E102: Elon closes Twitter deal, $META uncertainty, Zuck's historic bet, big tech decline & more

1. 0:00 – 3:13

   Sacks is back and recaps his week off!

   1. DSDavid Sacks0:00

      My stans really took over the comment board.

   2. JCJason Calacanis0:02

      Yeah, Sax, how was your week off when, uh, you, you gave up on the pod for a week and then did four media appearances-

   3. DSDavid Sacks0:09

      (laughs)

   4. JCJason Calacanis0:09

      ... for 90 minutes each on other pods? You did six hours of pod- You took off from this pod to give your ratings to Megyn Kelly and, uh, Dave Rubin.

   5. DSDavid Sacks0:17

      Yeah, I did a 45-minute hit with Dave Rubin on Ukraine.

   6. JCJason Calacanis0:21

      Okay.

   7. DSDavid Sacks0:21

      So be sure to check that out. And then... Yeah, did I do... No, Megyn, Megyn Kelly, uh, Freiberg and I did that the week before.

   8. JCJason Calacanis0:28

      Was that this week? Oh, okay.

   9. DSDavid Sacks0:29

      Surprisingly, she didn't invite you back.

   10. JCJason Calacanis0:31

       Yeah, I don't know. What could have happened? (laughs)

   11. DSDavid Sacks0:33

       (laughs)

   12. JCJason Calacanis0:34

       That was so great. It was so great. That was awesome. I love Megyn Kelly.

   13. DSDavid Sacks0:37

       Didn't she call you a prick?

   14. JCJason Calacanis0:38

       Yeah, she did. (laughs) She did. And she only knew me for 45 minutes. Usually that takes, like, three or four days.

   15. DSDavid Sacks0:43

       (laughs)

   16. JCJason Calacanis0:43

       She just got right to it.

   17. What's going on? Let your winners ride. Rain man, David Sax. What's going on? And I said... We open sourced this to the fans and they've just gone crazy with it. What's going... Love you, bestie. Queen of quinoa. What's going on?

   18. DFDavid Friedberg1:01

       Sax, we have not had such negative panning comments on YouTube since J-Cal-

   19. DSDavid Sacks1:07

       (laughs)

   20. DFDavid Friedberg1:07

       ... um, got Brigadooned for his, uh, pro-Ukraine rhetoric a few weeks ago.

   21. JCJason Calacanis1:10

       Now I'm getting Brigadooned for Sax not showing up.

   22. DFDavid Friedberg1:13

       I know.

   23. JCJason Calacanis1:13

       I get Brigadooned for asking him a question, then I get Brigadooned from him not showing up.

   24. DFDavid Friedberg1:17

       So maybe you're not getting Brigadooned. I don't know. Maybe it's just honest commentary from the market.

   25. CPChamath Palihapitiya1:19

       When will you guys realize that there are three to five million people a week that listen to this podcast?

   26. DFDavid Friedberg1:26

       (laughs)

   27. CPChamath Palihapitiya1:26

       100 nitwits who comment on YouTube. They're neither right nor wrong. They should just be completely ignored.

   28. JCJason Calacanis1:33

       Turn the comments off.

   29. CPChamath Palihapitiya1:34

       The only thing that matters are the ratings, if you care about that at all. And last week was one of the best-rated shows we've ever done.

   30. JCJason Calacanis1:40

       I think it was highest rated after Elon's episode.
2. 3:13 – 31:19

   Elon finalizes Twitter deal, immediate content moderation decisions, platform potential

   1. CPChamath Palihapitiya3:13

   2. DFDavid Friedberg3:13

      (laughs) Sax, were you at a building on Market Street yesterday by any chance?

   3. JCJason Calacanis3:16

      (blows raspberry) No-fly zone.

   4. DSDavid Sacks3:18

      The homeless shelter?

   5. CPChamath Palihapitiya3:19

      (laughs)

   6. JCJason Calacanis3:20

      (laughs) Well, I think if you're gonna talk about an abandoned homeless shelter...

   7. DSDavid Sacks3:25

      (laughs)

   8. CPChamath Palihapitiya3:25

      Freiberg, I think it's fair to say that there will be a lot of people...

   9. JCJason Calacanis3:28

      Hmm.

   10. CPChamath Palihapitiya3:29

       ... that we know-

   11. JCJason Calacanis3:31

       (laughs)

   12. CPChamath Palihapitiya3:31

       ... that will go and help-

   13. JCJason Calacanis3:33

       Hmm.

   14. CPChamath Palihapitiya3:33

       ... make Market Street better. Make Market-

   15. JCJason Calacanis3:35

       Yeah.

   16. CPChamath Palihapitiya3:35

       Street great again.

   17. JCJason Calacanis3:36

       Bet. Make Market Street great again.

   18. DFDavid Friedberg3:38

       Make Market Street great again.

   19. JCJason Calacanis3:38

       Absolutely, absolutely. I'm, I'm looking forward to some tofu salads and, uh-

   20. DSDavid Sacks3:42

       (laughs)

   21. JCJason Calacanis3:42

       ... meditation. Namaste.

   22. DSDavid Sacks3:44

       (laughs)

   23. JCJason Calacanis3:45

       But literally, I think 8,000 square feet is meditation rooms that haven't been used in five years.

   24. CPChamath Palihapitiya3:50

       Quite honestly though, like, on the other side of this, I would say Parag Agrawal does deserve a statue for shareholder value creation. What he-

   25. JCJason Calacanis3:57

       Absolutely.

   26. CPChamath Palihapitiya3:57

       What... 54.20 a share, which, by the way, we said was gonna happen and it did happen, was ginormous in this market. And I just want to see the look on that barista's face when they're warming up the oat milk-

   27. JCJason Calacanis4:10

       (laughs)

   28. CPChamath Palihapitiya4:11

       ... (laughs) when, when a band (laughs) of very, very tough-knuckled, uh, company builders walks through that door.

   29. JCJason Calacanis4:19

       Yeah. The Oatly has left the building. Let's just leave it at that.

   30. CPChamath Palihapitiya4:23

       Wow.
3. 31:19 – 1:02:52

   Meta's historic bet on VR and stock price predicament, governance structure, and more

   1. CPChamath Palihapitiya31:19

      All right, let's talk about, uh, Meta. Brad Gersten was on last week. We've had an ongoing discussion about Big Tech, entitlement spending, the number of employees at these companies. On Monday, Brad, uh, I think, you know, got a little worked up on the last pod maybe and dropped an open letter. Some might say activist. Uh, he would say constructivist. To Zuckerberg and the team over there, "Hey, maybe pump the brakes on the CapEx, maybe do a riff, uh, maybe become profitable." Anyway, the, uh, revenue in, in the rep- the third quarter was a complete, utter disaster for Meta, and the stock has plummeted and been under $100 a share. I don't know who wants to start on this one, but...

   2. Okay, look, there's a lot to unpack here, so I think-

   3. Tons, yeah.

   4. ... I think we should take our time, because I think one part of it is Meta.

   5. Okay.

   6. But one part of it is actually about what we talked about a few episodes ago, which is, like, this Big Tech put, right?

   7. Mm-hmm.

   8. Where they define the rules of the game on the field for every other startup.

   9. Mm-hmm.

   10. And I think the third part is just about, like, the era of Big Tech being over and what it means for the stock market. If, if... I think if you section it out in those three ways, Jason, we can have a pretty rich convo.

   11. Yeah.

   12. I'd love to tease some of this up.

   13. Where do you want to start? Yeah, where do you want to start?

   14. Okay, so let's, let's start with Meta. So Nick, can you please throw up Apple versus Meta for a second? And let me just give you guys the talk track, and then maybe we can go from there. So when you look at Apple versus Meta, there's this really interesting thing that comes up, which is, in 2016, you know, and we've said this before, you could not give Apple stock away. They were generating a ton of cash. It was sitting on the balance sheet. In many ways, Facebook was doing the same thing. And there was this famous dinner. I don't know if it was a dinner that ever happened, but that's how the, the lore is told, between Tim Cook, Carl Icahn, and I think Luca Maestri, the CFO. And in it, what Carl Icahn said is, "Listen, I have a below-the-line suggestion for Apple." And what does that mean? If you look at a PnL, you have your revenues, that's above the line. You have costs, that's also above the line. And then you have your profits, and then it's what you do with the profits. So what he was suggesting is below the line, after the fact. He had no suggestions for how the business should be run. He just said, "Give us back the money, and we will reward you. The stock price will go up." And what's interesting to note here is the black line is the performance of Apple stock as, as they've given back, and they've used a ton of their own balance sheet cash to buy back the stock. Okay? So they've spent $396 billion since 2016 to buy back stock. In the same time, Facebook has spent almost 100 billion. Now, here he is... Here's where you start to see the divergence. So you would have said, "Well, shouldn't Facebook's stock have reacted in the same way?" And for a very long time, it actually looked like it was, right until about September 21. And then obviously, this thing fell off a cliff. And the reason why it started to fall off a cliff was somebody started to notice that, hold on a second, even though you're buying back all these shares, the bottom of the funnel, right, you're leaking all of these shares to all of these new employees. Why are you hiring so many people? And this is when people started to uncover what was happening above the line at Facebook and is what caused this massive dispersion. So Nick, if you go to the first chart. So what has actually been going on above the line? Here's what's going on. If you look at the light purple bar, Facebook, in the last two years, have spent $25 billion on Reality Labs. And they said that they're going to spend, you know, meaningfully more in 2023 and then sustain that investment for a while. So if you do a little bit of math, if they spent, you know, they spend around 4 billion a quarter right now, so 16 billion a year. That'll go to 25 billion in 2023 and then they'll sustain that. What that means is that over this, you know, 12 or 13-year life of Reality Labs as we've seen it, these guys will have spent a quarter of a trillion dollars. And what I did here was I just wanted to understand- (laughs) Hilarious. I wanted to understand a quarter of a trillion dollars in the context of other major leaps in humanity. So at the left is what Apple spent in its entirety. By the way, these are all inflation-adjusted dollars for today. Apple spent $3.6 billion to create the first iPhone.And what they did was they said every subsequent version of the iPhone would only be funded from the cash flow and profits of the generation before it. Right? So they used consumer demand as their guiding principle, so it was a very incremental approach. iPhone 1, iPhone 2, and now we're at iPhone, you know, 14 or whatever, 13. But the point is, it took 3.6 billion to get that juggernaut off the ground. Um, the Manhattan Project will cost 23 billion in today's dollars to create the atomic bomb. Tesla, in its entire life, spent 25 billion to get to free cash flow profitability, and they took this incremental approach as well. We'll create the, you know, the, the Coupe, uh, the Roadster, then the Model S, then the Model X. They iterated their way.

   15. JCJason Calacanis36:53

       Yeah.

   16. CPChamath Palihapitiya36:53

       They used customer demand and all of that revenue to fund future growth. The cum spend on Tesla was 25 billion. Boeing spent 32. Google and other bets have spent 40. The only thing that I could find in history that is comparable to what Meta has basically said they're gonna spend is the entire Apollo program, which cost in today's dollars a quarter of a trillion as well. So the problem is that below the line, Meta was doing the right things. Above the line, they've created, I think, an enormous set of pressures for themself, which is, you know, if you think about the Apollo program, this was 13 years of building rockets, getting to low earth orbit, then getting to be able to, you know, orbit the Earth, then eventually building an entire infrastructure and capability to land on the moon and get back. So there was a lot of incremental progress there. I think what people don't understand is where is this quarter of a trillion dollars going? And is it going to be a leap in humanity at the scale of the Apollo program? Because it now is becoming the single largest capital allocation program in capitalism history. Nothing comes close. So I think that that is a really interesting maybe jumping off point to talk about what's going on inside of this business. It's, I think they're doing all the right things below the line, but there's this one major big red flag above the line that has to be probably better explained by them if they want to have long-term shareholders. And basically what happened was when people heard this, they said, "This is a dumpster fire. We're outta here."

   17. JCJason Calacanis38:28

       Sax, what do you-

   18. DSDavid Sacks38:29

       Can I ask a question?

   19. JCJason Calacanis38:29

       Yeah.

   20. DSDavid Sacks38:29

       What happened with the whole, uh, Brad Gerstenmaier, uh, proposal? Was that actually discussed on the call?

   21. JCJason Calacanis38:35

       No.

   22. DSDavid Sacks38:35

       On their earnings call?

   23. CPChamath Palihapitiya38:36

       They, you know, they-

   24. JCJason Calacanis38:38

       Ignored.

   25. CPChamath Palihapitiya38:38

       Well, I, I, I don't wanna say it was totally ignored, because I, I do think that they should be given credit for a couple of things. I think that the core business continues to march forward, and they basically said, "Look, we're gonna slow headcount growth. Some teams will shrink." I think the problem is really in this Reality Labs, the amount of investment that they're making is so outsized and so abnormal and doesn't compare to anything anybody's ever seen. I think everything else in the business seems to be actually quite functional. So the problem is that this above the line thing, though, has become so big it could sink the business. You know, it's very, very hard to see an investment case for a quarter of a trillion dollars of money in the door before you really start to see something magical. Now, they may have something super magical that nobody knows about that they're going to unveil and say, "Ha, see, told you." And maybe there should be a set of outcomes where we plan for that. But the reality is, it's, you know, $25 billion a year for the next umpteen years, and it's, it's, and I think people-

   26. JCJason Calacanis39:47

       I thought the number was 10 billion. Where did the 25 billion come from?

   27. CPChamath Palihapitiya39:50

       No.

   28. JCJason Calacanis39:50

       This number?

   29. CPChamath Palihapitiya39:50

       It's four billion a quarter right now.

   30. JCJason Calacanis39:52

       Okay.
4. 1:02:52 – 1:06:32

   Big tech's 2022 decline, macro outlook, market breakdown

   1. CPChamath Palihapitiya1:02:52

      Amazon puked as well, Jason. The... Can you just throw up the big tech chart? 'Cause I think like you guys should see this, 'cause I think this is very important for Silicon Valley.

   2. JCJason Calacanis1:03:00

      Amazon reported their Q3 earnings yesterday, Thursday. Total revenue, 127 billion, up 15% year-over-year, 5% quarter-over-quarter. Net income was 2.9 billion. And they're predicting, uh, they're, they're giving slower guidance going forward.

   3. CPChamath Palihapitiya1:03:14

      I mean, what's incredible on this chart is that, you know, when, when everybody talks about being long the S&P 500, it was always really a proxy for being long Amazon, Facebook, Google, Microsoft, and Apple. And at the peak, you know, in May of this year, it was still, you know, 25 cents of every single dollar of the S&P 500 were these five companies. And, you know, we always said the market bottom will be when the generals, quote-unquote, get shot, you know, to-

   4. JCJason Calacanis1:03:39

      Yep.

   5. CPChamath Palihapitiya1:03:39

      ... to borrow a phrase from Gavin Baker. And it looks like the generals have been shot.

   6. JCJason Calacanis1:03:43

      Yeah.

   7. CPChamath Palihapitiya1:03:43

      And what's incredible is this week, every single one of those companies, other than Apple really, reported pretty crappy earnings. They got totally taken to the woodshed. The percentage of the, of these companies as a percentage of the S&P is now, you know, off by 500 basis points. It's down to 20%, yet the markets are ripping higher today. So I think it's kind of what we talked about three weeks ago. Like, the bottom is kind of in for the short term, you know? So it's really exciting actually to see. I think this is the point where you have to now start to get pretty constructive about where things are going. Because if this stuff could not bring the market down, it's hard to see something other than an exogenous event, probably some Russia-Ukraine event, really having a negative impact. So to me, I'm kind of like, I don't know, it seems like pretty bullish for me.

   8. JCJason Calacanis1:04:31

      Well, also GDP was 2.6%. So I mean the-

   9. CPChamath Palihapitiya1:04:34

      Yeah.

   10. JCJason Calacanis1:04:35

       ... this, this very weird conflicting data, we had two negative quarters of growth, we're in a recession, then we have a, the third quarter is up 2.6%, so okay, we-

   11. DSDavid Sacks1:04:42

       Yeah, but remember, Jason, I, I said that we were gonna have a double dip. That was, I-

   12. JCJason Calacanis1:04:46

       Sure.

   13. DSDavid Sacks1:04:46

       ... that was the most likely thing. So we-

   14. JCJason Calacanis1:04:48

       Sure.

   15. DSDavid Sacks1:04:48

       ... had this sort of mild technical recession based on nominal GDP growth not being bad, but simply not quite keeping up with the inflation rate.

   16. JCJason Calacanis1:04:59

       Yeah.

   17. DSDavid Sacks1:04:59

       Now things are a little bit better, but I still think the huge recession is to come next year because all the interest rate increases we've seen. So the Fed is, you know, pedal to the metal on interest rate increases, just like they were pedal to the metal on printing money. And so at first they, you know, they were too loose and now they're probably being too tight too fast. So I think we're headed for a huge recession next year, and I think you're seeing that in, in the softness of all these forecasts.

   18. JCJason Calacanis1:05:25

       Yeah. Yeah, the-

   19. DSDavid Sacks1:05:25

       But look at the, look at, look at the, look at the mortgage, uh, rates right now, something like 7.1% up from 3% at the beginning of the year.

   20. JCJason Calacanis1:05:31

       Mortgage rates are crazy. They, they broke the backs of the housing market. The, the inventory and prices, inventory shot up. Prices have shot up. New mortgages have, uh, gone down And, you know, we, we talked about job openings. Here's the, the Fred chart for job openings real quick. You can see the, the peak we were talking about, we were wondering if that would come plummeting down. Well, here it is, folks. Yeah, plummeting down from 11 million, uh, losing a million in a month. Yeah, job openings coming, smashing down. There's the Fed fund rate. You know, that's a pretty high ramp. So you think double dip recession. What do you think, Freburg, Chamath, in terms of what 2023 looks like? You're, you're sort of saying, Chamath, a bottom is forming. I kind of agree with that.

   21. CPChamath Palihapitiya1:06:13

       I think the stock market is going up. Then it'll go back down because I think what David said is right. (laughs) But for the short term, this thing is going up.

   22. JCJason Calacanis1:06:23

       Short term up and then it's a pain next year.

   23. CPChamath Palihapitiya1:06:24

       You know, we've, we've generally been positioned for it to go up and, uh, and at some point we will reverse and, uh-... position for it to go back down, but it's going

5. 1:06:32 – 1:27:29

   Ukraine update: Progressives call for diplomacy, then flip flop, chip sanctions on China

   1. CPChamath Palihapitiya1:06:32

      up.

   2. JCJason Calacanis1:06:32

      Sax, it seems like you took a week off from the All-In podcast, and people stopped talking about Ukraine. Uh, you wanna give us an update? I mean, obviously, the war's not over, but it does seem like it- it somehow has fallen out of the public's consciousness a bit. Uh, I don't know if you'd disagree.

   3. DSDavid Sacks1:06:47

      Well, I don't know if I'd go that far. There was, um, the big event in the Ukraine war debate this week, was that the House Progressive Caucus put out a letter signed by 30 progressive members to merely suggest that while we continue to fund Ukraine on a virtually unlimited basis, we also, in parallel, open up a diplomatic track with Russia to mitigate against the threat of us being drawn into, uh, the war, and specifically a nuclear war. (laughs) And just that very, I'd say, anodyne letter, that very, um, tepid sentiment really, they weren't questioning in any way the providing, again, of virtually unlimited support to Ukraine. That r- met with such a fierce reaction on social media and in the traditional media that I think all but one of the signatories recanted or walked back the letter. And kudos to Representative Ro Khanna for not being one of the people who recanted. He stood tall and gave an interview on CNN and MSNBC saying, "Why has diplomacy become a dirty word? I voted for every single appropriation to give aid and weapons to Ukraine. I'll continue to do that, but I don't see a problem with us maintaining diplomatic relations. We might need those to avoid an unwanted escalation."

   4. JCJason Calacanis1:08:09

      Well, and here we are, yeah.

   5. DSDavid Sacks1:08:10

      Kudos to him for standing tall. But it's amazing to me that the Progressive Caucus, which used to be one of the groups in Congress that questioned American involvement in foreign wars, like the Iraq War, they basically, they- they have moved off that and they- they threw in the towel so quickly on this. It was really kinda pathetic to see.

   6. JCJason Calacanis1:08:32

      I mean, it- it- really, like, this is back to Shakespeare, (laughs) like, politics makes for strange bedfellows. You find yourself aligned with the most left part of the Democratic Party in trying to just say, "Hey, maybe we should negotiate peace a little more firmly-"

   7. DSDavid Sacks1:08:46

      I want us to pursue the right foreign policy, and I don't really care which party has the right idea.

   8. JCJason Calacanis1:08:51

      But you said you would- you would actually donate to anybody who is-

   9. DSDavid Sacks1:08:54

      Yes. Yes.

   10. JCJason Calacanis1:08:54

       ... pushing for that, so did you actually make (laughs) any... I mean, I- I- I- I'm not-

   11. DSDavid Sacks1:08:57

       It just happened, but I- I- I plan to donate to members of both party who push for a correct foreign policy, which I believe needs to be a little bit more restrained, a little bit more questioning of what is in it for the United States. And we need to be careful about overextending ourselves and we need to ask what is in America's vital interest. And listen, you can support-

   12. JCJason Calacanis1:09:20

       So will, uh, will AOC be coming to the, uh- with A- with AOC being-

   13. DSDavid Sacks1:09:24

       No, because she-

   14. JCJason Calacanis1:09:24

       ... doing a br- Oh, she- she's pro?

   15. DSDavid Sacks1:09:25

       She recanted.

   16. JCJason Calacanis1:09:26

       Ah.

   17. DSDavid Sacks1:09:26

       So she's one of the ones that recanted. But-

   18. JCJason Calacanis1:09:28

       What- what do you think happens in a situation like that? Well, how do they get them to recant? Yeah.

   19. CPChamath Palihapitiya1:09:31

       Yeah, like, why- what is the point of recanting something that was so benign? It's not-

   20. DSDavid Sacks1:09:36

       Totally.

   21. CPChamath Palihapitiya1:09:37

       No, but what- what do you think ha- Like, what- what's happening behind the scenes? Like, why are people so afraid to say that, you know, you can be in support of Ukraine, but also still try to find a resou- Why was that turned into such a scarlet letter?

   22. DSDavid Sacks1:09:49

       Uh, it's a great point, and I think it just shows the heat right now on the issue. Her- her- here's what I think.

   23. CPChamath Palihapitiya1:09:55

       Does it- does it do that or does it just show how- the progressives as just kind of clown towns?

   24. DSDavid Sacks1:09:59

       I mean, it's- it's kinda sad. I mean, Jayapal, who is sort of the leader who put out the letter, threw her own staff under the bus. And I guess there was this snafu where the members all signed this letter in July and then held it for a few months, and then they put it out two weeks before the election. I can see why that timing didn't make sense. I don't know why, like, they release it now, not two months ago, not three weeks from now, after the election. I can understand all those political considerations. But once you put the letter out, just stand by it. Don't throw your own staff under the bus, because like you're saying, the letter was really a pretty anodyne statement of, "Hey, listen, do you think we can just have diplomacy on a parallel track at the same time that we're arming Ukraine?" I just don't see the downside. But look, here's why I think they took so much heat, is there's a lot of people on this issue who start with the end result of what they want, and the end result that they want is, uh, Putin and Russia leave Ukraine with their tail tucked between their legs, and they basically don't get one square inch of Ukraine. They believe that is the only acceptable moral outcome here. And they may be right about that. But then what they're doing is they're kind of reverse engineering all the beliefs that they have based on that outcome, that moral outcome they wanna get to. So for example, for the longest time you heard things like, "Putin is definitely bluffing about using nuclear weapons." Well, how do they know that? They don't know that. They can't say that for sure, but it's what they wanna believe, because if you believe that nuclear war is a possibility, you might not go all the way for that maximalist position of the only acceptable outcome here is Russia leaving with its tail tucked between its legs. And I- hold on. And- and- and I- and I- I think the same thing is happening here with diplomacy, is people who want a certain result in the war are afraid that diplomacy might result in something less than that.

   25. JCJason Calacanis1:11:53

       Right.

   26. DSDavid Sacks1:11:54

       But that's not a reason not to engage in diplomacy, and it's not a reason to deny the potential of this war to spin out of control, potentially into a nuclear war.

   27. JCJason Calacanis1:12:04

       Sax- You wanna catch him up?

   28. CPChamath Palihapitiya1:12:05

       Sax is like a walking thesaurus, so Jay Kal, for you, I looked up anodyne, and it means, "Not likely to provoke dissent or offense; inoffensive, often deliberately so."

   29. JCJason Calacanis1:12:14

       Yeah. Like, uh, it's like oat milk.

   30. CPChamath Palihapitiya1:12:15

       I know. You were looking- you were looking at the screen-

Episode duration: 1:36:00