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I'm recording yeah how's my hair Nick do I look ridiculous and should I wear a hat oh my God I went to the
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teaching Salon in for a haircut a few days ago the teaching Salon ten dollars
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you got ten dollars worth of value my neck was literally bleeding the guy cut my neck like six places it's diagonal on
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the back and he was stoned the whole time again
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why would you possibly do that there was nothing available I told my wife I'm like get me any hair appointment
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anything I just gotta get my haircut in so long and then she's like oh I got you an appointment at the teaching school oh I'm like that's
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high-end all the hair salon stylists go there must be awesome this guy butchered me guys worth over 100 million
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he got a 10 haircut ten dollars and then he's like what would you like to tip you shouldn't be a Barber get a
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new career [Music]
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tonight
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love you guys all right everybody welcome back to the
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all in podcast episode 141 chamath polyhapatia has gone missing
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somewhere in the Mediterranean we've sent some search crews out we got some beacons we're trying to find him but he
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is not here today there will be no conspicuous consumption or discussion of
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truffle season or wine but instead we went to the BG squared if you got to come to all in Summit 2022 one of the
00:01:44
highlights of the event was having two Bee Gees Brad gerstner and Bill Gurley
00:01:50
on the Pod so we thought for All-Star summer we would bring in some All-Stars here welcome back to the Pod fifth
00:01:57
bestie Brad gerstner and Bill Gurley how are you sir I'm doing great thanks for having me on Bill you you don't do a lot
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of press you don't do a lot of pods and I know you're on a lot of boards but
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you're not part of benchmark's next fund so people are wondering are you retiring what are you up to I know you're still
00:02:16
got all these boards you're on but what's Bill Gurley up to these days yeah I appreciate that I'm as you mentioned
00:02:21
I'm on nine Benchmark boards still so I'm working with those and and doing the classic work that I've been doing my
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whole career second thing is I've I've started I've done a handful of Angel deals about 1
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100th the um the frequency of Jay cow here but but a few so dip in my dip in
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my toe in the water and then third I've been working hard on on a book I've got a co-writer we've
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been doing a ton of research we've got a proposal ready to go in an agent we're going to go out to publisher soon oh
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well you should just do Harper business I'll put you in touch with Hollis that's the winning publisher that's the best business publisher in the world and uh
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perfect Harper Collins business the world's greatest publisher world's greatest
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publisher um yeah it's it's a further development of
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a of a speech I gave at the University of Texas business school about how to
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Chase and succeed in your dream job oh nice oh so like career advice letter
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to a younger girly is that what this is a letter to a younger Builder I didn't want to do like oh here's my you know
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thoughts on Venture Capital that didn't feel right this is some I'm more passionate about and I so might I hope
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will be impactful to a lot of people I've already gotten quite a bit of feedback from people that have been moved by the the the shorter version on
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the uh on the presentation well when you when you look on your career unpack it for a minute
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um what do you think the things you got right where or the things you know you might change
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in terms of your career and and being happy and finding your passion yeah I do
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feel super fortunate that I was able to do you know my my dream job for over two
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decades and I love Innovation I love betting and gambling and I love the combination of
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being able to Think Through markets and disruptions and and to be able to place bets and all those things are super
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exciting things I got right um studying history which is something I
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talk a lot about and we'll be talking about in the in the book like knowing who the the Patriarchs were of your
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industry and knowing what they thought I think is super powerful in any endeavor and then networking you know just like
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crazy which I think is actually easier today so those are a couple of the themes that we develop networking and studying
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history specifically you and I have had many conversations about biographies we both share a passion for those top
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biographies not of business people but that had an impact on you and then I'll go around
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the horn top biographies that had an impact on you preferably ones that are in business but if it is business I guess it's okay one that actually led to
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me developing this theme was was learning more about Danny Meyer's Journey who is
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the renowned restaurant owner in New York City and the founder of Shake Shack but he had a career where he was in
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sales he was about to go to law school and his I think his uncle told him what
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are you doing you know you want to be a restaurant owner and he stopped that day took a job at 10K a month or 10K a year
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he took like a wow 90 pay cut and started studying and that gets into
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the History part but he just started studying and obviously the rest is history for those of you that know about
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Danny Meyer setting the table is the book yeah that is the book Union Square Cafe Grand
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Mercy Tavern amongst some of his great restaurants going around the horn here Friedberg you have a favorite biography you read
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or something that impacted you young in your career and then do you feel like you figured it out and
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what did you what would you change about the early part of your career so the same two questions that's a three very loaded questions I don't know how to
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pick which one you want to answer that one I will tell you when I was running my company in 2011.
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yeah the Climate Corporation I read the Walter Isaacson uh biography of of Steve Jobs yep and he actually profiled a
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number of jobs as management techniques my only operating role prior to that was working at Google so that was the only
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management experience or exposure I had had and then reading about how jobs ran his
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management team it actually changed my behavior going into the office I
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I took a very different approach and I saw the results almost immediately what was the primary thing that impacted you
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well first of all like having the Cadence and the and the directness
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with the team engaging the team fully in discourse immediately making decisions getting everyone to commit moving
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forward very quickly I was a first-time CEO so I never had a good Mentor and reading those segments
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of jobs as management style in his biography was just a really great tool to add to my emerging toolkit on how to
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be a manager and how to be a CEO and how to run a company uh that was big for me
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I could rehash everything about early on in my life I don't think that's a good use of Walter but yeah isaacson's book
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on Elon coming out in a couple of weeks which should be interesting I I sat for
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an interview with Walter for that one so I'm interested to see how that turns out yeah I did too I I was asked to I didn't
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uh yeah we were asked to you didn't do it no I did it I did it you know I don't I didn't ask to do it I got asked you
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know if I would give some anecdotes I think sax also got asked if he would do some anecdotes so I think it's going to be pretty good and
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Walter was hanging around he's been putting passages out on Twitter right yeah I mean he's such a good writer and
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just watching him you know David and I were at Twitter for a little bit and you know just being he was hanging out he
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was like you know in the corner of the room like participating in a lot of these meetings yeah so he was there
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basically during the whole transition I think that was going to be the ending of the book is you know he had to cut it
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off at some point but he was there for the first month of the transition you have the Twitter takeover and for rocket
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launches and everything in between so he I mean watching his biography technique is uh it's pretty intense I mean he
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spends a long time with the subjects and you know just taking notes and talking
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to everybody around him so he would you know peel off sacks or peel me off hey uh could I ask you a question about this
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or ask a question of this what do you think of this speaking of books I'm in the rare position of needing your advice
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oh okay maybe sort of a compliment okay Harper
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College I'm going to do a book about how to create run scale operate software
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companies which will be an extension of the blog I've been running for a couple of years which I haven't really been
00:09:02
active on mainly because I've been using that time for this pod but I was writing it a pretty good clip until we started
00:09:09
doing all in pod so I want to get back to putting that together yes and I could go chapter by chapter you know here's
00:09:15
how you should think about marketing here's how you should think about sales here's how you think about Finance metrics and so on but I'm not sure
00:09:23
that's the best way to present the material so yeah do I just write the book that I think it should be or do I
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work with a publisher on what the business book should be and they'll kind of give me the guidance so it's a great
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question you are in a unique position where you
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know you're successful and you have an audience for the book and success for you is for you know great Founders to read the book and for it have impact as
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opposed to somebody who's an author who just wants to be published right so you have a different reason to do this
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I think you should write the book you should decide who you want the audience to be and what you want to get out of
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the book and you should forget about Publishers in the whole grand scheme of things then when you write the treatment
00:10:03
you write the first five chapters or so then you can bring it to a select group of Publishers you can get an agent I can
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introduce it to two or three agents there's you know top two or three in this field and um I think what you
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should do is the business advice is out there right and the techniques are out
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there but what you have is you have War Stories so the technique I used in my book Angel was to you know talk about
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techniques and investing that I had learned from other folks including Bill Gurley and Michael Moritz or whatever but then I would give my anecdotes
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things I had experienced personally and what that does is it makes the examples let people really
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get some narrative out of the book and so the lesson combined with the actual practical experience that's kind of the
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magic of these business books I think do you have a favorite biography yourself sex either business or
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non-business I don't know if they I read a lot of business biographies
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one business how to book hmm back in the PayPal days you know I
00:11:05
didn't have any real business education good to Great do you remember what it was it was good to great yeah I mean
00:11:11
that was the seminal book at the time yeah so I read this book and literally one chapter was on how you should stick
00:11:19
to your core idea and then the next chapter was about how you should be flexible so I'm like well
00:11:24
both of these ideas are right situationally yes but so how do you decide so right I came away from the
00:11:30
book thinking this isn't really going to help me because it doesn't give you what you really need which is what are the
00:11:36
specific situations in which you should apply a given principle hmm yes and I kind of came away from like
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thinking that business self-help books just weren't that they're too theoretical and weren't that helpful
00:11:48
well then this is where biography has really become helpful because you actually get to see why the you know
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technique was deployed Brad do you have any business bios that you uh related to that about sex sex do not write a how-to
00:12:00
book yeah right write a book about your visceral experiences right that just you
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happen to teach people how to along the way right you have a lot of you know I I just think the story is is powerful
00:12:18
unbelievable is it calling Zoom bombing when you just
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zoom
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hold on
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thank you to the starlink team yet again coming to the rescue
00:12:41
the All-Star Game no no I just wanted to come and say hi guys you have to hang this is the Black Mirror version of The
00:12:48
Brady Bunch right here what happened are you lost at sea we tried to get you we
00:12:53
will find you the yacht was missing the dinghies missing we sent out search Crews hold on your camera angle you look
00:13:00
like Tiger Wood in this shot a guy a guy that I work with each month through the Michael bridges of the all in podcast
00:13:06
and that you haven't missed a podcast since the beginning so then that's the only reason why
00:13:11
it's in your head yeah yeah it's in my head love you guys uh enjoy the podcast I'll
00:13:18
talk to you later I'll watch the Iron Man streak continues
00:13:24
he's drunk that was a drunk yeah remember he's nine hours ahead Jake how
00:13:30
to answer your question yes please Teddy Roosevelt man in the arena Phil
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Knight Alexander Hamilton those three for me that like the takeaway the the red
00:13:41
thread that connects them is do that matters do stuff that matters your life is short get in the arena major in
00:13:48
the majors but do stuff that matters so they all were Inspirations for me both in terms of how I organize my own life
00:13:55
but also how I think about investing fantastic and I'll give you a couple of ones that you may not have thought of
00:14:00
something like an autobiography the biography of Akira Kurosawa the famous film director absolutely outstanding
00:14:07
great recommendation I'm gonna I actually wanna read that that's a great question I'll read that who wrote it
00:14:13
Akira Kurosawa it's an autobiography oh it's his autobiography autobiography born standing up Steve Martin Bill
00:14:19
girlian talked about this one and it really is fantastic I've actually listened to it
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twice um and that's one of the great things about these biographies you listen to him a second time here's another one sax this is critical for you
00:14:32
on writing [Music]
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Stephen King oh Stephen King huh on writing might be top five for me of all
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time and he really goes into like the story of Harry he wrote like a small treatment of
00:14:50
Carrie he was a math teacher he threw it in the garbage because he was so frustrated with his wife sees it in the garbage she reads it she says this is
00:14:56
incredible you should keep writing it he writes it he sells the book for ten thousand dollars he's getting paid like nine
00:15:02
thousand dollars as a teacher he can't quit his job and back in the day they used to sell your hardcover rights and your paperback
00:15:09
rights separately if your hardcover went well then you would do a paperback and go Mass Market
00:15:15
he gets a call they sold the rights to the mass Market book four hundred thousand dollars the paperback
00:15:21
this agent gets on the phone and says it's forty thousand dollars and he thinks he hears forty thousand he says well forty thousand dollars that's
00:15:27
incredible that's four years I might be able to quit my job as a teacher because I know it's four hundred thousand it says okay so forty thousand dollars
00:15:34
divided by nine it's like maybe it's even closer to five years he says no you're getting four hundred thousand he
00:15:39
can't believe it and that was basically the story about Stephen King but it'd be great great to listen to prior to
00:15:45
writing a book he's uh absolutely it's it's super amazing most people don't
00:15:50
know this fact but King wrote The novella that became Shawshank absolutely
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yes he's got a lot of those you didn't know it and then the Malcolm X biography is
00:16:00
amazing too if you haven't read it so those are just non-traditional ones of people following their passion one of
00:16:07
the things about it is the extreme effort and the Decades of perfecting a craft that I found super appealing about
00:16:12
these nothing happens uh easily in your honor Jay Cal the rest of the episode seven seconds Seven Samurai by the way
00:16:20
if you're a startup founder entrepreneur or CEO best film to watch because
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well yeah I mean there is none of those there is no giving up
00:16:31
you do what it takes and you persist I think persistence is one of the biggest I've talked about it's one of the
00:16:37
biggest predictors for success and there's a character that emerges
00:16:43
once you're facing challenge this film does such an incredible job of demonstrating the essence of that
00:16:49
character yeah um I think it's also a similar character that's needed in his biography you'll see that a number
00:16:55
of the actors in that film occur in other films by
00:17:02
Kurosawa uh do you know who that star is though yeah exactly
00:17:08
it was his viewers he was he was score to De Niro Scorsese yeah sort of modeled
00:17:16
his relationship with De Niro after Kurosawa and George Lucas Kurosawa Francis Ford Coppola were all Disciples
00:17:22
of kurosawas you know incredible well the um seventh Samurai was remade
00:17:28
as a western the municipant seven with I think Steve McQueen and Yul Brenner yep
00:17:34
a lot of Chris always movies were remade as westerns yep it just works pretty well and they were they were all scored
00:17:40
by any Amore County a lot of them by you know Marconi which I was listening to in the coal plunge I
00:17:45
started doing the call play oh my God I it's I would just like to say I'm just a hearty you this is such a random
00:17:50
show we have nothing well we'll get there but I mean I just want to start the podcast by saying you today is there anything else that's going to be
00:17:56
talking about on the show I'm like I don't think so Joe Rogan and all these who said in order to be like
00:18:02
successful you have to jump in a coal Plunge because now I've done it four times out of the last like I'm doing it
00:18:08
every other day and they're right I feel like a superhero after I do this anybody doing cold plunge here besides me and
00:18:14
Tremont nobody occasionally well I mean I was in Mexico occasionally and they had this
00:18:21
this cold plunge thing and I we did it every day that we were there at the hotel but then we came back well it you get
00:18:28
this endorphin run chat uh Rush afterwards it's incredible and then afterwards now when I go to the gym I
00:18:34
only do like a 10 minute ice cold shower afterwards like it's critical to like and it feels amazing you feel like so relaxed after you I did I did six I did
00:18:41
five or six minutes at 58 degrees I've been lowering it two degrees a day but the first day I did it at 43 or 44. for
00:18:49
like 45 seconds and my body started shaking I got hypothermia instantly Bill you've done it you've done this nonsense
00:18:54
occasionally Jason I'm still not convinced there's any medical uh benefit too but
00:19:00
you guys shoot it's very trendy it's very true
00:19:06
I have an inference so I'm doing inference
00:19:18
my last week has been failure completely you just sit here and you take your bike
00:19:24
into the cold plunge and then you ride it into the infrared Sada and then you go play Pickleball yeah okay and you're
00:19:30
wondering why everybody hates us um lifestyles of the abhorrent
00:19:37
one percent all right listen a couple other rentals that are Kurosawa films
00:19:42
are worth watching actually he did he did versions of Shakespeare which I think is really interesting absolutely
00:19:48
so Kurosawa took on Shakespeare and then Hollywood kind of adapted Kurosawa but a couple of really good ones thrown up
00:19:54
blood was kurosawa's adaptation of Macbeth and then Rand was his adaptation
00:19:59
of King Lear two of my favorites worth checking out Hidden Fortress also Grant in Fortress became the basis for Star
00:20:06
Wars or it was a big influence yeah the R2D2 and c3p characters C-3PO characters
00:20:12
who are like sort of telling the story are in the Hidden Fortress you can see the direct descendants here but for me
00:20:17
the genre I love for Curacao is his film the wah era stray dog
00:20:23
high and low I mean these are exceptional films and high and low I wanted to remake when I was thinking
00:20:28
about being a film director and it turns out Spielberg owns the rights high and low incredible story but we digress here
00:20:36
you got you just one one last anecdote oh no the TV Show Breaking Bad was
00:20:42
inspired by ikiru the Kurosawa film yes about a guy who finds out he's gonna die and when he finds out he's gonna die
00:20:47
suddenly he becomes one of my true self like with this true like nature comes out so an incredibly poignant film that
00:20:55
obviously the extraordinary uh TV Show Breaking Bad yeah the curo is um means
00:21:02
to live in Japanese and this is the story of uh somebody who has basically lived a modest amid it's somebody who
00:21:08
lived a midlife but then at the end decides he wants to do something meaningful with his little pittance of
00:21:13
money and to make an impact on the world and so he decides he's going to take a a parking lot that's disgusting and filled
00:21:20
with garbage and make it into a a kid's playground so people can enjoy their life it is and
00:21:27
it's also it's um as an old man so in a
00:21:32
way this parallels their careers and trying to do something important
00:21:37
there's another one I live in fear so those two to live and I live in fear are about aging and getting old the genre if
00:21:43
you don't know Kira korsawa you know just you're gonna need to be a little patient because it doesn't have a Thousand Cuts
00:21:49
per minute like modern films it's not the Transformers or a Marvel film but it's well worth it if you can get your
00:21:56
ADHD under control I would start with the Samurai movies yeah Seven Samurai thrown to blood and
00:22:03
ran yeah you go there and then there's I mean if you want to go super intellectual roshamon yeah which is
00:22:10
about yeah so there's your uh USC uh Film
00:22:19
School Divergence save a hundred grand okay we'll see you all at UCLA yeah okay VC
00:22:27
market update Carta has released a series a funding map covering the first
00:22:32
half of 2023 but the date is what's interesting they covered and Carter basically manages cap tables and stuff
00:22:39
like that for folks original company was e-shares I think is a funding map which just shows like
00:22:44
how much money was raised nothing really too consequential in there but what's really interesting is the data on
00:22:51
series a rounds series a rounds are typically the rounds when a benchmark or Sequoia a craft come in and you know
00:22:59
join the board and put in a significant check before that you have angels
00:23:04
and Seed investors and after that you have growth funds but the series a is considered like a seminal moment in the history of a startup
00:23:10
median round is now seven million Rays that's down 26 year over year
00:23:17
and this is all data from the first half of the year it's the first half of 2023 versus 2022 which was a really crummy
00:23:24
year we're down from the crummy year 26 on the dollars raise seven million
00:23:29
and the the pre-money valuation 40 million down 17 so last year it was 11
00:23:34
million raised on 48. I don't have the 2021 data here but it would be even more
00:23:40
so just right off the bat reactions oh sorry you Bill Gurley to
00:23:46
what we're seeing in this series a space this is a return to normalcy I mean the series A's
00:23:51
back in the you know Uber days and Airbnb days where what five ten million
00:23:57
bucks on a 30 million so this is return to normalcy yeah I don't I don't think you've gone quite back to that line
00:24:04
right and so I think there's still a significant amount of competition at that level and
00:24:11
um I the fact that it's awful a little bit is is noteworthy but it's not like off 50 right I think that market remains
00:24:18
competitive I think there's a number of great people out there investing at that level and I and of course the AI deals
00:24:26
like one thing that might be interesting is if you pulled the AI deals out I bet those numbers would be more akin to what
00:24:33
they were two or three years ago because those are being done at 200. is the reason you went to Angel Investing or
00:24:39
seed investing let's call it because it's so crowded and competitive at the series a level and what seed investing
00:24:47
is now is what series a investing was for the 20 years of your career okay
00:24:56
I think if I were practicing institutionally I would I would State the series a level and dig board seats
00:25:03
and try and get as much ownership as possible which is the then the Benchmark strategy I I um this is more of a hobby
00:25:10
thing for me got it and I don't want board seats anymore but it's super super crowded at series a
00:25:18
still to this day yeah I said it was competitive I don't know that it's super crowded I think a lot of people realize
00:25:25
that if you can get two and a half or three percent management fee investing 300 million dollars at a pop that's an
00:25:32
easier lifestyle than actually taking board seats and doing work and so I think a lot of money and activity got
00:25:39
pulled into the late stage Market nearly every firm started doing that and and
00:25:44
once the once the center of gravity goes there and affirm you know and you're
00:25:50
investing 200 million a clip can you imagine the Monday meetings like who's paying attention to the person that's
00:25:56
putting 5 million out at a time like it'd be hard it's like going to playing high stakes cards and then you get
00:26:02
invited to you're playing 100 200 and you go to 510 games except there's a
00:26:08
team and who's paying attention to the person playing in the little game and so I actually think the number of people
00:26:14
that practice at that level has actually gone down huh but that doesn't mean you
00:26:19
know the the business since I got in only got more competitive and so there's
00:26:25
still enough and and and the other thing is the founders have learned how to play
00:26:30
however if there's 10 people doing it they know how to play them off of one another they're very skilled at it yeah
00:26:37
that's a that's a weird thing that happened is like the Playbook because of podcasts because of blog posts I mean
00:26:44
just how to how to run a company and then you know how to you know negotiate
00:26:50
with VCS has it's all been unpacked sax what are you seeing uh you're a series a investor you compete with the Sequoias
00:26:57
the benchmarks uh heads up for these series days what are you seeing in the series a and what do you take from this
00:27:02
data being down 26 year over year which probably actually means probably 50 down from the peak uh what are your thoughts
00:27:09
well yeah the The Venture Capital Market peaked in Q4 of 2021 in terms of both
00:27:15
valuations and the amount of money that was being deployed and it kept going down throughout all of 2022 and I think
00:27:23
it bottomed out in q1 of 2023 basically in the last several
00:27:29
months and I think now the pace of deployment has sort of stabilized and
00:27:34
it's kind of stabilized at a pre-pandemic level so you know maybe a
00:27:39
2019 level now I think that probably amassed some big differences by round so like you're
00:27:46
saying series a rounds are more competitive there's relatively more action there I think the late stage rounds Brad can
00:27:53
speak to this the capital there is dried up I think considerably more and those rounds are much harder to get
00:27:59
and the reason I think is because that when you have more operating history then it's harder to raise around based
00:28:06
on narrative whereas when you're at a very early stage you can basically just raise money based on a dream and a story the way I
00:28:13
frame it to people is when I'm and part of this is my fault because I'm training people in our accelerators and pre-accelerators I tell them you're
00:28:20
either selling promise or performance and you know once you start having customers and numbers and retention
00:28:26
you know someone like sax is going to be like give me the data and they're going to look at churn and say yeah this business is too much turn it's a leaky
00:28:31
bucket whatever but when you're solving promise it's a lot easier than selling performance I'll tell you guys a CEO
00:28:36
that is a well-known CEO public company now he told me and I think girly I think you
00:28:43
guys were investors um he said as soon as we started having Revenue our valuation felt like it went
00:28:50
down as soon as we started making profit our valuation went down because at that point you're you know you're judged on
00:28:56
the quality of that stage of the business whereas before you could paint
00:29:01
a picture with a thousand words about the different pads you might walk and everyone wants to believe the optimistic
00:29:06
path will be walked and so you can boost your valuation boost investor interest but once those numbers start to come
00:29:12
through it it really changes the investor criteria for how they assess the value of the business well a lot of people will state if if they have a
00:29:19
product launch coming they'll they'll tell you to raise money
00:29:25
old saying it's better to raise on the sizzle than on the stake yeah unless the
00:29:31
steak is pretty high grade yeah obviously if the steak is great then yes that's the best time to take that disc
00:29:37
off the table Yeah Yeah but but just to recap I think where we are I think the Venture Capital markets have
00:29:43
stabilized for funding new companies I think there's a Mania going on with AI both in terms of the size of these
00:29:49
rounds and the valuations it's like 2021 for a lot of AI companies we're not participating in that craziness we are
00:29:56
doing some seed checks I would say in early stage AI companies were kind of calibrating the size of the check with
00:30:03
the stage and amount of risk and I think that's appropriate so you are going pre-series AC putting
00:30:09
in that's a 500K one million dollar check seed is what makes the most sense I think for AI
00:30:15
startups because if you wait for a later round then they're not being priced
00:30:21
based on fundamentals at all yeah yeah which exercise is that 500k million we just did one of a four million dollar
00:30:28
check where he let kind of a bigger seed round got it fantastic I love that those are called seed runs today I mean it
00:30:35
used to be three to five million what's your series a but yeah sure seat around three to five I still don't understand the term precede so just to finish the
00:30:42
thought I think where we're at and you know Brad can can chime in on this is I think the Venture Capital Market is
00:30:47
stabilized for new companies new fundraising however I think there's going to be a one to two year period of
00:30:53
distress for all these companies that raised in the peak yep 2020 2021 and are
00:30:58
now running out of money and they don't have enough Revenue they're not growing fast enough and or their burn is too
00:31:04
high and all those companies are gonna be facing down rounds or restructurings
00:31:09
or they're not gonna be able to raise well people are also marking their books now we're starting to see the marking
00:31:15
so we're going to have probably a one to two year period of distress for all those bubble companies while we have a
00:31:23
little bit of a Resurgence for new companies I got another topic I'm going to go to here related
00:31:29
but bradwich want to let you chime in on the late stage there because you operate in the BC stage yeah I think uh and this
00:31:35
is related to the topic I suspect we're going to transition to but listen there is a lot of activity in
00:31:41
venture today right and we're very reflective to the stock market people were really scared in Q3 and Q4 of 2022
00:31:49
started in 2021 but Q 2022 was scary to people because public market valuations
00:31:56
for growth companies were down over 50 so we really saw you know IPO markets
00:32:01
Venture all all start to slow down coming out of that we've seen you know Stock Market within you know 10 of
00:32:08
all-time highs we see you know this wave of AI occurring what I would tell you is under
00:32:15
500 million maybe under 600 million right series B and C rounds are as hot
00:32:22
as I've ever seen them in data infrastructure and Ai and software Etc
00:32:27
um so there is a lot of competition there the later stage stuff which as you know I call quasi-public so if a company
00:32:33
is over a billion dollars right now you're you're very reflexive relative to
00:32:39
what's happening in the public markets we're starting to see activity I just read whiz raise more money it's got 200
00:32:44
million dollar ARR raised at 10 billion so those markets are 50 times Revenue
00:32:50
yeah we did not participate um 50 times Revenue yeah no so there is
00:32:56
definitely activity I know a deal we got called on yesterday raising two and a half billion at 100 billion there is a
00:33:03
lot of activity however sax is right there is you know remember we had a
00:33:08
thousand unicorns at the end of 2021 and I've said a hundred percent of those are going to do a Down Round and we're still
00:33:15
in the early stages of that reset to occur there was some you know there's a
00:33:20
report out this week that lots of people comment on Twitter where public markets were down 50 and private marks were down
00:33:26
I don't know five to ten percent like that will all normalize it's all going to be down you know the same so that's
00:33:33
the only place I don't see activity underperformant companies that were valued over a billion dollars those are
00:33:39
debt on arrival until you get to a market clearing price and we're not there yet okay so the other big issue
00:33:45
here is a lot of money was raised by VCS or you know commonly known as dry powder
00:33:52
in the industry but there are some misconceptions about this dry powder people are saying oh my God all this money is going to come flowing into the
00:33:59
ecosystem Kumbaya it's going to be the Roaring 20s again however uh bill you did a little tweet
00:34:06
storm what people don't realize is when we refer to dry powder at VC firms
00:34:12
the VCS do not have that 250 billion dollars or whatever it is quarter
00:34:17
trillion dollars sitting in their bank accounts that money is sitting in another person's bank account LPS
00:34:22
Harvard's endowment Calpers Sovereign wealth funds Etc it has not been drawn
00:34:28
down by the VCS yet so Bill why is this an important fact for people to
00:34:34
understand and what are the Dynamics that LPS are dealing with yeah and
00:34:39
there's a ton of Dynamics between the GPS at the Venture capitalists and the LPS that those endowments that Brad
00:34:46
started to hit on one of those which is the marks aren't in the right place and
00:34:51
and so so the thing you just explained critical Jason which is you don't actually have the money there's no
00:34:57
there's no Venture firm sitting around with you know all of the money that
00:35:03
they've got committed to their Fund in a bank account that's just why not why does that not actually occur because
00:35:09
people would say oh you raised a billion from these folks they gave you the billion right one of the the brilliant
00:35:16
realities of the way that a LP agreement works with a venture fund is they're not on the irr clock until they actually
00:35:23
pull the money down so they explain what that means yeah they charge fees based on the total committed amount but they
00:35:29
don't actually draw the money down and get gauged on the performance of their investment until they need it and so a
00:35:36
classic Venture firm will do five six drawdowns over a 10-year period of a fund
00:35:42
and so they don't act they literally don't have the money a couple of other things worth noting so
00:35:47
and some of that I didn't put in the Tweet but the marks aren't right and everyone kind of quietly knows that the
00:35:54
marks aren't right but there's actually no incentive to get to Marx right here explain what a mark is to folks so
00:36:01
private companies have evaluation that's assessed either by the GP themselves in
00:36:07
most cases which is a bit of a conflict of interest sometimes by your auditor he
00:36:12
and wire whoever's auditing your Venture fund but of course the techniques they have for assessing valuation are
00:36:18
extremely crude because they're not Market based they're just they're not public companies yeah
00:36:24
and so there's actually not a way to know they have an extremely complicated cap tables
00:36:29
the other thing is many LPs are actually bonus on the paper Mark and
00:36:38
this is something that a lot of people don't realize and so they don't have an incentive to dial around to the GPS and
00:36:46
say get your marks right because it's actually going to reflect poorly on them if they were to roll those of them both
00:36:52
of the lp and the GP are in a dance there hey we know that stripe is not worth 100 billion right now it's worth
00:36:58
50 billion but if you mark it down I don't get my bonus I'm the person who's giving you money for your next fund and
00:37:05
so when we're assessing hey how much are we going to give you for your next fund we're going to look at the performance of previous funds as an indicator push
00:37:12
back on what you just said I agree with what you just said except no one has the explicit conversation it's an emergency
00:37:19
it's an emergency Behavior it's emergency dynamic system yeah show me an incentive I'll show you an outcome kind
00:37:25
of situation but there's no I've never heard of an LP like brow being GPS to get their marks right like especially on
00:37:32
the downside never heard of that ever those marks can be done by an audit like I said they could be done by a round of
00:37:39
financing and then there's a secondary Market weird secondary Market secondary Market
00:37:45
can do it and sometimes LPS have this weird situation where different Venture firms are marketing companies like
00:37:50
radically different prices oh which creates some interesting Dynamics okay so I did this series I did the seed
00:37:57
round of stripe where I'm Y combinator and I say you know what 50 billion is fine we'll go to market at 50 billion
00:38:03
because we we invested at 2 million in stripe but then whoever did the you know
00:38:08
series G or whatever it's up to we did the 100 billion dollar Mark is like ah we'll mark it down to 90. but you know
00:38:14
somebody Calpers or Harvard has two has the same share class there's two
00:38:19
different funds at two different prices so then you could really triangulate on reality huh another Dynamic that uh that
00:38:26
makes the powder less less dry that that I didn't mention in the Tweet storm imagine you're on your first or second
00:38:33
Venture fund or imagine you're a fund that used to just have a One Fund but
00:38:39
they've expanded to four funds okay now imagine you don't have a lot of
00:38:45
liquidity proof points on those funds do you really want to run out of money and
00:38:50
go test whether or not you can raise your third fund or your second fund or do you kind of want to wait and see if
00:38:57
you can develop some track records so because you may be facing the imminent
00:39:02
death of your firm if you run out too quickly and and go back to Market and
00:39:07
there is no market so I have 100 I have a hundred million dollar fund it's my third fund okay what pace am I going to
00:39:14
do this I'm going to do it in 24 months or 18 months like maniacs we're doing during the peak or am I going to take a
00:39:19
36 month approach a more traditional three-year deployment if I even if I take a 40 month deployment hey I got
00:39:24
time to work out all these issues in the previous portfolio sax you've heard this sort of dynamic what are your thoughts
00:39:30
on the dry paper issue you yourself have a lot of dry powder I understand so how do you think about it we do have a lot
00:39:36
of dry powder and we're growing really slow I mean there's no feeling that we have to rush out and deploy this capital
00:39:42
and one of the things that's interesting about the period we've been in that's been surprising to me is that art
00:39:49
metrics actually haven't changed I mean the the things that we're looking for in a software company haven't really changed we look for a certain amount of
00:39:55
ARR certain growth rates certain amount of net dollar retention a certain CAC a certain Capital efficiency that bar
00:40:02
hasn't changed for us but the number of companies meeting that bar has gone down considerably because they have headwinds
00:40:07
because customers are in austerity measures or companies are going out of business and saying hey let me consolidate my SAS tools Enterprise
00:40:13
buyers are sharpening their pencils they are trying to consolidate vendors there's a lot of headwinds in the buying
00:40:19
cycle right now yeah and it's a little bit like I don't know if you remember in the.com Crash 20 something years ago oh
00:40:27
I remember it yeah so back in 99 2000 the conventional wisdom was that the
00:40:33
company you wanted to be in was Yahoo because Yahoo is profitable and when all these startups went out of business
00:40:39
Yahoo would be the way that you could own a piece of the future of the internet but you wouldn't have to take
00:40:45
all the startup risk and then it turned out that all of Yahoo's revenues went away because their revenues were coming
00:40:51
from Banner advertisements bought by startups which were funded by VC dollars so when you had the whole.com crash
00:40:58
Yahoo's business dried up yep so then Yahoo lost whatever it went out it turned out a lot of people weren't
00:41:04
wearing swim trunks it was yeah so so Yahoo's business was actually highly correlated with startup funding and I
00:41:11
think there's been an aspect of that with a lot of these companies where you would think that they're pretty
00:41:18
insulated from the business cycle even like especially the enterprise software companies there's a lot of
00:41:25
software companies that were selling to other startups that was pretty obvious they're going to be impacted but even the ones selling to Enterprise companies
00:41:31
have been affected in subtle ways and there just aren't that many startups right now hitting that same bar that
00:41:39
they were hitting just a couple years ago freeberg your thoughts on this LP GP
00:41:44
Dynamics and dry pattern I mean I think I mean one aspect on the
00:41:53
same front of uh VCS being somewhat reticent to deploy more
00:42:00
capital it's flowing through to the lp space and Gurley can probably Pine on this for a
00:42:06
sec and probably Pine on this too but and all of you guys obviously could but it's been
00:42:12
apparent in the last year that LPS are wondering what do they have
00:42:17
what are these portfolios ultimately really going to be worth what's the actual cash distributions and I think there's these new rules regularly where
00:42:23
you got to distribute five percent of your assets each year to the institution that you're mentoring they'll explain
00:42:29
this you're an endowment you're obligated to not just grow your
00:42:34
endowment both either from the board of the like the Alabama Board of Trustees of the University or I think there was a
00:42:41
tax provision put in that if you're not Distributing five percent then you're
00:42:46
exposed to tax on the returns and so there's a there's a unquestionable
00:42:53
potential issue with LPS around their own liquidity so they've all followed
00:42:58
the Dave Swenson model where they've all got 50 percent or even more in illiquid
00:43:04
assets you move into a cyclical decline where the number of IPOs and liquidity
00:43:10
events both for VCS and PE remember PE is way bigger than BCS private Equity
00:43:16
aren't coming and then the drawdowns keep coming and so you have to meet the
00:43:21
drawdowns you're not getting any liquidity your constituent needs five
00:43:26
percent liquidity and now you got a cash crunch now you you have cash crunch as
00:43:32
an LP and I think GPS are aware of this issue so you know do you want to provoke
00:43:38
that or not right you run early or you run late you don't
00:43:43
want to be in the middle so I'll just say like anecdotally it it seems
00:43:49
LPS are more reticent I've heard several folks talk about how they're reducing
00:43:55
commitments by 50 two-thirds or in some cases a hundred percent particularly after the the mad rush for
00:44:01
Capital over the last couple of years or Capital commitments I would say for the last couple years and so the downstream effect of that
00:44:09
ultimately as the current funds get deployed there are fewer new funds and
00:44:14
less New Capital being committed from these LPS into new funds and you know fast forward two or three years
00:44:21
and there's going to be less Capital available and so it keeps the bar High uh this is a while this is you know and
00:44:26
so the bar I think is only going to get higher over the next couple of years as that Capital cycle moves its way through
00:44:33
the system it's probably worth explaining what Freeburg was talking about in terms of a commitment so you
00:44:39
may have a let's just say University X has committed 25 million to funds three
00:44:47
through five for Venture fund Z and now
00:44:52
they're saying in the next fund we're going to be at 10. instead of 25. when
00:44:57
they say they're making that commitment that Capital gets deployed by The Venture investor over the next on
00:45:03
average probably five years so the reduction in a commitment this year means that there's less Capital to
00:45:10
invest over the next three to five years and so that gets played out as we fast forward we're you know we're still
00:45:16
sitting on funds from the last couple of years as those funds get invested the new funds are going to be smaller
00:45:22
there's going to be fewer of them which and that's when the market gets much tighter is in the next couple of years you know Brad this seems like the
00:45:28
greatest setup ever feels like the setup last year buying equities when everybody was scared if
00:45:34
everybody is tightening their belts if VC funds are not going to deploy this feels like the time to be deploying so
00:45:41
maybe you could talk a little bit about this austerity measures coming or just belt tightening
00:45:46
or some people may be getting out of the Venture business who shouldn't have been in it to begin with all of this seems like a great setup for
00:45:53
more discipline and more disciplined Founders if the VCS have to be disciplined doesn't that trickle down to
00:45:58
the portfolio companies 100 but and while this might happen while this might
00:46:05
happen I'm going to take the other side I don't think that's what the lived experiences of most VCS in Silicon
00:46:11
Valley today on series a series B series C is certainly not in the area we're competing we're seeing four or five 600
00:46:18
million dollar deals get done on zero Revenue two three million dollars in revenue and so let me just throw out
00:46:24
perhaps an alternative view as to why this might look a little different than the world of austerity that we saw in
00:46:32
2002 2003 2009 10 and 11. the first is right the stock market is near an
00:46:37
all-time high and we know that you know the Venture markets are reflexive to the stock market we talked about that the
00:46:43
second reason which I think is interesting is most firms on average are a lot bigger okay that creates two
00:46:49
issues we have a situ situation where younger partners and principals who all did deals that were overvalued over the
00:46:56
last few years they want to put some points on the board in a reprice deal because they have to have some winners
00:47:02
so you have this principal agent problem the people who used to check them were the senior Partners right the the
00:47:09
investment committee but now they have a lot of mouths to feed so when you put
00:47:14
money to work you pull down more fee and so you know these funds now I mean
00:47:19
if you're tiger or some of these big funds you have giant cost bases that
00:47:24
you've created because of the the size of the firm that you created the third is the nature of LPS and Bill mentioned
00:47:31
you know Dave Swenson in 2002 MIT Yale Harvard they would call you
00:47:38
know who were the early backers of venture firms they would call these Venture guys up and say listen we're hurting there were a lot of markdowns we
00:47:45
need to slow down the pace of deployment right and so they were a factor LP said
00:47:51
Slow It Down I'm not hearing that out of LPS today
00:47:57
okay and I think one of these changed I certainly am hearing it out of traditional LPS some family offices some
00:48:04
endowments but pensions Sovereign wealth funds Etc who now represent a much
00:48:10
bigger percentage of the total Capital base of venture they have money coming out of the ground every day that they
00:48:17
need to deploy like they did in private equity and so again I'm not saying this for certain and certainly there are more
00:48:23
Discerning Sovereign wealth funds than others who are saying don't speed up the pace of deployment but I'm wondering if
00:48:30
that nature that change in the nature of the lp base is also contributing to this
00:48:36
you know as sax called AI Mania yeah I mean we see it in Hollywood some new uh
00:48:41
actors come in they want to build a brand we saw the Russians do it
00:48:46
we saw the Japanese do it they only seen China do it people come in new entrants at the table they get splashy cashy they
00:48:52
want to place a lot of bats they want to make a name for so I pulled a brand so that's an interesting Counterpoint our entire business of course is based on
00:48:58
exits the highest form of exit I guess is an IPO an overpriced acquisition would be the second
00:49:05
and it was a secondary market for shares as a distant third looks like the IPO window might be
00:49:13
cracking open a bit and uh some people are being forced the guns to the Head
00:49:18
arm owned by SoftBank masioshi-san looking to raise 10 billion at a 50 60
00:49:24
70 billion dollar valuation could be the largest IPO of the Year instacart looking at a 12 billion dollar
00:49:30
evaluation Reddit kind of went dark they had a couple of problems with their Community but they were in line stripe
00:49:37
obviously in line clavio's got a five billion dollar evaluation and then we saw a couple of
00:49:43
uh what I'll say are non-traditional companies going public something called shark ninja I saw in public we had a
00:49:50
little conversation about this Brad kerstner they have a market cap of 4.3 billion they had a pop of 40 percent
00:49:56
kava a Greek food chain they went public and have a market cap of five billion dollars surf air a
00:50:03
company I'd passed on investing in what was intrigued by they do Pilates uh shuttles between places on the west
00:50:10
coast here little short runs they did a direct listing in July marked a cap of 85 million didn't go
00:50:16
well Bill Gurley is uh the IPO window opening
00:50:22
or are people kind of on the ledge who have no choice but to jump and hope for
00:50:27
the best one thing we didn't probably spend enough time on in the last topic which I'll just hit on briefly is the
00:50:33
complexity of those unicorns so Brad mentioned I I saw a deck that said there were more private unicorns than public
00:50:41
tech companies so for a billion dollars at one point in time um which is shocking but those because
00:50:48
those companies grew up in the 99-20 to 21 time frame where you could raise
00:50:53
money at excess evaluation their cap charts are very complex and rigid they have different licked preferences at
00:51:00
different places and and and they've got board members who all have different marks and are all very worried about
00:51:07
whether this thing can get to a certain place or not and so it's very difficult to come in and do another private round
00:51:13
in those situations you might have to you you might have to put the return in a guaranteed pick dividend to IPO or some
00:51:21
complex derivative and a lot of people I think Brad would agree with this a lot of people just say they opt out and say
00:51:28
no this is too hard I'm not going to go in there and negotiate with five different constituencies on how to do is
00:51:34
you can't just do a simple investment because of that okay so it's gotten too complex which then if the buyers of
00:51:42
those shares do not want to be involved in that crazy okay stripe Worth or just pick stripe as an example 50 billion or
00:51:49
100 billion and the last investors are at 100 YC in a two million yeah sure
00:51:54
maybe a bad example just because they're total lick press stack may still be a fraction of their market cap for a lot
00:52:01
of these unicorns the lick press stack can be very close to their market cap or their today's valuation and that's what
00:52:07
creates so you have a billion Central problems you got a billion dollars in investment in the company and
00:52:13
liquidation money that has to come out to pay those investors but the company's only worth two billion or a billion and
00:52:18
now it's yeah when you get to that place sometimes going public is just the easiest way to clean it all up because
00:52:25
everybody converts to Common and we just the company starts trading and reality
00:52:30
is reality it's kind of like taking the medicine yeah and I think that happened one good example was square at one point
00:52:36
had done a derivative financing on top that was somewhat problematic and they just felt like they had to get out and
00:52:44
they did and it cleaned up the capture and one thing I've been waiting on we'll see if it happens but because of hyper
00:52:51
competition and investing in 99 2000 20 20 21. there was a term removed from most term
00:52:58
sheets it gave investors the right to protect their lick pref on an IPO that's gone in most
00:53:05
of these cases so you could convert lick press under which for a founder or an
00:53:11
early stage angel investor would be a huge win got it whereas if you sold a
00:53:17
company in m a the lick pref would play does that make sense yes so the last investor comes in they're getting a
00:53:24
multiple of their money back except in an IPO right and so the IPO happens you
00:53:29
know yeah and I suspect most of those late stage investors keep assume that
00:53:34
their investment has a debt-like floor on lick press and if this were to start
00:53:40
to happen or Recaps which can also be done self and self-inflicted Recaps I
00:53:45
have seen many times just to get past the structural complexity either one of those things could wipe out that lick
00:53:53
press so net net early more IPOs are going to happen I think there's two
00:53:59
things I think that complex cleaning up complexity is a great reason to for the
00:54:04
public market and Brad already said we've seen a massive recovery in in
00:54:09
software stocks like the marks are better than they were two years ago so
00:54:15
Brad or sax uh just m a wise we've seen Lena Khan we've discussed it many times
00:54:22
seems to be saying all business equals bad any merger equals bad she's gonna
00:54:28
you know attempt to throw cold water on any merger that's happening
00:54:33
so M A seems to be being taken off the plate by not just Selena Khan but also
00:54:40
the eu's is seems to be turning the screws so if we don't have an m a market then that means there's only an IPO mark
00:54:46
correct I mean that's just another one of the reasons that is pressuring these companies these companies need to raise
00:54:52
Capital so just to double click on what Bill said and put some numbers around it right because we read a lot of stats
00:54:58
about how many IPOs there were so I had the team pull some figures 480 IPOs us IPOs in 2020.
00:55:07
1035 so a huge bubble in 21 181 in 22 and 123. okay but I think that
00:55:16
overstates right because we had a lot of spacks and crappy IPOs so it really
00:55:21
overstates the quality IPOs so you know we're one of the major buyers in Tech IPOs so I just went to the team and said
00:55:28
how many IPOs were we tracking and did we consider participating in during these years so that was 46 in 2020 100
00:55:37
in 2021 the three in 2022 and zero year to date
00:55:44
in 2023. okay I don't want to be in the Greek food uh so but what I would say is
00:55:49
I just returned from Deer Valley this week where Morgan Stanley's putting on a conference talking to their big potential IPO buyers we are now queued
00:55:57
up as you and I we had this tweet exchange Jason this week and I said you
00:56:03
know in that exchange the world's normalized fear of covet's past hyperinflations passed Etc first class
00:56:09
IPOs are coming and a bunch of down-round IPOs are coming so let me just explain really quickly on that right you mentioned instacart right
00:56:18
super high quality company I think it's last private round was 50 or 60 billion in the bubble and now it's rumored to be
00:56:24
going public at somewhere around 10 billion dollars okay so that represents
00:56:29
the reset that will have to happen and as Bill said if you were a investor in that last
00:56:36
round of instacart and you were buying preferred shares and thought you were protected that preference is washed
00:56:42
right so you're going to be down 50 60 70 percent on those preferred shares because you're going to be converted
00:56:48
into common in that IPO it's the right thing for the company to do it's the right thing for the investors to do it
00:56:54
cleans up the cap table so that is an example of you know the Down Round IPOs
00:56:59
of high quality companies that you're going to see come public then you're going to have folks like arm like bite
00:57:05
dance data bricks would be another one of these I think that you know sneak that would be more in that instacart
00:57:11
camp you know like there will be some discount relative perhaps to their fully diluted last rounds valuation but these
00:57:18
make no mistake about it or high quality companies that will lubricate and altimeter will compete for those IPOs
00:57:24
because these Bankers are hell-bent on pricing these IPOs at a discount to fair
00:57:29
value they need them to work they need to bring buyers back into the IPO Market because these companies need liquidity
00:57:35
so suddenly the banks need to get wins for the people buying
00:57:41
these shares as opposed to in the past they were like yeah we're just selling a security at the market rate whatever
00:57:47
that famous the famous monologue from
00:57:52
what was the movie was that Jeremy Irons who gives that monologue we're selling securities to informed buyers and that's
00:57:58
it I mean it's a pretty dark scene so it won't be a light switch Jason but I do
00:58:03
think Margin Call Margin Call thank you it was Jeremy Irons I don't think it'll look like a light switch but it will be
00:58:09
I think we're gonna see five six seven IPOs good size IPOs in Q4 we'll probably
00:58:15
see closer to 10 in q1 and then it will start opening up in the back half of next year in part because Boards of
00:58:20
directors will begin to realize you know what we have to go public if it's down round
00:58:26
who cares it's acceptable and this is really healthy we need these companies
00:58:31
and by the way I'm in the bill Gurley Camp you should not stay private forever you should get your company if you have
00:58:37
100 or 200 million in Revenue get your company public innovate and grow in the public markets with the discipline and
00:58:43
Cadence at the public markets and if it's if it's a you should expect the prices lower because the world was out
00:58:50
of their mind in 20 and 21 and multiples of reset
00:58:56
a news story with me just about some of the incredible returns in the golden hour venture capital Washington
00:59:03
University Duke University some of these endowments just exploded in value yeah I remember when
00:59:10
this article came out it was September 29 2021 less than two years ago yeah and we were all feeling really good yeah
00:59:16
about our industry yeah but as it turns out the whole thing was inflated by all
00:59:22
the free money that the FED had air dropped so you know the public markets
00:59:27
were really frothy it was basically very bubbly especially for growth stocks you
00:59:33
had all these new IPOs and spacks and so forth and they were super bubbly
00:59:38
and the result was that the returns both realized returns and on paper for these
00:59:45
endowments were massive so if you think about the lp the lp Community if they're
00:59:51
making commitments in 2021 the way they do that is they look at the total value of their endowments and then they
00:59:57
allocate a certain percentage by asset class so they'll allocate a certain percentage to public markets
01:00:03
certain percentage to real estate private equity and then VC so if the overall value of the endowment is really
01:00:10
big then that percentage that goes to VC is going to be really big too and then what happened is you had this huge
01:00:16
correction over the next couple of years and so one of the things we heard from the lp Community last year is a problem
01:00:22
they called the denominator effect which explained yep well the value of their
01:00:28
portfolios had gone down a lot because the public markets were down was it something like 50 50 in some cases yeah
01:00:34
for growth stocks and like 15 20 for the entire market right so the value of the portfolio was down but the Venture
01:00:41
Capital part of that was not down both because of the the lag in getting fresh
01:00:46
marks and then also because they had already made commitments to new VC funds at the peak of the
01:00:53
market so all of a sudden the percentage of their portfolio that was VC related roughly doubled and so that's why all of
01:01:01
a sudden the lp commitments have dried up is because they're over allocated to VC yeah now all right as the public
01:01:09
markets have come back this year then that problem mitigates to some degree but yes I think it's still out there and
01:01:15
I think this is why you're seeing certainly domestic LPS really slow their
01:01:21
allocations to venture capitals they still have the denominator problem now I think that's less of an issue overseas I
01:01:27
think Jake how you observed that the the four seasons of the the bar at the Dubai
01:01:33
look like the Rosewood when we were there I literally got stopped four times
01:01:38
from the elevator to the front door I am not kidding four people stop me that's
01:01:44
two more than would stop me at the Rosewood going to the front door it was you should recognize that as a hyper
01:01:50
attraction or for where available money was yes relative to the US Dollars and
01:01:58
whether they were available or not yeah I think we're in for a period here I've just it continued distress and pain even
01:02:04
though the market is sort of normalized or stabilized now again I just think we've
01:02:10
been in a huge software recession for the last year yeah I think that it's been masked by the fact that the rest of
01:02:16
the economy seems to be okay but this is the worst software recession we've been in I think since the.com crash I mean
01:02:23
the buyers have been laying off employees by the thousands and since software is bought on a per seat basis
01:02:29
yep the the market has really condensed we had one startup that was selling to
01:02:34
Twitter and they got a renewal and I think they're 100 off 80 off because
01:02:41
elon's laid off eight percent of the employees yeah and that's before negotiating the last 20 which you could
01:02:46
negotiate 50 off that I told them they did a great job who's getting that 20 because elon's can't see everything yeah
01:02:53
I was like really impressed they were able to renew it 20 of last year's value you know what we need a vendor we had a
01:03:00
bender and this Bender went on for far too long and you know what if you go out you know two three nights in a row until
01:03:06
four or five in the morning that next week is going to be painful and suffering that's what the industry is going through it's just going to take a
01:03:13
lot a lot of coal plunges and infrared and pickleball and to feel good again one thing I would
01:03:20
like in retrospect that I think Super interesting about the Venture Capital cycle one I think it's inherently
01:03:27
cyclical and it's always going to be that way unless we fundamentally change the structure of the industry because it
01:03:34
just invites competition and there's no barriers to entry but I went and talked to some LPS that
01:03:40
have been in the business for a very long period of time and a vast majority of the reason Venture outperforms other
01:03:47
asset classes has to do with these tiny Windows when you have a super proudly market and if you don't if you aren't
01:03:55
around for that part you know if you strip those years out of a 40-year
01:04:00
assessment it's actually not that interesting an asset class which highlights the need for Venture funds to
01:04:08
get liquidity at the peak yes right when we are at the peak is when people get
01:04:14
the most Brazen the most confident and they start talking about how we're going to hold forever and so you had Venture
01:04:21
firms with the biggest positions they've ever had in their entire life go over the waterfall and and basically
01:04:28
evaporate what could have been returned yeah I mean diamond diamond hands can come back and bite you and you've said
01:04:35
famously you can't what was the line you had to candid iron are well you can't I don't think I said it but it's been said
01:04:41
yeah since we're on our movie Bender here for those of you who haven't seen Margin
01:04:47
Call just one of the great scenes this is the best scene the whole theme by the way is like the
01:04:52
best scene I think of modern Finance films so good look at this murderer will be selling
01:04:57
this too same people we've been selling it to for the last two years and whoever else will buy it but John if you do this you will
01:05:06
kill the market for years it's over and you're selling something that you
01:05:12
know has no value we are selling to willing buyers at the current fair market Price
01:05:19
so that we may survive
01:05:24
oh man you can rationalize a lot on Wall Street man but yeah
01:05:30
what Bill's saying is that the opposite took place which is VCS drink the
01:05:35
Kool-Aid and didn't sell when that we're at the peak of the market they also got caught up in a competition of trying to
01:05:42
to uh appeal to the founder Community is saying hey we're in it forever we're
01:05:47
going to hold forever we're your best friend forever but Bill there there was also this
01:05:52
element that drove that strategic ration office data set
01:05:58
which is the best performers in Tech generated most of the value after they
01:06:04
went public I mean you know there's a trillion dollars of market value generated in Nvidia in apple in Google
01:06:10
in Amazon all over the many years post going public and you know if you read
01:06:17
sequoia's notes when they kind of made the transition that they made they said we don't want to you know walk away from
01:06:24
the power law that the power law continues to accumulate and accrue even in the public markets and we want to
01:06:30
continue to participate in that because there's another 100x upside coming from here in the ones that we select we want
01:06:35
to stay with not necessarily we're going to stay in all of them yeah there are some that we believe are still 100x
01:06:41
upside from here and just because there's an IPO doesn't mean that we want to exit the position that there's now more Capital available to them more
01:06:48
public currency they can use to do transactions to hire Etc and we want to participate in that value creation
01:06:54
totally and the last double could be the biggest right bill I think the total number of companies that meet that criteria in the history of the Venture
01:07:01
industry is like 10 or 15. yes and you name many of them and the problem is
01:07:07
that the rhetoric becomes common narrative and becomes part of the ethos
01:07:12
of the firm and people want to apply it to every single company to everything that's right right totally that's not
01:07:18
true I mean I I don't want to get too specific here but you had to come you
01:07:24
had you know you do have some let's say uh seasoned vets yourself included Bill
01:07:29
who when given the opportunity to get liquidity on an incredible investment will do so Fred Wilson sold I think all
01:07:37
of coinbase when it goes public he just clears the position when things go public that's been his philosophy kind
01:07:43
of the antithesis of what Sequoia and Roloff are doing with some of their Holdings and then we've seen uh wework
01:07:50
has an existential crisis they don't think this might be a viable con uh concern anymore but famously Benchmark
01:07:56
was able to sell shares at a very high valuation at some point and lock in an incredible return yeah
01:08:04
yeah okay there it is yes okay so
01:08:10
let me see a question Bill about getting older well let me ask sax a question
01:08:16
let me ask you questions to be the world's 17th the best
01:08:23
moderator to go sex you you have an investment in SpaceX right I mean there's been a lot of secondary action in SpaceX why would you not sell SpaceX
01:08:29
at this valuation today or maybe did he as you kind of think about this yeah I think we were going to wait till the
01:08:35
company IPOs I think that would be our default when it goes public sex do you then think
01:08:40
what's the upside from here or do you think my job is done I think my job is
01:08:45
done yeah I think my job is done I think what we would do is just distribute the shares and then each LP can make their
01:08:50
own decision that's about whether they want to hold it or not yeah yeah one of the nice things about
01:08:57
distributions is that nobody has to sell so everyone can make their own decision
01:09:03
about whether to hold or not yeah once the company is public and the public has all the information
01:09:08
through disclosures the odds that I know something special that a seasoned Public
01:09:14
Market investor doesn't that's probably pretty low I mean they're great
01:09:21
Paradox of what we all do and Brad you have both a public and a private
01:09:27
portfolio I started trading public market equities to get better at my private Behavior Bill you've done that
01:09:32
forever is public markets you can't trade on inside information private companies that's all you're trading on
01:09:38
maybe you could speak to a little bit about being what do they call it when you do both crossover investors does
01:09:44
that make you a crossover investor is that the proper term well Bill gurley's the original crossover investor he's been trading
01:09:50
public stocks since you know and he's been doing that yeah researching him you know but you know the fact of the matter
01:09:56
as has Warren Buffett and you know who would laugh at the idea of a crossover fund he's been running one of the
01:10:02
world's largest public portfolios and private portfolios forever he would say I invest in great companies that are
01:10:07
mispriced there are moments in the market cycle where late stage Venture is
01:10:13
mispriced to the downside and there are moments in the cycle where the public markets are mispriced to the downside
01:10:19
what we saw in 2021 is the private markets were crazily overvalued in 2022
01:10:27
we had this massive correction in the public markets we believed that they overshot in part we believe that because
01:10:33
we didn't think we were going to have hyperinflation forever Etc and so you
01:10:38
and I invested in you know meta and a lot of other things that were on their ass you've got to buy in the public
01:10:45
market when there's blood in the streets right as as War as Buffett says buy when they're blood in the streets and sell
01:10:51
when there's trumpets in the air and you know there are definitely blood in the streets when you saw things down 60 70
01:10:57
80 90 percent now does it feel like trumpets to you now or does it feel like trumpets next
01:11:02
quarter or the quarter after if you look like people are polishing those trumpets right now yeah I mean a
01:11:08
lot of it obviously depends on your view on what's going to happen in the economy fundamentally and I'm happy to shift to
01:11:14
that but what I would say is this remember the chart that I've showed many times about software internet valuations
01:11:20
we were you know 70 above normal and then we were 30 percent below normal and
01:11:25
now we're closer uh to the trailing 10-year average of internet and software valuations there are always outliers on
01:11:32
both sides of this but I would say a lot of the positive Arbitrage that we saw in 22 has been squeezed out of the public
01:11:38
markets and we're close to fair value so now if you want to generate Alpha this
01:11:43
is going to be about picking individual winners versus individual losers this is going to you know like the beta trade on
01:11:51
ma on global macro I think has largely played out you know the catch up back to kind of fair value and now I think
01:11:58
there's a debate between kind of hard Landing soft Landing are we going to have a re-acceleration inflation or not
01:12:03
every operation where you come down on these major issues I think dictates whether or not
01:12:09
you know now can I correct something you said Jayco yeah please all right all right so you
01:12:16
said that public markets inside information isn't allowed whereas private markets it's all
01:12:21
inside information I think that could give viewers a misleading impression of what we do as VCS
01:12:27
okay the way that around typically comes together it's not like we get tipped off
01:12:32
by some Insider at the company and some you know nefarious way what happens is
01:12:38
that the company chooses to engage with us or a select number of firms in a
01:12:43
process and then gives us their metrics and you know gives us the business plan
01:12:48
it gives us the forecast and it's all done in a very above board way it's not like we're being tipped however the part
01:12:56
of it that I guess is true is that a private company does not necessarily
01:13:01
engage with everyone in the world on a website a quarterly report and say
01:13:07
Here's what our revenue and our costs were and here's our earnings although some private companies do start that
01:13:12
process by and large they by and large they're selective about who they want to be on
01:13:18
their cap table and that's the big difference in private a public company doesn't care
01:13:24
who's on its cap table it doesn't really know who's got you know Apple doesn't know every shareholder and who's got an
01:13:32
account set E-Trade or whatever Charles Schwab I mean they may care who their biggest shareholders are but they don't
01:13:37
care who the average shareholder is whereas a private company really does care and part of the reason why they care is because these startups are
01:13:45
highly risky and they want to have investors who have a track record of
01:13:51
behavior where they don't have to worry about being they're gonna lose every time something doesn't work out which is most of the time so I think there's good
01:13:58
reasons why startups want to control who their
01:14:03
investors are by the way there's also the issue of value add right I mean other things being equal Founders and startups would rather have
01:14:09
investors who can help them as opposed to Simply you know John Q public yeah I
01:14:15
mean you mentioned both scenarios you don't want somebody who's a neophyte who's going to cause chaos and be upset when Revenue goes down or things are
01:14:22
swinging up and down and yeah if you're public yeah buy the share if you want or sell the share if you want it's a
01:14:27
Marketplace sorry just pull up this this image I I just posted this is from you know you guys know Gokul rajaram
01:14:35
Gokul is a great human we used to work together at Google then he worked with
01:14:41
Jack at Square he's at doordash today and he was a leader at Facebook after
01:14:46
Google but he did this tweet last month any Tech Venture investor who Compares their
01:14:53
funds returned to the s p is being naive or disgenuous the correct index to
01:14:58
compare to is the QQQ you know the NASDAQ Composite and its performance has
01:15:03
been mind-boggling and as you can see here over a 20-year investment period
01:15:09
if you basically just buy the top 10 public tech stocks and at the end of
01:15:15
each year rebalance to the top 10 at the end of the year your multiple over that period of time
01:15:22
is 24x 20 years yeah and over a ten years there's quite
01:15:28
a bit of hindsight bias here and saying we're only going to look at the top ten right it's like how do you determine you
01:15:34
know why not top hundred I mean are you willing to say that for the next 10 years that you should only buy the top
01:15:40
ten what if over the next 10 years it's more of the field versus the top 10 you
01:15:45
know the next 25 yeah I think comparing VC as an asset class to the NASDAQ makes
01:15:51
a lot of sense yes I think that's fair yeah and that's that's the second column from the right
01:15:58
which is basically yeah 5.2x over 10 years so if you're not
01:16:04
beating 5.2 x which is a totally liquid investment if you just bought the QQQ index what this really shows is Apple
01:16:11
Google Facebook and Amazon have had a
01:16:16
massive run-up well that's not that's not what they show that's that that's actually not true jcal because if you
01:16:22
look at just the static it doesn't you know outperform it's the rebalance that outperforms which is whoever's winning
01:16:28
in the market meaning whoever's gaining market value each year is you then you know double down your dollars into for
01:16:34
next year and that's changed over a 20-year cycle over a 10-year cycle and it really starts to play out over time
01:16:40
but I mean yeah if you just look at the QQQ that's the Benchmark as an investor
01:16:45
as a private investor and you know gokul's comment in his uh in his tweet is that uh you know if they can return
01:16:52
call it seven to eight X over ten years or in this case 5x over 10 years you could argue that a venture fund needs to
01:16:57
return a significant premium probably a 25 30 premium due to the illiquidity and the riskiness of the investment cycle
01:17:04
there whereas the QQQ could just sell anytime you want so you know call it a you know you know you need to kind of be
01:17:09
demonstrating a 30 premium to the uh 5.2 x tenure which is um about six and a
01:17:15
half seven X called 7x cash on cash I mean according to this the Venture asset class is super over funded so why why is
01:17:22
that then girly do you have a point of view yeah I mean it would be completely speculative
01:17:29
but I I do think if you look at the structure of endowments you know you've
01:17:34
you've had a few people really leading the way in terms of a Playbook with
01:17:39
Swenson you know Dave Swenson uh who passed away recently but but Dave Swanson
01:17:46
he ran yells and downman and is considering and I think you know the
01:17:51
vast majority of people decided they were going to follow that Playbook which had a you know oversized investment in
01:17:58
illiquid assets PV Venture real estate uh Commodities those kind of things and
01:18:05
I think it led to just a massive like and and these things take forever to
01:18:12
figure out if they're right or not um if your portfolio is over 50 percent liquid like who knows what's right and
01:18:19
what's wrong you could do a wreath you know you could there were years where Yale was printing like 27 percent year
01:18:26
and then in in one reset no nine wiped out you know a ton of that so it's super
01:18:33
hard to know but but I do think that philosophy became broadly adopted
01:18:39
yeah well look at um can you pull up this chart real quick this is a chart from statista that is value of venture
01:18:46
capital investment in the U.S from 2006 to 2022 and what you see is there's there's
01:18:52
basically a few different levels before 2014 call it the industry was basically
01:19:00
a 50 billion dollar a year industry in terms of deployments then you had a run-up where for several
01:19:06
years it was around 100 billion and then in the pre-pandemic Years 2018 1920 was
01:19:13
around 150 billion a year of deployment and then it went totally nuts in 2021 it
01:19:18
was 350 billion it started to come down in 2022 to about 250 billion I think
01:19:24
where we are right now is kind of at that 2019 level of about 150 billion a
01:19:30
year the question is like what it should be I mean should this be a 150 billion a year industry should this be a 100
01:19:36
billion a year industry should this be a 50 billion dollar a year industry yeah it sounds like 100 to 150 would would
01:19:43
have been the steady state and all some portion of this is stay private longer having an impact where those last
01:19:50
couple of rounds were the big huge juicy rounds and if people had gone public in
01:19:56
year seven eight nine like Microsoft Google not Google but Microsoft let me
01:20:01
Google when what year was Google when it went out eight you know going out a little bit earlier would have chopped off some percentage
01:20:09
of this girl yeah and I I I do think one of the most interesting things to watch is going to be how these 1000 unicorns
01:20:16
private unicorns play out because not only do they have the cap structure problem but they lived and grew up in a
01:20:24
day and age where they were told growth at all costs and it it's super hard
01:20:29
culturally to go from that type of execution to the principal type execution you guys have been promoting
01:20:36
over the past several months it's just hard it's not impossible but it's very very Google went public in year six yeah
01:20:43
that's 23 million of total Venture raised I think prior to IPO
01:20:48
think about what that means if a lot of those unicorns are fake what does that say about innovation in the American
01:20:55
economy we had this narrative over the last decade that the pace of innovation had fundamentally increased because of
01:21:01
the availability of tools and Technology and so you had a lot more unicorns being created I mean I remember
01:21:07
back in I don't know like a decade ago or 2010 era let's say
01:21:14
you know there were maybe was like 20 to 50 unicorns a year maybe 20 unicorns a
01:21:21
year there were arguably 10 to 20 girly great companies formed a year in Silicon
01:21:27
Valley or in the tech industry in the west I mean I remember when Andreessen kind
01:21:33
of gave this this talk about it maybe a dozen years ago he said the number was 17. there's like 17 important companies
01:21:40
created every year in Silicon Valley and your goals VC is to be in one of those 17 then all of a sudden we had was it
01:21:47
like 100 200 300 unicorns a year yeah I mean if you and so the questions I mean
01:21:52
them are real well I mean Brad was just talking about that you're giving a 50x
01:21:58
multiple 50 times Top Line I'm not talking about earnings folks I'm talking about Top Line If you get 50x to every
01:22:03
company then you only need 20 million dollars in Revenue to be a unicorn and that's unrealistic when compared to the
01:22:09
public markets where things are trading at five times Top Line and 20 times earnings if it's high growth right so is
01:22:15
it just a different Market all right there's a major slowdown in China or we could talk about Portnoy and
01:22:21
binary question markets just real quick I'd spent a lot of time on the island of
01:22:28
Maui I think it's really sad I don't know if you guys ever been to Lahaina the whole town beautiful town it's so
01:22:34
sad yeah it's gone I just wanted to make sure that we mentioned it because uh yes pretty depressing what happened
01:22:42
I don't know if you guys have seen the wildfires in our families we all went to that area
01:22:47
from vacation my favorite remember that sucks yeah Maui's my favorite code of 13. yeah yeah I mean Maui's my favorite
01:22:53
place on Earth um been to Lahaina so many times it's super sad what happened I just wanna send a message on the water
01:23:00
with those old buildings and porches gorgeous and it's it's just all gone right now so yeah this global warming
01:23:05
thing and these fires and wind man what a hot summer I mean we could do it in
01:23:10
southern Iran check this out the temperature hit 155 degrees it is nine degrees warmer than it's ever
01:23:18
been off the west coast of uh the United States right now there was 90 degree ocean temperatures
01:23:25
off of the Florida coast the sea surface temperature in the North Atlantics the highest it's ever been by uh I think
01:23:31
seven years or is it all the hoax look the the peop people want to debate
01:23:39
all day long about anthropogenic climate change I'm telling you with like
01:23:44
absolute certainty the data right now is unfucking believable how hot and how
01:23:51
dangerous the Earth is becoming and we're seeing not just the fire in Maui the sea surface temperature which
01:23:58
increases the probability of severe tropical storms and hurricanes in the coming season it's un unlivable you know
01:24:05
watching in Saudi Arabia in Dubai 130 degree temperature 95 degree overnight
01:24:12
lows if you don't have air conditioning you will die yeah in a lot of these places
01:24:19
so there are parts of the Earth where people cannot afford the amenities and the luxuries that we have so is it a
01:24:24
world just it's just saying there is no hope there is no hope this fall right in
01:24:30
front of you yeah the Earth is warming the amount of extreme weather is increasing the significant effect of
01:24:37
that is is becoming apparent and you know it's we could debate for hours
01:24:43
about what quote can you do about it but there's just a series of really awful things happening right now yeah um and
01:24:49
it's becoming more frequent and more apparent that this is a pretty serious thing that we're oh yeah all you have to
01:24:55
do girly is follow what you're doing down there in Texas which has is it the highest renewable energy percentage of
01:25:02
any state now is Texas greater than California so one of the biggest accessories I saw
01:25:08
some politician from Texas saying we got we got to get off all these results there's no Silver Bullet if you want to
01:25:13
talk about the you know the fundamental challenge that we all face in terms of whether atmospheric carbon is driving
01:25:20
heating or not if you if you follow that track there is no Silver Bullet there is a lot
01:25:25
of things that have to go right in a coordinated way and there are Market incentives that make it very difficult for any of those things to actually get
01:25:31
done all the way through but renewable energy and nuclear you would say are important two of the most important yeah
01:25:38
they're still industrial production I mean there's just like you the the list goes on
01:25:43
you know systems in agriculture there's a lot to clear history what's the clearest path I mean if you had to
01:25:49
if you said hey put 90 of your effort on these three things it would be nuclear Renewables painting people's roofs with
01:25:57
white paint like this new uh paint That's reflects stuff I mean what would be in your truck that's not going to
01:26:03
change much no let's see this conversation another time we've got Brad and Bill here I think but honestly I'd love to have this conversation we should
01:26:09
put on the document next week we'll do a big thing here yeah so just wrapping up here on sort of uh macro it'll give you a
01:26:15
little macro Brad CPI seems like it's measured and consumers
01:26:23
seem like they're running out of money and starting to tighten their belts unemployment still all-time low still 9
01:26:30
million job openings feels like um this is the steady state for the next
01:26:35
year or do you think hard Landing no Landing soft Landing well maybe Nick can bring up the first
01:26:41
chart this morning we had CPI reported we had the smallest back-to-back monthly gains in core CPI in over two years back
01:26:48
to point two percent annualizing just over over two percent now so on a year-over-year basis it was 3.2 percent
01:26:55
now remember it was only six months ago that people were still hyperventilating about you know this 9.1 percent we saw
01:27:02
last year that everybody on this pod I think was largely in a grievement that was coveted stimulated but you know the
01:27:09
blue line here represents the consensus estimates of folks like Goldman Sachs right which is pretty
01:27:15
similar to what the fed's own estimates are if you go to the next uh slide here
01:27:20
Nick this is what people the current market is betting will happen to the FED
01:27:25
funds rate so the market is saying like you know you've heard shamase many times higher for longer I happen to think
01:27:31
we'll have higher rates for longer too but the market is saying we're worried about an economic slowdown that's going
01:27:37
to force the fed's hand so the market is betting that the FED funds rate will come down either because inflation
01:27:43
continues to roll or because the economy continues to slow and so this third
01:27:48
slide which I think is a really interest one which which nobody really talks about but this is the reason I think
01:27:53
drucken Mill and other are worried about recession there's a measure by the San Francisco
01:28:00
fed which is called the effective funds proxy rate okay so this is not the FED
01:28:06
funds rate this is what they say the total impact of
01:28:12
quantitative tightening plus rate hikes are and we're now back to the highest
01:28:18
level on that proxy rate since we've been since May of 2000 it's up over
01:28:23
seven percent I think that's the reason people are looking at this is blue line up over seven percent that's the highest
01:28:30
effective rate calculated by the San Francisco fed since all the way back to May 2000 and this is the concern a lot
01:28:36
of people could you just explain that why is the effective rate three percent higher than the official rate because of
01:28:43
quantitative tightening because there's a lot of other things going on in the economy the impacts interest rates the
01:28:51
rate at which you can borrow part of it is there's just less money in the system some kind of crunch basically exactly
01:28:57
like just because the rates four percent doesn't mean you can get out you can't borrow nobody can borrow at the 10-year rate okay so if you're a company or an
01:29:04
individual and you want to go borrow you have to buy at a much higher rate so that is where the rubber meets the road
01:29:10
if you're trying to borrow to buy a house borrow to buy a car our borrowed to expand your business the the Blue
01:29:15
Line represents a much better you know calibration for the level of tightening in the economy so there is a a very
01:29:22
strong debate and I would say the Market's actually betting here that the FED is overdoing it because of what you
01:29:29
see in that blue line and that the economy is going to slow the lag effects of this tightening have not yet been
01:29:35
felt and so this gets back to the question we had before which is where are we in the cycle and whether or not
01:29:41
we're going to continue to have growth now really interesting Jason Bloomberg's headline today was the summer of
01:29:47
disinflation and we said on this pod six months ago we said it's more likely by the end of
01:29:53
2023 we're going to be talking about disinflation than inflation and lo and behold not only not only are are we
01:30:00
seeing signs of disinflation air tickets down 18 year over year but China just
01:30:05
posted actual disinflation yeah right so prices are coming down
01:30:11
people are going to be surprised that there's more products or services available at lower prices which then
01:30:17
could infect the salaries because hey we're not making as much money at this company we've got to cut salaries I mean we know that the FED at the start of
01:30:24
covid was more like the the curses of disinflation are almost bigger than the
01:30:30
curses of inflation and China just saw CPI down three tenths of one percent in
01:30:37
the month this week annualized that's over three and a half percent that is a major problem for China so I think you
01:30:44
have some some yellow flags here right that say do we have too much tightening
01:30:49
if one of the global engines of growth is experiencing this level of disinflation that's going to impact the
01:30:55
global economy and Global demand Etc so yeah um I think it's been the pattern of the FED right they they seem to react
01:31:02
late and then they overseer this has been the veeam and so there's also just to add one other
01:31:10
Cloud to the Silver Lining it's the amount of debt that's out there correct so both private debt and government debt
01:31:18
yeah Consumer Debt is high this real estate commercial real estate's high I got debt everywhere and people are going
01:31:24
to have to Belt tighten and maybe austerity and stop spending on some YOLO trips but if your salaries keep going up
01:31:32
hmm
01:31:47
well it's got 300 000 followers so we have we have record household debt 17.1
01:31:52
trillion record Mortgage Debt 12 trillion record auto loans 1.6 trillion
01:31:58
record student loans 1.6 trillion which as drunken Miller points out have to start being repaid I think as of
01:32:03
September yeah because Supreme Court overturned uh binds unconstitutional debt forgiveness yep record one trillion
01:32:10
in credit card debt that I think should be pretty worrying because credit card rates are now around 25 percent it's not
01:32:16
a credit card debt it gets the interest on that is it is obviously floating and
01:32:23
so when rates go up to you know where they are now then it gets it gets very putative so David precisely and this is
01:32:30
remember we're seeing inflation rollover huge and we have a chips act and an
01:32:36
infrastructure we have massive government spending going on and we still see inflation rolling over so I
01:32:42
just find it interesting that within six months we've gone from worrying about hyperinflation to Bloomberg running a
01:32:47
headline Summer of disinflation the last piece of it is government debt so at the rate that the government is racking up
01:32:54
deficits the treasury is going to have to float something like 3 trillion
01:33:00
of new t-bills by the end of the year and we're rolling something like 9 trillion of Old Government debt over the
01:33:08
next 18 months at new higher interest rates so there's a lot of debt and we'll continue that discussion next week as
01:33:14
well as the global warming one hearts and prayers out to the the fine people of Maui who invite
01:33:21
us to come to their incredible Paradise we hope you all stay safe and have a great recovery you're in our thoughts and prayers for
01:33:28
Brad gerstner the fifth bestie for the architect David sacks and the Sultan of
01:33:34
science I am the world's greatest moderator and officiant if you're getting married uh and four Bill Gurley Bill girl you
01:33:41
have some anecdotes about the all-in Pod you were talking PG squared close on closing on an anecdote here and close us
01:33:48
out obviously huge hats success you guys have had when you first mentioned you
01:33:54
were going to do this I don't think anyone had any idea that you would reached this level and I know the hard
01:33:59
work it takes to for you guys to do this weekly it's amazing um but I was walking down this do you
01:34:05
guys share anecdotes about people mentioning all in I was walking down the street in Austin a few months ago and a
01:34:12
guy came up to me goes are you Bill Gurley so yeah and he says you're that
01:34:18
guy they sometimes talk about on all in right yes
01:34:27
there's your subtitle if you remember the guy they talk about it sometimes
01:34:32
Tombstone there's your Tombstone to your point bill it took 10 years of hard work by jaycal for the rest of us we just
01:34:38
walked in off the street exactly thanks I got you all on my shoulders that's why he thinks he deserves more than 25
01:34:44
holding you all on my shoulders but he don't get more than 25 Jacob where are
01:34:49
you running off to why do we got to shut this down saxoned early and I may stay and just keep talking the world's greatest moderate and we'll see you all
01:34:56
next time on the all-in podcast bye bye we'll let your winners
01:35:03
Rock rain man we open source it to the fans and
01:35:10
they've just gone crazy [Music]
01:35:25
foreign [Music]
01:35:49
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