00:00:00
did you just finish a good cry because
00:00:01
you had this wetness right here on your
00:00:03
eye oh sorry I just got out of my coal
00:00:05
Plunge in my sauna because you know I
00:00:07
hit a new record low weight 169 this
00:00:09
week oh hold on my way what's your
00:00:12
temperature on oh I don't want to say
00:00:14
it's
00:00:14
embarrassing I don't want to say no what
00:00:16
is it I've been doing like 56 58 that's
00:00:20
great it's okay I mean all these
00:00:22
lunatics like I don't know they're at 45
00:00:24
degrees 48 degrees I think it's
00:00:26
unnecessary you get the same value I
00:00:28
think of 15. my two-year-old does 56.
00:00:30
it's good it's really impressive I
00:00:32
consider an 80 degree pool to be a cold
00:00:34
Plunge
00:00:36
unless it's like 85.
00:00:43
there's no difference between them
00:00:45
[Music]
00:00:47
if it's not the temperature
00:00:51
[Music]
00:01:04
[Music]
00:01:08
fits it's crazy and then I went in my
00:01:11
infrared sauna so now I've been going in
00:01:13
you do the cold then the warm I think
00:01:15
you're supposed to be warm then cold no
00:01:16
they say end on uh cold and so yeah yeah
00:01:20
I just do like a site cold warm cold
00:01:24
cold warm cold yes what are you doing
00:01:26
like two minutes ten minutes two minutes
00:01:28
or what do you do yeah exactly like one
00:01:30
or two minutes cold plunge four minutes
00:01:32
you warm up you get back to it and then
00:01:34
you jump back in yeah it works pretty
00:01:36
good you know I have to say my energy
00:01:38
level goes way up have you been tracking
00:01:40
your blood pressure
00:01:42
I have not uh but I have this uh
00:01:45
Executive Health coach that I'm using
00:01:46
and so that's where I got those
00:01:49
ridiculous glasses the blue lights and
00:01:51
my sleeps better
00:01:52
I got some I've taken some supplements
00:01:55
uh I'm eating estrogen
00:02:01
estrogen bro
00:02:04
levels are at an all-time high for
00:02:05
hanging out with you guys it just oozes
00:02:08
odd to me no it turns out you know even
00:02:10
at 52 my testosterone is very high so
00:02:13
that's why because you're a free
00:02:14
testosterone I don't have the number
00:02:15
here but they said it's the the high end
00:02:17
of normal so I was like should I be
00:02:18
shooting up testosterone they're like no
00:02:20
you're good you're good just we'll send
00:02:23
it over to Freeburg I said all right
00:02:25
great send it over to freyberg it's all
00:02:26
good A lot of people take testosterone
00:02:28
in their 50s and 60s and I've had a
00:02:31
couple of my friends in their early 60s
00:02:33
start H is it HGH
00:02:36
human growth yeah is that right not a
00:02:38
good idea seems like a really bad idea
00:02:40
that off menu stuff I don't think it's a
00:02:43
good idea
00:02:44
I think you got to be careful with the
00:02:45
off menu items I think you can get a
00:02:47
prescription for it is that right yeah
00:02:49
yeah I know there's something off menu
00:02:51
items available to
00:02:52
affluent people with the right doctors
00:02:55
and I don't think it's a good idea I
00:02:57
mean you guys see Bezos he's jacked I
00:02:59
didn't bring up anybody specifically but
00:03:02
he looks great I think that's just all
00:03:04
weights
00:03:05
is he going to be president
00:03:07
I mean if you had your choice right now
00:03:11
between Bezos and Bob Iger who would you
00:03:13
try then Biden I think we know who you'd
00:03:16
pick I mean listen I was talking to some
00:03:19
affluent people and they everybody's
00:03:21
going to some affluent people I don't
00:03:24
want to say who but if Vivek is now
00:03:27
people are starting to talk Vivek I
00:03:29
think he's hitting the right chords man
00:03:30
Vivek is about to pass to Santas he will
00:03:33
be I think if you look at the polling
00:03:35
right now New Hampshire he'll be the
00:03:38
clear number two
00:03:40
in about four between four and eight
00:03:43
weeks from now
00:03:44
crazy that's crazy and so I think if he
00:03:47
becomes a clear number two the the think
00:03:50
of this it's like then all of a sudden
00:03:52
all these Maga supporters are given
00:03:56
Trump and then Trump with some small
00:03:58
feature improvements that are actually
00:04:00
pretty meaningful right and then they're
00:04:03
like well do I want the 80 year old
00:04:05
Trump or do I want the 38. right with
00:04:08
like the super features you know I can
00:04:10
forgive all of his other issues when he
00:04:13
tells me that he's going to cut the
00:04:14
government the federal government by 75
00:04:16
75 my gosh sold so you're right so
00:04:20
you're on team Vivek I want to continue
00:04:21
to gather a little data there's no rush
00:04:23
to make a declaration right now give me
00:04:25
a little bit of time come up are you
00:04:26
with Vivek yes I and and the reason is I
00:04:29
would love
00:04:30
for it to be RFK and Biden in a debate
00:04:33
and then Trump and Vivek in a debate so
00:04:36
that I could really figure out between
00:04:38
RFK and Vivek who I would like to vote
00:04:40
for
00:04:41
but I think it's been pretty clear that
00:04:43
the Democrats have chosen to Railroad
00:04:46
rfk's candidacy it's unfortunate because
00:04:48
I don't think we're given a real Fair
00:04:50
Shake in really being able to evaluate
00:04:52
him yeah even the the tractors like
00:04:55
Friedberg you have some pretty
00:04:57
significant things that you dislike
00:04:58
about RFK which I think are fair
00:05:00
they're never going to get a chance to
00:05:02
get aired out because you're never going
00:05:04
to get a chance to be put on a national
00:05:05
platform where there will be really
00:05:07
enough debate and I think that's where
00:05:11
America loses so yeah in that context I
00:05:15
would say that Vivek has done more in
00:05:17
the last month to convince me that he is
00:05:19
fiscally responsible
00:05:21
and that he
00:05:24
has some intuitions that I think RFK and
00:05:28
Trump and a lot of people in America
00:05:30
share which is just about the usefulness
00:05:34
of The Blob
00:05:36
and you know that there maybe needs to
00:05:38
be a grand experiment where we
00:05:40
deconstruct The Blob and I'm for that
00:05:43
experiment to be totally honest with you
00:05:45
to see what happens sex where you at
00:05:48
he's unhappy what I would say I think
00:05:50
it's too early in the process to say
00:05:51
definitively okay this person has to be
00:05:53
the person for me I'm viewing candidates
00:05:55
as either being acceptable or
00:05:57
unacceptable and Vivek is acceptable to
00:06:00
me I think desantises too
00:06:03
the ones who are unacceptable to me are
00:06:05
the ones who would escalate this Ukraine
00:06:06
war because I think that avoiding world
00:06:08
war three is to me the central issue of
00:06:11
the campaign
00:06:12
so for me it's just a litmus test issue
00:06:14
I can only support a candidate who would
00:06:16
work to end this war not one who had
00:06:18
escalated where does our fiscal
00:06:20
emergency sit for you in terms of
00:06:22
priorities so no World War III Priority
00:06:24
One is the fiscal emergency that we're
00:06:26
facing
00:06:27
priority two or is it overstated by
00:06:29
maybe event or others no I think it's
00:06:31
important but the problem is this is
00:06:33
that in order to do something about that
00:06:35
problem you really need bipartisan
00:06:39
support yeah because it would be suicide
00:06:41
for one party to try and do all the
00:06:43
heavy lifting without the support of the
00:06:44
other and I just don't see
00:06:46
in the near to midterm that you're going
00:06:49
to get that kind of bipartisan support
00:06:50
no matter who is president whether it's
00:06:52
a Democrat or Republican the only issue
00:06:55
that for sure the American president has
00:06:58
unilateral discretion over is our
00:07:00
foreign policy
00:07:01
and so for me making sure that the next
00:07:04
president pursues a foreign policy that
00:07:07
doesn't result in the destruction of the
00:07:09
United States that to me is the
00:07:10
overwhelming issue it doesn't mean these
00:07:13
other issues aren't important but look
00:07:14
at how simple numbers are let me show
00:07:16
you this Paul for a second just so we
00:07:18
level set with the audience
00:07:19
poll ending September 18 2023 for those
00:07:22
of you not watching on YouTube Trump 39
00:07:24
is that or 38 then the vague 13 Haley 12
00:07:29
Christie 11
00:07:30
DeSantis 10 percent
00:07:33
that is a stunning Turner yeah that's
00:07:36
probably because it's New Hampshire Jake
00:07:37
Hill but you know no I know it's just
00:07:39
but that's a very critical state right I
00:07:40
mean exactly what do you think about
00:07:42
what dalio said on stage about the need
00:07:45
to have a Manhattan Project Style effort
00:07:48
here that is bipartisan comes to the
00:07:51
center and tries to resolve this as that
00:07:53
scale of an emergency is that realistic
00:07:56
to kind of frame this as we are in a
00:07:59
fiscal emergency we have to get a
00:08:01
Manhattan Project Style effort underway
00:08:02
to try an engineer a solution well let's
00:08:04
back up first of all I think you asked
00:08:06
the right question to him which is is
00:08:08
our decline a matter of physics you know
00:08:10
due to forces we can't control or is it
00:08:12
something we still have control over and
00:08:14
I think that that's a really good
00:08:16
framing I think if you're in the bucket
00:08:18
that we can do something about it I mean
00:08:20
I believe that we can the question is
00:08:22
how and I think his view was that
00:08:25
somehow you get all these Elites
00:08:26
together and you get them on the same
00:08:27
page I don't think that's how our system
00:08:31
works I think what happens is you have
00:08:33
elections people compete against each
00:08:35
other and then voters decide who's right
00:08:36
and so one side has to defeat the other
00:08:40
and I think until we get some clarity
00:08:42
from voters on the direction they want
00:08:44
to go I don't think there's going to be
00:08:45
a resolution but to your point there's
00:08:47
no solution without bipartisan
00:08:49
bipartisanship here so what is the path
00:08:52
to bipartisanship when it comes to the
00:08:53
fiscal crisis I'm not sure wouldn't the
00:08:55
obvious thing be if one party wins with
00:08:58
that as part of their platform then it
00:09:00
becomes part of the winning platform and
00:09:02
the winning formula or we're just saying
00:09:03
that's not even possible because it's
00:09:04
too unpopular to tell people that they
00:09:06
don't get free money I think it's
00:09:08
political suicide for one party to
00:09:10
engage in deep Cuts deep government Cuts
00:09:14
deep cuts of programs especially popular
00:09:15
programs he'd probably cut the unpopular
00:09:17
ones at the margins but
00:09:19
political suicide to cut anything
00:09:21
important without having the other party
00:09:23
on board there's been a couple of times
00:09:24
where we've been able to have this type
00:09:26
of consensus
00:09:27
I mean the one that always gets
00:09:28
mentioned is when Reagan and Tip O'Neill
00:09:30
cut a deal
00:09:32
and they were able to reform
00:09:34
entitlements and make some changes to
00:09:36
those programs and they kind of did it
00:09:37
arm and arm
00:09:39
and that worked and then the other time
00:09:41
where it kind of happened
00:09:43
not through agreement but almost through
00:09:45
lack of agreement was when we had the
00:09:47
sequester remember when Obama was
00:09:49
President and what happened is the
00:09:51
Democrats and
00:09:53
the Republicans worked out a deal where
00:09:54
if they couldn't agree you would get
00:09:57
equal Cuts in both military spending and
00:10:00
social spending the idea being that
00:10:03
Republicans wanted the military spending
00:10:04
the Democrats wanted the social spending
00:10:06
and that's ultimately what happened is
00:10:08
that they couldn't agree and so you got
00:10:10
the sequester and we had some spending
00:10:12
restraint for a short period of time the
00:10:14
problem now is that both Republicans and
00:10:17
Democrats want more military spending I
00:10:20
don't hear anybody really argue for
00:10:22
cutting military spending except for
00:10:23
maybe rokana at our event but
00:10:26
the Democrats are completely on board
00:10:28
with war now and then on the social
00:10:30
spending I don't think either party
00:10:31
really wants to cut Social spending
00:10:32
either or do entitlement reform so there
00:10:35
is no constituency
00:10:36
out there for reigning in
00:10:39
the biggest sectors of government
00:10:40
spending so I don't see how it's going
00:10:42
to happen no matter who the president is
00:10:44
well the fourth thing function will be
00:10:46
the debt service costs which is just
00:10:48
crossed a trillion dollars a year just
00:10:49
to pay the interest and it's mounting
00:10:51
right 30 of our debt I think is coming
00:10:53
up for refinancing in the next 12 months
00:10:56
and that's going to refinance at a five
00:10:57
percent rate because that's where the
00:10:58
markets are at just like consumers can
00:11:00
ignore it Friedberg and put their
00:11:01
fingers in their ears and say la la la
00:11:03
la I don't have to worry about my
00:11:05
payments then the payments show up and
00:11:07
you've got to worry about them same
00:11:08
thing's going to happen here in the US
00:11:09
right the federal budget will get
00:11:11
naturally constrained at some point here
00:11:13
but yeah as The Economist service Stein
00:11:15
once said if something can't go on
00:11:17
forever
00:11:18
it won't so I think I think you're right
00:11:20
Friedberg
00:11:22
it's not Yogi Bears I think yeah if
00:11:25
something can't go on forever it won't I
00:11:27
think that that's where we're headed is
00:11:29
we're going to have restraint impose on
00:11:31
us from the outside it's not going to
00:11:32
come from Washington people stop buying
00:11:35
treasuries interest rates just have to
00:11:37
go up to what's happening in Japan right
00:11:39
I mean their bond auctions have uh been
00:11:41
very um
00:11:42
lukewarm and supposedly a lot of the
00:11:46
money in Japan is coming West looking
00:11:48
for opportunities to get Alpha so we
00:11:51
have an example that we can look to all
00:11:53
right let's get we can get started here
00:11:54
we have so much to talk about I think we
00:11:56
got to give some flowers here last year
00:11:59
the Sultan of science the prince of
00:12:00
panic attacks the queen of quinoa was an
00:12:03
absolute Terror when I did the all in
00:12:06
Summit 2022 and then this year he was an
00:12:09
absolute All-Star and Delight what an
00:12:12
amazing job you did on the content
00:12:14
people are saying the content that all
00:12:16
in Summit 2023 is the best conference
00:12:18
ever had Bill Gurley got a four minute
00:12:20
ovation
00:12:21
that talk is on YouTube Elon Musk
00:12:25
star LinkedIn from uh forty thousand
00:12:28
feet he crushed it Toby was fantastic
00:12:31
Ray dalio Larry Summers Mr Beef Beast
00:12:34
Gwyneth Paltrow the bow Tes sisters
00:12:37
which we did a pretty good show and I
00:12:39
have to say a great job to sax and
00:12:42
Friedberg uh who who held the line with
00:12:44
the bow Test sisters in our group chess
00:12:48
Brian Armstrong
00:12:49
who am I missing here I mean what an
00:12:52
incredible lineup
00:12:53
Nicole Polk Rock Anderson Jenny just Rob
00:12:57
Henderson
00:12:58
I mean extraordinary let me just go
00:13:00
around the horn chamac your
00:13:03
what what
00:13:04
um discussion
00:13:07
or moment pick your choice there
00:13:10
for you was the most intellectually
00:13:12
engaging and important
00:13:14
at the summit you can mention two or
00:13:15
three if you like
00:13:17
I thought number one were my outfits
00:13:20
pretty great I mean you did do an alpha
00:13:22
change twice a day so congrats on that I
00:13:25
like this Fortune a really good job with
00:13:27
that I do agree I agree did you guys get
00:13:30
the special shoes from Laura Piana oh my
00:13:33
God the king's cashmere loafers yeah
00:13:35
those are ridiculous I'm wearing them as
00:13:36
we speak actually I wore them they're
00:13:38
out of night and I can you wear them yet
00:13:40
socks yeah yeah those are the most
00:13:44
incredible shoes clouds
00:13:46
ten pairs or something and yeah and we
00:13:49
got four special for us yeah then I get
00:13:51
back to the Beverly Hills Hotel the
00:13:53
sweet
00:13:54
that freyberg booked me a beautiful
00:13:56
sweet thank you Freeburg and there is a
00:13:58
Laura shafted me on my room what what
00:14:02
yeah let me put you by the garage no I
00:14:05
got a room that was
00:14:07
well it's very appropriate that these
00:14:09
rooms exist but it's handicap accessible
00:14:11
which totally fine except the problem is
00:14:13
the the closet and everything is set for
00:14:16
wheelchair height why didn't you change
00:14:18
your room dude and so all Mike and so I
00:14:20
thought oh he just [ __ ] me on purpose
00:14:21
he just tried to control your little
00:14:23
passive aggressive name check so all
00:14:25
right you guys got some work to do in
00:14:27
the group therapy chat I would never do
00:14:29
that to you guys don't worry when I when
00:14:31
I organize this Summit I'll make sure
00:14:32
these details are perfect I fly onto
00:14:34
moth's plane he has gluten-free Nutella
00:14:36
crepes handmade in the morning and I
00:14:38
stick him in a handicapped accessible
00:14:39
room where he can't even put his bag I
00:14:41
mean and I can't put my clothes except
00:14:43
without it touching the ground so then I
00:14:45
had to play them on the bed and then I
00:14:46
had to lay them on this is my first
00:14:48
world problems yeah the audience right
00:14:50
now is just triggered by the suffering
00:14:53
that you went through at the Beverly
00:14:54
Hills Hotel my honest reaction was I
00:14:56
thought the content was really inspiring
00:14:58
I guess it's kind of like
00:15:00
I knew what I was going to get up front
00:15:01
with so many of the folks because I knew
00:15:03
them but then where I still came away
00:15:05
where they exceeded my expectations
00:15:07
number one probably was Graham Allison
00:15:10
oh I could literally talk to him for
00:15:13
eight hours a day I feel like and I
00:15:16
don't know him well so I felt like I was
00:15:18
scratching the surface of the things
00:15:19
that he knew I could do an entire dinner
00:15:22
I think where he could just walk through
00:15:23
the Cuban Missile Crisis and I could
00:15:25
just sit there listening so I thought he
00:15:27
was unbelievably
00:15:29
intellectually
00:15:30
stimulating for me
00:15:33
every time I sit down with Toby
00:15:35
I'm just like in awe of how smart and
00:15:39
different Toby lootkey is
00:15:42
and so I always kind of like walk away
00:15:44
thinking this is really one of the very
00:15:47
special entrepreneurs of Our Generation
00:15:49
just in terms of his mindset underrated
00:15:51
I thought Larry had the line of the
00:15:53
summit Larry Summers
00:15:55
Rory said
00:15:57
self-esteem
00:15:59
should come from Achievement and not the
00:16:02
opposite which is that achievement
00:16:04
should come from self-esteem and he was
00:16:05
talking about
00:16:07
wokism and sort of like the entire
00:16:10
philosophy around that stuff right now
00:16:12
and I thought that that was really
00:16:13
insightful those are probably the three
00:16:15
moments I thought girlie's obviously
00:16:16
presentation was superb but again it's
00:16:19
kind of like saying the obvious because
00:16:20
it was just so master class but the the
00:16:22
from what I expected to what I got those
00:16:25
were the three that I thought were the
00:16:26
most
00:16:27
inspiring and net new positive for me
00:16:30
fantastic sax did you have any moments
00:16:33
aside from Gwyneth Paltrow saying she
00:16:35
was your favorite bestie other than that
00:16:38
being the Claire number one for you and
00:16:40
crushing soul-crushing for us I've never
00:16:43
even heard that because the uh sound
00:16:46
issues we had technical issues during
00:16:48
her interview and it got really hard to
00:16:50
hear her at various points and I don't
00:16:52
think you guys heard that either right
00:16:54
I heard it I tried to ignore it I tried
00:16:56
to block it I couldn't I couldn't hear
00:16:58
it so I didn't know that yeah well
00:17:00
congratulations can we uh can we chew
00:17:02
that up right here no we're not doing
00:17:03
Victory Laps on the Pod we talked about
00:17:05
this on the chat no I mean that's
00:17:07
awesome go go for it I want to hear it
00:17:08
yeah
00:17:18
oh my God
00:17:21
no is that his her husband thinks that
00:17:23
she is attention
00:17:31
oh
00:17:33
oh this is not good
00:17:34
David is incredible oh the husband's
00:17:37
jealous that's not a good situation for
00:17:40
you sex after that what did you like sex
00:17:42
be honest you I I want to also give
00:17:44
credit to David sacks who um showed up
00:17:47
for every talk
00:17:49
and Friedberg said uh Jake out the issue
00:17:53
I said well anything I can help he said
00:17:54
oh well actually uh the issue is I asked
00:17:57
David sax to show up at 8 45 for the run
00:17:59
through and he um he won't respond to me
00:18:01
can you can you get in touch with him I
00:18:02
said let me tell you what's going to
00:18:03
happen with David sacks program's going
00:18:05
to start at nine he'll be here at 8 56.
00:18:08
and if you get him on stage for two out
00:18:10
of three talks you did better than I did
00:18:13
and friedberg's team which God bless the
00:18:16
production board team they did an
00:18:18
amazing job these Wolverines are
00:18:19
incredible shout out to Laura
00:18:22
Rachel and everybody on the team there
00:18:24
they did a fantastic job
00:18:26
and sure enough Zach shows up at 8 56
00:18:28
goes on stage and he crushes it so great
00:18:31
job uh getting him on stage but congrats
00:18:33
on showing up first well they wanted me
00:18:35
I mean I asked when's the first Speaker
00:18:36
going on stage yeah actually it was 10
00:18:39
a.m right 10 a.m sorry 10 10 10. so I'm
00:18:42
like okay in my head I'm thinking okay
00:18:43
I'll be there at 9 59.
00:18:56
[Laughter]
00:19:07
look I thought the conference was
00:19:09
amazing it exceeded my expectations
00:19:12
your conference exceeded my expectations
00:19:14
too Jake out but I think fever took it
00:19:16
to another level and yes he did exceeded
00:19:18
my my already high expectations yeah you
00:19:20
know highlights I mean I think starting
00:19:22
with Ray dalio as the first speaker was
00:19:24
really interesting I think we only got
00:19:26
to go for what 30 40 minutes with him I
00:19:28
felt like we could have gone for two
00:19:29
hours yeah I'll have to bring it back on
00:19:31
the Pod and
00:19:32
you know drill into that topic more two
00:19:35
hours with dalio would be amazing
00:19:37
because I think what's really
00:19:38
interesting is the way that he's looking
00:19:40
at the Grand sweep of History right he's
00:19:42
thinking about not just a 10-year
00:19:44
business cycle or a 75-year debt cycle
00:19:47
he's looking at a 250-year Empire Cycle
00:19:50
I think this is really interesting that
00:19:52
he thinks in that really big way
00:19:54
I agree Graham Allison really
00:19:56
interesting we could have spent two
00:19:57
hours with him Larry Summers these are
00:19:59
all people I think we should bring back
00:20:00
on the Pod for a long-form conversation
00:20:04
I agree that bill gurley's talk was one
00:20:06
of those great Ted style talks that I
00:20:09
think should go viral I think it has you
00:20:11
know I think 200 million people should
00:20:13
watch that yeah I mean the people
00:20:14
retweeting it are incredible and I was
00:20:16
at a dinner party last night and
00:20:18
everybody was talking about it so it's
00:20:20
it's spread into our industry and it's
00:20:22
starting to tip over into other
00:20:23
Industries already the chess was really
00:20:25
fun I am a game day player that way you
00:20:27
know I I brought it and managed to win
00:20:30
the game else
00:20:34
I know there are a lot of Great Moments
00:20:35
I'm sure forgetting about things I love
00:20:37
that I love that yeah the parties were
00:20:39
incredible right now
00:20:42
the parties were absolutely incredible
00:20:43
we missed both of you guys at the Grimes
00:20:45
DJ set that was amazing by the way I
00:20:47
think chamato's there for that weren't
00:20:49
you there no I left right at 10 to fly
00:20:51
back to the Bay Area early night yeah I
00:20:54
got it yeah she Grimes thank you to
00:20:56
Grimes for doing that for me a personal
00:20:58
favor uh the audience lost their minds
00:21:00
Santa Monica she was incredible she's
00:21:02
such a performer it's incredible yeah
00:21:04
people were losing their minds uh for
00:21:07
you Freiburg uh best moments uh on stage
00:21:09
it was just great to be with everyone
00:21:11
and go through it I mean honestly I
00:21:12
didn't Source all these speakers you
00:21:14
guys did and so I don't want to take
00:21:16
credit for that I think it was what I
00:21:18
had hoped you know I went to Ted for 12
00:21:20
years I started going to Ted I think
00:21:21
2007 and I felt pretty disappointed over
00:21:24
the last couple of years and I actually
00:21:26
spoke to the CEO of Ted and said I'm not
00:21:29
going to go anymore because so much of
00:21:31
this the talks became kind of social
00:21:34
justice type talk nonsense I wouldn't I
00:21:37
don't want to use that term because I do
00:21:39
think it's all very well intentioned and
00:21:40
I think it just became overwhelming that
00:21:43
you would go to Ted and you would
00:21:44
basically
00:21:45
feel bad about yourself
00:21:48
and that it kind of missed the element
00:21:49
of the world is an amazing place we
00:21:52
should have a great degree of optimism
00:21:53
with technology and where it's taking us
00:21:55
we should observe the greater cycle and
00:21:57
the bigger perspective of things that
00:21:59
are happening in the world not kind of
00:22:01
go into them who done it and who's to
00:22:03
blame and US versus them kind of
00:22:05
mentality which I think so much of this
00:22:06
stuff turned into at Ted and I was
00:22:08
really hoping we could capture some of
00:22:10
that and so I'm really glad we got a lot
00:22:12
of the speakers we did and had a couple
00:22:16
hours to be able to share you know those
00:22:18
sorts of perspectives so it was fun I
00:22:21
really enjoyed what you did with the
00:22:22
conference in terms of the editorial
00:22:24
Direction was great you leveled it up
00:22:26
certainly from last year as Tremont
00:22:27
pointed out correctly and it had a great
00:22:30
amount of optimism realism
00:22:32
and we didn't talk about Superfluous
00:22:35
virtue signaling
00:22:37
social justice woke nonsense that really
00:22:40
is should not be at the top of the
00:22:42
agenda in my mind I'm not saying that
00:22:44
these issues are not important to some
00:22:46
people but I think prioritizing what's
00:22:49
important in the world is what I got out
00:22:50
of the conference you know when you have
00:22:52
people on this level
00:22:54
speaking for for you know very long
00:22:56
periods and not long enough but you know
00:22:59
that Larry Summers and and you know
00:23:05
they really gave you a sense of this is
00:23:08
what's important in the world right now
00:23:10
this is the priority and I came away
00:23:13
from it so intellectually stimulated
00:23:14
that maybe just say hey you know I want
00:23:16
to travel more I want to read more I
00:23:18
want to have more conversations and I
00:23:20
have been basking in that like after
00:23:22
glow so I just want to say you know once
00:23:24
again
00:23:25
what an extraordinary uh amount of
00:23:27
teamwork just as the moderator of our
00:23:30
quartet I felt everybody did a great job
00:23:33
moving the ball around I think everybody
00:23:35
was on their game everybody you know I'm
00:23:37
talking about the three of you guys
00:23:39
we're very focused on just knowing
00:23:41
exactly when to insert a great question
00:23:43
so I felt like we were playing
00:23:44
basketball like the Warriors when they
00:23:46
play Prime basketball ball moved really
00:23:49
well great questions people picking up
00:23:52
on themes threading themes from one talk
00:23:54
to the other and it just made me really
00:23:56
excited for next year so I just want to
00:23:58
say a great job to each of you
00:24:00
thank you back at you yeah back at you
00:24:03
listen uh we could talk about ourselves
00:24:04
all day but people hate that let's talk
00:24:07
about what's going on in the markets
00:24:08
yeah we only did it for 40 minutes
00:24:10
perfect okay yeah exactly IPO is an m a
00:24:13
on fire we've had a ridiculous week
00:24:16
six quarters of down Market has suddenly
00:24:19
turned into a bunch of green shoots on
00:24:23
the m a front Cisco announced it
00:24:26
acquired Splunk for
00:24:28
20 billion dollars in an all-cash deal
00:24:31
if the notes are correct here it's about
00:24:33
10 of Cisco's market value somebody did
00:24:36
a trade where they they bought a bunch
00:24:38
of options and uh so that looked a
00:24:40
little fugazi congratulations to Nancy
00:24:42
Pelosi on that trade possibly
00:24:45
and actually don't forget your favorite
00:24:47
word allegedly allegedly allegedly
00:24:50
perhaps I don't know she's good at
00:24:52
trades so if somebody's going to make
00:24:54
money on that trade or somebody's going
00:24:55
to jail
00:24:56
so congrats to shkreli instacart clavio
00:24:59
and arm all ipoed in the past week
00:25:04
and you know they've Fallen back to
00:25:06
Earth
00:25:07
just crazy stat 21 months since the last
00:25:11
significant Venture back company went
00:25:13
public I'll leave out like the Middle
00:25:15
Eastern food company was that Cava that
00:25:17
went public and then the vacuum company
00:25:20
that went public but that's just in the
00:25:22
past seven days so we talked about this
00:25:24
on the program we discussed hey we'll
00:25:26
know when the markets are back if some
00:25:29
of these companies are forced to walk
00:25:31
the plank slash get public you know and
00:25:35
fix their cap tables and sure enough
00:25:37
instacart really kind of represents that
00:25:38
most most of the late stage investors in
00:25:41
instacart are underwater the early stage
00:25:43
folks absolutely crushed it chemov
00:25:46
listen you're you're uh Market expert
00:25:49
here you've taken a lot of companies
00:25:51
public
00:25:51
what do you think the last week means
00:25:54
for the greater technology industry I
00:25:57
don't think that this was the great
00:25:59
reopening that we all were hoping for
00:26:04
I think it's important to understand the
00:26:06
Dynamics of
00:26:07
bank-led traditional IPOs in America and
00:26:11
the best way to understand them is to
00:26:14
contrast and compare to how that same
00:26:16
company would go public in Europe or
00:26:18
Asia because it'll explain what what
00:26:20
happened and I think unfortunately what
00:26:22
has happened is not good for the market
00:26:23
so typically what happens is when you
00:26:26
construct an IPO you're selling 15 to 20
00:26:29
percent of the company
00:26:31
and when you do that you go and you call
00:26:34
hedge funds and you call these mutual
00:26:36
funds but what are called long onlys
00:26:38
right meaning they don't short they just
00:26:40
go long these big mutual fund companies
00:26:42
and you try to find a handful of people
00:26:44
to Anchor the IPO so they take a huge
00:26:47
piece of that 15 to 20 percent
00:26:50
and in Europe and Asia the Securities
00:26:52
Law says that when you get such a big
00:26:54
allocation
00:26:55
you have to hold it for six months which
00:26:58
means you're treated exactly the same as
00:27:00
the employees who are typically locked
00:27:03
up in an IPO for at least six months
00:27:06
and so what happens is these firms do
00:27:09
all kinds of diligence
00:27:11
and when they buy something it's because
00:27:13
they really believe in it and then they
00:27:15
go along it for you know what is at
00:27:17
least half a year so it's a it's a
00:27:18
non-trivial amount of time
00:27:20
so that's what happens in Europe and
00:27:22
Asia 15 to 20 of the company is sold a
00:27:24
handful of people anchor and you're
00:27:26
locked up for six months now you need to
00:27:28
look at how American IPOs are done which
00:27:31
is why people have experimented with
00:27:32
direct listings
00:27:34
we've experimented with spax it's
00:27:36
because the fundamental architecture of
00:27:38
IPOs are broken
00:27:40
they're set up in a dynamic where it's a
00:27:44
heads I win tails you lose situation for
00:27:47
the bankers that run the IPO now what
00:27:50
happened in these three IPOs
00:27:52
number one it was less than 10 percent
00:27:54
of the float so highly highly highly
00:27:57
concentrated small amount of the of the
00:28:00
company was made available for sale
00:28:03
number two there really weren't anchors
00:28:06
what happened was the allocation of that
00:28:09
less than 10 percent was smeared across
00:28:11
50 or 60 different organizations and
00:28:15
then number three there was no lockup
00:28:16
which meant that people could sell right
00:28:18
away
00:28:19
and so what you saw with all of these
00:28:21
companies was the exact same Dynamic
00:28:23
which was it opened
00:28:25
because there was such a small amount of
00:28:27
Supply it traded up and the minute that
00:28:30
retail which typically tends to be late
00:28:32
to the game because they don't have
00:28:33
access to these things right when they
00:28:36
started buying
00:28:37
what was unique this time around is all
00:28:39
of the mutual funds just dumped
00:28:41
everything hmm
00:28:43
and the hedge funds were like well we
00:28:45
don't have a real allocation our friends
00:28:46
said in the group chat he got a five or
00:28:49
ten million dollar allocation in these
00:28:50
IPOs
00:28:51
these are 20 and 30 billion dollar hedge
00:28:54
funds five and ten million dollar
00:28:55
allocations don't move the needle so the
00:28:57
hedge fund sold right away and got on
00:28:59
the sidelines and said I don't care
00:29:00
about this
00:29:02
the long onlys bought just enough to
00:29:04
make the stock go up because of such a
00:29:06
small Supply then when retail stepped in
00:29:07
they just dumped it all
00:29:10
and so unfortunately what's happened is
00:29:12
all three IPOs within a few days have
00:29:15
breached their issue price now they're
00:29:17
at the same issue price may be slightly
00:29:19
higher but that is an unsuccessful
00:29:22
Dynamic what could have been different
00:29:24
the banks could have
00:29:26
forced these companies to sell up to 20
00:29:28
the banks could have found a few anchor
00:29:31
buyers the banks could have created a
00:29:34
lockup structure for these anchor buyers
00:29:35
they did none of it
00:29:37
and so the result is a lot of downward
00:29:40
pressure
00:29:41
in a moment where the overhang of rates
00:29:43
has have come back and are forcing all
00:29:46
of us to realize and we'll talk about it
00:29:48
in a second that these rates are going
00:29:50
to be higher for longer which completely
00:29:51
changes how you value these tech
00:29:53
companies so
00:29:54
net net very poor IPO construction by
00:29:58
the Banks and this the grand reopening
00:30:02
was a grand closing I think okay so just
00:30:04
to put some numbers on that instacart's
00:30:06
flow it was 6.7 and clavia's Float 7.6
00:30:09
arms load almost hit the 10 9.4 but
00:30:12
certainly less than the 20 that you
00:30:14
would expect so then I guess the
00:30:16
follow-up question here sax is why did
00:30:19
these companies go out and do will we
00:30:23
see the the other big ones go out the
00:30:25
stripes uh and some of the other backed
00:30:27
up inventory what's what's the back
00:30:29
channel in our industry about the
00:30:31
viability of other IPOs is this going to
00:30:33
push a lot more people out to get
00:30:34
liquidity even at discounted prices even
00:30:37
with the headwinds that jamath points
00:30:39
out or is this going to have a chilling
00:30:40
effect and people are going to say you
00:30:42
know what let me wait till 2025. so I
00:30:44
think they went out because investors
00:30:46
and others need liquidity and there's no
00:30:49
point holding on and waiting for
00:30:50
evaluation that's never going to come
00:30:51
back I mean so you take instacart for
00:30:54
example their last private round was at
00:30:56
39 billion what's the market cap now
00:30:58
around 10. nine nine so it's great that
00:31:01
they got out I I think I know it's at
00:31:03
eight today two said eight I mean that
00:31:05
look it's sort of a green shoot that
00:31:06
they got out but we're never going back
00:31:09
to the evaluation level so we had a
00:31:11
couple of years ago during a giant zurp
00:31:14
created asset bubble so I just think
00:31:16
there's no reason to wait and you look
00:31:18
at SoftBank they needed the liquidity
00:31:20
from the arm IPO yeah so I think that's
00:31:22
why these companies are going out is
00:31:24
it's we're kind of getting back to
00:31:25
business as usual just to broaden out
00:31:27
the question a little bit
00:31:29
what I think is interesting is that for
00:31:32
the past year or so we've been in a
00:31:34
software recession it really started in
00:31:36
the first half of 2022 the Market's
00:31:38
Creator especially for growth stocks
00:31:40
there's a huge correction evaluations
00:31:42
that happened in especially the first
00:31:44
half of 2022 but then about a year ago
00:31:48
so starting in mid-22 and continuing
00:31:50
through Q2 of this year you saw a
00:31:54
reduction in growth forecasts everybody
00:31:56
started forecasting down
00:31:58
there wasn't a single board meeting that
00:32:00
I was in in private companies that
00:32:02
wasn't missing their numbers and
00:32:03
reforesting down and you saw it in the
00:32:06
public companies as well I think German
00:32:07
ball sub Stacks showed that the average
00:32:10
growth forecast for SAS companies for
00:32:14
next 12 months have been cut roughly in
00:32:16
half
00:32:17
so for the last year year and a half
00:32:19
we've been in a software session you
00:32:21
could brought say a B2B recession we saw
00:32:24
companies like meta Google and so on Cut
00:32:27
thousands of jobs
00:32:28
tens of thousands of jobs you know get
00:32:31
much more efficient yeah each that meant
00:32:34
they were buying a lot less software on
00:32:35
a per seat basis so I think we've been
00:32:38
through call it a B2B or Enterprise
00:32:41
recession but the thing that's held up
00:32:43
stronger than I think people might have
00:32:45
expected over the past year has been the
00:32:46
consumer consumer spending has kept the
00:32:49
economy afloat so the b2c part of the
00:32:53
economy has been strong whereas B2B has
00:32:54
been very weak what I wonder about next
00:32:57
is whether that's going to flip I wonder
00:33:00
if the consumer is on their last legs
00:33:03
here you see their credit card debt is
00:33:06
at an all-time high interest payments on
00:33:08
credit card debt all-time high mortgages
00:33:11
the rate now is approaching eight
00:33:13
percent so no one can afford to sell
00:33:15
their house which has a three percent
00:33:16
more mortgage and then buy a new one at
00:33:18
eight percent so real estate
00:33:20
transactions have cratered the
00:33:22
commercial real estate industry is you
00:33:25
know on its last legs I think they're
00:33:27
starting to throw the keys back to the
00:33:28
bank and start forfeiting buildings
00:33:29
because they can't refi at a attractive
00:33:31
rate so I just wonder if the consumer
00:33:35
now is about to go through the type of
00:33:37
pain and restructuring of their personal
00:33:39
balance sheets the way that the
00:33:42
Enterprise segment of the accommodate
00:33:43
over the past year Friedberg your
00:33:45
thoughts on what we're seeing here in
00:33:47
terms of the IPO window companies
00:33:50
getting out and and the impact that'll
00:33:53
have maybe on how limited partners look
00:33:56
at Venture funds that's been frozen for
00:33:58
18 months limited partners and I'm
00:34:01
raising a fund right now publicly under
00:34:03
506c so I can talk about it and it's
00:34:05
going great but man it's a lot of
00:34:07
meetings and I'd say two-thirds of the
00:34:10
meetings I'm having people are saying
00:34:12
we're not adding managers we're cutting
00:34:14
managers and we're cutting commitments
00:34:16
to managers but we'd love to meet you
00:34:18
know just to start the relationship you
00:34:19
know
00:34:20
so what do you think this means overall
00:34:22
for the
00:34:23
limited partner GPS and the startup
00:34:26
Market
00:34:28
star of a turnaround or maybe just
00:34:30
sideways for more I guess we should just
00:34:33
put the volume in context if you look at
00:34:37
the slide this is from Ernst young
00:34:39
showing the IPO activity by year and
00:34:43
this was through June 30th so if you
00:34:45
assume kind of a steady state
00:34:47
you probably are going to come in at a
00:34:49
volume that's less than 22 and and
00:34:51
perhaps even less than going back all
00:34:54
the way to 2019 with less than 1200 IPOs
00:34:57
during the year compared to the peak of
00:35:00
2400 which happened in 2021 if you go to
00:35:03
the next slide and just look at the
00:35:04
total dollar volume Rave so that IPO
00:35:06
proceeds thus far through June 30th of
00:35:10
this year is just around 60 billion
00:35:12
compare that to a total of about 180
00:35:15
billion
00:35:16
all of last year
00:35:18
450 billion in 2021
00:35:22
and the IPOs we're talking about today
00:35:24
instacart clavio
00:35:27
arm in total raised about five and a
00:35:30
half billion dollars so you know that
00:35:33
kind of
00:35:34
doesn't have a huge consequence on this
00:35:36
dollar volume for the year
00:35:38
and then if you look at what's in the
00:35:40
pipeline right now in terms of what's
00:35:42
publicly filed as s1s there's basically
00:35:45
nothing right now so I think everyone's
00:35:48
kind of sitting around waiting to see
00:35:50
how these transactions go before they
00:35:52
decide to put other stuff I think the
00:35:54
big mistake
00:35:55
is that we continue to treat IPOs as
00:35:58
this big yardstick
00:36:00
the real yardstick for a business is the
00:36:03
performance of the business
00:36:05
and the valuation you get when you raise
00:36:07
Capital at some point in time is largely
00:36:09
driven by market conditions not
00:36:11
necessarily by the performance of the
00:36:13
business and the value of the business
00:36:14
over time the market will do its job and
00:36:17
rightly value that company we've talked
00:36:19
at length about how much value has
00:36:21
accrued as a public company for Apple
00:36:23
for Microsoft for Google 99.9 of their
00:36:26
total market value with realized post
00:36:29
IPO so that the IPO transaction I think
00:36:32
it's a little too much weight and gets a
00:36:34
little too much attention in terms of
00:36:37
determining success or failure of a
00:36:39
business and success or failure of the
00:36:41
investors in that business so I really
00:36:43
hate this whole thing about does the IPO
00:36:45
price go up on a day it's this really
00:36:47
weirdly engineered thing that they try
00:36:50
and do to drive psychology and marketing
00:36:51
by Banks
00:36:53
the banks to try and get people to give
00:36:56
them more capital or to give them more
00:36:57
deals in the future do you think that
00:36:58
the IPO Market would be better served if
00:37:00
banks were forced to be locked or the
00:37:03
the allocations were forced to be
00:37:05
six-month flock like the employees of
00:37:07
course
00:37:09
maybe longer what if they what if they
00:37:11
were locked for 70. what do you think
00:37:13
well where would the float come from on
00:37:15
day one
00:37:16
but why do you need a flip
00:37:18
yeah I mean that's that's a good point I
00:37:20
I believe the direct listing should be
00:37:22
the way that you do this and then you do
00:37:23
a um a follow-on offering once you're
00:37:25
sharing the problem with the direct
00:37:27
listing
00:37:29
as I've found as a seller because I went
00:37:32
through a handful of direct listings I
00:37:34
went through slack and I went through
00:37:35
coinbase coinbase right yeah and in the
00:37:38
slack direct listing
00:37:40
I only sold a small portion on day one
00:37:44
and it turned out to be a a mistake and
00:37:47
the reason was because the pricing of a
00:37:49
direct listing forces you to find the
00:37:52
absolute highest price at the open
00:37:53
[Music]
00:37:55
now I we learned
00:37:57
that so then going into the coinbase IPO
00:38:00
what all the Venture investors did was
00:38:02
distributed
00:38:03
literally the day before and the day of
00:38:06
the direct listing right so that you
00:38:08
would get delivered your stock at the
00:38:10
highest price so that you could sell
00:38:12
I'm not sure that that serves
00:38:15
anybody any better you know what I mean
00:38:18
because then you get a lot of price
00:38:19
volatility and the price just goes
00:38:22
straight down
00:38:23
so I don't exactly know what the answer
00:38:25
is I suspect though that
00:38:28
getting companies to float at least 15
00:38:30
to 20 percent
00:38:32
and doing a better job of allocation so
00:38:34
that you're right David removing the
00:38:36
psychology of like it has to go up a
00:38:38
hundred percent on day one is success is
00:38:42
the thing that actually catches these
00:38:43
companies off guard now we haven't even
00:38:45
talked for a minute about whether any of
00:38:47
us thinks
00:38:48
the quality of instacart and clavio and
00:38:51
arm are good businesses and this is part
00:38:53
of it as well exactly you just spent 15
00:38:54
or 20 minutes debating the stock price
00:38:57
that is completely divorced from the
00:38:58
reality of these businesses and that's a
00:39:01
bunch of distraction that the banks
00:39:02
create as well that are that is totally
00:39:04
unnecessary I mean what do you guys
00:39:05
think about these businesses let me just
00:39:08
respond to the direct listing point I I
00:39:10
just want to also point out Spotify
00:39:12
went public via direct listing the stock
00:39:14
actually traded up after the direct
00:39:15
listing it went down a little bit after
00:39:17
but it continued to trade up you know
00:39:19
into the 2021 era and today it's trading
00:39:22
at or above what it was trading at
00:39:24
during the direct listing so can I tell
00:39:25
you why though the performance of that
00:39:27
business fundamentally drove interest
00:39:29
from investors the thing with the
00:39:31
Spotify IPO was that it was still a very
00:39:33
new vehicle and so that direct listing
00:39:35
was we were all learning as we went
00:39:37
along
00:39:38
and at the end of the day there was one
00:39:39
bank that kind of not cornered the
00:39:41
market but really became an expert on it
00:39:43
and they used Spotify as the example so
00:39:46
by the time Spock and then coinbase came
00:39:48
along the Playbook was so tight that
00:39:51
everybody knew how to play the game
00:39:53
so I think a lot of the Spotify post IPO
00:39:57
Behavior was a bunch of people figuring
00:39:59
out what a direct listing meant by the
00:40:01
time that we actually dl'd slack and
00:40:03
specifically when we dealed coinbase the
00:40:06
bank was so sophisticated in telling us
00:40:08
here's what's going to happen here's
00:40:10
what you should do what do you want to
00:40:11
do and obviously we wanted to do the
00:40:13
thing that maximized returns for our LPS
00:40:17
so I'm not sure that the Spotify example
00:40:19
will ever repeat in a direct listing I
00:40:21
think that the slack and
00:40:23
coinbase particularly will be the
00:40:25
example going forward you'll top tick
00:40:28
day one and then the thing will spear
00:40:29
down find a bottom and then why does
00:40:31
that matter what is isn't it ultimately
00:40:33
about finding the real market value for
00:40:34
the company yeah it doesn't matter it
00:40:36
doesn't matter that the price goes down
00:40:38
or goes up that ultimately the buyers
00:40:39
that want to pay a certain price will
00:40:41
step in and buy and the folks that want
00:40:43
to sell because they think the price is
00:40:44
higher than their Mark will want to say
00:40:45
I agree with you I do think that it's
00:40:47
really about business fundamentals but
00:40:49
there's a lot of people that
00:40:52
get caught up in the price as what the
00:40:55
quality of the business is now those
00:40:56
people are maybe not the most
00:40:58
sophisticated people in the world but
00:40:59
they make a lot of noise for not knowing
00:41:01
what's going on and so they can be a
00:41:03
real distraction to a CEO trying to run
00:41:05
a business I remember in 2008 I think
00:41:09
I've told you guys this story it was
00:41:10
like November of 2008
00:41:12
Expedia was trading down to seven bucks
00:41:14
and I saw Dara at some event in March
00:41:18
Yeah March and he said hey our Stock's
00:41:19
at seven bucks I can't believe it I mean
00:41:21
like everyone should be buying our stock
00:41:22
and that was well off of the price that
00:41:25
it had been trading at in 030405
00:41:29
and sure enough if you had bought that
00:41:32
stock you know you would have made 15x
00:41:35
from there to where we sit today and
00:41:37
even more if you sold at the top take in
00:41:39
2021. so you know these yeah that's a
00:41:42
that's a good chart so look at where
00:41:43
Expedia was in in March of 09 it was
00:41:46
right around seven bucks
00:41:48
and I think that that was for me like
00:41:50
the first example where I really
00:41:52
understood that the price where the
00:41:55
market trades a stock shouldn't matter
00:41:57
as much as the fundamental value of the
00:41:59
business if you're willing to be a
00:42:00
long-term holder if you're willing to
00:42:02
say and you're willing to do the work
00:42:03
and you have to do the work yeah most
00:42:05
people are not willing to do the work
00:42:06
they want to look at a price and then
00:42:09
they want to imbue all of their own
00:42:12
psychological desires into it versus
00:42:14
what are the actual ones and zeros of a
00:42:16
spreadsheet tell you yeah but I'm like a
00:42:18
pure efficient mark
00:42:20
never shared should be
00:42:22
a cell they should be able to sell
00:42:23
whatever people want to buy should buy
00:42:25
the market and if the stock gets too
00:42:26
cheap
00:42:27
there's plenty of capital out there to
00:42:29
step in and buy the stock if they think
00:42:30
that it's too cheap and the market can
00:42:32
find itself so let's do the underwriting
00:42:34
of instacart then were any of you guys
00:42:35
investors in instacart no they're
00:42:37
already I am in a fund that's an
00:42:39
instacart
00:42:41
from the seed round so I will do I think
00:42:45
very well because of that let's bleep
00:42:47
that out thank you uh that's that will
00:42:51
be a that'll be a yum yum for jaycal but
00:42:54
let's just talk about Revenue
00:42:56
when it trickles down all the way to you
00:42:58
as an LP what's the real multiple
00:43:01
I guess you know if you take out the
00:43:03
carry 25 or 30 percent less than uh what
00:43:07
looks like to be um the whole fun first
00:43:10
so yeah that that fund's been paid back
00:43:13
many times over already so that do you
00:43:15
know what the multiple is on that fun
00:43:16
for you yeah it'll it was eight million
00:43:18
invested
00:43:20
and uh no that's their investment that's
00:43:23
not your investment yeah what if you
00:43:26
look at your investment is that
00:43:28
investment is going to be uh 200x 100 or
00:43:31
200x somewhere somewhere in that range
00:43:33
I'll I will report back but I think the
00:43:35
seed round investors are going to be
00:43:36
hold on so so you're saying eight
00:43:38
million will become 1.6 billion I think
00:43:41
it's over a billion we can actually have
00:43:43
a chart here let's take a look uh let's
00:43:44
assume it's a billion 1.6 seems a little
00:43:46
high let's say a billion
00:43:48
but let's say the fund was what five six
00:43:50
hundred million
00:43:52
for the lp it's like a 2X
00:43:55
I'm just saying that yeah for the fund
00:43:57
it was 100x but for the lp it's a 2X I
00:44:00
think that's a big difference right the
00:44:01
Fun's already in the black so mitigating
00:44:04
factors okay so it's two extra turns of
00:44:07
your investment uh meaning if it was a
00:44:09
4X Jason he's saying that it'll become a
00:44:11
success yeah
00:44:13
yeah something like that yeah I mean
00:44:14
it's a good font I'm not disparaging it
00:44:16
but I just I'm just trying to set things
00:44:17
and put things in proportion I think I
00:44:20
think at this point that fund's at 21x
00:44:22
right now
00:44:23
something in that range so it's a pretty
00:44:25
great fund in in terms of total because
00:44:28
let's go to 23x something to that effect
00:44:30
yes it's going to be pretty amazing what
00:44:33
else was in there
00:44:38
Instagram
00:44:39
and WhatsApp were also in the fund
00:44:42
either before it or with it so they were
00:44:44
it's a pretty good fun there were two
00:44:45
funds uh I wouldn't say which firm this
00:44:48
is um what 12 and 24x I I believe is the
00:44:52
last time I checked them WhatsApp was a
00:44:54
monster that was a really well everybody
00:44:56
should learn from WhatsApp
00:44:58
um and you know shout out to the Sequoia
00:45:00
team douglioni I think and um they did
00:45:03
every round Jim Gastonia they did every
00:45:07
round so it was an internal round for I
00:45:09
think four rounds in a row so they just
00:45:11
made preemptive offers the reason
00:45:13
WhatsApp was a home run is because it
00:45:15
was so Capital efficient
00:45:17
yeah I didn't burn that much they didn't
00:45:19
raise that much so there's very little
00:45:21
dilution yep for everybody
00:45:27
let's pull up this uh chart here this is
00:45:30
super telling to pull up you know who
00:45:33
made money and I think this shows you
00:45:34
what happens in a certain environment
00:45:36
when people do not look at entry price
00:45:38
the series C underwater no no seriously
00:45:41
not underwater everybody from F on is
00:45:45
kind of underwater uh and everybody from
00:45:47
the series C is underwater compared to
00:45:50
the S P 500 to your point free uh free
00:45:52
bird even and then everybody who
00:45:54
invested in 2020 and 2021 actually lost
00:45:57
money General Academy DST D1 T row
00:46:01
Fidelity all the late stage folks even
00:46:03
Sequoia was in that late stage that
00:46:04
series I in 2021 but it was worth 39
00:46:07
billion
00:46:09
Not only was it bad for all the late
00:46:12
stage investors who invested at too high
00:46:14
a price I would argue that it was bad
00:46:17
for the companies and even their early
00:46:18
stage investors because these companies
00:46:20
got so inefficient the delicious yeah
00:46:24
yeah the solution was ridiculous I also
00:46:26
think you have to think about this in
00:46:28
the context of what your alternative
00:46:31
returns are I think that we always look
00:46:33
at these numbers and we think we try to
00:46:35
make judgments but if you put yourself
00:46:37
into the mindset of the of an investor
00:46:40
it's actually the alternative of what
00:46:43
you could have gotten and it's the
00:46:44
spread between the two that's really
00:46:46
important so Nick do you want to just
00:46:47
throw up this image that I just sent you
00:46:49
this is an example that I saw in axios I
00:46:51
thought that this visualization by the
00:46:53
way I want to try to use this
00:46:54
visualization in the future because it
00:46:57
tries to really it just paints available
00:47:00
this picture shows is essentially and
00:47:03
this uses instacart as an example but
00:47:05
you could use it for any company but it
00:47:07
just basically shows you at every point
00:47:09
in which you could have invested money
00:47:10
in instacart
00:47:11
what would the equivalent return have
00:47:13
been had you just invested that same
00:47:15
amount of money in the S P 500 and the
00:47:18
difference between that is what you
00:47:19
would call the alpha right because the S
00:47:22
P 500 is the beta meaning it is what the
00:47:26
Market's going to do it'll be up 10
00:47:27
it'll be down four percent whatever and
00:47:30
so by owning the market
00:47:32
you get that
00:47:33
if you decide to not own the market and
00:47:35
make an explicit decision like owning
00:47:37
instacart then you get a different
00:47:39
return stream and if you compare the two
00:47:40
you know how much better or worse you
00:47:42
would have been
00:47:43
so what this chart shows for example is
00:47:45
the series F investor in 2018
00:47:48
if you had taken a dollar and put it
00:47:50
into instacart would have gotten 13 but
00:47:52
if you had put a dollar into the S P 500
00:47:55
you would have gotten 68 percent
00:47:57
in the series C in 2015 had you invested
00:48:01
a dollar in instacart you would have
00:48:02
made 153 percent
00:48:05
but the s p would have returned 121. the
00:48:08
difference means that the series C
00:48:10
investor generated about 32 Alpha
00:48:15
now then the decision you have to make
00:48:17
is that 32 percent of incremental gain
00:48:21
over the last
00:48:23
seven years or eight years
00:48:26
was it worth it because you're not
00:48:28
liquid and because you have to then
00:48:30
solve for illiquidity and other things
00:48:32
and this is the math that I think all of
00:48:34
the LPS will be engaged in they'll be
00:48:36
doing these calculations it just goes
00:48:39
back to what Sax's Point said which is
00:48:41
our business frankly did very well in
00:48:44
moments where we had zero interest rates
00:48:47
our business now when
00:48:49
prevailing rates are at five or six
00:48:51
percent
00:48:52
and you can own those things or you can
00:48:55
own structured credit for 11 to 13 our
00:48:58
business unfortunately does not look so
00:48:59
good and when people do the calculations
00:49:01
on what the true Alpha of venture
00:49:03
capital is they're going to come back
00:49:05
with answers like this which is it's not
00:49:07
that great
00:49:09
and I do think it will impact how
00:49:11
limited partners have an appetite to
00:49:14
give all of us or you guys folks that
00:49:16
are that are accepting LP checks more
00:49:18
money because the alternative universe
00:49:21
is more liquid
00:49:23
it's less volatile
00:49:25
and it has roughly the same amount of
00:49:27
return I can tell you what they're
00:49:28
saying because I'm doing about a dozen
00:49:31
LP meetings a week and I've got 50 more
00:49:34
on the calendar until the end of the
00:49:35
year so I'm going to hit 100 of these
00:49:36
meetings they're really saying two
00:49:38
things one we want to go earlier we
00:49:39
don't want to go later as that chart
00:49:41
proves they're suddenly fascinated with
00:49:43
the seed in series a rounds and they're
00:49:46
looking for distinctly different
00:49:49
strategies uh they're looking for some
00:49:52
sort of edge so the first two questions
00:49:54
are how early are you getting in and
00:49:56
securing a 10 position in this company
00:49:58
and then what's your Edge and literally
00:50:00
the start of my pitch deck now when I
00:50:03
walk people through it is I have two
00:50:05
podcasts one of them gets 50 million
00:50:07
lessons a year the other one gets over
00:50:08
50 million listens a year those 100
00:50:10
million listens result in 20 000
00:50:12
applications I have larger deal flow
00:50:14
than anybody with the only exception
00:50:16
being Y combinator and that resonates
00:50:19
with books um but if you're somebody
00:50:21
who's got a new fund and you're like
00:50:22
what's your what's your Edge yeah I go
00:50:25
to you know some demo days that's not an
00:50:28
edge you have to have a massive
00:50:30
Competitive Edge and a differentiate you
00:50:33
have to be differentiated in some very
00:50:36
credible believable way and they're
00:50:37
telling me the same thing they're
00:50:39
cutting two funds out of their 20 and
00:50:41
then they're cutting their commit
00:50:42
commitments to the weaker ones of the
00:50:44
other 18. I have a question for all of
00:50:46
you guys you had a wonderful question
00:50:47
which we never touched guys what do you
00:50:48
guys think about the arm business model
00:50:51
or the clavio business model have you
00:50:54
guys had a chance to look at any of
00:50:55
those companies and think about that
00:50:56
yeah I'll meet you up the facts and then
00:50:57
you guys respond the revenue is up 15
00:51:00
year-over-year 716 million ad revenues
00:51:03
206 million that's on Pace to make up 28
00:51:06
of their revenue this is just the last
00:51:08
quarter I'm talking about it right here
00:51:10
end of June 30th net income 114 million
00:51:12
they have 600 000 instacart Shoppers
00:51:14
those are like uh the drivers you can
00:51:17
think of them like doordashers or Uber
00:51:18
drivers 7.7 million monthly active
00:51:20
orders the red flags is that their gross
00:51:23
transaction volume which is the value of
00:51:25
all of the groceries in the in the bags
00:51:27
uh is flat but ad revenue is growing
00:51:30
this means ad revenue is a just a
00:51:32
massively larger percentage of the total
00:51:34
revenue they think they can you know
00:51:36
they're on track for 800 million in ad
00:51:37
Revenue so this is starting to look not
00:51:39
like a e-commerce business but more like
00:51:41
a
00:51:42
an advertising business your thoughts
00:51:44
Freiburg or socks on the actual car
00:51:47
business yeah Amazon by the way has that
00:51:48
Dynamic too now have you seen the charts
00:51:51
showing advertising on Amazon compared
00:51:53
to the entire internet yes it's huge and
00:51:56
also Uber's blown past a billion I
00:51:58
believe here's what we know we know that
00:52:00
advertising multiples broadly speaking
00:52:02
have contracted
00:52:04
right so I think that the market in
00:52:05
general
00:52:06
doesn't love that Revenue quality
00:52:09
because it's too levered to interest
00:52:11
rates in the economy so when the economy
00:52:13
does well more companies advertise when
00:52:15
the economy doesn't do well companies
00:52:17
advertise less
00:52:19
that's number one and number two the
00:52:22
ones that can systematically drive
00:52:23
advertising more broadly
00:52:25
the Facebooks and the Googles of the
00:52:26
world tend to get an increasing share so
00:52:29
advertising as a revenue stream I think
00:52:30
is is good and complementary
00:52:32
unfortunately the markets don't
00:52:34
necessarily love it
00:52:36
and then the second thing generally
00:52:37
speaking for these businesses that drive
00:52:40
huge gtbs gross transaction values is
00:52:43
I think most people when they try to
00:52:45
find what they're worth
00:52:46
are very sensitive to the take rate
00:52:49
and what they typically do is they
00:52:51
assume a falling take rate which means
00:52:54
what percentage of the transaction can
00:52:56
you get and the reason why most people
00:52:58
do that is that history has shown that
00:53:00
these kinds of businesses
00:53:02
cannot defend take rate for a very long
00:53:05
period of time
00:53:07
whether it's for competitive pressure or
00:53:09
whether it's because their suppliers
00:53:11
actually develop more pricing power
00:53:14
take rate tends to decay
00:53:16
so said in you know in grocery land I
00:53:18
think it's because Walmart and
00:53:21
Amazon
00:53:22
will try to do it for much much cheaper
00:53:25
and or charge
00:53:27
just be more aggressive in how much they
00:53:30
they want to keep which means it's less
00:53:33
that you can maybe necessarily pass
00:53:34
through I don't know the instacart
00:53:36
business at all but if I were starting
00:53:37
to look at it that's where I would focus
00:53:39
is what are the assumptions on take rate
00:53:41
and if the take rate is going up had it
00:53:44
would be a little bit of a head
00:53:45
scratcher I think that you have to model
00:53:48
the health of the business with a
00:53:50
declining growing share yeah I can
00:53:52
actually build on that pretty easily
00:53:53
having spent a long time in the
00:53:55
advertising Market if this was very
00:53:56
profitable advertising to math it would
00:53:59
get a 25 x multiple on earnings let's
00:54:03
take that 800 million you put it at 400
00:54:05
million in profits like if the other
00:54:07
business didn't exist so you have 400
00:54:09
million in profits of advertising times
00:54:10
that by 20 you get 8 billion
00:54:13
that's exactly there market cap so it
00:54:16
perhaps what you're saying is exactly
00:54:19
what the market is is actually penciling
00:54:22
out uh Google which obviously has a lot
00:54:24
of other Technologies I think a 28x PE
00:54:26
and Facebook is crushed it like 35 p e
00:54:30
but these are much different scale and
00:54:33
scale matters
00:54:34
this is not one or two billion in you
00:54:37
know a little extra revenue on top of
00:54:39
your business that's the entirety 90 95
00:54:42
of that I think what's working in favor
00:54:44
of instacart is that if you compare it
00:54:45
to probably Uber and doordash or Airbnb
00:54:48
at least Airbnb Dash I'm gonna guess
00:54:52
that it looks pretty cheap now I think
00:54:54
of all the three businesses Dash
00:54:56
probably has the biggest upside quite
00:54:58
just like again arm's length I don't I
00:55:00
don't own any of these three stocks I'm
00:55:01
just saying business model quality Dash
00:55:03
teams infinitely scalable
00:55:07
Airbnb I think probably has
00:55:10
long-term issues with take because of
00:55:12
this exact reason because just
00:55:14
competitive Dynamics and pressure
00:55:15
regulatory capture you're seeing that in
00:55:18
New York Airbnb
00:55:19
and then the question is
00:55:21
what is the business outside the United
00:55:23
States look like for instacart
00:55:26
I don't know but if I had to figure out
00:55:29
what to pay for that's how I would kind
00:55:31
of try to break the problem down sax any
00:55:32
of your thoughts on the in the actual
00:55:34
business here or do you want to jump
00:55:35
over to clavia yeah I think uh clavio's
00:55:38
the really interesting one at least from
00:55:40
my standpoint because it's a software
00:55:42
business
00:55:43
I think Jason lemkin had the take here
00:55:45
he said that clavio's IPO will be the
00:55:47
ultimate yardstick for SAS and 23 and 24
00:55:50
top growth top margins top Founders
00:55:52
gonna Cruise past a billion and ARR
00:55:55
whatever multiple they end up trading at
00:55:57
you home is certainly worth less I think
00:55:59
it's trading at about 12 times for
00:56:01
Revenue
00:56:05
last quarter they did 165 billion that's
00:56:08
165 million sorry yeah so they're at 650
00:56:11
million in ARR growing 56 percent
00:56:14
that's amazing so year over year 51
00:56:17
every year so you know project F4
00:56:19
they're probably going to be at a
00:56:20
billion in AR next year 119 nrr which is
00:56:25
very good especially considering that is
00:56:28
folks yeah it's not Revenue retention
00:56:30
it's the way to think about that is if
00:56:32
you just look at your existing customers
00:56:35
going into next year what percent of
00:56:37
that subscription base
00:56:39
is gonna be there
00:56:41
and if it was 80 it would mean 20 of
00:56:44
your customers are churning away if it's
00:56:46
119 it means you have expansion from
00:56:49
your customer base in other words your
00:56:51
customers are buying more and there
00:56:54
there will be some who churn but the
00:56:55
ones who are expanding more than make up
00:56:57
for that and then they've been very
00:56:58
Capital efficient apparently they've
00:57:00
only burned 15 million today that does
00:57:02
not mean they've only raised 15 million
00:57:04
they've raised several hundred million
00:57:06
in various growth rounds but they've
00:57:08
still got that money in the bank
00:57:09
so I assume they raise it as a cushion
00:57:12
in case they missed their forecast or
00:57:14
something like that yeah it seems like a
00:57:16
pretty strong business but I think his
00:57:17
point is right is that they're kind of
00:57:20
the ceiling you know
00:57:22
so I think Founders still have maybe
00:57:24
unrealistic expectations from the days
00:57:26
when SAS businesses were being valued at
00:57:28
100 times ARR have you had this
00:57:30
conversation sax with folks coming in
00:57:32
for funding who have great businesses or
00:57:35
let's call them good to Great businesses
00:57:36
somewhere in that zone they're seven
00:57:38
eight nine businesses but their
00:57:40
valuations are way off and do you do you
00:57:43
bring up hey here's what your your
00:57:44
company would be worth publicly this is
00:57:46
what your last round is and then trying
00:57:48
to negotiate in between those two
00:57:50
numbers because it does seem like
00:57:52
Founders are bringing that up
00:57:54
proactively in some meetings with me
00:57:56
they're actually aware of public comps
00:57:58
now and and they're kind of admitting
00:58:02
hey I get it kind of situation yeah I
00:58:04
think Thunder expectations have adjusted
00:58:06
on this yeah which it is healthy yeah
00:58:08
when you're in a hot Market there's
00:58:10
definitely a lot of
00:58:11
sharing among founders of what's
00:58:14
happening and where valuations are at
00:58:16
and I think the same thing is probably
00:58:17
happening in the down Market as well so
00:58:19
yeah I think everyone's getting more
00:58:20
realistic yeah just to finish on clavio
00:58:22
I just want to give a shout out to Toby
00:58:23
Lukey the best thing that I saw about
00:58:26
that was that Shopify actually owns like
00:58:28
11 of this company which I think like if
00:58:31
you look at the
00:58:33
corporations again just doing an
00:58:35
incredible job of building an ecosystem
00:58:36
not only does Toby support these
00:58:38
companies but Shopify ends up owning a
00:58:40
huge non-trivial portion I think Shopify
00:58:42
owned like 11 or 12 percent of clavio
00:58:45
amazing I think with the sale of the
00:58:47
flex Port deliver back to flexport they
00:58:50
own 13 or 14 of it
00:58:52
I suspect they probably own a
00:58:54
non-trivial share of stripe and it's
00:58:57
incredible you're right if you do some
00:58:59
of the parts on on Shopify their cash
00:59:02
and cash and then cash equivalents are
00:59:04
only valued at like two or three billion
00:59:05
so I feel like there's a ton of upside
00:59:07
there just for free again I don't own it
00:59:08
I haven't done the work but I'm just
00:59:09
saying seems like seems like it seems
00:59:11
great Travis yeah so I think that brings
00:59:14
up a really interesting point which is
00:59:15
the only vulnerability or negative I
00:59:19
think about clavio's business is the
00:59:21
fact that 70 of it is on Shopify so
00:59:24
that's a platform dependency and
00:59:27
whenever 70 of your business is on one
00:59:29
platform you always have to be afraid of
00:59:30
getting the rug pulled out from under
00:59:31
you by the way that was PayPal's problem
00:59:33
back in the day 20 years ago 70 of our
00:59:36
business was on eBay eBay had a
00:59:38
competitor we were constantly worried
00:59:40
that they were going to pull the rug out
00:59:41
from under us if we could have made a
00:59:43
business deal with eBay we would never
00:59:45
have had to sell the company it would
00:59:46
have been ideal I think clavio is really
00:59:48
smart creating alignment with Shopify by
00:59:52
letting them invest giving them Equity
00:59:53
doing a REV share agreement and they
00:59:56
would be smart to continue that rev
00:59:58
share agreement into the future to take
01:00:00
this risk off the table because
01:00:02
investors do not like existential risk
01:00:04
you could have a perfect business but if
01:00:06
there's some hard to quantify risk of
01:00:08
the whole thing basically getting rug
01:00:09
pulled then how do you discount that
01:00:11
David as an investor you look at that
01:00:13
and you're like okay I then price this
01:00:15
company as a function of Shopify
01:00:18
that's a good point I mean 70 percent of
01:00:20
the business is Shopify the way I would
01:00:22
look at it is I would price it as a SAS
01:00:25
business because Shopify is more of a
01:00:26
transaction well they're a transactional
01:00:28
slash SAS business clavius is a pure SAS
01:00:31
business I price is a SAS business but I
01:00:33
would have to create some sort of
01:00:35
discount for the chance that you know
01:00:39
well Shopify adds the features how do
01:00:42
you figure that out that's a really
01:00:43
complicated thing to figure out yeah I
01:00:45
agree but I think that clavio mitigates
01:00:47
the risks extent they do this like
01:00:49
rupture agreement it's a really Savvy
01:00:50
move for people who have insights into
01:00:52
the market to own pieces of emerging
01:00:55
companies and lock in that partnership
01:00:56
this was Emil Michael a shout out at
01:00:59
Uber and Travis did this with all of the
01:01:02
grabs DDS Etc and then Dara just slowly
01:01:06
sold those positions and they were
01:01:07
incredible cash
01:01:09
a creative to that stock and to running
01:01:11
that business let's talk about care
01:01:13
table for a second
01:01:15
um this also trended on Twitter with the
01:01:17
Tweet storm if you don't know what
01:01:18
airtable is it's kind of like what is it
01:01:21
it's like Excel meets a database and
01:01:23
it's more programmable
01:01:24
so if you wanted to have a bunch of it
01:01:26
uses it a lot of small businesses use it
01:01:29
medium-sized businesses and they use it
01:01:32
to let's say instead of hiring somebody
01:01:35
to build a database system uh or it's
01:01:37
like Google Sheets on steroids it's
01:01:39
actually a really good product it's a
01:01:41
really sick product yeah I've seen it
01:01:42
use like 10 different ways some people
01:01:44
use it for tracking uh product feature
01:01:47
requests uh and you know task lists some
01:01:50
people use it for contact database some
01:01:52
people use it for complex project
01:01:54
management it's super extensible super
01:01:56
easy to use and great collaborative Tool
01:01:59
uh if you think about it like it's like
01:02:01
a spreadsheet for words instead of
01:02:02
numbers yeah yeah but you could also do
01:02:04
numbers so yeah with a lot of great
01:02:06
features that you can do really Dynamic
01:02:08
things within the spreadsheet do you
01:02:09
guys believe in this Swiss army knife
01:02:12
approach of building these kinds of
01:02:13
things or do you believe that it's just
01:02:15
cheaper and simpler to build
01:02:17
best-in-class versions of each of those
01:02:19
use cases Friedberg that you just I
01:02:20
think it allows certain businesses to
01:02:22
have a very specific tunable version of
01:02:26
what they need from call it a project
01:02:27
management tool so if you use a
01:02:29
traditional project management tool it
01:02:31
may be too overbuilt or it may be too
01:02:34
specific whereas this tool allows you to
01:02:35
build something unique for your platform
01:02:37
so that's where I've seen a lot of teams
01:02:38
use it instead of other tools like jira
01:02:41
or whatever for traffic well that's a
01:02:43
good point I just wonder that you get
01:02:45
these
01:02:46
small non-scalable use cases because
01:02:48
then if a company is successful
01:02:51
don't they then just migrate to jira for
01:02:54
example no I view it a lot like
01:02:55
spreadsheets basically the reason people
01:02:57
use spreadsheets for so many different
01:02:59
things is because everyone's got their
01:03:00
own representation of data and
01:03:02
utilization of a spreadsheet and I think
01:03:04
this is just an extension of that it's
01:03:06
the cult big about it is a more
01:03:07
feature-rich spreadsheet tool I actually
01:03:09
think that Jamal's question is is an
01:03:11
excellent one I I tweeted many years ago
01:03:13
that the way I saw Excel was the long
01:03:17
tail of use cases that hadn't moved into
01:03:19
a dedicated SAS app yet that's
01:03:21
interesting yeah and that the way that
01:03:23
if you wanted to be a SAS founder you're
01:03:24
trying to come up with ideas find some
01:03:27
really complicated Excel spreadsheet
01:03:30
that's used across so many different
01:03:31
businesses yeah and just figure out if
01:03:33
you can move that into a SAS app so for
01:03:34
example think about harda you know
01:03:37
before Carter people just use a
01:03:38
spreadsheet for the cop team and every
01:03:40
company totally had a half tablespoon
01:03:43
totally but they just move that into
01:03:45
specific Sasa so I think there's a lot
01:03:47
of that and so and all a spreadsheet is
01:03:49
it's a visual representation of a
01:03:51
database with some relational logic that
01:03:53
you build into the the cells of the
01:03:54
spreadsheet and this this pattern of
01:03:56
breaking apart breaking apart a major
01:03:58
product was the playbook for Craigslist
01:04:00
people looked at Craigslist and said oh
01:04:02
there's Couchsurfing make that Airbnb oh
01:04:05
there's a ride sharing I'm going to La I
01:04:08
have two extra seats that became like
01:04:10
uber so people this Playbook has an
01:04:13
original of that too where every
01:04:14
category on Craigslist became its own
01:04:17
dedicated Marketplace yeah yeah it was
01:04:20
one well you know so everybody uses yeah
01:04:23
free break everybody uses something
01:04:25
different that's interesting when it
01:04:26
comes to you that's the one that comes
01:04:27
first Craigslist was a huge dating
01:04:28
product before dating apps came it was
01:04:30
casual encounters or missed uh what was
01:04:32
it called
01:04:34
misconnections misconnection is
01:04:36
hilarious freedoms like me you the
01:04:38
numbers I think the point though the
01:04:40
question that I was asking is exactly
01:04:42
this which is you have these
01:04:45
beefed up
01:04:47
workflow things that happen in Excel but
01:04:50
then eventually you go to these systems
01:04:53
of record
01:04:54
that are purpose built to solve the use
01:04:56
case and if the use case is important
01:04:59
enough it just seems like that's what's
01:05:00
happened I don't have a view because
01:05:01
I've never used the product but I wonder
01:05:03
whether part of this valuation reset
01:05:05
doesn't reflect that Dynamic it is a
01:05:08
dynamic the two companies or yeah two or
01:05:12
three companies that represent it best
01:05:13
is there's a product called Coda which
01:05:16
is part Wiki part air table part
01:05:18
database and it's programmable and
01:05:20
notion
01:05:21
and now people are making templates in
01:05:24
notion
01:05:25
and then they're adding
01:05:27
things like project management so I
01:05:29
asked my team to do project management
01:05:31
for events and they tried base camp they
01:05:34
were looking at Asana and then somebody
01:05:36
was like you know what I just added it
01:05:38
to notion is good enough it's not as
01:05:40
good as those other two products but
01:05:41
it's good enough and we don't have to
01:05:43
and the reason they want to do is not
01:05:45
because we're cheap I don't want to
01:05:46
spend money on another SAS product we
01:05:47
don't want to have to teach everybody a
01:05:49
new SAS product we don't have to want to
01:05:50
do the logins for that so I think it is
01:05:53
a natural tension and people are doing
01:05:55
both Tremont Phil some people like the
01:05:57
best of breed but you're also seeing it
01:06:00
I don't know if you saw this past week
01:06:01
slack added I think during dreamforce
01:06:03
the ability to give you an AI summary of
01:06:06
everything you missed and then Zoom
01:06:07
added AI summaries of calls so that
01:06:11
feature that uh I guess otter and some
01:06:14
other people were doing that feature is
01:06:16
now built into Zoom you get you get a
01:06:18
transcript from Zoom for free and now
01:06:19
you get a summary of the call for free
01:06:22
that is work that was done by somebody
01:06:25
on the meeting right somebody was
01:06:26
responsible for me being the note taker
01:06:28
sometimes somebody was so those are jobs
01:06:30
that are gone and I think it speaks to
01:06:32
the bigger economy I had the CEO of
01:06:34
kayak on this week in startups this week
01:06:35
it'll come out next week it was really
01:06:37
great and I asked him about hiring and
01:06:39
the size of the company said I'm not
01:06:40
hiring anybody in the next year or two
01:06:42
because all my developers are 30 or 40
01:06:44
better I got Junior developers that are
01:06:46
acting like senior developers I got
01:06:47
senior developers who are turning into
01:06:49
10x developers we're not hiring we're
01:06:51
just going to have increased margin so
01:06:52
what happened to airtable airtable had a
01:06:55
massive valuation uh here's the Tweet
01:06:57
storm
01:06:58
that's somebody from CB insights this
01:07:01
guy Anand uh who I think I follow him
01:07:03
did something happen or nothing well
01:07:05
they're most recently valued at 11.7
01:07:07
billion in December their 2021 series
01:07:09
app his thesis not only is their table
01:07:12
worth less than 11.7 billion it's likely
01:07:14
worth less than the 1.4 billion in
01:07:17
funding it has raised to freeburg's been
01:07:19
bringing this point up over and over
01:07:21
about the overfunding and cash in is
01:07:23
less than the valuation most yeah most
01:07:25
of these unicorns are worth less than
01:07:27
their total prep stack and this is a
01:07:29
good example I've just been through this
01:07:31
this week I went I saw there's a company
01:07:32
I was an investor in that I saw this
01:07:34
happen
01:07:35
contract to do their big problem is I
01:07:38
mean they're doing over 100 million of
01:07:39
ARR it's a it's a great product and 150
01:07:43
million of ARR that's no small feat the
01:07:45
problem is the growth rate I think it's
01:07:47
only 15 what do you do with the founder
01:07:49
of sex because this was my point earlier
01:07:50
is in these circumstances it's still a
01:07:53
good business investors are going to
01:07:54
want to own these shares at some price
01:07:56
someone will buy new shares at some
01:07:58
price but but to do this transaction
01:08:00
given that the preference in the company
01:08:01
which is effectively debt is greater
01:08:03
than the value of the company the
01:08:05
founders and the employees get their
01:08:06
ownership Stakes wiped out so if you
01:08:09
want to I think you know I think their
01:08:11
only hope is to go public because that
01:08:12
wipes out the prep stack and everyone
01:08:14
basically just owns their percentage of
01:08:15
the company if they don't go public
01:08:18
private investor do that why would a
01:08:20
preferred investor allow that to happen
01:08:22
well this is going to be the huge
01:08:24
tension on the board is that if you're a
01:08:26
common holder or if you're one of the
01:08:27
early investors of the company you want
01:08:29
to go public if you're a late stage
01:08:31
investor you don't want to give up your
01:08:32
preference but those late stage people
01:08:34
sex did not have blocker rights in many
01:08:37
cases because the market was so hot they
01:08:39
just put the money in without yeah I
01:08:41
mean unless they had a ratchet into the
01:08:43
IPO but yeah yeah but in many cases but
01:08:45
that's not a universal truth right it in
01:08:47
almost in the majority of these cases
01:08:49
the preferred shareholders do have
01:08:51
significant representation on the board
01:08:53
they do have the ability to influence
01:08:55
whether or not the company is going to
01:08:56
go public and there's likely some middle
01:08:57
ground that every company ends up having
01:08:59
to meet at which is we're going to recap
01:09:01
the company in a way that we're going to
01:09:02
give some shares newly issued shares the
01:09:05
founders
01:09:08
yeah that in doordash I think they all
01:09:11
just got dragged out they didn't have a
01:09:12
choice my understanding of some of these
01:09:14
late rounds during Peak zurp 20 20 21
01:09:18
from talking to Bill Gurley which people
01:09:20
did not negotiate those rights those
01:09:21
rights the blocker rights weren't
01:09:23
available and If the majority of common
01:09:24
says we're going public you're going
01:09:26
public and that's the that's the end of
01:09:28
the story here's here's the punch line
01:09:29
to the air table if you look at the uh
01:09:31
Ford price to sales multiple 78x for an
01:09:36
11.7 billion dollar valuation at 150
01:09:38
million ARR and you compare it to the
01:09:40
trailing price to sales multiples
01:09:44
in the project management space Mondays
01:09:46
at 12x plus Asana 6.6 acts and
01:09:49
smartsheets at just around 8X so it's a
01:09:52
challenge yeah well to freeburg's point
01:09:54
one of the downsides of taking all this
01:09:58
excessive Capital at these ridiculous
01:10:00
valuations is that it produces a dynamic
01:10:02
in your boardroom where your board
01:10:04
members are at war with each other the
01:10:06
late stage investors are going to be at
01:10:08
war with the early stage investors and
01:10:09
the founders and who knows who comes out
01:10:12
on top of that thing that's not
01:10:13
something Dynamic I don't know if you
01:10:14
guys have but I've got like so many
01:10:16
anecdotes over the last couple of months
01:10:18
on this exact scenario playing out an
01:10:21
amalgamation of those you know without
01:10:23
talking about specific ones but you know
01:10:25
you can make yeah what is the dynamic
01:10:27
and how does it work itself out investor
01:10:29
invested a multi-billion dollar
01:10:30
valuation
01:10:32
the company is now worth 20 of that
01:10:34
valuation
01:10:35
and the investors have more money in the
01:10:37
company than it is worth and the company
01:10:40
needs more cash they can't go public at
01:10:42
this rate because the markets are shut
01:10:44
down no one's going to buy new shares
01:10:45
they can't raise cash by going public so
01:10:47
they have to raise cash in the private
01:10:49
markets so then the tough question is
01:10:51
okay what's the value of the company in
01:10:53
almost all of these cases the CEO has
01:10:55
been replaced
01:10:57
or they're with some professional CEO so
01:11:00
there's a new Option pool created equal
01:11:01
to 10 to 15 of the company new options
01:11:04
are issued and a round is done at a
01:11:06
significant discount and there's a huge
01:11:08
recap and a pay to play and all this
01:11:10
other sort of stuff starts to play out
01:11:11
that the original Founders in the
01:11:13
company get wiped out most of the
01:11:14
management team leaves because their
01:11:16
options are now worthless and the
01:11:18
investors who historically have been
01:11:20
totally passive late stage investors
01:11:22
have had to step in and try and take
01:11:24
action in rebuilding a management team
01:11:25
which guess what they're not necessarily
01:11:27
good at and so it ends up becoming this
01:11:29
really nasty unwinding of the business
01:11:31
because everyone thinks oh well I
01:11:33
deserve to get a fair deal because I put
01:11:35
money in and I have a preference in this
01:11:36
company Founders don't want to see their
01:11:38
ownership go down from 20 to 2 percent
01:11:40
they're like why would I keep working
01:11:42
for two percent I'm fully vested I'm
01:11:44
Gonna Leave the management team's like
01:11:45
wait a second I'm getting offers left
01:11:47
and right to go join other companies and
01:11:48
so it's a real kind of nasty unwinding
01:11:50
and I think that's the scary scenario
01:11:52
that's likely going to play out not all
01:11:54
but a good chunk of these companies that
01:11:56
are there are still business Services
01:11:57
they have decent value to their business
01:11:59
but they just raise too much Capital
01:12:01
relative to the valuation of the
01:12:02
business today if you looked at it on a
01:12:04
blank piece of paper these businesses
01:12:05
would look incredible at whatever the
01:12:07
true valuation is today
01:12:10
but if you have the psychological
01:12:12
hindsight bias of what the price was two
01:12:14
years ago
01:12:16
you just can't see that you get it
01:12:18
totally can't get it and by the way I
01:12:19
will say and there's structure there's
01:12:21
like Legacy structure in the cap table
01:12:23
from
01:12:24
yeah yeah meaning there's like this prep
01:12:26
stack I will say that the terms are so
01:12:28
crazy good for the recap that investors
01:12:32
are clawing their way into the recap
01:12:34
round well that means oh my God nature
01:12:36
markets are healing that's means we're
01:12:39
in the end game right that's part of
01:12:41
what's happening
01:12:42
it's totally predatory it's totally
01:12:44
predatory
01:12:46
is
01:12:48
like to go public again I think that
01:12:50
when there's a recap and the founder is
01:12:53
still running the company there's a
01:12:54
chance of it being fair but when they
01:12:56
bring in a new CEO who then does a recap
01:12:58
oh yeah they don't care they don't care
01:13:00
they don't care about their audience
01:13:03
exactly and all these Recaps turn into a
01:13:05
disaster yeah well it's recap or you're
01:13:09
going to go out of business so I mean
01:13:10
this is a forcing function and everybody
01:13:13
partied too hard I think it's time for
01:13:16
everybody's favorite part of the show
01:13:18
which is to give chamoth his flowers
01:13:23
here we go
01:13:25
the FED spoke this week
01:13:29
and
01:13:30
it's time
01:13:34
for Fortune moth to take his Victory lap
01:13:37
here he goes everybody
01:13:40
is this
01:13:42
evangelis yes evangelis doing Chariots
01:13:45
of Fire this week
01:13:48
the FED said
01:13:50
to quote Shema
01:13:52
well this is
01:13:54
this is but interesting connections to
01:13:57
the Deep state for longer there he is
01:14:00
there's shrimach leading the pack I sent
01:14:02
my I sent my talking points from six
01:14:04
months ago to my deeps up to our friend
01:14:06
deep State [ __ ] deep style sent the
01:14:10
note and deep statement sent it to the
01:14:12
fed and then fed just cut and pasted it
01:14:14
into them will stay higher for longer
01:14:20
absolutely we don't care who cares I
01:14:22
don't think anyone understands what it
01:14:23
is that jamas said that he's taking the
01:14:25
Victory lap on once you see the subject
01:14:26
that rates will stay higher for longer
01:14:31
and now he takes his Victory lap all
01:14:34
right enough of the shenanigans
01:14:36
chamat said rates will stay higher for
01:14:38
longer the FED said rates will stay
01:14:40
higher for longer at the end
01:14:41
congratulations Jamal you got it right
01:14:42
thanks okay we're going to give our
01:14:46
chariots a fire
01:14:49
[Applause]
01:14:50
can you sell the metal in the group chat
01:14:55
this is when Obama who is Obama giving
01:14:58
the medal to what's the real picture
01:15:00
here it's Obama is he giving it to him
01:15:03
well I think he's getting it
01:15:05
I thought it was so
01:15:10
so I think what happened this week
01:15:13
is actually pretty important because
01:15:16
I think the markets were really trying
01:15:18
to force Jerome Powell to start the
01:15:21
cutting cycle
01:15:23
and now they had to move
01:15:25
the date at which they could expect cuts
01:15:28
out by a year
01:15:31
and I think that we're only starting to
01:15:34
see the reverberations of that you're
01:15:35
gonna have to reprice
01:15:37
a lot of risk assets so
01:15:41
if you put it all together
01:15:44
oil is creeping back up
01:15:46
so commodity prices essentially are
01:15:49
trending up
01:15:51
I don't think that's going to have a big
01:15:53
impact on inflation because of the way
01:15:54
that
01:15:56
owner equivalent rents and core CPI is
01:15:59
calculated because it's calculated on
01:16:00
this six-month lag this dumb nonsense of
01:16:03
just how arcane our system works but
01:16:06
that's going to spike down so basically
01:16:09
the fed's like saying we know all of
01:16:11
this is happening we're sitting on our
01:16:12
hands but the problem is that if you add
01:16:15
another
01:16:16
100 basis points to your discount rate
01:16:19
for an unprofitable SAS company my gosh
01:16:22
guys you're taking like another
01:16:25
turn and a half of market cap out of the
01:16:28
business like if you thought it was
01:16:29
worth eight times it's not worth six and
01:16:31
a half six times
01:16:34
so unfortunately that's gonna hurt
01:16:37
everything that's not the top seven tech
01:16:40
companies
01:16:43
and everything else is just gonna just
01:16:46
kind of meander along for a much longer
01:16:48
time so it's really good for the
01:16:50
Magnificent Seven
01:16:52
I think it's really bad for everything
01:16:54
else
01:16:55
and we're going to be in a holding
01:16:57
pattern for a while crude oil
01:17:00
uh is at uh let's see 89 a barrel yeah
01:17:05
it's it's you know I told remember
01:17:07
remember this conversation I told my
01:17:09
CEOs guys let's get enough cash to last
01:17:11
through the middle of 25. sure remember
01:17:14
I was pretty clear about that to folks I
01:17:16
mean get to get to
01:17:18
default alive but if you can't please
01:17:20
have enough money to the mid of 25 I
01:17:22
think that that was wrong
01:17:24
I think now you got to be q1 of 26
01:17:28
and maybe even mid 26 so now I have to
01:17:31
go back to all these CEOs and redo an
01:17:35
entire justification for why they need
01:17:37
to cut even more people cut even more
01:17:40
expense cut more burn
01:17:42
I don't know where we're gonna find
01:17:43
another year of burn in most of these
01:17:46
businesses so I was wrong by at least a
01:17:49
year Jason because of this I think I got
01:17:51
the words right but I got the timing
01:17:52
wrong yeah just to further translate
01:17:54
this okay so the markets right now are
01:17:57
definitely taking a bath
01:17:58
the growth stocks are off significantly
01:18:00
expect them to be off more yeah and the
01:18:03
reason is because the market starts at
01:18:05
price in rate Cuts next year and now the
01:18:07
FED is saying that because inflation
01:18:09
ticked up a little bit it's not coming
01:18:11
down as much we have higher energy
01:18:13
prices we may not get those rate Cuts I
01:18:16
think the FED still maintains that we'll
01:18:18
get 50 basis points or rate Cuts next
01:18:20
year but the market was pricing in more
01:18:22
and I think people are starting to
01:18:23
wonder if we'll even get the 50.
01:18:26
so as a result of that interest rates
01:18:28
are going to stay higher longer which
01:18:30
means that risk Capital will be less
01:18:32
available so valuations are going to go
01:18:35
down or at least they're not going to be
01:18:36
racing back up like they used to when I
01:18:39
was saying mid 25 sax that was because
01:18:42
the forward curves started showing Cuts
01:18:44
in early 23.
01:18:46
you know what I mean so I was like okay
01:18:47
let's assume they're wrong by 18 months
01:18:49
it turns out that that initial data
01:18:51
point in early 22
01:18:53
my God we were wrong by three years
01:18:57
not a year and a half it's brutal and I
01:19:00
think the X Factor here is that we're
01:19:02
running almost two trillion dollar
01:19:05
deficits in peacetime well I mean we're
01:19:08
not in a direct War we're in a proxy war
01:19:10
but in relative peace time and in a
01:19:12
relatively decent economy so what
01:19:17
happens if either of those things change
01:19:19
and what happens to long-term rates as
01:19:23
all of these debt issuances you have to
01:19:26
get raised as the FED has to keep
01:19:28
selling more treasuries to fund our
01:19:30
deficit in debt at these higher rates do
01:19:33
long-term rates keep going up based on
01:19:35
the debt financing needs of the federal
01:19:36
government and then this is again where
01:19:38
you know we made a huge mistake by
01:19:40
politicizing this idea of
01:19:43
raising money Beyond 30 years we made
01:19:46
that mistake under the Trump presidency
01:19:47
because people reacted to Trump saying
01:19:49
it but it was the smartest thing we
01:19:52
could have done to give our kids and our
01:19:54
grandkids a reasonable economy
01:19:58
and Friedberg has been right all along
01:19:59
about just like our spending is just
01:20:01
going up and up and up and now
01:20:02
short-term rates are
01:20:05
really high maybe we'll have enough
01:20:08
political will to just get out of the
01:20:11
fed's way and the FED can actually look
01:20:13
at raising in durations past 30 years
01:20:16
because if you believe that we're going
01:20:18
to start an aggressive cutting cycle at
01:20:20
some point
01:20:21
and you believe we'll get back to like a
01:20:23
two percent terminal rate you could
01:20:25
theoretically justify 50 60-year bonds
01:20:29
at much lower than the third year but I
01:20:31
don't see it happening here's um a
01:20:34
really good way to
01:20:35
look at this there are prediction
01:20:37
markets this one call she is when I use
01:20:40
k-a-l-s-h-i chances of a rate cut by May
01:20:43
of 2024
01:20:46
29 chance and these are people actually
01:20:49
making bets on these things and so it
01:20:52
has gotten pushed out and I guess 74
01:20:55
Chance by the fourth quarter third
01:20:58
fourth quarter of next year people think
01:20:59
they'll be already cut so we're a year
01:21:01
away from a rate cut everybody needs to
01:21:03
just take that off the table which means
01:21:05
the translation for Founders for GPS is
01:21:09
performance has to go up you got a Beat
01:21:12
five six seven percent or whatever
01:21:14
people are going to get on those other
01:21:16
instruments corporate debt you know 10
01:21:18
11 12 you got a really hard bogey to
01:21:21
beat here the alternative to that
01:21:22
statement is that total Capital has to
01:21:24
go down
01:21:25
in order for the capital remaining to
01:21:29
have its return multiple increase given
01:21:32
that there's a generally
01:21:35
set number of companies that are going
01:21:36
to generally create a certain amount of
01:21:38
value over the next couple of years and
01:21:40
the way to create that value is so if
01:21:42
that's true well I'm saying if there's a
01:21:43
bunch of startups that are going to make
01:21:45
100 billion dollars of market value over
01:21:46
the next five to seven years
01:21:48
you need to have less Capital going into
01:21:50
those companies in order for that
01:21:52
Capital to generate a higher return
01:21:53
which is on your day-to-day basis means
01:21:55
what Freebird explain on a day-to-day
01:21:57
basis on a daily basis it means there's
01:21:59
gonna be less companies that are going
01:22:00
to get funded but more importantly it's
01:22:01
going to be less LP money going into
01:22:02
Venture and there's going to be less
01:22:04
Capital available to fund startups in
01:22:06
aggregate by significant amount on a
01:22:09
daily basis you need to do more with
01:22:11
less as a Founder you need to Delight
01:22:13
customers with less resources spend less
01:22:15
money on marketing spend less money on
01:22:17
teams yeah and get to profitability
01:22:18
you've got to be a stronger founder I'm
01:22:21
seeing it across the board in the seed
01:22:23
stage two three four Founders raising
01:22:25
250 to a million instead of raising
01:22:28
three to five I gotta be honest Jacob I
01:22:30
thought it was much easier
01:22:33
to kind of say the sky was falling this
01:22:36
time last year
01:22:38
right now and I think that people are a
01:22:41
little bit again exhausted about hearing
01:22:43
this message constantly of like cup more
01:22:44
it's like I think that they're exhausted
01:22:48
and I see a lot of Founders that are
01:22:50
exhausted and giving up there's a lot of
01:22:53
giving up they're like they're like I
01:22:54
can't cut anymore and now I do think we
01:22:57
have to go back to them and say if we're
01:22:59
doing our jobs right okay even okay now
01:23:04
are strategic viewers right
01:23:07
but the time scale of our analysis was
01:23:10
wrong
01:23:11
and I think now you got a plan to mid-26
01:23:14
I don't even know where to start to be
01:23:16
honest with that conversation actually
01:23:17
that what I'm seeing is people are
01:23:19
merging companies and M A's picking up
01:23:21
because hey you got two companies doing
01:23:23
five million each but they're burning 2
01:23:26
million each a year cut half the team
01:23:28
put one team with the other and I think
01:23:30
you're going to just see some of that
01:23:31
portfolio consolidation happen go ahead
01:23:33
sex I think one way to put it is that
01:23:36
we've had a regime change those are the
01:23:38
words that we've been using for a while
01:23:40
and specifically we've gone from a
01:23:42
regime of capital abundance to a regime
01:23:44
of capital scarcity
01:23:46
and I think a lot of people were holding
01:23:47
out hope that there's gonna be a quick
01:23:49
bounce back
01:23:50
because we'd cut these interest rates
01:23:52
and capital would start flowing again in
01:23:54
a big way and I think that the FED here
01:23:57
has dumped a bucket of cold water
01:24:00
on the markets basically saying we're
01:24:01
not bouncing back to Capital abundance
01:24:04
anytime soon we're going to be in this
01:24:06
environment of more Capital scarcity and
01:24:09
that's what I think just Founders and
01:24:10
VCS now have to take into account is
01:24:12
this shift could be permanent or it
01:24:15
could it could last a while it could
01:24:16
last five ten years sure we're seeing a
01:24:19
lot of the question I have is just what
01:24:20
do you guys think is going to happen to
01:24:21
the consumer because I I actually think
01:24:23
that even though Founders in many cases
01:24:25
could cut more and they could have acted
01:24:27
faster I actually think that the B2B
01:24:29
economy has kind of taken its licks I
01:24:32
mean for the last year we've been in
01:24:33
this software recession companies have
01:24:36
been sharpening their pencils they've
01:24:38
been cutting costs and getting more
01:24:39
efficient yes you could say maybe they
01:24:41
haven't done enough but the consumer has
01:24:43
still been strong but what is the
01:24:45
consumer going to do now that credit
01:24:47
card rates and interest payments are at
01:24:48
all-time highs they're going to they
01:24:50
can't sell their house no here's what
01:24:52
they're going to do they're going to
01:24:53
skip an iPhone cycle instead of going
01:24:55
from you know 13 to 14 or 14 to 15
01:24:58
they're going to go 13 to 16 for 14 to
01:25:00
17. they'll just skip which which I did
01:25:02
for the first time I don't need to skip
01:25:04
it but I was just like this 13 is good
01:25:06
enough they're going to skip upgrading
01:25:08
their car you're going to keep your car
01:25:10
for an extra two or three years and uh
01:25:12
if you were thinking about moving your
01:25:13
house you're gonna say you know what I'm
01:25:15
going to make this house work uh we're
01:25:16
gonna put two of the kids in order 100
01:25:18
right I think that is that is I think
01:25:20
that's very I think that's very well
01:25:22
said and and the the other side of it is
01:25:25
that some of these industries where you
01:25:27
have these large ticket purchases that
01:25:29
drive consumer consumption
01:25:31
their backs are against the wall look at
01:25:33
the automakers that the deals that's
01:25:35
that the unions have proposed to the
01:25:37
automakers will cause them from I
01:25:40
thought I saw an out an analysis of Ford
01:25:42
where Ford would go if you just did a
01:25:45
pro forma and went back the last couple
01:25:47
years they would have gone from like you
01:25:49
know 30 billion of profits to minus 17
01:25:52
billion of losses so that's a 47 billion
01:25:54
dollar swing in the Ford p l the only
01:25:56
way they overcome that is with more
01:25:58
expensive cars which Jason to your point
01:26:00
means that those cars are not going to
01:26:02
get sold I do think that you're going to
01:26:04
just have a little bit of belt
01:26:05
tightening in the in the consumer I
01:26:07
think this is interesting I think you
01:26:08
know traumath you're right that at the
01:26:10
same time that the auto companies are
01:26:13
facing what you'd expect to be reduced
01:26:15
demand because no one can afford a car
01:26:16
payment at these higher interest rates
01:26:18
the unions are going on strike demanding
01:26:21
oh I think this is existing higher wages
01:26:24
yeah for a four day work week how does
01:26:27
this one day work week I think that the
01:26:28
the labor deal is an existence risk to
01:26:32
the unionized Auto industry in America
01:26:34
and I'm not opining on whether this deal
01:26:37
should or should not happen I'm just
01:26:39
making an observation if the deal as
01:26:41
announced happens
01:26:43
and you sensitize
01:26:46
stalantis GM and Ford's p l to these new
01:26:49
terms
01:26:51
and then you compare that against
01:26:53
non-unionized highly automated
01:26:55
organizations like Tesla and rivian
01:26:58
it's going to be very difficult for the
01:27:00
established Auto industry to survive
01:27:02
right and then if you'd layer on top of
01:27:04
it
01:27:05
seven eight nine percent consumer
01:27:07
lending rates for new cars forget about
01:27:10
it and yet the FED forecast at the same
01:27:13
meeting they were being hawkish about
01:27:15
race they also said that they were
01:27:17
expecting unemployment next year to be
01:27:19
4.1 percent down from their previous
01:27:21
expectation of 4.5 percent and they
01:27:24
forecast the economic growth would be
01:27:25
higher so I just don't understand how
01:27:27
these countervailing forces aren't going
01:27:30
to create so much stress in the economy
01:27:32
that something breaks and these uh idiot
01:27:36
unions honestly their timing is so dumb
01:27:38
whether it's the ones uh you know in
01:27:39
Hollywood or this car strike while
01:27:41
they're
01:27:42
shutting that's great it's great for
01:27:44
Tesla I mean it's giving Tesla the
01:27:46
entire U.S auto market yeah Tesla is
01:27:48
lowering the price when I bought my
01:27:50
model y long range I think I paid 72 for
01:27:53
it
01:27:54
the old price on this chart says 66.
01:27:57
that car is now 53.
01:28:00
that's down 20 a 13 000 saves the model
01:28:03
y long range I think is the greatest
01:28:05
vehicle ever made I page 57 I think for
01:28:08
my model y long range oh no no I think I
01:28:12
sorry I paid 57 I paid this price for
01:28:14
the model y performance the best car and
01:28:17
yeah that'll be a forty thousand dollar
01:28:19
car in the next three years well you
01:28:21
know and I looked at it and I it's
01:28:22
speaking of austerity measures I I was
01:28:24
like I have a model X do I get another
01:28:27
model X I think I'll just go with the
01:28:28
model y because the model X is I don't
01:28:30
know 50 more and I I just prefer the
01:28:32
model I think I think this labor deal is
01:28:34
going to put tremendous pressure on
01:28:36
these established Auto ovms China is now
01:28:39
the world's largest exporter from what I
01:28:41
understand that just happened they work
01:28:43
I looked it up 58 to 64 hours a week
01:28:46
Factory workers the U.S Factory workers
01:28:48
want to work 32 hours a week they want a
01:28:51
four day work week
01:28:52
I mean I don't understand the timing of
01:28:55
these unions I mean they're just gonna
01:28:56
move these factories to Mexico or I
01:28:59
think it's reasonable for the unions to
01:29:01
ask for as much as possible on behalf of
01:29:03
their members that's like
01:29:05
obvious and good because meaning if
01:29:07
you're collecting fees from those folks
01:29:09
and you're doing a good job on their
01:29:11
behalf your job is to ask for as much as
01:29:13
possible I get that
01:29:15
where I see the breakdown is that it
01:29:18
just doesn't seem like there's enough
01:29:19
numeracy between them and the companies
01:29:23
that they're negotiating against to
01:29:24
really sit down and look at what the
01:29:26
impact of this is because you may get a
01:29:29
short-term labor deal that you can
01:29:31
celebrate but it may actually destroy
01:29:34
that Union member's pension yes it may
01:29:36
destroy the company and this is my
01:29:38
concern is that then that has to get
01:29:40
bailed up by by the U.S taxpayer and
01:29:43
once it happens in one industry it's
01:29:45
going to be very difficult to actually
01:29:46
not do it in in other Industries and
01:29:49
the thing that needs to be understood is
01:29:51
the risk that it puts on those kinds of
01:29:54
tail outcomes and I think that that's
01:29:55
not well discussed nobody in the media
01:29:58
is really talking about it they make it
01:30:00
a
01:30:01
a moral issue of like what is the CEO
01:30:04
pay versus what is the ratio of multiple
01:30:07
yeah and yeah sure look that's an
01:30:09
important issue at some level but if you
01:30:11
if for example like you have U.S
01:30:13
senators blathering on about how they'll
01:30:15
wear a suit and not look like a homeless
01:30:16
bum if this deal happens in that and
01:30:19
it's like well that's not what you
01:30:20
should be saying what you should be
01:30:21
saying is my team has done a financial
01:30:23
analysis and here's what it shows
01:30:27
right they're not saying that this is
01:30:29
crazy what you're saying is that the
01:30:31
negotiation and also the political
01:30:33
dimension of this have become completely
01:30:36
untethered from economic realities yes
01:30:39
they are negotiating in the review Mira
01:30:41
they basically talked about whatever
01:30:43
billions of dollars in profits the
01:30:45
companies previously had during the serp
01:30:46
environment during the Heyday and yeah
01:30:49
it's just timings off just add it to the
01:30:51
list of latent problems in this economy
01:30:53
it just feels to me like something's
01:30:55
about to break but
01:30:56
who knows I mean if the zero points asks
01:30:59
you you keep bringing up like what
01:31:00
happens with the consumer yeah I think
01:31:02
they just slow their role you know
01:31:04
staycation
01:31:05
instead of your conversation what Larry
01:31:07
Summers said at the summit he said that
01:31:10
soft Landings are like second marriages
01:31:12
the Triumph of Hope over experience yes
01:31:16
meaning everyone's talking about a soft
01:31:18
Landing everyone's banking on a soft
01:31:19
Landing but soft Landings are actually
01:31:21
exceedingly rare
01:31:23
when you have very fast rate tightening
01:31:25
Cycles it generally has a very
01:31:28
predictable effect on the economy
01:31:29
there's a lag but the effect is very
01:31:31
predictable which is it causes
01:31:32
recessions
01:31:33
and then I would know you've already
01:31:35
been in a B2B recession we're starting
01:31:36
to come out of that but I think the
01:31:38
consumer hasn't been hit yet and maybe
01:31:40
that has to do with all the stimulus
01:31:42
they push through yeah and that created
01:31:45
some amount of
01:31:47
cushion for the consumer but I just
01:31:49
wonder if that cushions run out now
01:31:52
we're about to enter a new phase and
01:31:54
what what all of these
01:31:56
strikes you if you overplay your hand
01:31:58
chamoth is automation so this happened
01:32:00
in New York just over 10 years ago the
01:32:03
fast food workers wanted you know I
01:32:05
think it was 15 20 bucks an hour okay
01:32:07
seems reasonable and they replaced every
01:32:08
cashier you go to McDonald's now you're
01:32:11
ordering on the app or you're ordering
01:32:13
on a kiosk in the space and we have an
01:32:17
investment in a company called hello
01:32:19
meter what this company does is pretty
01:32:21
simple they just study what's going on
01:32:23
inside fast restaurants
01:32:25
and then they just increase the speed at
01:32:28
which people are getting served and
01:32:30
they're crushing it why people can't
01:32:33
hire people there's not enough
01:32:34
immigrants in the country anymore we
01:32:36
have an anti-immigration thing going on
01:32:38
here so unemployment's too low and the
01:32:41
the salaries are too high it's not
01:32:43
working a lot of restaurants are
01:32:45
breaking because a 30 or 40 dishwasher
01:32:48
is the difference between a com you know
01:32:49
a restaurant being profitable or not all
01:32:51
right listen there's apparently some
01:32:53
potential major breakthrough in
01:32:55
autoimmune disease treatment with this
01:32:58
new inverse vaccine let's go to our
01:33:01
science correspondence
01:33:03
the Sultan of science himself for
01:33:04
science corner
01:33:07
the taxes turns his camera off
01:33:12
wow
01:33:14
he'll be back oh he's back I'm here or
01:33:17
I'm here jeez you wouldn't even let me
01:33:18
get away with that nope
01:33:21
uh we were Zoom shaming you do not leave
01:33:25
you could learn something sucks
01:33:31
my super gut I just have my super gut
01:33:33
chocolate oh so good I just got my super
01:33:36
protein and uh the weight loss continues
01:33:38
Health boosting my gut is so good there
01:33:43
was a paper published in the journal
01:33:45
Nature this week which I thought was
01:33:46
worth highlighting sex you're going to
01:33:48
be quizzed afterwards on exactly what I
01:33:51
say during this this and the
01:33:53
implications for it we've all heard of
01:33:54
and know folks that have autoimmune
01:33:56
conditions and some of us may suffer
01:33:58
from them an autoimmune condition is
01:34:00
when our immune system mounts an attack
01:34:03
against A protein that exists in our
01:34:05
body that is natively part of our body
01:34:07
our immune system kind of mistakes that
01:34:09
protein for being a foreign antigen so
01:34:11
the term antigen refers to proteins that
01:34:13
the immune system views as invading and
01:34:16
it needs to go in and attack so when the
01:34:17
immune system messes up and it sees a
01:34:19
protein in our body as being a foreign
01:34:21
antigen and starts attacking it you get
01:34:23
these autoimmune conditions and
01:34:25
autoimmune conditions as you know are
01:34:26
very debilitating
01:34:28
cost on the health system on people's
01:34:30
lives the top 10 autoimmune diseases
01:34:32
rheumatoid arthritis
01:34:35
even type 1 diabetes multiple sclerosis
01:34:37
irritable bowel Sjogren's Hashimoto's
01:34:40
thyroiditis these are all pretty
01:34:42
in different ways damaging
01:34:44
diseases so this team at University of
01:34:47
Chicago in 2019 published a paper
01:34:50
where they actually took an antigen
01:34:53
and glycosylated it so basically
01:34:55
attached some sugar molecules and
01:34:57
carbohydrate molecules to it
01:34:59
and presented it in the liver so they
01:35:01
put it into the blood and it showed up
01:35:03
in the liver and they were able to cause
01:35:05
type 1 diabetes to not develop in an
01:35:07
animal model That was supposed to get
01:35:09
type 1 diabetes so they did an extension
01:35:11
of that work and the team has gotten
01:35:12
broader and they just published this
01:35:14
week a much more substantive paper that
01:35:17
highlights a pretty incredible technique
01:35:19
that may potentially address
01:35:23
a long list of autoimmune conditions so
01:35:27
they take the antigen the protein that
01:35:30
is are you saying sorry in the type 1
01:35:32
example are you saying like the beta
01:35:33
cells didn't get destroyed like it just
01:35:35
stopped it just stopped everything on
01:35:37
the dime yeah so the immune system has a
01:35:39
bunch of ways for self-regulating there
01:35:42
are T cells in our body called t-reg
01:35:43
cells or regulatory T cells their job is
01:35:46
to go find the T cells and the
01:35:48
antibodies that are attacking our own
01:35:50
protein that's their job and when they
01:35:52
don't do their job the antibodies and
01:35:55
the T cells go and attack our own body
01:35:57
so T-Rex cells kind of when they're
01:35:59
turned off they're not doing their job
01:36:01
so
01:36:02
it turns out that when a protein is
01:36:05
presented in the liver in this this
01:36:07
particular part of the liver
01:36:09
the immune system recognizes that
01:36:11
protein as being a safe protein and
01:36:14
there's a regulatory process that gets
01:36:16
kicked off that causes the immune system
01:36:17
to start to see that protein as being
01:36:20
safe it should not be attacked and t-reg
01:36:23
cells start to develop and other systems
01:36:25
start to develop that tell the whole
01:36:26
immune system stop attacking this
01:36:28
protein this is a safe protein this is
01:36:31
our body
01:36:32
this is like friendly fire right like do
01:36:34
not it's like Friendly Fire do not
01:36:36
attack this protein
01:36:37
so what they did is they took several
01:36:39
antigens proteins and it glycosylated
01:36:42
them meaning they put some you know
01:36:44
molecules on them put them in the in the
01:36:46
blood just with an IV hookup they go
01:36:48
into the liver and once they're in the
01:36:49
liver the immune system sees them and
01:36:51
it's like whoa these are totally safe
01:36:53
now and they sound by analyzing all the
01:36:55
different T cells the regulatory pathway
01:36:58
that emerged that caused the body to
01:37:00
stop attacking that protein and they
01:37:02
were able to end MS
01:37:05
using this induced system in animals so
01:37:07
basically that we have a known model for
01:37:09
making multiple sclerosis show up in
01:37:11
animals and they were able to stop Ms in
01:37:14
the Animals by taking this particular
01:37:16
protein that they use for Ms and they
01:37:18
put it in the in the liver through uh IV
01:37:20
they did the same with an egg allergy
01:37:22
and they did the same with several other
01:37:23
antigens this represents a very novel
01:37:27
and seemingly super impactful and
01:37:30
Powerful way to think about eliminating
01:37:32
autoimmune disease going forward is that
01:37:35
we can take the antigen and we now know
01:37:37
the antigen or the protein that causes
01:37:39
almost all of these autoimmune
01:37:41
conditions from thyroiditis to lupus to
01:37:44
ra to Ms and we can take that protein
01:37:46
glycosylated put it in an IV ends up in
01:37:49
our liver gets presented and our immune
01:37:51
system realizes I shouldn't be attacking
01:37:52
this anymore and resolves it so it opens
01:37:55
up a whole new category of Therapeutic
01:37:58
Pathways for addressing all autoimmune
01:38:01
conditions it's a totally new modality
01:38:02
it's a very interesting approach it'll
01:38:04
be he studied more deeply folks will
01:38:07
take this paper and try and start to
01:38:09
develop very specific Therapeutics
01:38:11
for very specific autoimmune conditions
01:38:13
using this approach and hopefully over
01:38:15
the next couple of years we see some of
01:38:16
these things have success gain traction
01:38:18
and go to market these autoimmune
01:38:20
diseases are typically some combination
01:38:22
of genetic and environmental so this is
01:38:25
not attacking them on that basis it's
01:38:27
attacking them in a different modality
01:38:29
you know there's two ways that we
01:38:30
address autoimmune conditions today the
01:38:32
first one is by presenting the antigen
01:38:34
to the immune system before you develop
01:38:36
autoimmunity this is like you know when
01:38:38
they give little bits of peanuts to kids
01:38:39
and yeah that's how you present prevent
01:38:41
peanut allergies in most autoimmune
01:38:43
conditions we're past that point the
01:38:45
immune system has already developed T
01:38:47
cells and antibodies to go and attack so
01:38:49
that doesn't work the second way is
01:38:51
immune suppression and that's terrible
01:38:52
globally suppressing meaning on the
01:38:54
whole body turning off the immune system
01:38:56
is not healthy in a lot of ways and
01:38:58
that's the current you know kind of Best
01:39:00
in Class
01:39:01
so this is a new approach which is we
01:39:03
can actually re-regulate the immune
01:39:06
system to not attack itself to not
01:39:08
attack our own proteins by introducing
01:39:10
that protein with with what's called
01:39:12
glycosylation getting it into the liver
01:39:14
and boom this magic starts to happen
01:39:17
and we'll see what the side effects are
01:39:19
as they start to try this on humans we
01:39:21
see we'll see what conditions are more
01:39:23
effective than others uh sorry for the
01:39:25
stupid basic question but how is the uh
01:39:28
how is it different when we put these
01:39:29
into say like uh you said these were
01:39:31
monkeys or chimpanzees so how are their
01:39:33
anuses different than Uranus
01:39:37
what sorry anyway let's keep going here
01:39:40
great science corner I'm laughing at how
01:39:43
contorted that you go you punch it up to
01:39:47
these workshops
01:39:49
let me work on punching it up we'll try
01:39:52
to get a better Uranus anyway it's super
01:39:54
cool autoimmune conditions the world's
01:39:57
getting better the tournament
01:40:00
refers to an approach to a therapeutic
01:40:02
and this modality is a new modality so
01:40:04
it's a super exciting new kind of
01:40:07
universe to be explored now on how we
01:40:09
might be able to treat autoimmune
01:40:10
conditions ranging from time okay let me
01:40:12
try hold on yeah
01:40:14
that's on the science one free bird what
01:40:16
part of the body do you think is going
01:40:19
to be most impacted by these discoveries
01:40:21
now
01:40:22
the immune system no no no that's not
01:40:24
good okay
01:40:26
here we go you guys are just so just
01:40:29
tell them about science
01:40:31
okay all right here we go okay here we
01:40:33
go Freeburg I thought the only solution
01:40:35
to Ms was uh fecal transplantation
01:40:39
through Uranus yeah
01:40:46
uh a misdirection there with the fecal
01:40:48
transplant and then we came back to get
01:40:52
that done we're gonna wrap here thanks
01:40:55
to everybody who came uh Brian Armstrong
01:40:57
also did a great job Elon did a great
01:40:59
job
01:41:00
thanks to everybody who showed up for us
01:41:01
and if you want to watch all the talks
01:41:03
all the talks are being released
01:41:05
exclusively on YouTube and X so go to x
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and look at the all-in podcast Twitter
01:41:11
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01:41:14
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01:41:15
talks uh available now and Rey from The
01:41:19
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01:41:21
doing a hundred fiftieth uh Meetup for
01:41:24
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01:41:25
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that for the Sultan of Science and the
01:41:30
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01:41:32
dictator in the arena making it happen
01:41:35
and four
01:41:36
[Music]
01:41:38
favorite bestie
01:41:40
David sax
01:41:41
moderate we'll see you next time bye bye
01:41:44
we'll let your winners ride
01:41:47
Rain Man David
01:41:49
attack
01:41:53
[Music]
01:42:01
besties
01:42:03
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oh
01:42:33
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