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hey everybody hey everybody welcome to
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another episode of the all in podcast we
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have a new bestie yesterday filling in
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for the prince of panic attacks
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[Music]
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the
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queen of quinoa the sultan of science
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can't make it this week i think after
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his incredible performance last week
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and him trending on tick tock with his
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incredible
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insights over uh sadly the the potential
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famine that could come after this
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ukraine
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war
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he decided he would take a week off i
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think it's just a little too much
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attention for him so we have a bestie
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guestie today yes the shaman of stocks
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is with us
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he brings the equanimity to equities you
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know him he'll bring that namaste to
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your payday his predictions are the
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anti-galloway
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brad gerstner welcome back to the
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program
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thanks for having me namaste uh and also
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with us of course the rain man himself
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he's bitter on twitter he's brawling on
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colin
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he's the bill of rights from pack
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heights
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david sacks boy you've really outdone
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yourself today wow and the prince of
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palo alto the overlord of the overton
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window
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paulie hupateo
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are you the stinker of stonks oh god
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relax you don't leave the comedy to me
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all right
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[Music]
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let your winners ride
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[Music]
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rain man david
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[Music]
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it's been a pretty pretty crazy couple
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of weeks here
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we are not a political show here but
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obviously when world affairs become
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acute as they have we cannot ignore
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uh the war that is occurring
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in ukraine uh
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we're going to talk a little bit about
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markets i think we'll start with those
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with brad gerstner here
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the sas
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market
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and the index uh
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why don't you walk us through this chart
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here because everybody's wondering
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what's happening with the markets given
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the war
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given interest rate hikes
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and the repricing of stocks i don't know
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how you would look at what happened in
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november december january brad how do
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you contextualize well certainly a
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repricing is certainly repricing but i i
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think of it more as normalization okay
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right chamath was saying it november i
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was i was on cnbc talking about the fact
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that when
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when we got to a post covered world
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rates were going to normalize go back to
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where they were in january 2020 that was
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around 2 percent
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and the growth multiples would have to
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come off of this historic red bull high
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that we were on during most of 2020 and
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2021 so we were 30 to 50 depending upon
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the index above the five-year average
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growth multiple pre-covet so that just
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needed to happen
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like we should be celebrating in one
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sense that that happened because that
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means that we overcame a global pandemic
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the downside is we couldn't play
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with artificial money zero percent rates
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trillions of dollars you know of of
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congressional and fed injection in order
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to prop up valuations
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and when it happened in and of itself
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that was going to be extraordinarily
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painful
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what i didn't anticipate and what most
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people didn't anticipate
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is that on top of that we're going to
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have increasing fears of hyperinflation
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not just getting back to normal
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rates and that we were going to find
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ourselves in the middle of
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an incredibly devastating war in ukraine
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those two things added to the
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uncertainty the risk premiums
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added to uncertainty around future
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inflation the dot plot exploded higher
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and expectations of forward rates went
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higher now why the hell does this matter
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it matters because
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when you take you know if you're looking
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at that chart
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the five year average the ten year was
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two and a half percent like we all got
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comfortable
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investing in this period of time the
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markets hate uncertainty we had a
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predictable way for us to estimate where
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we thought our wax should be in our
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discounted cash flow models
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all of a sudden that was thrown into uh
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thrown into the air oh my god look what
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we got going on i can't believe it look
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at this oh yeah never compete with
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babies or animals yeah no chance no
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chance this is talita talita
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look at this little look at this little
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butter ball oh my goodness lord look at
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that so so good sex that's called a
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child it's uh you have three of them
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those are babies and what you're seeing
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there is affection from a father and a
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child
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look at how cute this little baby is
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going to eat sax is like
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this is taken from my time
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get that baby out of here
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ah so cute so brad i guess what
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everybody wants to know now that we see
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this repricing occur
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is what do you think's gonna happen in
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2022 uh and then into 2023 so
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we're now multiples are now below the
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five year average for for software we're
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about at the five year average for
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internet we're well below the five year
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average
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i said on twitter that the rate path
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last week became a lot more certain the
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fed said something last week that i
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think is still not
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well reported well understood
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the fed said at the end of the year
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we're going to have
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two percent negative real rates
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they said we expect inflation exiting
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the year to be 4.3 and we expect the
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tenure to be around 2.3
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the reason the market exploded higher
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is because under the fed's prior
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protocol
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a four percent uh a four percent
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inflationary rate would mean that rates
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would have to go to four and a half and
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if you take rates to four and a half
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then growth multiples need to be about
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30 below the five year average
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okay so as investors whether we're
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investing in mid-stage venture late
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stage venture whether we're investing in
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the public markets like we need to know
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what exit multiples are
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and it was bad enough that we had to
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bear the drawdown coming off of you know
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this this red bull high of 2020 and 21.
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but if you think we're durably going to
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an inflation rate of three percent or
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four percent and an interest rate
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environment of three percent or four
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percent then you simply have to adjust
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what you're willing to pay for growth
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assets and so as i look ahead right we
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don't we don't know with certainty
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the question is what's the distribution
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of probabilities
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and you know just this morning city
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goldman sachs raised their exit year
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their their exit tenure for 2022 to 2.7
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percent and took it as high as three and
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a half percent for 2023.
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i think it's going to this period is
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going to be marked by a lot of
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uncertainty around inflation and rates
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till we have more clarity and what that
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means is allocators of capital are going
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to allocate less to risk assets and
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they're going to pay less for risk
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assets um but you know listen if i look
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out over the the 5-10 year horizon i
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don't believe in global stagflation i
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don't believe that we're in this new
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hyperinflation environment um but we're
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going to have to get through this next
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uh six 12 18 months and it's going to be
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filled with a lot of volatility and a
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lot of uncertainty jamath what rings
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most true about what brad just said and
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then what can you add to the prediction
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for this coming year
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i mean i don't know what the prediction
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for this year is um i
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i think the markets are mostly moving
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upwards for the short term
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and then i think volatility is going to
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come back
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i'm just trying to find
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good long-term businesses and just
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kind of close my eyes and
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not have to look at these stock prices
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every day and as long as i can
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manage my own psychology i think i'll be
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fine i think that's probably the thing
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that most of us need to be doing the
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interesting thing about brad said is
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that
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the implication of that is that it means
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that
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late stage venture is pretty badly
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mispriced
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and i think you're going to have to
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knock these things back by 50 60 percent
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i think you saw the first
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real big movement there
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yesterday which was the instacart print
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right we went from a 40 billion
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valuation
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uh to i think it was 24.
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if you look at from february of last
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year which was really the high for all
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of us right that's when we all thought
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we could do no wrong
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you know the comps to uh instacart are
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off anywhere between 50 and 70
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you know takeaway is off 70 uber's down
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60 doordash was down 55
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so these are some big moves and so you
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know
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it made sense that instacart had to get
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kind of like reset
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the problem that it has is that it's now
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the nth player trying to get public into
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a space with many players who've guzzled
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up a lot of capital in a low rate
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environment
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and so if you think about company
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building this is why entrepreneurs have
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to pay attention to this stuff
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you want to get money when money is
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cheap
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but the problem is you can't control
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that timing and so if you can't control
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your operating margins and your
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profitability
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then you're gonna have to go and
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basically pay somebody an enormously
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high price to get their money and i
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think that's what's setting
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itself up to happen in a bunch of these
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markets i think
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enterprise sas has always claimed
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long-term
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profitability
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um the thing is when you look at sort of
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like the real long-term companies
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they've built some enormous moats right
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like if you look at a service now or a
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sales force at the high end
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and then there's a crop of a couple of
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companies like palo alto networks who
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are the next ones coming after who
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seemed like behemoths in the making
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but everybody else i think people have
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to really question like where the
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long-term profitability going to come
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from and so if that's true then the late
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stage private sas companies are in
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trouble similarly in places like
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delivery where again you've had a bunch
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of comps come out they've been curing in
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the public markets for years
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you know uber doordash there's a couple
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of these behemoths getting built
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doordash being the most obvious
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and then there's a bunch of more kind of
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question mark business models including
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uber which is not really hanging
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together in the public markets
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so i think the real question for
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entrepreneurs is if you have
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the nth business
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nth being not the first not the second
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but you're the seventh or eighth or
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tenth trying to go public
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and all the seven or eight before you
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are gas guzzling machines
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you're going to pay a very heavy price
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to get public
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and i think that that's the reckoning
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that we're starting to see so i'm really
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interested to see how that plays out you
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know the instacart valuation
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could easily be cheap at 24. but it
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could just as easily be overpriced by
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another 10 billion dollars depending on
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how people think about who the last
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buyer of resort is in the public markets
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saks did uh instacart miss their window
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to go public and then what does this say
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about the backlog of hundreds of
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unicorns
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that the venture community is investing
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heavily in
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some of them are probably gonna have to
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ipo at down rounds um i think that's
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sort of the takeaway explain what that
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is to uh to neophytes well it just means
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that they're gonna have to go public at
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evaluation lower than what the last
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private round was so all of these late
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stage private investors who assumed that
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they would always make money investing
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in a company in the last private round
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before it went public they they thought
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that was sort of an automatic gain in
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arbitrage and it's not and there's going
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to be
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some disappointment there brad's been
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sharing these charts with me since i
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guess what december
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brad um
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where the charts basically show
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uh public
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sas valuations as a multiple of arr and
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then he's got a similar chart
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for it sort of the internet companies
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the sort of nonsense internet companies
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as a function of revenue and we've been
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looking at these charts
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you know once brad showed these to me
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again four months ago it became so
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obvious what was going on which is that
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valuations were reverting back to the
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historical mean if you look at you know
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during the two-year period during covet
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the they the multiples had risen to some
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insane level right and because of all
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the liquidity that had been pumped into
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the system so as soon as you saw that
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the charts that way
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you could just see where things were
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headed which is back to historical
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averages now we're below those averages
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um partly because no no no
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not really the multiples are can i
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summarize brad's chart because it is
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extremely elegant and simple for
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the layman to understand
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so here's the layman's understanding of
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of brad's uh uh analysis technical
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analysis and and and balance sheet and p
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l analysis which is accurate
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when rates are zero
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typically people are willing to pay
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eight times
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revenue
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for a company
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okay so if you're generating 100 revenue
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top line revenue you're generating 100
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million revenue in your reasonably high
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margin reasonably high growth software
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business
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that's worth 800 million dollars in the
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public markets
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for every 100 basis point increase
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in rates
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you decrease the valuation between 15
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and 20
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so if you think rates are 2.75
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the price is somewhere between 30 to 40
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percent cheaper
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than what it was when rates were at zero
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so if you go back and you look at every
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techcrunch article
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and every bloomberg article
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and every information article and you
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look at all those headline valuations
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when rates were at zero
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we all just said rates are going to be
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somewhere between you know 2.5 to 3
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percent at the end of this year
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at a minimum you have to haircut those
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things by 30 to 40 percent
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steady state meaning the company is
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continuing to execute on all on all
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cylinders
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if they have a downtick in their
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performance
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then it it increases that discount if
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rates go higher it increases the
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discount but the basic way to think
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about this is for every 100 basis point
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increase in rates you got to downtake
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that valuation by 15 to 20 percent
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and i think you know just to be fair i
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think i don't think there's any daylight
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between you and saks on this what what's
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actually saying is the 40 percent just
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giving the numerical rule that that's
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something i think you're right that is
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the
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that is the the correlation and so this
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idea listen we all get paid to find good
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companies and avoid bad companies that's
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generally what we get paid to do we're
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decent at it
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all of a sudden in fact most fundamental
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investors say hey i'm not a macro expert
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i don't know where inflation's going i
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don't know where interest rates going i
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just find good companies
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we've had a decade or longer where that
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was okay to do that was easy to do
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because guess what inflation was at two
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and we had two and a half percent tenure
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when all the sudden you have massive
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volatility in that it's not acceptable
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as an investor just to say well none of
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this matters because it does matter
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right price matters because what you can
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exit for is essential to the game and
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there were a lot of people invested in
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2013 14 and 15
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when when the cost of entry was low and
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exited when the cost of entry was high
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multiple expansion hides many sins
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right and now just the opposite is
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happening in a dramatic and historic way
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and that multiples were higher than
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they've ever been caused by a global
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pandemic
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and the exit rate for a lot of those
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companies right is going to be very
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painful i think that saks's point about
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down around ipos i don't think this is
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the exception david no reddit i think i
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think the vast majority of companies
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that come public in the next 12 months
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are going out below their last round of
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valuation yeah
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the reddit rumor was that goldman put a
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10 billion dollar price on the cover
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and that you know it effectively been
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cut in half again these are all rumors
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so these could completely not be true i
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don't i don't have any knowledge one way
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or the other
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uh to 5 billion
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and that may actually end up being too
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expensive it just depends on where the
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market is well just so people are clear
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when investors sophisticated investors
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make these late stage valuations at very
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high multiples like they have they do
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have some downside protections in other
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words they cannot lose more than the
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money that was put in when this thing
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ipos or they may get kickers of
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additional shares so maybe these ipo no
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no in fairness you're talking about
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something very important but they're
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very rarely in these high priced rounds
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because most of these high priced rounds
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are in go-go companies where all of
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those rights get stripped away this is
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why
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i do think jason what you're actually
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bringing up is in in the last innings of
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a bull market
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you have incredibly irresponsible
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behavior by a bunch of these investors
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and that's also going to get exposed as
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well so jason what you're talking about
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is what's called an ipo ratchet yeah
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which means i'm giving you this money at
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this price
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but if you can't ipo at this price then
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you're going to give me an equivalent
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number of shares that makes me whole
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right right so it's as if i am i am
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indifferent to what price you ipo at
00:17:02
that's extremely dilutive to really one
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really important class of individual
00:17:07
which is the employees of the company
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it's also really dilutive to other
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investors who've come in before them
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but jason you're probably right to the
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extent that there were ipo ratchets
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they'll get triggered but i think in
00:17:17
many of these go-go companies and you
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know brad and sachs can confirm but i
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see it all those rights get stripped
00:17:22
away it's like come in at this crazy
00:17:24
price
00:17:27
get out get get our logo on your
00:17:30
fundraising deck for the next round
00:17:32
and so this is the price of the capital
00:17:34
it's been a little bit of sloppy
00:17:36
behavior just so people understand this
00:17:37
if the reddit valuation was 10 billion
00:17:40
somebody put in you know 100 million in
00:17:42
this late stage round if it came out at
00:17:44
5 billion they would get twice as many
00:17:45
shares to make up for that difference
00:17:48
that doesn't exist in the case of reddit
00:17:50
j cal you know it was fidelity who led
00:17:52
that last round so they're going to be
00:17:54
price takers at whatever price the
00:17:56
company comes public what does that mean
00:17:58
explain that price takes you so you know
00:18:00
if they come public at five billion
00:18:01
dollars and you put in a hundred million
00:18:03
dollars your stake is now worth 50
00:18:05
million right right so why didn't they
00:18:08
have the discipline to put in these
00:18:10
protective provisions ratchets etc what
00:18:13
happened in the market to chamas point
00:18:15
they haven't really existed in most
00:18:17
deals for the last five years right uh i
00:18:19
go back to 2000 and i think 2007 2008
00:18:22
kayak raised money with a ratchet in
00:18:25
their last pre-ipo round it prevented
00:18:28
them from getting public for three or
00:18:30
four years that dilution overhang
00:18:32
um was a significant impediment to
00:18:35
getting public so you know listen we all
00:18:38
know that groupon raised at 20 billion
00:18:40
dollars went public in a year later is
00:18:42
worth two billion i mean it's not as
00:18:43
though this hasn't happened before
00:18:45
uh but yes uh people people got a little
00:18:48
laxative i just wanted to i just want to
00:18:50
say one other thing though because
00:18:51
multiples coming down is a problem
00:18:54
what this really reveals is the
00:18:56
importance of stock and company
00:18:58
selection
00:19:00
right because if you were a shitty
00:19:02
company with an unproven business model
00:19:04
way out on the risk curve okay
00:19:07
and you had a super high valuation last
00:19:09
year and you don't you know there's a
00:19:11
good chance you never grow in it grow
00:19:13
into it you never get back to that
00:19:15
valuation example your example your
00:19:17
growth will do you sell well give us an
00:19:19
example company okay discord ripple
00:19:22
companies
00:19:24
in the 15 minute delivery space in
00:19:27
europe
00:19:28
you know i i i would say go puff is one
00:19:31
of the best of them there are a lot of
00:19:32
startups that got funded with billions
00:19:34
of dollars in europe unproven business
00:19:36
models burning tremendous amount of cash
00:19:39
right like i don't know why they need to
00:19:41
exist i don't think they're going to get
00:19:42
funded right maybe one or two of them do
00:19:46
but when you have doordash and uber that
00:19:47
are free cash flow positive that have
00:19:50
strong brands and that can redeploy
00:19:52
those profits back into compete in those
00:19:54
markets i think it's very tough neobanks
00:19:55
are another example neobanks you know
00:19:58
the number of neobanks that have been
00:19:59
funded at
00:20:01
exorbitant valuations
00:20:03
where
00:20:04
um you know the problem is all of these
00:20:06
financial services companies are
00:20:08
essentially an arbitrage on rates right
00:20:10
when rates are zero
00:20:11
they take that money at zero percent and
00:20:13
then they can go and execute a business
00:20:15
model you know and sell that money at
00:20:17
one percent and take the difference but
00:20:19
when their cost of capital is two or two
00:20:21
and a half or three percent the whole
00:20:22
business implodes on them so you're
00:20:23
going to see
00:20:24
a bunch of these financial services
00:20:26
companies get under pressure
00:20:28
another example jason is like all the
00:20:29
low end you know bottoms up sas
00:20:31
companies and the reason is because they
00:20:34
spend their time inside of google and
00:20:36
facebook doing customer acquisition and
00:20:38
managing this very intricate dance of
00:20:40
ltv to cac
00:20:42
and when all of those input costs go up
00:20:45
their business implodes because you
00:20:47
can't raise rates faster or you can't
00:20:49
raise prices i would say then faster
00:20:51
than the input costs are and then all of
00:20:52
a sudden your unit economics blow up and
00:20:54
in all of this
00:20:56
what is the salvation in a moment like
00:20:58
this
00:20:58
it's being
00:21:00
healthy gross margins
00:21:02
healthy contribution margins and in a
00:21:05
realistic path to profitability which
00:21:07
means being ebitda positive this year or
00:21:10
within the next two years said another
00:21:12
way if you're profitable you're not
00:21:14
going to go away
00:21:15
if you can't if you can't show that
00:21:16
you're you know to use the famous paul
00:21:18
graham adage default alive
00:21:20
in a moment like this
00:21:22
then you are a price taker which means
00:21:24
that you will have to pay probably a
00:21:28
very high cost of capital to raise
00:21:29
incremental capital to support a
00:21:32
fundamentally fragile and non-resilient
00:21:34
business model is the issue here saks
00:21:36
that when you see the getter gorilla zap
00:21:39
all these instant delivery companies get
00:21:41
funded
00:21:42
at exorbitant prices and they're the
00:21:45
seventh eighth ninth as chamath is
00:21:47
pointing out no no instacart was the
00:21:49
seventh those are like the tenth
00:21:50
eleventh okay so now here we are this to
00:21:53
me seems like
00:21:54
the fault of
00:21:56
poor judgment by capital allocator sacks
00:21:59
are there too many venture funds
00:22:01
chasing too few deals and not thinking
00:22:04
through what investing in the 10th 11th
00:22:06
or 12th player in a market is going to
00:22:09
be able to do
00:22:10
is it too
00:22:12
i think part of what's going on with the
00:22:13
companies you mentioned is that they're
00:22:14
physical world companies they are very
00:22:17
capital intensive they burn a lot of
00:22:18
money they're operationally intensive
00:22:21
i
00:22:22
have sort of i soured on those
00:22:23
businesses years ago and that's why i
00:22:25
just focus on sas because they're
00:22:27
basically perfect gross margin
00:22:28
businesses
00:22:29
they're very they can be
00:22:31
very capital efficient if the founders
00:22:33
want to run them that way
00:22:35
so what we're doing now is telling
00:22:37
founders lengthen your runway be more
00:22:39
capital efficient you need to understand
00:22:42
that you know multiples if you raised
00:22:44
last year at 100 times arr you need to
00:22:46
understand that the next time you raise
00:22:47
it may be at 20 times ar so
00:22:50
now you can grow into that right if
00:22:52
you're tripling and then triple again
00:22:54
the next year you'll be able to grow
00:22:56
into that valuation but you know make
00:22:58
your money last two three four years
00:23:00
instead of you know burning it in 12 to
00:23:01
18 months
00:23:03
unless you want a down round
00:23:05
i think this is this is the point that
00:23:07
now
00:23:09
allocators venture capitals are going to
00:23:11
spend the next six months thinking about
00:23:13
what's in bucket one
00:23:15
low quality companies burning a lot of
00:23:18
cash that may very well not make it
00:23:20
across the chasm no path to
00:23:22
profitability what are the high quality
00:23:24
companies that yeah the multiple's down
00:23:26
because public market multiples are down
00:23:28
risk premiums have changed inflation
00:23:29
change but they have plenty of cash on
00:23:32
the balance sheet and think about it
00:23:33
this way
00:23:34
snowflake became a poster child in the
00:23:36
public markets of a high priced uh sas
00:23:39
business
00:23:40
snowflake this year will grow its free
00:23:42
cash flow at over 100 a year next year
00:23:45
probably you know 80 or 90 free cash
00:23:48
flow not just revenue free cash flow
00:23:50
in q4 i think they booked 1.4 billion of
00:23:53
revenue q4 on a business that entirely
00:23:56
in last year did 1.2 billion in revenue
00:23:59
right you think about that the
00:24:00
incremental was more than what they had
00:24:02
generated in the prior many years
00:24:05
that business so let's say we reduce the
00:24:07
multiple by 50 percent but the company's
00:24:10
growing top line and free cash flow by
00:24:12
100 doesn't take you very long to grow
00:24:15
through the multiple compressions so
00:24:17
snowflakes multiple is plummeting for
00:24:20
two reasons one because the stock price
00:24:22
came down number two
00:24:24
because right their growth rate and free
00:24:26
cash flow growth is so high and so now
00:24:29
if you look at the multiple it's similar
00:24:31
to what we would expect of a regression
00:24:33
of the five-year analysis unless these
00:24:35
companies unless these private companies
00:24:37
are want to go dark for the next three
00:24:39
to five years meaning
00:24:42
you know no sophisticated late stage
00:24:44
investor doing around or going public
00:24:46
they'll be okay
00:24:48
but otherwise they're going to have to
00:24:49
reckon with a version of what brad just
00:24:51
said which is the high the flight to
00:24:53
quality problem
00:24:54
you know when in moments of uncertainty
00:24:56
and high volatility
00:24:58
it's just more straightforward
00:25:00
to
00:25:02
go to the things that are reliable and
00:25:04
so you know when you think in the public
00:25:06
tech markets what is a reliable must-own
00:25:09
company well i would put snowflake in
00:25:11
the list of these must-own
00:25:14
high-growth software businesses right
00:25:17
you know the fangs tend to be in the
00:25:19
must-own category but then there are all
00:25:21
these other businesses that then get
00:25:22
orphaned because they're kind of nice to
00:25:24
own would love to own would be great in
00:25:27
any other circumstance
00:25:28
and that gets even more exacerbated in
00:25:31
the in the private markets you have to
00:25:32
remember
00:25:33
right now
00:25:34
like the private markets cannot really
00:25:36
exist without an incremental buyer of
00:25:39
equity
00:25:41
right
00:25:42
holder somebody has somebody needs to be
00:25:44
the better you
00:25:46
somebody needs to be the bag holder
00:25:47
after you and the problem right now is
00:25:50
that those folks have a lot more
00:25:54
credible safe durable assets that they
00:25:57
can own
00:25:59
and not have to deal with all the crazy
00:26:01
anxiety that comes with owning something
00:26:03
that's that's high volatility like or
00:26:05
chamath correct me if i'm wrong or brad
00:26:07
if they don't want to even be involved
00:26:09
in this meshuggana they could just be in
00:26:11
cash and the interest rates are going up
00:26:12
so maybe they can say you know what i'll
00:26:13
just sit this out for a year is that
00:26:16
also happening with those folks well is
00:26:18
that too hard to do because of
00:26:19
impressions she knows a bunch of these
00:26:21
folks but like take for example d1 you
00:26:24
know it's uh dan sondheim's great
00:26:25
investor i mean my understanding is that
00:26:29
they are sort of off privates completely
00:26:32
because why invest in a private company
00:26:34
at x times ar when you can invest in a
00:26:37
public sas company for six times so
00:26:40
they've substituted i think tiger is
00:26:41
still in market with a gigantic fund for
00:26:44
privates but the valuations have come
00:26:46
down so they're essentially re-pricing
00:26:48
everything i think those are probably
00:26:49
the two broad reactions you could have
00:26:51
right brad
00:26:53
certainly i i would say this broadly
00:26:55
speaking the late stage private
00:26:57
financing market inventure is closed
00:27:00
um because there hasn't been
00:27:02
right we're in this this buyer seller
00:27:05
standoff
00:27:06
sellers aren't to the point where
00:27:08
they're willing to accept that a new
00:27:09
rate a new regime of multiples exists
00:27:12
right it's painful we saw you know the
00:27:15
instacart news here recently but i think
00:27:18
you know like listen we're not even 10
00:27:20
or 20 of the way into the psychic reset
00:27:23
that needs to occur in order for us to
00:27:26
see real price discovery
00:27:28
that's not going to occur until these
00:27:29
companies need money or want to go
00:27:31
public that's right this fall is when
00:27:33
we'll start to see real price discovery
00:27:35
you couldn't pry a late-stage dollar out
00:27:38
of my hand right now because i don't
00:27:40
think we have real price discovery going
00:27:42
on early stage venture if we're
00:27:44
investing in an incredible you know
00:27:46
software business at 300 million 400
00:27:48
million 500 billion we think could be
00:27:49
worth tens of billions you can withstand
00:27:51
a little inflation but the later you get
00:27:54
in the life cycle of a business it's
00:27:55
about irrs and irrs in late stage at
00:27:59
last year's valuations relative to
00:28:01
today's public market valuations that is
00:28:03
a negative arbitrage explain irr why
00:28:06
that matters yeah just for the latest
00:28:08
you know we expect uh our herder rate in
00:28:10
the public markets is a 20 risk adjusted
00:28:12
rate of return so if i'm you know like
00:28:16
you know you look at these late stage
00:28:18
private valuations from last year i mean
00:28:20
uh
00:28:21
you know saks just talked about
00:28:23
companies repricing down 40 or 50 or 60
00:28:25
percent so if they haven't done that now
00:28:28
just didn't
00:28:30
just up level this what brad is saying
00:28:31
is the following jason
00:28:33
any person can wake up tomorrow
00:28:35
and buy the s p index right what buffett
00:28:37
would tell you to do just by the s p 500
00:28:40
index
00:28:41
that historically
00:28:43
has compounded at around eight percent a
00:28:45
year if you reinvest the dividends so
00:28:47
you can do nothing
00:28:49
right get a basket of the 500 best
00:28:51
companies in the world that are
00:28:52
automatically selected for you based on
00:28:54
revenue and profitability you don't have
00:28:56
to do anything
00:28:57
and that'll compound at eight percent
00:28:59
that is effectively the risk-free rate
00:29:00
if you want to own an equity
00:29:02
so if you're going to step into the late
00:29:03
stage private markets and you know buy
00:29:06
some shares in you know dingdong.com
00:29:09
you got to be
00:29:10
rewarded for that which typically means
00:29:12
that there is a premium above the eight
00:29:14
percent and what brad is saying like you
00:29:16
know it's it's actually more than double
00:29:18
in his case what he's saying is it's two
00:29:19
and a half times you know you've got to
00:29:21
clear 20 percent to you otherwise you're
00:29:23
better off on a risk-adjusted basis it
00:29:25
is what's likely to happen i'm looking
00:29:27
here at a list go puff at 40 billion
00:29:29
canva at 40 billion
00:29:31
florina at 45 billion discord at 15
00:29:33
billion ripple at 15 billion these
00:29:35
grammarly at 13 billion these don't make
00:29:37
sense given that if they were public
00:29:39
they would be trading at well
00:29:42
you can 60 of that here's what you can
00:29:44
say
00:29:45
if if everything is held equal
00:29:48
just with the rise of rates you have to
00:29:50
reset those valuations between probably
00:29:52
15 and 40 percent okay at a minimum
00:29:56
minimum but what brad said is also true
00:29:58
which is if they then keep growing at a
00:30:00
superior rate
00:30:01
they can get back to even so meaning 18
00:30:04
months they could also show up again at
00:30:06
40
00:30:07
and be net net awash they could get
00:30:09
unstuck but a lot of hard work will need
00:30:12
to happen underneath the covers of these
00:30:14
businesses in the next two years okay
00:30:16
for that to happen and that's what's
00:30:17
going to happen with a lot of these
00:30:18
early stage private companies right is
00:30:20
let's say the error multiple
00:30:23
has gone from 100 times to 20 or 30
00:30:25
times
00:30:26
they have to grow their arr 5x to get
00:30:29
the same valuation
00:30:31
so the question is can they grow their
00:30:33
ar-5x before having to return to market
00:30:35
that's just to get a flat round now if
00:30:37
they are tripling this year and then
00:30:39
doubling next year then that's 6x growth
00:30:42
in arr so even if
00:30:44
you know the multiples gone down 5x they
00:30:46
could still get a slight upround so
00:30:48
that's the game i think all these
00:30:49
companies are going to be playing is
00:30:51
lengthen your runway so that you can
00:30:53
grow into your valuation and not take it
00:30:56
down round because the problem is if
00:30:58
you're ever in a situation where you
00:30:59
take a down round
00:31:01
it's
00:31:02
way worse than just the dilution because
00:31:03
now the psychology of everyone in the
00:31:05
company changes everyone has to worry
00:31:07
that you're gone sideways it's hard to
00:31:09
experience but here's the here's the
00:31:11
difficulty of what saks is saying though
00:31:14
in order to grow revenue you have to
00:31:15
invest right you have to invest in sales
00:31:17
people and account management functions
00:31:19
in engineers and product managers right
00:31:22
and all of those people uh need to exist
00:31:24
which actually increases opex right it
00:31:27
increases burn it doesn't maintain burn
00:31:29
and so this is the death spiral jason
00:31:31
you're talking about which is in order
00:31:32
to actually grow by those multiples
00:31:34
you actually don't have more fuel you
00:31:36
gotta increase your speed you burn more
00:31:38
fuel you don't actually have the money
00:31:39
to to withstand two or three or the
00:31:41
altitude you're now so it's going to be
00:31:43
a very precarious balancing act of
00:31:45
trying to figure out how these companies
00:31:46
actually get to the other side because
00:31:48
again
00:31:49
i think the the buyers in this case will
00:31:51
be will drive a hard bargain you know i
00:31:53
mean like look
00:31:55
organizations like you know durable d1
00:31:58
tiger altimeter these guys are the
00:32:00
smartest of the smart they're not dumb
00:32:02
yeah and so you know the price of
00:32:03
capital is going up in that case and so
00:32:05
you know they're going to strike really
00:32:07
good opportunities for their investors
00:32:10
right for their lps if we were going to
00:32:11
do an analogy here 20
00:32:13
the analogy here is these founders were
00:32:15
on autopilot
00:32:17
they were asleep at the wheel and now
00:32:19
all of a sudden they're in the soup and
00:32:20
they got to be really perfect no that's
00:32:22
not fair i don't think they were asleep
00:32:24
at the wheel at all i just think that
00:32:25
they you know
00:32:27
when the music is on you got to dance
00:32:29
they did it they raised money at the
00:32:31
highest valuation possible god bless
00:32:33
them
00:32:34
now you're going to see who uh is really
00:32:37
good at what they do
00:32:39
um and who is benefiting from a lot of
00:32:42
just natural uh
00:32:44
you know you know
00:32:45
but people were only there
00:32:50
for the first time
00:32:51
that's what i'm talking about you're
00:32:52
gonna have to make real changes
00:32:53
look in an um
00:32:56
well in an up market or a boom market
00:32:58
the three things that matter are growth
00:33:00
growth and growth in a down market the
00:33:02
three things that matter are growth burn
00:33:04
and margins it's not that growth stops
00:33:06
mattering it's just that burn and
00:33:08
margins also matter and now there's
00:33:10
going to be real trade-offs before it
00:33:12
was just how much money can we spend how
00:33:14
quickly to get growth now let's wait a
00:33:16
second is this growth efficient you know
00:33:18
and will we have enough runway to get to
00:33:21
the next round without having to take a
00:33:23
down round brad when we saw at the peak
00:33:26
of the pandemic some leadership i'd say
00:33:28
you know seasoned or well-informed
00:33:30
leadership airbnb and uber come to mind
00:33:33
cut their staffs massively they use that
00:33:35
crisis to reset their cost structure and
00:33:38
get to profitability quicker those were
00:33:39
money losing businesses for a long time
00:33:42
maybe you know taking advantage of these
00:33:44
hot markets is that what needs to happen
00:33:46
here are we going to see a cascade of
00:33:48
companies lowering their evaluation
00:33:49
lowering their costs sharpening their
00:33:51
pencils cutting staff and then becoming
00:33:53
more efficient and more ruthless at you
00:33:55
know the sixth seventh eighth product
00:33:57
they're launching saying hey let's go to
00:33:58
the core product and make it sing make
00:34:00
it profitable
00:34:02
you know frank slootman has said
00:34:04
that silicon valley is full of companies
00:34:06
that are walking dead and they don't
00:34:08
even know it
00:34:10
right zombie starting you know frank is
00:34:12
you know he says in tape sucks he says
00:34:14
listen i'm a wartime ceo not a peacetime
00:34:17
ceo
00:34:18
right he came into he came into
00:34:20
snowflake when it was growing over 300
00:34:22
percent
00:34:23
and he
00:34:24
you know
00:34:25
he he reconstituted what what that
00:34:28
culture was about to prepare for wartime
00:34:31
right because he says when wartime comes
00:34:33
right and it gets challenging i want to
00:34:35
run the field
00:34:36
right i don't want to be laying off
00:34:37
employees i want to be that's the time
00:34:39
to hire
00:34:40
that's the time to press the advantage
00:34:42
that's the time to invest in product
00:34:44
that's the time to win the new customers
00:34:47
over the course of the last 12 to 18
00:34:49
months a lot of people without that
00:34:50
experience
00:34:52
right took a negative signal and the
00:34:54
signal was money will always be
00:34:56
available and it will be available at
00:34:59
ever increasing valuations and of course
00:35:01
anybody who's been at this for 20 years
00:35:03
like the four of us we know that isn't
00:35:05
true but it's amazing i mean
00:35:08
the behavioral psychology our ability to
00:35:11
gaslight ourselves totally in these
00:35:13
moments and move out on the risk curve
00:35:16
and ignore these lessons right and so
00:35:19
i really actually hurt and i've spent a
00:35:21
lot of time on zooms lately
00:35:24
with founders and with their teams
00:35:27
talking them through this because like
00:35:29
we talk about it in the abstract and in
00:35:32
through the lens of a spreadsheet but
00:35:33
there are a lot of people's lives at
00:35:35
stake if you're an employee and you went
00:35:37
to this company and you took everything
00:35:39
in stock at 15 billion that's now worth
00:35:42
5 billion you're totally underwater at
00:35:45
the same time the cost of buying a home
00:35:47
and mortgage rates and everything else
00:35:48
is going up against you i mean this is a
00:35:51
massive morale problem right uh you know
00:35:54
for for companies that frankly we want
00:35:57
to invest in these are the innovators
00:35:59
but this is what happens when you have
00:36:01
government intrusion
00:36:03
right that we can all debate whether or
00:36:05
not is worthwhile but it was hugely
00:36:07
distortive what we know to be true
00:36:09
is that we had more distortion in
00:36:11
markets the last two years than probably
00:36:14
any time since post world war ii
00:36:16
and the consequence of that is dramatic
00:36:19
and you know we all kind of saw it but
00:36:21
we all kind of gaslighted ourselves as
00:36:23
well because you were like well maybe
00:36:25
there is a new normal maybe we have
00:36:27
accelerated digitization the truth of
00:36:29
the matter is the law of economic
00:36:31
gravity is interest rates and inflation
00:36:33
and it remains yeah and and this time
00:36:36
turns out is not really that much
00:36:38
different
00:36:40
i think jason if you take your list of
00:36:41
these high-priced startups yup i think
00:36:43
it would be a good useful exercise for
00:36:46
somebody to do somebody in the press
00:36:47
should probably do it but if you take
00:36:49
that list and just rank companies based
00:36:51
on valuation the last announce date yup
00:36:54
and then if they are not announcing
00:36:57
layoffs of any kind
00:37:01
you can probably forecast when they're
00:37:03
going to burn through the money
00:37:05
especially if they're hiring and the
00:37:07
reason that you can probably forecast
00:37:09
that accurately is you can pretty much
00:37:10
predict what opaques will be
00:37:12
especially knowing the fact that their
00:37:14
input costs are actually going up so for
00:37:16
example most of these businesses that
00:37:17
rely on facebook and google and
00:37:19
instagram for customer acquisition those
00:37:21
input costs are going up and the reason
00:37:22
you know that is that's two trillion
00:37:24
dollars of market cap that doesn't give
00:37:26
a flying [ __ ] what's happening in
00:37:28
startup land they're gonna make their
00:37:30
numbers
00:37:30
right okay
00:37:32
those are the most important companies
00:37:33
in the world
00:37:34
they will ratchet up the prices and so
00:37:37
your input costs are going up it's not
00:37:39
just the physical supply of materials
00:37:41
that i think is going up it's just the
00:37:43
cost of customer acquisition is going to
00:37:45
probably go up by 20 30 40
00:37:47
right and you know this because facebook
00:37:49
and google guide
00:37:51
to where they need to perform and so if
00:37:53
you pass that through the venture
00:37:54
ecosystem that all of a sudden now
00:37:57
upticks your burn yeah if you're adding
00:37:58
more people it upticks your burn yep and
00:38:01
now back to david's math you then also
00:38:02
have to grow five or six x that none of
00:38:04
this hangs together so we are at the
00:38:06
beginning of probably a very
00:38:08
complicated process of unwinding yeah
00:38:11
the distortion that we've lived through
00:38:12
in the last couple years at this point i
00:38:14
mean you have to blame the capital
00:38:15
allocators in this instance they bought
00:38:18
these logos they suspended disbelief
00:38:21
we've had this ridiculous culture of no
00:38:23
governance
00:38:24
uncapped notes
00:38:26
just pushing i see it on the boards i'm
00:38:27
on you guys probably too some people
00:38:29
just pushing top line growth never
00:38:31
discussing uni economics never
00:38:33
discussing the bottom line and they
00:38:35
created these crazy fugazi markups they
00:38:37
raised bigger funds based on it and they
00:38:39
just were never the adults in the room
00:38:41
the stories of capital it's infuriating
00:38:42
i'll tell you an incredible conversation
00:38:44
i had yesterday with one of my partners
00:38:45
so he's been you know with me for 10
00:38:48
years
00:38:49
he was really the one that pushed us
00:38:50
very early on to go into deep deep deep
00:38:53
tech when nobody else is doing it 3d
00:38:54
printing of rockets satellites all that
00:38:56
stuff and it's been
00:38:58
so i really trust and respect his
00:39:00
perspective and he was telling me a
00:39:02
story
00:39:02
he uh called um a recruiter
00:39:06
um you know because we've been toying
00:39:08
with
00:39:08
you know
00:39:09
helping get some folks to help us manage
00:39:12
some of our early stage deal flow and he
00:39:14
asked her essentially something to the
00:39:16
point of like uh who are the types of
00:39:18
gps that are getting hired today in
00:39:19
early stage
00:39:21
and he said you know this is how we
00:39:22
approach our business right we have a
00:39:24
permanent capital balance sheet you know
00:39:26
we do you know at most one deal a year
00:39:28
per partner and she said well you're
00:39:30
never going to get anybody
00:39:31
because a mid-level executive at one of
00:39:33
these high-flying startups that then
00:39:34
goes and joins a venture firm
00:39:37
she said the consistent single thing
00:39:40
that they make their decision on are you
00:39:42
ready for this
00:39:43
is how many deals will i be allowed to
00:39:45
do per year
00:39:47
what
00:39:49
and so you know these people are make
00:39:51
work construction workers
00:39:54
right that's dig a ditch fill a ditch
00:39:55
that is not what investing is
00:39:57
that's not about having a discerning
00:39:59
philosophy on what a business should be
00:40:01
or a market so if you have a bunch of
00:40:03
capital allocators jason to your point
00:40:05
who are
00:40:06
unsophisticated about investing probably
00:40:08
very sophisticated operationally but
00:40:10
fundamentally don't know what they're
00:40:11
doing and they're coming and
00:40:13
transforming in an organization
00:40:15
that should be a disciplined discerning
00:40:18
allocator of capital and turning them
00:40:20
into a velocity deal machine
00:40:23
this is what you're going to get
00:40:24
i mean sometimes the best money sacks is
00:40:27
money you put into a bet you've already
00:40:28
made continuing to build the pot with a
00:40:31
startup that's already proven themselves
00:40:32
correct so i think what we're going to
00:40:34
see we have a follow-on fund yeah i mean
00:40:36
i got to say the the things you guys are
00:40:37
saying are making me feel great about
00:40:39
our portfolio explain um not not because
00:40:42
we won't get hit with the same valuation
00:40:45
corrections that everybody else is going
00:40:46
to suffer but because
00:40:48
you know a few years ago we decided we
00:40:50
were going to invest in a certain kind
00:40:52
of company i mean high margin sas and
00:40:54
marketplace businesses that were not
00:40:56
capital intensive we defined a new
00:40:58
metric that didn't exist called burn
00:41:00
multiple which is the amount of money
00:41:02
you burn
00:41:03
for every dollar of incremental ar that
00:41:06
you generate incremental uh subscription
00:41:08
revenue
00:41:09
and you know we turned down investments
00:41:11
that were growing fast but they had a
00:41:13
horrible burn multiple
00:41:14
and um so and and i do think most of our
00:41:17
companies raised last year when you know
00:41:21
they made hay while the sunshine so
00:41:23
there's going to be
00:41:25
they need to manage their cash flow so
00:41:27
they don't have to raise too quickly but
00:41:29
um as long as they do that and they keep
00:41:31
growing they're going to weather the
00:41:33
storm what's the right number spend
00:41:34
three dollars to make one spend two
00:41:36
dollars to add one what's what's your
00:41:38
ratio so what i've said is that if you
00:41:40
can spend a dollar or less to generate
00:41:43
an incremental dollar of ar you're doing
00:41:45
amazing and uh between one and two is
00:41:48
good so in other words if you're burning
00:41:50
20 million in a year to add an
00:41:52
incremental 10 million of ar you're
00:41:54
doing quite well in startup land and
00:41:56
then when you start getting it to two
00:41:58
and a half three that's a problem and
00:42:00
then above three is just bad
00:42:03
spending 30 million to add 10 million an
00:42:05
ar
00:42:06
it means it takes three years or
00:42:07
probably four or five because you'll
00:42:09
have turn to get that money back yeah
00:42:11
and that's just a lack of discipline and
00:42:13
how many vcs are we on the boards uh or
00:42:15
you know other investors are we on the
00:42:17
board and having that nuance of a
00:42:18
discussion it's always just top line top
00:42:20
line top line who's going to be the next
00:42:22
holder i think it's very difficult
00:42:23
because i think the number of qualified
00:42:25
investors have gone way down as the
00:42:27
surface area of investing has gone way
00:42:29
up so again just going back to this
00:42:31
conversation this woman is staffing most
00:42:33
of these venture firms with their junior
00:42:35
and mid-level partners
00:42:37
and again the qualification to become a
00:42:38
venture capitalist at this point is not
00:42:40
that you have
00:42:42
an ability to pick or you know in
00:42:44
david's case have operated and actually
00:42:46
run a business and then actually have
00:42:48
developed a
00:42:49
methodical framework or brad's business
00:42:51
which is brad had to start from
00:42:52
literally zero in the public markets and
00:42:54
work his way backwards to end up with 15
00:42:56
or 20 billion of assets it's it's none
00:42:58
of that it's are you a vp at an xyz
00:43:01
unicorn that may also be poorly run
00:43:03
and all of a sudden that you know gives
00:43:05
you the qualification to go into a job
00:43:07
where
00:43:08
and it's not their fault where what they
00:43:11
are told is
00:43:12
uh what you want is what we're going to
00:43:14
give you which is the ability to write
00:43:15
you know x number of checks per year
00:43:18
that is insanity that's not what makes a
00:43:20
good investor
00:43:22
and then your ability to then give
00:43:23
advice i don't know it's probably zero
00:43:26
or less than zero your ability to give
00:43:28
advice is uh i think we have to qualify
00:43:30
bad advice is being given so
00:43:32
the ability to give quality advice is
00:43:34
what's missing in this formula i just
00:43:36
think these people are really naive like
00:43:38
you know and it's not their fault but
00:43:40
you know they're given way too much rope
00:43:42
to hang themselves with and they're and
00:43:43
and the the the unfortunate byproduct is
00:43:46
going to be the
00:43:47
uh the companies who gets bad advice or
00:43:49
the bad businesses that get funded um
00:43:52
and that's not what you know an
00:43:53
efficient capital market should do
00:43:55
so one of the things i'm seeing our
00:43:57
portfolio companies do is use burn
00:44:00
multiple as a governor for how fast
00:44:02
they're going to grow
00:44:03
so for example
00:44:05
they will say that the burn multiple
00:44:08
should not exceed two
00:44:09
in the next quarter so you know we want
00:44:12
to so that the old way of doing it would
00:44:15
be that the company would just have a
00:44:16
forecast and say we're going to grow 3x
00:44:17
this year we're going to grow
00:44:19
er from 10 million to 30 million and
00:44:21
whatever that cost it costs right that
00:44:24
was basically how companies did it now
00:44:26
what i'm seeing from some of our
00:44:27
portfolio companies is they are saying
00:44:30
yeah our goal is to grow from 10 to 30
00:44:32
but we will not spend
00:44:34
so much money that our burn multiple
00:44:36
exceeds two
00:44:38
so you know if if it turns out that
00:44:40
there's a trade-off here between growth
00:44:42
and burn burn is going to win we're not
00:44:44
going to exceed
00:44:46
that level of that ratio of spending
00:44:49
and that's actually a good i mean i've
00:44:51
seen a few companies implement that
00:44:52
already
00:44:53
and it's probably something they should
00:44:54
all be doing i mean if these are pilots
00:44:56
they basically created a rule to not
00:44:58
stall the plane
00:45:00
right you got to keep a certain altitude
00:45:01
a certain speed
00:45:03
so what is the opportunity here then if
00:45:05
we're going to have too many companies
00:45:07
two high evaluations if we're going to
00:45:09
hang around the rim and try to get some
00:45:10
rebounds here and try to find
00:45:11
opportunities what are the opportunities
00:45:13
what are the layups here for capital
00:45:15
allocators and for founders if we have
00:45:17
there are no great advice for them
00:45:18
there's nothing there's
00:45:20
there have never been layups and the
00:45:22
problem is
00:45:23
um you know
00:45:24
in in up markets whenever we think that
00:45:27
there are
00:45:28
um
00:45:29
it ends up being what causes our
00:45:31
downfall later because we we just take
00:45:32
the wrong signal away i i i don't think
00:45:35
that there are
00:45:36
i don't want to be investing incremental
00:45:38
capital into a late stage startup that's
00:45:40
poorly run that doesn't have their
00:45:42
margins in line
00:45:43
and then having to work it out why do
00:45:44
that again i can just go in the s p 500
00:45:47
and get eight percent and yeah it's not
00:45:49
thirty percent but it's eight percent
00:45:50
and i don't have to deal with all this
00:45:52
nonsense like wow a bunch of people
00:45:54
think because you're a crossover
00:45:55
investor right i mean you have the
00:45:56
ability to choose between public
00:45:58
privates or wherever you want to play i
00:46:00
actually think what i am is an investor
00:46:02
right you you don't have lps for a vc
00:46:05
fund like saks and i do but but this but
00:46:07
this is my point like i think investing
00:46:10
irrespective of whatever stage you do it
00:46:12
still fundamentally comes down to the
00:46:13
following which is do you have the
00:46:15
judgment to understand whether these
00:46:18
decisions are marginally good
00:46:20
marginally average or marginally
00:46:22
destructive for the short medium and
00:46:23
long term of a business
00:46:25
and i just don't think that enough
00:46:27
people steep themselves
00:46:29
in the practice that it takes to get
00:46:31
good at that
00:46:32
kind of a game
00:46:34
and i think what these moments expose
00:46:37
is that the status games that come
00:46:39
around investing
00:46:40
because it just seems like it's easy it
00:46:42
just seems like you don't do much work
00:46:44
that's what ruins
00:46:46
these periods and the implications i
00:46:48
think is brad said is really right it
00:46:50
affects the employees it affects the
00:46:51
entrepreneurs it affects the startup
00:46:52
culture it affects the incremental
00:46:54
desire for people to take a shot at
00:46:56
things you can overcome all of it we
00:46:58
have and we will again
00:47:01
but i really think like to the
00:47:02
entrepreneur the message is if you're
00:47:04
you know taking a term sheet i think you
00:47:06
have to have better judgment to really
00:47:08
look at that on that investor and say is
00:47:10
this person really qualified to help me
00:47:12
because in these moments
00:47:14
in the absence of help you're probably
00:47:16
going to basically have a valuation
00:47:18
reset at the minimum case and the worst
00:47:21
case is you go out of business what's
00:47:22
insightful about you said chamoth then
00:47:23
i'll hand it to you brad is that a lot
00:47:26
of the founders picked
00:47:28
based on the highest valuation who their
00:47:30
next investor should be and now we see
00:47:31
what a trap that is brad you know the
00:47:33
takeaway for me is we return to a place
00:47:36
we've always been which is
00:47:38
about selection
00:47:40
right
00:47:41
look at the mean returns for ventures
00:47:43
for 20 years they're lousy
00:47:45
lousy right
00:47:47
ninety percent of the of the spoils
00:47:50
they've apparently barely mapped to the
00:47:52
public
00:47:52
five to ten percent of the investments
00:47:54
and that's the way it's always been look
00:47:56
at look at buffett right by superior
00:47:59
companies at good prices what are the
00:48:01
two technology companies buffett bought
00:48:03
in the public markets
00:48:04
right apple and snowflake snowflake
00:48:07
apple and snowflake he doesn't own a
00:48:09
broad basket of
00:48:11
long tail internet or long tail software
00:48:14
and so i think what you're going to see
00:48:16
and and to sax's point i think even
00:48:19
running a recipe on software as though
00:48:21
all arr is created equal i mean i can
00:48:24
show you five companies each with a
00:48:25
hundred million of are each growing at
00:48:27
30 percent and there's massive
00:48:29
dispersion in future outcomes yeah right
00:48:32
and so like i i just think that this at
00:48:35
the end of the day is a craft business
00:48:37
it's an essentialist business it's about
00:48:40
finding and identifying those very very
00:48:42
very few companies that ever durably are
00:48:45
worth more than 10 billion dollars you
00:48:47
know on my screen today chamath was just
00:48:50
talking there are four internet
00:48:51
companies that are green today
00:48:54
amazon google apple and facebook
00:48:56
everything else on my screen is bleeding
00:48:59
mustang mustang versus versus
00:49:02
everything else is red and my growth
00:49:04
internet stocks are down 400 basis
00:49:07
points
00:49:08
right the market is voting with its
00:49:10
wallet where it wants to sit on the risk
00:49:12
curve right and i think we're just gonna
00:49:14
go there's no new normal here this is
00:49:16
just back to the future right is what
00:49:18
we've always done and you know the reset
00:49:20
is always painful uh the only surprising
00:49:22
thing is how often we have to go through
00:49:24
it
00:49:25
if if opportunities do arise where will
00:49:27
they where would they be brad i mean i
00:49:28
was watching peloton i always loved that
00:49:30
company i see the change in management i
00:49:32
see the management
00:49:33
you know thinking about profitability
00:49:35
thinking about creating it into a
00:49:36
marketplace maybe having uh
00:49:39
more hardware available disconnected
00:49:41
from the software etc do you think
00:49:43
there's opportunities there or there
00:49:45
will be opportunities over the next year
00:49:47
to buy some of the names that aren't the
00:49:49
fangs
00:49:50
um
00:49:52
what we do in the first instance jason
00:49:54
and listen we we outperformed last year
00:49:57
because we owned quality and we're short
00:49:59
lower quality stuff
00:50:01
unfortunately this year the market said
00:50:04
guess what it's all overvalued quality
00:50:06
low quality doesn't matter
00:50:08
we're taking it all lower
00:50:11
and so for us in moments like this and
00:50:13
i've lived probably through five of them
00:50:14
in the public markets
00:50:16
we always do the same thing
00:50:18
d gross take risks down first thing is
00:50:22
like have less chits on the board
00:50:25
number two
00:50:26
reduce the number of outliers pull in
00:50:29
the risk curve right for me i want to
00:50:32
own five or six things because remember
00:50:34
i'm the biggest lp in the fund
00:50:36
this is my money i want to sleep well at
00:50:38
night and i want to protect the
00:50:39
foundations
00:50:41
the the endowments the good causes we
00:50:43
represent i can't do that with a company
00:50:45
that has an unproven business model i
00:50:48
may think that it's going to be great in
00:50:49
the future but i don't know so
00:50:51
the problem with for the pelotons of the
00:50:54
world right they may be incredible
00:50:56
returners
00:50:57
but what every portfolio manager on the
00:51:00
planet is doing today is compressing the
00:51:03
number of names of their portfolio
00:51:05
saying what are the companies i know
00:51:06
with absolute certainty
00:51:08
whether rates are two and a half three
00:51:10
and a half four and a half five and a
00:51:11
half is going to be worth more over the
00:51:13
course of the next two to three years
00:51:14
that's what i want to own
00:51:16
right
00:51:17
right but what i was just going to start
00:51:19
not even interrupt but jason what you're
00:51:21
talking about is what a lot of people do
00:51:23
you see a lot on twitter and i call it
00:51:25
clapping as a strategy
00:51:28
what about this and what about that and
00:51:30
what about if they do this and what
00:51:31
about clapping is not a strategy
00:51:33
clapping is something people do at the
00:51:35
blackjack table it turns out it doesn't
00:51:37
actually influence the cards sure
00:51:40
um and so i think you have to stop with
00:51:42
the clapping as a strategy because to be
00:51:44
clear that's not my strategy i was
00:51:45
asking that as the moderator is there
00:51:48
just
00:51:51
i think you're representing a
00:51:52
psychological reaction that a lot of
00:51:54
people have
00:51:55
and i think what brad is trying to tell
00:51:56
you is clapping is not a strategy i know
00:51:58
i'm asking that on behalf of the
00:51:59
audience it is not my belief just to be
00:52:01
clear
00:52:02
my commentary to the audience is
00:52:03
clapping is not a strategy yes correct
00:52:05
yes
00:52:06
if enough people though do what you're
00:52:08
saying brad
00:52:09
and they just retreat to quality at some
00:52:12
point that qual those quality companies
00:52:14
would then become fully valued maybe
00:52:16
even overvalued and thus the cycle
00:52:18
begins again or not so long does that
00:52:20
take no you nailed it what happened last
00:52:23
year 2021 dispersion collapsed
00:52:26
go check out jamin ball who does
00:52:28
incredible software analysis on our team
00:52:31
dispersion collapsed between the best
00:52:33
cohort and the worst cohort of software
00:52:35
companies last year the first thing that
00:52:37
happened is dispersion returns we pay a
00:52:40
higher price for the best [ __ ] and we
00:52:42
pay a lower price for the low quality
00:52:44
stuff right then when we start to
00:52:47
recover when there's more predictability
00:52:49
in the world when we resolve the war
00:52:51
when we understand the path of inflation
00:52:54
right the stuff close in on the risk
00:52:56
curve that'll start being fully valued
00:52:59
so then we will be brave enough to walk
00:53:01
a little further out on the ice on the
00:53:03
lake
00:53:04
testing it is it safe to walk here
00:53:06
and then you walk out a little further
00:53:08
and sadly right eventually we're in the
00:53:11
exact same pattern we've been before
00:53:13
which is we'll know we're at a market
00:53:15
top five or six or seven years from now
00:53:18
when we repeat the same asinine behavior
00:53:20
that we just went through when everybody
00:53:22
becomes complacent again and over
00:53:24
bidding this stuff way out on the risk
00:53:26
curve i'm just suggesting to you the
00:53:28
number one question i get from gps
00:53:30
venture capitalists and others right now
00:53:32
is when are we going to bounce back let
00:53:34
me be absolutely clear
00:53:35
there is no bouncing back to where we
00:53:37
were the last 18 months that was the
00:53:40
outlier that was the make-believe
00:53:43
what i hope and expect is that we can ba
00:53:45
bounce back to the five-year average but
00:53:48
even to durably trade at the five-year
00:53:50
average we have to have a lot more
00:53:52
clarity on the war in ukraine on
00:53:54
inflation and rates so that's a perfect
00:53:56
place to pivot sacks
00:53:58
uh we are now here and i think this is
00:54:00
the fourth or fifth episode where we've
00:54:02
been discussing the war and we flipped
00:54:04
it today just to do markets first uh for
00:54:06
a little change of pace and since we had
00:54:08
brad here where are we at with the war
00:54:10
and what are your what is your
00:54:12
expectation of it wrapping up or it
00:54:14
escalating well actually there's a tweet
00:54:16
storm this morning um that schmoth you
00:54:18
sent to the group
00:54:20
that
00:54:22
from a russian official and it seemed to
00:54:24
indicate well it indicated what we've
00:54:26
kind of known for a few weeks now which
00:54:28
is what the broad contours of what a
00:54:31
peace deal would look like which is
00:54:33
there's three main pieces
00:54:34
uh neutrality for ukraine the russians
00:54:37
insist that it not be part of nato
00:54:40
they get to keep crimea which they annex
00:54:42
in 2014 that's been a fade accompli
00:54:44
and then some version of independence
00:54:47
for these
00:54:48
sort of breakaway territories
00:54:51
in eastern ukraine the in the donbass
00:54:53
region everyone kind of knows that's the
00:54:56
the broad strokes of the deal then
00:54:57
there's you know a lot of details are
00:54:59
going to matter a lot to the people who
00:55:01
live there like is there this land
00:55:03
bridge from crimea to don bass but
00:55:05
frankly don't matter as much to all of
00:55:07
us the united states of america so the
00:55:09
question is you know what what is the
00:55:11
administration going to do about it
00:55:12
biden just went to europe and
00:55:15
you know my concern is that no one in
00:55:18
washington and i talked about this last
00:55:20
week seems to be pushing
00:55:21
for a ceasefire it seems like their
00:55:24
preferred position
00:55:25
is for russia to bleed out as as long as
00:55:29
possible in ukraine for the us to fund
00:55:32
an insurgency a la afghanistan where you
00:55:36
know these fighters in eastern ukraine
00:55:38
are sort of like the mushrooms urgency
00:55:40
is that the right word
00:55:41
well sure because you know if they're
00:55:43
defending their own land
00:55:45
and so we're the mujahideen i mean i
00:55:47
know but why would you call it an
00:55:48
insurgency or defending their land if if
00:55:51
the government of ukraine falls then it
00:55:53
becomes an insurgency so the point is
00:55:55
that the administration
00:55:57
the question is what's the
00:55:58
administration's end game here do they
00:56:00
want to lead the world to a ceasefire or
00:56:02
do they want to protract the conflict to
00:56:04
impose on the russian state
00:56:07
a afghan-style
00:56:09
uh you know debilitating defeat to
00:56:12
destabilize the russian regime neil
00:56:14
ferguson had a column this week in um it
00:56:18
says bloomberg he's from the brooking
00:56:19
institute at stanford no he's from he's
00:56:21
from hoover uh i'll move around the
00:56:22
start yeah so i'll read i'll read this
00:56:24
part where is that
00:56:26
can you just explain to people what the
00:56:27
hoover institute is and how that leans
00:56:29
whoever institution for war and peace i
00:56:30
would say it sort of leans um
00:56:34
i idealistic in foreign policy i would
00:56:37
describe neil as sort of the most
00:56:38
realistic idealist got it um
00:56:41
but he's quite well sourced i think uh
00:56:44
with you know in with
00:56:46
you know various people in washington
00:56:48
and europe and what he wrote is the us
00:56:51
intends to keep this war going the
00:56:53
administration will continue to supply
00:56:56
the ukrainians with anti-aircraft
00:56:57
stingers anti-tank javelins explosive
00:57:00
switchblade drones it will uh keep
00:57:02
trying to persuade other nato
00:57:04
governments supply heavier defensive
00:57:05
weaponry and so on uh he says washington
00:57:08
will revert to the afghanistan after
00:57:11
1979 playbook of supplying an insurgency
00:57:14
only if the ukrainian government loses
00:57:16
the conventional war so the concern here
00:57:18
is that the u.s government
00:57:21
has an incentive actually that right
00:57:24
they don't want a quick end to this war
00:57:26
is basically the theory is they want the
00:57:28
russian state to bleed out and be
00:57:30
destabilized
00:57:31
in a way it's the one chance we have for
00:57:34
like regime change there without us
00:57:35
actually starting a war is that they
00:57:36
have this self-inflicted wound that is
00:57:38
the theory yeah and i think a lot of
00:57:40
people are saying that that is what a
00:57:42
lot of people want in washington i don't
00:57:44
you know this is not like conspiracy
00:57:45
theory people are saying this is our
00:57:47
chance to topple the russian state to
00:57:49
destabilize it there was a rand
00:57:51
corporation how do you survey a few
00:57:54
years ago hold on there's a rand
00:57:55
corporation study done a few years ago
00:57:57
that was commissioned by somebody
00:57:58
probably in our state department or
00:58:00
someone like that where they talked
00:58:01
about this that if we want to
00:58:03
destabilize the russian regime ukraine
00:58:05
is the way to do it right they would
00:58:07
fall for it right they would actually
00:58:09
fight that fight that is an unwinnable
00:58:10
fight we would basically be putting an f
00:58:12
we'd be supporting an afghanistan-like
00:58:15
path for them to go down like we did and
00:58:17
they did previously to that right and
00:58:19
the problem the problem that i see is
00:58:21
just this which is we've discussed on on
00:58:23
this program the downsides of this war
00:58:25
first it's a humanitarian disaster
00:58:27
second we've talked about the risk of
00:58:29
recession later in the year third
00:58:32
freberg talked about famine the risk of
00:58:34
famine later this year if the spring
00:58:36
planning doesn't happen and then fourth
00:58:38
we have this
00:58:39
always have this risk that the war spins
00:58:41
out of control and goes nuclear right
00:58:43
and leads into war three those are some
00:58:46
vital american interests to avoid all of
00:58:48
those scenarios i don't see an
00:58:50
equivalent vital american interest
00:58:52
in determining the exact nuances of who
00:58:54
rules the donbass in other words the
00:58:56
broad strokes of this agreement are
00:58:58
there
00:58:59
you know what the u.s should be doing is
00:59:01
leading
00:59:02
they should be pushing for lead not
00:59:04
bleed lead the way to a ceasefire not to
00:59:06
inflict maximum damage on the russian
00:59:08
regime which we don't know exactly what
00:59:11
their intent is because
00:59:12
they're doing this behind closed doors
00:59:14
brad what's your take on this i think
00:59:15
that dave and i talked about this at
00:59:17
dinner the other night i think there's
00:59:18
something bigger playing out here i mean
00:59:19
clearly he's the expert on real politic
00:59:21
and you know but
00:59:23
it seems to me
00:59:25
that
00:59:26
we have
00:59:28
had decades of military diplomacy
00:59:31
right and and most recently the pal
00:59:33
doctrine of overwhelming force we don't
00:59:35
want to make the same mistake we made in
00:59:36
vietnam so like we're going to go in
00:59:39
with full force
00:59:40
and you know
00:59:41
basically the public doesn't support you
00:59:43
know military adventure ism anymore
00:59:46
right and so now we have maybe we'll
00:59:48
call it the blinkin doctrine which is
00:59:50
the pal doctrine equivalent but for
00:59:52
economic force
00:59:54
it's the nuclear economic weapon that is
00:59:58
on full display by the west right now
00:59:59
that i think has really significant
01:00:01
implications
01:00:03
right it's reunited the west
01:00:05
um and i don't think this is just about
01:00:08
putin and i think the reason that the us
01:00:11
and western europe is slow playing this
01:00:13
a bit as they're sending a message to
01:00:15
the chinese as well
01:00:16
which is
01:00:18
that we we are unified and we will use
01:00:21
an economic weapon of mass destruction
01:00:24
if
01:00:25
right you don't play by global norms and
01:00:28
so the box i think we're in from a
01:00:29
negotiating perspective
01:00:31
right uh in ukraine right now is not a
01:00:34
box around neutrality i mean neutrality
01:00:36
is already clear
01:00:37
i mean we had zielinski didn't even ask
01:00:39
for a no-fly zone he's not even asking
01:00:41
for nato membership they've already
01:00:43
seated neutrality i think the real
01:00:46
question is sanctions
01:00:47
i don't think the west wants to roll
01:00:49
back sanctions and i think putin's
01:00:51
saying i can't hightail it out of here
01:00:53
unless you roll back all the sanctions
01:00:55
and give me a little bit of the donbass
01:00:57
and so watch the next week or two like
01:00:59
in any good negotiation
01:01:01
unfortunately i think both sides are
01:01:03
going to amp up their current strategies
01:01:05
we may see missiles coming out of russia
01:01:08
and we may see european uh complete
01:01:11
european embargo of russian oil three
01:01:13
million barrels a day
01:01:15
those will be the final straws right
01:01:17
before we enter negotiations because
01:01:19
then they can see the last things that
01:01:21
they took as part of the negotiation
01:01:24
but this i think is going to be all
01:01:26
about economic sanctions um and uh and
01:01:30
and i think the west is playing a a
01:01:32
really strong game what i worry about
01:01:34
and saks has talked about this at length
01:01:37
is that we overreach we over play our
01:01:40
hand here in an effort to send a signal
01:01:42
to other parties around the world
01:01:44
right and that has fat tail risk
01:01:47
associated with it that you're
01:01:49
representing
01:01:50
in taiwan let me ask a question how many
01:01:52
of us
01:01:53
woke up or this at the beginning of this
01:01:54
year or making our new year's
01:01:56
resolutions and said
01:01:58
that we
01:02:00
need to risk recession famine and war in
01:02:04
order to destabilize and topple the
01:02:06
russian regime when did this become a
01:02:09
vital american interest no one at the
01:02:11
beginning of the year thought this was
01:02:12
an important goal of america what's more
01:02:15
important is is basically getting our
01:02:17
economy back on track getting back on
01:02:19
track after this long day this long
01:02:22
this this plague we've had i mean nobody
01:02:25
needed this problem and what the
01:02:27
administration should have done was use
01:02:29
diplomacy and all their resources to try
01:02:31
and prevent the conflict and now the
01:02:33
conflict has occurred we should be
01:02:35
pushing for a negotiated peace and
01:02:37
ceasefire we do not have a vital
01:02:40
national interest in the details of who
01:02:42
roles rules the dawn pass yeah the
01:02:44
problem with your setting up of that
01:02:46
question is that we did not start the
01:02:48
war putin did shamafi you've been
01:02:50
silenced so far what are your thoughts
01:02:52
on this war that jason saying we started
01:02:54
the war well you're saying did we wake
01:02:56
up and say that we should do this we did
01:02:58
not listen
01:02:59
to you a lot of other people in the
01:03:01
media woke up on february 24th and you
01:03:03
think putin went mad and there's no
01:03:04
prehistory to this conflict now here's
01:03:06
the deal hold on a second this is a war
01:03:09
of russian aggression it's true that
01:03:11
putin started it he's the invader
01:03:13
however there were things we could have
01:03:15
done to prevent or to avoid this war and
01:03:19
american diplomacy completely failed and
01:03:21
we even discussed it the month before
01:03:23
this war started we talked about how the
01:03:26
u.s could have given a written guarantee
01:03:29
to russia that ukraine would not be part
01:03:31
of nato just this week zielinski in an
01:03:33
interview with fried zakaria admitted he
01:03:35
was told by blinken you will not be part
01:03:38
of nato but we don't admit that publicly
01:03:40
what games were they playing what is the
01:03:42
point of playing that kind of game with
01:03:44
the grave issue of war and peace why
01:03:46
didn't lincoln say publicly what he said
01:03:48
to zielinski
01:03:50
this administration did not do
01:03:51
everything he could do to prevent war
01:03:54
and now we are faced with all of these
01:03:56
existential risks why for what reason
01:03:59
the reason is that it gave
01:04:01
the united states an opportunity to
01:04:03
topple russia
01:04:04
i mean exactly who who of us thought we
01:04:06
needed that at the beginning of this
01:04:08
year
01:04:09
well i think that you know the thing to
01:04:11
keep in mind and i'm again i don't i'm
01:04:13
not saying that this is right but i'm
01:04:14
just game theorizing
01:04:17
uh that these are like you know um
01:04:21
grudges that these guys have held for a
01:04:23
very long time and i think it started
01:04:25
when they were in the obama white house
01:04:27
and it carried over to now
01:04:30
and i think they saw an opportunity to
01:04:32
basically execute a strategy that
01:04:34
essentially now i think we're moving
01:04:36
into the second phase of this war which
01:04:38
is effectively trying to bait russia
01:04:40
into doing something really egregiously
01:04:41
bad
01:04:43
and that is terrible david to your point
01:04:45
i think we're willing to
01:04:46
you know sacrifice a lot i think we've
01:04:48
decided that uh implicitly by based on
01:04:51
the actions of of the american
01:04:53
government
01:04:55
and and it's weird it's like we're
01:04:56
trying to get russia to react and so the
01:04:59
rhetoric in fact
01:05:01
the rhetoric since that do you guys
01:05:03
remember i think it was only 10 days ago
01:05:05
that both russia and ukraine said the
01:05:07
surface area of a deal
01:05:10
is pretty much in sight
01:05:12
um oh friedberg from the top rope coming
01:05:14
in look at you freedberg i mean like you
01:05:17
you look like an everyman i mean i'm so
01:05:19
proud of you are you actually driving
01:05:21
your own car gas guzzling car suv in the
01:05:24
mountains you you should be you should
01:05:26
put your skates in that tank
01:05:28
is in that tank is that putin's gas i
01:05:30
only use it i only use ethanol i make in
01:05:32
vats in my backyard
01:05:34
when i don't
01:05:35
solar panels that are handcrafted in my
01:05:37
bag out of my way to find a luke oil gas
01:05:40
station
01:05:41
filled up um what i was saying guys was
01:05:43
that uh you know from the 10 days from
01:05:45
when you know both sides russia and
01:05:47
ukraine were like hey you know we think
01:05:48
we're basically there we have a deal
01:05:51
the rhetoric has gotten really insane uh
01:05:53
you know yesterday i think it was like
01:05:55
the united states said you know we
01:05:57
we think that russia should be kicked
01:05:58
out of the g20 then russia responded and
01:06:00
said i'm only going to sell in that gas
01:06:02
and settle it in rubles
01:06:04
you know all of a sudden uh other actors
01:06:08
china and saudi arabia are in the game
01:06:10
now you know china and saudi arabia are
01:06:12
negotiating settling a huge oil trade in
01:06:14
yuan why in the last 10 days have all
01:06:16
these things happened when we were so
01:06:18
close to getting something done
01:06:20
i think the best explanation is that um
01:06:24
we are willing to
01:06:25
i guess we've decided i mean
01:06:27
none of us have decided but american
01:06:29
government decided that some amount of
01:06:30
sacrifice is okay uh if
01:06:33
it could trigger a russian escalation
01:06:35
which could then further destabilize
01:06:36
that country and i think they believe
01:06:38
that that's more important than anything
01:06:39
else
01:06:41
and i think we you know from where i
01:06:42
said i think we can take putin at his
01:06:43
word that he actually cares about
01:06:45
reunification and that's not to say he's
01:06:47
crazy david um and i don't think we can
01:06:49
control his behavior i think you're
01:06:51
wouldn't you use word reunification
01:06:53
uh i've never said that jason and also
01:06:55
just today the russian military the
01:06:57
tweet that i sent you guys was from the
01:06:59
russian military and that was an
01:07:00
official statement and i don't think he
01:07:02
they would be allowed without putin's
01:07:04
explicit sign off they no longer talked
01:07:07
about denatificating
01:07:09
ukraine or demilitarizing ukraine they
01:07:12
simply focused it on the donbass
01:07:15
and to use your sun tzu argument it's
01:07:17
almost like they're trying to construct
01:07:19
their own golden bridge to exit in a way
01:07:21
where they can claim victory to the
01:07:22
russian people to explain the tens of
01:07:25
thousands of you know russian military
01:07:27
people that have been killed in this
01:07:28
whole conflict right because they have
01:07:30
an explanation that they have to give
01:07:32
but in in all of this i think that we're
01:07:34
we're uh probably exposing a very high
01:07:37
risk game of poker that we're playing
01:07:39
which is it seems that the us government
01:07:41
is focused more on the destabilization
01:07:43
of
01:07:44
of russia than they are in getting this
01:07:45
conflict behind us i mean he did he did
01:07:47
say in his speech since time immemorial
01:07:49
the people living in the southwest of
01:07:51
what has historically been russian land
01:07:53
have called themselves russians and
01:07:54
orthodox christians that's don bass yeah
01:07:56
i know but he is there's been a jason
01:07:58
there's been a civil war going on since
01:07:59
2014 in this donbass region between
01:08:02
ukrainians and these sort of these
01:08:04
russian speakers
01:08:05
and now that civil war is this a balkan
01:08:08
style civil war that has now escalated
01:08:10
with you know ukraine and russia getting
01:08:13
in and now the whole west potentially
01:08:15
could get in this is a very dangerous
01:08:17
situation that we should not let spin
01:08:18
out of control i'm agreeing with that
01:08:20
you guys asked me did he ever talk about
01:08:21
reunification he did he did in his
01:08:23
speech that was not one of his stated
01:08:25
war objectives now you could keep
01:08:26
accusing him of being a liar but look
01:08:28
what his objective is i'm just talking
01:08:30
about his word that he believes these
01:08:31
areas are russian and they should be
01:08:33
considered
01:08:34
where they are predominantly russian
01:08:36
speakers
01:08:39
i'm not taking a side and who should
01:08:41
rule the donbass okay yeah i think it's
01:08:43
a complicated ethnic strife sort of
01:08:46
issue like we saw in the balkans all the
01:08:48
time between the russians who live there
01:08:50
and the ukrainians who live there what i
01:08:52
do know is it's not worth risking war
01:08:54
three over an agreement 100 agreement
01:08:57
100 agreement sacks let me can i ask you
01:08:59
a question
01:09:00
um
01:09:02
so
01:09:04
how is putin gonna withdraw without a
01:09:06
hundred percent lifting of the sanctions
01:09:10
and how is the west possibly going to
01:09:12
trust him to withdraw
01:09:15
right
01:09:16
while taking all the sanctions off that
01:09:18
seems to me like when when i try to
01:09:20
construct the golden bridge in my mind
01:09:23
it comes down to
01:09:25
you know like how do we how do we whack
01:09:27
up the sanctions do we take some of them
01:09:29
off say prove to us be out for x period
01:09:32
of time and then we'll roll the other
01:09:33
ones off because these sanctions are not
01:09:35
going to be rolled back in the next
01:09:36
three months based on some ceasefire
01:09:39
i i agree with that i i don't know that
01:09:42
putin can expect the sanctions to be
01:09:44
lifted or that he can effectively
01:09:46
negotiate for that i think
01:09:48
again where i think the
01:09:50
the peace deal is is that we've known
01:09:53
all along what it's going to be ukraine
01:09:54
will agree to neutrality in exchange for
01:09:57
some security guarantees from the west
01:10:00
uh
01:10:01
russia will get to keep crimea because
01:10:03
that's been
01:10:04
a fetacon police since the annexation
01:10:06
2014
01:10:07
and there will be some sort of
01:10:10
regional autonomy for these sort of
01:10:13
russian-speaking areas
01:10:15
in the dawn bass which by the way we
01:10:17
could have had that too there was a a
01:10:18
deal called mints2 since 2015 that
01:10:21
simply hasn't been implemented
01:10:23
so
01:10:24
you know i think that those are the
01:10:25
broad strokes of the deal and then
01:10:26
there's questions about well is there a
01:10:28
land bridge from crimea to the donbass
01:10:31
and you know what weapons exactly does
01:10:34
ukraine get to get from the united
01:10:36
states or get to keep i mean so look
01:10:37
those details matter a lot to the people
01:10:39
who live there but the broad strokes of
01:10:41
this i think are pretty well understood
01:10:43
i'm not betting this way with with our
01:10:45
book
01:10:46
but if i had to guess
01:10:48
we are going to have a period of
01:10:50
significant escalation on both sides
01:10:53
before they both get to the table
01:10:55
macron said this week that we still have
01:10:58
the europeans have not made a decision
01:11:00
about the embargo of russian oil that
01:11:03
will collapse the russian economy and
01:11:05
oil will go to 180 or 200 a barrel i
01:11:08
think that's a real likelihood
01:11:10
and the second one is i think the
01:11:12
russians will amp up military aggression
01:11:15
um uh in some phase saving measure and
01:11:17
to have more to negotiate with
01:11:19
um so maybe to answer my own question is
01:11:22
if there is an oil embargo then you take
01:11:24
the oil embargo off right as part of the
01:11:27
economic sanction whacking up of the
01:11:29
sanctions um because that's really the
01:11:31
nuclear option uh against the russians
01:11:34
economically
01:11:37
but it's a you know unfortunately i
01:11:40
think we have to be prepared for this to
01:11:42
get worse before it gets better because
01:11:43
it makes sense from just a game theory
01:11:46
for both sides to grab as much as they
01:11:48
can right before they sit down at the
01:11:50
table so they have more [ __ ] to give to
01:11:52
each other right but the problem is if
01:11:55
both sides keep asking i agree with that
01:11:57
fundamental analysis is that neither
01:11:59
putin nor zelinski can be trusted on
01:12:00
their own
01:12:02
uh to basically make peace because they
01:12:04
want to push their advantage if either
01:12:05
one believes that they're winning on the
01:12:07
battlefield they're going to push their
01:12:08
advantage to grab as much they can to
01:12:10
then negotiate from a position of
01:12:11
greater strength the problem is that
01:12:13
they're in an escalatory spiral where if
01:12:16
you know one or both of them
01:12:17
miscalculate we never get that deal and
01:12:19
i think the longer the war drags on the
01:12:21
harder it is to make a deal not easier
01:12:24
one one of the i'd i have to say one of
01:12:26
the disturbing things that came out over
01:12:28
the past week was in that
01:12:30
interview that i mentioned uh where
01:12:31
fried zakaria interviewed zielinski
01:12:34
zielinski said
01:12:36
he said that it's we're either gonna get
01:12:37
a peace deal or war three
01:12:40
and i'm listening to this thinking wait
01:12:42
a second um
01:12:44
you know that
01:12:46
that is a pretty scary posture for him
01:12:48
to be taking and furthermore who
01:12:51
appointed him leader of the free world
01:12:53
you know the decision to have war three
01:12:56
is not his decision he is not the
01:12:58
president united states we did not vote
01:13:00
for him we may think he's heroic we may
01:13:03
think he deserves our support but he
01:13:06
does not get to turn this into war three
01:13:08
for us the american people did not
01:13:11
choose that
01:13:12
and this is where i go back to buying in
01:13:14
the administration and their leadership
01:13:15
what are they pushing for are they
01:13:17
pushing for a protracted
01:13:19
never-ending afghan-style war
01:13:21
in ukraine or are they going to lead the
01:13:24
situation to some sort of negotiation or
01:13:26
cease-fire and i just think if we're
01:13:28
considering the interests the united
01:13:30
states we would not let this decision
01:13:33
purely be zielinski's this guy is
01:13:35
willing to entertain war three that
01:13:37
can't be acceptable to us but what what
01:13:39
what what is his worst alternative i
01:13:41
mean like he's losing his country so of
01:13:42
course he wants to say
01:13:44
the thing
01:13:45
that would scare us into action
01:13:47
potentially right so he has nothing to
01:13:49
lose so he's right
01:13:52
for us
01:13:53
he's not he's using he's he's using
01:13:56
rhetoric to get us to talk about it
01:13:57
which he just won like he you can see
01:14:00
that what he's saying is working yeah uh
01:14:02
because you're talking about it so uh i
01:14:04
think the i think the bigger
01:14:06
question in all of this is
01:14:08
when
01:14:09
uh is the united states willing to draw
01:14:11
a really hard line so there was a
01:14:13
another thing that happened which is
01:14:14
that you know biden essentially said
01:14:15
like you know if they use chemical
01:14:18
weapons we will react sort of in kind
01:14:21
right there was some some version of
01:14:22
that it's a red line basically he said
01:14:24
yes and and then he also said you know
01:14:26
depending on uh you know how they use
01:14:29
nuclear weapons we could theoretically
01:14:31
respond so just the the rhetoric is
01:14:34
ratcheting way way up and that is
01:14:37
surprising to me because i would have
01:14:39
thought
01:14:40
we had a deal in sight just get it done
01:14:42
be pregnant
01:14:46
you're assuming that we have the
01:14:47
influence you assume david that we have
01:14:49
the influence to actually cut a deal you
01:14:51
were saying yourself for the last couple
01:14:53
of months that the u.s power has waned
01:14:56
and that we don't have influence so
01:14:57
which is it i think you're just blaming
01:14:59
it i believe we have the influence to
01:15:01
get facilitated
01:15:04
we lost our influence listen let me give
01:15:06
you an example
01:15:07
we are giving zielinski and the
01:15:08
ukrainians all these incredible weapons
01:15:11
what are the conditions on that if
01:15:13
zielinski is unwilling to make a
01:15:15
reasonable peace deal
01:15:17
do we do we have any conditions and are
01:15:19
giving him these weapons why wouldn't we
01:15:21
insist zelinski listen we support you we
01:15:24
basically are against this russian
01:15:26
aggression you should have the right to
01:15:28
defend your homeland and drive them out
01:15:30
but we also want you to take a
01:15:31
reasonable peace deal if one is
01:15:33
available and we need you to specify
01:15:35
what that is you're
01:15:37
we exercising that kind of discretion i
01:15:38
don't think so i think you're assuming
01:15:41
that biden is blocking this when in fact
01:15:43
it might be that putin is and i believe
01:15:45
you're taking putin's sort of
01:15:47
position here over our own presidents i
01:15:49
think you need to know for a second that
01:15:51
we don't want to have this continue or
01:15:53
escalate you actually think there's a
01:15:54
world in which biden wants to see this
01:15:56
escalate i don't think that that's the
01:15:57
case
01:16:01
david we do not have the influence today
01:16:03
that we did it is no
01:16:04
longer first united states you know gets
01:16:07
to dictate to the world what's going on
01:16:08
here we no longer have to thought about
01:16:10
this who wants to talk to israel putin
01:16:12
wants to talk to macron in france not us
01:16:14
because we're not seen as an honest
01:16:15
broker but but look
01:16:17
we don't have the influence we once had
01:16:19
okay let me explain
01:16:20
i'm not saying we can dictate the
01:16:22
outcome okay but we can push for a
01:16:25
negotiated settlement instead of a
01:16:27
protracted we can lead not bleed okay
01:16:30
chamoth laid it out neil ferguson laid
01:16:32
it out the rand corporation laid it out
01:16:34
these there is a significant chance that
01:16:37
there are definitely actors in the state
01:16:38
department who want to see an
01:16:41
afghan-style situation insurgency play
01:16:44
out in eastern europe that's their goal
01:16:46
okay
01:16:47
now i don't know what biden is thinking
01:16:49
but he has made no statement to the
01:16:51
contrary what have we done to help lead
01:16:53
the situation to a negotiated settlement
01:16:56
name one thing
01:16:58
well i don't think we're in the room
01:16:59
david
01:17:00
but biden is in europe in the room i i
01:17:03
read all their public statements i don't
01:17:04
see anything i don't think they want to
01:17:06
negotiate through the press
01:17:07
with putin i don't think they want to go
01:17:10
up right now i think that says enough
01:17:12
about him what his intent is he's in
01:17:14
poland right he's going to pause he's in
01:17:16
poland we're scaling up our military
01:17:17
presence listen yeah i mean i don't
01:17:20
all i'm saying is look i don't know
01:17:22
exactly what biden is saying or doing
01:17:23
behind closed doors what i'm saying is
01:17:26
that the u.s should be playing a
01:17:27
constructive role to get to a negotiated
01:17:29
cease-fire not indulging
01:17:32
this sort of fantastical thinking that
01:17:34
we can basically perpetrate a regime
01:17:36
change operation
01:17:37
i agree with you on that i agree with
01:17:39
you on that i
01:17:40
i'm worried that there may be a small
01:17:42
strain of that probability in the range
01:17:45
of outcomes here and i didn't think that
01:17:47
before i really thought that okay maybe
01:17:49
we were a little bit on the outside
01:17:50
looking in but it looks like you know
01:17:53
we're pretty close to a deal these guys
01:17:54
will get in a room they'll
01:17:56
you know chop it up and uh it'll be done
01:17:59
and uh instead honestly if you just look
01:18:01
at the headlines and the rhetoric and
01:18:03
the words from all these three leaders
01:18:05
in the last uh ten days it's been
01:18:08
it's been in the other direction and so
01:18:09
you have to wonder what is the point of
01:18:11
all of this right now otherwise it could
01:18:12
be crescendoing like brad said
01:18:15
you know i i i i listened to blinken
01:18:18
over the weekend
01:18:19
and he talked about what i think he
01:18:21
defined what is this new doctrine of
01:18:23
economic statecraft he said our
01:18:24
objective is we have the power to impose
01:18:28
overwhelming costs on our target okay
01:18:31
economic costs and he said our cause
01:18:34
putin's actions are remembered as a
01:18:36
strategic failure
01:18:38
not regime change that's what's within
01:18:41
our control that is very different
01:18:45
bush wanted regime change in iraq and we
01:18:49
executed it through the pal doctrine of
01:18:51
overwhelming military force i think that
01:18:53
this is a doctrine of overwhelming
01:18:55
economic force that is meant to not only
01:18:58
signal to the russians but every other
01:19:00
rogue dictator in the world if you go
01:19:02
rolling into your neighbor
01:19:04
uninvited you can count on the fact that
01:19:06
there's going to be massive economic
01:19:07
sanctions because
01:19:09
our our military deterrence is no longer
01:19:11
a deterrent
01:19:13
everybody knows we're not going to go
01:19:14
defend taiwan everybody knows we're not
01:19:17
going to send our military into ukraine
01:19:19
so we have to demonstrate
01:19:21
that we actually have economic resolve
01:19:23
not these poo-poo sanctions we've been
01:19:25
having around the world for the last 20
01:19:27
years and if that is the lasting impact
01:19:29
on this i think you're right you know
01:19:31
that that we turned this into an
01:19:33
economic nuclear weapon yeah
01:19:37
better than sending our kids
01:19:39
around the world to get killed i think
01:19:41
you're absolutely right and i think tony
01:19:43
is very smart to say what he said
01:19:45
the um
01:19:46
the one thing that i would want though
01:19:49
on top of that tell me if you agree is
01:19:51
just to ratchet down our rhetoric which
01:19:53
we can control and maybe to to i mean
01:19:56
why not say that listen we're willing to
01:19:59
put these sanctions on the table we're
01:20:00
willing to basically reinstitute
01:20:03
economic ties with russia if we can get
01:20:05
to a satisfactory outcome well you don't
01:20:07
want a reward
01:20:09
i would say is we're making a big
01:20:10
assumption to say that there's not back
01:20:12
channel diplomacy going on from the
01:20:14
israelis the turks the the french you
01:20:17
know having those conversations on our
01:20:19
behalf right like i i don't i honestly i
01:20:22
i don't know that there that's a high
01:20:24
probability that we're not sending those
01:20:26
signals but to your point i i just don't
01:20:28
know i don't know i don't know
01:20:30
i
01:20:33
but here's what i would say is look i
01:20:34
can only judge from the public
01:20:35
statements and i think there is signal
01:20:37
in these public statements and this the
01:20:39
statements are all
01:20:40
one way there is no olive branch it's
01:20:43
all it's all basically about escalation
01:20:46
just like in january before the war what
01:20:49
were the state department's statements
01:20:51
about the situation they said that
01:20:53
nato's door is open and will remain open
01:20:55
even though they told zielinski in
01:20:57
private that he would not be joining
01:20:58
nato okay that was an astounding
01:21:01
revelation that came out this week on
01:21:04
the fried zakaria show number two
01:21:06
lincoln was saying
01:21:07
that there there was no change in the
01:21:09
american position and there would be no
01:21:10
change they said these are all public
01:21:12
statements that the u.s would never
01:21:14
recognize the russian annexation of
01:21:16
crimea never
01:21:18
you know he said that we went into these
01:21:21
peace talks to represent our core values
01:21:22
there's no change on that so in other
01:21:23
words it's been the position of the
01:21:25
united states to be hard line with
01:21:28
russia to basically engage in no
01:21:30
compromise whatsoever
01:21:32
and uh
01:21:33
it's basically double down it's a double
01:21:34
you assume you assume david you don't
01:21:36
know those are the public statements i
01:21:37
know but you're assuming that there's no
01:21:39
back channels going on and just to just
01:21:41
i wanted to make one quick point
01:21:43
which was
01:21:44
you know what if we offer to take the
01:21:46
sanctions off and then we are training
01:21:48
putin that these kind of misadventures
01:21:51
get him something don bass etc and that
01:21:54
the sanctions roll off so the isn't
01:21:56
there a possibility chamath that if we
01:21:58
don't keep the sanctions up we're
01:22:00
actually rewarding his behavior i'm a
01:22:02
huge guy look i've been the first person
01:22:04
in the front of the line on sanctions i
01:22:06
thought this was the most brilliant
01:22:09
approach to this whole thing and i still
01:22:11
believe that sanctions work and i think
01:22:13
that this will [ __ ] that country what
01:22:16
i'm saying though is that there are
01:22:17
these moments where instead of then
01:22:20
sticking to the rhetoric that tony
01:22:22
talked about what he said i don't know
01:22:23
brad where tony said this uh this
01:22:25
weekend but like sticking to that
01:22:27
there are these added flourishes that i
01:22:29
think are unnecessary so what i mean by
01:22:31
that is the talk about you know us
01:22:33
reacting
01:22:34
uh or retaliating for the use of
01:22:36
chemical weapons biden made a campaign
01:22:38
vow i don't know if you guys remember
01:22:40
this about nuclear weapons where you
01:22:42
know he was very clear that you know it
01:22:44
is a mechanism to demonstrate that this
01:22:47
deterrence exists
01:22:48
and instead he actually
01:22:51
caved and instead he put out this
01:22:53
carefully worded statement which kind of
01:22:54
walked back the campaign valve earlier
01:22:56
this week and i'll just read it to you
01:22:58
i'll just read what the wall street
01:22:59
journal said it said by president biden
01:23:01
stepping back from a campaign vow has
01:23:03
embraced the long-standing u.s approach
01:23:05
of using the threat of a potential
01:23:06
nuclear response to deter conventional
01:23:09
and other nuclear dangers in addition to
01:23:11
nuclear ones during the 2020 campaign
01:23:14
biden promised to work towards a policy
01:23:15
in which the sole purpose of u.s nuclear
01:23:19
the nuclear arsenal would be to deter or
01:23:21
respond to an enemy nuclear attack
01:23:22
instead
01:23:24
now it holds that the fundamental role
01:23:26
of the nuclear arsenal will be to deter
01:23:29
but that it leaves the opening to
01:23:31
respond and use it in extreme
01:23:33
circumstances so these are big changes
01:23:35
and if if our whole goal is to just
01:23:38
focus the surface area to an economic
01:23:39
set of sanctions
01:23:41
these are somewhat unnecessary would we
01:23:43
all agree we don't need to talk about
01:23:44
changing our nuclear policy yeah biden
01:23:46
was right on the campaign trail the
01:23:48
united states of america should never
01:23:50
use nukes except if nukes are used on us
01:23:53
come on we know that yeah and we're
01:23:55
talking about changing that now that's
01:23:57
insane
01:23:59
look it shows that there there's an
01:24:01
influence
01:24:02
in our government our state department
01:24:04
of certain hardline elements who want
01:24:06
this very tough policy that includes
01:24:09
destabilizing the russian regime and
01:24:11
maybe toppling putin i'm just saying
01:24:13
that objective is not worth all the
01:24:16
existential risks that we're now facing
01:24:19
all right do we want to touch on the ccp
01:24:21
tax cuts we want to wrap we're at 80
01:24:22
minutes
01:24:23
i mean the the ccp tax cuts harkens me
01:24:25
back brad you can react to this because
01:24:27
you lived it with me
01:24:28
2018 2018-19 i'll say it again we were
01:24:31
in this unique moment where
01:24:33
you know we were not sure whether there
01:24:34
was runaway rampant inflation and in q4
01:24:37
of 2018
01:24:39
the fed basically said okay you got us
01:24:41
you know the boogeyman exists we're
01:24:43
going to go tame inflation and they ran
01:24:45
forward and raised rates
01:24:48
and lo and behold the chinese economy
01:24:50
turned over in q1 of 2019
01:24:52
we had like a you know kind of a blippy
01:24:55
little recession
01:24:56
um and we had to overcome it because
01:24:58
china became stimulative now here we are
01:25:01
again
01:25:02
we're worried about this inflationary
01:25:03
boogeyman
01:25:04
and the chinese government basically
01:25:06
extended these tax cuts increased the
01:25:09
tax cuts and essentially said we're
01:25:10
going to be very stimulative
01:25:12
in the economy especially through the
01:25:14
back half of the year
01:25:16
now china again is a massively export
01:25:19
driven economy right so
01:25:22
the reality is that as goes china so
01:25:24
goes the rest of our economies and so i
01:25:26
think that it's a setup where how can
01:25:28
the united states be under so much
01:25:30
inflationary pressure where china is
01:25:32
effectively telling you that we are in a
01:25:34
um
01:25:36
in a contraction and a recessionary
01:25:38
period and so if that's where china is
01:25:41
there's a risk that we may already be
01:25:43
there or entering that
01:25:45
and so i think it's a little um you know
01:25:47
uh
01:25:48
contributing
01:25:49
to you hit two really important points
01:25:51
jamal number one which we didn't get to
01:25:53
earlier i tweeted a few weeks ago the
01:25:55
fed's probably behind the curve on
01:25:57
recession not inflation
01:25:59
right we have massive demand destruction
01:26:01
going on right now on the u.s economy
01:26:03
massive the producer define what that
01:26:05
means brad define what that means so i
01:26:07
mean if you just think about what does
01:26:08
six dollar gas mean what does no stemi
01:26:10
checks mean what is the fact that you
01:26:12
actually have to go and get a job again
01:26:14
mean you know we're we're rolling back
01:26:16
trillions of dollars off the fed balance
01:26:18
sheet i'll tell you what it means is
01:26:20
that people can't spend as much money
01:26:22
just the increase in the 30-year
01:26:24
mortgage means you're buying power in
01:26:26
december four months ago
01:26:28
to buy a house and you if you could
01:26:30
afford 1200 bucks a month that buying
01:26:32
power bought you a 350 000
01:26:34
house today it buys you a 295 000 house
01:26:37
people's ability
01:26:39
right to have money to spend money is
01:26:42
getting crushed so i think we are going
01:26:44
to face an economic slowdown if you look
01:26:46
at the pmi so this was the inflation
01:26:49
read in january
01:26:51
little people didn't really notice it
01:26:54
pmi in january came in at 0.2 versus the
01:26:58
consensus
01:26:59
estimate of 0.6 that means the producer
01:27:03
level of inflation was meaningfully less
01:27:06
than we expected
01:27:08
if you look at consumer confidence it's
01:27:10
plummeted one of the four biggest
01:27:12
drawdowns over the last 20 years retail
01:27:15
sales in uk this morning crashing
01:27:17
consumer confidence in the uk crashing
01:27:19
the chinese government sees this we're
01:27:21
we're not surprising look at the what's
01:27:24
going on in the world with energy prices
01:27:26
we've never had oil over 120 bucks and
01:27:28
not gone into a recession we're facing a
01:27:31
global slowdown that will have big
01:27:33
implications for inflation big
01:27:35
implications for rates but
01:27:38
china sees this coming and says we're
01:27:40
going to get ahead of this we've got a
01:27:41
people's congress in november we've
01:27:44
promised him five and a half percent gdp
01:27:46
growth three trillion of that is export
01:27:48
driven that means if europe and the
01:27:50
united states catches a cold they catch
01:27:52
the flu okay so they have to do
01:27:55
everything in their power this is why
01:27:57
they're not going to supply the russians
01:27:58
with weapons right because it's
01:28:00
economically assassin assassinating
01:28:03
themselves
01:28:05
right so we have this interconnected
01:28:06
world this idea that we're
01:28:08
de-globalizing
01:28:09
what we do doesn't impact anybody else
01:28:11
like that ship has sailed a long time
01:28:13
ago and the chinese see this
01:28:16
that's why i think there's also a
01:28:17
probability by the middle east this
01:28:19
summer the fed in the united states is
01:28:22
saying we now see a balanced risk
01:28:24
between growth and inflation
01:28:26
saks let's get you in on this just as we
01:28:28
wrap here the chinese communist party
01:28:31
premier talked about tax costs and this
01:28:34
is a quote fertilizer applied directly
01:28:36
to the roots of the economy tax rebates
01:28:38
look like reductions but actually are in
01:28:39
addition today you get back tomorrow you
01:28:41
get more in returns
01:28:43
does this mean the united states uh
01:28:45
people will go back and get jobs because
01:28:46
they need to have more money and that
01:28:48
maybe we should be looking at you know
01:28:50
tax cuts at some point
01:28:52
listen jkl i think we got big problems
01:28:54
here at home in the united states brad
01:28:57
and chamoth they've laid out these
01:28:58
gigantic economic risks that are facing
01:29:00
the country
01:29:01
you know i tweeted at the beginning of
01:29:03
the year january 24th the president's
01:29:05
main job is to ensure peace and
01:29:07
prosperity and bind's popularity was
01:29:09
already plummeting i think this is when
01:29:10
his poll numbers were at 38
01:29:12
but if he gets us into war and recession
01:29:15
he ain't seen nothing yet
01:29:17
this war the longer it drags on the
01:29:20
longer it basically can spin out of
01:29:22
control and become something worse that
01:29:24
sucks us in the longer it creates the
01:29:27
risk
01:29:28
of basically causing a recession in the
01:29:30
united states
01:29:31
we need the american we need the the
01:29:34
blind administration to help try and
01:29:35
lead
01:29:36
to a better outcome here instead of
01:29:38
ratcheting up the rhetoric all right
01:29:39
folks there you have it that's your all
01:29:42
in podcast for this week
01:29:44
thanks so much to brad kirstner for
01:29:46
joining us and filling in for the sultan
01:29:48
of science bg thanks bro and a lot of
01:29:51
great announcements here brad will also
01:29:53
be joining us for the all in summit
01:29:55
we're about to wrap up tickets uh we've
01:29:57
announced a bunch of great speakers uh
01:30:00
for the event may 15 16 and 17 in miami
01:30:03
uh you can just do a search for the all
01:30:05
in summit we have uh given out uh we've
01:30:08
sent 200 emails to people who asked for
01:30:09
scholarships and 100 of them have taken
01:30:11
the tickets 500 of the 650 tickets or so
01:30:14
are accounted for we'll be wrapping up
01:30:16
registration in the next week or two and
01:30:18
we look forward to seeing you all at the
01:30:20
new world symphony in south beach do you
01:30:23
have any announcements of people who
01:30:24
else is appearing oh my lord we have
01:30:26
great announcements keiser boy is coming
01:30:28
joe lonsdale is coming nate silver is
01:30:30
coming nate silver i love nate silver
01:30:32
well we decided chamoth we would have
01:30:34
people do 15 uh to 20-minute
01:30:38
ted-style talks like position papers and
01:30:40
so
01:30:42
who else do we have doing that uh
01:30:45
tim urban of weight but why who's a
01:30:47
brilliant tech speaker and writer nate
01:30:49
silver's gonna do that and then uh
01:30:51
antonio is coming he was just on uh
01:30:53
uh
01:30:54
and uh he was just on a rogan show and
01:30:57
so we're gonna have these like 20-minute
01:30:59
uh kind of hits then the besties will
01:31:01
sit with them we'll do those back to
01:31:03
back
01:31:04
kimball musk is going to come and talk
01:31:05
about his uh dao that he's doing for
01:31:07
non-profits brad we're going to talk
01:31:08
about what topic so we're collecting all
01:31:10
this talent and then we'll figure out
01:31:12
what positions they're going to play in
01:31:13
the show and what the themes will be but
01:31:15
the themes will match what we've been
01:31:16
talking about here and we don't want to
01:31:18
pre
01:31:19
uh set the themes six or seven weeks
01:31:21
seven weeks out from the event because
01:31:22
we don't know what the world will look
01:31:23
like then uh and then free burke said he
01:31:25
wanted to do a position paper and
01:31:26
actually give a 20-minute talk so
01:31:27
bessie's will have that ability and
01:31:29
besties will start the event and end the
01:31:31
event tons of different speakers
01:31:33
rotating in and out talking about the
01:31:34
most important topics of our time but i
01:31:36
would like to have peter there can you
01:31:38
get peter thiel to come he's maybe the
01:31:40
most iconoclastic please please
01:31:42
i'm just not i have to get over my
01:31:45
uncertainty that this whole conference
01:31:47
thing is really a grift
01:31:48
it's not a great we're putting all the
01:31:50
money is going back into the event and
01:31:53
we gave 200 scholarships there would be
01:31:55
no profit from the other there needs to
01:31:56
be a really nice swag bag and i i think
01:31:58
it was already at 600 dollars a person i
01:32:00
just spent three or four hundred letters
01:32:02
what is the material of the hoodie all
01:32:04
right
01:32:05
if
01:32:06
it's gotta be a cashmere hoodie if
01:32:07
that'll be on the ground hundred dollars
01:32:10
for people need to be able to buy up to
01:32:12
the to the special hoodie brad i just
01:32:14
spent six hundred thousand dollars per
01:32:16
gift bag for 600 gift bags okay it's
01:32:18
like 400 grand in gift bags and chamath
01:32:20
wants to put a six thousand dollar so
01:32:23
that i just wanted to know what the
01:32:24
material was of the hoodie in the bag
01:32:26
that's all i'm just asking a question
01:32:27
this is my life brad i am busting my ass
01:32:29
to put this event on and
01:32:31
complaining about the gift bag saks is
01:32:33
complaining on me making a dollar from
01:32:35
it and free berks having a panic attack
01:32:37
that we don't have enough great speakers
01:32:39
and i'm doing all the work that's my
01:32:41
whole [ __ ] life i appreciate you j
01:32:43
kell i know you did say some nice stuff
01:32:44
to me you did say some nice stuff right
01:32:46
appreciate that
01:32:47
i'm bored with you getting a fee for
01:32:49
your hard work yeah i don't need to give
01:32:51
you like an hourly wage you know 15 an
01:32:53
hour no i'm not your weight slave david
01:32:55
sucks
01:32:56
i'm working hard here
01:32:58
but i'm working hard but i i just wanted
01:33:00
to be appreciated i don't think you
01:33:02
should have like a cotton blend is my
01:33:05
i think
01:33:08
by the way brad do you have any thoughts
01:33:10
on the sushi is there should we be using
01:33:12
brown rice and not the two line cloth
01:33:14
tuna no just make sure there's golden
01:33:16
brown gold leaf on the sushi
01:33:18
no literally we're spending i think for
01:33:22
300 or 400 000 per party it's over a
01:33:25
million dollars in parties and i'm
01:33:27
talking to talent bookers about serious
01:33:29
talent coming to perform drake can you
01:33:31
get drink how about dueling that's three
01:33:33
million dollars do a lipo two million
01:33:35
dollars in two million dollars that's
01:33:37
what the dungeon i got what does that
01:33:38
mean
01:33:39
how much is dojika she's great i think
01:33:41
those are all seven figures i would like
01:33:43
to anyway what i'm trying to do
01:33:45
worthwhile
01:33:47
i mean that would make it an incredible
01:33:48
party oh god i mean i really would like
01:33:50
to get started how much is drake again
01:33:52
two million dollars i heard two to three
01:33:53
million
01:33:54
and get drake
01:33:56
yeah good idea yeah yeah yeah cancel the
01:33:58
bags
01:33:59
give it all the drink
01:34:01
so you guys are saying
01:34:04
and all the work i do i should take two
01:34:06
million dollars and hand it to [ __ ]
01:34:08
drake yes yes
01:34:11
drake is more valuable than you 25 years
01:34:14
of working on events and media brad and
01:34:17
these these are my friends who are like
01:34:19
take the 2 million drinks you can put in
01:34:21
your pocket and finally make a profit on
01:34:23
your work and just hand 2 million in a
01:34:25
bag
01:34:26
to
01:34:27
drink we don't need the bags forget
01:34:28
about this one guys can i get a plane
01:34:30
i'm
01:34:32
do we get to work with drake on which
01:34:33
songs he's he would sing i think
01:34:36
he does like a medley of like three what
01:34:37
i would like to do is have three songs
01:34:39
for two more come on i think it's
01:34:41
basically like a hundred thousand a
01:34:43
minute i think that's what you're in for
01:34:44
a hundred thousand per minute just 20
01:34:46
minutes
01:34:47
that seems egregious no i mean these
01:34:50
guys get paid when when i hired snoop he
01:34:52
did like 20 songs for me i mean it was
01:34:54
unbelievable
01:34:56
two or three hours
01:34:57
three hundred
01:34:59
that's because he forgot he was there
01:35:01
yeah he had a great time oh my god man
01:35:03
he was blowing this joint that was so
01:35:06
powerful that i was 10 feet away and i
01:35:08
got stoned i mean
01:35:10
it was like
01:35:11
he walked in it was like i remember
01:35:13
it was like 20 super bowl shows
01:35:16
good stuff all right everybody love you
01:35:18
besties love you brother
01:35:21
we'll let your winners ride
01:35:24
rain man david sacks
01:35:29
[Music]
01:35:51
we should all just get a room and just
01:35:53
have one big huge orgy because they're
01:35:54
all just useless it's like this like
01:35:56
sexual tension but they just need to
01:35:57
release
01:35:58
[Music]
01:36:02
your feet
01:36:09
[Music]
01:36:14
oh
01:36:16
[Music]
