E133: Market melt-up, IPO update, AI startups overheat, Reddit revolts & more with Brad Gerstner

Chamath Palihapitiya 0:00 I'm so fucking tired. I've slept six hours in three and a half days. Six hours-

Jason Calacanis 0:05 So wait, wait, you went-

Chamath Palihapitiya 0:06 ... maybe seven hours.

Jason Calacanis 0:06 ... to the World Series-

Chamath Palihapitiya 0:07 Fuck.

Jason Calacanis 0:07 ... of Poker with Helmuth? So you spent-

Chamath Palihapitiya 0:11 No, no, no. First of all, I flew public. Took Southwest.

Jason Calacanis 0:14 What?

Chamath Palihapitiya 0:15 Yeah, cost me $49.

Jason Calacanis 0:15 You were on a Southwest flight?

Chamath Palihapitiya 0:17 Yeah, it cost... I got a ticket for 49 bucks. It's like, so fucking incredible.

Jason Calacanis 0:19 Oh, did you sit in seat A1, also known as J Cows res- reserve seat? It has my name on it.

Chamath Palihapitiya 0:24 Well, I was in the front row.

Jason Calacanis 0:26 Okay.

Chamath Palihapitiya 0:26 Y- y- it's great. Like, Southwest has these numbers, and what they do is-

David Friedberg 0:30 Hold on, you were in first class on Southwest?

Jason Calacanis 0:32 No, no, no, no. Premium Plus.

David Friedberg 0:34 He was in the front row.

Chamath Palihapitiya 0:35 No, there's like, these signs that, that like, have a number that attaches to your ticket, and then you stand in that line, and then you go on in this orderly way. And so I was... I had like, A5 or something, so I was like, the fifth person on, and then I sat in the front and I put my bags-

Jason Calacanis 0:50 Mm-hmm.

Chamath Palihapitiya 0:50 ... up top.

Jason Calacanis 0:51 Yeah. You carried your bags, yeah.

Chamath Palihapitiya 0:52 An hour later, I was in Vegas. It was so easy. Southwest is phenomenal. And then I flew back. Anyways, and after, after losing as much money as I did, it felt good to fly for $49. I gotta be honest with you.

Jason Calacanis 1:03 Well, austerity measures have-

David Friedberg 1:04 Oh my god.

Jason Calacanis 1:05 ... their benefits. You can sleep better at night with austerity measures. And did you go to the all-you-can-eat buffet and take it to go as well?

Chamath Palihapitiya 1:11 No, I never do that.

Narrator 1:12 Let your winners ride. Rain man, David Sacks. We're going all in. As I said. We open source it to the fans and they've just gone crazy with it. Love you guys. Queen of Kinwah. Going all in.

David Friedberg 1:30 Why did you fly Southwest?

Chamath Palihapitiya 1:31 Why did I fly Southwest? Well, the plane's in Europe with Matt. That's number one. And then two, I just wanted some flexibility to get in and out depending on when I busted these tournaments. So let me tell you about these tournaments.

Jason Calacanis 1:42 Hmm.

Chamath Palihapitiya 1:43 The 100K is literally like a murderer's row of like, every great poker pro. So it was like, 96 of us or something.

Jason Calacanis 1:52 Hmm.

Chamath Palihapitiya 1:53 I gotta be honest with you, it was so much fun.

Jason Calacanis 1:57 Hmm.

Chamath Palihapitiya 1:58 So much fun.

Jason Calacanis 1:59 Why? How so?

Chamath Palihapitiya 2:00 You know, the... we play 40-minute levels and you have to really get the chips moving, which means that there's only so much like, you know, game theory optimal poker you can play, and at some point, you just gotta gamble it up and you gotta take-

Jason Calacanis 2:12 Hmm.

Chamath Palihapitiya 2:12 ... your shots and you have to be willing to bluff and, you know, you have to bet for thin equi-... It's so much fun and then you see some of these guys that just lose their minds. Anyways, it was, it was really, really a lot of fun. I finished in the middle of the pack, like, 42nd or something, so that was brutal. But then the thing that I'm the most proud of is that I went from that and I hopped in the 3K-

Jason Calacanis 2:32 Hmm.

Chamath Palihapitiya 2:32 ... 6, 6-handed right afterwards and there was like, 1,250 people in that and I got to 81st and-

Jason Calacanis 2:38 Whoa.

Chamath Palihapitiya 2:39 The problem was I just couldn't get anything going. I couldn't get any real card...

Jason Calacanis 2:42 Mm-hmm.

Chamath Palihapitiya 2:42 Like, you need some card distribution. Like, you have to, at some point-

Jason Calacanis 2:45 Yes.

Chamath Palihapitiya 2:46 ... make some hands. You can't just... You know, I could bluff my way to 81st, but I needed hands to really, to really, really have a chance to chip up and run it. Then I played in the Razz-

Jason Calacanis 2:56 Hmm.

Chamath Palihapitiya 2:57 ... which is seven-card stud low. There's 126 people now and I finished in the middle of the pack there, and then this 10K bounty, there was about 600 people and I finished like, 150th or-

Jason Calacanis 3:08 Those are all respectable.

Chamath Palihapitiya 3:09 I mean, I now play tournaments. I have no idea how to play a tournament, to be honest. I know how to play poker, I know how to play cash games, but tournaments are very different. So I feel like I was very ill-prepared, but I had so much fun. And you know, the crazy thing is when you're playing for 12 hours a day, you are focused for 12 hours. The thing that I forgot is that you end up... I ended up losing like, two and a half pounds.

Jason Calacanis 3:32 Oh, wow.

Chamath Palihapitiya 3:32 If your brain is going, going, going for eight hours a day-

David Friedberg 3:35 That's the biggest muscle in the body.

Chamath Palihapitiya 3:36 Biggest fucking thing. And I was, I was mentally devastated at the end of each night. You're just lying in bed, eyes awake.

Jason Calacanis 3:43 Yep.

Chamath Palihapitiya 3:43 And then you can't sleep and so then, you know, you go and you play craps and baccarat.

Jason Calacanis 3:46 (laughs)

Chamath Palihapitiya 3:47 Break the casino for-

David Friedberg 3:48 Whoa.

Chamath Palihapitiya 3:48 ... a couple hundred dimes a night there and then-

Jason Calacanis 3:49 Oh. (laughs)

Chamath Palihapitiya 3:49 ... go back to bed. It's great.

Jason Calacanis 3:51 Great. (laughs) Sounds like a great week.

David Friedberg 3:52 The good news is, uh, is Phil was live blogging for you on your behalf from, uh, from Vegas.

Jason Calacanis 3:59 Yeah, over your shoulder.

Chamath Palihapitiya 3:59 Oh, by the way, the other thing was I brought my phone, but I don't have anything on my phone, like, I don't have Twitter, I don't have any of that stuff. So I was just totally in the zone.

Jason Calacanis 4:08 Hmm.

Chamath Palihapitiya 4:08 It felt so great to not be connected to social media.

Jason Calacanis 4:10 It's a flow experience. It's a flow experience when you can turn everything off-

David Friedberg 4:13 That was really great.

Jason Calacanis 4:13 ... and just be in the moment. Congratulations on the, on the... you know, coming in the 10% of the field in the 3,000 or 8% of the field. That's incredible, dude.

Chamath Palihapitiya 4:21 If I really practiced at these tournaments, I think I would bank a couple, but I just don't have the time.

Jason Calacanis 4:25 The paradox there is that you did best in the largest field. If you can do this for three or four years and you go into those Razz fields when it's 100 or those 25K, 100Ks when it's 100, 200 people-

Chamath Palihapitiya 4:37 In the 100K, there's 90, 95, 96 people. Like, you really do have about a 1% shot of winning the thing, which is pretty-

Jason Calacanis 4:43 Yeah.

Chamath Palihapitiya 4:43 ... incredible.

Jason Calacanis 4:44 Yeah. Razz too. Razz is always 100.

David Friedberg 4:47 I love tournament poker. That was my... that was my game back in the day.

Chamath Palihapitiya 4:50 Well, it's because, it's because you're afraid to lose money, so-

David Friedberg 4:53 (laughs)

Chamath Palihapitiya 4:53 ... it's perfect for you. Put up a small amount of money and you can play for many hours. You're prob-... In your mind, you're probably dividing the number of hours by your buy-in so that you can think about what your hourly cost is.

David Friedberg 5:02 I actually like tournament poker 'cause when you lose, you lose. Like, you can't just-

Chamath Palihapitiya 5:06 Yeah.

David Friedberg 5:07 ... rebuy-

Chamath Palihapitiya 5:07 Totally agree.

David Friedberg 5:07 ... and basically... And then, and then there's a broader macro strategy. You start to play the chips against the other players 'cause you know how everyone else is playing based on how many chips they have in front of them.

Chamath Palihapitiya 5:16 It's a great point. This theory of ICM, which is like, independent chip model, is exactly what you just said. The craziest thing, Friedberg, happens right at the money bubble. These guys-

David Friedberg 5:25 Yep.

Chamath Palihapitiya 5:25 ... start... I've never seen this before. They ultra tank.

David Friedberg 5:28 Ultra tank.

Chamath Palihapitiya 5:29 Yep.

David Friedberg 5:29 Oh, yeah.

Chamath Palihapitiya 5:30 They go in the tank for two minutes and then they fold.

Jason Calacanis 5:32 So obnoxious.

David Friedberg 5:33 When I used to play tournament poker, I'd sit... I'd, I'd fold ace-king suited, you'd fold pocket queens, you'd fold everything if you're on the bubble-

Jason Calacanis 5:41 The bubble.

David Friedberg 5:41 ... of getting into the money or you're on the bubble of getting to the final table. It just doesn't matter 'cause if there's three guys with you that, that have smaller chip stacks, let them get blinded off and now you're in the money or now you're on the final table and then you'll play poker. It's like, go get up, go have some dinner, come back in an hour. Don't even look at your cards if you can cruise your way there. It's a totally different kind of game. Totally different.

Chamath Palihapitiya 6:01 There's a guy that was tanking, he was a really lovely guy, a British guy.... I offered him the min cash just, (laughs) just to not tank. I was like, "Please stop tanking for four minutes." And folding your- I'll just-

David Sacks 6:13 He needed his action.

Jason Calacanis 6:14 I had a guy do this in a tournament and I timed it with the rest of the table. I took out my phone, I timed it, and I said, "Whatever number of seconds you do, I'm doubling." And I just did that. It was so obnoxious that the entire table, like, the guy finally stopped.

Chamath Palihapitiya 6:29 Well, in the, in the 100K we actually had a better setup, which is that we had these iPads on the table, and everybody gets a 30-second shock clock.

David Sacks 6:36 Yeah.

Chamath Palihapitiya 6:36 So you can't-

David Sacks 6:38 Wow.

Chamath Palihapitiya 6:38 ... really fuck around. But then in these big field events, they're not gonna have iPads on f- a hundred tables, obviously.

Jason Calacanis 6:45 Yes.

Chamath Palihapitiya 6:45 And so instead, people just tank forever and then you have to call the floor, and you have to call time on these folks.

Jason Calacanis 6:50 (sighs)

Chamath Palihapitiya 6:51 The funniest thing, though, was, like, the last tournament I bought in for was a 10K secret bounty, which means that on day two when you knock somebody out, you actually, everybody stops the action, you go up on stage, and you pull, like, out of, it's like treasure hunting.

Jason Calacanis 7:03 Yeah.

David Sacks 7:03 Come on.

Chamath Palihapitiya 7:04 And some of these bounties can be, like, a million bucks.

Jason Calacanis 7:06 Ooh.

Chamath Palihapitiya 7:07 And obviously, there's a lot of people there that kind of recognize me. And when they saw me in the 10K secret bounty, there was, like, a movement. It was so funny. They were like, "If you win the secret bounty and you win the million, we're gonna revolt and burn the room at Parris, Parris to the ground." (laughs)

David Sacks 7:23 (laughs)

Chamath Palihapitiya 7:24 It would have been so... And I, and I thought, "You know, it's true. It'd be patently unfair if I was the one that won that million dollar secret bounty."

Jason Calacanis 7:30 How many selfies did you take on Southwest? That's the question everybody wants to know. How many people recognized you on Southwest, and what was the shame that you felt?

Chamath Palihapitiya 7:38 No, it was great.

Jason Calacanis 7:38 Or you felt great?

David Sacks 7:39 (laughs)

Chamath Palihapitiya 7:39 I'm gonna fly, I'm gonna fly Southwest to Vegas all the time now. It's fucking great. It, I literally was, honestly, to get from my house to the gate where you stand-

Jason Calacanis 7:47 Mm.

Chamath Palihapitiya 7:47 ... to get into the plane, it was, like, plus or maybe 15 minutes more than just driving on the tarmac. Like, it was a nothing burger.

David Sacks 7:53 Jake L.

Jason Calacanis 7:54 It's amazing (laughs) what a down market can do to people's framing. (laughs)

David Sacks 7:58 You know what this is? You know what this is?

Jason Calacanis 7:59 What is it, Brad?

David Sacks 8:00 This is the victory of the age of fitness. 2:01.

Jason Calacanis 8:04 Absolutely. (laughs)

David Sacks 8:05 2:01, the dictators-

Jason Calacanis 8:07 Southwest.

David Sacks 8:08 ... Southwest. You were in the fir- the first row of Southwest though.

Jason Calacanis 8:09 Starting measures.

David Sacks 8:10 You were in the front row of Southwest.

Jason Calacanis 8:11 All right,

Jason Calacanis 8:12 listen. There's a big docket today. We've got a lot on the plate. David Sacks is busy in a star chamber right now selecting the next president of the United States. He's picking a VP and the Cabinet for whoever's gonna win, so he couldn't make it today. So we brought the fifth bestie, Brad Gerstenher back, and great timing, because the FED decided to pause rate hikes in just yesterday, I guess. And this would have been the 11th consecutive rate hike. Is that about right?

David Sacks 8:37 Sounds right.

Jason Calacanis 8:38 And they anticipated two more 25 basis hikes before the end of the year. So here's just the, um, FED fund's effective rate. So you can all can see it here over time. And there was also some big news this week. Couple of 2023 (laughs) IPO candidates started to be floated. Obviously, we've been hearing about Reddit and Stripe for a while, but ARM confidentially filed for an IPO back in April, and they're seeking to raise between eight and 10 billion later this year. And that would be, uh, a pretty big deal for SoftBank, which owns the firm. And that could, I guess, save SoftBank, which has had a, just a brutal run with the two different opportunity funds-

David Sacks 9:22 Sorry, why would this sa- save SoftBank? The ARM deal is being done... Is, what's the valuation that's being done at?

Jason Calacanis 9:28 SoftBank acquired ARM for 32 billion in 2016. They don't know the valuation right now. They haven't put that out there yet.

David Sacks 9:34 I mean, they were originally looking for anywhere from 30 to 70. But, I mean, Brad, where do you think that comes out?

Jason Calacanis 9:38 I have no idea.

David Sacks 9:39 I think that, you know, they're shopping to get these anchor tenants into ARM. If the IPO market was super hot and this was really easy to get done, this would've been done, you know. So I think, you know, they're tiptoeing now because they need to get it into the public market. But, you know, I, I, I think that anybody who does an IPO today, okay, is going to demand a, you know, a rate of return into that offering that is a significant margin of safety relative to all deals that were done in '20 and '21. And what that means is on the road show, investment banks go and they try to drum up demand. They wanna have anchors in the IPO book. They call firms like ours. They call strategic investors. They wanna size up what that is. And, you know, they give you their expectation of fair value or where they think the IPO will trade to. Of course, you meet with management. You ascertain and develop your own expectations of fair value. What I'm saying is, maybe in the peak, you know, in '20 and '21, people were getting thinner and thinner in terms of the margin of safety they demand. I, my expectations, whether it's ARM, whether it's Databricks or other companies that are starting to queue up, and these are fantastic companies, right? Make no mistake about it. NVIDIA tried to buy ARM, and, you know, Databricks is doing over a billion in revenue, growing extraordinarily fast, led by an incredible team. But in order to get into the public markets, they have to, you know, step in with a bigger discount than they would of, you know, pre this correction.

Jason Calacanis 11:20 Yeah. And, uh, just to put some numbers on it, ARM had agreed to be acquired by NVIDIA for 40 billion before the talks fell through. That was due to regulatory scrutiny. Bloomberg says ARM is aiming for a valuation of 70 billion. Obviously, there's no confirmation about that. That's just the news, hopefully intelligently speculating about it.

Chamath Palihapitiya 11:35 What exactly would you be buying for $70 billion?

David Sacks 11:38 Yeah, I thought-

Chamath Palihapitiya 11:39 They missed it.

David Sacks 11:40 Yeah.

Chamath Palihapitiya 11:41 ARM had a window where they had to make some really important product decisions to be able to actually have reference designs that actually made sense beyond just simple mobile processors and CPUs, and they don't have any of that. So they have a good cash cow business. It's probably worth 25 billion. They paid 30 some odd.

David Sacks 12:00 32. Yeah.

Chamath Palihapitiya 12:01 They could've gotten it out for 40 something, but it's a mid-20s billion dollar company. No more.And if you're- and if- if you buy it at the 20s, you're buying a cash flow yielding asset.

David Friedberg 12:11 And the-

Chamath Palihapitiya 12:12 Good luck to all the players, I guess, is what I would say.

David Friedberg 12:14 ... clearly, it's a function of SoftBank seeking liquidity, right? I mean, they, uh, they've had this position for how many years now? Four years?

Jason Calacanis 12:25 No, more. I think this was-

David Friedberg 12:27 Six, maybe?

Jason Calacanis 12:27 Six years?

David Friedberg 12:28 Something like that, yeah.

Jason Calacanis 12:29 When did they buy it? Was it 2016? I think it was longer. Yeah, 2016, they bought it. So this has been-

David Friedberg 12:34 And in the fiscal year-

Jason Calacanis 12:35 ... yeah, seven, seven.

David Friedberg 12:35 ... ending March, the Vision Fund alone took a $32 billion write-down. Obviously, SoftBank has a big chunk of the Vision Fund.

Jason Calacanis 12:44 But this is not in the Vision Fund, right? This-

David Friedberg 12:46 And it's not in the Vision Fund, exactly. It's on, uh-

Jason Calacanis 12:47 This is on balance sheet.

David Friedberg 12:49 It's on balance sheet.

Jason Calacanis 12:49 It's on balance sheet, yeah.

David Friedberg 12:50 Yeah. But it's clearly a liquidity driver for them. I don't think that this is ... You know, first of all, Jason, I don't think the point about SoftBank needs saving is necessarily true. It's not a company that needs saving, but they've certainly taken some hits.

Jason Calacanis 13:02 Well, they could use a win, is what my point... Yeah.

David Friedberg 13:04 Yeah, they could use a win, but-

Jason Calacanis 13:07 The last two, uh (laughs) , quarterly calls, uh, you know, Masayoshi-san was pretty repentant and humble.

David Friedberg 13:16 Right.

Jason Calacanis 13:16 And in fact, he used that exact language. We talked about it here.

David Friedberg 13:18 So there's, uh, big liquidity needed at some point for the business. So if they can get this thing out and get liquid on it, it would certainly support the balance sheet more than anything.

Jason Calacanis 13:27 You know, the, the market is on a tear this year, Brad. Is there, now that everybody's buying back into tech stocks, I, I guess two questions. Why is everybody suddenly buying into tech stocks when people think there's gonna be a recession and consumers have run out of money, and ... Yeah, what, what, what's the thinking here of why so much money has gone to tech and this incredible rally? Uh, it's been great to watch, but, uh, people seem to be perplexed by the rally. And then, the Fed, even though they didn't do a rate hike, seemed to put cold water on it and say, "Hey, listen. Don't get ahead of yourselves. We're gonna probably do rate hikes later in the year."

David Sacks 14:06 We all have short memories. You know, tech had a devastating year in 2022, so this is a bit of a reversion to the mean, right? If you remember the chart, we, you know, we showed a lot on this pod last year, at the b- at the end of, starting at the end of 2021, was that we were trading at, you know, multiples that were, you know, 50 to 70% above their 10-year average. Um, and at the trough, we were trading about 30 to 40% below the 10-year average, right? So the market corrected. It overshoots on the upside because rates went to zero. And by the end of 2022, when you had Larry Summers and others who were going out and saying, "We don't know what the upper bound of inflation and rates is," that's really scary to the markets. And so, you had this overshoot to the downside. We're still trading below the 10-year average for internet and software companies based upon our numbers. And so, when you look at this, as we said at the end of last year, the framework changed early in this year. All of '22 was about two things, is inflation going higher and are rates going higher? And those things are debilitating for growth assets and growth multiples. By the beginning of this year, we started to have confidence that inflation had peaked, which meant that rates were largely in kind of, you know, spitting distance of their final destination, and the framework shift to economy. Are we going to have a hard landing? Now, remember, at the start of the year, Mike Wilson, from Morgan Stanley, who made, give him credit, made the call in 2022. He said '22 was gonna be awful. He was right, but he stayed in that bearish position at the beginning of 2021, said the economy's gonna hit the skids in Q1 and that we're gonna revisit 3,000 or 3,200 on the S&P. Instead, we're sitting at 4,300. So he was tragically wrong at the beginning of this year because, again, he was fighting, I think, the last battle that he, uh, that was won, as opposed to looking ahead and saying, "This is no longer about rates and inflation." So the NASDAQ has moved 30% to start this year. You know, the Fed said yesterday, um, "We're hitting pause." Um, you know, the quote, uh, from Chairman Powell that has everybody a little bit perplexed is, on the one hand, he says, "We're data-dependent." On the other hand, he said, "We're likely to have more rate hikes," right, and that rates are going to stay high for a couple years. Well, if we're data ... Well, you can't have it both ways. If we're data-dependent, we have a hard landing, like Stan Druckenmiller thinks we're gonna have in Q4 of this year, then rates are gonna get cut. But the market seems to like this. And let, l- let's talk about where we are. The 10-year's at about 3.7. The S&P's basically flat in terms of where it was and, uh, where it was before and where it was after the rate hike announcement. The economy appears to be reasonably good. 80% of earnings in Q1 beat. The guides were okay. Stan Druckenmiller said, "I've shifted." You know, he pulled forward when he thought we were gonna have a hard landing based upon the bank crisis, which now feels like it's a distant memory for many. And he's now calling for potentially a hard landing in Q4. So the Fed just came out and said, "No, we're not gonna have a hard landing in Q4. We think we're gonna have 1% growth." They think that inflation to end the year is gonna be at 3.2% versus the 3.7% Goldman consensus. What I would say is, you know, we've moved, but we're still below the 10-year average. But you have to start paying attention now to individual stocks that have likely gotten a- ahead of themselves or where they've taken out of-

Jason Calacanis 17:51 What's an example of that? Who's gotten ahead of themselves?

David Sacks 17:52 ... a lot of the, uh, a lot of the return. A lot of, a lot-

Jason Calacanis 17:54 Facebook, Apple-

David Sacks 17:56 No, uh, it-

Jason Calacanis 17:56 ... Microsoft?

David Sacks 17:57 You know, I think a lot of the AI-related stocks are now at or within 10% of our end-of-year price target. And when you, when you see that, take something like NVIDIA. If I'm playing at home or I'm a, you know, a professional investor, I may say, "Oh, I'm gonna go sell some-... long-dated calls to buy a little protection to the downside. I don't think there's any problems with NVIDIA. I think they're gonna continue to perform. I think they'll beat their numbers for the balance of the year. But, you know, remember, at the start of the year, people thought they were gonna miss their numbers for data center. People thought data center revenues this year were gonna be negative, and they just revised their guide from 7 billion in Q2 to, to 11 billion in Q2. So they've absolutely blistered their numbers, and the stock's gone from $125, you know, to, to over $400. So when you have those parabolic moves, just like we did with rates last year, uh, I think it's wise to say it's a fantastic company, we wanna be involved, it's gonna continue to be one of our larger positions. But if I can lock in 20% yield by selling calls six months out, I think that's a reasonable risk/reward. So, you know, I think that's where we are. And now, now the question really becomes, and it's unknown and unknowable, right, are we gonna have a soft landing, a medium landing, a hard landing in Q4 and rolling into next year? And I would say as an investor, I'm very data-dependent. You know, we're talking to companies, we're looking-

Jason Calacanis 19:26 What data point should we all be looking at this point, Chamath, you think? Jobs? Unemployment? Just the stocks and their multiples and how are you looking at it as a capital allocator, Chamath? Still on the sidelines?

Chamath Palihapitiya 19:39 What if I said, like, a broken record? Rates are gonna be higher than you want, and they're gonna be around for longer than you like. And now Powell is basically telling you the same thing. So, we're almost at the end of, I think, the bottoming though. I don't agree with Druckenmiller. I think he's wrong.

Jason Calacanis 19:59 On which part? That there's gonna be a hard landing in Q4.

Chamath Palihapitiya 20:02 Yeah. Yeah, and, and the reason there's not gonna be a hard landing is you just saw China today basically say, "We're gonna start to rip in trillions of dollars." They're gonna stimulate the economy. You can't have a hard landing when China's printing trillions of dollars. Not possible. So, I think that what Powell was forecasting is that if China starts to basically turn on the money printer and go through a huge spade of quantitative easing, it's gonna just inflate everything, because they're just such a critical artery to the world economy. And so, you just have to get prepared for rates just being sticky and inflation being sticky. And I think that that's probably the most reasonable base case for the rest of the decade.

Jason Calacanis 20:43 Rest of the decade. Seven more years of this.

Chamath Palihapitiya 20:45 Yeah, yeah, yeah. And so in that environment, the problem is that now you have the seven or eight most valuable tech stocks priced to perfection yet again. If you look at their enterprise value over their net income, these things are trading at astronomical yields that are less than half of the two-year note, and now approaching sometimes less than half of the 10-year note. Government bonds. That makes no sense. And if you subtract out those seven or eight biggest companies in the S&P 500, the S&P has not been a great asset. So, the, I think the equal weighted index brag, you probably know the exact number. The equal weighted index is just shit. So, what does all this mean? I think it means that people are psychologically exhausted with having lost money. They are psychologically wanting to will the market up. They want to psychologically believe whatever will allow them to influence rates getting cut. But I think the most reasonable bear case is rates aren't getting cut, and whatever hope you had of rates getting cut just went out the window today, because there is no world in which you cut rates when China's gonna print a trillion dollars a month.

Jason Calacanis 21:57 Friedberg, a lot of people seem to think that, uh, this big run up in the markets is AI related. Everybody's got an AI angle for their company. Some of them super valid, like Microsoft and Google. Other ones feels kind of speculative. We talked about BuzzFeed, talked about having AI journalists and their stock, uh, which is, looks like it's gonna be delisted, got a quick pop. Do you think the AI, AI actually coming to market, driving efficiency, driving revenue for companies is going to happen in the short to mid-term, or is it more like mid-term to long-term? In other words, is the AI rally overheated and fake?

David Friedberg 22:37 I don't know if I would assume that the pricing of equities is entirely driven by AI. Uh, I think there's a lot of factors and including a lot of folks maybe being on the sidelines for too long and needing to come and buy in at the same time. But I do think that there's a radical realization underway that a lot of businesses that are dependent on services that might be replaced by AI don't necessarily have the longevity today. Those are businesses that have been severely hurt by the point of view of what AI could bring to market, uh, and bring to industry. So there's a lot of stuff happening on the short side. On the long side, I think it's a distribution curve on, like, how quickly different industries will be affected in a positive way by AI. Certainly, the most obvious is demand for chips- (laughs) 'cause all this infrastructure-

David Sacks 23:36 Yeah.

David Friedberg 23:36 ... is being built out. So that's the first. And so, you know, with a high discount rate, which is the environment we're in today, you can more quickly bet on those opportunities. And so you see a disproportionate bubbling in valuation and multiples on businesses like that. There are other businesses that are further down, like services businesses. How long until lawyers are able to leverage AI? How long until banks, investment banks are gonna be leveraging AI to create new products and improve their margins? There's a lot of speculation and a lot of ideas, but the discount rate is quite high right now, and that's probably a few years out to the point that the fuzziness wipes out the potential value there.

Jason Calacanis 24:15 Explain what you mean by the discount rate in this context.

David Friedberg 24:17 So let's say that I think that investment banks are gonna be severely-... change in seven to 10 years. That's the time horizon I think that their business is gonna improve because of AI, a- as an example. Or, you know, factory machinery automation, right? Manufacturing businesses. Probably 10 to 15 years. So I can't really give them that much credit today, and so I, I apply a higher discount rate there. But there are other industries that are certainly being affected much more quickly. And, you know, I'm sure Brad and his, his team of, of, uh, finance wizards probably have a, a board, you know, where they have this list of all the industries that are gonna be affected and what time horizon. I mean, that's the way you could kinda think about this. And over different time horizons, you could kind of accrue some net improvement to earnings and say, "Okay, you apply a discount rate to that. Here's how much the stock should trade up." And, and, you know, that's one way to kinda think about this. I don't think it's-

Jason Calacanis 25:08 Brad.

David Friedberg 25:08 ... everything everywhere all at once.

Jason Calacanis 25:11 Great drop. Uh, (laughs) great reference, Brad. When you-

David Friedberg 25:13 Great. By the way, I, I gotta tell you, I just saw that movie.

Jason Calacanis 25:16 Yeah.

David Friedberg 25:16 I, I had to reference it because I saw it over the weekend. Have you seen that movie?

Jason Calacanis 25:19 Of course, of course. Yeah, what was your take?

David Friedberg 25:21 What an unbelievable film. I've, I had not seen that film. I had-

Jason Calacanis 25:24 Very kind.

David Friedberg 25:25 ... kept kinda postponing it. Incredible. Anyway-

Jason Calacanis 25:27 Yeah.

David Friedberg 25:27 ... uh, shout out.

Jason Calacanis 25:27 What is it? What movie? It's, uh-

David Friedberg 25:29 Everything Everywhere All at Once. It won best picture at, at the Oscars last year. And-

Chamath Palihapitiya 25:35 I don't trust the best picture awards at the Oscars. For a few years, I've just been duped by that award.

Jason Calacanis 25:40 Hmm.

Chamath Palihapitiya 25:41 Like, you get some really crap ass movies that are, like, um ...

David Friedberg 25:44 Watch this movie and then report back. Let's, I won't even say anymore.

Chamath Palihapitiya 25:47 Like, politically correct or whatever.

David Friedberg 25:48 Yeah.

Chamath Palihapitiya 25:48 And then they, they get this award, you know.

Jason Calacanis 25:49 Yeah, there was a little virtue signaling. They were doing a little catch-up because of Oscars So White, the movement to try to balance things out. In fact, people-

Chamath Palihapitiya 25:57 Well, that doesn't exactly reinforce trust. That actually destroys complete trust and reputational credibility.

Jason Calacanis 26:03 Yes. They're, uh, virtuous. And actually, that was something people said, that Everything Everywhere All at Once was possibly, uh, because it's an Asian cast.

Chamath Palihapitiya 26:11 I don't even know, what is it, what is it?

Jason Calacanis 26:13 It's a sci-fi adventure surrealist kind of romp. Michelle Yeoh is in it. Uh, she's very famous.

Chamath Palihapitiya 26:20 Ooh, from Crouching Tiger, Hidden Dragon?

Jason Calacanis 26:22 Correct. There you go.

David Friedberg 26:22 Yeah, exactly. There you go.

Chamath Palihapitiya 26:23 Oh, she kicked ass in that movie.

Jason Calacanis 26:25 Ke Huy Quan is in it, who played Short Round in Indiana Jones-

Chamath Palihapitiya 26:28 In Indiana Jones?

Jason Calacanis 26:29 ... in Indiana Jones and the Temple of Dolmes.

David Friedberg 26:30 That's great. Yeah.

Chamath Palihapitiya 26:30 Yup.

Jason Calacanis 26:31 And I would do my impersonation, but I would get canceled for doing the impersonation of him in that film.

Chamath Palihapitiya 26:36 Is that ... That guy must be like fucking 70 years old now.

David Friedberg 26:39 Yeah, yeah.

Jason Calacanis 26:40 No, he's like an old ... He's like 50 or something.

Chamath Palihapitiya 26:42 He's an adult.

Jason Calacanis 26:42 But it, it's pretty great because he also won best actor, best supporting actor. And there are all these pictures of him with Harrison Ford and Steven Spielberg. The guys that made it- Because Spielberg cast him.

David Friedberg 26:53 Yeah. The guys that made it are, like, music video directors. You gotta go see this film. It's really good.

Jason Calacanis 26:58 It's on a visual basis.

David Friedberg 27:00 It's really good. By the way, it's very good.

Chamath Palihapitiya 27:00 You have to go to a theater?

Jason Calacanis 27:01 You have to go to the theater? No, no, no.

David Friedberg 27:02 No, no, no.

Jason Calacanis 27:02 You just watch it in one of your theaters.

David Friedberg 27:04 Watch, watch it on Apple TV in one of your theaters tonight.

Jason Calacanis 27:06 Go to your plane.

David Friedberg 27:07 Go in one of your theaters.

Jason Calacanis 27:08 Get in one of your-

David Friedberg 27:08 Go to the theater on your plane and watch it tonight.

Jason Calacanis 27:09 Yeah, the theater ... (laughs) It's literal. Go to the theater on his plane, actually.

David Friedberg 27:12 I'll do that. I'll do that. I actually will do that. I'll do that when I fly to your theater.

Jason Calacanis 27:14 (laughs) This is the best moment on, Shamaz's plane I ever had. I go to the bathroom and it's a long flight back from Italy, so I'm taking my time. And I see that A-sob, A-S-subsoap that I can't afford. It's like a hundred-

Chamath Palihapitiya 27:27 Aesop.

Jason Calacanis 27:28 Yeah, that one.

Chamath Palihapitiya 27:29 Aesop.

Jason Calacanis 27:29 I see that and I'm like, "Wait a second." So I look in the cabinet underneath. I'm like, "If there's two up here, there's gotta be six down below." So I check in the galley. Of course there's six down there. I put two, I boost two in my bathroom.

Chamath Palihapitiya 27:40 (laughs)

Jason Calacanis 27:40 Which I'm still not through with my, in my, uh, bathroom here.

Chamath Palihapitiya 27:44 That's about 300 bucks I new upped it.

David Friedberg 27:46 Oh my God. Oh my God.

Jason Calacanis 27:47 And I go and I check out, he's got a TV set up. So I'm like, "Oh, I wonder what movies are on here." And it's Netflix. He's got so much bandwidth on that fricking plane that he can stream on the plane.

David Friedberg 27:57 You have to download every movie on the plane.

Jason Calacanis 27:57 You don't have to download your movies before you take off on Shamaz's plane. All right. Let's get back to work here.

David Friedberg 28:02 Brad, have you seen it by the way? Have you seen that movie?

Brad Gerstner 28:05 Yeah, it's an incredible movie. Incredible movie. You just gotta watch it.

Jason Calacanis 28:07 But I don't ... It's not the best film of the year. That was Tar but I don't wanna get into it with Shamaz.

Chamath Palihapitiya 28:13 Oh my God, I tried to watch Tar.

Jason Calacanis 28:15 (laughs)

Chamath Palihapitiya 28:16 That movie sucks balls.

Jason Calacanis 28:18 (laughs)

Chamath Palihapitiya 28:18 It was so boring and fucking self-absorbed and contrived.

Jason Calacanis 28:21 It was, it was a little self-absorbed. I'll admit.

David Friedberg 28:23 But the best thing about it-

Chamath Palihapitiya 28:24 For anybody that has sleeping issues and otherwise needs to use a sleeping aid, I would just put that movie on because-

Jason Calacanis 28:30 Yeah.

Chamath Palihapitiya 28:30 ... you know, once you see Cate Blanchard blathering on and walking back and forth from her kids' fucking school and then some crappy piano play, you'll fall asleep.

Jason Calacanis 28:39 Absolutely.

Chamath Palihapitiya 28:39 And then next thing you know, it'll be the morning.

Jason Calacanis 28:40 Brad, what puts you to bed faster, Shamaz? Ambien, Tar, or Science Corner? Brad does Tar-

Chamath Palihapitiya 28:48 No, I love ... I actually love Science Corner.

Jason Calacanis 28:50 You like Science Corner too?

Chamath Palihapitiya 28:51 I don't take, I don't take, I don't take sleep aids. I've taken Ambien three times in my life.

Jason Calacanis 28:55 Yeah, but that was recreationally during the day.

Chamath Palihapitiya 28:57 That's different.

Brad Gerstner 28:58 No, no, no. It was prescribed to me 'cause I wanted to try it. I also tried Lunesta once. A ho- they were, they're both like brutal like-

Jason Calacanis 29:04 Be careful with that stuff, man. You'll start tweeting weird shit. Be careful.

Chamath Palihapitiya 29:07 I tried those sleeping aids four times in my life. And you wake up, I wake up with a ... It has a really bad tail effect. So like you wake ... I woke up-

Jason Calacanis 29:14 Oh, yeah.

Chamath Palihapitiya 29:14 I wake up super groggy. I only get five or six hours of sleep with it. So anyways, I, uh, I do take melatonin and that's really good.

Jason Calacanis 29:22 That works. That's natural. Yeah.

Brad Gerstner 29:23 Or-

Chamath Palihapitiya 29:23 It kinda does the trick, does the trick for me. And then I try to just-

Brad Gerstner 29:25 Why is everybody on melatonin all of a sudden? Like, everybody I know takes melatonin. Are you sure?

Jason Calacanis 29:29 It's just a natural way to ease into sleep.

Chamath Palihapitiya 29:32 Yeah. For me, what I do is like I use it as part of a routine where like typically around 10:00, like all the, you know, devices, things get silenced and do not disturb mode and I'm in a really restful place by 10:00. And then usually by 10:15 to 10:30 I'm out like a light.

Jason Calacanis 29:48 Man, I wish.

Chamath Palihapitiya 29:49 I'm out like a light. I mean-

Jason Calacanis 29:49 I just got this infrared sauna. You guys have infrared saunas? This is like the new hotness. And, uh, man, that is incredible. Uh, you get a ... Heart rate goes way up and then you sleep like a baby. Okay, let's get back to AI. Brad, are people getting too much credit in their stock prices and is the AI-

Chamath Palihapitiya 30:04 Wait, do you do contrast therapy after the infrared sauna?

Jason Calacanis 30:07 I don't know what contrast therapy is.

Chamath Palihapitiya 30:09 Do you jump into a-

Jason Calacanis 30:09 What is that?

Chamath Palihapitiya 30:09 Meaning when you do the hot, then you jump into, like, an ice bath?

Jason Calacanis 30:12 No, I'm getting an ice bath-

Brad Gerstner 30:14 Of course he is.

Jason Calacanis 30:15 ... next for my little outdoor sauna area and I'm gonna start doing that. I did that with, uh, my friend, Antonio, Anton- friend of the pod, Antonio Gracias. He's got one of those cold plunges. We jump in the cold plunge together. He's got this thing at 45 fricking degrees.He says, "Don't try to do too much. You'll have a heart attack." So I go in, I get 45 seconds in, I start breathing-

Chamath Palihapitiya 30:33 Well-

Jason Calacanis 30:33 ... like, really heavily.

Chamath Palihapitiya 30:35 Yeah.

Jason Calacanis 30:35 And I'm like, "I gotta get the hell out of here." He does six minutes.

Chamath Palihapitiya 30:39 Yeah, I do four-

Jason Calacanis 30:39 The man is an animal.

Chamath Palihapitiya 30:40 I do four minutes three times a week.

Jason Calacanis 30:43 What temperature? What temperature?

Chamath Palihapitiya 30:44 42 to 44. The research paper that everybody references now, I think her name is Susanne S- Soderberg or something like that, she's the Swedish researcher. Huberman did it on his podcast, uh, Rogan did it. Anyways, the, the data is like an ho- like a little less than an hour of heat and 11 minutes of cold per week-

Jason Calacanis 31:06 Per week?

Chamath Palihapitiya 31:07 ... was shown to be physiologically optimal. So I do it-

Jason Calacanis 31:09 Hmm.

Chamath Palihapitiya 31:09 ... three times a week, 20 minutes of heat followed by four minutes of, of cold plunge three times a week.

Jason Calacanis 31:15 Do you have, like, a cold plunge where you set the dial on it or is it-

Chamath Palihapitiya 31:18 No, no, I just-

Jason Calacanis 31:18 ... just pour cold water in?

Chamath Palihapitiya 31:19 No, I do old school. I, uh, I use the Mr. Steam-

Jason Calacanis 31:22 That's the best.

Chamath Palihapitiya 31:22 ... in my bathroom.

Jason Calacanis 31:24 Uh-huh.

Chamath Palihapitiya 31:24 Because I, after I'm done working out, the last thing I wanna do is schlep outside, find my slippers-

Jason Calacanis 31:28 Yeah, yeah.

Chamath Palihapitiya 31:28 ... put on a robe. I'm not gonna do any of that. So I walk upstairs, I do the Mr. Steam at, like, 110 degrees. And then while I'm working out, somebody just makes an ice bath for me. And-

Jason Calacanis 31:40 Oh, love it.

Chamath Palihapitiya 31:40 ... I put a bunch of ice in the tub, fill it with water (laughs) and just jump in it. And boom, done.

Jason Calacanis 31:44 So they, what do they do? Do they carve, like, a bunch of baby seals in ice and then they just, when you get in-

Chamath Palihapitiya 31:48 No, no, no.

Jason Calacanis 31:49 ... they push them in?

Chamath Palihapitiya 31:49 All the ice cubes-

Jason Calacanis 31:50 (laughs)

Chamath Palihapitiya 31:50 ... were made to look like my face.

Jason Calacanis 31:52 (laughs)

Chamath Palihapitiya 31:52 So I have these shapes of, uh, ice-

Jason Calacanis 31:53 So it's like a bust of yourself. You got that custom-

Chamath Palihapitiya 31:55 So I'm like looking at myself.

Jason Calacanis 31:56 Yeah. No, infrared gets up to, like, 130, 140 degrees and your heart rate will go up to 140 (laughs) , 150 degrees in this. It's a whole different experience than the Mr. Steam stuff.

David Sacks 32:06 Jay Kay, I was at a, I, I was recently on a ski trip. Yeah. And it's a, a, this extraordinary sauna, it's wood-fired, okay?

Jason Calacanis 32:14 Oh, you told me about this.

David Sacks 32:15 So the, so the, so the lead guide on this trip, we go down there, he gets the thing heated up before we show up, right? And I show up with this great athlete down there, and we go in the hot box-

Jason Calacanis 32:26 Mm-hmm.

David Sacks 32:26 ... because, you know, this is the thing to do.

Jason Calacanis 32:28 Yeah.

David Sacks 32:28 And I look at the thermostat, I think it's broken.

Jason Calacanis 32:32 True.

David Sacks 32:32 It shows, like, j- it's hard pegged at, like, 225 degrees Fahrenheit.

Jason Calacanis 32:37 That's little high.

David Sacks 32:38 You know, you walk in, you're, uh, I mean, you slow cook meat at 225.

Jason Calacanis 32:42 Yeah, that's, that's literally my brisket recipe.

David Sacks 32:44 My eyes are burning, my lips are burning, you know, and th- this, this person sitting in there is like, "Now, this is the way you do it, right? Tough guys, you know, do it at this temperature." And we're like, "All right." So, you know, we sit in there for, like, 10, 10 minutes and then we go and we jump in a, you know, in, in a frozen lake. And about 10 minutes later, we're taking off. We had to leave this particular place. And, you know, people are wa- uh, waving goodbye and they're looking, you know, they have to look over the sauna-

Jason Calacanis 33:09 Yeah.

David Sacks 33:09 ... as they're waving goodbye and they notice that the sauna is on fire-

Jason Calacanis 33:13 Ah, yeah.

David Sacks 33:14 ... while (laughs) they're sitting there.

Chamath Palihapitiya 33:14 (laughs) That's, that's basically what happens when you go to 220.

David Sacks 33:18 It's on fire. (laughs)

Chamath Palihapitiya 33:19 (laughs)

Jason Calacanis 33:19 Grease fire.

David Sacks 33:19 Unbelievable.

Jason Calacanis 33:19 Yeah.

David Sacks 33:20 It's, uh, people are taking this a bit to the excess.

Jason Calacanis 33:22 It's a little crazy. All right, so back to, back to the docket

Jason Calacanis 33:25 here. AI.

David Sacks 33:26 Yeah.

Jason Calacanis 33:26 Are people getting too much credit and public markets kind of running with this before it's actually ready for prime time? Just to add to Freidberg's point here, uh, there are a lot of people talking about doing things. In start-ups, I see people actually doing things. I would say four out of five start-ups, uh, that we've invested in and the majority of them that we're being pitched on right now are not only talking about AI, which they were all talking about it three years ago, they're actually implementing it now because the toolsets are available. I just had a call. Thank you, Freidberg, for putting me in touch with the Google people. I just did a call this past week with Google and they gave me some previews of what they're working on. I can't say anything about it, but it's, it's mind-blowing. I think Google's not as far behind closed AI as we think.

Chamath Palihapitiya 34:05 Brad, what's your read on Google now? We had a little-

David Sacks 34:08 Yeah.

Chamath Palihapitiya 34:08 ... kerfuffle when I, when I talked about Sundar's reaction to, you know, AI and the concerns that others might have on folks talking about the company. I mean, what's your point of view on Google today? I don't know if you've talked about this.

David Sacks 34:20 Yeah, yeah, no. Well, I mean, I think, you know, I had this, I had this dinner, this incredible dinner actually, Thursday at the pub and, you know, it's, it's how I know S- Silicon Valley's back because it was just, like, serendipitous. We threw it together in the afternoon, you know. It was just like four extraordinary, you know, CEOs there and, you know, you had Mustapha, the, one of the co-founders of DeepMind there and Rich Barton from Expedia and Zo- uh, just, just an incredible group. And the $20 trillion question i- is, how does the entire open architecture of the web get re-architected in the age of AI? Another way of ask- asking the question, because we're all kind of playing small ball, right? We're all talking about, "Oh, you know, our TPUs and GPUs, you know, and who, what cloud's gonna get accelerated." That's kind of the small ball. The big ball here, the $20 trillion question that has defined the entire internet for our entire careers has been web search. And I will tell you that the conversation around that table, there's increasing confidence that whatever comes next, right, the top of the funnel is up for grabs. And all of those dollars over a period, again, of five years, seven years, is going to get redistributed. And make no mistake, Google is well-positioned to make its claim for that. But its claim is going to come at the expense of search. And so Google may create the best AI in the world, but it's gonna have to fight off the cannibalization of core search. And the question is, in this new thing... And so Rich Barton, you know, uh, an incredible, um, product founder, right? Think about Expedia-

Jason Calacanis 36:00 CEO of Zillow.

David Sacks 36:02 Yes, and Zillow. So he's founder of Expedia and founder of Zillow. Two vertical search engines that dominated, right, their particular verticals. And the topic of the conversation was that the new UI, right, the new u- way you interact with your customers, right, is not optimizing a web page. It's not optimizing an application. He calls it the race to intimacy. The race to intimacy that you have to build a conversational UI-

Chamath Palihapitiya 36:31 I've run that race a few times.

David Sacks 36:32 Right. (laughs) And, no, and it's a related race, which I'm o- because-

Chamath Palihapitiya 36:35 I think that was a sprint, not a marathon. (laughs)

Brad Gerstner 36:39 ... sometimes it's been a marathon.

David Sacks 36:40 And the penultimate question is-

Brad Gerstner 36:41 Not in your direction.

David Sacks 36:43 ... who ends up on top?

Chamath Palihapitiya 36:45 I'm a runner.

David Sacks 36:45 Yeah, are you always on top, Chamath?

David Friedberg 36:46 (laughs) Oh, this is-

Chamath Palihapitiya 36:48 I, I run really good middle distances, and then if I need to just make it, you know, run a Boston marathon, I can if I want. But I don't want to.

David Friedberg 36:54 Oh, okay. Yeah, sure you can. (laughs) Yeah.

David Sacks 36:56 But I think, you know, I took a poll around the -

Chamath Palihapitiya 36:58 Does he think... Sorry, does he think Zillow is dead? I mean, he's not a longer shareholder, I'm guessing?

David Sacks 37:02 I, uh, I... I mean, those, he's-

David Friedberg 37:03 No, he's the CEO.

David Sacks 37:04 He's the CEO, he's the chairman-

Chamath Palihapitiya 37:05 Sorry, sorry, not Zillow. Sorry, not Zillow. Uh, Expedia. Pardon me. What does he think about Expedia and travel and search?

David Sacks 37:09 Well, we, you know, you and I had this conversation. Gurley chimed in, Nikesh chimed in on Twitter. Well, you're not on Twitter, but they chimed in, you know, uh, about the conversation from last week's pod. Every vertical search engine and Google itself, that architecture is suspect, right? The question's just over what timeline is it suspect? But the world is moving past ten blue links. Information retrieval that look like a card catalog is not-

Chamath Palihapitiya 37:37 Yeah.

David Sacks 37:37 ... where we're going.

David Friedberg 37:38 You no longer need an index. You need someone to do the retrieval from the index for you. That's the, the new service that it-

David Sacks 37:44 And extract the knowledge and present the knowledge.

David Friedberg 37:45 And, yeah, yeah, that's what I mean. It's personalized to you. But I think one of the questions that's still outstanding from an architectural point of view in terms of your interaction with all the data in the world is, are you as a user gonna have a number of independent relationships with your travel search engine-

David Sacks 38:02 Exactly.

David Friedberg 38:03 ... uh, your travel agent? Or are you gonna have a relationship with your doctor, medical office, and you're going to have a separate relationship with your, you know, financial, uh, advisory type service? Or are you gonna end up seeing, similar to the challenge we have in search versus vertical search today, an aggregator of services because there's value in cross-populating the data and the knowledge about you across those services? So-

David Sacks 38:26 Yeah, sure.

David Friedberg 38:27 ... you know, I think-

Chamath Palihapitiya 38:28 Guys, it's gonna be the-

David Friedberg 38:28 Should-

Chamath Palihapitiya 38:29 No, it's gonna be the former because, like, obviously there's value to the company because every company wants to profiteer from you and monetize you in nine different ways and maximize the equity for their employees and their founders and their board and their shareholders. But that's not what people want, right? So, like, for example, when you go to a doctor, would your doctor be better off if, you know, she also had all of your data from, I don't know, pick your other service providers? Of course, maybe. You could make a claim that if they had all of your personal information and you, they understood how, your risk factors, they could do a much better job. But the reason you don't do that is you want some segregated relationships. A, it gives you some level of privacy, but mostly it gives you control. In a world of AI where you can be more conversational, the idea that humans will wanna get reduced to talking to one thing for everything I think is wrong. I think instead it's actually gonna be-

David Friedberg 39:22 I agree with you, Chamath.

Chamath Palihapitiya 39:23 ... hyperfragmented because the best-in-class use cases are going to be the things that people want. And then B, it gives the user control. The one thing I would tell people is, do not give up all of your data to one thing who's professing to be it all. They are going to lie to you and trick you, and you're gonna have a social media problem writ large all over again.

David Friedberg 39:45 There's another way to think about this, which is the reverse of the client-server model, where today you as, you are the client, you are the node on the network, and you're communicating with the center of the network, which is the server, which is the service provider. And all the data sits there, and you're getting data in and out of their product to suit your particular objectives. But the future may be that more data is aggregating and accruing about you, you end up becoming a server, you then have the option, just, this speaks to kind of the architecture on the internet. Imagine if every individual had their own IP address, and that individual's IP address, uh, had behind it, behind your ability to control, lots of information and lots of output about all, all your interactions across the different network of service-

Chamath Palihapitiya 40:28 I think that's a-

David Friedberg 40:28 ... providers that you use.

Chamath Palihapitiya 40:29 That's a very smart framework, I think.

David Friedberg 40:31 And that obj- and, and ultimately what, what you, what you-

Chamath Palihapitiya 40:33 But you have to agree, you wanna be able to rent that data to services and have them pay you for it.

David Friedberg 40:36 100%. And I don't even, I don't even think it's about rent as, yeah, as much as it is about you should have complete-

Chamath Palihapitiya 40:40 And the reason, the reason rent, well that, then you have to rent it, you can't give it to them 'cause that's be stupid.

David Friedberg 40:45 That's right. And so your-

Chamath Palihapitiya 40:46 Right?

David Friedberg 40:46 ... your goal, your, your usage, like, let's say the doctor says, "Hey, can I, can I get access to your health data?" Or sorry, your, your Apple Watch activity data for the last year. You then have the option to provide that data to them through some permission-type service that you then make available so there will be interconnectivity amongst the service providers, but entirely gated and controlled by the user.

Chamath Palihapitiya 41:06 Look, you're seeing this upfront now with Reddit when, in this world, the people that create the content are actually in control of the data. And if you try to like-

David Friedberg 41:16 That's right. That's right.

Chamath Palihapitiya 41:16 ... monetize an API without paying the people that created it or giving them control, they'll revolt. And you're-

David Friedberg 41:22 Wow.

Chamath Palihapitiya 41:22 ... seeing it happen. Now, Reddit lost, what, 90 some odd, X percent of all of their content because the mods were like, "Fuck you" to Reddit? Well, think of that writ large where everybody is asked-

David Friedberg 41:32 Already happening.

Chamath Palihapitiya 41:33 ... "Hey, I'm this great service. Hey, I'm this great service. I can solve X, Y, and Z problem for you. Just give me all your data." And then if you're not asking, "Well, what do I get?" And they're like-

David Friedberg 41:42 Yeah.

Chamath Palihapitiya 41:42 ... "Well, you're gonna get a whiz-bang service," and that's all they s- they, you say, you're being tricked.

David Friedberg 41:47 It's already happening. I mean, there's an open source lawsuit against, uh, Microsoft's GitHub Copilot, and you have the Getty lawsuit. And, you know, it, it, there's also a corollary for this. Google tried to kill Expedia already. They tried to kill Yelp, and it didn't work. Folks use both services, and, you know, if you, if you are trying to boil the ocean like ChatGPT might, I think it's not gonna work because there's gonna be so much innovation, so much community brand and all that kinda stuff. And these LLMs seem to be trending towards good enough or some kinda parity that I think you're right, Chamath, people are just not gonna give their data over wholesale. I've been using the, the Zillow plugin to get exact. And the Zillow plugin sucks on ChatGPT.

David Sacks 42:28 Yeah, yeah.

David Friedberg 42:28 It's getting slightly better, but it-

David Sacks 42:30 Plug-in's the wrong model. But it's, I mean, I mean-

David Friedberg 42:32 It's gonna li- this will exist on Zillow's site. Zillow will not let ChatGPT take their business. You're gonna go to Zillow's site and you're gonna say, "Hey, show me homes that have a sauna and an ice plunge (laughs) and that are four bedrooms and that are, you know-

Jason Calacanis 42:45 ... fixer-uppers or are not fixer-uppers and have en suite bathrooms and whatever. And, and it's just gonna give you that list. Why would they give that business to ClosedAI?

David Sacks 42:53 Can I take a crack just at summarizing-

Jason Calacanis 42:55 Sure.

David Sacks 42:55 ... what we all just said? Because y- your, your initial question was, Friedberg was like, "What does this mean for Google?" What we all just said that what we're certain of is there's not gonna be 10 blue links and a model of search that they have monetized in a way that has been the most prolific business model in the history of capitalism, right? So that's a problem for them, you know, from a business model perspective, so they're gonna have to reinvent their business. That's gonna be hard to do. It's like rebuilding the plane on the fly. But let... then, if you just go to the two models that we outlined here, on the one hand, Chamath said, "You know, you're gonna work with all of these agents." That's exactly what Mark Zuckerberg said on Lex. He's like, "You're not gonna have one super agent. You're gonna have, you know, hundreds of agents." And he, he, he thinks of WhatsApp and all of his platforms as the new open web where all of these agents will live and you'll interact with them, you'll interact with your Zillow agent there, you'll interact with your booking agent, you know, your Expedia agent there, et cetera. On the other hand, ChatGPT, Pi at Inflection, Reid Hoffman and, and, and Mostapha, and many others think that the benefits of general intelligence, this will be the first time that we solve vertical problems horizontally, right? And their metaphor, the compare there is we all don't have 100 personal assistants in ou- in our office. You have one that gets to know you really well. They get to know what you like to wear, how you like to travel, the things you like to eat, the things you like in your house, how many kids you have. So there's real leverage in that, in that horizontal knowledge that can then be applied to these different verticals. I think the answer lies in between. Your personal assistant will do a lot of the general stuff, okay, whether it's Pi, ChatGPT, whatever Googs comes up with, et cetera. But I think they will subcontract the work, whether they chain it out via, you know, behind the, the, the scene, you know, mechanism to other agents... So for example, if you're interested in traveling to this undisclosed location that I'm at in, in, in Europe right now, you know, my a- my, my assistant doesn't know anything about this place. So she may interact with a specialist for this particular place to get you that magical experience. So, you know, I, I don't think you have to pick one or the other, but architecturally-

Brad Gerstner 45:13 Right.

David Sacks 45:13 ... $20 trillion of value on the web is built around web pages, advertising, and e-commerce, right, and sending traffic to those other places. And what we're all saying unequivocally is it's moving to knowledge extraction and intelligent agents, and I think that's tectonic.

Jason Calacanis 45:34 But I still think there'll be clicks. I, you know, I have been using Bard a whole bunch and they have made massive rapid progress. Just to give you but one example here, I'll share my screen. It is pretty extraordinary how quickly they're figuring this out. And I did this just in a search while we were talking, what are the five best Greek restaurants, uh, in the Bay Area. Obviously came up with Kokkari and, you know, other ones. And then I asked it, like, "Hey, what are the top items on each of these menus?" They started putting images in and linking to Yelp. And then I said, "Hey, tell me the most expensive wines," and it actually got that from Kokkari. They have a Chateau Margaux 2009 for 1,500. Chamath, I don't think it's good enough for you, but-

Brad Gerstner 46:14 What year is it? (laughs)

Jason Calacanis 46:15 It looks like 2009. Yeah. They have Screaming Eagle 2013. I'm, I don't know if that's a no-go, Harlan 2014.

Brad Gerstner 46:22 No-go. No-go, no-go.

Jason Calacanis 46:22 Yeah, so it's a no-go.

Brad Gerstner 46:23 Nouveau riche, yeah.

David Sacks 46:25 (laughs)

Brad Gerstner 46:25 Yeah.

Jason Calacanis 46:25 Anyway, um-

Brad Gerstner 46:26 Oh, Harlan's good. Harlan's good. One of your Harlans.

Jason Calacanis 46:27 Harlan's okay. Okay, good. So we gotta save. Anyway, this, I did this same exact search, like, four weeks ago. It didn't have images and it couldn't get me the items on the menus. And these could all be links, and these could all be paid links. So in these results there's nothing to stop Google from saying, "Hey, Yelp, if you want, we'll put your information here or not. Up to you. You choose. Do robots.txt, except we're gonna call it ai.txt. You tell us what you wanna be included and if you wanna be included, we want, you know, it's, it's a marketplace for clicks. We'll include three of your images with clicks and we'll call it sponsored." They are gonna be able to insert ads into here that are better than the current ads and that will-

David Sacks 47:04 Oh, for sure.

Jason Calacanis 47:04 ... perform at a higher level and they're gonna know us. This could actually be the reverse of what everybody's thinking. This could lead to higher CPMs and higher costs per click because of intent.

Brad Gerstner 47:13 By the way, I mean, the, the 2014 is actually, I think, uh, underrated and it's very highly rated, but I think it is an excellent one.

Jason Calacanis 47:22 All right, well let's see.

Brad Gerstner 47:22 That's an excellent year.

David Sacks 47:23 Um, Jason, as to your point, I think all of that, I mean, that's impressive, it's true. You can also do it on ChatGPT. I'll just say the number of people I interact with on a global basis who talk about ChatGPT versus Bard is, like, 10 to one today. Now Google's got massive dif-

Jason Calacanis 47:40 Yeah, that, that's gonna change real fast.

David Sacks 47:41 Google's got massive distribution power. Let me tell you what I, what I also think the-

Jason Calacanis 47:45 But, but t- to your point, Brad, about this, br-

David Sacks 47:46 Yeah.

Jason Calacanis 47:47 I just wanna, I wanna respond here.

David Sacks 47:48 Yeah, sure. Sure, sure.

Jason Calacanis 47:48 Bard versus-

David Sacks 47:49 Yeah.

Jason Calacanis 47:49 ... ChatGPT-4. That's... people are not paying attention. And when Google puts this on the homepage-

David Sacks 47:56 Yeah.

Jason Calacanis 47:56 ... and starts sending 5% of users to it-

David Sacks 47:58 Yeah, for sure. Powerful. Powerful.

Jason Calacanis 47:58 ... I mean, obviously it's expensive to do it, people are gonna have their eyes jump out of their head. I think Google's going to beat ChatGPT-4, I'm saying it right here, right now. I think they're going to beat them because I think that they're better at indexing all this information and understanding it than anybody on the planet and they have the, the largest ad network. If they get this done in the next six months, I think it's gonna increase the cost per click 'cause they're gonna know so much about each user. Continue, Brad. I know I'm in the minority here.

David Sacks 48:25 Well, uh, uh, no, no. I, I mean, listen, I think a lot of Google's revenue comes from de facto navigation of the web. They term, they turn the URL into a navigation box, there are a bunch of ads there that, you know, people click on, they don't even know they're clicking on ads, and, you know, they, they generate a lot of revenue off of that. But let, let's be clear, Google is firing at this-... I just don't think it's gonna be as monopolistic as they are in search. I think there are going to be other competitors who are gonna be well-financed, who are gonna have access to the data. Um, and today, you have well north of 100 million people who are paying to, you know, a huge percentage of those, to use ChatGPT. And I think that this, uh, you know, it's the first competition. But, you know, Friedberg knows. He and I had the back and forth. They reported earnings. Stock was flat. I said on CNBC that we had sold our shares. We bought back some of the shares around Google IO because we do think they're gonna be a player. We think they're gonna be a beneficiary. But I, I would say, as I sit here today, the distribution of potential for them is less than it was before ChatGPT, you know, the p- uh, uh, the distribution of, of upside. They have some competitors now who are going to be vying for this next new thing. And I wonder whether or not, you know, as they try to navigate, you know, you're saying they're gonna take some of this traffic from search and feed it into this other thing, this other thing better monetizes well as search, or by definition, that means revenue goes down.

Jason Calacanis 49:58 It feels like Google is so close to figuring this out. I, I mean, I, I've been doing some Bard searches on flights.

David Sacks 50:03 Jake, how much Google do you own? How much Google do you own?

Jason Calacanis 50:05 Not enough, not enough.

50:06 Six shares?

50:07 You know, I've just been playing with the J, on my jtrading.com.

50:09 (laughs)

Chamath Palihapitiya 50:09 He's thinking of adding a, a seventh share.

Jason Calacanis 50:11 He's thinking about adding, because he talked to 10,000 last week.

50:13 I'm thinking of adding $10,000. I would like a buy-in or two. But, uh-

Chamath Palihapitiya 50:17 (laughs)

Jason Calacanis 50:17 ... let's pivot over to this Reddit thing-

Chamath Palihapitiya 50:18 (laughs)

Jason Calacanis 50:18 ... 'cause it's super important that people understand this.

Chamath Palihapitiya 50:20 (laughs) Seventh share.

Jason Calacanis 50:22 I'm gonna buy 17 more shares. I'm gonna buy, like, a Harlin 2014 equivalent in shares.

Chamath Palihapitiya 50:27 (laughs)

Jason Calacanis 50:27 No, my J trading is up right now, jtrading.com. Shout out, uh, to my trades. I did it as, for fun. I'm up, like, 20% returns-

Chamath Palihapitiya 50:34 How, how come you're only-

Jason Calacanis 50:34 ... versus 6%.

50:35 Well, Jake-

50:35 ... versus the market.

50:35 ... you went kinda quiet for a while. So when you're down, you don't talk about it? And then the thing comes up and you talk about it?

50:40 No, I had no... I bought all the stocks I liked and I didn't want to change them.

50:43 And do you track them and exit, or what do you do with management?

50:45 I'm gonna track the exits, but I haven't exited any. If you go to jtrading.com, you can play along. But, uh, yeah.

David Sacks 50:51 Jake, how can you only be up 20%-

Chamath Palihapitiya 50:54 (laughs)

David Sacks 50:54 ... when Facebook has doubled-

Jason Calacanis 50:56 Oh, sorry, 22.43.

David Sacks 50:58 Yeah, but Facebook doubled off the bottom. The whole goal of trading, Jake Howell, is to maximize your highest conviction.

Jason Calacanis 51:05 Teach me. Okay.

David Sacks 51:05 Maximize your highest conviction. What'd you do, put a nickel? Did you put 5% into Facebook?

Jason Calacanis 51:10 I don't know. I just, I just bought companies as they went by in the group chat.

David Sacks 51:13 I know, but what I'm telling you, when you fre-

Jason Calacanis 51:14 When you talked about it on group chat, I made the trade.

David Sacks 51:16 ... when you trade companies, you gotta put a lot of chips on the table. I mean, you have pocket aces.

Jason Calacanis 51:19 Okay, yeah. That's, I think... What's the optimal number-

David Sacks 51:22 You have pocket aces.

Jason Calacanis 51:22 As a day trader, Brad, what's the optimal number of names I should have?

51:25 You're not, you're not a day trader. You don't trade.

Chamath Palihapitiya 51:28 (laughs)

Jason Calacanis 51:29 As a, uh, long trader-

David Sacks 51:30 Yeah, yeah, y-

Jason Calacanis 51:30 ... what's the optimal number of names I should be in?

David Sacks 51:32 Uh, you have too many.

Jason Calacanis 51:34 Okay.

David Sacks 51:34 Um, I think with your level of insight, um, you know-

Jason Calacanis 51:38 Yes.

David Sacks 51:38 ... on the things that you really believe in, there was such asymmetry in that position at the time that you bought it.

Jason Calacanis 51:44 Yeah.

David Sacks 51:44 It was your best idea. You should have put at least 30% of, of whatever you were going to allocate to this-

Jason Calacanis 51:49 Okay.

David Sacks 51:49 ... into that position.

Jason Calacanis 51:50 That's what I'll do. Yeah. I mean, it's done okay. I mean, listen, I'm up, what did I buy? I bought, uh, 500 shares and, uh, my basis is 47 and I'm at 140. So it was a good trade. Yeah.

David Sacks 52:00 Now imagine if you could, you know, 10 or 20X that.

Jason Calacanis 52:03 Yeah, that's what I should have done. Yeah, yeah.

David Sacks 52:04 All right, anyway.

Jason Calacanis 52:05 Jason, how, how, wait, hold on. How much have you put into all those stocks?

Chamath Palihapitiya 52:08 1.5 million.

Jason Calacanis 52:09 I, I basically took, I had some money in an index fund laying around and I was like, "Let me do this."

Chamath Palihapitiya 52:13 1.5 million.

Jason Calacanis 52:14 I did J trading as a blatant attempt to get a sponsor for This Week in Startups.

Chamath Palihapitiya 52:19 (laughs)

Jason Calacanis 52:19 So I was like, "Oh, maybe Robinhood or ETRADE will sponsor this and I'll make it like a segment."

52:23 (laughs)

Chamath Palihapitiya 52:23 Oh my gosh. So good.

Jason Calacanis 52:24 So I was like, "Let me do, like, a segment where I trade and see if I can secure the bag." And it, you know, the markets are so crushed that nobody's spending advertising from Robinhood or ETRADE or Interactive Brokers or Bloomberg.

Chamath Palihapitiya 52:35 Oh my God.

Jason Calacanis 52:35 But I, I also did it because I wanted to become better at public market trading. To your point, uh, last week's con- conversation, Chamath, is undering, understanding when to sell and when to go long when you get distributions as a VC. That was really the reason I tried to do it, was just to try to have skin in the game, you know, just like learning to play PLO or you playing the RAZ tournament. I just wanted to-

Chamath Palihapitiya 52:54 It's, it's very, it's very easy. Once you get shares distributed to you, immediately sell them.

Jason Calacanis 53:00 (laughs)

Chamath Palihapitiya 53:01 And then-

Jason Calacanis 53:01 No. Yeah.

Chamath Palihapitiya 53:01 ... and then, hold on.

David Sacks 53:02 Yeah.

Chamath Palihapitiya 53:02 And then re-underwrite from scratch from there.

Jason Calacanis 53:06 Okay.

Chamath Palihapitiya 53:07 Once the money is sitting in your account, even if it takes a day, a week, a month-

Jason Calacanis 53:11 Hm.

Chamath Palihapitiya 53:11 ... it's not like the stock's gonna rip and triple on you over the next 30 days. Re-underwrite it from scratch-

Jason Calacanis 53:17 Okay.

Chamath Palihapitiya 53:17 ... and then see if you have that much conviction when you see the money in your bank account.

Jason Calacanis 53:21 Hm, I like it.

David Sacks 53:22 I would just tell you guys, the distributions, you know, there were a lot of firms that rode, you know, a lot of these big names, right, all the way down. Um, you know, that, that, they got public but they didn't distribute much, if any. And it's really interesting-

Chamath Palihapitiya 53:41 Don't say the names, but what do they rhyme with?

David Sacks 53:43 (laughs)

Chamath Palihapitiya 53:43 I'll, I'll, I'll start. I'll start.

David Sacks 53:45 (laughs) Uh, but what's really interesting-

Chamath Palihapitiya 53:47 McKoy. Go ahead. You go, you go next.

David Sacks 53:49 (laughs)

Chamath Palihapitiya 53:49 You pick one.

David Sacks 53:51 Not doing it. Um-

Chamath Palihapitiya 53:52 Bleiger, Bleiger.

David Sacks 53:54 (laughs)

Chamath Palihapitiya 53:54 Okay, next.

Jason Calacanis 53:54 Andreesen Borowitz.

Chamath Palihapitiya 53:57 Maunderslund.

Jason Calacanis 53:58 Look at, Friedberg just dropped off.

54:00 (laughs)

David Sacks 54:00 (laughs)

Jason Calacanis 54:01 He's like, "I don't wanna be associated with this conversation."

54:04 All right, listen, we all got our asses kicked.

54:05 Uh.

54:06 Except for me. Uber's up 67% this year.

David Sacks 54:09 Oh, come on, come on. Let me... What, what I was gonna-

Jason Calacanis 54:11 Andreesen Blorowitz.

Chamath Palihapitiya 54:14 (laughs) Just riots.

Jason Calacanis 54:15 Right.

David Sacks 54:15 All of the, what tends to happen-

Jason Calacanis 54:17 Stop.

David Sacks 54:17 ... is things hit the bottom-

Jason Calacanis 54:18 (laughs)

David Sacks 54:18 ... they bounce a little bit-

Jason Calacanis 54:20 Hm.

David Sacks 54:20 ... and people are so relieved that they bounced a little bit-

Jason Calacanis 54:24 Mm-hmm.

David Sacks 54:24 ... that they immediately start distributing because LPs are hammering them.

Jason Calacanis 54:28 Oh, got it.

David Sacks 54:28 LPs are like, "Why did you not send us this, you know, Snowflake when it was at $400 a share?"

Jason Calacanis 54:35 (laughs)

David Sacks 54:35 "Why did you not send us this DoorDash? Why did you..." You know, go through any name, you know, that you can think of. But then people compound the mistake, I think, that as soon as they get a little relief, boom, it's out the door.

Jason Calacanis 54:48 Hm.

David Sacks 54:48 And then the thing doubles on them.... and I just think, y- you know, part of the benefit of me having to get up every day, 5:00 AM, deal with public markets, and think about long or short is what we were talking about in the fall of 2021, around the table, before the poker games, which is, the public market is tilty, it doesn't feel good, and that... You know, we stopped making venture investments in October of '21, principally because of how we felt about public markets at that point in time. And so I think a discipline... In fact, I was meeting with a managing p- uh, partner of a very big venture firm in Silicon Valley this week. They just started about a year ago or six months ago doing public market investing, and they said it was incredibly valuable-

Jason Calacanis 55:33 Mm-hmm.

David Sacks 55:34 ... to how they think about distributions and what they're doing in the venture business, so.

Jason Calacanis 55:36 That's what it's been for me.

David Sacks 55:38 Yeah.

Jason Calacanis 55:38 I have now started to learn how these things are priced, and I just think it's great as a learning thing for me. I have to make two decisions. One, to distribute to my LPs, which I just give them the shares the second I have them and let them make the decision. But then it's also personally for me. Do I wanna hold it or do I not?

David Sacks 55:52 Yeah.

Jason Calacanis 55:52 I like your suggestions. Uh, nice punch-up, Chamath, of looking at the cash and then deciding if you wanna reallocate or not.

Chamath Palihapitiya 55:56 Did you guys see this crazy thing from CalPERS where they were like-

Jason Calacanis 56:00 Yeah.

Chamath Palihapitiya 56:00 ... yeah, they were, they were down like four... I mean, horrible returns on the venture side, and so their decision was to double down.

Jason Calacanis 56:07 Well, they didn't have. They took like a decade off from venture.

Chamath Palihapitiya 56:11 The returns of what they did invest in venture were atrocious.

David Sacks 56:13 To be fair, I don't know how the board has changed at CalPERS, but CalPERS brought in an, a new CIO, an entire new team, and so they can't be held liable for, you know, that track record. I did kinda see something on Twitter about it. I was shocked. It would be very difficult to manufacture that bad a track record if what I saw was accurate. However, I would say the team that is there now, the portfolio that they're putting together, and doubling down where I think venture is kind of at the bottom or bottom third, and I think-

Jason Calacanis 56:44 Oh, this is the bottom, yeah.

David Sacks 56:45 ... I think, uh, bottom third. I don't know, bottom half?

Jason Calacanis 56:48 Mm-hmm.

David Sacks 56:48 You know, listen, in venture, you gotta find three things. You gotta find... You know, you don't wanna invest all your money at the top, so you gotta get the bot- you know, bottom third. None of us can call the bottom, but, you know, last year at the end of '22, we were certainly in the bottom third of valuations. Then you wanna be early in a major platform disruption. I think we all agree we're early in a major platform disruption. This is probably the third of our careers. And then you wanna back one of the best firms, best brands in Silicon Valley. Like, if you do-

Jason Calacanis 57:18 Yup.

David Sacks 57:18 ... like, and people know who those are. And if you do those three things, you know, simultaneously, like, you've got a good shot at producing really incredible vintage.

Jason Calacanis 57:25 Just to put some numbers on the CalPERS thing so you can respond to it, Chamath-

David Sacks 57:27 Yeah.

Jason Calacanis 57:27 ... America's public, largest public pension, CalPERS, that's California's, manages some 444 billion in capital on behalf of California's 1.5 million state, school, and public agency employees. Is leaning into venture. After years of bringing down its VC exposure to 1%, to a 1% target, the institutional investor is now looking to increase its allocation more than sixfold, obviously 6%, from 800 million to five billion, the Financial Times reported. So thoughts on that, Chamath?

Chamath Palihapitiya 57:57 Well, I mean, this is the moment. There's a lot of venture firms that are hard up for money, and so they may have a shot.

Jason Calacanis 58:04 They can get allocations now.

Chamath Palihapitiya 58:05 In order to get into these funds, the problem that they have to realize is they may be buying a bunch of toxic assets or a bunch of toxic partners in the sense that a lot of these people have been getting run over for the last three or four years. Th- we don't know. Again, we've said before, most venture investors are probably unprepared for the shock because they've never lived through one. There's been a lot, a lot of junior muckety mucks that were hired because they were XYZ middle level exec at Rando Company. Means nothing. So I don't know. I think it's smart that they ha-... I, I mean-

Jason Calacanis 58:41 They have to be thoughtful in picking managers.

Chamath Palihapitiya 58:42 First of all, first of all, how is it that the Calif-... Like, literally, it's like-

David Sacks 58:47 I know. It's incredible.

Chamath Palihapitiya 58:48 ... trillions of dollars being made in your backyard, and some genius was like, "Well, the thing that's creating all the wealth in the world, which is in our backyard, where we probably have the best pitch in order to get into these funds-"

Jason Calacanis 58:59 (laughs)

David Sacks 58:59 (laughs)

Jason Calacanis 58:59 We're going to reject 1%.

David Sacks 59:00 And you just call Doug Leone and say, "Hey-"

Chamath Palihapitiya 59:02 Oh, my god.

David Sacks 59:03 "... who are the... Give me the list of 10," and put money on those 10 and call it a day.

Chamath Palihapitiya 59:06 Oh, my god. That's-

Jason Calacanis 59:07 I mean, unbelievable. To run-

Chamath Palihapitiya 59:08 That's unbelievably derelict. That's unbelievably-

David Sacks 59:12 Yeah.

Chamath Palihapitiya 59:12 ... sloppy and emotional.

David Sacks 59:14 I will tell you, the, the, I-

Chamath Palihapitiya 59:15 And look, sorry, that's it. Sorry. Let me just finish. That's-

David Sacks 59:16 Yeah.

Chamath Palihapitiya 59:17 Actually, that's the best word to use. When you look back on a decision like that, there's no numerical justification that one could have made in the 2000 teens to have made that decision, except that that was an emotional decision. And when you're running a half a trillion dollar fund, there is no room for emotion. You should not be allowed. There should be some... So I think, like, that shows a very hollowed out and, at a minimum, imbecilic risk management infrastructure at CalPERS that needs to get fixed. So wh- whether the allocation goes up or down, if I was a teacher and my money was being managed by them, I'd say, "Man, these people, I would wanna understand how they're making decisions." Because I don't... I would wanna see the investment memo that got them to decide as an investment committee that 1% in the most important asset class that's in your backyard that's making all the money in the world made any sense. I just wanna read that memo and see, could I agree with that?

Jason Calacanis 1:00:14 Hm, that's why writing deal memos is so important.

David Sacks 1:00:16 Mm-hmm.

Jason Calacanis 1:00:16 Because then I would wanna, then... Hold on, hold on.

Chamath Palihapitiya 1:00:17 Then I would wanna read the investment memo that says, "We're gonna change course and get back to 5 or 6%." Because if that process isn't fixed, these decisions are just going to be equally bad. You're just gonna compound bad on top of bad. Because again, they clearly did a terrible job and then, on top of that, they had horrible partner selection because the people that they did invest in, because the data is public, have performed horribly. So what changes now all of a sudden, right? Because if the best firms still don't want you in, increasing it from 800 million to five billion just means you're gonna lose 4.2 billion more than you would have otherwise at 800 million.

Jason Calacanis 1:00:54 It says here they made, uh, two bets. They had bet on, uh, looks like Light Speed in the last couple years, Light Speed and TPG. So we'll see how those go. That was in 2020.

David Sacks 1:01:05 And I, uh, th-

Jason Calacanis 1:01:05 Those can be tough-

David Sacks 1:01:06 I do-

Jason Calacanis 1:01:06 ... those can be tough bets.

David Sacks 1:01:06 ... I do, I do have-

Jason Calacanis 1:01:07 Who knows?

David Sacks 1:01:07 ... I do have some data on this-

Jason Calacanis 1:01:09 Yeah.

David Sacks 1:01:09 ... because we've spent a lot of time talking with them. And as you know, Jason, we were just talk... you know, like talking to folks like Mobadala, who I, I, I ... Yep.

Jason Calacanis 1:01:16 Yeah.

David Sacks 1:01:16 California is one of the largest sovereign wealth funds in the world, right? This is not just a state. This is bigger than most countries, right?

Jason Calacanis 1:01:23 Yeah.

David Sacks 1:01:23 This is one of the biggest economies in the world. I would say that what my interactions with the new team have been very impressive. And I will tell you, they're not just looking at funds and building a new portfolio. I think they are thinking about doubling down at the right time, and they're thinking about thematic bets against super cycles like AI, to say, "Let's allocate this much money. Who are the three or four deep strategic partnerships that we can have to drive, you know, return on that?" So I, I, I think it's ... I, I think they're on their way. But I, I agree with you, they're the sovereign wealth fund of the most prolific state in the world, and they should have outsized returns, not trailing returns.

Jason Calacanis 1:02:04 I just wanna point out, uh, one thing here, is the power of writing. Chamath, you decided to write your annual letter a couple years ago. Brad, you also, uh, will write a letter, famously the Facebook Getting Fit one or the Meta Getting Fit one. The power of writing is ... and I, and I just did this for, uh, the launch fund four, and when you write a deal memo, compare it to doing a deck. There ... the questions you get are so qualitatively different, and the people you attract are so (laughs) different, it is extraordinary. I am advising startups across the board to write really tight deal memos, 'cause I write these, we write these deal memos internally when we make an investment. But man, is it great for clarity of thought and for the person on the other side to just stop and read 1,000 words or 2,000 words as opposed to go through some stupid performative deck. It, it's just so ... such a better process. Maybe you could, you both could speak to that. Or Freedberg, I don't know if you're, you've been writing deal memos, but maybe for people who are listening who are capital allocators and founders.

David Sacks 1:02:59 I've been writing for years.

Jason Calacanis 1:03:00 Why, and what is the ... what, what does it, what does it do for you? Yeah.

Chamath Palihapitiya 1:03:04 Well, it allows you to actually find people who will critique things in a thoughtful, intelligent way. It's hard to critique decks because you use broken English, you use fancy graphics. All of a sudden, somebody that's very good at, like, graphical layout can dupe somebody else. And so you don't get to good outcomes because this weird group think effect sets in when you look at decks. So I'm not a fan of decks. I, I use them, but they need to be a companion to some sort of long form narrative document. And I just think it's more useful. You get people who can really think about what they agree about, what they don't agree about. It shows the intellect of the person writing it, quite honestly. I just think it's a, it's like a basic skill that people should have. It's a useful skill to teach people as well. Decks are very dangerous, I think. If you're gonna make decisions, I would encourage you, the bigger the decision, a deck is insufficient. It can be a companion piece, but it needs to be attached to long form documents. But the long form documents don't need to be long either, two, three, four, five pages. But without it, I think you're gonna allow some really bad decisions to creep in to some good ones.

Jason Calacanis 1:04:12 Freedberg, any writing from you for deals?

Brad Gerstner 1:04:17 No.

Jason Calacanis 1:04:18 Okay. You haven't. (laughs) Uh, he ran. He doesn't wanna talk

Jason Calacanis 1:04:22 about writing. All right, as everybody knows, uh, Reddit is on strike right now, or I should say the mods who run Reddit are on strike. 95% of Reddits went dark. They basically turned off new posts, or they just went private, basically. Nobody could join. Nobody could see the content, I believe is, uh, what that mean- means, between Monday and Wednesday. And the reason they're doing this is because Reddit decided it would start charging for its API. So, uh, who gets impacted by using the API? It turns out apps. We saw this at Twitter as well when Twitter started changing its pricing for its API, and this means that some of the really high-end Reddit apps would have to pay $20 million a year for access to Reddit's data. Now, they originally had said they were changing this pricing because they were gonna train AI models, uh, and they wanted anybody using that data, i.e. Google Bard or ChatGPT-4 and ClosedAI, they wanted them to pay for it. And Steve Huffman was, uh, explained all this in a New York Times profile in April. You can go search for that, Reddit wants to get paid for helping to teach big AI systems. The largest app is called Apollo, uh, just so you know, if you're, if you're not into those. Reddit really came out with their app really late. This was a function of the 2005 to 2015 timeframe. Back then, web 2.0 startups didn't have a lot of capital, so they let other people build on their APIs and build apps. Some of those apps caught steam and are actually better than the apps developed, uh, at least for a while, it was better than the Twitter app and the Reddit app. So, thoughts on this, Freedberg?

Chamath Palihapitiya 1:05:55 There's a history here, um, is mimicked at both Facebook and Twitter, both of whom had open APIs that provided access to third party app developers to build tools on top of the platform by accessing either user data or content off of the network and then making that available via some different product function, some different UI than the native tools allowed. If you'll remember, Facebook started to kill off its API, and in the process, killed a number of these third party app developers, the, the most prominent of which was Zynga. I think this was around the 2012 timeframe. Do you guys know if I'm right on that? I think it's right.

David Sacks 1:06:34 Sounds right.

Chamath Palihapitiya 1:06:35 And, you know, we saw the same thing happen i- in Twitter, where, if you guys remember in the early days, a lot of users accessed tweets from people that they followed through third party apps, and third party apps all competed for, uh, the user, and ultimately, Twitter's management team realized that having direct access to the user, being able to control the UI, the UX, and not just become a, a data network, but to actually become a, a service for users-

David Friedberg 1:07:03 ... made a similar sort of change. So, you know, Reddit's motivation around AI training is, is an interesting one, but it does speak to this idea that these social network companies, social in the sense that the users themselves are creating the value, they're creating the content, at both Facebook, at Twitter, and at Reddit. Ultimately, the company loses the value if that data, that content gets extracted, uh, and they can't monetize it or capture the value somehow. And it's a lot different. You know, every company ultimately wants to become a platform company, meaning that they can offer multiple products or services to users that sit on top of some, you know, network that they've created. And in the process, create a network effect because more products, more apps creates more users, more users, you know, begets more, more, uh, more apps and so on. That works well in some contexts, like an Apple App Store context. But in the context where there is a network unto itself, like Facebook, Twitter and Reddit, meaning that there is already a user network that is generating value in the form of the content that's being produced and consumed, you don't necessarily gain anything by then building an app network on top of it. And I think that's been one of the kind of key learnings that's repeated itself over and over with Twitter and Facebook. The thing about Reddit, it's always been a community service. If you guys remember, like in 2014, 2015, Ellen Pao stepped down after there was a Reddit revolt. She was the CEO at the time. And she fired an employee at Reddit that ran the Q&A site for Reddit's mods and their users. And the network, the community was super pissed off when this happened, and they all revolted and they were gonna shut down the service. And ultimately, Ellen, you know, got removed from her role as CEO when this happened. So, you know, because so much of the value of Reddit isn't in the management team, it's not in the, the work that the software engineers do that run the company, it's not the, the VCs or the shareholders, the value of Reddit is inherent in the community. It's inherent in the individuals that build the content on that platform. And that community has convened many times in the past at Reddit to change the rules, to say, "This is what we want this community to become, and this is how we want this management team to operate." And so it's a really uniquely positioned business. It says a lot about how social networks in this kind of modern era are operating. It really speaks to how much of the value ultimately accrues to the shareholders in a business like this, when the users themselves can step in and unionize and say, "Hey, you know what? We're not gonna allow this much value to be pulled out of the network in this way. We want this to change." So I think it'll, it'll have a lasting effect in terms of investing in social network or social media type businesses, where the users are generating so much of the value and have the ability to kind of communicate with one another and control where value ultimately falls.

Jason Calacanis 1:09:48 Chemath, you were, uh, at Facebook, I think, when Zuckerberg realized enabling a bunch of folks to use the API wasn't as good as controlling the user experience, having a uniform user experience, and, uh, it got deprecated. And I remember Zynga and a bunch of other people had games and were sucking users off the platform. There was a LinkedIn competitor at one point that was growing at a incredibly violent pace, and I guess y'all made a decision, "We don't want you sucking our user base (laughs) off the platform." Maybe you could expand on what the decisions were at Facebook at the time.

Chamath Palihapitiya 1:10:21 That was one of the things I ran, I think. One of my teams was responsible for Facebook platform. Yeah, it was just a very clinical decision around enterprise value. Look, the, the thing with Reddit is that it's a hot mess. And in order to try to create enterprise value, they decided to really leverage the mods so that there was some l- level of control, and that control was necessary so that they could basically sell ads. That's how this thing moved in lockstep, because the minute that there was corporate venture investors and other investors, and a need