E162: Live from Davos! Milei goes viral, Adam Neumann's headwinds, streaming's broken model & more

Jason Calacanis 0:00 All right, everybody. Welcome to the 54th Annual World Economic Forum here in Davos.

Chamath Palihapitiya 0:06 (laughs)

Jason Calacanis 0:06 You guys didn't know this, but as elites ourselves, we were invited to kick off the festivities.

Chamath Palihapitiya 0:12 Surplus elites. Surplus elites.

Jason Calacanis 0:13 Yeah. You know, the All-In podcast very popular, and so they wanted us to come and represent the pod and our audience there. And, uh, it's been amazing. If you haven't seen some of the great musical performances this year, I mean they're, they're so notable.

Chamath Palihapitiya 0:27 (laughs)

Jason Calacanis 0:28 Let's just start off here. I mean, guys, we were here for this live.

Chamath Palihapitiya 0:33 (laughs)

Jason Calacanis 0:33 Soak it in. I mean, on the, put that on replay here, Jamal.

Chamath Palihapitiya 0:36 Soak it in. (laughs)

David Sacks 0:37 Oh. There's the air flute.

Chamath Palihapitiya 0:38 (laughs)

Jason Calacanis 0:39 (laughs)

Chamath Palihapitiya 0:40 Soak it in.

Jason Calacanis 0:42 Wait, wait. There's a great moment where she really starts vibing.

Chamath Palihapitiya 0:46 (laughs)

Jason Calacanis 0:46 Wait for the head shake.

Chamath Palihapitiya 0:49 (laughs)

Jason Calacanis 0:49 The eyebrows are great, but the head shake comes in at about there. There it is. There it is. There's that head shake.

Chamath Palihapitiya 0:54 I like her... I like her muumuu. I like her muumuu.

David Sacks 0:56 Have you ever played the air flute?

Chamath Palihapitiya 0:58 (laughs)

David Sacks 0:58 Or just the skin flute, Jamal?

Chamath Palihapitiya 0:59 Just the skin flute.

David Sacks 1:00 (laughs)

Chamath Palihapitiya 1:00 At high school.

Jason Calacanis 1:00 Only in high school. Who went there? It's like a, it's like a high school thing. But guys, guys, th- this isn't it. There, there were other... Uh, there was a witch doctor or something. I'm not sure exactly what's going on here. I'm gonna just apologize in advance for mocking this.

Narrator 1:13 (Native American chanting)

Jason Calacanis 1:14 Or for Sax mocking it, I should say.

Narrator 1:18 (Native American chanting)

Chamath Palihapitiya 1:20 (laughs)

Jason Calacanis 1:20 This was incredible.

Chamath Palihapitiya 1:21 Whew.

David Sacks 1:22 (laughs)

Jason Calacanis 1:22 I don't know exactly what's going on here with the blowing of the hair.

Chamath Palihapitiya 1:25 (laughs)

David Sacks 1:25 We've come a long way from COVID, that's for sure.

Jason Calacanis 1:27 But I... It's kind of like you're a fluffer.

Chamath Palihapitiya 1:28 (laughs)

David Sacks 1:28 Yeah.

Jason Calacanis 1:28 So they're blowing the COVID on each person's forehead here to spread the COVID.

Chamath Palihapitiya 1:33 (laughs)

David Sacks 1:33 (laughs)

Jason Calacanis 1:33 They've all taken the mRNA vaccine.

Chamath Palihapitiya 1:35 (laughs)

Jason Calacanis 1:35 But, you know, uh, we each have a speaking gig.

Chamath Palihapitiya 1:38 (laughs)

Jason Calacanis 1:38 Each of us is speaking. And so I thought to kick us off here, gentlemen, instead of us just telling everybody our schedule, I would sing our schedule.

Chamath Palihapitiya 1:49 (laughs)

Jason Calacanis 1:50 And so let me just grab a... Let me see if I got my guitar here. Hold on. I gotta have a guitar here.

Chamath Palihapitiya 1:54 (laughs)

Jason Calacanis 1:54 Let me just grab it here. Oh, here it is. Okay.

Chamath Palihapitiya 1:57 (laughs)

Jason Calacanis 1:57 Hold on. I just happen to have a guitar here.

David Sacks 1:58 Is that an air guitar or a real guitar? Oh. It's a real guitar. Okay.

Jason Calacanis 2:00 No, it's a real guitar. It's actually a real guitar here. So, but I thought, you know, everybody is really excited about each of our speaking gigs, so I thought we would just kick it off here. Let me just see if it's in tune. (guitar strum) You guys hear that? Oh, okay. All right. Was that... I think we got it. << Kumbaya, my Lord. Kumbaya. >>

Chamath Palihapitiya 2:22 (laughs)

Jason Calacanis 2:23 << Sax is interviewing Putin, my Lord. Kumbaya. In the dictator lounge at noon. Kumbaya. >>

Chamath Palihapitiya 2:35 (laughs)

Jason Calacanis 2:35 << Conquering Europe. Kumbaya. >>

Chamath Palihapitiya 2:40 (laughs)

Jason Calacanis 2:40 And now I'm gonna... There's a little audience participation in here, besties. I need you each to sing with me.

Chamath Palihapitiya 2:46 Okay.

Jason Calacanis 2:47 It's a... We're gonna start here. It's gonna be... Just listen one time and then you're gonna repeat. Okay? Here we go.

Chamath Palihapitiya 2:52 (laughs)

David Sacks 2:52 (laughs)

Jason Calacanis 2:53 I try, try to keep it together. << Oh, Davos. Kumbaya. >>

Chamath Palihapitiya 2:59 (laughs)

David Sacks 2:59 (laughs)

Jason Calacanis 2:59 So just, "Oh, Davos. Kumbaya." Ready? Three, two. Oh, Davos. Kumbaya.

Chamath Palihapitiya 3:05 Oh, Davos. Kumbaya.

David Sacks 3:07 Oh, Davos. Kumbaya.

Jason Calacanis 3:08 Okay. Very good, very good. Okay. Now we go to the next verse here. << Chamath's in Luaropiana. Kumbaya. >>

Chamath Palihapitiya 3:18 (laughs)

David Sacks 3:18 (laughs)

Jason Calacanis 3:18 << Hosting Steve Bannon at 1:00 PM. Kumbaya. >>

Chamath Palihapitiya 3:23 (laughs)

David Sacks 3:23 (laughs)

Jason Calacanis 3:24 << Friedbergs at 2:00 PM. Kumbaya. Billionaire bunker panel. Kumbaya. >>

Chamath Palihapitiya 3:35 (laughs)

David Sacks 3:35 (laughs)

Jason Calacanis 3:35 << Thiel just bought one. Kumbaya. Hunter Biden after-party at 1:00 AM. >>

Chamath Palihapitiya 3:46 (laughs)

David Sacks 3:47 (laughs)

Jason Calacanis 3:47 << Eight balls and escorts for everyone brought to you by Barisima. >>

Chamath Palihapitiya 3:51 (laughs)

David Sacks 3:52 (laughs)

Jason Calacanis 3:52 That's for you, Sax.

Chamath Palihapitiya 3:53 (laughs)

David Sacks 3:53 (laughs)

Jason Calacanis 3:53 And now you all sing. Oh, Davos. Kumbaya.

Chamath Palihapitiya 4:04 Oh, Davos. Kumbaya.

David Sacks 4:05 Wow.

Chamath Palihapitiya 4:06 Fabulous.

David Sacks 4:07 You really are the world's greatest moderator.

Narrator 4:09 What does it mean? To let your winners ride?

Jason Calacanis 4:13 Rain Man David Sachs.

Narrator 4:15 I'm going all in. What's this? And I said we open source it to the fans and they've just gone crazy with it.

Jason Calacanis 4:21 Love you, Betsy.

Narrator 4:22 What's this? Queen of quinoa. I'm going all

Narrator 4:25 in.

Jason Calacanis 4:25 All right, everybody. Yes, the, uh, World Economic Forum is wrapping up in Davos. Uh, if you don't know what the WEF is, I'll just give you the brief overview. 3,000 people, five days. Tons of parties. Happens in Davos, Switzerland. It's run by a foundation. Uh, they call these non-government organizations, NGOs. Uh, I can think of it kind of like the TED Conference. Topic this year was Rebuilding Trust. It's politicians, business leaders, economists, journalists, all the elites. The mission statement of the WEF, improving the state of the world by engaging business poli- political, academic, and other leaders of society to shape global, regional, and industry agendas. It's a money-printing machine. I'll give you a funny backstory later if you care to know. But basically they try to shake you down for about 40 grand a year to go to this thing. Tons of notable moments that we can get to on the docket here. Friedberg, any highlights for you watching this, you know, get mocked on social media? This year, it's, it's been a slow unraveling from this being something that people used to flex about, going to Davos. Now people are literally apologizing on social media, X, Twitter, et cetera, explaining why they're going, because they're kind of feeling shame in going to this event. So what, what are your thoughts on the sort of whole flipping of this from being a flex to requiring an apology in advance?

Chamath Palihapitiya 5:49 You guys know Andrew Ross Sorkin, the journalist for CNBC? I think he posted on Twitter, you know, "I know, I know. Forgive me. I gotta go to Davos." It's almost like embarrassing now that you are associating yourself with the elite cabal in the Swiss Alps-... during a time of rising global populism and all the criticism that's been rained down on Davos in the last couple of years. And then Davos is trying to adapt by trying to be more cool and appeal to the, the populist notions, uh, that have criticized them, thus the flute playing-

Jason Calacanis 6:25 (laughs)

Chamath Palihapitiya 6:25 ... thus the shamanism. You know, and, and thus, I think, a lot of what Javier Milei has called a general economic support for what he defines as collectivism, which I'd love to talk about, but wh- why don't we just say that? So I think-

Jason Calacanis 6:38 Yeah.

Chamath Palihapitiya 6:38 ... there's generally been, like, a response from the community that attends Davos, but there, there's a lot of conflict here with the fact that folks are flying in on private jets and telling everyone to stop producing carbon, the fo- the fact that they're all dining and spending lots of money and telling everyone that we should move to more, towards socialist conditions and higher taxation. It's all a lot of irony wound up in this whole thing. It's almost like a, like a, like a Simpsons show, is, is what it's become.

Jason Calacanis 7:02 Well, and the theme, rebuilding trust, is kind of insulting at its face, at least to me. Like, "W- we don't trust you." (laughs) "You don't need to rebuild trust with us, we're not going to trust you. There's no way for you to do that, especially after what happened with COVID." Sachs, did you have any sort of reaction to this year's Davos and just how people are reacting to it? You heard Freberg's sort of thoughts on it.

David Sacks 7:28 Well, Davos has become a parody of itself, and that's why you saw these clips go viral of these ridiculous antics of the priestess doing, I don't know what she was doing. But the only two sets of remarks that actually were taken seriously on their own terms was the speech by Milei from Argentina, and then also comments by Jamie Dimon. And the reason why they went viral is because they were actually saying sensible things that contradicted the sort of established wisdom or consensus at Davos. I mean, they were effectively subtweeting the other elites at Davos. I mean, Milei gets up there, and I think he's introduced by Klaus Schwab, and he immediately starts denouncing collectivist experiments and says that the West is in danger because its elites have been co-opted by a vision of the world which leads inexorably to socialism and thereby to poverty. So Milei basically says this right in front of Klaus Schwab. I mean, he's describing the, the people at Davos. That's why that took off and went viral.

Jason Calacanis 8:34 It was incredible. I mean-

David Sacks 8:35 Yeah.

Jason Calacanis 8:36 Yeah.

David Sacks 8:37 In a similar way-

David Friedberg 8:38 And he flew there commercial.

David Sacks 8:40 (laughs) I didn't know that.

Jason Calacanis 8:42 Yeah.

David Sacks 8:42 Yeah, kudos to him. Jamie Dimon gave this interview, I think it was on CNBC, where he basically went full Chamath. You know, he basically admitted that Trump had been right and that, you know, a lot of the criticism of Trump and all the derogatory comments for years were, were basically just lazy. And he said that, you know, Trump was largely right on NATO, on immigration, on tax reform. He grew the economy well. He-

David Friedberg 9:10 Immigration.

David Sacks 9:11 ... immigration. He was mostly right on China, he said. Dimon said he didn't always like how Trump said things-

David Friedberg 9:18 Said things.

David Sacks 9:18 ... or talked about people, but he said his policies were largely sound and only looked better in time since we've abandoned them. And, and he's basically saying that, you know, "Look at where we are right now," and he questioned the kind of everything is hunky-dory narrative that the Biden campaign is pushing out. So he really went off script there and, like I said, I think Chamath said it first here on this pod three months ago, and now Jamie Dimon is, is accepting that. So that was a huge subtweet, you could say, of all the elites at Davos and the accepted wisdom and, you know, the narrative that they're all pushing out. So, you know, that was the other big interview that went viral, and I think that's really saying something. That, you know, that the elites now have parodied themselves to the point where Davos has become a joke and the only talks or remarks out of Davos that people pay attention to are the ones talking sense to the people at Davos because they're not listening.

Jason Calacanis 10:22 Chamath, your thoughts?

David Friedberg 10:23 Look, everything has a season, and I think that when there was a much more singular hierarchy of status, Davos played a very important role to signal to other people that you had made it. But, you know, these things come and go, and I think that this is sort of in the back half of its usefulness and half-life. What, is it probably more than anything else now? A glorified enterprise software sales conference where the reason to go to these conferences, for a lot of these companies, I suspect, is that it allows you to close very big deals, multimillion dollar licenses of this, that, and the other thing, where you can get the leaders of that counterparty across the table from you and hammer out a deal. And I think you pay 40 grand a ticket for the right to get everybody together to do that. So I think they want to pretend that it's a lot more than what it is, and I think what it is is that. And I think whenever you have the ability to convene people to close business, that's valuable. Beyond that, I think it's sort of in the eye of the beholder, and it used to be that the beholder thought that this was important, and now I think we realize it's much of nothing. It's shaman and air flutes and all kinds of stupidity, which is why people have the courage to go and mock it. And I think that Milei's comments and Jamie Dimon's comments exemplify that. The only other thing I would say is that I had heard, although I haven't seen it so I don't know, is that Alex Karp apparently did a very thoughtful speech about antisemitism, and-

Jason Calacanis 12:01 He did, yeah.

David Friedberg 12:01 ... which was also, which was also very counter-cultural to the established logic that the, the surplus elites at Davos want to believe, which is the anti-Israel, pro-Palestine line. I haven't heard it though, so I don't know-

Jason Calacanis 12:14 Yeah.

David Friedberg 12:14 ... how impactful that was.But those are the three things that I, that I've just seen on Twitter, just kind of ...

Chamath Palihapitiya 12:19 The Milei speech, I think is the one that everybody is keying on and, and correctly so. You know, obviously he's the, he's the new president of Argentina, and this speech was amazing. I- people might not, people mi- might not also know that he was a, an economics teacher. And so this talk about collectivism leading to suffering and regulatory capture and bloat, which we'll talk a little bit about when we talk about Boeing today, was incredibly powerful. It's super basic, you know, like listen, free markets work. There are people opting in to either side of it. He went over essentially without saying it, the Rule of 72, and like 200 years of GDP growth and how GDP growth under capitalism rises everybody up, and then collectivism, AKA socialism is a bit of a disaster. But it's well worth watching it. There was a really cool thing that a company called HeyGen did, H-E-Y-G-E-N, with their AI tool, they just immediately took his speech, put it in his own words and, um, published it and translated it as if he was speaking English, 'cause he was, he was speaking in his native tongue. So really worth checking it out and, yeah, it was super notable. It's pretty basic but it-

David Friedberg 13:33 I think-

Chamath Palihapitiya 13:34 ... I think it's everybody wants to hear this right now which is, if you're picking collectivism and socialism and redistribution of wealth, Ar- Argentina has like a really good history of watching this fail, and now they're in the process of dismantling it.

David Friedberg 13:49 And I'll say something else before Friedberg says something here, which I think is gonna be very thoughtful. Jason, the other reason why Argentina's a really good example to use is that, what does Davos represent at a different level? Well, what it is, is old Europe getting together in a way that allows them to continue to coalesce power. And what's interesting is, if you had presented the case of any other country trying collectivism and failing, it wouldn't get nearly the same attention as Argentina, and the reason is that Argentina has so many ethnic Europeans. And I think that's another reason, which is like when you present people that are telling you it didn't work that frankly look like you, speak the same language as you, I think it actually goes further in making the point than if you found somebody in South Asia or Africa that said the same thing to these folks, which they have, which they've not listened to. And so this is why I think Milei is so interesting and important because he looks the part of a Western leader. And I think that that, unfortunately, is what it's gonna take for some of these folks to listen.

Chamath Palihapitiya 14:56 Yeah, and everyone's acutely aware. I mean, I'll say three things on this. One is just talking to your point, Chamath, about the history of Argentina and how it relates to this position that Milei holds in being able to speak credibly to this. Second is what he said, which I think is really important. And third is how it relates to the United States. But this was clearly, to my, from my view, one of the most important media events of the year. I do think that anyone that's listening to us right now should go watch it and go listen to the entirety of the speech. It is so important. I hope everyone really takes in what he said. Just briefly on Argentina, in the mid-19th Century, Argentina was a colonial nation, very agricultural but a lot of free market pioneerism going on. Businesses were built and an economy flourished in Argentina. Um, this photo I put up here is from 1913, uh, Buenos Aires, which at the time was called Paris of the West. I was about to say, it looks like Paris, right? The architecture- Yeah.

David Friedberg 15:50 ... and everything, it's beautiful-

Chamath Palihapitiya 15:51 And, uh,

David Friedberg 15:51 ... and stunning.

Chamath Palihapitiya 15:52 But here's, here's some statistics a lot of people don't know. Argentina at this time was wealthier than France or Germany, twice as wealthy as Spain, and had one of the top 10 highest GDP per capitas of any nation on Earth in 1913. And so it was this flourishing, vibrant economy with, uh, a lot of innovation, a lot of arts, a lot of building, a lot of, um, employment, uh, a lot of immigration. And then, uh, as the series of military coups began, I don't know if you guys are aware, but there was a military coup in 1930, 1943, 1955, 1962, 1966, 1976, and in every one of these cases, the essence of the coup was one of relativism, which is some people have benefited more than others, as a result, we need to change the way that the government and the social structure is functioning, and it had to be taken by force. And I think this is the big story of Argentina that says so much more than any other nation of the past century, century and a half, which is that these cycles happen based on not absolutism but on relativism, and I'll just give you what I mean by that. Milei made this point which is so important. From the year 1800 to the year 2020, in the year 1800 we saw 95% of the world's population in extreme poverty. By 2020, it was less than 5%. And this was driven by free market capitalism democracies that allowed people, individuals to pursue their own self-interest, and as a result, deliver products into a marketplace that people wanted and were willing to pay for, and that incentive, that market-based system allowed the entire world to move forward. The relativism problem is that some people moved forward faster than others, and that causes this great cycle of what some people might call envy or jealousy. And Milei said it best, "The West is in jeopardy," which is the key statement he was trying to make in his point, that countries are no longer defending free markets. This is a quote. "Private property and other institutions of libert- libertarianism due to errors in their theoretical framework and ambition for power, opening doors to socialism and condemning us to poverty, misery, and stagnation. Socialism has failed in all countries where it was attempted." And then he started to harp on about neoclassical economic theory and the issues with that. But I wanna show you one last image which speaks so clearly to the point that he's making, which is as these governments that are well-intentioned...... and the people that elect the governments and put them in power are well-intentioned, then try to redistribute wealth by getting the governments to step in and play a market role, the market role that they play causes inflation, causes degradation in economic opportunity, economic mobility, and prosperity for most people. And you can see this in this chart, which we've looked at many times, but everything on the top of this chart... This is a chart that shows the 20 years of price changes of various goods and services in the United States. Everything that's gone up in price is something that the US government has a role in buying or paying for.

Jason Calacanis 18:56 Yeah, controlling, yeah.

Chamath Palihapitiya 18:58 And everything that's gone down in price is where there is a free market that has allowed people to access goods and services at a lower price over time as opposed to a higher price over time. And while the intention is that the government is doing good for people by making education, healthcare, and other, uh, goods and services available to them, the government stepping in and intervening in the free market causes the price to go up. And ultimately, you end up in a really negative cycle that resolves in this collectivism approach that he's talking about. And that's why I just wanted to tie back what he said to what's going on in the US today. And the gr- and I've harped on this a lot, but the growing role that the federal government is playing and the intention is good, but the impact is bad over time. And that's really, uh, I think why it was such an important speech. He was so clear. It was so important for me to hear it. I'm sorry I harped on, but I just really-

Jason Calacanis 19:46 No, it's, it's-

Chamath Palihapitiya 19:46 ... thought that was the highlight.

Jason Calacanis 19:47 ... the key of his speech is, hey, good intentions can lead to, to a bad outcome here. Yeah, you want everybody to have healthcare. You want everybody to have education. The government is providing it, and there's no customer and there's no market, there's no competition. And the products and services that you are referring to, they include medicine, they include college, they include tutoring. They, they don't just incl- and they include air conditioning, they include refrigerators and televisions, smartphones, all of that. And, um, picking which system and which set of problems you wanna have, I guess, is what societies need to do and, and free markets, yeah.

David Friedberg 20:20 It's a weird reflexive loop though for governments because these people... What he also said was these aren't just well-intentioned people, they're also a small class of elites that wanted to feel like they were better than everybody else by implementing things that worked. And so there is a dark part of this as well, which is their desire for power, and I think it's important to not gloss that over. So this wasn't just a bunch of bumbling do-gooders that screwed things up. This was also a bunch of folks that, that irrespective of the data had an opportunity to gain influence and power. And I think that that's, that's an important thing to acknowledge because it created a very negative reflexive loop that governments used. Meaning if you look at Friedberg's charts, why did that happen? Well, part of what happened was the administrative state became more and more powerful. They were able to pass laws. They were there to decide who the winners and losers were. That is a drug, and that drug is very addictive. And so what happened as this happened was the laws went and reinforced those dynamics of those people being able to decide winners and losers. The thing that it has that has not happened yet though, and we're maybe we're beginning to see it in some of these markets that the government is too involved in, is that it has bred a level of incompetence and incapability that we now have to unwind because the average everyday citizens' lives are either at risk or these services are just so expensive that it's just untenable, and I think that's where we are now.

Jason Calacanis 21:52 It's a great

Jason Calacanis 21:53 segue, I think, into this Boeing issue that we've seen because here's an issue of regulation and safety where you want the government and you want safe planes and, and you want some level of regulation, but then you get regulatory capture, so maybe you-

David Friedberg 22:04 But the government, the government has not been the supporter of the safety agenda that citizens think.

Jason Calacanis 22:10 Yes.

David Friedberg 22:11 Meaning when you look at what has happened in the US airline industry, there are a handful of end user providers, but those are all using OEM equipment from one of two vendors, Boeing or Airbus. So it's a duopoly, but in many ways, it's a monopoly the way that these folks fight with respect to tariffs and imports and incentives. So the United States airline industry is a monopoly of one company. Now, if you look at what's happened, what they would say is, well, planes have become safer and safer and safer. Yes, but they've become safer in some ways, in, in the most simple and obvious ways, but they've become unsafe in that you have these fleets of planes that are now behaving very unpredictably. And if you look under the hood, what happens is Boeing, as an example, in like the last four years, how much money do you think they've spent on lobbyists and PACs? I'll tell you, $65 million. How much have they spent just in the last year? Almost $11 million. They're like the 15th most active spender in, in politics in Washington. Now, what did they use that money for? Well, that's also documented. See, the crazy thing is this stuff happens in plain, in plain sight. So they were able to water down the safety regulations. What does that allow you to do? It allows you to have a situation like this unfold, and then on the other side, the pilots unions can lobby those same politicians who are taking money from Boeing and prevent systems that would actually make these planes safer. You can have more improvements in the guide by wire technology. You can have more improvements in GPS. You can have more improvements in a computer's ability to help improve and augment the capability of the pilot. Unfortunately, that would result either in fewer pilots or less pay, and so that doesn't happen nearly as fast and obviously as it should. It's the same for air traffic control, and all of these issues build up because we've allowed monopolies to build up. So as much as we think we are a capitalist society, we have veered...

Chamath Palihapitiya 24:20 ... into this collectivism in certain markets. And where it's measurable and obvious, we need to point at it and say, "Let's go fix it."

Jason Calacanis 24:26 Yeah. And, and this would be a... Let me just tee up a little bit of what you're referring to, in case people don't know, but everybody probably saw the news that on January 5th, the door blew off of, uh, one of these Boeing 737 Max jets. If you've heard that name before, it's because this isn't the first time that the Max jets have had problems. This plane safely landed, thank God, and there was nobody sitting in the row where the door blew off. And this has to do with some bolts on the doors. But this is just the start of problems with the 737 Max. I- There's an incredible documentary if you haven't seen it. We'll, we'll put it in the, uh, show notes, Boeing's Fatal Flaw. And the version before this, the 737 Max 9 is the one that had the, the bolts come off, Chamath. The Max 8, if you remember, there were two really harrowing, uh, instances where tragically 346 people died in these two instances because-

Chamath Palihapitiya 25:15 That's right.

Jason Calacanis 25:16 ... the plane, literally the software on the plane, which is called Max, um, Maneuvering Characteristics Augmentation System, which was designed because they were trying to get more fuel efficiency and they had positioned the engines in a weird way on, on the wings, so they had to kind of help pilots, uh, level the stuff. And to your point about regulatory capture, there was all this behind the scenes manipulation of the market to try to get these planes built, to try to get them out the door because there was so much money at stake. Well, on these two terrible accidents, the plane, the nose literally dove and the pilots were fighting it in both cases.

Chamath Palihapitiya 25:54 Right.

Jason Calacanis 25:54 They, they just crashed and, and everybody on board died. And for 20 months, the, the 737 Max models were grounded, and, uh, that cost the company over $21 billion. So-

Chamath Palihapitiya 26:06 Look, the-

Jason Calacanis 26:06 ... there is no competition, to your point. And then in a free market, if there were 10 providers, would this be much different, Chamath, and-

Chamath Palihapitiya 26:12 Absolutely.

Jason Calacanis 26:13 Yeah. So I think that's what you have to realize here is that these duopolies, you'd think there's competition. In a duopoly, there isn't competition.

Chamath Palihapitiya 26:19 No, I mean, like, for example, like if you look at the car market-

Jason Calacanis 26:22 Yeah.

Chamath Palihapitiya 26:22 ... how many instances... I think the last big incidence that I remember was, I think Ford had an issue with the fuel tanks of some cars that were exploding, right?

Jason Calacanis 26:30 Yeah.

Chamath Palihapitiya 26:31 But the reality is when that happens, there are alternatives. One is that there's legal requirement for Ford to just fix these things quickly. There were lawsuits that happened, there was class actions, there was settlements, but there's also the ability for folks that can afford it is just to switch vendor, and of which there are 50 other vendors to choose from. That is a healthy dynamic. So today, when you look at the auto market, what do you see? A plethora of choice. And when you see fatalities or safety issues, they are overwhelmingly driver error.

Jason Calacanis 27:03 Yes.

Chamath Palihapitiya 27:03 And we assume that, and we get insurance to deal with that. When you look at airplanes, you have these three sections of risk that each are compounding because there is no competition. Number one is that the monopoly vendor has zero pressure to actually test these things adequately. Because on the other side of building something well is shareholder pressure to deliver something sooner and faster so that they can reap more profits. Then second is you have a regulatory infrastructure that puts rules on top of rules, but then will bend the rules if you donate to them.

Jason Calacanis 27:38 Mm-hmm.

Chamath Palihapitiya 27:38 Right? And that's measured and known. And then the third are the folks that actually operate the planes who have this actual incentive to not see technical improvements because it defends their job for longer. And in all of these cases, there isn't enough competition to shine a light on this to say, how does society actually want this market to operate? This is collectivism. It's not working.

Jason Calacanis 28:02 Freyberg, do you have thoughts on this Boeing regulatory capture and the issue of only having two vendors there, and the complexity of these machines now i- in relation to that?

Chamath Palihapitiya 28:13 Nick, you can pull this up. This is an audit of the business model for a company called TransDigm Group. TransDigm Group is a aircraft aerospace parts manufacturer. They sell certified regulated, uh, aircraft parts to aviation companies as well as to airlines, private pilots, and also the government. And they do about 7 billion in revenue, three and a half billion in EBITDA. So Chamath, to your point a couple weeks ago about what's the (laughs) appropriate competitive EBITDA margin that a company can ultimately achieve, their EBITDA margin's 53%, this company.

Jason Calacanis 28:54 Insane. Better than Facebook. Insane.

Chamath Palihapitiya 28:56 On 7 billion of revenue and growing. Nick, if you wanna pull up their stock chart, and you guys can see how the business has performed over the years. And their business model has been relatively simple. They've acquired aerospace companies, got... that have certified parts, they drop the cost and raise the price. And (laughs) they do that over and over again, and here's the business over the last 10 years. This thing is, um, you know, a roughly 10 bagger, eight to 10 bagger in the last 10 years. The market cap is 60 billion today. No end in sight. And so there was a government audit done of the business. By using uncertified cost data, which is one of the most reliable sources of information to perform cost analysis, we found that TransDigm earned excess profit, profit of at least $21 million on 105 spare parts on 150 contracts. So they're selling spare parts into the government. The government auditor came in, audited them, and identified... Because there's no real audit, there's no real accountability in government as purchasers, but there is regulatory authority on deciding who are the winners and who are the losers in the market. TransDigm has been elected a winner because they have regulatory approval to make and sell these parts. The cost to get approval to make and sell these parts is so high that it makes it prohibitive for startups to come in and compete in this marketplace. And now that they're a preferred supplier and they get these single contracts where there's no competition, uh, to be a supplier, they can raise the price every year.... multiple audit reports over the last 23 years have highlighted the problem of the Department of Defense paying excess profits on sole source contracts where cost analysis was not used to determine fair and reasonable prices, and this problem continues to occur. Now, I'm not necessarily saying that this is a negative on TransDigm. It's a fantastic business. It's well-run. It's one of the best-run public companies with a multi $10 billion market cap in the world. But the condition is that the US government comes in and picks and chooses through its regulatory authority which companies can make products, the cost to enter and compete becomes prohibitively high, and then the company has complete pricing power and there's very little accountability in the overall system. And I think that this plays out not just with this company, but obviously also with Boeing and the fact that we've narrowed down the competitive market space to just a few sole source providers that have very little accountability and eventually these sorts of conditions arise. Either prices get too high, quality degrades, all the other things that natural market forces would keep a check on.

Jason Calacanis 31:18 Yeah. And in- in terms of competition, Chamath, the, I guess, the only thing you could say is consumers could potentially maybe try to avoid the 737 Max. I know I did when all these accidents happened. I just told, you know, my- my person who books the flights, "Hey, d- do not put me on a 737 Max." Period, full stop. And you know what? You're gonna wind up paying a lot more, you're gonna have a hard time getting certain routes, you're gonna reduce it because, you know, most airlines, I think, have these 737 Maxes in their- so you- when you have such a few number of providers, to your point about it's not like cars, it's not fragmented like that, you can't avoid a certain car type, a plane type the way you can avoid a car type, so... Just wrapping up here, Chamath, what changes should we see in terms of late-stage capitalism, something in the example like air travel and- and manufacturers? Is there any way to unwind this reasonably, or is it too late because w- we're at this ...

David Friedberg 32:16 Well, I- I- I- I go back to some of the examples that we've made fun of before. Y- y- you have to rely on the government to actually be competent in key moments and time. I think this is one of them. The organization that could do something about it, for example, take the FTC or even take the DOJ, you know, we are investigating Amazon's purchase of the portable vacuum cleaner, Roomba, right?

Jason Calacanis 32:46 C- critically important issue. (laughs)

David Friedberg 32:48 And that is apparently, for the American people, higher than the sclerosis that the government has enabled, enabled, in the airline industry which affects everybody. So could the right government agencies choose to actually focus on something important here and actually figure out, "Hmm, why is this happening?" Because I think the door plugs issue is endemic of a much bigger problem. This is a company that's rotting because there is no accountability, and the reason there's no accountability is there's no real functional competition. And I have not seen any good answer to accountability other than competition.

Jason Calacanis 33:30 Yeah, I mean, the- the good news, uh, is the FAA really took quick action to ground these 171 Boeing 737 Max aeroplanes.

David Friedberg 33:41 But they don't- they do not understand the scope of the problem if they let them back in the fleet and this is happening.

Jason Calacanis 33:46 The bigger picture problem of lack of competition, yeah. They- they are-

David Friedberg 33:49 No, no, no, my- my- my point is-

Jason Calacanis 33:50 ... tasked with the safety of these, yeah.

David Friedberg 33:52 My- my point is, like, you have to adjudicate the interaction of very complicated hardware and software in that first go-around. Here is just a pure systemic hardware failure. So the point is that whether it's them or their suppliers, there's just a- some complacency that sets in when you know you'll always have the business, to Friedberg's point. It is a very corrosive thing in running a business trying to have motivated employees when they know on the back end of it that they could make anything in the world and they'll just be able to sell it to somebody and they'll have to take it. That's that example that Friedberg just cited, $20 odd million for just random stuff, for, what is it, 15 pieces? That's crazy. That's just straight-up theft. And so when you have that, how do you expect the employees of that organization to give a (beep) ? I don't see how- I don't see how you could expect that. And so my point is the FAA has a much bigger problem. So for example, like the DOE has a loan program to try to create a diverse energy infrastructure in the United States, maybe we need to look at some of these sectors and instead of building the administrative state, take some of that money instead and just create programs to get more competition.

Jason Calacanis 35:15 All right, in other news,

Jason Calacanis 35:16 Adam Neumann, you remember from WeWork infamy/fame i- has a new startup, you may have heard of it, Flow. They've raised a ton of money. He started buying a bunch of apartment buildings. The idea, people can rent nice apartments in cool cities that focus more on social interaction and hanging out, w- common spaces, all that great stuff. And there's also allegedly or reportedly some sort of rent-to-own where renters can receive equity in the company over time and I don't think this has ever been released, but the idea would be maybe you own shares in Flow. Flow manages around 3,000 units, most of which were purchased by Neumann after he left WeWork and, you know, he took down a windfall as an exit package. And so according to The Real Deal, it's a real estate publication, Neumann had a 60 million variable rate mortgage on, uh, one of these properties in June. Sax, maybe you could explain to us what's going on here since you have a lot of experience in real estate.

David Sacks 36:12 Well, it's pretty simple, he can't make his interest payments.

Jason Calacanis 36:14 (laughs) Okay, so-

David Sacks 36:16 The reason is, is 'cause he had floating rate debt. So if he had locked in his debt over, say, 10 years back in, when he bought this building in 2021 or whenever it was, when interest rates were-... extremely low. You know, that was during the, the ZIRP period. He probably could have locked in long-term data at maybe even 3%, three or 4%. And instead, he got floating rate debt. And if you look at where commercial debt is now, I mean, it's 7, 8, 9%, if you can get it, which is pretty hard. So he maxed out on debt when he bought these buildings. He bought them top of market, it sounds like, in 2021 because real estate, like a lot of things, moves inversely to interest rates. So when interest rates spiked over the last year or so, then real estate evaluations went down. So he bought a bunch of buildings top of market using a lot of debt that was floating rate, interest rates spiked, perfect storm, now he can't make his interest payments.

Jason Calacanis 37:15 The crazy part about this when I was watching it happen, Chamath, and we talked about it, I think, on the program at the time was Andreessen Horowitz put in, like, over 300 million at a billion dollar evaluation, but they didn't do that in peak ZIRP. They did that in 2022 when the writing was on the wall. What are, what are your thoughts on why they would make a, a bet like that and, uh, yeah, just tech VCs betting on real estate for a second time? How does that occur?

David Friedberg 37:41 Well, I don't think it occurs because they cared about real estate. I think it allows them to take $300 million of committed capital and put it out there so that they're $300 million less available, which means that they're $300 million closer to raising a new fund-

Jason Calacanis 37:58 (laughs)

David Friedberg 37:58 ... which means that they can raise, they can charge 2% on more money. That's why they did it.

Jason Calacanis 38:02 Got it.

David Friedberg 38:03 Yeah.

Jason Calacanis 38:04 So just-

David Friedberg 38:04 (laughs)

Jason Calacanis 38:04 ... keep the money train deploying capital. It's a place-

David Friedberg 38:07 Yeah.

Jason Calacanis 38:07 ... where you can put a big huge check and you can raise your next fund and, you know?

David Friedberg 38:11 Yeah. Why not?

Jason Calacanis 38:13 Yeah. Okay. Well, there you have it. (laughs) I mean-

David Friedberg 38:15 Let me, let me, let me offer a-

Jason Calacanis 38:16 I mean, I, I, I don't-

David Friedberg 38:17 ... counter a-

Jason Calacanis 38:17 ... disagree. I think that candidly what you've said is exactly how mega funds are thinking about it. We have to deploy capital to raise our next fund, and if we still have capital in our last fund, then we can't deploy.

David Friedberg 38:27 But Jason-

Jason Calacanis 38:27 Go ahead, Friedberg.

David Friedberg 38:27 Wh- If you're gonna have to deploy large amounts of capital, wouldn't you feel better deploying that capital with an entrepreneur who's actually run a big business before even though the business failed? No, no, no, if you're-

Jason Calacanis 38:40 Does-

David Friedberg 38:40 ... if you're, if you, if you were not optimized for fees, you would do what Peter Thiel did and just have the fund and return the money.

Jason Calacanis 38:46 Right. He, and for, for, for the-

David Friedberg 38:48 Peter Thiel does that-

Jason Calacanis 38:49 ... by the way, for those-

David Friedberg 38:49 ... because he's already won. But for everybody else-

Jason Calacanis 38:51 (laughs)

David Friedberg 38:51 ... that's trying to win, the only way to win in a world where your, your exits are not that great is to actually generate money via fees. Even though that fees are taxed at current income, that's the way to win in venture. It's not carry, it's by fees. And so it's, uh, and, and I, and I don't blame Andreessen. I think, like, that's, that's smart for them to do. And if they have folks that are willing to enable that by giving them money, they should do it. But are they gonna generate huge rates of return? Probably not because that's not what real estate is known for. Real estate is known for long, steady tax ARBS that slowly compound for the, for the owner of the company over 20, or, or the owner of the business over 25 to 35 years. That's not what a venture fund is supposed to be doing for a 10-year, 12-year return cycle. So obviously, they're doing it for fees. That's okay. I think that's capitalism.

Jason Calacanis 39:42 What do the LPs then think, Sacks? If we look at this, you know, you're an LP in a technology firm, I'll take Andreessen out of it for a second, but let's just say some giant LP gives giant amounts of money to a venture capital firm, and then they're deployed in real estate, what happens, you know, in their minds? And is there any kind of tension that would occur-

David Sacks 40:02 Well-

Jason Calacanis 40:02 ... just hand in hand in this situation?

David Sacks 40:04 ... y- you can never judge a VC based on one investment. If we were to do that, every VC would have a lot of egg on their face because we're supposed to take big swings and swing for the fences and try and hit home runs and grand slams, and a lot of them are gonna make you look foolish. You have to look at an investment portfolio and track returns over time. So I wouldn't judge any particular investor based on one investment. So I don't think that's fair. Now, in the case of this investment, if you want me to explain what I think went wrong, I think Adam Neumann had a compelling vision. His vision was to create a new experience in, in, I guess, you'd call it apartment living, and that people would be willing to pay more for that because he would create this national brand in apartments. And right now, apartments are super local and there's, there is no brand i- in, you know, apartment living. So I think as a entrepreneur, as an operator, he had a, a great vision, and I think he actually achieved his vision. If you read these articles carefully, what they say is that his occupancy was high and people were willing to pay at least a little bit more for the experience of being in a Flow apartment. The problem for Adam Neumann is that at the end of the day, his plan to raise rents by creating an experience, even though it worked, it just didn't raise rents that much. And what ended up being much more important were the moves in interest rates and how he capitalized these acquisitions and the price he paid on the acquisitions. So there's an old saying in real estate that you make money based on the buy, not on the sell, meaning that, you know, when you go and sell your apartment building or office building or whatever, you're monetizing an acquisition that you did correctly. And if you don't buy at the right price, you're never gonna be able to make money on the sale. And I think this is a really good example of this where he bought at top of market, his capital stack was over reliant on debt, and he had floating rate debt. I mean, those are just financial mistakes and timing mistakes that you can't make up for, no matter how good an operator you are in real estate. And in a way, I mean, this is the same thing that happened with WeWork, which is he delivered an excellent product. I mean, people love WeWork offices.

Jason Calacanis 42:21 Absolutely. Yeah. They, they pick them over other offices because of the vibes, because-

David Friedberg 42:27 Yeah.

Jason Calacanis 42:27 ... of the culture, because of the community. So he, he is a ma- he has some mastery of that, but to your point-

David Friedberg 42:32 Right.

Jason Calacanis 42:33 ... entry price matters and the economics matter.

David Friedberg 42:35 Well, he is-

David Sacks 42:35 If you look at WeWork, it didn't fail because the product wasn't good. It was because he didn't pay enough attention to the financial-

Jason Calacanis 42:42 Yeah.

David Sacks 42:42 ... aspects of the business. With WeWork, he leased a bunch of offices at the absolute top of the market, and then over-invested in TIs, tenant improvements. With Flow, he bought a bunch of real estate at the top of the market, and sort of did it with the wrong capital stack. So, this is the problem, is that when you get into a real estate business, it doesn't really matter how great you are as an entrepreneur or operator if you're not good at, like, sort of the legacy, old school real estate part of it. And the, the old school real estate guys were, were saying during WeWork, "This is not gonna work." You know?

Jason Calacanis 43:17 Yeah.

David Sacks 43:17 "This is, this is regis, but with a bad capital structure." And the old school real estate guys were saying something similar about this. And, you know, it just goes to show that if you are gonna try and disrupt a legacy industry, you do have to kinda understand the ins and outs of, of that legacy industry.

Jason Calacanis 43:34 And the great paradox of this, Sacks, was when he did GreenDesk, which was the precursor to WeWork, when he did the first WeWorks in San Francisco and other places, his playbook was, "Find a building that's empty that cannot be leased." So he got 25 Taylor Street, like 6th and Market, the worst area by the Tenderloin. And we had an office there for a little bit, and I had my podcasting studio there for a little bit. This was a terrible off- this was a terrible area, but he made it hip and cool, and it was really cheap. And man, it sold out and it was packed and the vibes were great. But then, as you're saying, then he moved all of a sudden to SoMa, and he started opening up these glass-filled ones and, you know, the ... He was renting them for less with all their giveaways and six months free and all the stuff than they could ever afford.

David Sacks 44:18 Right. Well, I mean-

Jason Calacanis 44:19 So, he k- he kinda had mission drift, right? The playbook, they just, they changed the playbook, and it economically was not viable.

David Sacks 44:25 Well, the timing, the timing got really bad. And again, they didn't pay attention to the financial aspects as much as they should. In this case, I think that if he was trying to execute this play today-

Jason Calacanis 44:37 Hmm.

David Sacks 44:37 ... and doing his acquisitions today, he could actually make it where ... He would, he would need a lot more equity, because he wouldn't be able to get as much debt financing. But if he had the equity and could do more of an acquisition based on equity, the prices he'd pay right now would be much lower. And then as interest rates come down, he could ride that wave.

Jason Calacanis 44:54 Hmm.

David Sacks 44:54 He could refi, pull his equity out, and put debt on it that is cheaper as the price goes down. So, there was a way to maybe make this work, but, you know, with real estate, the timing is just so important. Again, your cost basis of when you get in the investment is probably the most important thing in terms of whether you make money or not.

Jason Calacanis 45:15 Did you see this, uh, by chance, the real estate piece in 60 Minutes, the package they did last week, Sacks?

David Sacks 45:20 (laughs)

Jason Calacanis 45:21 It was basically what we were talking about here a year ago. Super compelling, uh, if you haven't seen it. It's basically (laughs) the All In podcast from 12 or 18 months ago. Has anything changed on the field in terms of commercial real estate, or is it just continuing to collapse-

David Sacks 45:34 No, I mean, nothing's changed.

Jason Calacanis 45:35 ... as it has?

David Sacks 45:35 I think that the, all the commercial real estate guys, uh, the s- the sponsors and the deal makers and so forth, they're all kinda hanging on by their fingernails, waiting for interest rates to come down.

Jason Calacanis 45:46 And all the leases are still coming off, right? Like, people are still who had six, seven, eight-year leases that were signed pre-COVID, before all of-

David Sacks 45:53 It depends on the market.

Jason Calacanis 45:54 Yeah.

David Sacks 45:54 I mean, some of the, some of the markets are, are coming back. But again, what this Flow news show, this Adam Neumann news shows, is that you could be fully occupied-

Jason Calacanis 46:06 Hmm.

David Sacks 46:06 ... and you could still default.

Jason Calacanis 46:08 Right.

David Sacks 46:08 And the reason is because of your capital structure. The interest rates-

Jason Calacanis 46:11 Got it.

David Sacks 46:11 ... have spiked up. You're now paying, you know, all of your operating income is being eaten up by your debt service. And the only way to, to make it through that is you, you go to your bank, is one of these regional ba- banks, and you work out a deal to extend. You know, they call it pretend and extend. And they let you hang on there. You'll, like, you know, extend the term of your loan.

Jason Calacanis 46:34 Kick the can down the road, yeah.

David Sacks 46:35 Yeah. They'll, they'll lower your debt payments in exchange for more term, and you just try to get to the other side of these high interest rates. And then once you get to the other side, y- again, you're hanging on, you're not defaulting. That's what everyone's doing. So, if rates don't come down as expected this year, you know, I think the market's expecting 150 basis points of, of rate cuts. If that doesn't actually happen, there's a lot of real estate sponsors who are in trouble. And in turn, there's a lot of regional banks who are in trouble, because they're the ones who made all these loans to these sponsors. So, everyone's trying to, like you said, kick the can down the road.

Jason Calacanis 47:10 Yeah. And, uh, the, the, the 60 Minutes piece also talked about how there's some emergency rezoning going on in New York specifically, where they take the floor plate in the middle, which I think you talked about, Sacks. You know, you have to have windows if you wanna convert to residential. And they just make an empty space, the void they call it, in the middle of the building that, you know, they'll deal with in the future. But they just have this empty space in the middle of the building that's not gonna get used, and then the rest that has windows gets used to be converted into lofts, et cetera, in New York. So, people are starting to think creatively, uh, if people don't come back to office. Okay. Let me ask you a question, just based on that com- the set of comments. Given Adam Neumann's experience as an investor in this space and this general opportunity, wouldn't you rather back a known ... someone who knows and has been through the market and has experience, versus some founder who shows up and has never run a business in this space? I mean, this guy has- I mean- ... more experience than anyone else. ... there's so few ... It's such a great point.

David Sacks 48:05 I don't know about that.

Jason Calacanis 48:06 Well, here's the thing, Freidberg. The, the great point about that is, you don't see a lot of founders who explicitly come out and say, "I wanna build a hundred billion dollar business. I wanna build a giant business." They're so rare that VCs who have a lot of chips, they would like to back those, you know, swing for the fences folks. And so, I do understand why people would back him again. And they've run at it before. They've done it, to some degree. Yeah, so maybe they-

David Sacks 48:28 I mean, yeah, they failed, but maybe they learned.

Jason Calacanis 48:29 ... learned from their mistakes, and this time around, he, he learned from his mistakes.

David Sacks 48:31 Yeah, but this is the exact same mistake.

Jason Calacanis 48:34 So therefore, they made the bet bad. I'm not advocating, by the way.

David Sacks 48:37 (laughs)

Jason Calacanis 48:37 I'm just asking.

David Sacks 48:38 (laughs)

Jason Calacanis 48:38 You know? No, I understand, but to your point, Freidberg, I can understand people want to bet on somebody who is crazy and swings for the fences. This entrepreneur-... clearly does not learn from their mistakes. I think both of those things could be true, right, Chamath?

David Friedberg 48:50 What I would say is that I think that where I've made the biggest mistakes in my investing career is when I confused what I was investing in for one thing when it was the other. And so, when I look back and I had a small dalliance in biotech because I thought, "Oh, this is going to be more computational biology and I understand computation, so this gives me an edge." Turned out I was wrong.

Jason Calacanis 49:14 Hmm.

David Friedberg 49:15 There was another time where I- I've invested in certain sectors of the economy because I thought they were technology businesses, and at best, they were tech-enabled versions of an existing industry. And when I look at those investments, the thing that I got wrong was not listening to the very experienced investors in those sectors and why they passed, and that has caused me no shortage of headache and grief. And so, if I had to learn anything from all of this, it would be that if it looks like a duck and it quacks like a duck, it's a duck. It's not a tech company. And so, if that duck means it's a real estate business, I would talk to a real estate investor and, and wonder to myself why they wouldn't have done this deal. Similarly, you know, when it's a biotech business, I have to ask myself, "Why wouldn't they have done it? They know more than I ever will in this space." And so similarly, I kind of look at this as an example of that, which is, could be a very talented person in an industry. I think just it gets important for us to be very clear and lucid and intellectually honest about what industry that is.

David Sacks 50:24 I think it's a great point. I mean, look, I think whenever you're dealing with a tech-enabled business, which I would define as a more traditional business model with some sort of software layer, you know, on top of it, you have to kind of assess, like, how much of a difference does that software really make at the end of the day? In this case, this is a real estate business with a very thin kind of software/operating/...

Jason Calacanis 50:52 A veneer of technology.

David Sacks 50:53 ... of ex- yeah. The experience layer is a very small part of the overall, let's call it P&L, of this business.

Jason Calacanis 51:02 Such a great point. Sachs, I mean, a perfect analogy would be, like, if you have, if you're taking a flight on United. The United app is delightful now. It's a really good app. I don't, you, this is a commercial airline, it's called United Airlines, Sachs. You pay for one ticket instead of the whole plane, but-

David Friedberg 51:15 Have you been to a McDonald's recently?

Jason Calacanis 51:17 I actually went to McDonald's, yeah. You order through an app now, and there's a big screen.

David Friedberg 51:20 The point is, you walk in there, and it's probably not the McDonald's you knew 15 or 20 years ago. It's not about waiting in line and ordering and, it's, it, that's not how it works anymore. There are still, the point is, is that a tech-enabled business or is that still a restaurant? Well, if you spend a lot of your time intellectually contorting yourself to try to justify why the next version of McDonald's is a tech-enabled business, you're just gonna lose a lot of money. It's a restaurant.

David Sacks 51:45 Yeah.

David Friedberg 51:45 Now, all restaurants need technology. And what you see by McDonald's is, even the oldest and most established are running forward very quickly to implement technology because they know that it creates efficiency, which then flows to the bottom line for them.

Jason Calacanis 52:00 Yeah.

David Friedberg 52:00 So, the reality is that we have lived in this wonderland where we've looked at these software businesses that have 80 and 90% gross margins and imposed that expectation on other markets, and then made investment decisions by trying to justify how that it's a tech-enabled real estate business, a tech-enabled healthcare business, a tech-enabled energy business, without being honest with ourselves that those businesses have, over decades, because of lots of competition, found a consistent and reliable resting place in terms of gross margins far below 80 and 90%. And so instead of willing tech-enabled businesses to be at 80 and 90 and tricking oneself, I think it's more realistic to ask yourself, why aren't 80 and 90% gross margin businesses decaying to 30 and 40% gross margins like every other part of the economy when everything will be technology-enabled? I think that that's a very reasonable question, and I think the answer is, there is no safe space. I don't think you can justify 80 and 90% gross margins in software when you can use a model and whip up a competitor. I just think that we are all going to a place where everything is a tech-enabled version of something.

Jason Calacanis 53:10 Yeah, marketplaces would be a notable exception there with network effects. So DoorDash versus the tech-enabled restaurant. Asset-light marketplaces, you and I, Sachs, have been involved in a bunch of different marketplaces together. Sometimes they're asset-heavy, sometimes they're asset-light. When they're asset-heavy, man, it's really hard to make those businesses work, huh, Sachs?

David Sacks 53:28 Yeah, I mean, I think we should differentiate between gross margin and then the net operating margin or, or, or profit, right? And so, you know, g- gross margin is what is the cost on the margin of providing one incremental unit? And the thing about pure software businesses is that on the margin, you can provision another instance of the product almost for free. I mean, there's a little bit of hosting cost at AWS or whatever. So on the margins, it's, you know, it's like the perfect gross margin business. Um-

Jason Calacanis 53:59 As opposed to a hamburger.

David Sacks 54:00 As opposed to a, a, yeah, a restaurant is gonna have very large costs of goods sold, or COGS. The simple heuristic that I use is just, does this company have large COGS, costs of goods sold, and are they physical world COGS? If they are, it's not a software business. It's, at best, a tech-enabled business. So just look for that. You know, does this business have large physical world COGS? Now, what I would say is, if the COGS are virtual, like, you know, it could be hosting costs or it could be paying Twilio for telephony or something like that, then at least it's still not, like, as good a business because the, the margins aren't as good, but...... it's very scalable, right?

David Friedberg 54:48 Yes.

David Sacks 54:48 Because you're, you're not- you don't have that, like, huge friction of needing to scale up physical world infrastructure or physical world supply chains, that kinda stuff. So I like virtual COGS a lot better, the- or digital COGS a lot better than physical COGS.

David Friedberg 55:03 I, I love it when marketplaces though, I mean, we could speak to that too, you know, when I had Dara on the pod the other week, and when he launches an adjacency, "Hey, we're gonna sell alcohol. Hey, we're gonna sell groceries. Hey, we're gonna add this thing that's right next to the already, you know, portfolio of, uh, of Uber offerings," doesn't cost them much, right? They just have to get the supply side up and running, but they already have the demand side, and I think that's where, like, these super apps-

David Sacks 55:24 Yeah.

David Friedberg 55:24 ... are doing really well, or Airbnb adding, you know, some inventory in a new city that they unlock, right?

David Sacks 55:30 Well, true, true marketplaces are perfect gross margin businesses as well because they don't have physical inventory that they themselves own. What you'll see is with a lot of marketplaces, they'll cheat by buying the inventory themselves, at least to jump start the market, and then selling it.

David Friedberg 55:48 Yeah.

David Sacks 55:48 And so when you see that line item on the P&L, the, you know, that they have real costs of goods sold, you know, "Oh, wait a second. This isn't a true marketplace. They're providing the service."

David Friedberg 55:59 Mm-hmm. Yeah.

David Sacks 56:00 And so again, it's just a way to, like, catch whether the business is truly one of these great high gross margin businesses or whether it's more of a tech-enabled business that's pretending to be a pure software business.

David Friedberg 56:13 Yeah, direct-to-consumer got people in a lot of trouble during the last cycle-

David Sacks 56:17 By the way-

David Friedberg 56:17 ... in venture capital. ... if you look at a lot of these companies, even the best SaaS businesses have seen their gross margins erode by about 15 to 20%. It used to be that best-in-class software business can generate 90, 91%, 80, eight, high 80s to low 90s gross margins. Now that's not true. You see a lot of these best-in-class companies that are in the high 60s, low 70s. So it already just shows you that that pressure has, has come upon the market. And so is it that the software-enabled business goes towards 85 or is it the 85% gross margin business goes towards 30? It looks like it's the latter. That's just what the data says.

David Sacks 56:57 Well, maybe I'm just categorizing certain costs differently than you are. But I don't know why a software business would go all the way to 30, right? Because again, sales and marketing don't count in the gross margin, G&A doesn't count, even R&D doesn't count in the gross margin. It has to be, you know, a unit cost that you can attribute on the margin to that incremental instance of the product. So things like, again, paying Twilio for metered telephony or paying OpenAI for, like, metered API access, all of that is definitely in COGS. And I think some customer support costs, that can be attributed on kind of a per instance basis. That goes in there. But if s- if sales and marketing and R&D and G&A aren't going in there, I mean, I just, I don't know why it would go all the way to 30. I guess I'm just saying that I still think software businesses, and marketplaces for that matter, are still the best kinds of businesses on a margin profile basis. The problem is that there's a lot of fake software businesses or fake marketplaces out there that are pretending to be pure tech businesses-

David Friedberg 58:01 Yes.

David Sacks 58:01 ... when actually they're, they're more like old school businesses that have the veneer of technology.

David Friedberg 58:07 And, I think, to your point, there, like, the trick of saying, "I'm an 80% gross margin business," but having no profitability is then who cares? So-

David Sacks 58:17 Yeah, that's true.

David Friedberg 58:17 ... when you look at the profit-

David Sacks 58:18 That is very true.

David Friedberg 58:18 ... when you, when you look at the profitability of these businesses, again, you'll be in the, the 20 to 30%. That's why when you see companies that are in the high 30s to low 50s, they're, A, very unique, and B, you should expect that there is something fundamentally monopolistic about them. And that is the simplest way to filter out these companies, because in a highly competitive market, you cannot extract those kinds of profit dollars. Cap- capitalism says you can't do that. So you can only do it when, when you have an N of 1 or N of 2 kind of competitive dynamic where there's essentially a mutual detente with your biggest competitor.

David Sacks 58:58 Yeah, it is, it is, uh, a good point that just because you have good unit economics or good gross margins doesn't mean that the business is profitable at the end of the day.

David Friedberg 59:06 It's good. Yeah, it could be totally crap.

David Sacks 59:07 I mean, you can have 80% gross margins and still be losing a ton of money because you've got too much overhead, you've got too much sales and marketing, you've got-

David Friedberg 59:13 Too much churn.

David Sacks 59:15 ... too much R&D. Yes.

David Friedberg 59:15 So you're selling to customers who don't really need it and then they eventually cancel, right? Like, we see that a lot. Look at the streamers, look at the streamers. Yeah.

David Sacks 59:23 Yeah.

David Friedberg 59:23 That's just a big recycling exercise. It's just, like, people come to the top of the funnel, they use a product, and then they leave, and then you have to re-acquire them over and over again. And it, and it could be the case that SaaS actually looks a little bit like that, too, at th- at the bottom line level. But when you hit your natural audience, it, it does get challenging, yeah.

David Sacks 59:38 Well, this is why in, in SaaS, there's a heuristic called the Rule of 40, which is for public market SaaS companies, you wanna see that their operating margin plus their growth rate equals 40 or is greater than 40, ideally. So in other words, you could have a SaaS business with a 20% operating margin and a 20% growth rate, and that would hit Rule of 40, and that would be a very attractive business. Or you could have, I don't know, it could be growing 50% year over year, and its operating margin could be negative 10%. And that'd be okay too because they're losing money, but at least the investment is leading to ab- well above average growth, you know? Or you could be growing, you could, you know, be growing slower, you could have a 10% growth rate and have a 30% operating margin, and that would also be hitting the Rule of 40. So it's just a simple way of, like, tracking whether this is a, a good business at scale. I don't think startups have to worry about this until they get to kind of the later growth stage.

David Friedberg 1:00:39 Yeah, when you're in your BC round, you're making 50, 100 million, yeah, you gotta be really thoughtful about this. In the beginning, you're trying to get product market fit and triangulate on something.

David Friedberg 1:00:47 So Chamath just mentioned streaming. NBC Universal, if you...

Jason Calacanis 1:00:51 ... didn't know it, paid the NFL a hundred million dollars for the exclusive str- streaming rights to one, that's right, one first round playoff game for the NFL. That happened last weekend between the Chiefs and the Dolphins. That was on their service Peacock, NBC's app, basically their version of Netflix or Disney+. It garnered 23 million viewers, which makes it, uh, the most streamed live event in US history. Even so, that's almost half of what the Packers and Cowboys had, about 40 million, Lions versus Rams same weekend, 36 million. And so this has brought into question what's going on with streaming. Uh, have these businesses gotten ahead of their skis? Just to give you a couple of charts, Disney+ took off like a massive rocket, peaked in Q4 of 2022 at 164 million subscribers. They're now at 150 million. Here's a chart. I mean, just amazing how, uh, quickly they got to Netflix-ish numbers. Here's Netflix's chart. Again, this is quarterly. They're up to now an all-time high, 247 million subscribers and the annual growth rate all the way back to 2001, still pretty spectacular, and their revenue also, uh, very respectable for Netflix. However, they overspent massively during the peak streaming era, 2019 to 2022, and that's when subscriber growth started to slow. Obviously, they were spending way too much and other entrants came in like Apple Plus and Amazon Prime where they really didn't even think that they had to make a profit. They were using streaming maybe to sell more iPhones or to get more Amazon Prime subscribers. So here is the major problem, here's the churn chart. Basically, churn means people cancel, right? And so as these services have cut what they're offering, the number of Marvel shows or Disney, you know, having Star Wars shows, the churn goes way up. People are also having subscription overload. I don't know how many of these I subscribe to (laughs) but I think it's all of them, or maybe out of these one, two, three, four, five, six, seven, eight, nine on the chart, I think I'm, I have seven of these. So there is definitely some unbelievable subscription burnout. And the streamers, i- in order to get these businesses above water, have raised their prices. We all know that. You've probably seen your streaming bills, you know, have three, four, or five bucks added to them every month, and at the same time they're cutting how much they're spending so you're paying more. For our last, Chamath, your thoughts on this dynamic.

David Friedberg 1:03:20 If you bring the chart back up, here's the most important thing that's worth noting. Let's take Starz as an example. It churns 12% of their users every month, which means that over a year they've churned 144% of their user base. That means that they have to basically turn their entire membership base one and a half times in order just to tread water, right? So if you start with 100, it's a lot of money that you have to spend to make sure you end the year at 100. Forget about growing. If you look at Peacock, they're gonna lose 100% of their subscribers in a year. If you look at Discovery, they're gonna lose 75%. If you look at Max, they're gonna lose 50 odd percent. Apple TV same. Hulu and Disney+ will lose 60%. Netflix will lose almost 40%. So the only winner in all of this is Facebook and Google. The only winners are Facebook and Google because that's where the ads will appear to try to reacquire these folks, right? So I guess that's a positive indication. But the reality is that money isn't infinite and so what happens in a dynamic where you have a category where there's just a lot of consumer churn, I think what happens is it evolves in phases. And in phase one, which is sort of where we are now where there's a bunch of relatively well-established folks, is that they are going to initially overspend on content because they're going to try to differentiate the cost of acquisition based on content, right, which makes sense. "I have a tent pole, come and watch it here. You can't watch it anywhere else." And I think that was the Peacock example where they had this football game and all these people showed up and they thought, "This is exactly why we're paying so much money for these rights because people will show up." I think the problem is that when everybody is doing it, everybody's doing it, and so you don't know how to differentiate. Even in our group chat, look at the number of times when somebody randomly says, "Is there something to watch?" And everybody's got 50 recommendations. Guess what I do? I tune it all out because I'm like, "50 across six different services? I have no way to track it," and then I lose interest and I'm like, "You know, I'll just stick to YouTube." So I think what happens is in phase one, folks spend a lot of content. In phase two, they realize that actually what you need to do is spend on a long tail of content in a much more disciplined way. So there's a company that, that I know about, for example, they just signed a pretty big deal with Amazon, hundreds of millions of dollars, and I was trying to figure out, is that a lot or a little? And it turns out that Amazon's trying to get three or four or five versions of these going, which means that before we probably could have gotten five or 600 million, and instead you get two or 300 million. It's still an incredible thing, but it just goes to show you that there's a lot of competition. And so instead of having a single mode, right, if you were to graph something, where there's a few pieces that just get all the money, now you're smearing this content across all kinds of stuff. And I think that that makes it very difficult to keep folks, so I suspect that you're just gonna see a lot of churn. I don't, I don't like this category at all as an investor.

Jason Calacanis 1:06:44 Clearly there's been an overspend here, but consolidation is coming. Freeberg, any thoughts on the streaming space?

Chamath Palihapitiya 1:06:49 I just think this is the opposite of what we were talking about earlier where there's a free market competing and it's benefiting consumers.I mean, the point that you made is a really good one, that there's a lot of great content to watch. Folks that raise prices, people cancel, so you gotta drop prices, you gotta offer good content. And I actually think this is a really good and healthy thing to see happen, is competition that benefits consumers and there'll be some set of winners here and some set of losers, but I think ultimately, it's just really good to see this, how it all shakes out. Who's willing to put up the big bucks? Who's got the smarter algorithm that predicts how fresh your content has to be and how unique it has to be relative to other platforms to keep the audience attention? I would argue, if you look at those numbers and you look at the performance over time, Netflix absolutely rules the roost in this sense. They're an incredible operating team, they have an incredible capability of predicting what content will work, how f- how quickly they have to refresh content, how much they should be investing in content per quarter, per month, and they're clearly retaining users and making money. And others maybe are, that are newer to the game haven't figured that out yet, but it's just very good to see the competition so I don't know how to predict what's gonna happen here, but it's good to see.

Jason Calacanis 1:07:57 It's clearly going to be a massive consolidation. Also these folks are launching advertising base versions, so you probably saw Netflix has an advertising tier and so a lot of these folks, uh, didn't have those. Disney+ I think is gonna have one as well.

Chamath Palihapitiya 1:08:10 You know what no one's paying attention to is YouTube TV. I don't know, do you guys subscribe to YouTube TV?

Jason Calacanis 1:08:15 I'm a Hulu person. Yeah, I think it's fantastic.

Chamath Palihapitiya 1:08:18 If you look at some third party data on YouTube TV, the subscriptions are going through the friggin' roof and it's really interesting to see because with YouTube TV, you're basically re-bundling the unbundling that happened in cable-

Jason Calacanis 1:08:30 Yeah.

Chamath Palihapitiya 1:08:30 ... except you're doing it over the internet and you can access it anywhere. So they've basically converted the pipe as the value, to the service itself as the value which you can access anywhere you want, on any TV, in any room without boxes, while you're on the road, on your phone, on your laptop. And it seems to be kind of highlighting that maybe it wasn't necessarily the bundling that was the problem, but the way that the service was being offered. So, who knows? Maybe bundling versus all of this part and parcel, you gotta pick five different providers and buy content on the fly, maybe that's not what consumers want.

Jason Calacanis 1:09:01 Young people don't care about the live channels, old people do, but yeah, Hulu and YouTube TV-

Chamath Palihapitiya 1:09:07 Right.

Jason Calacanis 1:09:07 ... are really wonderful products because they work really well on Apple TV, the apps work great, but they also work great on your iPhone, your iPad, so-

Chamath Palihapitiya 1:09:15 Yeah.

Jason Calacanis 1:09:15 ... you know, they're-

Chamath Palihapitiya 1:09:16 Yeah.

Jason Calacanis 1:09:16 ... really spectacular in that way. Sacks, any thoughts on this space?

David Sacks 1:09:19 Well, just to tie this conversation back to what we were talking about with margins and SaaS and tech-enabled versus real software businesses, I personally have never seen a B2C subscription business that works. The churn is just too high. I mean, what I've seen is that the monthly churn rates on a software subscription for consumers is somewhere in the 5-10% range. So, on a full year basis, you're retaining maybe 50% of your customer base. You're effectively rebuilding your business from scratch every two years. It's a very tough place to be. This is why I basically skew towards B2B SaaS, is because a good B2B SaaS business will have net expansion. Instead of 50% churn, you'll do 120% expansion, and so you're actually building a subscriber base with longterm value. Now, how did Netflix do it? I mean, Netflix avoided that prohibitive level of churn by spending literally billions of dollars on content and original programming, and again, it goes back to the point this is not a pure software, pure tech business. It includes an old school studio which is very capital intensive, and they financed a lot of that content acquisition with billions and billions of dollars raised during that ZIRP period, from I think both equity and debt. And you have to wonder if that could be done again in this post-ZIRP period where capital is just a lot scarcer.

Jason Calacanis 1:10:47 I think this is gonna work really well though for Netflix and Disney, man. These huge archives that they own, these libraries are gonna get them to three, four, five hundred million global subs and just become money printing machines that I don't think they're gonna need a ton of new content.

David Sacks 1:11:01 The question is whether you could recreate an archive of that level today given how much more expensive capital is. My point is that ZIRP helped Netflix catch up-

Jason Calacanis 1:11:10 Yes.

David Sacks 1:11:10 ... to these studios and create this huge library, but still, I think that what the streaming services have shown in their churn is that if you don't provide original content and original programming, then users will churn off that. So, you have to kind of have both. You kind of have, like, the library as filler, but if you don't have a hot show come along every so often, the subscribers will churn off that.

Jason Calacanis 1:11:34 Yeah, you need to have some new content depending on how deep the library is. It feels like Netflix and Disney+ have done a great job with their libraries, just to give you an idea. Revenue for Netflix for 2023, $33.5 billion, 247 million subs, that's a ARPU yearly revenue for those folks, $136 bucks a year. Now the reason you're seeing that, uh, number not make sense if you're paying $15 a month is because internationally, Netflix is a lot, lot cheaper. But I- I love those two businesses. I think they're gonna be extraordinary over time compounding-

David Friedberg 1:12:07 Netflix has to acquire 100 million people a year just to stay even.

David Sacks 1:12:12 What's their churn rate?

David Friedberg 1:12:14 4% a month.

Jason Calacanis 1:12:15 I think it's fine.

David Sacks 1:12:15 Right, so they're churning half their customer base every year, that's my point.

David Friedberg 1:12:20 100 million people.

David Sacks 1:12:22 They're rebuilding their customer base from scratch every two years. How does that make sense?

Jason Calacanis 1:12:26 It's totally fine because what happens is you have people coming off their parents' plan, getting their own, people go through a bad beat, they don't like it, you know, whatever, they unsubscribe, but they all come back, back and forth, back and forth, and then it just keeps growing over time.

David Friedberg 1:12:41 I think you're describing something that's true. I think David is describing why it's a shit business.

Jason Calacanis 1:12:47 (laughs)

Chamath Palihapitiya 1:12:47 I mean, if they sp- if they make more money than they spend, and I don't think they need to do a ton of advertising.

David Sacks 1:12:52 Eventually you churn through so much of the market that actually you can't maintain that growth rate.

Chamath Palihapitiya 1:12:57 I'm gonna-

David Sacks 1:12:57 I mean, if you reactivate, maybe you can do it, but I-

Jason Calacanis 1:13:00 I think that's what's happening.

David Friedberg 1:13:02 ... from a business perspective, the only logical thing that I would do if I was running one of these businesses is attach it to another business where you can think about it in terms of LTV. So, the only obvious example of that, I think, is Amazon Video because you can stick it beside Prime and a bunch of other things, and now you have a very different way of justifying LTV and minimizing churn. And that seems like a ... I buy that argument, Jason. I don't buy like a standalone business like this, trying to do it, bleh, yucky.

Jason Calacanis 1:13:33 I, I, no, I-

Chamath Palihapitiya 1:13:34 Sorry, real quick, have you guys dug into Netflix's business? I mean, they're still growing top line, the EBITDA margin continues to expand. I mean, all those facts might be true, but that churn engine and that recapture engine seems to be working in a way that they're printing cash and growing.

David Friedberg 1:13:49 Yeah.

Chamath Palihapitiya 1:13:49 It's pretty impressive. I don't know if there's a limit there, but I mean, I, I haven't looked at the analysts, but-

David Friedberg 1:13:53 That, I think that is the key question.

Chamath Palihapitiya 1:13:56 Yeah. Yeah.

Jason Calacanis 1:13:56 To the bundling point, Apple Plus, which is the TV component, uh, not the hardware product, is bundled as part of this Apple One program, which is kind of like Amazon Prime. And so I think you're seeing a little bundling there. Netflix also added video games to make it even more sticky, so I think there's like a subscription super app coming, which the New York Times has kinda done, right, with Wordle, crosswords, The Athletic, Wirecutter, and the New York Times. So I think you're gonna start to see some bundling with that.

David Friedberg 1:14:23 Honestly, you just said a jumble of names that went in one ear and out the other. I don't remember a single one you said. This is my point. For most people, Jason, not an, a media aficionado-

Jason Calacanis 1:14:31 Oh, New York Times is doing-

David Friedberg 1:14:32 ... like you.

Jason Calacanis 1:14:32 ... fantastic doing this bundling. Some people come for the crosswords and Wordle, and that's why they subscribe and they like the news. Other people come for the news, they discover crosswords and Wirecutter and The Athletic and they stay for that. So, I, I do think there's gonna be an incredible business here. I'll take the other side of it.

Chamath Palihapitiya 1:14:46 Yeah.

Jason Calacanis 1:14:47 They spent a lot on content though during that period where Disney+ came in, and I think everybody's now has a little more discipline and the budgets came way down. If you didn't know, The Hulk cost 250 million or something, The She-Hulk rather, that cost 225 million for nine episodes.

Chamath Palihapitiya 1:15:02 What?

Jason Calacanis 1:15:02 The first Avengers, 225 million. (laughs)

Chamath Palihapitiya 1:15:04 Wait, sorry, 225, 250 million for, for-

Jason Calacanis 1:15:06 Yes.

Chamath Palihapitiya 1:15:07 ... nine episodes?

Jason Calacanis 1:15:08 Of The She-Hulk.

Chamath Palihapitiya 1:15:08 Oh my Lord.

Jason Calacanis 1:15:09 And, and people criticized it for having bad CGI, so it's ... I think there's like new discipline coming to Hollywood.

Chamath Palihapitiya 1:15:14 Was this a Netflix show?

Jason Calacanis 1:15:15 A Disney+ show.

Chamath Palihapitiya 1:15:16 A Disney+ show?

Jason Calacanis 1:15:17 Yeah.

Chamath Palihapitiya 1:15:17 No, I, I don't know about you guys, I've been rewatching The Sopranos. I find some of the content on HBO Max to be the best content out there.

Jason Calacanis 1:15:23 Oh my God, I've, I've watched it twice.

Chamath Palihapitiya 1:15:24 It's, it's like there's so much rewatchability on it. Disney doesn't have that much rewatchability, I don't know.

David Sacks 1:15:28 The, the only reason I keep my Max subscription is 'cause I'm waiting for, uh, House of the Dragon season two.

Chamath Palihapitiya 1:15:33 (laughs)

Jason Calacanis 1:15:33 Yeah.

David Sacks 1:15:34 I mean, if they didn't have that one show, I'd be like, "Yeah, cut it." You know?

Chamath Palihapitiya 1:15:37 Yeah.

David Sacks 1:15:37 I do think th- this could help Netflix because a lot of these streaming services came along, we had way too many, right? We got saturated with streaming services, and most of them you subscribe to, you may not even remember subscribing.

Chamath Palihapitiya 1:15:49 Yeah.

David Sacks 1:15:49 You may just subscribe to a free trial to get an NFL game, and then you get billed because you forgot to cancel it.

David Friedberg 1:15:55 By the way.

David Sacks 1:15:56 Yeah.

David Friedberg 1:15:56 Have you guys ever gone into Apple iCloud settings and looked at your subscriptions?

Jason Calacanis 1:16:03 Oh boy, yeah. Get in there and rip-

David Friedberg 1:16:05 Uh, guys, just ri- go, g- if you have like an extra five minutes-

Jason Calacanis 1:16:10 Just rip it out.

David Friedberg 1:16:10 ... you will save so much money-

Jason Calacanis 1:16:12 Yeah.

David Friedberg 1:16:12 ... by going into subscriptions in your settings and just turning them all off. I was shocked.

Chamath Palihapitiya 1:16:17 (laughs)

David Friedberg 1:16:17 I was shock- I mean-

Chamath Palihapitiya 1:16:18 This is part of your austerity measures?

Jason Calacanis 1:16:19 Absolutely.

David Friedberg 1:16:20 You know how many subscriptions to Disney+ I had?

Chamath Palihapitiya 1:16:23 How many?

David Friedberg 1:16:24 Well, this is what's so gross is why they even let me do this. I had three.

Chamath Palihapitiya 1:16:27 (laughs)

Jason Calacanis 1:16:28 What?

David Friedberg 1:16:30 Three.

Chamath Palihapitiya 1:16:31 Y- uh, how did you-

David Friedberg 1:16:32 How is it even possible?

Chamath Palihapitiya 1:16:33 One for the plane, one for the kids.

David Friedberg 1:16:36 But I had, I had three.

Chamath Palihapitiya 1:16:37 Yeah.

David Friedberg 1:16:37 I had three. I had two HBOs, I had two Netflix. Oh no, Netflix keeps sending a message saying, "Hey, you need to update your payment information." But then I'm watching Netflix on my Apple TV, so I'm like, "I'm clearly playing for, paying for it somehow."

David Sacks 1:16:52 (sighs)

David Friedberg 1:16:52 It's so confusing and (beep) .

Jason Calacanis 1:16:55 I have the perfect solution for you. There are credit cards now where you can set a spending limit, and so what I do is every year, I just turn off the limit on that credit card. I just take it from unlimited or uncapped down to zero, and I do this for business as well. And then all-

David Friedberg 1:17:10 You know what I call that, Jason?

Jason Calacanis 1:17:10 ... the subscriptions time out.

David Friedberg 1:17:12 You know what I call that?

Jason Calacanis 1:17:12 What?

David Friedberg 1:17:13 Jeff. Jeff does that for me.

Jason Calacanis 1:17:15 Jeff does it for you? (laughs)

David Friedberg 1:17:16 (laughs)

Jason Calacanis 1:17:16 Yeah. Hey but, I mean having somebody go in there and then you-

David Friedberg 1:17:19 I have a, I have a Jeff. I have a Jeff.

Jason Calacanis 1:17:21 Just know, but it's very simple. You only use one card for subscriptions and then you turn it off every year to see which-

David Friedberg 1:17:25 Yeah, yeah, yeah.

Jason Calacanis 1:17:25 ... ones you wanna keep going. It, it works really well. And then you move the other ones to a new card.

David Friedberg 1:17:28 I don't even wanna say how many thousands of dollars I was wasting on like Duolingo. I was like, "I'm paying for Duolingo," and then I was paying for like-

Jason Calacanis 1:17:35 And your Italian is still terrible.

David Friedberg 1:17:37 Yeah, terrible, and then I, I had, I had like-

Jason Calacanis 1:17:39 Why do you have a case against them? You could sue them.

David Friedberg 1:17:40 No, then I had Duolingo and I had Babbel and I had Rosetta Stone. So I'm like, "My Italian is not improving because of any of these three apps," but I was paying them collectively