E151: WW3 risk, War with Iran?, 4.9% GDP, startup failures growing, new Speaker & more

1. 0:00 – 1:16

   Bestie intros!

   1. CPChamath Palihapitiya0:00

      What are the next steps in your interview process for your cabinet position?

   2. DSDavid Sacks0:03

      (laughs)

   3. CPChamath Palihapitiya0:04

      Secretary of Treasury, Chamath. Secretary of State, Sachs. J-Kall?

   4. JCJason Calacanis0:10

      Uh, Press Secretary, obviously.

   5. CPChamath Palihapitiya0:11

      Press Secretary. (laughs) Oh my God, Press Secretary.

   6. DSDavid Sacks0:14

      (laughs)

   7. JCJason Calacanis0:14

      Can you imagine me in the press briefing room?

   8. DSDavid Sacks0:16

      (laughs)

   9. CPChamath Palihapitiya0:17

      Whoever wins the presidency, I just want you guys to know, I would l- I would be a great secretary of sweaters.

   10. DSDavid Sacks0:22

       (laughs)

   11. CPChamath Palihapitiya0:22

       I will source incredible-

   12. DSDavid Sacks0:24

       Only cashmere.

   13. CPChamath Palihapitiya0:25

       ... vicuna. I will redesign the outfits of the entire military industrial complex.

   14. JCJason Calacanis0:31

       In Loro Piana, yes.

   15. CPChamath Palihapitiya0:33

       Oh thank you.

   16. DSDavid Sacks0:33

       (laughs)

   17. JCJason Calacanis0:33

       The Navy SEALs will be in Loro Piana from head to toe.

   18. CPChamath Palihapitiya0:35

       (laughs)

   19. DSDavid Sacks0:35

       (laughs)

   20. JCJason Calacanis0:35

       It's a new outfit for them. They're going to go whack Osama bin Laden next time with Loro Piana $4,500 print shoes.

   21. CPChamath Palihapitiya0:41

       Could you imagine? Could you imagine SEAL Team 6 wearing vicuna? (laughs)

   22. JCJason Calacanis0:45

       Loro Piana. (laughs) Absolutely, it's going to be great. It can chill you, those Apaches and the Blackhawks. It's g- You're going to want, like, a pashmina wrap or something. Good pashmina out there.

   23. CPChamath Palihapitiya0:55

       Oh my god. (laughs)

   24. DSDavid Sacks0:55

       (laughs)

   25. JCJason Calacanis0:55

       Have you been to Afghanistan at night? It's freezing.

   26. DSDavid Sacks0:58

       (laughing) Yeah.

   27. DFDavid Friedberg1:00

       Going all in.

   28. NANarrator1:01

       Let your winners ride.

   29. JCJason Calacanis1:04

       Rain Man, David Sachs.

   30. DFDavid Friedberg1:07

       Going all in.
2. 1:16 – 22:02

   WW3 risk, is WSJ trying to escalate US vs Iran?

   1. DFDavid Friedberg1:16

   2. JCJason Calacanis1:16

      All right, everybody. Welcome to episode 151 of the All-In Podcast. With me again today, the sultan of science, the queen of quinoa, the prince of panic attacks, David Friedberg, the dictator himself, Chamath Palihapitiya, and your crazy angry history uncle, David Sachs is here. Welcome to the program, everybody. Uh, we got a very full docket. I guess we'll start it off with how the war and the conflict in the Middle East is going here. Sachs, you hosted a Twitter Space, uh, with Vivek, uh, and Elon on preventing World War III. What was the premise and the reason for setting up this, uh, trio to talk about World War III?

   3. DSDavid Sacks2:04

      Well, I think Vivek actually had the idea to do it. Uh, we had a couple other folks on the panel as well. We had, uh, Colonel Daniel Davis who has a podcast called Deep Dive, he's a military expert. We had Alexander Mercouris from The Duran, which is a top geopolitics podcast. And so we were talking about the risk of the- th- a series of chain reactions that could happen in the next few weeks here over what's happening in the Middle East. Elon wanted to do it because of what he said, which is that he's talking to a lot of world leaders, he's talking to a lot of different people and they tell him that the risk of some major war happening or some greater catastrophe is higher than they've ever seen. So, he was quite concerned about that. And, you know, I think a few things came out of it. Uh, the first is, and I think Elon took this position most strongly, we really need to end the war in Ukraine. It, the combination of having a war in Ukraine that involves the United States and then a war in the Middle East that could also involve the United States, and Russia has troops in Syria, there's a lot of ways for this to spiral out of control. There's a lot of, um, room for unintended consequences. His view was, "Look, we've just had five months of counteroffensive here, it didn't go anywhere. On net, the Ukrainians didn't take back any territory. In fact, the Russians slightly gained territory. So, this war is going nowhere, it has failed, it is time for the administration to work towards a ceasefire and a resolution. Because having-"

   4. JCJason Calacanis3:34

      Failed for who?

   5. DSDavid Sacks3:36

      Well, the Ukrainians have not taken back-

   6. JCJason Calacanis3:37

      What do you mean you say failed?

   7. DSDavid Sacks3:39

      They had a completely failed counteroffensive.

   8. JCJason Calacanis3:41

      Okay. But you said the war has failed, so I'm just curious, which side was going to fail?

   9. DSDavid Sacks3:43

      Sorry, the counteroffensive has failed.

   10. JCJason Calacanis3:45

       Okay, got it.

   11. DSDavid Sacks3:47

       We're now, the counteroffensive started on June 4th or 5th, it's now October 26th and if you look at the map that the New York Times provided, Ukraine has not taken back any meaningful amount of territory. In fact, Russia on net has gained territory even when it was supposed to be Ukraine on offense. So there is no prospect of Ukraine achieving its objective of evicting Russia from their territory. So what is the point-

   12. JCJason Calacanis4:13

       But they have, they have defended themselves from an invasion from Putin, yeah? You would say that?

   13. DSDavid Sacks4:18

       They've ended up-

   14. JCJason Calacanis4:19

       Successfully.

   15. DSDavid Sacks4:20

       ... killing hundreds, uh, what's successful about it?

   16. JCJason Calacanis4:22

       Yeah.

   17. DSDavid Sacks4:22

       Several hundred thousand Ukrainians have died.

   18. JCJason Calacanis4:23

       Well, no, they successfully didn't get taken over as a country when they were invaded by Russia.

   19. DSDavid Sacks4:26

       That assumes that was, that was Russia's goal.

   20. JCJason Calacanis4:29

       Okay. So when they sent the troops in there, their goal wasn't to invade? What was their goal then?

   21. DSDavid Sacks4:36

       Honestly, you don't really understand the history of the conflict.

   22. JCJason Calacanis4:39

       No, no, I mean, we've, we've talked about history of the conflict, I'm just saying the way you're framing it is that Ukraine failed. Uh, it seems to me they've also, the argument could be that they defended themselves successfully.

   23. DSDavid Sacks4:47

       If you look at what's happened this year, so I'll-

   24. JCJason Calacanis4:50

       Yeah.

   25. DSDavid Sacks4:50

       Let, let's just put a pin in what happened last year because I think there's different ways of interpreting it, but if you look at what's happened this year-

   26. JCJason Calacanis4:57

       Yeah.

   27. DSDavid Sacks4:57

       ... and certainly over the last five months, Ukraine has made no progress in evicting the Russians, nor is there any prospect of them evicting the Russians. So the continuation of that war doesn't achieve anything except kill the flower of Ukrainian youth and continue to-

   28. JCJason Calacanis5:12

       And Russian youth.

   29. DSDavid Sacks5:14

       The Ukrainians are dying in much higher numbers and Russia's a much bigger country, they've got something like five times the population. So moreover, with this new conflict in the Middle East, you create all these un- unintended consequences and all this risk of escalation being in a proxy war with Russia. So that was the first thing to come out of the, the Twitter Space was a consensus among the people who were there that it's time to resolve this conflict with Russia. The United States does not need to be in a proxy war with Russia. We need to normalize relations. It's way too dangerous to be continuing this with what's going on in the Middle East. The second half of the, the Twitter Space I think was about the scenarios here for what could come in the Middle East. And just briefly, I think that there's three scenarios here for what could happen, assuming Israel goes into Gaza. This is what everyone's waiting for, is will there be a ground invasion of Gaza? Netanyahu says they're going to do it.The theory on why they haven't right now is the US is actually moving a bunch of assets into, military assets, into place. They're putting air defense batteries around military bases in the Middle East. So there's been a lot of reporting that the US has told Israel to wait until the US military is ready for any blowback that could happen. But Netanyahu has been very clear that they are going in no matter what anybody else says. Three scenarios could arise from that. Number one is what Israel and I think the administration want, which is that they have a successful military operation and the US's threats deter Hezbollah or Iran from getting in. So that would be like scenario number one. Scenario number two would be that the Israelis go in, it's guerrilla fighting, it's much tougher than anybody expects. They start to take casualties. At the same time, you get massive public uproar. You get a lot of protests. The Arab Street erupts, more and more leaders across the world denounce Israel. And so you kind of muddle your way eventually towards a ceasefire in a couple of months. So that would be scenario number two. Scenario number three is that this thing spirals out of control very quickly where you get Hezbollah in the north invade, so you have a second front. The West Bank could erupt in protests that could potentially create a third front. Iran could get involved either because they feel the need to defend Hezbollah or because you have people like Lindsey Graham who are basically already calling for war with Iran. So either side could basically escalate into that. So I think there's three-

   30. JCJason Calacanis7:37

       Explain what happened with Lindsey Graham because he was telling them if Iran, if they got involved that we would strike back. Yeah?
3. 22:02 – 33:28

   Nuclear risks

   1. CPChamath Palihapitiya22:02

      plan of action? My concern, it's, uh, everyone's gonna think it's crazy, but it's that there's a very, very low probability, but now probably much higher than it was, that the world marches towards using a nuclear weapon for the first time in a long time. And the reason is, as Sax has pointed out so many times, there is significant material and industrial production shortages, not just in the US but around the world, to support rising conventional wars that seem to be scaling all over and it's gonna be multiple fronts. And to feed those wars with conventional weaponry, there's, there's a breaking point. Our cost of weaponry is 10X Russia's cost of weaponry supposedly, I mean, I'm just quoting Sax on this point. But, um, if all that is true, at some point, these conflicts become really difficult to maintain, and if we're in the midst of a conflict, you may not be able to simply re- retreat or recede. At some point, the question is, well, how do we gain superiority again? And whether that's us or Russia backed into a corner, or Israel backed into a corner, who also has a, a nuclear arsenal, there's a, a couple of scenarios. There's like a million scenarios from here. There's a qu- million realities we could live in from here, from today. But there's some number of them that end up with someone saying, "I gotta press the button." And there's, remember, not all nuclear weapons are these things that wipe out a million people instantly. Some of them are small, low tactical weapons. That is still very low probability, but much higher than it was a few weeks ago that we find ourselves walking because of the fact that we're gonna have multiple conflicts and burn through all this conventional weaponry, not have industrial production systems to support all these conflicts, but every, uh, there's a bunch of countries that have a trump card. And once you start talking about it, it'll seem scary at first, then it'll get normalized, and then it'll become a question of when and where and how, and then all of a sudden it's like, holy shit, this is a different world we're living in. That's a scary place I don't wanna be in. Anything we can do to eliminate those paths from being walked, I'm in favor of, even if that means seeding strategic advantages today. I, I just don't think that that's a place we wanna go.

   2. JCJason Calacanis24:22

      There's, like, uh, nine nuclear powers. Who do- who do you think is going to be the one who would actually use a nuclear bomb, Freeberg? Do you have some speculation there?

   3. CPChamath Palihapitiya24:33

      I- I-

   4. JCJason Calacanis24:33

      Or do you just think everybody runs out of bullets and tanks and missiles and then they go to nuclear because they have nothing left?

   5. CPChamath Palihapitiya24:38

      I don't know. Look, I- I-

   6. JCJason Calacanis24:39

      That's-

   7. CPChamath Palihapitiya24:39

      ... I tend to think in terms of, like, there are multiple parallel scenarios that can play out, so I don't have a point of view.

   8. JCJason Calacanis24:44

      Sure.

   9. CPChamath Palihapitiya24:44

      I'm not gonna say deterministically I think this thing is gonna happen. Again, I think this is very low probability.

   10. JCJason Calacanis24:49

       Sure. I get that.

   11. CPChamath Palihapitiya24:49

       But I could see a bunch of scenarios emerging. Like, let's say that Russia's got their back against the wall and Putin's feeling lost and desperate and he needs to use a tactical weapon to, you know, get some regional victory. Again, these tactical nuclear weapons, they're- they're not necessarily the kinds of things that you would use to level Manhattan. Those exist, but there are other weapons in the arsenal that I- I get worried that someone says, "We're backed in a corner. We have nowhere else to go. We can't win this thing conventionally and we cannot lose." And that's the moment when someone says, "This is the... Let's start talking about this." And that conversation happens before it gets used, then that conversation becomes normalized, and then suddenly it's not this thing. We all grew up in a world where this was never a real threat or risk or conversation. There was the Cold War and the dismantling, and we were kinda headed in a good direction for the last 40-some-odd years. But now it's like, I don't see it going in that good direction anymore. So I'm just really nervous about that, you know.

   12. DSDavid Sacks25:50

       Yeah, I think you should be nervous about that. Let me give you a couple of examples. So, so first of all, I- I agree with Freeberg's point that humans who are convinced of the righteousness of their cause have a tremendous ability to wave away or justify any sort of tactical implications. So, for example, we did use two atomic bombs to end World War II. That wasn't the only time it was advocated. If you go back to, I think it was around 1950, MacArthur wanted to win the Korean War by using 20 to 30 atomic bombs, and his plan was to so thoroughly irradiate the border between China and North Korea that China would never be able to invade through a invading army for something like 50 years. Truman had to fire him because Truman didn't agree with the strategy (laughs) . And, by the way, MacArthur was not some crazy, you know, he was not some, like, wacko. He was the most respected man in America in 1950, and Truman paid a huge political price for having to fire him. It was one of the reasons why Truman couldn't run for re-election again. So, this idea that, like, rational people would never use these things, not true. The generals in 1962 during the Cuban Missile Crisis were all ready to take the nukes off the chain if the Soviets were willing to break the- the naval blockade. So, you know, it's not just foreign powers who have rattled the saber on nukes. Uh, we've done it at various points through our history too. Let me give you a more mundane example. Just earlier this year, Biden said that we were out of 155 millimeter artillery ammunition, and so we had to give Ukraine cluster bombs. Remember this? Just a year before, that same administration had said the use of cluster bombs was a war crime. So in other words, they were able to change their morality on the use of cluster bombs because tactically they were out of the type of a- of ammunition they want to use and they had nothing left. So, you know, I think this kinda reinforces Freeberg's point. Now, look at our inventory replacement times for key systems. This is a report by CSIS, that is, uh, a military think-tank in Washington. What they show is that our industrial capacity is so hollowed out that it's gonna take us five-plus years to replace our stockpiles of artillery ammunition, of Javelins, of Stingers, of, uh, GMLRS, uh, is another type of rocket system. And so we are, like, dangerously low on key types of ammunition. And yet, remember when 60 Minutes did that interview with Biden? They said to him, "Well, gee, if we're in war, both on behalf of Ukraine and behal- behalf of Israel, doesn't that pose any trade-offs?" And Biden's response was, "No, we're the most powerful nation in the world." For good measure he said, "We're the most powerful nation in the history of the world." So he doesn't see any trade-offs. He doesn't see any limits on American power. Quite frankly, I think this is why he's dangerous, is 'cause he still thinks that the US is living in 1991. He's been in Washington for 50 years and he only remembers the unipolar moment. All of his instincts and experience have been shaped by that period of time when the US was the only superpower, that we were the global hegemon. We're no longer in that position anymore, you know? First of all, Russia and China are strong. They are great powers too. And Iran is much stronger than Iraq. Iran is four times the size of California and has roughly 90 million people, and they got a lot of engineers. And even if we did want to attack 'em, it's not exactly clear how you would stage that attack. Just getting to Iran would require flying over some very dangerous territory. It's not clear we have the, uh, we have the bases or the air clearance rights from allies to be able to even get to Iran. Moreover, Iran apparently has a very strong missile program, so they may even have the ability to fire missiles or hypersonic missiles at our aircraft carriers that are sitting in the Mediterranean Sea. So, if we get in a war with Iran, it's no joke. This is not gonna be shock and awe. This could be a very, very dangerous situation for the United States, which is why when people are just kinda making these idle threats, they should be very careful about that, because Iran is hearing that too and they're getting ready. And- and one last point on that. Thanks to our destabilizing the Middle East with the Iraq War and the Syria regime change operation, Iran now has proxies in both Iraq-... and Syria. They've got, uh, Iraqi Hezbollah. They also have proxies in Yemen with the Houthis. And all of those groups could stage attacks on American military bases there.

   13. JCJason Calacanis30:34

       We've, uh, gone down the worst case scenario here, use of a nuclear bomb, the United States invading Iran. Here's just a list of the nine countries that are nuclear powered, that have nuclear bombs rather than are nuclear powered. And as you can see, um, Russia, US, China, France, UK, Pakistan, India, Israel, and North Korea. Israel denies they actually have them. And Pakistan has been the one who has been profi- pro- proliferating them, getting bombs to North Korea and helping Iran with their program. Iran obviously does not yet have a nuclear bomb, but we don't know how far they are because intelligence is sparse on that topic based on my cursory research. What's the best case scenario here, Chamath?

   14. DSDavid Sacks31:18

       Jake, uh, uh, Jake, uh, I, I, sorry, Jake, I just wanna-

   15. JCJason Calacanis31:19

       Go ahead.

   16. DSDavid Sacks31:19

       ... be clear, I just wanna be clear that I don't see nuclear use as likely.

   17. JCJason Calacanis31:23

       Yes. That was Farid Berg's point, yeah.

   18. CPChamath Palihapitiya31:24

       Uh, uh-

   19. DSDavid Sacks31:24

       And-

   20. CPChamath Palihapitiya31:25

       No, I, I, I, I, sorry, I did not say it was likely at all either. Not at all.

   21. JCJason Calacanis31:28

       No, no. You said it's a small possibility, and we just-

   22. DSDavid Sacks31:30

       Right, right.

   23. JCJason Calacanis31:30

       ... spent 10 minutes talking about that small possibility. Yes. Just so everyone is clear.

   24. CPChamath Palihapitiya31:32

       I just, I just want everyone, like, let's say something goes from 2% chance to 8% chance, it's now 4X in the next 20 years, that's-

   25. DSDavid Sacks31:42

       Right.

   26. CPChamath Palihapitiya31:42

       ... a significant shift in risk. And I, I think there have been others like Ray Dalio, I think, or Warren Buffett, some people have said that the chance of us using a nuclear weapon over a long enough period of time approximates 50 to 100%. It starts to get very high because, you know, at some point these things proliferate, the intelligence, the capabilities proliferate.

   27. JCJason Calacanis32:03

       Yeah.

   28. CPChamath Palihapitiya32:03

       They get into the wrong hands. There's all these different scenarios that emerge. So the probability might be low on any given period of time, but over a long enough period of time, these things become a real kind of concern. The nukes that were dropped on Hiroshima and Nagasaki are like 20 kiloton yields. I mean, we have massive, massive, massive warhead, multi-warhead missiles that have mega- many, many, megatons of yield, but there are sub 20, sub 10 kiloton yield nukes that can be deployed in a conventional, in, in what people would call a tactical setting. So you're not talking about-

   29. JCJason Calacanis32:36

       Yeah. The, the, the-

   30. CPChamath Palihapitiya32:36

       ... this, you know-
4. 33:28 – 40:34

   Best case scenarios for de-escalation

   1. JCJason Calacanis33:28

      What's the best case scenario here? Obviously we haven't had the ground invasion. We've had, uh, Qatar and Saudi and a number, and the United States obviously, doing some pretty hardcore diplomacy, and we've had some hostages released. So, you know, I've been, and I've been spending some time here in the Middle East, there is a theory that people have brought up multiple times here that there's a deal going on right now to get the hostages, a larger number of them, and that the ground invasion may not occur. Th- this is just a theory that a number of people have been talking, uh, here, and maybe they're just optimists, but is there an optimistic scenario here, Chamath? Is there a golden bridge out of here? Is there a possible path to, you know, the peace process getting back on track? Or does it all just seem hopeless? And if there is, and if there is a possible path, what would that look like? Let- let's just see if we can come up with, uh, any optimistic framing or, or, or theory here.

   2. DFDavid Friedberg34:25

      Why? It's just as bad as the other side.

   3. JCJason Calacanis34:28

      Okay, so you don't see one, yeah, okay.

   4. DFDavid Friedberg34:29

      How about we just look at the facts on the ground. The facts are that we have this long simmering war between Russia and Ukraine that doesn't seem to have an end, and there doesn't seem to be a loss of life at which they're willing to stop or whether the international community is willing to force a ceasefire. And then now you have this one, which is in the thousands and will escalate into tens of thousands, but it seems like it's on a path to be slow and simmering. So, I don't know what to say except that it does not seem to be escalating. And the reason it isn't escalating is that there is enough emotional impact that's causing people to understand that the stakes are high. And so when the actual actions are relatively de-escalatory, I find that the rhetoric ratchets up, right? It's almost inversely proportional. You know, it's kind of like, what was the, the phrase in World War II about Churchill? Iron fist wrapped in a velvet glove. Is that, is that the phrase? Something like that? But the idea is that when you act decisively, you say little, and when you have no plan of really escalating, you say a lot. So I think that right now we're saying a lot, which actually counterintuitively to me says we're not planning to do much of anything. And I think that that's good. So I'm all for (laughs) Lindsey Graham braying as long as we don't take it too seriously and, and sleepwalk into some escalation.

   5. JCJason Calacanis36:07

      Sax, any chance that this, uh, gets de-escalated and what might that look like?

   6. DSDavid Sacks36:12

      Sure. I think there's a chance. I think like Chamath said-

   7. JCJason Calacanis36:15

      What would it look like? Yeah.

   8. DSDavid Sacks36:17

      Well, what it looks like, I think, is that the ground invasion keeps getting paused either because the US needs more time to get its military in place or because...... the Israeli military realizes this is going to be a very difficult operation and they need more time to plan. And while that's happening, there's a serious diplomatic effort going on. And while that's happening, there's also more pressure being brought to bear against Israel to not go in. So for example, you saw Erdogan this week make some statements, I actually thought they were pretty outrageous, where he described Hamas as basically being freedom fighters, but warning Israel not to go in. There were much more reasonable remarks by King Abdullah of Jordan, basically at least recognizing the atrocity that had taken place against Israel, but also trying to advocate for the lives of Palestinian civilians in Gaza and telling them that it would be a mistake to go in. So you're seeing, like, a wide range of opinions across, I'd say, major players in the Middle East, but all of it, the gist of it is basically telling the Israelis not to go in. So you've got all these delays and pressures going on and so maybe there's some chance it could deescalate. I personally think that that's still unlikely, and the main reason for that is I think Israel is determined to go in. I think Netanyahu has made that clear. I think from the Israeli point of view, they don't feel like they have a choice. They've suffered the biggest massacre of, of Jews since the Holocaust and they can't be perceived as simply standing by and doing nothing. That would make them look extremely weak in a region of the world where you don't want to look weak.

   9. JCJason Calacanis38:02

      They have to annihilate Hamas, I guess is the, the thinking.

   10. DSDavid Sacks38:06

       Well, th- they say that their objective is to destroy Hamas, but I think that probably from their standpoint, they'd consider it a success if they could significantly degrade Hamas, set them back 10 years, destroy-

   11. JCJason Calacanis38:17

       And get the hostages back, yeah.

   12. DSDavid Sacks38:18

       ... destroy their capability to wage war against Israel, to undermine their tunnel networks and so forth. So I think Israel still feels like this is something they have to do, and so I kind of think that the most realistic good case scenario is that if they do go in, that the military operation, for various reasons, is not a long one and eventually a ceasefire can be agreed to before this can escalate out of control. And so there's a bunch of, like, very delicate red lines there for a lot of different players. And so in order for that scenario to work out, I think it's going to take some very deft behind-the-scenes diplomacy from the Biden administration really, and I'm not sure they're capable, I'm not sure they're up to that task. So this is why I think it's such a dangerous situation.

   13. JCJason Calacanis39:05

       Well, can I ask you a question, by the way?

   14. DSDavid Sacks39:07

       Yeah.

   15. JCJason Calacanis39:07

       Is Lindsey Graham speaking on behalf of the United States officially with the president's approval? He can't possibly be freelancing that. I didn't have any... I- I- I tried to research it online, I couldn't find any, um-

   16. DFDavid Friedberg39:22

       Well, why don't you fill in the blanks, Jason?

   17. JCJason Calacanis39:23

       ... information on if that was sanctioned or not.

   18. DSDavid Sacks39:25

       Yeah.

   19. DFDavid Friedberg39:26

       Well, Jason, think about this. David texted this into the group chat and then tweeted it as well. Do you think Mohammed bin Salman is meeting with a group of 10 senators that's just off on a, an adventure?

   20. JCJason Calacanis39:39

       No.

   21. DFDavid Friedberg39:40

       Okay. Well, there's your answer.

   22. JCJason Calacanis39:41

       Yeah. Yeah. No, no, I'm just-

   23. DSDavid Sacks39:43

       Look at this photo. I think this, the picture says a thousand words. So you have a, a delegation of senators, by count about 10 senators there.

   24. DFDavid Friedberg39:52

       There's 10 of them on the trip.

   25. DSDavid Sacks39:52

       They've gone to the Middle East.

   26. DFDavid Friedberg39:53

       Yeah.

   27. DSDavid Sacks39:53

       Yeah, they're meeting with Mohammed bin Salman-

   28. DFDavid Friedberg39:55

       Five Republicans and five Democrats.

   29. DSDavid Sacks39:58

       And who has the seat of honor right next to MBS in the front of the room? So I personally would like to believe that Lindsey Graham is just an outlier and he doesn't speak for anybody, but unfortunately, this delegation saw fit to put him in the front of the room. I consider that very scary.

   30. DFDavid Friedberg40:13

       Well, I think it's also fair to say that the office of MBS would have coordinated that decision with the White House before receiving them. That's, that's typical political protocol.
5. 40:34 – 1:09:14

   Murky macro picture: Main Street disconnects from Wall Street, startup shutdowns, challenged returns

   1. JCJason Calacanis40:34

      All right, uh, I guess we'll move on to some business issues here. The macro picture is, uh, quite confounding. GDP, uh, as we were talking about in our group chat, grew 4.9% year over year in Q3, higher than the 4.3% expectations and much higher than the 2.1% growth in Q2. Highest year over year GDP since, uh, Q4 2021. Uh, and we thought we were going into a recession, we'd have a couple of quarters of, um, contraction. That hasn't happened. CPI in September was 3.7, slightly above the 3.6 estimates. And Chamath, what do you take from all of this, this crazy high growth GDP? Is this because of stimulus, government spending? What, what is this, uh, confounding, you know, uh, inflation coming down and getting somewhat under control and then crazy GDP growth?

   2. DFDavid Friedberg41:25

      I don't know. I don't think anybody knows. But it's really confounding for the markets. I think it's really bad for markets in general. It's probably the worst for private companies, because you have this effect now where everybody's been wanting to price in a recession, right? Everybody wants to see that shoe drop where they say, "Oh, okay, here it is. Something's softening. Demand is softening." And then when you see a print like this where the economy's expanding, you're kind of confused and you're like, "Well, where, where is this softening gonna come from?" And so what happens is people become very overreactive to small amounts of data, and that actually started to come out I think basically since August. And what's been happening since August is that every time a company reports, the sector that's gotten the most attention has been fintechs, and the reason is that fintechs tend to be on the bleeding edge of capturing consumer demand. And if consumer demand shrinks, that's probably the first sign that there's going to be a recession, right? Because consumption is about almost 70% of the US economy.And so since August, what you've seen are the large leading edge public fintech companies just get absolutely murdered. And yesterday was an even worse day because what happened yesterday was a company with basically world line started to report softness in spending. Now, that spending was not even in America. That spending actually happened to be within a segment of their customer base (laughs) in Germany. And that was enough to just literally sink the stock, I think 60% in a day. So we have on the surface a healthy growing economy, but underneath the surface, what we s- what we are betting on increasingly is that consumer demand has basically stopped. So you can see here Adyen is down 50% since the beginning of the year, but again, most of this was since August. Block is down another 35%. PayPal is down 30%. So, so that's one thing, which is, this is a big bet that consumption is slowing and shrinking. The economy will be in a recession over these next two or three quarters, which will give the fed the motivation and the justification to lower rates starting in the middle of next year. That's the big bet in the market. But separately, if you take a different lens and look at this data, we all have a bigger problem in Silicon Valley land, which is how do the capital markets take companies public when this is happening? And the reason why this data is so important is, we've said this 1000 times, there are only two companies that can structurally open the capital markets for all startups. One is SpaceX Starlink, but that's on its own path and not going public soon, and the other is Stripe. And the problem-

   3. JCJason Calacanis44:28

      You could probably add TikTok to that as well. Yeah.

   4. DFDavid Friedberg44:30

      No, because that's a Chinese company with all kinds of overhangs. So no, I would disagree with that.

   5. JCJason Calacanis44:34

      But with 30 or 40% US ownership, so...

   6. DFDavid Friedberg44:36

      I, I would disagree with that, but no.

   7. JCJason Calacanis44:38

      Okay.

   8. DFDavid Friedberg44:39

      So I think it's Starlink and Stripe, and the, the problem now for Stripe is that the public comps dollar for dollar are off 50%, which from the beginning of the year, which then says that if you apply that ratably to its valuation, they did around at 55 billion, then the market clearing trade may be 25 to 30 billion now. Now 25 to 30 billion for Stripe, you're incinerating 70 billion dollars of equity value, right? And about five to $10 billion of actually paid in capital. So what does that do for Silicon Valley and for VCs? I think it's going to put a lot of pressure on companies and valuations. So yeah, we're in for a real slog. So on the surface for the real economy, I think it's generally decent news. For startup land, I think it's not good. And then specifically within startup land, sectors like fintech are in pretty bad trouble, I think.

   9. JCJason Calacanis45:38

      And the late stage, obviously still very much in trouble. Freberg, any thoughts on the startup economy? You had some, uh, thoughts on this, I think too.

   10. CPChamath Palihapitiya45:45

       I'd like to hear your guys' experiences, but there's definitely been a big holdup in series BCD later rounds because so much of the market questioning is, you know, when, when is the next round gonna get done? Which is based on when can the companies potentially go public. And, uh, ultimately, if you don't see a path to a window opening up, you don't fund the pre-IPO round, you don't fund the late stage round, the growth stage round, everything gets held up. And a lot of rounds that are getting done lately have been these kind of convert or bridge rounds where existing investors are funding the company to give it another year or two of runway. That was definitely the case for most of this year coming out of '22. I think post the summer, it seems like a lot of folks I'm talking to are starting to wake up. There's even more series B at lower prices, and everyone's kind of capitulating and ac- accepting that there are still great businesses out there. It's just that they got overpriced in their A or their B, and let's price 'em at a lower valuation. And rounds are sort of starting to get done in the fall here.

   11. JCJason Calacanis46:47

       I'll have you react to this data, Sacks. Um, Carta manages cap tables for folks, but they have produced this chart, and this is Carta companies only. So this is a subsection, who knows, Carta may power the cap tables of 10%, 20% of Silicon Valley. The rest are done on other pieces of software or even in Google Sheets or, uh, literally in an Excel sheet by an attorney who is, uh, working with the company. If you look at this chart in 2020 and 2021, you had about 70 startups shutting down per quarter. In 2022, you see that number double and we start seeing 129, 141 a quarter. And then in 2023, this last quarter, Q3, uh, rocketing up to 2020, so roughly three times what we see in the boom markets. Sacks, any thoughts on this data? I have a couple of observations, but I wanted to go to you first.

   12. DSDavid Sacks47:43

       Well, uh, this is not surprising to me at all. This is the bubble of 2021 working its way through the system. We know-

   13. JCJason Calacanis47:51

       Yes.

   14. DSDavid Sacks47:51

       ... that there were these gigantic rounds that were funded in 2021, especially in the second half where you had this asset super bubble. It wasn't just in tech, it was like all growth stocks, crypto everything. And so there were a lot of startups that raised huge funding rounds at the peak of the market, and they haven't had to raise for a couple of years. Well, now they're starting to run outta cash and they do have to raise, they're finally being forced to go back into market, and a lot of them are either burning too much money or they don't have the numbers to justify another round. Or if they do, it's a structured round, a down round. Or again, they just are unable to raise, they have a broken process and they eventually start winding down. So I think you're gonna see this dynamic for the next 18 months or so, but this is not a new dynamic. This is the lagging indicator of what we've been talking about since the regime change of the first half of 2022, is that the markets...... started looking for different things. Instead of growth at all costs, it's been about growth with unit economics and efficiency and the valuations went way down, and there's a lot of companies that no longer qualify and they're getting weeded out. So, this is just-

   15. JCJason Calacanis49:00

       Yeah.

   16. DSDavid Sacks49:00

       ... a delayed reaction to things we already knew.

   17. JCJason Calacanis49:03

       That's the key part, the delayed reaction as well. I'll just note, when a company does shut down, that process typically takes two or three quarters. And for a founder to accept the shutdown, that might take one, two, three quarters as well. So, anything you're seeing in 2023, that might be a shutdown where the employees were all laid off in late 2022, uh, and you see that-

   18. DFDavid Friedberg49:21

       But I mean, I have a, I have-

   19. JCJason Calacanis49:22

       Yeah.

   20. DFDavid Friedberg49:22

       ... a question for you guys. What, what turns this around?

   21. JCJason Calacanis49:25

       I'll tell you what I'm seeing in the early stage. We are seeing many companies come to Founder University and two or three people who wanna build a company who can't get jobs at Google or Stripe, they're not hiring, so we'll see two or three developer teams working on a project and then raising 250, 500K at a five to $12 million valuation, and then very quickly getting to 10 to 50K-

   22. DFDavid Friedberg49:48

       Right.

   23. JCJason Calacanis49:49

       ... in monthly revenue.

   24. DFDavid Friedberg49:49

       But what about all this money that we need to return so that we can recycle and keep doing this job? What, what needs to happen? Sacks, Friedberg, what do you guys think needs to happen to get, to crack? Because, like, the three IPOs we've had have not fared particularly well, and the market just seems to get harder and harder for tech companies, even profitable ones, right? So-

   25. CPChamath Palihapitiya50:13

       Yeah, I mean, I think, I think profitability is key. I think that's the great evolutionary forcing function here. It's like a tale of two world, of two startups. The one startup needs cash for a long period of time and the other one's found a path to profitability. The one that's found a path to profitability, they have an infinite number of options available to them. It might take longer to get public or whatever, but they can wait it out because they don't need money. The one that needs cash continuously and will for a long period of time is really screwed.

   26. DFDavid Friedberg50:41

       What about the multiple of these profitable companies? That seems to have changed materially as well.

   27. JCJason Calacanis50:45

       I, I'll tell you something that's starting to happen as well, Chamath, is that the public markets are looking at their stocks if they're undervalued, and then Dara at Uber is reportedly planning, like, buying back u- upwards of 20% of the Uber shares in the next five years. And then you look at a company like Snap, which is c- majority control with super voting shares, they're still losing three or 400 million a quarter. So y- y- I think Friedberg's exactly right, tale of two cities. Some people refuse. And then if the stock is so cheap, people start buying it back, uh, and, and the f- the freezing of employees and the expenses going down while revenue goes up and earnings increase, I think that's the setup. If you're looking for the setup, I think it's the public market companies showing the path to profitability, buying back stock, and then these small companies not getting big.

   28. DFDavid Friedberg51:29

       I don't understand. How does, how does that, how does that help private companies go public?

   29. JCJason Calacanis51:32

       If the private companies follow suit and they're profitable and they control costs and they... People get greedy looking at how profitable they are as opposed to their 50% growth rate, they start looking at their increasing earnings and how much cash they're throwing off. And I think that's starting to trickle down through the startup ecosystem. People are trying to get to pra- to profitability quickly.

   30. DSDavid Sacks51:52

       I don't know. I mean-
6. 1:09:14 – 1:12:59

   Cruise robotaxi accident update

   1. JCJason Calacanis1:09:14

      I guess. We should do just a quick hit here on this Cruise follow-up story. We had talked earlier about the Cruise accident and, and self-driving. Well, a lot of news has come out about this, gentlemen, that is, um, potentially explosive. As we all know, just to catch everybody up, on October 2nd there was a hit-and-run accident, and this tangentially, uh, included that Cruise vehicle. Uh, the Cruise vehicle, uh, a woman tragically got hit by a car driven by a human. That, that car ran off. That woman got knocked into, uh, in front of a Cruise self-driving car, which then ran her over. Uh, okay. (laughs) California's DMV has suspended Cruise, uh, and their permit because allegedly the company withheld footage of the incident. If you remember, we had a little discussion here about-

   2. DSDavid Sacks1:10:05

      Mm-hmm.

   3. JCJason Calacanis1:10:06

      ... the taxi had rolled over the person.

   4. DSDavid Sacks1:10:08

      Mm-hmm.

   5. JCJason Calacanis1:10:08

      And then we talked about, hey, you know, you're not supposed to move off of the person when we, we did our whole joke about, uh, EMT JCal. Uh, well, it turns out after the AV collision, the Cruise vehicle apparently pulled the woman forward 20 feet. And this has been confirmed now by Cruise. But when Cruise gave that information to the regulatory agency, the California DMV, they didn't show that footage. In other words, they showed just the first half of the footage, and that has gotten their license suspended. So we have, or we're left to interpret, why did Cruise not tell the full truth to the DMV? And now, Friedberg, to your point about society taking risk, now we have allegedly Cruise... I don't know what the most generous way to say this is, but they either omitted or they straight up lied to the California D- uh, DMV, uh, DMV.

   6. DSDavid Sacks1:11:08

      I mean, JCal, if it's true that they lied and were deceptive about the video, then yeah, that's like do not pass Go, go directly to jail time. I mean, that's really bad.

   7. JCJason Calacanis1:11:17

      Yeah.

   8. DSDavid Sacks1:11:18

      One point I made last time was that I didn't think Cruise w- was sophisticated enough tech- or really GM, who's their backer, was sophisticated enough technologically to get this right. And I still maintain that. And so if on top of that they were deceptive about what happened, then that's like the kill shot. One question I have, JCal, is there was an NBC reporter who was on the scene, just happened to be on the scene, and I remember her reporting that Cruise was not responsible. So I'm just wondering like where the disconnect here is between all these various reports.

   9. JCJason Calacanis1:11:53

      I have a theory. Yeah, I have a theory. Which is not responsible for the accident, but then responsible potentially for the subsequent, the dragging of the, the body. So I think that's the, the issue here is that they may be able to claim, "Hey, we had nothing to do with the accident." But then in what happened after the accident, yes, the, the technology failed apparently. Or maybe the technology never took into account what happens if you run somebody over that was rocketed under your car. And maybe that's just a freak accident that we have to get used to that possibility happening. And that could happen with obviously human drivers, so it's just a possibility that that could happen.

   10. CPChamath Palihapitiya1:12:30

       You don't think that, that edge case is hard-coded? (laughs)

   11. JCJason Calacanis1:12:35

       I mean, the edge case of how would the car know there's a person underneath it? I, I don't know that the car-

   12. CPChamath Palihapitiya1:12:40

       No, no, no, but I'm saying you're, you're bringing up something so obvious as to be comical, which is like, of course there has to be some emergency cutoff when there's like some obstruction. Anyway-

   13. JCJason Calacanis1:12:52

       Sure.

   14. CPChamath Palihapitiya1:12:53

       ... let, let's let all the facts come out though

   15. JCJason Calacanis1:12:54

       Yeah, let, uh, I, I think we'll wait for the rest of the facts to come out. We've got, I think, 80% of them here, 90%

7. 1:12:59 – 1:24:47

   Hurricane Otis's rapid progression and the second-order effects on US coastal communities

   1. JCJason Calacanis1:12:59

      of them. But Friedberg, you had told us, uh, in the group chat that Hurricane Otis would, uh, potentially be disastrous for Mexico, and, uh-... turns out you are correct. Uh, 27 people are dead in Mexico, and maybe you could explain to us why this storm is unique, uh, and why, if you think this, that we're seeing more of these, uh, or are we seeing more of these, or, or is the coverage in the media, uh, you know, and the reaction to it getting distorted?

   2. CPChamath Palihapitiya1:13:29

      I don't know about the media coverage. The big story with Hurricane Otis is that it went from being kind of a tropical storm to being a Category 5 hurricane in about six hours, and then it made landfall in Acapulco at a Category 5 hurricane. And no hurricane forecasting models had predicted this, and hurricane forecasting models are what are, you know, typically run off of ensemble models, meaning that there are multiple things that may happen and that those simulations are run on very compute-intensive systems. And there are many, many simulations being run all the time. Every six hours, these simulation runs are done, and then you look at these, and you create a probability of things that may happen. And none of the forecasts had any probability associated with this event happening. It was so out of the bounds of anything we have seen historically that none of the models had any chance ascribed to this tropical storm suddenly evolving into a Category 5 hurricane in six hours and then making landfall on a city with a million people. We can look at pictures, if you guys want, on what happened in Acapulco. It's obviously pretty devastating. There's apparently no power lines standing in the entire region. Here's some photos.

   3. JCJason Calacanis1:14:41

      Oh, God.

   4. CPChamath Palihapitiya1:14:41

      I mean, look at this, like-

   5. JCJason Calacanis1:14:42

      Wow.

   6. CPChamath Palihapitiya1:14:43

      ... 165-mile-an-hour sustained winds. The eyewall went through the, the town. This is a h- a million people, by the way, many of whom live in not concrete-reinforced buildings up against the mountain there. And so the devastation is really extraordinary. But the, the shocking thing is that there was no prep. There was no warnings. There was no alerts. There were a ton of tourists sitting in these hotels. Look at the... I don't know if you have any of the hotel photos, Nick, but it's insane. There are zero windows left in any of the hotels, any of the condos, any of the resorts. They are gone. So imagine you're, you're like in Acapulco. You're drinking beer and tequila, and then you go to sleep, and this thing hits at 1:00 AM as a Category 5 hurricane and destroys everything. There's no power. There's nothing. So if you pull up the first chart, most of the energy that, that is absorbed from the sun ends up in our oceans. So, you know, we talk about atmospheric carbon increasing energy retention, and people can debate that all they want, where the carbon comes from, et cetera, et cetera. At the end of the day, there is energy coming into the Earth from the sun, and that energy is being retained. The vast majority of that energy is retained by the oceans. So the first couple hundred meters of the oceans r- uh, retain north of 90% of the energy, uh, absorbed by Earth. If you go to the next slide... So that results in water temperatures going up. So if you look at, um... This is compared to the, the, uh, 1955 to 2006 average, and you can measure ocean heat content, but ocean heat content has risen fairly linearly since the '90s. And you can kind of see, uh, you know, how much excess of that heat there's-

   7. JCJason Calacanis1:16:20

      Is that correlated to temperature perfectly or no?

   8. CPChamath Palihapitiya1:16:22

      So this is ocean temperatures over time. Uh, so here you can see 2023. And so this shows you, um, the average sea surface temperature. So 2023 has been such an outlier, and this is also because of these, um, El Niño phenomena, but the, there's obviously, over time, if you were to look at the average sea surface temperature trend, it's rising linearly with heat content over time. And in particular, in 2023, there's an extraordinary rise in temperature. So off the coast of Acapulco, the sea surface temperature was 88 degrees Fahrenheit. I mean, it was so hot. The water... Like, imagine an 80... That's like a David Sacks swimming pool, it's so warm-

   9. JCJason Calacanis1:16:59

      Yeah. Yeah.

   10. CPChamath Palihapitiya1:16:59

       ... um, you know, going down many meters in the ocean. So when a storm goes over that level of heat, it takes heat out of the ocean, and that heat coming out of the ocean increases the wind speed, and then it, the wind speed pulls more heat out of the ocean. And that's how these things become escalatory until they hit something cold, like a mountain or the, the, the land. The land is much cooler, and then these things start to dissipate and break apart. And that's why these things form over the ocean. So the point is no models predicted this, and that's because we've never seen this level of energy stored in the oceans before. And the model training has never really accounted for this sort of extreme condition. This extreme condition, obviously, is, is what some folks are arguing is becoming more frequent. So it brings into question, you know, the, this, this, this, um, ability for us to actually forecast. The, the rise in the temperature over time is driving this, um, and then, uh, w- From an economic perspective, this is the, one of the key points I wanted to make. When an event like this happens, there's a market called the reinsurance market, and the reinsurance market sets the price for covering insurance companies against a big loss where you can lose a ton of stuff at once. Insurance companies like to write insurance policies, like car insurance is a great business, because there's never one big event that causes everyone to get in an accident on the same day. But with property insurance, a hurricane can cause everyone to lose on the same day. So insurance companies need to buy reinsurance. And then there's these big reinsurance companies, and they have pools of capital, and there's capital markets involved and bonds that are sold to protect reinsurance. So there's, you know, hundreds of billions of m- of dollars, trillion-dollar-plus, in reinsurance. When an event like this happens, those reinsurance markets take a loss, and the loss causes them to raise rates significantly. And it's... And when that happens, the reinsurance markets harden is what they say, and then rates go up next year for reinsurance. And then the insurance companies pass those rates on to consumers and to property developers and to the people that have mortgages, and the more of these events happen, even though it just happened in Acapulco, it impacts insurance rates everywhere. So as we see the events like what happened in Maui, what happened in Acapulco, what happened in Miami, you can start to see more of these things start to happen at the same time. The cost for insuring property goes up.... and that starts to make this whole system very difficult to maintain because if the cost for insurance doubles or triples and people can't really afford it, but the mortgages require that they have it in all of these high-risk coastal cities and coastal areas, that's where an economic hit either has to be absorbed by the federal government or...

Episode duration: 1:43:40