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

Jason Calacanis 0:00 Captain Calacanis is here-

Chamath Palihapitiya 0:02 (laughs)

Jason Calacanis 0:02 ... reporting for duty.

Chamath Palihapitiya 0:03 Wait, is that a Spirit Airlines cap?

Jason Calacanis 0:05 Absolutely. (laughs) Spirit Airlines. I just wanted to say, All-In Podcast now sponsored by Moncler and Spirit Airlines.

David Sacks 0:12 Or now sponsored by the Village People.

Jason Calacanis 0:15 (laughs) (singing) YMCA.

Chamath Palihapitiya 0:18 Now, are you a pilot or a flight attendant, J Cal?

David Sacks 0:21 He's a flight attendant.

Chamath Palihapitiya 0:22 (laughs)

David Sacks 0:22 I don't think he's thin enough to be a flight attendant.

Jason Calacanis 0:24 Are you fat shaming me?

Chamath Palihapitiya 0:25 (laughs)

Jason Calacanis 0:26 Are you body shaming me?

David Sacks 0:26 Ooh, can't do that nowadays. That'll get me canceled.

Chamath Palihapitiya 0:29 (laughs)

Jason Calacanis 0:29 Getting sacks, canceled at this point, like fat shaming would be number 72 on the list.

David Sacks 0:34 He can't get canceled because all the libs have left Twitter. There's nobody to- (laughs)

Jason Calacanis 0:37 There's no hall monitors left. (laughs)

David Sacks 0:39 There's no hall monitors.

Chamath Palihapitiya 0:40 That's not true. They all pretend.

Jason Calacanis 0:41 No, they quit every week. (laughs)

Chamath Palihapitiya 0:42 Yeah, it's like all the libs that said they'd move to Canada when Trump got elected.

Narrator 0:45 What you saying?

Jason Calacanis 0:46 Yeah, Canada immigration.

Narrator 0:47 Whoa, we're going all in.

Chamath Palihapitiya 0:47 Go ahead.

Narrator 0:47 What you saying? Don't let your winners ride. Whoa, we're going all in.

Jason Calacanis 0:52 Rain Man, David Sacks.

Narrator 0:54 What you saying? Whoa, we're going all in.

Chamath Palihapitiya 0:57 And I said-

Narrator 0:57 ... we open source it to the fans and they've just gone crazy with it.

Jason Calacanis 1:00 Love you Betsies.

David Friedberg 1:01 Whoa, we're going all in.

David Sacks 1:01 I'm getting queen of quinoa.

Narrator 1:03 Whoa, we're going all in.

Jason Calacanis 1:05 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.

David Friedberg 2:43 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.

Jason Calacanis 4:28 Shemath, what do you think? What should happen going forward?

David Sacks 4:30 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-

Jason Calacanis 4:58 You're pragmatic about it.

David Sacks 4:59 ... 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.

Jason Calacanis 7:08 Mm-hmm.

David Sacks 7:08 And I think that this is sort of where we're at, um...

Jason Calacanis 7:12 Six weeks in.

David Sacks 7:13 My gosh.

David Friedberg 7:14 Totally. Yeah, I was saying-

Jason Calacanis 7:15 Six weeks in.

David Friedberg 7:15 ... 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-

Chamath Palihapitiya 7:22 No, this is, this is where I disagree-

Jason Calacanis 7:24 Okay, Sacks.

Chamath Palihapitiya 7:24 ... 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-

David Sacks 7:39 Wait, can you, before, okay, before you react to that-

Chamath Palihapitiya 7:42 ... they were, they were doing the equivalent of dancing, dancing in the streets every time they booted off someone they didn't like.

David Sacks 7:45 Fair enough. Before you react to what Freiberg just said at the end, that coda, can you respond to what I just said?

Chamath Palihapitiya 7:50 Yeah.

David Sacks 7:50 Isn't it true? Like, it's like...

Chamath Palihapitiya 7:51 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.

David Sacks 8:53 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.

Jason Calacanis 9:04 Yes.

David Sacks 9:05 There's only a decision where some percentage will support and some percentage-

Jason Calacanis 9:09 Correct.

David Sacks 9:09 ... will always be against.

Jason Calacanis 9:10 Correct.

David Sacks 9:10 That's my point.

Jason Calacanis 9:11 Correct. He did say when he took over, he knew that would be the case. He said, "You will know I'm doing the good job when both sides are equally upset." Just to, to put a pin in it, I think it's important for people to understand what the new policy is, so I'm just gonna quickly read it just to, to, to put a pin in it.

David Friedberg 9:25 Well, 8 seconds, hang o- hang on. Sorry. Hang on one sec before you get to... Because I think the, the philosophical point rather than the, the specific one is i- is an important one, and I just wanna respond to what Chamath said and, and, and have Sacks respond to this. In the case of the, the points you make around the Twitter files... And by the way, I don't agree with any of the moderation decisions personally.

Jason Calacanis 9:43 Okay.

David Friedberg 9:44 So I don't think that someone should be suspended for posting public information. I don't think someone should be suspended for saying controversial things. That's my personal opinion, just so I'm clear on that, because I know that, you know, that that's been questioned.

Jason Calacanis 9:55 You would describe yourself as? A-

David Friedberg 9:57 A libertarian.

Jason Calacanis 9:57 ... strong free speech-

David Friedberg 9:58 (laughs) Yeah.

Jason Calacanis 9:58 ... yeah, libertarian, strong free speech. Okay, go ahead.

David Friedberg 10:00 Sure. And, um, and, and so in this particular case, I think what really irked me, I was trying to identify why it made me so angry-

Jason Calacanis 10:07 It triggered you.

David Friedberg 10:08 ... what he did yesterday.

Jason Calacanis 10:08 Yeah, sure.

David Friedberg 10:08 It triggered me. It really did. And I think the reason was that in the case of the Twitter file points, um, it was a minority, it was a minority that was affected. It was one person that was affected because the majority wanted to do that thing to that person. And I think in this case, it's that the minority wants to affect the majority in the sense that Elon has aggregated this control and this power over moderation, and he's benefiting himself and a few people that have private planes, and he's shutting down hundreds of tweet feeds, Twitter feeds, that are using publicly available information. And so it feels even more onerous of a, of a, um, a use of power, um, and influence because he's taking, um... He's doing something that benefits a small number and affecting a large, larger number, whereas the alt-... whereas the other one was affecting a small number that benefited a large number because that's what, uh, a lot of people wanted to see happen. A lot of people wanted to see Trump suspended, and it wasn't right either.

Jason Calacanis 11:05 Okay.

David Friedberg 11:05 I don't know if that, if, if that makes sense.

Jason Calacanis 11:06 All right, yeah, no. We understand your position completely.

David Friedberg 11:08 Yeah.

Jason Calacanis 11:09 I, I just wanna add to that. In this policy, I think it's very important to understand what he is saying about this. Accounts dedicated to sharing someone else's live location are gonna be suspended going forward. You can still share your own location, obviously. Content r- required, uh, you know, content for public engagements, you know, the president is speaking somewhere, whatever, you just really can't be persistently, consistently tracking an individual otherwise known in, you know, plain speak as-

David Sacks 11:35 Oh, sorry, Jason, if NPR-

Jason Calacanis 11:36 ... stalking.

David Sacks 11:37 But Jason, if NPR is live tweeting-

Jason Calacanis 11:40 Sure.

David Sacks 11:40 ... Jerome Powell's speech-

Jason Calacanis 11:42 Perfect, no problem.

David Sacks 11:43 ... at an XYZ location.

Jason Calacanis 11:44 Not a problem. If they do Jerome Powell's location for the next-

David Sacks 11:49 Yeah, location.

Jason Calacanis 11:50 ... year, for, for, for the next year 10 times a week on his off-duty, on duty-

David Sacks 11:55 No, no, no. I'm just-

Jason Calacanis 11:55 ... that's the same thing we're talking about.

David Sacks 11:56 I'm j- I'm just saying, like, let's just say he gives a speech every week. Is that illegal?

Chamath Palihapitiya 12:01 No, if you're giving a s-

Jason Calacanis 12:01 Totally fine.

Chamath Palihapitiya 12:02 If you're giving a speech at a public place where you've announced-

David Sacks 12:06 Yes.

Chamath Palihapitiya 12:06 ... that you're gonna be appearing at a certain time and place, you've already made public-

David Sacks 12:09 No problem.

Chamath Palihapitiya 12:09 ... where you're gonna be.

David Sacks 12:10 No problem.

Chamath Palihapitiya 12:10 What we're talking about is, and what- what- what Elon jet was showing was a live stream of precision GPS coordinates over a sustained period of time.

Jason Calacanis 12:19 Yes.

Chamath Palihapitiya 12:19 And not to be too dramatic about it, but if you look at, like, the weapons that are so successfully being used in Ukraine right now, they're all precision GPS guided. Now, right now, you have to be a state actor to get a hold of those weapons. But you could imagine over the next decade that having someone's precise GPS coordinates over a sustained period of time, it would be pretty easy to target them for, and not to be dramatic here, but for assassination.

Jason Calacanis 12:42 Yo-

Chamath Palihapitiya 12:42 That is a security risk. There's no way around that.

Jason Calacanis 12:45 I brought this up with Palmer Lucky, man. I'm scared. That dude could come at me anytime when I get my jet.

David Sacks 12:50 (laughs)

Chamath Palihapitiya 12:50 (laughs)

Jason Calacanis 12:50 I don't want Palmer Lucky taking me out.

David Sacks 12:52 (laughs) You can get out.

Chamath Palihapitiya 12:53 This is about a jet, but-

Jason Calacanis 12:53 Yo, Palmer, I'm sorry, dude. Do not take me out. I'm gonna get my jet. I'll be on my first flight and he's just gonna send a drone in.

Chamath Palihapitiya 13:01 But look, let's talk about hypocrisy for a second, okay? Because-

Jason Calacanis 13:04 Uh-oh. Here we go.

Chamath Palihapitiya 13:04 Let's- let's talk about CNN's hypocrisy and the media's hypocrisy. Because earlier in the week, they were saying that any criticism of Yoel Roth, who is Twitter's former head of trust and safety, amounted to a threat to his safety. And they had this, like, theatrical tweet where they claimed he was having to flee his house, which a lot of people found, uh, pretty preposterous. They were basically saying that public criticism of someone who has put themselves out there to engage in a public debate, who's writing op-eds for the New York Times, that is a threat to safety. However, publishing someone's real-time location on a continuous basis so they can be targeted-

Jason Calacanis 13:41 It's not- it's not intellectually consistent. It's not intellectually consistent. That is not-

Chamath Palihapitiya 13:44 ... it's not a threat to safety. I'm sorry.

Jason Calacanis 13:45 Yeah. Of course, yeah.

Chamath Palihapitiya 13:45 If I- if one of those two things is a threat to safety, it's the real-time doxing of somebody.

Jason Calacanis 13:49 Yes.

Chamath Palihapitiya 13:50 I think we now understand why Elon did what he did. He basically had an incident in LA in which the safety of his kid was threatened because he's got stalkers coming after him. So his safety is a real issue. This is not like a made-up issue.

Jason Calacanis 14:02 But why should his-

Chamath Palihapitiya 14:03 Look-

Jason Calacanis 14:03 Yeah, why should his personal e- experience affect the usage of a service that hundreds of millions of people use? And that's the big issue.

Chamath Palihapitiya 14:10 The decision should not be based on what affects him personally.

Jason Calacanis 14:13 Yeah.

Chamath Palihapitiya 14:13 There needs to be a principled basis.

Jason Calacanis 14:15 Yeah.

Chamath Palihapitiya 14:15 There needs to be a principled basis for any decision about-

Jason Calacanis 14:17 Could have been done better.

Chamath Palihapitiya 14:18 ... content moderation or censorship. Maybe in the first few hours of that decision, it wasn't handled perfectly because there wasn't a principled basis. But since then, one has been put in place. The principled basis is what JCal showed. And this applies to everybody. And so, you know, now it's a debate about whether that policy makes sense. Now, is Elon just as arbitrary and capricious as the former, uh, executives who were running trust- trust and safety at Twitter? I don't think so, for two reasons. Number one, he's promised transparency. He said that when we ban or shadow ban an account, there has to be a reason for it and you have to be alerted to it. In other words, none of this shadow stuff.

Jason Calacanis 14:53 No shadows.

Chamath Palihapitiya 14:53 You need to be informed, okay? That is different.

Jason Calacanis 14:55 You get your- you get your speeding ticket, you get your ticket. It's- it's there.

Chamath Palihapitiya 14:58 Right.

Jason Calacanis 14:58 Right. No more shadow.

Chamath Palihapitiya 14:59 That is different. And then the second thing is that, and again, I think you could say they didn't do this perfectly in the first few hours, but there needs to be a principled basis for a censorship decision and it needs to be applied to everyone equally. And so far, we haven't seen any basis for believing that he's not applying this principle equally. I mean, it's still very early. Whereas the former rulers at Twitter were indulging their personal bias and personal preferences in who they were banning. There were two standards of justice. If you were someone who was allied with them, it was almost impossible to get censored, no matter how hateful your tweets were. But if you were somebody on the other side of the political debate, they were eager to suppress you. And I think that at least so far, Elon has not shown that type of selectivity.

Jason Calacanis 15:40 He selected against someone that put him at personal risk. He- I think, yes. And so here's what I-

Chamath Palihapitiya 15:48 But do you understand what I'm saying?

Jason Calacanis 15:48 Yeah, I do. I do. I do. Hold on a second. If that- Totally, yeah.

Chamath Palihapitiya 15:50 If that's where the decision had stayed-

Jason Calacanis 15:52 Yeah.

Chamath Palihapitiya 15:52 ... then I would agree with you. But I think that since then, they've put in place, they've undergirded that decision with a principled policy.

Jason Calacanis 15:59 I gotta tell you, I think those sites are... I think those tweet, um, streams are cool. I think there's some cool tweet streams that some of these people run, and there are hundreds of them and- and they're actually kind of cool. You can see where these different planes- You're in favor of people tracking people's planes? Yeah, they show like where Air Force One is, they show all these different planes. It- look, and whether or not the FAA should be publishing this data is a separate question, but it's on the open internet. It is already there. It's like turning off the RSS feed from the open internet to protect himself.

Chamath Palihapitiya 16:24 Okay.

Jason Calacanis 16:24 That's why it feels onerous.

Chamath Palihapitiya 16:25 So here's the part I agree with, which is, I think this policy with regard to planes specifically is gonna be futile.

Jason Calacanis 16:32 Yeah.

Chamath Palihapitiya 16:32 It's gonna be, at best, harm reduction.

Jason Calacanis 16:34 Totally.

Chamath Palihapitiya 16:34 Because as long as there's many ways to publish this information-

David Sacks 16:36 No, it's on Reddit, it's on Facebook.

Chamath Palihapitiya 16:39 ... it's pointless to suppress it on Twitter.

Jason Calacanis 16:39 Yeah, yeah. Exactly.

Chamath Palihapitiya 16:39 So listen, I think- I think this whole- I think this whole policy on Twitter is a little bit of a red herring. I think the real issue, the real underlying issue is that the FAA is publishing these ICAL numbers, thereby making every plane personally identifiable. I don't think there's- I haven't heard anyone explain why that's necessary.

Jason Calacanis 16:55 I have a counter to it, Sax, if I may. I have a counter to it, actually, Sax, if I may. What we saw, whether you agree with it or not, with the mass banning of certain individuals did actually silence them and take them out of the public square. One of the reasons, in fact, Elon wanted to buy Twitter. So if you look at certain individuals, whether it's Milo, Alex Jones, Trump himself, right on down the line, when they got banned across all systems, it was dramatic in terms of the reach of the- that information. So because of the size and scale of YouTube, Facebook, Twitter, et cetera, when they act in coordination, they can, uh, have a dramatic impact. Not a perfect impact, but a dramatic, which is why we have this issue of, hey, should 230 be rethought? Because when they act en masse, it is extraordinary what they can do to an individual. They took- Yeah. ... Alex Jones. Who- how do you consume Alex Jones? You have to seek that out in a major way. It's- it's distinctly different. Chamath, last word, and then we're moving on to what could be the greatest science corner ever in the history of all in pod. Final word, Chamath.

David Sacks 17:58 I, um-

Jason Calacanis 17:58 (laughs)

David Sacks 17:59 I think this is- this is a great transition. We're about to talk about nuclear fusion. And my point is, I don't care about any of this stuff. Like I said-

Jason Calacanis 18:06 Yeah.

David Sacks 18:06 Like, this is my point is like, the- if you- if you take like an average person, okay?You know, we are, let's say, awake 16 hours a day. And, you know, if you take out the time with our family, David, the family is people that are related to you.

Chamath Palihapitiya 18:22 (laughs)

David Friedberg 18:23 We'll get there. Can we DM Sax those people one more time so he has it?

David Sacks 18:27 And... Yeah, we'll send you their names. Um, but if you take that out, and you take out, you know, exercising and, you know, bathroom time and eating-

David Friedberg 18:34 Uh, could we also explain that to Sax? That's when you, uh, increase your heart rate and sweat, Sax.

David Sacks 18:38 The point is that you have, let's just call it, 12 hours, you know, of functional executive time that you can apply to a problem, and you can break that down into these blocks, right? I would really love what is basically the smartest human and the most productive human of our generation to be filling those blocks with things that sort of, like, really transcend. And, increasingly, and I agree that freedom of speech is important, increasingly, those buckets are being filled with things that are very low level and hyper tactical and are distractions at best to the, to the path of free speech. And so I think that hopefully he gets all this shit under control over there. He finds a good executive team. I would like to see him get back to landing rockets on barges, getting to Mars-

David Friedberg 19:36 Let's do it.

David Sacks 19:37 ... getting, getting to the moon.

Chamath Palihapitiya 19:37 You know, I mean, look, you got a point.

David Friedberg 19:38 Finish self-driving. We're almost there.

Chamath Palihapitiya 19:40 Dr. Mouth definitely has a point. But I, I'd just say, one of the reasons why we don't care that much about this issue is because I think something to, to understand that's important is there are different kinds of speech, and different kinds of speech deserve different levels of protection. The fact of the matter is, like, business advertising is not as protected as political speech. Porn is not as protected as political speech. Political speech, speech criticizing the people in power, is the most protected category of speech because the founders of the country understood that the people in power will always try to insulate themselves from accountability-

David Friedberg 20:10 Yep.

Chamath Palihapitiya 20:10 ... by limiting that kind of speech. But that is precisely the kind of speech that the former rulers of Twitter suppressed the most and showed the least sensitivity to. So listen, I mean, is Elon gonna be the perfect content moderator? No. I mean, shouldn't there have to have-

David Friedberg 20:23 Nobody is. Nobody is.

Chamath Palihapitiya 20:24 Nobody is, but I do not believe that it puts him in the same category as, you know, Vijay Gadde or Yoel Roth, who showed no sensitivity for political speech. He has indicated a desire to restore freedom of speech, and I think they ultimately ended up in a good place on this doxxing policy.

David Sacks 20:40 I want, I want him to get us to Mars. I want him to get us to Mars. I don't care about any Twitter handles.

Chamath Palihapitiya 20:42 Okay. Let's move on to the best science corner ever.

Chamath Palihapitiya 20:48 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.

David Sacks 20:55 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.

Chamath Palihapitiya 21:01 Okay, hold on. I know that you're in the anti camp. Please let the science nerd have his moment.

David Sacks 21:05 Well, you have to, you have to say it correctly so that people understand-

Chamath Palihapitiya 21:07 Okay.

David Sacks 21:07 ... what you're talking about.

Chamath Palihapitiya 21:08 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.

David Friedberg 21:17 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.

Chamath Palihapitiya 23:02 How is it done?

David Friedberg 23:03 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.

Jason Calacanis 24:57 So, Freeberg-

David Friedberg 24:58 Yeah.

Jason Calacanis 24:59 ... what actually happened this time that made this work?

David Friedberg 25:02 So what they... Yeah.

Jason Calacanis 25:02 For what, a- apparently only $3 billion, you said. You didn't say three trillion. You said three billion.

David Friedberg 25:07 Three and a half billion.

Jason Calacanis 25:07 About a third of... Yeah, about a third-

David Friedberg 25:09 Yeah.

Jason Calacanis 25:09 ... of what Sam Bankman fraud stole (laughs) .

David Friedberg 25:11 (laughs) . Right.

Jason Calacanis 25:11 We have done something here.

David Friedberg 25:13 Yeah.

Jason Calacanis 25:13 Allegedly. So what actually happened that is so dramatic that we have a press conference, everybody's losing their mind?

David Friedberg 25:20 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.

Jason Calacanis 26:11 Okay.

David Friedberg 26:11 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-

Jason Calacanis 26:25 Mm-hmm.

David Friedberg 26:25 ... 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-

Jason Calacanis 26:34 Got it.

David Friedberg 26:34 ... 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.

Jason Calacanis 27:54 There it is.

David Friedberg 27:54 Yeah, tokamak. This is what we talked about, the conical-

Jason Calacanis 27:56 That is the magnetic spinning thing that looks like-

David Friedberg 27:59 Yes.

Jason Calacanis 27:59 ... Iron Man's, uh, arc reactor. (laughs) .

David Friedberg 28:02 Yeah, and so this one-

Jason Calacanis 28:03 Which I think they based it on, yeah.

David Friedberg 28:04 Yeah, you create a plasma. You, you basically speed up the hydrogen nuclei super, super fast, the- these deuterium and tritium nuclei super, super fast. And then you use magnets, and the magnetic field has to precisely squeeze the plasma, squeezing it, squeezing it, squeezing it. And if it's slightly off in even the tiniest way, think about a, a balloon, right? If you put a pinhole in a balloon, everything escapes from the balloon.

Jason Calacanis 28:26 Yeah, you gotta do a perfect one.

David Friedberg 28:26 That's how, that's how technically hard this is. You're basically trying to create a balloon with a magnetic field and you're trying to keep the gas and you're trying to make it smaller and smaller and smaller. And if any tiny hole emerges, the entire plasma shoots out-

Jason Calacanis 28:38 Now that they've done this-

David Friedberg 28:40 Does that...

Jason Calacanis 28:40 ... is that what happens in Uranus?

David Friedberg 28:42 (laughs) .

Jason Calacanis 28:42 Like, when you're trying to hold in the Ragu.

David Friedberg 28:45 (laughs) .

Jason Calacanis 28:45 Anyway, uh, let me ask this question then, um-

David Friedberg 28:49 Uh...

Jason Calacanis 28:49 ... about the consistency of this, and then we'll go to you, Chamath. Can they do it consistently or do you think this is like they got lucky once, uh, or are we gonna be sitting here a year from now and they're like, "We put in two and we got out six."

David Friedberg 29:02 So the, there's a number of these-

Jason Calacanis 29:03 "And we did it five times."

David Friedberg 29:04 Yeah, so, so now we've proven that humans can do this, okay? Which is... Look, I mean, I, I wanna give you guys some, uh... and I, I know kind of some of Chamath's concerns, which is how production-ready-

Jason Calacanis 29:13 Humans to recreate the sun is what we, this comes down to.

David Friedberg 29:16 Yeah. Do you know? Know? Know?

29:17 Guys, I want to just say one, like, im-

29:20 (laughing) . Not even close.

29:21 I wanna say one important thing from a historical context. All breakthrough technology starts out seeming impossibly large, impossibly expensive, and impossibly slow. The Human Genome Project 20 years ago cost $100 million to sequence the human genome. Today, we can do it in a couple of minutes for $100, okay?

Jason Calacanis 29:44 Incredible.

David Friedberg 29:44 The first computer, the ENIAC computer, had 500 FLOPS of compute capacity, it filled a room, it cost $8 million to build. 20 years later, we had a mainframe. 20 years later, we had a PC.

29:54 You're using it all on the wrong... No, this is all this emotional bullshit. You're using the wrong examples.

Jason Calacanis 29:59 Okay, let him finish, then you go, Chamath. Good. Finish your sentence, Freeberg, and then we go.

David Friedberg 30:03 And today we have an iPhone that can do two trillion FLOPS (laughs) of compute in your pocket. I think that what we're seeing with, um, fusion today is similar to what we saw with the ENIAC computer in the 1950s, which is the demonstration that compute is possible, and now we're seeing a demonstration that fusion is possible.Okay.

David Sacks 30:20 And a lot of folks have a- anticipated this moment and they've invested ahead of this. Now, I don't know if any of these companies that are currently kind of being built are gonna be production-ready anytime soon. My estimate-

David Friedberg 30:31 Hm.

David Sacks 30:31 ... is that we will see production demonstration-

David Friedberg 30:34 Okay.

David Sacks 30:34 ... of fusion-

David Friedberg 30:35 Here we go.

David Sacks 30:35 ... like 2030, in the 2030s, so call it eight years from now plus, and then you'll see grid scale scale up in the 2040s. So this isn't something that's gonna happen next year or two years from now.

Jason Calacanis 30:45 It's already happening. What are you talking about?

David Friedberg 30:47 Okay, now, Chamath, your rebuttal.

David Sacks 30:49 Oh my God.

David Friedberg 30:50 Knowing you're a huge fan of solar.

David Sacks 30:52 This is the most naval gazing, head up your ass scientific bullshit I've ever heard.

David Friedberg 30:56 Whoa. Oh, okay. Well, well.

David Sacks 30:57 A couple points. Let's start with the basics. The first is that there was no previous technical analog- Wait, why are you being... Like- like, why are you angry at me? I'm not angry. I find this so tiring hearing this. It's all syrupy nonsense.

David Friedberg 31:10 You seem a little triggered.

David Sacks 31:11 Because it's not-

David Friedberg 31:11 He's- he's right.

David Sacks 31:11 Yeah, why are you so angry?

David Friedberg 31:12 But it's not-

David Sacks 31:12 Like, I don't get it.

David Friedberg 31:13 Because I'm not happy.

David Sacks 31:14 Because I don't find this intellectually honest.

Jason Calacanis 31:16 Okay. Explain why-

David Sacks 31:17 I find it utterly intellectually dishonest. But let's keep our emotions- Can I... Let me finish. Let me finish.

David Friedberg 31:22 (laughs)

David Sacks 31:23 Okay, when you talk about sequencing the genome, there was no alternative. So you're right, it was an enormous technical leap forward. When we built a computer, there was no analog. It was an enormous technical leap. And so you're right, we have a cost curve we don't understand and then we iterate as rapidly as possible. And all these innovations where we built an entire infrastructure to ride down the cost curve. The thing is, fusion energy exists today. It's called the sun. We actually know how to capture it at virtually no cost right now. So according to the IAEA, today you can capture grid level solar energy for about three cents a kilowatt hour. That's as close to zero as we've ever been and over the next 10 years, their forecast is it's gonna get to one and a half cents. If you then want to store it, and you layer in storage costs, we'll be at a whopping three cents a kilowatt hour. That's where we are today. And so I think that fusion does exist. I do think that this is an incredible technical leap to replicate something that exists and I think that's where the intellectual dishonesty is. It- it does exist, it has been captured, it can be harnessed, and there is a positive energy equation just in a different modality that doesn't speak to these technically minded individuals. A couple of other points about what I saw. I think it's incredible what happened, okay? But just to make sure we're clear, this is 192 lasers the size of three football fields that consumed 322 megajoules of energy, which then ultimately deliver two megajoules to a target which then release three. So this is why I'm saying we had positive what's called ignition energy. We did not have positive electrical energy captured. So yeah, could we figure this out? Absolutely. Can we then shrink the three football fields down to something that looks the size of a- a laptop? We possibly could. Will it take 20 or 30 years? Possibly. But in the meanwhile, if the goal is unlimited costless energy, you're on that cost curve already. Yeah, but why can't it be both? So you're, you said I was being intellectually dishonest. What was I intellectually dishonest about? Where's the dis... Where's dishonest? Yeah.

Jason Calacanis 33:40 You're comparing this...

David Sacks 33:42 I- I'm saying what- what you're saying is right. Yes, you can get-

Jason Calacanis 33:44 You- you seem to be in agreement.

David Sacks 33:45 ... which is totally scalable, industrial scale. Like, yeah. I- I- I just think that, I think that you're trying to say that this is an entirely new thing. No, it's a different approach to a thing we've already beaten and- and basically-

David Friedberg 33:56 Okay.

David Sacks 33:56 ... captured.

David Friedberg 33:57 Let me bring-

David Sacks 33:58 I mean, what I would- what I would argue, Chamath, and I think this is important, the- the net energy you can capture on say a football field sized facility from solar is, you know, a tiny fraction of the energy you could generate from a football field sized fusion reactor. And that's why the argument would be like, hey, you know, when we were developing computers, hey, we have abacuses, we shouldn't be developing computers. And I think that's- No, no. ... that's the analogy I would use here. This is why the cost per kilowatt hour is what the, uh, the levelized cost of energy tries to do. It tries to- to normalize that argument away because everybody would say that, "Hey, hold on a second, you're gonna need plane fulls of this or boatloads of that." And people said, "No, what's the levelized cost of energy?" How, what is-

David Friedberg 34:41 So-

David Sacks 34:41 ... the cost per kilowatt hour to generate energy?

David Friedberg 34:43 Agree.

David Sacks 34:44 And- and what I'm saying is, that is an absolute scale and free is zero and we're at 1.5 cents already.

David Friedberg 34:51 I- here's- here's what I would say. J- hold on one sec.

Jason Calacanis 34:53 Okay.

David Friedberg 34:53 Chamath, the opportunity here is not necessarily about cost reduction, it is about scalability. And if hydrogen is abundant, which it is on this planet, it is nearly infinitely abundant, we can take that hydrogen and we can scale up energy and electricity production in a way that is unimaginable compared to solar.

David Sacks 35:12 Got it.

David Friedberg 35:12 And I don't think that solar should be excluded. Solar is key today and should be scaled up and I'm 100% in agreement with you. But the scalability to go a 100X if we want to make a hundred times more electricity, I think we need fusion and I think that it's feasible.

Jason Calacanis 35:26 Okay. So I think we have, uh, reached a- a good settlement here. Chamath, you're saying, hey listen, we're getting solar down so cheap we can solve this problem-

David Sacks 35:35 Not just solar, all forms of energy.

Jason Calacanis 35:36 Okay, great. We are, we are solving that, so for our needs today. And then what Friedberg is saying, but what if you had unlimited, a thing that we can't even imagine? Beautiful. Now watch as I get Sachs involved in a science conversation-

David Sacks 35:49 I wanna see this. Yeah, what's the pivot to Sachs?

Jason Calacanis 35:49 ... he has zero interest in. Mr. David Sachs, if in fact there was 100% more free electricity available in this timeframe, the next 10-

David Sacks 36:01 100X.

Jason Calacanis 36:01 ... to 20-

David Sacks 36:02 100X.

Jason Calacanis 36:02 100X the available energy, in other words, supply of energy just becomes flooded.... and it's free essentially. What would be the geopolitical reaction on Planet Earth in terms of, uh, this incredible rivarly, rivalry we have with China and for humanity on a political basis?

David Sacks 36:23 Such a good question, J Cal.

Jason Calacanis 36:24 Go ahead, Sax.

David Sacks 36:24 That's a good question.

Jason Calacanis 36:25 Here we go. Thank you. World's greatest moderator here.

Chamath Palihapitiya 36:27 Why don't we let Freeburg answer it?

David Sacks 36:29 No, no, I want to hear your answer, Sax.

Jason Calacanis 36:29 But you're the politics guy. Get in there.

David Sacks 36:31 Yeah.

Jason Calacanis 36:31 What... Um, take a second to think it through.

Chamath Palihapitiya 36:32 No, I wonder if, if Freeburg already has thought about this. Let's... I want to hear his answer.

Jason Calacanis 36:35 No, no, we want you.

David Sacks 36:35 No, no, I think it's... Uh, uh, I actually want to hear your answer.

Jason Calacanis 36:37 Yes.

David Sacks 36:37 Like, you know, in, in a world where, you know, energy becomes more abundant and more affordable and more scalable-

Chamath Palihapitiya 36:41 (laughing)

David Sacks 36:41 ... and more affordable and more scalable-

Jason Calacanis 36:42 David hasn't been paying attention, guys. This is what he's trying to say.

Narrator 36:44 (laughing)

Chamath Palihapitiya 36:45 So don't put him off the spot.

Jason Calacanis 36:45 He was just, he was just on a group call with Tucker, Milo Yiannopoulos-

Chamath Palihapitiya 36:48 By the way, can I, can I just say-

David Sacks 36:49 Can I stop?

Jason Calacanis 36:49 (laughing)

Chamath Palihapitiya 36:49 By the way, can I just say this?

Jason Calacanis 36:50 (laughing)

Chamath Palihapitiya 36:50 J Cal, I'll ca- I'll call your intellectual dishonesty and raise you a steel man.

David Sacks 36:54 Go ahead. (laughing)

Narrator 36:55 (laughing)

Chamath Palihapitiya 36:55 Go ahead. (laughing)

Jason Calacanis 36:57 I love you.

Chamath Palihapitiya 36:58 (laughing)

Jason Calacanis 36:58 I love you, Saxey-poo. You know I do. Sax and I had a great night out Monday night... or Sunday night.

David Sacks 37:03 I like to be very clear. On Monday night.

Chamath Palihapitiya 37:03 Whoo, let's talk later. (laughs)

David Sacks 37:05 I just want to be very clear.

Jason Calacanis 37:06 Chamath and I need to get drunk together.

David Sacks 37:07 I think... Last week, he called me petty too. I think we're, we're on bad blood.

Jason Calacanis 37:09 Well, here, here's where I want to be clear. I, I think that-

David Sacks 37:11 We, we...

Jason Calacanis 37:12 I'm just glad you guys are fighting, not me and Sax.

David Sacks 37:14 Guys, please let me finish.

Jason Calacanis 37:15 Okay. Let me finish.

David Sacks 37:15 I think that this breakthrough is really valuable. I think it's interesting to see that these kinds of scientific breakthroughs continue to happen in government-sponsored facilities and not private companies. Um, and I think that that's probably where a lot of these innovations will continue to come from, because look at the scale of what had to be built, three football fields and 322 megajoules of energy and 192 lasers. This is really complicated, expensive stuff. I'm an enormous fan of these kinds of scientific breakthroughs. I want to be clear. I think that where I struggle is translating this into actually an investable area, and I worry that this is going to consume lots of money by folks that could otherwise put money to work in things that will actually pull forward our energy independence and energy abundance sooner and faster. So for example, you know, there are all kinds of things that we could do to secondary, ternary, third and fourth and fifth generation batteries that aren't happening today. There are a bunch of things that we could do to actually create an infrastructure of green hydrogen. And the, the simplistic answer is we could do it all, but the reality is money is finite, and we can't. And all I'm observing is, I do think that more practical things that do have geopolitical ramifications m- sooner are not gonna get funded because people do get enraptured by this, and my skepticism is that this is still in the realm of government-sponsored research and is not really an area that for-profit private companies can tackle. And so I would rather those for-profit companies... For example, Y Combinator just today put out something where they re- you know, call to action, a request for startups in climate. And when you look at that list, those are really practical, investable areas, and I just want to make sure that the capital allocators that listen to this weigh those equally. I am glad- Well, let me as- Yeah. Mm-hmm. I'm glad that the US government did this. I hope they do more of this. But if you're asking me, quite honestly, I would rather the next $10 billion go into energy efficiency HVAC than fusion, because A, fusion exists, and B, I think it's gonna happen at an innovative bench scale level by the government and not by a private company. All right. Let me just, let me just respond to that real quick. Chamath, I, I think that the idea of allocating our resources as a society should be done on kind of, you know, on a portfolio basis, 80% on the pragmatic near-term, 15% on the kind of next gen, and 5% on the moon shot. And this maybe f- go... starts to shift from the 5% to the 15%. Maybe it's still in the 5%. But I don't see kind of over-funding happening. So I'll tell you guys, there was a survey done. There's 33 private companies in fusion, uh, that are kind of fusion companies today, uh, VC backed. Eight new this year. So the number has kind of increased by 33% this year, and, um, so far this year, those companies have raised around three to $4 billion. The biggest pro-

Jason Calacanis 40:11 Which, by the way, is a fraction of what was done by 15-minute delivery (laughs) companies from convenience stores.

David Sacks 40:17 Exactly. Exactly my point. And, and by the way, the biggest funding is happening in ITER, which is the largest construction project in Europe, and this is a $30 billion production-scale fusion demonstration system that should be online by the end of the 2020s.

Jason Calacanis 40:30 Government-sponsored.

David Sacks 40:31 Government-sponsored, yeah, and so to your point, yeah. This is my point. I am a huge fan of government-sponsored research like this. Yeah, it's great.

Jason Calacanis 40:36 Now we get finally the first science corner. Everybody brace themselves. It's the first science corner where David Sax has his opinion.

David Sacks 40:43 Hop the cherry, Sax.

Jason Calacanis 40:44 Here we go.

David Sacks 40:45 Come on. You can do it. You can do it. You can do it, Sax.

Jason Calacanis 40:46 He's coming in. Mr. David Sax-

Chamath Palihapitiya 40:47 Well, what's your question? Your, your question was a little bit... was, was not a very hard question. It was just-

Jason Calacanis 40:52 Let me rephrase. Okay, hold on. I'm coming in. What's the geopolitical impact if this does happen, 100x energies as album?

Chamath Palihapitiya 40:58 Well, obviously, it's fantastic for the United States if it actually happens, and the reason is, if you look across the world, there's this thing in politics known as resource curse, where the worst governments, the most despotic governments tend to be in the countries that have the biggest natural resources, ironically. So the countries that have huge amounts of petroleum or other kinds of minerals, they've... tend to have pretty corrupt governments. And the reason for that is that if you're sitting on a giant oil reserve, you don't need to make anything else work. You just fight over who gets to control that oil reserve, and that's where politics ends up being. You don't need to create policies that foster innovation or attract knowledge workers, right? You just basically mine that oil. So if, all of a sudden, you're talking about turning energy into a software problem or an innovation problem, that looks a lot more like the software industry. That's an area where the United States has a huge advantage. And yeah, I think it would pull the rug out from under many countries all over the world in favor of the United States. I mean, it's a big if, because where I agree with Chamath is this stuff still seems pretty far off, and it's still pretty unproven from a-

42:12 ... commercial standpoint, but I agree with Freeberg, why not try investing in it and cultivating it and see where it goes?

Jason Calacanis 42:18 Okay, fantastic. This was a fantastic science corner where we actually engaged David Sacks. Which country, uh-

Chamath Palihapitiya 42:26 (laughs)

Jason Calacanis 42:26 You know, uh-

Chamath Palihapitiya 42:26 Did you find anything to disagree with there, J-Cal?

Jason Calacanis 42:29 All right, take it easy. This, I just wanna let people know-

Chamath Palihapitiya 42:32 No, you didn't. I think you, you like that answer, right?

Jason Calacanis 42:33 I, well, I, I love all of your intellectual-

Chamath Palihapitiya 42:36 Was I steel enough for you or was it more like copper?

David Sacks 42:37 I love you intellectually. I love tools.

Chamath Palihapitiya 42:40 Was it copper, man? It wasn't steel

David Friedberg 42:41 No, it was, I thought he was a steel person.

Jason Calacanis 42:43 I love ... It felt silverish.

David Friedberg 42:44 Steel person.

Jason Calacanis 42:44 It felt silver, silver Manning.

Chamath Palihapitiya 42:46 (laughs)

Jason Calacanis 42:46 But I love when you're intellectually honest.

David Friedberg 42:48 He's a silver personing.

Jason Calacanis 42:49 Yes. You're silver theying. You're silver theying. Uh-

Chamath Palihapitiya 42:52 Was that a plat- was that platinum, gold, or silver? Or steel?

Jason Calacanis 42:54 I think that's, you're, you're in platinum with some diamond dust. Um-

David Friedberg 42:57 (laughs)

Chamath Palihapitiya 42:57 I think the fact

Chamath Palihapitiya 42:58 that J-Cal and Sacks-

Jason Calacanis 42:58 Can I just say-

David Friedberg 42:59 ... spent a couple nights together this past week has really improved the mood of the show.

Jason Calacanis 43:03 It really does. (laughs)

David Friedberg 43:03 I mean, when you guys go out and drink together and have fun-

Jason Calacanis 43:05 It's hilarious. (laughs)

David Friedberg 43:06 ... you, you guys are hilarious.

Jason Calacanis 43:06 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.

Chamath Palihapitiya 44:23 (laughs)

Jason Calacanis 44:23 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.

David Sacks 44:34 You're raining threes. You're raining threes.

Jason Calacanis 44:35 Raining threes.

David Sacks 44:35 You know, like-

Jason Calacanis 44:35 It was literally like, cut into here-

David Sacks 44:37 What were these mid-range jumpers or threes?

Jason Calacanis 44:39 I was at, uh-

David Sacks 44:39 Yeah.

Jason Calacanis 44:40 ... free throw line extended. Free throw line extended.

David Sacks 44:42 (laughs)

Jason Calacanis 44:42 Cut into here Rain Man and Rain Dance from Along Came Polly. Rain Dance, Rain Man.

Narrator 44:50 Let it rain. (rain pattering) Rain dance. (rain pattering) Let it rain. (rain pattering) Let it rain. (rain pattering)

Jason Calacanis 44:59 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-

David Sacks 45:15 (laughs)

Jason Calacanis 45:15 ... uh, Chamath as Phil Hellmuth will tell you-

David Sacks 45:17 That's racially charged. That's racially charged.

Jason Calacanis 45:17 No, no, I was speaking in-

Chamath Palihapitiya 45:19 J-Cal, the only person who drops more names is Phil Hellmuth. I mean-

Jason Calacanis 45:22 Absolutely, I'm trying to catch up.

Chamath Palihapitiya 45:23 You, you name-drop any more-

Jason Calacanis 45:24 D- I'm, I'm leaving out 10 names.

David Sacks 45:25 No, he is. He's holding back, he's holding back three names, J-

Jason Calacanis 45:26 I am literally ... Sacks, Sacks, am I leaving out 10 names?

David Sacks 45:30 He wants to say it so bad, but he's not gonna say 'em.

Jason Calacanis 45:32 No, I'm not saying anything. Not doxing anybody.

David Sacks 45:33 Oh, you're so brutal.

Jason Calacanis 45:34 There'll be zero doxing.

David Sacks 45:35 Oh, brutal.

David Friedberg 45:35 Look, now he's getting uncomfortable. The smile went away.

Jason Calacanis 45:37 We, I kid you not, Chappelle comes over and says, "J-Cal, Sacks, you guys wanna go to, uh, a- after, to do a, go, go see me do a show at like 1:00 AM at this like local comedy club with 70 seats?" I said, "Word, yes." We go at 1:00 AM. Chappelle sits on stage, smoking cigarettes and doing th- 90-second pauses and then having a beer and interacting with the audience and does a two-hour set after doing this set with Chris Rock at the Chase Center. Me and Sacks and Draymond hilariously laughing. The, the stuff, Chappelle is a genius. And when you see his show, and Chris Rock by the way, he puts a tight set together. I mean, Chappelle's got this storytelling thing where he kind of meanders a little bit and then he, he hits you with it. But Chris Rock is just bang, bang, bang, bang, bang, bang, bang. It, extraordinary. Just two incredible minds at the top of their game.

David Sacks 46:38 Artists.

Jason Calacanis 46:38 Artists at the top of their game, doing what society needs. But more importantly, doing what David Sacks and I needed.

David Sacks 46:46 (laughs)

Jason Calacanis 46:46 Which was to laugh our asses off together.

Chamath Palihapitiya 46:49 Oh, my God. (laughs)

Jason Calacanis 46:49 And remember our friendship. So it was a great night out. I wanna say to bestie Draymond, Dave Chappelle, and Chris Rock, thank you. The David Sacks, J-Cal bestie friendship has never been stronger. I don't know about Freeberg and Chamath, that seems to be on the rocks.

David Friedberg 47:03 Yeah, it's weird. We'll be in, uh, we'll be-

David Sacks 47:06 I, I, I love-

David Friedberg 47:06 We'll be, we'll be vacationing together next week, so we'll-

David Sacks 47:08 I love, I love Freeberg. I love Freeberg.

Jason Calacanis 47:10 Yeah. Well, we are going to be, uh-

David Friedberg 47:13 Whatever's, whatever, whatever is going on, we'll take a walk and figure it out.

Jason Calacanis 47:15 Well, I just wanna say the alliances amongst the besties. People, you know, there's a lot of concern.

David Sacks 47:18 I got mad, I'll be honest. I got mad at Freeberg when he edited that Google bit-

Jason Calacanis 47:22 Oh, here it is.

David Sacks 47:22 ... to say the exact opposite of what he actually said. That, to me, felt dishonest and disingenuous.

Jason Calacanis 47:26 Ooh, yeah, don't bring that up. Please don't bring that up. Yeah, just beep that. But yes.

David Sacks 47:28 That, that is the thing that bothered me. I have to be honest. That's you playing to the crowd versus you being honest and telling what you think.

Jason Calacanis 47:35 Freeberg, do, does Freeberg, can I-

David Sacks 47:36 That did bo- that did bother me.

Jason Calacanis 47:36 All right, let me, if, put that in the form of a question. Freeberg, has your fame as the sultan of science, 'cause listen, you, nobody knew who you were outside of Silicon Valley before this-

David Friedberg 47:45 No, look, I'll, I'll, I'll, look, you, you guys can lead this in. I'll-

Jason Calacanis 47:46 ... has it impacted your ability to speak?

David Friedberg 47:47 No, no, no, not my fame. I, look, I, I'll be, I'll be honest, and I'll speak openly about this. I had said that there could probably be a significant headcount reduction of like 75% at Google and the business could keep operating. And I took it out. And I took it out because I have a lot of friends that work at Google. Google's a close, um, partner of mine. They're an investor of mine. And, um, frankly, I just wanna be careful about that. It's not something I commonly do. Uh, you know, I, as you guys know, I usually speak my mind pretty clearly. But I was just trying to be respectful. And that's the reason I did it, you know? So now it's in, now it's on the record.

David Sacks 48:20 I think that that, I think that that was fine. What I'm saying is not that. It's just that-... the part that you edited in actually made it seem like you were not saying that at all, but the opposite.

Jason Calacanis 48:29 Ah, I see.

David Sacks 48:30 I think if you had cut the whole thing-

Jason Calacanis 48:31 I see.

David Sacks 48:31 ... it would have been more honest.

Jason Calacanis 48:33 So-

David Sacks 48:33 But to keep that other thing in-

Jason Calacanis 48:35 Okay.

David Sacks 48:35 ... actually led the perception of the opposite. And I think that, I think-

Jason Calacanis 48:37 So you were triggered by that?

David Sacks 48:39 No, no, no. I'm not triggered, I'm saying-

Jason Calacanis 48:41 But, you know, you know I don't-

David Sacks 48:41 ... I think we should have a principle. Hold on, hold on, guys.

Jason Calacanis 48:43 ... I don't edit stuff very often, Chamath. Like, yeah.

David Sacks 48:44 I know. I think that we should just have a principle to not play to what the perception of what we say should be, especially if it means we could be saying the opposite of what we actually mean. That's all.

Jason Calacanis 48:55 Intellectual honesty-

David Sacks 48:57 And I think-

Jason Calacanis 48:57 ... is a bestie tenant.

David Sacks 48:58 I think that's important.

Jason Calacanis 48:59 It's a bestie tenant.

David Sacks 48:59 I think so.

Jason Calacanis 49:00 Absolutely. Bestie tenant.

David Sacks 49:01 I think so.

Jason Calacanis 49:01 Always... And the other bestie tenant, besties always come back together. If we have a fight, we always come back together. Sax, can I-

Chamath Palihapitiya 49:07 I'm still mad at you.

Jason Calacanis 49:08 (laughs)

David Sacks 49:08 A little bit?

Jason Calacanis 49:09 (laughs)

Chamath Palihapitiya 49:09 Nah, I'm just kidding.

Jason Calacanis 49:10 Didn't w- Okay, we're just-

Chamath Palihapitiya 49:11 But talking about hypocrisy, I mean, so Chris Rock gets up there-

Jason Calacanis 49:14 How great was Sunday night? How great was Sunday night?

Chamath Palihapitiya 49:15 Chris Rock gets up there-

Jason Calacanis 49:16 Yep.

Chamath Palihapitiya 49:16 ... and he gives... Like, right out of the gate, he's attacking woke.

Jason Calacanis 49:19 (laughs)

Chamath Palihapitiya 49:20 Right out of the gate.

Jason Calacanis 49:21 Swinging, came out swinging-

Chamath Palihapitiya 49:22 Yes.

Jason Calacanis 49:22 ... like Will Smith.

Chamath Palihapitiya 49:24 (laughs) Shug Smith, you mean?

Jason Calacanis 49:27 Shug Smith. He took down Will Smith.

Chamath Palihapitiya 49:30 (laughs)

Jason Calacanis 49:30 The W- I mean, the Will Smith take down, which you will see in the special, is so complete. It is just, mm, chef's kiss. But how great was his set? Let's say, just giv-

Chamath Palihapitiya 49:41 Yeah, I mean-

Jason Calacanis 49:41 Give Chris Rock his flowers.

David Sacks 49:42 He did, he... Did he filet and fricassee-

Jason Calacanis 49:44 (laughs)

David Sacks 49:45 ... Will Smith? (laughs)

Jason Calacanis 49:46 He-

Chamath Palihapitiya 49:47 He did. But I thought the more important part of the set was the, he came right out, like, calling out all this, you know, you know-

Jason Calacanis 49:53 Woke nonsense.

Chamath Palihapitiya 49:53 ... holier than thou w- woke stuff, yeah. And, and there was an undercurrent to Chappelle's set as well.

Jason Calacanis 50:00 And also he said, "Listen, words can't hurt you unless you write them on a piece of paper and tie them to a brick." (laughs) We... These... Uh, uh, uh, a bigger point right now, and this does tie into our first story, is, I think comedians look at Twitter as a place to get canceled, not a place to be part of the discourse. And that's a huge loss, that's indicative of our society being broken. And it's incredibly important that these comedians be allowed to mock and to speak and to step over the line and challenge us as citizens in a free society. And we should cherish them, and we should not even try to cancel them. Let them cross the line. Let them say things that make us uncomfortable, so that we can understand ourselves and our society better. And I just wanna say-

Chamath Palihapitiya 50:49 Why can't you include lips of TikTok in that?

Jason Calacanis 50:52 Oh. Do we wanna have a discourse about it? Oh my God. I can- Let's go. What's the next topic?

Chamath Palihapitiya 50:55 No, I don't wanna have a conversation about it, I'm just asking you.

Jason Calacanis 50:56 What's the next topic? What's the next topic, please? I'm okay with mocking.

David Friedberg 50:58 No, don't start.

Jason Calacanis 50:59 You guys, you did so well.

David Friedberg 51:00 Please.

Jason Calacanis 51:00 Come on, let's go. (laughs)

Chamath Palihapitiya 51:01 (laughs)

David Sacks 51:01 Here we go. (laughs)

David Friedberg 51:02 No. J-Kel, cut it out.

Jason Calacanis 51:03 Uh, all right, well, we have two more science corners to get to. (laughs)

David Sacks 51:08 (laughs) All right.

Jason Calacanis 51:09 Well, if you don't want... I mean, I just wanna say that-

David Sacks 51:10 No, let's talk about the

David Sacks 51:11 Coupa deal. And Sax, this is right up your alley. Have you... Did you know this company?

Chamath Palihapitiya 51:14 I haven't paid a lot of attention to it, to be honest.

David Sacks 51:16 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?

Jason Calacanis 51:26 Mm-hmm.

David Sacks 51:27 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-

Jason Calacanis 51:36 Explain what Coupa is, please.

David Sacks 51:38 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.

Jason Calacanis 51:49 Finance.

David Sacks 51:49 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.

Jason Calacanis 53:31 Sax, your thoughts?

Chamath Palihapitiya 53:31 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-

David Sacks 54:10 By the way, Sax, Sax, it was 77% premium, uh, before the rumors came out that this was happening.

Chamath Palihapitiya 54:14 Okay.

David Sacks 54:14 So it was a pretty good premium.

Chamath Palihapitiya 54:15 Yeah, good, good, good point.

David Sacks 54:16 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.

Chamath Palihapitiya 54:24 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.

David Friedberg 55:18 Right.

Chamath Palihapitiya 55:19 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.

David Friedberg 56:26 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%?

Chamath Palihapitiya 56:45 Sure. I mean, it, it, it is, um, and that's what you're paying a premium for.

David Friedberg 56:49 Yep.

Chamath Palihapitiya 56:50 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-

David Friedberg 56:58 Yep.

Chamath Palihapitiya 56:58 ... then you're, uh-

David Friedberg 56:59 You're paying for that, you're paying for that outcome in a couple of years, right?

Chamath Palihapitiya 57:01 Yeah, basically. Well, think about it. If you're paying-

David Friedberg 57:03 You're getting a discount to the outcome in a couple of years.

Chamath Palihapitiya 57:05 Well, if, if you're paying-

David Friedberg 57:06 Yeah.

Chamath Palihapitiya 57:06 ... 30 times today and it triples next year, you're only paying 10 times next year, and if it triples again-

David Friedberg 57:10 Exactly.

Chamath Palihapitiya 57:10 ... you're only paying three times. So if that keeps going, that's where your arbitrage is. But here's the thing you have to weigh against that, is that these early stage private companies, many things go wrong.

David Friedberg 57:21 Yep.

Chamath Palihapitiya 57:21 And they hit a plateau, they fizzle out, or their growth rate starts to... The bigger they get, the harder it is to grow. It's-

Jason Calacanis 57:27 So they should be priced at a discount, not a premium, because there's risk.

Chamath Palihapitiya 57:31 There's more risk. They're growing faster, but there's more risk. But also, it's very hard. Once you get to a bigger number of ARR, 50, 100 million of ARR, it's extremely b- difficult to be doubling or tripling year over year.

David Friedberg 57:43 Let me just point one thing out. So I looked at the numbers on Coupa. I think they had about 170 million of stock-based comp expense in the last nine months. So those are employees that are getting $170 million in compensation in the form of shares. So they get those shares. They can then sell those shares and get cash for them, and then-

Jason Calacanis 58:03 On the public markets.

David Friedberg 58:04 ... p- pay- and then p- on the public markets and pay their bills. So when a company like this goes private, for those employees to just remain at their baseline comp, that stock-based comp needs to be replaced with something else, or else they're seeing their salaries reduced. So, you know, there's this balancing game when these companies go private in terms of, how do you give them the comp that they're earning to keep them engaged in the business versus-

Jason Calacanis 58:30 The answer is you don't. (laughs)

David Friedberg 58:32 Versus ... No, but versus cutting the exp-

Jason Calacanis 58:33 You let them, you let them quit 'cause you wanna do a RIF anyway.

David Friedberg 58:36 Right. So, I mean, do you... But for the people that stay, right? So, so there's a balance, because it's not just, "Hey, cut the OpEx." You have to cut the OpEx, including stock-based comp, and this company generated about $100 million ... Sorry, $210 million of free cash flow or operating cash flow in the last 12 months.

Jason Calacanis 58:56 Yep.

David Friedberg 58:56 So if you, if you take out the stock-based comp, these guys are actually breakeven or losing money, roughly. Um, and so-

Jason Calacanis 59:03 Yeah, breakeven.

David Friedberg 59:03 Yeah, and growing.

Jason Calacanis 59:03 Yeah, and break even roughly, so there's a real question mark on this business and businesses like this that go private, where if you actually cut the OpEx and you cut the salaries and you cut the headcount, but you have to find new ways to pay people because you've been paying them with stock in the past, how do you kind of bridge that gap? And I think that's probably a little bit of the balance and the art of what these guys do well. All right. Chamath, if I may, can you explain to the audience, uh, what a private equity firm's expectation is in terms of return when they buy a company like this? And then Sax, I saw your tweet that you wanna feature, and you'll go next. Go ahead, Chamath.

David Sacks 59:35 Well, I think it's changed over time, and this is what's so powerful about the private equity industry. Um, look, you have to think about what their incentive is, because it kind of guides the outcome.

Jason Calacanis 59:46 Yes.

David Sacks 59:47 Um, early on, they were very much like venture capitalists. They were out in the, you know, edges of risk-taking, um, doing all kinds of very difficult, gnarly deals. So if you look back in the history of private equity, you know, these huge, crazy deals like RJR Nabisco or TWA Airlines were the first, um, of the industry, and they reaped enormous returns, but there was a lot of risk, and it required very heavy-handed management. Oftentimes, what that meant was firing a lot of people. Over time, private equity has gotten institutionalized, and they don't generally feature themselves as a place to get the best necessarily returns, but they are places where you can put enormous amounts of money, where the l- the likelihood of loss is extremely zero, and you generate very good rates of return.Now again, this depends on whether you want to look at IRR or DPI, right? So a lot of people will market IRR, which, you know, I think is kind of like a gameable metric, but, you know, those IRRs can be 20, 25%. If you look at DPI, which is really how much cash you get back, you know, private equity firms can generate one and a half to 2X of the money you give them, um, but they do it consistently and they very rarely lose money. So all of that is important into understanding what's going to happen in this cycle. These folks are going to buy a ton of these private software companies. I think that they are going to fire lots of people. I think they are going to make these companies run hyper-efficiently, and they will make sure that they generate that 1.2 to 1.7X that has been historical. Very rarely will they lose money in these things. Uh, by the way, that's gonna mean that a lot of these other companies will have to reset valuation. So you saw yesterday, checkout.com went from a $40 billion valuation down to 11. You're seeing some companies only go down 10 or 15%. But it's all happening.

Jason Calacanis 1:01:54 It's a process, isn't it, Chamath? Isn't this just like what happens in real estate where-

David Sacks 1:01:57 It's the beginning of this process.

Jason Calacanis 1:01:59 Yes, 'cause in, in real estate, my understanding, having lived through these boom-bust cycles, is the person living in the home still believes their home is worth, you know, this incredible valuation. And then the people who want to buy it are like, "That doesn't match reality." And then the real estate brokers go back and forth trying to get people to, you know, go through this messy middle and come to true price discovery. A private company, it's hard to get pro- true price discovery until they're on the brink of insolvency.

David Sacks 1:02:23 We won't, we won't see it.

Jason Calacanis 1:02:24 They don't have the money.

Chamath Palihapitiya 1:02:24 Right. Well, we, we just got some data on that, actually. Can we put, bring this Cooley data in?

Jason Calacanis 1:02:28 Let's do it. Yeah.

Chamath Palihapitiya 1:02:29 Yeah, so Cooley looked at, I guess-

Jason Calacanis 1:02:32 A law firm in Silicon Valley.

Chamath Palihapitiya 1:02:33 Yeah, they're a prominent Silicon Valley law firm. They looked at a thousand deals over the last three quarters of this year.

Jason Calacanis 1:02:38 Mm-hmm.

Chamath Palihapitiya 1:02:39 And what they saw is that you're, the later the stage, the bigger the valuation correction. So Series D rounds went from three and a half billion-

Jason Calacanis 1:02:46 Oh!

Chamath Palihapitiya 1:02:46 ... to 527 million. That's an 85%-

Jason Calacanis 1:02:48 One seven? Oh.

Chamath Palihapitiya 1:02:50 Yeah, that's an 85% drop. Series C went from 502 million to 130 million.

Jason Calacanis 1:02:55 Two thirds.

Chamath Palihapitiya 1:02:55 That's a 74% drop.

Jason Calacanis 1:02:57 (sighs)

Chamath Palihapitiya 1:02:57 Series B went from 164 to 90.

Jason Calacanis 1:03:00 Okay.

Chamath Palihapitiya 1:03:00 That's a 45% drop. And then Series A went from 58 to 45. That's only a 22% drop. There's just less room to compress there. But the point is that Series B, roughly a 50% drop, Series C, roughly a three quarters drop, and Series D, roughly a, um, like I said-

Jason Calacanis 1:03:19 One seventh.

Chamath Palihapitiya 1:03:19 ... 85%. Yeah, one seventh drop. So I think founders right now are, they're just, like, a little bit delusional about this money they raised last year. They're still way too anchored on last year's valuation. And if only they would think in terms of this capital they raised last year, in terms of, of its real dilution, in terms of what the company is worth now, I think they'd be treating it more, more precious. So for example-

David Sacks 1:03:45 Yes!

Jason Calacanis 1:03:45 But it sucks. S- sorry, go ahead.

Chamath Palihapitiya 1:03:46 For example, hold on, if you raise-

Jason Calacanis 1:03:47 It's like they won the lottery and they-

Chamath Palihapitiya 1:03:49 Yes.

Jason Calacanis 1:03:49 ... they don't wanna, they don't realize they won the lottery.

Chamath Palihapitiya 1:03:50 Right.

Jason Calacanis 1:03:50 I had this conversation with a founder, and-

Chamath Palihapitiya 1:03:52 This is the only money they're ever gonna see, is the bottom line, and they're spending it like they're gonna win the lottery every year. So for example, let's say you take a company-

Jason Calacanis 1:03:59 Not how it works.

Chamath Palihapitiya 1:03:59 Yeah, let's say you take a company that raised 200 million last year at two billion. So, it was 10% dilution. So in their heads, they're thinking, "Oh, well, this isn't that expensive." Like, 10% dilution's a rounding error, but really, probably the company is worth maybe 400 million now.

Jason Calacanis 1:04:15 (laughs)

Chamath Palihapitiya 1:04:15 Right? 'Cause it's gone down 80%.

Jason Calacanis 1:04:17 Yes.

Chamath Palihapitiya 1:04:17 This 200 million of your 400 million is half the value of the company.

Jason Calacanis 1:04:21 Yes, so that's, yeah.

Chamath Palihapitiya 1:04:22 And you're squandering it, you're squandering it at a rate of 100 million a year. So you're basically burning up 25% of the value of your company this year and the next year.

Jason Calacanis 1:04:30 So done.

Chamath Palihapitiya 1:04:30 And then by the way, you're gonna be in crisis after that, 'cause you're probably-

Jason Calacanis 1:04:33 It's like a lottery winner buying, like, a giant superyacht.

David Sacks 1:04:36 I ha- had an observation that a lot of the investors that sit on the boards of these companies, th- they have an incentive to not see those valuations come down too quickly, do they not? And so there is this sort of, like, interest in, "Hey, I don't want you to have to go reprice the company or do a down round, because then my portfolio gets written down, and then I'm in the middle..." Everyone's always in the middle of a fundraising cycle with LPs, "And then I'm gonna have a tough conversation with my LPs about my, my value." So do you not see VCs and investors playing an active role in trying to keep the valuations propped up to some extent, particularly where they have big markups?

Chamath Palihapitiya 1:05:14 100%.

David Sacks 1:05:14 Either by extending bridge rounds or doing other sorts of, you know, uh ...

Chamath Palihapitiya 1:05:20 Look, n- nobody, nobody likes to go through a down round, and that includes founders and existing investors in the company. That being said, we're not talking here about new financing conversations. What we're talking about is advice that are ha- is happening in board meetings. And, you know, maybe other VCs aren't pushing as hard as we are, but, you know, the advice I'm giving in board meetings is what I'm telling you publicly today, which is, this is the last money you may be able to raise on attractive terms, if at all. You need to treat it much more preciously. The world has fundamentally changed. And by the way, we haven't even gotten into what's coming, the demand contraction that's coming next year. We're already s-

Jason Calacanis 1:05:57 Explain what demand contract- contraction is for the audience, please. Thank you.

Chamath Palihapitiya 1:06:00 Okay, look, there's gonna be three major sources of slowdown for software companies next year. Number one, new business is gonna dry up. Companies are just gonna sp- be spending a lot less money next year, because they're all cutting costs. So you should expect your new business to be roughly 50% of what it was. Uh, next year, it'll be 50% of, of what it was last year. That's my rule of thumb for most companies. New business down 50%. Number two, churn is gonna be higher. We haven't seen that much logo churn yet, but next year, a lot of companies are gonna start going out of business, and it's gonna happen over the next two years. So you're simply gonna see logo churn rates, say, among small businesses go from, like, a historical norm of 15% to maybe 25 or 30, especially if you're-

Jason Calacanis 1:06:45 In other words, your customer, the logos goes poof.

Chamath Palihapitiya 1:06:49 Your customers simply are not gonna exist.

David Sacks 1:06:49 Yes. That's what a logo means, yes. The actual entity.

Chamath Palihapitiya 1:06:53 And then the third... Yes. And the third major source... Yes, logo churn means the entity doesn't exist. Then you've got seat contraction, which is these companies are not hiring as fast. In fact, they're doing layoffs. So they're simply not gonna buy as many seats of your software as they needed to in the past. For the last decade, we've had a tailwind, an enormous tailwind for software companies of seat expansion, which is every year your existing customers would buy more seats of your product for their new employees. Now they're actually gonna have fewer employees or maybe headcount freezes. So they're actually buying fewer seats.

David Friedberg 1:07:24 Oh, my God.

Chamath Palihapitiya 1:07:24 Fewer seats.

David Sacks 1:07:24 By the way-

Chamath Palihapitiya 1:07:24 Fewer seats.

David Sacks 1:07:25 ... if you, if you take all those three things, the deal of the century-

David Friedberg 1:07:28 Hmm.

David Sacks 1:07:29 ... was Figma selling to Adobe for $20 billion.

David Friedberg 1:07:31 Yes, sir. Yes, sir.

David Sacks 1:07:31 Because if you take those three things-

Chamath Palihapitiya 1:07:34 (laughs)

David Friedberg 1:07:34 Oof.

David Sacks 1:07:34 ... I mean, oh my God, they just absolutely top-ticked before any of this stuff was known.

Chamath Palihapitiya 1:07:39 Totally.

David Sacks 1:07:39 So today, Adobe could probably buy this thing for, like, $7 billion (laughs) instead of $20 billion.

David Friedberg 1:07:45 So does that mean they try to do a breakup fee and get out of the deal? Is that even possible?

David Sacks 1:07:51 I don't know. But if I was s- if I was Figma, I'd try to close this thing ASAP and get that money now.

David Friedberg 1:07:54 Yeah, yeah.

Chamath Palihapitiya 1:07:55 Yeah. You're right about that. And, and by the way, what I'm seeing from founders is that they still want to grow 100% plus over the next year. The problem is that the headwinds are gonna be intense. So if, if you're flying a plane and the headwinds are extremely intense and you try to maintain your speed, you're going to burn an enormous amount of fuel. You're going to be incredibly inefficient.

David Friedberg 1:08:17 Headwind.

Chamath Palihapitiya 1:08:17 It's better to basically just moderate your speed, let the headwinds basically pass. We're going to have major economic headwinds for the next four to six quarters, call it year and a half. It's okay to have a slower growth rate. Preserve your cash. Don't burn up your fuel.

David Friedberg 1:08:32 Yeah, hunker down.

Chamath Palihapitiya 1:08:33 So what we're trying to do-

David Friedberg 1:08:35 Batten down the hatches.

Chamath Palihapitiya 1:08:35 ... is give... We're trying to give permission to our founders to grow at a slower rate because they feel this enormous pressure from their VCs to grow at, at, at insane rates.

David Sacks 1:08:44 Can I build on this? I think Friedberg said it very well. The scam in venture capital is demonstrated in the following chart. This is using Cambridge and our friend Brad Gerstner helped put this together. So what is this? This goes back all the way to 1997. And the gray bar is what venture capitalists share with their limited partners as to how well they are doing. What is called-

David Friedberg 1:09:09 The top quartile of venture capitalists.

David Sacks 1:09:11 ... the top qu- And this is the top 25%.

David Friedberg 1:09:12 Yes.

David Sacks 1:09:12 Okay, so this is, this is a venture capitalist and, you know, our, our returns have been consistently top quartile, so instead of cherry-picking anybody else, I'll just use us, but it could be Sequoia, Benchmark, you name it. We would go back-

David Friedberg 1:09:24 Launch. We're in there.

David Sacks 1:09:25 Launch. You would go back to folks, Craft, you would go back to folks and say, "Hey, guys, the total value of our portfolio is three times your money in 1997's vintage." Okay? It, it was, uh, four times your money in the 2010 vintage. Feels really good. But again, the job of the venture capitalist is to convert the gray bar into the purple bar. And historically, there has been a decay. So for every dollar of gray bar that you show, you typically only get 73 cents actually returned to people.

David Friedberg 1:09:59 Mm-hmm.

David Sacks 1:10:00 Okay?

David Friedberg 1:10:00 The paper value, the book value versus... Yeah.

Chamath Palihapitiya 1:10:02 Just to be clear, the val- the valuations that you get when you sell your company or it goes public end up being 73% of what you marked at the peak, what you said they were worth.

David Sacks 1:10:11 Exactly right, exactly right. And the actual value of this purple bar going back, you know, 30 years is 1.7x. So just to put numerical numbers on this, if you were a venture capitalist, you would raise $100 fund. At the peak, you would actually show that that $100 became two hundred and about $28. But when, when push came to shove and when it was all said and done, you would return $170 back to your investors. That's the rough equation. So what's the problem? Well, the problem, as you can see in this chart, is right around 2015. Which is, all of a sudden, you know, what we've started to see are these continually elevated gray bars. Yes, this stuff is worth seven times, six times, five times, but we have not seen the purple bars catch up. Now some people will say, "Well yeah, but you have to give it time." And, you know, this is probably what other vintages looked like.

David Friedberg 1:11:15 It has to bake. That's reasonable, yeah.

David Sacks 1:11:16 And all you need to do is do what's called a regression. And you need to regress these things to the mean and make the following assumption. Assume for a second that this time is not different. Assume that these historical averages, 2.2x, 1.7x holds. Well, that's what the, the black line here shows. You can calculate the area above the curve as the value at risk, right? The amount of money we will destroy because of all the shenanigans that Friedberg just talked about, propping up marks, not willing to look at actual market clearing prices. Well, if you do the math, the sum of the area above this black line is almost a trillion dollars around the world. And it is about $600 billion for US venture capitalists. This is the dynamic that the private equity industry is going to prey on. So if you saw Thoma