E161: US strikes Houthis, market instability, Q1 rate cuts in doubt, Carta's major mishap, DEI

Jason Calacanis 0:00 Nick, can you cue the tape?

David Friedberg 0:01 This is now the worst form of a sho- oh my God.

Chamath Palihapitiya 0:06 (laughs)

David Friedberg 0:06 I, uh-

Jason Calacanis 0:07 I mean the fact that he hit the rim is a miracle. (laughs)

David Friedberg 0:10 ...the, the most unaethle- what is? Oh my God. I have to-

Jason Calacanis 0:13 Oh! Oh! Look at- oh!

David Friedberg 0:13 I wish we could get slow motion on that. Oh. Do the slow mo.

Chamath Palihapitiya 0:17 It's like the ball, the ball is just moving forward.

Jason Calacanis 0:20 Start the slow mo.

David Friedberg 0:20 Now look at his hand. Look at the right hand. Look, oh! Look at- oh! (laughs)

Jason Calacanis 0:22 Look at that. He let it- wh- what is that about?

David Sacks 0:25 One-handed.

David Friedberg 0:27 It's-

Jason Calacanis 0:27 I mean that has nothing to do with basketball.

David Friedberg 0:30 It's the most unnatural- Oh. ... basketball/athletic movement I've seen. Come on. It wasn't that bad.

Jason Calacanis 0:38 Mm, I mean the lean forward too is just-

David Friedberg 0:40 You know the, the lean forward, the kind of like sassy jump.

Jason Calacanis 0:44 (laughs)

David Friedberg 0:44 You know, the sassy jump.

Jason Calacanis 0:46 What are you saying when you say sassy? (laughs)

David Friedberg 0:47 The little sashay. He little sashayed on the side there. It's nice.

Chamath Palihapitiya 0:52 I'm going all in. Let your winners ride.

Jason Calacanis 0:55 Rain Man David Sachs.

Chamath Palihapitiya 0:58 I'm going all in. And I said- We open sourced it to the fans and they've just gone crazy with it.

David Friedberg 1:04 Love you bet, Heidi.

Jason Calacanis 1:05 Queen of Quinoa.

Chamath Palihapitiya 1:06 I'm going all in.

Jason Calacanis 1:08 All right, everybody. Welcome to the All In Podcast with me again, the Chairman Dictator, Chamath Palihapitiya, David Freiberg, the Sultan of Science, and The Rain Man himself, David Sachs.

Jason Calacanis 1:21 Our first topic will go to our war correspondent. The U.S. and its allies have struck Houthi targets in Yemen. Sachs?

David Sacks 1:29 Well, we talked about this two weeks ago on the show and we talked about it as a escalatory risk in the Middle East back then, and I think that that is playing out now. We fired, I don't know, maybe 100 rockets and missiles at Yemen last night. The purpose of the strike is to restore deterrence and, I guess, try and prevent the Houthis from attacking commercial shipping in the Red Sea. But that deterrence is not working. I mean, there's already a new attack by the Houthis this morning of a commercial ship in the Red Sea. So, I don't think this is gonna have any impact other than to escalate the conflict in the Middle East and put us on a path to war with Iran, which is really where the Neocons want to take us. You've heard, obviously, the warmongers like Lindsey Graham are calling for that, but even Speaker Mike Johnson is talking about that. I think that's where this is all headed is a larger war in the Middle East that features the U.S. and Israel going to war with Iran. I think we should all be very concerned about that actually.

David Friedberg 2:34 But yeah, I mean, you have to be fair. It's not just, it's not just the U.S., right? It's now the U.S., the UK, Israel, Qatar, UAE, and Saudi against the Houthi rebels. That's a big alliance and you've got to think that Iran will think very carefully about how close they want to get to the Houthis in the middle of all of this because that's a, that's a huge armada, if you will, of countries that I don't think you really want to cross as a group.

David Sacks 3:04 Well, I think S- Saudi Arabia and UAE are, are playing this very carefully, I think. They did not participate in the strikes. They did allow the U.S. to fly overhead or to use its territory, but they released a statement calling for restraint and de-escalation. So I think they're very nervous about this blowing up into a wider regional war. I don't think they want that. The allies who participated in the, the campaign of airstrikes were UK, Australia, Canada, Netherlands, and Bahrain. But I don't think they actually did anything. I don't think they contributed any assets. They just provided their names to this operation and provided some diplomatic cover.

Jason Calacanis 3:45 Freiberg, any thoughts?

David Friedberg 3:46 Well, Sachs, you posted a comment on Twitter, which I wanted to respond to where you said China has the largest shipping volume through the Red Sea and they're staying out of this conflict, letting the U.S. do, do the dirty work. But the Houthis didn't attack Chinese ships. They specifically attacked Western ships. Isn't that correct? I mean, this is a very targeted disruptive event that the Houthis have been undertaking for some time now and they're using these very interesting tactics with drones that can be very destructive and very hard to block, and doing it not at Chinese ships, but at a very targeted enemy.

David Sacks 4:22 Right. Well, what the Houthis have said is that they're only attacking ships that are either Israeli or going to Israel, but-

David Friedberg 4:28 Right. But they're all Western ships.

David Sacks 4:29 ... in reality, they've, they've attacked, they've attacked a much wider range than that.

David Friedberg 4:33 But not Chinese.

David Sacks 4:34 Um, it, it may be true that they haven't attacked ships that are declaring themselves to be Chinese ships or Russian ships. However, there are more Chinese shipping containers on all the ships that are going through the Red Sea and the Suez Canal than any other country. So, there's no question that if we're talking about the disruption of global trade, this is gonna have a big impact on Chinese trade, whether it's on Chinese ships or not.

David Friedberg 5:01 Or it could benefit them because they can get through that shipping lane and the rest cannot.

David Sacks 5:05 Their own ships can get through, but foreign ships, European ships that have Chinese shipping containers on them are not getting through.

David Friedberg 5:12 Yeah.

David Sacks 5:12 So their trade is still getting disrupted.

David Friedberg 5:15 And they need that.

David Sacks 5:15 Nevertheless, they don't feel the need to engage in this militaristic response or participate in that.

David Friedberg 5:21 So in terms of understanding implications of the escalation in this conflict, let's just quickly talk about number one, I'm assuming shipping prices are gonna go up, freight prices are gonna go up. But hold on a second. We talked about this with Ryan. Remember the question that I asked him? This is really an issue for Europe. It's not an issue for the United States because there are alternative routes. You can go through the Pacific and you can go down through the bottom of, of Africa, right? And all that does is add like a 5 or 10% increase. So, what we're really debating is what is the risk of inflation and a backup of goods and shipping rates into Europe? Yeah. And this is why I don't understand why America needs to even get involved. I understand why the Netherlands and the UK and France and all these folks need to send resources to unclog this. That makes a lot of sense.... but I don't see why the U.S. needs to be involved. Other than providing moral support or logistical support, what is, what is the point?

David Sacks 6:18 Well, Chamath, this is exactly my point, is the number one type of trade that's going through the Red Sea are shipping containers from China going to European ports.

David Friedberg 6:28 Right.

David Sacks 6:29 And as a result of what the Houthis are doing is having to go around the Horn of Africa, it's adding two or three weeks to the trip, and it's raising the cost of a shipping container from China from say $1,500 to-

David Friedberg 6:41 Okay. So then-

David Sacks 6:41 ... $3,000. It's Europe and China who are impacted the most, but for some reason, it's the U.S. that decides it has to take the lead in doing this. And the problem is that, first of all, the action is futile. I mean, the Houthis have been at war on and off with the Saudis for a decade and the Saudis have been backed by Western weapons and we have not been able to defeat the Houthis. So this missile strike last night is not gonna deter them, it's not gonna stop them. They're very determined, very tough fighters. Second, they are gonna be looking for retaliation. They're gonna be looking for blowback. And Cham- to, Chamath, to your point, they're not gonna be looking for retaliation against China or Europe, they're gonna be looking at it against the United States. So we're incurring this cost and risk onto ourselves.

David Friedberg 7:28 Okay. So, so let, let me put this question to you then. We have no obvious economic incentive to get involved because we can sustain our economy through different shipping ports that at best raise rates 5 or 10%. Right? We can absorb that in the economy. 100% which could drive inflation is a European problem. So there's no economic incentive necessarily to get involved. So what is the incentive? It feels like, not to play conspiracy theorist, but like a wag the dog moment, a- another distraction to add to the plate. What do you think about that line of thinking?

David Sacks 8:05 I tweeted something just like that. This does feel... It's a wag the dog in the sense that the Biden administration was looking-

David Friedberg 8:13 Do you want to explain the reference for folks that may not get it?

David Sacks 8:14 Yeah. There's a movie called Wag the Dog that came out in the early '90s where the president is up for re-election and there's a horrible scandal that's about to come out, like a Monica Lewinsky type scandal. This is before Monica Lewinsky, by the way, but, um, it really was sort of one of those movies that kind of predicted the future. But in any event, the president's trying to avoid this Monica Lewinsky type scandal, and so the political aides and advisors decide the way to do that is to start a war. But they don't start a real war, they basically manufacture a fake war on a sound stage in a, in a movie studio. And it's pretty hilarious how they keep the whole thing going. David Mamet, who's a brilliant, brilliant writer, wrote that script. But this movie came out right around the time of the Lewinsky scandal with Clinton, and so therefore, it took on this larger political and cultural significance.

David Friedberg 9:07 Yeah, it's been used as kind of a-

David Sacks 9:07 So, yeah. So wag the dog is, you know, you basically start a war because of the political benefits as opposed to the real necessity of going to war. And I think you can make that accusation here, Chamath, because I think that the Biden administration was looking impotent. I mean, they were basically telling the Houthis to stop, they were pleading with them to stop interfering with international shipping. The Houthis weren't listening. By the way, the reason why the Houthis are doing this is they're doing it in solidarity with the Palestinians in Gaza. They've demanded that the Israeli invasion of Gaza stop and humanitarian aid be let in and they're not gonna stop interfering with global trade until that happens. So that's the Houthis' position. The Biden administration's been telling them to stop and b- I think that they w- were looking increasingly feckless and impotent, and that's why they did this strike.

David Friedberg 9:56 Well, is it, is it that?

David Sacks 9:56 The problem, the problem is that the strike's not gonna have any impact. And so, so what- what- what's the point?

David Friedberg 10:02 Well, is it that or is it that... I think if you take the wag the dog analogy to the limit, I think maybe a different interpretation, I'm not saying that they did this, but a different interpretation of that analogy would be that they are struggling domestically, and I think JCal tweeted this, but if you look at the polls and you look at Dean Phillips all of a sudden and you look at what's happening on the Republican side, there's so much activity and momentum, frankly, for non-Biden candidates all a- all across the board that that would be the most wag the dog explanation, in my opinion, which is like, to distract folks from the domestic malaise by pointing some place far away and saying, "We're doing something very righteous here, let's all get on the same page and support us."

Jason Calacanis 10:49 How does that logically make sense, Chamath, if the U.S. is against wars and people are tired of wars? Like, what would be the... That's the only problem I have with the logic of the wag the dog theory is-

David Sacks 11:00 Is, is America against wars?

David Friedberg 11:01 ... nobody wants wars... Who's against wars, Jason?

Jason Calacanis 11:04 The American people have been very much against starting foreign wars. We've talked about it here, but-

David Friedberg 11:09 All right. But they don't... So let's talk about the people that run the country.

Jason Calacanis 11:12 No, I know that.

David Friedberg 11:12 Are they against wars?

Jason Calacanis 11:12 So what you're saying, they're doing it... The logic here is wag the dog is to curry favor. Sachs, you said they're rallying, this is to rally the American people around like a patriotic cause. But this isn't like a, you know, O- 9/11 situation where Bush got a lot of credibility for saying, "Hey, we're gonna go get these terrorists." Americans don't want more wars right now. The polling is very specific on that. So then I guess, Sachs, what is the w- the logic there to wag the dog if this is something American people don't want?

David Sacks 11:43 Well, I, I think you're right, Jason, in the sense that the American people are exhausted by wars, especially Middle Eastern wars. We've just gotten out of two decades of endless forever wars in the Middle East and I don't think the majority of the American people want to get back in. So I think you're right on that level and it's true that if you were to poll the American people and ask them, "Are you in favor of getting in more wars?" they would say no. The problem is that with every war, the mainstream media starts propagandizing for the wars and they'll basically demonize whoever it is that we're gonna go to war with and explaining why-They're a huge threat, they'll engage in threat inflation, and so the American people end up supporting it. So we're against war in the abstract but in every particular case, we end up supporting it. That's what happened with Ukraine. It's even happening right now. If you look at polling for this Houthi conflict, I think most Americans believe it's a good thing to strike the Houthis. So yeah, they're against it in the abstract, but in each particular case, the media is able to manufacture consent for the US involvement.

Jason Calacanis 12:48 So just to challenge that-

David Sacks 12:50 Yeah.

Jason Calacanis 12:50 ... as well, so now our theory is, or your theory is, the media plus the Biden administration are in cahoots to wag the dog, create this support of a war in order to distract from domestic issues, in order to curry favor with the American public that doesn't really want more wars. That's where I'm saying, like, I think wag the dog might have been something 20 years ago, like you're saying, that could work as a technique, but I- I- I can't imagine anybody would want to do more military action at this point in time when the American public is exhausted from it.

David Sacks 13:29 Well, I, I Tweet-

Jason Calacanis 13:29 Which is what you've said for the last six months on the spot.

David Sacks 13:32 I tweeted that, yeah.

Jason Calacanis 13:32 Yeah.

David Sacks 13:32 Look, I, I, I tweeted-

Jason Calacanis 13:33 Sorry.

David Sacks 13:33 ... exactly that sentiment, is that I don't think wagging the dog is gonna work. I think there'll be a short-term rallying around the flag effect, but I think that overall, if this conflict is still going on in November, it's gonna weaken Biden by making him look like a president who's lost control of events. So I, I agree with you that ultimately, the perpetuation of this conflict is not ultimately in Biden's interest. Now, nonetheless, it may factor into their political calculation, that in the short term, they think this makes them look good.

Jason Calacanis 14:06 That would seem super incompetent as, like, a, a, a political strategy to me, but I'm not a political expert.

David Sacks 14:11 Well, I mean, this is not... I mean, despite the fact that this administration claim to be the, the foreign policy grown-ups, they haven't shown a lot of competence. They couldn't even find Lloyd Austin, who's the Secretary of Defense for five days.

Jason Calacanis 14:21 (laughs) That's not what-

David Sacks 14:21 No one knew where he was.

14:22 That's not what happened. (laughs)

14:25 No, he checked into the hospital for a procedure and no one could find him for several days. And there was an article, I think on CNN, talking about how he was managing this Houthi strike from his hospital bed.

Jason Calacanis 14:36 Yeah, that was weird.

David Sacks 14:37 Now, I hope, I hope the man's okay. I don't want, you know, but, um...

14:39 He's got, he's got prostate cancer.

14:41 I know. I, it's, it's, that's sad, but...

14:43 And he had a UTI, he had a UTI. That's why he was in the hospital.

14:46 But fair enough, but no one in the White House, the White House couldn't find him for a couple of days.

Jason Calacanis 14:50 Is that true they couldn't find him?

David Sacks 14:51 Yes.

14:51 I mean, having a UTI is a very benign kind of thing, right?

Jason Calacanis 14:54 Well, he had, he had a prostatectomy-

David Sacks 14:57 Ah.

Jason Calacanis 14:57 ... and then he got discharged from the hospital. And somewhere along the way, he got a UTI, which was-

David Sacks 15:04 Ah.

Jason Calacanis 15:04 ... severe apparently.

David Sacks 15:05 Oh, okay.

Jason Calacanis 15:06 Went back to Walter Reed, and yeah, in those three or four days, the handoff of power to his deputy happened, she was on vacation on a beach somewhere. (laughs)

David Sacks 15:17 (laughs)

Jason Calacanis 15:18 So and you're right, the... And the problem was that the other person, the chief of staff, had the flu, so they couldn't escalate to the White House. So it was like a comedy of errors, but I, I don't think it was anything. But anyways.

David Sacks 15:30 I mean, imagine if you were, like, a C-level executive at a company and you're gonna be out of the office for a few days and unreachable. You would set up a clear chain of command, you'd have a deputy who the CEO could get ahold of if, if necessary. In this case, you've got the Secretary of Defense, who, if the United States was attacked in some way, is part of the chain of command. The president would need that person in the situation room. So the fact that they couldn't find him for a couple of days is really, I think, unforgivable. How does that even happen?

Jason Calacanis 16:02 Is that really true that they couldn't find him? Like, they literally could not call-

David Sacks 16:06 They didn't know where he was for a couple of days. This was widely reported.

Jason Calacanis 16:08 But they, but they couldn't call him on his cellphone or his chief of staff or the eight people who-

David Sacks 16:13 Nobody knew where he was.

Jason Calacanis 16:15 Ah, wow. Yeah. Okay.

David Sacks 16:18 All right. Very good.

Jason Calacanis 16:20 Ha- having kept up on, on, on the details of his UTI and his cancer, I hope he's okay.

Jason Calacanis 16:24 So, uh, segueing into markets, the likelihood of a Q1 rate cut is not looking good. We had a slightly hotter than expected December CPI interest rates, hit a 22-year high in July, as everybody knows, when the fed raised the range from 5.25 to 5.5, but they've left rates unchanged, if you haven't been following it, uh, as inflation has cooled. But in December, the CPI rose 3.4% from a year earlier. That was just a slight tick above, and of course, markets are wondering, is this gonna be a, a glide path into a soft landing or could it be choppy going forward? Freeburg, higher for longer interest rates. You think that's still gonna be the case? And what are your thoughts going into the new year?

David Sacks 17:14 Well, Larry Summers put out a note saying that he thinks that the rates are gonna stay higher than the market is predicting based on the yield curve right now. So I think the market's currently saying no cuts in March and high probability of cuts in June, but some folks like Larry are saying might be longer because inflation is very sticky. And if you look at the breakdown on the drivers of inflation, you start to think about what's the underlying business activity that's going on. Like, car insurance went up by 20%, which was one of the key drivers. And car insurance has always been this lagging indicator, but it does ultimately drive costs up later. The reason car insurance rates go up is because the cost to repair a car goes up and the cost for medical care goes up. When that happens, the insurance companies actually have to file with state regulators to get approval to raise their rates. And it can take over a year for the regulators to then approve those raising of rates. So by the time the rates get raised-... the other factors have maybe leveled out, but you're still gonna have some elements of, uh, costs that are gonna continue to climb for some period of time after you get the core engine tuned down. So these are the sorts of things that I think we're seeing in the, the current, uh, CPI data is that there are some of these lagging effects of an overheated economy or overstimulated economy that are now starting to play through. And so there's a number of these. It's not just car insurance, but there's a lot of things that are gonna linger for a while and they're going to be very hard to work their way through the system very quickly. And as a result, it may be the case that rates are going to need to stay higher for longer.

David Friedberg 18:58 I think the thing with inflation that is worth noting is that a couple of things are true at the same time, which I think is interesting. I think we were the ones in May of '21 that started getting very antsy around inflation, and we started to look at the five and ten-year breakevens. Do you guys remember that?

David Sacks 19:17 Mm-hmm.

David Friedberg 19:17 We would, like, look at that chart a lot, and I think it was very predictive. We also used to look at the future oil curve. You know, not that we're macro economists, but I think it's it's useful if average everyday people can have a few things to look at. If you look at those things today, it tells you the same picture, which is inflation has cooled. We're going through the last kind of, like, throes of some of the random variables still being a little sticky. The broad trend is down. I think it's indisputable. At the same time, even with the conflagrations in the Middle East, if you look at what people think about the future price of oil, it's also down. Oil futures are, I think, about 5% to 10%. Future prices are about 5% to 10% lower than spot right now, for whatever that's worth. But the third thing, which I think is important, is we've now started to see folks come back from the new year and start to imp- effect some pretty big layoffs, and they're across industries, right? Citibank today just announced 20,000 layoffs. That's a huge amount of people that are going to lose their jobs. So what does all of this mean? It's that I think that people expect that as inflation contracts, the money supply will expand, but demand has yet to reset properly. So that's the last thing, and I think Friedberg's mentioned this a bunch. Consumer spending has always been crazy, people living on credit, all of this stuff. That is now finally, I think, the last thing that has to get sorted out. So in the absence of demand, back to the way you started, Jason, companies will cut expenses in order to maintain profitability because they don't really want to cut prices unless their product really sucks.

Jason Calacanis 21:06 Yeah, and just to note that Citigroup, as you mentioned, 20,000 cuts by 2026. Google also laid off hundreds of people, Amazon, hundreds of people. Discord laid off 17%, and there's a viral video going around of a woman laid off by Cloudflare, you know, who was only on the team for, like, six months or something, or five months. And it does seem like, yeah, firing people before the holidays, laying them off is considered, you know, do it in the fourth quarter. So maybe there was some, some, uh, backed-up layoffs that people decided to do into this year. But it certainly feels like sacked people are... And you said this, I think, in the predictions episode or the recap episode, hey, you know, maybe it's still gonna be a little bit of turbulence and the soft landing isn't guaranteed. Maybe you could expand on that.

David Sacks 21:53 Yeah, my prediction for the year was bumpy landing.

Jason Calacanis 21:57 Hmm.

David Sacks 21:57 I thought soft landing was a little too optimistic and I also thought that this big stock market rally that we had in November, December was too much, too soon. The market, starting in November, started pricing in about 1.5% of rate cuts this year, believing that the inflation problem had been licked. And now what we're seeing is, first of all, you had a slightly hotter than expected inflation report, and now we have this escalating situation in Yemen, where this war in the Middle East might expand. And just so you understand, I mean, the Houthis have already said that if the United States attacks them and uses Saudi or UAE airspace to do it, that they will consider themselves at war with Saudi Arabia and UAE, and that they will try to do things like light the Saudi oil fields on fire. I don't think they have the capability to do that necessarily, but it's an indication that things are very volatile. Another thing I think we're likely to see in the Middle East is continued attacks on US military bases in Iraq and Syria. So that whole region is a powder keg, and if it develops into a wider regional war, then I think you could see an oil shock. And if there's an oil shock, I think you can kiss rate cuts goodbye because that's going to percolate through the whole economy and have a big impact on inflation. So I just think that there's a lot of downside to these very optimistic projections that we're going to get these huge rate cuts. It might happen, but I just see a lot of risk.

Jason Calacanis 23:27 Yeah. Friedberg, do you think these oil shocks are here for the long term or a possibility? You've been talking a lot about alternative energy, nuclear, obviously. Uh, so is, is... And the US has become a net exporter of oil. So do you think this risk of oil disruption from the Middle East is with us for the long term or do you think that's waning now?

David Sacks 23:52 There's definitely structural risk because you have a supply chain that can get disrupted in a number of ways and limited alternative options. If you look at the chart I just shared, it's the US Strategic Petroleum Reserve. So we have about 350 million barrels in the, uh, Strategic Petroleum Reserve today. That's down from, call it early '21 when we were at 650 million barrels.And, you know, it was pretty much at that level for decades, after the buildup leading up to 1990. We haven't been at a level this low in the Strategic Petroleum Reserve since 1983. And so, there's not a lot of levers for the government to intervene, uh, to support the supply as there may have been in the last couple of years in the case of some supply shock because of a conflict that arises in a major oil-producing region.

Jason Calacanis 24:55 It's a really interesting chart, isn't it? Because that was after the oil crisis of the '70s, and you look at how long it took to build it up-

David Sacks 25:01 Yeah.

Jason Calacanis 25:01 ... and how large we built it. It's a really fasc- I've never seen that chart before, but if you look at the, you know... I don't know if you guys remember the oil lines. Did you have them in Canada, Chamath? Where y- I remember in Brooklyn, you had an even number/odd number license plate thing if you wanted to get gas. You know, some days was the even number, some days was the odd number. I remember my parents getting online for gas and waiting for two hours or three hours to get gas.

David Sacks 25:24 Yeah. By the way, I'll say this is not a real cost today that we're experiencing, but as Sax is pointing out, there's a number of ways that this can become a real cost. I was in Austin this week, and the thing that shocked me the most was how cheap gas was (laughs) at the gas station. You can get gas for, like, two bucks and 25 cents a gallon. It's pretty awesome.

Jason Calacanis 25:43 It's like $6 when you're in Lake To- Lake Tahoe (laughs) .

David Sacks 25:46 Yeah.

25:46 Just so everyone understands how the SPR got depleted, last year when inflation was the top story, you know, on the front page of every newspaper and gas prices were hitting, what, seven or eight dollars, the administration started releasing crude from the SPR to try and bring the price down. And they did that for about a year, and they were basically subsidizing the price of oil. Now, that's why our stockpile is low, and that was a really great political strategy. But if we end up in a real crisis, we're gonna have less dry powder to deal with it. So, you know, we could have a perfect storm of things coming together here, where at precisely the time we end up getting involved in a big war in the Middle East, our tools to mitigate the oil shock that would create have been reduced by what the administration's done over the past year. Now, I don't know that that's gonna happen. I mean, I still think we're several steps away from a regional war. But you look at how many fronts now we have conflict in the Middle East. There's about five different fronts where there's conflict. You've obviously got Israel's war in Gaza. You've got Hezbollah in the north basically firing rockets. You've got US bases in Syria and Iraq coming under attack, and now we have the US striking Yemen. So, there's just so many ways that this could spiral out of control.

Jason Calacanis 27:12 Isn't the SPR designed so that when we have an economic crisis like this to use it? Like, I mean, it's...

David Friedberg 27:16 Yeah, you're, uh, the, the Biden administration does a lot to dip it. By the way, you have to give credit to the Biden administration in one, in one form. It's not necessarily skill per se, but when you look at the SPR depletion, they were selling at incredible moments in the market. And the Energy Department, I actua- I think they, they just announced that they're buying another, you know, four or eight billion dollars, uh, to replenish the SPR. So, they'll be doing that now. But they were selling, if you look at these price points here, they were selling when prices were $80 and $90 a barrel, and now they're buying it back at $70. So, uh, at least the United States can take some solace in the fact that we ARBed out (laughs) a few billion dollars for Treasury.

Jason Calacanis 27:59 I wonder, uh, how the SPR relates to consumption. You know, we see this chart, but it's in the number of barrels, right, 350 million barrels or something like that. Is that what the chart says? And then it peaked at 6 or 700,000. I wonder what it needs to be, Chamath or Friedberg, on a, as a percentage of our consumption as more EVs hit the market, right, and as the number of miles per gallon goes up. So, I, I couldn't find a chart for that. I tried to find it. If anybody in the audience knows the SPR in relation to consumption, that would be a very important chart, no?

David Friedberg 28:32 I think they're pretty independent, Jason.

Jason Calacanis 28:34 How so? Like, we just build it up independent of what we need?

David Friedberg 28:38 No, the, the Strategic Petroleum Reserve is, is essentially that. It's, it's not meant to be something that's, that's meant to book end usage. You know, if in a highly functioning market, there's theoretically an infinite amount of oil that's available. And so if there's more consumption, you'll be able to find more oil. You'll just have to pay a different price for it. This SPR is meant to be used in very different kinds of situations. This-

Jason Calacanis 29:03 Like a war.

David Friedberg 29:03 ... is interesting.

Jason Calacanis 29:03 Yeah, right, like when there's a disruption.

David Friedberg 29:05 Right.

Jason Calacanis 29:05 When, when there's an acute disruption.

David Sacks 29:07 It's supposed to be break glass in case of emergency.

David Friedberg 29:09 Yeah, exactly. But-

David Sacks 29:10 It's a piggy bank.

Jason Calacanis 29:10 But how many days is it supposed to last-

David Sacks 29:12 It's a piggy bank.

Jason Calacanis 29:12 ... is what I'm sort of getting at.

David Friedberg 29:13 Piggy bank.

Jason Calacanis 29:13 Like, I, that's what I wonder, because over time, are we consuming more oil now as a country, or are we consuming less? I would think consuming less.

David Friedberg 29:20 We're consuming more, but, but the thing you have to keep in mind is that even in an acute shock, what, you can't just look at the SPR because we have now domestic oil capability.

Jason Calacanis 29:30 Right.

David Friedberg 29:30 And a lot of that developed under two presidents, Obama and Trump. And both of them deserve a lot of credit because we have a capability now to be self-sufficient, and we are a net exporter because of the work that happened-

Jason Calacanis 29:44 Nat gas.

David Friedberg 29:44 ... during that time. Yeah, nat gas.

David Friedberg 29:46 Oh my gosh, do you guys see all of this, uh, mishigas with Carta this week?

Jason Calacanis 29:50 (laughs)

David Friedberg 29:50 Crazy, huh?

Jason Calacanis 29:51 Absolutely. Uh, actually it's on the docket. So, those of you who don't know, Carta is cap table software. If you don't know what the cap in cap table is, uh, which many of you might not, it stands for capitalization. What is it? It's a Google or an Excel sheet that says who owns the number of shares in a company. This gets very complex in private companies, and they've made quite a business out of it.

David Friedberg 30:11 Wait, wait, wait, can I pause you there?

Jason Calacanis 30:12 Yeah.

David Friedberg 30:13 There, there was a lot of comments that said exactly that, "It gets very complicated." I apologize. Uh, I've, I've owned equity in companies for 20 years. What the hell is "exactly complicated"?

Jason Calacanis 30:23 Well-

David Friedberg 30:23 I don't understand that statement. I'm not, I'm not directing it at you, Jason.

Jason Calacanis 30:26 Yeah, yeah.

David Friedberg 30:27 But I want...

Jason Calacanis 30:27 I can tell you, yeah.

David Friedberg 30:28 'Cause I, I feel like that is, like, some...... BS statement.

Jason Calacanis 30:33 Yeah, it's not. The thing is, you as acting as a price round individual in a lot of these cases, it was very simple to do a price round. But when you inserted SAFEs into this, you know, a simple agreement for future equity that Y Combinator created and you put capital, uh, um, convertible notes into this, founders started doing, like, dozens of these, Chamath. And at the early stages, the cleanup work and understanding how many shares people owned, especially with-

David Friedberg 31:01 No, but J-Cal, what I'm saying is, what, like... Okay, tell, may, let me stop. Ho- ho- let me ask it a different way.

David Sacks 31:06 Yeah, sure.

David Friedberg 31:07 We did this with spreadsheets.

David Sacks 31:09 Let me answer your question.

David Friedberg 31:10 Okay.

David Sacks 31:11 So, in a private company, let's say a company issues options to an employee and they don't have a good record of that. The employee executes the options, they now believe that they own shares. Unlike in a public company, where there's a broker of record, every share is registered in a public company. You know who owns the shares, you know what broker is holding those shares, and every share is traded through a public exchange. So there's a record of every transaction that takes place with every share in a public company. In a private company, there's no independent legal regulator that tracks all the shares. So you could issue options to an employee and forget that you did that, put the document in a, in a drawer, and the employee shows up five years later and they're like, "Wait-"

David Friedberg 31:52 I get it. There's not-

David Sacks 31:53 Or I, I, I've experienced this. I've had advisors show up, be like, "Look, here's my advisory agreement. I was given options."

David Friedberg 31:58 I get it.

David Sacks 31:58 "I was given options."

David Friedberg 31:58 But, but, but sir, I'm asking a different question. You're, you're saying something. Great, I get that.

David Sacks 32:02 I'll tell you what I think the killer feature was.

David Friedberg 32:04 Why is that complicated to implement in software? I don't understand.

David Sacks 32:07 I, I'll tell you. I, I, I think the killer feature for Carta, it was called eShares back then, was getting the shareholder to sign for their stock certificates. So to Freidberg's point, in the old world, where it was all done by email and a spreadsheet, they would literally have to send you a paper stock certificate-

32:23 Yeah.

32:23 ... that you put in a file cabinet somewhere.

32:24 And if you lost it, you had to sign a document-

32:26 And the thing that-

32:26 ... si- with, with, uh, lawyers saying, "Oh, I lost my, my certificate. I promise you I lost it."

32:31 Right.

32:31 All that sort of stuff.

32:31 So I, I think the killer feature was digitizing the stock certificates and then you would sign for them using, like, an e-signature, you know, on Carta. And they would just keep it for you.

David Friedberg 32:42 No, I get it. I'm not saying that it's... I'm not, I'm not debating the value, you guys.

David Sacks 32:45 But are you-

David Friedberg 32:45 The complexity.

David Sacks 32:45 You're saying why is the software complicated? Yeah, why is the software complicated?

David Friedberg 32:48 This is not complicated. Nothing you guys have said is complicated.

David Sacks 32:50 No, I don't think it's super complicated but, but, but what happened was, 'cause I remember when, like, the market tipped, right? Is I got one email from a company that was using eShares back then and I would just do the digital signature and I started getting a few more and a few more. Pretty soon, there was a network effect. Like, I don't wanna have to wonder where my digital stock certificates are. I just know that they're all at Carta. That's very convenient for me as an investor. I think it's very convenient for the company to be able to manage all this stuff digitally. So look, I mean, DocuSign is not a complicated technology either and that is, what, a multi-billion dollar company? 'Cause there's a very strong network effect. You don't wanna have to have all of your signatures at a whole bunch of different companies. So I think that's how it kind of got off to the races and then since then, they've been able to add more workflows, they've been able to add fund management. They've been able to add a number of things to make it stickier and more feature-rich. And it's not that expensive. It's like 10 grand a year-

33:48 Well-

33:48 ... or something like that.

Jason Calacanis 33:49 ... it's kind of getting very expensive for startups. We're talking-

David Sacks 33:52 10 grand a year is, is expensive?

Jason Calacanis 33:54 I mean, for a seed-stage startup, it's a lot. And then we invested in a company called Cake Equity that's doing it for, like, $1,000 a year. To Chamath's point, you tweeted, "Why can't this be $1,000 a year?" Go to Cake Equity, you'll see.

David Friedberg 34:05 Well, can we, can we just go to my tweet? Like, I was confused by all of this stuff. So-

Jason Calacanis 34:10 But we haven't even gotten to the story yet.

David Friedberg 34:11 Oh.

Jason Calacanis 34:11 So just... Sorry, Jason, go ahead.

David Sacks 34:12 Yeah.

David Friedberg 34:12 Yeah, yeah, sorry.

Jason Calacanis 34:12 Yeah, it's okay.

34:13 So anyway, what you're hearing is this software is very integrated into startup culture. We all have a lot of opinions on it because the cap table is where all the value is recorded. The cap tables have gotten much more complicated, but this is not like building the TikTok algorithm or ChatGPT. To be clear, to Chamath's point, this is not really hard software to build. So correct on that. And Sachs, correct to your point, it's super convenient if everybody uses the same platform and for a series A, B, C company, spending $10,000, $20,000 a year on this is not that big of a deal, uh, although there are cheaper options. But-

David Sacks 34:48 And these VCs and investors use it too, to track their portfolios.

Jason Calacanis 34:52 Absolutely. And so-

David Sacks 34:53 It grew from one to the other, just to be clear. So I mean, first, companies started using them for their cap tables. Then they got into the fund management business. So if you were a fund, you were receiving all of your stock certificates. Then you started using it to communicate with your LPs. So we've started doing that and it's very convenient for that.

35:09 So it's a real-

35:09 So it's a-

35:10 ... it's more of a network effect business than a hard software business, I think is Sachs' point.

35:13 Totally.

35:14 I just-

35:14 Totally.

35:15 This, this super network- This business, this business has benefited from the network effects.

35:18 Totally.

Jason Calacanis 35:18 So, they had such strong network effects, here's the brouhaha, the donnybrook that came up, uh, this past week.

David Sacks 35:26 (laughs)

David Friedberg 35:26 (laughs) Donnybrook.

David Sacks 35:27 That's funny.

Jason Calacanis 35:27 You can look it up.

David Sacks 35:29 (laughs)

35:29 (laughs)

Jason Calacanis 35:29 It's...

David Sacks 35:29 I like that word.

Jason Calacanis 35:30 It means-

David Friedberg 35:30 Yeah, me too.

David Sacks 35:32 Yeah, me too.

Jason Calacanis 35:32 Yeah. So the company-

David Sacks 35:34 I bet you knew a lot of Donnys in Brooklyn.

Jason Calacanis 35:36 We ha- We... (laughs) I was involved in a couple of-

David Sacks 35:38 (laughs)

Jason Calacanis 35:39 ... donnybrooks if I'm being honest and they, they, they escalated from brouhahas, typically.

David Sacks 35:43 (laughs)

Jason Calacanis 35:44 Not unlike an average episode of this podcast. And so-

David Sacks 35:47 (laughs)

David Friedberg 35:47 (laughs)

David Sacks 35:47 There are probably some donnybrooks involving guys named Donny.

Jason Calacanis 35:50 Yeah, Donny was typically the guy who started-

David Sacks 35:52 Nick, this episode is gonna be named the Donnybrook episode. Please.

David Friedberg 35:55 (laughs)

Jason Calacanis 35:55 So, uh, the company had a massive violation of trust. As they were expanding to figure out other businesses to come into, they got into what's called the secondary market. For those of you who don't know what the secondary market is, people like to trade stocks of private companies. You may have heard people buying and selling Stripe or SpaceX. And so employees, early investors might sell their shares to other people. Now, this is not happening as a primary offering from the company where they raise money and, and issue new shares. This is people who have shares. Carta was in a great position to do this because they had the cap table. Now on your cap table might be 100 investors, 30 of them might be your friends, family, very quiet, you know. Could be Jeff Bezos, who was a seed investor in, in Google.... some folks at Carta who were in the secondary business, violated the trust and the privacy of companies who had angel investors or early-stage investors on their cap table and started contacting them directly saying, "Hey, do you want to sell your shares in company A to this person? We're trying to create a market for it." They got called out publicly. The CEO, Henry Ward, who is a unique individual as, uh, as many CEOs are, tried to do some calms. It was a disaster of calms for a couple of days while they tried to explain basically breaking their own terms of service, and it all ended up with them selling the secondary business, which I understand was a tiny business for them. Overall, your thoughts, gentlemen. I don't know if anybody has strong thoughts.

Chamath Palihapitiya 37:27 Why did you say he was an interesting individual, you mean?

Jason Calacanis 37:30 Um, he communicates directly-

Chamath Palihapitiya 37:32 Uh-huh.

Jason Calacanis 37:33 ... in a very effervescent, candid way.

Chamath Palihapitiya 37:38 Okay.

Jason Calacanis 37:38 Like some founders do.

David Friedberg 37:39 Effervescent. Wow, that's a nice-

Chamath Palihapitiya 37:41 Yeah.

David Friedberg 37:41 ... nice, effervescent.

Jason Calacanis 37:42 I mean, um, just trying to-

David Sacks 37:44 What I was saying, he's, he's sparkling? (laughs)

Jason Calacanis 37:46 I think he is bad at PR but entertaining to listen to, right? Like, I think maybe they should've had a little bit of a slightly more thoughtful, uh, approach to this, but it all happened in real time, so it's very difficult to deal with a crisis in real time, I think.

David Friedberg 38:00 I have two comments.

Jason Calacanis 38:01 Go ahead.

David Friedberg 38:03 The, the first is I actually disagree with David Sacks. I, I think that there is literally no concept of network effects in this business, and it makes no sense here. And the reason is that when you look at the public markets, which are an infinitely larger, we have a vibrant public stock market that has no concept of this, and it works, where you have companies like Computershare, you have companies like SSNC. There's just a plethora of providers that do fund administration and frankly, I'm glad that there's a plethora of providers. I use some of them, and I trade one against the other to get a constantly cheaper price. We use the distribution agents, and depending on which bank I'm working with on whatever deal, I have shares at, at multiple different agents. And they also cost virtually nothing, and I don't see a world where that deflationary cost reduction doesn't come to this market either because I don't see this as a, as a defensible area of software. I think it's a necessary piece of software. So, I kind of, like, randomly tweeted out just kind of like, oh, 'cause I was just watching from the sidelines. Now, in full disclosure, I was a Carta investor. I sold all my equity in a secondary transaction actually, that-

Jason Calacanis 39:16 Speaking of secondary transactions. (laughs) Yeah. Was that a good trade?

David Friedberg 39:19 Yeah. I sold, yeah, I sold it all two and a half years ago. So, I- I have no opinion one way or the other on this company. I understand process automation, but I don't think process automation is defensible. So, if you build software around process automation, you will be competing in a race to the bottom on price. That is... And I have not seen a single example of a company that's proven this otherwise. There are different companies that create real lock-in because of what they built. That isn't one. So, I tweeted this out. Some person sent me this, and Jason, to your point, the two most prevalent competitors that they showed me were Mantle and Pulley.

Jason Calacanis 39:56 Never heard of them.

David Friedberg 39:57 I think one is YC company and, and one is not, but Mantle and Pulley I think were the two that, that came up the most often. And Jason, to your point, what they both told me was Carta's like 10K a year, 12K a year, and these guys are 90% discounted, a tenth of the price, which again proves there is not a lot of super compelling software lock-in here. It's useful stuff, but that useful stuff is eventually gonna get as close to free as possible. These guys are proving it. And then last night, while we were at poker, I got this thing. Somebody in two days-

Jason Calacanis 40:32 Oh.

David Friedberg 40:33 ... built an open source competitor (laughs) and just put the code out there and said, "Here you go. Take it."

Jason Calacanis 40:38 Yeah.

David Friedberg 40:38 Isn't that incredible?

Chamath Palihapitiya 40:39 Exactly.

David Friedberg 40:40 Guys, that happened, that happened in two days from that tweet.

Chamath Palihapitiya 40:44 Right. And by the way-

David Sacks 40:46 I don't know if I got-

David Friedberg 40:47 How crazy is that?

David Sacks 40:48 ... if I got a stock certificate from... What's the name of this thing?

Jason Calacanis 40:52 (laughs) Open source clone.

David Sacks 40:54 ByeByeCarta.com. I'd, like, groan. I'd be-

Jason Calacanis 40:57 (laughing)

David Sacks 40:57 ... like, "Oh, here we go." I've gotta, like, find my-

David Friedberg 40:59 Okay, first of all, that's totally not true-

David Sacks 41:00 ... find my certs in, like-

Jason Calacanis 41:01 It wouldn't-

David Sacks 41:01 ... five different sites, and this thing is probably going to go out of business in six months.

David Friedberg 41:05 Come on, that's not true and you know it. You know it. You don't know where the certs are.

Jason Calacanis 41:08 I can actually-

David Friedberg 41:09 You don't care.

David Sacks 41:09 It'd be seriously annoying to have to deal-

Jason Calacanis 41:11 I can, I can actually-

David Sacks 41:12 ... with somebody new.

Jason Calacanis 41:12 ... tell you what's, what's happening in the market with startups. Startups are looking at the alternatives. They wanna save money. The bigger companies are probably not as price sensitive to them also. You know, spending $20,000 as a Series B company, nobody cares. But for the startups, they tend to find the most efficient software and-

David Friedberg 41:30 But here's-

Jason Calacanis 41:31 You're exactly right, Chamath, on that. Yeah.

David Friedberg 41:32 Yeah. My comment is less about Carta itself and its price point.

Jason Calacanis 41:37 Yeah.

David Friedberg 41:37 My observation is twofold. One is, software that doesn't have a fundamental lock-in-

Jason Calacanis 41:44 Yeah.

David Friedberg 41:45 ... does not have pricing power, number one. And number two, we are almost at the tipping point of a set of tools that will allow competitors in a matter of days to compete with an 80% feature complete solution-

Jason Calacanis 41:58 Mm.

David Friedberg 41:58 ... at a fraction of the price. That's my, that's my generalized observation as manifested in this Carta example in less than a week.

Jason Calacanis 42:06 Well, what do you do with some observation like this? If you have this 80% observation, is there anything you could-

David Friedberg 42:09 So then I was like, well, you know what? I'm just gonna go for it. So, I-

Jason Calacanis 42:13 (laughing) I'm teeing it up for you here.

David Friedberg 42:14 So, I, I, I'm starting this thing.

Jason Calacanis 42:17 Okay.

David Friedberg 42:17 And I've been working on this idea for a little bit, but... And I've been experimenting with it with some of my companies, but then I was like, you know what? We should just do this. So, the concept here is w- we're gonna build this incubator. It's called 8090. I have a team. I have a bunch of developers offshore, and we are going to basically create a hit list of software that we think is relatively straightforward-

Jason Calacanis 42:40 Mm.

David Friedberg 42:40 ... and mispriced and could be built much more efficiently in 2024 using all of these co-pilots and tools.... and our, our boundary conditions will be, can we deliver 80% of the functionality at 10% of the price, so at a 90% discount?

Jason Calacanis 42:56 Mm. So 80/90 is like-

David Friedberg 42:59 80/90-

Jason Calacanis 42:59 ... sort of what you're go-

David Friedberg 42:59 ... is what, is what the name of the incubator is. And-

Jason Calacanis 43:01 Got it.

David Friedberg 43:01 ... what was interesting is, when I tweeted this out, we had 1,200 people essentially give us a product roadmap. They told us the software that they would want, they told us the features that they need, they told us the things that they don't need. And so, the idea here, Jason, I think, is I'm just gonna build this in the, in the wild. I'll create the list of companies, we'll publish that out, let people vote on it-

Jason Calacanis 43:22 Okay.

David Friedberg 43:22 ... then we'll publish the PRDs of what the 80% version is, and we're gonna work backwards with my team in South Asia to try to build these things at a 10% price point.

Jason Calacanis 43:35 So Sacks, your thoughts. You're a SaaS investor. It's, uh, you're vertical. Your thoughts on Chamath's plan to be the most hated person in Silicon Valley (laughs) -

David Sacks 43:45 (laughs)

Jason Calacanis 43:45 ... by underpricing every piece of SaaS software by 90% (laughs) in real time.

David Sacks 43:50 Well-

Jason Calacanis 43:50 Can he do it, in your estimation?

David Sacks 43:52 Yeah. Well, I think there probably are categories where you could do that. But in general, what I would say is that it always looks easier from the outside than from the inside. Meaning that you look at any particular SaaS category leader and you're like, "This is easy." Like, "I could do this." And then, when you actually get into it, you realize that, "Okay, the product I'm seeing is kind of an iceberg. I'm just seeing the tip of the iceberg. Below the waterline is all the business logic that's been written into the system." There's, like, a much deeper and longer list of features. Not in every category. You might be right that in some categories you don't need the product depth. But in many other categories, there's just a lot of subtle features, usability issues that have been figured out, integrations, you know, with other-

Jason Calacanis 44:37 Ongoing support.

David Sacks 44:39 Ongoing support.

Jason Calacanis 44:40 Training.

David Sacks 44:40 And then you have the whole sales and marketing component to it. So, what ends up happening is, you attack a category saying, "Oh, this is gonna be easy." You know, a year or two into it, you're like, "Wow." Like, the category leader, we're not even close to where it is in terms of table stakes here, and it ends up being more of a slog than you thought. And then, you find out the market doesn't necessarily have as much of an incentive to switch. I'm not saying it can't be done. There are categories where I think the category leaders become stagnant and has stopped innovating, and I think those are ripe for disruption. I mean, look, I'm kind of trying it in a way. We're gonna be launching my Slack killer soon. I feel a lot better about that because Slack got acquired, doesn't, hasn't really innovated in a, a few years.

Jason Calacanis 45:24 And Salesforce, by the way, just announced zero hiring in 2024, and the Slack teams were like, "What? How are we supposed to hit our roadmap without more people?" Like, "What's going on here?"

David Sacks 45:33 Right.

Jason Calacanis 45:33 So, there is, there is that as well.

David Sacks 45:34 Yeah. So look, I definitely think it can be done.

Jason Calacanis 45:36 Mm-hmm.

David Sacks 45:37 But I don't know, I think you gotta choose carefully the categories where the iceberg isn't bigger than you think, basically.

45:45 Well, Sacks, I want... Do you think that there's a shift in the business model for SaaS companies that emerges from what Chamath is talking about? Where I think right now, sales and marketing costs as a percent of revenue on average for a scaling enterprise software company around 55% of revenue, or something in that range. Does that number get compressed by bringing price down? So you bring price down, but you need fewer people to go in and do the selling, fewer-

46:10 I don't think so.

46:11 ... um, folks to do marketing?

46:11 I mean, that ha- that has not been the pattern. I mean, look, everyone was saying things like this when enterprise software shifted from on-prem to the cloud. You know, when we went from Oracle and Siebel to Salesforce.com, people would say, "Oh, this is gonna fundamentally change the business. Sales won't become that important. Product's gonna be all important." It was true to some degree. I mean, I do think that-

Jason Calacanis 46:31 You tried to do it. That was your, what you pioneered at Yammer. You, you tried to do bottom-up-

David Sacks 46:35 Yeah.

Jason Calacanis 46:35 ... sales.

David Sacks 46:36 So there was... Product-led growth became a thing.

Jason Calacanis 46:38 Yeah.

David Sacks 46:38 You know, and a very important thing. And I still think that's the best way to build a SaaS company, is you let the users just try it on a freemium basis as opposed to having sales knock on the CIO's door, let the employees pull the product into the company, then go close the deal. So, it did make important changes, but it did not get rid of sales. I mean-

Jason Calacanis 46:57 Mm-hmm.

David Sacks 46:58 ... you know, what I believed doing this stuff way back in 2008 is we'd be able to get rid of sales and just make enterprise products completely self-distributing. That never happened. People have been predicting the, the death of sales for a long time, and it's never happened.

David Friedberg 47:11 I think your vision is absolutely right, and I think this... In a world of AutoGPTs, it's going to happen. And I think the way that it's roughly gonna happen is as follows. I think what happens is that... And Zoho is a, is another good example of how you can do this, which is, what you need are a small set of tools that provide useful capability for a company that work elegantly together. Now, when you work elegantly together, there's a bunch of things that you need. You need security, you need handoffs and handshakes, you need different ways of handling exceptions, you need a, a common kind of data model. All of those things can actually be configured on the fly dynamically by and between two sets of software if you let the AI actually run and auto-configure itself. And so, I think the experimentation is as follows. You have product A and product B, you want to adopt them both. They have elements of an agent that can go and auto-configure themselves to each other. Separately, I think what the CFO or the CEO does is allocate a budget, and that budget is an agent. And what that agent does is it works with these other agents to say, "Okay, great. I can spend money on these features." That is the thing we've not explored. We've always taken software that we build, and all of a sudden pause automation and hand it over to people to run it through a relatively archaic go-to-market process. And I think what's worth trying to figure out in 2024 and beyond is how to use these tools to automate all of the low-level negotiation that happens before you can adopt software. I just think it's totally unnecessary. And I think that this is where software can do a very powerful job on behalf of the salesperson. Does it mean the salesperson is totally out of the loop?... no, but I do think that if these tools are lightweight enough, especially the young, nimble companies will actually say, "Great. My procurement person is actually an AI agent with a budget." And it's the products that then figure out how to negotiate for the share of that budget and then configure how to work amongst itself. That is the key innovation that I think someone will figure out. That is the Zoho 2.0, right? That is the Salesforce 2.0. It sort of this app app store, common data bus kind of an idea that, that I think somebody will build. I would like to try to help.

Jason Calacanis 49:31 Well, people have started building ... because you're starting to see the features overlap in many programs. You're seeing HubSpot, Salesforce, Zendesk. They're all kinda getting into each other's businesses.

David Friedberg 49:40 But see, but, but it's just... Those are, those are... That's a great observation, but those are all closed products. What I mean is, like, there is, like, a totally open protocol and set of standards for how-

Jason Calacanis 49:51 Sure.

David Friedberg 49:51 ... product A integrates and interacts with product B on many levels.

Jason Calacanis 49:56 Hm.

David Friedberg 49:56 Right? From security to data model and everything in between.

Jason Calacanis 49:59 Yeah.

David Friedberg 49:59 And I think that that is what needs to get figured out and be very much an open source idea.

Jason Calacanis 50:04 The great part about this is, this is gonna be massive competition. It will lower prices, it'll add features, and, uh, the, the, the team over at 37Signals is doing something similar. If you look at once.com, they are also gonna go after Slack, Saxs, and they're gonna just charge one time for the software. I think I may have mentioned it on a previous one, but their concept is-

David Sacks 50:24 Yeah, you did.

Jason Calacanis 50:24 Yeah, just, my gosh, five for once.

David Sacks 50:26 Do you use Slack now?

David Friedberg 50:27 Can we take a moment actually. Nick, can you throw up my tweet? Can you take a moment to just say thank you to Stewart Butterfield-

David Sacks 50:33 (laughs)

David Friedberg 50:33 ... and what he pulled off? Thank you. As a Series A investor, I thank you, sir.

David Sacks 50:39 Yeah, 27 times ARR, uh, is looking like a pretty great exit multiple.

David Friedberg 50:44 Oh, there's my reply. Oh, yeah, look at my reply.

Jason Calacanis 50:47 Yeah.

David Sacks 50:48 (laughs)

David Friedberg 50:48 I mean, my gosh.

David Sacks 50:49 (laughs)

David Friedberg 50:50 What a deal.

Jason Calacanis 50:51 And at the time, it was... They were public and people were wondering like, "Hmm, was this a good deal or not? Should they have stayed independent?" But the product velocity never seemed to get going.

David Friedberg 51:02 Saks, how are you... How are you thinking about what the critical go-to-market MVP capability is for Slack? So, this here's what I'm curious about. There's chat, right? The problem with chat, in my opinion, is that Slack has become totally overrun, where you could be a five-person company and all of a sudden you'll have 500 channels.

Jason Calacanis 51:24 Yes.

David Friedberg 51:24 So, there's no scarcity. And that scarcity is, in my opinion, what makes, what makes all corporate chats in this modern version, Teams included, totally unusable. So much noise and distraction. So, how are you thinking about that problem?

David Sacks 51:40 I totally agree with that.

Jason Calacanis 51:40 Yeah.

David Sacks 51:40 I totally agree with that. What you hear from every single company that has more than, I don't know, 50 employees is that Slack doesn't scale. Because what happens is you have a channel get created, and there's a whole bunch of conversations in there that are kinda munched together. And if anybody in the company wants to participate in any one of those conversations, they have to join that entire channel. And as a result, every single employee ends up in every single channel. And it's just a giant mess and there's way too much noise. So, I think that the channel model was beautiful in terms of letting people get started really easily. You just jump into a channel and start posting. That's why it took off. But it's not particular enough in terms of, of addressing conversations to the right people. So, that's basically one of the problems that we're fixing. The other thing I've heard from people is that, "We love chat, but we also really like the feed that Yammer had as a way to quickly scroll through new stuff."

Jason Calacanis 52:37 Yeah.

David Friedberg 52:37 You had a top-level corporate feed. People forget that. There was like this, "Hey, if you wanna get-"

Jason Calacanis 52:41 Yeah, I love, I love that.

David Friedberg 52:41 "... the pulse of the entire organization, go to this one corporate feed."

David Sacks 52:44 We were the first ones to figure out that, like, a feed should be used inside of an enterprise, not just in a consumer social network.

Jason Calacanis 52:50 Right.

David Sacks 52:51 So, in any event, I, I'd say those are, like, two of the main concepts, is combining feed and chat in a way that actually makes sense and solving the noise, the signal noise problem.

David Friedberg 53:01 Do you have a name for it yet?

David Sacks 53:03 Yeah. It's gonna be called Glue.

David Friedberg 53:05 Ooh, I love that.

Jason Calacanis 53:06 Ooh.

David Friedberg 53:06 Can I remind you...

David Sacks 53:07 (laughs)

David Friedberg 53:07 Can I, can I remind you that as a, as a humble investor, sir, I, I, I think I was part of Yammer and Slack, so I, I'm, I can add super allocation.

Jason Calacanis 53:16 You can add value. You can add value.

David Sacks 53:17 You're in, you're in. There's just one requirement for the-

David Friedberg 53:20 You gotta use it.

David Sacks 53:21 ... early investors is you guys actually have to use it. You gotta do a rip and replace on your Slack and-

Jason Calacanis 53:25 What?

David Sacks 53:25 ... hop to Glue.

David Friedberg 53:26 Sure, sure. Why not?

David Sacks 53:27 If you're willing to do that, you're in.

David Friedberg 53:28 Perfect.

Jason Calacanis 53:29 I'm in. I'll take 250.

David Friedberg 53:30 Done. Done.

Jason Calacanis 53:30 500K, yeah. Lock me in for a slice.

David Sacks 53:33 How much?

David Friedberg 53:33 I'll take 500.

David Sacks 53:34 Yeah, I mean, so I think what we're gonna do is before launch, we'll do, like, a seed round.

Jason Calacanis 53:38 Nice.

David Sacks 53:38 Right now it's all been incubated by Craft. So, we'll do a seed round-

Jason Calacanis 53:41 What about a 50 million round before the C round?

David Friedberg 53:43 For influencers.

Jason Calacanis 53:43 So, like, 60 million.

David Sacks 53:44 6,000,000 posts, six posts?

David Friedberg 53:46 I'll put 50 in at six pre.

David Sacks 53:48 (laughs)

David Friedberg 53:49 56 posts. How about that?

David Sacks 53:51 It's not gonna be that cheap, but it won't be, it won't be a super expensive round 'cause what we wanna do is incentivize, you know, influencers to, like, support the product, switch to the product. So, it really is gonna be-

David Friedberg 54:02 Do you have glue.com?

David Sacks 54:04 Uh, we have glue.ai.

Jason Calacanis 54:06 Hm.

David Friedberg 54:06 Oh, wow.

Jason Calacanis 54:07 Nice.

David Friedberg 54:08 I was gonna get 8090.ai, but then I didn't like it. You know what I got instead? Tell me if you like this. 8090.inc. So, it's just 8090.inc.

Jason Calacanis 54:18 Yeah, that's fine.

David Friedberg 54:19 It's fine, right?

Jason Calacanis 54:19 It doesn't matter. Everybody searches. I mean, eventually-

David Friedberg 54:21 Yeah.

Jason Calacanis 54:21 ... you fake it till you make it. If the 8090 domain happens, you get it. Or you put get or go 8090.com. So, do that before the show gets published.

David Friedberg 54:29 What is it? Get or go?

Jason Calacanis 54:31 Like, if people have an app-

David Friedberg 54:32 Oh, get8090. Ooh, nice. Smart.

Jason Calacanis 54:33 Get8090 or go8090.

David Sacks 54:35 Right.

Jason Calacanis 54:35 So, you know, if it's a service, you say go8090, and if it's whatever, you say get, uh, if it's a, an app or something, right? Like, you're just gonna go get it here at this domain name. It's just easy to remember.

David Friedberg 54:43 I also, I also got vcsaasgoboom.com.

Jason Calacanis 54:47 Oh, excellent.

David Friedberg 54:48 (laughs)

Jason Calacanis 54:48 Well, I have wetyour... People don't remember this. For a callback, I have-

David Friedberg 54:51 Boo.

Jason Calacanis 54:51 ... wetyourbeak.com. Uh, I think it just goes to-

David Friedberg 54:54 That's awesome. (laughs)

Jason Calacanis 54:54 Wetyourbeak.com just goes to our website. So, that... I mean, that was the basic scandal.... Sacks. They let the sales team doing secondary, apparently, or somebody broke a rule, they weren't exactly clear with it. It sounded to me like, you know, they didn't want to throw anybody under the bus exactly. But h- how big of a violation is it to let people go sell into the cap table secondary shares without the CEO or your customer even knowing that you accessed that data? Where would you put that on a, a violation of trust scale, Sacks?

David Sacks 55:27 I think it was a huge issue for them because the only reason startups give their data to Carta is because they trust them to keep it private.

Jason Calacanis 55:36 Yes.

David Sacks 55:36 And I think a big part of the problem with the Carta vision of creating the secondary marketplace is that founders don't want it. Fundamentally, that's the problem.

Jason Calacanis 55:44 Hmm.

David Sacks 55:44 I mean, Carta is in the perfect position to rationalize and make liquid the secondary market. The vision was correct in that sense and the reason for that is because Carta not only has the cap table and they know who all the investors are, they also have all the documents. They got all of your corporate documents, the bylaws, all that kinda stuff. They can very easily execute these transactions. So Carta was in a great position to replace all of these secondary brokers who are running around creating books on their own. The problem they have is that at the end of the day, founders don't really want secondary markets to take place in their company shares.

Jason Calacanis 56:22 Hmm.

David Sacks 56:22 And I think there's a few reasons for that. One is price discovery. I think a lot of these startups now, if their shares were to be freely traded-

Jason Calacanis 56:31 Hmm.

David Sacks 56:31 ... would be trading below-

Jason Calacanis 56:32 Bad timing.

David Sacks 56:34 ... below the last round's mark-

Jason Calacanis 56:35 Yeah, bad timing.

David Sacks 56:35 ... so they don't want it. Second, th- the founders don't necessarily want their investors getting out and then getting new investors on the cap table that they don't know.

Jason Calacanis 56:44 Hmm.

David Sacks 56:44 So founders are somewhat particular about who their shareholders are. It's different than public companies in that way. I mean, Apple doesn't really care who its shareholders are. Private companies do care.

David Friedberg 56:54 Do you think that that's sustainable in a world where companies take 14 or 15 years and they're trying to retain talent?

David Sacks 57:00 Well, I think, uh, it would be better for everybody if there was more organized liquidity. I mean, I, one of the things I love that SpaceX has done-

David Friedberg 57:08 Perfect.

David Sacks 57:08 ... is that for the last number of years now, they've had-

David Friedberg 57:10 Every year.

David Sacks 57:11 ... a tender offer every year. And-

David Friedberg 57:12 Not even every year, like almost every quarter right now.

Jason Calacanis 57:14 It's every six months, I think-

David Friedberg 57:16 Yeah.

Jason Calacanis 57:16 ... was what my understanding of it is. But yeah, I mean, it would be good for this to work.

David Sacks 57:19 But think about, think about that example. So with SpaceX, it's been up and to the right on a pretty consistent basis, so every tender round has been a bump. Sometimes it's been a small bump, sometimes it's been a larger bump. The company, I don't think, has gotten greedy, so they haven't tried to shoot the moon and raise evaluation too much, so they were able to keep a very organized process. And they've, they've had this attitude from the beginning of letting their employees and investors get liquidity when they need to. So it's been great. But that's very different, by the way, tha- tha- that sort of organized tender process is very different than the secondary market that Carta was organizing, right? Because Carta was trying to do what all these secondary brokers are doing, which is they hit up people one at a time and just say, "Are you looking to buy or sell?" And they're trying to organize secondary transactions that are not part of an official process. And I think that's a huge part of the problem here.

Jason Calacanis 58:11 Friberg, did you have thoughts on it? Yeah.

David Sacks 58:13 Well, I mean-

58:13 Sure.

58:13 ... there's an element of secondary transactions in private companies that are unstructured generally being a problem. The issue with Carta was, was there a violation of trust with respect to the transparency onto the cap table that they have access to because they have all the data in their systems. And when I was at Google in '04 or so, Sergey was kind of throwing around the idea, "Why don't we start a hedge fund? Because we have all this data about what people are searching for and we can see all of this consumer behavior and we could trade on that and have a huge data advantage in the marketplace." And ultimately, whether or not there was an impropriety of the use of data, and even if we excluded personal data and search data, just using internet-based traffic and internet data, the perception of the problem would have damaged Google's brand so much. First of all, is there an actual conflict where you're taking people's, what they consider to be private data and using that to make money from their data without their permission or acknowledgement or explicit consent? And secondly, even if you are doing this in a way that doesn't use their data because you just generally have knowledge about who buyers and sellers are in the market outside of your software, the view that you may be using the, the data in conflict, uh, can damage your brand and damage your customer relationships so much. So it seems-

Jason Calacanis 59:35 100%. Yeah.

David Sacks 59:35 ... i- in hindsight a little silly, but I think to Chamath's point earlier, it may indicate the necessity for them to think about building another business on top of this core software business that is a more true marketplace driven business so they can make, you know, over time, more money. And that's probably where this all came from. They saw a need to build something that was more than just monthly subscription fees.

Jason Calacanis 59:54 And the truth is they weren't making money from it, and they shut it down.

David Sacks 59:57 It's true that Carta is trying to become a multi-product business. They started with, you know, startup cap tables and then they added fund management, then they added this broker business. But if you read Henry's last blog, the secondary market is what he originally wanted to disrupt, is he always wanted to create this secondary market-

Jason Calacanis 1:00:17 Hmm.

David Sacks 1:00:17 ... and he created the cap table business, the SaaS software as a way to get to that.

Jason Calacanis 1:00:22 Yeah.

David Sacks 1:00:22 I think what he's realized is that the real value is in the SaaS software, and this marketplace is not that valuable. I mean, the, the SaaS business is doing something like 250 million a year of revenue, and the broker business was only doing a few million. Yeah, three million. So I think the value has turned out to be in the SaaS, and moreover, this broker business was compromising the trust and safety, uh, uh, or the perception of trust that the company has from customers.

David Friedberg 1:00:49 The problem with that SaaS revenue is if you look at Mantle and Pulley, that 250 million could be 25 million.

Jason Calacanis 1:00:56 And cake (laughs) . My investment, yeah. (laughs)

David Friedberg 1:00:58 And cake, sorry ab- about, yeah.

David Sacks 1:01:00 Yeah. (laughs)

David Friedberg 1:01:00 And cake, but, but the point is the fact that there are, there are many competitors I think is a sign of the, of a low...... barrier to entry, and a lack of a true fundamental lock-in.

David Sacks 1:01:11 Let's say you are an investor and you're looking at Pulley or Mantle. Why would you even think that's an attractive company to invest in if success looks like you're compressing a $250 million market down to 25 million? Like, what's the point?

David Friedberg 1:01:25 Well, I think-

David Sacks 1:01:25 I- I- I think a lot of these competitors got funded during the whole ZIRP era where everything got funded. I mean, if you were to- if you were to look at that market today, why would you even fund a disruptor?

David Friedberg 1:01:35 Well, so look. I think Mantle's raised and then-

Jason Calacanis 1:01:36 But there are other strategies too. Yeah. There's other strategies you could add on to this in adjacencies.

David Friedberg 1:01:41 My understanding is Mantle and Pulley raised in the low single digit millions. That gives them a lot of room to run a 25 and $50 million business profitably and never raise any more money. The problem is on the opposite side. If you raise money at eight or nine or $10 billion when companies trade at 20 times, and now companies trade at six times, now all of a sudden you have to have $1.3 billion of revenue a year to break even. And I think that's the real problem.

Jason Calacanis 1:02:08 Hm.

David Friedberg 1:02:08 So, it's not that Henry hasn't built a great company. I think he deserves a lot of credit. The question is entry point, and the question is upside. And the upside is governed by the difficulty of the things that you're doing and how much pricing power you have for those difficult things. And so, I think what we're realizing is that there are few difficult things in software. Few. And it's just, like, it's just true. And as a result, every product, this is not a Carta thing, every product will see a ton of competitors. So, the only thing that you can do is have an extremely leveraged OpEx and an extremely low cost to serve. That is the only protective- protective mechanism one has, it seems to me on the outside looking in. Unless-

Jason Calacanis 1:02:52 Network effects are also important, I would say.

David Friedberg 1:02:54 Unless you have an Instagram. You're right, that product is infinitely better with everybody. Or a TikTok. Great. Now you can just, you can spend as much money as you want.

Jason Calacanis 1:03:03 Or Airbnb. Yeah.

David Friedberg 1:03:04 But that's not what-

Jason Calacanis 1:03:05 Network effect businesses.

David Friedberg 1:03:06 ... I think procedural software is.

David Sacks 1:03:10 Yeah. I don't know. I mean, look, we're- we're gonna just have to agree to disagree. I think there is some pricing risk to Carta from these competitors. But my guess is it ends up being stickier than that. But in any event, I mean, I do think that Henry, at the end of the day, pulled off a nice save by just getting rid of the business-

Jason Calacanis 1:03:26 I agree with that.

David Sacks 1:03:27 ... altogether. I think that was a smart way to respond. Clearly, the first response didn't work.

David Friedberg 1:03:32 No.

David Sacks 1:03:33 The first response was-

David Friedberg 1:03:33 The- uh, the first response enraged people.

David Sacks 1:03:35 ... sort of like a very-

Jason Calacanis 1:03:35 Yeah.

David Sacks 1:03:36 Yeah, it was a very confusing denial where he's- he said, "This isn't our policy, but there's still people who are doing it."

Jason Calacanis 1:03:40 And he also blamed, he also got into it and blamed the person who called him out on it and was like, "Why- why are you calling us out on this?" And then, like, every founder was like, "Because you violated our trust." And he was like, "Oh, yeah. Sorry." (laughs)

David Sacks 1:03:51 Yeah. Well, also people were showing-

Jason Calacanis 1:03:52 Don't blame the victim.

David Friedberg 1:03:53 (laughs)

David Sacks 1:03:53 People are showing, like, email campaigns that have been going on for months and it seemed much more organized and it-

Jason Calacanis 1:03:59 Yeah.

David Sacks 1:03:59 ... it was very hard to believe that this was just an accident instead of a-

Jason Calacanis 1:04:02 No.

David Sacks 1:04:02 ... deliberate strategy. And you could see the whole startup community was e- was, you know, evaluating its options in real time on X.

David Friedberg 1:04:09 Oof. Yeah.

David Sacks 1:04:09 And that's when he came out and hit the whole thing with a sledgehammer, just said, "We're gonna get out of this business."

Jason Calacanis 1:04:14 Smart man.

David Sacks 1:04:14 And I think it was really smart to do that, is kinda quell the crisis. Like I said, I don't think this is a business that startup founders want their cap table software to be engaged in.

Jason Calacanis 1:04:26 No, definitely not. Yeah.

David Sacks 1:04:27 And- and just, by the way, just a third point on that. Wh- you know, one reason was price discovery, another reason was having undesirable shareholders. The- the third reason is just founders don't want to create a competing fundraising process to primary financing.

Jason Calacanis 1:04:40 Yeah.

David Sacks 1:04:40 I think this is actually a really important point. The reason why founders don't want there to be a secondary market is because their company may need to raise money.

Jason Calacanis 1:04:48 Yeah, you wanna go through the front door-

David Sacks 1:04:49 Yeah.

Jason Calacanis 1:04:50 ... to the CEO and the board, not the side door to get a- get some- uh- uh-

David Sacks 1:04:54 Yeah.

Jason Calacanis 1:04:54 ... you know, exposure to the company.

David Sacks 1:04:55 Well, I think- I think in the ZIRP era where there was all this excess funding flying around, then it kinda made sense to let secondaries happen. But in a world in which funding is scarce, you want that money to go into the company, not into-

Jason Calacanis 1:05:08 Yes.

David Sacks 1:05:08 ... the pockets of the early shareholders. And so-

Jason Calacanis 1:05:10 Mm.

David Sacks 1:05:10 ... I think, like, the timing of this whole thing is, like, really off. It all feels like kind of a function of ZIRP in its own way.

Jason Calacanis 1:05:16 Yeah, agree.

Jason Calacanis 1:05:17 All right, Zach, you were, uh, in the group chat talking about this viral clip about Star Wars. You wanted to chime in on it? Maybe you could, uh, cue it up, Nick?

David Sacks 1:05:25 I mean, as you may recall, my pick for business loser of 2023 was Disney. And it seems like they haven't learned anything from the horrible year they've just had. What is the balance of activating a force for change, but also trying to permeate that patriarchy, that power structure? (laughs) And is that a part of the calculation of your art as well, and- and what's been the reaction to that?

Guest 1:05:54 Oh, absolutely. Um, I like to make men uncomfortable. I enjoy making men uncomfortable. (laughs)

1:06:04 (applause)

David Sacks 1:06:04 This is the new director of Star Wars.

Jason Calacanis 1:06:06 All right. Your thoughts, Zach?

David Sacks 1:06:07 Well, I saw the-

Jason Calacanis 1:06:08 (laughs) Jeez.

David Sacks 1:06:08 ... comment on that tweet was, "This is gonna be the biggest Disney flop yet." Isn't that what it said? I mean, look, I- I don't know what Bob Iger is doing. He seems to want to burn Star Wars to the ground like the rest of the Disney brands by playing politics. This director doesn't seem to have had a lifelong fandom for the franchise. Uh, she didn't really talk about how she had grown up marinating in this universe, loving its characters. Her background is in documentary filmmaking, and there's nothing wrong with that, but there's no indication from her that she truly loves Star Wars. And in fact, the comments that she's making right now are indicating that she's gonna politicize it. The patriarchy is not why anybody is a fan of Star Wars that goes to see its movies. So, nobody wants to see that movie.

David Friedberg 1:06:56 It's the opposite. (laughs)

David Sacks 1:06:57 It's the opposite. They wanna avoid it. They don't go to Star Wars movies for the politics. And she's also trying to solve a problem that doesn't really exist. I mean, science fiction may skew male in its fan base-But it's not because sci-fi franchises don't like strong female characters. I mean, just stepping out to the larger world for a second, you've got Ripley in Aliens, you've got Sarah Connor in the Terminator movies. You've got-

1:07:22 Princess Leia.

1:07:24 ... Trinity in The Matrix, you've got Princess Leia, Padme, Ahsoka in Star Wars, so-

Jason Calacanis 1:07:30 You seem to know a lot of these female charac- y- you're deep into Star Wars, right?

David Sacks 1:07:33 Yeah, dude, I'm really, I'm a Star Wars geek.

Jason Calacanis 1:07:35 Ahsoka.

David Sacks 1:07:35 I'm a Star Wars geek.

Jason Calacanis 1:07:35 You've got, you've got some good pulls here, yeah. Padme.

David Sacks 1:07:37 So, so it's not this idea that there aren't ph- strong female characters in Star Wars is, that's just kind of a myth, right? And-

Jason Calacanis 1:07:43 It's, yeah.

David Sacks 1:07:44 So it's not, it's not like the universe needs to be reset in this way. And you could just see the whole fan community kinda groaned at this comment, because they're just like, "Oh, here we go again. St- Star Wars is gonna ruin another franchise by playing politics." And the amazing thing is that, is that, you know, Iger doesn't seem to learn from this at all.

1:08:05 But there's nothing wrong with having a female director either. Right, Sacks? I mean, you're not saying that. You're saying that a particular person who has a political agenda in how they wanna shape the story of Star Wars is the issue.

1:08:17 Of course.

1:08:17 Right. Now-

1:08:17 Of course.

1:08:18 I will also say, I think one of the core driving narratives, emotional narratives of Star Wars is the oppressor-oppressed storyline.

Jason Calacanis 1:08:26 It's a highly political- it's a highly political storyline, yeah.

David Sacks 1:08:28 Well, I have, I've always said I think Star Wars has been, like, the most anti-technology effector in society since the '70s, because Star Wars is all about the, I, I've said this before, but the Ewoks destroying the Death Star and, like, the no tech overcoming the oppressor big tech, and so we have to destroy big tech. And anyone who has the better technology is very likely the oppressor and, uh, they have all the wealth and they have all the power and they have all the control. And so those who do not have the power, do not have the wealth, do not have the control, do not have the technology have to go and destroy that, whether it's the Empire or that, you know, kind of evil force. And that's the core narrative of Star Wars. So I do think that at its heart, Star Wars in and of itself is an oppressor-oppressed, uh, storyline that relates very deeply to technology and wealth and has helped shape the Western psyche for a couple of decades in a very meaningful way, or has really reflected maybe perhaps the Western psyche, uh, in a very meaningful way.

Jason Calacanis 1:09:25 What did you think of Andor?

David Sacks 1:09:27 I think you're superimposing current day terminology on a movie that was created in, the first one in the 1970s when intersectionality did not exist. Yes, there are political overtones to Star Wars. You've got the Rebel Alliance against the Empire. That is not diversity politics. Sorry. It's about-

1:09:48 I'm not saying diversity politics. I, I-

1:09:50 It's really about the corruption of power. I mean, you know the famous phrase, uh, by Lord Acton, which is, "Power corrupts, and absolute power corrupts absolutely." To me, those are the political overtones of Star Wars. It's not-

1:10:02 Yeah, so you always have to destroy that, that power.

1:10:04 ... about dividing the world into intersectional categories.

Jason Calacanis 1:10:06 It was about war. I mean, let's be honest.

David Sacks 1:10:08 Yeah.

Jason Calacanis 1:10:08 It was, Lucas was a child of the Vietnam War era and he was highly influenced, as was Francis Ford Coppola and, uh-

David Sacks 1:10:14 Yeah, the Americans with all this wealth and power came into the jungle to try and destroy a peasant nation and, and cause death u- upon a peasant nation, and the peasant nation survived and won. And there was a narrative to that that I think is reflected in this and is reflected very deeply in a lot of the stories that have come since. And I'm not saying DEI is, as a solution was the storyline out of the original Star Wars, but the original Star Wars was very much driven by the leverage that technology provides to those in power that gives them, you know-

Jason Calacanis 1:10:43 Yeah.

David Sacks 1:10:43 ... extraordinary influence over those who don't have power.

1:10:45 Well, if there were political overtones to the original two trilogies, and actually I, I think there were some really interesting themes, especially in that second one where Palpatine loses power-

1:10:54 Not even, not even, not even poli- bi- by the way, not even political.

Jason Calacanis 1:10:56 Oh, yeah.

David Sacks 1:10:56 Let me, let me just be clear. Social, right? So social systems, which won't-

1:11:00 I understand, but-

1:11:01 Yeah.

1:11:01 But my point is that Lucas didn't hit anybody over the head with those themes. And his goal certainly wasn't to make anyone feel uncomfortable. His goal was to entertain, and whatever political or social overtones there were were very much in the background because that's what good art does. One of the reasons why Hollywood produces so few really interesting movies these days is because the political overtones are really in the forefront and they really hit you over the head with them, and so therefore they're just not very entertaining. It's just not very good art. And I think that's why the fan community was like, "Oh, here we go again."

1:11:40 Yeah.

Jason Calacanis 1:11:40 Let me just set, make sure people understand. This is a nine-year-old clip, and for context, this is probably during like the, you know, early days of the DEI movement, just so we're clear on that. But y- you had another point to make, David. Go ahead.

David Sacks 1:11:51 But Sacks, I think that Hollywood has imposed upon itself, uh, certain degrees of restriction on the artistry of the artists in the community, because the standards now to be nominated for Best Picture define a number of, uh, DEI representation and inclusion standards, and they're listed here. So in order to qu- and I, if you guys will remember at, at our summit, uh, in LA, I asked Gwyneth Paltrow about this and she wasn't familiar with these changes that had been put in place. But in order to qualify for a Best Picture nomination, you have to meet some of these standards, and these standards include onscreen representation, themes, and narratives that relate to having at least one of the lead characters or significant supporting actors come from minor- minority background, including ethnic background or-

Jason Calacanis 1:12:40 Oh my God.

David Sacks 1:12:41 ... or by gender.

Jason Calacanis 1:12:42 I could get nominated for an Oscar? Look, I'm Sri Lankan.

David Sacks 1:12:45 (laughs)

Jason Calacanis 1:12:46 South Asian.

David Sacks 1:12:47 Yeah.

Jason Calacanis 1:12:47 Look, I'm in the parens here.

Chamath Palihapitiya 1:12:49 Mm. Mm. You're in.

David Sacks 1:12:49 Or at least 30, or 30% of the actors in a secondary cast, in the secondary group have to be women, racial or ethnic group, LGBTQ+, or people with cognitive or physical disabilities or who are deaf or hard of hearing. The main storyline, theme, or narrative of the film is centered on an unrepresented group, either women, racial or ethnic group, or LGBTQ+. They can meet the criteria if the creative leadership team has at least two of the following creative leadership positions met by one of the under- underrepresented groups.... and so on and so forth. If you're an artist, a filmmaker, and you wanted to make a film, a World War II biopic, which, uh, was on the front lines in World War II and was entirely white males, would you have been able to be nominated for best picture? Or would you have had to go and, you know, take some actions that have, would have affected your artistry and your freedom of expression in making that film? And as a big fan of film, and you guys, I think all of us are probably in the same boat, at least a couple of us are.

Chamath Palihapitiya 1:13:47 Three of us are. Three of us are.

David Sacks 1:13:48 Three of us are. This would have limited a lot of the best pictures of all time, I would say, if you had to impose standards on what the artists were allowed to do or how they were allowed to make their film. And that's really what's taken over Hollywood. So I, Sacks, I would say it's not just a Bob Iger Disney thing, but this has become a standard in Hollywood-

Chamath Palihapitiya 1:14:06 Yeah.

David Sacks 1:14:06 ... that the DEI movement has so deeply affected the intentionality of what-

Chamath Palihapitiya 1:14:11 Yeah.

David Sacks 1:14:11 ... has historically been a truly creative, uh-

Chamath Palihapitiya 1:14:14 I agree.

David Sacks 1:14:14 ... artistic framework.

Chamath Palihapitiya 1:14:15 If you talk to Hollywood writers, if you talk to Hollywood writers, they'll tell you that things have become extremely politicized and it's a mess. Uh, Iger's been a little bit contradictory about this. In April of last year, there was this article saying that Iger was doubling down on inclusivity and diversity, and he described that at a shareholders meeting. By November, he was saying that Disney movies have become too focused on messaging. So it seemed like he was finally getting it, that after the horrible year they had, but then we had the Star Wars news, and it seemed to suggest that they were hiring a director who really wasn't right for the material. So we'll just have to see. My sense is that they have not made the course correction they need. If you want to see the peak