaintiffs to
01:17:58
prove which is actual malice he admitted
01:18:00
that they platform things that they you
01:18:03
know knew or should have known were
01:18:04
false he admitted that he should have
01:18:06
put a lid on it sooner he admitted that
01:18:08
he knew it wasn't true but he said the
01:18:10
reason they did it is because they're
01:18:12
afraid of Their audience or a portion of
01:18:14
Their audience going to some rival
01:18:15
Network so basically what he said is in
01:18:18
not so many words is that his motivation
01:18:19
was greed and in our system of law that
01:18:23
is a complete offense against claims of
01:18:25
deformation now I think what we need
01:18:27
here is to rewrite the defamation laws I
01:18:29
think the Supreme Court needs to
01:18:31
overturn New York versus Sullivan
01:18:32
Clarence Thomas is basically uh
01:18:34
intubated that he would support that I
01:18:37
think that would be a great thing to do
01:18:38
I think actual malice should not be the
01:18:40
requirement if reliable I think of a
01:18:43
television network or a publication puts
01:18:46
out information they know is false they
01:18:47
should absolutely be liable for it and
01:18:49
that is enough to show and if we did
01:18:51
that by the way it wouldn't just be fox
01:18:53
in this particular case it'd be CNN and
01:18:56
MSNBC we have to completely revise their
01:18:58
coverage and all of these Tech reporters
01:19:00
who do nothing but to fame the tech
01:19:02
industry the entire Tech press just
01:19:04
about is a slow moving defamation
01:19:07
lawsuit Elon Musk would probably be the
01:19:09
richest man in the world just based on
01:19:11
all the defamation lawsuits he could
01:19:12
bring if we were to overturn New York
01:19:14
Times versus the richest richier guy
01:19:17
yeah because all they do is to fame Elon
01:19:20
Musk every week which claims that are
01:19:23
ridiculous
01:19:26
there you go folks very very
01:19:28
intellectually honest I like it David so
01:19:30
what you're saying is you expect the
01:19:33
Dominion lawsuit to fail
01:19:35
can it be appealed all the way to the
01:19:38
Supreme Court can this be the case that
01:19:40
rewrites New York versus Sullivan good
01:19:42
question that's a good question I'm not
01:19:43
sure I mean I think that'd be great if
01:19:45
it did just be clear listen I think that
01:19:47
if Fox Were Somehow found guilty I think
01:19:49
one and a half billion is a kind of a
01:19:50
ridiculous amount of Damages I don't
01:19:52
think Dominion was damaged to one half
01:19:54
billion but do I think that it would be
01:19:56
a good thing if this lawsuit were
01:19:58
challenged all the way Supreme Court and
01:20:00
they overruled New York Times versus
01:20:01
Sullivan let's fund the lawsuit I would
01:20:04
fund that lawsuit
01:20:06
is not is is Sue MSNBC and CNN for all
01:20:10
the nonsense they spread every night
01:20:12
yeah just to be clear I have a couple
01:20:14
things that I would want to go and
01:20:16
um get correct clean up I just want to
01:20:18
be clear here though Brad David's guy
01:20:20
Tucker he did the right thing that's the
01:20:24
most important part of the story isn't
01:20:25
it David that you're still listening
01:20:27
you're not being Nuance you want to
01:20:29
throw a Tucker under the bus I think
01:20:31
Tucker did his job I think Tucker did
01:20:33
his paradoxical
01:20:35
job yes yeah I think the guy who looks a
01:20:38
little worse is Hannity because the
01:20:39
Hannity in the text admitted he didn't
01:20:41
believe the story but as a trump
01:20:42
loyalist he endorsed the Theory
01:20:45
that's really good Brad you we uh you
01:20:48
know you you come on the show every
01:20:49
couple of episodes and pitch in here as
01:20:51
our fifth Beatle would you like to touch
01:20:53
the third rail what are your thoughts
01:20:55
and uh would you like to get some
01:20:56
incoming email from all your LPS about
01:20:58
your position on Fox News and I mean
01:21:04
we just I just feel like I sat through a
01:21:07
University of Chicago Law School class
01:21:09
it was awesome
01:21:11
and great I think we have some good
01:21:13
issues here that we still got to tick
01:21:14
off on jaycal yes okay well we gotta
01:21:17
talk just for a second about China as it
01:21:20
relates to tick tock because because all
01:21:23
right here we go this Holly hearing
01:21:24
that's coming up so we've got a hearing
01:21:26
in Congress let's start with you are a
01:21:29
shareholder a significant shareholder in
01:21:31
bike dance the parent company of tick
01:21:33
tock we have to say that correct correct
01:21:34
correct you started that position and my
01:21:39
kids use reels and everybody you and I
01:21:41
have had a spirited debate on yes you're
01:21:43
a shareholder okay about this so I so I
01:21:46
haven't you want me to Tee It Up you
01:21:47
want to see it but hold on a second here
01:21:48
like because just like sax had to defend
01:21:50
himself before he even got started
01:21:52
otherwise
01:21:54
I have to do the same
01:21:56
okay here we go shareholder of meta who
01:21:59
stand s to do incredibly well if Tick
01:22:03
Tock in the US is banned so you have a
01:22:05
spread wait you win either way
01:22:07
I've got a hedge on good okay you know
01:22:10
if Tick Tock in the U.S gets banned but
01:22:13
you know the con the context here is the
01:22:16
tick tock band debate is heating up
01:22:19
right and it's all in a March up to the
01:22:22
Holly hearing I think it's on March 23rd
01:22:25
and there's real like we we spent a lot
01:22:28
of time at the start of this pod on
01:22:29
inflation I think a much bigger issue
01:22:31
right now I was just with all these
01:22:33
investors the main issue on their mind
01:22:35
was Global decoupling between China and
01:22:38
the United States we're going to see a
01:22:40
level of Chinese
01:22:43
hate leveled out of out of Congress both
01:22:46
sides I mean we heard it chamoth at
01:22:48
dinner at your place not so long ago
01:22:50
that this hearing is drawing more demand
01:22:53
for speakers from both sides of the
01:22:55
aisle than any such conference uh in a
01:22:57
long time but there's a lot of there's a
01:22:59
lot of heat now around tick tock should
01:23:01
it be banned
01:23:03
and
01:23:04
when I when I look at the situation if
01:23:07
you frame it for bike dance because
01:23:09
Shema talked about this a couple weeks
01:23:10
ago it's been reported
01:23:12
bite dances revenue is about 120 billion
01:23:15
dollars
01:23:16
it's been reported their profits are
01:23:19
about 25 billion dollars that is almost
01:23:21
identical in size to meta meta's worth
01:23:23
about 450 billion so 120 billion Top
01:23:26
Line it's also been leaked that in that
01:23:29
Tick Tock is about 14 billion of that
01:23:32
and that U.S Tick Tock is three to four
01:23:35
billion
01:23:36
U.S Tick Tock three to four billion of a
01:23:39
hundred and twenty and it loses money
01:23:42
so there's a lot of debate should we ban
01:23:45
it should we not ban it is it going to
01:23:47
go public and what should happen what do
01:23:48
you think what do you want to ask and as
01:23:49
a shareholder listen I think it's about
01:23:51
an American I think this is a puppet
01:23:53
debate over a much bigger conversation
01:23:55
that's going on one of the things I've
01:23:58
urged the company to do over the course
01:24:00
of the last several years is parental
01:24:03
controls my kids use tick tock they use
01:24:05
reels and what I want is to be able to
01:24:07
set effective time limits and I also
01:24:09
want Tick Tock has incredible uh video
01:24:12
content in math in science and history I
01:24:15
want to be able to set a slider and say
01:24:17
20 of the videos that get shown over
01:24:20
this one hour period have to include
01:24:22
some of these math and science videos
01:24:24
for my 12 year old then he can elect and
01:24:26
not watch at all or watch it
01:24:28
they announced those product changes
01:24:31
yesterday
01:24:32
um so they're teeing up those product
01:24:33
changes I don't happen to think there's
01:24:35
a nefarious plot but I also understand
01:24:39
that people might not want this and so
01:24:41
like listen I think we should have a
01:24:42
debate I think that the CEO of tick tock
01:24:45
should show up he should speak the the
01:24:47
truth at the Holly hearing and if the
01:24:49
U.S Congress wants to ban Tick-Tock in
01:24:51
the U.S or force a spin or a sale I
01:24:53
think we should do it and stop debating
01:24:55
it but the much larger conversation
01:24:57
is whether we have a hard or a soft
01:25:00
decoupling with China and I think this
01:25:02
is just Canary in the coal line all
01:25:04
right so let me just tee up also uh and
01:25:07
chamoth I'll get your reaction on Monday
01:25:09
the White House gave government agencies
01:25:10
30 days to remove tick tock from all
01:25:12
federal devices all federal agencies
01:25:14
must lead Tick Tock from phones and
01:25:16
systems and prohibit internet traffic
01:25:17
from reaching the company this is
01:25:19
following moves by Canada in the EU and
01:25:21
Taiwan
01:25:23
and uh obviously there is a bigger house
01:25:27
committee focused on China that held its
01:25:30
first meeting this week so there is the
01:25:31
bigger picture but let's start with the
01:25:34
smaller picture number one do you think
01:25:36
it's a security risk to have a Chinese
01:25:37
company have this kind of access and
01:25:40
influence with Tick Tock specifically
01:25:41
and what do you think the remedy should
01:25:43
be for that and then we'll get big
01:25:45
picture and we'll get snacks involved in
01:25:46
this as well should it be banned should
01:25:48
they have this kind of access to
01:25:49
Americans and influence
01:25:52
should it be banned
01:25:54
no because I believe in a free market
01:25:57
will it be banned
01:25:59
yes because it's
01:26:03
the most obvious
01:26:06
cultural way to
01:26:10
pick a fight with China without actually
01:26:12
picking a fight with China so yeah I
01:26:14
think it's going to be the most obvious
01:26:17
victim of all of this and so I don't
01:26:19
know my advice to my friends who are
01:26:20
shareholders
01:26:22
not just Brad but others is sell sell it
01:26:25
move on it's in the Warren Buffett what
01:26:28
Warren Buffett calls the two hard bucket
01:26:31
sax uh do you think that this is a
01:26:34
national security issue do you
01:26:36
personally believe Tick Tock should be
01:26:38
banned
01:26:39
or do you like me believe that we should
01:26:42
just do a reciprocation test in order
01:26:44
for tick tock to be allowed here in the
01:26:46
United States then Twitter Facebook meta
01:26:48
Instagram LinkedIn
01:26:51
Etc
01:26:51
need to be allowed in China and you have
01:26:54
this many days to reciprocate or else
01:26:56
it's banned I don't think Jamal is right
01:26:57
that tick tock's going to be GPC
01:26:59
roadkill and GPC stands for great power
01:27:02
competition you're going to start
01:27:03
hearing that term more and more it's
01:27:05
going to become the organizing principle
01:27:06
of American foreign policy and I just
01:27:08
think that Tick Tock is Tick Tock is all
01:27:10
caught up in that and you know
01:27:13
personally I'd like to understand what
01:27:15
it is exactly that they're doing with
01:27:16
Tick Tock and instead of just having
01:27:17
these vague accusations I actually
01:27:19
really like to understand
01:27:24
yeah I'd like to know a lot more about
01:27:26
that but in any event I just think
01:27:28
you're going to get caught up in this
01:27:29
this again GPC that's going to be the
01:27:32
the dominant organizing principle of our
01:27:35
foreign policy
01:27:36
I think that people are coming around to
01:27:38
realizing that it's China not Russia
01:27:41
that is the central
01:27:43
Global competitor and adversary of the
01:27:45
United States it's the only country in
01:27:48
the world that's a potential pure
01:27:49
competitor to the U.S this economy is
01:27:51
roughly the same size as the U.S it's
01:27:53
got four times the population it's the
01:27:55
one that we really need to watch out for
01:27:57
I think there's growing realization in
01:28:00
Washington
01:28:01
that the Ukraine war is a little bit of
01:28:04
a misdirect and that we need to
01:28:07
basically get back to doing what we were
01:28:09
doing before the war which is pivoting
01:28:11
to Asia and by the way thinking about
01:28:13
that just for a second
01:28:15
in I think David you're
01:28:17
totally right because the game theory
01:28:19
now to me makes a lot more sense in the
01:28:21
frame in the framing of GPC so for
01:28:23
example if you think about what the
01:28:25
chips act does right
01:28:27
the chips Act
01:28:29
basically says we are going to near
01:28:31
shore or onshore
01:28:34
every capability we need so that we can
01:28:37
make and manufacture all the critical
01:28:39
semiconductors for all of our interests
01:28:42
technological business military Etc
01:28:45
but what is that really what that is is
01:28:48
an option to not have to defend Taiwan
01:28:51
and why is that important it's because
01:28:54
today if Taiwan were invaded by China we
01:28:56
get pulled into a conflagration that we
01:28:58
don't know how it ends we don't know
01:29:00
what the beginning middle of end of it
01:29:01
looks like it's extremely dangerous and
01:29:03
precarious so spend a couple trillion
01:29:06
dollars create Financial incentives
01:29:09
build a bridge to Korea and to Japan so
01:29:12
that they bring onshore into Mexico all
01:29:15
the capabilities we need with Western
01:29:17
Europe who are already our allies
01:29:18
already along with Japan and Korea and
01:29:21
now all of a sudden we have complete
01:29:23
optionality and now we can deal with the
01:29:26
greater Chinese hegemony in a much more
01:29:28
balanced way so I think the GPC framing
01:29:33
is shared by the way between the
01:29:35
Democrats and the Republicans so this is
01:29:37
why it's so much bigger than one single
01:29:39
company that's why I think I think tick
01:29:41
tock's roadkill Brad if you frame it as
01:29:43
a competition we're not framing it as a
01:29:45
war we're in competition and part of
01:29:47
that is going to be this decoupling is
01:29:49
this decoupling helpful to America is it
01:29:53
helpful to humanity is it better that we
01:29:56
decouple a bit this interdependency
01:29:58
maybe got a little too deep as we saw
01:30:00
during covid with uh Supply chains well
01:30:03
I mean it's a great in a great power
01:30:04
struggle it is what the words imply
01:30:06
right
01:30:08
so I don't you know part of the reason
01:30:10
you want to have
01:30:12
trade uh with China and part of the
01:30:15
reason we don't want to have a hard
01:30:16
decoupling is uh you know a
01:30:18
long-standing theory that company
01:30:20
countries that trade together are less
01:30:21
likely to go to war
01:30:23
so you know I think if you listen to
01:30:25
what's coming out of this
01:30:27
you know these uh Select Committee this
01:30:31
week that held its first hearing is on
01:30:32
the on the extremes you hear people
01:30:35
saying hard to coupling right and in the
01:30:38
middle you have people saying listen we
01:30:39
need to define a circumference around
01:30:41
National Security and we need to
01:30:43
decouple as to all things that are
01:30:46
within that circumference now I will
01:30:48
tell you that the debate is about how
01:30:50
large is that Circle so it starts off as
01:30:53
for example sophisticated computer chips
01:30:55
out of Nvidia so China you know can't
01:30:58
compete with us in the AI arms race but
01:31:01
it's quickly emerged into you know
01:31:03
batteries energy food supply chains the
01:31:08
circumference has now become almost as
01:31:10
large as the economy itself I would
01:31:12
argue that it's not just the chips act
01:31:14
it's also Ira which is another trillion
01:31:17
dollars of funding for uh basically
01:31:20
onshore and Supply chains
01:31:24
vital materials to build batteries Etc
01:31:28
you know so I think it's a very
01:31:30
reasonable policy by both parties to
01:31:32
pursue it's clear that we're going to
01:31:34
have some decoupling
01:31:36
I think it's a it's a it's going to lead
01:31:39
to an interesting question on the part
01:31:41
of China you know she was out last week
01:31:43
saying you know I'm going to make a
01:31:46
speech about peace with Russia
01:31:48
you know this is more David's territory
01:31:51
but my hunch is that there may be you
01:31:54
know if China China thinks it's going to
01:31:56
be a hard decoupling from an economic
01:31:58
perspective this is bad for global
01:32:01
economic growth this is bad for China's
01:32:03
growth I don't think it's bad for growth
01:32:04
I think it's bad for inflation
01:32:07
explain well because I think that we'll
01:32:10
have many versions of everything
01:32:11
everywhere so we will some more
01:32:13
redundancy yeah more redundancy we're
01:32:16
going to rely on Central and South
01:32:18
America in a meaningfully bigger way and
01:32:21
what that'll mean is that there'll be
01:32:22
more jobs in economic prosperity for
01:32:24
those countries they'll feed the United
01:32:26
States China will feed it less and as a
01:32:28
result
01:32:29
there'll be more inflation because you
01:32:30
won't have the cost advantages by the
01:32:32
way China is not just going to sit there
01:32:34
and take this line down they've already
01:32:36
punched back a few times so for example
01:32:38
on the middle of the summer China
01:32:40
introduced a tariff and slowing the
01:32:43
export of certain materials and
01:32:45
Technology to make solar Wafers now why
01:32:48
is that critical well again talked about
01:32:50
this before but we are going to take the
01:32:52
marginal cost of energy to zero in this
01:32:54
country and the levelized cost of energy
01:32:57
particularly via solar is the cheapest
01:32:59
it's ever been and so
01:33:02
what China sees is oh my gosh if the
01:33:04
United States has abundant free energy
01:33:06
now all of a sudden a huge component of
01:33:10
what drives costs is gone yep so now the
01:33:13
United States could partner with El
01:33:15
Salvador Mexico Honduras you know
01:33:18
Argentina Brazil it's happening here too
01:33:20
yeah no but I'm just saying it's close
01:33:22
by yes right and if you can deliver zero
01:33:25
cost energy to those places now the
01:33:27
manufacturing capability could exist
01:33:28
there my point is it's such a
01:33:30
complicated chess piece so China is not
01:33:32
taking any of this line down but I think
01:33:34
that what David's framing is totally
01:33:36
accurate this is the beginning of a GPC
01:33:39
and it's an economic Tit for Tat that
01:33:41
we're going to play out we tax chips
01:33:43
they tax solar panels we go after tick
01:33:46
tock just as a
01:33:48
confusion maker right
01:33:50
yeah
01:33:53
I can tell you the the there's a very
01:33:56
easy test for if China sees Tick Tock as
01:34:00
a strategic
01:34:01
asset and that's it's going to create
01:34:04
more shareholder value Brad if they were
01:34:06
to spin it out and make it a publicly
01:34:08
traded American company with American
01:34:09
sharehold it would create more
01:34:10
shareholder value for bike dance
01:34:12
therefore if they don't spit it out that
01:34:15
means they're not acting in the interest
01:34:16
of shareholders and shareholder value
01:34:18
they're acting the interest of their
01:34:20
National Security
01:34:21
pretty clear reciprocation and
01:34:24
collaboration would be
01:34:26
a much better model I think for for
01:34:27
working with the Chinese and hopefully
01:34:30
we can find some things and we can
01:34:32
collaborate on Brad raised the the
01:34:34
Chinese peace proposal in Ukraine which
01:34:36
I think said an interesting topic can we
01:34:38
do you guys want to go there for a
01:34:40
minute
01:34:41
sure uh yeah all right can I take a shot
01:34:43
explain what the Chinese were doing I
01:34:45
think it was a clever diplomatic
01:34:47
maneuver by the Chinese to try and grab
01:34:48
the moral High Ground here they're
01:34:50
basically saying listen we're interested
01:34:51
in peace we're going to put forward a
01:34:53
proposal the Americans fell into the
01:34:55
Trap of basically dismissing it right
01:34:56
away throwing cold water on it the U.S
01:34:58
state department has done this twice
01:35:00
before remember back in March of last
01:35:02
year enough tolly Bennett from Israel
01:35:04
tried to negotiate a peace deal and he
01:35:07
himself said that it was the West the
01:35:09
Americans who rejected it he thought it
01:35:11
had a 50 50 chance of succeeding you
01:35:13
then had the peace process in Istanbul
01:35:15
Turkey with erdogan presiding over it
01:35:17
you had the the Istanbul communique
01:35:20
which again they were very close to
01:35:22
having a peace deal and blinking in the
01:35:24
U.S threw cold water on it so what's
01:35:27
happening here is that the U.S is not
01:35:29
playing its traditional role as
01:35:31
Peacemaker where we try to go in and
01:35:34
mediate these conflicts we're doing the
01:35:36
opposite of that we're throwing cold
01:35:37
water in the peace process now why are
01:35:39
we not acting as the mediator I'll tell
01:35:40
you why but because we are a
01:35:42
co-belligerent this is an American proxy
01:35:44
war that we're fighting against Russia
01:35:46
so we have no interest in mediating a
01:35:47
peace process and moreover we're not
01:35:49
trusted to mediate a peace process
01:35:52
because we're one of the effectively
01:35:54
strategy by Xi Jinping yes to take the
01:35:57
global moral High Ground I I agree with
01:36:00
that no no I said it on Twitter a couple
01:36:01
weeks ago like this this is amazing that
01:36:03
he's starting the peace process we want
01:36:05
regime change we want to deplete and we
01:36:07
want to ankle Putin they want to keep
01:36:09
him in the game the more despots there
01:36:11
are the the worse the better it is for
01:36:13
them they would like to keep the Legion
01:36:15
of Doom uh going they don't want to see
01:36:17
regime change in democracy in Russia
01:36:19
eventually I don't think that's how they
01:36:21
view it but listen Jake how is very
01:36:23
close to getting it but here's where I
01:36:25
would disagree with you a little bit
01:36:27
let me explain okay go ahead so from the
01:36:32
Chinese point of view the war in Ukraine
01:36:34
is like Mana from Heaven okay they love
01:36:37
this war number one okay because it's
01:36:41
interfering with the US's pivot to Asia
01:36:44
we were basically in the process of
01:36:46
redeploying all of our force all of our
01:36:48
military to containing them in East Asia
01:36:52
and now we're bogged down in Europe okay
01:36:54
so that's number one number two we are
01:36:56
massively depleting our stockpiles of of
01:36:58
weapons we've used something like nine
01:37:01
years of stingers and five years of
01:37:03
javelins and we're running out of
01:37:05
ammunition I can't believe we're running
01:37:06
out of artillery the Russians actually
01:37:08
have a six to one artillery Advantage
01:37:10
which is why they're actually doing much
01:37:11
better in this war than people are
01:37:13
acknowledging we should come back to
01:37:15
that the last thing is that the Chinese
01:37:17
now are benefiting from the economic
01:37:20
sanctions on Russia because Russia is
01:37:22
now selling them oil and gas and all
01:37:25
their minerals
01:37:27
so it's been this has been a wonderful
01:37:30
thing from the Chinese standpoint so
01:37:31
this is the problem with us thinking in
01:37:34
this Marvel movie Way of the World in
01:37:36
which we're the Super Friends and we're
01:37:38
against the Legion of Doom okay is
01:37:41
because there is no natural Alliance in
01:37:43
the real world between China Russia and
01:37:45
Iran these are three very different
01:37:48
regimes with different types of
01:37:50
governments who naturally would not get
01:37:53
along
01:37:54
they would be adversaries naturally
01:37:55
they'd be suspicious of each other as
01:37:58
China and Russia were during the Cold
01:37:59
War but we have pushed them closer
01:38:02
together this is the problem with having
01:38:04
this overly moralistic view of foreign
01:38:06
policy over to you Jason what do you
01:38:08
think
01:38:09
is there a question is there a question
01:38:11
what's the question yeah I mean you
01:38:13
frame it as the Legion of Doom so just
01:38:15
explain
01:38:16
well it's the axis of Evil the the the
01:38:19
50 uh
01:38:23
Brainiac would not be working together
01:38:25
if it weren't for us declaring a war on
01:38:28
both of them actually Pakistan
01:38:32
Iran and and China work together on
01:38:36
nuclear technology so they do when it's
01:38:38
convenient for them work on things like
01:38:40
nuclear bombs so uh there is an
01:38:43
affiliation but you're correct they're
01:38:45
they're the 50 of the planet
01:38:48
of humans on this planet who live under
01:38:50
authoritarians and so they they're
01:38:52
authoritarians they're always going to
01:38:53
think in their own interests they're
01:38:54
always going to think in their own
01:38:56
interests above their own peoples let
01:38:58
alone the people of another country they
01:39:00
don't care they don't care about human
01:39:01
rights if they don't care about the
01:39:02
rights of humans and they certainly
01:39:04
don't care about the rights of humans in
01:39:05
another country and the West is uh on a
01:39:08
noble mission to spread democracy in the
01:39:11
world and that is a noble Thing Worth
01:39:12
Fighting For and is worth defending
01:39:15
free countries from despots I know that
01:39:18
you are a fan of these folks sacks
01:39:20
apparently and you think they should be
01:39:21
able to run amok I will take the other
01:39:23
side of it I think the West should act
01:39:24
in unison the only criticism I have is
01:39:27
that we are not acting in unison I would
01:39:29
like to see the West instead of sending
01:39:30
Biden to Ukraine hold on
01:39:33
we've talked enough you just accuse me
01:39:36
of somehow being fans of these people
01:39:37
where did I ever say that I was a fan of
01:39:40
XI and China or Putin or the ayatollahs
01:39:43
in Iran hold on you said we provoked
01:39:45
Putin Putin invaded another country hold
01:39:47
on we caused it
01:39:51
hold on a second
01:39:53
I am arguing for a geopolitical strategy
01:39:55
that benefits the United States I'm on
01:39:57
Team America and your policy of driving
01:40:00
these people into an axis of Evil is
01:40:03
foolish for the reason I said which is
01:40:04
we are going to power up the Chinese
01:40:06
economy so they are a much more
01:40:08
formidable enemy to the United States
01:40:10
that is the last thing we need to do now
01:40:12
with respected hold on a second let me
01:40:14
finished you had a chance
01:40:16
with respect to Ukraine and Putin there
01:40:19
there's no question that Putin invaded
01:40:21
okay he is the aggressor however the
01:40:24
question you have to ask is why and the
01:40:26
fact of the matter is that first of all
01:40:29
we fermented a coup in Ukraine in 2014
01:40:32
this is your democracy spreading that
01:40:34
you like is all of a sudden we got these
01:40:36
ngos and we got Victoria Newland from
01:40:38
the state department in there basically
01:40:40
fermenting these coups it doesn't work
01:40:42
out quite the way you think Jay Cal
01:40:43
that's problem number one okay then we
01:40:46
try to run NATO right up to Russia's
01:40:48
border okay and you expect them just to
01:40:50
accept that because we're a benevolent
01:40:52
superpower that's not the way the real
01:40:54
world Works Putin was tremendously
01:40:56
threatened by that and it wasn't just
01:40:57
him it was all Russian Elites read the
01:41:00
bill Byrd's member from 2008 yeah it
01:41:02
means that he explains that even the
01:41:04
liberal elements within Russia were
01:41:06
tremendously threatened by NATO
01:41:08
expansion that is what basically
01:41:10
poisoned diplomatic relations between
01:41:12
the United States and Russia and it was
01:41:14
a major cause of this war now listen
01:41:17
just because you don't think it's
01:41:19
provocative doesn't mean that the
01:41:21
Russians don't think it's provocative
01:41:23
you have to be able to put yourself in
01:41:24
the other guy's shoes for just one
01:41:26
second and the fact that matter is is
01:41:28
there are diplomatic steps that we could
01:41:30
have taken to defuse this crisis in this
01:41:32
war and we didn't do it and now look
01:41:34
what's happened hundreds of thousands of
01:41:35
people have been killed and Ukraine's
01:41:37
been destroyed it's been absolutely
01:41:38
destroyed and let me tell you right now
01:41:40
it looks like they're losing this war so
01:41:42
I don't see where your superhero policy
01:41:44
has gotten us except to make China
01:41:47
richer and more powerful and to destroy
01:41:49
Ukraine that is where your naive
01:41:51
idealism has gotten us yeah and I would
01:41:54
say if you if if left to your devices
01:41:57
and you are not engaging and not
01:42:00
presenting a united front against Putin
01:42:02
he will invade country after country the
01:42:04
West must fight for democracy we must
01:42:06
fight for human rights even if it's
01:42:08
uncomfortable and you seem to think we
01:42:11
provoked him to invade this country he's
01:42:13
a murdering dictator authoritarian who
01:42:15
has been murdering his own people I'm
01:42:18
saying other people for his entire
01:42:20
career and he will continue to do so let
01:42:23
me clarify because you're putting words
01:42:24
in my mouth okay when you say that I
01:42:26
think that we believe
01:42:28
believe what I believe is that we took
01:42:30
actions that in Russian eyes were
01:42:32
provocative
01:42:35
I'm saying that from their subjective
01:42:37
point of view they saw these actions as
01:42:38
provocative they said so listen the
01:42:41
Russian which is what I said we provoked
01:42:43
it is your position no yes I just
01:42:45
explained that's not the words hold on
01:42:47
his position is that in their eyes they
01:42:50
were pretty much Jason
01:42:52
we're talking about and no why oh
01:42:55
oh boy you're like what you're doing
01:42:57
right now is like dishonest I just
01:43:00
explained the language that I would use
01:43:01
yes yes we provoke them we took actions
01:43:05
that in Russian eyes were provocative
01:43:07
there's a difference provocative
01:43:09
provoked yes the act of provoking stop
01:43:11
lying okay it's getting too much okay
01:43:13
let's move on we're gonna we're never
01:43:14
gonna agree on the sax okay and I mean
01:43:18
in the audience that nobody on this
01:43:20
podcast is an expert on foreign policy
01:43:22
sax is not Henry Kissinger you know I'm
01:43:24
not Obama
01:43:28
show you had come around to my point of
01:43:30
view you said this war was a mistake on
01:43:32
the very last show you said it was a
01:43:34
disaster and now no
01:43:41
I believe the West should present a
01:43:43
united front and we should hold the line
01:43:45
with Russia invading other countries
01:43:48
that's my belief I do not think we
01:43:49
should be doing this solo I think we
01:43:51
should not be sending Biden we should be
01:43:53
sending 15 liters of countries to
01:43:56
Ukraine we should be sending people in
01:43:58
and we should be doing a peace process
01:43:59
and I think the military industrial
01:44:00
complex
01:44:02
largely driven by the GOP is what's at
01:44:05
fault here they want to use these
01:44:07
weapons they want to replenish the
01:44:08
supply and they want to regime change I
01:44:10
don't think we should be going for
01:44:11
regime change I think we should be
01:44:12
building bridges so my point is
01:44:14
a little more subtle you're doing it
01:44:16
right there you're basically engaging in
01:44:18
this ridiculous rhetoric that we've seen
01:44:20
in the media which is that if you simply
01:44:22
want a more realistic American strategy
01:44:25
because you believe it benefits America
01:44:27
that you're automatically accused of not
01:44:29
being a Putin sympathizer no you're
01:44:31
doing what the mainstream media has done
01:44:33
I just said to you it should be the
01:44:35
entire West as a group as a block
01:44:38
negotiating with Putin what do you think
01:44:40
what do you think
01:44:42
to be part of that I I welcome Xi
01:44:44
Jinping Germany and the United States
01:44:46
and France and the UK all getting
01:44:47
together and trying to get these two
01:44:49
parties to settle what do you think what
01:44:51
do you think we're doing right or wrong
01:44:53
with China right now
01:44:56
yeah what do you think we're doing right
01:44:58
and wrong or right wrong or I think we
01:45:00
should be in discussions with them
01:45:02
consistently I don't believe we should
01:45:05
be isolating them I think we should be
01:45:06
looking for areas we can collaborate on
01:45:08
the environment
01:45:10
technology you agree you agree with the
01:45:13
chips act you agree with basically
01:45:14
onshoring and you're showing all the
01:45:16
critical infrastructure we need is that
01:45:18
I think we should not be dependent on
01:45:19
any
01:45:20
foreign we should have energy security
01:45:23
we should have uh methodology security
01:45:25
technology of course yes but I think
01:45:27
every country should I think China
01:45:29
should have that we should have it every
01:45:31
country should aspire to be resilient
01:45:33
and not be dependent on another country
01:45:35
and being dependent on a dictator like
01:45:37
Germany was on Putin or we were with
01:45:39
China for medicines or for you know
01:45:42
medical equipment or chips we do not
01:45:44
want to be in that position ever that's
01:45:46
one question just on Ukraine just for a
01:45:48
second Jay Cal would you be willing in
01:45:49
order to achieve a peace deal
01:45:51
for Ukraine would you be willing to
01:45:54
agree to two things number one that
01:45:56
Ukraine would be a neutral country
01:45:57
instead of part of NATO and number two
01:45:59
that we would recognize for Mia being
01:46:02
part of Russia would you be willing to
01:46:03
give those two things I think that's up
01:46:05
not up to me I think it's up to the
01:46:07
people of Ukraine and Russia to sort
01:46:09
this out and it's up for the West to set
01:46:11
the table for them to do it and part of
01:46:13
setting the table for them to do it is
01:46:14
to make it more painful for them to stay
01:46:17
at this war so if they are told if you
01:46:19
keep fighting over these things and you
01:46:20
don't come to a resolution between those
01:46:22
two parties who have to live with that
01:46:24
resolution that is the uncomfortable
01:46:26
thing that will force them and that
01:46:28
could be China us and India all working
01:46:30
together all of us working together to
01:46:32
force those two parties into a solution
01:46:34
that works for them we have Brad for 10
01:46:35
minutes I want to move on I want to show
01:46:37
you guys a tweet about Harvard students
01:46:39
and I want you guys to react to
01:46:40
draymond's comments because they're just
01:46:43
incredible I don't know if you
01:46:44
guys saw this but isn't that
01:46:45
unbelievable
01:46:47
it says there was a study at Harvard
01:46:49
that found that 43 percent
01:46:52
of white students there are Legacy
01:46:54
athletes or related to donors or staff
01:46:59
that's unbelievable
01:47:00
is that public knowledge or is that like
01:47:03
kind of leaked information I wonder this
01:47:04
is from Dolores handy I don't know who
01:47:07
that is maybe we could click on who the
01:47:09
source of that is legacy's gotta go
01:47:11
right that that concept
01:47:14
should I just go away
01:47:17
yeah is there a valid reason to have a
01:47:19
legacy is there a valid reason to have
01:47:21
Legacy
01:47:22
it feels unfair it feels Un-American
01:47:25
that these important institutions give
01:47:28
preference to people who are stupider
01:47:29
and Achieve less if this is an
01:47:31
achievement based uh system it just
01:47:34
feels unfair
01:47:36
yeah I mean well we know we know that
01:47:37
the first class had zero percent
01:47:41
the trend line looks like so at some
01:47:43
point we're approaching 100 I think
01:47:44
we're just debated one question right
01:47:46
one of the things I would like to see
01:47:48
chamath is what's the relative
01:47:49
performance 10-years after graduation
01:47:52
between the legacies and the kids who
01:47:54
had to scratch and fight to get
01:47:56
into the place
01:47:58
oh my God yeah I mean I think we know
01:48:01
the answer
01:48:02
well you would think they would be
01:48:03
higher performers the latter group but
01:48:05
you would also think that if Legacy got
01:48:07
you into Harvard then the Legacy your
01:48:11
group is going to get you into other
01:48:12
things right you'll have the end in
01:48:13
other places they're the ones who are
01:48:15
miserable and walking around you know
01:48:18
rich and haven't achieved anything
01:48:21
yeah well some sacks didn't get into
01:48:23
Stanford uh based on his stats
01:48:27
buying a building right well that's for
01:48:29
sure
01:48:29
okay so uh here is a video from Draymond
01:48:33
Green what I do want to go back to is uh
01:48:37
uh Black History Month this is actually
01:48:39
the first time you've seen me in a Black
01:48:40
History Month uh shirt all black history
01:48:43
month and it's very intentional and I
01:48:46
really just threw this shirt on because
01:48:47
I didn't have another shirt to throw on
01:48:49
but black history month at some point
01:48:51
can we get rid of it
01:48:54
like
01:48:56
at some point
01:49:00
why why we got to keep getting the
01:49:02
shortest month to celebrate our history
01:49:05
you got Governors want to take our
01:49:06
history out of schools
01:49:09
and I'm not going to be the fool to go
01:49:11
say yeah we get celebrated for 28 days
01:49:14
so at some point I'd like to get rid of
01:49:16
it it's
01:49:18
you know we're making all these changes
01:49:20
in the world can't talk about these
01:49:22
people can't talk about those people
01:49:23
can't say this can't say that
01:49:26
at some point it's time to get rid of
01:49:27
Black History Month I get rid of black
01:49:29
history
01:49:31
like they're trying to do
01:49:33
but Black History Month
01:49:35
nah teach my history from January 1st to
01:49:39
December 31st and then do it again
01:49:42
and then again and then again and then
01:49:45
again that's what I like to see
01:49:47
strong so good
01:49:51
he's the best
01:49:54
you need to clip the last 10 seconds of
01:49:57
that that we all need to tweet that
01:50:01
there was a a correction we needed to
01:50:04
make about the stripe chart last week go
01:50:05
ahead yeah so you have the floor we
01:50:07
talked about
01:50:09
some stripe stuff last week and my
01:50:11
analyst came to me after the show was
01:50:12
published and there was a couple of Miss
01:50:14
calcs in the spreadsheet that generated
01:50:16
the graphic which big up to him for
01:50:18
calling it out very quickly anyways I
01:50:19
just wanted to show you the updated one
01:50:21
just so that we could make sure we get
01:50:22
that on the record I guess this would be
01:50:24
a purple color is that purple yeah
01:50:26
that's actually when you calculate net
01:50:27
revenue and I think what
01:50:29
did was calculated gross revenue which
01:50:32
is in the red so we showed this but it
01:50:34
actually should be purple so that's the
01:50:36
updated accurate version of the analysis
01:50:40
so there you have it what does that mean
01:50:42
for stripe versus ad gen in terms of
01:50:44
just which is a better business just to
01:50:47
summarize it no I mean I mean to be
01:50:49
honest with you it doesn't it it's it
01:50:50
says what we said before which is that
01:50:52
the the previous valuation was very
01:50:55
expectation heavy and the new valuation
01:50:59
is definitely more in line but still
01:51:01
very rich relative to other companies
01:51:04
who have large profitability and large
01:51:07
growth rates and I think that's the key
01:51:10
takeaway which is it's very hard to both
01:51:13
have huge margins and grow it
01:51:16
mediumly High double digit rates and the
01:51:19
few that can Visa Mastercard and adjen
01:51:22
tend to trade it
01:51:24
a very different valuation set than
01:51:26
everything else and so I think that's
01:51:28
the challenge for stripe if they can do
01:51:29
it they'll be in that class okay for the
01:51:32
Sultan of science doing his spack in New
01:51:35
York having an incredible dinner in at
01:51:37
Carbon right now can I say it can I say
01:51:39
Enjoy the vegetarian I pre-tilted him he
01:51:43
texts he texts into our group oh don't
01:51:45
do it don't do that and he said uh let
01:51:47
me know if you want me to dial in and
01:51:50
save the episode my insta reply gerstner
01:51:54
is on fire we're also
01:52:04
he's Irreplaceable except you know this
01:52:07
episode is pretty good pretty good
01:52:09
pretty good
01:52:13
we love you we love you
01:52:16
oh my God it wasn't a bad episode until
01:52:19
Jay Cal started
01:52:26
words in English that you can't strike a
01:52:28
single word you struck my single word
01:52:31
last week when I called under pressure
01:52:33
in a debate he falls back on all the
01:52:35
usual virtue signaling and oh yeah yeah
01:52:37
okay who did you vote for in 2016-2020
01:52:40
be honest see like you're doing right
01:52:42
now look at this oh God did you vote for
01:52:44
Hillary and Biden Legion of Doom they're
01:52:46
the Legion of Doom
01:52:47
[Laughter]
01:52:50
you know there's actually a meme there's
01:52:52
a meme on Twitter that anyone who
01:52:54
disagrees with me is Russian
01:52:55
disinformation or Pro Putin I haven't
01:52:58
seen that one yet that's pretty funny
01:52:59
that's basically you I don't think here
01:53:00
I don't think you're probably knife
01:53:04
during this entire year of Ukraine UK
01:53:06
Ukraine I say every time to be clear
01:53:09
you're not saying Putin is right for
01:53:11
invading Ukraine and you're like no of
01:53:13
course the dogs it just stop no no thank
01:53:15
you for saying that no thank you for
01:53:16
saying that I appreciate that I always
01:53:18
try to say that's making it correct so
01:53:19
it's a very nuanced discussion it's a
01:53:21
very nuanced discussion like we could
01:53:23
nobody's in favor of this war nobody
01:53:26
nobody's in favor of it everybody's
01:53:28
trying to resolve it I think we just
01:53:29
have different views of what resolution
01:53:31
looks like did you guys read this crazy
01:53:33
article in Bloomberg businessweek about
01:53:36
proz Michelle the founder of the
01:53:38
co-founder of the Fugees and his
01:53:40
entanglement with the one MDB Scandal
01:53:42
did you read this article no I have no
01:53:44
idea article Stars I like the culture at
01:53:47
the end let's put the tinfoil hats on
01:53:48
and do culture his phone rings and it's
01:53:51
a Chinese woman that says something like
01:53:54
you know your cousin wants to meet you
01:53:56
he goes to the Four Seasons where he
01:53:58
gets a note that says walk around the
01:54:00
building twice to make sure you're not
01:54:01
followed goes back into the Four Seasons
01:54:03
gets a key card goes upstairs into a
01:54:07
room where they then escort him to a
01:54:10
different room in a penthouse take all
01:54:12
of his phones and he meets with the vice
01:54:13
chairman of security for China
01:54:16
where that guy is asking for an
01:54:18
introduction to trump it is that's how
01:54:20
the article starts it is incredible
01:54:23
reading the incredible incredible
01:54:26
reading I encourage all of you to read
01:54:27
it it's so uh what is it called juicy
01:54:31
it's so juicy spicy if you want to read
01:54:33
some crazy story there is a company
01:54:36
called wirecard in Germany and there's a
01:54:39
New Yorker article about the biggest
01:54:40
fraud in German history I highly
01:54:43
recommend reading this one we didn't get
01:54:45
to it today but oh my God if we had like
01:54:47
a long reads post show it'd be
01:54:50
incredible I personally don't think we
01:54:51
should promote any stories by the
01:54:53
mainstream media we have no idea whether
01:54:55
it's true or not I mean seriously we'll
01:54:57
see you soon thank you so much for
01:54:59
filling in love you bro thanks bro yeah
01:55:01
pretty pretty good love you guys for the
01:55:05
Rain Man David sacks the pacifist of
01:55:07
Peace the Sultan of science Brad
01:55:09
gershner the dictator chamoth I'm the
01:55:12
world's greatest moderator and speaker
01:55:14
at your corporate event for 50 75 dimes
01:55:17
Jake out talk to my speaker Bureau let's
01:55:19
get this grip done people we'll see you
01:55:21
next week bye-bye
01:55:26
we'll let your winners ride
01:55:29
Kim
01:55:35
[Music]
01:55:46
besties
01:55:47
[Music]
01:56:00
it's like it's like sexual tension that
01:56:03
they just need to release somehow
01:56:08
[Music]
01:56:10
we need to get Mercies
01:56:15
[Music]
