E29: Coinbase goes public, direct listings vs. IPOs, unions & more with Bestie Guestie Brad Gerstner

1. 0:00 – 3:01

   Bestie intro & crowning a new SPAC king

   1. NANarrator0:00

      Any word from the dictator or should we just do a-

   2. BGBrad Gerstner0:02

      Yeah.

   3. DSDavid Sacks0:02

      I don't know, man. I gotta-

   4. BGBrad Gerstner0:04

      I haven't heard from him.

   5. DSDavid Sacks0:04

      I- I- I cannot spend my whole day sitting on Zoom waiting for Chamath.

   6. NANarrator0:07

      Or I could have Brad Gershner come on and sit in for-

   7. CPChamath Palihapitiya0:09

      Isn't he richer than Chamath?

   8. DSDavid Sacks0:10

      He is now.

   9. NANarrator0:11

      He's got the largest SPAC in the world. Should we do that? Should I just have Brad come on the pod and then-

   10. DSDavid Sacks0:14

       Oh, my God. Yes.

   11. NANarrator0:15

       ... and then talk to the court on how Chamath-

   12. CPChamath Palihapitiya0:16

       We have a new SPAC king. We have a new SPAC king.

   13. DSDavid Sacks0:17

       Start it now. Get him on. Start it.

   14. CPChamath Palihapitiya0:19

       Yeah, that's a great idea.

   15. NANarrator0:19

       And then Chamath comes in later. Chamath comes in later and he's like, "What the fuck?" We're like, "We replace you with the new SPAC king."

   16. CPChamath Palihapitiya0:25

       (laughs)

   17. NANarrator0:25

       Oh, my God.

   18. DSDavid Sacks0:25

       Oh, my God. Get him on.

   19. BGBrad Gerstner0:27

       Is this like a- a kidnapping and you guys are gonna take me out and drop me off behind, uh-

   20. DSDavid Sacks0:32

       (laughs)

   21. NANarrator0:32

       (laughs)

   22. BGBrad Gerstner0:32

       ... behind the railroad cars? What's going on here?

   23. DSDavid Sacks0:34

       Uh-

   24. NANarrator0:34

       Okay. Here we go.

   25. BGBrad Gerstner0:35

       Good. I'm good.

   26. NANarrator0:36

       In three.

   27. BGBrad Gerstner0:37

       How's the gain?

   28. NANarrator0:38

       Gain is great.

   29. DSDavid Sacks0:39

       Good.

   30. BGBrad Gerstner0:39

       << In three. >>
2. 3:01 – 12:06

   Coinbase's direct listing, comparing vehicles to go public & lockup periods, Sacks on Coinbase vs. NYT

   1. NANarrator3:01

      So let's get to the direct listing. Uh, good segue. Clearly, the biggest news of the week is Coinbase, the largest direct listing ever. Uh, Bill Gurley somewhere is smiling. And that's on top of Roblox, which I think was the second biggest. Uh, 2020 revenue, 1.2 billion.

   2. BGBrad Gerstner3:19

      Sorry, Brad, did- did Snowflake direct list or that was a traditional IPO? No, that was traditional IPO. Traditional IPO.

   3. NANarrator3:24

      I don't know who got their bet weak, their... wet their beaks on this one. Sacks, did you have a little bit?

   4. CPChamath Palihapitiya3:31

      I had a little tasty poo.

   5. NANarrator3:32

      Little tasty poo, ooh.

   6. BGBrad Gerstner3:34

      I had, uh, I had a lot showered upon me.

   7. CPChamath Palihapitiya3:37

      (laughs)

   8. NANarrator3:38

      Uh, explain boys.

   9. CPChamath Palihapitiya3:39

      Oh, because you're... 'cause you're in Ribbit, right?

   10. BGBrad Gerstner3:41

       I am Mi- I was Mickey's... one of Mickey's largest LPs, yeah.

   11. NANarrator3:44

       Who's Mickey for the audience who doesn't know?

   12. BGBrad Gerstner3:45

       Mickey Malka who runs, uh, Ribbit Capital, who owns 7%, um, or 10% or se- seven or 8% of Coinbase. And what was incredible was I got distributed all of it yesterday, which by the way, I think for direct listing, the strategy, to me, makes a lot of sense. I made a mistake, in hindsight, if I think about my distribution strategy, 'cause myself, Axel and Andresen, when we did the Slack direct listing, we distributed probably five, 10%, and then we waited and then we trickled it out over time. But by definition, I think the price action on direct listings shows you that you top tick the top price at... in the moment on the open print. And so, you know, if you're going to sell, you're probably better off selling absolutely right away. And if you look at the price action on direct listings, it's basically been one way direction down from the point of the direct listing. Spotify did that for two years, it kind of languished. You know, Slack did that until the Salesforce acquisition. Um, so in general, I think if- if a direct listing happens, when you get distributed the stock, you should probably sell it right away.

   13. NANarrator4:47

       And that, uh, means it was priced correctly as opposed to under-priced. Is that what we should take from that?

   14. BGBrad Gerstner4:54

       Well, no, because I think-

   15. NANarrator4:56

       There's no price hit.

   16. BGBrad Gerstner4:57

       ... what's, what's tbd is what is the morale hit to the company to see a one-way direction down in, you know, a stairway down on the stock price. So maybe it was good for selling shareholders. It's not necessarily good for the morale of employees, which then could impact the long-term enterprise value that's being built at a company. So I think there's a bunch of TBDs. I do think that direct listings are administratively clean in some ways. But company building may not necessarily win out.

   17. DSDavid Sacks5:22

       But Chamath, you had a point of view, I think it was last year or two years ago, about how, you know... A- and I read some papers that one of the analysts at Wall Street put out showing that, um, there isn't much of a benefit to lock-ups with respect to short or long-term, uh, price volatility. Do you still hold that point of view? Like-

   18. BGBrad Gerstner5:40

       I think lock-ups are... I think lock-ups are really unfair because they... they're, they're attacks on the people that have been there the longest, which are the employees. So, you know, the idea that somebody that comes in at the absolute last minute... You know, Brad and I have done a bunch of IPOs recently where, like, you get allocations in a book. He and I had nothing to do with companies, but we get shares and we sell at day one. Then there are people that have been in that company for six, seven, eight, nine, 10 years who sit around, you know, twiddling their thumbs-... watching all these other people generate one-

   19. NANarrator6:11

       Make money.

   20. BGBrad Gerstner6:11

       ... one-day returns. There was a tweet that Bill Gurley had yesterday that says there's a well-known crossover fund that over the last year has printed a billion dollars of, of one-day share gains. Well, that's crazy. So I think that lockups are kind of a, a regressive tax on the people that do the work, and they, they are just rewarding people that have nothing to do with companies.

   21. CPChamath Palihapitiya6:32

       Brad, what, what did you do in Grab? 'Cause do you lock yourself up, right, for a couple of years and do, or is there a lockup for the existing shareholders in Grab?

   22. BGBrad Gerstner6:39

       Yeah, so fir- first, I totally agree with Chamath. Lockups are one of the most insidious things, I think, about the traditional IPO process. Um, you know, the fact that DoorDash employees are sitting there watching the stock go from 100 to 200 and then-

   23. NANarrator6:53

       (clears throat)

   24. BGBrad Gerstner6:53

       ... you know, all these other folks are selling while they'll watch the stock go from 200 back to 100, uh, I, I would think is incredibly demoralizing. And it doesn't... Here's the thing. It doesn't need to exist. In Roblox, there was no lockup. The employees were free to sell. But guess what? A lot of them chose not to sell, right? It's fairer and, and, and quicker price discovery-

   25. CPChamath Palihapitiya7:14

       Right.

   26. BGBrad Gerstner7:14

       ... when you actually allow the supply and demand to s- to exist in, in balance. So what we, what we did at, um, at Grab was we fought hard for the most open, unlocked, right, day one we could possibly get. Um, in that case, there are a lot of big shareholders who are on the board, so they're deemed affiliates under Section 16 of securities laws, so they can't sell, right? They're deemed to be insiders, right? And, um, but we... At the end of the day, all employees can sell. There is a group of senior management that said, "Hey, we want to voluntarily lock as a signal to the market." But all other employees in the company can sell. So there are over 5,000 employees in the company. Um, and all of the early shareholders can sell on day one. And I think this was, uh, the first time I've seen this in, in, you know, this alternative IPO. So we have, uh, almost a third, uh, of the entire, uh, share base of the company that is available for sale on day one.

   27. CPChamath Palihapitiya8:09

       Incredible. Hey, Brad, can I ask one more question? The, um, the, the economics for Grab, are th- are they better under your structure than they would have been for a traditional IPO to get the same amount of capital when they're paying 7% to the underwriting banks?

   28. BGBrad Gerstner8:23

       You know, as you reme- a- a- as we all know, you know, Bill Gurley has, (laughs) has laboriously pointed out and documented that there are two expenses to a traditional IPO, right? There's the upfront fee, 5.5, 6%, whatever they're paying on the amount of capital raised. Uh, but he would argue the much bigger expense, right, is the indirect cost of the structural underpricing.

   29. CPChamath Palihapitiya8:46

       Right.

   30. BGBrad Gerstner8:46

       Right? So in a traditional IPO, let's say you have a $10 billion enterprise value, raising a billion dollars. If it's being underpriced, he would argue structurally by 40%. We can all debate that, but that's $400 million of dilution to employees and to existing shareholders. I, I think everybody in the Grab process, um, both the buy side portfolio managers from Fidelity, Janus, T Rowe, et cetera, as well as the company believe that we got a 20 to 30% higher price than a bank would've got because of the conviction the portfolios managers had-
3. 12:06 – 15:21

   David Sacks on running for governor

   1. CPChamath Palihapitiya12:06

      Um...

   2. BGBrad Gerstner12:07

      Sax, d- are you running for governor 'cause it looks-

   3. NANarrator12:09

      (laughs)

   4. BGBrad Gerstner12:10

      ... like you've taken Botox?

   5. (laughs) Yeah. Hey, guys, do you know anybody taking Botox?

   6. CPChamath Palihapitiya12:13

      Do you take Botox? Did you take Botox?

   7. BGBrad Gerstner12:14

      No, no.

   8. NANarrator12:14

      He's in Miami, so it's probably-

   9. BGBrad Gerstner12:16

      What is going on with your cheeks and your face?

   10. NANarrator12:17

       Lace 'em out, lace 'em out on the Botox.

   11. BGBrad Gerstner12:19

       He's also wearing heels.

   12. NANarrator12:19

       Your lips, your lips are incredibly swollen.

   13. BGBrad Gerstner12:21

       No, they're not.

   14. NANarrator12:21

       I mean, they look very succ-

   15. BGBrad Gerstner12:23

       (laughs)

   16. NANarrator12:23

       ... succulent. It's unbelievable.

   17. BGBrad Gerstner12:25

       Sorry.

   18. CPChamath Palihapitiya12:25

       I've got a new lens. I've got five different, uh, technologies, uh, making me, slimming me here.

   19. NANarrator12:31

       But you do have-

   20. CPChamath Palihapitiya12:31

       (laughs)

   21. NANarrator12:31

       ... your pin on today, and you do look very governorial. And I noticed that you bought-

   22. CPChamath Palihapitiya12:36

       I'm wearing my Miami pin. This is my City of Miami pin. That-

   23. NANarrator12:39

       Francis gave you that pin?

   24. CPChamath Palihapitiya12:40

       Francis gave me the pin.

   25. BGBrad Gerstner12:41

       That's fantastic. Let's see if he can see it.

   26. NANarrator12:43

       Did he tell you, "Never call me Francis"?

   27. BGBrad Gerstner12:45

       (laughs)

   28. CPChamath Palihapitiya12:45

       (laughs)

   29. What is the big announcement today, Sacks?

   30. I wore it for you guys.
4. 15:21 – 32:37

   Brad & the besties react to the crazy Q1 in the markets, a16z's savvy buying moves with Coinbase, issues with short-term behavioral lock-in

   1. BGBrad Gerstner15:21

      Can we go back to the, to the markets just for one second-

   2. NANarrator15:24

      Yeah.

   3. BGBrad Gerstner15:24

      ... 'cause I just wanna, I wanna ask a couple questions? Brad, uh, Q1 was nuts. Let's get some color commentary from, uh, a big player in the capital markets, you. Talk s- through us, uh... Talk to us through what, uh, factor rotation w- was. Talk to us about your reactions to this Archegos Capital thing, about inflation.

   4. NANarrator15:46

      Also, gut check.

   5. BGBrad Gerstner15:47

      Like, what is the, what is th- what does the rest of the year look like? Like, talk... Just how... What's your sentiment? How are you feeling? Just give us a reaction on just the economy, the markets.

   6. NANarrator15:55

      And the gut check, Brad, on... Weren't you, like, the biggest shareholder in United at some point? And then you just got walloped?

   7. BGBrad Gerstner16:01

      Oh, yeah. That was a bad way to start off 2020.

   8. NANarrator16:03

      Yeah, I wanna hear about that gut check going.

   9. BGBrad Gerstner16:04

      It was a bad way to start off 2020.

   10. NANarrator16:05

       Why not call it-

   11. BGBrad Gerstner16:06

       However, I would say that it ended up being the best year in the history of the firm. And so, you know, like, we, like everybody else, had to reinvent a lot of things about our business last year. And, and, um, uh, we learned a lot from that moment and, and the courage that a lot of people at, at United showed through, through that period of time without a lot of help. Uh, a lot of people think the government was helpful. There's a lot of unhelpful things that were being done but notwithstanding that fact, to, to Chemas' point... Um, Chema, I, I think I went on CNBC in November and just said, like, "When we normalize, there's no reason that the 10-year shouldn't be, uh, uh, back at the level it was in January '20," right? And for every 1% move in the 10-year, you've got a 10 to a 20% drawdown in growth multiples.

   12. NANarrator16:51

       Yeah.

   13. BGBrad Gerstner16:51

       And the reason for that is very simple. They're long duration assets. You discount it back at a higher rate, and so you have multiple compression. And so, we were starting at an all-time high in terms of growth equity multiples for both software and internet, uh, when you look at October, November of last year. We've seen about 30 to 40% retracement or com- you know, giveback in terms of those multiples, right? In some names, it's bigger, and some ten- some names, it's less. I suspect that there's another 10 to 20% to go, right, uh, for a 10-year that's gonna be sitting here at one-eight. Um, it... I, I just got done talking as part of this roadshow, as you know, to all the biggest growth equity portfolio managers on the, on the public buy side. I can tell you, they're all de-leveraging growth. They are not adding. They're not looking to add dollars to growth. And these are the biggest, uh, managers in the world. And so, we're not through that process. There are some people who've anchored themselves to the fact that Zoom was just at 500. They're like, "Oh my god, it's going straight back to 500." You're like, "No, 500 was the outlier event." That was the all-time high multiple event. It will get there in the fullness of time, but it's gonna have to get there through earnings growth.

   14. So, so what do you think then happens in the privates and... You know, there's a lot of talk about certain firms, some of your competitors in the growth stage side, ripping capital into companies every 24 hours or 48 hours. Where, where does that then normalize? Because aren't we setting up a dynamic where if you have a bunch of growth firms pricing crazy rounds whose valuations can... then will not be able to be held up in the p- public markets, aren't we creating a different kind of problem?

   15. Well, um, you know, you and I have watched this dynamic play out probably four, five times over the course of the last 15 years, where there's this inversion, private capital markets, private markets are actually overvalued relative to public markets. I just looked at a few IPOs this week, over the last couple of weeks. Deliveroo, hot private company down 30% in the IPO. AppLovin came out this week, 20% down in the IPO. Right? At the end of the day, the great thing... You know, as, as Munger likes to say, you know, the markets are a voting machine and the public markets are a brutal voting machine. Um, and so, you know, it just is gonna take... Remember when Groupon got done that last private round at 20 billion, and then about nine months later it's trading at 5 billion? Or Zynga. I mean, you and I-

   16. Zynga, yeah.

   17. ... can go through the list. We've watched this. You know, so it just takes the smack down and people losing actual money, um, and, and... However, so that's the one side, right? This is a temporary dynamic, markets will clear. I think it is possible, you referenced, you know, uh, a, a good friend of, uh, uh, of mine, y- you know, who's supposedly writing a term sheet every two days, um, you know, uh, at Tiger. The truth of the matter is you can ho- you can hold simultaneous truths. You can believe the next three months that we're likely to have more multiple compression in the public markets. Right? You could hedge your public book in a variety of ways against that, like, like we did and, and announced last, last December. And at the same time too, you can believe that the secular trend in technology has never been more potent. Right? And I believe that if you own an index of the top 30% of technology companies in the world today, and you're willing to hold them for five to 10 years, you will be incredibly well rewarded. The gr- the, the, the most asymmetric bet maybe in the history of all of investing is having a golden ticket to have access to the best technology companies in the world today. It's, it's, i- i- i- it's like unfair play. And everybody on this call is playing in what is a highly asymmetric and unfair game stacked in our favor. Now, we can screw that up by trying to think we're good at short term trading, or doing a bunch of other stuff. We can get individual things wrong. But if you bet on the top, the top quartile of technology companies on a global basis like Tiger and others are doing, um, and you, and you have time on your side, you're gonna be well rewarded.

   18. We, we talked about the mid-market, late stage venture space being a no man's land, a vortex. The value being created in the late stage, and value being created in the early stage, but the money in the middle becoming a commodity because of Tiger, Coatue and others coming in, and just coming over the top. Do you, uh, subscribe to that, Brad? Do you think that's just a financial transaction in the middle and not a lot of value to be made there? Or do you think there's a lot of value there?

   19. No. I mean, I, I, uh, you know, listen, it doesn't matter in Snowflake whether you invested in the $100 million round, the $200 million round, the $500 million round, the $1 billion round where Sequoia came in. You, you know, if the company is going to $200, $300, $400 billion, right, all of those are extraordinary returns. So Altimeter has described itself, uh, often as a life cycle investor. Right? I represent the biggest portion of the capital in the firm, some long term endowments are, are number two and number three, and we have a multi-decade view on the world. And our view is the one that I just articulated. I want to have maximum dollars. I don't care that it's all in the B or the C or the D or the IPO or... You know, I want to have maximum dollars behind our best ideas, and I want to be an incredible partner to these companies as they move through the life cycle. And part of the reason we built a capital markets business to help founders in a better way step into the public markets, is it's part of our mission. Right? Like, I wanna own... You know how frustrating it was to me, Jason, to be pre-Mar- or pre-IPO in Mongo or Twilio or Okta, and then when it came to the IPO, I have to go to the banks and grovel? Right? And grovel for an allocation, and they dribble $5 or $10 million and I see them handing big che- y- you know, big allocations to people who I know are gonna flip it, and I actually want to own the stuff? It's very frustrating. And so we think there's a better way. And when those companies come public in the future-

   20. You, you said something which, uh, I wanna use as a question to, uh, Friedberg and Sacks, and Jason, 'cause these guys are involved very sense- in one way in what I'm gonna say, which is, you said gross tonnage of dollars. One of the most incredible things that I thought about the Coinbase, um, uh, S1, was the amount of unbelievably smart buying that Andreessen did. And I thought to myself, Andreessen just out-Sequoia-ed Sequoia. And what do you guys think about sort of how they've been able to, to actually execute? It just seems like Andreessen is done an incredible, incredible job. I don't wanna... I mean, Jason, you're close to Sequoia, s- so are you, Friedberg. I just want you to react to that.

   21. CPChamath Palihapitiya23:24

       No, you gotta give, you gotta give them credit on Coinbase, because I think they made the, they made the most money. I guess, um, Ribbit and Garry Tan at Initialized may have made the highest ROI because they invested a smaller amount of dollars earlier, but-

   22. BGBrad Gerstner23:38

       My return, my return in Ribbit wa- uh, the, the, uh, Maya from Iconic told me was 506 times.

   23. CPChamath Palihapitiya23:45

       Right, exactly.

   24. BGBrad Gerstner23:46

       Fasho, uh.

   25. CPChamath Palihapitiya23:46

       So, so, so Ribbit made the 500X, and I guess Andreessen, but Andreessen made like $20 billion of returns, of which, you know, they're probably getting 25, 30%. So they, they made the most money. Uh, it may not have been the highest IRR, but it was the most money. And you're right, they doubled down in this like 2018, 2019 period. It sounded like they were doing a bunch of secondary buying. They maybe bought-

   26. BGBrad Gerstner24:10

       They were buying the stock at 25 bucks.

   27. CPChamath Palihapitiya24:12

       Yeah.

   28. BGBrad Gerstner24:12

       They bought it all from- Incredible.

   29. CPChamath Palihapitiya24:13

       ... Fred Wilson in Union Square. So as much as Fred made-

   30. BGBrad Gerstner24:16

       Right. They were buying it from other investors.
5. 32:37 – 50:27

   Top insights from Bezos' letter to shareholders, Amazon employees reject the union in Alabama

   1. BGBrad Gerstner32:37

      I have a question I want to ask you guys as well, which is, um, I just want to go back to the public markets for a second. I tweeted out some of these amazing things I learned from the Bezos, uh-

   2. NANarrator32:45

      Oh my God, this is demented.

   3. BGBrad Gerstner32:47

      Did you guys see what I- what I tweeted?

   4. NANarrator32:49

      I saw your tweet, and I- and I've been reading it. It's unbelievable, the-

   5. BGBrad Gerstner32:52

      It's been- Do you have it in front of you, Jason, do you want me to say?

   6. NANarrator32:53

      I do. Well, I'll just give you the Chamath tweet here high-level. 28% of purchases on Amazon are completed in less than three minutes. I think we've all done that. 50% of purchases is- are on Amazon are completed in less than 15. And if you actually look at that, and I think this is a really- I don't know if you made this calculation or...

   7. BGBrad Gerstner33:12

      No, this is Bezos wrote it in the letter.

   8. NANarrator33:13

      Bezos wrote-

   9. BGBrad Gerstner33:13

      All of these things are, yeah.

   10. NANarrator33:14

       So if you value your time at $10 an hour, a very low one, um, that's $750 a year, um, and that means your Prime is free of $120 a year. So that leaves you with-

   11. BGBrad Gerstner33:25

       Now, let me say-

   12. NANarrator33:25

       ... 630 in profit.

   13. BGBrad Gerstner33:26

       Let me say it differently. Uh, the average trip to the store, driving, buying, coming back, is an hour. So what Bezos said is that, "Typically, we will save you 75 hours because we can make all of that more efficient for you." At 10 bucks an hour, that's worth $750.

   14. NANarrator33:42

       Right.

   15. BGBrad Gerstner33:42

       "We only charge you 120 for Prime, which means you're f- you get $630 of savings." But then he goes on to say, "And we have 200 million customers on Prime, so we're saving them $126 billion." My instant reaction was two things. And so the last two points in that tweet are mine. One is, holy fuck, that's more in one year than what most companies are worth in their entire lifetime. And the second is that you can buy Amazon for 13 times one year's worth of savings for a customer, if- just if you look at Prime.

   16. NANarrator34:13

       Yeah.

   17. BGBrad Gerstner34:14

       Which- which makes Amazon seem exceptionally cheap. But I- I- reason I brought up Amazon is he also wrote in there about his responsibility to his employees, and we were just talking about employees and churn. And this was incredible to me, that 70% of their employees voted down the unionization effort in Alabama. And I just wanted to get Saxy Poo.

   18. CPChamath Palihapitiya34:32

       Yeah.

   19. BGBrad Gerstner34:32

       Red- red pill it, crush it, snort it, what do you- what do you got to say?

   20. NANarrator34:36

       Yeah.

   21. CPChamath Palihapitiya34:36

       Well, I mean, what- what happened is you had in Alabama, there's a Amazon plant there that, uh, where they- there basically was an election to decide whether they would go union or not. And there were 2,536 workers who voted in this union election. About 1,800 voted against unionization versus 738 who voted to unionize. And then ballots from another 505 workers were either- were challenged by either Amazon or the union, so we don't know yet what they mean. But those votes won't change the outcome, so the election is over. Now, this was a heavily lobbied election. I mean, Amazon was lobbying, um, employees, but so were the unions. And it looks like the unions, at the end of the day, were lost, and the employees voted to, you know, remain unionless.

   22. BGBrad Gerstner35:28

       Brad, what do you think?

   23. I thought it was a beautiful defense of capitalism that's very much needed right now.

   24. Yeah.

   25. You know? Um, it reminded me a lot, frankly, of the Gates Foundation annual letter, you know, where Bill Gates is saying, you know, "Capitalism is far from perfect, but it's resulted in the most important era of prosperity and health and wellness in the history of the planet." And, you know, as I said on CNBC this week, you- you- you know, we live in a moment where capitalism is absolutely under attack. Um, and I truly believe it's the greatest force, the greatest potential force for good in the world. It brought us a vaccine, right? It brings us innovation that pulls people out of poverty, that makes people healthier, that edu- gives an opportunity for people in rural areas that are impoverished to be educated. But I do think it's incumbent upon Bezos. I think he- this was very much a robber baron sort of defense of building railroads.

   26. Mm.

   27. And I thought it was brilliant in its execution. But I think it's important in- i- i- in- for all of us to stand up, not defensively, but to say, "What are our obligations to make capitalism the greatest force for good?" You know, Chamath, whether it's you and I talking about Invest America on CNBC and giving every child in this country, uh, uh, participation in the ownership society-

   28. Right.

   29. NANarrator36:56

       Well, there's also-

   30. BGBrad Gerstner36:57

       ... right, or all the other initiatives that we need to work on to de- you know, to- to make the case. We need to make it better.
6. 50:27 – 54:28

   Reacting to Drew Holden's recent thread on media double standards in covering each party

   1. CPChamath Palihapitiya50:27

   2. BGBrad Gerstner50:27

      This is a good jumping off point to one very, uh, to the next then topic. There's a bunch of things happening in government that I just want to get your guys' reaction to. One, which was, uh, the crazy summary that somebody did about the reaction to Biden pulling out of Afghanistan. Okay? The second is, um, unfortunately Biden reiterated Trump's decision on, uh, refugee numbers just today. Um, so he's not... He had a pledge that he would, you know, go back to the, the original numbers, uh, the Obama level numbers, and he said he's not going to. He's going to keep it at the Trump level, which basically says, you know, very nominal refugees. And then the third is the growing frustration and perceived incompetence of the CDC, and now you have the entire business community starting to push back. Those are three completely different things, but they just speak about some government things I'm curious about your reactions to. Anybody? Everybody?

   3. NANarrator51:21

      Well, I mean, the thing that that highlights for me is the media double standard. And I think this is why a lot of people are going to centrism and why this podcast has become a purple podcast and a, and a rational podcast because AOC was going down to the border, hysterical crying. You remember the photos? They were all dressed in white. And is there any difference between what Trump did at the border and what's happening now? Doesn't feel like it. It feels like it's a problem that they're both trying to solve and it's 90% the same outcome. And then you look at Afghanistan, you know, Trump's like, "We gotta get outta here," and then the press dunks on him, like, "How could you do that?" And now Biden's doing it and he's getting high fives. And so I would just like to see some consistency from the press and the reaction in Americans on these issues which seem to be non-winnable or, you know, how much do you lose in these instances? Like, A- Afghanistan's a lose-lose and the border is a lose-lose. Like, it, it... There's, there's no winning, I don't think, in these, in some of, in some situations that a president has to face. I'm interested what Sax has to say.

   4. CPChamath Palihapitiya52:19

      Well, yeah, I saw that, I saw that tweet storm on the media double standard around Afghanistan and we should show that and, and link to it in the show notes 'cause the, the, whoever it was-

   5. BGBrad Gerstner52:26

      It's incredible.

   6. CPChamath Palihapitiya52:27

      It's incredible. I mean, he, he-

   7. BGBrad Gerstner52:29

      Incredible. Incredible.

   8. CPChamath Palihapitiya52:29

      This is like definitive proof of, of the media double standard-

   9. BGBrad Gerstner52:33

      (laughs)

   10. CPChamath Palihapitiya52:33

       ... where he goes literally... He does a side by side of every single major Prestige media outlet, their coverage on Trump versus Biden's draw down in Afghanistan. You know, Trump, Trump did the major draw down and I think got us down to maybe like 1,500 troops there. I think he missed a political opportunity not to just go all the way down to zero. Then he could have taken credit for ending the war, which I think he wanted to do. For whatever reason, he didn't get it done. And he basically handed Biden a beautiful opportunity just to kind of end the war once and for all. I think it's very popular. People are... We've been there for 20 years. I think people want to get out. So I think Biden's decision was politically correct and I think it was the, the, the, the right decision as well. I think we've... It's, it's, it's time to be out of there. But yeah, the, the coverage in the press was just completely hysterical about Trump doing it. It was predicting all sorts of negative consequences. Um, and then when Biden did it, like, like Jason's saying, it was, um, nothing but kudos. So-

   11. NANarrator53:28

       Well, the, the CNN quote-

   12. CPChamath Palihapitiya53:29

       You, you... No, no, no... Not, not only is the press not objective and not impartial, but they change their mind about a particular issue based on which team is doing it.

   13. NANarrator53:39

       Yeah, I mean, if you look at the two quotes, they have a CNN tweet that they, they... He just screen grabbed CNN on the same issue. He says, "This is reckless and it's really risky," of Trump's plan to withdraw troops. And then f-... The next CNN tweet from this administration, President Obama praised President Biden's bold leadership to withdraw from Afghana- Afghanistan by September 11th.

   14. CPChamath Palihapitiya53:59

       And there's dozens of these. NPR, CNN, New York Times, Washington Post-

   15. NANarrator54:04

       Over and over and over again.

   16. CPChamath Palihapitiya54:04

       Yeah.

   17. NANarrator54:05

       And then I think this is why Americans hate the media.

   18. CPChamath Palihapitiya54:08

       Absolutely. I mean, the, the, the... This is the, you know, what the, what the conservatives side would call the mainstream media, you know, MSM. They... I mean, but they are proving their bias right here. I mean, and, and they're increasing irrelevance. This is why the American public don't trust them, don't listen to them, and don't care what they have to say.

   19. BGBrad Gerstner54:23

       Brad, what do you think?

   20. Well, I, uh, I, I wanted to... You know,

7. 54:28 – 1:04:20

   Federalism's benefits throughout COVID, State-by-state results reveal lockdowns didn't work, vaccine incentives and PR due to J&J decision

   1. BGBrad Gerstner54:28

      at a federal level, we really can't opt out of any of this, right? We're not gonna leave the country.

   2. (laughs)

   3. We got an election every four years.

   4. (laughs) That's true.

   5. So we were just talking about market failures in the state of California. And one of the most beautiful designs of our system of federalism, back to this idea of markets, right? Is the fact that you get to choose what state you want to live in. And in a post-COVID world, we have the greatest A/B testing in the history of federalism.

   6. Mm-hmm.

   7. Because now you can live and work from anywhere, and the differences between state policies have never been greater. And so we've never had this incubation that we can all watch and live tweet about on Twitter. And so now Texas and Florida, they get to make choices. California gets to make its choices. And then we get to see. And political scientists are going to have a field day in five to 10 years. Um, and people are voting with their wallet today. The A/B test in real time, we have the largest economic migration in the history of this country occurring right now.

   8. (laughs)

   9. And Gavin Newsom and Lorena González, they're going to have to ha- be held accountable for the conditions in San Francisco, for the decisions with respect to companies leaving the state, people leaving the state, and frankly, it's not about lower taxes. I would contend the even bigger issue is the contempt for capitalism, the contempt for entrepreneurialism and innovation that exists in California. And I have no intention to leave, but I will tell you this. Like, I'm gonna fight like hell for a third way, right, that actually says capitalism can be a force for good in California, um, and that's why Sax needs to run.

   10. CPChamath Palihapitiya56:17

       (laughs) Well, let's talk Sax is in Miami.

   11. BGBrad Gerstner56:18

       Sax is in Miami.

   12. CPChamath Palihapitiya56:19

       I, I love... I l- love this idea of a, of a state by state A/B test. I mean, what was the old line? I get...It was the l- it was FDR's line that, uh, or that federalism is l- the laboratory... The states are the laboratory of democracy.

   13. Yeah. Great.

   14. So, I want, I want to show this. I just posted, um, a link in the chat of COVID death rates, uh, in the US by state. And it's really remarkable, because every state has very... Has... We've seen a lot of very different COVID policies, um, by state. What we see is that California and Florida have almost the same death rate. I think California is like 154 per 10,000 and Florida is like 159. It, it's a very, very small gap, um, despite the fact that California has had the longest and most severe lockdowns in the country, and Calif- and Florida has been the most open. And then meanwhile, you look at states like, um, like Michigan, which has also had very severe lockdowns and has had a much higher death rate. And so, you see like there's, there's really no correlation between, uh, death rates for COVID per capita and the, the severity of, of lockdowns. Basically, the data shows that lockdowns don't have an impact on a state's success in battling COVID. And, you know, it's just remarkable that we still aren't... Despite this data, despite the fact that, you know, science is now showing us, uh, we still have lockdowns in the state of California. We've loosened up a little bit, but we're still talking about orange tiers. And it's just... And I, I'm here in Florida right now. They're, they're... It's open. It's open. And, you know, Florida has a lot more old people than California, and the death rate is just about the same as California. So, it's just remarkable to me that we are stuck in, in this mentality of lockdown. And I think it's because Newsom has bought into this savior myth that he has. I think he's remembering all this press that he and Cuomo got at the beginning of COVID about what great saviors they were and how they protected the population from, from COVID.

   15. BGBrad Gerstner58:16

       But it's also been compounded by federal failure, because the CDC basically said, or not said, they revealed themselves to be incompetent. You know, the same person that we all thought was an incredible genius, Fauci, increasingly looks like a... Somewhat of a, an idiot. And, you know, not completely informed on the topics that he should be informed about. And then, you know, you have these federal agencies com- So, for example, when you put the CDC and the FDA together, some of their decisions are just complete head scratchers. Like, for example, this past week, you know, the FDA stopped the use of the Johnson & Johnson vaccine because seven women between the ages of 18 and 48 got a blood clot and one passed away. And if you think of do- over seven million doses, right? And so-

   16. CPChamath Palihapitiya59:01

       One million.

   17. BGBrad Gerstner59:03

       One... It's, it's literally-

   18. CPChamath Palihapitiya59:04

       One in seven million for fatality.

   19. BGBrad Gerstner59:05

       ... one in seven million for fatality.

   20. CPChamath Palihapitiya59:07

       Fatality.

   21. Right. And, and actually here, here's the crazy thing about that, is-

   22. BGBrad Gerstner59:09

       More, more people died in car accidents on the way to getting those vaccinations and actually died from a blood clot. And so, we can't-

   23. CPChamath Palihapitiya59:14

       More than lightning strikes.

   24. BGBrad Gerstner59:16

       Or lightning strikes, sometimes.

   25. CPChamath Palihapitiya59:17

       Right. So, so, so it's, it's, it's bad risk assessment, but it's also been very bad PR for, for the vaccine. So, in the wake of that, the, uh, with the polling on vaccines went down by like 15 points. And so, they're scaring people away from getting vaccines. I don't know if that polling was just on J&J or whether it applies to other vaccines as well. But the most important thing that the health officials could do is just convince people to get vaccinated. And the decision they made on rolling back J&J has really hurt that. And then also, this, you know, the, the, the Fauci comment said even if you're vaccinated, you can't go to movies, you can't go to sporting events, you still have to wear a mask, you still can't, you know, get together in groups in indoor spaces. Well, then why would you get vaccinated? Why would you take that chance?

   26. That is-

   27. Uh-

   28. ... so critical. Friedberg, do you think if you get a vaccine, you should be allowed to take the mask off? Like, that could be a reward? Look, I mean, (laughs) it's a, it's a bigger question than the science question, right? But, um, I certainly don't think that there's any risk to you or people around you once you've been vaccinated, uh, with respect to your wearing a mask. Um, and so, uh, you know, this... The, the, the mask mandate, I think as you guys pointed out, is a little bit more kind of political and social posturing, uh, than it is kind of, you know, scientifically reducing the, the, the spread of the, uh, of the virus once you've been vaccinated. Once you've been vaccinated, you're in the clear, theoretically can do what you wanna do. Uh, yeah.

   29. Of course. So, so... I mean, let's just be really clear. Once you get vaccinated, there's no reason to wear a mask. Remember, the reason for the mask mandates was source control, right?

   30. That's right, that's right. Yeah.
8. 1:04:20 – 1:09:26

   Degradation of faith in institutions accelerated by COVID

   1. BGBrad Gerstner1:04:20

      is that what, the implicit thing about what you're saying, which is scary, is unlike times before about measles or chickenpox, you, we now are basically debasing the credibility that these government institutions have about anything they say. That's the real enemy in the room when this is all said and done. So now you have people that are acting on their own. So, so CDC says, "You can't fill the middle seat." The airlines say, "No, go fuck yourself. We're gonna fill whatever seat we want," and nobody's gonna complain. Back to what Brad said, because they're risk underwriting for themselves and saying-

   2. CPChamath Palihapitiya1:04:49

      Yeah.

   3. BGBrad Gerstner1:04:50

      ... "Wait, you don't know what you're talking about anymore." And so where does it leave us?

   4. NANarrator1:04:53

      Is that a good thing or a bad thing?

   5. BGBrad Gerstner1:04:55

      You know, one of the ways states, even d- even democracies maintain power was information control.

   6. Right.

   7. Right? And there is no information control today.

   8. NANarrator1:05:03

      Right.

   9. BGBrad Gerstner1:05:03

      Anywhere. In fact, the- the- we have frictionless information, which means that by definition, I think there's greater chance for decentralization. I mean, remember, you know, the Arab Spring, governments were overthrown on the basis of Twitter. Right? I don't believe we live in a Hobbesian state of, you know, of- of suffering in- in the natural order of things. Right? But I certainly believe that government has a role to play to help organize us and, uh, you know, because there are big issues that we face in the future. And, you know, I just hope we can find a balance, uh, you know, uh, i- i- in the path forward.

   10. NANarrator1:05:40

       But this ... I- I think, Chamath, this is a, um, an inoculation, I think, to bad institutions. If you look at people who spent $250,000 going into debt at some big expensive college, these young folks are saying, "I'm not gonna do that anymore." Now those colleges have to react and change. And now we're seeing it with the teachers, right?

   11. BGBrad Gerstner1:05:59

       They're not gonna, they're-

   12. This ... But I think, Jason, it's actually more extreme than that. Like, we're learning that institutions aren't reliable, number one.

   13. NANarrator1:06:06

       Mm-hmm.

   14. BGBrad Gerstner1:06:06

       And then the second is that we're learning that those institutions are static. So meaning, like today there's ... I think that there's a lot, there's a big case to be made that the CDC doesn't really know what they were doing, and that in some cases the FDA has been a little overreactive. Okay? Now, what can we do about these things? It's not like we can have a new CDC that we all create and believe in, or a new FDA. These are the laws of the government. Those laws won't change because there's a bunch of incentives for folks who are currently in power that oversee those things to remain that way. So now, you know, exactly as Sax said, on the whim of frankly like, you know, maybe an overreaction, we pull vaccines off, then we pull them back on, then we pull them off. You know, the reaction to the AstraZeneca vaccine was kind of a little, uh, awe-inspiring. You know, "Oh, it's bad. No, it's okay. Oh, it's good. No, it's bad. Take it off, take it on, put it on." And that's a- that's been a global reaction. So you add all of these things up, I think the takeaway is what Friedberg said, institutions are broken because the incentives of the people that run them are not aligned to the people that actually expect output from them.

   15. CPChamath Palihapitiya1:07:18

       I'll say two things to this. O- th- that- that's an important point. One is institutions to me are like, like, like a, any living organism, they wanna grow. And so, uh, you know, every government wants to add laws, spend more money, grow its budget. Every company wants to have more power, grow its top line. Even every university, Harvard's endowment wants to grow over time. It wants to do more research. It wants to have more classes. It wants to have the bigger campus. Every institution as a result is then trying to aggregate, um, more resources and more power and more authority. And so, you know, then when you have these moments where the institution doesn't serve the stakeholders that it is meant to serve, you have this breakdown of trust in the institution and institutional fallout begins. Whether that's the financial system and the, and the evolution towards, uh, decentralized finance and Bitcoin and so on, or the failure of government and the ignorance against laws and what the government is telling us to do and so on, uh, or in companies. Um, a- and so the big question for this century is gonna be, are we gonna allow that to happen? Now, I mentioned this a few pods ago, what I'm most concerned about is the absolute, um, a- alternative to an institution is a mob rule. And a mob rule, as we've seen where you get cancel culture and you get, um, you know, GameStop going through the roof and- and you get, um-... trial before, um, uh, bef- without a jury, uh, and, and trial without a judge, uh, can be really ugly and can be really nasty. And so the original intention of many of these institutions was to create a system by which there are rules and values that we all ascribe to, and those values go out the window when those institutions fail. So the big pr- the big challenge, you know, we as, as a, as a, as a, as humanity are gonna face this century is this, this, this dichotomy between the failure of institutions and the need for institutions to constantly grow, versus the challenge of not having institutions with respect to how do we operate societally with mob rule, uh, and distributed rule. Um, and, and it's gonna be interesting to, to kind of see. Th- there's gonna be a lot of back and forths over the next couple of decades, I would imagine, with respect to how do we make, uh, economic, government, and business, uh, uh, uh, decisions and how they play, and w- whether institutions or kind of distributed decision-making plays a role, uh, in, in that

9. 1:09:26 – 1:11:42

   Republican Senator Josh Hawley calls for big tech antitrust reform, bypassing institutions for progress

   1. CPChamath Palihapitiya1:09:26

      oversight.

   2. NANarrator1:09:26

      I think there's a good, uh, good segue here to your pal, Josh Hawley, Hawley, uh, Sachs. I, I never thought I would see the day that a Republican wanted to bust, (laughs) uh,-

   3. CPChamath Palihapitiya1:09:36

      Yeah.

   4. NANarrator1:09:36

      ... all the big companies. But he says no acquisitions by companies with a market cap over 100 billion. Putting aside the fact that this wasn't Elizabeth Warren or Bernie Sanders proposing this, this was your b- your bestie, your Josh Hawley, Sachs. Have you met him or donated to him?

   5. CPChamath Palihapitiya1:09:54

      I haven't met him. I haven't met him. Um, I, I'd make-

   6. NANarrator1:09:56

      Get the second question, you make a little donation there to Hawley?

   7. CPChamath Palihapitiya1:09:58

      (laughs) Uh, maybe, maybe one day. We'll see, you know? We'll see.

   8. NANarrator1:10:02

      We'll see. Okay. What do you think about this, uh, concept?

   9. CPChamath Palihapitiya1:10:04

      Uh, two, two points, okay? N- number one, you're right that this is showing, you know, there's, there's a big political realignment underway. Uh, this legislation could have come from Elizabeth Warren or Bernie Sanders. I think they would have justified it in different ways. I think what Hawley's concerned about is a concentration of power by big tech companies who are then using that power to censor people, so that's kind of the impetus there. I think Sanders and Warren, their impetus would be around more of a concentration of wealth and money and the power that that creates. So slightly different motivations, but I think they're probably on the same page here. It's kind of this populist wildfire that's, uh, that's kind of burning in, in both parties. So I think that's sort of the first observation is, is, is it's kind of this new populist realignment of our politics. The second point I'd make about this is that this legislation is, it's what I would call sort of performative legislating. I mean, I don't think this bill is a serious proposal to become law. Um, it's too much of a sledgehammer. I think that, you know, if the goal here is to try and rein in big tech, I think just banning, you know, any acquisition by firms over $100 billion market cap, it is way too much of a, um... It's just not, you know, it's just not, uh, crafted enough. I mean, it would have-

   10. NANarrator1:11:18

       Is there any merit to it and how would you change it, Sachs?

   11. CPChamath Palihapitiya1:11:20

       It would have tons of unintended consequences for, you know, what we do. I mean, we've talked about this before.

   12. NANarrator1:11:25

       Wait, wait, isn't it good for what we do though? I mean, if companies stopped selling early, if Instagram and YouTube stayed independent, wouldn't this have been much better for the investors?

   13. BGBrad Gerstner1:11:32

       No, no, no, it was a, it was a blanket, it was a blanket statement that said any company can't do it if they were over 100 billion.

   14. CPChamath Palihapitiya1:11:39

       Right.

   15. BGBrad Gerstner1:11:39

       So Berkshire Hathaway's business, poop, done, gone to zero.

Episode duration: 1:18:40