E171: DOJ sues Apple, AI arms race, Reddit IPO, Realtor settlement & more

Jason Calacanis 0:00 Has anybody else seen Dune 2 in IMAX?

David Friedberg 0:02 No, don't say anything.

Chamath Palihapitiya 0:03 Ugh, don't say anything about Dune. I wanna see it.

Jason Calacanis 0:06 All I wanna say about Dune-

Chamath Palihapitiya 0:07 No, don't say it. Okay, stop, stop. Just stop.

Jason Calacanis 0:08 ... is it, it is fantastic and I want to see it again in IMAX.

Chamath Palihapitiya 0:12 Stop. Just stop.

Jason Calacanis 0:12 That's it. That's all I'm saying, is that it's worth seeing twice.

Chamath Palihapitiya 0:15 I don't even want to know that you think it's good.

David Sacks 0:17 It's overrated.

Chamath Palihapitiya 0:18 It makes me... Ugh!

David Friedberg 0:20 (laughs)

Chamath Palihapitiya 0:20 Stop, both of you. See, the exact-

Jason Calacanis 0:21 He didn't see it. He didn't... Sacks didn't see it.

David Sacks 0:23 No, I saw Dune.

Jason Calacanis 0:24 Dune 2.

David Sacks 0:25 Yeah, I saw it. It's overrated.

Chamath Palihapitiya 0:27 Okay, stop. Stop. Okay, stop. Everybody, you... Both of the two of you-

Jason Calacanis 0:30 It's not overrated.

Chamath Palihapitiya 0:30 It... There's, like, five great scenes. Stop.

Jason Calacanis 0:33 Sacks, the scene where-

Chamath Palihapitiya 0:35 Stop.

David Sacks 0:36 (laughs)

Chamath Palihapitiya 0:37 Stop. Stop. You guys are so annoying.

Narrator 0:39 What your winners ride.

Jason Calacanis 0:42 Rain Man David Sacks.

Narrator 0:44 I'm going all in.

David Sacks 0:47 And I said, "We open sourced it to the fans and they've just gone crazy with it."

Jason Calacanis 0:51 Love you guys.

Narrator 0:51 Queen of quinoa. I'm going all in.

Jason Calacanis 0:55 All right, everybody. Welcome to the All-In Podcast. With me again, The Chairman Dictator, Chamath Palihapitiya, David Sacks, The Rain Man, yeah, and The Sultan of Science, David Freiberg. It's your boy J Cal here and we have so much to go through. The DOJ dropped a Sherman Act suit on Apple today, right as we were about to tape the program. It seems like Thursdays is the big news drop day now. So this DOJ suit outlines five alleged abuses and they claim, obviously, that those abuses reduce competition while limiting consumer choice and raising the prices that consumers pay for their iPhone. We talked about this actually just a couple of weeks ago when we talked about peak Apple. The five categories are, very quickly, super apps, cloud gaming apps, messaging apps, smartwatches, and digital wallets. If you don't know about super apps, that's the one that's... Maybe you haven't heard of if you're listening to this. In Asia, they mentioned how Alipay, WeChat, and Paytm are, uh, super apps. What does that mean? You get, like, five or six different functions in one app. Social media, images, purchasing, getting rides, you know, all that stuff. And when you have that, you can move from one platform to another super easily. And when it comes to messaging apps, we've all experienced the green bubble friend. So, the main argument of the lawsuit, pretty interesting, they explain, and it's a really well-written document, I read it this morning, that when Apple faces new competition, instead of lowering prices for consumers or offering a better deal to developers they would, quote, "meet competitive threats by imposing a series of shape-shifting rules and restrictions in its app store guidelines and developer agreements." I've faced this every time I've invested in an app startup. They complain about the goalpost moving by Apple, and Apple shares down about 3% on the news today. I'm sure everybody's got some interesting thoughts on it. Chamath, you were talking about peak Apple just last week or the week before, I think. What are your thoughts on the lawsuit that dropped today?

Chamath Palihapitiya 3:03 To be honest, I haven't read it and I don't really know, like, the odds of these things just because it seems like some of this stuff is so clearly political, and I think that these things have seasons to it in the sense that there are moments where these things are more likely to go in the favor of the company and more likely to go in favor of the government. The one thing I'll say is that these guys have been losing a fair number of these things. So, they're kind of 50/50 in their fight with Epic. They've basically lost against their fight with Spotify. They definitely are in a moment where people are looking at the profitability of these devices as the source of their long-term cash flow, and I think they realize that there's not a lot of growth because they haven't entered a bunch of new markets. So, the real question is, knowing all of that, did they do something beyond what they've already always done to try to lock people in and can they prove it? I think that that's really where the government's case will come down to because then it's clear that Apple probably understood that their market was kind of solidifying and they introduced these blocks, essentially, into processes that, that force people to stay. That's probably bad news for them but I don't, I don't really know because I haven't read the lawsuit.

Jason Calacanis 4:27 Yeah. Sacks, did you get a chance to read it or do you have any thoughts, generally speaking?

David Sacks 4:31 I haven't read the filings but I read some of the press coverage about it. I would say, based on the press coverage that I read, that there's not really a smoking gun here. At least, the press hasn't reported one. And what I mean by that is there... Let me give you a couple of examples that were in the press. One is that apparently the filing made a point about when Tim Cook was confronted some time ago by a user saying, "When I try to send a video by text to someone with an Android phone, it just doesn't work very well. It never works." It was a guy trying to send a video to his mom and Tim Cook responded, "Well, your mom should buy an iPhone."

Jason Calacanis 5:08 (laughs)

David Sacks 5:09 It's kind of like a throwaway comment by Tim Cook. Probably not a great idea for him to say that, but that's an example of what the lawsuit brings up. Another example is that the Apple Watch doesn't work with Android phones, you know, it only works with iPhones, obviously. Again, is that really a smoking gun issue? I don't think so. I mean, it's... This is Apple's whole strategy, is that all of its products work seamlessly together and Apple hardware doesn't really work with other operating systems. It never has. So, at least based on the press coverage, I have yet to see a single smoking gun example coming out of this lawsuit. Now, I think what those examples highlight is what this lawsuit is really about is your view of interoperability. What the government is saying is that Apple needs to make its apps and its devices more interoperable with other ecosystems. So the watch needs to be interoperable with Android.Apple messaging needs to be interoperable with Android messaging and so on. What the government is saying is that Apple is refusing to play ball with other applications, other operating systems, and that creates a monopolistic network effect. What I think Apple would say is, "No." The fact is that Apple, from the outset, has always tried to do everything soup to nuts. We've always done the hardware and the software together, and that's what creates the magical experience. And so Apple's entire product strategy is based on creating a vertically integrated stack that goes from hardware, to operating system, to key applications. And I think Apple has a point saying if you try to make us unwind all of that, the product's just not gonna work as well. It's not gonna be the same product experience that everyone's used to. So again, I think that how you view interoperability is at the core of this lawsuit. I think that both the government and Apple make good points about that, and I'm a little bit skeptical right now that the government has a smoking gun. At least one hasn't been reported in the press, and so I'm a little bit doubtful right now that the government's gonna be able to win this case.

Jason Calacanis 7:18 Friedberg, any thoughts?

David Friedberg 7:20 Yeah. I mean, I think it's a function of consumer choice. If consumers wanna have this closed system where they can iMessage with other iMessage app holders and not be able to have a seamless integrated messaging experience with Android users, they'll be happy. If they're annoyed, they'll switch over to an Android. So, you know, this has always been Apple's orientation. I, I think I mentioned this to you guys, I've been on a Mac since 1984 when the Mac original came out. I still have my first Mac original, by the way. I keep it in my office on my shelf. And Apple's, you know, always had, like, a really hard focus on the software that they make available to their users to create an incredible product experience. So, I don't know if this is necessarily about market abuse as much as it is a consumer choice. If the consumers didn't like the product, they didn't like the fact that things were not available, that things were very expensive, they would go elsewhere. And you do see-

Jason Calacanis 8:18 Yeah.

David Friedberg 8:18 ... that in segments of the market. And as we talked about a few weeks ago, you do see that ex US. Most of the smartphone market is actually Android-driven.

Jason Calacanis 8:26 Yeah.

David Friedberg 8:26 So this is a premium product that people are willing to pay a premium price for, even if that means limited access. I think developers are frustrated that they can't access this premium market, but I'm not sure that Apple necessarily should be coerced to service developers when, at the end of the day, the consumers are paying for the products.

Chamath Palihapitiya 8:45 And to your point, like, is it, is it really the case that a green bubble versus a blue bubble is really that limiting? You know, it's not the end of the world.

Jason Calacanis 8:52 It's annoying. It's annoying, but not super limiting.

Chamath Palihapitiya 8:54 It's annoying, but it's not the end of the world.

Jason Calacanis 8:55 Yeah. I, I would say Apple has completely abused their power every chance they get in order to capture this 30% from the App Store. They blocked the ability for you to use Audible or, you know, other marketplaces to buy books and media. They blocked the ability to use other media players like VLC, blocked the ability to use browsers. And if you leave Apple unchecked, they just keep abusing it. And so I think this is kind of one of those lawsuits that's like, if we don't stop them, they'll just keep making it worse. And when people file complaints, then Apple will back down, which they did on media players, and, and they'll stand down. If you think about this from the PC era to now, then you can see how pernicious their behavior is. When you buy a laptop, the idea that you would have to go through an app store and pay a $30 tax to put a piece of software on your computer would seem insane. Only-

David Friedberg 9:50 30%. 30%.

Jason Calacanis 9:51 Yeah, a 30% tax on your... Which would seem insane. Like, if you buy a laptop, you should be able to put whatever software you want on it. But they did this magic trick where they said, "Oh, no, if you wanna put software on your phone, it has to go through the app store. It has to be 30%." And that's really the anti-competitive thing here. I think this will be settled. And if you look at the different issues here, I think this is gonna be actually a huge win for Apple. Because if iMessage were to exist on Android, they would get all of those users to download iMessage, and they would have all those users. If they made the watch compatible, they would open up many more people to buy the watch, and you would get more watches. I think that Apple's thinking way too short term about the lock-in here, and they should, you know-

Chamath Palihapitiya 10:31 I don't think-

Jason Calacanis 10:31 ... allow more of these apps, uh, allow more watches, and they should allow the gaming thing. I, I think that they're being petty.

Chamath Palihapitiya 10:37 I don't think anything's gonna happen here 'cause it's taken them five years to file. There's a, at least a 50% chance that the administration is gonna turn over, which means that this lawsuit changes or goes away entirely. And then even if it does kind of proceed, it's gonna take 10 years of very detailed arguments for something to happen. And frankly, probably in 10 years from now, we've already moved to a different compute platform, and this is not gonna matter.

Jason Calacanis 11:03 I mean, there, there is the coin toss of what the Trump administration would do here. For sure that's valid. But I think these o- things will all get settled. I think the settlement will be iMessage releases. They allow the... See, the thing about the Apple Watch, it's not just sax that they're allowing it on Android. It's would you allow Android watches to connect with the SDK directly into the iOS operating system, which they block you from doing. I think they should just have a little switch in your Friedberg settings that allows you to flip it and say, "I take responsibility for allowing third-party stores, and I want to be able to load any software." It's your computer. It's iPhone.

David Friedberg 11:41 I don't think the government should t- should regulate. I don't think the government should be able to mandate that.

Jason Calacanis 11:45 Uh, I think they... Yeah. I mean, I, I, I like the fact that the government is-

David Friedberg 11:48 I mean, everyone wi- keeps looking to the government to do things that they want as a consumer.

Jason Calacanis 11:52 Yeah.

David Friedberg 11:52 Make your choice with your dollars. Make your vote with the product and service you wanna buy instead of running to the government and asking the government to come and do stuff to make things happen.

Jason Calacanis 11:59 Do you feel that way about price fixing?

David Friedberg 12:02 What do you mean price fixing? In what context?

Jason Calacanis 12:03 If, like, a group of people price fix the pri- cost of a phone, or, like, let's say the 30% from the App Store, which just happens to be the same between two app stores.Do you think price fixing is something valid for the government to come in on?

David Friedberg 12:15 I don't think that... I, uh, it's not the same.

Jason Calacanis 12:16 Do you think price fixing is something the government should come in on, is the question?

David Friedberg 12:20 If there's limited access to products in a market and all the cr- participants get together to set the price in the market, I do think that's anti-competitive, and that's... there's a good role for the government to play there.

Jason Calacanis 12:31 Okay.

David Friedberg 12:31 But Google and Apple don't price fix because Android is an open access system, you can put any application you want any way you want. There are several app stores to put Android apps on your Android device. Google operates an app store called Google Play, but there are other app stores you can go to as well, and they all have different prices. And Google's app store costs, by the way, are not Apple's, and they're not 30%. And we talked about this last time, I'll pull it up for you again, it's like 15 to 12 going down. It's a sliding scale. So there is competition in that market. Generally, I think the point about if there's limited access to a market for products for consumers and everyone in that market gets together and sets a price, that is anti-competitive and there's a good role for government to play there. But I don't think that having the government come in and say, "I want this feature to have this button and this flip in my app," is- is what I want my government doing. I want my government protecting me from crime.

Jason Calacanis 13:23 Mm-hmm, yeah.

David Friedberg 13:24 And, you know, defending the country, and I don't want all the other stuff that the government does to drive costs up, which is generally what the government does.

Jason Calacanis 13:31 Sacks, what do you think the role of the government is here in terms of anti-competitiveness? Especially in the case, I'm curious, your thoughts on a duopoly. Like, if you look at Google's search monopoly, pretty easy to understand, like, hey, they got 90%. But here you got two players who have, you know, roughly 50% of the market each or 60/40 depending on where you are. So what- what- what is the- the- the proper role of government here and is this an overreach?

David Sacks 13:55 No, I mean, I actually think, just to give the government lawsuit some credit, I actually think it's good to hold Apple's feet to the fire and make sure they're not engaging in anti-competitive tactics. One of the things I've said previously on the show is that I think the government's been making the mistake of going after bigness for its own sake, and I don't think that bigness in and of itself is bad. It might be a reflection that the company's done an incredibly good job and that's why it has a lot of customers and a lot of market share. What I've said is I think the government should prevent anti-competitive tactics. So I think that this lawsuit is good in the sense that it's targeted at the right types of things. It's not just going after Apple because its market cap is so big, it's going after specific things that it's doing to kind of lock in its network effect. Now, the problem that I see is just that the examples that we've been given so far from the lawsuit just don't seem that compelling. Again, I'm kinda waiting to find out where's the smoking gun here. But to Freeburg's point, I mean, look, I don't think you can just say that if you don't like what Apple is doing, go to a different platform, because the point is that there's only two choices and they can both engage in anti-competitive tactics and they can both create lock-in.

David Friedberg 15:08 But Sacks, there are not just two choices. Android is an open operating system. Google has a fork of Android that they put on certain smartphones. There are other smartphone makers that use other forks of Android. So Android has enabled... and the reason Google bought Android was to provide a counterbalance to exactly the dynamic of one handset manufacturer having an operating system that could control access to the internet and to apps, and so Google open sourced Android. Many handset manufacturers use their own versions of Android to put their own experience on the phone, and then Android users can put apps from anywhere they want and other companies offer app stores. So there are many app stores to go to and there are many different handset manufacturers. And a lot of people, I think incorrectly, look at the operating system landscape in mobile and say, "Oh, there's Android and there's iOS," but Android is an open platform and there are many different forks of it run by many different companies. So I think that it is actually a very competitive market. Like we talked about last week, I think close to 80% of global handsets are run on Android forks. So, you know, it's not necessarily the case that there are only two choices. And Google does not control Android, there are many developers that contribute to open source there. Google has their own fork that they do a lot of work on but anyone can take their own fork and do... I mean, you guys can... you know, when you in- when you, um, when you boot up a Samsung or Sony TV, that's running Android and that's running their own version of Android.

David Sacks 16:32 Are you arguing that Apple doesn't have market power?

David Friedberg 16:34 In the US they do. Ex-US, they're, you know, they're- they're-

David Sacks 16:37 Yeah. I mean, and I think... sure, we're talking about the US market.

David Friedberg 16:40 I mean, I think the US market they're about-

David Sacks 16:41 And I- I still think they have some s-

David Friedberg 16:42 Are they about 50/50? We pulled this chart up last week, but I think they're about 50/50.

Jason Calacanis 16:45 It's slightly more in the US now, it might be 55/45 right now.

David Friedberg 16:47 Yeah, something like that.

Jason Calacanis 16:49 The issue is the cat and mouse that Apple is really good at playing, they will push their advantage and so we see the five things that the Justice Department wants to go after here, but the app store is obviously one of them. And before that I mentioned some of the other categories where they do this abuse of power. They basically keep it up as much as they can until they get checked and I- I think interoperability is actually, in the long term, gonna be in their best interest. They'd use interoperability when they need it. So Apple Music and iTunes, they allow you to use Windows and Android, it's only when they see an advantage and that's really the hypocrisy of Apple. And I think it's, uh, really important that the industry stand for more interoperability and the ability for you to load any software that you want on your device. This is a compute platform, the ability for them to block you from installing your own apps on it I think is a really terrible precedent.

David Friedberg 17:38 By the way, Jason, what you're saying is a very fair statement from a consumer point of view and from an industry point of view, and that's where that voice should come from to force in the marketplace changes from Apple. But having the government do this and having the government involved I think sets all these bad precedents.

Jason Calacanis 17:53 Yeah, they're representing the people.

David Friedberg 17:54 Somebody did it. They asked Tim Cook to do it and Tim Cook said, "Pound salt, buy a phone for your mom."

Chamath Palihapitiya 17:58 No, but aren't they representing the people? Like, how do you expect the people to organize, like, file a class action?

David Friedberg 18:04 No, I think if enough companies boycott the Apple platform and tell consumers to boycott, they'll- they'll... I mean, consumers can make decisions, that's not

Narrator 18:11 Unrealistic-

David Friedberg 18:11 Developers can make decisions whether or not they want to develop for Apple.

Chamath Palihapitiya 18:13 No, that's not realistic. You know that.

Jason Calacanis 18:15 It's not realistic in the market, yeah.

Chamath Palihapitiya 18:15 Come on. That's naive. Come on.

David Friedberg 18:17 I don't think I want the government stepping in to tell private companies what to do because customers don't like what they're doing.

David Sacks 18:22 Wait, wait, wait. Do you think that the government should have stepped in to prevent Microsoft from taking over the browser, the whole Netscape case?

Jason Calacanis 18:30 Bundling?

David Friedberg 18:31 I don't know the case well enough. I mean, I remember it, but I, I don't wanna speak, I don't wanna speak definitively on that.

David Sacks 18:36 I think there was a substantial chance that if the government didn't step in that Microsoft would have extended their Windows operating system monopoly-

David Friedberg 18:43 They did have an absolute monopoly.

David Sacks 18:45 ... to the browser.

David Friedberg 18:45 They, they did have a monopoly on personal compute OS at the time.

David Sacks 18:48 Well, it wasn't an absolute monopoly. I mean, you could still-

Jason Calacanis 18:50 It was close.

David Sacks 18:50 You could use Macintosh.

Jason Calacanis 18:51 Yeah, you were, you were the one. You were using Macintosh at that time.

David Sacks 18:53 Right. Exactly.

David Friedberg 18:54 No. Tha- that's what I'm saying. At the time, Macintosh was like 5% of the market.

Jason Calacanis 18:57 It was under 10% at the time, yeah.

David Friedberg 18:58 Yeah, it was about fiv- four or 5% at that time.

David Sacks 19:00 But it was a duopoly.

David Friedberg 19:00 Microsoft was 95% of the personal computing market, so they did have an absolute monopoly on that market.

David Sacks 19:06 You still had a choice. You had a consumer choice. It wasn't a very good consumer choice, but you still had a consumer choice.

David Friedberg 19:11 What was my choice?

David Sacks 19:11 You could go use Macintosh.

Jason Calacanis 19:12 And you did. You were using Macintoshes.

David Friedberg 19:13 I don't think a lot of people could afford it. Yeah.

David Sacks 19:16 Okay. But the point is that Microsoft had substantial market power, and what they were in the process of doing was the smart thing from a business standpoint, which is you take your operating system monopoly, you use that to extend into the browser, you kill Netscape, you take over with Explorer, you bake Explorer into your Windows operating system-

David Friedberg 19:34 Yeah.

David Sacks 19:34 ... so that two things are basically the same.

David Friedberg 19:36 And-

David Sacks 19:36 Then from there Hold on. From there, you leverage your control of the, of the browser and the home screen to control search, okay? And so you think about, like, all the dominoes that would have fallen if Microsoft had continued. Maybe if, like, Bill Gates had continued being CEO. And there would have been no Google, there would have been no Yahoo.

Jason Calacanis 19:54 They would have controlled the internet.

David Sacks 19:55 They would have controlled the internet, so-

Jason Calacanis 19:56 And they were actively ... You left out a big piece of it, Sacks, which you'll remember the second I say it. They were trying to break HTML and open standards by creating ActiveX and using all this-

David Friedberg 20:06 That's right.

Jason Calacanis 20:06 ... funky code.

David Friedberg 20:07 Yeah, yeah. That's right, that's right.

Jason Calacanis 20:08 And so you have to understand, these companies will ... If you give them an inch, they'll take the mile.

David Sacks 20:13 Right.

Jason Calacanis 20:13 And that's exactly what Apple does consistently. They consistently try to squeeze. I think it's great. Sacks is right. Tactics is the way to go after these companies. These are five recent tactics. I think th- the, the government's gonna win changing three of these, and that's win. That's a win for me.

David Friedberg 20:30 Yeah, the mobile operators tried to do the same at that same time, if you guys remember. Verizon-

Jason Calacanis 20:34 Yes, you couldn't have an app.

David Friedberg 20:35 ... AT&T, Cingular. They, they ... You could only put their apps if you bought it through their store- Yeah. ... on their operating system on the mobile phones that they contracted to have made. So, they all had their own custom version of the handset manufacturer's OS, which al- g- ... And then they did rev-share back with the manufacturers, and that's why Android was acquired. It wasn't actually at the time to compete with Apple. Android was acquired to compete with all the mobile phone companies that were trying to block access to the internet and apps.

Jason Calacanis 21:03 Well, Google wanted to maintain its search monopoly, let's be honest.

David Friedberg 21:06 But they were also getting-

Jason Calacanis 21:06 That's what they ... That's why they bought it. They knew-

David Friedberg 21:08 So, so for-

Jason Calacanis 21:08 ... users would be there, and they wanted to have the default browser.

David Friedberg 21:10 They didn't want to have the access to the internet blocked-

Jason Calacanis 21:13 Yeah.

David Friedberg 21:13 ... by this, by the handset manufacturers.

Jason Calacanis 21:14 And they wanted to be the default searching browser in the app, which is what you have to agree to, by the way. So, if you don't wanna talk about perniciousness (laughs) and heavy-handedness, if you have an Android, you ... and you wanna use the Android updates from-

David Friedberg 21:24 That's not correct.

Jason Calacanis 21:24 ... Google-

David Friedberg 21:25 That's not correct.

Jason Calacanis 21:26 You ... No, no.

David Friedberg 21:26 No, no. You, you, you're-

Jason Calacanis 21:26 You have to give the bundle of apps i- if you want the updates and support from Google. You can fork it-

David Friedberg 21:30 If you ... You're right. That is correct.

Jason Calacanis 21:30 ... but then you don't get their support, which then breaks your phone.

David Friedberg 21:33 If you want their version, that's right.

Jason Calacanis 21:35 Yes, yeah. So, they-

David Friedberg 21:36 That's right, yeah.

Jason Calacanis 21:37 Th- th- you know, there's a little cleverness here, I think.

David Sacks 21:39 So, you have two basic ecosystems in mobile. It is a duopoly, and both of them advantage themselves in ways that grow over time. And I think that if Apple were completely left unchecked, it would figure out ways to boil the frog and keep extracting more and more value out of downstream applications.

Jason Calacanis 21:58 Totally. They boiled the frog.

David Sacks 21:59 And I think, and I think-

Jason Calacanis 21:59 We're paying $1,600 a phone now.

David Sacks 22:01 Yeah.

Jason Calacanis 22:01 How are we paying $1,600 a phone?

David Sacks 22:03 So, look, I think it's, I think it's good for the government to hold their feet to the fire, but here, here's the thing that government's lacking is, again, that example they can point to that's really compelling. I mean, with the Microsoft Netscape thing, it was really obvious what they were doing, right?

Jason Calacanis 22:16 Oh, yeah.

David Sacks 22:16 The browser was the gateway to the whole new platform, which was the internet. And if Microsoft could make that a feature of the operating system, their dominance would extend into the new computing platform.

David Friedberg 22:27 But do you remember how they did it, Sacks?

David Sacks 22:28 Apple Watch is just not the same thing. The Apple Watch is kind of a, uh, an appendage-

David Friedberg 22:32 It's minor.

David Sacks 22:33 ... of your phone that most people don't even want. So, i- it's hard to point to something.

Jason Calacanis 22:37 Do you remember, Sacks, how they were getting the browser built in? They were going to the OEMs, the Dells of the world, the HPs, and saying, "If you want this price for Windows, you have to include the browser on the desktop." It has to load, it has to ask for your credentials, all this stuff. Or, you can pay $150 for Windows, um, if you want it without the browser bundled. So, they used this pricing to get the OEMs to, to bundle it, and that, that was where-

David Sacks 23:05 Well, isn't that what Google's doing with Android, effectively?

Jason Calacanis 23:07 Exactly.

David Sacks 23:08 Is, like-

Jason Calacanis 23:09 It's exactly right.

David Sacks 23:10 You can have your own version without Google Search if you're willing to put up with all these headaches, and these costly headaches.

Jason Calacanis 23:17 And maintain an operating system, update the operating system.

David Sacks 23:19 Yeah.

Jason Calacanis 23:20 Yeah. It's exactly what they're doing, so ... Anyway, I think three out of five of these get settled and it'll be good for consumers. Ultimately, I, I, I would ... Not financial advice, but I think that Apple's gonna be able to manage this. I'd buy the stock. I may buy more of the stock. I think that this will be good for them long-term. All right,

Jason Calacanis 23:36 listen. Going even deeper into Apple and this Google relationship, big questions emerged this week as Bloomberg reported that Apple was speaking to both Google and OpenAI about powering certain AI features on iOS specifically. According to the article, this deal between Apple and Google seems much more likely than the OpenAI one and could happen this year. As you know, we've talked about it on this show before, Google has been the default search engine on iPhone for, I think, over a decade now. And, uh, Google pays Apple $20 billion a year, and that's pure profit for Apple. Uh, it's unclear what features they would power with Google Gemini. Maybe it's like the search deal and Google Gemini's on there. Maybe it's built in. And Apple has been building its own LLM. It's called Ajax. They've been doing some other open source stuff called Maggie. What do you think, Chamath? You were talking about this on Twitter. You, you had a pretty-... good tweet and a pretty strong position. If Apple is gonna use Gemini, what does that say to you about Apple and their view of the future?

Chamath Palihapitiya 24:39 I think it's them giving up. This is the most consequential new development in technology and compute in probably 20 years, 30 years. And so, to be spending tens of billions of dollars of R&D and to not have enough allocated to this so that you have a legitimate path forward to do it yourself, I think is a little inexcusable actually. It's akin to IBM in the '70s going to Microsoft and, and basically asking them to build the operating system for them. When you're such a dominant company and such a dominant position, but you abdicate your responsibility to innovate, I think that that's a really bad situation for a company to be in.

Jason Calacanis 25:25 It's like Yahoo adding Google Search, right?

Chamath Palihapitiya 25:27 And then by the way, on the heels of, like, turning off cars and, and losing these antitrust issues in Europe and then being sued by the DOJ here, to then be in a licensing discussion with a third party for such a critical technology, I think is just, says not very good things about the state of the company.

Jason Calacanis 25:49 Friedberg, your thoughts on this potential deal? We, we don't know what features this would power. We don't know if it's Siri or it's just image editing or search or an extension of search, maybe giving an answer.

David Friedberg 26:00 I have no idea. It seems to me like there's ... If they a- If Apple's doing the right thing, which I'm sure they are, they're probably building their own alternative platform here. They realize it's gonna take them some time in the interim. They wanna have a stopgap. And my guess is go- by going to Google, they're probably gonna get paid instead of having to pay someone else for the technology 'cause Google will realize some benefit from getting users over to search results and seeing ads. So, Google will probably benefit and pay them instead of them having to go pay someone for access to some technology that consumers might want access to.

Jason Calacanis 26:36 Sacks, any thoughts here?

David Friedberg 26:37 I'm sure Apple's gonna make an investment in building their own models here.

David Sacks 26:41 Yeah, I mean, uh, who would look at the launch of Google Gemini and say, "I want that"? That launch was a total fiasco. (laughs) We talked about it.

Jason Calacanis 26:50 (laughs) Another woke company.

David Sacks 26:51 Yeah.

Jason Calacanis 26:51 I think it fits the Apple philosophy pretty good. (laughs)

David Sacks 26:54 I know. How woke would Tim Cook have to be to look at the launch of Gemini and say, "Oh, yeah, I don't see anything wrong there." You got that exactly right. (laughs)

Jason Calacanis 27:00 Yeah, absolutely. (laughs) I want that.

David Sacks 27:03 Yeah.

Jason Calacanis 27:03 Siri, show me the president of the United States. (laughs)

David Sacks 27:06 I mean, apparently Tim Cook is the only person on Earth who's impressed with the launch of Google Gemini. I mean, I can't believe this story is true. It's just, it can't be true.

Jason Calacanis 27:14 I'm so excited today to launch Gemini on stage here at iOS 27. Oh my God, can you imagine him on stage doing searches live in Gemini?

David Sacks 27:24 It just can't b- The story can't be true 'cause it'd be so strategically dumb. Like Jamal said, even if Google Gemini were great, you'd still want-

Jason Calacanis 27:32 Hm.

David Sacks 27:32 ... to invest in having your own thing because it's such a strategic technology. Why would you ever outsource it to your main competitor?

Jason Calacanis 27:39 Uh, you know, uh-

David Sacks 27:39 But in this case, you know that Gemini was terrible. It was a fiasco. And so, it, the story makes no sense. I just can't believe it's true.

Jason Calacanis 27:46 It's probably people knocking on each other's doors.

Chamath Palihapitiya 27:49 They spent $30 billion last year on R&D, 30 billion.

Jason Calacanis 27:54 Apple, to be clear.

Chamath Palihapitiya 27:56 They spent $30 billion on R&D. What did they spend it on?

David Sacks 28:00 Catering? (laughs)

Jason Calacanis 28:02 I mean, you gotta think, Apple Vision f- is a big piece of that, right? Chips, I guarantee you, like, half of that is the M3, M4 chips.

Chamath Palihapitiya 28:10 Yeah, but I'm, I'm just saying 30 billion, like, not a couple crumbs fall out of somebody's pocket, and so there's $50 million allocated to just, like, you know, mucking around with LLaMA or mucking around with Mistral.

Jason Calacanis 28:21 What if they took Project Titan, the car com- car deal? That was ten billion, uh, supposedly they had spent on that. I mean, if they put that towards AI, it would be Microsoft.

Chamath Palihapitiya 28:30 Well, but again, again, it goes back to the, to the people. I don't thi- I don't think the, the person in charge of the windshield wipers for Project Titan is gonna be the person that figures out how to land a really killer LLM.

Jason Calacanis 28:41 Yeah.

Chamath Palihapitiya 28:41 That's a different skill set.

Jason Calacanis 28:43 The-

David Sacks 28:43 But it's not even that expensive. I mean, you're right, there's still-

Chamath Palihapitiya 28:45 One's a mechanical engineer and one's a computer scientist, so, uh, these are not the same people. They're not fungible that way.

Jason Calacanis 28:50 I mean, I guess the question here is Apple capable of building, on a culture basis, Friedberg, this type of software? They're a hardware company, so they have it in their DNA.

David Sacks 28:59 It's not hard. You're standing on the shoulders of the whole open source movement. All you have to do, like Jamal said, all you gotta do is take the latest Mistral model or, um ...

Jason Calacanis 29:06 Yeah, jump on Hugging Face and start working.

David Sacks 29:09 I mean, you're not starting from zero because of open source.

Chamath Palihapitiya 29:12 No, not only are you not starting from zero, not only do you have the foundational models that are excellent and available in open source, you have probably the most prolific set of training data that has ever been ex- created in the entire world to make these models kick ass.

Jason Calacanis 29:24 Yeah, you have all the Apple photos archived. I wonder if in their terms- See, that's the thing is, their terms of service is so privacy based, I wonder if they could even use that information.

Chamath Palihapitiya 29:33 And I just think, look, at the end of the day, the Apple brand is still exceptional.

Jason Calacanis 29:36 Mm-hmm.

Chamath Palihapitiya 29:37 And so if you're given a $10 million a year job at Google versus a $10 million a year job at Meta versus a 10 milliard- $10 million a year job at Apple, if you're, like, one of these killer AI people that get these kinds of offers, I gotta presume that Apple gets their fair share of these people.

Jason Calacanis 29:55 Yeah, you would think.

Chamath Palihapitiya 29:56 And even in the worst case, you see Microsoft doing, like, pretty heavy-handed deals with companies like OpenAI and just this week with Inflection. So it's not as, as, as if these deals can't be done, right? And so it just kind of, like, leaves ... I don't know, it's just, it's quizzical to spend that much money to not necessarily be willing to compete on the human capital, to not necessarily be in the market acquiring these businesses. I don't know, it's just, it's just a question mark. Like, what's going on over there?

Jason Calacanis 30:27 Yeah.

David Sacks 30:28 Jomoth asks, "What's going on over there?" We have some inside footage. Nick, you wanna play tape? (instrumental music)

Jason Calacanis 30:37 What's going on here? (tense music) What are we watching?

Narrator 30:50 I hope we didn't keep you waiting. Mother Nature.

David Friedberg 30:56 Mother Nature, welcome to Apple. How, how was the weather getting in?

Jason Calacanis 31:06 Oh, she's controlling the weather.

Narrator 31:06 The weather was however I wanted it to be.

Jason Calacanis 31:08 This is so cringe. Yeah, they did this couple of- But, but this reflects their self-image. I mean, they released this. They care about the planet. No, it, it reflects that they think somehow this is an accurate reflection of the way they do meetings. No, I think it was the, um, the point they were making is- No, I think it was a skit. ... they were trying to do a skit about, like, how they're doing less packaging and including... That, that skit was to tell you that you're not getting a charger in your next iPhone (laughs) 'cause they, they don't, they wanna save the climate. Uh, I thought the intent was-

Narrator 31:37 Eh, it's a little... Yeah.

Jason Calacanis 31:37 Maybe it's a little cringe. I think it was a little cringe, but yeah. I think it was a little cringe, but- ... but I do appreciate that they are doing sustainable products and not putting as much stuff in landfills, so I think they should get a lot of credit for that. What I do think about this deal that's really interesting is it's sort of cementing the Google and the Apple alliance against Microsoft, and Microsoft has big, you know, AI ambition, so this is kind of interesting. If you lock in the duopoly of Google and Apple, and then you lock in Google's search monopoly, and you start fighting Microsoft, I think that's what we're... I think that's what's probably going on here, is they're trying to figure out, "How do we keep Microsoft away from running away

Jason Calacanis 32:17 with this?" All right, we covered that huge NAR lawsuit back in December, and there has been a settlement. Big news for the National Association of Realtors. They've agreed to pay $418 million in a settlement last week, and a federal jury found that the NAR and several large real estate brokerages conspired to artificially inflate agent commissions. The settlement is pretty, a pretty big deal. People are freaking out about it. As you know, the seller of a home pays the buyer's agent's commission. So, you have a buyer and a seller, 6% fee typically, sometimes it's five, but they split that 3% to the buyer and the seller, but the seller is paying that 3% to the buyer. Now, that can't be listed in the MLS anymore, and that deal cannot be done ahead of time. Buyers are responsible for paying their agent's commissions going forward. So, if you bought a million-dollar house, and you were the buyer, you would pay $30,000 to your buyer's agent, or you would choose to not have an agent, or you would choose to negotiate it, and you have to have a signed contract. This is a crazy, just shocking, shock to the system, according to most people who are in it. I've seen a lot of real estate folks who are saying this is gonna be healthy, because you have this, you have to have this conversation between the buyer's agent and the buyer. But commissions in the United States are $100 billion a year, and one analyst projected the lawsuit could lead to a 30% reduction in commission payments, and that would eliminate about half of the 1.6 million active NAR members from the industry. You had a lot of feelings on this, Friedberg, when we talked about it-

Narrator 33:56 Mm-hmm.

Jason Calacanis 33:56 ... a couple of months ago. What are your thoughts on this settlement? Is anything gonna change? Is this as groundbreaking and shocking as people seem to think it is?

David Friedberg 34:05 Well, I would take this settlement, along with a lot of the developments and advances in AI, as being the moment of catalyzing real change in the residential real estate agency industry. It's an industry that's been known to have fixed pricing and be very expensive to consumers, a real tax on the system, and it's largely been wrapped around this idea of mitigating your liability, reducing risk, servicing the customer. Many of those aspects over the last couple of years have been largely standardized through forms, digitized, because so much of this information is no longer going to get paperwork from the courthouse, but a lot of the information sits digitally and can be accessed in a democratized way, and the fact that so much of the service and discovery, reading through documents, understanding what they mean and what they say, can be automated through AI and LLMs, much of this is kind of coalescing around what I hope and expect will be a more seamless, automated, direct marketplace for consumers. The challenge is that most consumers put most of their personal net worth into their home, and so it is where most people's net worth is tied up, and so because it is such a sensitive investment, and it is their entire savings, they wanna have a trusted advisor by them. So, it's gonna take some time before that trusted advisor becomes some piece of software, but I do think that software is gonna play more and more of a role in providing advisory tools and services to consumers in this transaction marketplace, and that's only gonna catalyze and accelerate the fee reduction. I do project, and I do expect that much of what is charged on a commission basis, on a percent of home value today, will change to being a fixed fee and a flat fee basis.

Jason Calacanis 35:58 So, 5K, 10K for your buyer's agent

Narrator 36:01 Mm-hmm.

David Friedberg 36:01 Different services. So, you can have-

Jason Calacanis 36:02 Yeah.

David Friedberg 36:02 ... someone do-

Jason Calacanis 36:03 A la carte.

David Friedberg 36:04 ... do the disclosure diligence for me for 5K. You know, negotiate the purchase for me for 10K. And you, as a consumer, will start to pick from a, a menu of the services that you wanna have rendered for you and things that you're comfortable doing yourself. I don't need someone to negotiate price. I don't need someone to find me a home. I've got Redfin, I can go do that. I can arrange open houses on my own. The lockbox is there. I'll go walk around the property. I don't need someone to point out that the color is nice in a room. And so I think that there's elements of what this hap- of what will happen here, which is a fragmentation and then an automation of these services, and as a result, significant fee reduction. And I'm in the middle of doing this myself right now with a piece of real estate where I'm not using an agent.... and I've been using a direct listing service. I've used all of the standard forms. There's a lot of AI tools you can use to kind of read all the disclosures so you make sure everything's copacetic. And these escrow agents, they'll handle a lot of what a lawyer will handle, and they'll get paid a, you know, a fee, which is much less than the agent's fee. So, I do think that there's a big disruption happening in this industry. I think it's, it's really important for consumers. Agents are going to be, you know, hands in the air telling you, "This is ridiculous, you need someone to help you, you need an advisor." That will continue for a good chunk of the market for a very long period of time. But I do think that it's for the benefit of consumers over time to see these fees come out of the system and see those savings go back into consumers' pockets, and for the value of their real estate to go, to go in their pockets, not into an agent's pocket.

Chamath Palihapitiya 37:30 Is it gonna change the profitability of a realtor pretty meaningfully, right?

David Friedberg 37:38 Most realtors won't be able to be in business.

Chamath Palihapitiya 37:40 Right.

Jason Calacanis 37:40 I think the sellers will do fine, and they might capture more of it because they'll, we're, they'll... My understanding is the se- the, the seller will maybe do both sides of the transaction.

David Friedberg 37:51 No, that's not what's gonna happen, and there's also gonna be limits on that. But, but here's what I will say. If you look at the, the, the number of people, there are 1.4 million members of NAR today, the National Association of Realtors. If you look at the distribution of earnings, uh, you guys know this, my guess is probably 10% of those realtors make 40% of the fee income or 50% of the fee income.

Jason Calacanis 38:16 Some there's a long tail.

Chamath Palihapitiya 38:17 There's a principle.

Jason Calacanis 38:18 Yeah.

David Friedberg 38:18 So there's probably a third of those folks who are already kind of sub-living standards in terms of income. Maybe half of them won't be able to make enough money in this new, you know, fee regime that the, it'll no longer be an attractive proposition to be a real estate agent for, uh, maybe half a million to a million people over time that are agents today.

Jason Calacanis 38:40 Yeah, you know, I, I... It's interesting this, the, the sellers are going to be faced with buyers who just show up having seen something on Redfin and don't have a buyer's representation. And so they think, from the stuff I've been reading, that the seller's agent might be h- pointing them to, "Hey, go to these services," and be acting as like one broker essentially representing both sides. That's what people are saying is the potential-

David Friedberg 39:05 Yeah.

Jason Calacanis 39:05 ... downside of this.

David Friedberg 39:06 I don't think that's gonna be... Yeah, that's not gonna happen for a couple of reasons, but l- let me ask you guys a question. If you guys wanted to go buy a new house, currently, you just go, you know, sign up an agent or buyer's agent, and they go walk with you, and eventually they'll get paid by the seller's agent. So now, you have to negotiate a fee with them upfront. Would you negotiate a fee and say to a buyer's agent, "Hey, I'll pay you 2% on whatever home I buy"? Would you be comfortable doing that, or 3% or 4%? How would you have that conversation?

David Sacks 39:35 No, look-

David Friedberg 39:35 What would you say, Sax? I mean, ferg- I know you've got a different situation 'cause you've got real estate people, like, working for you. But, like, if you were to go out and ge- uh, if... Would you go out and get an agent and pay, and negotiate a fee with them?

David Sacks 39:46 It is not worth it to the buyer to pay 2 to 3% of the purchase price to-

David Friedberg 39:51 Yeah.

David Sacks 39:51 ... make appointments. You can see-

David Friedberg 39:52 Yeah.

David Sacks 39:52 ... all the houses on MLS, through Zillow or Redfin or whatever.

David Friedberg 39:56 And what about handling closing and disclosures?

David Sacks 39:58 No buyer would ever voluntarily agree to pay this massive commission. It's not worth it. So it's game over for the realtors if buyers are forced to pay their own broker's commission. The only reason this system works is because the seller's forced to pay for it.

David Friedberg 40:17 Yeah.

David Sacks 40:18 And when you sign the listing agreement with the seller's agent, you can negotiate a little bit at the margins. Sometimes you can get the 6% down to 4 to 5% for a big listing. But 50% of it will always go to the buy side. I mean, I've said to these guys, "The buy side agent doesn't do anything. Why don't you make it 2% for yourself and 1% for the buyer?" They won't do that.

Jason Calacanis 40:38 They just won't take your business. The seller will not represent you.

David Sacks 40:41 They have like all sorts of rules against it. So the-

Jason Calacanis 40:43 Yeah.

David Sacks 40:43 ... the whole thing is like protect... It's like a racket that's protected somehow. So-

Jason Calacanis 40:47 And now it's been cracked.

David Friedberg 40:48 Yeah.

David Sacks 40:48 Well, I, I still am like a little bit skeptical that this is gonna work out exactly the way we're saying, because it is just such a, a death blow to the industry if buyers are forced to pay their own commissions, uh, their own-

David Friedberg 41:01 Oh, yeah.

David Sacks 41:01 ... like buy side broker's commission. And in the articles, they're saying there's still like some gray area about what's gonna happen, but that is what should happen. Buyers should be responsible for paying their own brokers. And if you do that, I think you'll knock out half the fees of this industry.

Jason Calacanis 41:16 Here's an idea. Why don't they, uh, ch- charge an hourly fee as a buyer's agent, like you might pay for a lawyer?

David Friedberg 41:19 There will be people doing that, Jacob, for sure.

Jason Calacanis 41:21 $200 an hour, $300 an hour. Yeah.

Chamath Palihapitiya 41:22 Doesn't this impact home prices as well? Like if you, if the buyer had to pay, all of a sudden their affordability effectively goes down. Because if they have to pay an extra-

David Friedberg 41:32 That's right.

Chamath Palihapitiya 41:33 ... $100,000 for a home, then that's $100,000 they can't pay th- less than they can pay for the house itself, because they have to pay an agent. So-

David Friedberg 41:39 But it nets out to, um-

Chamath Palihapitiya 41:40 ... it all comes back into home prices, no?

David Friedberg 41:41 It nets out, because the seller's agent's no longer paying 6%, they're paying 3%. And so now, the seller's agent has 3% more that-

Chamath Palihapitiya 41:51 Right. So your net, your net's the same.

David Friedberg 41:53 That they'll take a hit on. Yeah. But net, net...

David Sacks 41:54 I think it's good for buyers and sellers because the transaction costs of trading go down.

David Friedberg 41:58 Exactly.

Chamath Palihapitiya 41:58 Yeah.

David Friedberg 41:58 The money goes back in consumers' pockets.

Jason Calacanis 42:00 Gonna create a more fluid market, yeah.

David Friedberg 42:02 And I think it's a great opportunity for startups. I'll say this right now, like I think there's gonna be a lot of startups that are gonna come out of this ruling that are gonna launch a la carte services leveraging AI to make these services available direct to consumers without needing an agent. And they're gonna be pretty compelling services, and they're gonna show up real fast.

Jason Calacanis 42:19 I mean, a lot of people will not list their home or sell it because that 6% might put them under water. So if it's down now down to 2 or 3-

David Friedberg 42:29 Totally.

Jason Calacanis 42:29 ... yeah, people might be like, "You know what?"

David Friedberg 42:30 It's always been crazy to me that anyone would pay a percent of absolute value. It makes no sense. I bought a home for a million, I'm selling it for a million one. So I've made $100,000 profit, but I gotta pay $60,000 of my total gross to an agent to sell it through you?

Jason Calacanis 42:47 Yeah, 60% of the profit goes to them, yeah.

David Friedberg 42:48 I just gave a, I just gave up 60% of my profit on my home.

David Sacks 42:51 Right.

David Friedberg 42:51 It makes no sense.

David Sacks 42:52 And the crazy thing is that a bad sale of your home would be, let's call it 900,000 or a million, and a great sale would be 1.2. So-

David Friedberg 43:02 Exactly.

David Sacks 43:02 ... it's a very small margin where they actually have an impact based on the quality of their effort, but they get compensated for the whole thing.

David Friedberg 43:11 Nothing. Yeah, for the whole thing, no matter what.

Jason Calacanis 43:12 Yeah, they should get compensated-

David Friedberg 43:13 No matter the outcome.

Jason Calacanis 43:14 It should be that you get a flat rate, $10,000 at a million, and then you get 10% over a million or something. You could give, just like you might with a salesperson.

David Sacks 43:24 Yeah, the incentive... The incentive comp should be variable based on performance, whereas the guaranteed part of the comp should be, like you said, a flat fee. It's kind of like the salesperson has an OTE, right?

Jason Calacanis 43:35 Exactly, like a sale. Yeah.

David Sacks 43:35 They got like a base and variable.

Jason Calacanis 43:36 Yeah.

David Sacks 43:37 Yeah. Totally.

Jason Calacanis 43:37 I mean, you could say, if you said, "1% up to a million," so that's 10K, and then 10% for the next 100K, and then 20% for the next 100K. So you would s- you know, that 1.2 million is really hard to get. Yeah, I'll give you 20% of that incremental 100. That would be a much better deal 'cause you'll be getting paid for the actual performance. So anyway, really interesting.

David Sacks 43:57 But you know, JCal, I, I have an idea for the National Association of Realtors.

Jason Calacanis 44:00 Oh, here we go.

David Sacks 44:02 If they wanna stop being perceived as an evil monopolist, all they gotta do is put out a cringe ad talking about the environment, everyone's gonna love them again.

David Friedberg 44:08 (laughs)

Jason Calacanis 44:08 Absolutely. They should do an ad where they have a diverse-

David Sacks 44:11 No landfills.

Jason Calacanis 44:11 ... cast of people. And that diverse cast could talk about, like, putting sustainable forestry around it to-

David Sacks 44:19 All they gotta do is say, "Something, something, landfills." Everyone will love them again. They can charge systems up.

Jason Calacanis 44:23 Absolutely. Absolutely.

David Friedberg 44:23 (laughs)

Jason Calacanis 44:23 Virtue signaling, right? They can genuine flat.

David Sacks 44:25 (laughs)

David Friedberg 44:25 Something, something, landfills.

Jason Calacanis 44:26 Yes. Absolutely. All right, let's keep the train moving

Jason Calacanis 44:30 here. The AI landscape shifting yet again. Microsoft just, just did-

David Friedberg 44:34 (laughs)

Jason Calacanis 44:34 ... another one of these shadow acquihires, this time of Inflection AI, bizarre deal. Microsoft has hired most of the team at Inflection AI, including the CEO, Mustafa, who everybody knows. I just actually had him on This Week in Startups. He was the co-founder of DeepMind. He worked at Google for years, and now he's going to be the CEO of a new company called Microsoft AI. It's essentially the consumer AI division of Microsoft, but they did give him the CEO title. For background, Inflection have raised 1.5 billion over the last two years. It was one of these giant fundings that occurred to build a foundational model like OpenAI is doing, like Anthropic is doing. They had a chatbot called Pi, very similar to ChatGPT. It was supposed to remember your history and build a relationship with you. That's all getting shut down. Reid Hoffman, who is a major investor in this company and who's on the board of Microsoft and who sold LinkedIn to Microsoft, him, played an important role in this deal according to reports. And the Inflection investors included Bill Gates, Eric Schmidt, and a bunch of other interesting folks. But this was a acquihire, which is the weird thing, Chamath. They hired all the employees, they leave the shell of a company, the company's gonna go do some enterprise stuff and investors get to keep their equity in Inflection, but I guess that might be worthless. There's something going on here that we don't know about this deal structure. When you saw this deal, and you see Satya taking the entire team like he threatened to do with OpenAI, if you remember, same exact kind of thing, "I'll acquire everybody if you don't take the deal." What is your take o- of what's going on here? Why did this occur like this instead of just buying the company?

David Friedberg 46:17 I mean, it occurred like this because Reid and Bill are inexorably tied to Microsoft, so they were able to get a deal for investors that would have never happened otherwise. And so good on them. I think they did a very good job protecting the fiduciary interests of the investors of this startup.

Jason Calacanis 46:36 Sacks, what do you think?

David Friedberg 46:36 No conflict, no interest, right?

Jason Calacanis 46:37 Yeah, I mean, we, we say that a lot. This is so weird though. Why not buy the company, Sacks? Is it because of antitrust?

David Sacks 46:44 Actually, that's a good theory. It's just as hard for Microsoft to get anything through at this point.

Jason Calacanis 46:49 Mm-hmm.

David Sacks 46:49 So probably they're just like, "Why even deal with the antitrust?" They don't really need the assets, so I think they license the core tech from the Inflection C Corp, and then they hire away all the talent, and then the investors get made whole. So I think it's like a- an acquihire with a little bit of tech along with it that they get through the licensing deal. Maybe that's just to protect them from an IP standpoint. My take on this is that this was a bailout. This was a bailout of the investors. I don't think-

Jason Calacanis 47:18 Huh.

David Sacks 47:18 ... the investors got ripped off here. I think the investors were, like, thrilled to get their money back. For whatever reason, this company wasn't going anywhere-

Jason Calacanis 47:25 Huh.

David Sacks 47:25 ... and it raised hundreds of millions of dollars. Reid and Bill obviously are, are wired in, they're on the Microsoft board. And this company did have some talent that Microsoft wanted.

Jason Calacanis 47:34 Okay.

David Sacks 47:34 So they basically did a giant acquihire and it bailed out the investors.

Jason Calacanis 47:38 Freidberg, is that your take? This is a bailout, or do you think this is a new interesting end run around antitrust where, hey, if Adobe wants to buy the next Figma, just buy the team, do a license of Figma, some fakaka lunacy? Or do you think this is a bailout? What, what's your theory here, Freidberg? And what does it say about Microsoft's approach to the AI space?

David Friedberg 48:01 I don't think this is some runaround antitrust. I think obviously, like a lot of companies, there's been a realization on how quickly foundational model development is commoditizing and how quickly costs-

Jason Calacanis 48:15 Hm.

David Friedberg 48:15 ... are escalating and how many folks are chasing it. So having some unique advantage in the particular plane of the market where they were participating as a startup maybe became difficult and untenable in negotiations and conversations between all these parties who all know each other very, very well and are all very friendly. You know, this ended up being kind of the best way to move forward. So...

Jason Calacanis 48:41 All right. There you have it, folks.

Jason Calacanis 48:43 In other related news, the Saudis are planning a $40 billion AI fund, according to The New York Times. Reps from the Public Investment Fund, uh, in Saudi-... have spoken to a number of firms about partnering on it. This would be the second-largest venture fund of all time behind SoftBank's $100 billion Vision Fund 1, which you remember was also backed by the Saudis and some other folks in the Middle East region. This new fund would reportedly invest in AI startups, chip companies, and data centers. So we thought we'd do a little quiz here. If you were given the 40 billion, David Sacks, how would you allocate the 40 billion in AI in today's market, 2024 going on? If they put you in charge of this $40 billion AI fund, where would you deploy it? Same question will come around the horn to you, Freyberg, and then you, Chamath.

David Sacks 49:34 Well, the first thing is, I wouldn't be in a rush to deploy all 40 billion at once because that's a recipe for spraying a lot of money into unproductive or overhyped things. So I would take my time, first of all. But second, in terms of coming up with a framework, I would think about the different levels of the stack of AI and try to figure out where the value capture is gonna be. And I think there's maybe four different layers of the stack. First, you've got the silicon, you've got the chips where NVIDIA is dominant, then you've got the foundation models where it's OpenAI, and then there's some open source models. And then you've got kind of infrastructure, dev tools, vector databases, things like that. And then finally, you have the applications sitting on top of that, which are just getting started. I think it's really hard to know from what we're seeing today exactly who's going to capture the most value in this stack. I mean, you could make an argument for or against pretty much any layer of the stack. I guess if I had 40 billion to deploy, what I would do is try to identify who are the leading companies at each level of the stack, and then who are the most promising challengers, and I would make a bet at e- every layer so I'm covered. That's not what I personally do because I'm not, you know, I'm just not a hardware investor, I'm not really an infrastructure investor, I'm more of an application investor. So I'm gonna focus on that fourth layer of the stack and just trust that there's gonna be enough value there. But again, if I was managing a $40 billion sovereign wealth fund, then I would play at every single level, and I would hire the best people who know each layer of that stack.

Jason Calacanis 51:00 Sacks, I think you do a good job of sort of showing the, the four layers of the stack. I think open source, the application layer, and specifically robotics are huge opportunities that are underinvested in right now. So I would take the top open source projects, I'd find those top contributors, take the top 20 or so open source projects and back them to the tune of, you know, significant money, 50 million, 100 million, whatever it takes, and try to own the top 20 or have insights into those top 20 open source models and own those teams. Look for the top contributors, really easy to do on GitHub and Hugging Face and Replit and other places where they're active, and empower those. Then obviously there's verticals. We're, we're working on people who are doing screenplays and tax just like you are, Sacks, and that's a fantastic place to deploy money. But then I think robotics is gonna be super, super compelling here, and that takes a lot of money. And so you do have the capital as a weapon and, you know, the 20-year view of this, and making a general pur- purpose robot like Elon's doing with Optimus or Figure AI's doing with their robot, I think robotics is a major place. You could probably buy... I don't know who owns Boston Dynamics now. I know Google sold it. So, you could probably buy some robotic companies and then put the AI on them and really take a 20-year view of robotics. Freyberg, your thoughts? How would you deploy the 40 million?

David Friedberg 52:24 The bottom three stacks are very difficult right now to find a footing obviously. Uh, you know, I think Sacks, the, you know, it's, it's the, I think the generally accepted framework for how to think about how the market is broken apart. But on the application side, I think, is where you could think about m- finding more traditional business model advantages. So, you know, I think your point about robotics is a really interesting one. You know, is there a enterprise-like sale of robotics tools that have positive ROI for enterprises? And is there a business that's working there and that is scalable? Vertical solutions in labor and automation and productivity gains are probably the best Sharpe ratio. Good alpha, lower beta, and a good place to kind of deploy competing in chips, competing in infrastructure, competing in models, it's such a, you know, as we just talked about with respect to what happened with Inflection and Microsoft this week, it's such a rapidly changing environment, it's hard to have high confidence in where things are headed there. So I do think that we do know that there are enterprise markets, we know that there are segments of things like food, medicine, you know, manufacturing. These are markets that aren't going anywhere, and they could all certainly benefit from unlocks in software or in robotics and automation and hardware. So, that's probably where I would think about concentrating capital. But, you know, 40 billion is a lot of money, so you'd probably think about deploying it over what period of time? Is it 10 billion a year over four years? And then is it broken apart in what way over those sectors and over what geographies, and, you know, then find good managers to help you get it deployed.

Jason Calacanis 54:09 Chamath, you're batting cleanup here. You got to hear everybody's answers before giving your own. What are your thoughts on your other besties' answers, and what's your plan to deploy 40 billion for the Kingdom of Saudi Arabia's Public Investment Fund?

Chamath Palihapitiya 54:23 The most, the most important thing that fund managers get wrong is not having appropriate reserves for your winners. And if I look back, the real profit dollars that I leaked was not not investing enough upfront but when I didn't have enough reserve to do the full pro-rata or even super pro-rata in the ones that worked. So the first thing you have to do-

Jason Calacanis 54:44 100%. Yeah.

Chamath Palihapitiya 54:44 ... and when I do the regression on all of my funds, you really need to reserve between 40 and 50% of the total fund size for reserves. So, take 20 billion off the table. And now you have a smaller problem, which is how do you deploy 20 billion? Because the other 20 billion is purely meant for the winners.... where you cram the money into the few that are winning so that you can make the most money. Of that 20 billion, I would probably take two-thirds of it, and I would go to all the hyperscalers and anybody that's providing cloud compute and essentially buy out all of the compute credits on GPUs so that I could tell any startup in the world, you will do a SAFE with me-

Jason Calacanis 55:26 (laughs)

Chamath Palihapitiya 55:26 ... the Kingdom of Saudi Arabia. I will give you free compute on, pick your cloud provider, pick your model, I don't care. So if you wanna run LLaMA on Groq, great. If you wanna run Mistral on GCP, great. If you wanna run OpenAI on OpenAI, fantastic. But we will pay for all the compute. In return, we get 7% upfront and you have to tell us some benchmark of how this model is improving.

Jason Calacanis 55:52 Hm.

Chamath Palihapitiya 55:53 And then you are hiring a team of people whose job it is, and you can probably train a model to do this as well, to ingest th- the reporting in a systematic way to understand if it is, as you guys said, a robotics company, there are measures of the quality of a robotic, a, a robot's dexterity or vision or manipulation or task completion rate. If it's a search engine, it's a different thing. If it's a consumer-facing app, it could be users. If it's a drug discovery app, it's the number of legitimate protein synthesis passes that, that pass, whatever it is. So now you've scoped the problem to 20 billion is in reserves, 15 billion of it is tied up in credits, and then the five billion I do think it's what David said, what Sax said, which is a billion and a half to the hardware, a billion and a half to infrastructure, a billion and a half to some of these discrete ideas. You probably need a 30 or 40 person team total, no more. But that business can, could make a trillion dollars if it was set up that way. But the key is to get the credits out to people so that the reality is, what the commonality across every single AI startup is that they will have to run on a model, and that model will be hosted somewhere in a cloud, and all of that compute will need to be paid for. So Saudi Arabia should pay for that compute, get six or seven percent upfront, and retitle the SAFE not as the... What is a SAFE called, Jason?

Jason Calacanis 57:22 Simple Agreement for Future Equity.

Chamath Palihapitiya 57:25 This should be the Saudi-

Jason Calacanis 57:26 Saudi Agreement for Future Equity.

Chamath Palihapitiya 57:27 ... Saudi Agreement for Future Equity. (laughs) I love it. That's what they should do.

Jason Calacanis 57:30 All right. Well, there you have it, MBS, the all-in KSA $40 billion fund. Give us a call, we'll fire it up, and w- we'll deploy the 40 billion for you. I kid. Maybe.

David Sacks 57:41 Actually, I'm curious, you guys, since everyone kind of seems to agree with the, the framework of the four levels of the stack. Where do you guys think the value cap is gonna be? Do you think it's gonna be by the chip companies, the foundation model companies, the infrastructure companies or the-

Chamath Palihapitiya 57:57 Mm-hmm.

David Sacks 57:57 ... or the applications?

David Friedberg 57:58 I'll actually change my answer in a little bit. I don't think it's necessarily new technology companies per se that are gonna benefit most, but I think that it's businesses in traditional industries that are gonna be able to leverage these tools, whether they're using open source tools or third-party technology capabilities that they're buying as a service or as a piece of software. There's an incredible set of advances that are gonna be realized in things like chemical manufacturing, drugs, general manufacturing that have existing scale and infrastructure that are the fastest to move to adopt these technologies are gonna benefit the, the most. And I think that's probably where most of the value will accrue is not necessarily a chip company, but in other businesses and traditional industries that can transform themselves-

David Sacks 58:43 Mm-hmm.

David Friedberg 58:43 ... using AI.

David Sacks 58:44 So your answer is at the application level.

Jason Calacanis 58:46 Application level, yeah.

David Sacks 58:46 And then within application level, you could divide it up between existing companies and startups.

David Friedberg 58:51 Yeah.

David Sacks 58:51 And, uh, existing companies that are able to leverage AI innovations that are lower in the stack.

Jason Calacanis 58:57 Another way to answer your question, Sax, is which is the most crowd- which spaces are the most crowded already? And so obviously chips are super crowded, lots of incumbents, lots of people going after it, and the foundation models are very crowded as well. And the application level is yet to sort of be built out, right? 'Cause we're in year zero or year one of that. So I do think application level is where there's a lot of value, but I also think the hosting and the development of these various niche models is gonna be a huge opportunity. So just, once again, those open source models being put into cloud computing environments and optimized, that could be a whole new level of AWSs and Google Cloud and Azures. So there is an opportunity for somebody to compete with those incumbents by just being better at those models that are open source and having the team that's doing those updates and then optimizing that cloud. So I would go with the cloud level for those open source models and providing that as a service like VMware does or other folks do. WordPress would be a tiny example of an open source project like that. And then I just, I, something tells me this robotics space, which has been a false start over and over and over again, I think this is the time where actually it's gonna work. And so I'm, I, I l- love that hardware robotics space.

Chamath Palihapitiya 1:00:14 Oh, yeah. I think you're right, Sax. I think it's kind of book-ended in my mind. I think the, the folks that are building fundamental hardware will make a lot of money over the next five to 10 years. And then the folks that are building the fundamental application level experiences will make a lot of money as well. And then who knows?

Jason Calacanis 1:00:31 Hm.

Chamath Palihapitiya 1:00:32 The thing that we're not talking about enough, and I don't understand it well enough, is the entire way in which apps are built needs to fundamentally be rethought from first principles because you essentially basically have these client-server apps where you have all of this business logic that's sitting back in some server somewhere, and I don't think that that's how apps get built today in a world of AI. And so it doesn't need to work that way. So I don't exactly know what that means, but it, it just seems like most of the architecture of how the internet works today doesn't make much sense.So, that would then support Freeberg's point that all of the kind of legacy things that we all know and trust also get rebuilt, and so that could create an entire wave where networking value gets recreated and everything. S- uh, so, my gosh, I mean, it could be very, very transformational.

Jason Calacanis 1:01:22 Yeah, I mean, the idea that you would just talk to a computer or in a chat interface, and you wouldn't use an app interface. You would just ask it questions, it would give you answers. Ask it questions, it gives you answers. Give it a task, it gives you a result.

Chamath Palihapitiya 1:01:34 This is why-

Jason Calacanis 1:01:34 Pretty compelling, yeah.

Chamath Palihapitiya 1:01:35 This is why, like, Saudi needs to basically make a bet that there's just developers that are swarming around ideas. Let them show you what's happening-

Jason Calacanis 1:01:43 Figure it out. Yeah.

Chamath Palihapitiya 1:01:43 ... because paying 800 million a year of fees is not the best way to generate a return on $40 billion if this is where you want to be investing, I don't think.

Jason Calacanis 1:01:52 Yeah.

Chamath Palihapitiya 1:01:52 800 million could pay for a lot of credits, which probably gets you one step closer to the,

Chamath Palihapitiya 1:01:57 to the answer.

Jason Calacanis 1:01:57 All right, Reddit went public today. They have 800 million in revenue. Company is worth over $8 billion. In trading, it's up 50%. What do you think, Chamath? Is this the opening of the IPO window again? Is this a one-off? We got Stripe coming. And, and what do you take from it popping 50% on the first day?

Chamath Palihapitiya 1:02:19 I don't know. I really haven't looked at the company. I haven't looked at the, the financials. But, like, these last three or four weeks, I think people have been so excited and raring to go. We're in the middle of another meme coin craze, so I-

Jason Calacanis 1:02:35 Oh, God. Don't bring it up. (laughs)

Chamath Palihapitiya 1:02:36 I just think- (laughs)

Jason Calacanis 1:02:37 We're all getting pulled into that nonsense.

Chamath Palihapitiya 1:02:39 I think the point is that I think there is a speculative party going on right now.

Jason Calacanis 1:02:45 Mm-hmm.

Chamath Palihapitiya 1:02:46 And I'm not saying that Reddit is part of it, but whenever these things are so mispriced, just means that people are, are ready to gamble a little bit.

Jason Calacanis 1:02:55 There's definitely a lot of gambling in the system, as we've seen, and we're recording this on Thursday, so who knows what the stock price will be tomorrow. Generally, these media companies-

Chamath Palihapitiya 1:03:03 I mean, the, by the way, sorry. The other thing is, like, Powell did say finally it looks pretty likely we're gonna get these three cuts, so we're gonna be down to 4.5 to 4.75 on Fed funds by the end of the year. It probably means that we'll get another 50 to 75 basis points through 2025. So, people will look out to the end of 2025 and look at a Fed funds rate that's sort of like-

Jason Calacanis 1:03:27 Hmm.

Chamath Palihapitiya 1:03:27 ... 3.75 to 4%. So, they're getting pretty excited and frothed up. So, this is the beginning of the beginning in terms of that kind of speculation.

Jason Calacanis 1:03:37 Yeah, we saw crypto go bonkers the last couple of weeks. Yeah, what, what's your take on all this, Sacks? Is, does it feel like people are in, uh, gamble mode again? And does that concern you, I guess, after what we just experienced?

David Sacks 1:03:52 Well, I think they're pricing in these rate cuts as if they're definitely gonna happen. Like Chamath said, I think the ex- market's expectation is with, let's call it 70% certainty, that you're gonna get three rate cuts this year. And it still seems to me that that's a little bit up in the air because inflation has not come down to the Fed's target of 2%. It's still right around 3%, 3.1%. So, it's been sticky around 3%. It was coming down pretty fast last year, but it's still there.

Jason Calacanis 1:04:23 Hmm.

David Sacks 1:04:23 So, people, I think, are maybe gambling in the sense that they're counting on rate cuts that haven't happened yet, but they liked Powell's dovish rhetoric yesterday-

Jason Calacanis 1:04:35 Hmm.

David Sacks 1:04:35 ... and they seem to think that that means that the rate cuts are definitely coming.

Jason Calacanis 1:04:38 Hmm.

David Sacks 1:04:39 I don't know how Powell can promise that without inflation coming down, unless he's trying to create a Biden put.

Jason Calacanis 1:04:45 Hmm. There it is, folks.

David Sacks 1:04:47 Which was my theory going into this year, is that-

Jason Calacanis 1:04:50 Yeah. If you took the, um-

David Sacks 1:04:51 ... is that we would get a Biden put from the Fed.

Jason Calacanis 1:04:53 Absolutely, and it's looking like-

David Sacks 1:04:54 (laughs)

Jason Calacanis 1:04:54 ... Biden has a clear path to victory based on the lowest unemployment of our lifetimes and this roaring stock market records. Yeah, this is a easy Biden victory. Freeberg, what do you think about the risk-on?

Chamath Palihapitiya 1:05:11 I don't know.

David Sacks 1:05:12 Powell is incredibly unpopular. If you look at his actual polling, he should not win the election. But that's in spite of, you're right, the economy is, seems to be doing pretty well, and the stock market's certainly doing pretty well. A president with these fundamentals would normally get reelected, but Biden currently is not, his polling is not the polling of a president who's gonna get reelected.

Jason Calacanis 1:05:33 It is pretty amazing-

David Sacks 1:05:35 But if, if Powell comes, if Powell comes through with the rate cuts, that will help him.

Jason Calacanis 1:05:39 It's pretty amazing how horrible a job he's doing, that he's made Trump look like a better candidate to some people. (laughs) That is an extraordinary achievement by Biden. I will have to agree there.

David Sacks 1:05:49 Look, I think the, the bigger economic issue we're talking about was that buried article in the Wall Street Journal about commercial real estate. Do you see that article?

Chamath Palihapitiya 1:05:59 That was crazy.

David Sacks 1:06:00 So, this Wall Street Journal article reported that of the 36 billion of office loans that came due in the commercial mortgage-backed securities market last year, only one-quarter were paid off in full.

Jason Calacanis 1:06:14 Hmm.

David Sacks 1:06:14 That's according to data from real estate analytics firm Cred10.

Jason Calacanis 1:06:17 Is that extend and pretend strategy that you see there?

David Sacks 1:06:20 Oh, yeah. I mean, only one-quarter of the loans got paid off.

Jason Calacanis 1:06:24 Mm-mm.

David Sacks 1:06:24 So, 75% didn't get paid off in full. So, there's-

Jason Calacanis 1:06:27 Somebody-

David Sacks 1:06:27 ... tons of buildings that are underwater right now, but nobody wants to foreclose and then sell them at a fire sale price.

Jason Calacanis 1:06:35 Mm.

David Sacks 1:06:35 So, yeah, everyone is, it's pretend and extend.

Jason Calacanis 1:06:38 Yeah, kicking the can down the road. Nobody wants to take the medicine, so, you know.

David Sacks 1:06:41 Well, they're hoping, they're hoping that rates will come down fast enough and occupancy rates will go up fast enough that no one has to foreclose, but if rates don't come down, then you have a real problem. I mean, again, everyone is just assuming that inflation will continue its path from 3% to 2%, and then we'll get these rate cuts. And they're hoping they can cling on. Landlords are clinging on, and I think the banks that loaned them all this money-... are clinging on for dear life. But if rates stay higher longer-

Chamath Palihapitiya 1:07:12 Hmm.

David Sacks 1:07:13 ... then you're gonna see some real distress-

Chamath Palihapitiya 1:07:15 Yeah. Pretty crazy.

David Sacks 1:07:15 ... including the regional banking system.

Chamath Palihapitiya 1:07:17 Freeberg, you had a, a science corner here. A couple of different things came up, the Hubble Telescope, 3D-printed organs. What, where do you wanna go with this?

David Friedberg 1:07:27 I mean, do you guys wanna talk about t- how the universe is expanding at an accelerating rate and expanding differentially everywhere we look, and we don't understand how or why?

David Sacks 1:07:36 Yeah.

Chamath Palihapitiya 1:07:36 100%, and Sax needs to use the loo, so yeah, definitely.

David Friedberg 1:07:39 (laughs)

David Sacks 1:07:39 (laughs)

Chamath Palihapitiya 1:07:40 He's all red. (laughs)

David Friedberg 1:07:42 He dropped. He dropped.

Chamath Palihapitiya 1:07:43 Well, I love science corner. Let's do it.

David Friedberg 1:07:46 Yeah.

Chamath Palihapitiya 1:07:46 Freeberg, it's your time to sign, to, to shine-

David Friedberg 1:07:49 Well, well, well, well, well.

Chamath Palihapitiya 1:07:49 ... as the sultan of science. Tell us what's going on with the universe.

David Friedberg 1:07:51 My favorite topic, astrophysics.

Chamath Palihapitiya 1:07:54 Here we go.

David Friedberg 1:07:54 My favorite topic. My favorite topic.

Chamath Palihapitiya 1:07:57 Sax is back. Sax is back.

David Sacks 1:07:58 Are we headed for Uranus?

David Friedberg 1:07:59 (laughs)

Chamath Palihapitiya 1:07:59 We're actually dead set on it. We're dead. That collision's not over yet.

David Friedberg 1:08:01 It's like the second course for his anus. He disappeared again.

Chamath Palihapitiya 1:08:04 He's just gonna drop in-

David Sacks 1:08:05 (laughs)

Chamath Palihapitiya 1:08:05 ... and do U- Uranus jokes.

David Friedberg 1:08:07 I hear him giggling with his camera off.

Chamath Palihapitiya 1:08:10 Oh, he's get, he's, he's with his writers. He's, he just-

David Friedberg 1:08:11 Yeah.

Chamath Palihapitiya 1:08:11 ... went to the writer's room to get an update on the Uranus jokes.

David Friedberg 1:08:15 It's long been known that our universe is expanding. We've all heard about the, the Big Bang Theory. And couple decades ago, scientists began to observe the brightness of supernovae or exploding stars, and then by looking at their brightness, we could tell how far away they were. And then looking at the shift of the light, whether it's getting red or blue, you can tell whether the light, the, the, the supernova is moving away from us or towards us and how quickly. And so what scientists have used those observations to deduce several decades ago, and for which a group won the Nobel Prize, is that our universe is expanding, meaning that everything is moving away from itself. It's almost as if we're all in a cake. The best analogy I've heard is that there's raisins in the cake, and as the cake expands in the oven, all of those raisins look around and they're all moving apart from each other. So the distance between everything is getting wider. Space is expanding. And so we can actually-

Chamath Palihapitiya 1:09:24 From the central moment of the Big Bang.

David Friedberg 1:09:26 That's the theory, is, right-

Chamath Palihapitiya 1:09:28 Yeah.

David Friedberg 1:09:28 This all started in the Big Bang, and it's not like, you know, we're all in the middle of the universe and the universe is moving away from us. It's that the-

Chamath Palihapitiya 1:09:34 Hmm.

David Friedberg 1:09:35 ... entire, entirety of space is expanding itself, and so everything is moving away from everything else. The challenge in the data was that recently we saw the different types of stars that were observed with the Hubble Space Telescope had actually a different rate of expansion of the universe than what-

Chamath Palihapitiya 1:09:54 Hmm.

David Friedberg 1:09:54 ... was previously thought from the supernova that we saw. And everyone thought there was something wrong with the Hubble Space Telescope data. So, you know, in a final print published last month, the James Webb Space Telescope, which showed much higher resolution of imaging and as a result, much better data, and here's an image of it so you can just see the difference between what came out of James Webb and what was used in Hubble. So that shows one star that was used to calculate the rate of expansion of the universe. And what this sh- star showed is that the rate of expansion of the universe as measured across a thousand of these stars, called Cepheid stars, in five different galaxies had a value that didn't match the value that we see when we look at exploding stars very far away. And so it once again confirms what the original Hubble data showed, which is that the universe is expanding at different rates-

Chamath Palihapitiya 1:10:48 Hmm.

David Friedberg 1:10:48 ... in different parts of the universe, which totally doesn't make sense, and there's no really clear answer as to the physics of why. If there was a big bang and the universe started to expand, it should be expanding the same everywhere. There's no reason that different parts of the universe should be expanding at a different rate than other parts of the universe, that there's differential expansion happening across the universe, and it really tells us that there's very little we know or understand about this large-scale structure of the universe and why these things are happening. There was one group that put out a theory where they said that the local universe where we see these Cepheid stars that this data is based on, there's almost like a little bubble, and on the outside of the bubble, there's galaxies and they're pulling stuff out faster than what's happening where there's not as much density. So there's a lot of different reasons and ex- and explanations for why this might be happening, but it's kind of a big story because it basically confirms that we see a lot of differential expansion happening across the universe and we don't know why.

Chamath Palihapitiya 1:11:44 Hmm.

David Friedberg 1:11:45 Just another big mystery of the universe. So super kind of interesting confirmatory data from James Webb this week. Shivak, do you wanna talk about the, the, the pig kidney?

Chamath Palihapitiya 1:11:55 I mean, I think it's, it's really incredible. They took a kidney from a pig and then they used CRISPR-Cas9 to edit out the, um, certain subset of the pig genes and edit in a certain useful subset of human genes, and then they transplanted that kidney into a 64-year-old man. Uh, and he apparently seems to be doing well. It's really incredible. And this is a guy that was at end-stage kidney disease, and my father went through this, but when you're at that end-stage renal disease, you're getting dialyzed every three days for up to four, five, six hours trying to... Basically have a machine that does the job of the kidneys for you to keep your blood clean, but it's just, it's kind of a death sentence, and it's like a slow-moving death sentence at that. So the idea that you could now use this effectively infinite source of organs seems really compelling. Pretty amazing. I don't know. What do you think?

David Friedberg 1:13:01 Definitely where we're headed. I don't even think they're gonna need-

David Sacks 1:13:04 Did, did you see?

David Friedberg 1:13:05 Yeah.

David Sacks 1:13:06 Speaking of medical breakthroughs, did you guys see the, the guy who got the Neuralink chip?

Jason Calacanis 1:13:12 Incredible. Playing chess with his brain? Oh, yeah. He's using the force.

Narrator 1:13:15 Yeah.

Jason Calacanis 1:13:16 That was awesome. He's using the force. (laughs) Yeah. He, he described it as he was playing chess and he said like, "I love playing chess and I've learned to use my mind to move pieces around." And he said like, "It's like having the force."

Narrator 1:13:27 Totally.

Jason Calacanis 1:13:27 I mean ...

Narrator 1:13:27 Totally.

Jason Calacanis 1:13:27 Wow. Amazing. I watched the livestream and he said that he was a quadriplegic from the shoulders down, but he loves chess. He wasn't able to play chess, now he's able to play chess. He was able to play Civilization, the game, which I guess was really hard in the absence of having this, this chip and now he can do that. It's, it's incredible. I mean, it's really incredible. It's so cool that they kind of went public with it. Or he, I mean, obviously he agreed to go public with it. I think Trevor is his name. It's pretty amazing. And there's more amazing stuff coming. They're making significant progress over there. I was talking to somebody who works there and, you know, it's, it's, it's gonna be ... Yeah. It's g- it's gonna be a process, but they're making significant pro- progress and they're gonna have, I think, even bigger announcements in the coming year. They're getting it done. It's for real, folks. Yeah. My, my kids were really blown away by it. You know, it's, it's interesting to me what, like, penetrates their cynicism bubble and, like, what they get actually- Yeah. ... impressed or excited by, and they thought this was really cool. You know, it's so funny. It's like people are breathlessly, like, looking at the Elon Don Lemon video and they're trying to opine whether he had a good interview or a bad interview, and it's like, he actually had one of the best weeks of his life. Yeah, Starship-3 made it up.

Narrator 1:14:47 Yep.

Jason Calacanis 1:14:47 Starship had an incredible performance last week. And then this thing this week, I mean, what an incredible seven-day run. (laughs) It's more than most of us will have in our lifetime. (laughs) It's, it's also nuts, like, uh, the-

Narrator 1:14:58 So crazy.

Jason Calacanis 1:14:59 That Don Lemon interview, like, there was actually some really interesting topics discussed, but I, I felt