E33: Apple’s hypocrisy, America fails math, crypto’s regulatory correction, Clubhouse, UFOs & more

Jason Calacanis 0:00 Friedberg. Friedberg.

Chamath Palihapitiya 0:01 What's up?

Jason Calacanis 0:02 It seems like you have a piece of shit on the side of your mouth, or is that a birthmark?

Chamath Palihapitiya 0:06 It's a-

Jason Calacanis 0:06 Oh, no, it's a birthma- gotcha. (laughs)

Chamath Palihapitiya 0:09 (laughs)

David Sacks 0:09 (laughs) Oh, sorry. Sorry, sorry.

Chamath Palihapitiya 0:10 Go on, Jason. Sorry. I'm sorry.

Jason Calacanis 0:10 Jes- Did, did you record that?

Chamath Palihapitiya 0:12 Yeah, absolutely. (laughs)

David Sacks 0:13 Jesus. (laughs)

Chamath Palihapitiya 0:14 Look at this guy. He takes his shirt off for one fucking selfie and now everybody who's fat and pale on the show, the other three of us, is gonna be ridiculed.

Jason Calacanis 0:23 I'm having steak tonight, S-T-E-A-K tonight.

Chamath Palihapitiya 0:26 Ah, I'm lifting twice a week now. (grunts) Come on, Sacks, come get some. Let's fucking go. Three, two-

Narrator 0:32 Don't go yet. Don't let your winner slide. Rain Man David Sacks. Don't go all in. As I said, we open sourced it to the fans and they've just gone crazy with it. The queen of quinoa. I'm going all in.

Chamath Palihapitiya 0:49 Hey, everybody. Hey, everybody. Welcome to another episode of the All-In Podcast with me again, the dictator himself, Chamath Palihapitiya, Rain Man David Sacks definitely with us, definitely a great driver. His dad lets him drive in the driveway. And, of course, everybody's favorite, the queen of quinoa, the science conductor himself, David Friedberg.

Jason Calacanis 1:14 Queen. Queen.

Chamath Palihapitiya 1:15 The queen.

Jason Calacanis 1:16 Queen. Queen.

Chamath Palihapitiya 1:16 Uh, lot of activity online. It's been a little bit of chaos since we, uh, all got together here. I guess we should talk about this Apple story with, uh, Antonio Garcia Martinez. You may have heard that he was hired by Apple to, I guess, run their ad efforts, and I have a little bit of information on kind of what he was gonna do there in terms of ads, which is really interesting. Um, but, uh-

Jason Calacanis 1:43 Tell us, tell us, tell us, tell us.

Chamath Palihapitiya 1:45 Okay. Well, anyway, y- you know how we're basically-

Jason Calacanis 1:48 Start at the beginning and assume people don't know who Antonio Garcia Martinez is.

Chamath Palihapitiya 1:51 Okay. So Antonio Garcia Martinez was a Facebook developer. He is some really smart guy who uses a lot of big words and wrote a book called Chaos Monkeys, which is a great book, where he takes, um, a very Jack Kerouac kind of, you know, a lot of prose, and, uh, he wrote this book about his time at Facebook. The problem is, he said some things in the book that would be, five years later, problematic. At the time, they were actually, uh, considered problematic by some folks. And in the full quote, maybe, uh, less problematic, but he was essentially ousted because of the following problematic quote. Um, the quote is, "Most women in the Bay Area are soft and weak, cosseted and naïve, despite their claims of worldliness, and generally full of shit. They have their self-regarding entitlement, feminism, and ceaselessly vaunt their independence, but the reality is, come the epidemic plague or foreign invasion, they become precisely the sort of useless baggage you'd trade for a box of shotgun shells or a jerry can of diesel." Um, and they shortened that quote to be that most women are soft and weak and, uh, full of shit. So, in conte- in context, in this book, he was contrasting the Bay Area women he had dated with the mother of his kids, who he describes as strong and tall and tough and amazing. Um, but still, the quote's a little gnarly, and the quote out of, you know, when it's out of context becomes particularly gnarly. And, of course, um, this led to, uh, a petition at Apple, which then led to him being fired, uh, which now is gonna lead to him probably (laughs) getting a $10, uh, million settlement. Uh, of course, there's a lot of, uh, hypocrisy being brought up here because Apple has allegedly been using, or Apple's supply chain has slave labor in it from the Uighurs and other ethnic minorities. Um, and obviously, Apple gave Dr. Dre billions of dollars, uh, for, uh, Beats by Dre, and, uh, he has a even more misogynistic, um, series of lyrics and was also accused of physically assaulting, um, I believe, his wife and other people he dated.

Jason Calacanis 4:22 Who? Dr. Dre?

Chamath Palihapitiya 4:23 Dr. Dre, yeah. Uh, so anyway, uh, what do you think? Okay, there you go. Next story. (laughs)

David Sacks 4:34 No, I'm happy to jump into this. Um, I think, Jason, I think you're, you're, you focus a little bit too much, and I saw your, your pod with, with Zach Collias on this. Um, a lot of good takes, but I think you're a little too focused on what AGM, as I think it's easier just to call him by his initials, what he did as opposed to what the employees at Apple did. And, um, there is at least four things that Apple did, or five things that Apple did wrong. I mean, number one, I think there was a very good reason not to hire this guy, which is that he wrote a best-selling tell-all book about the last big tech company he worked at.

Chamath Palihapitiya 5:07 (laughs) Yeah.

David Sacks 5:08 So why, if you're a big tech company, why in the world would you hire him? So that was stupid decision number one. But they did decide to hire him, and once they hire him, they got to treat him like any other employee and give him a chance to show what he can do. And so that leads to mistake number two, which is these 2,000 employees who signed this petition really distorted and took out of context that passage. And I know the passage is cringe, okay, um, a- and gnarly and, and it could, you know, certainly appear sexist, but you have to put it in its context. And the, the larger con- this is a work of literature. This is a best-selling, uh, book. It's, what, 150,000 words. They're taking 150 words out of context. And the context was, like you said, he's describing the mother of his children, the love of his life in, as this sort of Linda Hamilton-esque in Terminator type figure or Charlize Theron in Mad Max. And this passage is not in there to describe all women. It's just basically a literary flourish to contrast...... the, the, this, the woman that he loves, uh, being such a badass compared to every other woman. And, and, you know, when Kara Swisher interviewed AGM five years ago, she brought up this passage. He explained it and she said, "Yeah, okay, I get it." So, you know, it, it's certainly the case that people can understand the context if they choose to and they simply are not choosing to understand the context. Which brings me to mistake number three, which is these 2,000 employees lied in their petition by claiming that their safety is threatened by Apple hiring AGM. That is simply untrue. It's physically impossible in the era of Zoom when everyone's working from home, but this guy is not a threat to anyone's safety.

Chamath Palihapitiya 6:47 No.

David Sacks 6:47 But they u- but they use that claim, they make that claim because they know that if you accuse someone of threatening your safety, it will trigger the machinery of HR to remove that person from the workplace. This is the language of safetyism, and it's a specific tactic to basically get somebody canceled or removed from the workplace. Okay? And then that leads to the, the, the next mistake, I think mistake number four, which is the bosses at Apple caved into this pressure. They were total cowards. They never even gave AGM the chance to explain himself. They never asked him, "What did you intend by this passage? What were you trying to do?" And by the way, they knew about this book when they hired him. They-

Chamath Palihapitiya 7:25 Yeah, I was about to say, it's even worse. They knew about the book.

David Sacks 7:28 Right.

Chamath Palihapitiya 7:28 They had vetted and they talked to many people as when a big to-

David Sacks 7:31 Right.

Chamath Palihapitiya 7:31 ... when a big tech company hires somebody for a major position like this, they call all the references-

David Sacks 7:37 Of course, of course they do.

Chamath Palihapitiya 7:37 ... and all of this is uncovered and dealt with.

David Sacks 7:39 Of course.

Chamath Palihapitiya 7:40 Yeah.

David Sacks 7:40 They knew about it and then when the mob complains, they fire him summarily without subjecting the decision to proper HR processes. This is HR by mob rule. It's totally unacceptable. No company should be run this way. And then finally, that brings us to number five, is that in explaining their decision and trying to justify their cowardice in giving it to the mob, they said that they fired him because of his behavior. AGM never had a chance to engage in any behavior. He had barely started (laughs) at the job. This wasn't because of his behavior. This is because of the book that he wrote five years ago. So what they're saying is that if you ever publish a written work at any time in your life, years and years ago, that that can somehow constitute present day behavior and that other people in the workplace sh- can have a problem with that. Be- that, this is not behavior. And this is why he's gonna have a giant, um, defamation-

Chamath Palihapitiya 8:30 Settlement.

David Sacks 8:31 ... suit and settlement, because they are making him unemployable in the tech industry-

Chamath Palihapitiya 8:34 Yeah.

David Sacks 8:34 ... by claiming that he was fired for some, some sexist behavior. He was not.

David Friedberg 8:39 What do you think he'll get paid in a settlement?

Chamath Palihapitiya 8:42 I put it at 10.

David Friedberg 8:43 10 million?

Chamath Palihapitiya 8:44 Well, I was just thinking, he's a half million dollar a year employee up to a million, with his RSUs, so let's just put it at a million. Unemployed for 10 to 20 years because of this, or the damages to his reputation. In r-

David Friedberg 8:55 And present value that back, yeah.

Chamath Palihapitiya 8:57 So in... Yeah, so I think 10 million's the number.

David Friedberg 9:00 My curiosity in this was just, um, did those 2,000 employees feel the same way about Dr. Dre?

David Sacks 9:07 Of course not.

David Friedberg 9:08 Or did they, do they feel the same way about some of the movies that they sell, uh, in the iTunes store? Or do they feel the same way about some of the games that they enable, um, in the App Store?

Chamath Palihapitiya 9:22 In the App Store, yeah.

David Friedberg 9:23 Or some of the subscriptions that are sold? Um...

9:27 Right.

9:27 Do they care, do they care that much about what's happening in their Chinese supply chain? Um, I mean, the, I think it seems, at least, on the outside, the answer is no. But it would be interesting to get an explanation of that from the same HR people. Um, I don't know whether the guy should've been fired or not, but I do think that you should have a predictable standard. And every company is allowed to do what they want. If the standard at Apple is that we are going to hold you accountable for everything you've done in the past, irrespective of whether you've disavowed it or not, so be it. That's their right. And I think that the employees of that company have a right to do that. I think they said if you start to arbitrarily enforce it, um, you go down this weird place which is like, basically I think what they're saying is, if it's good for business, we're going to ignore it. If it's not obvious that it's good for business, we'll act because it's a low-cost way of keeping the masses, um, you know, the, the medicated. And I think that's what's even scarier to the 2,000 people. It's not that, you know, maybe they should feel proud that they got their pound of flesh, but they really should figure out how they wanna stand on all these other points, because to cherry pick puts, puts the whole company in just a weird posture that's, that's not scalable.

Chamath Palihapitiya 10:40 Freeburg?

David Friedberg 10:42 Uh, I'm less interested in the hypocrisy and the values debate, which is obvious as kind of the first order point with all this stuff. It's like, do the employees have the right values? Is there hypocrisy by management? Is there hypocrisy by the employees? What, what strikes me though is, um, a failure of leadership at these organizations. You know, you guys think back to Brian Armstrong's kind of purging of the woke mob and the political discourse that was happening at Coinbase a few months ago. He took a point of strong leadership, um, to a new level, and I think it highlighted when the leader steps up and says, "This is how we're gonna operate, these are how we're gonna make decisions," and puts his foot down, uh, people will leave and you evolve the culture. And I think it indicates to me that certain companies, as they've gotten really big and really successful, like Apple and even Alphabet and various other kind of large tech companies, the leaders no longer lead. The employees lead the narrative on culture and the narrative on values. And, um, you know, it speaks to two things. One is that there perhaps aren't founder leaders running those organizations anymore, that there are managers whose jobs is to-

Chamath Palihapitiya 11:54 That's critically important too. Yeah.

David Friedberg 11:55 ... whose job is to keep the wheels on and keep the wheels from falling off. So, they have more to lose and they are constantly trying to protect the downside than they are trying to be aggressive about growing to the upside.

David Sacks 12:07 Um, and then I think it's just, uh, you know, secondly, this kind of, um, you know, failure, uh, to kind of define what your values are from a leadership perspective, and the void gets filled by the employees. The void gets filled by the mob. And so while-

Chamath Palihapitiya 12:23 Yeah.

David Sacks 12:23 ... it's this one kind of, you know, debatable point today and this one kind of hypocritical point today, it's really interesting to see that this isn't happening at other companies that are founder-led. And if it is, the, you know, the culture gets reset.

Chamath Palihapitiya 12:35 Steve Jobs would have handled this completely differently than-

David Sacks 12:37 Steve Jobs would not have let his employees tell him who-

Chamath Palihapitiya 12:40 No. He would have stopped and said, "Let's have a discussion about this."

David Sacks 12:42 And I think he would have had a really clear point of view about who we hire, why we hire them, and how we make-

Chamath Palihapitiya 12:46 Right.

David Sacks 12:46 ... decisions, and not let the demo- democratic kind of rule or the, you know, um, employee rule, kind of-

Chamath Palihapitiya 12:51 It's not even democratic. It's not like all employees took a vote. How much of this, Chamath, has to do with the coddling of Silicon Valley employees for two decades vis-a-vis, you know, you get driven to school on your school bus. You sit on... You know, you get your lunch prepared for you. We do your dry cleaning. Every Friday, you get to come and ask challenging questions to the leaders. And this concept of, like, you know, everybody has a voice at work as opposed to, this is a company controlled by shareholders and or a founder and you work for it and there is a trade of services here, vis-a-vis what Toby had to say at Shopify, which is, "This is not a family. This is a sports team. You are here to perform. We are here to perform for our customers. The end."

David Friedberg 13:32 So the... In fact, if you, if you had a chance, and maybe Nick, we can post it in the show notes, but the email that Toby Lutke wrote to Shopify employees was unbelievable. That, to me, is like, that's a tour de force that should be basically, like, pr- That should be minted and sold as an NFT. Um-

Chamath Palihapitiya 13:50 (laughs) What's an NFT?

David Friedberg 13:51 And then, uh-

Chamath Palihapitiya 13:51 We forgot about those. (laughs)

David Friedberg 13:52 And it was, it was, it was just an incredible email, Jason, to your point. And the way that that started, uh, if I, I, I may be getting these facts wrong, but there was an emoji of a noose inside of a Slack channel. Um, and then, and then folks got quite upset with it. And so I think Toby's response was to basically shut down the whole channel and say, "Hey guys, you know, we're losing the script about why we're here." And, you know, I think Brian Armstrong's essay was a version of that. The question is, why are we here? If I had to guess, I think it's because we've pumped so much money into Silicon Valley companies. They didn't know where to spend it. And so I actually think that what we've really done is over-hired far too many people into many of these companies. And so they kind of are very smart people sitting around twiddling their thumbs and so obviously they're just gonna get distracted, meaning, um, I remember, like, you know, at Facebook, there was barely enough people to keep the lights on for a while. Then, I remember, by the time I was leaving, I was like, "Wow, there's way too many people here." A lot of them, and most of them, were all really, really smart, but it wasn't obvious to me what many of them did. And, you know, people would look at me and then say, "Oh, you know, that's a really arrogant thing to say, and that's not true, and everybody's valuable." I don't know. Um, you know, if you look at Google, I've always thought, like, that company could probably run by 2,000 people. But, you know, there's 200,000 people, so the 198 other thousand of them need to find something to do.

Chamath Palihapitiya 15:23 (laughs)

David Sacks 15:23 (laughs)

David Friedberg 15:23 It's probably the same at Apple. It's probably the same at all these big tech companies. And that's the leverage that you get from technology. It's naturally massively deflationary. So, but if you keep pumping billions and billions and billions of dollars into these companies where the app experience is written by 50 or 100 critical people or managed by 500 or 1,000 critical people, um, this is the natural byproduct, I think-

Chamath Palihapitiya 15:49 Which-

David Friedberg 15:49 ... of all of that.

Chamath Palihapitiya 15:49 By the way, Freidberg said organizations want to grow, right? Like, how many organizations say, "You know what? We should be smaller. We don't need this many people."

David Friedberg 15:56 Well, so you're saying something-

Chamath Palihapitiya 15:56 You know?

David Friedberg 15:57 So you're saying something really important. Not enough founders and boards understand the difference between growing a business and growing an org. Those are two totally different things, and the reason is because we've lost sight of very simple financial metrics in Silicon Valley, meaning if you go to any other industry where there is a cost of capital, people understand what return on invested capital means. They know how to measure it.

Chamath Palihapitiya 16:21 Yeah.

David Friedberg 16:21 They know what operating leverage means. They know what margin expansion means, and they-

Chamath Palihapitiya 16:24 Yeah, we, we only have valuation, like... (laughs)

David Friedberg 16:26 And they seek that out. Here, we think about, exactly as you said, valuation. And so this idea that having 100 people do the work and see margins lift is antithetical to the Silicon Valley culture. It's, "Oh, as margins go up, let's just keep running the same profitable business, but instead have a 500 people, a 1,000 people."

Chamath Palihapitiya 16:43 Saks, what do you think? Y- you're an operations machine. People would say on a COO basis, you're one of the top three to five in the history of the Valley. What do you say, COO man?

David Sacks 16:53 (laughs) Um, yeah, I mean, look, Ch- Chamath is right that in a company that's w- well-run and well-led where, uh, people, uh, people don't have time on their hands to engage in these shenanigans. Um, so yeah, I mean, I think, I think that's absolutely right. I think companies and startups are increasingly have to choose whether they want to be Apple or whether they want to be, um, Coinbase or Shopify for that matter. And just this, this week at Apple, there's a new petition circling. Now there's a petition called- by thousands of employees calling for Tim Cook to denounce the Israelis and endorse the Palestinian side-

Chamath Palihapitiya 17:29 What? (laughs)

David Sacks 17:29 ... of the conflict. Yeah.

Chamath Palihapitiya 17:30 (laughs) How's that gonna work? (laughs)

David Friedberg 17:32 Well, uh, of course-

Chamath Palihapitiya 17:32 Does he have a position on abortion? Is there an-

David Friedberg 17:34 (laughs)

Chamath Palihapitiya 17:34 ... abortion position at Apple yet?

David Sacks 17:36 Well, but now, but, but now that they've given into the, the woke mob, there's no reason for the mob to stop. They're gonna be-

Chamath Palihapitiya 17:41 Yeah.

David Sacks 17:41 ... circulating a petition every week, and that's kind of the point is... So, and actually AGM himself had a really good quote about this. He, he did a great interview with, um, Matt Taibbi and, um, he, he laid out the choice that companies face like this. He said, "It's interject..." This is, um, Antonio Garcia and Martinez saying, "It's interjecting the whole fucking Twitter cesspool with all the dog piles and all the performative signaling and all that crap into a corporate setting and replicating those dynamics and calling it work." That's basically what happened is... What's happening is you, you're, they're... These employees are performing Twitter at work-

Chamath Palihapitiya 18:16 Yes. On Slack.

David Sacks 18:18 And they're per- on S- on Slack and they're-

Chamath Palihapitiya 18:18 Yes.

David Sacks 18:18 ... pretending like it's really work, and it's not.And I think, you know, founders are gonna have to make a decision. Do you stand up and take a, a Brian Armstrong-like position or a Tobi position? Or do you eventually degenerate into some sort of-

Chamath Palihapitiya 18:32 Or a Basecamp, by the way.

David Sacks 18:34 ... mob rule? Or a Basecamp- (laughs)

Chamath Palihapitiya 18:34 Because even Basecamp, the most woke, virtual signaling founders on Twitter decided to take-

David Sacks 18:41 That's right.

Chamath Palihapitiya 18:41 ... the most libertarian or spartan approach, you know, stoic approach of Tobi, to give you Tobi's quote.

David Sacks 18:48 Well, well, well bit... Well, Basecamp, just to finish the Basecamp thought. So, so Basecamp tried to accommodate this sort of like woke mentality and what they found is that they got pushed so far, it became so distracting, they eventually had to move to the Armstrong position and that's kind of my point is once you-

Chamath Palihapitiya 19:05 Yeah, everybody's-

David Sacks 19:06 ... give in-

Chamath Palihapitiya 19:06 ... going to move to that-

David Sacks 19:07 Yeah, at the end.

Chamath Palihapitiya 19:07 ... point. I mean, and if you don't believe... What I, what I said was like, "Listen, if you believe that a organization that allows political speech and this kinda stuff as a p- primary function inside the company, well then go build a competitor to Basecamp and show that that system works better." Here's Tobi's quote, uh: "To help you make this more clear to team members, here are some pointers about what Shopify is not. Shopify, like any for-profit company, is not a family. The very idea is preposterous. You are born into a family. You never choose it and they can't un-family you. It should be massively obvious that Shopify is not a family, but I see people, even leaders, casually use the term like Shopifam, which will cause the members of our teams, especially junior ones that have never worked anywhere else, to get the wrong impression. The dangers of 'family thinking'" in quotes, "are that it becomes incredibly hard to let poor performers go. Shopify is a team," italicized, "not a family. We literally only want the best people in the world. The reason why you joined Shopify is because I hope all other people you met during the interview process were really smart, caring, and committed. This is magic and it creates a virtuous magnetism on talented people because very few people in the world have this in themselves. People who don't, should not be part of this team." I mean-

David Friedberg 20:25 When I was, um, when I was at Facebook-

Chamath Palihapitiya 20:26 Tha- that's strong.

David Friedberg 20:27 (smacks lips)

20:27 When I was at Facebook, we used to convene the senior team. And, you know, I was like, "I want... I- I really wanna fire the bottom 5 or 10% of the company over here." And we would force stack rank and we did it for about three or four years, and then the excuse was, "It's too big and there are too many people and the roles are too diverse and you can't rank." I- I actually don't believe that, even to this day. I think it's pretty obvious who the real 1000x kind of employee contributors are and by the way, they exist in every function. There's 1000x salespeople, there's 1000x, you know, product managers, there's, there's the 1000x people that work in facilities. They exist in every job function and companies, I don't think, do a good enough job of figuring out who they are. And so instead what happens is people that are not even a 100x or not even a 10x are really more like a 1 or 1.1x can basically hide in all of that noise. And I think that if you could separate HR into two things, or there's really three things. One is like benefits, which is critical. The second is actually like safety and the, the ability to whistle blow if there's something really nefarious or bad that's happened. And then the third that's really valuable, I think is organizational design, right? How do you put people in good jobs and how do you allow them to have a huge amount of autonomy to run and build a career? But all of this other policing stuff, to me, just seems like, um, it coddles to the lowest 25%. I don't know if the... and this is my intuition, the, to the lowest 25% performers of every company.

Chamath Palihapitiya 21:53 Of course. Of course, it does and just to, uh, close this story up and wrap to our next, uh, Anton Agm announced that he is going (laughs) to take a year, wait for it, to write for Substack. (laughs)

David Friedberg 22:04 (laughs)

Chamath Palihapitiya 22:04 So, he is gonna get paid $10 million, I- I would guesstimate, in a settlement by Apple. He's gonna get a half million dollar advance.

David Friedberg 22:12 I'll take the over. I'll take the over.

Chamath Palihapitiya 22:13 You'll take the over? (laughs)

David Friedberg 22:14 (laughs)

22:14 I'll take the over.

Chamath Palihapitiya 22:14 If only we can bet on this. Oh, I set such a good line. We can bet on it.

David Friedberg 22:19 We can set a good line.

22:19 We can bet on it.

Chamath Palihapitiya 22:19 Yeah, we can bet on it. I'll take the over. Who, okay, I set the line at 10.

David Friedberg 22:22 I'll take the over.

Chamath Palihapitiya 22:22 Anybody want the under?

David Friedberg 22:25 I'll take-

22:25 Yeah.

22:25 You'll take the... uh-

22:27 Well, go, go give it, give a different bid and I'll then, I'll figure, I'll tell you what-

22:29 Yeah, you got a different line, you can set it different line.

Chamath Palihapitiya 22:30 Yeah, different line. Set a different line. I think 10's a good line.

David Friedberg 22:34 No, I think it's conservative.

Chamath Palihapitiya 22:34 'Cause you gotta think like if- if they offer him 7 or 8 million-

David Friedberg 22:37 Jack, can I point at you?

David Sacks 22:38 I mean, it's gonna be something like that. I don't know what the big... what the number is, but, uh-

Chamath Palihapitiya 22:42 We'll never know.

David Friedberg 22:42 I'll- I'll ma- I'll make a line. 15.6 million.

Chamath Palihapitiya 22:45 I'll take the under. I'll take the under.

David Friedberg 22:47 Wow. Really?

Chamath Palihapitiya 22:48 We'll take the under. Yeah, 15's way too much.

David Friedberg 22:50 David?

Chamath Palihapitiya 22:50 Way too much.

David Friedberg 22:50 That David's quite sensitive.

David Sacks 22:51 I'd say under 15.

Chamath Palihapitiya 22:52 Yeah, that's not a good line. I think 11 would've been a better line.

David Friedberg 22:56 Good thing 11 11.5 is a good line.

Chamath Palihapitiya 22:58 11 can run the book.

David Friedberg 22:58 Okay, let me do it. 11.5, what do you take?

23:00 Can I-

David Sacks 23:00 Jamal can afford the book against all three of us.

David Friedberg 23:02 Over. Over.

Chamath Palihapitiya 23:02 Okay, 11.5. Jamal takes the over. 11.5? Free Book Sacks?

David Friedberg 23:06 Yeah, I don't know. Under... Let's keep going.

23:08 Can I just tell you why? If you look at the last four year compounding of Apple stock, right? And so if you think about reasonable number of grants as his level of seniority, plus the-

Chamath Palihapitiya 23:16 Oh.

David Friedberg 23:16 ... imputed compounding-

Chamath Palihapitiya 23:17 Mm-hmm.

David Friedberg 23:18 ... plus whatever he would have gotten-

Chamath Palihapitiya 23:19 Oh, you should be part of his team. Who-

David Friedberg 23:20 (laughs)

Chamath Palihapitiya 23:20 Somebody send this clip because that's the argument is-

David Friedberg 23:24 I- I- I do think you end up getting to probably 20 million.

Chamath Palihapitiya 23:26 Sure, yeah, you just, you got to include the appreciation.

David Friedberg 23:28 And then you get to buy it now, yeah, you gotta buy it now priced at 15 and call it a day.

23:31 And they've-

Chamath Palihapitiya 23:31 But also, also you could make the argument they've rendered him unemployable in the industry, so he needs-

David Friedberg 23:36 And then there's foregone income for them in the future.

23:39 That's what I believe is, ugh, then- then it could be 20-

Chamath Palihapitiya 23:40 Also, mental suffering. What about suffering?

David Friedberg 23:42 Yeah.

Chamath Palihapitiya 23:42 He is going to suffer. He's gonna need to be on meds.

David Friedberg 23:45 Yeah.

Chamath Palihapitiya 23:45 My client is suffering. He's in therapy twice a week. He can't get out of bed. He's not gonna be able to be in functional relationships, and he's too scared to leave the house.

David Sacks 23:54 He should wait on the Substack, 'cause he's gonna make so much money on Substack, it's gonna mitigate his damages. (laughs)

Chamath Palihapitiya 23:59 Yeah, don't take the-

David Friedberg 24:00 (laughs)

Chamath Palihapitiya 24:00 ... Substack deal.

David Sacks 24:01 Don't take... (laughs) Wait, just wait on the Substack. (laughs)

David Friedberg 24:03 Wait, I'll, I'll, I'll give you guys another stat. Do you guys know what Apple's market cap divided by employees is? Apple is-

Chamath Palihapitiya 24:09 Uh, it's probably-

David Friedberg 24:09 Apple's market-

24:10 7 million an employee?

Chamath Palihapitiya 24:12 Anyone else?

David Friedberg 24:13 Wait a second. This got me higher than that.

Chamath Palihapitiya 24:14 There's 100,000 employees and it's worth 2 trillion?

David Friedberg 24:18 Okay. There's a 150,000 employees.

Chamath Palihapitiya 24:20 Okay.

David Friedberg 24:20 2.1 trillion, so it's 14 million an employee.

Chamath Palihapitiya 24:24 Perfect.

David Friedberg 24:24 So the other way to think about it is if Apple's like gonna lose one or two good employees over this-

24:29 Um, you know, they'd, uh, they'd happily pay up to get, uh, to get the guy to be quiet. So, it's worth one employee to pay $14 million. Uh-

David Sacks 24:37 Well, no. I mean, uh, well, you're, you're, you're not dividing by all the slave labor in China.

David Friedberg 24:42 And the-

David Sacks 24:43 (laughs)

David Friedberg 24:43 ... Sorry, I'll, I'll recalc. I'll recalc.

David Sacks 24:45 (laughs)

David Friedberg 24:45 Yeah. Well, no, they cost, they actually cost zero, so. (laughs)

David Sacks 24:49 (laughs)

David Friedberg 24:50 That was bad. Sorry. (laughs)

24:53 Or I'll recalc

Chamath Palihapitiya 24:53 I mean, it's dark-

David Friedberg 24:54 Or, or, or I'll recalc.

Chamath Palihapitiya 24:54 ... but it's true.

David Friedberg 24:54 Or I'll recalc.

Chamath Palihapitiya 24:55 Or I'll recalc.

David Friedberg 24:55 Or I'll recalc.

Chamath Palihapitiya 24:55 I mean, this is the hypocrisy of Apple. They've literally got slave labor in their supply chain, not that they want it in their supply chain, but those employees-

David Friedberg 25:03 Jacob, how do you, how do you, how do you know that?

Chamath Palihapitiya 25:05 ... those employees had no to-

David Friedberg 25:05 How do you know that?

25:05 Let, let's just go through this 'cause, like, this is a common narrative, but has anyone actually, like, gotten to the bottom of-

Chamath Palihapitiya 25:10 Well, that's why I said reported. I mean-

David Friedberg 25:12 Yeah. Yeah.

Chamath Palihapitiya 25:13 Uh, it is, it is known that the Uighurs are-

David Friedberg 25:14 Again, like I don't like, I don't, I don't like pushing, I don't like pushing narratives that aren't, like, you know-

David Sacks 25:17 Okay, okay. Well, I, I actually, I tweeted something that... Well, I retweeted something that came from, I think, a pretty valid sto- source. Um, that author from The Atlantic who I think is pretty legit.

Chamath Palihapitiya 25:29 Also, I just think, uh, just in terms of his quote, if he had taken the word woman out of the quote, um, most people in the Bay Area are soft and weak, mm, in a zombie apocalypse, I don't think you're recruiting from the Bay Area. Uh, but related to this story, uh, in terms of Chamath's point about, you know, uh, 1,000 X performers,

Chamath Palihapitiya 25:48 uh, America is, uh, really doing a bad job at math. And Garry Tan, uh, the venture capitalist, retweeted and, and participated in a tweet thread about immigrants. Um, "Who know that standardized test is probably your best shot at getting somewhere." Uh, "Your money or social status can't take you. The rules are, well, standardized." And he tells this story about this. But there was a Persuasion article (laughs) , um, about us failing math and that they're going to be, in California, getting rid of the gifted programs for math because it's unfair to the kids who are not gifted. As a kid who is, was not gifted, uh, and to the three kids on the program who were in gifted programs, or at least two of you were, I have no problem with there being a gifted program, but any thoughts on this?

David Friedberg 26:34 I think it's just shameful.

David Sacks 26:36 Yeah. It really is.

David Friedberg 26:37 It's, I mean, like, we are, we are really doing our level best to just completely fuck our population. Why? I mean, why is this even... How could this even be possible? It's, like, like, just as, like, it's, it's kind of, like, the equivalent. It's the moral equivalent of actually saying, "You know what? We're gonna eliminate welfare for the bottom fo- 5%." Like, w- our job as a society is to kind of, like, find the broadest set of solutions for the most number of people and solve for both extremes. So, when you're dealing with education, you both need to understand that there are folks that need some kind of structural support. Look, when I came to Canada, I had ESL, right? English as a Second Language. You take that so that you can learn the native language of a country. It didn't mean that I was stupid, it just meant that I was behind. You know? If I had dyslexia or something else, I would need some kind of support. One of my children had a speech impediment. We had a speech therapist. This is what you do. But on the other side, if you have a kid who's an incredibly high performer who has the potential to just completely crush, hey, like, you should be able to give that kid a pathway to achieve and give back. So, the idea that you would eliminate anything at the extremes is kind of completely uncompassionate and stupid, just totally fucking stupid.

Chamath Palihapitiya 27:54 Well, it's in the name of having a more equitable (laughs) math class.

David Friedberg 27:58 Again, I hate that word please don't use that word.

Chamath Palihapitiya 28:00 Yeah, I get that to trigger you. (laughs)

David Friedberg 28:01 Please don't use that word. Please don't use that word. That is let, that is the least-

28:04 By the way, this, this... I mean, this goes back to the point I made a few episodes ago that, you know, you can have progress or you can have equality, but it's very difficult to have both. And, uh, you know, if you wanna try and make everyone equal and give no one the opportunity to have more or get more than anyone else because of whatever the circumstance may be, whether it's earned-

Chamath Palihapitiya 28:21 No, that's not true.

David Friedberg 28:21 ... or whether it's inbred. Uh, uh, no, but this is my point. Like, you know, you limit the ability for everyone to, to progress as a group because we're now limiting the ability for folks to take calculus. I think-

28:31 No, equality, look, I'll use a video game example. Equality means we all get to play Grand Theft Auto, not that we have a, a, somebody who actually plays for us and gets to the same answer and just gives you a ticket that says, "Here's what your result was."

Chamath Palihapitiya 28:43 Yeah, we don't all get the same score on Donkey Kong.

David Friedberg 28:44 Right.

28:44 You don't get the same score.

Chamath Palihapitiya 28:45 Yeah.

David Friedberg 28:46 So the, so the, so the, that's, that is what equality means, is that we all get to play, and we all get a chance to play.

28:51 Versus equity, which is leveling everyone.

28:53 Equity is leveling everybody and saying, "Here's your result."

28:56 Right.

28:56 "And by the way, it's the same as this other person's result."

28:58 M- and this, and this is number... Whatever the misnomer is. But the, the notion of leveling everyone, where no one can be ahead of anyone else by too far, uh, obviously limits, as a group, our ability for the top decile to, to increment or the top quartile to increment. Um-

29:10 I gotta think.

David Sacks 29:10 I, I-

David Friedberg 29:10 Look, let's, and let's again use-

David Sacks 29:12 Yeah.

David Friedberg 29:12 Let's again use our friends because, instead of ours, but, you know, we know a lot of really smart people, um, who have really, really smart kids. We also know people in general that are in tough circumstances who also probably have really smart kids. Just purely selfishly for me, I want those kids (laughs) doing the best they can to figure out what the hell they can invent for us in the future. Why would you slow those kids down? You know?

David Sacks 29:40 Yeah.

David Friedberg 29:40 Right.

29:40 It's kind of, like, saying, you know what? Like, how about a Black athlete? Would you, would it be preposterous to say, "You know what? You don't have a right to go to the NBA and make money for your family. I'm gonna slow you down because there's another white kid that's gonna go through four years of college, so you know what? You're gonna have to go through four years of college, and you're gonna have to pay for it."

Chamath Palihapitiya 29:57 Well, actually, what I would propose, uh, Chamath-

David Friedberg 29:59 Does that make any sense?

Chamath Palihapitiya 30:00 ... is when I go up to dunk, that we just, the rim automatically lowers two feet.

David Sacks 30:05 Yeah, yeah, yeah. I like that.

Chamath Palihapitiya 30:05 So I can dunk (laughs) , and then when you go-

David Sacks 30:08 I like that.

Chamath Palihapitiya 30:08 ... for, like, a ball just raise it six inches.

David Sacks 30:09 Yeah. It's more equitable.

Chamath Palihapitiya 30:09 It'd be more equitable for me.

David Friedberg 30:11 That's more equitable.

Chamath Palihapitiya 30:12 (laughs)

David Friedberg 30:12 Yes, more equitable.

David Sacks 30:13 Yeah, let me, let me, let me add another layer to this. So, I, I agree with you, with you guys that what we should be thinking about is opportunity. We should always be asking, "What increases opportunity for the most people?" And that's how we should measure political programs, and we're not doing that here. We are r- sort of leveling down, but I would say it's even more nefarious than that.... which is, I think what's happening is that the education establishment is completely failing our kids and our schools, and what they're trying to do is destroy the evidence of that failure.

Chamath Palihapitiya 30:41 Wow.

David Sacks 30:42 And, and so they're hiding, they're hiding the results. Now, this persuasion piece-

David Friedberg 30:47 Well said.

Chamath Palihapitiya 30:47 Wow. Well, well said.

David Sacks 30:47 Yes. This persuasion piece lays out the statistics, which are pretty grim. Okay? So according to these like global measurements by OECD, okay, math proficiency in the US, we rank 37 in the world, okay, and there's only 37 developed nations in the world according to the developed... So we're last among developed countries. China, which is our main global competitor, is number one. Okay? And we achieved these horrible results despite ranking fifth in the world in per-pupil spending. So it's not a spending problem. Okay? And as we know, to the extent we do have high performing math students in the US, a huge, uh, majority of them are actually foreign born, and so we're actually kind of cheating our, our numbers a little bit. It's even worse than it appears. Now, what is the education establishment doing about this? How are they hiding the failure? Well, uh, when school comes back in the fall, they're planning to eliminate accelerated math. Okay? That means that there's no more algebra for eighth graders who are ready to take it on. There's no more calculus for high schoolers who want to, you know, do like the AP classes and get a jump on STEM, you know, for college. The entire idea of gifted students is now under attack, like we talked about, in the name of equity. It's become a catchall for every bad idea. And the-

Chamath Palihapitiya 32:00 (laughs)

David Sacks 32:00 ... University of California system has now abandoned the SAT and ACT. So they temporarily got rid of those requirements during the pandemic, but now they've used it-

Chamath Palihapitiya 32:11 Yeah, never waste a crisis. Let's, let's keep them in.

David Sacks 32:12 ... as an excuse. They've never wasted-

Chamath Palihapitiya 32:12 Yeah.

David Sacks 32:12 ... a crisis and now they say they're not bringing back the requirements until at least 2025. And you can bet it's never gonna return at all. And so here's the thing, they're trying to get rid of measuring how bad we are at math so we won't have to think about it. They just want to give everyone a gold star and a pat on the back, and s- say how equitable we are.

Chamath Palihapitiya 32:30 You know what this reminds me of, Sax, is when you threw away the, um, the, uh, digital scale I got you.

David Friedberg 32:36 (laughs)

Chamath Palihapitiya 32:36 (laughs)

David Sacks 32:37 Right. I'm not, I'm not fat because I'm not measuring it. Great. Problem solved.

Chamath Palihapitiya 32:42 Perfect. (laughs)

David Friedberg 32:44 (laughs)

Chamath Palihapitiya 32:45 Oh my God, it's like, we really, w- it's, it's the movie Idiocracy. It liter- literally, we are doing the movie Idio- have you guys seen Idiocracy? It's like-

David Friedberg 32:53 Why, why don't we, why don't we just, uh, why don't we just eliminate all admissions programs at every university and just have one global admissions board-

Chamath Palihapitiya 33:00 Yeah.

David Friedberg 33:01 ... where every campus is the same? What is the difference between MIT, um, and Stanford and Caltech and the University of Arkansas? In my opinion, there shouldn't be. It's more equitable to just have somebody go close to home, because you can save money, you know, carbon emissions are lower, right? You can just take the bus to the local school.

Chamath Palihapitiya 33:18 Also, competition is unfair.

David Friedberg 33:19 You can have one centralized place teach you-

Chamath Palihapitiya 33:21 Yeah. Why have anybody compete?

David Friedberg 33:22 ... a few basic course. I mean-

Chamath Palihapitiya 33:23 Yeah.

David Friedberg 33:24 ... if I said this, you'd, you'd think that I was a crazy person.

Chamath Palihapitiya 33:26 Yeah.

David Friedberg 33:26 Except that's basically what we're now telling all of our high school and middle school kids.

Chamath Palihapitiya 33:29 I'm also getting rid of Michelin stars, and I'd like Yelp to take off their f- review system, because it's not equitable. Like, we should not have Michelin stars anymore. Every chef should just get-

David Friedberg 33:38 You know, every restaurant's the same.

Chamath Palihapitiya 33:39 Every restaurant should get three-quarters of a star.

David Friedberg 33:41 We should not, the health department should not give ranks of letters, and they should not be forced to post it because that's inequitable.

Chamath Palihapitiya 33:48 No. Absolutely.

David Friedberg 33:49 You know?

Chamath Palihapitiya 33:49 Yeah. Yeah. Also, you can game, you can game the health test. You could-

David Friedberg 33:52 Okay, so, so-

Chamath Palihapitiya 33:53 ... literally just follow the rules.

David Friedberg 33:54 ... let me just ask the, um, the counterpoint question, which is, uh, uh, standardized testing, for example, benefits people that can afford tutors and special, you know, classes to get ahead and therefore-

Chamath Palihapitiya 34:08 Provide more tutors.

David Friedberg 34:09 ... yeah, therefore, it-

Chamath Palihapitiya 34:09 For free.

David Friedberg 34:10 ... well, therefore, it's higher income people that can always l- well, the point is they can always layer on additional tutoring, they can always layer on additional classes, and they're, therefore, they can always-

Chamath Palihapitiya 34:17 There's a finite number of math. It's a finite score, Friedberg. You can only get 800 on the math SATs.

David Friedberg 34:22 I, I'll, I'll, I'll, I'll be somewhat, um, flip-floppy here. I don't believe in standardized tests that much. I never did well particularly in standardized tests. I do think that they can be gamed. But that's different from what we're talking about. What we're saying is, if kids show aptitude, we are explicitly choosing to not give them a chance to develop at their potential. And the problem is, we do this in other areas. We do it in athletics, we do it in music, we do it in the arts, but we're not gonna do it in STEM. That's what we're choosing to do. That is what's crazy. So choose to get rid of the SAT or ACT-

Chamath Palihapitiya 34:59 Yeah.

David Friedberg 34:59 ... whatever you want. I don't care. But if you are the LeBron James of physics, Jesus Christ, like, let-

Chamath Palihapitiya 35:05 Mm-hmm.

David Friedberg 35:05 ... that kid become the LeBron James of physics.

35:07 I'll tell you, like, I, I, um, I got into UC Berkeley because I had great standardized test scores, because I had an aptitude for-

Chamath Palihapitiya 35:14 What was your SAT, Friedberg? Let's do this.

David Friedberg 35:17 Um, I got a, uh-

Chamath Palihapitiya 35:19 Let's do this.

David Friedberg 35:20 ... an 800 math and I think it was-

Chamath Palihapitiya 35:22 Of course.

David Friedberg 35:22 ... a 720 verbal.

Chamath Palihapitiya 35:24 Y- okay, so you got a 1520 out of 1600 at the time. I got an 11-

David Friedberg 35:28 Yeah, and I got an 11-

Chamath Palihapitiya 35:28 I was 1160.

David Friedberg 35:28 ... and I got an 800 on the math.

35:30 (laughs)

Chamath Palihapitiya 35:30 Sax.

David Friedberg 35:30 You know. (laughs) You know, right?

David Sacks 35:32 I was, uh-

Chamath Palihapitiya 35:32 I'm last, obviously. Sax, go ahead.

David Sacks 35:34 I wa- I wa- I was, uh, 750 math, um, 720 verbal.

David Friedberg 35:40 14-

David Sacks 35:41 ... 70.

David Friedberg 35:41 Are you writing this down?

Chamath Palihapitiya 35:42 470. Take that one.

David Sacks 35:42 This was pre- this was pre the inflation. There was a big, uh, SAT inflation.

David Friedberg 35:46 I, I was, I was, uh, I was 1510 on the SAT.

Chamath Palihapitiya 35:49 Oh, we were... Okay, so I was-

David Friedberg 35:51 I woke up, I woke up in a-

Chamath Palihapitiya 35:51 ... 400 points, 500 points behind each of you.

David Friedberg 35:54 I wrote it. In C- in Canada-

Chamath Palihapitiya 35:55 Makes sense.

David Friedberg 35:55 ... it was just kind of like, we didn't even write it, but I went and I wrote it just for shits and giggles and...

Chamath Palihapitiya 35:59 I didn't do well, I didn't do well-

David Friedberg 35:59 Well, but, but, Shamayun said you, you just said you weren't good at standardized tests, so what are you talking about with this?

Chamath Palihapitiya 36:03 Yeah, you're in the top 3%.

David Friedberg 36:05 Yeah.

36:06 Yeah, I know, but generally, like, I wasn't a good test taker. I was in probation in college academically.

David Sacks 36:10 Yeah, but I think-

David Friedberg 36:10 I'm not a good test taker.

David Sacks 36:11 But look, the, the reason why these tests got invented was actually to prevent discrimination. Um, I think it was back in like the '50s.

David Friedberg 36:18 Right, right.

David Sacks 36:19 Um, you know, I think it was like... And at that time, it was Jews being kept out of the IV League. And one of the ways that they corrected for that was they made everyone take the same test, and so you could see the scores and it would sh- shine some light on, you know, making sure that people didn't just get in because they were legacies, that they got in because-... um, you know, they, they had good, they had good, good scores. And there's been decades of work since then to try and eliminate bias in the test, and so the, the, the claims of bias now in the tests really aren't supported. Now-

Chamath Palihapitiya 36:48 Right.

David Sacks 36:48 ... to, to Freeburg's point, obviously that if you take some rich kid who lives in the suburbs who gets a 1400 and you compare that to a kid in the inner city who doesn't have... who grew up poor, doesn't have the advantages, and that kid gets a 1300, well, which score is better? Probably the 1300. And so you can take that into account, in my view, in the admissions process. But eliminating the scores altogether? Why would you wanna have less information to make a decision?

Chamath Palihapitiya 37:18 Yeah. There, there's no reason not to get rid of these. I would just think more holistically about how you accept students. And I mean, isn't more competition and having better teachers what we should be focusing on here, as opposed to even standardized testing or, God forbid, canceling programs? Let's just invest in more competition for schools.

David Friedberg 37:35 Well, so in Canada, we had this thing where when, when I was graduating, we had specific different kinds of math contests and computer science contests and other things that you could write, the Putnam, et cetera. And, uh, those things were actually really instructive because they were purely verticalized things that could test your aptitude. And the school that I went to, University of Waterloo, would look at a lot of those things and adjust for it, because my grades were decent, but my... some of those... one... this one specific math test I took was pretty good, I remember. And then they would adjust it exactly as David said to, "What is this kid's background and his circumstances?" And they called it a Frunch factor. They would just adjust my marks. And that's how I got into Waterloo, and I didn't think I was going to. So, um, there's all kinds of ways where you can be smart about it. But again, we're talking about... Guys, don't lose sight of what you're saying. We are actually gonna cut all these kids off at the knees starting in grade eight.

David Sacks 38:29 Right.

David Friedberg 38:29 So forget about all of this stuff.

David Sacks 38:30 Right.

David Friedberg 38:30 By the time that these kids graduate, they're gonna be... I... honestly, they're gonna be, like, really dumb.

Chamath Palihapitiya 38:35 Right. The problem, the problem-

David Friedberg 38:37 This really has to be-

David Sacks 38:37 ... ultimately isn't just measurement. It's the denial of opportunity to learn. It's about, it's about getting rid of the learning and the classes. That's the biggest problem.

David Friedberg 38:45 You have to move to a state with a gifted program now if your kid is really smart. You have to give up-

Chamath Palihapitiya 38:49 Or opt out of public education, um, which doesn't help anybody. I mean, literally, schools don't have to te-... We, we put it... Ne- we've now designed a system, to summarize (laughs) . Schools don't have to compete for students. Teachers don't have to compete for jobs or for their employment. And now we're saying students don't have to compete. So if you remove competition from the human condition, uh, you're just not gonna have any performance. There, there's going to be no progress. And as a species, we need progress. We need to solve global warming. We need to solve a lot of issues. Uh, and, and don't we wanna live longer and better lives? Like, where is the optimistic nature of the human species? Competition is at the core of excellence. And to just take it out of everything, the whole stack?

David Sacks 39:36 J-Cal, that's the smartest thing you've ever said, way smarter than an 1120 SAT score.

Chamath Palihapitiya 39:40 (laughs)

David Friedberg 39:40 (laughs) Thank you. Thank you. I mean, honestly-

David Sacks 39:42 Are you sure it was only 1120?

Chamath Palihapitiya 39:44 Honestly, see-

David Sacks 39:44 By the way, how lame is it that we're still talking about our SAT scores like 30 years later?

Chamath Palihapitiya 39:48 800 was the average-

David Friedberg 39:49 No, no, no.

Chamath Palihapitiya 39:49 ... so in Brooklyn-

David Friedberg 39:50 What's lame-

Chamath Palihapitiya 39:50 ... when you're 320 points above average, David-

David Friedberg 39:52 What's lame-

Chamath Palihapitiya 39:52 ... it's a BFD.

David Sacks 39:54 (laughs)

David Friedberg 39:54 What's lame is the four of us all remember-

David Sacks 39:56 (laughs)

David Friedberg 39:56 ... down to the number-

Chamath Palihapitiya 39:57 (laughs)

David Sacks 39:57 ... what our score is. That's what's lame.

Chamath Palihapitiya 39:59 (laughs)

David Friedberg 39:59 That's lame.

Chamath Palihapitiya 39:59 I think I was 1120, 1150. I gotta, I gotta look it up. Um, all right. Uh, do we wanna go to the crypto meltdown or talk about inflation or do we... should we dovetail those together or do you just wanna go straight to UFOs?

David Friedberg 40:10 Well, Bri- Biden just, uh... they, they just, uh... a press release just hit the wire and they just cut the infrastructure bill from 2.3 trillion to 1.7 trillion.

David Sacks 40:19 And, and-

Chamath Palihapitiya 40:19 Oh, so we're doing our job (laughs) here at the-

David Friedberg 40:21 And-

Chamath Palihapitiya 40:21 ... Altman Podcast.

David Friedberg 40:22 ... and, uh, I, I, I had heard from somebody that there just is not the broad-based support, um, for, uh-

Chamath Palihapitiya 40:30 Yeah.

David Friedberg 40:31 ... the capital gains tax, so that's not gonna happen. Um, and it looks like the corporate tax will probably go to 25%, um, not even up to 28%. And interestingly, I didn't realize this, but one of the biggest features of the bill that has the most popularity is that they're closing this loophole around IP that sits outside the United States. And that more than the corporate taxes will raise almost a trillion dollars of revenue.

Chamath Palihapitiya 40:55 I agree with that one. Why should you put your... why is Apple... I mean, you wanna talk about hypocrisy, putting their IP in Ireland so they don't pay taxes in the company-

David Sacks 41:01 Goog- Google does the same. It was a big breakthrough-

Chamath Palihapitiya 41:03 ... everybody's doing that.

David Sacks 41:03 ... yeah.

Chamath Palihapitiya 41:03 Why does that exist? It's so un-American.

David Sacks 41:07 Well, it's a subsidiary that has different taxation on it and, you know, to kind of... that capital and that, uh, uh, and that earning-

Chamath Palihapitiya 41:15 Right, but, but, but-

David Sacks 41:15 ... sits, sits outside the US.

Chamath Palihapitiya 41:16 ... that, that IP was made in California. It was not made in Dublin. No offense to, you know, my home country.

David Friedberg 41:24 I remember Facebook, we did the... we did this exact thing, we signed over all the IP and then the IRS sued Facebook. And I remember, like, I was called either to... I was subpoenaed and we went through, like, a whole multi-year trial, it may still be going on, and it was around this issue, which was the IRS said, "Hey, Facebook, how come you, you know, you ported this over there?" And I think Facebook's answer was, "Yeah, we paid the tax." And I think they did. They don't think they did anything wrong because the laws allowed it, but it effectively helped shield then tens of billions of dollars of future taxes.

Chamath Palihapitiya 41:55 I, I, I mean, I remember reading about this and I'm like, "How does this s- pass the sniff test?"

David Sacks 41:59 Well, it's where the revenue is recognized, J-Cal. So you basically can produce the IP here and then transfer it to your subsidiary. When you transfer it to your subsidiary, you can recognize the earnings in that subsidiary and that subsidiary pays taxes in its local jurisdiction. Um, the... I think the issue Facebook had was that they transferred the IP and they undervalued what the future value would be from that IP transfer, and that's why the IRS sued them, is this accounting snafu in terms of like, what did you value it at, at the moment you transferred it?

Chamath Palihapitiya 42:29 Here's another idea. Why doesn't... why don't they look at, as part of this IP licensing, where does the consumption of that IP occur?And where do the employees who maintain that IP, uh, live?

David Friedberg 42:41 J Cal, it's a very smart idea. The problem is, that's a slippery slope that then gets to local taxation. You know, the thing is, we have all these global tax treaties where these large corporate entities can basically play this game and they're not subject to local tax. But that's the thing that's going to really start the undoing of the big monopolies because if you start to abandon these global tax treaties... And you're starting to see it. France is trying to do some stuff. The UK is trying to do some stuff. States, in- individually in the United States are trying to sue these companies or tax them more. That's the, that's the first way to chip away at these monopolies, is to basically say, "Fuck your global tax treaty. You need to pay X amount of dollars to be here." And it already exists because of these, you know, um, realist- uh, sorry, the retail tax nexuses and, uh, how e-commerce companies have to pay local tax in the areas. Um, but once it sort of touches a whole bunch of other industries, um, and countries, uh, I think that you're gonna have that. That's why I think Yellen, Janet Yellen, yesterday said that, you know, she's in support of trying to have a global minimum tax of 12%. Basically, trying to get to the end state and tell every country, "Let's all circle the wagons and agree that we'll all just charge everybody 12% and then we won't go all our separate ways." The pr- the problem is that if you have a lot of usage in a country, you know, that country doesn't care what the taxation is in Zimbabwe, right? Or Canada. They're like... If I'm the UK or France, I'm like, I look at the top 20 apps in my country, and I'm like, "Wait a minute, these guys would be paying me $50 billion a year in tax." It's hard to get away from the incentive to, to not wanna tax these companies right now.

Chamath Palihapitiya 44:15 Sax, any thoughts?

David Sacks 44:17 Yeah, I don't have a huge thought on the, the IP issue. Um, it, it seems like... I know their, th- the Republican proposal on the infrastructure was six to 800 billion. Um, Biden's proposal initially was 2.3. Chamath is right now, they're down to 1.7. I think the, the markets have been choking on the size of all of this tax and spend, and the... There's been all these reports of inflation spiking, and so the growth stocks have just been hammered because we're all expecting big interest rate increases to control this future inflation. So, um, Biden's been horrible for growth stocks so far and it really... I guess that what it shows is that... You know, what are growth stocks? Growth stocks are a future investment, and it shows the way that the government can crowd out... When you have excess government spending, I guess you can call it an investment if you want, but when you have excess government spending, it starts to crowd out private investment because it raises interest rates and that, you know, decreases the, the value of growth stocks and there's less money that flows into that.

Chamath Palihapitiya 45:23 Yeah, it does seem like the market reaction to the infrastructure bill, uh, and to inflation has made Biden reconsider his approach, and maybe he just came out too hot. Is, is that your take?

David Sacks 45:36 I don't, I don't, I don't think Biden's reconsidering. I think it's people like Joe Manchin. Um, remember, it's a 50-

Chamath Palihapitiya 45:41 Mark Warner. Exactly.

David Sacks 45:42 Mark Warner, Kyrsten Sinema, the, the moderate... There's a three or four moderate Democrats in the Senate who, I think, are receiving the message. Chamath put it really well the last pod that the markets are sending a message to Washington. I think some of those centrist Democrats read the message. I don't think Biden's aware of an- I don't know what he's aware of, he doesn't seem too aware of anything to me, but I think the moderate Democrats are getting the message.

Chamath Palihapitiya 46:04 (laughs)

David Sacks 46:05 And they're telling, they're telling the White House the package is too big and they- they're, um... And then I think that's why it's coming down.

David Friedberg 46:10 The other, the other thing that I think people, um, may be getting their heads around, here's what's changed since last week. There's a growing body... If I had to say, like, you know, the beautiful thing about the, the markets is that it is an extremely elegant voting mechanism in the short term, right? I mean, Buffett says it's, it's a voting machine in the short term and a weighing machine in the long term. But if you look at sentiment and how things are voted on in the public markets in real time, it's incredibly illustrative. So, um, there's a body of people now that are voting a very different scenario than inflation. What they're voting for now is this idea that by the fall, a lot of this short-term pent-up demand will have worked its way through the system and instead we'll be back to this realization that we've had for the last 20 years which is, "Hey, wait a minute, people don't actually wanna buy more of these physical goods. They're gonna go back to consuming the way they did before. It's gonna reflexively push towards technology companies again and we're gonna have this rebirth of growth." And you would say, "Well, how would you know that that vote is likely?" And this one incredible thing happened this last week which I just wanna throw out here. Um, one thing that I look at is this thing called 10-year breakevens, which is basically a thing that the Federal Reserve of St. Louis publishes. And what it basically shows is, like, what people think collectively, trillions of dollars, what the 10-year break-even interest rate's gonna be. And it peaked last week at 2.54% and it's fallen 13, uh, basis points, um, just in the last week, down to 241.

Chamath Palihapitiya 47:41 Mm-hmm.

David Friedberg 47:41 And I don't know whether it's sustained or whatever, but there is a growing idea that the worst may be behind us. And if you layer on top of this now, Biden pulling back, right?

Chamath Palihapitiya 47:53 Mm-hmm.

David Friedberg 47:53 On, uh, stimulus because he's can't get it done. Pulling back on cap gains, pulling back on corporate taxation, um, and a more measured policy of investment. We, we could all be back by the fall.

Chamath Palihapitiya 48:07 So we're basically taking the medicine and getting back to where we were, but we still have massive asset inflation we're seeing in houses, cars, and other things.

David Friedberg 48:16 Well, we may have just pulled forward demand, meaning, you know, people are like, "Okay, I'm flushed with money. The savings rate in the United States has been, you know, at- at- uh, going at an incredible clip." People may pull forward all that spending and say, "I was gonna buy a car 18 months from now," or, "I was gonna buy a house two years from now. Fuck it, I'm gonna do it now-

Chamath Palihapitiya 48:33 Yolo.

David Friedberg 48:33 ... because prices are going up too fast. I don't want to miss out." But then they're out of the market now for the next many number of years and this is what I'm saying, where you see this short-term spike of demand-

Chamath Palihapitiya 48:44 Mm-hmm.

David Friedberg 48:44 ... and then things get back to normal. If that's what we see, good times are back in growth stocks.

Chamath Palihapitiya 48:49 Yeah. (laughs)

David Friedberg 48:50 (laughs)

David Sacks 48:50 (laughs)

Chamath Palihapitiya 48:50 (laughs) Woo-hoo! Hoo-hoo! All in podcast sentiment levels go high again. (laughs) I- I've literally... I did, like, two or three early stage deals recently and I had members of my syndicate say, like, "How does this valuation make sense?" And I said to them, "You know, it, it actually doesn't make sense, um, if you're looking at it with the traditional metrics, but..."... all valuations are higher at all stages, so I'm going to selectively, you know, overpay compared to what we were paying a year or two ago. You know, if I really love a company. But I will sit out a lot of... I'm sitting out a lot of rounds right now that I just can't get my head around the valuation, so hopefully some normalcy comes.

David Sacks 49:28 Well, there, there's always a trickle down. There's always a trickle down from growth stocks in the public markets to, to venture, right? Because the, the last private investors, like the big funds who do the super late stage stuff, they're just doing an arbitrage on what they pay versus what the company's gonna list for publicly. So when they see those valuations go down, they adjust, and then it works its way all the way down the stack. So, you know, growth stocks have just been hammered and especially all the recent listings, the IPOs and SPACs and everything. And, and that's gonna trickle its way down, I think, to venture, it's just a matter of time.

Chamath Palihapitiya 50:02 I think we have the... Yeah, and I think we have the lead indicator on that is Clubhouse, right, which will be the canary in the coal mine. I don't know how you guys reconcile-

Jason Calacanis 50:09 Explain,

Jason Calacanis 50:10 explain what's going on with Clubhouse, just for those of us not too close to it.

David Friedberg 50:12 So explain, explain what it is.

Chamath Palihapitiya 50:14 Okay, so Clubhouse is a casual audio space. You go into a room and you're immediately taken to a live conversation with people speaking on stage and an audience. Audience members can be promoted to the stage and start talking. And so you're-

David Friedberg 50:26 In an... Wait, wait, hold on, it's in an app and it's all audio.

Chamath Palihapitiya 50:29 In an app. In an app audio.

David Friedberg 50:29 So there's an app, there's an app you go in and it's all audio?

Chamath Palihapitiya 50:32 Yes.

Jason Calacanis 50:32 Right, so it's like amateur night at a strip club, but for words? (laughs)

Chamath Palihapitiya 50:35 (laughs) Uh, or more a comedy club, whatever. You just bring people onstage. Yeah, it's kind of like the champagne room, but a little different. Um, so (laughs) anyway... (laughs) And there we go, our first cancellation of the pod.

David Friedberg 50:47 It's more, it's more scheduled, it's more... Yeah. (laughs)

Chamath Palihapitiya 50:48 Apple, 2,000 signatures from Apple to remove All-In from the podcasting app.

David Friedberg 50:52 Oh, my God.

David Sacks 50:53 Yeah.

Chamath Palihapitiya 50:53 We just lost three ranks in the Apple podcasting app. So what's very interesting about this app is that it had a massive number of downloads during the pandemic because people were home and people were not doing anything at night 'cause they were sheltering in place. And, um, they had in... you know, two million downloads in January, 9.5 million in February of this year, and then came crashing down, 2.7 million in, in March and 922 in April. But at the same time, their valuation over 18 months went from 100 million in their seed when they had like 3,000 or 4,000 users to a billion to 4 billion in the last round of financing for a company with zero revenue and, uh, let's call it a couple of million people using the app. And what's really interesting is the same venture firm led all three rounds, à la Sequoia's investment in WhatsApp where they did all the private funding. So you have no outside capital marking this valuation, a $4 billion valuation, $4 billion.

David Sacks 51:52 Well, they got a, they got an acquisition offer from Twitter for four billion and they, they turned, they did this-

Chamath Palihapitiya 51:58 Was that ever confirmed?

David Sacks 51:59 Uh, I've heard it was real.

Chamath Palihapitiya 52:01 Okay.

David Sacks 52:01 So, so, but... So basically the reason why the four billion private round happened was so they would keep going as an independent company. They could basically take some ships off the table through secondary and kind of go for the bigger outcome. But yeah, they could have just sold to Twitter for four billion.

Chamath Palihapitiya 52:15 So-

David Sacks 52:15 That, they may end up regretting that.

David Friedberg 52:18 But, like, is this really a function of a broader, um-

Chamath Palihapitiya 52:22 Inflation?

David Friedberg 52:22 ... valuation inflation or is this just a function of, there was a company that was a social network with hypergrowth and then it turns out that the product had no stickiness and the hypergrowth went away and it collapsed?

David Sacks 52:34 The souffle collapsed, the souffle killer collapsed.

David Friedberg 52:35 The souffle collapsed. Can I, can I, can I just point out, like... And, and forgive me if any, any of you guys are investors in this company or anyone that's listening cares, but, like, if this thing came out before YouTube, people would say, "You know, this is interesting, but it needs an asynchronous killer." It needs a thing where you can, like, record a conversation, post it online, and people can come and watch it and listen to it when they want. It was always so crazy to me that you had to be logged into the app to listen to what was going on, and if you didn't, you missed the conversation and there was no way to, like, go watch the recording of the conversation. Like, am I crazy to think that this was just, like-

David Sacks 53:09 No.

Chamath Palihapitiya 53:09 No.

David Friedberg 53:09 ... something silly?

David Sacks 53:09 I think you, I think you, I think you nailed it that they don't have async in there. And actually I've got a little disclosure to make here.

David Friedberg 53:15 Oh. Oh.

Jason Calacanis 53:16 Oh. Oh.

Chamath Palihapitiya 53:17 What?

David Sacks 53:19 So-

Jason Calacanis 53:19 Woo!

David Friedberg 53:19 What? The beat got wet, but it didn't get too wet.

David Sacks 53:21 Special, special, special-

Jason Calacanis 53:22 All right, new story.

David Friedberg 53:23 Woo!

David Sacks 53:23 Breaking news story. Okay, so I think I understand what Clubhouse did wrong. Async is a huge part of it. But rather than tell you exactly, I'm gonna show you because I've been incubating a new app-

David Friedberg 53:35 What?

Chamath Palihapitiya 53:36 What?

David Sacks 53:36 Yes.

David Friedberg 53:36 What?

Chamath Palihapitiya 53:37 What?

David Sacks 53:37 That we're... We're, we're on test flight right now.

David Friedberg 53:41 (laughs)

David Sacks 53:41 And you guys, after this pod, I can, I can demo it for you.

David Friedberg 53:44 Okay.

David Sacks 53:44 And if you guys, if you guys want to invest, I'm gonna close around this week for it.

Chamath Palihapitiya 53:49 Oh, beep's getting wet.

David Sacks 53:50 And so if you guys wanna wave your beaks and do it.

David Friedberg 53:51 What's our valuation? What's the valuation?

Chamath Palihapitiya 53:52 Yeah, what's our insider All-In? What's the bestie vow?

David Sacks 53:55 I'll, I'll talk-

David Friedberg 53:55 Yeah, what's the bestie vow?

David Sacks 53:55 I'll, I'll talk to you guys about it offline.

Chamath Palihapitiya 53:57 Bestie vow.

Jason Calacanis 53:57 How much, how much money do you wanna raise? Yeah.

David Sacks 54:00 We're already, we're raising 10 million bucks and we already have commitments and... but I'm creating room for you guys.

David Friedberg 54:04 Great. Yeah, yeah. I'll take it.

Chamath Palihapitiya 54:06 Yeah. So 500K each?

David Friedberg 54:07 I'll take it.

Chamath Palihapitiya 54:08 Sounds like 500K each. Where is it a million each?

David Sacks 54:10 Let's, let's talk about it offline, but, um, but the app's on test flight. I think we'll be ready to launch in a few weeks.

David Friedberg 54:14 Can I, can I say one thing though?

Chamath Palihapitiya 54:15 Sure. Wait, wait, what's it called? Can you say what it's called?

David Sacks 54:18 It's, it's... Yeah.

Chamath Palihapitiya 54:18 Oh.

David Sacks 54:19 No, I'll say it. It's called Call-In.

Chamath Palihapitiya 54:21 Call-In.

Jason Calacanis 54:22 Call-In. I thought it was... I thought it was gonna be called Glub-bouse. (laughs)

David Friedberg 54:27 (laughs)

Chamath Palihapitiya 54:27 (laughs)

Jason Calacanis 54:28 Does this have a podcast...

Chamath Palihapitiya 54:31 It's called Yammer-ific. (laughs)

David Friedberg 54:32 Does this have a podcast draw? Like, are we gonna do the podcast on it?

David Sacks 54:33 We absolutely could do the podcast on it, and it would be awesome. Nick would be out of a job, so I don't think he would like that too much, but-

Chamath Palihapitiya 54:39 No, it wouldn't have the quality level, but I think it's good for call-ins. If we wanted to do a call-in show-

David Sacks 54:42 Yes, so-

Chamath Palihapitiya 54:42 ... it would be good for that, because it's called Call-In.

David Sacks 54:43 Yes, it'd be great, it'd be great to do... Exactly, that's why it's called Call-In is because the ability for you to take callers-

Chamath Palihapitiya 54:50 Yeah.

David Sacks 54:50 ... is obviously a, a huge feature. But also, like, we could host after-parties for our fans to, like, you know, chop up the latest episode and talk about it.

Chamath Palihapitiya 54:58 Yeah, th- these fans are getting crazy. Did you guys see the All-In stats Twitter handle? I don't know the Twitter handle off the top of my head, but somebody's... These kids are doing, um, uh, they're using machine learning or something to-... know what percentage of time we each speak on the pod and how many monologues," and they're doing all these statistics. It's crazy.

David Friedberg 55:19 That's really cool. Um, I was gonna say, uh, in defense of Clubhouse for a second, I don't, I don't know the app per se, but I think, like, why Andreessen did all of that, in my opinion, is because they're pressing a hot hand, which makes a ton of sense from their perspective. It's like, you know, I think, like, they're going for the kill shot, 'cause I think they are basically-

Chamath Palihapitiya 55:38 They're rolling.

David Friedberg 55:38 ... set up... They're basically set up to become Sequoia if, if they really... I mean, I think... If you think about, like, which two firms are really crushing on all cylinders right now, obviously Sequoia's always been the perennial number one. But if you think about the, the heater that Andreessen is on, it's incredible. And so from their perspective, the $4 billion valuation is less important than what is their real capital at risk, and that's probably 100 or 150 million, which in the grand scheme of having $40 or $50 billion of AUM, if you consider the value of all their public positions as well, that's a really reasonable risk to take. So I think if you view it-

David Sacks 56:13 For sure.

David Friedberg 56:13 ... in that way, it's kinda like, they're taking a shot to try to just, you know, go for it.

Chamath Palihapitiya 56:17 If it does become worth $10 billion or $50 billion... Also, i- if it o- if it only gets sold for $500 million, they get their money out first, so what does it matter?

David Friedberg 56:26 What does it matter?

David Sacks 56:26 They're going for the $100 billion outcome. I mean, they've seen that Instagram sold too soon. They saw that Snap turned down a $3 billion offer from Facebook, and now it's worth $80 billion, so they're going for the $100 billion outcome, wh-

Chamath Palihapitiya 56:37 YouTube, $1.6 billion, yeah.

David Sacks 56:39 Yeah, and now it's worth hundreds of billions. So, they're hoping it's gonna be like that. Um, but Chamath- Ch- Chamath is right. Look, if they had taken, what, say, 20% of a $4 billion outcome, $800 million, that doesn't even pay back their fund, right? But i- if it ends up being $100 billion outcome, they make $20 billion. Now it's like a Coinbase for them.

Chamath Palihapitiya 56:57 I... What, what do you think they gave to the founders-

David Sacks 57:00 Well, who knows? But-

Chamath Palihapitiya 57:00 ... to keep them in the game? Because $4 billion-

David Sacks 57:02 Second year-

Chamath Palihapitiya 57:02 ... if they owned 80% (laughs) -

David Sacks 57:05 Yeah, they took all... They took chips off the table. But here's the thing, all those decisions were made before the recent collapse and engagement at Clubhouse.

Chamath Palihapitiya 57:12 Mm-hmm.

David Sacks 57:12 I'm not sure anybody would be paying $4 billion for it now, given-

Chamath Palihapitiya 57:17 Mm-hmm.

David Sacks 57:17 ... everything that's gone wrong. But, you know, who knows? It's still pretty early.

Chamath Palihapitiya 57:21 The... And just for people who are curious, there is a Twitter handle, allin_stats. And, um, yeah, it's allinstats.com. I don't know. Th- We're not affiliated with these maniacs, but, um, we, we love the Stans, and, uh, we're gonna do something in person in September. Congratulations to the Stans for losing their minds. I think it's a pretty good, uh, way for them to capture a bunch of, uh, attention on the Twitter. All right,

Chamath Palihapitiya 57:46 um, crypto is getting absolutely hammered. Uh, and I... It's... The Chinese have once again said that, uh, they're basically saber-rattling about cryptocurrency. They're obviously gonna do their own, um, uh, crypto.

David Friedberg 58:00 Jason, I think you... I think you have to talk about China in a, in a slightly broader lens than just what's happening in crypto, because, like-

Chamath Palihapitiya 58:06 Okay.

David Friedberg 58:06 ... this is the same week where they basi-... They've, they forced, you know, Zhang Yiming to resign from ByteDance. I mean, you know-

Chamath Palihapitiya 58:14 Did they?

David Friedberg 58:14 Last w- last week it was, or last month, it was the CEO, Peng Duoduo. Like, these guys are-

Chamath Palihapitiya 58:17 And Jack Ma's MIA?

David Friedberg 58:19 They're going for the jugular. I mean, it's like-

Chamath Palihapitiya 58:21 Wait, where, where... Where... What... Why are they taking out all their top CEOs? This would be like putting Elon and Jeff Bezos-

David Friedberg 58:28 Now, this is-

Chamath Palihapitiya 58:28 ... eh, on the bench. Wh- Is it they just don't want any heroes?

David Friedberg 58:31 Uh, I don't know. I mean, I, I guess maybe the speculative part of me would say they're showing them who's really in charge of these companies. I mean, i- it would be crazy, to your point, if the government of the United States forced Sundar Pichai and Tim Cook and Mark Zuckerberg and Elon Musk-

David Sacks 58:48 Right.

David Friedberg 58:48 ... to resign. It's like, "Hey, sorry. I'm sorry. You need to leave right now and put somebody else in." And, by the way-

Chamath Palihapitiya 58:53 Deactivate their badges? (laughs)

David Friedberg 58:55 (laughs) Yeah, we just-

Chamath Palihapitiya 58:56 Nice.

David Friedberg 58:56 We just relentlessly criticize them, right? But, but yeah, it's different.

Chamath Palihapitiya 58:59 Yeah, we just demonize them. (laughs)

David Friedberg 59:01 (laughs)

Chamath Palihapitiya 59:01 We just try to cancel them.

David Sacks 59:02 But, look, but they deserve that level of scrutiny because the amount of power they have. But, but yeah, they... We don't, we don't put them in jail or house arrest or drive them out of their companies, and that is a big advantage for the US economy.

Chamath Palihapitiya 59:14 The Treasury Department here in the United States is doing a little saber-rattling. They want to know anytime there is a $10,000 transaction in any kinda digital token, and, uh, they're talking about a CBDC to do their own cryptocurrency, so they're putting out a white paper for feedback this summer. Um, and, uh, we are now seeing a pullback on Bitcoin from, you know, uh, mid-60s to, uh, you know, now into the 36, 37,000 per bitcoin. Do you think this is the end of the beginning, beginning of the end?

David Friedberg 59:49 It's the beginning of the beginning. David Rubenstein was on CNBC today. And David Rubenstein, for those you guys who don't know, is, um, was co-founder of Carlyle Group. You know, more blue chip and blue-blooded you cannot get, and very connected in Washington. And, you know, he said it best where he said, you know, effectively, th- people want this, and the government will, uh, have no choice except to support it, because you can't take something like this with this much institutional and retail demand away. So, we have to go to the place where now crypto needs to be like everything else. And maybe the crypto Stans get upset with that because they don't like it that, you know, a bunch of their parents are all of a sudden gonna be buying tokens and stuff, but they gotta get over it. Um, and this stuff should be, you know, transacted in the same way you transact anything else. You buy it. You sell it. You get a tax return. You pay your taxes, and you move on.

Chamath Palihapitiya 1:00:42 This reminds me of the transition that we all went through with, I don't know if you remember, Kazaa and Napster and BitTorrent. Like, e- everybody... All the... We... A, a lot of our contemporaries in their 30s, you know, whatever, 10, 20 years ago were like, "You can't stop it. You can't stop it." And y- it got stopped. (laughs) You know, like, you made it illegal, and you prosecuted people, and then you came up with solutions that were regulated like Spotify or, you know, Netflix, and you gave the consumers what they wanted. So, D- David, do you think this is a similar path right now that we're going through, which is the crypto zealots and the, and the, and the Stans are gonna-... basically have to get used to, as Chamath's saying, their parents buying it and, and crypto not being this underground thing, but being regulated in a, in a major way in the United States? And is that a good or bad thing?

David Sacks 1:01:30 I, I, I think the thing that, that's happening quietly behind the scenes is that major Wall Street players, institutions, endowments, and so forth, uh, over the past year have decided that bitcoin and crypto is a legitimate asset class and they've been allocating to it. Huge, huge pools of capital, balance sheet capital, have been allocating into it. I don't think that's gonna change. This is probably a pretty good buying opportunity. We've seen these crashes in bitcoin many, many times over the years. It plummets down and then it goes back up, and it eventually goes back up and reaches a new peak. So this is probably a pretty good entry point for the next rally. We don't know when that's gonna be. But the whole point of bitcoin is that it's censorship-resistant and China can do its best to try and stamp it out, but I don't think they'll be successful at that. And-

Chamath Palihapitiya 1:02:17 You don't?

David Sacks 1:02:18 I don't.

Chamath Palihapitiya 1:02:18 Oh, you're so wrong about that. That, that is-

David Sacks 1:02:21 They, they make-

Chamath Palihapitiya 1:02:21 ... the most naive take, worst take you've ever had.

David Sacks 1:02:23 H- h- how is China gonna stop bitcoin?

Chamath Palihapitiya 1:02:25 Uh, how do they stop VPNs? They put people in jail. How do they stop religion?

David Sacks 1:02:28 Oh, they, they may-

Chamath Palihapitiya 1:02:28 They put people in jail.

David Sacks 1:02:29 They may make it incredibly hard for Chinese citizens to get ahold of bitcoin. I agree with that. But they're not gonna be able to stop bitcoin.

Chamath Palihapitiya 1:02:36 N- they're not gonna stop bitcoin in the West, but they will stop it in China.

David Sacks 1:02:41 They will-

Chamath Palihapitiya 1:02:41 100% full stop.

David Sacks 1:02:42 They, they will, they will try.

Chamath Palihapitiya 1:02:42 And you know how many servers are in China? The, I mean, (laughs) go talk to the people-

David Sacks 1:02:46 The mine-

Chamath Palihapitiya 1:02:46 ... who were in Tiananmen Square about what happened.

David Sacks 1:02:48 The miners will have to move out. The miners will have to move out.

Chamath Palihapitiya 1:02:50 Yeah, the miners are done and then i- if, it would be an underground thing. Like, it'll be like having a VPN, which is five years in jail for selling VPNs.

David Friedberg 1:02:57 What do you think about the IRS requirement that you have to report any bitcoin transaction over $10,000? Do you think that that ... And, and Americans can be prosecuted for not reporting, right? So I, I don't know how much-

1:03:09 I, I think that that's, that's fine.

1:03:09 I'm, I don't know how much, but-

David Sacks 1:03:10 Fine.

David Friedberg 1:03:11 Huh?

1:03:11 Good.

David Sacks 1:03:11 So what?

David Friedberg 1:03:11 Do it.

David Sacks 1:03:12 So has.

David Friedberg 1:03:12 Yes. Get over it. But I do think that'll-

Chamath Palihapitiya 1:03:14 But, you, but you don't, you don't get rid of 20%-

David Friedberg 1:03:15 Yeah.

Chamath Palihapitiya 1:03:15 ... of the transactions that might have been nefarious.

David Sacks 1:03:17 No, this is, this is the Silk Road fallacy that, you know, that the only legitimate use for crypto or, or these c-

Chamath Palihapitiya 1:03:23 Well, I said 20%. I didn't say only legitimate.

David Sacks 1:03:24 Okay, fine. But so y- maybe that makes it that small fraction of illegitimate or illicit use cases-

Chamath Palihapitiya 1:03:30 Yeah.

David Friedberg 1:03:30 But, but you think, Friedberg, no, Sachs, I think the point is, um, that they're trying to chase down, it's not about illegal use cases. It's about not reporting a taxable gain on your bitcoin before you use that money to buy something. So the notion that-

David Sacks 1:03:42 Sure, of course, about tax evasion.

David Friedberg 1:03:44 Right. It's a tax-

David Sacks 1:03:44 But look, but, but that, but that's not, that's not gonna stop bitcoin usage. Um, you know, e- s- smart people who've been trading bitcoin have been paying taxes on it for years. That's not ... I don't think that's really an issue. If you were in China and you had created your wealth in China or many, many other countries all over the world and there were currency restrictions and controls and the government was asserting more and more power and were putting business leaders under house arrest and, and seeking to put them under their thumb, you'd be trying to convert as much of your net worth into bitcoin as possible so that all you have to do is if you ever had to flee the country, you wouldn't have to have dollars in your suitcase or gold bricks or diamonds. You'd simply have to have a password in your brain that you could access at any computer terminal when you got out of the country. And so that, I think, that sort of digital gold is a phenomenal use case of bitcoin. And the more oppressive all these countries become, the more they increase the value of that use case.

David Friedberg 1:04:41 Yeah. What do you think is the black swan event in crypto, in bitcoin in particular?

Chamath Palihapitiya 1:04:44 I don't know.

David Sacks 1:04:47 Well, there's that, th- there's a negative-

Chamath Palihapitiya 1:04:47 Taxation in the United States, a 10% tr- uh, additional taxation like you do on ci- uh, cigarettes. That would be for me. The United States putting a tax on it that makes it less competitive with our f- our national coming cryptocurrency. The CBDC that the United States will launch in the next two or three years, they're going to say, "If you wanna use any of these other currencies, there is a 10% tax on them. We want you using ours, the legitimate one."

David Sacks 1:05:12 The, the, the, there's, there's a very negative black swan that o- obviously has never occurred, um, but if anyone ever manages to counterfeit, uh, bitcoin, uh, or this is the double spend problem, right? If you could ever, if you could ever double spend or, or, or figure out a way to create bitcoins, um, or counterfeit them, whatever, that weren't in the blockchain, if the number of bitcoins ever grew beyond the 21 million, that's just built into the way that the whole thing works. If that ever happened, bitcoin is instantly worthless. That would be the black swan on the negative side. I think the black swan on the po-

Chamath Palihapitiya 1:05:43 How could that ha- if it didn't happen in the first 11 years, what do you think the likelihood on a-

David Sacks 1:05:46 Well, that, that's, that-

Chamath Palihapitiya 1:05:46 ... percentage basis that it happens in the 20th?

David Sacks 1:05:49 Exactly.

David Friedberg 1:05:50 It's too expensive now, and it's too, it's too visible. Like, the, the way that it would have happened, it would have happened in the first two or three years.

1:05:56 Or the argument could be made the opposite, that now it's so valuable that it's worth investing to figure out how to-

Chamath Palihapitiya 1:06:00 To make a target, yeah.

David Friedberg 1:06:01 Yeah. And, and, and as, and e- and ra- rather than have it be about a diminishing probability, it could be an increasing probability over time, which is that the pathways to get there start to get resolved. Whereas in the past, you didn't have enough time to resolve those pathways.

Chamath Palihapitiya 1:06:15 It, it would have to be-

David Friedberg 1:06:16 And I'm thinking highly theoretical here, but, like, certainly there's, there's, there's a lot of technical-

Chamath Palihapitiya 1:06:19 Yeah, but that doesn't take into account that it's open source and that everybody can see it. So you would think that everybody would discover the vulnerability at the same time, right? In an open source project?

David Friedberg 1:06:28 Well, no, I think the, I think the issue practically speaking in this would be that you would see these resources getting organized, meaning you'd see silicon being bought in volume by some centralized player and then you'd have to see water and power come together as well. And this is where I think it's just not realistic, where today that I think the horse has left the barn because if you try to basically capture enough hash rate to kind of like overpower this network, it's, it's s- it's like the scene in Austin Powers where he's screaming in front of a, uh, a steamroller but the steamroller is moving at, like, one foot a minute.

Chamath Palihapitiya 1:07:03 Right. You see it coming.

David Friedberg 1:07:04 It, it's just like you just see it coming.

Chamath Palihapitiya 1:07:06 Well, would you have a black swan, Friedberg? You asked a loaded question, so do you have one?

David Friedberg 1:07:10 I think about it a lot. I don't really ... I mean, it's a black swan, it's a ... because it's a black swan, (laughs) so you don't really see it coming. But, like, you know, the, the, the thing about bitcoin which has always given me pause-... is the fact that the only way it works is if everyone believes that more people are gonna believe in it tomorrow than believe in it today.

Chamath Palihapitiya 1:07:34 Well, that's the only way it appreciates.

David Friedberg 1:07:37 Yeah, but the, uh, the, for, for a variety of reasons, it, it's also the only way that it works because, um, if it starts to depreciate, it becomes s- almost like this unwinding circumstance. And there are moments where it unwinds, but then people kind of say, "Well, you know what? More people are gonna get on this." There's the Chinese argument. There's the Argentinian argument. There's all the reasons why people will try and store wealth in this system, and that becomes a rationale for continuing to bet on it. And, uh, my observation is so many people that are active in Bitcoin compare Bitcoin to the price of the dollar, which to me seems like it doesn't make sense relative to the intention of Bitcoin, which is to not be part of the monetary system that uses the dollar as kind of the de facto, you know, um, uh, system of value. Uh, and so why have the comparison to the dollar as the objective for Bitcoin? Why is the objective not transactions, use cases, number of people that are active on the network, et cetera, et cetera? What, wha-

Chamath Palihapitiya 1:08:34 Yeah, nobody buying it is buying it as a substitute for dollars.

David Friedberg 1:08:36 But what, yeah, so, so-

Chamath Palihapitiya 1:08:37 They're buying it as a lottery ticket.

David Friedberg 1:08:38 But what is the... Well, so, so yeah, that's, that, that's right. And so then it becomes this rationale that it's like it's an investment that you put money in, in the form of dollars or your local currency with the intention that you will be able to get more of your local currency out at some point in the future. And the only way that works is if you expect someone else will buy it from you at a higher price in the future. Therefore, it's all about propagating the, uh, you know, the marketing around the Bitcoin. Whereas if your objective was really about making this become a replacement currency system or replacement monetary system, you would ultimately care less about, you know, what's the dollar value per coin and you would care more about how many people are using it, you know, how, how active, how, how many people own it, et cetera.

Chamath Palihapitiya 1:09:15 Let me build on that question then. So, Sachs or Chamath, if the CBDC and American's currency, you know, starts to move towards a Bitcoin blockchain-like experience, what would America start to look like if 10 or 20% of your dollars, instead of being held in a bank, were on a, a blockchain with an American-

David Sacks 1:09:35 It's, uh, a government, a government-backed blockchain doesn't accomplish anything that people are-

David Friedberg 1:09:41 It's still centralized.

David Sacks 1:09:42 It's centralized, and not only is it centralized, but also it's still prone to debasement, right?

David Friedberg 1:09:48 Yeah.

David Sacks 1:09:48 And so look, human beings have used everything from gold coins to seashells as money. We can make anything money that's easy to transact if we all agree on it. That's the sense in which Bitcoin is the bubble that becomes true if everyone believes in it.

David Friedberg 1:10:03 That's right.

David Sacks 1:10:03 Provided, provided the number of Bitcoins stay at 21 million and that the technology enforces the scarcity. The problem we have with the US dollar is the government can just print as many of them as they want.

Chamath Palihapitiya 1:10:14 Yeah, you change the denominator