All-In PodcastE169: Elon sues OpenAI, Apple's decline, TikTok ban, Bitcoin $100K?, Science corner: Microplastics
EVERY SPOKEN WORD
150 min read · 30,046 words- 0:00 – 0:55
Bestie intros!
- JCJason Calacanis
Chamath, who are you giggling with? Are you with your kids? What's going on here? You're, you're making Google face.
- CPChamath Palihapitiya
No, I, I got a, (laughs) I got a message from Nat.
- JCJason Calacanis
Oh, no.
- CPChamath Palihapitiya
She's like-
- JCJason Calacanis
Was it Helmuth?
- CPChamath Palihapitiya
No, no. I got a message from Nat. She's so funny. So, you know, we're ... I was like, "Blah, blah, blah." She did a lit- Uranus joke into (laughs) our-
- JCJason Calacanis
(laughs)
- CPChamath Palihapitiya
... my chat and I lost it. (laughs) It is like Friedberg always says, "Your anus is, uh, right there at the edge of the universe." No, she's like, "Are you hungry? I could eat a you- your anus." (laughs) Oh, no. We could go to a great restaurant, Your Anus.
- JCJason Calacanis
(laughs)
- CPChamath Palihapitiya
They serve the great meals there.
- DSDavid Sacks
(laughs)
- CPChamath Palihapitiya
Uh, they have a great chocolate lava cake.
- NANarrator
Let your winners ride. Rain Man David Sachs. I'm going all in. And I said we open source it to the fans and they've just gone crazy with it. Love you Betsy. Queen of Quinoa. I'm going all in.
- 0:55 – 37:06
Elon sues OpenAI: complex structure, tax issues, damages, past comparables
- JCJason Calacanis
All right, everybody. Welcome back to your favorite podcast of all time. It's episode 169 of All-In with me again, the chairman dictator, Chamath Palihapitiya, uh, David Friedberg, your sultan of science, and The Rain Man, yeah, definitely, David Sachs has his Montclair hat back again. I guess they're back in stock. How we doing, boys? Welcome back to the show. Let's get to the docket here. Issue one, Elon has sued OpenAI, begun the meme wars have.
- DSDavid Sacks
(laughs)
- JCJason Calacanis
After we finished the recording last week, you know, the memes are incredible. (laughs) After we finished recording last week, Elon sued Sam Altman, Greg Brockman, and the OpenAI organization. He's suing for breach of contract, fiduciary duty, and unfair competition, and his argument is basically OpenAI started as an open source nonprofit. As you know, he, he gave them something like 50 or 75 million, I forget which, both those numbers quoted. And then, of course, everybody knows OpenAI turned into ClosedAI. They became a closed source for-profit venture after the tech was deployed. This enabled them, obviously, to benefit from tax, uh, non-profit tax breaks while building the tech, but they now have two corporate entities. There's this nonprofit called OpenAI. There's a for-profit. It's called OpenAI Global LLC that was created in 2019. And there's all this funky relationship between the two. We'll get into that, 'cause it's kind of interesting, actually. Elon said that if OpenAI is allowed to do this, then it should be the standard for every company going forward. That's an interesting point. You can start by donating money to a nonprofit and then make a for-profit. It seems pretty ca- capital efficient. So what does Elon want to get out of this? According to the lawsuit, he wants OpenAI to open source their models. By the way, that's what Facebook and Apple are doing right now, so tha- that seems more than reasonable since that's how the company was formed. And he wants to make sure that shareholders receive no financial benefit from OpenAI. And we can get more into a bunch of the OpenAI nonprofit status a- and their structure. It's super convoluted. But I wanna just get your initial reaction, Sachs.
- DSDavid Sacks
I haven't read the legal filings, Jason. My knowledge of the case is just coming from following what's on Twitter. And the last time I commented on one of Elon's lawsuits on this pod, I ended up in six hours of depositions, so...
- JCJason Calacanis
(laughs)
- DSDavid Sacks
Remember that was the-
- JCJason Calacanis
Yeah.
- DSDavid Sacks
... the whole Twitter lawsuit. In any event, my understanding of the case from the tweets that are flying back and forth is, I think Elon is making two points. One is that when OpenAI was set up, it was set up to be a nonprofit and to promote AI as an open source technology that everyone could benefit from, and no one large tech company would control. In that case, Elon was primarily concerned about Google. I think now he's more concerned about Microsoft. Nonetheless, the idea was that this would be open source. So I think point number one is, Elon feels like the rug was pulled out from under him. After he donated 40-something million dollars to this, they completely changed what it was gonna be. And I think he's used the word swindled before. He feels like he was cheated. And I think usually when there's a lawsuit like this, um, it's usually because somebody does feel fundamentally cheated by what happened. So I think that's the first point. The second is, that I think that Elon's making is, "Well, wait a second. If you can start a company as a nonprofit using pre-tax dollars, and then all of a sudden convert to for-profit, then why wouldn't everybody do this in order to circumvent paying taxes?" And I think that's another, I'd say, valid and interesting point that, that he's made. Now, OpenAI has responded to this by publishing some of Elon's emails to them, and they think that they have a smoking gun here because apparently Elon told them they need to raise far more money in order to have a chance of taking on Google/DeepMind. I just don't know whether that's the smoking gun they claim it is, but that's, that's basically what they're putting out there. And then to add fuel to the fire, you've got VCs coming over the top debating different aspects of this. You've got sort of Vinod defending OpenAI. He was the first VC investor in it, and so he's been out there attacking Elon. And then I think Marc Andreessen is responding to Vinod and mayb- I don't r- know if he's exactly defending Elon. Anyway, it's turned into a whole maelstrom on X, and then everyone else is stor- starting to put out a whole bunch of, uh, crazy memes. So I don't know who's gonna win this case in court, but the memes are definitely lit. And, uh, maybe the funniest one is that Elon has said that, uh, if OpenAI will simply change their name to ClosedAI, he'll drop the lawsuit. (laughs)
- JCJason Calacanis
(laughs) I think he's serious about that.
- DSDavid Sacks
I think he is serious about it, but I think he's making his point, which is, "You ended up doing something different than what you told me when you got me to write this big donation, a- and when we co-founded this thing together." So-
- JCJason Calacanis
Yeah.
- DSDavid Sacks
I think that sort of sums up Elon's position on this.
- JCJason Calacanis
Chamath, a year from now, where do you think we'll be with this?
- CPChamath Palihapitiya
Well, I think, I think there's one more thing which is that...
- DFDavid Friedberg
They used his name pretty aggressively to get more money and he was very instrumental in getting some of the early critical hires, particularly Ilya, which has been, I think, well-documented, Sutskever to leave Google, right? So that's probably Sachs where also some of this feeling that he was bamboozled comes from. But I think that all of those emotions matter less than the rule of law, which is his second point, which is the important point. Irrespective of whatever one email says or another email, it's not great for the US tax system if all of a sudden a big gaping loophole is identified and taken advantage of. I think that there's a huge economic incentive for the state of California, every other state where these OpenAI employees lived and have gotten equity and now have gotten paid, there's an incentive for Treasury, there's an incentive for the IRS. It touches a lot of aspects of very complicated tax law and so I think that's why there will be a resolution to this case because I think that that answer is very important and I think it will, as he has correctly identified, motivate a lot of people's actions going forward. So independent of what the emotional situation is amongst all the, all the actors in this play, the reality is he's identified a loophole and that loophole needs to get fixed. I'll give you a, a different example of this that's much more benign but it dragged on for eight or nine years. At Facebook there was a period where, and this was public so I can, I can tell you, we transferred a lot of our IP to Ireland at one moment and there was a transfer payment and whatnot, and then a few years afterwards when, when everybody realized, including us, and we had miscalculated, but when everybody realized the value of Facebook, that transfer payment did not seem correct. And it was a huge tax arb that we had facilitated, right? Because all of that IP sitting inside of Ireland gets taxed at, you know, a very different rate than that IP would have gotten taxed in the United States. And other companies had copied this. Long story short, the IRS sued. You know, similar to you, David, I was in years of depositions and interviews and all of this stuff. So the point is that the government really cares about these kinds of things because so much money is on the line and if OpenAI turns out to be this multi-hundred billion dollar behemoth, this will get figured out in court because there's just too much money at stake.
- JCJason Calacanis
Freeberg, any thoughts, and maybe Steelman, if you, if you feel like it, OpenAI's position?
- DFDavid Friedberg
Yeah. I think we're all ignoring the documents that OpenAI put out yesterday showing emails and interactions with Elon, where Elon acknowledged and recognized the necessity of having a for-profit subsidiary that could pursue the interests of the foundation by raising billions of dollars of outside capital. I think it's a really interesting set of facts that provides a different light on the story and it was really important that OpenAI release it. I'm gonna share a-
- JCJason Calacanis
Well, bu- well, hold on, Freeberg, I did mention that.
- DFDavid Friedberg
Freeberg, I mentioned that too.
Yeah.
My point is it doesn't allow you to break the law.
Yeah. So let me just, um, tell you guys, uh, a little bit about another example. My sister works at a nonprofit called the Cystic Fibrosis Foundation. Cystic fibrosis is an inherited disorder, affects the lungs and digestive tract. It's debilitating, really affects children. There is a nonprofit called the Cystic Fibrosis Foundation established in 1955, they did tons of work on drug development research and it was a nonprofit for years until they realized that there needed to be a market-based system to create the necessary incentives to drive the capital needed to find a drug that could cure cystic fibrosis. And in the year 2000, they invested, out of their foundation endowment, $40 million in a company called Aurora Biosciences. Subsequently, it was acquired by Vertex and they continued to invest another $60 million, so a total of 100 million bucks in the lifetime of the development of a drug that could cure this disease. In 2005, a drug was discovered and in 2012 the FDA approved it. The nonprofit then sold their rights, their interest in this for-profit entity, for $3.3 billion. It was an incredible return, it was the...
Incredible.
... largest-
Wow.
... investment return by a nonprofit in history.
Who did they sell it to? Back to the company?
I actually think they sold the rights to Royalty Pharma, who you and I know well. And that $3.3 billion continued, uh, opened up this ability for them to continue to make investments. They now fund biotech VCs and they make direct investments and other things. But it really set the benchmark for this concept of what's called venture philanthropy, where a nonprofit parent company can make investments in for-profits that can raise additional capital that's needed to pursue the broad, difficult interests of the nonprofit. And I think that this argument really kind of ties into what happened with OpenAI, and you can see it in the email exchanges with Elon where he was so prescient that I- I give Elon extraordinary credit for this, that he saw that this is gonna take billions of dollars a year of investment to realize the pursuit that OpenAI was going after and there was no way that Elon was gonna be able to generate that cash himself or that Reid or others were gonna just be able to pony up that money. They needed to have some sort of for-profit vehicle that would allow the market to work and allow capitalists to find their capital into this organization to make this, this investment interest. So, I think the real question with respect to, is OpenAI in trouble as a foundation, is does the nonprofit own a meaningful piece of the for-profit entity? And I don't know the answer to that, I don't know if you guys do.
- JCJason Calacanis
Sounds like it. I mean, yeah, it must, right?
- DFDavid Friedberg
So if they do, then they have an investment interest. The second question is, does the nonprofit parent still do charitable stuff? Because if it doesn't-... then there's a real question on the nonprofit status. I think you have to have a certain amount of your assets deployed every year in order to qualify for 501 (c) (3) . So, I think the test in the courts will likely end up being, look, it's totally reasonable to have a for-profit entity, to fund a for-profit entity. Other nonprofits have done it, particularly when you need to attract billions of dollars of outside capital to make it work. The real question is, does the nonprofit still do nonprofit stuff?
- 37:06 – 44:46
OpenAI's focus on AGI, different interpretations of AGI in tech
- DFDavid Friedberg
- JCJason Calacanis
The other thing that's completely hypocritical here is they said it when they hit AGI and they're gonna be, like, a sentient artificial intelligent going on here, Friedberg, that they would wrap up shop, and they're gonna no longer be a non- nonprofit, et cetera. But they haven't... And, but they're claiming they haven't hit that, but they closed the software. So, it should be open source if they haven't hit AGI, and you don't think they've hit general intelligence, right, Friedberg? Or anything close to it? Maybe you could educate the audience on what that is, and, and that claim-
- DFDavid Friedberg
(laughs)
- JCJason Calacanis
... that they have to-
- DFDavid Friedberg
No, I don't think they have.
- JCJason Calacanis
... sort of shut off the for-profit. Yeah. They haven't.
- DFDavid Friedberg
But I think the... We keep repeating this concept of the model should be open source versus closed source. Making AI for the benefit of humanity can be interpreted in a lot of ways. There may have been some anecdotal conversation at some point with Elon or others about, "We're gonna make the models open source." Uh, but there was a reason that that change was made along the way, which was to attract dollars, and those dollars need to have some return of capital available to them, because they're private investor dollars. And so I don't think that that was necessarily, and correct me if I'm wrong, I don't think that's in the mission, that the OpenAI software models will be open source. Making AI for the benefit of humanity could probably be interpreted in a lot of different ways, and we'll see. But no, I, I don't think that anyone has this... Achieved this holy grail of general intelligence.
- JCJason Calacanis
Yeah.
- DFDavid Friedberg
I think one of the, the, one of the more interesting and kinda wacky things about OpenAI is that their mission is explicitly to create AGI, which most people would associate with some sort of sci-fi dystopian outcome. And-
- JCJason Calacanis
Yeah.
- DFDavid Friedberg
... I think this has, like, raised the fear factor around AI, because they're explicitly trying to create the sentience that's gonna replace humanity. Now, I think they define AGI in a different way. They say it's something that can replace 80% of the jobs, but I think we all kinda know what it really is. So, I just wonder if- I don't know. I think, I think that that's, like... That assumes a steady state in the world. So, if you end up with a system, and the system has all the capabilities of a bunch of really highly qualified knowledge workers, and I can sit in front of a s- computer terminal, and I can say, "Let's design a mission to Mars." A mission to Mars could be a 20-year engineering project with hundreds of people involved to design the buildings, to design the flight path, to figure out the fuel needs, to figure out how you would then be able to terraform Mars. And what if one person could interact with a computer and design a plan to go and inhabit Mars? All of the technical detail docs could be produced. All of the engineering specifications could be generated. All of the operating plans, all of the dates, the amount of labor needed, the amount of production needed, the amount of capital needed. What would otherwise take NASA or some, you know, international or well-funded private company many, many decades to do, a piece of software could do in a very short order. I think that's, like, a really, like, for me, poignant example of the potential of having these tools broadly available, that the potential of humanity starts to become much broader. We could say, "I wanna develop a city underneath the ocean, because I want to explore more of the Earth. I, I think humans need to go s- go solve cancer, figure out the biologic drugs and the combination of biologic drugs that would be needed to solve cancer based on this p- this patient's genotype." The extensibility of highly knowledgeable, or what other people might call general intelligence type tooling, is extraordinary, that one individual starts to have an entire cohort of knowledge workers available at their disposal to do things that we can't even imagine today. So, I don't think that it is nefarious. It's nefarious because we assume a steady state of the world today, that nothing changes, therefore a piece of software replaces all of us. But the potential of humanity starts to stretch into a new era that we're not really comfortable with, because we don't really know, know it or understand it yet. I'm not saying it's nefarious to, uh, want to develop AI, because I agree with you about all the extraordinary potential of it. I'm saying there's something a little bit cultish and weird about explicitly devoting yourself to AGI, which I think in common parlance means Skynet.
- JCJason Calacanis
Yeah, it means it's something sentient-
- DFDavid Friedberg
I mean, when you talk about creating-
- JCJason Calacanis
... smarter than humans.
- DFDavid Friedberg
Well, I think, I think that's, that's... May- maybe that, that parlance is what needs to be addressed, which is, AGI effectively enables equivalence to a, a human knowledge worker. And that, you know, that can kind of unleash a, a new kind of set of opportunities like this one is. So, you think that's what it is?
- JCJason Calacanis
My definition for AGI is smarter than the smartest human being who ever lived.
- DFDavid Friedberg
Yeah, I was talking to somebody this week who's in a position, who said the definition of AGI is very fuzzy, that there isn't a clear definition, and therefore, it allows every side to kind of anchor on their interpretation of what that term means, and therefore kind of justifies their position. So, you know, I don't really feel great about, like, just saying, "Are we at AGI?" Or is it... We don't have a clear sense of what it means. I do think if you look at some of the work that was done by Anthropic and published in the Claude 3 model this week... Did any of you guys see the demos that were done of the output of that model? There was a guy who wrote a thesis in quantum physics on a very esoteric complicated problem set, and he asked Claude 3 to solve this problem set, and it came up with his thesis. It was really, like, extraordinary. And this is something, he's like, "No one in the world knows this stuff." And he's like, "I can't believe this model (laughs) , like, came up with my thesis."Wow.
- DSDavid Sacks
And that's the sort of thing that very few people on Earth even read or understand, and the Claude 3 model was able to kind of recreate the basis, the buildup, and then the, the, the output of his thesis was really extraordinary.
- JCJason Calacanis
It'd be like somebody writing a screenplay and then giving it the first two acts and saying, "Guess the third act," and it's like, "Oh, yeah. This is the third act. (laughs) Here's what happens." Like it's pretty impressive, the reasoning ability.
- DFDavid Friedberg
Yeah, but I mean these, these are like comp- like yeah, complicated-
- DSDavid Sacks
Let me ask you, like d- deep down when these guys say they're going to create AGI, what do you think they really mean in their heart of hearts?
- JCJason Calacanis
Oh, they mean the Terminator. Yeah. They mean the sentient GPT. (laughs)
- DFDavid Friedberg
(laughs) You guys are- you guys are-
- JCJason Calacanis
Totally.
- DFDavid Friedberg
... propagating some bad (censored) . And you guys shouldn't be saying that.
- JCJason Calacanis
No, no, no, I think that's-
- DSDavid Sacks
No, no, I mean-
- JCJason Calacanis
... I think that's what they think.
- DSDavid Sacks
Remember what Larry Page said?
- JCJason Calacanis
That's what, I mean, Elon has said it.
- 44:46 – 49:53
Groq update with Sunny Madra!
- JCJason Calacanis
- DSDavid Sacks
Oh, look.
- JCJason Calacanis
What's up, Sunny?
- DSDavid Sacks
It's now time to do, uh, just a quick little congratulations to our dear friend, Sandeep Madra. We call him Sunny. That's his nickname, and he's one of our poker buddies. He keeps building great companies. And in this case, Sandeep is the first person to collect all four Besties. We all invested in his company, Definitive. And Definitive, uh, was working in AI, but we got some great news this week, and we thought we would give him his flowers. Sunny, you wanna tell us what happened this week with our investment in your company, Definitive Intelligence at definitive.io, I believe is your domain name?
- SMSunny Madra
Yeah. Well, you know, with your guys' support, and, you know, we've been growing our company, and we saw a really great opportunity to work together with Groq. And we've been working with them for a couple of months, and all the hype that you've seen has been built on the collaborations that we've done building the cloud offering, the API offerings. And so, you know, we've decided to merge with them, and we're super excited. And all the Besties are now not only, uh, shareholders in Definitive previously but now shareholders in Groq.
- DSDavid Sacks
This is, this is the first investment, I think, where we're all on the cap table, right? So we can all... We're all rooting in the same direction. What's happening in the developer side? How's the momentum going?
- SMSunny Madra
Well, the, the momentum's incredible. You know, we have now 16,000-plus developers in our, you know, self-serve playground, as well over like 1,000 apps that people have developed using the API, and all kinds of new functionality. You know, the API allows people to get a higher rate of throughput on tokens and low latencies. There's all kinds of new applications from voice to realtime translation of webpages. You know, we're collecting them on our Discord. We have, you know, 3,000 (laughs) people in the Discord as well. It is a real community that's come together building around Groq. And what I will say is, you know, sort of the same jump that developers saw when we went from dial-up internet to broadband, they're seeing that now and from using like traditional APIs for LLMs to using, you know, the ones that we offer.
- DSDavid Sacks
You guys support the latest anthropic models that they just launched that seem pretty kick ass?
- SMSunny Madra
No, we don't have those yet, but we're, we're in dis- you know, we're ha- having discussions with everyone out there, and we wanna support their models. Right now, what we've done, given all the demand, is we've kinda limited it to Llama2-70B and Mixtral. And we actually have a bunch of other models that we make available in private mode for folks, so we're pretty excited. But if there's anyone out there that wants to have us, you know, give us a call, and we'll, we'll get you going on our systems.
- DSDavid Sacks
Well, Sunny, congrats to you. You're an incredible entrepreneur. And it's always fun to kind of be on the journey with you. This is my fourth business that I've done with Sunny Madra.
- JCJason Calacanis
That's amazing. Extreme Labs.
- DSDavid Sacks
Yeah.
- JCJason Calacanis
Then there was the company before that.
- DSDavid Sacks
No, even before that... No, no, no. There was a company even-
- JCJason Calacanis
There was one before Extreme?
- DSDavid Sacks
You have to understand. Sunny and I met because Sunny went to school where I grew up. He went to the University of Ottawa. I grew up there.
- JCJason Calacanis
Oh.
- DSDavid Sacks
And we met through a mutual friend, and his first company was called SpongeFish, which I backed, I think, in 2006 maybe.
- SMSunny Madra
Yeah.
- DSDavid Sacks
I mean, I had no money. I might have written a $10,000 check.
- JCJason Calacanis
(laughs) Yeah, what'd you give him, $8,000? (laughs)
- DSDavid Sacks
10K maybe.
- SMSunny Madra
Maybe less. (laughs)
- DSDavid Sacks
Maybe less.
- JCJason Calacanis
10K check.
- DSDavid Sacks
5K. Yeah. I mean, whatever I had.
- SMSunny Madra
Right, 5K.
- DSDavid Sacks
I didn't, I didn't have much.
- JCJason Calacanis
I like it. Scraped together.
- DSDavid Sacks
And it's, it's our fourth business.
- 49:53 – 1:06:25
Have we hit peak Apple?: Losing regulatory battles, iPhone stagnation, Buffett starts trimming
- DSDavid Sacks
guys.
- JCJason Calacanis
All right. Issue two, issue two, Apple is battling two major iOS developers, and regulators are siding with the devs. You may know about the Apple versus Epic Games saga. We've talked about it here. Epic Games planning to create a custom app store on iOS because Europe's DMA, the, the Digital Markets Act, has said that Apple now has to allow third-party app stores in the EU. So Epic created a developer account based in Sweden, and Apple actually approved the account two weeks ago. Then on Wednesday, Apple flipped, terminated Epic's EU developer account. And Apple said one of the reasons they terminated the account was because Epic's CEO publicly criticized their DMA compliance plan. Additionally, on Monday, Apple was fined two billion by the EU's antitrust regulators and was forced to remove its anti-steering rules, uh, from music apps like Spotify. Basically, Apple has been restricting music apps from informing users about pricing and discounts, and the European Commission considered this anti-competitive since Apple runs Apple Music. And they want Spotify to pay 30%. Daniel Ek, a friend of the pod, you know, basically did a whole video on this about how they can't charge 30% more, yada yada. Sacks, you've, uh, spoken about Apple's monopoly before. Your thoughts on what's happening in the EU, and then we'll get into Apple's wider problems.
- DSDavid Sacks
I mean, did you just say that Apple booted Epic from their app store because they didn't like what Epic said about them?
- JCJason Calacanis
(laughs)
I think that their feelings were hurt.
- DSDavid Sacks
I mean, we talked about... Well, th- like, they're violating Epic's free speech because they don't like what Epic is saying. I mean, this is-
- JCJason Calacanis
According to Epic, yes.
- DSDavid Sacks
... this is crazy heavy-handed by Apple.
- JCJason Calacanis
Apple heavy-handed with developers? Yeah.
- DSDavid Sacks
Have they lost their minds? I mean, this is right out of power corrupts, and absolute power corrupts absolutely.
- JCJason Calacanis
Yeah.
- DFDavid Friedberg
Mm-hmm.
- DSDavid Sacks
I mean, whatever dispute you have with Epic, you don't boot them out of your app store 'cause you don't like their criticism of you.
- JCJason Calacanis
Mm-hmm.
- DSDavid Sacks
I mean, this is basically proving exactly what everyone's been saying about Apple-
- JCJason Calacanis
Totally, totally.
- DSDavid Sacks
... which is they're too powerful and heavy-handed.
- JCJason Calacanis
Yes.
- DSDavid Sacks
And Apple's coming along and saying, "Let me confirm it for you guys," by acting tyrannically against Epic.
- JCJason Calacanis
Exactly.
- DFDavid Friedberg
(laughs)
- DSDavid Sacks
I mean, talk about a backfire. This seems insane to me.
- JCJason Calacanis
Yeah, it's super nuts. Chamath, any thoughts on this before we get into Apple's other problems?
- DFDavid Friedberg
I think it's the beginning of, of the decay of Apple.
- JCJason Calacanis
Peak Apple. Well, let's, let's get into that. Um, there's tons of headwinds facing Apple.
- DFDavid Friedberg
You can add a bunch of other things to the list as well, Jason.
- JCJason Calacanis
Yeah.
- DFDavid Friedberg
The thing is, Apple, for the last couple of years, has been what is effectively what we call a GDP plus growth company, which means that, take GDP, two, three, 4%, maybe they can grow by a couple of percentage points more than that, but they're effectively levered to GDP. Meaning when you look at a Facebook or an NVIDIA, they're growing at 50%, 200%, 2,000%, whatever it is, that's not tied to GDP. They're just taking share. But Apple is a, is a company now that grows as the, as the economy of the world grows. So that's not super great for its future prospects, unless it can expand the surface area of where they operate. And then on that dimension, the, there are few trillion-dollar markets that they can really penetrate. And they just announced that they've killed a project in one of those areas, which is autos, right? Project Titan, which was $10 billion turned out to be a failure. So all of these things, I think, mean to me that it is effectively becoming a cyclical, rate-sensitive stock. And then the coup de grace, Warren Buffett.
- JCJason Calacanis
Hmm.
- DFDavid Friedberg
And Nick and I were talking about it this week, and what was interesting about Buffett's letter is that you can tell when Buffett has gotten disengaged with a company based on the number of times he mentions it in his annual letter. So in this example, this is the number of times Apple was mentioned. And just to be clear, what I mean by mentions is not when it's included in a chart or part of a disclosure. What I mean is when Warren actually explicitly mentions it in a positive or even negative way, or he doesn't mention it at all, which I think rings very loudly. He went from basically saying Apple was the absolute end-all and be-all, and now what you can start to see is this shrinking, and it's gone from basically a bunch of times to almost none. He did mention it once, but he mentioned it in the context of talking positively about Coca-Cola and Amex.
- 1:06:25 – 1:21:08
TikTok ban: New proposed House bill would force ByteDance to divest TikTok, or ban the app outright
- DSDavid Sacks
All right, let's go to issue four, TikTok bipartisan ban. Will the CCP agree? A bipartisan group of a dozen-plus lawmakers introduced a bill that would effectively ban TikTok. In the House this week, the bill is officially called the Protecting Americans from Foreign Adversary Controlled Applications Act. Gives ByteDance 165 days to divest from TikTok. That's the parent company, the Chinese company that owns TikTok, the app that's very popular in the West, especially here in America. It would make it illegal for companies like Apple and Google to show TikTok in their app stores. As you know, TikTok, 170 million US users.
- JCJason Calacanis
And they claim that they're headquarted in- headquarter in Singapore. I know people who have worked at TikTok or do work at TikTok, and they said that's nonsense to me. The company said it has not and will not share user data with the CCP. I- in my mind, it's an obvious lie. In 2021, the CCP took a board seat on ByteDance Beijing-based subsidiary. That's according to Reuters. And then in 2022, ByteDance admitted that it accessed IP addresses and data by journalists covering TikTok to see if they'd been in the same places as ByteDance employees, obviously to find leakers. And ByteDance claims they fired the people involved, yada yada. Last year, a former head of engineering at ByteDance US said CCP members had God mode access to user data in 2018. Sax, um, I could go m- explain more of this, but I just gotta go to you here. If this, if ByteDance is not spying on Americans and the CCP is on the board, that would be, make no logical sense to me. And why are they fighting the divestiture if it's just a financial reason? Why wouldn't they take the CCP off their board? Do you think it's spyware? Do you think the US is crazy for allowing this product here in the United States when we're not allowed to put Twitter, Facebook, Instagram, pick your social network? In China, we have zero reciprocity here.
- DSDavid Sacks
Look, if it's true that TikTok is sharing data with the CCP, then I think The United States is well within its rights to either ban it or d- cause it to be divested. And I personally like the divestiture option. I mean, that's what Trump was suggesting during his term. 'Cause we don't, I think, in the United States like to just essentially confiscate or destroy people's property, but I think we're within our rights to require it to be divested to an entity that we know is completely separate from and won't cooperate with the CCP. This bill is a better, i- is better than the last bill we talked about that was targeted at TikTok. I don't know if you remember that one, but it was weirdly prohibiting Americans from using VPNs and gave the government the right to go after Americans who were using VPNs. So this one seems cleaner and better and more narrowly targeted at divestiture. Now, at the beginning of my response to you, I did say if. You know, I know that everyone's just assuming that it's true that TikTok is sharing data with the CCP, but I just wanna confirm that that is the case, because they are denying it, and I can understand why people think it and why it might even be likely. But since we do have a concept of due process in America, I do think some evidence should be provided that that actually is taking place.
- JCJason Calacanis
Well, we've had, you know, whistleblowers inside there, but Chamath, if the CCP is spying on their own citizens, what are the chances that they wouldn't take the opportunity to spy on government officials who have TikTok on their phone or their kids and get compromise on them possibly or know locations of people? What does your gut tell you? Is the CCP... Is this too dangerous for-
- CPChamath Palihapitiya
Oh, um-
- JCJason Calacanis
... us to have here in America under CCP control, or this kind of influence being on their board?
- DFDavid Friedberg
I think you're asking the exact right question. I have two comments to make. One is, Nick, if you can bring up this article about the Google AI IP case. Basically, what happened was that the DOJ filed an indictment. Actually, I think I sent, I-I think I sent you guys the actual indictment. But essentially, what happened is there was an engineer at Google-
- JCJason Calacanis
Yeah, this is crazy.
- DFDavid Friedberg
... that has been charged with, that has been charged with stealing AI secrets for China. And I don't know if, whether he's back in China now or not, but the, the whole point is that if it's happened at Google, right, where there's a motivation for the Chinese intelligence apparatus, and frankly, every intelligence apparatus, to infiltrate that organization and get access to all kinds of data, I think we should presume, by default, that all of these organizations are infiltrated. And I think that that's probably a more conservative and reasonable posture. So Facebook is infiltrated. Google is infiltrated. Apple is infiltrated. TikTok is infiltrated. So on that dimension, I think that it should be considered 100% certainty that this data is getting back to not just the Chinese, but multiple state-sponsored actors. So the question about TikTok then, I think should be one of business. And I think Palmer Lucky did a very good job of simplifying this down to its essence, which is essentially what he called the law of equivalent exchange. If you wanna just play this, it's like, uh, just a few seconds.
- CPChamath Palihapitiya
I was kind of frustrated that people made TikTok into a cultural issue. Now, by the way, I'm totally on the culture war side of it. Uh, but-
- DFDavid Friedberg
(laughs)
- CPChamath Palihapitiya
... but, but I was saying, practically speaking, you should not make this a culture war issue. Don't talk about how it's ruining our youths' ideals. Just say, "Strictly on a trade basis-"
- DFDavid Friedberg
Yes.
- CPChamath Palihapitiya
"... we cannot allow them to sell this thing to us if we can't sell the same thing to them." Like, that, that, that should be totally fair.
- DSDavid Sacks
That's reciprocity.
- JCJason Calacanis
That's reciprocity. Me and Palmer Lucky in sync.
- DFDavid Friedberg
Right, so this is what he calls the law of equivalent exchange, and I think it just makes a lot of sense. So on the face, what I would say is, Jake L, my response is, I think that the CCP, but also other intelligence organizations, have infiltrated all of these big companies and all of our data is accessible by them. I'm not gonna say on a whim, but I think it's accessible. I think you have to deal with TikTok as a business issue, and I agree with Palmer Lucky, which is they should not be able to sell to us what we cannot sell to them. And I think that that's a fair principle that we can live on.
- JCJason Calacanis
Reciprocity is a very simple position. Friedberg, let me use your creativity, your love of cinema. If you were to use this tool, let's take the most cynical approach here or interpretation, CCP has complete access to the algorithms and they want to do maximum damage, let's say, during the election, let's say, in a conflict like-... the one going on in Ukraine with Russia, or in Gaza. What could they do using the algorithm, using videos? What would be the doomsday scenario for America?
- DFDavid Friedberg
As in the CCP comes in and influences the management of this company and tells them what to tweak and how and why?
- JCJason Calacanis
Yes.
- DFDavid Friedberg
Content-wise?
- JCJason Calacanis
What would they do?
- DFDavid Friedberg
I think we saw this during, after October 7th, that there was a significant surge in pro-Hamas videos relative to Israel support videos. That's the sort of thing where you could kind of see something that sets an opinion that may be disruptive to the social fabric, to the election cycle, that starts to get shared more frequently and showing, shows up in feeds more frequently. Unlike Facebook and other places where there's a linear feed where you can scroll up and select what you want to watch, as you know, TikTok has already lined the videos up, so when you scroll up, they've, they automatically play the next thing for you. So the ranking really matters in terms of viewership, uh, on TikTok, unlike a lot of other kind of select-to-play social media, uh, type networks.
- JCJason Calacanis
Could it shift an election? Hearts and minds in a war?
- DFDavid Friedberg
Well, I've always said this, I think it's the craziest thing in the world that someone can spend advertising dollars and change someone's vote. (laughs) Like, like just think about that fact for a second. I mean, I, I've said this before and people have told me I'm an idiot for saying it, but-
- DSDavid Sacks
Meaning that it can or that it does?
- DFDavid Friedberg
That you, that both. That, that, that it does, is like-
- DSDavid Sacks
Oh it can and does. Sure. I mean ...
- DFDavid Friedberg
But think about it, like, like people don't individually go and gather data and then make an informed opinion about who they're gonna vote for. Their opinion changes based on seeing an ad. It is so crazy to me that that's the truth.
- DSDavid Sacks
I think the, I think the country knew that it does, that's why they prevented it from happening, until Citizens United.
Episode duration: 1:33:59
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