Break up Google, Starbucks CEO out, Kamala’s price controls, Boeing disaster, Kursk offensive

1. 0:00 – 5:27

   Bestie intros: Jason gets a dish named after him!

   1. JCJason Calacanis0:00

      All right, everybody. Welcome to the number one podcast in the world. I am your boy, J-Cow, the world's greatest moderator, executive producer for life. With me again on the All-In Podcast is the Rain Man, David Sacks. Yeah, looking healthy, looking good, looking trim. The hair's great. How you feeling, brother?

   2. DSDavid Sacks0:19

      Good. Good. Got a haircut.

   3. JCJason Calacanis0:20

      Yeah. You're good. Good.

   4. DSDavid Sacks0:21

      All good.

   5. JCJason Calacanis0:22

      Haircut looks good. Now, do you go to the barber or the stylist, or do they come to you? Everybody wants to know.

   6. DSDavid Sacks0:26

      They come to me. (laughs)

   7. JCJason Calacanis0:28

      Yeah, of course. Of course they do. Of course they do.

   8. DSDavid Sacks0:30

      (laughs)

   9. JCJason Calacanis0:30

      And then with us, of course, your sultan of science. He loves those vegetables. His name is David Friedberg, uh, from Berkeley to the Bay, our boy. How you doing there, brother? Are you living the lake lifestyle? You having a nice, restful August?

   10. DFDavid Friedberg0:45

       Loving, loving the outdoors.

   11. JCJason Calacanis0:47

       Good for you. You look so healthy. Speaking of looking healthy-

   12. DFDavid Friedberg0:50

       Celebrated birthday with, uh, Jason Koon yesterday. Happy 39th, Jason Koon.

   13. JCJason Calacanis0:55

       Oh, he's the mesh-

   14. CPChamath Palihapitiya0:56

       Happy 39th, Jason Koon.

   15. DFDavid Friedberg0:58

       We did a long mountain bike ride with our other buddy, Z and, uh-

   16. JCJason Calacanis1:02

       Oh, Z burgers.

   17. DFDavid Friedberg1:02

       ... had a little family barbecue last night.

   18. JCJason Calacanis1:05

       Very nice.

   19. DFDavid Friedberg1:05

       Everyone had a good time.

   20. JCJason Calacanis1:06

       What'd you do, a little portabella mushrooms? What'd you do? You put a little zucchini on the grill?

   21. DFDavid Friedberg1:10

       Let's just say I show up with my own food to a barbecue.

   22. JCJason Calacanis1:13

       Absolutely you do. All right, and everybody's favorite, the chairman dictator, Chamath Palihapitiya. You love him, you hate him, but you can't ignore him. How you doin'? Look at the number of buttons here. You got the, uh, Mao collar on, and I don't think any of those buttons are button.

   23. CPChamath Palihapitiya1:30

       None of them are buttons.

   24. DFDavid Friedberg1:31

       (laughs)

   25. JCJason Calacanis1:31

       None of them are button.

   26. DSDavid Sacks1:32

       (laughs)

   27. JCJason Calacanis1:32

       You became a meme once again. Once again, the All-In Podcast creating memes. You were swirling. You were swirling a little white wine last week. You were in the arena and, uh, I'm putting up all the numbers, going macro, and you're swirling wine. The, the audience loved it. Uh, what's going on today?

   28. CPChamath Palihapitiya1:47

       (laughs)

   29. JCJason Calacanis1:47

       Do you have a bottle?

   30. CPChamath Palihapitiya1:48

       That was a 2019 Ca' Del Bosco.
2. 5:27 – 28:10

   DOJ considers breaking up Google after last week's antitrust ruling

   1. JCJason Calacanis5:27

      All right, listen, Chamath's big O outcome is on the table. The DOJ is looking at breaking up Google. This is huge news in our industry. Last week, we talked about the ruling that Google had an illegal monopoly in search and advertising. The case was brought by, uh, Trump's DOJ back in 2020. Chamath said two outcomes are possible, little O, big O. Little O, consent decree. You know, like Microsoft did back in 2000 with the Internet Explorer decision. The big O, we didn't think that was a major possibility, but here we are. Google getting broken up. DOJ is going big O-On Wednesday, Bloomberg reported the DOJ is considering a breakup. According to the article, most likely breakup targets are Android OS, Google Chrome, and AdWords. Okay. Last time the government tried to break up a monopoly was 20 years ago when they tried and failed to dismantle Microsoft. We know how that's gone. That company's doing great. So let's talk about it. Aside from search and advertising, there's kind of five pillars at Google, and you're a former Googler, so we'll go to you first, Friedberg, I think. Cloud, $40 billion in revenue, growing 30%. YouTube, $34 billion, growing 15%. A little volatile because it's advertising that doesn't include like premium YouTube TV and that stuff, but... Oh my Lord, uh, YouTube is up to 2.7 billion monthly active users. World population is 8.2, so quite significant. Netflix has $38 billion in revenue. They're worth almost $300 billion, so that's an interesting corollary. You got Waymo doing 50,000 paid trips a week now, $2.5 million a year, and that's growing, uh, quite nicely. You got Android, right? They don't disclose revenue. You got the G Suite. So, let's start with you, Friedberg, and then I'll go to you, Chamath, because you made the prediction. What do you think would be accretive or, uh, generally increase the market cap and be something that Google would be happy with and the government would be happy with if you had to, like, maybe shed one or two properties? What, what's a possible outcome here? And your thoughts broadly on this.

   2. CPChamath Palihapitiya7:24

      I'll just start by commenting I'm not really sure what the improvement to consumer pricing or competition would be in different breakup scenarios. I'd really like to understand the DOJ's analysis on that. How does breaking up one of these things improve the, uh, the consumer experience? I could see the case for Android because Android defaults to Google Search. But again, Android's an open source operating system, and so everyone has their own fork or a lot of the handset manufacturers will have their own fork of Android. Obviously, the Google fork defaults to Google Search, so it benefits Google's services quite well. I think that would be an analysis that the DOJ would really have to kind of prove out, that there is real, uh, anti-competition associated with Google's influence over the open source Android operating system fork that they manage and license out. I think understanding that would be good. I do think that there's a lot of value unlock in YouTube. So if Google were to just generally spin out YouTube, that is probably a business that, on its own, would attract an investor base that might otherwise not want to get into the conglomerate. And, you know, there's always this notion of what's called a conglomerate discount. When you put a lot of different businesses together, the businesses, in aggregate, get valued less than the individual parts would, would be valued on their own, because different investors interested in a business investment thesis would like to bet on cloud, would like to bet on YouTube, would like to bet on AI, and so... And, and so each one of these kind of like segments, if they can be unlocked, can actually be value-creating in terms of overall market cap. The challenge is the way YouTube's infrastructure operates. It operates on shared infrastructure with the rest of Google services. So does cloud, so does search, so does AdWords. So there's one common, uh, cloud infrastructure that everything runs on, and then there's, um, one common advertiser pool. There are dedicated advertising salespeople within YouTube, but there's also dedicated shared infrastructure on advertising between YouTube and search and AdSense and so on. And there's ad sales teams that actually can sell across search and third-party publisher sites and YouTube. And so, you know, breaking up those shared teams becomes a little more technically difficult, but YouTube certainly seems like an unlock. The question is, what happens with all the infrastructure layer? Does that go with cloud? And if it does, then YouTube, AdWords, and search all become customers of cloud. So there might be one way that this could work. But I think net-net, if this were to happen, there could be a lot of, um, upside in the market cap. I'll also say it just feels like the tenor of all of this is anti-success and not anti-competition, and any- anything that's kind of successful or big is automatically deemed to be a monopoly. And I think we really have to kind of understand how are consumers and the market for competition being affected by having all these things together? And that's what should really be focused on and studied, not just the fact that something is big and successful. And we'll see how that all plays out.

   3. JCJason Calacanis10:33

      All right. Chamath, uh, you predicted the possibility of a big O. Here we are. Your thoughts on what this might look like, chances of it happening, and then just maybe if you're interested in the, uh, anti-success approach here, or do you think this is more, you know, valid criticism of Google's massive search monopoly?

   4. CPChamath Palihapitiya10:56

      Well, when I painted that series of outcomes, just kind of like looking forward, I really didn't think that this big O outcome was a very large probability. I was like... You know, I would have handicapped that at single-digit percentages.

   5. JCJason Calacanis11:12

      Hmm.

   6. CPChamath Palihapitiya11:13

      And I think the reason why the DOJ leaked this thing and floated this trial balloon, essentially, is in part... I didn't weigh enough what Sax was talking about, which is that there really is a massive bipartisan amount of support against Google. Now, it cuts on two different dimensions. I think that there is one dimension which is more Republican-oriented, which is just about freedom of speech and putting your thumb on the scale. But if you take the Democratic point of view, it's more the anti-successful vein that Friedberg just mentioned. The thing is, though, that it'll make strange bedfellows because it unites both sides against pushing for a big outcome. If you go back to the last big O...

   7. ... outcome that we had in antitrust law, which was AT&T in the 70s and 80s. That lawsuit was a decade long, right? And essentially what happened was wh- when it looked like AT&T was going to lose the case, they were the ones that proposed splitting itself up. And so, I think that it's... This is going to start this really interesting chess game here where obviously Google has to appeal and fight this. But if it looks like the political pressure is gonna build and the courts aren't going to let them off the hook and have a little old outcome, probably the best thing to do is for Google to initiate it themselves because they can answer a lot of the questions that Friedberg just raised. And they'll do it in a way where going back to the people that matter along with the customers and the employees or the share- shareholders, you can do it in a way where the sum of the parts will be greater than the value today of Google. So, I think that there's a shareholder win. It needs to be offered by Google and then negotiated. But to be really honest with you, Jason, when I, when I kind of was thinking about it last week, I really thought this was a single-digit probability. I still think it's a single-digit probability, and if it grows, it's the most meaningful thing that's happened in technology, quite honestly.

   8. JCJason Calacanis13:37

      All right. Sachs?

   9. CPChamath Palihapitiya13:38

      From a business perspective.

   10. JCJason Calacanis13:40

       Cool. Sachs, your thoughts.

   11. DSDavid Sacks13:41

       I agree with Chamath that Google has the opportunity to do something really interesting here, which is get ahead of the curve and break itself up before the political system forces that onto it. And the advantage of doing that is that it could partition the company in ways that are economically smart. The big categories would be search, advertising, and YouTube, and I think that would have two big economic benefits for shareholders. One is you unlock value by deconglomerating like Friedberg was saying. Second, once you break up the company into these pieces, there's less places for employees who aren't doing anything to hide, you know, for all this bureaucracy to hide.

   12. JCJason Calacanis14:21

       (laughs)

   13. DSDavid Sacks14:21

       I mean, look, G- Google is famous for employees who don't do anything, right? The guys sitting on the roof, sunning themselves all day.

   14. JCJason Calacanis14:28

       (laughs)

   15. DSDavid Sacks14:28

       If you break up the company into three or four smaller companies, right, there's just way less room for people to hide. And I think that they could all be lean or more efficient operations and that would accrue to the benefit of, of shareholders. So, I think that would make a lot of sense. And then furthermore, I guess a third point is that you forestall the possibility of the government doing something that could actually be very harmful. And, you know, the, the piece here is that I guess the DOJ is talking about spinning up Android and Chrome, and I think it's worth pointing out that those aren't really businesses in and of themselves. The reason why Google developed Android and Chrome was to prevent anybody from getting upstream of them, right? They saw what Microsoft did in terms of capturing the operating system and then capturing the browser, and they didn't want to potentially allow Microsoft or anyone else to essentially win the high ground, capture the high ground upstream of them, and be able to divert traffic away from search to their own search engine or some- someone else's search engine. So, they began this strategy of commoditizing those layers of the stack, and it worked brilliantly. I mean, Android and Chrome have become very popular and it guarantees that nobody else can get upstream of them and then disintermediate them. But the problem is, if those things get spun out and have become businesses on their own, how would they function as businesses? It's not clear to me that there's an obvious strategy there. I would l- like to ask Friedberg. Friedberg, do you, do you see a way that Chrome and Android could be spun out and, and become viable businesses on their own, or do you agree that they were essentially created to commoditize layers of the stack rather than become profitable businesses of... On their own?

   16. CPChamath Palihapitiya16:13

       Yeah. So, they, they were both created to avoid third parties blocking access to Google Search. That's why they were both started. And remember, Sundar was the product manager on Chrome originally. That was his big kind of product that he ran for quite some time. So, Android was all about making sure that the handset manufacturers didn't basically default consumers to do search and use the internet in a way that would disadvantage Google. So, Google said, "You know what?" Just like Zuck is doing currently with LLaMA, Google said, "Let's make an open source mobile operating system that's better than any other mobile operating system, and we'll make sure that consumers have choice and they have the ability to go where they wanna go and it's not just defaulted by the telcos or the handset manufacturers." So, that was the reason. And obviously they ended up making their own fork of Android, which is the most popular fork of Android that has Google as a default search engine. So yeah, and they, and they get license fees from that, but fun- fundamentally it's really just in service of making sure that people go to Google Search. So, where that ends up sitting in a split-up company, I have no idea. And, uh, Chrome similarly, you know, eh, Google originally supported Firefox and gave a lot of money to Firefox, and then Firefox just wasn't moving fast enough, so Google started hiring Firefox engineers and built Chrome in-house as a way to keep Netscape and Internet Explorer from blocking access to Google Search and defaulting, uh... And, and they built a default to Google Search, obviously. What do you think, J Coe?

   17. JCJason Calacanis17:40

       You know, I, I, I have a long relationship with Google, um, as a content creator, and they, they do have a massive monopoly in search. That's absolutely true, and the Justice Department, I think, is, um, well within their rights to, to take a deep dive on that. They don't have it in ads. If you look at the competition for Google in advertising, you got Meta, TikTok, and Amazon, which have very, very significant advertising businesses, and then like a bunch of new players, um, which are referred to basically as the shopping cart ad networks. That's Uber, Instacart, DoorDash, et cetera.And so when you look at this, it's- it's kind of paradoxical that it really does rhyme with what happened with Microsoft. They're two decades late on this. The- the search monopoly has been squeezed for every dollar and to build every sub-component of Google's monopoly. Lights, shopping, all of these things put into Google Search and put at the top, above organic search, has basically killed hundreds, hundreds of startups over the decades. And so, I actually don't think this is gonna do much if they do a breakup. The easy solution for Google, and I agree with, I think people who said that here, is to just spin out YouTube and Waymo. Those two are perfect standalone businesses. Yeah, there's some backend stuff, but like you said, Freyberg, they could become customers of the ad network of the cloud for some number of years. But YouTube and Waymo, those should be like a $400 billion company, a $50 billion company, and those are right in the zeitgeist of the future and what advertisers want. So I- I think offering those two up would unlock massive shareholder value. The most damaging one would be Android. If they forced them to sell Android, that is going to be massively damaging because an independent Android company could then, you know, give their search default to Bing, and Microsoft would happily bid for that.

   18. CPChamath Palihapitiya19:29

       No, no, no. Not could. Not could. They- they must in order to- to capture-

   19. JCJason Calacanis19:33

       Sure.

   20. CPChamath Palihapitiya19:34

       ... maximum economic value.

   21. DSDavid Sacks19:34

       They would auction it. Yeah, you're right. They would auction it.

   22. JCJason Calacanis19:36

       They would auction it.

   23. CPChamath Palihapitiya19:36

       They would auction it.

   24. JCJason Calacanis19:36

       Right. And so, I mean, losing every...

   25. CPChamath Palihapitiya19:37

       On- on Google's fork of Android, right?

   26. JCJason Calacanis19:39

       Correct.

   27. CPChamath Palihapitiya19:40

       Yeah.

   28. JCJason Calacanis19:40

       And so that is the dominant player and then they have handsets. So that Android company-

   29. DSDavid Sacks19:43

       Wait, how much is that worth? How much is that worth because maybe that does make Android a viable business on its own?

   30. JCJason Calacanis19:48

       Well, no. You know, it would be probably worth...
3. 28:10 – 45:37

   Starbucks replaces CEO with Chipotle chief

   1. JCJason Calacanis28:10

      docket. Starbucks' CEO is out after a year and a half of underperformance. Starby's CEO, Laxman Narasimham, uh, stepped down e- after just 16 months on the job. Uh, I'll break down what went wrong and get your reaction to all this. I know you have some strong feelings on it. Friedberg, as well. Earlier this week, Starbucks shares were down 20% year-to-date compared to the S&P, up 12%. Company saw two straight quarters of declining revenue, the definition of a recession, in fact. They've had to raise prices massively due to inflation. That has annoyed customers. And customers have been irate about the wait, which has been caused by two things. One, they have a broken staffing algorithm. That's led to massive understaffing. And then the app has become, the Starby's app is incredibly complex and you can order ridiculous drinks that's causing a massive-

   2. DFDavid Friedberg28:57

      I'm sorry, why do you, why, why do you keep saying Starbeans?

   3. JCJason Calacanis29:00

      It's what the kids call it. It's what the kids call it, Starbeans.

   4. DFDavid Friedberg29:02

      Oh, that's part of the problem. Okay. I've never heard of them.

   5. JCJason Calacanis29:05

      Kids are addicted to this.

   6. CPChamath Palihapitiya29:06

      That's what kids call it?

   7. JCJason Calacanis29:06

      Kids are addicted to it. Yeah, and they've added like all these like fruity drinks with, and stuff that would be like along the boba lines that have made, have become incredibly popular with millennials and Gen Z. So anyway, Laxman was the, uh, handpicked successor by Howard Schultz, and Schultz helped prep and train Laxman but he's been super critical of him recently, kind of like the Bob Iger, Bob Chapek, uh, relationship we saw play out in 2022 over at Disney. Brian Niccol, the current CEO of Chipotle, is gonna take over at the end of August. Investors love this move. Shares jumped 25% on Tuesday.

   8. DFDavid Friedberg29:39

      What did you... Sorry, what, what did you call it? It's called Chipotle. Normal people call it Chipotle.

   9. JCJason Calacanis29:43

      Oh, sorry. Brian Niccol, the current CEO of Chipolte. Chipotle?

   10. DFDavid Friedberg29:47

       No.

   11. DSDavid Sacks29:48

       Chipotle.

   12. JCJason Calacanis29:49

       The CEO of Chipotle.

   13. CPChamath Palihapitiya29:51

       (laughs)

   14. DFDavid Friedberg29:51

       No, Chipotle.

   15. JCJason Calacanis29:52

       Chipotle.

   16. DFDavid Friedberg29:54

       Chipotle.

   17. JCJason Calacanis29:54

       Chipotle?

   18. CPChamath Palihapitiya29:54

       See you at Chipotle. (laughs)

   19. JCJason Calacanis29:54

       (laughs)

   20. CPChamath Palihapitiya29:54

       Welcome to Chipotle. We essentially have Chipotle. (laughs)

   21. JCJason Calacanis29:57

       Who knows? I don't eat at this place anyway.

   22. CPChamath Palihapitiya30:00

       Chipotle. (laughs)

   23. JCJason Calacanis30:00

       Stocks jumped 25% on Tuesday, largest single-

   24. CPChamath Palihapitiya30:03

       Chipotle.

   25. JCJason Calacanis30:03

       ... day increase, yada yada. Meanwhile, Chipotle dropped 8%. Niccol is on a heater. When he switches teams, the odds go with him, and Starbucks has a bunch of, uh, activist investors who are winning massively as part of putting pressure on this. Friedberg, Starbucks and Nike, both iconic global brands, both have faltered. What's your take?

   26. CPChamath Palihapitiya30:23

       Well, the- the one argument is there's a founder-led problem here, which is when the founder steps out and professional management takes over and you have the same expectations that you had when the founder was leading, things go, um, sideways. But Starbucks faces many more kind of macroeconomic challenges. Nick, if you pull up, uh, Starbucks financial report. So here you can see that their, uh, net revenue growth was only about 1% year over year, but their operating margin's been on the decline. So they have not really been able to boost their operating margin very much in the past five years. So while they've raised prices, they've had a really hard time making more money, and that's because the cost of food and the cost of labor and the cost of rent and the capital expenditures needed to upgrade stores has far exceeded the ability for them to grow revenue and compete. And now revenue is flatlining because consumers are getting tapped out with respect to how much they can spend. And there's only so much innovation you can really do to charge more, get people to come in the store more, and drive up revenue. Brian Niccol has an incredible reputation. Prior to Chipotle, he ran Taco Bell, and he ran Taco Bell for several years and made it one of the most profitable QSR, quick-serve restaurants in the world. He did this by focusing on every nickel. He is notorious for being a cost cutter, for being an efficiency driver, for being a productivity hound. He goes into the business and he figures out every step in the supply chain, every step of the operating activities of the employees and the stores, and figures out ways to make sure-

   27. DSDavid Sacks32:00

       Wait. Did you say that Brian Niccol focuses on every nickel? Was that-

   28. CPChamath Palihapitiya32:05

       (laughs)

   29. JCJason Calacanis32:05

       Hey.

   30. CPChamath Palihapitiya32:05

       He did say that.
4. 45:37 – 59:20

   Work culture, WFH's damage to informal mentorship

   1. JCJason Calacanis45:37

      All right, so now, there's a- a big culture thing going on here, Freyberg, of, uh, hard work in corporations. I don't know if you saw Eric Schmidt at Stanford. They took this talk down and Eric Schmidt is walking the comments back. But here we go, folks. This is the money clip from Eric Schmidt.

   2. CPChamath Palihapitiya45:51

      Google decided that work/life balance and going home early and working from home was more important than winning. (laughs) And to startups, the reason startups work is because the people work like hell. And I'm sorry to be so blunt, but the fact of the matter is, if you all leave the university and go found a company, you're not gonna let people work from home and only come in one day a week. (bell rings)

   3. Ooh, good reaction.

   4. Can you show the Starbucks clip? Can you show the Starbucks clip?

   5. Well, it's just self-evidently true. I mean, he's basically making a- a point similar to what I said about Google's so large that employees can hide and not do very much and, you know, they can kind of coast.

   6. JCJason Calacanis46:33

      Rest and invest.

   7. CPChamath Palihapitiya46:33

      It's not just- it's not just Google.

   8. Yeah.

   9. JCJason Calacanis46:35

      Oh, it's ni- it's pervasive.

   10. CPChamath Palihapitiya46:36

       Sure, of course.

   11. Yeah.

   12. JCJason Calacanis46:37

       Yeah, let's pull up the, um, the Starbucks CEO clip.

   13. DFDavid Friedberg46:41

       I'm very disciplined about balance. If there's anything after 6:00 PM, and if I'm in town, it's gotta be a pretty high bar to keep me away from the family. Anybody who gets a minute of time off that better be sure that it's important, because if not, it'll just wait for another day.

   14. CPChamath Palihapitiya46:56

       This makes me so uncomfortable just hearing that. I feel holy (beep) .

   15. JCJason Calacanis47:00

       I mean, retire, bruh. Just retire.

   16. CPChamath Palihapitiya47:02

       What does America value, is the real question. Does America value success, performance, or does America value comfort? And the problem is, American- American work culture has shifted to valuing comfort, and that is the inevitable outcome of decades of extraordinary success. And now the performance culture is losing to the comfort culture, and the competitors-

   17. I think you guys are putting a lot of things together. The problem is that I don't think that that's the, his truth, actually. I think that this guy's clip sounds very inauthentic. I think what probably happened is the PR and policy group of Starbucks says, "Hey, listen, here's the average age of your employee and here's what they value," and he probably spouted some politically correct nonsense to try to inspire the troops. I think a lot of CEOs do this. Like, I think we're seeing in modern media today that a lot of CEOs have actually become the least version of their authentic self. They are being packaged by people to dress and act and say things in a certain way, and I think what happens as a result of that is that you have a wayward culture where nobody knows what people stand for. That's when the corrosiveness of folks not working at all or having jobs at two different companies comes in. Like, that's a total moral and ethical breach that happens because people think it's acceptable, and I think people think it's acceptable because it's not in the talking points of how the CEOs are trying to package themselves to tens of thousands of employees.

   18. JCJason Calacanis48:43

       Hmm. So you think this was a PR-designed genuflect? I like that insight. Sax, your thoughts overall.

   19. DSDavid Sacks48:51

       Well, it could, it could be a genuflect, I don't know. Um, look, I would say that there are a lot of Americans who do feel that way about work. But I think it's not appropriate in, in two cases. Number one is if you're ambitious and you really want to rise in your organization, then you gotta have more of the J-Cal attitude, which is, "I'm gonna be the first to work and the last one to leave, and I'm gonna show my boss, I'm gonna get promoted." So if you wanna be ambitious in your career, that's not a good attitude to have. And then on the other extreme, if you're the CEO of a company, your attitude has gotta be, "I'm 24/7 with this shit." You know? It's like-

   20. JCJason Calacanis49:27

       Yes.

   21. DSDavid Sacks49:27

       ... I'm always online, I'm always reachable. The buck stops with me. Now, obviously you're gonna cut out time to be protected that you can spend with your family. But your attitude's always gotta be that I'm available. You know, I don't turn off my phone, I don't do any of that stuff. I just think that if you're running an organization, you can't take this attitude that, "Oh, it's 6:00 PM, I'm switched off." You know, it just doesn't work that way.

   22. JCJason Calacanis49:52

       Yeah.

   23. DSDavid Sacks49:52

       So-

   24. JCJason Calacanis49:52

       Especially if you're running one of them-

   25. DSDavid Sacks49:53

       ... I don't, I don't think that's...

   26. JCJason Calacanis49:55

       Yeah. (laughs) Yeah. I mean if you're-

   27. DSDavid Sacks49:56

       I just don't think it's an appropriate thing for someone like that to say when he's the CEO of a multinational corporation.

   28. JCJason Calacanis50:01

       Yeah, I think that is the key insight, uh, Sax, I'm with you on this, which is leadership starts at the top. If the leader says, "Hey listen, don't bother me after 6:00, I'll talk to you at 9:00 AM," then that's just gonna go through the entire organization. And it's already hard enough to run these organizations. Now, if you run a lifestyle business as your local cafe and you want to do that and you're running it at a break-even, that's fine. This is a publicly traded company with shareholders with massive competition who could get taken out by all these other brands that are, that are trying to compete with it. You have to have... This is a war. We are at war. We have to figure out how to lower prices. We need to grind every nickel from, you know, the supply chain, rent, we have to renegotiate contracts. And then, you know, just to speak on the work ethic issue, this country is in a, um, a very significant war about going back to work and work ethic. Y- you mentioned Overemployed and the ethics around that, Chamath. And then there's a group of Americans, and I've been studying this a bit, that are opting out of capitalism or hacking capitalism. There's a very interesting movement, it's called FIRE, Financial Independence Retire Early. And if you look at the two subreddits, Overemployed and the FIRE subreddit, young people are saying ha- capitalism is there to be hacked. And my way of hacking it is I'm gonna have two jobs. And I had a startup come to me and say, "We've got this great engineer, literally from Google, who wants to work from us and he's making 400K. We can get him for a buck 50." And I said, "Oh wow, that's great. Why would he do that? Is he independently wealthy?" They said, "No, he's keeping his job at Google." He says it takes 10, 20 hours a week and he's gonna work 60 hours a week for us. And I said, "Is that ethical or legal?" And they're like, "I don't know. That's why we're asking you." These are 20-year-old founders we had backed. And I was like, "This is incredibly unethical and you're gonna get us in a lawsuit. Don't do it." But that is what's, you know, the, the give and take. And if you look at what happened with Dell this past six months... Have you been following that, Friedberg, the Dell story?

   29. DFDavid Friedberg51:54

       No.

   30. JCJason Calacanis51:54

       It's pretty incredible. They told everybody, "We're coming back to office." People were like, "Yeah, I don't wanna come back to office." Okay. Reasonable. Y- you think you do a better job at home, I get it. What they said was, "If you wanna be work from home, you can't get a promotion and you can't get a salary increase." And do you know what employees said? "Okay. I don't want an increase. I don't... I, if, if my choice is stay at home and, and have no salary increase, and I don't care about a raise. I don't care about a, a promotion."
5. 59:20 – 1:21:27

   Election update: Harris flips the polls despite unclear policy; reports of price control focus

   1. JCJason Calacanis59:20

      Okay, let's go to our little election update and some news about Kamala and a little bit of socialism coming. So here's, uh, how I, I set it up today. We'll see how this goes. 2024 election update is here. I'm gonna do two things, gentlemen. I'm gonna just tee up the latest polls, um, and then I asked our crack all-in research team to just give me the top, you know, couple of issues in the principals' own words. Uh, the principals being, you know, the press on either side and the four people who are running for office. So let's just go through the numbers here. Nate Silver, a friend of the pod, now has Kamala Harris at 57% favorite to win the electoral college. There's your first chart. And you can compare this to what happened with Biden before the hot swap. Trump had a 73% probability to win the electoral college, so that is the, the swing of all swings, and obviously a lot has happened since then as well as the assassination attempt on Trump. Massive swing for Harris, as you can see in, uh, Nate Silver's chart. He's doing something called Silver Bolts, and he's not at 538 anymore, but this is the most telling chart. You can see Biden, Trump there and it's a, it's almost a clean sweep in red. And then you go to Harris, Trump and the shift has been 100% blue. Pretty dramatic. Harris is flipped, according to Silver, Pennsylvania, Wisconsin, Arizona, Michigan, Nevada, and Virginia. Here's a couple of, uh, quotes and then we'll get into it. The big critique from Republicans this past week is that Harris won't do interviews. God, it's just ridiculous that they have not sat for interviews and meanwhile Trump is doing every podcast and, and Twitter Spaces on the planet. Uh, but the big news is that this might have changed by the time you listen to this podcast. Everybody knows we tape on Thursdays for the world's number one podcast and it comes out on Fridays.Washington Post Jeff Stein reported that Kamala Harris will propose the first ever federal ban on corporate price gouging for food and groceries on Friday.

   2. CPChamath Palihapitiya1:01:17

      Oh.

   3. JCJason Calacanis1:01:17

      Uh, we're gonna... I'm gonna hand that off to you, Freeberg, to detail-

   4. CPChamath Palihapitiya1:01:20

      I'm gonna throw up. Oh, I'm gonna throw up. Ugh.

   5. JCJason Calacanis1:01:21

      Take it easy.

   6. NANarrator1:01:22

      Go ahead. Sorry.

   7. JCJason Calacanis1:01:22

      We got just... We're gonna get there. You're going to get your, um... you're gonna get your rare vegetables in a second.

   8. NANarrator1:01:28

      (laughs) .

   9. CPChamath Palihapitiya1:01:28

      (laughs) .

   10. JCJason Calacanis1:01:30

       So, uh, the other big... (laughs) You're gonna get your...

   11. CPChamath Palihapitiya1:01:33

       (laughs) .

   12. JCJason Calacanis1:01:34

       You're gonna get your veggie sashimi soon.

   13. CPChamath Palihapitiya1:01:37

       Your red vegetable. (laughs) .

   14. JCJason Calacanis1:01:37

       All right. From the JD Vance, uh, corner, he is questioning, uh, Tim Walz's service. Here's the quote. "Well, I wonder, Tim Walz, when were you ever in war? When was this?" Harris' campaign in responding, "In his 24 years of service, the Governor Kerry fired and trained others to use weapons in war, innumerable, innumerable times..." Yada, yada, yada. Uh, a lot of back and forth there about that issue. But let's get to... Um, and it was an incredible, uh, two-hour spaces. Audio was a little rough, but the content was great. Elon had a conversation with, uh, Trump, and, uh, they talked about nuclear power. Elon offered his services two or three times to Trump, sacks to, uh, do efficiency, uh, in the, uh, government and maybe cut some costs. But that's what happened notably in the last week. Freeberg, what's your take on this reported by the Washington Post, and I think confirmed by Politico, uh, move by Kamala Harris-

   15. CPChamath Palihapitiya1:02:39

       Thank you for asking.

   16. JCJason Calacanis1:02:40

       ... to price fix?

   17. CPChamath Palihapitiya1:02:41

       Thank, thank, thank you for asking, Jake Sal.

   18. JCJason Calacanis1:02:42

       Do you have any feelings on it? Yes, yeah.

   19. CPChamath Palihapitiya1:02:43

       I unequivocally hate socialism. Socialism destroys innovation, destroys productivity, and destroys individual liberties. Agriculture and food markets have insanely competitive dynamics because there are commodity markets, there are tons of competitors, there is no monopoly in making food, there is no monopoly in making CPG products, there is no monopoly in retail, there is no monopoly in grocery stores. It is a small margin, highly competitive, highly fragmented free market. And the free market works in that everyone is always competing with each other, creating new productivity improvements, and as a result, over time, prices come down, except when the government intervenes and gets involved. So, I would argue that the real cause of price inflation in food is not the supposed price gouging by corporate players in the ag and food industry, all of whom are deeply competitive with one another, but rather is the result of the inflation associated with government spending and stimulus coming out of COVID. Nick, exhibit one, the fed balance sheet. From COVID to today, the fed balance sheet grew from 4.2 trillion to $7.2 trillion, a growth of 70%. The Federal Reserve went out and they bought assets and they issued debt to banks and i- introduced liquidity into the system. If you go to the next slide, as a result, the M2 money supply increased from 15 trillion to 20... $21 trillion since COVID, a 40% increase. Okay? So now, there is more money in the system, so the cost of everything should go up, which is exactly what we've seen. We can walk through a couple of the other commodity price charts from the St. Louis Fed. Here is the price of electricity. As an example, the price of electricity has gone up a little bit less than the M2 money supply. But the truth is, when you start to actually look at ag commodity prices over time, what's happened is there was certainly a boost coming from COVID, but the competition and the challenges in overproduction in the ag markets has started to hit and started to bring prices back down. So, here's the price of strawberries. Strawberries today are selling for less than they were pre-COVID. Potatoes are now back to where they were pre-COVID. Now, let me give you some statistics on some of the supposed price gouging companies in the industry. Kraft Heinz stock pre-COVID was 29 bucks a share. Today, Kraft Heinz stock is 34 bucks a share. 2019 revenue of 25 billion, 2023 revenue of 26 billion, EBITDA on 2019 of 6.1 billion, EBITDA on 2023 of 6.3 billion. There's not a lot of profit gouging. In fact, Kraft Heinz has not been able to keep up with the inflation. Starbucks, which we just talked about, their stock was at $90 pre-COVID, and today, 93 bucks. 2019 revenue of 26 billion, operating income of 4.1 billion, 2023 revenue of 36 billion, but operating income only 5.9. Margins have come down in Starbucks. Nick, if you pull up the McKinsey chart, this is a study of the grocery industry, the State of Grocery in North America 2023 by McKinsey. Accelerating pressures on profitability to cope with the pandemic's upheaval, grocers have had to dramatically increase CapEx, increased supplies. As a result, they've seen a significant impact on margins. Here's the margin profile pre-pandemic, and today. Gross margin has declined by two points from 47.6 to 45.6. EBITDA margin has declined by one and a half points. And now, let's just go to the final chart, which is CPG companies, the companies that make food and sell it to consumers. As you can see, during the COVID era, the three-year rolling TSR has declined since COVID across the board. So, food companies are seeing food prices come down. So, farmers are really suffering. Labor costs have tripled since the pandemic, but they're still having to sell products at the same price. CPG companies have lower margins and supermarkets have lower margins. So, there is nowhere in the ag or food supply chain that we are seeing fundamentally price gouging or profit-taking happening. What has happened is the cost of labor, the cost of moving stuff around, the cost of fuel, the cost of electricity, the cost of goods has all risen with inflation because of the increase in the money supply and federal spending, and the stimulus associated with the Federal Reserve buying assets onto their balance sheet. So arguably, I would say that trying to step in and cap prices will reduce competition, and as a result will reduce investment in improving productivity. And we have seen this countless times with every socialist experiment in human history has started with caps on food, and it has resulted in bread lines like you see in the image behind me today, as we can see in Soviet Russia. This is a mistake.It is a problem. It is anti-American, it is anti-free market, it is anti-innovation, it is anti-productivity, and ultimately it's anti-liberty. And I cannot stand it. That's my rant.

   20. JCJason Calacanis1:07:42

       Okay. Thanks for coming to Freeburg's TED Talk. Chamath, yes, you're nodding strongly in agreement. This is just dumb and pandering. Am I correct?

   21. CPChamath Palihapitiya1:07:50

       There is no sustainable solution to inflation if you cap what a company can charge, because what they'll do is they'll just stop producing. They'll manage to a margin that-

   22. Stop competing.

   23. ... yeah, they'll- they'll just stop. And the reason they can stop is that they would rather contract and maintain their profitability than lose money. And then what happens is there's less products in the market, and so the prices go up. So, I think it stands to reason that the Harris campaign has access to some reasonably smart people. They also have access to really smart people like Larry Summers. And so I think if they just make a few phone calls, they'll figure out that this is a really terrible idea.

   24. JCJason Calacanis1:08:36

       Sax, any thoughts? Overall election and this specific issue. You take it either way you like.

   25. DSDavid Sacks1:08:41

       Yeah. So this story was reported by The Washington Post and by Bloomberg and others. So, it appears to be more than just a rumor or conjecture. I mean, these are publications that are apparently well-sourced within the Harris campaign. So, I think it is fair game for us to comment on this policy proposal that she apparently will be coming out with. Look, I think Freeburg is right about the policy. The idea of price controls is widely discredited across the political spectrum. I mean, I think virtually all economists agree on this. This was tried extensively in the 1970s, not just under Jimmy Carter, but Nixon tried wage and price controls. And Gerald Ford had this whole program called Whip Inflation Now where they printed out these buttons, called- these WIN buttons, and then Carter extended it. That's why we had huge lines at the gas pumps is because we had, uh, price controls on gas. And those lines at the pump went away almost overnight when Ronald Reagan came in and removed the price caps on- on gas. So, we've tried price controls before. It didn't work, and it is remarkable that she would be proposing here potentially as her first major policy proposal on the economy to go back to this 1970s era failed policy. And I think it's really tipping her hand in terms of where her economic proposals are gonna come from and what she really thinks. Keep in mind that throughout the- the Biden presidency, he rhetorically would blame corporate greed for the rise in inflation we saw, as like a scapegoat, because he didn't want to blame himself for all the spending. But she's going further now and actually instituting this as policy.

   26. JCJason Calacanis1:10:31

       Yeah. And so just to be clear with everybody, we don't have the actual policy here, but it's been reported. Seems like it's true. Maybe it's not. Maybe they step it back. We don't know the details of this at all. What we do know is it's been tried before. What we do know is there are times when you could, like in an economic emergency, like during, um... What was the giant, uh, hurricane or wars? You know, you can keep your eye on this. Um, but the truth is, as we just talked about with Starbucks, you know, Sax is like, "I got a free cup of coffee or close to free." I make my own cold brew. Uh, shout out Cafe Du Monde, 'cause I don't want to pay $8 for it. The market responds, and when you put your thumb on capitalism or you put 12 thumbs on capitalism and on- on the scale, all kinds of weird behaviors occur. It does not work. And consumers can just simply opt out. They can make breakfast at home.

   27. CPChamath Palihapitiya1:11:23

       It's a great point.

   28. JCJason Calacanis1:11:23

       They can brown bag their lunch. And- and you know what?

   29. CPChamath Palihapitiya1:11:26

       It's a good point.

   30. JCJason Calacanis1:11:26

       Then companies are going to be like, "Holy (beep) , people are not buying $8 coffees. Let's make a- a cheaper Happy Meal."

Episode duration: 1:46:01