E108: Doxing debate, Nuclear fusion breakthrough, state of the markets & more

1. 0:00 – 1:05

   Jason's new gig!

   1. JCJason Calacanis0:00

      Captain Calacanis is here-

   2. CPChamath Palihapitiya0:02

      (laughs)

   3. JCJason Calacanis0:02

      ... reporting for duty.

   4. CPChamath Palihapitiya0:03

      Wait, is that a Spirit Airlines cap?

   5. JCJason Calacanis0:05

      Absolutely. (laughs) Spirit Airlines. I just wanted to say, All-In Podcast now sponsored by Moncler and Spirit Airlines.

   6. DSDavid Sacks0:12

      Or now sponsored by the Village People.

   7. JCJason Calacanis0:15

      (laughs) (singing) YMCA.

   8. CPChamath Palihapitiya0:18

      Now, are you a pilot or a flight attendant, J Cal?

   9. DSDavid Sacks0:21

      He's a flight attendant.

   10. CPChamath Palihapitiya0:22

       (laughs)

   11. DSDavid Sacks0:22

       I don't think he's thin enough to be a flight attendant.

   12. JCJason Calacanis0:24

       Are you fat shaming me?

   13. CPChamath Palihapitiya0:25

       (laughs)

   14. JCJason Calacanis0:26

       Are you body shaming me?

   15. DSDavid Sacks0:26

       Ooh, can't do that nowadays. That'll get me canceled.

   16. CPChamath Palihapitiya0:29

       (laughs)

   17. JCJason Calacanis0:29

       Getting sacks, canceled at this point, like fat shaming would be number 72 on the list.

   18. DSDavid Sacks0:34

       He can't get canceled because all the libs have left Twitter. There's nobody to- (laughs)

   19. JCJason Calacanis0:37

       There's no hall monitors left. (laughs)

   20. DSDavid Sacks0:39

       There's no hall monitors.

   21. CPChamath Palihapitiya0:40

       That's not true. They all pretend.

   22. JCJason Calacanis0:41

       No, they quit every week. (laughs)

   23. CPChamath Palihapitiya0:42

       Yeah, it's like all the libs that said they'd move to Canada when Trump got elected.

   24. NANarrator0:45

       What you saying?

   25. JCJason Calacanis0:46

       Yeah, Canada immigration.

   26. NANarrator0:47

       Whoa, we're going all in.

   27. CPChamath Palihapitiya0:47

       Go ahead.

   28. NANarrator0:47

       What you saying? Don't let your winners ride. Whoa, we're going all in.

   29. JCJason Calacanis0:52

       Rain Man, David Sacks.

   30. NANarrator0:54

       What you saying? Whoa, we're going all in.
2. 1:05 – 20:48

   Twitter's new privacy rules, notable suspension, doxing dynamics

   1. NANarrator1:05

   2. JCJason Calacanis1:05

      A hacker figured out a way to take all this data and track, you know, people's yachts, people's planes. Obviously one of those people was Elon. Elon had a security issue. This is all public information. So, the larger issue at stake here is the fact that the law allows for people to, uh, do this persistent tracking of planes, which then becomes persistent tracking of a person. And what really is at stake here is how we define the term doxing. For people who don't know the term doxing, it means giving a person's location. That could be your home. That could also be you're at a location for some period of time. You're- you're at a hotel, you know, for a basketball game. Uh, and it's pretty clear. You could take a picture of a celebrity and say, "There's a celebrity here. Oh, Lady Gaga is at the farmer's market." What I object to here, uh, we all understand doxing is dangerous, and it, uh, in fact is against the law to just give people's addresses and stuff like that. Um, the issue here is a new type of doxing, which I- I'll call, you know, persistent coordinated doxing, where dozens of times a month you're giving a person's location. It- it may not be against the f- the First Amendment. Sachs, I think you would agree. But we have to ask ourselves, do we want to live in a world where whether a person is on an electric bicycle or an airplane or any device in between, somebody should be releasing dozens of times a month a specific dedicated feed of their location? It is terrorizing as a parent when this happens. I've had doxing. People on the call here have had various security concerns. We don't want to live in a world with de facto doxing. What these sites were doing was de facto doxing.

   3. DFDavid Friedberg2:43

      I think it was a bad decision, and I think that it, um, uh, represented... Y- uh, on the least generous statement would be that it represents deep hypocrisy in that not just a few weeks ago did he say he would never delete that account, but he also said he was buying Twitter to enable freedom of speech and freedom of expression and that he wouldn't come in and do the same sort of content moderation that was done by the old regime. And then he came in and did exactly what the old regime did, which is that he took the rules and he took the, quote, "moderation policies," and he found a way to use them to make some editorialized decisions that he thought was appropriate. Now, the more generous thing is what you guys are saying, which I don't think is necessarily wrong, which is that he's trying to protect people where there's some loophole or some law that doesn't seem right morally, but it is the law, and it is what it is. In those cases, I think you run into the exact same issue that the old guard at Twitter had, that the moderators and the executives at YouTube have dealt with, and that the executives at Google have dealt with, and that we sit here and we criticize until you're on that side of the table and you're forced to make these moderation decisions, you're forced to make these policy decisions, and you're forced to implement these policy decisions because of some moral framework that you now think is appropriate. And guess what? Some people will say that's not freedom of expression. That's not freedom of speech. You're taking that away from some people. You're taking this particular case away from a 15 or 16-year-old kid who's built a- a- a Twitter feed. And so what I think it shows is just how hard it is to moderate these sites, these platforms, and that there is no simple, easy, idealistic ideologue of, hey, all these things are open. All these things can be used by anyone all the time, because as soon as one of these edge cases start to happen, you want to come in and do something about it.

   4. JCJason Calacanis4:28

      Shemath, what do you think? What should happen going forward?

   5. DSDavid Sacks4:30

      So, I- I have had these issues happen to me multiple times. Um, I'm not nearly as important, um, as Elon is, um, but it feels the same when you're in the middle of it. Um, it feels pretty terrorizing. Um, that being said, uh, I think the real decision for somebody like me is that if- if it's too much is frankly just to get rid of it and, you know, to find a different mode of transportation that's a little bit more anonymous. And the reason-

   6. JCJason Calacanis4:58

      You're pragmatic about it.

   7. DSDavid Sacks4:59

      ... and the- and the reason I say that is that I just think that you- you would have to go and get the government to basically change the law, which they're not going to do, and so then as a result your reaction will seem somewhat contrived and deeply personal, and in that I think you lose credibility. Let me just summarize this and be the first one to just state this. I think that if there's any person in the world that can figure out Twitter, it's probably Elon. But man has he taken on just a gargantuan battle, and increasingly I am not a fan of this battle, and I'll tell you why. This is a man who has essentially proven that he can bend the laws of physics on behalf of humanity. He's done it twice, once in electric cars and once in rocketry. The problem is that the realm of decision making at Twitter has nothing to do with the laws of physics and is governed by emotions and psychology in which there is no canonically right answer. And so he's quickly finding out that half the population will always find fault with him no matter what he does.And now, the implication of that becomes very important. We saw yesterday that he had to sell another $3.8 billion of Tesla stock. Why is that? It's because this transaction, which was, you know, very tight to get done, probably required lots of margin. You know, there are... I, look, I have a margin loan at Credit Suisse, so I know how these things work. And you can very quickly get margin called. You have to sell down things that you own in order to maintain your collateral limits. We've talked about this before. He's had to do this twice now in the last few weeks, and that's because, again, not because of the demand at Tesla as far as we can tell, but because people believe he's distracted, and so people are anticipating weakness at Tesla. People are now shorting the stock. Anyways, it's causing this downward spiral. And can he fix it? I think so. Can he pull it all out? Sure. Is it just putting himself under an enormous amount of pressure that he could have avoided? Somewhat, yes.

   8. JCJason Calacanis7:08

      Mm-hmm.

   9. DSDavid Sacks7:08

      And I think that this is sort of where we're at, um...

   10. JCJason Calacanis7:12

       Six weeks in.

   11. DSDavid Sacks7:13

       My gosh.

   12. DFDavid Friedberg7:14

       Totally. Yeah, I was saying-

   13. JCJason Calacanis7:15

       Six weeks in.

   14. DFDavid Friedberg7:15

       ... this guy learned in six weeks what it took YouTube seven years to learn, how hard it is to moderate content. And, you know, I think the thing that-

   15. CPChamath Palihapitiya7:22

       No, this is, this is where I disagree-

   16. JCJason Calacanis7:24

       Okay, Sacks.

   17. CPChamath Palihapitiya7:24

       ... is you're, you're, you're attributing so much good faith to these content moderators at YouTube and Twitter when the Twitter files reveal that they made no effort to suppress their bias. In fact, they were, like, pretty much doing the equivalent-

   18. DSDavid Sacks7:39

       Wait, can you, before, okay, before you react to that-

   19. CPChamath Palihapitiya7:42

       ... they were, they were doing the equivalent of dancing, dancing in the streets every time they booted off someone they didn't like.

   20. DSDavid Sacks7:45

       Fair enough. Before you react to what Freiberg just said at the end, that coda, can you respond to what I just said?

   21. CPChamath Palihapitiya7:50

       Yeah.

   22. DSDavid Sacks7:50

       Isn't it true? Like, it's like...

   23. CPChamath Palihapitiya7:51

       Well, look, I mean, if you define what Elon is, you know, doing there as, you know, acting as, uh, a judge arbitrating on every little content moderation decision, is that a great use of his time relative to what he could be building at Tesla and SpaceX and doing on behalf of humanity then? No, clearly not. But if you define what he's doing in the larger sense as restoring free speech to the most important town square social network, hopefully thereby inspiring other tech companies to move in the direction of opening things up, then I actually think it's a pretty good use of his time. So look, I think we can quibble about this or that decision that he makes or this or that tweet, but I think the overall thrust of what he's doing is very important for the country and for humanity. So I get where you're coming from. Hopefully, he'll find some people at Twitter who he can empower and trust to make these content moderation decisions so he's not drawn into every single little battle, right? We do want him focused on the highest priority problems.

   24. DSDavid Sacks8:53

       My point is just that I get that. I just think that what he's learning and what we're living and seeing in real time is that there is no canonically right decision ever in this space.

   25. JCJason Calacanis9:04

       Yes.

   26. DSDavid Sacks9:05

       There's only a decision where some percentage will support and some percentage-

   27. JCJason Calacanis9:09

       Correct.

   28. DSDavid Sacks9:09

       ... will always be against.

   29. JCJason Calacanis9:10

       Correct.

   30. DSDavid Sacks9:10

       That's my point.
3. 20:48 – 42:58

   Nuclear fusion breakthrough and geopolitical ramifications

   1. CPChamath Palihapitiya20:48

      So, uh, according to sources, scientists who work for the US government have achieved a net energy gain in a fusion reaction for the first time.

   2. DSDavid Sacks20:55

      No, no, not net energy gain. Get it right. We had ignition energy, which is very different from net energy gain. All right, keep going.

   3. CPChamath Palihapitiya21:01

      Okay, hold on. I know that you're in the anti camp. Please let the science nerd have his moment.

   4. DSDavid Sacks21:05

      Well, you have to, you have to say it correctly so that people understand-

   5. CPChamath Palihapitiya21:07

      Okay.

   6. DSDavid Sacks21:07

      ... what you're talking about.

   7. CPChamath Palihapitiya21:08

      Let, let me just make it even simpler then. Explain to us what fusion is, Dr. Friedberg, and explain to us why this could potentially change everything.

   8. DFDavid Friedberg21:17

      We did this on a, on a show once before, but I'll kind of do a quick kind of summary again. Basically, if you take atomic nuclei, which are made of protons and neutrons, and, uh, they repel one another, right, because protons are positively charged. So they wanna push apart from each other. So with enough energy and enough density, meaning that they're moving fast enough and they're close enough, they'll overcome their repulsion and, and jam into each other. When that happens, some energy is released because the total mass of the fusion of those, um, those nuclei, uh, is actually less than those nuclei when they're on their own. And so some energy is released, and that energy drives a, a chain reaction. And so fusion is this concept that, uh, is fundamental to physics and fundamental to the energy driver of our universe. So the star in our, uh, in our sky, uh, the sun, uh, is driven by fusion, and only about 15% of the mass of the sun at the center is dense enough to actually drive fusion. So the big challenge with fusion is how do you get these, these atomic nuclei close enough together and moving fast enough that they'll actually fuse and release energy? And that's super hard. The reason it happens in the sun is because the sun has so much mass that the gravity pulls all those particles together. They get close enough, they get hot enough, they move fast enough, and fusion happens. Boom, all this energy comes out, and everyday, we're warm. Now, uh, to do it on earth is very difficult, but if we can do it, what happens when you fuse nuclei together is you don't release, uh, any... This isn't like a, a radioactive fission reaction. You release energy that can be harnessed, uh, to drive our, our systems, our, our technology.

   9. CPChamath Palihapitiya23:02

      How is it done?

   10. DFDavid Friedberg23:03

       Yeah. So in the 1950s, you know, this was theorized, "Hey, we could do fusion on earth." We gotta get a really, really dense plasma, meaning the atomic nuclei and the electrons have kind of gone off the atoms and it's just the nuclei spinning apart. You gotta get them to move super fast, like, tens of millions of degrees Celsius, and you gotta get them really close together. So how the heck can you do this? So there's a couple of, um, concepts to do this, one of which is called inertial confinement, which is where you basically create a little pellet of the, uh, the material you're gonna try and get to fuse, and you put a ton of energy on the outside. And you compress it really hard, really fast. And when you compress it really hard, really fast, and you can get it to be done in a perfect sphere, and you can get it to collapse on itself very quickly without, you know, kind of shooting all over the place, enough of those particles will come close enough together, fast enough, hot enough, and they will start to fuse. Another way is through, uh, magnetic confinement, where you use magnetic fields to create a really hot plasma, get it to spin around or to move, and then the magnet brings that super hot plasma closer and closer and closer together until all those particles are moving fast and they're dense enough that they start to fuse. So, you know, one is called magnetic confinement, the other one's inertial confinement. And so what we saw happen this week...... is at the National Ignition Facility, which is a facility that was built starting in 1997, and they've spent about three and a half billion dollars to date. They demonstrated a net energy output from the fusion reaction of an inertial confinement system. And what that means is they took a little pellet and that pellet was made up of, uh, deuterium and tritium. The atomic nuclei that they use, the particles that they use are deuterium, which is a proton and a neutron stuck together, and then tritium, which is a proton and two neutrons stuck together. And the reason they use those two combinations is of all the different ways you could fuse, uh, nuclei together, this has the best energy output of any kind of reaction.

   11. JCJason Calacanis24:57

       So, Freeberg-

   12. DFDavid Friedberg24:58

       Yeah.

   13. JCJason Calacanis24:59

       ... what actually happened this time that made this work?

   14. DFDavid Friedberg25:02

       So what they... Yeah.

   15. JCJason Calacanis25:02

       For what, a- apparently only $3 billion, you said. You didn't say three trillion. You said three billion.

   16. DFDavid Friedberg25:07

       Three and a half billion.

   17. JCJason Calacanis25:07

       About a third of... Yeah, about a third-

   18. DFDavid Friedberg25:09

       Yeah.

   19. JCJason Calacanis25:09

       ... of what Sam Bankman fraud stole (laughs) .

   20. DFDavid Friedberg25:11

       (laughs) . Right.

   21. JCJason Calacanis25:11

       We have done something here.

   22. DFDavid Friedberg25:13

       Yeah.

   23. JCJason Calacanis25:13

       Allegedly. So what actually happened that is so dramatic that we have a press conference, everybody's losing their mind?

   24. DFDavid Friedberg25:20

       So yeah, I just want to highlight one more thing about why this is so hard. You have to get such an incredible density. You have to get in- incredible energy, so high temperature and high density that confining those atoms and not letting them escape and, and, you know, um, basically dissolve before they fuse is super difficult. It requires so much energy in such a controlled way, in such a perfect and precise way that all of the digital technology, the magnets, all the measurement systems, all the software, it's taken us decades to get everything that allows us to do this today. And now we're at the point that we may be able to start to realize production scale opportu- uh, kind of versions of this. So what they did is they had a small deuterium and tritium pellet, and they shone 192 lasers onto this container that held that little fuel.

   25. JCJason Calacanis26:11

       Okay.

   26. DFDavid Friedberg26:11

       Those 192 lasers, the whole thing happened in a billionth of a second. The laser has pulsed. Boom, here's an image of it. And as they did that, they, you know, basically X-rays kind of hit the sphere, this little b- bee bee, if you will-

   27. JCJason Calacanis26:25

       Mm-hmm.

   28. DFDavid Friedberg26:25

       ... uh, BB kind of thing, and compressed it. And it compressed so quickly and with such heat and it didn't dissipate because it was done so precisely, all the lasers hit-

   29. JCJason Calacanis26:34

       Got it.

   30. DFDavid Friedberg26:34

       ... at the exact right time. Boom, this thing compressed, and then energy came out, and the energy that came out that was measured was one and a half times the energy that kind of went into that reaction. And here's a chart that, that I'll show you from the National Ignition Facility, which shows just how inefficient the system still is. And this isn't even speaking to, um, to Chamath's point, but basically these guys, um, lose 90% of the energy that they put into the, the center of the system. Uh, only 10% is actually used to drive the compression. The rest of it is lost, and there's a lot of ways to improve the efficiency of the system from here. But basically, they put two megajoules in, they got three megajoules out. And so it was the first proof point, production proof point, in the 70 years that we've been theorizing about nuclear fusion here on planet Earth that this is possible and it's real. Now, this is these kind of inertial confinement systems. There are 33 private technology companies today that have raised about three to four billion dollars so far this year to pursue several other technologies besides what the National Ignition Facility is showing to try and build production-ready versions of nuclear fusion. And so these 33 companies are using a bunch of different types of tools, one of which is the tokamak. If you show the image, I'll show you this one.
4. 42:58 – 51:11

   Jason and Sacks's big night

   1. CPChamath Palihapitiya42:58

      that J-Cal and Sacks-

   2. JCJason Calacanis42:58

      Can I just say-

   3. DFDavid Friedberg42:59

      ... spent a couple nights together this past week has really improved the mood of the show.

   4. JCJason Calacanis43:03

      It really does. (laughs)

   5. DFDavid Friedberg43:03

      I mean, when you guys go out and drink together and have fun-

   6. JCJason Calacanis43:05

      It's hilarious. (laughs)

   7. DFDavid Friedberg43:06

      ... you, you guys are hilarious.

   8. JCJason Calacanis43:06

      Sacks and I laughed our asses off Sunday night. Can I just say, we, Sacks and I had the best 48 hours together in a decade. This is Sunday night. It turns out Chris Rock and Chappelle are playing at the Chase Center, where, um, Chamath used to own a piece of the Warriors, right? And this incredible arena has this incredible show. And, you know, me and Sacks and some friends, we'll leave it at that, go to the show. Our f- our bestie Draymond is at the show. So I text Dre and I'm like, "Hey, you going to see Chris Rock by chance tonight with, uh, Chappelle?" He said, "Yes, sir." I said, "Hey, I'm gonna go with a couple friends. Maybe we roll together, hang out after the show." We go, and after the game, after the show, which was incredible, we go backstage, uh, I'm sorry, to the t- to the, uh, practice court. And we're hanging out with Draymond on the practice court with Dave Chappelle. Dave Chappelle and I start shooting hoops. David Sacks is talking to Chris Rock about free speech. Steph Curry comes out and starts giving Dave Chappelle and J-Cal, uh, shooting lessons. We're, Chappelle and I are bricking like old men, you know, i- i- you know, uh, on a concrete court. All of a sudden, Sh- i- i- Sh- Steph says, "Hey, J-Cal, you gotta..." And by the way, he's a fan of the show.

   9. CPChamath Palihapitiya44:23

      (laughs)

   10. JCJason Calacanis44:23

       He says, "You, you're short every time. And, uh, just, you know, hit the backboard. You gotta go long." Then he tells Chappelle, "Y- you gotta change this." All of a sudden, we start hitting shots like, you know, we're on the Warriors.

   11. DSDavid Sacks44:34

       You're raining threes. You're raining threes.

   12. JCJason Calacanis44:35

       Raining threes.

   13. DSDavid Sacks44:35

       You know, like-

   14. JCJason Calacanis44:35

       It was literally like, cut into here-

   15. DSDavid Sacks44:37

       What were these mid-range jumpers or threes?

   16. JCJason Calacanis44:39

       I was at, uh-

   17. DSDavid Sacks44:39

       Yeah.

   18. JCJason Calacanis44:40

       ... free throw line extended. Free throw line extended.

   19. DSDavid Sacks44:42

       (laughs)

   20. JCJason Calacanis44:42

       Cut into here Rain Man and Rain Dance from Along Came Polly. Rain Dance, Rain Man.

   21. NANarrator44:50

       Let it rain. (rain pattering) Rain dance. (rain pattering) Let it rain. (rain pattering) Let it rain. (rain pattering)

   22. JCJason Calacanis44:59

       I was hitting brick after brick. Rest in peace, Philip Seymour Hoffman. So then we're chilling, and, uh, Sacks and I are talking to Dave Chappelle. Joe Lacombe, owner of the Warriors are there, the majority owner, uh, you know, as opposed to you being a minority owner, uh-

   23. DSDavid Sacks45:15

       (laughs)

   24. JCJason Calacanis45:15

       ... uh, Chamath as Phil Hellmuth will tell you-

   25. DSDavid Sacks45:17

       That's racially charged. That's racially charged.

   26. JCJason Calacanis45:17

       No, no, I was speaking in-

   27. CPChamath Palihapitiya45:19

       J-Cal, the only person who drops more names is Phil Hellmuth. I mean-

   28. JCJason Calacanis45:22

       Absolutely, I'm trying to catch up.

   29. CPChamath Palihapitiya45:23

       You, you name-drop any more-

   30. JCJason Calacanis45:24

       D- I'm, I'm leaving out 10 names.
5. 51:11 – 1:22:08

   State of the markets: Coupa acquired by Thoma Bravo, startups at all stages seeing heavy valuation reductions, what LPs are thinking

   1. DSDavid Sacks51:11

      Coupa deal. And Sax, this is right up your alley. Have you... Did you know this company?

   2. CPChamath Palihapitiya51:14

      I haven't paid a lot of attention to it, to be honest.

   3. DSDavid Sacks51:16

      Oh, really? The thing you guys asked is like, you know, what signal will Elon's moves at Twitter, uh, be for the rest of, uh, the tech industry?

   4. JCJason Calacanis51:26

      Mm-hmm.

   5. DSDavid Sacks51:27

      I think the biggest wake-up call is to actually PE companies. So, if you play this out and you think that Coupa is, you know-

   6. JCJason Calacanis51:36

      Explain what Coupa is, please.

   7. DSDavid Sacks51:38

      Coupa is a, is a software, is a service company that, uh, does revenue management, I guess, or expense forecasting, or s- some- something in the financial realm.

   8. JCJason Calacanis51:49

      Finance.

   9. DSDavid Sacks51:49

      I don't particularly know, to be honest. But anyways, this is a company that, you know, was off 70% or 80% from the high, like a lot of SaaS companies were when rates started to go up. And they got this offer from, from Thoma Bravo. But here's what's so interesting about this deal. If you think that, you know, these guys bought a company... I'm just gonna make up a number, at 20 times EBITDA, right? And, and you see Elon at Twitter and you think, "Well, wait, maybe we can't cut 75%, but maybe we can cut 50% of headcount and the company can still do well," and, you know, you take half of the expenses out of the business, all of a sudden, you know, if your EBITDA doubles, you're actually buying it at 10 times. So, I think the thing that is the, that is the real insight here is twofold. Private equity, um, can still put out a lot of private credit to fund these deals, and SaaS companies are perfect because they have huge free cash flow, right? So instead of funding it based on earnings, they can fund it based on ACV and ARR. So, private equity will be super active. And two, all these rifts basically show what the efficient frontier is for the number of employees you need to run a company. And if you can cut 50% of the headcount, private equity folks will do that. And so I think Coupa is like the canary in the coal mine. It is the beginning of what I suspect is a tidal wave of PE-sponsored deals in tech companies, largely SaaS, but may go into other realms- Yeah, recurring revenue- ... taking, taking advantage of these two things. ... that can go profitable. Yeah, yeah. Tap the private credit markets and finance it based on ARR, and then fire 50% of the team and double earnings capacity.

   10. JCJason Calacanis53:31

       Sax, your thoughts?

   11. CPChamath Palihapitiya53:31

       So, on, on Coupa, I thought the most interesting thing was just the, we, we got a public comp. Well, we got a comp on what private equity is paying for public companies right now. So, the deal happened at an $8 billion valuation, that was a 31% premium to the public price. It was 8.4 times next 12 months, uh, revenue. And on a trailing basis, it was about, uh, 10.4 times the last 12 months revenue. And by the way, all the comments were around how, what a rich price Thoma Bravo was paying. People generally thought they were paying a premium to the valuation. So, I think this-

   12. DSDavid Sacks54:10

       By the way, Sax, Sax, it was 77% premium, uh, before the rumors came out that this was happening.

   13. CPChamath Palihapitiya54:14

       Okay.

   14. DSDavid Sacks54:14

       So it was a pretty good premium.

   15. CPChamath Palihapitiya54:15

       Yeah, good, good, good point.

   16. DSDavid Sacks54:16

       Yeah, huge. And there was a, and there was a, there was a bidding war with Vista, and so, it was a, it was a really rich kind of deal that, that got done here.

   17. CPChamath Palihapitiya54:24

       Right. So, so my, my point is that people thought this was a really rich deal, and yet, the valuation multiples are so much lower than what private company founders expect.So remember, last year at, you know, the peak, founders were thinking 100 times the ARR was normal. 100 times. And, uh, you know, you could roughly say, you know, ARR is, is roughly equivalent to the next 12 months' revenue. It's not perfect, but it's roughly the case. So these founders were expecting a valuation, a, a multiple 10 times what the public markets are paying. And the public mar- and, and, and actually, the, the public markets are, are, are half of where Thoma Bravo was in this particular deal. So the public markets right now are valuing, uh, the median SaaS company at about five and a half times and a high growth, but that'd be for, like, a 20% year-over-year growing company. And they're valuing the high growth companies at maybe eight times.

   18. DFDavid Friedberg55:18

       Right.

   19. CPChamath Palihapitiya55:19

       You know, and Thoma Bravo did this at 10 times. So that gives you a sense of what the ballpark is, and these are companies that are already public, they're at scale, they're doing roughly a billion dollars of ARR. They have already kind of won their category to some degree, whereas private companies are subscale. They're, you know ... Typically, you're talking about companies with one, five, 10, usually under $20 million of ARR. They are s- they're not de-risked. There's still a ton of risk. We've seen many, many SaaS companies fizzle out and plateau at 20 million of ARR, never get to 100 million, never mind a billion. And yet these founders think that they're entitled to, you know, even in this market, 30 to 40 times ARR. No way. I mean, like, it's getting to the point now where, you know, maybe it should be 10 times, 20 times, like, max for, f- and that'd be for a company that's growing two and a half, 3X year over year. So I still think that, like ... So I think basically what we're seeing here is even a good scenario, like a Coupa acquisition that was done at a premium, like, it's still a wake-up call to the private markets that the valuations are still completely and utterly out of whack.

   20. DFDavid Friedberg56:26

       Yeah. Let me ask you a question, Sax. So this company was growing 45% last year, they're growing 35% this year, and they got this multiple. Why is it not worth a significantly higher multiple if a company's growing two and a half to 3X, which is 250%, 300%, a- and these guys are only growing 35%?

   21. CPChamath Palihapitiya56:45

       Sure. I mean, it, it, it is, um, and that's what you're paying a premium for.

   22. DFDavid Friedberg56:49

       Yep.

   23. CPChamath Palihapitiya56:50

       But so the, so the, the ... Here's the theory of it, is that if you can invest in a private company that's, say, tripling year over year, and they can do that for another five years or whatever-

   24. DFDavid Friedberg56:58

       Yep.

   25. CPChamath Palihapitiya56:58

       ... then you're, uh-

   26. DFDavid Friedberg56:59

       You're paying for that, you're paying for that outcome in a couple of years, right?

   27. CPChamath Palihapitiya57:01

       Yeah, basically. Well, think about it. If you're paying-

   28. DFDavid Friedberg57:03

       You're getting a discount to the outcome in a couple of years.

   29. CPChamath Palihapitiya57:05

       Well, if, if you're paying-

   30. DFDavid Friedberg57:06

       Yeah.

Episode duration: 1:29:23