E106: SBF's media strategy, FTX culpability, ChatGPT, SaaS slowdown & more

Jason Calacanis 0:01 I'm now recording.

David Sacks 0:02 Jesus, you look terrible.

Chamath Palihapitiya 0:03 What's going on? Did you sleep last night?

Jason Calacanis 0:04 Do I look tired?

David Friedberg 0:05 You do look a little tired, yeah.

David Sacks 0:06 You look unshaven.

Chamath Palihapitiya 0:07 Yeah. What happened last night?

Jason Calacanis 0:09 I had a holiday party at my house last night from my office and...

David Sacks 0:12 You look destroyed.

Chamath Palihapitiya 0:13 Yeah, what's going... I mean, did you drink?

Jason Calacanis 0:15 I did drink, yeah.

David Friedberg 0:16 What does vodka and oat milk taste like?

Chamath Palihapitiya 0:19 (laughs)

David Friedberg 0:19 Does it taste like-

Chamath Palihapitiya 0:19 He had a White Russian. (laughs)

David Friedberg 0:22 A White Russian Big Lebowski style. With oat milk. He's like, "I want a White Russian with oat milk." Oh my God.

Chamath Palihapitiya 0:28 Well actually, my White Russian is made with Oatly.

David Friedberg 0:30 And please compliment that with a huge punch in the face.

Jason Calacanis 0:34 Give me five minutes. I'm gonna go, I'm gonna go shave and-

David Sacks 0:36 It's called the hair of the dog.

Chamath Palihapitiya 0:38 Yeah.

David Sacks 0:38 You could do a little Bloody Mary.

Chamath Palihapitiya 0:40 Banana bud. Banana man.

Jason Calacanis 0:42 Should I go get a beer? I might get a beer just to beat this hangover.

Chamath Palihapitiya 0:45 Go do it. Yeah, go get a beer.

Jason Calacanis 0:46 Hang on, I'll be right back.

Narrator 0:49 Going all in. So let your winners ride. Rain Man, David Sacks. Going all in. And I said we open source it to the fans and they've just gone crazy with it. Love you, S.I.D.E. Queen of quinoa. Going all in.

Chamath Palihapitiya 1:05 All right, listen. Uh, we have to start with scam, bank run, fraud. I mean, Sam Bankman-Fried.

Jason Calacanis 1:10 (laughs)

Chamath Palihapitiya 1:12 I get that wrong sometimes. Uh, he was interviewed by, uh, Andrew R. Sorkin, the suit, uh, at DealBook, who gave him softball after softball. Then the next day, he was on Good Morning America.

David Friedberg 1:23 You're being really passive-aggressive right now.

Chamath Palihapitiya 1:26 A little bit. A little chip over there. Little chippy, little chippy.

David Friedberg 1:30 You're throwing a little shade at our friend, Andrew R. Sorkin. Stop.

David Sacks 1:30 He's sticking the knife in. He's sticking the knife in.

Chamath Palihapitiya 1:32 That's it.

David Sacks 1:32 But J Cal's got a point. He's got a point. A little bit.

Chamath Palihapitiya 1:35 Just a little bit.

David Sacks 1:35 A little bit.

Chamath Palihapitiya 1:36 Little bit.

David Sacks 1:37 (laughs)

Chamath Palihapitiya 1:37 Anyway, the New York Times continues to embarrass themselves, uh, by handling Sam Bankman-Fried with kid gloves. Wow. George Stephanopoulos, my Greek brother, Stephanopoulos the Spartan came in and absolutely fricassee-d and filleted Sam Bankman-Fried on Good Morning America. Very important to note that Good Morning America, uh, the segment was between holiday cocktails and the cast of The White Lotus. And Andrew R. Sorkin was at the DealBook Finance Conference.

David Sacks 2:07 But you know, that, that, that Stephanopoulos interview was two hours, but they reduced it down to 10 minutes.

Chamath Palihapitiya 2:13 Yes.

David Sacks 2:13 So, there were probably a lot of sort of-

Chamath Palihapitiya 2:16 Yes.

David Sacks 2:16 ... cordial conversation, banter, and then softball questions. And then he does stick the knife in and, and does the fricassee, but he cuts out all the other stuff, so he just gets it down to the 10 minutes.

David Friedberg 2:27 Absolutely.

Chamath Palihapitiya 2:28 What Stephanopoulos did to him was extraordinary in that he said over and over again, "In the FTX terms of service, you cannot touch the user accounts, but you, at Alameda, were taking them and you were loaning them out." I don't know who is advising, uh, Sam Bankman-Fried at this point, but why he is talking so much. He was also on a two-hour Twitter Spaces after all this. At this point, Sacks, what do you think is going on here in the mind of Sam Bankman-Fried, and also, the media, which seems to have a very veritable way of dealing with this obvious fraud and crime?

David Sacks 3:11 Right. Okay, well, you know, I can speculate about SBF. I think if there is a strategy here, it is this. He is basically copping to criminal negligence in order to avoid the more serious charges of fraud. And I think, again, if there's a strategy here, it is he saw himself being defined as Bernie Madoff 2.0 in the press.

Chamath Palihapitiya 3:35 Mm-hmm.

David Sacks 3:35 And if that image, which may well be true, uh, cemented around him, then prosecutors would never stop, they would never accept a plea that basically gave him anything less than a Madoff-like sentence, which would be, you know, decades in prison, maybe a life sentence. So, he is out there doing what lawyers would tell you never to do, which is basically incriminate yourself, create more of a record, but he's doing it to change the public perception, maybe muddy up the public perception, get people thinking that okay, he, you know, thi- this, that he, he's admitting he did something wrong, but it wasn't deliberate, it wasn't fraudulent. It was just basically carelessness or sloppiness. And if he succeeds in muddying the wa- waters enough, then maybe the prosecutors will give him a plea deal that allows him to have his life back at some point. I think that would be the crazy, like a fox explanation of what's happening. Now, there is, you know, an alternative explanation as well, which is, I just think that these types of guys, you could call it, you know, a, a narcissistic fraudster-

Chamath Palihapitiya 4:40 Mm-hmm.

David Sacks 4:40 ... they think they can talk their way out of anything, you know?

Chamath Palihapitiya 4:43 Because they have.

David Sacks 4:45 They have. Um-

Chamath Palihapitiya 4:46 Yes.

David Sacks 4:46 ... you know, what, what-

Chamath Palihapitiya 4:46 And they've talked their way into getting hundreds of millions of dollars of investment.

David Friedberg 4:51 Billions.

David Sacks 4:52 Billions, yeah.

Chamath Palihapitiya 4:52 Uh, in some cases. And so they just feel, and they've been trained by employees, partners, investors, the press, that they can talk their way out of any of this stuff.

David Sacks 5:02 Yeah, well, I think, yeah, the average person is not really used to dealing with one of these personality types who, um, is, I mean, they clearly are smart and they're articulate, articulate and they know what to say and they're crafting their words. What they've learnt through their life is that if they use the precise magic words with a person, they can pretty much, you know, convince them of anything, get them to do anything. And in particular, I would say investors tend to fall for this, not because investors are dumb, but because investors are so clear about what they're looking for and what they want.

Chamath Palihapitiya 5:32 They're predictable.

David Sacks 5:32 They're predictable, yeah, but like, we're, you know, VCs especially, we're looking for the 100X outcome or whatever. So it's easy for this type of personality to construct a story to essentially-

Chamath Palihapitiya 5:43 Mm-hmm.

David Sacks 5:43 ... stroke the erogenous zones of a VC-

Chamath Palihapitiya 5:46 Whoa.

David Sacks 5:46 Yeah, and, and, and sort of trick them. And so there is probably a positive reinforcement loop that gets created in the minds of one of these people who, and they start to think that they can basically talk their way out of any situation. So I think that would be part of what's going on here. And you know, if you look at sort of the tactics that he's using to do this...... you know, all of a sudden, he's trying to portray himself, you know, before this, he was portraying himself as the smartest guy in the room. Now all of a sudden, it's this babe in the woods impression-

Chamath Palihapitiya 6:15 (laughs)

David Sacks 6:15 ... where, "I didn't know, it was my subordinates."

Chamath Palihapitiya 6:18 Oh, "I'm sorry."

David Sacks 6:18 "I wasn't really in control. That was somebody else."

Chamath Palihapitiya 6:21 "I could have done better." Yeah.

David Friedberg 6:22 Right.

David Sacks 6:22 Each individual decision, he says, looked sensible to him. It's just, it all added up to something he didn't anticipate. Like, really? Y- you know, loaning yourself a billion dollars of, of basically, the, the company's money, which was basically customer money, that seemed reasonable to you? I don't know how you defend that individual decision. And there's many like that. But, but this is sort of the narrative that he's trying to construct. And, um, let me stop there, but I think there's a lot more that can be said to dismantle the narrative he's trying to create. But I wanna let other people get in here.

Chamath Palihapitiya 6:53 Chamath, what's your, what's your take on this? And then, Freeberg, we'll give you-

David Friedberg 6:54 Can I make a comparison to SBF and Trump through the lens of the media? So if you go back to 2016, you know, Donald Trump violated every single establishment bias that these left progressive journalist elites had. And so they basically just attacked, attacked, attacked, attacked. But then you went into the election, and there was a very clear data point that said whatever you thought was at l- was at best limited, and you missed the tone of the country. Because 50-plus percent of the country held a very different view about this person. And instead of taking a step back, and th- and then the left media, the mainstream media re-underwriting and learning and then saying, "You know what, mea culpa, I got this wrong," they just doubled down. And they said, "No, it still doesn't meet our priors, and so we're just going to ring-fence this problem, and we're gonna just try to destroy this issue, because, you know, we wanna control the narrative and, uh, and, and by result, we wanna control power." Now you look at SBF, it's the exact opposite. He went to the perfect elite private high school. Then he went to one of the most prestigious elite private universities.

Chamath Palihapitiya 8:17 MIT.

David Friedberg 8:17 His parents teach governance of all things at one of the most elite liberal institutions in America.

Chamath Palihapitiya 8:24 Stanford.

David Friedberg 8:25 They are in the establishment of the progressive left. And what happened was, he took customer funds and all of this money, he made tens of millions of dollars of political donations. He wrapped himself in this blanket of a progressive left-leaning cause called effective altruism. And all of the mainstream media fell for it and embraced him, as well as some politicians, because it met everything that they themselves also bought into.

Chamath Palihapitiya 8:56 Yes.

David Friedberg 8:58 And now you have this cataclysmic event, a multi-deca-billion dollar fraud or bankruptcy, millions of customer accounts who are frozen, you know, tens of millions to hundreds of millions to billions of dollars lost and stolen from them, and they refuse to re-underwrite this kid. And the reason is because, in order to do so, it's like eating your own tail, and that's why they don't wanna do it. And so this is why you have the media basically allowing him to do an apology tour. Now, this is his second time at manipulating them. The first time, he was able to manipulate them by basically being one of them. And now, he's allowing them and their desire to basically protect themselves so that he can create some kind of a defense for himself. And I just think the whole thing is gross, because it misses the entire mood of the nation. This is an enormous financial fraud that was perpetrated on tens of millions of people, and there's no accountability, because in order to do so, the media would effectively have to admit that they missed it and they got it wrong. And they refuse to do it. And I think, like, that is the really big problem that nobody is really speaking out about, is like, well, if these folks are meant to be the last stop to make sure that there's truth and honesty and transparency in society, and you can't count on them, and in fact, they're just gonna reflect their own narrative, what is one supposed to do to learn the truth?

Chamath Palihapitiya 10:28 In a way, what you're saying, and then we'll go to you, Freeberg, is this fraud was encased in all the gilded facade that America hates right now.

David Friedberg 10:38 It reflects the institutional rot of America. It reflects every single aspect of institutional rot that every non-elite talks about all the time, but elites, when they have those labels, will refuse to give up.

David Sacks 10:52 And just to add to that, the, the, the thing that's missing, th- th- I'd say one of the big issues with the institutional rot in our country is the lack of accountability when somebody gets it wrong. We saw this with COVID, right? The health establishment is saying that they want amnesty.

Chamath Palihapitiya 11:07 Yeah.

David Sacks 11:07 And Atlantic Magazine was willing to give it to 'em. So the point is that this, this class of people think that when they get it wrong, that they're the experts, but when they get it wrong, there should be no accountability. And so, Chamath, to your point, the media and these institutions are not willing to re-underwrite SBF when he so clearly is a fraudster.

Chamath Palihapitiya 11:27 Uh, Freeberg, what do you think the, of this theory, you had a large amount of donations to politicians, uh, obviously you have coming from Stanford, MIT, et cetera, and then, uh, you have these investments, gifts/advertising/donations to ProPublica, Vox, uh, this new publication Semaphore, The Intercept, that have all been uncovered now. Did he do this paying off of all the elites, you know, splashy cashy, giving money to everybody because he knew he was doing a fraud and that this is evidence of this is a premeditated fraud? Or do you think this is a deranged individual who just was seeking status?

David Friedberg 12:08 I don't know...

Jason Calacanis 12:10 ... the, the motiva- there's a video you can watch of this guy. For some reason, FTX has left up all of their videos on YouTube from three years ago called Quantitative Trading 7,500 Cell Wall of Bitcoin on Binance. It's a 17 and a half minute YouTube video of SBF trading arbitrage across markets. I think it provides probably the best, like, natural, non-scripted insight into this guy's behavior that you could see. You know, because it's not like him being interviewed, it's just him living in his world.

Chamath Palihapitiya 12:46 Hmm.

Jason Calacanis 12:46 And he's just, you know, a mouse trying to get a piece of cheese. Like, he's-

Chamath Palihapitiya 12:51 (laughs)

Jason Calacanis 12:51 ... you know, he's like out there, he's, you know, scrambling around in the markets, he's finding edges, he's finding advantages, and he's, and he's clearly just taking advantage of them all day, every day. That's who he is. Now, you put a person like that in an unregulated environment, and there was this clustering demand for an unregulated environment because of a lot of what you guys are saying, which is people have this disdain for the elitism and the, and the institutional rot and all these things. So Bitcoin emerged as a solution out of 2008 to the, you know, the, the, what felt like institutional rot that, that governments have a key role in. But when you have no regulation and you have no trusted central authority involved, mice that are trying to find cheese will rule the day. And I think that's what happened here. If it wasn't this guy, it was someone else. It was gonna be someone else. And then all of a sudden everyone's clamoring and saying, "Hey, we needed the government to protect us. No one protected us. Someone's gotta save us. Where are the regulators? Where are people that are supposed to keep an eye on this stuff?" When the whole premise of so much of what was being sold was non-regulatory regimes, was openness, was peer-to-peer trust protocols. And it turns out that in that sort of an environment, the mouse that is hungriest for the cheese will get the cheese. And that's exactly what happened. And I don't, I don't know how much-

Chamath Palihapitiya 14:12 Okay. So-

Jason Calacanis 14:12 ... of it was-

David Sacks 14:12 I don't agree with this.

Jason Calacanis 14:13 ... him saying, "I'm creating intentional fraud."

Chamath Palihapitiya 14:15 Yeah.

Jason Calacanis 14:15 Which certainly seems to be the case, versus him saying, "I'm gonna pay these guys." I don't know how much of it- it was even that intelligent, but the guy was clearly like trying to get a piece of cheese.

Chamath Palihapitiya 14:24 Okay, so this cheese eater, this rat is a League of Legends-

David Sacks 14:29 (laughs)

Chamath Palihapitiya 14:29 ... uh, you know, expert playing on eight different monitors at a time, the cryptocurrency game while hopped up on speed.

Jason Calacanis 14:37 Yeah.

Chamath Palihapitiya 14:37 I'm not saying that to be cruel. I'm saying that because they admitted it. They talked about it in their staff meetings, instructing their traders and team members of how to take speed.

Jason Calacanis 14:49 He admitted to it in an interview this week-

Chamath Palihapitiya 14:50 Yes.

Jason Calacanis 14:50 ... he said that it was all legal prescription drugs, but they were taking them. Yes.

Chamath Palihapitiya 14:54 Yes. And literally in the same videos you're referencing people see speed patches or I, I don't even understand this, but there are patches you can put on your body to deliver speed to you at some, you know, dose or whatever. Sacks, you buy this theory-

David Sacks 15:08 No.

Chamath Palihapitiya 15:08 ... care that this isn't about the elite side of it, it's about the non-elite, the anarchy side of it.

David Sacks 15:14 No.

Chamath Palihapitiya 15:14 And this cheese eating rat was just wanted to eat more cheese.

David Sacks 15:18 No, I, I don't buy this narrative because I see too much design intentionality behind what happened. So in other words, it wasn't just a series of individual decisions that didn't add up. Many of those individual decisions by themselves were totally unjustifiable. And moreover, there were too many, there's too much evidence of sophisticated behavior here. Again, he overnight went from portraying himself as a smartest guy in the room to the, to the babe in the woods. And so for example, when you look at the construction of all these entities and the corporate org chart, you know, of all the related entities, it's a very sophisticated attempt to obscure and construct certain, you know, protections. When you look at the way that Alameda was exempted from the normal margin requirements in FTX, there was the so-called back doors. There was intentionality there. There was intentionality in terms of who was hired to staff these organizations. Again, they hired-

Chamath Palihapitiya 16:17 Or wasn't hired. No board-

David Sacks 16:19 Right.

Chamath Palihapitiya 16:19 No CFO. The omission is also crazy.

David Sacks 16:20 Yeah, exactly. And the guy, the guy who was in charge of compliance wa- like Chamath talked about in a previous episode, was the guy who was involved in the ultimate bet p- uh, poker cheating scandal.

Chamath Palihapitiya 16:31 (laughs)

David Sacks 16:31 You know, not, not exactly-

Chamath Palihapitiya 16:32 The super mode. (laughs)

David Sacks 16:33 Yeah, exactly.

Jason Calacanis 16:34 Right.

David Sacks 16:34 Or look at this goofy goofball Caroline Ellison, who was put in charge of Alameda, right?

Chamath Palihapitiya 16:39 His girlfriend. (laughs)

Jason Calacanis 16:40 (laughs)

David Sacks 16:41 It's, it's being done for a reason, right? He's setting it up in a certain way. And, you know, the one time I interacted with him at this, um, tech conference, he was sitting there holding court and he had all of his minions around him who were following his orders. This was a guy who was controlling his business. He was making the decisions at, I think, a task level. And, um, he knew exactly what was going on here. So, look, I just don't buy, I do not buy this idea that, um, that he was like a blind mouse who's just stimulus response, you know, in the moment. I, I think that-

Jason Calacanis 17:15 Oh, yeah, by the way that, that wasn't, that wasn't my point, Sacks. My point was whether it was him or it was gonna be someone else, it was bound to happen.

David Sacks 17:23 No, I don't ag- I don't agree with that.

Chamath Palihapitiya 17:24 That the idea... Another criminal would've emerged. Well-

Jason Calacanis 17:25 That, that we want to have completely free, unregulated Bahamian based trading, you know, environments that we can supposedly trust because someone puts on a good face when there is no real regulatory body and regulatory authority overseeing it. At some point it was gonna happen.

David Sacks 17:42 Well, no, hold on. It, it is a... Look, Coinbase is a fully regulated institution-

Jason Calacanis 17:46 But they're regulated. They're not set up in the Bahamas and they're not unregulated. And he set up and he had no oversight.

David Sacks 17:50 Right.

Jason Calacanis 17:50 He had no board. There was no regulatory regime. There was nothing-

David Sacks 17:54 But how was he able but... Okay, so first of all, look, I don't think this had to happen. I think that, again, I think that excuses too much because it implies that if it wasn't SBF it would be somebody else. I actually think that this was a highly concerted effort. Listen, he courted regulators. He donated to politicians. He courted the media and donated to them.

Jason Calacanis 18:11 He was, yeah, he was really good at it.

David Sacks 18:13 This was elaborate... He was really good at it.

Jason Calacanis 18:14 Yeah.

David Sacks 18:15 He was unusually good at it.

Jason Calacanis 18:16 No, and I totally agree on that. Yeah. Super smart, super connected, really thoughtful design on how he committed this on how he did this.

David Friedberg 18:22 I only think an insider could have pulled off something at this scale.

Jason Calacanis 18:25 I think you-

Chamath Palihapitiya 18:25 I agree. See, this is where, Chamath, you're exactly right. He-

Jason Calacanis 18:28 I think you needed to be an insider-

Chamath Palihapitiya 18:29 This level of cynicism here is he knew the playbook and he admitted it. You pointed this out with the chats that were released where he said, "Hehe."

David Friedberg 18:36 "Hehe." Yeah. Look, I mean, look, just like-

Chamath Palihapitiya 18:38 The "Hehe" chat.

David Friedberg 18:39 ... look how, like, convoluted and intertwined all these people are, like Gensler's intertwined with the parents.

Jason Calacanis 18:46 Yeah.

David Friedberg 18:46 Parents apparently bundled a bunch of money to Elizabeth Warren. You know, he was dating the CEO of the business that he owned 90% in. There are all these other random shell companies that he owned 100% of where they were lending back and forth hundreds of millions to billions of dollars.

Jason Calacanis 19:02 Yeah.

David Friedberg 19:02 To David's point, that is a sophisticated con that you have to architect, and the way that he was able to get away with it is that not a single reporter or regulator thought to dig in. And the reason I think is because he said all of the right things that wanted them to embrace him. He admitted it. And the reason is, he admitted it.

Chamath Palihapitiya 19:24 This is a d- this is the dumb game that we woke Westerners have to play-

David Friedberg 19:26 Like, imagine-

Chamath Palihapitiya 19:26 ... we say right shit but less and then everyone thinks we're a good person.

David Friedberg 19:29 Exactly, imagine-

Jason Calacanis 19:30 Pull that quote up on what he said, 'cause it's actually a good quote.

Chamath Palihapitiya 19:32 It was what I just said.

Jason Calacanis 19:34 Is that the quote? Yeah.

David Friedberg 19:34 Is that exactly what he said? Yes.

Chamath Palihapitiya 19:35 Yes. He said it's, it's the, it's the game that we woke Westerners have to play.

Jason Calacanis 19:38 Yeah.

Chamath Palihapitiya 19:38 We have to say the right shit but less, or everyone likes us.

David Friedberg 19:40 He actually said the most uncomfortable thing out loud, which is, "Look, by having gone to Crystal Springs High School, by having professors, my parents that went to Stanford, by having gone to MIT, I can pull this off." That's, that's what he said, because he can go with those things because, "I'm a, I'm a champion of effective altruism that I can justify any of these decisions, how amoral or immoral that they be, because I'm trying to help, you know, my brother stand up a multimillion dollar pandemic response business, I'm trying to do this, I'm trying to do that." And all of these regulators and all of these reporters said, "Okay, you get the hall pass." Now, imagine if you replaced him with some random kid in some developing country, or even from the United States, who did, went to public high school, who went to some random state school. Do you think that they could have pulled any of this stuff off?

Chamath Palihapitiya 20:34 No. You need the patina of the privileged class. The New York Times- That's what he had, the patina- The New York Times- ... of the privileged class.

David Friedberg 20:41 Even after this fraud, The New York Times wrote more of a puff piece on him than the hit piece they wrote on Bryan Armstrong last year when Bryan Armstrong wouldn't toe the line on allowing politics at work. Remember that?

Jason Calacanis 20:53 Yeah.

Chamath Palihapitiya 20:53 Unbelievable.

David Friedberg 20:54 Yeah, so the big en- I think what Chamath is kind of saying here is that the big enabler here is not crypto per se, it's all of these institutional biases and elite biases that he was able to play into, partly because he was a big insider. I mean, in a way, he monetized his parents' life

David Friedberg 21:09 work. The problem that I think this allows us to put a fine point on is the following. You know, in society, we've confused a lot of people to think that the opposite of liberal is conservative or Republican. And I think that's the cycle that drives the mind virus inside the mainstream media. The problem is the opposite of liberal is illiberal, (laughs) okay? And what illiberal means is to be narrow-minded and unenlightened. It means to be puritanical, it means to be fundamentalist, and this is really what it allows us to see now. We have now had six years of data, case after case after case, where if you are woke, if you are a social justice warrior, if you have the right credentials that justify your upbringing, if you have institutional, uh, bonafides that come from your parents, you get to create the narrative and you get a hall pass. And everybody else basically is at the subject and the mercy of the mainstream media. And so if you don't kiss the ring and bow down to them, they will try to destroy you or run you out of town. But if you are one of them, they will give you a hall pass. And when it's time for them to change their mind in order to tell the truth, they won't do it. And so these types of grifts will continue, as Friedberg said, because there is no check and balance without a healthy independent media. There is no way for all of us to actually know what's really going on. Guys, some person in the media could have asked the question and dug in deeper around the connections between Alameda and FTX for the last 24 months. At no point-

Chamath Palihapitiya 22:55 They still could've diligence at a venture firm.

David Friedberg 22:57 ... at no point could any person have asked these questions and found ex-employees and said, you know, "Are there any unseemly connections here between FTX and Alameda?" There was no disgruntled employee. I mean, every company has disgruntled employee whistleblowers. But here where there was billions-

Chamath Palihapitiya 23:14 Yeah.

David Friedberg 23:14 ... of dollars being made by tens of people, not a single person who felt on the outs said anything? Well, he was also giving- It's because... Hold on.

Chamath Palihapitiya 23:21 ... millions of dollars to press outlets-

David Friedberg 23:22 It's because... Hold on.

Chamath Palihapitiya 23:23 ... in donations.

David Friedberg 23:23 It's because the questions weren't asked and then this kid paid hush money to the mainstream media.

Jason Calacanis 23:28 Let me ask a question of you guys. Do you think that it's the media's responsibility in this context, or do you think that there should have been a regulatory authority that had oversight of this business like there is for every bank and every trading operation in the United States? And every one of those businesses has a compliance officer-

David Friedberg 23:44 There's a chicken and egg problem.

Jason Calacanis 23:44 ... and has regulators up the wazoo making sure that customers are kept safe and protected. Or do we think that, that should, should offshore vehicles be allowed like this that allow people to operate?

David Friedberg 23:54 It's a reasonable question, but there is a chicken and egg question. We were all standing around holding our hands while the CFTC and the SEC were fighting. That's not something that consumers can be expected to adjudicate. So yes, we should have legislation that clearly defines all of this, but there were enough parameters that created regulatory frameworks where a bunch of good actors did operate in them and are continuing to do so, like Coinbase. So I don't think this is a regulatory issue. I think that if you believe there are people who are supposed to forensically examine things and get to the bottom of things and ask hard questions-... those people did none of that here. And, and what's, what's even more worrisome is what they're showing is now with an massive amount of data that shows that you could ask hard questions, they don't care to because it makes them look bad.

Chamath Palihapitiya 24:44 I disagree with this, Chamath. I think regulators failed here because they have been reactive to crypto, they have not been proactive, and they have not been clear with the crypto community that what they were doing was illegal and they should have put the regulations in quicker and they're playing catch-up. But all three groups failed. The media failed, the regulators failed, and VCs failed. Capital allocators failed, uh, ap- apparently to due diligence here and install proper governance. You cannot put a company like this, you know, in business-

David Friedberg 25:12 But my only point, Jason, is that-

Chamath Palihapitiya 25:13 ... with billions of dollars and have no board of directors-

David Friedberg 25:15 No, I agree with you.

Chamath Palihapitiya 25:16 ... or, or he lied to them, which is possible.

David Friedberg 25:18 No, I agree with you, Mi- my point is that while regulators are, are basically fighting a territorial turf war-

Chamath Palihapitiya 25:24 Yeah.

David Friedberg 25:24 ... okay, the media could have still done their job. They chose not to.

David Sacks 25:28 Guys, it was worse than that because not only... It, it's not just a case where the SEC failed to exercise any oversight of him or dig into any of these questions. He was in the room with them crafting the next set of regulations. He was working on the regulations-

Chamath Palihapitiya 25:42 Yes.

David Sacks 25:42 ... that you're talking about that are supposedly needed.

Chamath Palihapitiya 25:44 While breaking them.

David Sacks 25:45 They let the fox in the henhouse.

David Friedberg 25:47 Yeah.

David Sacks 25:47 He was gonna craft a, a new type of regulatory license for these types of exchanges with the result that he was gonna get one and some of his competitors weren't. This is one of the things that triggered CZ to basically, you know, do what he did, which is-

Chamath Palihapitiya 26:04 He rug pulled them.

David Sacks 26:05 ... uh, basically that SBF was trying to get, uh, Binance and, and competitors like that banned while SBF would be one of the sole people to get the license.

David Friedberg 26:14 By the way, Jason, Jason here's an example-

Chamath Palihapitiya 26:16 He got jumped. He just got jumped.

David Sacks 26:16 ... he was working with the regulators.

David Friedberg 26:17 Yeah, Jason, you just said something derogatory towards CZ. He rug pulled them. Uh, did he do that or did he actually expose the fraud?

Chamath Palihapitiya 26:24 That's what I mean by rug pulling. Yeah. He was partners with him-

David Friedberg 26:27 Well, that's not what... That's not what rug pull means, Jason.

Chamath Palihapitiya 26:28 Okay. Well, he was partners with him and then he realized he was weak and that he was doing some stuff that was shady and he decided he would eliminate a partner who was creating regulation, as Zach said. Whatever you want to say. He knifed him.

David Sacks 26:40 All he did was indicate a desire to liquidate his position in a token that-

Chamath Palihapitiya 26:44 Yeah.

David Sacks 26:45 ... was supposedly perfectly liquid.

Chamath Palihapitiya 26:47 Okay. (laughs)

David Sacks 26:47 And that's basically... That caused the everything to unravel.

Chamath Palihapitiya 26:50 Yeah. But these were partners, right? I mean, they were, these were-

David Sacks 26:52 No, they're competitors.

Chamath Palihapitiya 26:52 ... they were deep business partners.

David Sacks 26:54 But they're not

26:54 They were competitors.

Chamath Palihapitiya 26:55 They were collaborating on these tokens together so they weren't competitors-

David Sacks 26:58 No, I don't think so.

David Friedberg 26:59 ... Jason, like part of the big loan that, that initiated all of this stuff like a year and a half ago was to buy FTX off the cap table. So, you know, this... All I'm saying is, like, you used words in your framing of a guy, you know, who's built a business is like he is this nefarious bad actor but-

Chamath Palihapitiya 27:19 Finance was FTX's first investor.

David Friedberg 27:21 ... Hold on, hold on, hold on a second. But, but David's right. All the guy did, as far as we can tell right now, is tweet, "I'm selling this token because I don't believe in the capital structure of this entity." And he got those tokens by being bought out of the cap table.

Chamath Palihapitiya 27:35 I know. He was partners with them. So if, if you, if you don't like rug pulled, how about backstabbed?

David Sacks 27:39 No, that, that's not-

Chamath Palihapitiya 27:39 These were business partners.

David Sacks 27:40 No, they're not partners.

David Friedberg 27:41 No, you still don't understand, Jason.

Chamath Palihapitiya 27:43 I... Of course I understand. They had... He was the first investor. So to do this-

David Friedberg 27:47 And then he got bought out.

Chamath Palihapitiya 27:47 ... to a company you invested in. No, no, he got bought out if you're business partners-

David Sacks 27:51 If you're part of the consideration... Hold on. Part of the consideration were these tokens, these FTT tokens.

Chamath Palihapitiya 27:55 I understand. Okay.

David Friedberg 27:56 Jason, when you... When Uber went public-

Chamath Palihapitiya 27:58 Yes.

David Friedberg 27:59 ... and you got distributed stock-

Chamath Palihapitiya 28:01 Yeah.

David Friedberg 28:01 ... did you distribute and sell Uber at any point?

Chamath Palihapitiya 28:06 Previous to that, I had. I sold some to ..........................

David Friedberg 28:08 No, no, no, no, no. I'm asking you a question. When Uber went public and you got-

Chamath Palihapitiya 28:11 No.

David Friedberg 28:11 ... distributed from Uber-

Chamath Palihapitiya 28:11 I didn't. No.

David Friedberg 28:12 ... of your stock, so you've never sold a single share of Uber ever?

Chamath Palihapitiya 28:15 Not since it's public. No, I sold it before in private markets.

David Friedberg 28:18 Okay. Okay.

David Sacks 28:18 But I'm sorry, but that doesn't make Jason a sh- a partner of Uber. You're just a stockholder.

David Friedberg 28:23 Yeah.

Chamath Palihapitiya 28:23 This is slightly different, I think, but okay, fine. You guys, if you guys wanna consider-

David Friedberg 28:27 It's not slightly different.

David Sacks 28:27 They were... Listen, Jason, they were-

Chamath Palihapitiya 28:28 He was the first investor in the company. They were business partners.

David Sacks 28:31 It might have been a historical situation, but their status at the time that CZ tweeted-

Chamath Palihapitiya 28:35 Mm-hmm. Wasn't they were competitors? Okay, fine. I mean, they became competitors. I agree.

David Sacks 28:39 And by the way, to, to Mohd's point about this rug pulling language, I think we're getting kind of down a rabbit hole here.

Chamath Palihapitiya 28:44 Yeah, we're getting in the weeds here.

David Sacks 28:45 But what CZ, CZ did perform a service in this sense, okay? SBF claims that four billion more was about to come in. I personally don't believe that sounds like bullshit to me. But if it is true, that would have been a bad thing. The more money that came in-

Chamath Palihapitiya 28:59 Yeah.

David Sacks 28:59 ... to that operation, SBF proved that he was a very poor custodian of customer funds.

Chamath Palihapitiya 29:04 Yeah, for sure. For sure.

David Sacks 29:04 They're being siphoned off for his own use.

Chamath Palihapitiya 29:05 I, I'm not defending SBF.

David Sacks 29:07 But the longer this went on-

David Friedberg 29:08 No, no, I, I'm just highlighting the language that you use is sort of like, again, part of that establishment elite narrative.

Chamath Palihapitiya 29:14 Mm.

David Friedberg 29:14 And I'm just questioning, you should maybe steel man... Take a second to just steel man-

Chamath Palihapitiya 29:19 Yeah.

David Friedberg 29:19 ... a more dispassionate view which is, here's a counterparty-

Chamath Palihapitiya 29:23 Okay. Yeah.

David Friedberg 29:23 ... who, when he left the cap table was given half cash, half tokens.

Chamath Palihapitiya 29:30 Okay.

David Friedberg 29:30 And he decided to sell his tokens.

Chamath Palihapitiya 29:33 Yeah. And tweet it publicly and cause a run on the bank. So the question is-

David Sacks 29:37 It was not a run on the bank. There was no bank. Where's the bank? Does he work on the bank language? Okay. Is something... This was in the Semafor coverage. Okay?

Chamath Palihapitiya 29:46 He did it publicly. That's my point. So I'll steel man it for you.

David Sacks 29:49 No, no, no.

Chamath Palihapitiya 29:49 "Hey, these tokens are worthless. I need to liquidate them as fast as possible." But why would you do that publicly? Why? Why wouldn't you do it privately?

David Sacks 29:56 Because you're about to move the market.

Chamath Palihapitiya 29:57 He wanted to move the market to zero.

David Sacks 29:59 He's about to move the market. He's letting people know why-

Chamath Palihapitiya 30:01 But he wanted to kill his competitor, as Chamath was just saying.

David Sacks 30:04 He told them that... He told the market... He told the market... I didn't say he was trying to do that.

30:08 We got to back up here because I think-

Chamath Palihapitiya 30:10 Okay, back up. Sure.

David Sacks 30:11 ... we, we've done a lot of like 30,000 foot like lessons and like takeaways from this whole thing but we haven't really established what it is that SBF did wrong. So I think we need to sort of take a second to unmuddy the waters.

Chamath Palihapitiya 30:22 Okay.

David Sacks 30:23 And part of that, I think we should start with this idea of a run on the bank because the fa- the press who've been writing puff pieces about SBF, I'd say mainly Semafor which he was a big donor to-

Chamath Palihapitiya 30:33 Yeah.

David Sacks 30:33 ... they've been trying to frame it as a run on the bank.... and then that implies that it's not really his fault, it could happen to anybody, lots of banks have had this problem. Okay, first of all, they're not a bank. Banks actually have the legal right, under certain conditions, to take customer deposits and loan them out, okay?

Chamath Palihapitiya 30:48 Yes.

David Sacks 30:49 They did not. Their terms of use did not allow that, as Stephanopoulos pointed out. SBF's answer to that was, "Well, we had this like margin account program, there were other provisions and other terms of use." But most of the customers-

Chamath Palihapitiya 31:00 Mm-hmm.

David Sacks 31:00 ... who lost money, the vast majority, did not opt in to that program, they never agreed to that. So, that's, that's point number one. Point number two is, I think we need to, to look at this language of margin account, okay? SBF's explanation of how customer money was siphoned off for his own personal use, i.e. to Alameda, is that Alameda had a margin account. So, I think we could perform a service here by explaining why it wasn't a margin account and, you know, Chamath under- and you guys understand this really well, the way that a margin account works is the following, okay, 'cause I think some of us have them set up with investment banks. You go to an investment bank, say Morgan Stanley, and you over- you post collateral. You actually over-collateralize. So for example, you might take $100 million of stock, post it at the investment bank, and then they will let you loan a certain percentage, nowhere near 100%, maybe 50% loan to value.

Chamath Palihapitiya 31:57 At the max, so if you, if you have a very, very liquid security, you may get 50% coverage-

David Sacks 32:03 Right.

Chamath Palihapitiya 32:04 ... which means if you posted $100 million, you could get a $50 million loan. But typically- If you have $100 million in Amazon stock, you're some Amazon VP, you can get $50 million loaned.

David Sacks 32:13 But, and if, and if it's a private asset, it's anywhere as high as 30%, 35%, but typically it's about 25%. My expectation is in a liquid token like this, would have basically gotten five or 10% coverage ratio, at the best of it. And then what happens is, you have these maintenance values. So if all of a sudden the value of these entities multiplied by that percentage that you're allowed to loan falls below, you have to post money. That's how a margin account works. Right. It's just, there is no free lunch in that.

Chamath Palihapitiya 32:44 Let me just say, say quite simply, very simply, what I, it appears this guy did. He took customer deposits in U.S. dollars. He then converted those dollars into some other asset, and he had a mark on that asset, let's call it a dollar a token. And then those dollars were moved to somewhere else.

David Sacks 33:05 No, this is simpler than that.

Chamath Palihapitiya 33:06 Because someone transferred in some other token.

David Sacks 33:08 No, no, no, listen, we need to fin-

Chamath Palihapitiya 33:09 But that's inf- but, but, but what happened-

David Sacks 33:10 We need to finish the, no, we need to finish the explainer around the margin account, okay, because what SBF did i- is this. He took customer deposits, gave them to himself-

Chamath Palihapitiya 33:21 Just, just to be clear, in, in, no he gave, he took customer deposits in U.S. dollars. They were wired in.

David Sacks 33:27 Yes. Correct. Okay.

Chamath Palihapitiya 33:27 He took those dollars out and he put a fake cur- token in, and he called that-

David Sacks 33:32 Right. That's right, he, so, so there-

Chamath Palihapitiya 33:33 And therefore he said, oh, he, therefore he said the balance sheet is good. But the value-

David Sacks 33:38 Yes.

Chamath Palihapitiya 33:38 ... of that token, it turns out, isn't a dollar, it's ten cents.

David Sacks 33:41 That's right. It was his, it was his-

Chamath Palihapitiya 33:42 Or zero.

David Sacks 33:43 ... sort of, it was sort of his made-up token that, uh-

Chamath Palihapitiya 33:45 FTT is the name of that token.

David Sacks 33:46 ... uh, that he, that he tightly controlled the trading of and, and artificially propped up the price.

Chamath Palihapitiya 33:50 And by the way, it wasn't just FTT.

David Sacks 33:51 So he had phony collateral, but-

Chamath Palihapitiya 33:52 Yeah.

David Sacks 33:52 Yeah, but, but, but here's the thing. It wasn't just the fact that his collateral was no good. It was also the fact that, and this is from the bankruptcy, uh, filing by the, the new, the Enron trustee guy. He specifically said that Alameda, unlike every other margin account on the platform, had the auto-liquidation provisions turned off. So wait, we have to finish the thought around how margin works. So like Ch- Chamath said, you over-post collateral, and if the value of that collateral goes down, or the, the, the, the position, your trading account, the value of that goes down, you either have to post more collateral or they will actually liquidate your collateral-

Chamath Palihapitiya 34:32 Yes.

David Sacks 34:32 ... to pay off the loan. So Morgan Stanley will never lose money on a margin account, never.

Chamath Palihapitiya 34:37 Right.

David Sacks 34:37 Like, the whole point is, because they don't make money on it, they loan you the money at like, you know, a few percents, like very cheap-

Chamath Palihapitiya 34:44 Yeah.

David Sacks 34:44 ... loan.

Chamath Palihapitiya 34:45 LIBOR plus or whatever it is.

David Sacks 34:46 Yeah, exactly. Th- that is not a risk account to them. And so, again-

Chamath Palihapitiya 34:50 Right, so in the theo- in the example, let's use an example (inaudible)

David Sacks 34:52 Yes.

Chamath Palihapitiya 34:52 In the, in the case of the VP at Amazon who's got $100 million in Amazon, they have a $50 million loan, if Amazon loses half its value, then that triggers the automatic selling of Amazon shares to get it back down to 50% coverage.

David Sacks 35:06 Yes, and they-

Chamath Palihapitiya 35:06 So now you gotta sell $25 million of Amazon shares, if the full $50 million was pulled down, to get back down to 25, to 50% leverage.

David Sacks 35:14 Yes, and they don't wait until like Amazon-

Chamath Palihapitiya 35:16 They don't.

David Sacks 35:16 ... stock is at the exact level where now-

Chamath Palihapitiya 35:19 Right.

David Sacks 35:19 ... the collateral equals 100% of the loan. They will keep that 50% loan to value.

Chamath Palihapitiya 35:23 Yes.

David Sacks 35:23 And they will liquidate you, you know, and, and by the way, you can lose your entire amount, right? So-

Chamath Palihapitiya 35:28 Yes.

David Sacks 35:28 ... you know, it, this is why trading on margin is so risky, is that-

Chamath Palihapitiya 35:32 You can get wiped out completely.

David Sacks 35:33 ... you can get wiped out very, very quickly with a small move down.

Chamath Palihapitiya 35:35 Because they are the custodians of that Amazon stock.

David Sacks 35:38 Right.

Chamath Palihapitiya 35:38 They are holding it for you now and they have the right to sell it to cover your margin.

David Sacks 35:43 Right.

Chamath Palihapitiya 35:43 You're saying that governor, that basic tenet, that basic safety control-

David Sacks 35:47 Right.

Chamath Palihapitiya 35:47 ... was turned off by Alameda, and it's even more sinister, Alameda controlled like 90 or 95% of these FTT tokens and was owned by Sam Bankman Fraud. So he owned that company then he claims he had no operating-

David Sacks 36:02 The c- listen, what should-

Chamath Palihapitiya 36:03 ... position in it.

David Sacks 36:04 What should have happened is, with that collateral, is that-

Chamath Palihapitiya 36:06 Yeah.

David Sacks 36:06 ... as the value of their position was going down and/or as the value of the collateral was going down, it should have been liquidated to pay off the margin loan. And that did not happen, and the reason it didn't happen is that Alameda got a special exception on the platform to turn off auto-liquidation. Therefore, it was never a margin account. If, even if it was a margin account, okay, and, and FTX somehow misadministered the margin account, it should never have taken other customers' deposits and use them to pay back that money. What should have happened is, if FTX was gonna lose money on a margin account, that would hit the FTX corporate treasury-Okay? And when the FDX corporate treasury ran out, the company files for bankruptcy then-

David Friedberg 36:50 I see.

David Sacks 36:50 ... and then all the other customers, hold on, their account is still there, their money is there, in segregated accounts. And in bankruptcy, they get their money back. The idea that a ma- margin account could ever cause another customer to lose money, that, like, whatever that is, that's not a margin account.

David Friedberg 37:05 There was a, there's a great article-

Chamath Palihapitiya 37:07 That's fine.

David Friedberg 37:07 ... there's a great article, uh, this one was a journalist that did his job properly. His name is David Z. Morris. He wrote an article in CoinDesk that summed up, for anybody that's interested, all of the actual fraud, and all of the crimes that were committed, in excruciating detail. And what's so sad about all these interviews and this press tour is, if anybody would just read this article, you can construct the right questions to ask this guy, just based on this one article. But the, the point I wanted to make is that one of the most interesting insights was these guys had lost an enormous amount of money already in calendar year '21. And so this is what's so crazy, Jason, about, you know, you using language like rug pulling and, like, you know, nobody-

Chamath Palihapitiya 37:53 Back stabbing.

David Friedberg 37:53 ... actually trying to, like-

David Sacks 37:54 Run on the bank.

David Friedberg 37:54 ... be clear, like, you, you guys are giving this guy a hall pass-

Chamath Palihapitiya 37:58 I am not giving him a hall pass.

David Friedberg 37:58 ... when if any wa- any industrious reporter-

Chamath Palihapitiya 38:01 I am not.

David Friedberg 38:01 ... could have found an employee who said, "Wait a minute, we just blew a three billion dollar hole in our balance sheet in calendar year 2120, and now we're sitting here at the end of '22."

Chamath Palihapitiya 38:12 There is great-

David Sacks 38:12 There is un-

David Friedberg 38:12 There is great articles that Jason-

Chamath Palihapitiya 38:13 Hold on a second. Hold on, I need to respond. I am not giving him a pass. And for you to blame journalists who are reflecting the crime and not putting any light on VCs and the capital allocators who made this investment and who did no diligence and did not put governance in it is the height of arrogance, Shamath. This is not the press's fault.

David Friedberg 38:32 They're not doing that either.

Chamath Palihapitiya 38:33 This is the VCs' fault.

David Sacks 38:34 Where is that article?

David Friedberg 38:34 What?

Chamath Palihapitiya 38:34 This is the capital allocator's fault. You're blaming the people who are telling the story after the crime has been committed.

David Friedberg 38:40 What story? Now you're out of line, Jason.

Chamath Palihapitiya 38:41 They're cover- they're covering the story up.

David Sacks 38:42 You're out of line. You can't handle the truth.

David Friedberg 38:44 Jason, they're covering the story up.

David Sacks 38:45 Okay, listen. Wait, can I get in here? Can I get in here? All right, listen. Jason, I will defend you against Shamath saying that somehow you're, uh, you know, that you're letting SBF off the hook. I know you don't want to let SBF off, off the hook.

Chamath Palihapitiya 38:57 I am not.

David Friedberg 38:57 Yeah, please.

David Sacks 38:57 However, you are letting the press off the hook.

David Friedberg 38:59 I am not.

David Sacks 38:59 And the reason why... Hold on a second. The reason why you're using this inaccurate language like rug pulling and run on the bank when there was no run and there was no bank is because you've been infected by this language that the media has inserted into the discourse. The media-

David Friedberg 39:14 Okay, yeah.

David Sacks 39:14 Listen, and hold on a second. Investors may have got it wrong last year. Investors may have got it wrong when they did that last round. But I think investors now understand what's happening. But the media is still covering for SBF by misexplaining what happened.

Chamath Palihapitiya 39:28 Okay, give me a percentage, Sax, of who's to blame here. VCs who invested and didn't set up any governance, regulators who did not set, uh, rules around crypto, and then, three, the media. What percentage out of 100% is the investors, the regulators, and the press? Go. Three numbers.

David Sacks 39:47 I would say that before the fraud got exposed, one-third, one-third, one-third.

Chamath Palihapitiya 39:51 No qualifiers.

David Sacks 39:51 One-third each before the fraud got exposed, but they-

Chamath Palihapitiya 39:54 Absurd.

David Sacks 39:54 ... were all jointly and severally liable. But after the fraud's been exposed, no investor is still defending SBF. But I, I, I think that the investors who were swindled by him, they feel bad about it.

Chamath Palihapitiya 40:06 So 30/30/30 is absurd. The press had no way to know the fraud was going on, just like the VCs who put the money in-

David Sacks 40:13 They wrote puff pieces. What are you talking about?

Chamath Palihapitiya 40:14 ... didn't. Okay. It doesn't matter.

David Friedberg 40:15 Jason, are you stupid? Like-

Chamath Palihapitiya 40:16 No, I'm not. I'm not. You're stupid because you-

David Friedberg 40:17 Wasn't, wasn't the journalist that exposed the fraud at Theranos? He's the guy that went and did all the work.

Chamath Palihapitiya 40:22 You guys are blaming the press-

David Friedberg 40:24 Hold on a second. John Carreyou went and found this thing-

Chamath Palihapitiya 40:28 Yes.

David Friedberg 40:28 ... when no, when everybody else was like, "This is perfect. It meets all of our priors." Let me finish, please. "It meets all of our priors. This is great."

Chamath Palihapitiya 40:34 And then you won't let me finish.

David Friedberg 40:35 And John Carreyou hold on. And so John Carreyou was like, "Mm, this doesn't pass the smell test to me. Let me go do some work." And he pulled one little string and over the course-

Chamath Palihapitiya 40:43 Yeah.

David Friedberg 40:43 ... of 18 months, he exposed the whole bloody thing. So hold on a second. So what is incredible to me is that it was possible to expose this thing before. Nobody did. I agree with David. It's about equal responsibility before. But afterwards, the bulk of the responsibilities now sits with regulators to clean it up and journalists to tell the truth.

Chamath Palihapitiya 41:02 Okay. And now may I respond to that since you called me stupid? You are delusional. Number one, every one of those investors in Theranos could have taken a fucking blood test at two different places, like Jean-Louis Gassia did, and write a blog post and prove that Theranos didn't work, and they withheld disbelief. Investors putting in $100 million, including Rupert Murdoch, didn't even take a fucking blood test or tell one of their diligence teams to do it. The same thing happened here with the investors in FTX. They did zero diligence, they set up zero governance. This was a failure of the investors and the governance for 99% of the problem, and then regulators should have caught it. And the regulators, in fact, did catch Theranos. So you're completely wrong. Chamath, again, the journalists come in after the fraud is happening. The investors and governance is responsible for stopping these things. FTX was a failure of governance and investors, and so was Theranos. The end. You're completely wrong.

David Sacks 42:04 Th- the que- the question is post, post-exposure.

Chamath Palihapitiya 42:07 Yeah, why are you guys obsessed with post? How about avoiding these things? You guys are blaming journalists-

David Sacks 42:11 Because the story is ongoing. Because the story is ongoing.

Chamath Palihapitiya 42:14 You are blaming journalists for something that is capital allocator's responsibility. It is our responsibility to due diligence. It is our responsibility to create a board of directors that checks on Elizabeth Holmes and Sam Bankman fraud.

David Sacks 42:26 Yeah, great. I didn't disagree. I, did I try to disarm you?

David Friedberg 42:27 Nobody's disagreeing with you.

Chamath Palihapitiya 42:28 You just called me stupid. You just called me stupid for pointing out something that you refuse to accept.

David Friedberg 42:33 What are you talking about?

Chamath Palihapitiya 42:34 It's not. I'm, I'm the biggest con man. Except the fact that capital allocators created this.

David Sacks 42:36 I'm Smart. I'm the older brother.

Chamath Palihapitiya 42:38 That's not... You can, you can make whatever joke you want.

David Sacks 42:41 I'm Smart. I was skipped over.

Chamath Palihapitiya 42:41 You guys are giving a pass to the investors and to governance.

David Sacks 42:45 You're doing your Fredo impression again. Come on.

Chamath Palihapitiya 42:47 I'm not doing Fredo. I'm not doing Fredo.

David Sacks 42:48 (laughs)

Chamath Palihapitiya 42:48 You guys are being absurd. This is why people say that we're delusional in this podcast.

David Sacks 42:51 This is his trigger word, don't call his dog.Don't call him dumb. It's like that character in Fish Call Wanda.

David Friedberg 42:56 The reason people say we're delusional is that we won't take acceptance of this issue.

David Sacks 42:58 Remember in Fish Called Wanda, like, the guy you can't call dumb?

Chamath Palihapitiya 43:01 Totally. He loses it.

David Sacks 43:02 He goes berserk.

David Friedberg 43:03 No, we're not going berserk. You guys have a blind spot. Capital allocator don't... He's responsible.

Chamath Palihapitiya 43:08 Yeah, he... He held the guy up to the balcony. He's like, "Don't, don't call me dumb." Holds him up in the balcony.

David Friedberg 43:11 I'm not going to defend... Uh, I'm not going to defend any single one of those investors. I, I mean, I, I think that they did a horrible job too.

Chamath Palihapitiya 43:17 I'm gonna get a beer. This is a great episode. (laughs) The rage just went up. (laughs)

David Friedberg 43:21 Um, but the reality is... Um, but the, but the reality is I think that if you think that you can... If you... It's, it's your decision to, to defend the mainstream media. I think that that's fine. I'm not defending them. No, you are. You said they have no responsibility.

Chamath Palihapitiya 43:30 No, I'm blaming the VCs. It's different. The culpability is with the investor class that has not had proper governance and diligence.

David Friedberg 43:38 Great. And you know what, Jason? How many articles have been written excoriating them?

Chamath Palihapitiya 43:42 Uh, yeah, some.

David Sacks 43:44 A lot. They look like fools.

Chamath Palihapitiya 43:46 Yeah, I mean, the show-

David Friedberg 43:47 Oh, yeah. No, just type in Sequoia Capital. Type in Sequoia Capital. Show me, uh, show me, uh... Show me the Washington Post... No, show me The Washington Post, New York Times, that's, like, digging in to that malfeasance or that lack of oversight and holding them accountable in a way that you feel exposes this problem to create change.

Chamath Palihapitiya 44:00 Well, if we look at Theranos, uh, those people, uh, who invested, including, um, Draper and, um...

David Friedberg 44:09 Show me the examples. Let's ask.

Chamath Palihapitiya 44:10 Rupert Murdoch, they, they really went after them, for sure. Yeah.

David Friedberg 44:13 What about here?

Chamath Palihapitiya 44:15 Uh, Wall Street Journal, one day ago, Sequoia Capital apologizes to its fund investors for FTX loss.

David Friedberg 44:20 Wow, that's-

Chamath Palihapitiya 44:20 Venture capital firm tells fund investors that-

David Friedberg 44:22 That's hard-hitting. (laughs)

Chamath Palihapitiya 44:22 ... it will improve due diligence on future investments after $100 million loss.

David Friedberg 44:25 They really got them. They really got them.

David Sacks 44:26 Yeah, let me, let me, let me read you-

Chamath Palihapitiya 44:27 That's a cover story in the Wall Street Journal.

David Sacks 44:29 I'm gonna, I'm gonna read you... I'm gonna read you a sentence from the New York Times coverage of SBF.

David Friedberg 44:34 Oh, I'm not defending that.

David Sacks 44:35 And Sam... Hold on a second. Sam Bankman-Fried is neither a visionary nor a criminal mastermind. He is a human who made the same poor choice that generations of money managers have made before him. Are you effing kidding me?

David Friedberg 44:46 No, I'm not defending them.

David Sacks 44:47 That was the New York Times' coverage.

David Friedberg 44:48 Yes, you are.

David Sacks 44:48 He also said his greed-

David Friedberg 44:50 I am not defending them.

David Sacks 44:50 ... his, his greed succeeded his craft.

Chamath Palihapitiya 44:52 You just called Andrew Horwitz an, uh, suit.

David Sacks 44:53 And then Semaphore, who was on the take, who received millions of dollars of his money-

David Friedberg 44:57 They're on the payroll. They're on the payroll.

David Sacks 44:57 ... said it was a run on the bank. Okay?

Chamath Palihapitiya 44:59 How much did they get? Five million?

David Sacks 45:00 Now, where is their apology? Hold on a second. Where is their apology? Sequoia has apologized. Where is their apology?

Chamath Palihapitiya 45:07 Oh, it has to come. I'm not defending the press.

David Sacks 45:09 Yes, you are.

Chamath Palihapitiya 45:09 I'm just saying-

David Sacks 45:10 Yes, you are.

Chamath Palihapitiya 45:11 No, I am not. I am literally telling you that the New York Times has been asleep at the wheel and throwing-

David Sacks 45:16 Where's the New York Times apology? The press is always demanding an apology from everybody else.

Chamath Palihapitiya 45:19 I'm agreeing with you. The press has done a shit job.

David Sacks 45:20 Hold on a second. The press is always demanding-

David Friedberg 45:21 The press is so incompetent on this. The Twitter spaces yesterday did a better job of trying to ask questions and getting-

Chamath Palihapitiya 45:26 I, I agree. I agree.

David Friedberg 45:27 ... to the truth than a single journalist has done or of the collective body of all of journalists.

David Sacks 45:31 Totally. Absolutely. Totally.

Chamath Palihapitiya 45:32 Literally, randos on Twitter spaces did a better job than Sorkin.

David Sacks 45:35 Let me tell you why that- why no one trusts the press, Jason. First of all, they have an agenda.

Chamath Palihapitiya 45:39 I am in agreement.

David Sacks 45:40 But second of all, when they make a mistake, they never admit it. When's the last time they did an apology or retraction? When's the last time they did what Sequoia did?

Chamath Palihapitiya 45:48 I don't know. And they need to apologize about New York Times. I am in agreement with you on that. But I think we have to first say, and this is where you guys have a blind spot-

David Sacks 45:56 They should be ashamed of themselves.

Chamath Palihapitiya 45:56 ... is what is the responsibility of capital allocators and governance and regulators? I think it's one, two, three. Our industry is responsible for setting up proper governance. The regulators are responsible for making sure that scientific claims are backed up. And then press is a distant third.

David Sacks 46:14 You know who I think is responsible? SBF.

Chamath Palihapitiya 46:16 Go. Yes.

David Sacks 46:17 One, two, and three. And then we can talk about four, five, and six.

Chamath Palihapitiya 46:20 Okay, four, five, and six. Capital allocators, regulators, the press, a distant sixth. I agree. Let's go on to China. God, it's so spicy today again. God, it's so hot. (laughs) Sorry.

David Friedberg 46:31 I do think, I do think when we attack the mainstream media, Jason feels a little twin- tinge of, like, uh, insecurity and illegitimacy because you were a journalist. I have... My personal perception is that-

Chamath Palihapitiya 46:41 No, no. I think that's bullshit. No.

David Friedberg 46:42 I have... I think that you have a, an incredibly romantic view of the craft as you practiced it back then, which I think was full of integrity.

Chamath Palihapitiya 46:53 Yes, I do. Yes, I do.

David Friedberg 46:53 And I think that's true. I thi- I think that you, you don't adequately realize how massively the industry has changed in the last 20 years since you've become an investor.

Chamath Palihapitiya 47:01 I, I realize it more than you do. I fully realize that the media has absolutely become biased, and they have lost-

David Friedberg 47:08 Are they corrupted?

Chamath Palihapitiya 47:08 Uh, in some cases, yes. I mean, if you're taking money from SBF and then giving him-

David Friedberg 47:13 Are they biased? Are they blinded?

Chamath Palihapitiya 47:13 They are corrupt if they're taking money from SBF and then giving him kid-glove coverage. Absolutely. That is the definition of corruption in my mind. What is what-

David Friedberg 47:21 What is it called when you don't take money necessarily like the New York Times and still treat them with kid gloves? What is that?

Chamath Palihapitiya 47:25 It is extreme bias. And the New York Times became extremely biased.

David Friedberg 47:28 Why do you think the bias... Why do you think that bias exists?

Chamath Palihapitiya 47:31 They were always left-leaning, but I, I can tell you why. They... When Trump came in, a generation of new journalists became activist journalists. They didn't want to tell stories and take it straight down the middle and let the facts tell the story and let the audience make their own decision. They felt an existential risk when Trump came into office. They got Trump Derangement Syndrome. They picked a side like MSNBC and Fox did, and the business model became, for the New York Times, pick a side and get the subscribers. It was a deliberate cynical choice on the New York Times part to go full MSNBC or full Fox, the two extremes in mainstream media, in order to get the subs. And they literally rallied the troops there to do anti-tech, anti-Trump, uh, coverage, and they became activists. And when journalists become activists, they are no longer journalists. They're activists or commentators. And that's the problem. It's being presented as journalism, when in fact it's activism.

David Sacks 48:28 So, you're, you're, you're right. So-

Chamath Palihapitiya 48:28 And that's a problem.

David Sacks 48:29 So shout out to Matt Taibbi, who just did a Monk debate, uh, on this ver-

David Friedberg 48:32 That's well said, by the way, Jason.

David Sacks 48:34 Yeah, on this very topic. And he has a great, great Substack basically saying what you're saying, Jason. And the, the, the best quote is, "The story is no longer the boss. Instead, we sell narrative." He's a lifelong journalist whose father was a lifelong journalist, and he understands the way the business has changed. And it's like what you're saying.

Chamath Palihapitiya 48:51 And, and this is why independent media, whether it's Substacks, whether it's call-in shows, whether it's all-in podcasts or other podcasts, Joe Rogan, Sam Harris, whoever it is-

David Friedberg 49:01 ... independent voices are now what consumers are seeking out, because they can sense the bias. They know Rachel Maddow and Tucker have a, an ax to grind, and they're left and right. They didn't-

Jason Calacanis 49:12 But what about these more... Yeah, exactly.

David Friedberg 49:13 ... expect The New York Times, Washington Post, and Wall Street Journal to... You know, they, they knew they were leaning. They didn't expect them to pick a side.

Jason Calacanis 49:19 Do you think we should cancel... If folks... Do you think folks are better off keeping their New York Times subscription, or replacing that New York Times subscription with a basket of Substacks, and-

David Friedberg 49:31 Uh, yeah, you answered your own question. It's the latter. I, I think y- you're on your own as a consumer now. You're gonna have to... And I think this podcast, uh, and the nuance we have, shout out to Freiberg for nuance, what we've-

David Sacks 49:42 (laughs)

David Friedberg 49:42 ... done on this podcast is-

Jason Calacanis 49:44 What's that funny, Sacks?

David Friedberg 49:44 ... to explain to people-

David Sacks 49:46 Freiberg's not the only one with nuance, J-CAL.

Jason Calacanis 49:48 (laughs)

David Friedberg 49:49 Nobody would describe David Sacks with the word nuanced.

David Sacks 49:51 What, he's the nuance department on this podcast? What am I?

David Friedberg 49:53 100% he is.

David Sacks 49:54 (laughs)

David Friedberg 49:54 But you would know that, 'cause you leave when Science Corner starts.

David Sacks 49:56 I'm the truth department, okay? Sometimes nuance-

David Friedberg 49:58 You're truth bombs. All right.

David Sacks 49:59 I'm the truth department. You can take the both sides department.

David Friedberg 50:01 The point is, consumers need, consumers need to become extremely literate, and they have to do-

David Sacks 50:07 (laughs)

David Friedberg 50:07 ... their own search for truth in today's age. They don't tr- They shouldn't trust New York Times. They shouldn't trust us. They should trust themselves. They shouldn't trust necessarily the CDC or, you know, the World Health Organization. They should trust themselves and come up with their own process for figuring out the truth in the middle of this mess.

Jason Calacanis 50:24 By the way, this is-

David Sacks 50:24 Oh, yeah.

Jason Calacanis 50:24 ... a good reflection on what's happened with the rest of media with respect to the creator class, where it- Right, it used to be the movie studios, and, you know, a handful of kind of aggregated creators that made all of the content, the, the record labels. And now, you know, independent artists, independent producers, independent creators, and now independent journalists-

David Friedberg 50:46 Hm.

Jason Calacanis 50:46 ... are gonna become the bulk of volume that's gonna be consumed. It's just a different consumption model. But we've already seen it happen with music.

David Friedberg 50:52 We've already seen it happen with music.

Jason Calacanis 50:52 We saw it happen with movies, and we've seen this disruption-

David Friedberg 50:54 Perfect.

Jason Calacanis 50:55 ... happen across all of these other media classes. Journalism and what we call the press is very likely gonna be kind of that next layer of disruption.

David Friedberg 51:04 I would trust having a conversation with you about science topics over reading a science article-

Jason Calacanis 51:09 100%

David Friedberg 51:10 ... you know, in The New York Times or Wall Street Journal-

Jason Calacanis 51:12 (laughs)

David Friedberg 51:12 ... if I'm being honest.

Jason Calacanis 51:12 100%.

David Friedberg 51:12 I would much-

Jason Calacanis 51:13 100%.

David Friedberg 51:14 ... prefer to talk to you about it. And if it was markets, I'd rather talk to Chamath. And if it was SaaS, I would talk to Sacks. Or operating a company. Speaking of operating a company-

David Sacks 51:22 Pro politics?

David Friedberg 51:24 Mm.

David Sacks 51:24 (laughs)

Jason Calacanis 51:25 (laughs)

David Friedberg 51:26 Uh, uh, we'll, we'll see. We'll see.

Jason Calacanis 51:26 Uh-

David Friedberg 51:26 But I think-

Jason Calacanis 51:26 We have to talk about- ... I think it's about having unique insight insight, right? Like, that wasn't the case. And what's interesting is that the people who are the professionals that have the knowledge and the touch points are also becoming loo- journalists, in the sense that they're also becoming speakers of their truth, right? And, and I think Twitter's a good enabling platform for this. We see it on YouTube, where, like, scientists are putting out their own videos, or market actors, like people that are traders in the market go out and they put out their own videos. And they put out their own podcasts, and I think we're probably a good reflection of that-

David Sacks 52:01 Yeah.

Jason Calacanis 52:01 ... uh, in the sense that, like, we are the actors in the market, and that we're not just the independent observer that has kind of a surface level view. We have the depth to be able to talk about the things that we choose to talk about. And I think that's where consumers find value, and will continue to find value, in terms of who the journalist or speaker is that they're gonna start to trust for their information. I had to, uh-

David Sacks 52:22 Yeah, I saw, I saw that interview you did with, um, Newcomer.

David Friedberg 52:26 Oh, yeah.

David Sacks 52:26 Yeah.

David Friedberg 52:26 Yeah, thanks-

David Sacks 52:27 And, and I saw-

David Friedberg 52:27 Thanks for that, J-CAL, that was good.

David Sacks 52:28 I saw his... Yeah, yeah, I saw that, that coverage.

Jason Calacanis 52:30 Great coverage.

David Sacks 52:30 I mean-

Jason Calacanis 52:30 Yeah.

David Sacks 52:30 ... he, he speaks a lot about the, uh, this phenomenon of going direct. And of course he's against it. Now, he interprets going dir- direct as an attempt by, um, newsmakers to avoid answering tough questions or take-

David Friedberg 52:43 Mm-hmm.

David Sacks 52:44 ... tough questions. I think that's ridiculous, because, for example, I go on CNBC all the time. I go on Emily Chang and, um-

David Friedberg 52:52 Bloomberg.

David Sacks 52:53 ... Bloomberg all the time. I submit to, like, really tough questions. I actually like those s- sort of sparring sessions.

Jason Calacanis 52:58 Yeah, I did HARDtalk this week. Have you ever done that?

David Sacks 53:00 Yeah, exactly.

Jason Calacanis 53:01 Holy crap.

David Sacks 53:01 So, so that, that's not what's going on here. I think what's going on is we have expertise. We wanna communicate them. And we do feel like the media has become a very unreliable narrator. There is too much-

Jason Calacanis 53:12 Totally.

David Sacks 53:13 ... bias-

Jason Calacanis 53:13 Totally.

David Sacks 53:13 ... and sloppiness. Not all of it is agenda. Some of it's just pure sloppiness. And there's no reason why we shouldn't go direct, and people wanna hear from us. The audience wants to hear from us.

Jason Calacanis 53:23 Same for... Look, look, look at Draymond. Look at Draymond and the success he's had with his pod, podcast.

David Sacks 53:27 His podcast, yeah.

Jason Calacanis 53:27 No basketball player has ever gone direct and created content like Draymond's created. And it's totally changed the game. And he was so clear. He's like, "We are, I am the media now." And I think that's-

David Friedberg 53:38 I mean, JJ, JJ Reddit, you know, Old Man and The Three, amazing-

Jason Calacanis 53:40 Yeah.

David Friedberg 53:40 ... amazing

David Friedberg 53:41 podcast. I was gonna tell you guys a story. So, I was in the Middle East last week, or this week, sorry. And, um, I had this crazy experience where I was trying to understand what was going on in China. And so I started on CNN, and the whole thing was the propaganda machine around a re- a, a democratic revolt, you know, pushing for democracy and trying to depose Xi. Then I moved to Al Arabiya, so one channel up. I went from Channel 10 (laughs) to Channel 11. And instead, what they were, uh, actually doing was interviewing people on the ground. And what they were talking about was literally how these PCR tests have become far too burdensome, and they just wanted it to end and more reasonable restrictions to get in and out of quarantine. Then I went from there to, uh, BBC. And at BBC, they had a China scholar who was talking about how, for decades actually, the Communist Party supports local level protests and demonstrations, because they've realized that it is a part of their political system to make sure that people feel like they have a say. And I was, like, taking a step back, and I'm like, if you listen to the US narrative, and even Jason, like, in our group chat, people fomenting for, like, revolution, and this is Tiananmen 2.0. And I'm like, "Well, I'm reading two other channels that tell us a completely different set of things." And I just thought, "Man, people just really fit the data-" Such a good point, yeah.

Jason Calacanis 55:05 "... to fit their bias."

David Friedberg 55:06 Yeah, we, we are projecting. We want to see a revolution in China. The people in China want-

Jason Calacanis 55:10 Or you do.

David Friedberg 55:11 ... to have their lives back.

Jason Calacanis 55:12 You do.

David Friedberg 55:12 You know, I would love to see more democracy in the world. Yes, guilty as charged.

Chamath Palihapitiya 55:17 ... I would like to see people be more free in the world. Dictator.

Jason Calacanis 55:21 I think most people just want to improve their condition. And I don't think people are as tied up on the philosophy of the government as they are about improving their condition. And as long as-

Chamath Palihapitiya 55:30 Yeah.

Jason Calacanis 55:30 ... their condition is improving, they're willing to put up with any form of government. And history shows that.

David Friedberg 55:34 By the way, the conditions in China have improved better than everybody's in the last decade.

Jason Calacanis 55:38 It's better than anyone, anyone in history.

Chamath Palihapitiya 55:39 They've moved 500 million people out of abject poverty, uh, and that's the great success of engagement. Isolationism, uh, would not have created that amazing outcome. 500 million people-

David Sacks 55:52 Wait, by engagement, you're referring, you're referring to-

Chamath Palihapitiya 55:54 ... going out of abject-

David Sacks 55:54 ... us throwing... Hold on a second.

Chamath Palihapitiya 55:56 To Apple building factories.

David Sacks 55:56 You're saying-

Chamath Palihapitiya 55:56 Apple building factories is what I'm referring to.

David Sacks 55:58 Oh, okay, fine.

Chamath Palihapitiya 55:59 Instead of you guessing.

David Sacks 55:59 If, if they, if they want to build something over there, I guess, that's better than us throwing open our markets and giving China MFN status to destroy American manufacturing and build up their economy so they can become a peer competitor to the United States.

Chamath Palihapitiya 56:13 Yeah. I mean, this is the balance of engagement, isn't it?

Jason Calacanis 56:15 Sax, we're talking (laughs)

Chamath Palihapitiya 56:15 If you engage too much, you give everything up.

Jason Calacanis 56:19 You know?

Chamath Palihapitiya 56:19 Sax, which of the current Republican agenda do you disagree with most strongly? Just as an aside.

David Sacks 56:27 Well, most Republicans are in favor of our Ukraine policy, this sort of unlimited appropriation of weapons and aid to them.

Chamath Palihapitiya 56:35 Don't you disagree with immigration policy of Republicans and Democrats?

David Sacks 56:38 Well, I, I have a more nuanced position on immigration, which is, I think we need to have a border. And it can't be just like an open border, which is the de facto policy we have now. But at the same time, I do think that we should have H-1B visas and we wanna... Like Chamath said, we wanna be an all-star team for the world. We wanna have the best people want to come here.

Chamath Palihapitiya 56:55 Well, and recruits.

David Sacks 56:56 So there's a balance.

Jason Calacanis 56:56 Yeah.

David Sacks 56:56 It's a balance. And then, you know, look, I think that... I was happy to see the Marriage Equality Bill finally pass the Senate. Yes, they did get about a dozen-

Jason Calacanis 57:04 12 Republicans voted for it, that's great.

David Sacks 57:06 12 Republicans supported it, so that's great.

Jason Calacanis 57:07 Awesome. Yeah.

David Sacks 57:08 But that's not the majority, unfortunately. You know, look, on, on what I would categorize as the old social issues, uh, you know, like gay marriage, like cannabis legalization, I was on the-

Chamath Palihapitiya 57:21 Choice.

David Sacks 57:21 ... liberal side, yeah. I don't think, you know, banning abortion entirely, a total abolition is gonna work for this country. I think Republicans will lose elections if they insist on that and I think they're getting that message. So, um, so yeah, I mean, look, I, I think that, um, I've always considered myself to be pretty centrist.

Jason Calacanis 57:40 And so you're not a globalist? You don't believe in open global markets with the US?

David Sacks 57:45 In general, I understand the benefits of free trade and I don't think we should be isolationist with respect to trade. I don't think that we can be a successful country if we are... we isolate our economy, so I do want to trade. However, with China in particular, I think we made a mistake in throwing open our markets to their products, giving them MFN status, while it gave-

Chamath Palihapitiya 58:08 Most favored nation for people who don't know MFN.

David Sacks 58:09 Yes, enriching them to the point where they became a peer competitor of the United States. Now, look, I understand why we made that mistake 20 years ago because everybody thought... the theory was that if we helped China become rich, that China would-

Chamath Palihapitiya 58:22 It's true.

David Sacks 58:22 ... inevitably become, um, more democratic and they'd be filled with gratitude towards the United States and they'd actually become more, uh, more hospitable-

Chamath Palihapitiya 58:31 Western.

David Sacks 58:31 ... towards us, more Westernized. And I think that theory has just proven to be wrong. I mean, they have not-

Chamath Palihapitiya 58:36 Or it's going very slowly. One or the other. Uh, let's own our clips here. Uh, here is Chamath's prediction from episode 61, and we'll see you on the other side of this quick clip.

David Friedberg 58:46 My worldwide, uh, biggest political winner for 2020, '22 is Xi Jinping. I think this guy is, uh... he's firing on all cylinders and he is basically ascendant. So 2022 marks the first year where he is essentially really ruler for life. And so I don't think we really know what he's capable of and what he's gonna do and so that's just gonna play out.

Chamath Palihapitiya 59:11 You think he's the biggest political winner, really?

David Friedberg 59:13 Oh my God, I think-

Chamath Palihapitiya 59:14 For next year?

David Friedberg 59:14 ... I think it's going to be a... he's gonna run roughshod not just domestically, but also internationally because you have to remember, he controls so much of the critical supply chain that the Western world needs to be-

Chamath Palihapitiya 59:26 I, I think you're completely wrong.

David Friedberg 59:27 ... used to survive, let alone thrive.

Chamath Palihapitiya 59:28 Com- I think you're completely wrong. I think he's losing his power, he's scared, that's why he took out all these CEOs. He's consolidating power because he fears that they're gonna win too big and then displace him, and he has massive real estate problems over there that could blow up at any moment in time, he could face a civil war there, I think he's totally isolated himself, um...

David Friedberg 59:46 Civil war? They don't even have guns.

Chamath Palihapitiya 59:48 Every major country is removing their factories and removing this dependency.

David Friedberg 59:52 There aren't even any guns there. What are you talking about? What are they gonna-

Chamath Palihapitiya 59:53 What's that?

David Friedberg 59:54 What are they gonna riot with?

Chamath Palihapitiya 59:56 Uh, did you not see Tiananmen Square? Did you not see the riots in Hong Kong? Are you not paying attention, Chamath? Ther- there's been many riots in China. They just happen to kill all the people.

David Friedberg 1:00:04 Jasen, those were crushed. And that's before he had full control.

Chamath Palihapitiya 1:00:07 I, I'm not saying there won't be a riot. He still will have massive amounts of, uh, I believe protests and yeah, he'll have to kill people.

David Sacks 1:00:13 I think, I think, I think the, the bigger risk is, is that China gets better for Xi Jinping, but worse for everybody else in China.

Chamath Palihapitiya 1:00:19 Exactly.

David Sacks 1:00:19 It's already worse for all the billionaires, uh, over there. It's worse for the tech industry. You've now got Evergrande, that whole, uh, you know, gigantic debt implosion. I think there could be contagion from China next year. I don't think-

Chamath Palihapitiya 1:00:32 Agree.

David Sacks 1:00:33 ... Xi's gonna lose his grip in any way, but I'm not sure China's gonna have a good year next year.

Chamath Palihapitiya 1:00:39 Wow. Nailed it. I think all three of us kind of got this right.

David Friedberg 1:00:42 What are you talking about? You got none of it right.

Jason Calacanis 1:00:44 (laughs)

Chamath Palihapitiya 1:00:44 Well, I, I said there were gonna be, there were gonna be riots and they were gonna, they were gonna have a recession, I mean.

David Friedberg 1:00:50 Jasen, look, I-

Chamath Palihapitiya 1:00:50 And you said that they would be squashed.

David Friedberg 1:00:51 Look, I-

Chamath Palihapitiya 1:00:52 That's exactly what happened. Both things happened.

David Friedberg 1:00:54 I actually think I have a pretty decent ability to steel man pretty concretely the details. I think that at best, when it comes to things like democracy and your belief in US exceptionalism in a specific political worldview, at best, you straw man. And I think that you get very biased without seeing the forest from the trees. The reason I said that is not because I'm like, you know, some huge Xi supporter. I'm just trying to steel man what happens when one individual person-... gets anointed leader for life-

Jason Calacanis 1:01:23 Yeah.

David Friedberg 1:01:23 ... of 1.3 billion people that then controls 20% of the world's GDP. There is no other single human being as powerful as him as of this month.

Jason Calacanis 1:01:36 C- Can I just say that-

David Friedberg 1:01:37 Go ahead, Sax.

Jason Calacanis 1:01:38 ... this show, this show is gonna become insufferable if every time you sorta said something in the past that was sort of correct, we're gonna have to replay it?

David Friedberg 1:01:47 I was actually playing-

Jason Calacanis 1:01:48 This show's gonna-

David Friedberg 1:01:48 I was actually playing that one for you, Sax.

Jason Calacanis 1:01:50 Go ahead.

David Friedberg 1:01:50 I think you're the one who nailed it.

Jason Calacanis 1:01:51 (laughs)

David Friedberg 1:01:51 I was giving th- that was a softball to you, actually, not me.

Jason Calacanis 1:01:54 I nail it every week, J-Cal.

David Friedberg 1:01:55 All right, take it easy.

Jason Calacanis 1:01:55 The show's gonna slow down if we play every clip that I got right.

David Friedberg 1:01:58 Yeah.

Jason Calacanis 1:01:58 (laughs)

Chamath Palihapitiya 1:01:58 You guys are asking to pull clips all the time. I just pulled-

David Friedberg 1:02:01 I, I-

Chamath Palihapitiya 1:02:01 ... one clip about China where you nailed it.

David Friedberg 1:02:03 No, no, no. Look, I, I think, like, and also, look what he did.

Chamath Palihapitiya 1:02:05 Chamath's the king of pull a clip.

David Friedberg 1:02:06 The, the Evergrande thing-

Jason Calacanis 1:02:08 (laughs)

David Friedberg 1:02:08 ... look what he did this week. They said, "Okay, you know what? The real estate industry can now issue secondary stock sales, raise equity, and equitize themselves." So, they're gonna find a soft landing for the equity part of- for the real estate industry in China, and now they're reopening. So, I don't know. I mean, like, I'm not sure what we're supposed to comment. What I'll- what I will stand by is what I said, which is, I don't think we have a very clear view about what's going on, what the substance of these protests are, and what people actually want if you're only consuming US media. And so, if you find a way to get a diet from a bunch of different sources all around the world, you may be- get a better sense. I had an accidental window into that by being in a completely different part of the world this past week.

Chamath Palihapitiya 1:02:51 Freeburg, any final thoughts on China and what's going on there before we move on to chat GPT, your favorite story?

Jason Calacanis 1:02:58 I think one of the things we often miss is that China, th- the CCP, does have their h- hand on the throttle. Like, they throttle up and down. We always think that it's a linear line and that it's super dogmatic and fixed, but there's certainly responsiveness. And the release of the lockdowns in Guangzhou and Beijing this week seems to have been a pretty good indication that when things do get... when, when things... when the tides do, do change, leadership there seems to respond. Not always, but, uh, enough to kind of keep things going. So...

Chamath Palihapitiya 1:03:34 Should they reopen, I think it's 60% of the population or so is vaccinated, with, obviously, vaccines that maybe aren't as, um, don't have the same efficacy as the ones, uh, here in the United States. Do you think they should open up and just let it rip? Uh, or do you think they should st- still try to maintain this zero COVID policy? 'Cause that is the debate right now-

Jason Calacanis 1:03:54 For, for what point of view-

Chamath Palihapitiya 1:03:54 ... I think that's going on over there.

Jason Calacanis 1:03:55 ... what's, what's, what's the objective? 'Cause obviously from-

Chamath Palihapitiya 1:03:57 That's what I'm asking you. Yeah, yeah.

Jason Calacanis 1:03:58 Well, from the objective of economic growth, they need to open up and they need to keep their economy working and they need to keep their labor force engaged, or else they're gonna continue to suffer. So, if economic growth is the objective, they, they need to open up, right? If the long-term health cost of the nation balanced again- against that is the calculus that they're kind of weighing, there's probably some more nuance to that. And certainly, um, my understanding is there may be a precedent setting which is, hey, we've said that it's a zero COVID policy, therefore we have to hold strict to it, hold- toe the line. Um, or else it looks like we're weak. And so there's also this, you know, maintaining the authority of the CCP objective. Uh, so there's a lot of maybe competing objectives right now. Uh, certainly don't have a sense of how they're, they're weighing them all. But, but I think that once, on- once all those videos came out this week-

Chamath Palihapitiya 1:04:54 Yeah.

Jason Calacanis 1:04:54 ... you guys saw them, but people were screaming. There was an apartment on fire where the doors were locked with steel beams on the, on the base of the building. At least that's what the, the video said. I don't know how much truth there is to that, but that's what was said. And clearly, people are extremely distraught and unhappy with the conditions of the lockdown. At some point, enough pe- people with enough loud voices, you know, something's gonna change. I mean, l- let's just remember, like, the bargain that's struck in that country and with all countries is that, you know, the citizenry, to some extent, are, are willing to tolerate their government so long as their conditions continue to improve and there's a bargain. There's some bargain that's struck. And as soon as that bargain starts to go south for, for, for the citizenry, then that, that, that governing entity is at risk. And I think that that's what we sort of started to see this week, was the conditions are getting far, far worse and far less livable for so many people in that country that the government had to shift.

Chamath Palihapitiya 1:05:57 Do you think, Chamath, this, uh, COVID strategy, and then we'll move on, was basically Xi Jinping wanting to get to that congress, his coronation, and now that that's over, maybe he can change gears? And then you can-

David Friedberg 1:06:11 Like I said, my, my belief is that I have a very poor access to enough data to have a, to steel man, um, what is actually going on there. But one explanation could actually be that in the absence of enough hospital infrastructure and ventilators and a bunch of these other things, they had to take a pretty severe approach to this, um, disease. I don't know what they know or didn't know. Maybe they understood, you know, the virulence of it, maybe that they have, uh, slightly different aging characteristics of their population. Maybe they genetically responded to the SARS-CoV-2 virus. I, I don't know any of these things enough to tell you, Jason.

Chamath Palihapitiya 1:06:53 Yeah.

David Friedberg 1:06:53 But the reality is what Freeburg says is right, which is that you cannot grow an economy if people are inside locked in their apartments. And it looks like they have decided that that's coming to an end and they're going to, you know, deconstruct all of these things. So, you know, the, the, the Chinese growth engine is coming back. And I think that that's gonna be an important factor economically that we're gonna have to figure out, because it's gonna have a huge implication to American growth and American inflation.

Chamath Palihapitiya 1:07:26 ... Sacks, if, uh, in fact the Ch- if the lab leak theory is correct, China might have some insights into this, uh, disease that, uh, maybe the West didn't, maybe that plays into their policy a bit. A- any final thoughts here?

David Sacks 1:07:40 Well, I- uh, J Cal, I'm just surprised to hear that you have a problem with their lockdown, uh, policy over there. Because aren't they just-

Chamath Palihapitiya 1:07:47 Oh.

David Sacks 1:07:47 ... implementing Democratic Party orthodoxy? I mean, isn't this-

Chamath Palihapitiya 1:07:51 (laughs)

David Sacks 1:07:51 ... the policy that Tony Fauci and Barbara Ferrer-

Chamath Palihapitiya 1:07:55 I- I-

David Sacks 1:07:55 ... you know, all the health experts-

Chamath Palihapitiya 1:07:56 I was in favor of lock- I was not in favor of lockdowns, what are you talking about? You're the one who had all your mask and had ventilators day one.

David Sacks 1:08:01 Isn't this, uh, the- the lockdown policy-

Chamath Palihapitiya 1:08:03 Wait, why are you painting this- why am I getting a-

David Sacks 1:08:05 Hold on, because you're defending the Democratic Party.

Chamath Palihapitiya 1:08:06 ... a stray here? (laughs) I'm just asking a question as the moderator.

David Sacks 1:08:09 Isn't this basically-

Chamath Palihapitiya 1:08:10 Why are you stray- why am I getting a stray?

David Sacks 1:08:12 Isn't this what got Newsom and-

Jason Calacanis 1:08:13 Don't deflect, J Cal, answer the question.

David Sacks 1:08:14 Yes. Hold on, let me-

Chamath Palihapitiya 1:08:15 I- I-

David Sacks 1:08:15 ... let me finish the question.

Chamath Palihapitiya 1:08:17 ... I'm not in favor of lockdowns.

David Sacks 1:08:17 Isn't this-

Chamath Palihapitiya 1:08:18 I was in favor of if people wanted to stay home, stay home, and then if people wanted to go out and take the risk, take the risk. I was always in personal choice.

David Sacks 1:08:25 But J Cal, isn't this what Gretchen Whitmer in Michigan and Gavin Newsome in California subscribed to, the idea that the way to fight COVID was through lockdowns? Now, yes, Newsome had 10 pages of exceptions for his political donors.

Chamath Palihapitiya 1:08:38 Absolutely.

David Sacks 1:08:39 And he didn't use the police to lock people in apartment buildings. He may have wanted to, but they didn't actually do that. But can you really tell me that this lockdown policy has been disavowed by people like Fauci or by the- the health authorities like the Barbara Ferrers of this world? They still subscribe to this view.

Chamath Palihapitiya 1:08:57 Do they really?

David Sacks 1:08:57 Yeah.

Chamath Palihapitiya 1:08:58 Is anybody doing the lockdowns now?

David Sacks 1:08:59 Show me, show me. Well, they're not able to do it-

Chamath Palihapitiya 1:09:01 Ah, I see.

David Sacks 1:09:01 ... because no one agrees anymore.

Jason Calacanis 1:09:03 Yeah.

David Sacks 1:09:03 But tell me- tell me where anybody-

Jason Calacanis 1:09:05 Well, I-

David Sacks 1:09:05 Tell me where any of the health experts who said that lockdowns were the correct response have repented and disavowed that view.

Chamath Palihapitiya 1:09:12 Yeah, I don't know. I haven't been- I haven't been tracking their, uh, mea culpas.

David Sacks 1:09:16 You- you're right.

Chamath Palihapitiya 1:09:16 But you- you- you yourself were in favor of lockdowns for a period of time.

David Sacks 1:09:19 No, I wasn't.

Chamath Palihapitiya 1:09:20 Yes, you were.

David Sacks 1:09:20 No.

Chamath Palihapitiya 1:09:21 You absolutely were. I'll pull the tape for the next episode.

David Sacks 1:09:22 No, I was in favor of a mask mandate. No, that's not true. I was in favor of a mask mandate. And I said the mask mandate was the alternative to lockdowns.

Chamath Palihapitiya 1:09:30 Okay.

David Sacks 1:09:30 I was saying that by May of 2020.

Chamath Palihapitiya 1:09:32 All right, listen, let's move on to the next thing. I- I don't represent... I'm an independent. I don't represent-

Jason Calacanis 1:09:36 (laughs)

Chamath Palihapitiya 1:09:36 ... the Democratic Party. I don't represent Fauci. (laughs) So I don't know why you're putting-

Jason Calacanis 1:09:40 No, you represent mainstream media.

Chamath Palihapitiya 1:09:42 I do not represent mainstream media. You just said I was an old school journalist who's mortified with where it is today.

Jason Calacanis 1:09:47 I'm giving you a hard time.

Chamath Palihapitiya 1:09:48 I represent old school media.

Jason Calacanis 1:09:48 I thought your- I thought your explanation was fabulous.

Chamath Palihapitiya 1:09:51 Oh, thank you. Thank you.

David Sacks 1:09:52 Obviously, J Cal, I'm giving you a hard time too.

Chamath Palihapitiya 1:09:54 Yeah.

David Sacks 1:09:54 I- I know that you were not a big lockdown proponent.

Chamath Palihapitiya 1:09:57 No.

David Sacks 1:09:57 But you understand the point I was making-

Chamath Palihapitiya 1:09:58 I do understand your point.

David Sacks 1:09:59 ... which is there were a lot of proponents-

Chamath Palihapitiya 1:10:00 Let's stop-

David Sacks 1:10:01 ... in the US-

Chamath Palihapitiya 1:10:01 Let's stop making me the Democratic spokesperson

Chamath Palihapitiya 1:10:04 here.

Jason Calacanis 1:10:04 I just want to let you guys know I'm feeling a lot better after my beer. Let's talk about, uh-

David Sacks 1:10:07 (laughs)

Jason Calacanis 1:10:07 ... OpenAI.

Chamath Palihapitiya 1:10:08 All right, let's go. All right.

Jason Calacanis 1:10:09 Come on, people. Let's go.

Chamath Palihapitiya 1:10:09 So listen, open-

Jason Calacanis 1:10:10 Let's talk about OpenAI.

Chamath Palihapitiya 1:10:12 All right. OpenAI is a, uh, a company that, um, builds, ah, artificial intelligence software and platforms.

Jason Calacanis 1:10:21 (laughs)

Chamath Palihapitiya 1:10:21 They have one platform called GPT. It is on its third version. As part of GPT-3, they created ChatGPT, which is a chat interface where you can ask questions to AI. The results are nothing short of stunning when they hit. Uh, some of them are a little bit mixed, but, uh, Friedberg has spent the last 48 hours, uh, drinking White Russians with oatly milk and playing with ChatGPT, including his question to the ChatGPT, which was, "Write a script of Chamath, Sacks, and J Cal, uh, talking about the future of AI in the style of a Quentin Tarantino movie." And I have to say, it was pretty great, the result. Go ahead, uh, Friedberg, tell us what you discovered.

Jason Calacanis 1:11:07 Well, I think you guys should read this real quick. We can cut it out if it's stupid, but, okay, Chamath-

Chamath Palihapitiya 1:11:11 You actually want to read the script?

Jason Calacanis 1:11:12 Yeah, read- read along.

David Sacks 1:11:13 I don't think you got the Quen- Tarantino part right. I mean, I think it was, like, impressive, but it- there's no F bombs. There's no, like, Tarantino-esque dialogue.

Jason Calacanis 1:11:19 And by the way, they- they excluded all of that from OpenAI.

Chamath Palihapitiya 1:11:22 I don't think you just got this right at all.

Jason Calacanis 1:11:22 They took- they took out all cursing and violent- cussing and violence from OpenAI.

Chamath Palihapitiya 1:11:25 Yeah, that explains it, because if this was a Tarantino script, there would be some choice language in here.

Jason Calacanis 1:11:30 Totally. But it's interesting, it's like the PG Tarantino script-

Chamath Palihapitiya 1:11:32 It is. Okay, here we go.

Jason Calacanis 1:11:33 ... because with no cussing, no violence, no sex.

David Sacks 1:11:35 There's no- there's no pop culture references.

Chamath Palihapitiya 1:11:37 You- you do the narrative. Yeah, you do the narrative. Go ahead.

Jason Calacanis 1:11:43 The scene opens on Chamath Palihapitiya, David Sacks, and Jason Calacanis sitting at a dimly lit table in a smoky bar. A bottle of whiskey sits in the center of the table, half empty. Chamath leaning forward, his eyes intense. "So what do you guys think about this ChatGPT thing?" David Sacks takes a sip of his drink.

David Sacks 1:12:01 "It's impressive, no doubt about it. A large language model trained by OpenAI