E110: 2023 Bestie Predictions!

Jason Calacanis 0:00 All right, everybody. Welcome to 2023. Everybody's well rested and ready to take on 2023? Yes? Chamath, how was your break?

Chamath Palihapitiya 0:07 Yes. Amazing.

Jason Calacanis 0:08 Okay. Saxypoo, I know you don't go to, uh, temperatures that are under 57 degrees anymore. Did you have a nice break? Did you go somewhere warm?

David Sacks 0:16 Yes.

Jason Calacanis 0:17 Okay, that's a confirmation. Uh-

David Sacks 0:19 (laughs)

Jason Calacanis 0:19 Wow, man of so many words.

David Sacks 0:20 (laughs)

Jason Calacanis 0:20 And Freeburg.

David Sacks 0:21 I'm over cold weather vacations.

Jason Calacanis 0:24 Yeah, uh, that does happen at a certain point. I-

David Sacks 0:26 Actually, we went to Florida. We went to the, the free state of Florida.

Jason Calacanis 0:29 Oh, really?

David Sacks 0:30 Yeah.

Jason Calacanis 0:30 What- what- what's going on in Florida at the turn of the new year, I wonder, that drew you down to the great state of Florida?

David Sacks 0:37 We were just freeing it up in the free state of Florida.

Jason Calacanis 0:40 (laughing)

0:42 What's going on? Let your winners ride. Rain Man, David Sachs. What's going on? And I said- We open sourced this to the fans and they've just gone crazy with it. Love you guys. Queen of quinoa. What's going on?

0:57 We have our 2023 predictions now. Uh, played some music and all that kind of stuff, Producer Nick, at this point. Let's get to it. Last year, we did our biggest-

Chamath Palihapitiya 1:06 By the way, do you guys, do you guys notice that every time we talk about something, somewhere between sort of two months to a year later, The Wall Street Journal ends up writing a big think piece about it?

Jason Calacanis 1:15 Yes, think piece about it, yes.

Chamath Palihapitiya 1:16 So, I tweeted into the group chat, like last year, we all talked about Sequoia and distributing public equities and-

Jason Calacanis 1:23 Yeah.

Chamath Palihapitiya 1:23 ... how it's very fraught and difficult. And then today, they write this big article about how people have just burned enormous amounts of billions of dollars that they could have returned to LPs, like these venture investors-

Jason Calacanis 1:36 Mm-hmm.

Chamath Palihapitiya 1:36 ... by not distributing.

Jason Calacanis 1:38 Yes.

Chamath Palihapitiya 1:38 That makes sense. Three weeks ago, when we did our end of the year wrap up, my big winner for 2022 were the pot shops, right? Citadel. And today, in Wall Street Journal, an article lands that these guys, with 56 billion of AUM, over the last two years have made almost $45 billion of revenues. Isn't that incredible? I mean-

Jason Calacanis 2:01 This is what happens, Chamath. Usually, uh-

Chamath Palihapitiya 2:04 They are j- These guys are just crushing it. And Citadel Securities did like almost, you know, seven and a half billion of revenue. I mean-

Jason Calacanis 2:11 Hm.

Chamath Palihapitiya 2:11 ... it's unbelievable, these businesses, how good they are.

Jason Calacanis 2:15 Yes. So, let's get into, uh, and this is typical. Chamath, if you think about journalists, they're trying to get into the conversations that are occurring at the bar after the event, the late night conversation, the group chats. Well, and that's what this podcast is. It's the exposed back channel, right? And so if you listen to this pod, you got the back channel of Silicon Valley politics, tech, science, et cetera. So, let's do our predictions. In 2020, we said our biggest political winner would be, uh, Sacks and I both said DeSantis, Chamath said Xi Jinping, and Freeburg

Jason Calacanis 2:44 said Putin. Who do we think is our biggest political winner, uh, going forward? Who do you pick? Sacks, biggest political winner for 2023? Who will be your biggest political winner for 2023?

David Sacks 2:53 Well, I went a little bit outside the box here because I think-

Jason Calacanis 2:56 Oh.

David Sacks 2:56 ... we're gonna have gridlock in Washington. So, not expecting a ton to be coming out of Washington over the next year. My pick for biggest political winner is Asian American college applicants.

Jason Calacanis 3:08 Oh.

David Sacks 3:08 There are two Supreme Court decisions that the court heard on Halloween last year. Uh, there was a lawsuit against Harvard and, uh, another lawsuit against, uh, UNC by a group called Students for Fair Admissions, and that they maintain that Harvard and UNC violate Title VI of the Civil Rights Act, uh, because Asian American applicants are far less likely to be admitted than similarly qualified applicants from other groups. And the, the federal courts in Boston and North Carolina rejected this argument, but the Supreme Court took up the cases. So, they kind of went out of their way-

Chamath Palihapitiya 3:46 Hm.

David Sacks 3:46 ... to hear this and I think that they are going to find-

Chamath Palihapitiya 3:49 They're gonna repeal affirmative action.

David Sacks 3:50 ... I think the majority will rule to strike down these policies that, uh, really discriminate against Asian Americans. And I think they're the last, uh, group in America where it seems to be okay to discriminate against, and, uh-

Chamath Palihapitiya 4:04 Absolutely.

David Sacks 4:04 ... I think the Supreme Court is gonna, is gonna find that unconstitutional.

Jason Calacanis 4:09 Chamath, any thoughts there? You have brought this up multiple times on the podcast over the last two years.

Chamath Palihapitiya 4:14 I have said that this was unfortunately... Affirmative action, when it started, I think had very, very good intentions, and I still think that there's a place for it. The problem is that these very liberal institutions decided to play judge, jury, and executioner on which minorities counted-

Jason Calacanis 4:34 Mm-hmm.

Chamath Palihapitiya 4:35 ... in affirmative action, and that's not what the intention was. The intention was to look at the establishment and their ability to get their progeny into these incredible schools, even when they didn't deserve to be there. And so I think this was always, uh, an issue of classism that was disguised as racism. And people who are in the upper classes of society have always had an edge. You had the legacy admissions into Harvard, you had people, the Kushners very famously, right? Like, the $5 million check from the father that got the son into the school, all of this stuff. It's al- it's been well written about. And whether or not those things are right isn't the point. I think the point is that there are folks in emerging lower middle classes who have the potential to crush and those kids should have a chance, and you can't just decide who those kids are based on the color of their skin. And in this case, what happened was, some Blacks were still allowed in, some Hispanics were allowed in, but Asian Americans broadly were discriminated, and that was a really stupid outcome. You cannot punish kids for willing to work their ass off, and I think that that was the unfortunate outcome of what affirmative action has become by 2022. So, it is gonna get repealed. The reason it's gonna get repealed is that...You know, we have case law that very clearly states that, that any institution that accepts federal funds cannot have any form of discrimination. And this is how these folks who have tried to repeal affirmative action have taken up this lawsuit. And hopefully the outcome is a more meritocratic system that also tries to create a plurality of different people from different backgrounds.

Jason Calacanis 6:25 Friedberg, any thoughts? Uh, if not, uh, your biggest political winner for 2023.

David Friedberg 6:30 Um, my biggest political winner for 2023 is, um, MBS, Mohammed bin Salman. I think that Saudi Arabia will have the most important year in kind of the modern era in terms of, uh, their role. I don't know if you guys saw this Reuters report from a few weeks ago, but there's kind of, um, a deepening discussion about the oil yuan trade, in that, um, Saudi would sell oil to China and they would get paid in yuan. Saudi Arabia sits at the intersection of the United States, Russia, and China. They have relationships with all three nations. And in the kind of, um, conflict and power struggle that is underway, I think that ultimately, the direction of where global currency kind of reserves will be taken, um, and the importance of these great nations and who sits atop whom can actually be dictated and s- significantly influenced by MBS this year, by some of the deals and trades he might put in place and the r- and the, the, the kind of partnerships he might forge. I think as a result, you will see him kind of rise in terms of influence, not in terms of, you know, hey, the world has accolades for this, for this guy. But I think in terms of global influence, uh, he will rocket ship to kind of the top because of this, this kind of, uh, jockeying he can now do between these three great nation states, um, in defining, you know, what's going to happen with the US and what's going to happen with China and what's going to happen-

Jason Calacanis 8:02 Great selection.

David Friedberg 8:03 ... with, with currency reserves-

Chamath Palihapitiya 8:04 Great, great selection. And I mean-

David Friedberg 8:05 ... and the US prime ministry.

Jason Calacanis 8:05 Great selection. Chamath, what do you got?

Chamath Palihapitiya 8:07 The shitty, the shitty thing, by the way, about your selection is that Biden, our explicit stance is unfortunately quite confrontational with MBS. And-

David Friedberg 8:18 Yeah.

Chamath Palihapitiya 8:18 ... you saw that play out in Q4. We asked them to ease up on OPEC+ to introduce supply cuts, and they did some nominal 100,000 barrel per day cut, didn't do much of anything. There was an article, to your point, Friedberg, just recently about Saudi really doubling down on getting the oil out of the ground and monetizing their petrochemicals. So there's just going to be a glut of supply in the market, and we have the least amount of influence with Saudi Arabia than we've ever had. And it seems like we could change that if we decided to, but I think Biden has taken this very confrontational approach, which doesn't seem to make-

David Friedberg 9:05 And remember-

Chamath Palihapitiya 9:05 ... a lot of sense.

David Friedberg 9:06 ... their stated intent is to diversify away from oil and into technology and other kind of emerging growth economies, that's why they funded the vision fund. That's why MBS made that big kind of visit to Silicon Valley a few years ago. And there is technology that they want to import into Saudi Arabia and they want to have ownership in around the world. And if the US is creating a barrier for them to import US tech into Saudi or for Saudi to kind of invest in the US, but China and Russia have open arms and all they want is for Saudi to start doing trades in yuan, it's going to happen. And I think that's where this guy has, um, kind of a real opportunity to shift the global, uh, economic dynamic.

Jason Calacanis 9:42 Say what you will about Trump, he, uh, had open dialogue with North Korea, China, Russia, MBS.

Chamath Palihapitiya 9:50 Keep your enemies close. Sure.

Jason Calacanis 9:52 You want to be able to talk to anybody, and he was-

David Friedberg 9:54 Anybody.

Jason Calacanis 9:54 ... able to talk to anybody. Now you also want to be able to say, "Hey, listen, you can't dismember a journalist like Khashoggi," and you need to be able to have both of those ideas in your head. You can't be rigid in foreign policy. You have to be fluid and keep people at the table talking. Chamath, who is your big politi- Who do you predict will be the big political winner of 2023? Chamath's prediction, everybody. Go ahead.

Chamath Palihapitiya 10:14 I really like spread trades, right?

Jason Calacanis 10:17 Okay, yes.

Chamath Palihapitiya 10:17 Where you go long something and short another. So I'd like to pair my biggest political winner with my biggest political loser for 2023.

Jason Calacanis 10:23 Okay.

Chamath Palihapitiya 10:24 And I am going to focus on the Republican nomination, and I am going to go long Nikki Haley, and I am going to go short Ron DeSantis. Now let me explain.

Jason Calacanis 10:36 Whoa.

David Friedberg 10:36 Mm.

Jason Calacanis 10:37 Sachs at, if-

Chamath Palihapitiya 10:37 Again, if you-

Jason Calacanis 10:38 If you're wa- If you're not watching Sachs right now, he is ready to interject. Go, Chamath.

David Friedberg 10:44 (laughs)

Chamath Palihapitiya 10:44 So I think that all of this nonsense, for example, in the House speaker race, all of the midterm results, what it really speaks to are, is people are getting exhausted with the lunatic fringes of both parties. That's point number one. And point... So that favors moderates as an emergent class. And point number two is that if you look back through many, many cycles of Republican and Democratic nominations, it is a very negative thing to be in the lead so early going into the Iowa caucuses in January. And so if you put those two things together, the risk is that DeSantis decays, things emerge, people attack him because he's the clear front runner, and the opportunity, just like it was for Trump in '16 or for Clinton or for George Bush, not Herbert Walker, but you know, W, is to emerge from the back. And so if I think about a moderate person who can emerge from the back, who can consolidate the ranks, they should probably be from the South, they will have a lot of these purple compromises that Sachs mentioned in their policy program, and they will have a history of winning and a history of normalcy.And so I think that of all of the places where you could ever elect a woman as President of the United States, I think it will come from the Republicans before it comes from the Democrats. I think the Democrats are unfortunately increasingly judgemental, and I think it's very difficult for a woman to emerge there. But I do think that Nikki Haley has a shot. So I'm gonna go long Nikki Haley, and I'm gonna short Ron DeSantis.

Jason Calacanis 12:27 Okay. I like it. A spread trade for his prediction. Well done. Before, uh, Sachs you interject, let me just do mine and then... 'cause then you'll have two to interject to. Uh, I was looking, uh, at Biden and Trump and thinking, "Hmm. Which one of these is gonna have the big win in 2023?" Since they're the two biggest, I think, uh, players, I have a prediction for Trump. I think he's gonna lose 50 pounds on the Ozempic. Everybody loves a weight loss story. I think he is going to be indicted by Garland.

David Sacks 12:55 (laughs)

Chamath Palihapitiya 12:55 Is he on... Wait a minute. Sorry. He's on Ozempic?

Jason Calacanis 12:58 No. I'm predicting an Ozempic run.

David Sacks 13:01 Ah.

Chamath Palihapitiya 13:01 Oh, wow.

Jason Calacanis 13:01 And he's gonna drop 40, 50 pounds. Then we're gonna have a �... Trump get indicted by Garland and the debates and the, and the, and the �... with DeSantis. I think he's gonna go after DeSantis based on weight and height, and then he's gonna win the nomination in '24, and we're gonna have Trump versus Biden. But this is a crazy prediction here, I think we're gonna have a settlement. I think he's gonna agree to not run and get the pardon. This is a crazy prediction, I know. But I think he loses the weight, he wins the nom, he gets indicted and then he gets the Richard Nixon pardon, global pardon for all of the shit he's done. Sachs, you can reply now (laughs) to these two crazy predictions, a spread trade and mine.

David Sacks 13:50 I mean, this is like proof positive that everything you have to say about Trump is an act of projection.

Jason Calacanis 13:55 Go ahead.

David Sacks 13:55 I mean, like, Ozempic? I mean, like... (laughs)

Jason Calacanis 14:00 (laughs)

David Sacks 14:00 I mean, are you talking about yourself or Trump?

Jason Calacanis 14:03 Strike. Boom.

Chamath Palihapitiya 14:04 Tell us your Ozempic story, Jacob.

Jason Calacanis 14:05 I, I, I did... Part of my weight loss journey has been Ozempic and Supergut. Yes. Both of those things and fasting.

David Sacks 14:10 Okay. All right.

Jason Calacanis 14:10 Have you, Sachs, done any Ozempic? Uh...

David Sacks 14:12 Yeah. I've, I've tried it. Yeah.

Jason Calacanis 14:14 Um, I think everybody should be looking into this if you have weight issues. It's a, it's a, it's a great, new Wegovy, Ozempic.

Chamath Palihapitiya 14:19 I, I, I would say it even more broadly. I've been reading a lot about these GLP-1s and I s-

Jason Calacanis 14:22 Yeah.

Chamath Palihapitiya 14:22 ... I gotta tell you, Statins are a clear wonder drug.

Jason Calacanis 14:25 Yes.

Chamath Palihapitiya 14:25 Okay. I think the, the 50-year longitudinal data on its value is pretty unimpeachable. Metformin, even taken prophylactically, has shown incredible benefits for cell regeneration, longevity, and glucose management. And look, the reality is, let's just take a step back. The American diet, we're all pre-diabetic. Okay. So let's just, let's just not b- beat around the bush. The way that Americans eat and our food supply and also probably in Western Europe, is pre-diabetic by definition. It's shit, it's trash. So Metformin makes a lot of sense. And again, its longitudinal data is incredible. But I gotta tell you, the early data on these GLP-1s are unbelievable.

Jason Calacanis 15:10 It's extraordinary.

Chamath Palihapitiya 15:11 It's extraordinary.

Jason Calacanis 15:11 And I can tell you from firsthand experience, I would lose half a pound a week when I would diet.

Chamath Palihapitiya 15:16 No, but what I'm saying is just-

Jason Calacanis 15:17 And I, I would drop 10.

Chamath Palihapitiya 15:17 ... it's beyond that. Um, what I'm talking about is insulin response-

Jason Calacanis 15:21 Yes.

Chamath Palihapitiya 15:21 ... it's cardiac health.

Jason Calacanis 15:22 Yes.

Chamath Palihapitiya 15:22 And so if this data tracks like this, man, you're just gonna wanna put everybody on these GLP-1s.

Jason Calacanis 15:26 Well, I just wanna also put a disclaimer out here, do your own research, work with your doctors, whether it's for Metformin or Ozempic. But I had great results on it. I recommend if you're struggling with weight loss like I did for many years, you talk to your doctor about it. That's it. It's not a commercial for Wegovy or Ozempic, but I do think these things are gonna change the world.

Chamath Palihapitiya 15:41 Or Mujaira.

Jason Calacanis 15:42 Well, and they're getting better and it seems like dia- people with diabetes are on them for life. So if your question is like, if I could do this for a year to lose weight, you know, I think diabetics are on it for life. So when I made my decision, again, work with your doctors, not random podcasts or venture capitalists for your health advice. I was like, well, if all of these people who have diabetes are gonna on it for years-

Chamath Palihapitiya 16:02 Unless it's non-toxic. Go get a Prenuvo scan, just to make sure you-

Jason Calacanis 16:06 Ah, absolutely.

Chamath Palihapitiya 16:06 ... you got no diabetes chances.

Jason Calacanis 16:07 All right. So there you have it. Those are our, uh, predictions. Sachs-

Chamath Palihapitiya 16:10 Wait, David.

Jason Calacanis 16:10 Did you want to respond to any of this?

Chamath Palihapitiya 16:11 I wanna, I want the Sachs to react to my spread trade.

David Sacks 16:14 Yeah.

Jason Calacanis 16:14 Okay.

David Sacks 16:14 So, so, so look, I think, you know, if you're going on a betting site, I think that, um, you could place that bet that Chamath made pretty cheaply and probably it's like, has some good upside to it. So I don't criticize it as a bet. Do I think it's actually gonna happen? No. And I, I think the reason is, is this. That if you look at what's happening right now with the speaker's race, there's two very clear wings in the Republican Party. There's an establishment wing and then there's kind of this populous MAGA wing. And the candidate, whoever it is in 24, needs to unite those two wings. And I think this is really the best argument for DeSantis is he's widely accepted by both. I think Nikki Haley's problem is that she's very well regarded within the, uh, establishment wing of the Republican Party, but she has no meaningful support within the populist wing. And so I don't think she's capable of bringing the party together, at least at this point in time. She would have to prove, let's call it populist bonafides that she just doesn't have right now. So this is why I think, you know, DeSantis... He, he does have front runner risks. You're right. That people are gonna keep taking shots at him as long as he's the front runner but-

Jason Calacanis 17:18 All right. Let's rip through-

David Sacks 17:19 He's capable, he's capable of uniting the party in a way that it desperately needs right now, as we're seeing with the Kevin McCarthy thing

David Sacks 17:25 playing out.

Jason Calacanis 17:26 Yeah. Okay. Let's go for our biggest losers. Uh, we'll rip through this. Last year I said Biden and Trump in the extremes. Chamath said the progressive left, again, the extreme. Sachs said Pelosi, who just wrapped up her tenure. And Freeberg said US influence globally was the biggest political loser. Uh, let's get our predictions for the biggest political loser of 2023. Freeberg, who do you think will be the biggest political loser of 2023? The world wants to know, Freeberg.

David Sacks 17:55 I would continue my US influence, but I, I am gonna shift. Here's what I think is gonna happen this year. My, my big prediction is based on, um, I think the world has too much debt.

David Friedberg 18:08 I think that the economic slowdown coupled with rising interest rates globally and a, and a dearth of, uh, kind of asset, uh, capital inflows means that there's gonna be a lot of issues with a number of debt markets around the world, particularly kind of emerging sovereign debt. Just to give you guys a sense, global debt is about $235 trillion in public e- and private. Um, you know, that's somewhere between five and $15 trillion of interest payments a year, depending on what the net rate is on $96 trillion global GDP. And there's another trillion and a half of unfunded liabilities in the US in pensions and Social Security and all this other stuff. I think this is the year where a lot of the debt markets start to unravel. The, the-

Chamath Palihapitiya 18:45 So Friedberg, is this a business loser-

David Friedberg 18:46 ... primary entity that steps in-

Chamath Palihapitiya 18:48 ... or a political loser?

David Friedberg 18:49 I'm gonna tell it in one second.

Chamath Palihapitiya 18:50 Oh, okay.

David Friedberg 18:50 This is the political, yeah, so the political ramifications, so the political ramifications for me, I think that the, um, the entity that steps in to try and support these, um, unwinding moments is the IMF. And I think that no matter what the IMF does, they're gonna look bad. I think that the, (laughs) you know, it's sort of like, like Jerome Powell, this, this past year, right? Like, you, you raised rates too late, you raised rates too quickly. No matter what you do, it has some adverse effect and impact. It's either inflationary, uh, or it impacts growth. And so I think the IMF, uh, is gonna get a lot of heat for either acting not too soon, uh, or sorry, not fast enough, or, uh, or acting too aggressively and causing inflation, uh, as a bunch of these markets face credit risk, uh, this year. So my big bet is the IMF is gonna play a major role, and we're gonna be talking a lot about the IMF later this year. I, I think as a result, the IMF will get a lot of heat and you'll end up seeing a lot of pressure and political, you know, just like we blame NATO, just like we blame Jerome Powell and the Fed, we'll end up blaming the IMF for a bunch of problems, uh, that'll arise. But the natural physics of what's going on is the world has too much debt and not enough growth to cover the debt, the cost of debt. That's it.

Chamath Palihapitiya 19:57 Okay.

David Friedberg 19:58 And the IMF will be the political kind of, you know, hit that'll, that'll result.

Chamath Palihapitiya 20:01 Who do you have-

David Friedberg 20:02 A little complicated of a point of view, but I think, yeah.

Chamath Palihapitiya 20:05 And who do you have, uh, as your biggest political loser prediction for 2023, Mr. David Sacks?

David Sacks 20:11 Well, I mean, Kevin McCarthy may not survive the week, so let me go in a different direction.

Chamath Palihapitiya 20:15 (laughs)

David Friedberg 20:17 (laughs)

David Sacks 20:17 I think California is my big political loser. And I would say in particular, the City of San Francisco, both are gonna have gigantic budget shortfalls. You may remember that this is back in 2021 when we had that asset bubble, California had a surplus of 76 billion.

Chamath Palihapitiya 20:36 Insane.

David Sacks 20:37 Yeah, insane. And then 2022 happened, and now the state is looking at a $24 billion deficit. Well, if we had taken, say, a third of that surplus from '21 and put it in a rainy day fund, we wouldn't have to worry about this deficit, but that was never done. Newsom started handing that money out like candy to the electorate to goose his elect-, his reelect numbers and to get him past the, that recall, remember.

Chamath Palihapitiya 21:03 Okay.

David Sacks 21:03 So the, the state never got its fiscal outlook in order, and now I think it's gonna be even worse in 2023. And San Francisco, the city, very similar kind of problem where its, uh, tax base is heavily dependent on commercial real estate, which is really suffering. So, you know, the City of San Francisco and the State of California, they've moved their tax base to, uh, to v- highly volatile capital gains and with a really lousy stock market. I don't know how these guys are gonna meet their budgets. So a lot of pain coming.

Chamath Palihapitiya 21:32 It's gonna be a lot of austerity and pain coming, that's for sure. And these people do not know how to manage a budget. They're incompetent. So you say California, Friedberg says IMF. Chamath, who do you think the biggest political loser for 2023 will be? Who's your prediction? Already gave it to me, DeSantis, right? Remember? He's part of this country. Okay. And, uh, I'm in alignment with you. I think DeSantis peaked a little too early and the forever Trumpers and the, and the chaos is gonna be a little too much for him to handle.

Chamath Palihapitiya 21:57 Okay, now we get into what everybody wants, business, business, business. Biggest business winner for 2023. Who do you have, Chamath, for your biggest, biggest business winner of 2023? I'm gonna pick something out of my portfolio. Mm-hmm. I think I'm the only non-trivially large investor in both SpaceX and Relativity Space. Relativity Space has a huge... SpaceX is clearly just crushing on all cylinders. And they're really the only game in town with respect to launch capability. And if you just Google it, you'll see that the Europeans, you know, have a hit or miss capability on launch. The Russians are completely unable to do launch now because of all of these sanctions. The private companies in New Zealand or the United States have also had fits and starts, really incapable. Relativity, which is really, which is now the second most highly valued space business, is about to do a launch in the third week of January. And the big difference between it and SpaceX, which is sort of why we did it, this is a early YC company I did the series A and kind of went along the whole way, they have 3D printed everything. And the reason why 3D printing is interesting is you take a... So if you, if you think a rocket costs $5 billion if built by NASA, Elon was able to take that to 100 to 500 million. And if you 3D print everything, you can take that cost to like five to 50 million. And so it allows you to just have this repeatability and manufacturability. Now, SpaceX also has a lot of 3D printed parts, but Relativity's entirely 3D printed. It has a launch in three weeks at Cape Canaveral, I think. And we have a, like a $10 billion order book that gets unlocked. So I don't know how to see beyond a lot of these market forecasts right now, so I'd rather pick a company. I'll pick something in my portfolio. If the rocket does not blow up, there's a (laughs) $10 billion order book and this company is now on a trajectory to be as valued as SpaceX. And if it doesn't- All right, talking his book times two. Well done. And if it doesn't, i- it goes to zero.

Jason Calacanis 24:15 ... Freeburg, go ahead and talk your book times two or three. Let's see if you can one-up Chamath. Which one of your investments will be the biggest business winner of 2023, Freeburg? (laughs)

David Friedberg 24:25 I'm not an investor. My big bet is OpenAI. It's just way too obvious to be anything else this year.

Jason Calacanis 24:30 (laughs)

David Friedberg 24:30 As you guys know, there are dozens of startups that are being started right now, based on OpenAI's demonstration of DALL-E and, uh, ChatGPT.

Jason Calacanis 24:37 Yes.

David Friedberg 24:37 I think we're seeing this in the enterprise and consumer markets. I think OpenAI will become, uh, to some degree, maybe, they could be, there's many paths they could take, be AWS providing tooling and infrastructure to all these startups that are building applications for consumers and, and business users. Or they will end up doing a massive deal with Microsoft. I think it's inevitable they're gonna get a billion-dollar-plus investment this year. They could power, you know, AI-driven Bing search and voice-driven search. They could build their own products and their own tools. And they're becoming great investors. They invested in Descript, which is a product company we use here for our podcast, which is an incredible product. And I think that Sam Altman is a very smart and, and shrewd investor as well. So for a lot of reasons, I think OpenAI could-

Jason Calacanis 25:18 Hmm.

David Friedberg 25:19 ... end up having an amazing year this year, and a lot of different paths they could walk. And we're gonna come out of this year and say they're one of the top tech companies in the Valley.

Jason Calacanis 25:25 Okay. Sacks, OpenAI has, of course, uh, increased your ability to talk to other humans, so you're seeing a lot of big wins there, I know. Um...

David Friedberg 25:35 (laughs)

Jason Calacanis 25:37 Is how do I talk to a (laughs) child about their college hopes and aspirations?

Chamath Palihapitiya 25:44 No, no, no. How do I talk to a child about their day?

Jason Calacanis 25:47 (laughs)

Chamath Palihapitiya 25:47 (laughs) Hello.

Jason Calacanis 25:49 It literally is 4-

Chamath Palihapitiya 25:50 Hello, hello progeny of mine. How are you faring today in this complicated-

Jason Calacanis 25:56 ChatGPT, write me a script-

Chamath Palihapitiya 25:58 (laughs)

Jason Calacanis 25:58 ... of talking to a 12-year-old about their hopes and dreams. Hmm. Say it in the voice-

David Sacks 26:02 That's interesting, using GPT for talking points on different topics. We should try that for the pod, you know?

Jason Calacanis 26:07 Oh, okay. Here we go.

David Sacks 26:08 We should have actually-

Chamath Palihapitiya 26:09 We should have done the GPT predictions-

Jason Calacanis 26:11 That would have been great, have GPT make its answer.

David Sacks 26:13 ... for each of these categories.

Jason Calacanis 26:14 Sacks, as a person on the spectrum, uh, yeah, how delightful is, uh, this, uh, ChatGPT in, you know, your treatment of your condition?

David Sacks 26:23 It's great. Let me, let me get to my answer here.

Jason Calacanis 26:25 Okay, please.

David Sacks 26:25 So, um, my, my answer for the big business winner of the year is America's natural gas industry.

Jason Calacanis 26:31 Mm.

David Sacks 26:32 And I have to admit, this is an aspect of the Ukraine war that I didn't fully appreciate until I read this New York Times article the other day about how natural gas prices in Europe have now fallen to the level they're at before the war. And everyone thought that there'd be this huge shortage and they wouldn't be able to heat their homes. Well, what happened? The, the answer is that Europe completely cut off their dependence on Russian gas. And in fact, the Nord Stream pipelines were blown up, so physically, they separated. But then on top of it, they basically started importing liquified natural gas from the US. And here's the key paragraph in this article from the New York Times is that, "Europe rapidly built terminals to receive liquified gas, sweeping away many of the usual bureaucratic obstacles and environmental objections." So in other words, what would normally would have taken decades to get approvals now was all put on a fast track-

Jason Calacanis 27:31 Hmm.

David Sacks 27:32 ... and Europe is now completely dependent on American natural gas. And I think this is th- again, the thing maybe I underestimated, the cold, hard American interest in this war is to basically turn Europe into a vassal of America's natural gas industry. Previously, they were about to be dependent on Russia, and Nord Stream was gonna make that situation permanent. We, you know, somebody blew up Nord Stream, now they're dependent on American LNG. They're gonna pay higher prices for that. But it's, uh, it's been a pretty impressive win for the American natural gas industry. And I think Biden has really pulled a 180 here, because you remember, when he first came into office, he canceled Keystone, he canceled drilling. He was very tough on the oil and gas industry. I think after he then delivered the hundreds of billions for the climate special interests and the Inflation Reduction Act, now he is taking care of the oil and gas industry.

Jason Calacanis 28:29 I love it. Here we go, nat gas.

David Sacks 28:30 So 180 flip by Biden.

Jason Calacanis 28:32 Yeah, nat... And so what you're saying is Biden dynamically changed course based on inputs, like a great leader would. Okay, well done, Sacks. (laughs)

David Sacks 28:40 Well, I don't, I don't... Listen, I don't know if this-

Jason Calacanis 28:41 (laughs) I'm choking with your gifts.

David Sacks 28:42 Uh, uh, well, no, listen, I think Biden has done something politically smart here. There's no question about it. I am giving him credit.

Jason Calacanis 28:49 Okay.

David Sacks 28:49 Does it mean that this war was worth it? No, I don't, I don't think we should be engaging in oil wars-

Jason Calacanis 28:53 Mm-hmm.

David Sacks 28:53 ... like we did in the Middle East.

Jason Calacanis 28:55 Yes. We agree.

David Sacks 28:56 So I'm not justifying this war, but I am saying that there is a cold, hard American interest-

Jason Calacanis 29:01 Mm.

David Sacks 29:01 ... undergirding the, uh, our position, which is it's about LNG.

Jason Calacanis 29:05 Yes.

David Sacks 29:05 It's not, it's not just about moral platitudes.

Jason Calacanis 29:08 Yeah, I mean, listen, you-

Chamath Palihapitiya 29:09 A strong start to 2023, vassal and undergirding.

David Sacks 29:12 (laughs)

Jason Calacanis 29:13 Uh, my biggest predictions, I, I'm working backwards from two here, I think the, uh, DoorDashes, Airbnbs, Ubers, Etsys of the world who need entrepreneurs, they need workers, they need supply, they've always been supply constrained. As unemployment becomes, uh, let's call it what it is, sticky, you're gonna see a lot more people participating in gig platforms or entrepreneurial platforms that enable them to make money, so I think they will be huge beneficiaries, especially if they continue to lay off employees like DoorDash and Airbnb did to rightsize their businesses. But my first one, my number one is laid-off tech workers. I think laid-off tech workers who, uh, get together in groups of two, three, or four, uh, developers, product managers, people who actually build stuff, and start companies together are going to become extremely successful, and they're gonna make incredible lemonade from these lemons of these big tech layoffs. So I think the startup space is gonna... And these laid-off tech workers who choose to take control of their destiny and starts companies are gonna be the true big winners. If you do it, do it with two or three friends, because you're gonna need developers, you're gonna need those, those talented people in the startups that have three founders get funded faster than the ones with one.Uh, so those are my two winners. All right. Oh, yeah, and last year our biggest business winners were, uh, Chamath said SMBs, Sacks said rise of the rest, uh, Friedberg said Stripe, and I said Disney Millennials

Jason Calacanis 30:34 and Gen Z. Let's go on to biggest business loser for 2023. Friedberg, who do you think will be the biggest business loser in '23? This year, in fact.

David Friedberg 30:44 Okay. So my biggest loser is the general category of capital-intensive Series B3D growth businesses in the startup landscape, private companies. Um, as you guys know, there's been a big shift in capital allocation. A lot of the folks who were writing big checks into growth rounds are retreating back to writing smaller checks in seed and A rounds. They don't want to write the $20 million Series B, they want to write the $5 million seed and A round. Uh, no one wants to kinda follow the valuation. No one wants to set the valuation for these growth businesses, particularly if after this round you know you need another big round of capital and no one's sure if someone's gonna be waiting on the other end. As a result, we're seeing tons of these businesses run into capital-

Jason Calacanis 31:26 Great pick.

David Friedberg 31:26 ... confusion walls. They can't pivot. I think we'll see what we saw in the dot-com bubble, where 99 and a half percent of these companies actually die. The half percent that win-

Jason Calacanis 31:35 Whoo.

David Friedberg 31:35 ... are gonna emerge as the next hundred billion dollar enterprises, the Googles and the Amazons of the world. So there will be light at the end of the tunnel for the winners, but generally, there are hundreds of companies in hardware, in syn bio, in biotech, in high growth enterprise, uh, software that require significant sales investment expense. A lot of these businesses where the capital-intensive nature of the business just doesn't have the market for it right now. Uh, and they're ... and, and investors are, are all retreating and they're gonna be selective. So that, that's where-

Jason Calacanis 32:02 Got it.

David Friedberg 32:02 ... I think there's gonna be more pain-

Jason Calacanis 32:04 Capital-intensive startups.

David Friedberg 32:05 ... um, and so ... By the way, seed, seed and A investing, hot as a button.

Jason Calacanis 32:08 Mm.

David Friedberg 32:08 Uh, B+ ...

Jason Calacanis 32:09 Chef's kiss.

David Friedberg 32:10 That's, that ... Yeah, that's it.

Jason Calacanis 32:12 Okay. Sacks, biggest business loser for 2023?

David Sacks 32:15 Well, I just, by the way, 100% agree with what Friedberg said, but my, my biggest loser for business in '23 is the consumer.

Jason Calacanis 32:22 Mm.

David Sacks 32:22 I just don't understand how the consumer isn't gonna finally tap out in this economy. I mean, they, they have a mountain of personal debt, credit card debt's at all-time highs. I think the average credit card rate hit 19.6% last week and is expected-

Jason Calacanis 32:38 Yeah.

David Sacks 32:38 ... to rise even further. Uh, the mortgage rates are above 7% now, so forget about trying to buy a new home or, uh, sell your home. And your stock portfolio's down too, and now layoffs are starting to pile up.

Jason Calacanis 32:49 Mm.

David Sacks 32:50 So, I just don't understand how we're gonna avoid a recession. And you saw, you know, Kashkari saying that r- the Fed's gonna keep raising. 5.4%'s his prediction. Uh, you know, I don't understand how if, if rates are at 5 and a half percent, that doesn't finally break the back of this economy and, uh, we go into recession. So-

Jason Calacanis 33:07 Do you think, Sacks, that the economy is actually broken right now? We just don't have the data 'cause the data lags 60 days i- in most people's minds? 'Cause it does feel like the consumer is just ... a- and real estate has just broken at this very moment.

David Sacks 33:19 It seems like it. I mean, the pain is very unequal, right? But in the tech industry, we've been in a recession for a year. I mean, like, the growth stocks are down 80%. What Friedberg said is true. No one's gonna fund these, you know, high-burning companies. There's an enormous amount of retooling that has to happen.

Jason Calacanis 33:34 Mm-hmm.

David Sacks 33:34 Look, I think the recession is here. It's just very unequally ...

Jason Calacanis 33:37 Distributed.

David Sacks 33:38 Distributed, exactly.

Jason Calacanis 33:39 Yeah. Well, I mean, if you look at it, uh, buy now/pay later, that's a category starting to break. Credit card debt, as you're saying, hitting, you know, uh, big, um, uh, bad records in terms of how much people love spending. Also, people's, um, savings are going down. So, the consumers' back has been broken. I think we're just gonna feel it in the, in the first and second quarter. Chamath, who's your biggest business loser prediction for 2023? The world wants to know.

Chamath Palihapitiya 34:05 Let me just build on what Friedberg and Sacks said for a second before I give you my pick.

Jason Calacanis 34:09 Sure.

Chamath Palihapitiya 34:10 I, I ... This is the conversation you and I had when we just got on. Guys, what I was telling J-Cal is at the end of Q4, I did five deals and four were pro ratas, one was a new deal. And they were all clean markups, so the four deals that other people put money into. And I was looking at them and I was trying to figure out, okay, what differentiates these things? And Friedberg, to your point, these were super clean startups with very clean cap tables that had clear progress, and then conversely, I had seven converts showed to me for companies f- whose valuations were anywhere between three and, I would say, 12 billion, and I did none of them. And not only did I do none of them, nobody else did any of them. And the problem was the real market clearing price was 80 to 90% down. And so, I was like, "What is going on here?" So, Friedberg, to your point, I don't even think it's just cash-intensive startups. I think it's, like, all growth companies are in a really bad place. I thought that this growth stuff would get sorted out in two to three months, and now I'm worried it's two to three years.

David Sacks 35:17 Yeah.

Chamath Palihapitiya 35:17 I think it's ... Here's the-

David Friedberg 35:18 Toxic. Toxic.

Chamath Palihapitiya 35:20 Here's the definition, Chamath. What, what I think has happened, and where I think the cutoff is, is when the value e- the implied market valuation of the company based on where public comps are trading is less than the total capital preference in the company, the, the total preferred stock.

Jason Calacanis 35:34 Wow.

Chamath Palihapitiya 35:34 And there's so many companies now that raised 400 million at a two billion valuation, but the company is actually worth 300 million now based on public market comps.

Jason Calacanis 35:42 Hm.

Chamath Palihapitiya 35:42 So they're worth less than their preference stack. So how do you sort-

Jason Calacanis 35:45 Yep. They're worth less in capital.

Chamath Palihapitiya 35:47 ... through that mess with investors?

Jason Calacanis 35:47 No. That ... This is why I think all these converts are getting done.

Chamath Palihapitiya 35:51 That's where the rubber meets the road on all these deals. Yeah, that's right.

Jason Calacanis 35:53 Who does the convert benefit? The convert benefits the VCs who wanna maintain the illusory valuation that they had before. They do that-

Chamath Palihapitiya 36:05 Their, their mark on the book, yep.

Jason Calacanis 36:06 They do that to assuage the limited partner who gave them money that the marks aren't as bad as they thought. But the people that really get screwed, as Jason said, are the common shareholders, because eventually those convert deals that do get done, those people will end up owning the company.

Chamath Palihapitiya 36:23 Yep.

Jason Calacanis 36:23 The cap table gets completely flushed and reset, and the employees get wiped up.Yeah. And then you gotta basically take all the employees who were there previously, who now hate the founder, and you gotta start over-

Chamath Palihapitiya 36:34 The people that all the work-

Jason Calacanis 36:34 ... and give everybody n- all, yeah, they're wiped.

Chamath Palihapitiya 36:36 The people that do all the work get fucked and the people-

Jason Calacanis 36:38 Yeah.

Chamath Palihapitiya 36:38 ... who do none of the work and who just want to maintain this shell game gets to basically live another day.

Jason Calacanis 36:44 Basically, people are investing, as you gave in the example earlier, like, hey, if it's a three-billion-dollar company but it's actually worth 750, people, instead of taking the valuation from three billion to 750, will say, "Okay, buy one share at the three-billion-dollar price and we'll give you three or four shares for free or for a penny," warrants, they're called, typically. Or you know, there's different ways to structure this. And then all of a sudden, nobody knows the actual denominator. They may own, um, 10,000 shares, but they don't know how many shares are actually issued because the warrants are not on the cap table. They're in some side document in a folder in a lawyer or CFO's office.

Chamath Palihapitiya 37:15 So let me, let me tell you my biggest business losers.

Jason Calacanis 37:17 Yes, please.

Chamath Palihapitiya 37:19 I think that the biggest potential business loser this year is Google Search-

Jason Calacanis 37:26 Ooh.

Chamath Palihapitiya 37:26 ... as measured by-

Jason Calacanis 37:27 Stunning.

Chamath Palihapitiya 37:28 ... pure profitability and engagement. I think it's easier for me to see where the, the usage comes from as opposed to picking OpenAI or ChatGPT in terms of where the usage goes to. And the reason is because I think a lot of people don't still fully understand how machine learning and AI work, but just 30-second primer. There's two big buckets of work. There's what's called learning, which is how you learn how to make predictions. And then there's what's called inference, which is when you actually type something into the search box, you get the answer. The thing with learning and what ChatGPT is showing is that they have learned by crawling the entirety of the web. There are five or six other organizations that are capable of crawling the entire web in terms of cost, in terms of compute, in terms of the quality of the transformers and the quality of the AI. And so I find it easier to predict the decay in the quality of Google Search as that much better than everybody else than I find it is to predict who will win because I think that with enough time and money, Oracle, Microsoft, Google, the Chinese internet companies can all compete. Facebook. And so I think that you'll converge on the same training, which will lead to the same inference, and so I think consumers end up getting confused and will end up being able to get high-quality search results from many places versus today, you know, you would only think that Google is the only game in town, quite honestly, for most people. So I think that-

Jason Calacanis 39:06 Well, the statistics show that. Yeah.

Chamath Palihapitiya 39:07 ... you know, Google could lose 10 or 15% of usage to all these other sites, and that may not make any of those sites that relevant, but it'll have a material measurable impact to Google and Google's bottom line.

Jason Calacanis 39:18 Fantastic prediction, and I think, you know, ChatGPT and these other ones, uh, are gonna have a very interesting marketing attack that they can do on Google is, why search when you can get an answer, right? Hey, we'll just give you the answer, you don't have to search. I had so many losers that I went through here. I'm just gonna run backwards through them. Number five, I thought founders who refused to downsize in 2022, could be big losers in 2023, obviously.

Chamath Palihapitiya 39:40 Bro, how do you get to have five and the rest of us are just, we all have to-

Jason Calacanis 39:42 I'm just, I'm just telling you my thought process. I, this was the one I had alone for.

Chamath Palihapitiya 39:45 I don't care your thought process. Oh my God.

Jason Calacanis 39:46 Number four, I thought VC funds founded in 2020. Then I thought crypto, 'cause Gary Gensler says it's all a stock. Then I went with you, Chamath. Number four, Google. My god, they got so many headwinds against them with this ChatGPT, but I wound up on white-collar workers with no hard skills. Twitter going down too. I think, you know, Elon said a couple of hundred people is all you need to run Twitter, and I think he said he has 2,000 employees or something like that. He has shown everybody, you know, hey, listen, these, more can be done with less, uh, or these things are overstaffed in a massive way. I think white-collar workers now, the idea that you're gonna have four offers and you're gonna be able to play them off each other is over when we tape the show.

David Sacks 40:24 Surplus elites. You're saying-

Jason Calacanis 40:26 Surplus elites?

David Sacks 40:27 ... surplus elites.

Jason Calacanis 40:27 Sure. White-collar workers, AKA surplus elites-

David Sacks 40:29 (laughs)

Jason Calacanis 40:29 ... people who actually, you know, are mid-managers who don't, who don't actually code or don't actually build a product or sell a product, don't actually do real work, uh, as, as I think, um, many people would frame it in the managerial class or the CEO class. Man, they're gonna have a hard time. And this week, Andy, uh, Amazon Andy cut 18,000 white-collar workers, not the blue-collar, the white-collar workers at Amazon. That was a big turning point. And Benioff, you know, he's ohana, he is mahalo, he is, uh, aloha, he does not like to lay people off, he considers Salesforce a family, he laid off 8,000.

David Sacks 41:04 I predicted that.

Jason Calacanis 41:05 Yeah, and I mean, that is, to me-

David Sacks 41:07 I did, I did tweet about that.

Jason Calacanis 41:08 Yeah.

David Sacks 41:08 Well, I mean, the reason's pretty simple, right? Their growth slowed down by two-thirds the most recent quarter, but they were still spending the same amount on sales and marketing. So when that happens, your CAC payback explodes, right? You go from three years payback to like 10 years. So they have to cut costs in order to rationalize their unit economics. So, and now it, it cascades, right? Because all of Salesforce's vendors are gonna be getting less money from Salesforce-

Jason Calacanis 41:33 Yes.

David Sacks 41:33 ... because they're tightening their belts. So then those companies are gonna have to cut, and the cycle just keeps going and going.

Jason Calacanis 41:39 Right. And everybody tightens their belts at the same time, freezes the economy, AKA recession, uh, and, and possibly worse. So, but mine was the surplus elite, so that's a nice, uh, little quartet. In 2022, just so you know, uh, I picked crypto, Freidberg also picked crypto, Chamath said Visa, Mastercard, and Sac said assets classes that benefit from government, uh, dumps and, and pumps.

David Sacks 42:02 Liquidity.

Jason Calacanis 42:02 Yeah.

Jason Calacanis 42:03 All right, let's go to biggest business deal of 2023. This is a prediction. What do we think could be the biggest business deal?

Chamath Palihapitiya 42:08 Easy, easy. This one is easy.

Jason Calacanis 42:09 Okay, Chamath, go. Let's go-

Chamath Palihapitiya 42:10 It's not, um...

Jason Calacanis 42:10 ... lightning round here. Go ahead, Chamath, quickly.

Chamath Palihapitiya 42:12 Starlink will go public.

Jason Calacanis 42:13 Ooh.

Chamath Palihapitiya 42:14 SpaceX will cut and paste the cap table and we will take-

Jason Calacanis 42:18 Yum, yum.

Chamath Palihapitiya 42:19 ... that Yum, it'll be yummy and delicious, and-

Jason Calacanis 42:21 Mm.

Chamath Palihapitiya 42:21 ... my prediction is that the Starlink valuation will be at least half of SpaceX's current private market.

Jason Calacanis 42:27 75 billy, just for Starlink.

Chamath Palihapitiya 42:29 75 billion. It will be phenomenal. And I think the reason why is that I think...In order for Elon to have complete financial flexibility and do what he needs to do and, you know, he talked about this on our pod, about the difficulties and the dangers of margin loans and all of that stuff.

Jason Calacanis 42:45 Yes.

Chamath Palihapitiya 42:45 He's gonna create breathing room for himself.

Jason Calacanis 42:48 Ah.

Chamath Palihapitiya 42:49 This is the simplest and most obvious way for him to do it. It'll give him a ton of more dry powder.

Jason Calacanis 42:54 Sure.

Chamath Palihapitiya 42:55 So I think that this is an obvious outcome in 2023.

Jason Calacanis 42:59 They already have a million subscribers in their better than nothing beta, as they call it. I have two of them. I think, uh, this is a great, great, uh, prediction.

Chamath Palihapitiya 43:08 I was the, I was the first one to get it for, for the global 7500. So, uh-

Jason Calacanis 43:12 Okay. Well, I-

Chamath Palihapitiya 43:13 ... I can tell you.

Jason Calacanis 43:13 ... I got it for, yeah, 5000. Yeah, similar. Uh, so, uh-

Chamath Palihapitiya 43:18 (laughs)

Jason Calacanis 43:18 ... there-

Chamath Palihapitiya 43:18 My 5000 and your 5000 are the same size. (laughs)

Jason Calacanis 43:20 Yeah, exactly. So, there you go.

Chamath Palihapitiya 43:21 (laughs)

Jason Calacanis 43:21 Uh, but no, I, there is a point here. People are underestimating-

Chamath Palihapitiya 43:24 Uh.

Jason Calacanis 43:24 ... the TAM, I think, of this product. The TAM is not existing broadband connections, it's second connections, it's connections where connections didn't exist, it's on-

Chamath Palihapitiya 43:33 By the way, just so you, just, just so you know-

Jason Calacanis 43:33 ... RVs, buses-

Chamath Palihapitiya 43:34 ... the best in class-

Jason Calacanis 43:36 ... villages.

Chamath Palihapitiya 43:36 ... the best in class broadband connection for a plane is called Ka-band.

Jason Calacanis 43:39 Mm-hmm.

Chamath Palihapitiya 43:40 And it costs 500 grand a year.

Jason Calacanis 43:43 That's ridiculous.

Chamath Palihapitiya 43:44 And you can replace it for, you know, a tenth of the cost and Starlink on a plane is dramatically better, bidirectionally. So I think Starlink is gonna go public and I think it's gonna be a, it's gonna be the best chance that we have of opening up the capital markets in 2023.

Jason Calacanis 44:01 Which is another way of saying people who own private jets, if they are flying 250 hours a year, which will probably be a reasonable number, two, three hundred hours a year, they're paying $2,000 hour, dollars an hour for their internet service. That is bonkers. Okay. Sax, who is your, uh, big deal? Biggest business deal prediction for 2023.

David Sacks 44:19 Biggest business deal '23 prediction is there will be a deal between, uh, Putin and Xi.

Jason Calacanis 44:27 Ooh.

David Sacks 44:27 And they met by satellite late last week to discuss ways to further help each other in 2023. Putin characterized it as a no limits partnership. You may remember that the two of them inked $175 billion gas deal in early February last year. That was three weeks before Putin invaded Ukraine. I think now Russia is even more dependent on China. We've really driven Russia into China's arms. And I think there will be a big deal, not just on energy, but on agricultural products, mineral products, and, uh, rare earth minerals that, you know, Chamath likes to talk about. I think there could be a trillion dollar deal between Russia and China this year, if I was gonna go out on a limb and make a prediction.

Jason Calacanis 45:13 Okay. So there is your 2023 prediction of the biggest deal, the legion of dictators is forming.

David Sacks 45:18 (laughs)

Jason Calacanis 45:19 Uh, I do think it's, uh, it is like a, you know, the, that, that The Axis of Evil. This is more legion of dictators, like, "Hey, let's do business together." Freeburg, you got a prediction for the biggest business deal of 2023? This is really going out on a limb here.

David Friedberg 45:31 I'll do two real quick. The first was the, similar to what Sax said, but it's kind of echoing what I said earlier, which is the Petro yuan trade. I think that's the Saudi China trade, if this happens and oil is sold in yuan, it marks the beginning of, I think, um, the end of the assumption that the US dollar is the global reserve and the risk-free currency, uh, in reserve for the world. So I think the Petro yuan trade, if you guys, um... Here's the Reuters article covering Xi's visit to Saudi Arabia last month, uh, first, second week of December. Once this gets inked and signed, it, it's a real shift, uh, globally. I think the other one that I'm, that I'm gonna point out that I think is a bit of a out of left field one maybe (laughs) and maybe I'm just gonna look like-

Jason Calacanis 46:26 Wildcard.

David Friedberg 46:26 ... a total idiot at the end of the year. But-

Jason Calacanis 46:27 Oh, do a wildcard. I like it.

David Friedberg 46:28 Yeah, this is my wildcard. So my wildcard is I think Apple ends up buying something completely out of the ordinary.

Jason Calacanis 46:33 Ooh.

David Friedberg 46:33 And here's why. I think Apple's core business, they're facing significant pressure with respect to their relationship, uh, and ties to China. As you guys may have seen last week, Foxconn announced that they're actually going, uh, further downstream in terms of their production model and they're trying to diversify away from being kind of the sole service provider to Apple. Apple, as you know, is under such pressure to get out of China politically that they've started to try and invigorate activity in Vietnam and elsewhere. So a lot of pressure on their relationship with their low cost producer and low cost production partner. They're also under a lot of political pressure because of the App Store revenues. You guys know this 30% app store thing-

Jason Calacanis 47:13 Yep.

David Friedberg 47:13 ... that they take. A lot of people are calling it monopolistic and antitrust is getting involved, so they're feeling that pressure. There's also the pressure with respect to the, you know, waning, uh, consumer demand for high-end electronics. Samsung last, yesterday or last week, I mean, or yesterday, I think, announced significant declines in consumer demand for electronics or their forecast as such, that has to impact Apple, uh, as well. So when you put all of this together, right, they're, they're, they're, they're being pressured to get out of their low cost manufacturing center, they're being pressured to stop making money on the App Store, they're being pressured because the demand may be waning, they have to do something big to kind of diversify the business. So I think they might end up doing something like buying a real content company.

Jason Calacanis 47:53 Hm.

David Friedberg 47:53 Maybe they do something like buy a Disney. Maybe they do-

Jason Calacanis 47:55 Love it.

David Friedberg 47:55 ... something like buy an automotive company, like, uh, Fiat Chrysler. I think there are a number of these kind of like what may seem today outrageous deals that Apple might end up kind of being pressured into doing so that they can get ahead of their forecast of the impact that all these pressures are gonna have on their core business. And so I think this is something interesting to kind of think may happen this year. I, I certainly have no insight or intel on, on anything or I could be completely wrong on this one, but it feels like they've gotta do something this year-

Jason Calacanis 48:22 I mean, listen-

David Friedberg 48:23 ... I mean, in order to keep that business growing.

Jason Calacanis 48:24 ... I think this is... I think you... I love your, your wildcard, because the MBS China trade and that relationship, sure, legion of dictators. But this one is really good. Uh, it's hard to buy Disney, monopolistic issues, but buying a car company, pretty easy, because that's a fragmented market. I love this prediction.I mean, now with Tesla, with its depressed stock price, Apple could make a run at Tesla. They have- they could almost buy it with cash, let alone BMW, Volvo, one of those brands, they could buy easily. What a great prediction. For me, the prediction is Amazon's three-legged stool grows into a sturdy cheer- chair with a fourth pillar. For those folks who are not familiar with how Amazon has built their businesses, there are three pillars in their stool, e-commerce, obviously, when you buy stuff, Prime memberships, which is kind of considered a separate revenue stream, and of course, AWS cloud computing. I think the fourth is gonna be this continuation of following the health stream, not advertising, 'cause that's not a consumer-based product, that's just the way they make money. Health is gonna be a big one for them. Uh, they obviously acquired One Medical, which was a small purchase. I think they're gonna buy Roman Hymns, they're gonna buy Peloton, they could buy a Whoop, and they're gonna go all in on health. And, you know, that three-legged stool becomes a very sturdy chair. And my runner up is TikTok is gonna divest under duress. I think that it's going to have to go public, and the Chinese are gonna divest their interest in it, uh, and just take their chips, because they're gonna be faced with the existential threat during the political debates over the next two years, there will be unanimous support from Democrats and Republicans to get TikTok out of the US. Therefore, they divest.

David Friedberg 50:04 Can I just test that-

Jason Calacanis 50:05 Sure.

David Friedberg 50:05 ... with y- with you guys? 'Cause we've talked about this a lot that, "Hey, we're gonna ban TikTok."

Jason Calacanis 50:09 Yes.

David Friedberg 50:09 How many of your friends' kids or your kids do you guys know spend hours a week on TikTok?

Jason Calacanis 50:16 100%.

David Friedberg 50:17 It's a lot.

Jason Calacanis 50:18 Yeah, 90%.

David Friedberg 50:18 How do you get over the political mountain of trying to ban TikTok? If you try and ban TikTok, whoever raises their hand and says, "We should ban TikTok," and actually gets it done, they're out of office. There is gonna be so much pressure and backlash, because people are hooked and love that app and use it all the time. To take that away from people-

Jason Calacanis 50:36 The young pe-

David Friedberg 50:36 ... will feel like this kind of-

Chamath Palihapitiya 50:38 Young kids-

David Friedberg 50:39 ... trauma.

Chamath Palihapitiya 50:39 ... that don't have phones-

David Friedberg 50:40 Yeah.

Chamath Palihapitiya 50:40 ... actually get everything that TikTok has on YouTube Shorts. So, I don't think TikTok is that important, because it- it is not actually, there is no sticky network effect inside that app. So there isn't usage that's dependent on people you know or a graph that you built. It's a lot of passively consumed content. And so, you know, you're- you're getting pushed a lot of algori- algorithmically defined content. You can do that on YouTube. And so I actually don't think it's that meaningfully important if TikTok goes away. I think the content creators stay. It's harder for them to build a business on YouTube Shorts, but if you look at the, and measure, the density of content inside TikTok, it exists almost one-to-one on YouTube.

David Friedberg 51:22 Mm-hmm.

Jason Calacanis 51:23 That's interesting. It's an interesting point, Chamat.

Chamath Palihapitiya 51:23 So you think- you think- you think it'll- you think it'll be okay if we- if we cancel TikTok in the US and we say, "That's it, you can't have TikTok anymore?"

Jason Calacanis 51:29 Everybody moves to YouTube and Instagram.

Chamath Palihapitiya 51:30 It'll be disruptive, but people will just go to YouTube and Instagram. It's not that big of a deal.

Jason Calacanis 51:34 In fact, a lot of the fav- my favorites-

Chamath Palihapitiya 51:37 If there was a network effect inside there, then I think people would have a reason to complain to somebody, whether it's your representative or whether it's somebody else to say, "Hey, don't do this. This would have a deleterious impact on my quality of life or my quality of experience." And you could make that clear claim on Instagram, Facebook, you know, Google, YouTube. But TikTok is- is much more brittle that way. And that's why they need to get public sooner and monetize this bloody thing, because I think that it's very easy actually to deconstruct TikTok's value into these other places.

Jason Calacanis 52:14 I can tell you my favorite TikTok is ChefsReactions, and I consume him now on Instagram, because he posts, w- he just copies one to the other and-

Chamath Palihapitiya 52:21 So ChefsReactions is a great example where he actually got banned by TikTok and then diversified on his own. And now what he does is he publishes across multiple streams. And if you look at all the big creators, they all do that because it makes no sense to actually give the power to any one of these things.

Jason Calacanis 52:37 Why have a dependency?

Chamath Palihapitiya 52:38 Why have a dependency?

Jason Calacanis 52:39 All right, let's keep the trains moving.

Jason Calacanis 52:42 Most contrarian belief, this is the Peter Thiel award, your chess partner, Sax. Who's winning in 2022 in chess? How many chess games do you have going with Peter Thiel right now and who's higher rated? You demolished me with your Queen's Gambit.

David Sacks 52:55 (laughs)

Jason Calacanis 52:55 I played one game, I got killed in seven moves. I'm- I'm- I'm ranked at 800, 900 right now. Sax is at 1800. He just walloped me. Who's higher rated right now? You or Peter Thiel?

David Sacks 53:04 Well, you acce- you accepted the Queen's Gambit.

Jason Calacanis 53:06 Well, you know, I just, I, I didn't even know what it was. I was like, "What opening is this?" You were like, uh-

David Friedberg 53:10 (laughs) .

Jason Calacanis 53:10 ... "Queen's Gambit, you're dead." Boom.

David Sacks 53:12 Queen's Gambit-

Jason Calacanis 53:12 It was like I got sniper-shot.

David Sacks 53:13 ... is the best, you don't want to accept the Queen's Gambit.

Jason Calacanis 53:16 All right, so now you tell me.

David Sacks 53:17 It's a ver- very pleasant game for white. I'm gonna go out on a limb here, you know, and- and-

Jason Calacanis 53:20 Okay.

David Sacks 53:20 ... and risk being wrong. Uh, my- my prediction or most contrarian belief is that the bromance between Biden and Zelensky comes to an end at some point in 2023. And, uh, let me state the- the part that I think is, uh, conventional wisdom and everyone agrees with, which is there's gonna be a massive Ukrainian counteroffensive in the spring. And I think that could go one of two ways. Either it could make limited gains, basically the Russians fight them to a stalemate, or it could be successful and they could basically push the Russians back to the February 23rd lines and then make a play for Crimea. I predict that in either one of those circumstances, Zelensky's interests and Biden's interests will start to diverge. So in the case of a stalemate, which I think is probably 50/50 here, Biden's gotta start going into election mode for 2024. And I think we're saying that we're gonna be in a recession. So I think that if there's a re- a stalemate, I think Biden's gonna tell Zelensky, "Wrap this thing up, it's time to negotiate, we need to get this over with." By the same token, if the counteroffensive is successful, I think that the administration, hopefully cooler heads will prevail and not let them take Crimea. That's basically what they're gunning for, is they not only wanna get back to the February 23rd lines, they wanna go all the way back to the 2014 lines of retaking Crimea. I think that's extremely dangerous. I think that could precipitate a nuclear war.And I think that the cooler heads in the administration will tell Zelenskyy to stand down and that's the right time to make a deal. So, I think in either one of these scenarios, I think you'll start to see a divergence between Ukrainian and the American interests, and that could create a rift. And I think no one's really predicting that.

Jason Calacanis 55:02 I, I think this is great. This is kind of what I thought the plan all along was, which was to deplete Putin of resources, distract him, and then, uh, get the West off of his oil and, and try to do regime change, but do it by bleeding him. This would be, uh, proof positive of that strategy, which is bleed him to the end and then sell Zelenskyy out. I think that's actually ...

Chamath Palihapitiya 55:23 (laughs)

Jason Calacanis 55:23 I know that's, I know it's cynical, but I think that's what we're doing. I think Ukraine is a tool to deplete Putin and then maybe get to regime change. Uh, I, I'm cynical as it gets with this. Chamath, what's your most contrarian belief of 2023?

Chamath Palihapitiya 55:35 I will go and pick that inflation, which people expect to fall off a cliff, doesn't fall off a cliff as fast or as meaningfully as people want. And so I will explain inflation as three different chapters. And we've seen the first two chapters play out. So 2021, chapter one, was all about energy inflation. And, you know, we all talked about having almost $10 gas at the pump and what does it mean for everybody and, you know, um, it caused that initial spike in inflation. And then we had it come off and Sax called this. He said, you know, "We're gonna have this sort of double hump." And 2022 was really the story of goods inflation, right? All these prices and all of these things went up because the input costs went up, and we all had to bear the implications of that. But then that started to ebb. Now, if you looked at the tail end of 2022, what I found super interesting was the number of articles I saw about wage inflation. Whether that was Biden using an 1800s era law to prevent a railroad strike, the number of states that increased minimum wage, the trend around unionization. So in general, my thought is that the pendulum is swinging very markedly away from capital and towards labor. And as the labor participation rate stays low and continues to go down, and also it's compounded by an unemployment rate that may go up, right? People are ... It's gonna be harder and harder to get people to do the work you need at the company you have unless you pay them more. And if that gets exaggerated, then inflation will stay where it is. It won't be as muted and it won't fall off a cliff as people want. So that's my-

Jason Calacanis 57:32 It'll be persistent.

Chamath Palihapitiya 57:34 That's my big contrarian-

Jason Calacanis 57:36 Got it.

Chamath Palihapitiya 57:36 ... wager for this year, is that we see inflation-

Jason Calacanis 57:38 That is quite contrarian.

Chamath Palihapitiya 57:40 We see wage inflation that keeps inflation not going down as much as people want.

Jason Calacanis 57:44 This is contrarian because everybody's saying, "Hey."

Chamath Palihapitiya 57:47 It's over.

Jason Calacanis 57:47 The consumer's back has been broken, the credit card debt is high, and everybody's being laid off, yada, yada, yada. Therefore, goods and services, there'll be more supply than demand and, uh, prices will lower. Very contrarian. Friedberg, do you have a contrarian belief for 2023?

David Friedberg 58:03 I think my, it follows my earlier points about the Saudi, China, Russia- Russia trade. This year, exiting 2023, it may be the case that, you know, there's historically been this belief and this continuing belief that the US dollar will always be the de facto global reserve currency. And the current mantra is that it's better than the rest. Everyone else is worse off than the US. Western Europe is in trouble. Japan is in trouble. China's in trouble. Everyone's in trouble. But if there is a coalition, an economic coalition, a, a scaled economic coalition that starts to shift the balance of power a little bit, and the US meanwhile is taking on extraordinary debt load, spending $1.7 trillion in an omnibus bill, you know, has this massive unfunded social security problem coming down the pipe and are trying to manage multiple funded conflicts around the world, it could be that the US dollar coming out of 2023 starts to trade more like a risk asset and less like a risk-free asset. And so I think that that's my big contrarian bet, is that maybe this year marks the beginning of the end of the US dollar as the kind of global de facto reserve currency based on some of these big trades that I talked about happening.

Jason Calacanis 59:23 Unbelievable. Great.

David Friedberg 59:23 Um, so that, that would be my, um, my big kind of contrarian-

Jason Calacanis 59:27 Perfectly said.

David Friedberg 59:27 ... thought. Look.

Jason Calacanis 59:28 Uh, that's your contrarian bet. The access- the legion of dictators, the MBSs, et cetera, they become, they form a new global currency.

David Friedberg 59:35 I, I, I would-

Jason Calacanis 59:36 Yeah. My term, not yours. Yeah.

David Friedberg 59:37 I'm not calling it a... I, I, yeah, I wouldn't say a legion of dictators, and I wouldn't say form a new global currency, but I do think that the fact that, that large economic trading models start to be done in non-dollar denominated form-

Jason Calacanis 59:52 Got it.

David Friedberg 59:52 ... you know, weakens the, uh, the kind of reserve status of the dollar to some degree. Not fully, right? It doesn't happen in a binary way. And then the dollar starts to trade more like a risk asset like other currencies do to some degree, not fully. So maybe, maybe this is the end-

Jason Calacanis 1:00:04 Once again-

David Friedberg 1:00:05 ... we start to see that shift.

Jason Calacanis 1:00:06 Once again, I take the exact opposite of your contrarian belief. I believe American exceptionalism continues to soar as Russia, China, Saudi Arabia to a lesser extent continue to self-sabotage themselves with insane wars like Putin has done or cutting off, uh, the heads of entrepreneurs in China, figuratively, uh, I'm say- saying here. Uh, I think you cannot have exceptionalism without entrepreneurs, without people having freedom. And I think that means American exceptionalism based on freedom is going to continue. And the legion of dictators, I believe, are gonna stab each other in the back before they change the world or move the currency. Can't trust them. They'll, they'll snap at each other.And or they're self sabotaging, stuff like Putin-

David Friedberg 1:00:50 Sacks, where do you fall out on these-

Jason Calacanis 1:00:51 Go ahead Sacks.

David Friedberg 1:00:51 ... on these two re-

Jason Calacanis 1:00:51 Sacks, where do you fall on our opposites here?

David Sacks 1:00:53 Yeah. I think that America is really feeling its Wheaties right now. I think that American power is immense. I think that the superiority of our weapons in Ukraine's been one of the big surprises of the war.

Jason Calacanis 1:01:04 Let's go upon the lucky.

David Sacks 1:01:05 I don't see the world in the simplistic, uh, good guys versus bad guys frame that Jake out does, however, America is on turbo right now and, um, yes, it is true that the BRICS would love to get off of the dollar because we are now using the dollar and the financial system as swift as a, as a geopolitical tool and a weapon, and they would very much like to be off of our dependence on our currency. But I don't think they're anywhere close to being able to do that yet, and like I said, America is on turbo right now.

Jason Calacanis 1:01:37 Let's go.

David Sacks 1:01:37 Now one thing, one thing I want to mention, this just came out, White House correspondent named Jennifer Jacobs just reported that the US has agreed to send Bradley armored vehicles, basically our best tanks, to Ukraine. Previously, US officials had balked at sending armored vehicles saying heavier weapons would be too difficult for Ukraine to operate and maintain, but allies are moving to provide such weapons. So we keep providing Ukrainians with more and more sophisticated weapons, more and more support. Like I said, this is leading up to a huge Ukrainian counteroffensive in the spring. And I really don't know what's going to happen at that point. I do think that the Russians will escalate. I don't think they can afford to lose this war. They view it as existential. And I, like I said, I hope cooler heads will prevail and if the Ukrainians are successful at breaking through, I hope that the Biden administration will shut this down before they try to retake Crimea, because, you know, we've discussed this before, I think the Russians, confronted with a choice between a total defeat that includes losing Crimea and their naval base Sevastopol and sees the Ukrainian flag flying over their base at Sevastopol, if, if that's a choice between that or potentially using a tactical nuke maybe at the mouth of the Crimean Peninsula as a firewall, I think they could choose the nuke option. So, um, it's a very dangerous situation. And, um, you know, very, very dynamic. There's a lot of possibilities.

Jason Calacanis 1:03:03 All right, let's go on to best performing asset of 2023. I'm going with seed stage investing again. I don't think people want to get into these toxic cap tables at the late stage, as Chamath pointed out. So I go with seed stage, eh, you know, and up to series A, the people brave enough to place bets, the founders brave enough to start companies, I believe it's the best performing asset class of 2023. Chamath, what do you got?

David Friedberg 1:03:23 I think that there's still a lot of uncertainty in the world and in the markets. And so I'm generally concerned that there's a lot of chop. And so I pick something that's pretty conservative, but I would have a combination of cash and the front end of the yield curve. So T-bills all the way up to two year bonds. So you can generate four and a half probably by the end of this year, 5% pretty safely owning this stuff while you wait for things to become more certain. And the way that I think about it is that I would rather miss the first 10 or 15% of a rally once we're really done with this stuff than try to overcorrect and try to pick a bottom, just because I think that you could lose a lot of money. So I think the goal for this year is to stay resilient and in the game and so owning, having a bunch of cash on the sidelines ready to pound it in, meanwhile, a portion of it collecting 5% is not such a bad thing while you wait for the bottom.

David Sacks 1:04:30 My answer was actually very, very similar, which is if Kashkari is right, that rates are going to 5.4% in Q1, why wouldn't you just put all your money in short term T-bills? You earn five, five and a half percent risk free.

Jason Calacanis 1:04:43 Yeah.

David Sacks 1:04:44 Like set it and forget it.

Jason Calacanis 1:04:45 Yeah.

David Sacks 1:04:46 And that's why capital flows are moving hugely right now from equities into bonds, especially if we're going to a recession, which is inherently deflationary.

Jason Calacanis 1:04:56 What do you got, Friedberg? Performing asset class of 2023.

David Friedberg 1:05:00 One of the things... So I think, uh, it's inevitable that we continue to have, um, significant infrastructure spending from both the stimulus and security point of view. So, you know, we kind of want to continue to stimulate the economy and, and support growth. We want to continue to create jobs and, uh, support this transition and the r- if, if the, if the recession predictions play out true and the job market does loosen, it's very tight right now, um, there's gonna be even more of an impetus to continue to do infrastructure investment. But I think there's also these big economic transitions happening underway right now with, uh, pharmaceuticals, with, uh, semiconductors, with energy. There's a lot that we've talked about where there's a security problem and a redundancy problem. And so, you know, there, there are a couple of ways to kind of play this infrastructure spending thesis in each of those areas. I've kind of highlighted four of them. One is in semiconductor capital equipment, so Calyten, Core Applied Materials, that, that, that range of businesses that provide and sell the equipment into the, uh, the fabs and the, and the, uh, organizations that build semiconductor manufacturing facilities. Uh, the second is kind of an oil and gas services. So similar to what Sachs said earlier, Schlumberger, Baker Hughes, that class of businesses I think benefit in this, in this environment. And this is independent of kind of economic conditions certainly, because these are big, uh, multi-year spending projects. The third is in the, the equipment to support them, so Deere and Caterpillar. And then the fourth, I think is an important one, I'll talk about this in a minute with respect to my biggest kind of anticipated thing for next year, which is, um, in, uh, pharmaceutical infrastructure. So Thermo Fisher and there's some company and others like them, uh, because there's a lot of build up happening to support these big transitions happening in the modalities that are being used, uh, in pharmaceutical drugs and diagnostics. And then I think that, uh, there's also a couple of these businesses that are diversified like Danaher, Honeywell, Thermo Fisher is a good example, that play across multiple of these, um-... uh, these opportunities. So th- those are, those are all great businesses to own and you don't need to worry about, you know, they're, they're, they're growing cash flow positive, dividend paying companies. And you don't need to worry about, you know, uh, "Am I getting 5% or five and a half percent based on the equity price this year?" These are long range businesses that are building real value, growing their top line, and, and compounding value from within. And then they're acquiring a lot of smaller businesses very cheap. I'll say one, that's an important trend I've seen across these companies. Danaher, Honeywell, Thermo Fisher, they buy small companies, they pay very little, and they immediately get massive, uh, return on invested capital. Like, they're in the, the high teens. So why get 5% on T-bills when you can get high teens ROIC, uh, uh, on the management teams running these incredible platforms? So that's where I- I'm most excited for this year.

Jason Calacanis 1:07:42 Okay, now let's move on to-

David Friedberg 1:07:44 That was like a, that was like a mad, that was like my, my mad, my mad money segment.

Jason Calacanis 1:07:47 I love it.

David Friedberg 1:07:47 I've never done the mad money segment before, but th- there you guys

David Friedberg 1:07:50 go.

Jason Calacanis 1:07:50 Worst performing asset, I, I went with energy, because, not that I think it's not important, but it just feels like, uh, everybody rushed into it in 2022 so it feels like it's overheated. And if we are in a recession, people might lower consumption, uh, in terms of energy and, uh, be looking for cheaper alternatives so it could be overheated, so I went with energy. Chamath, worst performing asset? You got one?

Chamath Palihapitiya 1:08:11 I think that if we've learned anything from the last three years, you have to separate the valuation of a company and how it performs in the stock market with its value in society. So for example, if you look at Zoom, Zoom's valuation has cratered, but its value in society has probably continued to go up. It's still a massively relied upon tool. The point is that markets do not give you credit for the value in society. They will give you credit when you are about to over-earn, but then they'll pull it all back when they think that you're going to under-earn. So, in that lens, I think that tech will have a tough year. I think energy will have a really shit year. And probably the biggest asset class that is going to get pressured is going to be junk debt. And the reason is a bunch of these variable rate loans, when rates are at 5% and 6%, that all of a sudden are like 11%, 12%, 13%, 14% coupons, a bunch of companies will have trouble meeting their debt obligations and will have to restructure the debt or will have to fail. So tech, energy-

Jason Calacanis 1:09:20 Sachs, worst performing asset for 2023?

David Sacks 1:09:22 Uh, subcategory of what Chamath just said, I think office towers in San Francisco are-

Chamath Palihapitiya 1:09:27 Mm.

David Sacks 1:09:27 ... that is some serious toxic debt. 27% vacancy rates and growing as leases roll. Uh, I think that a lot of these buildings, maybe virtually all of the San Francisco downtown's gonna be owned by the bank soon because no one can

Jason Calacanis 1:09:42 real estate in San Francisco has-

David Sacks 1:09:43 Well, specifically the office towers-

Jason Calacanis 1:09:45 ... perhaps

David Friedberg 1:09:45 Got it.

David Sacks 1:09:45 ... specifically the office towers 'cause no one wants to be in those, those skyscraper buildings south of Market, you know, mired in homelessness. So, um, yeah, I mean, I think that a lot of those buildings are gonna be owned by the banks. There's gonna be some major fire sales.

David Friedberg 1:09:57 Oh, wow.

David Sacks 1:09:57 Remember, this was the hottest commercial real estate market in the country-

Chamath Palihapitiya 1:10:02 Yeah.

David Sacks 1:10:02 ... a few years ago, and now it's the worst.

Chamath Palihapitiya 1:10:04 Well, look what happened to-

David Sacks 1:10:05 So when you think about-

Chamath Palihapitiya 1:10:05 Look what happened to BREIT. What do you think about that crazy thing that happened with the Blackstone REIT? I mean, that's nuts. You know, this is-

Jason Calacanis 1:10:11 Explain what happened.

Chamath Palihapitiya 1:10:12 Blackstone has a product called BREIT. It's like a $70 billion exchange traded fund effectively, and what it is is the ability for individual investors to own access to Blackstone's, you know, commercial real estate portfolio. And they had such a massive amount of redemptions that they had to close redemptions at the end of Q4. And they were worried that the redemptions were gonna continue to go up. These are individual investors who basically sees the writing on the wall, as David said, and wants their money out. And so they went to the University of California pension system and they essentially got a huge infusion of capital, I think it was about $4 billion, where they guaranteed 11.5% interest to these guys for the $4 billion. And they also posted a billion dollars of their own equity in, in the actual REIT to backstop it. So, what does it show you? I think what Sachs is saying is really right. It's a- it may not just be in San Francisco, but, you know, with all of these people either getting laid off, with all of these people now working remotely, we may finally start to see the beginning of the reckoning in commercial real estate, which has been an unbelievably performant asset class up until right about now. And, and on top of that, you have to factor in these much higher rates, and so these building owners, if they financed it, which they invariably have always financed, they have huge variable rate payments that are due on these buildings, the rent rolls are lower. Even people like Twitter is r- refusing to pay the rent, so you have to take them to court. So it, it elongates when they have to pay, and so you could miss a bunch of rent payments and all of a sudden the banks could just go crazy and take ownership of these things.

Jason Calacanis 1:11:51 Okay. Do you have a worst performing asset class for 2023 prediction? Sultan of Science, Queen of Quinoa, David Friedberg.

David Friedberg 1:12:00 Uh, it's, it's really simple. I've mentioned it before, it's consumer credit. We assumed that raising, rising rates and inflation would taper down consumer, uh, demand, c- meaning consumers buying goods and stuff, and that certainly hasn't happened. I'm, I'm in Vegas right now. I was in the car yesterday and the driver grew up in Vegas. Uh, he's like, uh, "In all the, I've lived my whole life in Vegas." He's like, "I've never seen a December like we just had." It was packed the entire month. He's like, "Normally in Vegas, it's dead up until Christmas and then New Year's people come into town, but it's normally dead." He's like, "I've never seen such a busy month." And I think we see this in the numbers. Consumers are still spending like it's 2021. They're still spending like interest rates are zero. As we talked about-

Jason Calacanis 1:12:43 (laughs)

David Friedberg 1:12:43 ... um, consumer-

Jason Calacanis 1:12:43 Lower.

David Friedberg 1:12:43 ... credit is skyrocketing while rates are skyrocketing. Um, and so I think we're gonna run into a real wall with respect to consumer credit in, um, uh, sometime this year, and you're gonna see, a- as, as you guys know-

Jason Calacanis 1:12:55 Great-

David Friedberg 1:12:55 ... this is such a complicated interwoven market of assets that the way that this, this can be traded, there's a lot of different ways to trade it, but I think it's gonna be a-In general, consumers are not going to be able to meet their debt obligations and it's gonna be really ugly.

Jason Calacanis 1:13:10 So defaults. Could be mortgages, could be-

David Friedberg 1:13:11 Yeah, defaults and-

Jason Calacanis 1:13:11 ... credit card debt. Defaults are coming.

David Friedberg 1:13:13 Yeah, and I think, so-

Jason Calacanis 1:13:14 Yeah, if you're putting-

David Friedberg 1:13:15 ... the markets, the market has priced in a bunch of this stuff. Obviously, companies like Affirm and, you know, the, the, um, uh, what are they called? Buy now, pay later companies. But-

Jason Calacanis 1:13:22 Yep.

David Friedberg 1:13:22 ... credit card companies, mortgages, there's a lot of assets that you can start to kind of pick apart where do you think this unravels first? How does it, what gets hit hardest? What's underpriced and overpriced? Probably a lot of good pair trading to do as Chamath kind of loves to talk about, uh, with respect to which of these are more likely or less likely to be sensitive to this dynamic. But there's, I think it's pre- it's gonna be a pretty ugly scene. Uh, consumers just have way too much debt relative to their earnings right now, and it's pretty nasty.

Jason Calacanis 1:13:47 And they have some confidence that they'll always have a job or some way to pay their four easy payments for their kid's trip.

David Friedberg 1:13:53 Dude, it's hard to, I'll say, it's, it's hard, it's, mu- muscle memory is serious. You know, you come out of 2021 when you had, um, it's not just stimulus checks. It was the low interest rate and f- and easy credit availability everywhere. And it's just easy to jump into getting new stuff and cool stuff. And then when you get used to getting new stuff every week or every month, you kind of stick with it. And you're like, "I don't want to give it up just yet. I just, not just yet. Not just yet." You know, and so it's, it's hard to kind of step back from spending when you have a new type of lifestyle. And I think that's what's going on.

Jason Calacanis 1:14:20 I think this is an incredible observation, yeah.

David Friedberg 1:14:22 There's a great TikTok of this guy that runs car dealerships and he sent them out, unlike how much incredible money, like, what a significant percentage of people's income they are spending on their monthly car payments. And people buy these cars that are well beyond what should be kind of a reasonable budget if you were to go to Suze Orman for advice.

Jason Calacanis 1:14:39 They stretch. They stretch.

David Friedberg 1:14:39 She said, "Do not buy that freaking car." (laughs) They stretch.

Jason Calacanis 1:14:42 Yeah.

David Friedberg 1:14:42 And it's, the stretching is gonna, is gonna snap this year. Yeah.

Jason Calacanis 1:14:45 Absolutely, which

Jason Calacanis 1:14:46 brings us to the most anticipated tre- I love it, great one. Most anticipated trend of 2023, related to yours, I went with austerity. I have a friend who sometimes flies private often, and I was talking to him about his Christmas vacation. This friend of mine, Chamath, instead of flying private to his vacation, he had to pick up his kids, he had to go back and forth. He was driving his car-

David Friedberg 1:15:11 That was me.

Jason Calacanis 1:15:11 ... three hour... That was you?

David Sacks 1:15:13 (laughs)

Jason Calacanis 1:15:13 Oh, okay, I didn't want to, I didn't want to de-clue you.

David Sacks 1:15:14 (laughs)

David Friedberg 1:15:14 Yeah. It was so, it was so great.

Jason Calacanis 1:15:18 But I had a friend named Chamath who would normally fly private to Lake Tahoe. And he's like, "No, I can't go out with you. I have skiing on Friday. I gotta pick up my kids and then I'm driving back." I say, "Wait a second, how are you doing that?" He's like, "I'm driving a car." I said, "What? Who's driving the car?" He said, "I'm driving the car." And that's why I say austerity is my anticipated trend of 2023.

David Friedberg 1:15:35 I agree with you. I actually think this is a really good opportunity to pull back on so much waste.

Jason Calacanis 1:15:40 Mm.

David Friedberg 1:15:41 I haven't really looked at my household budget in probably two or three years. Didn't even bother.

Jason Calacanis 1:15:46 Why?

David Friedberg 1:15:46 And then, and then when I looked at it, I was like, "Wow, this is really inflated to a level that I didn't expect."

Jason Calacanis 1:15:51 Yes.

David Friedberg 1:15:52 But it makes a lot of sense to live in a more heads down, austere way. I don't know, yeah. I-

Jason Calacanis 1:16:00 Well, I mean, look at tonight's menu.