All-In PodcastE112: Is Davos a grift? Plus: globalist mishaps, debt ceilings, TikTok's endgame & more
EVERY SPOKEN WORD
150 min read · 30,021 words- 0:00 – 6:27
Bestie intro, who gets credit for the podcast?
- CPChamath Palihapitiya
J Cal, you have a really long nose hair.
- JCJason Calacanis
Thank you. (laughs)
- CPChamath Palihapitiya
On your, on your left nostril.
- JCJason Calacanis
(laughs) This one here? This side?
- CPChamath Palihapitiya
Yeah, yeah.
- JCJason Calacanis
Okay, hold on one second.
- CPChamath Palihapitiya
Do you see it, Nick? You see it? See that? You can see it.
- DFDavid Friedberg
Take care of it.
- DSDavid Sacks
Every (beep) show we have this issue.
- CPChamath Palihapitiya
Every show, he's got all this, like-
- JCJason Calacanis
I'm getting old man hairs. I feel like Sax.
- DFDavid Friedberg
You gotta get a grooming tool.
- CPChamath Palihapitiya
I am tired of treasure hunting your nostrils.
- JCJason Calacanis
Send me a link for what he uses.
- DSDavid Sacks
Get a lawnmower.
- DFDavid Friedberg
Manscape makes one.
- DSDavid Sacks
(laughs)
- JCJason Calacanis
I'm gonna get it.
- DFDavid Friedberg
Yeah.
- CPChamath Palihapitiya
Just look in a mirror, bro.
- JCJason Calacanis
Can you come over on the way to poker, Friedberg, and help me Manscape?
- DSDavid Sacks
(laughs)
- DFDavid Friedberg
Yeah.
- CPChamath Palihapitiya
You're not coming to poker. Don't come to poker, you're sick.
- JCJason Calacanis
I just, if I Manscape, can I come to poker?
- NANarrator
Let your winners ride. Rain Man David Sacks. I'm going all in. And I said we open sourced it to the fans, and they've just gone crazy with it. Love you, Wes Eisinga. Queen of Quinoa. I'm going all in.
- DFDavid Friedberg
Okay, so J Cal, you're gonna be a participant today. The world's greatest moderator is taking a week off to allow his voice to recoup, to recover, to heal.
- JCJason Calacanis
Yes.
- DFDavid Friedberg
So he can come back blaring with his usual mid-sentence interruptions and excellent moderating tactics next week. We-
- DSDavid Sacks
With his foghorn, leg horn moderation.
- 6:27 – 19:13
Top candidates for the Republican nominee in 2024: DeSantis, Youngkin, Haley; major 2024 issues, balancing the budget
- GUGuest
me.
- CPChamath Palihapitiya
While we're talking about all kinds of random stuff, the- the number two thing that I see in the What's Happening tab on Twitter right now is how Ron DeSantis is getting blasted for banning AP African American Studies because he thinks it falls under the STOP WOKE Act. That's this, the headlines. It's going absolutely nuclear on Twitter right now. Here's some of the quotes. "Shocking. Ron DeSantis has banned," all caps, "the teaching of AP African American Studies in Florida. Florida has gone from don't say gay to don't say Black." Next tweet. "Claiming it violates the STOP WOKE Act and has no educational value, Florida Governor Ron DeSantis has banned AP African American Studies from schools."
- DSDavid Sacks
Let me-
- CPChamath Palihapitiya
Crazy.
- DSDavid Sacks
... make a prediction right now. This will all redound to his advantage. The- the same people who said that he was Death Santis for basically not instituting COVID lockdowns, he was proven correct. Then they said that this bill that prohibited the teaching of gender fluidity to five-year-olds, they claim- tried to claim that was a don't say gay bill. 70% of Florida supports that. That redounded to his advantage. I don't know the story behind this particular course, but if the question is whether CRT is gonna be funded by the state and he's preventing that, again, I think that'll be a 70% popular issue. So let's just wait and see how this plays out.
- CPChamath Palihapitiya
Fair enough. I just want to claim that my spread trade may be- It's tough to be the leader in the Republican nomination process in January of 2022. It's starting.
- DSDavid Sacks
Yeah, I agree-
- CPChamath Palihapitiya
Sorry, 2023.
- DSDavid Sacks
It's tough to be the front runner-
- CPChamath Palihapitiya
It's starting.
- DSDavid Sacks
It's tough to be the front runner in either party. But I- I'd say the bigger threat to DeSantis is there's a new poll where Trump came out on top. So Trump's still his biggest threat. Yeah. So unfortunately, J Cal may be right that the Republicans may do something stupid here and, uh, nominate a candidate who's, I think, less electable than DeSantis.
- GUGuest
I actually don't take any joy in it. I actually-
- CPChamath Palihapitiya
I think Nikki Haley is gonna come out of nowhere and win this thing.
- GUGuest
Well, th- it's possible. I, you know, I- I really would like to see some non-political, non-career politicians run for office, the Bloomberg, you know, sort of category. It feels like these career politicians are just really, really bad at executing and, uh-
- CPChamath Palihapitiya
Scumbags.
- GUGuest
Yeah.
- DSDavid Sacks
You know- you know who likes Nikki Haley?
- GUGuest
Who?
- DSDavid Sacks
Democrats. Democrats.
- GUGuest
Why?
- DSDavid Sacks
You guys.
- CPChamath Palihapitiya
Why?
- GUGuest
Why do we like her? I'm an independent.
- DFDavid Friedberg
Because she's polarizing. She's polarizing.
- DSDavid Sacks
No, she's a safe establishment Republican who basically is not gonna put up, uh, any fierce resistance to what the Davos crowd wants to do.
- CPChamath Palihapitiya
I don't think that's true. I think she was pretty-
- DSDavid Sacks
She's not gonna win the Republican nomination.
- CPChamath Palihapitiya
I don't think she cares about Davos people to save her life. I think that she is a moderate, reasonable person who had to govern in a southern state and got everybody on board. That's- that's pretty crazy. She's a pro-life person who negotiated a 20-week support for abortion in 2014. So this is a person that knows how to get stuff done. South Carolina happens to be the state that's actually at the leading edge of climate transition. She's had more jobs and more money come in, into a southern red state of people and companies willing to build for climate change than any other state in the country.
- DFDavid Friedberg
So you like her as a candidate?
- CPChamath Palihapitiya
So I don't know. She's just- she's- so I- I just think that she's actually, like, normal and sane and not an idiot.
- 19:13 – 39:51
WEF in Davos: is it a grift? Somber mood, globalist mishaps, evaluating the US free trade policy
- DFDavid Friedberg
but guys, let's just continue the conversation and talk a little bit about this World Economic Forum gathering that, that took place in Davos. I know you guys wanted to, to talk about it this week.
- DSDavid Sacks
Can I just applaud Jake L's intellectual honesty? I'm, like, blown away right now.
- DFDavid Friedberg
Well, it's 'cause he's sick. Okay, so look, um-
- JCJason Calacanis
No, it's 'cause I'm not moderating.
- DFDavid Friedberg
(laughs)
- DSDavid Sacks
(laughs)
- JCJason Calacanis
When I moderate, I'm always trying to get the best out of you, Sax.
- DFDavid Friedberg
The budget conversation is an important one, as it relates also to the global economy and growth. So Davos took place, uh, you know, over this past week, just so everyone knows, and I remember, you know, working at Google 2004. I remember, like, how exciting it was for the executives to kind of start to transition into the Davos stage. It became this moment where you're kind of finally on the world stage. It's an exciting moment for CEOs, for world leaders, for global economists to get together, talk about the state of the global economy, where the world is headed, what we can and should be doing about it. And Davos is also this, this place of pride and prestige for being invited and being a part of the party, the global elite party, as some people are now calling it. And that's what I think is the important conversation, is that the World Economic Forum gathering in Davos has recently been cast as this gathering of the global elites, those who are trying to take control and run the world a- as they see fit. And Sax, I'd love your point of view on how that transition has happened. Because one of the important ways that the Davos gathering has been cast, and the World Economic Forum has been cast, is in the negative light of being globalists. And globalism has had a really important role in driving global economic growth and prosperity. And it has had these adverse effects in the US, as we've seen, with wealth inequality, loss of jobs, offshoring, gutting of industries, and so on. I think that there's a really important way that Davos has been politicized, but the risk of that is significant. Because if we do lean into this globalist notion and say it's all about elites trying to take control of our world, and we all become isolationists, that countries around the world can suffer deeply from the economic consequences of that shift. So maybe, Sax, you can kick this off, and es- especially in light of our conversation today about the need for economic growth and the reduction of global debt to support, you know, a more prosperous world in the future. This idea that right now we're talking about Davos and the World Economic Forum as a gathering of global elites, and maybe, Sax, you can kind of give us the history and the point of view on how that positioning has come about.
- DSDavid Sacks
Well, it's a meeting of, of global business and government leaders, so they are the elites. I mean, you add them all together and they do control a substantial portion of the world economy and most of the, you know, nations with the biggest economies. So there's no question, these are some of the most important people in the world. A bunch of the articles coming out of Davos reported the somber mood and tone of the conference. The level of anxiety and worry was very high. And I think that, for a brief moment, it looked like these people were staring in the mirror and realizing that their management of the global economy over the last couple of decades has been a bit of a disaster. I mean, you do have ruinous deficits and debts piling up in bo- the US and across the world, something like 350% debt to GDP globally. So we've talked about that. You've got this war in Ukraine that I and many people around the world think was easily avoidable and was a diplomatic failure. You're coming off of two years of badly botched COVID mismanagement, where the governments of the world pursued a horrible policy on COVID and made everything worse. You've got decades of energy policy promoted by the World Economic Forum where they want to get people off fossil fuels and natural gas and get them on to less dense, less reliable energy, including promoting things like organic farming in Sri Lanka, which we talked about-
- DFDavid Friedberg
Right. Right.
- DSDavid Sacks
... on the show, caused their economy to collapse. You've got the World Economic Forum promoting ideas like, "You're gonna own nothing in the year 2030 and you're gonna be eating insects because no one should be eating meat." So you've got these, like, wacky, extreme, you know, environmentalist ideas and anti-capitalist, anti-property ideas coming out of Davos. So I think the whole thing's been a bit of a disaster. And for a brief moment, it looked like these people, again, were self-reflecting on their role in creating these disasters. But of course, the tone quickly shifted to blaming disinformation on social media as the root cause of all these problems, as opposed to their decades of decision-making running, you know, the leading nations of the world and the leading companies of the world. And I think that the blame is properly put not on social media, but on these leaders for making, you know, bad decisions.
- DFDavid Friedberg
Do you believe in the benefits of global trade, where countries trade with one another and shift the sourcing of supply and labor to the cheaper source so that the buyer can benefit from having things at a lower price, and ultimately the global economy grows, as kind of being beneficial to the US over the last 30 years? Or net negative? 'Cause we talked, you know, about the, the obvious...... consequences of global trade, where we've had industries gutted in the United States and now we're trying to onshore them again and build redundancy and so on. But that's becoming very expensive and ultimately leads to the inflation of goods and services. And so as you look at kind of the, the-
- DSDavid Sacks
Yeah.
- DFDavid Friedberg
... the positive agenda of the World Economic Forum over the last 30 years being about improving global trade and global relations to enable global trade, are you an anti-globalist? And, you know, do you start to see yourself falling more in that camp as you see and hear more of what comes out of Davos and from these organizations like them?
- DSDavid Sacks
Well, look, all economic prosperity comes from trade. If we didn't have trade, then we would all be subsistence farmers and hunters and gatherers. So we basically specialize in something and then create an overabundance to that and trade it for the rest of our necessities. The issue is that trade not only creates prosperity, it creates dependencies because you're dependent on the people you're trading with, and also it has distributional f- effects in terms of geopolitical consequences. So, trade with China has created some prosperity, but it's also hollowed out the American manufacturing sector while also making China very rich, which has basically turned China into a major geopolitical competitor for the United States. So I'm not like a free trade fanatic. I mean, I understand the ways that trade creates wealth, but I think it can also create these downsides that have to be managed. And the fact of the matter is that this unfettered free trade ideology contained the seeds of its own destruction because all the revisionist powers who are seeking to revise the US-led global order, they were basically enriched and built up by the very free trade ideology that neoliberals were promoting. So this neoliberal wor- world order has kind of created the seeds of its own destruction. I think that it would have been much smarter for us two decades ago to be much more restrained in the China trade and to not throw open our markets to Chinese products. We basically gave them MFN status. This is back in the early 2000s and it was a bipartisan project and bi- a bipartisan decision. But the result of that has been the rapid rise of China at the expense of our manufacturing sectors.
- DFDavid Friedberg
And to the benefit of our consumer class, right? I mean, we do have $600 iPhones because of it and we do have cheap TVs and there has been a consumer market that's demanded these low price goods to, you know-
- DSDavid Sacks
Yeah, but I mean-
- DFDavid Friedberg
... live a better life, right? Like-
- DSDavid Sacks
So, yeah, but so, so everyone gets cheap goods at Target, but in exchange for that, we now have a real peer competitor to the United States which is capable of disrupting, let's say, our primacy in East Asia and, you know, is creating a much more challenging world. So look, I, I can understand the reasons why people bought into this two decades ago, but I think that if we had it to do all over again, I think most people would recognize that we should not have given China permanent MFN status and we should have been more temperate in our willingness to throw open our markets to these countries.
- DFDavid Friedberg
Chamath, do you think that the World Economic Forum has kind of transitioned into this kind of neoliberal organization now that's promoting these neoliberal beliefs that aren't really tied to the original construct of global tr- enabling and supporting global trade and supporting the global economy and creating more prosperity and security around the world?
- CPChamath Palihapitiya
I think it appeals to the insecure overachiever elite.
- DFDavid Friedberg
Yeah.
- CPChamath Palihapitiya
You know, nobody building anything really gives a shit about Davos. Nobody is thinking, "What's going on?" Nobody even knows when it happens.
- DFDavid Friedberg
Right.
- CPChamath Palihapitiya
So who cares about it? People who like status and went to fancy schools and wants to feel like they're in the club and that's how they've made it is going to this place which underneath is a membership organization where people pay based on the number of people that get to go. So is it really that important? Substantively, no. But overachieving surplus elites in the West really value the signal that it represents to other overachieving surplus elites in the West. So that's what Davos is. That's what the Allen and Company Conference has become. A lot of these things started off much purer than what they are today, but these are all membership-driven, revenue-generating efforts. In 30 or 40 years, the All In Summit will probably become that too.
- DFDavid Friedberg
(laughs)
- CPChamath Palihapitiya
It's just the nature of things. So I wouldn't spend so much time focused on a group of people getting together. The funniest thing about Davos that I saw was Zero Hedge, which said that the amount of prostitution is at record levels in Davos. And so it just kind of boils down to what it is, which is like any other conference, it just happens to be with more security guards and less security guards. And the same stupid stuff happens at Davos that happens in Vegas at name your conference, CES. It's just a different kind of attendee. So I think the bigger thing is that we are learning that the world tends to have these policy perspectives that swing in a pendulum, and the problem with the pendulum is that it, it is at extremes. And Sachs is right. We went from an extreme where we were very closed off and we were essentially subsistence farmers, all of us were, and then the pendulum has essentially peaked probably in the mid teens of this decade or of this century, where we realized too much globalization actually hollows out local economies. So we need to find the equilibrium point, and that inherently has more inflation, that inherently has higher prices, and that inherently has slower progress, but more consistent progress that benefits more people. And this is what is so ideologically disruptive to, again, surplus elites, because they need the $600 iPhone. The idea that they can't upgrade every year...... drives them into such a tizzy that they need to export all the jobs. Whereas, a $1,000 iPhone or a $1,500 iPhone may just mean that your upgrade cycle is two years. And just ask yourself, how many times have you upgraded as soon as the phone came out to realize, "Man, this phone is actually worse than the previous version and I probably could have just waited"? And there's a lot of work that actually goes into building these things to actually make them better. So all you're doing is you're giving up optionality, you're allowing your brothers and sisters to struggle, to basically feed the profit motives of one company. That, in hindsight, doesn't need to happen. So there's an equilibrium and I think that these next few decades will be about finding it. We have decided, it's categorical, that that level of globalization that we have had, this unitary, singular, monocultural way of thinking about things, is over. And David's right, it's because that system has created too many threats to the hegemony that brought us there.
- DFDavid Friedberg
J-Cal, do you-
- CPChamath Palihapitiya
And that's the good thing, I think, in general.
- DFDavid Friedberg
Yeah.
- 39:51 – 1:00:42
Rebuilding infrastructure while avoiding the debt ceiling, immigration reform
- DSDavid Sacks
- DFDavid Friedberg
Well, Chamath, let's- let's transition this to the- the broader question that I think we got into it a couple episodes ago on how can we afford this transition if there is this mounting kind of trend against globalization, this mounting de-globalization movement and effort, particularly in the US. And again, as Sax pointed out, global debt to GDP is something like 300 to 350% depending on how you count, and we're running into a debt ceiling here in the US. I guess the question is, how do we afford to build the infrastructure redundancy and make the investments at home to replace global trade? Can we afford to do it? And how's this going to play out as we run into this, you know, s- uh, debt ceiling vote?
- CPChamath Palihapitiya
I don't think that's the right question. I think it's the-
- DFDavid Friedberg
Yeah.
- CPChamath Palihapitiya
... inverse of that question. How can we afford not to? With the amount of discontent and the amount of economic strain that people feel, if you want to really quell populism, you're going to have to create economic vibrancy at home. When people are making money and they find purpose, they're less agitated, they're not storming the Capitol, they're not electing fringe candidates, they're not doing domestic terrorism, they're just going to work and building a life, right? We know that. So how can we afford not to? How can we afford not to, like, bring back jobs to the heartland of America? So the reality that I have, and I think a lot of people have, is that this debt to GDP thing is a bit of an intellectual red herring. And the reason is people talk about this thing constantly in these absolute terms with no historical precedent that relates well to our current moment. There is no magic number at which thing this experiment that's called America fails. So I think that you have to be a little bit more intellectually honest and say that at best, it's a relative problem, and it's relative to the countries that have already established dominance, of which there are eight or nine, and then the emerging economies, and then thinking about what critical things will they bring to the table in 15 or 20 years from now. And in that context, I think that people will hem and haw, but ultimately they'll capitulate, they will raise the debt ceiling, and they'll continue to fund this transition away from globalism. And I think that's the argument that will get the Republicans over the line, because it's going to bring a lot of spending and stimulus and jobs to frankly a lot of red states that would otherwise kind of continue to wither and die on the vine.
- DFDavid Friedberg
I think here's my biggest concern. We're either trying to walk a tightrope or there's no tightrope to walk. And if we make these investments and they're not economically viable investments, it's a path to ruin. And what I mean by that is if we're building factories, manufacturing facilities, infrastructure that relies on yesteryear's technology and systems of production and glo- and- and- and kind of economic systems-... and there are alternatives that are competing on a global stage that are better, more productive, more advanced, then we lose, and we've made an investment in a negative ROI way.
- CPChamath Palihapitiya
But hold, hold on a second.
- DFDavid Friedberg
Because those jobs won't last.
- CPChamath Palihapitiya
Can I, can I ask you a question?
- DFDavid Friedberg
Yeah.
- CPChamath Palihapitiya
See, when, when you say that though, you're making a very basic assumption, which I think you can question, which is you are underpinning that on fundamental economics that can change if we choose to. For example, let's take like natural resources, okay? Every time you do a plan, the industry, and I define the industry as every for-profit company and Wall Street and the debt markets, they refuse to underwrite this thing at a higher cost of capital. They use a WACC of six or seven or eight, and they will fight tooth and nail to use the smallest discount rate possible, because it allows them to capture more of the profit dollars. But if you actually had a realistic WACC of like 10% on an, on a massive infrastructure project, guess what? You're actually pretty equivalent to a government, and in fact, in many cases, the government becomes cheaper. So I think the thing that is worth debating, and I'd like your reaction to this, it's not that what you're saying. It's we refuse to change the guardrails on our profit-making ability, and if you extended the window, if you changed the discount rate, if you said PEs can be different, you would have a very different economic justification for what you just said. It completely changes, a hundred basis points changes everything you're saying by tens of years.
- DFDavid Friedberg
One way to describe that, yeah, is, uh, uh, another way to reframe what you just said is that the useful lifespan of an investment isn't 40 years or 50 years, but it may be 12 years. And if you, if you recast the investment decision as this has to be a 12-year return instead of allowing it to be modeled as a 40-year return, then you start to really filter out a lot of the nonsense, and you can actually see real payback. It doesn't make sense to spend $100 billion on a train to take people from LA to Fresno or whatever craziness the, the California high-speed rail program has turned into. It was originally like a billion dollars to go from LA to, to San Francisco. There was economic justification. To get payback on $100 billion or whatever it's ballooned into, the whole system should be shut down. So I guess there's a, from a policy perspective and accountability framing that's missing, but also bringing in the time horizon on which we need to get paid back for these things. My point was that in China, and I've, I've made this point many times, but I just think it's a really important one that'll play out over the next couple of years, they're building 450 nuclear power plants. They're gonna get the cost of industrial power below five cents or four cents a kilowatt hour, and they're electrifying all their factories. As they do that, it's no longer a unit of human labor that's needed to produce goods. It's a unit of electricity, and if they're driving down the cost of electricity and all products can be made using electricity, you have a huge economic advantage.
- CPChamath Palihapitiya
It's not the cure-all that you think that is. Even if you have free energy, you have to think about the inputs and the thing that China-
- DFDavid Friedberg
Sorry, I, but no, no, sorry. I, I'm not talking about energy. I'm just saying a general framing, like...
- CPChamath Palihapitiya
No, no, I understand. I-
- DFDavid Friedberg
My point being like, the investments we should be making are where is the puck headed? Not where has the puck been?
- CPChamath Palihapitiya
No, no. So I just, I just wanted to comment on where the puck is heading. Even if energy is zero in China, you have to think about inputs, meaning factories make things with inputs. And if you look, for example, in natural resources, the inputs by and large don't exist in China. And so all I'm saying is that all of these inputs, whether again, you can take natural resources that proliferate massively in the United States, it turns out that India is utterly, utterly, utterly poorly addressed in a geographical survey perspective. And we are finding that India's raw resources are off the charts, okay? There's certain places in Africa, tons of stuff in Indonesia and Australia. All of those things may not have to go to China because there are subsidies or there are equivalently cheaper decisions that governments can make so that they choose not to send it. And all of a sudden, all of that spending doesn't matter as much because the Australian government makes a trade-off that says, "You know what? I'd rather have these jobs here, and I'm willing to have a longer payback cycle for these jobs to be here than instead of ship it to China." And he, they tell the, they, they tell the Australian citizens, "I'm sorry guys, but you're gonna have to replace your car every seven years as opposed to every five. I hope you're okay with that. But that'll mean full employment and it'll prevent fringe candidates and populism and let's go forward."
- DFDavid Friedberg
Where do you invest-
- CPChamath Palihapitiya
I am investing-
- DFDavid Friedberg
... to support your thesis?
- CPChamath Palihapitiya
I am investing a lot of money in those places that control the natural resources that are poorly understood, meaning there are places like India where our geological survey capacity is relatively naive, and it turns out that in critical parts of the energy supply chain or other places, they can play a huge role. And the Indian government's cost of capital has an element, they're sophisticated enough to add a f- an element to the formula that accounts for full employment. If I build it in this state and if I try to get this many jobs created, the full circle feedback of that allows me to actually transfer price it into the Indian market at this price, which is cheaper than anything that China can do, even at zero energy. That's the kind of sophisticated decision-making that is emerging because of this de-globalization trend, and it's happening everywhere. So the Indians are doing it, the Germans are doing it, and then the US is doing it. And then on top of that, what they're, what they're doing in terms of game theory, which I think is even more sophisticated, is they're not letting China be alone. They're actually now slowing China down, because China, turns out, actually needs inputs from these Western economies, and they're like, "We're just not gonna give them to you anymore. So do the best you can." For example, in semiconductors, the Dutch, the Germans, the Americans, we've now essentially embargoed all of our most sophisticated equipment from ever getting in there.That will increase, even with zero energy, the cost of what comes out of there. And that will balance the playing field so that the Germans, the Dutch, the Americans can bring other partners in at a different cost of capital to make it economically neutral and at parody. And the reason they'll do it is to create jobs for Americans, or the Dutch, or for the Germans.
- DFDavid Friedberg
Okay.
- JCJason Calacanis
I think the most-
- DFDavid Friedberg
Yeah, go ahead, J-Cal.
- JCJason Calacanis
... uh, Freeburg, I, I, I just, I, I think the most important thing here isn't, like energy, I don't think it's infrastructure, I don't think it's natural resources, at least for America. It, it's entrepreneurs, and, and that's what it's always been for this country, and its immigration is the silver bullet here and inspiration. And, and the freedom that this country has for entrepreneurs and founders to pursue a vision, to start a company, that's why we've won so big historically, is the, the combination of immigration and the inspiration that these entrepreneurs do on a global basis to get more entrepreneurs to come to this country, to go to Stanford, to start companies. And that's why China is now losing. Uh, they cribbed this incredible formula we had of letting Jack Ma do Alibaba, and then they decided to, for whatever, you know, insecure or stupid reason or pragmatic reason, to consolidate power. A- and that's what will push the world forward and, and make our country thrive. We have to fix immigration. We have to keep letting entrepreneurs define the future because the government can do so much. They, they can underwrite a couple of chip factories here or there. Sure, we could put money into nuclear or fission or fusion, whatever the next technology is, but you need a singular person who wants to make it their life's mission, who wants to have their sense of pride and innovation push the world forward, and those people are rare. And we are in a competition globally that we are not focused on, uh, that we need to get refocused on to recruit the greatest minds in the world who want to change the world, to do it on American soil.
- DFDavid Friedberg
I do not disagree with you, J-Cal. I think, you know, to my earlier comment about how do we walk the tightrope of the debt burden, the de-globalization and populous and movements and the, and the challenges and opportunities ahead, it has to come through innovation. I think that's how you, you have to invent a new tightrope, basically.
- JCJason Calacanis
I think the challenge though is, Freeburg, that it takes a recognition that there are singular individuals in the world, one in a million, one in 10 million, one in 100,000, whatever it is, who can just drive an entire economy forward, whether it's Gates with Microsoft or Steve Jobs with Apple. There are singular individuals who come to this country-
- CPChamath Palihapitiya
Bam, Bam Brogan with, uh, the tunneling company.
- JCJason Calacanis
(laughs) Nice follow-up. Nobody knows what you're talking about except for me.
- DFDavid Friedberg
(laughs)
- 1:00:42 – 1:17:22
TikTok's endgame in the US: banned, spun out, or something else?
- JCJason Calacanis
issue.
- DFDavid Friedberg
Okay, guys, I'm going to move us forward to the, uh, the banning of TikTok. So I want to kind of change the, the tone a little bit. This, uh, story recently is that, uh, TikTok has been banned for use on the campus Wi-Fi networks-
- JCJason Calacanis
Let's go.
- DFDavid Friedberg
... at a number of universities, including UT Austin, Auburn, Boise State, the University of Oklahoma. So college students can't access the app when they're on the campus network.This is following 19 states that recently banned TikTok in government devices. As everyone knows, TikTok is a product from ByteDance, which is a Chinese-based company. And there's been quite a lot of political and regulatory huffs and gruffs about ByteDance having this level of insight and access to users in the United States, with the assumption being that much of the data that they're pulling out of the app is available to the Chinese Communist Party, which creates a security threat to the United States. That's one argument. I think there is also a significant tie-in to ByteDance. There's over $8 billion of capital invested in ByteDance by firms that we know well, like Sequoia Capital, Tiger Global, Coatue, Susquehanna, and others. They're trying to find a way to monetize their investment in what is truly the most viral, fastest growing, highest revenue-growing, biggest startup in the world right now, in ByteDance. So there is a restructuring proposal apparently underway that's being discussed in Washington, D.C. right now, to try and restructure the organization and the ownership structure and the oversight of, uh, TikTok and ByteDance, such that US regulators and US companies can oversee the data, the use of the data, the algorithms underlying TikTok, and monitor 'em from within the United States. Question for this group here on the McLaughlin Group of 2023 is, does that do-
- JCJason Calacanis
McLaughlin.
- DFDavid Friedberg
... enough for you? McLaughlin, do you guys think that that's enough? First up is, uh, Chamath, who's been silent for a bit.
- CPChamath Palihapitiya
I think this is really bad news for ByteDance. Basically, what's happening is that, and TikTok, all the frustration that all these legislature, legislators and politicians have had over Facebook and Google and other sort of big tech companies is gonna get focused on ByteDance because you have this common enemy that you can point to as a boogeyman of sorts. And I'm not saying that it's right, but I think that what you're starting to see is it's much easier to pick a fight with a Chinese company and win, and get broad-based support, than it is to pick a fight against an American company with a bunch of American employees and American market cap and American know-how and American IP that gets impacted. So, I don't think this is going to end well for TikTok and I think the goal, if I were any of these people on the cap table, would be to sell it in secondary to somebody else and get out. I think the next big shoe to drop is going to be advertisers who come under a lot of pressure. So for example, think of all the advertisers that have left Twitter. There is a point of efficiency where you can live with all of the mess that Twitter has because it comes with a lot less scrutiny and oversight and political pressure than advertising on TikTok. And that, I think, is the next kind of like big wave here so I think it's very, very bad. I think, I think the enterprise value of this company is quite challenged and these guys should try to sell and get out.
- DFDavid Friedberg
Who are the buyers in that secondary market though? I mean, that's a lot of capital.
- CPChamath Palihapitiya
The thing is, the cap tables haven't been segregated so what you own is equity in ByteDance.
- DFDavid Friedberg
Right.
- CPChamath Palihapitiya
But the problem is, the look through ownership would, will discount a lot of TikTok if they see a lot more of this stuff happening. You guys have to remember, this is the first three or four weeks of 2023. Wait till we're here in September and October and November, wait till the election year starts. It's not good. So it's a discount on ByteDance that probably takes ByteDance down by 70 or 80 billion.
- DFDavid Friedberg
Yeah.
- CPChamath Palihapitiya
So that's a 35, 40% discount to their last mark. So, you know, if somebody can sell in the high hundred billions of dollars, I think you should, I think they should prob- they should consider it. There's, it's worth it, I think.
- DFDavid Friedberg
Jakew, I know you've got strong opinions on TikTok and the-
- JCJason Calacanis
Well, no, I, I think you have to be incredibly pragmatic here. This is the same as the 5G issue. You cannot trust the Chinese government to not steal intellectual property or to put back doors into the software. It is common business practice there. Huawei was banned. They basically stole the source code from Cisco, that was proven, and it was proven that they were spying on people. Canada, the UK, the United States, Vietnam, everybody has banned using 5G technology from China for a reason, because they will use it to spy on you. This is, uh, the nature of an authoritarian government. It is far too powerful to have a, uh, not only the surveillance capabilities that are built into owning TikTok in the hands of the Chinese Communist Party, to have the ability to very, uh, in a very nuanced fashion, trend certain videos that would steer the United States in a certain direction politically or-
- CPChamath Palihapitiya
Into stupidity. (laughs)
- JCJason Calacanis
Yeah.
- CPChamath Palihapitiya
Into stupidity.
- JCJason Calacanis
Towards stupidity is one, of course, right?
- CPChamath Palihapitiya
Yeah.
- JCJason Calacanis
They're, they're letting their, you need to only look at what-
- CPChamath Palihapitiya
That 60 Minutes, that 60 Minutes clip is incredible, right?
- JCJason Calacanis
Yeah. You need only look-
- CPChamath Palihapitiya
It's like they show, they're showing science videos to the kids in China-
- JCJason Calacanis
Exactly.
- CPChamath Palihapitiya
... and they're showing stupid nonsense to the kids in America. What do you think over millions of videos-
- JCJason Calacanis
They're trying to do sci-
- CPChamath Palihapitiya
... that does to our children versus their children?
- JCJason Calacanis
You can be 100% certain they're doing psyops on our children as we speak. They are trying to make us dumb and distracted while they get smart and sharp.
- DFDavid Friedberg
And by the way-
Episode duration: 1:36:38
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