E172: SBF gets 25 years, Trump's meme stock, RFK Jr picks VP, Biden's 2025 budget & more

Jason Calacanis 0:00 Nat and I have goals when I play poker. She always leaves me with the following. Play well, check. Have fun, check. Do not eat late at night, never a check.

David Sacks 0:12 (laughs)

Jason Calacanis 0:12 No. Never a check.

David Sacks 0:13 Not a chance. Not a chance.

Chamath Palihapitiya 0:13 As soon as we finish dinner, within 20 minutes, back at the poker table, Chamath's like, "May I have my Häagen-Dazs now?"

Jason Calacanis 0:20 (laughs)

David Sacks 0:20 (laughs)

Chamath Palihapitiya 0:20 "May I have my second Häagen-Dazs now? Uh, Hellmuth, you are buying the belt tonight."

Jason Calacanis 0:25 Hellmuth is literally on the belt.

David Sacks 0:26 Hellmuth-

Chamath Palihapitiya 0:26 "Hellmuth, fire up- fire up the cheeseburger belt, Hellmuth."

Jason Calacanis 0:28 (laughs) Did you see... Freeberg, you should've seen last week. Hellmuth, at the dinner table, Sean made some, like, incredible, I thought, like, fresh sorbet of some fruit or whatever. He, at the dinner table, ordered from DoorDash, double stuff Oreos-

David Sacks 0:43 (laughs)

Jason Calacanis 0:44 ... some Nutter Butters (laughs) , and some jelly beans.

David Sacks 0:46 Nutter Butters?

Jason Calacanis 0:47 They arrived when we left dinner and got back to the poker room.

David Sacks 0:51 (laughs)

Jason Calacanis 0:51 It was so disgusting. And then the next day, my whole household, everybody, Nat, the kids are like, "What are these things?" They were, like, holding up these Nutter Butters.

David Sacks 0:59 (laughs)

Jason Calacanis 0:59 They were looking at them like they've never seen a Nutter Butter.

David Sacks 1:02 The best part about-

Jason Calacanis 1:03 (laughs)

David Sacks 1:03 ... Phil Hellmuth's DoorDash addiction is that, like, at least once a month, Chamath would be like, "Somebody ordered, like, four entrees, like pastas and two desserts to my house, and I didn't order it." And then Phil's like, "Oh, that's me," on the group chat. "That's me."

Jason Calacanis 1:22 (laughs) Yeah.

David Sacks 1:23 'Cause he doesn't take the time to change his address-

Chamath Palihapitiya 1:25 Change the address.

David Sacks 1:25 ... back to his house.

Jason Calacanis 1:26 Yeah.

David Sacks 1:27 And then you see the naked truth of what he's ordering.

Jason Calacanis 1:29 (laughs)

Narrator 1:30 I'm going all in. Let your winners ride.

David Sacks 1:35 Rain Man David Sachs.

Narrator 1:38 I'm going all in.

David Friedberg 1:39 And I said- we open source it to the fans and they've just gone crazy with it.

Chamath Palihapitiya 1:43 Love you bet, Heiny.

David Sacks 1:44 Queen of quinoa.

Narrator 1:45 I'm going all in.

David Sacks 1:47 One person who's not gonna be eating well (laughs) is SBF. He was just sentenced. Breaking news Thursdays continues here at the All-In Podcast, episode 172. But SBF was just sentenced. With me again today on the pod, of course, the dictator, Chairman Chamath Palihapitiya, sultan of science, David Freeberg, and the Rain Man, yeah, David Sachs. I'm Jason Calacanis. Welcome back to the number one podcast in the world, episode 172 of the all-in podcast.

Chamath Palihapitiya 2:19 (coughs)

David Sacks 2:19 Your favorite. SBF just sentenced 25 years.

David Friedberg 2:23 You're always over-hyping.

Chamath Palihapitiya 2:25 (laughs)

David Sacks 2:25 Always. I'm a hype man. It's always what I do.

Chamath Palihapitiya 2:27 Overpromise and underdeliver.

Jason Calacanis 2:27 (laughs)

David Sacks 2:27 Absolutely. I'm a, I'm a hype man. I'm like favor- Flavor Flav of this organization.

David Sacks 2:33 (laughs) SBF, Sam Bankman-Fried of FTX, was found guilty, as you know, a couple of months ago, in November. And he just got sentenced to 25 years. In total, FTX customers lost eight billion, investors lost 1.7 billion, and lenders lost 1.3 billion.

Jason Calacanis 2:50 Jason, is that without par- parole?

David Sacks 2:54 Um-

Jason Calacanis 2:54 When is he eligible for parole?

David Sacks 2:56 So...

Jason Calacanis 2:56 Was that... Does it say?

David Sacks 2:57 That is a good question. It doesn't say what the parole could be. The prosecutors had sought-

Chamath Palihapitiya 3:02 There's no possibility of parole in federal cri- uh, criminal cases.

David Sacks 3:06 Yeah. So, federal prosecutors sought 40 to 50 years. So the judge went a little bit light, I guess, and gave half. In his sentencing, Judge Lewis Kaplan said SBF had lied throughout the trial and showed no remorse. Quote, "He knew it was wrong, he knew it was criminal. He regrets that he made a very bad bet about the likelihood of getting caught, but he is not going to admit a thing, as is his right." In related news, FTX is also selling the majority of its stake in Anthropic for 884 million to Mubadala, the sovereign... one of the sovereign wealth funds from the UAE, and other investors, including Jane Street, where SBF worked for a hot minute, the Ford Foundation, Fidelity, and some other investors. From CNBC, lawyers representing the bankruptcy estate told the judge in Delaware last month that they expect to fully repay customers and creditors with legi- legitimate claims in the FTX case. That doesn't take into account equity holders. So, looks like that one investment could save a lot of people their deposits.

Chamath Palihapitiya 4:08 I saw an analysis recently that showed that they were gonna be in, in a surplus, so investors were gonna get money back, and all the depositors were gonna get their full 100% back.

David Sacks 4:18 Yeah, I don't know how much Bitcoin or other coins they owned, but if they didn't see that Bitcoin-

Chamath Palihapitiya 4:23 A bunch of these coins are now-

David Sacks 4:24 ... at 30 or 40, and it's at 60 or 70 now, yeah, that would be material, right?

David Friedberg 4:28 The crazy thing is that SBF was not, it turns out, a terrible investor. He made a seed investment in Anthropic that's worth billions now. He made a seed investment in Solana that I think is worth billions now, especially now that Solana's recovered. I think that Solana was tarred with the brush of being a SAM coin because SBF invested in it, but as it turns out, as far as we know, it's a completely legitimate developer project. Sam was an investor, but not a participant. And you look at the price of it, it's now rallied to something like an $80 billion market cap.

Chamath Palihapitiya 4:59 Yeah.

David Friedberg 4:59 The point being that a lot of the investments he made ended up being pretty good investments. And FTX itself, the trading platform, as far as we know, was a functional, workable business. I mean, it was a offshore crypto marketplace, so I don't wanna u- necessarily use the word "legitimate," but I think that it was, I think, as good as any of these trading platforms. So the, the crazy part of this is, I'd say, unlike the Madoff case, where from the beginning with Madoff, it was entirely a Ponzi scheme. There was nothing of value there. In this case, you had a, call it legitimate or semi-legitimate crypto platform combined with some legitimate angel investments. And so, what I think went wrong here was Alameda, that Sam decided to siphon off customer deposits to gamble with his hedge fund, which was completely optional. He didn't need to do that. I mean, he already had a winning business and winning bets in his portfolio. So, this whole Alameda thing, he didn't need to get into. And then, of course, siphoning off customer deposits to spray around for political donations to feel like you're a big shot-... was also really stupid. So, th- this is the crazy thing I think about SBF, is, it, it was sort of like this, this manic... Uh, there was like a, a manic element to it. There was a messianic element to it. He wanted to take shortcuts. He wanted to believe he was gonna save the world, and then did all these criminal things in pursuit of that, that he didn't really need to in order to be successful. And that's why I think it's such a curious case, is it's not... It wasn't full Madoff in a way, because there were some legitimate elements to, to his portfolio.

David Sacks 6:43 You're right about the messianic thing. These guys were all drunk on this effective altruism concept that, I think, whatever crimes they committed by stealing the deposits and then going and investing them, they saw themselves as Robin Hood. "We're gonna take these deposits, we're gonna make a ton of money, and then we're gonna give it all away." Of course, they didn't have a (laughs) CFO. Nobody did diligence on these investments. There were no controls in place. And he was literally stealing his customers' money to gamble, as you're saying.

David Friedberg 7:10 Right. A- and I think, I think, actually, one, one quote that I saw reported, uh, from the judge was that if you steal customers' money, go to Vegas, gamble it-

David Sacks 7:20 Yes.

David Friedberg 7:20 ... you're still guilty even if you can pay them back with the winnings.

David Sacks 7:24 Yeah.

David Friedberg 7:24 But that suggests to me that actually the, the FTX trustee is on a path to repaying the 11 billion of customer deposits that were absconded with.

Chamath Palihapitiya 7:35 I just found it. And-

David Friedberg 7:36 And I don't know if that's true or not, but-

Chamath Palihapitiya 7:37 It is true. In early February, the trustee said they now expect 100% payment back to the depositors in all the accounts, and all the excess will go to the shareholders in FTX, all the preferred holders that invested in the stock. I don't know, um, what the total pref stack was in FTX, but it sounds like there's gonna be recovery there as well after all of the customer deposits are made whole.

Jason Calacanis 7:58 Wow.

David Friedberg 7:59 So, this is my point, is he didn't need to do this. I mean, it was so insane. I mean, FTX, like I said, was a workable business. He made workable seed bets, but then he went crazy with Alameda and the-

Chamath Palihapitiya 8:14 Yeah.

David Friedberg 8:14 ... the Robin Hood stuff.

Jason Calacanis 8:14 Yeah.

David Friedberg 8:15 And so it's just such a interesting case.

Chamath Palihapitiya 8:17 Alameda... By the way, Sacks, Alameda is what he started with. So, he, he started a firm that was meant to arbitrage crypto markets because there's all these different markets that didn't connect around the world. So, the original concept was that he would u- set up a hedge fund, like a Jane Street, to arbitrage. And so he would arbitrage crypto pairs using different exchanges around the world. He set up all these different accounts, and he would trade long one way, short the other way, and make a spread. And then he made so much money on the hedge fund, and he said, "Why don't we just do this all centrally?" And that's how he started setting up FTX, was it's, uh, his own cryptocurrency exchange. So, like, the legacy was that Alameda was there from the beginning and the arbitrage across these illiquid, no transparency type markets, was really the core driving principle when he started all this work. The crypto exchange came later. And so it was like he always had this orientation that he was trying to arb everything. And I think I told you guys this, when I saw that video on YouTube right after he got arrested, and then they took it down off of YouTube. It was like an hour-long video showing him trading and doing his day job in the office.

Jason Calacanis 9:19 Yeah.

Chamath Palihapitiya 9:19 And it reminded me of, like, a mouse in a maze, like trying... Like, everything was, like, arb... Like, he was finding little arbs he could make everywhere, non-stop, like his brain was probably -

David Friedberg 9:27 But they weren't good at it. They lost a ton of money, and then he puts this-

Chamath Palihapitiya 9:30 ... and then he lost money. Yeah.

Jason Calacanis 9:31 Yeah.

David Friedberg 9:31 And then he puts this dingbat in charge of-

David Sacks 9:35 (laughs)

David Friedberg 9:35 ... of Alameda, who proceeds to lose billions of dollars. I mean, the whole thing was so stupid.

David Sacks 9:40 I mean, it's gonna be such a great movie (laughs) . I can't wait for the movie.

David Friedberg 9:44 I think one of the craziest parts of this is he had co-founders in FTX who weren't part of Alameda, and they just let him do this. Why would they do that? I mean, their own stakes in FTX, minus Alameda, could have been worth many millions of dollars, hundreds of millions of dollars, maybe billions of dollars, and-

David Sacks 10:04 I mean, the truth is, in business, you can do all kinds of criminal and crazy things until you get caught, and these folks were doing insane, crazy things, that the system is based on trust. And people can break that trust. We saw it, remember, with, um... What was, uh, Full Tilt Poker? They were also taking the customer accounts and gambling (laughs) those, those dollars. They literally mixed the operations budget and the customer deposits at Full Tilt Poker back in the day.

Chamath Palihapitiya 10:32 I think part of the, part of the rationale, if I remember right, I read the, the Michael Lewis book on this. And part of the rationale SBF gave to Michael Lewis was that Alameda was supposed to be a market maker liquidity provider to the exchange, so they were playing an active role on the exchange of making trades available to create the market.

Jason Calacanis 10:52 Hmm.

Chamath Palihapitiya 10:53 And that was a key aspect of getting the market moving, was that they had this l- well-capitalized market maker and they knew how to actively trade on a platform, and they just built their own platform, and then they were able to attract, with more liquidity, more participants onto their exchange. And that was a key aspect of the business model.

David Friedberg 11:09 That might have kickstarted it. Yeah.

Chamath Palihapitiya 11:09 Right.

David Friedberg 11:09 But that could have kickstarted it. But, like, you know, five minutes into it, you could probably turn that off. I mean...

Chamath Palihapitiya 11:14 Right.

David Friedberg 11:15 You know what I'm saying? Like-

Chamath Palihapitiya 11:16 Yeah.

Jason Calacanis 11:16 Yeah.

David Friedberg 11:16 ... they didn't need to do that once you get to a certain point.

David Sacks 11:19 Also, these people were all on speed, so (laughs) there's that.

David Friedberg 11:23 It contributed to the mania.

David Sacks 11:25 Yeah. I think, like, they were, they were hopped up on speed and they felt that they were gods and that, you know, stocks go up, coins go up. They can do anything they want. They can hang out with celebrities. It just got diluted, and they were super entitled. I mean, this is a level of entitlement and criminal behavior that we rarely see. Doesn't matter if their tokens went up.

Jason Calacanis 11:50 When I had my one and only interaction with SBF, which was over a Zoom, I asked for a model, and this arrogant dingdong that worked for him sent me, like, a five-line Excel (laughs) spreadsheet.

David Sacks 12:08 (laughs) Here's a model.

Jason Calacanis 12:09 And I thought, and I thought (laughs) , "This is the worst example of arrogance and hubris I've ever seen."

David Friedberg 12:17 I, I had one interaction with SBF.

David Sacks 12:19 Uh-oh.

David Friedberg 12:20 Do you wanna hear it?

David Sacks 12:21 Yeah (laughs) .

12:22 Yeah.

David Friedberg 12:22 I got in a little bit of a, of a tiff with him. So it was at a, at a tech conference. Uh, this was a few years ago. This was when he was a- absolutely at his, like, peak. Like, everybody wanted to talk to him. He was sort of holding court. He had a bunch of lackeys around him. And this is, like, a pretty exclusive tech conference. I'm not gonna tar their name by mentioning them in this context. But, so a friend of mine said, "Do you wanna go over and meet with SBF?" And so I said, "Sure," or whatever. So we go sit down, and I started asking him about this ballot initiative that he was funding in California to raise our taxes to fund a pandemic prevention center. And as it later turned out, that his brother was gonna run this thing.

David Sacks 13:04 (laughs)

David Friedberg 13:05 And so I, I said to him, "You don't even live in California. What are you doing funding a ballot initiative here in my state where I live, you live in the Bahamas or whatever, in order to fund this boondoggle," which by the way is looking in the rearview mirror. "We don't need it. Like COVID's over, and even if we did need a pandemic prevention center, the federal government should do it, not California taxpayers." And he starts getting very animated and defends this thing, and we, and we sort of get into an argument. And, uh, so I kinda, you know, ended it by saying, "Well listen, I'm gonna, um, just to let you know, like, I'm gonna publicly oppose this, you know, vigorously." And uh, 'cause I, you know, I just wanted to let him know, like, "I'm gonna call you out for this."

David Sacks 13:45 Yeah. Standing up for the little guy, David Sachs.

13:47 Yes.

David Friedberg 13:47 (laughs)

David Sacks 13:47 David Sachs coming in here.

13:48 Standing up for his state.

David Friedberg 13:49 So when I got back from that conference, I actually talked about it on this pod. I talked about that ballot-

David Sacks 13:54 Yeah.

David Friedberg 13:54 ... initiative in California.

David Sacks 13:55 I remember, yeah.

David Friedberg 13:56 And that was the-

David Sacks 13:57 And they capitulated.

David Friedberg 13:58 ... that was the origin story to that. Yeah.

David Sacks 13:59 They capitulated, right?

David Friedberg 13:59 Oh, that's right, yeah. Like a month later they dropped that thing 'cause it was too much heat. But little did we know that they were enmeshed in all this criminality and they were absconding with all this money.

David Sacks 14:10 What is Sam Bankman-Fried's brother's name? Bam Bankman-Fried?

David Friedberg 14:15 Was it, like, Gabe or something?

David Sacks 14:16 Oh, Gabe, nice.

14:18 I had one interaction with him. At some, uh, at a annual general meeting I got asked to interview him, and it was, like, a private affair a couple of months before this all blew up. And he's dressed like a slob, you know, like literally he's, doesn't look like he showered, his clothes don't fit, he's wearing flip-flops and shorts as kind of like the shtick, and he's a billionaire, blah, blah, blah. And I start talking to him, and his leg is shaking, like, uh...

14:47 Restless leg syndrome.

14:49 I mean, it, but no, it's, he's got his hand on it, he's, like, trying to control it.

14:52 Does he, did he have, did he have restless leg syndrome?

14:54 It's bouncing, I kid you not, like, 100 times a minute. It was disturbing. And so I'm wondering if this guy's got a panic attack or what's going on. And I kind of, like, toned down my crypto skepticism (laughs) questions because I felt so bad for him that I thought he was having a panic attack, and then I realized this guy's hopped up on (beep) speed, and he's got so much, uh, of Adderall or whatever. These, these kids were taking some patches that you wear to release this stuff. I am convinced that these guys were taking a level of speed...

15:26 Unbelievable.

15:27 ... that would kill a, an elephant.

15:29 Like Vietnam War level.

15:30 Yeah. Like, these guys were out there. I mean, he wa- I mean, patches, these guys were wearing patches, and he was shaking 'em.

David Friedberg 15:38 Was it like this?

David Sacks 15:39 No.

15:40 Oh (laughs) .

David Friedberg 15:43 I can't.

David Sacks 15:43 Did Hitler have... (laughs)

15:45 He was apparently totally addicted to drugs.

15:46 Right, Hitler was also on speed. That looks like he's on amphetamines there, yeah. It did look like that actually, if I'm being honest. Apparently, apparently Hitler did.

15:53 (laughs)

15:53 It was kind of almost exactly like that.

David Friedberg 15:56 (laughs)

David Sacks 15:57 (laughs) Oh my god, where has that... For people who don't know, the Third Reich was on speed. There's, like, many, many stories about this, yes, Sachs, that they were hopped up on speed?

David Friedberg 16:08 I, I believe so. I'm not sure, but I, I believe so.

David Sacks 16:10 Yeah, there's a big, uh...

David Friedberg 16:11 I think entire books have been written about-

David Sacks 16:13 Yeah.

David Friedberg 16:13 ... drug use by the, the Third Reich, but-

David Sacks 16:16 Yeah.

David Friedberg 16:16 ... I haven't delved into it.

David Sacks 16:18 Yeah, no, no, I've, I've, I listened to a couple podcasts about it, in fact, and, uh, so it must be true. Um... (laughs) I've listened to some podcasts. All right, moving on (laughs) in the, uh...

David Friedberg 16:30 If it was on MSNBC, it must be true. (inaudible)

David Sacks 16:33 Or Fox, or Fox, or if it was, uh, Beep the Great, your anonymous (laughs) friend on Twitter, it must be true.

David Sacks 16:41 All right, Trump just made $5 billion on paper with his meme SPAC. Trump Social Network has finally de-SPACed. It's now publicly traded. You can go buy Donald Trump's SPAC at DJT, is the ticker symbol. They are on pace for a whopping $4.5 million in revenue on a $60 million loss. They're growing, like, 3X year over year. And the company is not disclosing any user metrics. This quote from one of their recent filings is next. "At this juncture in its development, TMTG," the Trump Media and Technology Group, "believes that adhering to traditional KPIs such as sign-ups, average revenue per user, ad impressions, and pricing or active user accounts, including monthly and daily active users, could potentially divert its focus from strategic evaluation with respect to the progress and growth of its business." So they are not tracking people...

17:37 Isn't that the business?

17:38 (laughs) I (laughs) , it's so laughable, like, I can barely get through it.

17:43 That's crazy. They said that?

17:46 Literally they said it. It's a quote-

17:47 That's crazy.

17:48 ... from their SEC filing.

17:49 Wow.

17:49 According to SimilarWeb estimates, Truth Social had about five mu- five million visits last month. As of Thursday morning, it's worth about 8.5 billion (laughs) , same as Reddit, or close to 2,000 times top line revenue. Company had about $300 million in cash after the merger. By comparison, Reddit, uh, has 800 million in revenue. Their market cap's 8.4 billion, or about 10 times revenue. So, uh, it should be about five, six, seven times revenue would be more realistic according to basic media comps.Reddit had two billion visits last month with 73 million daily active users. That's pretty significant. Uh, the SPAC took a long time to close. There was an SEC investigation into three men allegedly making 23 million buying then dumping shares of DWAC after the merger was announced. They all face at least five fraud and conspiracy charges. Of course, this is what happened before it was de-SPACed. And so, what do you think, Chamath? Thoughts on this-

David Friedberg 18:52 So just to be clear-

David Sacks 18:53 ... meme SPAC or stock?

David Friedberg 18:54 ... I, I, I just think we should be really clear because you're just floating this insider trading thing out there as part of the introduction, which is a huge allegation, and we have to be really clear, that is related to a few investors and not to the company itself. And their s-... the company's SPAC was approved by the SEC. So I just think we have to be clear, clear about that.

David Sacks 19:15 Here's the SEC char... Yeah, just to be super clear, "SEC charges former DWAC board member and others for insider trading." DWAC.

David Friedberg 19:24 I just don't think this is the story. This is just not-

David Sacks 19:26 Well, no, this is the reason-

David Friedberg 19:27 ... the story.

David Sacks 19:27 ... it was delayed, so just to be clear. It was de-... the whole, this whole thing's been delayed for a couple years because of this.

David Friedberg 19:33 Okay.

David Sacks 19:33 Yeah.

David Friedberg 19:33 Okay, fine. So it was delayed. The SEC approved it. The company is now trading.

David Sacks 19:37 Public. Yeah.

David Friedberg 19:38 Public.

David Sacks 19:38 What do you think of the valuation?

David Friedberg 19:39 And that's the real topic, isn't it?

Jason Calacanis 19:41 Here's what I'll say. I think that this is a really important watershed moment, and it reminds me of 1997. Nick, throw this little image up. In 1997, David Bowie issued what was then famously called the Bowie Bond. It was $55 million that yielded 7.5%, which is about 80 bps above the 10-year at the time. These were 10-year bonds.

Chamath Palihapitiya 20:07 That's awesome. I didn't know that.

Jason Calacanis 20:08 The bond payments were linked to 20 albums that Bowie had released before 1990. And so these are, like, 280 songs, and what he basically said was like, "Listen, folks, you're essentially buying a piece of me, and in this case, my past work, and I'm gonna take this $55 million upfront, and you're gonna get paid this interest based on the royalties that I generate off that historic library for a 10-year period. We think you're gonna get paid the 55 million plus the 7.5% a year, and then I'm gonna take back the rights. And if I default, if these bonds default, you will own the songs." And it turned out that it was an incredible bet. The people that bought it, I think it was Prudential, which was an insurant... I thi- I think it's an insurance company, they got paid. The bonds did not default. In 2007, Bowie took back the ownership of that catalog, of that back catalog, but instead what he had was 55 million upfront, which allowed him to go and buy all kinds of other parts of his catalog that he didn't otherwise own. So why is this interesting? This was the first example, I think, of people monetizing themselves, their name, and their likeness. In this case, it was done via debt. I actually think when you look today, what's happening is a, a more sophisticated version of that movement but at much larger scale. I mean, we were all joking that there was a bunch of meme coins that launched, not with any of our support, by the way, but, you know, with our names, with all these other quasi-famous people's names. Those things went up and were worth millions of dollars of value. And I think what this Donald J. Trump, the DJT Company, what it represents is effectively a trading coin, a baseball card, if you will, a trading card via a stock on the value of Donald Trump's enterprise value, his name, his recognition, and his likeness. So this, I think, is the modern instantiation of the Bowie Bond. And what's incredible is you can see Bowie, 30 or 40 years ago, he could have generated $55 million in inflation-adjusted dollars. That's about 100 million in today's dollars. Trump, three and a half, four billion. I think it sits on top of this idea that these very famous people, the Kim Kardashians of the world, the Donald Trumps of the world, the MrBeasts of the world can eventually take companies public, and when you take a company public, you have to remember, Jason, there's the revenue and the profits, right? But if you look at the balance sheet of a company, there is always a line item called goodwill. And goodwill is what people use to separate the assets and the liabilities and whatever's left over to generate the shareholder equity. So in this case, Donald Trump, the DJT Company's balance sheet will show a ginormous entry in goodwill, and that is the value of his name. Coca-Cola has such a goodwill line item. PepsiCo does, Gatorade does, Nike does, and this company does. And I think there's gonna be a lot of other companies that will go public that effectively generate a huge goodwill line item that represents the name brand value of the person associated with it.

David Sacks 23:25 So you're a buyer?

Jason Calacanis 23:26 I'm not saying that. I'm just saying that there is a lot of people that will be buyers, that essentially will buy this as a Donald Trump, a directional bet on the value of his brand.

David Sacks 23:35 Hmm.

Jason Calacanis 23:35 And I'm also predicting that many other individuals will go public and have enterprise values that are levered in the same way as DJT, and that is a modern version of the Bowie Bond from '97.

David Sacks 23:51 Friburg, your thoughts on the, Chamath's argument that this is a proxy for the value of Donald J. Trump's brand?

Chamath Palihapitiya 23:59 I think that's certainly one reason why people are buying the stock and driving the price up. And another one is probably a vote against traditional media, that there's a contingent of folks who are basically voting with their dollars and saying, "We want an alternative to traditional media and traditional publishing platforms that have censorship that we don't agree with or have editorialization that we don't agree with."... and that this investment, I think, represents a way for them to vote and say, "I don't want the old way. I want a new way." And while this may or may not be the new way that succeeds, it may or may not be a great business, and it may or may not even have much viewership or, or usefulness, it's a mechanism by which people can put some money down and say, "I'm voting on an alternative. I wanna see an alternative." (instrumental music plays) So I do think that there's a flashpoint indication that arises from this that's more than just the memeing aspect of it, which is certainly fun. Everyone crowds into a stock, stock price goes up, it's kind of, like, to the moon, and so on. I think there's also this element of demand for alternative media. There is demand for a different type of publishing platform. And so I think that that's what this most represents to me from a, um, what the market is telling us perspective.

David Friedberg 25:17 I think there's one other thing going on here, which is that this represents a populist reaction to the lawfare against Donald Trump, that I think Trump supporters want to support him against all of these lawsuits and this persecution that he's been facing. And I think one proof of this is if you turn the dial over to MSNBC, they've been losing their minds all week over this because they thought they had finally gotten the man. There was this $450 million judgment in New York that he was fined for supposedly in- inflating the value of, of assets against which he got loans, even though the bank did its own independent appraisal of the properties and even though the banks fully got paid back and said they wanted to keep doing business with him. So they thought they had finally gotten DJT and he was gonna have to pay hundreds of millions of dollars in fines. And then lo and behold, the SPAC comes along and he makes millions and millions of dollars. Now, that's not locked in yet. We're still in this lockup period where for six months, there's a very small float and it's probably the case that once there's more shares on a liquid market, we'll find out what the real valuation is. So let's call the valuation we're seeing today based on a very small float, let's call this more of a preliminary number and Trump can't sell yet, but presumably after six months when the lockup comes off, he'll be able to sell. So look, I think fundamentally what's going on here is this is political. Trump's enemies are angry about the SPAC because they see that it gives him a lifeline, and I think Trump supporters are deliberately buying the stock to support their guy and to say that this lawfare against Trump that basically seeks to imprison the man or bankrupt the man instead of simply run against him is a new low in American political discourse. And I think there's millions of people who agree with that, and some of them are willing to buy the stock as a, as a protest vote.

David Sacks 27:14 I agree 100% with the protest vote. It's, uh, you know, he had, what? 60, 70 million people vote for him. He got 74%, 74 million rather, 46.8% to Biden's 81 million. If but 2% of those people wanna buy the stock, it's a million and a half people. And that's exactly what's happening here. They don't care if they lose the money. Actual value of this company with five million in revenue, four million in yearly revenue, I mean, if you really wanted to be absolutely insane and give it 100X valuation, it's worth 400 million. And so, and if whatever goodwill Donald Trump's likeness is, maybe that's another 500 million. But you'll lose a large amount of money, I predict, if you buy this. And if you're buying it as a protest vote, sure, go for it.

David Friedberg 28:01 Why don't you, uh, J Cal, why don't you short it as a J trade like Gabe Plotkin?

David Sacks 28:05 I, you know, I've never shorted a stock and I, I, I think-

David Friedberg 28:07 Remember Gabe Plotkin?

David Sacks 28:10 No. Who's this?

David Friedberg 28:11 Oh, remember from, uh, Melvin Capital? He thought he could-

Chamath Palihapitiya 28:14 He blew up his fund shorting GameStop.

David Friedberg 28:16 He thought he could outsmart-

David Sacks 28:17 Yeah.

David Friedberg 28:17 ... all the apes. He bought the meme stocks (laughs)

David Sacks 28:19 Yeah, that's, I mean, that's exactly why I wouldn't do it. I've never shorted.

David Friedberg 28:21 (laughs)

David Sacks 28:21 I think that, you know, you get these Trump voters and it starts going up because of the small float, which is what's happening now. They might send this thing to $80 billion, you know? Who knows what is possible-

David Friedberg 28:32 Yeah.

David Sacks 28:32 ... with the short float and a moti- motivated, you know, million, two million people.

Jason Calacanis 28:37 You guys are bringing up something else as well, which is we've shifted from fundamental based stock trading being the overwhelming driver to there's a lot of, like, very speculative day over day activity that you can't control anymore. And I think it's part and parcel of what's happening in other markets in America as well. So when you look at sort of, like, what happened in 2016 when the Supreme Court said each state can regulate sports gambling, all forms of, like, online gamesmanship and betting just started to skyrocket. It could be casinos, lotteries, sports betting, it didn't matter, but everything just caught a massive ginormous bid. And when you look at the products that service the retail market, they've also become increasingly gamified. Robinhood is probably the best example of, of having built an incredibly good business by making things more like a game. And then recently, adding fuel to the fire are things like zero-day options, which are just like... And there was a big article in the Wall Street Journal where, like, one of the reporters, she became addicted to it. And like, the Wall Street Journal gave her, I wanna say, like, like, a few thousand bucks, but she had to disgorge the profits. And she, like, 2000 X... Or she had, she got like a 2000% return or something speccing zero-day options via Robinhood. So the point is that on top of the whole movement to sort of allow individuals to monetize their own name and likeness via the stock market, which we just talked about, the second movement is that a lot of these things are becoming less financialized and more gamified. And so you just have many more participants. And so to your point, you can have a GameStop moment in any of these things. You can have these zero-day options run the stock to the moon. I would be, I would tread very lightly here.

David Sacks 30:30 Yeah. And just another warning, you know, the, (sighs) the stock market bases things ultimately on, like, earnings and profits and so when we look at this as a proxy, and Mr. Beast would have the same issue, or Martha Stewart, you have a key man, key individual risk here, i.e. this person goes to jail, they die, whatever, which Martha Stewart always had on her businesses, and then what is included in this is key. So when, if he does another TV show and it becomes a hit again, is that included in this? No. If he has another building, are his buildings included in this? No. If the golf course is included? No. What's included in this, included in this deal, when you buy DJT, is apparently just a really Know your right to tell. fukaku, crazy, (laughs) you know, social network that nobody uses. So just be clear what you're buying.

Jason Calacanis 31:22 No, you're right. The, the more sophisticated version of this trading card analogy would be if Donald Trump contributed his brand licensing revenue in perpetuity to the asset and then it really is a longitudinal forward bet on the Trump name.

David Sacks 31:41 Yeah.

Jason Calacanis 31:41 And that, that's sort of more like if Virgin, like if Richard Branson took the Virgin holdco public.

David Sacks 31:48 Yes.

Jason Calacanis 31:49 That's effectively what that is as well, like, you know, Branson over 40 or 50 years has built an incredible business. I think the stat that I heard when I got to know him was he's created 20 businesses worth at least a billion dollars or more over his lifetime.

David Sacks 32:05 With the Virgin brand?

Jason Calacanis 32:06 With the Virgin brand, and the Virgin brand is a licensing model where he holds that right and he will license it to you for a share of the revenue. That's independent of anything else that he may do with these businesses. And so if he took that Virgin holdco public then what you're buying is a longitudinal discount of cashflow on the value of Virgin. And to your point, if Trump contributed that name and likeness licensing capability into this, by the way, he could also still do that. So to the extent that this business saw a contraction and maybe the Truth Social thing didn't end up being that valuable, but the other aspects of the media business he could create by basically saying, "Okay, look, this will get a share of my licensing revenue for my name," would effectively be a proxy to do that. So he's got a lot of outs here to maintain this market value, and then on top of that, to your point, there's 70 million-odd people who would want to support him in one way, shape, or form.

David Sacks 33:00 I would not go anywhere near shorting it (laughs) given his, uh, his fan base is incredibly likely to keep buying these shares and if you want to know the actual value of this business today, I'm an expert at this, it's $100 million. It's $200 million. It's not-

David Friedberg 33:16 Don't short it.

David Sacks 33:17 ... anywhere close to this.

David Friedberg 33:18 Put your money where your mouth is.

David Sacks 33:19 No, we, we just-

Jason Calacanis 33:20 (laughs)

David Sacks 33:20 No, no, we just explained. It, wh- when you have a small float like this and a rabid group of people who are gambling, you, you will get your face ripped off.

David Friedberg 33:27 You'll get Plotkin-ed.

David Sacks 33:27 It's absolutely stupid. What's that?

David Friedberg 33:29 You'll get Plotkin-ed.

Jason Calacanis 33:30 (laughs)

David Sacks 33:32 Oh yeah, I mean, it's, it's disastrous. I mean, they, what did they say? We can be stupid longer than-

David Friedberg 33:37 We can be retarded longer than you can be solvent.

David Sacks 33:40 Yeah. (laughs)

David Friedberg 33:42 The Redditors.

David Sacks 33:42 It is such a great line. (laughs) I mean, but you can gamble like this on stocks, yet you cannot invest in private companies. I don't get the legal system in America. Be careful out there folks, you will lose a large portion of money is my prediction if you buy this stock, but feel free if you wanna gamble.

David Friedberg 34:01 Look, I think, I think this is all part of the ongoing backlash to lawfare.

Jason Calacanis 34:05 Yeah. Yeah.

David Friedberg 34:06 Joe Biden instructed his Justice Department to prosecute Trump. It's, in my view, it's utterly unprecedented in American history for one president to try and prosecute, imprison, and bankrupt his main opponent in the political election, and there are millions of Americans who are absolutely disgusted by this. I think it's a new low in American politics, and God bless all the people buying these shares to support Trump. This is a protest vote. I don't know whether you're going to make money or lose money. Like I said, I don't think you can justify the valuation based on fundamentals, but you can sure as hell justify it based on payback.

David Sacks 34:40 Yeah, I mean, if you want to give your money to a billionaire, buy the stock. Absolutely. Feel free. I think probably, I agree with you, like, maybe two of the six lawsuits are a bit weak. I think the three or four other ones, you know, he committed the crimes and he's just paying the price. But, you know, we can agree to disagree on this pod. Intelligent people do.

David Sacks 34:59 Speaking of intelligent people, RFK Jr. just picked up his running mate. This is a little bit crazy and I'm really interested in hearing your thoughts on it. He chose a 38-year-old Bay Area lawyer, Nicole Shanahan, as his VP. RFK explained why he chose her, "She knows big tech very well, how they use AI to exploit the public, how they censor and surveil Americans to push certain agendas. She understands the health consequences of toxins in our air, soil, and food." And he wanted a younger person to represent Millennials and Gen Z. He says younger generations feel like nobody represents them in Washington. He also wanted an athlete in good shape to inspire Americans to live healthier lives, and Shanahan donated four million in support of RFK Jr.'s Super Bowl ad that ran earlier this year. Sax, what do you think of this pick?

David Friedberg 35:55 Well, um, the, this pick does not excite me, I'll, I'll be frank. Uh, but, uh, since I'm gonna say something critical, I want to, let me start by saying something positive 'cause I, I really, you know, I love Bobby Kennedy. I mean, I think that he represents a number of really great issues that I agree with. I mean, first of all, he's been the most articulate critic of the Ukraine war, understands it deeply, and has explained it extremely well. He stood up for sealing the border. He went down there, showed that it's outta control, completely agree. He was a vocal critic of Fauci and lockdowns, was completely right about COVID. He sup- he supports civil liberties and free speech. So-... you know, I wanna say like Bobby Kennedy is great. The issue I have with this pick is that she doesn't represent any of those issues. She has a completely different issue matrix, and, uh, I, I watched her speech. And just to say something positive about her, I mean, I like her enthusiasm, I think she's 38 and it's nice to have someone running for political office who's not in their (laughs) 70s or 80s, and I think she's genuine. I actually think she's saying what she really believes, and that's really nice and refreshing. But again, if you go back to the issues themselves, she brought up three issues. Number one is she says she wants to make Americans healthy again, it's the focus on chronic disease. I'm not saying she's wrong about that, that's just not my issue. Number two, she brought up criminal justice reform. This one concerns me. Apparently, she donated to Gascón, who's a Soros DA who helped destroy San Francisco and then failed upward to LA. So apparently, she's a Gascón supporter. That does not fill me with confidence. That is a, quite frankly, luxury liberal belief in this, uh, decarceration idea, so I'm not excited about that. Her third issue was climate and environment-related but, but in a very specific way. She went after big agriculture. She said, "We can no longer support extractive corporate agriculture." I'm gonna let Friedberg speak to that one. Uh, I can't really say whether she's right or wrong, but that's just not one of my issues. So listen, at the end of the day, I feel like this pick accentuates and underlines the issues in Bobby's platform that appeal to the, to, to the left, frankly, to, to liberals. And I... Look, I think Bobby's candidacy is a complex candidacy that brings together people from both left and right, but again, this pick does not speak to me. It speaks to the more liberal parts of his coalition.

David Sacks 38:30 Does it increase his chances? And who would've been the person who would've increased his chances most? Tulsi Gabbard.

David Friedberg 38:36 Well, the person who would've been amazing would've been Tulsi Gabbard, okay?

David Sacks 38:42 Mm-hmm.

David Friedberg 38:42 If he had chosen Tulsi-

David Sacks 38:43 Slam dunk.

David Friedberg 38:44 ... that would've blown the doors off.

Jason Calacanis 38:46 Slam dunk.

David Sacks 38:46 Yeah, I mean, and Tulsi's been saying, Chamath, publicly that she would be proud to serve with Trump, and it's seeming likely that she's got a, a shot at that, yeah? Being the VP for Trump?

Jason Calacanis 38:59 I'm not gonna comment on that.

David Sacks 39:02 Okay.

Jason Calacanis 39:02 Let me just say something else. I think Tulsi Gabbard is really impressive, I think she's independent, and I think she really stands firmly on her own two feet in a way that I find inspiring. I, like Sacks, have many, many positive thoughts about Bobby Kennedy. I think he is... He was really a breath of fresh air, Jason, this, in this election cycle because he was able to say the unsayable things and made those things more easy to be said by others, and I think that there's a really important role in that, and I think he deserves a lot of credit for that. And then the fact that he said things that were so unconventional and not mainstream that are now mainstream views, I think says a lot to the fact that he was pretty grounded in first principles thinking on those topics, and I think that having those kinds of people in office are really good for America. All of that said, I do agree with David that I think the pick was meant to be more about covering his left flank, and I found that an odd calculation, and I wonder whether it wouldn't have been easier to cover the right flank. And there are different folks that are, that could've been in the mix to do that. And so, I think that it was a calculation though, and I think it's about he has a core set of issues, it's about whether he appeals more to this side or to this side in order to get the totality of the votes that he thinks is possible. Second, he was under a little bit of a time constraint because some of these states need the VP candidate named, and he's under a shot clock that the other two are not. So I mean, I, I wish Bobby the best because I think some combination of Bobby doing well and some uh, upheaval between the Democrats and the Republicans is really the only chance we have of having a credible third party. Let's see now what happens... By the way, w- we should just say, like, you know, Joe Lieberman passed away, which is really unfortunate. You know, he was a really independent thinker as well. W- let's see what No Labels really does here. There's a little bit of chaos over at No Labels, I think, but... So there's a lot of moving parts. So, it was clearly calculus. I don't totally understand what that formula was though.

David Friedberg 41:35 Just to build on something Chamath said, there's a report by Colin Rugg that the DNC realizes what Chamath said about this covering Bobby's left flank rather than his right flank, and apparently they're in somewhat of a panic about this. And y- I think what you're gonna see is that lawyers from the DNC and the Biden campaign are gonna fight tooth and nail to keep this ticket off the ballot, at least in the major contestant states, like the five or six states where the presidency will be decided in 2024. And of course, they'll be saying they're doing this to save democracy, but you're gonna see, I think, a full-court press by DNC lawyers to keep the Kennedy-Shanahan ticket off the ballot.

David Sacks 42:18 Yeah, this seems really like it's gonna damage Biden, which was my original prediction, and that a l- reason why a lot of the right wing were supporting RFK was because they wanted... They saw this as a clear path to take away a couple points from Biden, and it seems like that's what's happening.

Jason Calacanis 42:33 I think the first part of what you're saying-

David Sacks 42:33 Yeah.

Jason Calacanis 42:33 First part of what you said is 100% right. I'm not sure that a bunch of Republicans are gonna get organized, JCal, to vote for RFK in that way.

David Sacks 42:44 Oh, no. I don't think they're gonna do that. I think they supported him publicly in order to build him up as a centrist candidate, knowing that it would take away from Biden. So I just think on a strategic political basis, all these Republicans ruled-

David Friedberg 42:56 They, they didn't do that for, for Marianne Williamson. Why not?

David Sacks 42:59 Yeah, no. She's not electable.

David Friedberg 42:59 'Cause she didn't speak to them.

David Sacks 43:00 Yeah, no. No, it's 'cause she's not electable. I mean, she's like-

Jason Calacanis 43:02 By the way, Marianne Williamson-

David Sacks 43:03 ... a bunch of crystals-

David Friedberg 43:04 Well, right. So you're s-

David Sacks 43:05 ... and not like a viable candidate. It's, it's pretty clear she's not viable.

David Friedberg 43:07 But why, why, why can't you just accept that people on the right like the issues that Bobby spoke to? Isn't that the simple explanation for-

David Sacks 43:13 Yeah. No, I don't... 'Cause I think that they're partisans, and they just wanna win. So I don't think it has anything to do with what you're saying. We should be like authentically liking and connecting with what he's saying. I don't think it was that. I think it's a strategic plant to try to pull Biden votes, and I think Republicans are smart for doing that.

David Friedberg 43:27 You think Bobby's a plant? You think he's a plant?

David Sacks 43:29 I think their support for him is for nefarious reasons. They're supporting him to take votes away from Biden, and here it is. We're all agreeing that this is gonna take votes away from Biden. So, I think it's a very clever strategy on the GOP's part.

Jason Calacanis 43:41 The other, the other thing-

David Friedberg 43:41 Well, hold, hold on. I... Just, just to add one point to that. Remember that when Bobby entered the race, he did so as a Democrat. He did so-

David Sacks 43:47 Yeah.

David Friedberg 43:48 ... challenging Joe Biden for the nomination of the Democratic Party. How did the Democratic Party react? They kept him off the ballot. They wouldn't give him a fair shot.

David Sacks 43:54 Yep.

David Friedberg 43:55 That's why he went independent. So he did not have to be this, you know, sort of like what you're kind of implying, like a fly in the ointment type third-party candidate. He tried to be the Democratic candidate.

David Sacks 44:05 Yeah.

David Friedberg 44:06 They wouldn't let him compete. If they had let him-

David Sacks 44:07 Yeah.

David Friedberg 44:07 ... compete in a fair way, maybe he would have stayed a Democrat.

David Sacks 44:10 I would have loved to have a massive competitive field of Democrats. I think the Democrats are screwing this up big time. I, I think this could be the mo- this could... I think they, he could peel off a couple of percentage points, yeah, in those states.

David Friedberg 44:24 I think you're right.

Jason Calacanis 44:24 More, more.

David Friedberg 44:24 I think you're right.

Jason Calacanis 44:25 I think you're ri- I think it's more than that.

David Sacks 44:26 So, I mean, if-

Jason Calacanis 44:27 I think it's more than that.

David Sacks 44:28 (laughs) So we all agree that's what's happening here, then we're just disagreeing on tactics.

David Friedberg 44:30 No, I don't... I, I think this is, I think this is where we-

David Sacks 44:33 But we agree it's taking points away.

Jason Calacanis 44:34 Yeah.

David Friedberg 44:35 I think we agree about that, but what I'm saying is that this is where we've ended up. I don't think it was constructed-

Jason Calacanis 44:40 Hm.

David Friedberg 44:40 ... to be this way.

David Sacks 44:42 Ah, interesting. Freeburg, your thoughts on this candidate, specifically around her love of organic food and wanting to take on the pesticides, toxic food, get out and the, and the industrial food complex.

Chamath Palihapitiya 44:58 I remain steadfast in my commitment to there being only one major issue facing this country, and that is the federal debt and the deficit. We are increasing the federal debt by a trillion dollars every hundred days. That number is not slowing down. The current budget proposal from the Biden administration calls for over $7.2 trillion to be spent next year. That makes the US federal government roughly one-third of our country's GDP. The outrageousness of the condition that the US is in right now makes it so insane to me that we are talking about any other topic, like big agriculture or whatever other nonsense was being spouted about as important topics to this particular person. If every voting citizen of the United States does not recognize the severity of the deficit and debt problem that the federal government faces, you are wasting your vote. And no candidate is speaking to what is clearly the biggest issue of our time, and we need to address this issue head on. So I don't care about this person or anyone else who's running for office that is talking about stuff that we cannot actually address and problems we cannot actually solve if we don't get our fiscal affairs in order. That's my point of view.

David Sacks 46:12 Got it. Okay, and, uh, w- uh, respect for that. Can anybody win the presidency on a, "Hey, we're gonna balance the budget, we're gonna cut spending," platform?

Chamath Palihapitiya 46:23 Nope. Nope. Nope.

David Sacks 46:24 So they can't win, and it's an existential issue.

Chamath Palihapitiya 46:27 That's why I... Look, I mean, I'll, I'll keep shouting into the abyss. (laughs) And hope-

David Sacks 46:31 Yeah.

Chamath Palihapitiya 46:31 ... that a few people hear it, and that at some point, it becomes a topic that folks do begin to focus on. I, I think that the ne- necessity of raising tax rates, the necessity ultimately of cutting entitlement programs, the necessary inflation that will arise because of the condition of the federal government's debt level, because we're gonna have to keep printing money, these are the sorts of things that are like a boiling pot that one day folks will wake up and say, "Well, what the heck happened? Everything got mismanaged." And it's not a Democrat problem. It's not a Republican problem. It's a, it's a fundamental problem of people voting themselves all the money and people getting voted into office by saying, "I'm gonna do more than is being done today," and that costs money. And no one actually addresses the rampant misuse of funds, the lack of accountability in spending, and the fact that we have an incredible amount of negative ROI spending, and the fact that we've effectively created an economy that's fundamentally dependent on federal spending. And I'll go through some statistics when we talk about Biden's budget later in the show, but I think that the significance is just overlooked by all of these candidates, and we're not really talking about the thing that matters though.

David Sacks 47:46 All right. So let's break down Biden's proposed budget of 2025. Proposed budget was 7.3 trillion for fiscal 2025. That starts in October of 2024. It's up 18% from 2023. Projected deficit, 1.78 trillion, which is similar to the deficits we ran in '23 and '24. The budget projects an average deficit of 1.6 trillion per year over the next decade. National debt, as, uh, Freeburg was alluding to, is insane. It's at 34.5 trillion. But we made some charts here to go through all of this. Let's pull up the first chart, and this is comparing Biden's proposed budget in 2025 with budgets from 2005 and 2015. Defense spending has actually grown pretty modestly during that time, but entitlements, interest payments, and nondefense spending have jumped significantly. US will owe 965 billion in interest on its debt next year. Now, that's 65 billion more than the pro's defense budget. And in 2026, the US will surpass 1 trillion on interest.... owed on its debt, and we'll talk about that more in a minute. But let's start here with this first chart. Anything jump out to you, Chamath, here, that's notable and worth discussing?

Jason Calacanis 49:02 All the areas that we need to cut, we can't even have a conversation about, so they'll never get cut and they'll keep growing. So I think that we probably need to figure out what the alternatives are. So if you can't have a conversation about (laughs) expenses, the only logical place is to have a conversation about revenues.

David Sacks 49:25 Mm-hmm.

Jason Calacanis 49:25 And what that means for the government is in taxation. And so, I don't know, Jason, what we do here. There could be a couple of saving graces. So there are some things happening, for example, on the Medicare side, that could be profoundly disruptive. They are ... Now, I'm not ... Uh, again, I'm just gonna put this out there as it's happening. I don't know if it's good or bad. But they are looking at reimbursing things like Wegovy and Ozempic and whatnot. If you look at the underlying costs of those kinds of chronic diseases, diabetes, heart disease, et cetera, and you put a large swath of the American population on those drugs, the reimbursement value of those drugs versus the cost of actually the chronic care management would save you many hundreds of billions of dollars a year. So that's something. Second is, on the defense side, there's a large portion of that budget that's migrating away from traditional tactical warfare to things that are unmanned vehicles and cyber and whatnot. That could save 2 or $300 billion there. So there are places where you could save $500 billion to a trillion dollars, but I think it's gonna be a almost impossible conversation and it'll happen by accident. So then the only forced conversation that I think we are going to have as a society is around taxation. And that's really bad for, you know, a lot of people that don't believe that's the path to generating growth.

Chamath Palihapitiya 50:56 One of the challenges is that there are ... And, and we should reference these in the show notes, Nick, but there are well-researched economic studies that show that when a government tries to increase the taxation level north of 20% of GDP of that economy, that you actually see GDP growth go negative. That even- th- there's a certain natural equilibrium on which you can tax the system. Beyond that level, investment dollars go down and growth begins to shrink. And that's what triggers the spiraling problem, because then the government spending needs to go up to continue to grow and support growth in the economy, and it creates this inevitable-

David Friedberg 51:34 Totally.

Chamath Palihapitiya 51:35 ... spiraling.

David Sacks 51:35 Would you call this the Atlas Shrug, the Atlas Shrug effect as investment goes down?

David Friedberg 51:40 There's a Fred chart-

David Sacks 51:41 Yeah.

David Friedberg 51:41 ... showing percent of GDP that's federal tax receipts and then percent of GDP that's spending.

Chamath Palihapitiya 51:49 Exactly.

David Friedberg 51:49 And th- and, and then the gap is your deficit, okay? And Freeberg's right that I think in the absolute best economy, or best years of the best economy, so it's like, you know, the best year of the Reagan boom and the best year of the Clinton boom when we had the government surplus, I think the government was extracting just shy of 20% of GDP. And in the '70s, when marginal tax rates were at 70%, so before the Reagan tax cuts, we were actually extrac- extracting a lower percentage of GDP. So there's only so much blood you can get from a stone. If you raise tax rates on a marginal basis high enough, the economy performs worse and you actually end up collecting less, or people spend a lot more money on lawyers and accountants to basically figure out more structuring schemes to avoid paying taxes. So, the years in which we've got the highest percentage of revenue out of the economy are in good economic years where we've had reasonable levels of taxation as opposed to the highest levels of taxation. And so the problem is with the spending. I mean, we used to be able to keep spending to somewhere between ... I'd say in the best years of, of th- the years of the Clinton surplus, I think, spending as a percent of GDP was like 18.8%. It's around 20% of GDP goes to federal spending. That's, that was normal.

David Sacks 53:15 Or-

David Friedberg 53:15 But then the spending got out of control during COVID and it went up to like 25, 30% of GDP went to federal spending. It's starting to come down, but it's still way too big a number. Anyway, my, my point is that a starting point for dealing with next year's budget is free spending. Just free spending. You know, the 18% increase is not a good idea. If we wanna get this problem under control, freeze the spending. We can talk about taxation, but you're only gonna get so much blood from the stone.

Chamath Palihapitiya 53:43 And increased spending is stimulatory, and so it works well in an election year. I would say we took two major crises and we had crisis-level spending, and then we normalized that spending and allowed it to carry forward, starting with the Oh-Way financial crisis with our monetary policy, and then being accelerated with COVID and, and our fiscal policy. I'll give you guys ... I, I did some back-of-the-envelope map. I'm sure there are economists who have done a better job of this than I. There are directly three million Americans that are directly employed by the federal government. There's 167 million workers in the US. So three million are directly employed by the federal government. If you take the rest of the federal spending that flows into the economy, it's about three and a half trillion a year, and assume 30% of that capital goes to equity holders in businesses, that own businesses that benefit from that spending and the rest flows through to labor, that's about 13% of GDP flowing through to labor. And assuming average annual income, that's another roughly 45, 50 million people that are directly benefiting, that are directly earning income because of federal spending. There's another 50 million people in the US that rely on Social Security. And here's another important statistic. There's somewhere between 12 and 20 million people in the US that pay more than 50% ...... tax rate today. So, those people are effectively working (laughs) for the federal government because half of their, their income goes back to the government. So, when you add this all up, there's, there's over 100, 120 million people in the US that are directly working for or getting paid by the federal government in the US. That is such a significant percentage of our economy, that is such a significant dependency on individual income on a federal government, it... I, I don't wanna use the term socialism, but the, the ability for US labor to earn is so largely dependent and largely driven by federal spending at this point, it becomes this critical linchpin to enabling progression economically, to enabling the labor force to continue to participate, that the federal government is now the primary customer or employer of most of the labor force in the United States today. That is a deeply and profoundly different circumstance than what I think the Founding Fathers envisioned, when the federal government was supposed to be this lightweight overseeing organization of a federated republic of states. And unfortunately, I think we find ourselves in a condition, as Jamal points out, that's very hard to get out of. This is gonna require a dedicated multi-decade effort to create a slow unwinding from this deep dependency that our labor force has on federal spending. And I, I'm just, like, so shocked that this isn't the, the critical problem of our day that we're not all spending time on. Folks have pointed out that this only goes one way at this point.

David Friedberg 56:31 Hey, Nick, can you bring up that first Fred chart? This is federal receipts as percent of GDP, and it goes all the way back to World War II. To Friedberg's point, we've never gone above 20%. Look at that. And we've had tax rates as high as 90%. I'm saying top marginal tax rates as high as 90%, I think after World War II, because we were trying to get out of the deficit that was created by the war spending.

Chamath Palihapitiya 56:56 You can't get above 20.

David Friedberg 56:58 Yeah, exactly.

Chamath Palihapitiya 56:59 The economy shrinks.

David Sacks 57:01 No, but hold on.

Chamath Palihapitiya 57:02 So... Yeah.

David Sacks 57:02 The, the... I- I gave you this OECD report. It says that since 2000, we've been in the mid-20s, and the OECD average is 34 in terms of tax to GDP.

Chamath Palihapitiya 57:14 Tax to GDP, is this... This includes state and local then, right?

David Sacks 57:20 Probably, yeah.

David Friedberg 57:21 Yeah. I just showed federal.

Chamath Palihapitiya 57:23 I think this probably includes state and local.

David Friedberg 57:25 Yeah. And if, and if you-

Chamath Palihapitiya 57:25 Which, by the way, is a whole 'nother bailiwick, 'cause I didn't include those numbers in my employment statistics. The US Bureau of Labor Statistics estimates that about 20.2 million Americans are employed by local and state governments, directly employed by local and state governments. So again, when you add this all up, the majority of the US labor force is employed by the government or is a beneficiary of the government as the primary customer, or is supported-

David Friedberg 57:51 Yeah.

Chamath Palihapitiya 57:51 ... by government entitlement programs.

David Friedberg 57:52 Mm-hmm. If you go back to that Fred chart for a second, I mean, if you, if you basically acknowledge the point that 20%'s the ceiling on how much we can extract from an economy based on 80 years of data, okay, with all sorts of differing tax schemes, then I think what we should say is that federal spending will be capped at 20% of GDP.

Chamath Palihapitiya 58:14 Yep.

David Friedberg 58:15 We should... You see what I'm saying? Like, if we can't go-

Chamath Palihapitiya 58:16 Always. Always.

David Friedberg 58:16 ... above 20%-

Chamath Palihapitiya 58:17 That's it. That's it.

David Friedberg 58:17 ... on receipts, cap fed- cap federal spending at 20%.

Chamath Palihapitiya 58:20 That, that should be a constitutional amendment.

David Friedberg 58:22 Right.

Chamath Palihapitiya 58:22 That's it. (laughs)

David Friedberg 58:23 And then, and then on the revenue side, we should say, "What is the best tax code to achieve that 18, 19, 20%?" Because what we do right now is we just say, "We'll just tax the rich." But what we've seen is we've been taxing the rich as high as 90% in the past and you didn't get more revenue. So, we should be much more scientific about saying, "Well, given that our target is, let's say, 20%, what's the best way to do that?" And no one really has that conversation.

David Sacks 58:52 No, none of the conversations have to do with data (laughs) or building a, a bulletproof system. The same thing we could say about immigration, where we try to talk about the numbers here of what's a reasonable number of people and tying that to an actual number, um, and it's pretty obvious we should have one immigration policy when we have 5% unemployment and a different one if we had, God forbid, 15 or 20% unemployment.

David Friedberg 59:18 Wait, can we just stay on budget for a second?

David Sacks 59:18 It could be tied to the unemployment rate.

Chamath Palihapitiya 59:22 The fundamental structural problem I'm highlighting is that we've created an economy that is so deeply dependent on federal spending, that the federal spending levels are what support so many employed and so many companies in the US.

David Sacks 59:36 You're answering your own question. That's why I can't stop.

Chamath Palihapitiya 59:39 Right.

David Friedberg 59:40 I don't think the real economy that creates all the innovation and all the value and all the, the, the good-paying jobs, I think that is separate from what the government does.

Chamath Palihapitiya 59:48 That's the deflationary economy.

David Friedberg 59:49 Yeah.

Chamath Palihapitiya 59:49 That's the, that's the true market-based deflationary economy. The problem is once we've layered in all of these layers of dependency from federal dollars flowing into businesses or into people's pockets, it's very difficult to back out of that.

David Friedberg 1:00:02 I don't call that dependency. I call that special interests. I think there's a lot of special interests who are basically eluding the federal government and taking all this money, and then they turn around and use some of it to, to g- donate back to the politicians and lobby for more spending. So, what you're calling dependency is really more special interests, meaning that I don't think we need to have this level of spending in order to have a successful economy.

David Sacks 1:00:25 No.

David Friedberg 1:00:25 I think it makes our economy less successful.

David Sacks 1:00:27 Yep.

Chamath Palihapitiya 1:00:28 It's still stimulatory 'cause, Sax, remember Mitch McConnell, when they were talking about supporting Ukraine, his primary argument, as you remember, was that all of these dollars are gonna go into defense contractors' pockets, which is gonna go to employees' pockets, which is gonna stimulate our economy. That's the fundamental thinking behind it.

David Friedberg 1:00:44 But that doesn't create value. That doesn't create value.

Chamath Palihapitiya 1:00:45 I know, but that's the thinking behind it, right? I mean, that's the political system that-

David Friedberg 1:00:49 Okay, l- let me just walk through this real quick. If the government prints a bunch of money and hands it to people as stimulus checks, we all understand that creates no economic value, it just creates inflation. Okay, now-

1:01:00 ... if the government does the same thing, but instead of a stimulus check, pays people to dig holes and fill them back up, that's the exact same thing. No economic value, just inflation. Now, let's say the government pays people to create bombs that create holes in other countries, exact same thing. No economic value for the country. It just creates inflation here. Why is that? Because the only thing that creates economic value in the United States is the production of goods and services that people can actually-

David Sacks 1:01:28 Totally.

David Friedberg 1:01:28 ... consume-

David Sacks 1:01:29 Totally.

David Friedberg 1:01:29 ... and use and that they want. And so federal spending on basically make-work projects or things that people don't really want or they don't use, or even worse, bombs that get dropped on poor people in other countries, none of that creates any value. But I don't think it's a real economic dependency. I think it is just a special interest that keeps lobbying for all this stuff.

David Sacks 1:01:50 But Sykes, what about housing and healthcare and education? 'Cause those are the three biggest line items, and it's been inflationary across all three of those line items in the US economy. The federal government has stepped in to provide broader access to housing, broader access to healthcare, and broader access to education. And in the process-

David Friedberg 1:02:07 That's why the price goes up.

David Sacks 1:02:08 Yeah.

David Friedberg 1:02:08 You know, there's that famous chart showing-

David Sacks 1:02:10 Exactly. Yes.

David Friedberg 1:02:11 ... inflation by category. In all the categories where the federal government provides subsidies, the prices have gone up, in all the categories-

David Sacks 1:02:17 Education, healthcare.

David Friedberg 1:02:18 Yeah.

David Sacks 1:02:18 And housing. And housing.

David Friedberg 1:02:20 The more the government tries to subsidize it, the more the providers realize-

David Sacks 1:02:23 Correct.

David Friedberg 1:02:23 ... "Wait a second, we can charge whatever we want-"

David Sacks 1:02:25 Correct.

David Friedberg 1:02:25 "... because the government's paying."

David Sacks 1:02:25 Correct. There's one customer, and they'll always pay. Yeah. There's one customer.

David Friedberg 1:02:28 So that, that's gotta be completely reformed.

David Sacks 1:02:30 Yeah. Here's a chart of all employees in government, and I think this Fred chart includes all employees in government, which would include state and local, and as you can see, we're- Yeah, that's right. It's 20 million- Yeah. ... local and state, 3 million federal. Yeah. And then the math I was highlighting was just my back of the envelope math, where there's 50 million people that are on Social Security in the US. Plus, if you do the math on how government spending flows into employers, in, into employees' pockets, it's about another 45, 50 million people that benefit from federal spending in the US. We're already kind of at a point of maximal dependency, if you will. Yeah, I mean, if you look at this chart, we have had 20,000 people working in government since the late- 20 million. ... '90s. Yeah. 20 million. 20 million since the late '90s. It's, it's now hitting a peak. And the question is, you know, how far up does it go from here? It's 23. Obviously the country is growing as well each year. So as a percentage, we don't have the percentage, but as a percentage of Americans, it hasn't grown that dramatically, but it certainly feels like this could keep going in the wrong direction.

David Friedberg 1:03:42 The one thing to keep in mind from all the doomsdaying, I would just offer you two data points. The first is that our debt to GDP, either historically, but also in relation to other countries, is still relatively reasonable. And what that basically shows is we have a lot more debt that we can't issue, which means that there's a lot more deficits to run. Not saying that it's right.

David Sacks 1:04:04 Yeah. Before the great financial crisis, it was running at 50, 60%, our debt, as a percentage of GDP. And to your point, Chamath, it's now at 1.2, so 120%. Other countries have much higher.

David Friedberg 1:04:19 So we have a lot more to run. Yeah, so Nick, if you wanna just throw that up. And so it means that the countries on the right haven't failed. They haven't done great necessarily, but they haven't failed in the way that we would define failure. And it's not as if the countries on the left are crushing it the way that we would define crushing it. And so it's not clear that there's a real correlation between debt to GDP and the performance over large longitudinal periods of times as a country. That's the first thing I'll say. The second thing is, if you actually look at all of these countries, the thing to keep in mind is where are populations growing and shrinking? Because at a very basic level, J-Cal, you, you mentioned this earlier, but when countries are shrinking, there's no fundamental ability to grow GDP, and you're just debating how much it shrinks. And the interesting thing about the United States is we are the only Western country that is forecasted to grow at reasonable rates above our replacement population. And so, you know, by the end of this century, we'll be around 400, 400-odd million individuals, and other countries will have been cut in half. And so again, there's some positive news as well. Now, to your earlier point, the problem is politicians will use this as a reason to continue spending because they won't be forced to. And that's not a great thing, but this is probably why the status quo will go on for a very long time.

David Sacks 1:05:43 Hmm.

David Friedberg 1:05:45 So grab the bag, get your bag, figure, (laughs) figure out what your, figure out what your thing is-

David Sacks 1:05:50 I don't know, man.

David Friedberg 1:05:51 ... and-

David Sacks 1:05:51 I just want people, like voters to, people to just understand-

David Friedberg 1:05:57 They're not going to.

David Sacks 1:05:57 Yeah, and it's like-

David Friedberg 1:05:57 They're not going to. Get your bag-

David Sacks 1:05:59 Yeah.

David Friedberg 1:05:59 ... like everybody else's. The problem we have is if... Okay, Nick, can you pull up the, the Fred spending chart?

David Sacks 1:06:04 We've talked about this a few times.

David Friedberg 1:06:05 Well, okay, so if you look there, there was a huge spike because of COVID, because of all that COVID stimulus-

David Sacks 1:06:11 Yep.

David Friedberg 1:06:11 ... that was air dropped on the economy. I think we're now down to about 22% for 2023.

David Sacks 1:06:16 Mm-hmm.

David Friedberg 1:06:17 But that, that's a big number, you know. We talked about how the absolute max you can extract is 20%. So what they should do is just freeze spending until the federal net outlays as a percent of GDP is down to 20%. That would be the, the simplest thing.

David Sacks 1:06:33 Such an easy solution.

David Friedberg 1:06:35 Yeah, but it all depends on-

David Sacks 1:06:35 What's great about it is it takes out the politicians making this partisan. Hey, there is a logical amount of, you know, taxation we can do before we freeze up the productivity of the country, which, if you talk to anybody, when taxes get high, people just start getting, protecting their wealth, I think you alluded to that, with strategies as opposed to investing.

David Friedberg 1:06:58 The hard part of it is that... I mean, look, I think we should do it, you know, 20% cap and, and free spending till we get there. The, the hard part is that our interest expense keeps growing because-

David Sacks 1:07:07 Mm-hmm.

David Friedberg 1:07:07 ... as our debt rolls onto more expensive...

1:07:11 ... higher interest bonds than our interest expenses increasing. Just a few years ago, our interest expenses were only 300 billion a year, and now it's over a trillion a year.

David Sacks 1:07:21 Hm.

David Friedberg 1:07:21 And that's just gonna keep growing and growing. And then the other thing that's gonna grow is all the entitlements related to, to demographics. So our, the country's demographics are getting worse, and so the entitlement expenses are gonna go up. So even holding it to 20%, if we could get there, is gonna take some work.

David Sacks 1:07:40 The La- I don't know if you read Larry Fink's letter from BlackRock. It was really good, and he talked about-

Jason Calacanis 1:07:45 You mean his 2030 business plan, J-CAL?

David Sacks 1:07:48 Basically, yeah. It's his way of extracting value from it. But he did make some salient points in it, as opposed to just him talking his book (laughs) of why you should do his retirement, your retirement savings with BlackRock. It was a fair point. But just getting the, "What age do people retire at?" That discussion we need to have, and we, we're not having that as a country. And then what percentage of benefits do people get at different ... And how do we incentivize people to stay in the workforce? I think it's a-

Jason Calacanis 1:08:11 Well, at a minimum, don't you agree we should just allow people to opt out of Social Security, and in a simple way of saying, "I don't need it, and I'll take care of myself." Use these proceeds for somebody else that could use it, that ... who has a better need for it?

David Sacks 1:08:26 Absolutely. Yeah, I mean, and then getting people to participate in their 401 (k) s, you know, a- at an earlier age and defaulting those to on as o- defaulting them to off. There's a lot of small behavioral things we could do in this country to get people saving earlier.

David Friedberg 1:08:41 Well, yeah, look.

Jason Calacanis 1:08:43 I, uh, I saw that Robinhood was running a scheme where if you moved your Roth IRA, they gave you 3% cash back. And I thought, "Is there an upper bound limit on what-"

David Sacks 1:08:53 (laughs)

Jason Calacanis 1:08:53 "... on how much you could move over?" 'Cause I wonder if I could just-

David Sacks 1:08:55 I think you have to keep your money in there for five years.

Jason Calacanis 1:08:58 Yeah. But that's okay. I'm just wondering, like, will they really write, like, a $100 million check (laughs) if you-

David Friedberg 1:09:02 Actually, Robin- Robin Hood-

Jason Calacanis 1:09:03 ... like a $5 billion Roth over?

David Friedberg 1:09:04 Robin Hood just sent me something. So we had a portfolio company called X1, which was making a new, like, credit card and credit card app. It was, like, awesome. I don't know if you guys used it. Anyway, they got acquired by Robinhood, and so the guys there just sent me their new Robinhood Gold card here.

David Sacks 1:09:22 Gold card? Yeah.

David Friedberg 1:09:23 This thing is the heaviest card. Here, just listen to it drop. Hold on. Let me tell my

Chamath Palihapitiya 1:09:27 My phone.

David Sacks 1:09:27 Don't cut yourself. Don't cut your toe off.

David Friedberg 1:09:30 (laughs) Apparently, it's got $1,100 worth of gold in it. That's what they're telling me.

David Sacks 1:09:35 I have one coming myself, and I've, I am proud to say I've sold no shares of my Robinhood. I keep all my Robinhood shares.

Jason Calacanis 1:09:41 What? If my, if I move my Roth IRA, they'll have to give me the whole building.

David Sacks 1:09:44 (laughs) They'll give you a gold-plated building? (laughs)

David Friedberg 1:09:46 Actually, they, they sent it to me in a, uh, Louis Vuitton, with a Louis Vuitton wallet. This is, like, unbelievable.

David Sacks 1:09:53 Whoa.

David Friedberg 1:09:53 Yes, it's got-

David Sacks 1:09:54 But look, they got a $50,000 ad on-

David Friedberg 1:09:56 ... Louis Vuitton and then, um-

David Sacks 1:09:56 They got a $50,000 ad on the program.

David Friedberg 1:09:58 Look at this. They got, like, a little LV wallet there.

Jason Calacanis 1:10:01 Oh, I like it.

David Sacks 1:10:02 There you have it, folks. Send a Louis Vuitton-

Jason Calacanis 1:10:04 (laughs)

David Sacks 1:10:04 ... wallet, get a free $50,000 ad (laughs) on the pod. Sign up now for your Robinhood Gold.

Jason Calacanis 1:10:10 Yeah.

David Sacks 1:10:10 But you, what is it, a credit card?

David Friedberg 1:10:11 Yes, a credit card.

David Sacks 1:10:12 It's a credit card. Yeah. Their, their, their whole plan was always to-

David Friedberg 1:10:15 This is hype.

David Sacks 1:10:15 ... provide the full suite of services.

Jason Calacanis 1:10:17 Do you guys carry credit cards and money?

David Sacks 1:10:19 I keep forgetting my wallet.

Jason Calacanis 1:10:21 Do you have any money? Does any-

David Sacks 1:10:22 But I always carry money.

Jason Calacanis 1:10:24 You have money?

David Sacks 1:10:25 I always carry money.

Chamath Palihapitiya 1:10:26 Yeah. You know, like, to tip, tip people or something?

David Sacks 1:10:28 Always have some cash-ish. Never ... You always gotta have a couple hundie, just in case. It's a really bad habit. You gotta keep a couple of hundie in the bag.

David Friedberg 1:10:37 You put the 100 on the outside, J-CAL, and there's a bunch of ones?

David Sacks 1:10:39 (laughs)

Chamath Palihapitiya 1:10:40 (laughs)

David Friedberg 1:10:40 You know what I mean?

Jason Calacanis 1:10:41 (laughs) No, no, no, no, no.

David Sacks 1:10:42 You can't do that.

Jason Calacanis 1:10:43 (laughs)

David Sacks 1:10:43 You get caught doing that in Brooklyn, you get your ass

Narrator 1:10:45 Got some ............................ on the outside and then-

David Sacks 1:10:47 Na, na, na, na. You can't-

Jason Calacanis 1:10:47 (laughs)

David Sacks 1:10:48 What we do is we get rid of the ones, the fives, and the 10s. You just get rid of those.

Jason Calacanis 1:10:51 (laughs)

David Sacks 1:10:51 You don't even keep them in circulation. That's-

Jason Calacanis 1:10:53 (laughs)

David Sacks 1:10:54 That's the best line, um-

Jason Calacanis 1:10:55 I mean, I, I get cash when I go to Vegas, but that's it.

David Sacks 1:10:58 That's it. Yeah. The, the best line ever was, this woman comes up to Sammy Davis Jr., and she says, "Hey, uh, c- can you, um, can you, can you break, uh, you know, this, whatever amount of money?" And he just pulls out 100 and gives her 100. And she says, "No, no, n- can you make change?" He says, "That is change, baby. That is change." (laughs) And that's when he considered change was the 100.

Jason Calacanis 1:11:21 There was a story out of Jeju. So, you know Triton Poker?

David Sacks 1:11:25 Yes.

Jason Calacanis 1:11:26 Okay, I'm not gonna say who it is, but there's a guy that was playing the high-stakes cash game. And apparently ... So he lost, like, eight million bucks, okay?

David Sacks 1:11:35 Oh.

Jason Calacanis 1:11:35 He tipped out 450K in 25k chips to, like, the staff and, like, the person giving him a massage and stuff. So it apparently became a free-for-all trying to (laughs) get into this game where everybody was like, "Are we pooling tips? Are we pooling tips?" And they were like, "No, we're not pooling tips." Just flags. He was tipping out flags.

David Sacks 1:11:54 Wow.

Jason Calacanis 1:11:55 Three or five chips.

David Sacks 1:11:55 That is incredibly, incredibly generous.

David Sacks 1:11:59 All right, uh, uh, Science Corner, rapid fire. You wanted to get to cocoa. Here we are. We're at cocoa. Friedberg, you have the floor.

Chamath Palihapitiya 1:12:10 You guys, you guys asked about cocoa. You wanna pull up the commodity price chart on cocoa? Look at that.

David Sacks 1:12:14 Okay. This is not cocaine. This is cocoa. This is chocolate, precursor to chocolate, not cocaine.

Chamath Palihapitiya 1:12:20 This is chocolate. As you guys can see from this chart, cocoa's moved in price from about 2,000 bucks a ton, which is where it normally trades at, to $10,000 a ton. 70% of cocoa is grown in West Africa, uh, in Ghana and Ivory Coast. And in that area, they've been severely hit by this El Nino weather year that we're just kinda coming out of. So here's all the cocoa production. 73% of it's in Africa, mostly in Ghana and Ivory Coast. That's where most of the world's cocoa beans are produced. Cocoa is grown from the cacao tree, which is about 10 feet tall. These bean pods, you take them down, you roast the beans, crush it, you make cocoa. When you eat a Hershey's bar, for example, 11% of that bar is ground up cocoa powder. So cocoa is, like, the critical ingredient in all the chocolate products we consume. So we had this massive El Nino event last year. So here you can see sea surface temperatures. So in Q4 of last year, El Nino spiked like crazy.... and that caused a lot of rainfall to hit the west coast of Africa. And as a result, this fungus was spread in cocoa trees. There's a fungus called black pod disease and this fungus spreads when rainfall hits the ground and it splashes up, gets in the tree, and then the tree has really bad yield and the cocoa production goes down. So now if you look at the cocoa production out of Ghana, you can see that we've seen a, like, 50% rough decline in cocoa production on the final bar chart. So that's the effect. So when that happened, basically everyone started to corner the market. So all the buyers of cocoa went in and started buying cocoa like crazy, and then all the short sellers got squeezed because there's typically a pretty good balance on the short and long side in the market. So then the short sellers got squeezed and it caused this big parabolic jump in price, and that's where we're at today. The chocolate companies, again, 11% of chocolate that you're buying at the store is made from this cocoa powder. Uh, they're talking about cutting the size of their chocolate bars, raising prices, and starting to use other ingredients, so you'll start to see that happen in the shelves in the next couple of months. But this is the big news in the commodity markets right now, is this, this parabolic spike in cocoa prices and, you know, consumers will get hit with high prices and smaller chocolate bars.

Jason Calacanis 1:14:30 Isn't there a scene in Trading Places...

Chamath Palihapitiya 1:14:33 Yeah, the, the OJ futures, orange futures.

Jason Calacanis 1:14:34 Yeah, oranges futures.

Chamath Palihapitiya 1:14:36 Yeah, that's right, they squeeze the orange market, that's right. That's basically what's happened in cocoa. So there was a bad weather event, yields dropped by 15% so we got half the production, and then all the traders came in and they squeezed the short side of the market and the price spiked. So that's kind of what's going on. It's like a meme stock.

Jason Calacanis 1:14:51 If I had a dollar for the number of times a fungus has ruined a good time, man.

Chamath Palihapitiya 1:14:56 (laughs)

David Sacks 1:14:57 Well, you know, it's interesting. I was looking at this and I was worried about chocolate prices.

Jason Calacanis 1:15:03 Here it comes, oh here it comes.

David Sacks 1:15:04 I was wor... I was really worried about chocolate prices, specifically, um-

Chamath Palihapitiya 1:15:08 (laughs)

Jason Calacanis 1:15:08 (laughs)

David Sacks 1:15:08 ... what happens right now in these edible anuses. Uranus prices have gone up somehow, so these chocolate uranus prices are skyrocketing in real time.

Chamath Palihapitiya 1:15:22 Where did you find this? How did you find this?

David Sacks 1:15:23 I just typed in uranus and typed in Freyberg uranus and chocolate and this came up, it was the number one result.

Chamath Palihapitiya 1:15:31 Chocolate shaped like an anus.

David Sacks 1:15:31 So we know what... There it is, uranus, uh, chocolate prices are going up.

Chamath Palihapitiya 1:15:36 I know what I'm getting you guys for Christmas this year. (laughs)

David Friedberg 1:15:38 Well it's pric... You notice it was priced in euros not dollars?

David Sacks 1:15:42 Yeah, it's not available in America, it's just-

David Friedberg 1:15:43 It was, it was coming from Belgium. I guess they got some serious kink going on over there.

David Sacks 1:15:47 That's... If you want a chocolate uranus, it's, it's there for you. (laughs) I mean, I just was like, "Google search chocolate uranus," and yeah. I don't recommend you make that search if you're listening to the pod. Don't, don't-

David Friedberg 1:16:03 Well, when I, when I heard there was a spike in coke prices it made me think of this.

Chamath Palihapitiya 1:16:09 (laughs)

David Sacks 1:16:10 (laughs)

David Friedberg 1:16:10 (laughs)

Chamath Palihapitiya 1:16:11 Say hello to my little friend.

David Sacks 1:16:14 I went to last time... When's the last time you watched Scarface beginning to end, not like just caught a couple scenes?

Chamath Palihapitiya 1:16:20 During COVID I watched it. Yeah.

David Sacks 1:16:21 It holds up, yeah?

Chamath Palihapitiya 1:16:22 Yeah. I mean, man, it is... By the way, I saw Dune Two. Chamath, have you seen it?

Jason Calacanis 1:16:28 No, no, don't say anything because I, I need to wait-

Chamath Palihapitiya 1:16:30 No, let me, oh Dune Two, yeah.

Jason Calacanis 1:16:30 ... till it comes to streaming.

David Sacks 1:16:31 Okay, I loved it.

Jason Calacanis 1:16:33 Sacks hated it, overrated.

Chamath Palihapitiya 1:16:34 I'm going back to see it, I'm going back to see it again. I'm going to see it at IMAX this time.

David Sacks 1:16:37 So you were with me? Oh, oh my god.

David Friedberg 1:16:37 I didn't hate it, I just think it's overrated. Like, Spielberg said

David Friedberg 1:16:41 it was like one of the greatest moments of his life or something.

Chamath Palihapitiya 1:16:42 It is one of the greatest movies I've ever seen. I thought-

David Friedberg 1:16:44 No, it's completely overrated. Eh, I'm not saying it's bad, it's just not that good.

David Sacks 1:16:48 Scale of one to ten, give it a number.

Chamath Palihapitiya 1:16:51 I will do anything to have this guy do Dune Three. He's talking about whether or not he should do it, he's like, "I'm only gonna do it if it's gonna be better than Dune Two."

David Friedberg 1:16:57 No, negotiation tactic.

David Sacks 1:16:57 You know he's Canadian, Denis Villeneuve?

Chamath Palihapitiya 1:16:59 Canadian guy, yeah.

David Sacks 1:17:00 He did Sicario.

Chamath Palihapitiya 1:17:01 Sicario and The Arrival, uh, like, he's honestly one of the top three directors of our era. He's incredible.

David Sacks 1:17:06 He, who's that, Villeneuva?

Jason Calacanis 1:17:07 Villeneuve?

David Sacks 1:17:08 Denis, no, Denis Villeneuve.

Chamath Palihapitiya 1:17:11 Villeneuve.

David Sacks 1:17:11 Villeneuve.

Chamath Palihapitiya 1:17:12 Villeneuve.

David Sacks 1:17:12 Villeneuve.

David Friedberg 1:17:14 I don't know, the, the hero in that movie is like this soy boy type.

David Sacks 1:17:18 Here we go.

David Friedberg 1:17:18 I mean, I don't really believe that he's leading an army.

David Sacks 1:17:21 Soy boy. (laughs)

David Friedberg 1:17:21 I just, I, it's, it's not credible.

Chamath Palihapitiya 1:17:23 You know the story... I, I read a lot about, you know, these were all like short stories published in magazines by Frank Herbert, and he was-

David Sacks 1:17:31 serialized, they were serialized, yeah.

Chamath Palihapitiya 1:17:32 serialized, and he was really into drugs, he was really into mushrooms.

David Sacks 1:17:35 Oh.

Chamath Palihapitiya 1:17:35 And so the spice came around from the mushrooms.

David Sacks 1:17:39 Makes sense.

Chamath Palihapitiya 1:17:39 It was written in 1965 when there was this idea that we needed to move towards zero population growth because the population spike on Earth was going to cause resource, uh, constraints and we were all going to die, if you guys remember this.

David Sacks 1:17:52 Hm.

Chamath Palihapitiya 1:17:52 And so there was this big movement, uh, it's what launched the hippie movement.

David Sacks 1:17:55 Did they not have math back in 1965?

Chamath Palihapitiya 1:17:58 Yeah, they, they really did think this and that there wasn't going to be improvements in productivity. So there were limited resources, the world-

David Sacks 1:18:03 Math. (laughs)

Chamath Palihapitiya 1:18:03 ... was going to run out of land and the ecology or the environmentalist movement kind of sprung out of this effort, so a lot of what he wrote about was the ecology and the connection-

David Sacks 1:18:13 Hm.

Chamath Palihapitiya 1:18:13 ... between the fungus and taking mushrooms and better understanding the world around you, so so much of this was rooted in a hippie movement, Sacks, to your point, when he wrote these original, um, short stories.

David Sacks 1:18:23 Do they ever explain what the spice is in Dune?

Chamath Palihapitiya 1:18:27 No, and it was tied to mushrooms.

David Sacks 1:18:28 They never explain why people want spice.

Chamath Palihapitiya 1:18:31 When he was interviewed, when