E168: Can Google save itself? Abolish HR, AI takes over Customer Support, Reddit IPO teardown

Chamath Palihapitiya 0:00 Jason, where are you? That, is that a virtual background or? (beep) oh, it's (beep) . Oh, right, that (beep) place. I, uh, it did look architecturally familiar to me.

Jason Calacanis 0:09 It is architecturally significant. We'll bleep out the (beep) house, but yes, I am... You know, this is like top three or four of, uh, places I like to be a house guest. You know, like I'm in rotation right now as my house guest.

David Sacks 0:20 You're Kato Kaelin-ing through our friend group?

Chamath Palihapitiya 0:22 (laughs)

Jason Calacanis 0:22 Basically. You know, I'm just a great house guest. People like to have breakfast with me. People like having me around, so I just find myself in mansions around the world.

David Sacks 0:31 Hey Nick, do you have an updated picture of Kato Kaelin? Is he still alive and kicking?

Jason Calacanis 0:35 He's alive for sure. He's gotta be 70 or something, right? He's gotta be old enough.

David Friedberg 0:39 He was on one of those reality TV shows with Dr Drew, I think, a couple of years ago.

David Sacks 0:43 What does Kato Kaelin do?

Jason Calacanis 0:44 He's a good hang.

David Sacks 0:45 Is he, yeah.

Chamath Palihapitiya 0:46 There's a lot of these people in LA, you know. Like just-

Jason Calacanis 0:48 They just hang.

Chamath Palihapitiya 0:50 (laughs)

Jason Calacanis 0:50 They kinda hang. They set things up. Oh my God.

David Sacks 0:54 Wow.

Jason Calacanis 0:54 Ooh.

David Sacks 0:55 Is that current, Kato Kaelin?

David Friedberg 0:58 He, oh man.

Jason Calacanis 0:58 He's 64 now.

David Sacks 1:00 Wow.

Jason Calacanis 1:00 God almighty. What did he-

David Friedberg 1:01 That's incredible.

Chamath Palihapitiya 1:02 How did he survive?

Jason Calacanis 1:04 He's got an Instagram account.

Chamath Palihapitiya 1:05 I'll tell you how he survived. See no evil, hear no evil.

David Friedberg 1:09 (laughs)

Jason Calacanis 1:09 Exactly. He goes, "I didn't see nothing."

Chamath Palihapitiya 1:12 (laughs)

Jason Calacanis 1:12 "All I know is hey listen, man, they gave me a pool house." And I didn't see anything.

David Friedberg 1:17 What'd you see, nothing?

Narrator 1:18 We're going all in. Don't let your winners ride.

David Sacks 1:23 Rain Man David Sachs.

Narrator 1:27 I'm going all in. And I said. We open sourced it to the fans and they've just gone crazy with it.

David Friedberg 1:31 Love you, besties.

David Sacks 1:32 Queen of quinoa.

Narrator 1:33 I'm going all in.

Jason Calacanis 1:36 All right, everybody. Welcome to your favorite podcast, the All In podcast, episode 168. David Sachs. Can you believe it? We've made it to 168 episodes. With me again, the Rain Man, David Sachs. How you doing, buddy?

Chamath Palihapitiya 1:51 Good.

Jason Calacanis 1:52 Yeah? Heard you got a big talk coming up? Giving another-

Chamath Palihapitiya 1:56 Yeah.

Jason Calacanis 1:56 ... speech? Yeah?

Chamath Palihapitiya 1:57 Yes, I'm giving a talk.

Jason Calacanis 1:57 In DC?

Chamath Palihapitiya 1:58 Yes, I'm giving a talk.

Jason Calacanis 1:59 All right.

Chamath Palihapitiya 2:00 (laughs)

Jason Calacanis 2:00 Get ready for that, uh, all of the GOP fans out there, all you Sachs fans. You get a big keynote coming from Sachs next week. Also with me, of course, the sultan of science, formerly known as the queen of quinoa. He's got another crop he's, uh, growing.

David Friedberg 2:16 (laughs)

Jason Calacanis 2:16 David Freiberg. How are you doing? How's the crops? How's the fields?

David Friedberg 2:20 (laughs) So worse.

Jason Calacanis 2:21 How's life in the fields?

David Friedberg 2:23 Worst cold open. (laughs)

Jason Calacanis 2:24 (laughs) Not a cold open. These are intros.

David Friedberg 2:26 Oh, intros.

Jason Calacanis 2:27 I'm glad you're not producing. There's a reason why I'm the executive producer. Go ahead, Freiberg.

David Friedberg 2:30 Mm. Mm.

Jason Calacanis 2:30 How's your, um, how's your crops? How's the-

David Friedberg 2:33 Great.

Jason Calacanis 2:33 ... how's life in the fields?

David Friedberg 2:34 It's great. Got a great team, making progress, tech is awesome.

Jason Calacanis 2:39 Hm.

David Friedberg 2:39 Having a lot of fun, it's great.

Jason Calacanis 2:40 Back in the CEO seat, huh? And of course, the chairman dictator, who's becoming completely insufferable because he invested in a company seven years ago that is absolutely crushing it right now called Grok. We talked about it last week. You're back, you're back, Chamath. Everybody's (laughs) talking about Grok. You're, you're on, uh, cloud nine it seems.

David Friedberg 3:00 Grok, Grok, Grok. Grok, Grok, Grok.

Jason Calacanis 3:02 (laughs)

Chamath Palihapitiya 3:02 (laughs)

David Friedberg 3:02 Grok, Grok, Grok, Bitcoin, Bitcoin, Bitcoin. Grok, Grok.

Jason Calacanis 3:06 (laughs)

David Sacks 3:06 (laughs)

David Friedberg 3:06 I mean, it is interesting how your book just literally whatever Chamath's book is, that's his mood. It's just Bitcoin 60, Grok.

Chamath Palihapitiya 3:19 Well, also the honesty level's gonna be through the roof now.

Jason Calacanis 3:22 Oh, right.

Chamath Palihapitiya 3:23 The, uh-

David Friedberg 3:23 (laughs)

Jason Calacanis 3:24 He's gonna be running for governor-

Chamath Palihapitiya 3:25 I mean-

Jason Calacanis 3:25 ... and buying the Hamptons again. (laughs)

Chamath Palihapitiya 3:26 ... the truth bomb that Chamath is gonna drop now.

Jason Calacanis 3:29 There is nothing like peak ZIRP Chamath. I mean, I don't-

David Friedberg 3:33 (laughs)

Jason Calacanis 3:33 Are we going back? Is, are we back right now?

Chamath Palihapitiya 3:36 I mean, on paper, what is your stake in Grok already worth?

David Friedberg 3:39 Let's not... We're not talking, we're not-

Jason Calacanis 3:40 We're not talking about it.

David Friedberg 3:41 We're not doing this.

Jason Calacanis 3:41 That's so uncouth. It's so uncouth, but he's buying the Hamptons and he's, uh, probably gonna buy-

Chamath Palihapitiya 3:45 Wait, wait, wait.

Jason Calacanis 3:46 (laughs)

David Friedberg 3:46 (laughs)

Chamath Palihapitiya 3:47 When have we-

David Friedberg 3:47 Stop. (laughs)

Chamath Palihapitiya 3:47 When has it been uncouth on this podcast to talk about-

David Sacks 3:50 (laughs)

Jason Calacanis 3:50 About wins. (laughs)

Chamath Palihapitiya 3:51 ... our wins or assets or any of this stuff.

Jason Calacanis 3:54 These are not wins yet. These are not wins. We have not-

Chamath Palihapitiya 3:54 I agree with that. It's not a win.

Jason Calacanis 3:55 We have not-

Chamath Palihapitiya 3:56 You can never count, you can never count your chickens before they hatch. That's absolutely right.

David Sacks 3:59 I am not counting any chickens.

Jason Calacanis 4:01 Don't book the win, yes.

David Sacks 4:02 There's a lot of hard work to do. There's a lot more people to sell products to, to build products. By the way, developers, by the way, on Grok just this past week in the queue, the wait list tripled. Now there's almost 10,000 developers.

Jason Calacanis 4:20 That's a big deal.

Chamath Palihapitiya 4:21 Oh, that's crazy.

Jason Calacanis 4:22 That's a great sign.

David Sacks 4:24 I think the most important North Star metric for these developer platforms is basically that. As goes the developers, so goes the platform. You can kind of count on some amount of pull through because some of those developers just statistically will land really important products. They'll consume more APIs, they'll just consume more stuff. It's just all goodness because if you have 9,000 or 10,000 people just e- again, waiting in line, once those guys get in, somebody's gonna create something magical.

Jason Calacanis 4:52 Hm.

David Sacks 4:52 That's the great part of having a platform isn't it?

Jason Calacanis 4:54 That's the, it's, it's beautiful.

David Sacks 4:55 People just take it and they build on it. While you're sleeping, something amazing can just get built and-

Jason Calacanis 5:00 Yeah.

David Sacks 5:01 ... you, you get some amount of the, uh, credit for that. Another thing that's really interesting is the number of developers is increasing. I've seen two or three founders recently, just the last couple of weeks, who were previously idea founders, who are now, have taught themselves to code. So, you know, there's, if there's 1% of the, you know, whatever number of millions of developers in the world, I think it's gonna like double or triple. So the, the pool of people who are writing code I think is about to grow very meaningfully. I mean, you guys, you guys saw the release from the White House where they were like, (laughs) "We, we don't want you to code in C and C++ anymore." (laughs)

Jason Calacanis 5:35 Yeah, that was very interesting.

Chamath Palihapitiya 5:36 (laughs)

Jason Calacanis 5:36 I mean, they were talking about memory leaks and like this is I guess the source of most memory leaks, therefore-

David Sacks 5:40 The White House wants you to learn to develop in memory-safe languages.

Jason Calacanis 5:44 Oh, great. Awesome.

David Sacks 5:45 Yeah.

Chamath Palihapitiya 5:46 So why are they involving themselves? Like they got nothing better to do?

Jason Calacanis 5:50 Yeah.

David Sacks 5:50 I mean, they have an opinion on, uh, you know, preventing security leaks.

Jason Calacanis 5:54 All

Jason Calacanis 5:55 right, listen. The top issue this week is the same issue as last week. Google's Gemini DEI black eye continues. We covered this woke AI disaster last week.It's kind of funny, I was watching CNBC and they had a hard time describing the problem. The woman just, I guess, didn't want to call it what it is. It's a racist AI. You type in text and it gives you the opposite or just culturally insane responses of ... If you put in, you want a picture of George Washington from Google's Gemini or Sergey Brin, you might get back like a Benetton-style diversity ad with like George Washington being Black or Sergey Brin being Asian, et cetera. And so this has caused, um, a bit of a kerfluffle here in the industry, to say the least. The stock is down 5% since we talked about it last week. And, uh, Sundar sent a memo to the Gemini team. Of course when they write these memos to a team, it's written to the entire world because you know it's gonna get leaked, and so you're, you're writing it as such, it might as well be a press release. I'll give, uh, two quick quotes here, and then I'll throw it to the besties 'cause there's so many questions that we have to address. Quote number one, "I know that some of its responses," referring to Gemini, "have offended our users and shown bias. To be clear, that's completely unacceptable, and we got it wrong." And to be clear, it wouldn't show white people, especially ones like George Washington or just somebody who is obviously a Caucasian. And so the next quote, "We'll be driving a clear set of actions including structural changes." To me, structural changes means, "We're gonna lay off a bunch of people and we're gonna get rid of the DEI group." That's, that's a new ma- that's a newfound motivational riff quote, in my mind. Freeburg, will Sundar survive? And is Google too broken to fix? I'm just gonna ask you since you work there. I don't wanna mean to make it uncomfortable, but what are the chances Sundar survives this? And what are the chances that Google can be fixed and produce great products quickly that delight users?

Chamath Palihapitiya 7:58 I don't know how to answer the Sundar will survive because it's kind of an idiosyncratic organization. There are a couple of founders who have super voting shares, um, and ultimately it comes down to their decision and the direction they want to take the company. And I have no insights into what they individually think. So, um, frankly, I've spoken to a lot of folks who are investors in Google over the last week, and a lot of folks are just deeply frustrated and angry, um, on a number of fronts. The business, really there's, you know, three businesses inside of Google. There's, you know, search and ads, there's YouTube, and there's cloud, and the rest of it is kind of noise. And to give you a sense of how big these businesses are, right, YouTube did 10 billion a quarter roughly, cloud did 10 billion a quarter. They have this devices business and subscriptions business does about 10 billion a quarter. And then search does about 50 billion a quarter, and the margin on search is much higher than any of those other businesses. And so the search margin, uh, the ad revenue on search is, you know, probably 100% of the true operating profit of the business. So, the real threat to Google is more are they in a position to maintain their search monopoly or maintain the chunk of profits that, that drive the business under the threat of AI? Are they adapting? And less so about the anger around woke and DEI because most of the investors I spoke with aren't angry about the woke DEI search engine, they're angry about the fact that such a blunder happened and that it indicates that Google may not be able to compete effectively and isn't organized to compete effectively in AI just from a consumer competitiveness perspective. So, you know, investors are banging the table. And in the past, we saw this with Meta, I think it was, uh, towards the end of '22 if you guys remember, and it was a similar situation. Investors were like, "Why are you investing in VR and AR? This is crazy. Why do you have all these people that are getting overpaid?" And everyone started to write off the stock, and the stock took a big nosedive for a period of time, just like Google's is right now. And then the changes came. And much like Google, there's an individual with super voting shares who basically said, "You know what? I am gonna step in and we're gonna make these changes, and we're gonna fix this organization, and we're gonna right size, and we're gonna focus on the product winning." And since then, Meta's stock is up a tremendous amount.

Jason Calacanis 10:24 Five X since then. Yeah.

Chamath Palihapitiya 10:26 Google shares are down about 10% over the past two weeks. By the way, I was one of the stupid people to sell Meta around that time.

Jason Calacanis 10:31 And your thinking was that they just can't get out of their own way, and the God king is ...

Chamath Palihapitiya 10:36 It, it's another, yeah, it's exactly, it's another one of these idiosyncratic problems. You don't know what this individual is thinking-

Jason Calacanis 10:42 Mm-hmm.

Chamath Palihapitiya 10:42 ... and what he is individually going to do. The point I'm making is that at Google now something has to give because the noise is so loud. The board is hearing this left and right. Investors are banging the table. Analysts are banging the table. And I'll, I'll tell you a couple of anecdotes. Internally, employees are now banging the table.

Jason Calacanis 11:00 Hmm.

Chamath Palihapitiya 11:00 A story, a story I heard this week was that someone stood up in a meeting and said, "A couple of weeks ago, if I had stood up in this meeting and said, 'We can't show Black people in the image generation at the rate that we're showing,' I would have been cast a racist."

Jason Calacanis 11:18 Hmm.

Chamath Palihapitiya 11:18 "And I didn't have permission to do that inside of the organization. But today ..." And everyone's like, "You're right. You would not have been able to stand up in the organization and say that." But I'll ... The tenor has changed inside of Google with a lot of the employees that I've spoken with who are now saying, "I can stand up and I can say that this group called Responsible AI has too much power." And it's a one-sided asynchronous problem where they get to come in and say, "We need to change this." And if you step up and disagree with them, you are deemed a racist, you are deemed, you know, culturally inappropriate, you are canceled.

Jason Calacanis 11:49 So it's just easier to keep your head down-

Chamath Palihapitiya 11:51 It's easier to keep your head down.

Jason Calacanis 11:52 ... in this kind of a circumstance and, and keep collecting your RSS.

Chamath Palihapitiya 11:54 And all of a sudden you wake up one day and you see the blunder that happened last week.

Jason Calacanis 11:57 Yeah.

Chamath Palihapitiya 11:58 And so now internally people are waking up and saying, "We need to change this." And I heard that that's made its way up to the higher ranks at Google and they're very actively, you know ... So, there may be a moment here where Google stock, which currently-... is trading at just 17 times 2025 consensus earnings, which is cheaper than all the other big tech companies by far and is still growing. Core business is growing. Cloud is growing 20%. Search is growing 15%. All these other businesses, YouTube is growing 20% a year. It's a growth business that's very profitable and, um, it's trading at a very cheap discount. So there's, you know, a ... The bull case is, now's a great time to buy because it's so cheap and there could be this moment where, you know, you see some of the changes that are needed internally to get the AI products to where they need to be to maintain the lead that is inherent because of Search.

Jason Calacanis 12:46 So, that would mean, Sacks, it would require, 'cause we're using Zuckerberg as an example, uh, we could also bring Twitter and X into this, it would require founder authority to come in there and make these changes. It would require Larry and Sergey, who have the super voting chairs, to come in there and say, "Hey, this is all changing. Enough of this." Do you think there's any chance of that happening or is Google just too broken to fix and they're going to just lose this opportunity, and it's Microsoft under Steve Ballmer missing mobile and cloud?

Chamath Palihapitiya 13:16 Well, to quote Jefferson, "The tree of liberty must be refreshed from time to time with the blood of patriots and tyrants." And I think there's something analogous here. I mean-

Jason Calacanis 13:26 Mm-hmm.

Chamath Palihapitiya 13:26 ... you have to, if you're going to refresh this company, you have to go in and you got to go in and make major cuts, not just to rank and file, but to leadership who doesn't get it.

Jason Calacanis 13:35 Mm.

Chamath Palihapitiya 13:35 And that's the only way it's going to get fixed. Do I think that Larry and Sergey are going to come in and pull an Elon and go deep and figure out which 50% or 20% of the company is actually good and doing their jobs? Probably not.

Jason Calacanis 13:51 Mm.

Chamath Palihapitiya 13:51 But is it possible that they could make a leadership change? Yeah, it's possible.

Jason Calacanis 13:56 Probable.

Chamath Palihapitiya 13:57 I don't know. I mean, I've heard that the company is the way it is because they like the way it is. I mean, that they're part of the problem, in effect. They don't see, they don't see the problem.

Jason Calacanis 14:07 Hm.

Chamath Palihapitiya 14:07 Or at least they haven't until now. Maybe they'll get the wake-up call.

Jason Calacanis 14:10 Mm. What are you thinking, Shamaal, watching all this happen?

David Sacks 14:13 I think it's basically a small cadre of a thousand people that have built literally the most singular best business model and monopoly ever to be created on the internet, and a whole bunch of other people that have totally transformed this organization, as Sacks said, into ability and a platform to reflect their views.

Jason Calacanis 14:38 Mm.

David Sacks 14:38 And so I don't ... Not a shareholder of Google and outside of the tools I use, I don't think I really have much voting power, so I don't ... And I- and I have so many alternatives now.

Jason Calacanis 14:50 Mm.

David Sacks 14:50 So, I actually think like the, I don't really care that much, I guess is the point. I think that the employees should care and the shareholders should care and they should come together and vote. And I think Sacks is right. I think the company is the way it is because they've chosen to be that way. And I think Friedberg is right, which is that there's a small group of people who have been protecting and breathing life into the single greatest business ever built, ever in the history of business. But now we need to have a confrontation amongst all of these three different groups of people and they need to make some decisions.

Chamath Palihapitiya 15:26 Let me put a few data points in, in play here, J-Cal.

Jason Calacanis 15:31 Yeah, please.

Chamath Palihapitiya 15:31 Uh, and this all, this all speaks to the problems being, let's say, deliberate as opposed to a glitch or an accident. So first, you have Sundar's letter to the company, which there was a very interesting tweet by Lulu Cheng Meservey, who does comms at Activision, and she writes a blog called Flak. She said, quote, "The obfuscation-"

Jason Calacanis 15:55 She's a comms expert, just for the audience here.

Chamath Palihapitiya 15:56 She's a comms expert, yeah.

Jason Calacanis 15:58 Yeah.

Chamath Palihapitiya 15:58 So she kind of graded Sundar's letter, and it was scorching. She said, "The obfuscation, lack of clarity, and fundamental failure to grasp the problem are due to a failure of leadership. A poorly written email is just the means through which that failure is revealed." So that was one reaction. Marc Andreessen had a series of posts indicating that the AI was programmed to be this way. Again, it's not like a bug, it's more of a feature. And that it's not an accident. This is, this is happening because, because the companies-

Jason Calacanis 16:31 They chose to be this way.

Chamath Palihapitiya 16:31 ... wanted to be that way. They chose to be this way.

Jason Calacanis 16:33 Right. Right.

Chamath Palihapitiya 16:33 And in fact, he goes further and says that these companies are lobbying as a group with great intensity to establish a government-protected cartel to lock in their shared agenda and corrupt products for decades to come. Wow. I mean, again, that's a really scorching critique here. And then, you know, the, the question I would ask is, who's been fired for this? I mean, imagine if, I don't know, one of Elon's products had a launch that went this badly. Do you think no heads would roll? No heads have rolled. And so you have to kind of wonder, well ...

17:06 What if it's a structural issue, Sacks? I mean, I- I- I ... The- the point does resonate with me that there is a group internally, and I think it's called the responsible AI team at Google. And this team's job is to enforce those principles, remember, that we brought up last week-

17:20 Yeah.

17:20 ... that they've defined. And so they go in and they're like, "Well, you know, if you just render an image of a software engineer and all the images are just white guys in hoods, that's inappropriate because there are plenty of non-white people. You need to introduce diversity." So then the programmers say, "Okay, we'll go ahead and overweight the model and make sure that there's diversity." And you can't say no because otherwise you are deemed a racist. So who's the individual that's responsible given that structural circumstance that exists within the organization? It's more of a cultural and structural problem to me than, you know, one of ... I- I guess ultimately there's leadership that's lacking, but ...

17:52 Actually, I- I- I agree with that to some degree. Let me describe how I think it, it works.

17:58 Mm-hmm.

17:58 So what, what I've heard about Google is that every meeting above a certain size has a DEI person in it. I mean, literally.

18:05 Probably right.

18:05 So, it's kind of like in the days of the Soviet Union, their military, the Red Army, would ha- in every division or unit, there would be, you know, a commander or lieutenant and there'd be a commissar.... okay? And the commander reported up the chain, and the commissar reported to the party. And the commissar would just quietly take notes in all of the meetings of the unit. And if the commissar didn't like what the lieutenant was doing, lieutenant would be taken out and shot. Okay? Now, that's kind of a dramatic example, but the point is that in every large meeting at Google, you've got this DEI commissar who's, like, quietly taking notes. I'll point out that at Google, the only person we can ever remember to get fired was James Damore, who was an engineer who complained about the political bias at Google. H- in other words, he was a whistleblower about the very problem that's now manifested. He's the only person you can think of to get fired at Google. I- Google was mocked on the show Silicon Valley. It was called Hooli, remember this?

Narrator 19:04 Yeah, you would be sitting on the roof and you would Rast.

Chamath Palihapitiya 19:04 That they satirized the guys sitting on the roof in

24:21 ... that you then make the informed business decision about what's the right way to build this product, what's the right way to build this company, and I'll take on some risk. And I think one of the challenges structurally inside of Google is that product leaders and other folks were never enabled to make the decision that there were these, as Sacks pointed out, kind of like policing-type organizations that were allowed to come in and veto things, and the vetoing... Or make unilateral decisions. And those vetoing on whether it's waiting or, or some, you know, training data set or output, that ends up killing the opportunity for the smart business leader to say, "That doesn't make sense. We can't do that."

Jason Calacanis 24:56 Yeah, this is where, this is where having founders in the organization every day changes everything, because the founders would say, "Hey, we, we're here to index the world's information. We're here to present the world's information. We're not here to interpret it. We're not here to win hearts and minds. We're not here for a political agenda." But there's a group of people there who it's apparent think that they're there to change the world, that Google is a vehicle for them to make social changes in the world, and, you know, that's art, and there's other ways to do that. And just paradoxically, like Hamilton making the Founding Fathers diverse and doing art, you know, that, that can win Tonys in that context. You could win tons of awards and acclaim and, and make incredible, beautiful art. But on the other side, like people are not looking for Google to do that. They're looking for Google to give them the answer and the data, and then these people are thinking, "It's our job to actually interpret the data for you," as we kind of touched on last week. So, uh, this is a thing.

Chamath Palihapitiya 25:51 Well, I think, uh, look, I think you guys are really close to the bullseye here, but I would just refine slightly what you're saying.

Jason Calacanis 25:59 Go ahead.

Chamath Palihapitiya 25:59 So here's how I think it happens. I, I don't think this is a rogue group. I actually think this is a highly empowered group within Google.

26:05 I do agree with you, yeah.

26:06 Yeah. I think what happens is Sundar says from the top that we're gonna be on the forefront of diversity and inclusion, because he personally believes that, and that's the way the social winds are blowing, and they think it's good for the company on some level. Okay? To implement that mantra, or that platitude really, HR hires a bunch of DEI experts. Okay? Lots of them. I think the company has like this huge HR department. And a lot of those people are basically fanatics. I mean, they're-

Jason Calacanis 26:38 It's their chosen career.

Chamath Palihapitiya 26:39 Yeah.

26:39 Yeah, they're trained Marxists, basically. And so they're the commissars, and they're sitting in all these meetings, and again, they're the ones taking notes and they're the ones who push the company in a certain direction. But you have to then go back to senior leadership and say it's their fault for letting this happen, because they should have made a course correction. They should have realized what was happening. They should have realized that through a combination of bias and through this sort of like overly empowered HR team, who are pulling a legal card. I mean, Friedberg's right about that. They're saying that our point of view is the law, which isn't true, but they're basically pulling the legal card and pushing the whole organization in a certain direction. It was up to leadership to realize what was going on and make a correction. And the, the thing that you're seeing now is that in the face of what's happened, the statement that we got really doesn't cut it.

Jason Calacanis 27:35 Funny they use the word problematic. (laughs)

Chamath Palihapitiya 27:36 Yeah, exactly. Uh, they're describing it as a glitch or a bug. It's not.

Jason Calacanis 27:40 Yeah.

Chamath Palihapitiya 27:40 It's a much deeper problem. And so therefore, you give, it gives no confidence that the solution is gonna be pursued in as comprehensive manners as necessary.

Jason Calacanis 27:51 Yeah, I think it's just a... That, that memo is a tip-off that there is a 20,000, 30,000 person rift and a reorganization, and they're just gonna keep cutting the DEI group, and they've already, Meta and Google have cut the DEI groups a bit.

Chamath Palihapitiya 28:04 I don't know if it's about, as much about cutting as much as it is about empowering. If you said to the product leaders, "You can make the decision. DEI and responsible AI and whatever other groups, they're gonna inform you on their point of view, but they're not gonna tell you what your point of view needs to be."

28:22 Yeah, but that DEI group's pulling the legal card. They're saying this is the law. They're saying that if you, if you-

28:26 Well, I'm saying that, that's what needs to change, right?

28:27 ... "If you don't do things the way we tell you, Google's gonna be hit with a civil rights lawsuit." That's what they're saying.

28:33 Oh, well, I mean, let's see if leadership can overcome that threat. But I think that's exactly the threat that is keeping the organization from resolving this problem, or could keep the organization from resolving the problem.

28:43 I think it's that, but I also wouldn't underestimate the bias. So, uh, you know, everybody there-

28:48 I hear you.

28:48 Not, I shouldn't say everybody, but it's a very liberal culture, right? It's a monoculture. So when you're swimming in that much bias, it's hard to see, right?

Jason Calacanis 28:56 Yeah.

Chamath Palihapitiya 28:56 Yeah.

28:57 When everybody is left of center... I mean, just look at something like political contributions, right? It's 90-something percent are Democratic. I mean, like high 90s. So it's just a, a liberal bubble, basically. And so-

29:10 Right.

29:11 ... when everybody's liberal, it's very hard to see when, you know, the results are way off center

Chamath Palihapitiya 29:17 as well.

Jason Calacanis 29:17 Also, if you g- if you give people this job, like how are they... What are they gonna do every day, Friedberg, if they've been given the job DEI and they've been given the job to do trust and safety? They, they're looking to fill their time and make an impact. You gotta, I think, maybe have less of these people. I honestly think-

Chamath Palihapitiya 29:31 No, you're right. And, and-

Jason Calacanis 29:31 ... it's about cutting people.

Chamath Palihapitiya 29:32 ... I don't know if you guys saw it, you know, Sean McGuire's a partner at Sequoia and he used to be a, a member of the team at Google Ventures when it, what's called Google Ventures, and he did a Twitter post. Did you guys see this?

Jason Calacanis 29:42 Yeah. (laughs)

Chamath Palihapitiya 29:42 Where he said when he was at Google, he was told by his manager, "I'm not really supposed to tell you this, it could get me fired, but you're one of the highest performing people here, but I can't promote you right now because I have a quota. My hands are tied. You'll get the next slot. Please be patient, I'm really sorry." It ultimately led Sean to leave Google, and, uh, you know, the, the rest is history. He's a partner at Sequoia now.

Jason Calacanis 30:04 You're saying because he's a white male.

Chamath Palihapitiya 30:06 Because he's a white male.

Jason Calacanis 30:08 Yeah.

Chamath Palihapitiya 30:08 And so the, you know, the R&D-

Jason Calacanis 30:10 I'll be honest, I had-

Chamath Palihapitiya 30:11 Yeah, go ahead.

Jason Calacanis 30:11 No, I had the same thing happen to me at AOL. When I was at AOL, and Chamath was there at the same time, the whole organization was white men from Virginia or whatever, and they gave me an SVP title, and I said, "Well, I want the EVP one." And they're like, "You know what? We can't have any more white males in that position right now."... we have to, like, get some more women in and, uh, people of color in that position. And they told me, "You'll have the same comp and bonus, but we just can't give you the title."

Chamath Palihapitiya 30:38 Jemad, do you think these, like, race and gender driven quotas m- make sense for HR departments to try and enforce upon managers to ma- to increase diversity? I mean, is that a good objective for an organization to have? This is, like, a topic a lot of people I've heard kind of flip back and forth on.

David Sacks 31:00 I... There is no company where I have majority control where I have an HR department.

Chamath Palihapitiya 31:04 You don't have an HR department?

David Sacks 31:06 No.

Jason Calacanis 31:06 Say more. Why?

David Sacks 31:07 I think that it's very important. You should go to a very respected lawyer at a third-party firm, someone very visible, an Eric Holder type person, and you should work with that law firm and retain them so that you have an escape valve if there are any kind of serious issues that, that need to be escalated so that you can get them into the hands of a dispassionate third-party person who can then appropriately inform the board, the CEO, and investigate. So that, that covers sort of all the bad things that can happen. Then there are buckets of, I think, good things. One, one important set of things is around benefits. My perspective is that the team should build their own benefits package that they want. They should understand the P&L of the company that they work for. They should be given a budget. And in, in my companies, again, what I do is I allow committees to form and I ask those committees to be diverse. But what I mean by diverse is I want somebody who has a sick partner, I want somebody who has a family, I want somebody who's young and single, so that the diversity of benefits reflects what all these people need. They go and talk to folks, they come back, and they choose on behalf of the whole company and there's a voting mechanism. Then when it comes to hiring, I think what has to happen is that the person that... for whom that person will end up working for, it's the head of engineering, it's the head of sales, those are the people that should be running the hiring processes. I don't like to outsource it to recruiters. I don't like to outsource it to HR. So, when you strip all of these jobs away, HR doesn't have a role. And what is left over is the very dark part of HR in most organizations, which is the police person, the policeman, right? The... What, what do Sachs call it? The commissar.

Chamath Palihapitiya 33:00 Commissar. (laughs)

David Sacks 33:01 That is why everybody hates HR.

Chamath Palihapitiya 33:03 Totally.

David Sacks 33:03 I have never met a company where that is a successful role over long periods of time. They are this conflict creating entity inside of an organization that slows organizations down. So, that allows me to empower individuals to actually design the benefits that they want, to hire the team that they want, and I let them understand the P&L in a very clear, transparent way, and the results are what the results are. You want more bonuses? Hire better people. And then what I do is at the end of every year, I talk about this distribution of talent and I make sure we are identifying the bottom 5 or 10%. They need to be managed up or they must be fired. Every year. And it does not matter how big the company is. You must manage up or out those bottom 5 to 10%. And see, in some cases I'm talking about one person because it's a small company. And in other cases, I'm talking about 30 or 40 people.

Jason Calacanis 33:59 So just hire the best person for the job?

David Sacks 34:01 No, you eliminate HR.

Jason Calacanis 34:02 Yep.

David Sacks 34:03 You empower the team. Make the, make, allow them to make their own decisions. Measure it, hold them accountable.

Jason Calacanis 34:10 Right. So if you have-

Chamath Palihapitiya 34:11 Yeah.

Jason Calacanis 34:12 ... a salesperson who just hires their, I don't know, 15 sorority sisters or fraternity brothers, whatever it is, and it just becomes not a diverse group-

David Sacks 34:21 Well, hold on.

Jason Calacanis 34:22 ... it is what it is.

David Sacks 34:23 That still may be diverse. This is my point. Like, the, the, the thing is that, like, there's different ways to sell. There's different sales motions. There's the sort of, like, elephant hunting kind of sales model. There's the dialing for dollars thing. So even those 15 sorority sisters, the way you describe it, could actually be diverse. My point is, that kind of superficial marking based on immutable traits will not yield a great organization. Instead it's, you're empowered to hire whomever you want. Just know that at the end of the year, we're going to measure them. Your bonus, their bonus, the company's performance-

Jason Calacanis 34:53 So it's just all performance?

David Sacks 34:54 Yeah. Performance.

Jason Calacanis 34:56 I mean, Frank Slootman said this and he, he got barbecued at some point. He said, "I don't have time to do this diversity stuff."

David Sacks 35:02 No, but like, like, it-

Jason Calacanis 35:02 "I just hire the best person."

David Sacks 35:03 By the way, in, in my companies, like for example, like when you do SOC 2 Compliance, you have to generate these reports, okay, especially for some of our customers, some of our companies, that actually show the diversity of our team. And when we measure them on the immutable traits, the... whatever they represent as their gender, whatever they represent as other dimensions, we are incredibly, incredibly diverse anyways. But the way that I-

Chamath Palihapitiya 35:30 I've never seen a startup that isn't diverse, you know. Uh, uh, uh, Silicon Valley attracts such a diverse mix of people. You know, w- w- w- what do we know about success factors for startups? Number one, the ones that are successful have a culture of meritocracy. Number two, they're non-bureaucratic and they don't have too much G&A, basically overhead in the company. Now, all those things are contradicted by having a large HR team or especially a DEI organization, right? They add bureaucracy, they add overhead, and-

Jason Calacanis 36:06 PIPS.

Chamath Palihapitiya 36:06 What's that?

Jason Calacanis 36:07 PIPS. (laughs) Performance improvement.

Chamath Palihapitiya 36:09 They cut into-

David Sacks 36:11 Well, PIPs are great. I PIP people all the time.

Jason Calacanis 36:13 Does it work?

David Sacks 36:14 Yeah.

Jason Calacanis 36:14 I mean, I, I, I know some people who are just like-

David Sacks 36:15 Yeah. Oh, bro, if you're-

Jason Calacanis 36:15 ... these PIPs don't work.

David Sacks 36:16 If you're a non-performing member of the team and you've been identified in the bottom 5 or 10%, we have a responsibility as management to coach you up or to get you to an organization where you're not in the bottom 5 or 10%.

Jason Calacanis 36:29 Yeah.

David Sacks 36:29 That's the right thing to do for people. You do that by being very transparent and writing it down.... you are not good at these things, you're underperforming in these things, fix them or you will not be here. That's a very fair thing to tell somebody.

Chamath Palihapitiya 36:42 Yeah. Look, how you wanna implement your own meritocracy, I think there's different ways for founders to do that. The point is, you want these companies to be a meritocracy. You don't want advancement in the company based on factors other than skill, merit, hard work, things like that.

David Sacks 36:56 Performance.

Chamath Palihapitiya 36:57 We- we know... Performance. We know that's a bad, bad path to go on. I think a lot of founders don't understand that DEI is not something they have to do. They don't have to have a DEI organization. This has somehow become a thing. It's- it's not required and I think people are realizing, like, w- why would you do that? Why would you create this large bureaucracy in the company that undercuts the meritocracy, that adds a lot of costs, and that slows you down? None of those things will help your company. What you need to have, I think Chamath laid out some really good best practices, you should have an outside law firm that I- I would say is, you could call it HR law, but I would just call it employment law. I would say, like, a non-ideological partner, e- an expert in employment law who sets up your company correctly and to whom you can take a complaint. If the- if an HR complaint gets raised through the chain of your company, you do have to take it very seriously and ask for a proper investigation. And that's probably best handled by an outside lawyer. So get that outside lawyer and then I think it's-

David Sacks 37:57 Sorry. By the way, always.

Chamath Palihapitiya 37:58 Yeah.

David Sacks 37:59 There's never a case where your coworker should know the intimate details of any of those si-... And that's what also creates this horribly rotten culture in HR, where these people act like gatekeepers of secret information. Salary information, bonus information, and then all of the other things. "Oh, you know, did you... This person did this with..." It's terrible to have that inside of a company. It should go to a dispassionate third-party person whose job it is to maintain confidentiality and discretion.

Chamath Palihapitiya 38:27 Yeah.

David Sacks 38:28 While investigating the truth.

Chamath Palihapitiya 38:30 Yeah. When HR is too powerful in a company, that's a red flag. At the end of the day, HR should be an administrative function. Their job should be to get people onboarded, sign their offer letter and their confidentiality and, uh, invention assignment agreement, and set them up on payroll, and get them benefits, and that kinda stuff. It should fundamentally be an administrative function and if it starts getting more powerful than that, it means there's been a usurpation.

David Sacks 38:56 You don't even need people for that. Like, you have software that does that now and it's all automated. You know, you send them a link-

Chamath Palihapitiya 39:02 Yeah.

David Sacks 39:02 ... you go to your favorite-

Chamath Palihapitiya 39:03 Sure.

David Sacks 39:03 ... you know, HR site, and boom, it's done.

Chamath Palihapitiya 39:05 Yeah. I don't think you need a lot of people doing this.

Jason Calacanis 39:07 Anything you wanna add to this discussion, Freeberg, as we, as we move onto the next topic?

Chamath Palihapitiya 39:10 I think that, unfortunately, the term diversity, equity, inclusion has been captured along, as Chamath points out, a single vector, which is this immutable trait of your racial identity or gender. And I think the more important aspect for the success of a team, for the success of an organization, is to find diversity in the people that comes from different backgrounds, different experiences, different ways of thinking. And so I- I'm not a huge fan of race-based metrics or gender-based metrics. Rather, I'm generally more oriented around be blind to those- those- those variables and focus much more on the variables that can actually influence the outcome of the organization.

Jason Calacanis 39:58 Yeah. One of the, uh, great paradoxes of this as well is we are moving to, uh, a much more multicultural, mixed-race society anyway. People filling out forms, a lot of our kids, you know, are p- are... could pick two or three of the different boxes on a DEI form. It's- it's not gonna make much of a difference in the coming

Jason Calacanis 40:15 decades. All right. Issue two, Google goes splashy cash. It's licensing deals for training data and it's now becoming a bit of a pattern. Google, we talked about, I think just last week, had done a deal with Reddit for $60 million. That's reportedly per year. Today, Stack Overflow is now using its overflow API to train Gemini. No word on the contract value. I did get some back channel that it's a multiyear, non-exclusive deal. According to Red's S-1, they have already closed 200 million worth of AI licensing deals over the next two to three years, so, you know, maybe it's gonna be 75 million a year or 100 million a year. Who knows how big that business can get? We're gonna talk about the S-1 from Reddit in just a moment. And, uh, they're, this is on top of all the other licensing deals that have occurred after Springer and OpenAI, remember that one? And OpenAI is in talks reportedly with CNN, Fox, and Time to license their content. That comes on the heels of that blockbuster New York Times OpenAI lawsuit that we talked about, I don't know, 10 episodes ago. And OpenAI's lawyers are trying to get that one, just to give you a little update on it, they're trying to get that case dismissed saying that the New York Times hacked ChatGPT to get certain results, and that the New York Times took tens of thousands of tries to generate the results, yada yada. And they said, here's the quote from the filing from OpenAI, "The allegations in the Times complaint do not meet its famously rigorous-"

Chamath Palihapitiya 41:38 (laughs)

Jason Calacanis 41:38 "... journalistic standards." Both OpenAI and Google-

Chamath Palihapitiya 41:40 All right.

Jason Calacanis 41:40 ... and Gemini have been furiously guardrailing their systems, as we talked about as well, to end- stop copyright infringement, like trying to make pictures of Darth Vader and that kinda stuff. Chamath, you've talked a little bit about your TAC 2.0 framework. Maybe you could talk about what you see happening here with all these licensing deals and what it means for startups in the AI space.

David Sacks 42:02 Well, just to maybe catch everybody up, TAC is this thing called Traffic Acquisition Cost, and you can see it most importantly in Google's quarterly releases, which is that what they realized very early on at the beginning of the search wars in the early 2000s is that they could pay people to offer Google Search. People would use it, and then it would generate so much money that they could give them a huge rev share and it would still make money. So I remember, Jason, when you and I were at AOL, this is the first time I met Omid, we were flying back to California. We were both in Dulles at the same time in, like, 2003 or '04.And that's when Omid did the first big search deal between AOL and Google, and it was, it was, I wanna say hundreds of millions of dollars back then.

Jason Calacanis 42:51 Yeah.

David Sacks 42:51 Where Google pays you upfront, you have to syndicate Google Search, and then they clean it up on the back end with some kinda rev share. So what's incredible is that that process has escalated to a point now where, for example, on the iPhone, it's somewhere between 18 and 20 odd billion dollars a year is what now Google pays Apple. So that's the traffic acquisition cost 1.0 world, TAC 1.0, and I just said that we should call this TAC 2.0 except now what Google is doing is instead of paying for search, they're actually paying for your data and saying, "Give it to me so that I can train my models and make it better." And I think that that's an incredible thing. Both it's very smart for Google, but also it's great for these businesses because it's an extremely high margin thing to do when you have a really good corpus of tr- of data that is very unique. So in the case of Reddit, that $60 million deal, I didn't, I, I looked through the S-1 to try to figure out whether it was a multi-year deal or not. It wasn't totally clear, but the point is that, you know, Google's paying Reddit 60 million bucks, and Jason, you just said that they're, they've done a couple more of these things. That's incredible. This TAC 2.0 thing is amazing. So if you're an entrepreneur building a website or building an app that has really unique training data or really unique data, you'll be able to license and sell that, and that'll be an incremental revenue stream to everything you do in the near future. That's amazing.

Jason Calacanis 44:17 Yeah, and I-

David Sacks 44:17 That's what TAC 2.0 is.

Jason Calacanis 44:18 It's gonna be incredible for the entire, uh, content and community-based industries. Do you think this could sustain content creation where advertising has become very difficult, Sax?

Chamath Palihapitiya 44:28 I guess my question to, to Chamath would be do you think this is going to be available to small websites? There'll somehow be some sort of program or... 'Cause I mean, Reddit's one of the biggest sources of content on the entire web, right? It's like a top five traffic site with tons and tons of user gener- generated content.

David Sacks 44:45 Yes.

Chamath Palihapitiya 44:45 Do you think, like, a small publication would be able to make these types of deals?

David Sacks 44:49 Yeah, and in fact, I think, like, if you go back to Search 1.0, that's exactly what these small companies were able to do, which was in a more automated way. They were able to basically partner, and in that example what they would say is, "Here, Google, why don't you just run your ads on our page?" Right? And that was sort of in that Web 1.0 world. So Google had solutions for the largest companies on the internet all the way to the smallest, and in this TAC 2.0 world, I do think that, that it works in that way as well. The problem in the, in that world if it's a small website that says, "Here's my training data," the question is how do you attribute how much incremental value a model derived from it versus something else? And so I think that that part has to get figured out. And so, you know, what Google will be able to pay you will probably be pretty de minimisly small if you're small right now. So, you know, to your point, if, if the upper bound is 60 million for Reddit, then the average website's gonna get a few hundred bucks. But that still may be a good start. And when Google figures out how to monetize this stuff or somebody else where then they can give you back some way to make money, I think, I think that there's a real monetization here. I really do.

Jason Calacanis 46:02 Ray Berger, you, you took the other side of this, but now that you see the market-based solution starting to emerge, what do you think of this market-based solution? You think it's, uh, got legs?

Chamath Palihapitiya 46:13 Well, I'm not convinced that this looks like TAC in the traditional sense where you're basically buying a continuous stream of traffic, and then you're helping to monetize that traffic. That's effectively what Google did in the ad syndication business and does today. That business makes about 10 billion a quarter at Google, and they're paying, call it 70 to 80 cents on every dollar back out to the owners of that traffic, the folks where that traffic is derived from. I would say that this looks a lot more like the content licensing deals to build a proprietary audience, which is effectively what Netflix did. They, they paid studios for content. Apple does this. They have proprietary content that they pay producers to make, and they put on Apple TV. Amazon does this and so on. This is a lot more like that where there are content creators out there, whether that content is proprietary like The New York Times or user generated like Reddit, and what they're trying to do is acquire that content to build a better product on Google Search. And I'm not sure how you get paid a continuous licensing stream for that content. Once you've trained the model, the content gets old, it gets stale at some point in a lot of cases like news, and then eventually, if you don't have a high quality continuous stream of content, it's not worth as much anymore. To give you guys a sense, humans generate in total... Well, let me just give you some stats. There's about a million petabytes of data on the internet today, and humans are generating about 2,500 petabytes of data, new data, uh, per day right now. Remember I shared a couple weeks ago, YouTube is generating about two petabytes of data, uh, per day. Half of all data generated is never used. So this is like records and files and stuff that gets put on a-

Jason Calacanis 48:04 Log files.

Chamath Palihapitiya 48:05 Log files, get stored somewhere, never accessed, never used. The majority of the rest of that data is not in the public domain. It's not on the internet. So there is a lot of data out there, what some people might call dark data, to train on. And I think that as the identification of better sources of training data and the value of training data, right now we're in this kind of shotgun approach. We're trying to blast out and, you know, source lots of content, lots of data. Just like over time Netflix got better at figuring out what content to buy and what to pay for it, and they're the best at it, I think so too will Google and others figure out what data is actually particularly useful, what it's worth, and what to pay for it.And so there's a lot of data out there to go and identify, to mine, to pay license fees to get access to. Whether those are continuous license fees or one-time is still TBD.

Jason Calacanis 48:58 That's a key issue, yeah.

Chamath Palihapitiya 48:59 So I think we're still a little bit early to know if this is, like, you know, a continuous model, like a TAC type business or if these are sort of chunky type deals, and we don't really know what the real value is yet, and that all changes over time. And remember tha- tha- the rate of data generation is increasing. So while we're generating 2,500 petabytes of data per day as a species on the internet, that number is going up every day. And so every year, all the old data becomes worth even less. So this is all changing fairly dynamically, and I think there's a lot still to be figured out on what the monetization model will be for content creators and, and how that's gonna change over time.

Jason Calacanis 49:34 Yeah. And this is a really good point. Some things will be like The Sopranos or Seinfeld or Simpsons where that library is worth-

Chamath Palihapitiya 49:41 Totally.

Jason Calacanis 49:41 ... a fortune and people will pay a billion dollars, a half billion dollars. Some, someone-

Chamath Palihapitiya 49:45 But no one's, no one's, no one's paying a lot for old NFL games, you know? (laughs)

David Sacks 49:47 Nick founded... By the way, Reddit's licensing deal was 203 million over... It says two to three years, so let's assume it's, call it three just to be safe.

Jason Calacanis 49:55 Mm-hmm.

David Sacks 49:55 So it's about-

Jason Calacanis 49:56 Mm-hmm.

David Sacks 49:56 ... you know, 60, $65 million a year. It doesn't say whether the deal with Google is exclusive.

Chamath Palihapitiya 50:01 Wow, so they could do it... They could do that same licensing deal multiple times. That's interesting.

Jason Calacanis 50:05 Yeah, none of these are exclusive, it seems.

David Sacks 50:07 This is what I don't understand. Why, why don't you do head deals like with folks like Reddit where you actually do it exclusively? Like, it seems like it's more valuable to spend a multiple of this number for, for one of the big seven who have tens of billions of dollars of cash anyways-

Jason Calacanis 50:22 And block the other players, yeah.

David Sacks 50:23 ... and block everybody else. That just seems so much smarter.

Chamath Palihapitiya 50:26 Well, then Reddit's multiple gets capped. If I'm Reddit, I don't wanna do that deal.

Jason Calacanis 50:28 Yeah, Reddit may not put it on the table, yeah, I mean-

Chamath Palihapitiya 50:30 'Cause then my multiple is capped. Like, the r- the way I can monetize my content is now set, and I'm done.

Jason Calacanis 50:35 This is why Reddit's gonna get bought.

Chamath Palihapitiya 50:37 And investors are gonna be like, oh, you're worth five times EBITDA. You know, that's it.

Jason Calacanis 50:40 Right. Reddit, Quora, Stack Overflow, they're gonna just get taken out. I th- this is, I think this is gonna be the new model.

Chamath Palihapitiya 50:44 Well, Quora's done around actually. Didn't Quora raise, uh, 50 to 500 recently?

Jason Calacanis 50:48 Yeah. I think they're gonna get taken out. I, I, I, I, I think these businesses have become too valuable because they do have ongoing content that just keeps getting generated.

Chamath Palihapitiya 50:56 But JCal, you used to run... You started web blogs, right? And I mean-

Jason Calacanis 50:58 Yeah, yeah, yeah. Gadget blog, web log, everything.

Chamath Palihapitiya 51:00 And but think about the value of that content today. It's negligible. Like, it was very valuable at the time.

Jason Calacanis 51:05 Yeah.

Chamath Palihapitiya 51:05 And as time went on, more content was being created 100 times, 1,000 times, 10,000 times more content that started to overshadow the value of that content. At the time the acquisition was done, it made a ton of sense. But all of a sudden two years later, particularly with the rate at which data is growing on the internet, it's like, does it make sense to buy any content anymore?

Jason Calacanis 51:23 So uh, you ta- Well, on the other side of that is historical content could be worth a lot of money, especially-

Chamath Palihapitiya 51:28 Some, some could be, for sure.

Jason Calacanis 51:29 Yeah. So if you had the Charlie Rose archive as an example, what is... You know, he's probably interviewed Kissinger 10 times.

Chamath Palihapitiya 51:35 Sure.

Jason Calacanis 51:35 And he's interviewed Kissinger for, you know, 10 hours. I've got two, almost 2,000 episodes of podcasts I've done with Startups over 13 years. Like, what if this week is-

Chamath Palihapitiya 51:43 Some of those are good, right?

Jason Calacanis 51:44 Yeah.

Chamath Palihapitiya 51:44 Right. (laughs)

Jason Calacanis 51:44 This week's Startups archive is gonna be worth something at some point, right? I'm, I don't think it's gonna be worth 60 million, but-

Chamath Palihapitiya 51:48 No, but what are all baseball games worth, right? Like, I mean-

Jason Calacanis 51:51 Yeah.

Chamath Palihapitiya 51:51 Who watches old baseball games?

Jason Calacanis 51:52 So they're not rewatchable, and I don't think the data-

Chamath Palihapitiya 51:54 Right.

Jason Calacanis 51:54 ... from them is particularly important. So I, I agree on that one. But historically stuff-

Chamath Palihapitiya 51:58 So we don't know, right?

Jason Calacanis 51:59 Yeah, we don't know, but-

Chamath Palihapitiya 52:00 And I just question how much of Reddit's content is actually, like, long-term valuable versus like they're covering a topic and they're talking about interesting stuff, and then-

Jason Calacanis 52:07 It's a really excellent point.

Chamath Palihapitiya 52:08 ... no one cares like a year later.

Jason Calacanis 52:09 It's a really, really excellent point. Yeah. Uh, and we'll figure that out. Okay.

Chamath Palihapitiya 52:14 And that's why I think it's like, it's the early days of knowing how to value all this content, particularly for LLMs. And so we don't really know yet. Over the next year, this will all start to become clearer, but it's, it's, again, it's the early days.

Jason Calacanis 52:23 Yeah. The same thing happened to music licensing, yeah.

Chamath Palihapitiya 52:25 Right. But if, if all the content creators kinda unionize, then it might increase-

Jason Calacanis 52:31 Like the music labels, yes.

Chamath Palihapitiya 52:32 I don't, I don't know if that's possible, kinda like the, yeah, like music-

Jason Calacanis 52:34 The music industry has ASCAP and other sorts of licensing.

Chamath Palihapitiya 52:35 That's the socialists, I love it. (laughs)

David Sacks 52:37 (laughs)

Chamath Palihapitiya 52:37 Well, I'm not, I'm not advocating for this, but the point I'm making is if they can't unionize, then there's a lot, there's just a huge number of vendors of content. And so models will need to buy some. But as long as they can get some, they don't need to have all. And therefore, it's basically highly competitive among su- suppliers, and there's a very limited number of buyers. So that tends to favor the buyer.

Jason Calacanis 52:59 This is why the news industry should have always had a federation, 'cause they could have just said to Google, "Hey, we're going to de-index ourselves from the Google search engine. And so you won't have the New York Times, Washington Post, LA Times. You're just not gonna have any of us unless you give us X, Y, and Z." And they were just too stupid and not coordinated to do it.

Chamath Palihapitiya 53:17 Yeah.

Jason Calacanis 53:17 Music industry, the exact opposite. You, you try to do anything with the music industry, they're gonna come down on you like a ton of bricks to this day. I see with startups all the time.

Chamath Palihapitiya 53:26 To this day. That's actually really interesting. Yeah. If all the, um, old school legacy newspapers and-

Jason Calacanis 53:32 Magazines.

Chamath Palihapitiya 53:32 ... magazines so on, hit-

Jason Calacanis 53:33 Blogs, online.

Chamath Palihapitiya 53:34 ... had basically formed their own whatever. Federation or cartel.

Jason Calacanis 53:38 Trade association.

Chamath Palihapitiya 53:39 Trade association, yeah. That would have been powerful.

Jason Calacanis 53:41 Yeah. I mean, that's what Murdoch wanted. Murdoch saw it clearly. He was like, you know, "Google's the enemy here. They're gonna take all of our revenue, and they're gonna get all our customer names, and we're not gonna even know the names of our customers."

Jason Calacanis 53:50 All right, issue three, Klarna crushes customer queries with AI. You may have seen this trending on X and Twitter and in the press. If you don't know Klarna, they're a Swedish fintech company. They do that buy now, pay later stuff. I think they were the originators of that online. And they put out a press release with some really eye-popping claims. AI assistants are now doing the work of 700 full-time agents at Klarna. They moved issue resolving times from 11 minutes with humans to two minutes with AI. And customer satisfaction is on par with human agents. And it said its resolutions are more accurate than humans, creating a 25% drop in repeat inquiries. That tracks. And so far, their AI, which they built with OpenAI, has had 2.3 million conversations, accounting for two-thirds of Klarna's customer support service chats. Klarna estimates its AI agent will drive, wait for it, a $40 million increase in profits this year. We could talk a little bit more about Klarna and their valuations, but Freeburg, what, what do you think this...... means if we're in year... this is the start of year two of ChatGPT as, like, a phenomenon, let's say. What do we think year three looks like?

Chamath Palihapitiya 55:02 So I think the tech- the techno-pessimist point of view is, "Oh my god. Look at all these jobs that are getting lost." I think the optimistic point of view is that that company has all of that excess capital now to reinvest in doing other things. That capital doesn't just become profits that flow out the door and everyone's done with that money, and that money just gets put away in a sock. That money gets reinvested, and that money gets reinvested in higher order functioning work, and that's really where there's an opportunity to move the workforce overall forward, which is what I think is super exciting and, and, um, I'm super positive about. We've seen this in every technological evolution that's happened in human history from, you know, the plow in agriculture to automobiles to computing and to now AI that, you know, humans moved from manual labor to knowledge work to now, ideally and hopefully, more creative work. And so I do think that it isn't just about eliminating jobs and making more money, but it's about enabling the creation of an entirely new class of work, whether that's prompt engineering or, you know, building entirely new businesses that simply can't exist today, or perhaps even downscaling businesses, where you no longer need to have a 10,000 person organization. Smaller organizations can be stood up as startups to start to replace large functioning organizations. So, I don't know. I think it's a time of great opportunity. I know that some people would view it as being highly shocking. I think it's inevitable that human knowledge labor, where the job of the human is simply the ingestion of data and then communicate an output of data seems like it will eventually be replaced by computing somehow, and this is happening now in an accelerated way with these LLMs. So, I think that what we should focus on and think about is: what are all the new businesses, all the new jobs, all the new opportunities that are... just couldn't have existed 10 years ago that are now emerging that are very exciting as the workforce transitions?

Jason Calacanis 56:50 Saks, you buy this techno-utopian view of this, all these jobs that are gonna obviously be retired are going to open up the opportunity for these humans to do even better work at Klarna? Or do you think it's just gonna go straight to the bottom line?

Chamath Palihapitiya 57:06 Well, it sounds like they're able to eliminate a lot of frontline customer support roles by using AI, which is what I would expect.

Jason Calacanis 57:14 Yeah.

Chamath Palihapitiya 57:15 I think this is a very natural application for AI. You know, the... it was already the case that you could pretty much find answers to questions by searching the FAQ, things like this. This, this is an even better way of doing that. So, so look, I, I believe that this will be a big area for AI, is saving on... Again, I use the word frontline customer support, because the way that customer support is typically organized is there's level one, level two, level three. The more difficult queries or cases get escalated up the chain depending on how hard they are, and I think the AI will do a really good job eliminating level one. It'll start to getting to level two, but you're probably gonna need humans to deal with the more co- uh, complex cases. Now, the question is where do those displaced humans go? I think there's gonna be new jobs, new work. That's always been the history of technological progress. And one of the things you're already seeing is there's a whole bunch of new AI companies that are exploiting this technology, and they need to hire people. So, I basically agree with Friedberg that you will elevate people's work by automating away the less interesting parts of people's jobs, and then creating more productivity and more opportunity.

58:24 By the way, just to use your, just to use your example, Saks. So imagine if all the level one support people, some chunk of them can now do level two support, and so the customers are gonna get greater hands-on care. More customers will get access to a higher level of service. The organization can afford to do that. They'll be more competitive in the marketplace because customers feel better taken care of. I just think that's how the organizations get leveled up as new technology kind of shows up like this. That's a great point. And then those folks can have a much deeper level of interaction with their customers than they are today. Just answering basic questions.

Jason Calacanis 58:58 But then the world gets more complex, and then people might get better at the software, and they might discover new features. Then you might be able to redeploy those people. If you look at coffee, like, I don't know, was it 40 years ago you went to order a cup of coffee, it was decaf or regular coffee, milk and sugar. Th- like, those are your four choices. And, and now you go order coffee, I don't know if you guys have used the Starbucks app or, you know, just had the SweetGreen CEO on the pod and, man, you can... The fidelity and the, and the nuance of what you wanna order is absurd. Chamath, where do you think this is all heading? Because there is the issue of displacement, how people, how quickly people can re- be redeployed. And if we're seeing in year two customer support and developers getting 10X, what other categories do you think we're gonna see fall next?

David Sacks 59:43 I think the truth is that, as you said, the real world applicability to AI was not last year. So I think we're really in the first five or six weeks of the first year.

Jason Calacanis 59:55 Hmm. So you consider that year zero?

David Sacks 59:57 That's year zero.

Jason Calacanis 59:58 Sure.

David Sacks 59:58 That was sort of like the, you know, where everybody was running around building toy apps.

Jason Calacanis 1:00:02 Proof of concept.

David Sacks 1:00:03 This is one of the first few times where you're seeing something in production where there's measurable economic value. And the important thing to note about that is that it's not just what it means for Klarna but what it means for everybody else. So if you look at everybody else, for example, here's Teleperformance, which is a, a French company that runs call centers. They lost $1.7 billion of market cap when that tweak went out, about 20% of their market cap. So this is, this is the real practical implication. Yes, Klarna replaced 700 people, and they saved 40 million of OpEx, but Teleperformance, while they were just doing their everyday work, lost 1.8 billion of their market cap at the exact same moment. And so what does it mean? I think that what Klarna should do is open source what they've built. And the reason is that you want to give companies like Teleperformance a chance to-... retool themselves with the best possible technology so they- they- they can actually preserve as many of the jobs as possible. Because at the limit, if every single company is able to implement something that is as economically efficient as what Klarna did, Teleperformance doesn't exist and there's $10 billion and 335,000 employees that will not have a job.

Chamath Palihapitiya 1:01:23 Yeah.

David Sacks 1:01:23 And so for Klarna, the reason to open source it is twofold. One is, they don't lose anything because you'll still need to train it on your own data and so there's no disadvantage that Klarna will have, right? They're just saying, "Look, I built this on top of GPT, here's what it looks like, and that production code can be used by anybody else. Go for it, but it has to run on your own data." That's a very reasonable thing. So I think it has the benefit of both, A, setting a technical pace that can help them attract better employees and more highly qualified people who find the scope of work even more interesting, and B, I think it's on the right side of history with all this AI stuff where it's allowing everybody to sort of benefit in a way that is the least destructive. But I just wanted to-

Chamath Palihapitiya 1:02:07 Yeah.

David Sacks 1:02:07 ... show you that the destruction was quite quick and it was pretty severe, and if two or three other big companies launch these kinds of tweets after real measurable results, Teleperformance would be a one billion dollar company shor- in short order.

Chamath Palihapitiya 1:02:20 There's a third reason I th- I think it's a brilliant idea for Klarna to open source this- this tool, 'cause it's not their business, right? This is just something they did as a- as a productivity improvement. They get the benefit back to them of the community working to advance that technology, so they don't have to put more engineers, like, advancing the ball on their-

David Sacks 1:02:38 Totally.

Chamath Palihapitiya 1:02:38 ... customer support AI.

David Sacks 1:02:39 Totally.

Chamath Palihapitiya 1:02:39 So they can just re- re-emerge in the changes that the open source community comes up with.

David Sacks 1:02:44 Yeah.

Chamath Palihapitiya 1:02:44 And since they're not in the business of selling AI directly, there's no reason not to do it, like Chamath said. So I-I think it's kinda brilliant.

David Sacks 1:02:51 Yeah.

Chamath Palihapitiya 1:02:51 This is Meta's strategy, by the way. I mean, Zuck's done the same thing.

Jason Calacanis 1:02:53 I was about to say, they should be building this on Meta's open source products and Apple's open source products. Right, Sax?

Chamath Palihapitiya 1:02:59 Yeah. Well, so what- what Meta said, what Zuck said on the Me- last Meta call is the reason we open source everything is because we don't directly sell AI. We create products that AI makes better, so by open sourcing this, we allow the community to advance the ball and we get-

David Sacks 1:03:14 Yeah.

Chamath Palihapitiya 1:03:14 ... to reincorporate those changes.

David Sacks 1:03:16 Yeah.

Chamath Palihapitiya 1:03:16 So it's a very smart strategy for companies that aren't directly selling the AI. Now-

David Sacks 1:03:21 Absolutely.

Chamath Palihapitiya 1:03:21 ... you know, if you're- if you're like Bret Taylor's new company, Sierra, obviously you're not gonna open source it because your whole business model is to create a proprietary solution.

Jason Calacanis 1:03:30 Yeah, but then to Chamath's mo- uh, you know, 80/90, whatever he was talking about, uh, with his, you know, incubator concept and, you know, these things go-

David Sacks 1:03:38 It's a company. It's a-

Jason Calacanis 1:03:39 It's a company? Okay, sorry.

David Sacks 1:03:40 It's a company.

Jason Calacanis 1:03:40 Um, is it 80/90 or 90/80? I'm sorry.

David Sacks 1:03:43 80/90, yeah.

Jason Calacanis 1:03:43 80/90. Is there a third word that comes off of it or are you just gonna call it 80/90?

David Sacks 1:03:47 Just 80/90.

Jason Calacanis 1:03:48 Just- got it, okay.

David Sacks 1:03:49 80% of the features at a 90% discount.

Jason Calacanis 1:03:51 So back to that, like, what does this mean if these things are getting to, Freeberg, your point about the pace? Man, the pace of these things, is it gonna improve 10% a year or 10% a month? If it's improving 10% a month, we're gonna get to 98% of queries done this year. If it's doing 10% a year, okay, we're gonna get to 99 or 98% of queries in four years. In other words, this is happening folks, and it's happening at a blistering pace.

David Sacks 1:04:15 Well, by the way, think of it, so not just Teleperformance, which is a- it was a $10 billion, now a $7.58 billion USD company, but think about Zendesk, right? Zendesk was a, I think a $8 to $10 billion private by PE.

Jason Calacanis 1:04:29 $10 billion went private, yeah. Yeah.

David Sacks 1:04:30 Yeah, it was a $10 billion take private in the hands of PE. The entire Zendesk workflow could be replaced by a handful of these open source agents where all of a sudden people can eliminate a lot of OpEx. I think the- I think the thing to keep in mind here is where the world is going has always been to try to lower cost.

Jason Calacanis 1:04:50 Mm.

David Sacks 1:04:50 And the original foundational principle of SaaS was that there's these line items in on-prem software that are just extremely expensive over time and very hard to justify, right? And so when people move to SaaS from on-prem, they were looking for cost savings. That was the initial thing. Now-

Jason Calacanis 1:05:07 Yes.

David Sacks 1:05:08 ... it's actually not cheaper anymore, but it's much more feature rich so you get a lot more value in SaaS, et cetera, et cetera. But the point of these AI agents and bots and workflows is that it'll reintroduce the concept of cash- of- of cost savings, of this idea that you can have cheaper, faster and better. And the more that that stuff is open source, my gosh, I think it just makes it very hard for companies that have point products to survive.

Jason Calacanis 1:05:33 You know, we- I was talking to a friend of mine, Josh Moore, who was the city head of Uber in New York, and he launched his own note-taking app. He's writing it himself, and he's obsessed with this concept of building a billion dollar, a unicorn company with one employee. And this is something-

David Sacks 1:05:50 Yeah.

Jason Calacanis 1:05:50 ... that a lot of people have been talking about. And my friend Phil Kaplan from DistroKid built a very large business in DistroKi- a unicorn with a very, like, I think low single digit number of people. This could be the future of, you know, efficiency. You- you could build, if you catch fire with a really hot company that gets a million customers-

David Sacks 1:06:05 It's absolutely the future. It's absolutely the future.

Jason Calacanis 1:06:07 And then if you think about our jobs in terms of capital allocation, well, how much capital does that founder need? Do they need to dilute 10%, 20%, 30%? They're not gonna need to dilute 60, 70, 80%.

David Sacks 1:06:17 A one person company should be able to spend less than a few hundred grand to get to product market fit in the next few years.

Jason Calacanis 1:06:22 Yeah. I mean, that's- that's kinda what we're seeing.

Chamath Palihapitiya 1:06:25 Just to go back to your question, J-Cal, like where does this go next?

Jason Calacanis 1:06:29 Yeah, please.

Chamath Palihapitiya 1:06:30 I think it's- uh, it's- it's really interesting to speculate about that. So what Klarna seems to be talking about are email-based customer support cases. I think where this is gonna go next is to phone.

Jason Calacanis 1:06:42 100%.

Chamath Palihapitiya 1:06:43 And these call centers use the- what are called IVRs, these interactive voice response systems, but they're very rigid. It's a lot of pre-recorded messages and it says, "Push one if your problem is this, push two if your problem is this." Everyone hates those things.

Jason Calacanis 1:06:55 Yeah.

Chamath Palihapitiya 1:06:56 I think where it goes next is you'll call up the call center and you'll get a- a voice that sounds like a human.... just talk to you.

Jason Calacanis 1:07:03 Yeah.

Chamath Palihapitiya 1:07:04 And you won't even necessarily realize that you're talking to an AI because there are already these AI companies that can do generative voices, any language, any accent.

Jason Calacanis 1:07:12 Oh, and they're fast now.

Chamath Palihapitiya 1:07:14 And they're fast. Yeah, th- then that's-

Jason Calacanis 1:07:15 And multi-language. Think about that.

Chamath Palihapitiya 1:07:16 Right.

Jason Calacanis 1:07:16 Just localizing them across the globe. You know, you wanna launch a product in Japan.

David Sacks 1:07:21 By the way, did you guys see? There was a Meta demo which I thought was really cool, which was, it was run on Llama 70B, but it was a real-time translation tool where the person was speaking in Hokkien Chinese and the, and the other person was speaking in English, and they were able to understand each other. But Saks, to your point, when that person calls, for example, B of A, now Spanish is not a language. It's actually many dialects and many, many, many different accents, right, depending on which country you're from. Like the accent that you hear in Spain is totally different than the accent in El Salvador or the accent in Chile or Argentina. And so wouldn't it be amazing where you, you call your B of A app, it picks up your accent and your tonality and it responds with the person of that exact same accent and tonality? That is incredible.

Jason Calacanis 1:08:08 Well, I'll take it to another level. You call, it recognizes your number. It knows what you're doing in the software. It knows the problem you've had. It knows the last three times you called and how long you've been using the software, and it anticipates, like, "Okay, I know this person has a Windows machine and it's f- you know, still five years old." And it's like, "Are you still using that same five-year-old Windows machine? Yeah, we know it's a bug with, you know, Windows whatever." Uh, "You should probably upgrade." I mean, it's gonna know the entire context of this. And so it, it's gonna just get... It, it could be more efficient than a human could ever be.

David Sacks 1:08:38 The best customer support interaction I had was I called JP Morgan Chase because I had an old credit card that I had had for 20 years, and I think that they had outsourced it to somewhere in the Caribbean. And this woman picked up the phone. It was so cool. "Chamath, what is the problem, man?"

Jason Calacanis 1:08:53 (laughs)

David Sacks 1:08:53 And I was like-

Jason Calacanis 1:08:54 (laughs)

David Sacks 1:08:54 ... "Oh, this is the best."

Chamath Palihapitiya 1:08:55 (laughs)

Jason Calacanis 1:08:55 (laughs)

David Sacks 1:08:55 And I had this whole conversation with her for 15, 20 minutes, nothing to do with the phone, uh, nothing to do with my credit card rather. It was great. She's like, "I'm-"

Jason Calacanis 1:09:03 Yeah.

David Sacks 1:09:03 "... really a man. You wanna cancel your card?" I was like-

Chamath Palihapitiya 1:09:05 (laughs)

David Sacks 1:09:05 ... "Yes, please."

Jason Calacanis 1:09:06 No, but you could do celebrities the best.

David Sacks 1:09:08 I am-

Chamath Palihapitiya 1:09:09 Yeah, celebrity voices. Yeah.

David Sacks 1:09:10 "JK, I'll do the DJT." Okay, let's, let's role play. Uh, you're-

Jason Calacanis 1:09:13 Okay.

David Sacks 1:09:13 ... Donald Trump. Okay?

Jason Calacanis 1:09:14 Okay. (laughs)

David Sacks 1:09:15 And I, and I am, uh-

Jason Calacanis 1:09:16 Hello.

David Sacks 1:09:16 ... JP Morgan.

Chamath Palihapitiya 1:09:17 (laughs)

David Sacks 1:09:18 "Hi, Mr. President."

Jason Calacanis 1:09:19 Chamath, Chamath, you're huge. You've got big spending.

Chamath Palihapitiya 1:09:22 (laughs)

Jason Calacanis 1:09:22 Every time I go see Chamath, I go see Chamath, I go in, amazing.

David Sacks 1:09:26 (laughs) "Mr., Mr. President-"

Jason Calacanis 1:09:27 Okay?

David Sacks 1:09:27 "... I would like to cancel my credit card, sir."

Jason Calacanis 1:09:29 "Okay, you don't wanna cancel it. We've got a great APR, 3.9%."

David Sacks 1:09:33 (laughs)

Jason Calacanis 1:09:33 "But for Chamath. You know what?"

Chamath Palihapitiya 1:09:35 (laughs)

Jason Calacanis 1:09:35 "He's my Sri Lankan friend. How much do we love Sri Lankans, okay?"

David Sacks 1:09:38 (laughs)

Jason Calacanis 1:09:39 "Huge. And d- but-

David Sacks 1:09:41 So good.

Jason Calacanis 1:09:41 ... not J-Cal. Nasty."

Chamath Palihapitiya 1:09:43 (laughs)

Jason Calacanis 1:09:43 "Nasty man, J-Cal. Very nasty."

Chamath Palihapitiya 1:09:46 He acts like a dog.

Jason Calacanis 1:09:47 He's a dog, okay?

Chamath Palihapitiya 1:09:48 (laughs) He's a dog.

Jason Calacanis 1:09:50 Some people say TDS.

Chamath Palihapitiya 1:09:52 (laughs)

Jason Calacanis 1:09:52 "How much do we love our Saks? Saks is poop."

David Sacks 1:09:55 (laughs)

Jason Calacanis 1:09:55 "Great. Uh, Mar-a-Lago."

Chamath Palihapitiya 1:09:57 (laughs)

Jason Calacanis 1:09:57 "I go to Saks' house. His house, huge. Huge house."

Chamath Palihapitiya 1:10:02 (laughs)

Jason Calacanis 1:10:02 "Almost as big as Mar-a-Lago."

David Sacks 1:10:05 Not quite.

Jason Calacanis 1:10:06 I gotta work on it (laughs) 'cause I haven't done it for years.

David Sacks 1:10:08 That's really good. It's really good.

Jason Calacanis 1:10:10 I gotta work on it.

Chamath Palihapitiya 1:10:10 Have you, have you seen that guy? There's a, there's a new, like, impressions guy who's amazing. He does Trump really well.

Jason Calacanis 1:10:15 I have seen him. He's on Howard Stern all the time, right? He does the Howard Stern.

Chamath Palihapitiya 1:10:18 Yeah, yeah, yeah.

Jason Calacanis 1:10:18 Shane Gillis?

Chamath Palihapitiya 1:10:18 He does Howard back to Howard.

Jason Calacanis 1:10:19 No, not Shane Gillis. This is another kid. Matt Fried, friend?

Chamath Palihapitiya 1:10:22 Yeah.

David Sacks 1:10:22 Oh, Matt-

Chamath Palihapitiya 1:10:23 Yeah, yeah, yeah, yeah. He does Howard back to Howard. It's hysterical.

Jason Calacanis 1:10:26 He does Howard.

David Sacks 1:10:26 Yeah.

Chamath Palihapitiya 1:10:26 Oh, wait, that video is good too. Hold on. That, this Donald Trump-

Jason Calacanis 1:10:28 Wait, let's-

David Sacks 1:10:28 Let me hear multiple Trumps.

Chamath Palihapitiya 1:10:29 ... is awful, but yeah.

Jason Calacanis 1:10:30 I wanna hear Trump. I wanna hear Trump.

Chamath Palihapitiya 1:10:30 Multiple Donald Trumps is hysterical.

Jason Calacanis 1:10:31 (beep) on other Trump impressions.

1:10:34 (laughs)

1:10:34 So like, "I'll tell you what, Zach. There are so many people that try to do, but you see the failed Alec Baldwin." Baldwin comes out on SNL, which used to be a lot funnier back when it was Jimmy Choo-

1:10:44 Holy shit, total dog.

Chamath Palihapitiya 1:10:44 He's a dawg.

Jason Calacanis 1:10:44 But Baldwin goes like this. He goes, "We've got a great show."

Chamath Palihapitiya 1:10:49 (laughs)

Jason Calacanis 1:10:49 "Boopity, boopity, boopity, boo. I don't do that. I never say, 'Boopity, boo.'"

1:10:53 "I never say, 'Boopity, boo.'"

Chamath Palihapitiya 1:10:54 (inhales deeply)

David Sacks 1:10:54 (laughs)

Jason Calacanis 1:10:54 "You see Steven Colbert? He comes out like, 'I know a da-da-dat, a da-dat, a da-da-dat, a China...' I don't say the 'da-da-dat.'"

David Sacks 1:11:02 (laughs)

Chamath Palihapitiya 1:11:02 (laughs)

Jason Calacanis 1:11:02 "And the last one is Jimmy failing Fallon. He touched my hair like a dog."

Chamath Palihapitiya 1:11:07 (laughs)

Jason Calacanis 1:11:07 And then Jimmy Fallon, he goes, "Okay."

1:11:09 "Failing like a dog."

1:11:11 "Okay, we're rolling? Okay. I don't do these moves. They're all wrong."

Chamath Palihapitiya 1:11:14 (laughs)

Jason Calacanis 1:11:15 So that's a little..."

1:11:17 Yeah, that's amazing.

David Sacks 1:11:17 That's an incredible impression.

Chamath Palihapitiya 1:11:19 He's incredible. Yeah, he's incredible.

Jason Calacanis 1:11:19 Wait, wait, did you guys see him doing, uh, Howard Stern?

David Sacks 1:11:21 You gotta see him do Howard Stern. It's so next level. You know the one he does that's incredible but subtle is, uh, Stanley Tucci? How are you, by the way? Robin, you look beautiful, right?

Narrator 1:11:30 Why, thank you, thank you.

David Sacks 1:11:31 Right.

Jason Calacanis 1:11:31 "Right."

David Sacks 1:11:31 "Right." Is it still (beep) you up, Howard? It's (beep) me up. Right?"

Jason Calacanis 1:11:34 Yeah.

David Sacks 1:11:35 (laughs)

Jason Calacanis 1:11:35 Right, because when I start talking to Robin after you leave-

David Sacks 1:11:38 Right?

Jason Calacanis 1:11:38 ... I get crazy, you know?

David Sacks 1:11:40 Right.

Jason Calacanis 1:11:40 Right, Robin?

David Sacks 1:11:40 Can we just talk about this? Can we just talk about this?

Jason Calacanis 1:11:42 Yeah, go ahead.

David Sacks 1:11:42 (laughs) Right?

Jason Calacanis 1:11:43 Go ahead.

David Sacks 1:11:44 Right or wrong, right?

Jason Calacanis 1:11:46 Right.

Narrator 1:11:46 (laughs)

David Sacks 1:11:47 Right.

Jason Calacanis 1:11:48 Right.

David Sacks 1:11:48 Now, Howard, left or right, right?

Jason Calacanis 1:11:50 Uh, right.

David Sacks 1:11:51 (laughs)

Jason Calacanis 1:11:51 Right.

David Sacks 1:11:52 Right.

Jason Calacanis 1:11:52 Right.

David Sacks 1:11:53 Right.

Jason Calacanis 1:11:53 Right.

David Sacks 1:11:53 Right on red, right?

Jason Calacanis 1:11:55 Right.

David Sacks 1:11:56 Right.

Jason Calacanis 1:11:56 Right.

David Sacks 1:11:56 Right."

Jason Calacanis 1:11:56 (laughs) It's so great. (laughs) He is killing it.

David Sacks 1:12:00 I think we have our halftime act for the All In Summit '24.

Jason Calacanis 1:12:02 Oh, for sure.

Chamath Palihapitiya 1:12:03 Oh my God, yeah. He'd be amazing.

David Sacks 1:12:04 He'd be unbelievable. I love Stanley Tucci, by the way. He's great.

Jason Calacanis 1:12:06 Oh, you gotta see this kid Stanley Tucci. I, I, do the Stanley Tucci.

Chamath Palihapitiya 1:12:08 Okay, do, yeah, I haven't seen that one.

David Sacks 1:12:08 Do this, do the Stanley Tucci. It's so great. Have you, have you guys watched the Stanley Tucci on HBO where he-

Jason Calacanis 1:12:14 Cooking?

David Sacks 1:12:15 ... cooking?

Jason Calacanis 1:12:15 Yeah. It's so great.

David Sacks 1:12:15 Where like he goes to Italy? It's so great. Oh, my God.

Jason Calacanis 1:12:17 It's so great.

David Sacks 1:12:17 It's so good.

Jason Calacanis 1:12:18 He does it on TikTok too. He just randomly cooks something and he's like, "I'm gonna make a frittata. I have some leftover gnocchi and I'm just gonna..."

David Sacks 1:12:25 I do watch him on, uh, TikTok.

David Friedberg 1:12:27 Thanksgiving is a special time. I'm in London celebrating. So today I'm making-

Jason Calacanis 1:12:33 Oh, this is fucking good.

David Friedberg 1:12:34 ... Stan stuffing.

David Sacks 1:12:34 (laughs)

David Friedberg 1:12:34 And also sugo di carne, or as it's known-

Jason Calacanis 1:12:38 (laughs)

David Friedberg 1:12:38 ... gravy. Now, the thing about stuffing is-

Jason Calacanis 1:12:41 (laughs)

David Friedberg 1:12:41 ... you might use a traditional white bread. But in my household, I use a homemade focaccia because I'm Italian on both sides, and nothing tastes better than bread with a little marinara sauce. It's a time for gratitude and giving thanks. Enjoy your holidays, and thank you very much. Felicity, go ahead.

Jason Calacanis 1:13:01 That is really good.

David Sacks 1:13:02 He's so good. He's so good. All right, listen, I don't know how we keep the show going here, but three,

David Sacks 1:13:06 two... Okay, issue four, Reddit's S-1 is kind of fun. Let's break it down everybody. 2023 revenue, $804 million, up 21% year over year.They're still losing money, uh, net loss 91 million in 2023. They lost a 159 million in 2022, so they're cutting the loss. Free cashflow's negative. Here's a chart of their quarterly revenue and cashflow. So they're kind of bouncing along the breakeven mark, as you can see there in the chart. They got a wonderful gross margin because they don't pay to produce the content unlike The New York Times or Netflix. And so an 86% gross margin, up 2% year over year. Their daily active uniques 76 million, up 27% year over year. Average revenue per user is incredibly low, three bucks and 42 cents, and their daily active unique users, uh, here you can see another chart growing nicely quarter over quarter. They got a billion two in cash. Most interesting probably, uh, and could be challenging to execute on is their direct share program. They're gonna carve out a bunch of, uh, shares in the IPO to sell to their most active mods. Those are the moderators, the people who run the, uh, different channels or subReddits as they're called.

1:14:19 What could go wrong? What could go wrong? (laughs)

1:14:21 What could go wrong? We've seen this movie before. And, uh, but they're gonna invite users to participate on it on a rolling basis. So-

1:14:27 A more unqualified retail buyer pool does not exist in the Reddit mods, except maybe the Reddit participants themselves.

1:14:35 WallStreetBets knows what they're doing, yeah. I think they'll buy the, uh, I think they'll buy after the lockup comes up. But let's just get started here. I think you looked at the S-1 a little bit, Freberg, and you had asked us to, you'd asked me to put it on the docket 'cause you were, you were digging into it. Anything stick out to you or thoughts on the business overall?

Chamath Palihapitiya 1:14:57 No, I mean, I wasn't pu- pulling. I just asked if you guys had read it. Um, Re- (laughs) um, I think-

David Sacks 1:15:06 Hey.

1:15:06 Hey.

Chamath Palihapitiya 1:15:06 I made a funny joke actually. (laughs) Read it, get it.

1:15:09 Accidentally.

1:15:09 Get it? i.e.- (laughs)

David Sacks 1:15:12 I'll let you guys go on for a minute. Go ahead. Go ahead. Tell me when you're ready.

Chamath Palihapitiya 1:15:16 (laughs)

1:15:16 Sorry.

1:15:17 It was a good pun. Too bad it was accidental. No, it was, it was intentional. I'll give you credit.

David Sacks 1:15:24 It was intentional. I'll give it to you.

Chamath Palihapitiya 1:15:25 So I think the, the thing about Reddit, if you could pull up the chart with the quarterly average daily active user data. This was a business that the last couple of years everyone was like, had flat-lined because it was only growing 5% a year in terms of usage. And then all of a sudden in the last two quarters, so starting in late summer, early fall of '23, so just six months ago, the usage started to climb pretty significantly growing 15 and most, in the most recent quarter, 27% year over year. Absent that growth story, it's a really challenged business because a business without much growth gets value typically on a multiple of the cashflow that they're generating. And, you know, there's less upside and all this kind of optionality goes away. That's kind of a key point. I, I don't know. I think, like, for you to make an investment at a five billion dollar valuation here, you've really gotta believe that the growth continues at this rate and it doesn't revert back to the mean growth rate of the last couple of years of basically 5%, which has roughly flat-lined. The other challenge they have is that their ARPU is only in that kinda $3 range, which is, like, less than 10% of where Facebook is at. And the data that Facebook collects on their users gives them the ability to do much better targeting on ads and therefore monetize their audience much better than Reddit has been able to do, to the order of over 10X. And then if you look at the ARPU number, how much they've been able to grow that metric, it's also, you know, been a little bit flat-lined. So this business, I think, is a real question mark. I mean, you could argue it's probably worth in the best, best case, in the two to three billion dollar kind of valuation range. And then you have to believe the bull case that the growth continues or accelerates from here and they have a plan to address the ARPU problem, they have other paths for monetizing their audience than what they're kind of doing today. What do you guys think this thing's worth? Do you buy it if it goes out at three billion or five billion, do you buy it?

David Sacks 1:17:18 I think the first question, which you nailed, that a buy side investor will ask is what happened in the last two quarters that was different than the last 15 quarters? That's gonna be a very important question and I think they're gonna have to have a very buttoned up answer for that.

Chamath Palihapitiya 1:17:37 Right.

David Sacks 1:17:37 And if they can point to very specific repeatable things, I think that'll be good. The thing that they... This IPO, if it goes off in the next four weeks, they won't have to wait, but if it doesn't get off in the next four weeks, they'll have to update the S-1 probably with Q1. And so you'll see whether this thing is a trend or whether it was a one-time thing.

Chamath Palihapitiya 1:18:02 Do you know what it is?

David Sacks 1:18:03 Well, the growth in the logged out is probably largely because typically if you use it on a phone, it tries to force you to use the app, right-

Chamath Palihapitiya 1:18:15 That's right.

David Sacks 1:18:15 ... so that you can be in this logged in experience. And if you just turn that off, you can get a lot more logged out because Reddit gets tremendous rank authority from Google. So if you just, if you just turn that off, I think that you'll have a lot of logged out customers and that will grow very quickly. And so maybe it's a decision that they'd rather have the top line number grow than have logged in users grow. But the logged in user growth has still been pretty healthy. It's basically doubled in the last three years, so... But to your point, Freberg, if they said, "Oh, our, our business is really only these 30 odd million logged in users," it would be worth a lot less than saying, "75 million." I think it's, I think you're right, it's kind of like in the mid, you