All-In PodcastE35: Biogen's controversial Alzheimer's drug approval, the billionaire space race, Bitcoin & more
EVERY SPOKEN WORD
150 min read · 30,062 words- 0:00 – 2:54
Bestie intro, Chamath's whereabouts
- JCJason Calacanis
(laughs)
- DSDavid Sacks
Like, Jacob-
- JCJason Calacanis
Sorry.
- DSDavid Sacks
... could you get any closer to the camera? I mean, your face is, like, right up in it.
- DFDavid Friedberg
(laughs) We can see your bloodshot eyes.
- JCJason Calacanis
Oh, God.
- CPChamath Palihapitiya
I mean, it- it's really unbelievable. (laughs)
- JCJason Calacanis
9:00 AM start time's-
- DFDavid Friedberg
(laughs) .
- JCJason Calacanis
... a little rough on Jacob. A little rough on Jacob.
- DSDavid Sacks
That's true. I want my second cup of coffee already.
- JCJason Calacanis
(laughs) This is- this is a lifestyle choice we may regret.
- NANarrator
I'm going all in. Don't let your winners ride.
- JCJason Calacanis
Rain Man, David Sachs.
- NANarrator
I'm going all in. And I said- We open source it to the fans and they've just gone crazy with it. USI. Love you at night. Queen of Quinoa. I'm going all in.
- JCJason Calacanis
Hey, everybody. Hey, everybody. Welcome to another episode of The All In Podcast. It's Saturday morning. It's ridiculously early, but we're taping the show because one of the besties happens to have left the continent with us from, uh, an undisclosed location, Chamath Palihapitiya. Are you in a wine cellar or-
- CPChamath Palihapitiya
(laughs)
- JCJason Calacanis
... in catacombs? Uh, wh-
- CPChamath Palihapitiya
I am in. I am in... Look at it. Wait for it, wait for it. Wow. D- Were you able to see that or no?
- JCJason Calacanis
No.
- DSDavid Sacks
What was it?
- JCJason Calacanis
Are you in the c- Are you in the cathedral somewhere?
- DFDavid Friedberg
You mean the ceiling of your room?
- CPChamath Palihapitiya
(laughs)
- JCJason Calacanis
The sky walks on the ceiling. It's incredible. So, you paid for the four walls and now you can afford the roof.
- CPChamath Palihapitiya
Yeah, okay, hold on, hold on.
- JCJason Calacanis
Fantastic. Congrats.
- CPChamath Palihapitiya
Okay, hold on. I'll do a little, I'll do a little, uh... Let's see if you can just see outside and get a sense of the view. Oh, you can't. Oh, no. It's hard.
- JCJason Calacanis
We can, we can. Just, uh, pause for a second.
- CPChamath Palihapitiya
Oh, yeah. There it is. There's the-
- 2:54 – 26:46
Breaking down Biogen's Alzheimer's drug & the FDA's controversial approval
- JCJason Calacanis
Friedberg. Right off the bat, I think we gotta go science and get the Friedberg ratio up from the get. Biogen has an Alzheimer's drug that on Monday the FDA approved. It's the first new treatment for Alzheimer's in almost two decades. And Biogen's drug is not a cure for Alzheimer's. Uh, and Friedberg will get into that. It does not reverse the disease's progression, but it does mitigate it gets it getting worse. Very strange moment in time. Uh, the FDA's advisory panel, three members of it have quit, because they didn't want to approve this drug because it had such a modest efficacy.
- CPChamath Palihapitiya
Three quit, but unanimous vote against approval.
- JCJason Calacanis
Right, so unanimous vote against, then three quit, and this is, I think, out of 10 or 11 individuals, um, so this is truly significant. The drug is going to cost $55,000. It still requires brain scans and all this kinda stuff, but it's hope for people suffering. Uh, and so the FDA approved it. Um, Friedberg, tell us on a science basis what we're seeing here. I- Is what's happening in journalism and social media now happening in science? Or is this some other, you know, search for truth, uh, or some other issue?
- DFDavid Friedberg
The Biogen drug that was approved this week is called aducanumab. Remember, any drug that ends with mab, M-A-B, means monoclonal antibody. So it's an antibody. Uh, and antibodies, you know, as we've talked about in the past, are proteins that can be made by our immune system and proteins that bind to a specific target that then tells your immune system to clear that target out of your body. So that's what monoclonal antibodies do. And we have been using biological drugs, monoclonal antibody drugs, for decades now, uh, to target specific cells or specific proteins in our body, um, that we can then remove from our body and that can reverse or change, you know, human health in very significant ways. So this is a, um, you know, a class of drugs that is very efficacious for having specific outcomes across many disease states. And so years ago, researchers at the University of Zurich were looking at people with Alzheimer's that were having slowly progressive dementia, and they looked at antibodies that they could find in their brain, and they found this antibody that they saw was binding to amyloid plaque. And amyloid plaque is one of the theorized mechanisms by which Alzheimer's progresses, that as amyloid plaque builds up in your brain, you know, you start to have dysfunction and inflammation, and then the amyloid plaque kind of may be the driver of Alzheimer's, but that is not proven. So they then, you know, ultimately gave it to a company called NeuroImmune who licensed it to Biogen, and Biogen started testing it. And they took this antibody, um, that they discovered and they turned it into a- a per- a- a- you know, an antibody you can now get injected into your body, goes into your brain. It bi- the idea is it binds to amyloid plaque and removes it from your brain. And so theoretically, this should slow down or stop Alzheimer's. But it turns out that as they ran this test across thousands of patients, it didn't have as much of an effect. And in fact, the data across many, many patients showed that it didn't really off of a placebo baseline, meaning people that didn't get the drug versus people that did get the drug, that it wasn't really that different in terms of cognitive scores and tests and all this other stuff.So, they abandoned it a few years ago. They kind of got this n- They stopped the trial, they had this kind of negative outcome and, you know, Biogen got beat up for it. And then all of a sudden, they refiled about nine months later with the FDA saying, "Well, look, when we look at the patients with the highest dosage of the drug..." 'Cause they gave it in three different doses. So, the- the people that got the most antibodies, this particular group of people had a 23% decline in the progression of their Alzheimer's, which is kind of one way of slicing the data. And- and as a result, they went back to the FDA and people were like, "Well, you know, some of the tests don't really show that still." There were some cognitive test results that didn't show that that was the case, and they fought back against it. And so some people were pushing back against it, and we're not sure, no one knows for sure how it all kind of came together at the end, but the FDA ultimately approved this drug. And here's what's challenging about this. You basically will go in, you'll get an injection of this- this antibody, just like you do with many other antibody-based therapies. It costs roughly $5 to make antibody therapy, just to be clear. So, when you make 'em, five bucks roughly is the cost, and they're charging $56,000 for this treatment. So, that's problem one in the pharmaceutical kind of debate is should we be charging this, you know, the quality of life premium. And then number two-
- CPChamath Palihapitiya
Medicare Part B. Yeah.
- DFDavid Friedberg
Yeah. And- and then n- part, uh, you know, the kind of second issue is, like, should this thing have been approved when it wasn't really that efficacious and you could slice the data slightly? And now all payers, you know, meaning all people who are insured or the government or whoever it is that's responsible for insurance payments, is ultimately bearing the cost of everyone with Alzheimer's. And there's 15 million people in the United States with Alzheimer's. They're gonna raise their hand and say, "Oh, my God. Anything that gives me any chance or any hope, I wanna get." But if it costs $56,000, is it really the responsibility of the insurance company and all the payers to give everyone a hope even if the drug may not work? Now, the downside and the side effect is negligible. There's no risk to taking this drug. So, it's all about the cost and the upside. And that- that- that- that is the big philosophical debate right now is like, first of all, should we approve drugs like this? Should we allow pharma companies to charge whatever they want even when the efficacy is very low and the cost is very low to make this stuff? And how do we ultimately decide what we approve and what we pay for?
- JCJason Calacanis
So, this is a classic risk/reward. Chamath, how do you look at this on a financial basis?
- CPChamath Palihapitiya
Yeah, let me- let me- let me give you sort of, like, a- a market investing kind of view on this. Um, look, I've been taking biotech pretty seriously over the last 18 months just trying to learn, because I think basically Friedberg ins- you know, incepted me with, uh, this idea that you- you have to know it. Um, so here's what's interesting in the setup for what I've learned and putting a little bit of my knowledge together, which is dangerous. But the setup for Alzheimer's is really scary. If you're Black, you're 20% more likely to get it. If you look at the distribution of all patients, 60% and upwards of, you know, 64, 65%, um, are women. So, if you think about the distribution of this disease, it's- it's the disease of minorities and it's the disease of women. Now, that's problematic in and of itself, because if you wanna have any form of equality, it seems like this is something that we have to tackle. The second interesting thing as a pr- as a setup to this is every single Alzheimer's drug that's ever gone through the FDA has been rejected and has failed. And what's interesting and the- the- the more social science around this is, this is also where two of the more infamous insider trading events ever happened, was around failed Alzheimer's drug. Um, the first, which is less known but inside baseball, was what happened at SAC, which was a huge hedge fund. But the second, that's very well-known, is Martha Stewart and why she went to jail was around an- uh, uh, the speculation and the insider trading of the phase three results of an Alzheimer's drug, which ultimately turned out to fail. It was almost the surest money on Wall Street, which is every time some- one of these drugs came to market, you just bet against it and it would turn out that these stocks would collapse. So, there is the social and market setup. I am super torn, but I think there are some positive points to make on this thing, so... But let me give you the negative case. The negative case is, what is the FDA doing approving a drug where there's no clear evidence that it leads to clinical benefits and it could give families a sense of false hope? What are you doing in terms of process if you have a unanimous vote against approval? So, why do you even bother having an FDA advisory committee of outside experts if they're just gonna do what you want? And it could set a precedent where companies, um, can get drugs approved on limited evidence. Now, here's the positive point, which is, they may be taking a long-term view and what they could be really doing is creating a market that ultimately incentivizes other folks to come in, where then ultimately those people are the ones that find the solution, right? Because this Biogen drug, Biogen came out and basically said, "We think this is a $100 billion market." So, now all of a sudden, you must believe capitalism is gonna take hold and a lot of young startups will say, "Well, shit, I should be going after this market as well." And so by going after that, after Biogen, then maybe you actually do get to the solution. And just a kind of a- a little bit of trivia, it turns out that the acting FDA commissioner in 2016, this woman Janet Woodcock, she was the one that approved a different form of drug in the exact same setup. That one was etaleprisene, which is basically for Duchenne muscular dystrophy. It had a negative panel vote. She basically said, "Nope, we're going with this." The scientific community reacted similarly back then, but she basically took the view that, you know, you're doing no harm, exactly what you said, Friedberg, 'cause the safety says it's fine. You're doing no harm to the patients by approving this drug, and maybe it might turn out to work in the end. And in that specific case for Duchenne muscular dystrophy, what we see four years later is that now there are a lot more companies focused on finding a solution, and they're pouring a ton of money into R&D, and maybe one of those things will break through. So, I think she could just be running the same playbook here in Alzheimer's, which is important enough, uh, that somebody needs to do something.
- DFDavid Friedberg
You're saying the economic incentive could drive further innovation in this space that ultimately could benefit patients more truly than this current drug?
- CPChamath Palihapitiya
I think so. And I think, like, you know what? Look, uh, a- a lot of, like, I think drugs that- that are potential solutions, in many ways, I think what the FDA is doing are two things which I think are really positive. The first is that they're accelerating their approval timelines, right? So you can have breakthrough approval and innovations, and so you can get to market much, much faster. The best example is what we've seen in these vaccines. But the second thing is, if you have a well-structured safety study that says that these things are not harmful to humans, then yeah, David, I- it's- it's basically saying, "Sell a $56,000 drug. There's a $10,000 copay." Now, we should talk about that, because that shows how broken Medicare plan B is, uh, part B, sorry. Um, but yeah, they're creating a $100 billion market out of nothing.
- DFDavid Friedberg
Yeah, but shou- shou- should that be the case, Chamath? Or should it be regulated? Because ultimately, if the regulators are approving the drug and enabling the commercial opportunity, shouldn't the regulators also say, "You know what? You can have this commercial opportunity, but you can only charge X. Because we're not gonna have the taxpayer pay the Y, uh, or pay-"
- CPChamath Palihapitiya
Yeah.
- DFDavid Friedberg
"... pay the, you know?"
- JCJason Calacanis
Or, hey, Freeberg-
- DFDavid Friedberg
Yeah.
- JCJason Calacanis
... let me ask a- a- a really basic question here. Why is there no, you know, document put out by the FDA saying, "Here's how we came to this decision," in plain English? Or is there? 'Cause I looked for that, couldn't find it. In other words, it, you know, the same way there was a vote, they could say, "Hey, listen, we understand the vote. We're overruling it for this reason." And why isn't there an interim step?
- DFDavid Friedberg
The FDA's not... The- the FDA's not your doctor, right? So I- I think the way things are set up is your doctor is meant to be informed about the panel's review of drugs and they... And there are labels that doctors need to be able to read and understand. And then the doctor's job is to make a decision on treatment for their patients and make a recommendation to their patients. So ultimately, the FDA is not a consumer organization. The labels that get approved, what the pharmaceutical companies have to say about their drug, all of that stuff is overseen by the regulators at the FDA, and then that is then used by the doctors to make treatment decisions. And, and ultimately translate-
- JCJason Calacanis
They couldn't kick this back and say, "Listen-"
- CPChamath Palihapitiya
No, Jason-
- JCJason Calacanis
But couldn't they kick it back and say, "We want you to do one more trial or some bridge step here. Hey, you can do 10,000 people over the next three years"?
- DFDavid Friedberg
They do that.
- JCJason Calacanis
And by the way-
- CPChamath Palihapitiya
They do that. They-
- DFDavid Friedberg
And- and they are gonna do continuing studies on aducanumab as it goes into market, and they always do that, and they always ask for more data, and they do this continuous review. The FDA is a really strong body and a really strong regulatory body, and we should all feel kind of pretty well, you know, safe and secure. But- but the issue with really, I think, the economic question on the other end, which is they could approve-
- JCJason Calacanis
That's the key.
- DFDavid Friedberg
... 100 drugs tomorrow, and then what happens to the economics of healthcare if everyone's allowed to charge any price they want for any care if it has even the slightest range of efficacy? We're not gonna be able to afford anything, you know?
- CPChamath Palihapitiya
So just to... So this is where, like, you know, regulatory bodies run i- run into each other, because the F-
- DFDavid Friedberg
That's right. That's right.
- CPChamath Palihapitiya
So Alzheimer's dr- Alzheimer's is a drug of the old, all right? Healthcare expenses are covered by Medicare. And in Medicare, there's a section called Medicare Part B which effectively is a way for these drugs to go to market. Just so you guys know, under a Medicare part B plan, a physician gets a 6% kickback of the price of the drug. Your doctor gets 6% of that $57,000.
- DFDavid Friedberg
That's a terrible incentive.
- 26:46 – 42:55
Billionaire space race: Is Bezos going to space too risky or a smart marketing move? How the space industry is a perfect example of effective government intervention. Can anyone dominate space?
- JCJason Calacanis
next topic. Bezos has decided that he will be the first billionaire in space. Uh, three people are gonna be going to "space" in quotes on an 11-minute flight on July 20th, 2021. Uh, Jeff Bezos in a promotional video on his Instagram, uh, sprung this on his best friend, his bestie, his brother Mark, who agreed to go with him, and there's bidding of $3 million, I guess, to go on Blue Origin.
- CPChamath Palihapitiya
It's up to 4.8, Jay.
- JCJason Calacanis
Oh, my gosh. 4.8 now-
- CPChamath Palihapitiya
Think so.
- JCJason Calacanis
... uh, on Blue Origin's site, uh, and, uh, just doing back of the envelope math, which I, which I did, uh, uh, last week when I heard this announcement, 600 people or so have gone to space. Some of them have gone multiple times. Blue Origin's done 20 some odd flights, two of which went south and probably would have exi- resulted in death, so I think 5 to 10% of Blue Origin's fi- flights would have killed, uh, uh-
- CPChamath Palihapitiya
(laughs)
- JCJason Calacanis
... sadly, Bezos if he had been on them. But obviously, they've made progress since then. Two of the 120 plus flights that SpaceX have done, but none in the last six years, um, have had an accident. Uh, and obviously, uh, Virgin Galactic had one tragic accident as well. So is this a wise idea? And where would we put the percentage risk of ruin/fatality on this?
- DFDavid Friedberg
I just, I just wanna, I just wanna do statistics for a second, Jason?
- JCJason Calacanis
Sure. Yeah.
- DFDavid Friedberg
Just because there were Blue Origin accidents in the past doesn't necessarily mean that it has any bearing in predicting the future likelihood of there being an accident because the data from the past is from different machines and different-
- JCJason Calacanis
Of course. Yeah.
- DFDavid Friedberg
... techniques and different processes.
- JCJason Calacanis
Yeah.
- DFDavid Friedberg
So I don't, I don't think, you know, to your tweet and the controversy with your tweet and, you know, your, your point now, I don't think you can necessarily look at the past. This is much more of a kinda-
- JCJason Calacanis
Deterministic.
- DFDavid Friedberg
... deterministic conversation about like, "Hey, look, here are the things we have done-"
- JCJason Calacanis
Yeah.
- DFDavid Friedberg
"... with our systems, and here's why we have a high confidence in this thing, you know, kinda working, but..."
- JCJason Calacanis
Which is obviously why people don't go on the first 50 rockets (laughs) or first 20 rockets, whatever it happens to be. But statistically, it's, it's not zero. So, I guess the question is, is this a w- a wise move? And where would you actually put the odds at?
- CPChamath Palihapitiya
But it could, it could very well be zero now.
- DFDavid Friedberg
C- yeah. You don't know, right? We don't know how well their safety systems have been developed and we don't know how, you know, the... I, I don't know anything about this, but I'm pretty sure that if Bezos is go... He's a pretty smart guy. He's not going in anything that's gonna have some high, some, some even nominal likelihood of, of death, right? Like...
- CPChamath Palihapitiya
And he knows probabilities, and he's been there in the last 15 test flights, and he's seen the data, and he's probably seen-
- DFDavid Friedberg
Totally.
- CPChamath Palihapitiya
... a string of nominal flights. And at some point, you just feel like, you know, "Okay, this is, this is really dialed in here."
- DFDavid Friedberg
My prediction is Bezos is gonna come back and he's gonna announce that he's gonna be the CEO of Blue Origin. I think this is what he does.
- JCJason Calacanis
He's going all in on Blue Origin, for sure.
- DFDavid Friedberg
I, I think this is what he wants to do with the rest of his life. I think it's been pretty clear that this is such a passion for him. And like, you know, he's, he's got the, the world's greatest money machine ever. It's a flywheel. It'll run as a monopoly for decades. He can do whatever he wants to do now. And so, when he takes a look at this, what's greater after you've conquered Earth than leaving Earth and moving on? So, to, to me, this seems to be so intellectually interesting to him and, um, and so kind of existentially interesting. My guess is he goes in full time on Blue Origin now that he's kinda transitioned to the chairman role, and he's kinda been pretty public about it.
- CPChamath Palihapitiya
100%. 100%.
- JCJason Calacanis
David?
- DSDavid Sacks
All right.
- 42:55 – 56:49
Big Tech getting back to the office: what is the new normal for companies with thousands of employees?
- DFDavid Friedberg
agree with you, Zach.
- JCJason Calacanis
In a microcosm of, uh, you know, the reopening of the pandemic, we've been at record low caseloads, um, and deaths are so low now from, uh, COVID-19 in the low hundreds that it's probably hard to know, Friedberg, you tell me if I'm wrong or right, if people are, of those 300 or 400 people dying a day, that's with COVID, from COVID, et cetera. Um, but anybody... I think it's intellectually correct to say that anybody who... over the age of 12 who wants a vaccine can get it. And anybody who's in a high-risk group certainly now has had over six months to, to get a vaccine. So we're basically done. And now the question becomes, what happens to society? Are we gonna go back to work? Uh, Apple employees, uh, wrote a letter, um, about Apple's, uh, demand. I'm using air quotes here, uh, that people come back to work three days a week. Um, Amazon just adjusted their return-to-work policy, uh, backing off their claim of, uh, in March that they're gonna return to an office-centric, uh, culture. They announced that employees can do two days remote, three days in the office. That seems to be the three-for-two, um-... Google has a similar policy. Um, they're expecting people to return to the office three days a week in September. Twitter said you can work from home forever 'cause Jack, uh, is an introvert and doesn't wanna (laughs) come back to work, I guess. Uh, Facebook employees either need approval to continue to work from home full time, or they will need to be back in the office 50% of the time. But Zuckerberg personally, uh, said that he is embracing remote work. Here's the quote. "I've found that working remotely has given me more space for long-term thinking and helped me spend more time with my family, which has made me happier and more productive at work." Which I guess is either devastating for real estate or this is a great negotiation that's going on. You had some choice quotes about Apple employees doing three, um, uh, letters/uh-
- CPChamath Palihapitiya
It's unbelievable.
- JCJason Calacanis
... petitions in three weeks?
- DSDavid Sacks
Yeah.
- JCJason Calacanis
Saks?
- DSDavid Sacks
Yeah. So, look, I- i, um, I- I don't have a problem with the work-from-home policy. My- my problem is with the fact that the Apple employees, um, keep doing what they do, which is sign these petitions, and of course, the- it's all this snowflake language around, "We're not being listened to. We're not being heard." You know? And then they wanna dictate to management, uh, the way that the company should work. And so they've circulated petitions to get other employees fired. They circulated petitions to make Tim Cook take a stance against Israel. Now they're circulating a petition on work from home. And of course, and, uh, that is what Apple employees do. And Apple management, uh, is doing what it seems to do, which is cave to these petitions every time. And so they're in an infinite loop where the employees have realized they can run the company by forming these- these sort of boycotts and petition mobs. And it's working. Now my- again, my objection is not to work from home. Most of my portfolio companies are now working from home or fully distributed. They're hiring employees everywhere. It's been very liberating for them to be able to hire talent anywhere in the world. And so I think the work-from-home question, the- the reason why these big companies are struggling with it, I think, quite frankly, is just because this is about their ability to supervise their employees. I think that work from home makes the best employees better, but it allows the worst employees to hide. And I think what this really comes down to is a fear on the part of Apple and Google and Facebook. They've got thousands of employees who aren't really working and are gonna be able to completely hide.
- JCJason Calacanis
Mm-hmm.
- DSDavid Sacks
And th- and I think that's what this policy comes down to.
- JCJason Calacanis
So that's a failure of management or just the nature of work from home?
- DSDavid Sacks
I think it's the nature of these gigantic companies where they've got-
- JCJason Calacanis
Ah.
- DSDavid Sacks
... so many employees that they're trying to figure out how to supervise them all and make sure they're actually doing work. There's this funny tweet that's going around. I don't know if it's true or not, but it got retweeted, about somebody saying that, "I've- I've gotten six jobs during the pandemic. They're all work from home and I'm waiting to get fired from them for, you know, people realizing I'm not doing anything." And so I think this work-from-home controversy ultimately is about the ability of these large companies to supervise a workforce that they don't know what they're doing, if anything.
- JCJason Calacanis
Oh my god, what a brilliant idea.
- CPChamath Palihapitiya
The big unsolved problem in the pandemic f- with respect to work from home is, how do you onboard new people? In my opinion. Like, if you have an established company with established people where everybody knows each other, it seems, like, uh, all positive to be able to work from home because there's trust, there's decorum, there's social norms. There's all these things that were established together. But what happens when all of a sudden you introduce one, two, three, four, five, 500 new people into the mix? How do you onboard these folks? How do you get... And I think that's not a solved problem. And until you do that, I'm not sure that work from home will be as effective as it can be because I think you'll just get a lot of people that- that, uh, languish a little bit as they switch jobs. Now, maybe what that means is they'll switch jobs less because they'll just say, "Actually, this is net better. My crappy job got a little bit better, so there's no reason to move." The- y- on your point of, uh, commercial real estate, J-Cal, I actually think it just brings the utilization down, but I'm not sure it destroys it because I think people need the phy- physical plant. Now, maybe over time, they'll get much smarter, um, about getting smaller spaces and having flex spaces, so like things like WeWork do better. Um, because then you use that for overflow space or that's how you- how you actually have a primary outfit. Um, but yeah, those are my thoughts.
- JCJason Calacanis
Friedberg, any thoughts?
- DFDavid Friedberg
I think it's gonna be hard to... What I'm hearing, I don't know if you guys s- have talked to a lot of CEOs, but I- I just hear it's kind of a little bit tough right now to find the balance of the rules around when to be in work because people have meetings, um, in the of- they'll have a meeting. 80% of the people will show up to the meeting, 20% will be remote, and then it's a huge headache for everyone to be like, "Okay, we're all in the room. We're all having a conversation. Now we gotta zoom the people in that aren't here. And this person decided not to show up today." And it's kind of become a little bit of a- a weird faux depa- or what- what's the- the- the right word?
- JCJason Calacanis
Faux pas.
- DFDavid Friedberg
Faux pas to come into, to like-
- JCJason Calacanis
A fox po.
- DFDavid Friedberg
Right, to- to not come into work while everyone else is meeting in person, and it's just becoming a little bit of a conflict across the organization right now. Um, there's gonna- it's gonna be sticky for a while. I'm not sure there's gonna be a great, um, solution, and it's gonna vary by company. Also, it's very different. As you guys know, when, you know, when I was single in my early 20s working at Google-
- CPChamath Palihapitiya
Uh-oh, here it comes.
- JCJason Calacanis
Uh-oh.
- DFDavid Friedberg
Well, no, it was like, it was- it was going-
- CPChamath Palihapitiya
Whoa.
- DFDavid Friedberg
... to work was like, it's cool.
- CPChamath Palihapitiya
Whoop.
- DFDavid Friedberg
Here's, it was like-
- CPChamath Palihapitiya
Whoop. Whoop.
- DFDavid Friedberg
(laughs)
- 56:49 – 1:05:01
Recent factors on the commercial & private real estate markets, inflation head fake
- CPChamath Palihapitiya
- JCJason Calacanis
I mean, and, uh, I sent you guys in the Slack the, or I sent you guys in the chat this, uh, socketsite.com, which is a cool real estate site for, uh, San Francisco that's been around for two decades, I think. Um, it's hilarious. They calculate how much open office space by how many Salesforce towers are empty in (laughs) , uh, an- it's 16 million of square feet of vacant office space now spread across, uh, San Francisco.
- CPChamath Palihapitiya
That's crazy.
- JCJason Calacanis
And this seems to me, at the same time we're having a crazy housing crisis, I don't know if you're monitoring this, but it turns out that banks and hedge funds and now Redfin and, you know, uh, Opendoor and all these companies are buying homes. Homes are getting bid up. At the same time, mortgage, uh, mortgages are at an all-time low and people are moving around and we're not constructing. So, I think we had a 60 or 70% decline in new housing, uh, being released into the market. And now we've got a, a full-blown housing crisis in the country.
- CPChamath Palihapitiya
I'm gonna go back, uh, out on a limb and put up my, uh, ten-year breakeven. I think this whole inflation thing is a head fake. And I think that, um, the- right now, we're in this weird position where the h- the home builders are not necessarily sure whether they're gonna rip in the capital necessary to build a bunch of homes. The reason they would slow down is if they think that inflation is coming, rates go up, mortgage rates go up, and then demand falls off. But if it turns out to be a head fake, the builders will then actually build what's necessary. And they have the capital capacity to do it, but I don't think that they've had the, the economic justification and the courage to do it. And, and in fairness to them, it's because the ten-year breakeven has gone straight up since the depths of the pandemic, which is essentially, again, just to, you know, get everybody up to speed, it's, it's how the market thinks about the future forward inflation rate. Anyways, over the last three or four months, or three or four weeks, sorry, since we talked about it, it's kind of steadily started to fall off. And I think there's a prevailing sentiment that, you know, we're gonna see some short-term spikes. We saw it this past week in CPI. Energy went bananas, right? The cost of energy, the cost of certain things. But then we're gonna get back to normal. And when we get back to normal, inflation will be okay. And I think, Jason, that's probably a solution, because if it gets, you know, if that, if that boogeyman is actually not real and, um, we put it away, then, um, uh, the builders will be back in size. And, and they'll green light a lot of projects, and I think you'll see housing supply kick back up really aggressively. That'll be good for us.
- DSDavid Sacks
Yeah, two, two points there, I think. O- one i- so I, I hope Chamath is right about the long-term inflation prognosis. Um, it's been, you know, it, it, it's, it's very important for investment in growth companies, growth stocks, and high tech companies that the inflation, the long-term interest rate remains low. So I hope you're right. I think that ultimately what's happening is there's a battle going on between, um, sort of fiscal and monetary policy coming out of Washington, which is highly inflationary, and then technological deflation. So for the last 25 years, because we've had this explosion of productivity around technology, it's dr- driven down the prices of pretty much everything that's not wh- where, where the prices aren't set by the government. So healthcare, uh, universities, things like that, the prices have gone up because the government's paying for it. Everything else, the price has come down massively. So we've, we were kind of in this battle between sort of, um, government inflation and technological deflation. I don't know which one's gonna win. Um, I do think the, the sort of, the, the, the policies we're seeing, creating a lot of government debt and, uh, the Fed continuing on this never-ending QE are, are pretty scary. But in any event, I hope you're right about where this ends up. I think on the... The other point was, um, was... Sorry, where we- we were on, uh-
- JCJason Calacanis
We were talking about the housing and-
- DSDavid Sacks
Yeah, the housing. So this is a, a really interesting sort of populist narrative that's evolving, where you've got, I mean, it's, I think both the left and the right can agree that it's a pretty scary thing that you now have major hedge funds buying up huge stocks of housing in the US, driving up prices so first-time home buyers can't buy a home. I mean, that is a very, uh, scary-
- JCJason Calacanis
It's a nightmare.
- DSDavid Sacks
It's a nightmare. It's a nightmare trend. And I think you're seeing a reaction to it on the left that California now proposed some new policy where they want the state of California to pay for 50% of first-time home buyers' houses, which just seems insane to me. But, you know, and then on the, on the right, um, Tucker just did a segment r- coming down, attacking, uh, BlackRock and these big hedge funds for, for basically, for, for en- for driving up the prices. So I think you're gonna see a unanimity on the populist left and right, eh, in reaction to these hedge funds. But the thing that no one's really talking about that they need to be talking about is the NIMBYism. I mean, Jason, you mentioned it. The reason why we don't have enough housing is because it's too hard to build. And Chamath is right that the builders could get the capital for it, but it is too hard to get these projects approved. That is the thing we've gotta, uh, that, that is the change we gotta make.
- JCJason Calacanis
To build on that, I think what's happening now becomes the catalyst to break the NIMBYism. If y- all these BlackRocks are buying up all the homes, if young people and young families can't buy a home despite mortgage rates being ridiculously low, and despite them having the money to do it and the desire to do it, then that's going to create a massive societal upheaval, I believe. And then that's gonna either drive people to other states, like Texas is benefiting because they're pro-development. It's gonna catalyze the massive movement of people out of New York, out of California, whatever states are, are giving too much red tape. It's gonna drive people to those states because that's where the housing people is gonna be built. Or those states are gonna crack under the pressure and say, "You know what?... w- you're- we're gonna let you build in Sacramento. Uh, and, you know, you guys know, um- um, I have a- a housing company in my portfolio and they are g- they are getting absolutely deluged with people begging them to do affordable housing in different locations. And the biggest problem they're having is sorting through all the projects and what are we gonna do? Uh, but the great news is technology exists now to build modular homes in factories, like Tesla does cars, and ship them to site and take six months to a year out of the construction process. So then it just becomes a matter of regulations and which state decides that they're gonna let people buy a home for the first time. And if California doesn't let people buy a home for a first time, who's gonna pay taxes here? Wh- where's the growth gonna come from? This is gonna be a-
- CPChamath Palihapitiya
The thing about homeownership-
- JCJason Calacanis
... this is a stall moment, I think.
- CPChamath Palihapitiya
Just- just so you know, then, the- the other- the other really terrible thing about homeownership is that it is where the preponderance of wealth creation for average Americans comes from. And so when you lock people out of homeownership, you're essentially ripping away 60 to 70% of how they're ever gonna make real wealth. And so, yet again, you exacerbate, Jason, to your point, the inequality that we have where a few folks make all the money and then everybody else, they're ch- kind of shut out from the equity market, they're shut out from private investing, and then they're shut out from owning a home. And no wonder people are pissed because it's like you throw your hands in the air and it's like-
- JCJason Calacanis
You're literally creating a revolution. You pulled up three ladders at once. You can't invest, you can't invest in private companies-
- CPChamath Palihapitiya
Tell me how I can- tell me how I can just earn some money so that I can pay for my kids to go to college, take a vacation, and have a nice life whenever. Tell me how to do it then.
- JCJason Calacanis
Yeah, 'cause look-
- CPChamath Palihapitiya
And- and nobody has a good answer.
- JCJason Calacanis
... j- just to summarize-
- CPChamath Palihapitiya
Government doesn't have a good answer.
- JCJason Calacanis
... you- you're- we're pulling up the ladder of homeownership. We've pulled up the ladder with the credit innovation. You can't invest in private companies. We've made higher education far too expensive. We pulled up that ladder. I mean, what's left for the average citizen to- to- to grow their wealth?
- DSDavid Sacks
This is a crazy thing. We pull up the ladder and then in response, government creates a program to subsidize people and bail them out at the end. I mean, it doesn't make any sense. I mean, Mike Solana had a- Mike Solana had a really funny tweet about the- the California, uh, program which was, it's amazing the lengths to which people will go to avoid building new housing, you know, new supply.
- JCJason Calacanis
Yes.
- DSDavid Sacks
It's like we subsidize home buyers for this artificial price increase we've caused by limiting the supply. All you-
- JCJason Calacanis
This is like eliminating people's, uh, student loans.
- DSDavid Sacks
Just allow supply and demand.
- JCJason Calacanis
Yeah, just make more colleges and make them cheaper.
- 1:05:01 – 1:15:58
ProPublica's report on billionaire tax returns
- JCJason Calacanis
- CPChamath Palihapitiya
What do you guys think about this whole ProPublica, speaking of health wealth inequality, this ProPublica leak of tax records? Somebody inside the IRS, or it was hacked, we don't know-
- JCJason Calacanis
Yeah, this is clearly a person-
- CPChamath Palihapitiya
... got ahold- got ahold of basically 3,000, uh, the- the tax records, many going back many years, of 3,000 of the wealthiest Americans. And ProPublica has slowly started to digest and- and issue, um, news reports about them. And it shows that, you know, in some years, guys like Bezos, um, paid no tax, um, whatsoever, were able to take huge deductions. You know, at one point actually, Bezos, in a year where he made, you know, kind of like billion dollars was able to essentially didn't, uh, claim he made nothing. And then made so little or made negative dollars that he got a $4,000 tax credit that's typically reserved for people, you know, people- (laughs) people who-
- JCJason Calacanis
It was a tax credit for your kids, yeah.
- CPChamath Palihapitiya
... who are th- Yeah, it's- it's unbelievable.
- JCJason Calacanis
It's not meant for billionaires ex- essentially, but, you know, they... This was a lot... The- I think the big story here is the leak more than, uh, capital gains, how capital gains works. We all know how capital gains work. ProPublica's got an agenda obviously. This is a left-leaning, uh, investigative journalism, uh, funded by the left, uh, and donations. And, uh, they do a great job with investigations. But in this case, they're just telling everybody what we already know, which is if you have giant holdings, you can get a loan against them. Whether it's you own a home and you can get a mortgage against it or equity line, or if you own a bunch of stock, you can get a margin loan. I mean, it- it's not really news. I think this is like stirring the pot. And the big news is who- who released this data? And then, you know, there are some countries, I believe Sweden is one of them, where tax records are public.
- CPChamath Palihapitiya
They have to be published.
- JCJason Calacanis
Or at least top level. Yeah, they have to be published. And so I think the way the United States is going is we're gonna force people to publish their tax records and we're gonna force some sort of minimum, uh, for people with holdings, AKA a wealth tax. Uh, and I- I'm not saying I agree with either of those, but I think that this is the way it's going. And I- I- somebody post it to our group chat-
- CPChamath Palihapitiya
I'd be- I'd be in favor of publishing-
- JCJason Calacanis
... 87,000 more IRS agents are coming online? So-
- CPChamath Palihapitiya
I'd- I'd be in favor of publishing tax returns. I- I have no... I- I- I- I think that that's a really good idea.
- JCJason Calacanis
As a flex, mostly? (laughs)
- CPChamath Palihapitiya
Oh, no, no. I- like I- I think it's a-
- DSDavid Sacks
(laughs)
- CPChamath Palihapitiya
I think it's a really smart thing to do. I think, like, you would see a lot less shady behavior if you had to publish this stuff.
- DFDavid Friedberg
When you publish your tax return, uh, Chamath, would you do it shirtless holding up your tax return in a mirror and take a selfie and then that's how you would publish it, or?
- JCJason Calacanis
Yeah. Yeah.
- CPChamath Palihapitiya
Glistening in sweat? How would you do it exactly?
- DSDavid Sacks
No.
- CPChamath Palihapitiya
More like- more like a one tear- one tear rolling down my cheek.
- DFDavid Friedberg
(laughs)
- JCJason Calacanis
(laughs)
- DSDavid Sacks
(laughs)
- JCJason Calacanis
It should just be a picture of you with a wheelbarrow of cash, just you dumping it into a furnace.
- DFDavid Friedberg
By the way, I- I- I-
- JCJason Calacanis
(laughs)
- DFDavid Friedberg
... I think- I think- one thing I'll say is I think these stories have highlighted just an incredible, um, uh, ability to- to shift the narrative and create a different kind of, uh, dialogue around taxation. Because, as we all know, the principle of taxation in the United States is that you are taxed on income. And income is a recognized gain, meaning when you sell an asset for cash or for some other asset, then you do-
- JCJason Calacanis
Or you do a job.
- DFDavid Friedberg
Or you do a job and then you get paid, you get that cash that you can now go use to go buy something or to, uh, to do whatever you want to do with. That is the transaction moment that you get taxed on. And everyone's saying, "Well, this guy's a billionaire. He has these billions of dollars. He paid no taxes." He didn't necessarily make billions of dollars of income that year. His stock value may have gone up billions of dollars, but if we all taxed each other when our stock values went up each year and we didn't get a rebate when our stocks went down, people would feel pretty upset. The average American, the average person would probably feel pretty upset if they got taxed every time their s- their stock portfolio went up and then they didn't get to have a rebate when their stock portfolio went down. So the principle of taxation is such that when you sell those shares and you ultimately generate income, that's when you get taxed. But the narrative is very quickly shifting where people are like, "Oh, this guy's a billionaire."... state- stated, you know.
Episode duration: 1:35:36
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