E43: Innovative venture strategies, Zymergen's implosion, Square acquires Afterpay & more

1. 0:00 – 16:30

   Big week for the besties: Friedberg's new raise, Sacks' new fund & more

   1. CPChamath Palihapitiya0:00

      He's optimizing the view.

   2. DSDavid Sacks0:01

      No, I'm optimizing for shade, actually. Trying to get out of the-

   3. JCJason Calacanis0:07

      Oh, Jesus fucking Christ, you look like a moron. (laughs) Look at that fucking glass. (laughs)

   4. CPChamath Palihapitiya0:10

      I mean, this dipshit showed up. He showed up to my beach club yesterday, and it was basically like someone had taken a mummy and then wrapped the mummy inside of a white sheet, and then presented him at this pla- at this place.

   5. JCJason Calacanis0:23

      Oh, was he lathered in his, like, SPF 500?

   6. CPChamath Palihapitiya0:27

      And so, I, I said-

   7. JCJason Calacanis0:28

      Lathered?

   8. CPChamath Palihapitiya0:28

      ... at one point, I said at one point, "Let's go for a walk." And this asshole had the nerve to grab his cellphone and a battery pack for the cellphone. I forced him to leave the phone. He felt naked. Then I made him take off his shoes and socks, and then I tried to get him to take his shirt off. We got almost all the way there.

   9. JCJason Calacanis0:45

      Yeah. That, that makes sense. All right, everybody. Here we go. Three, two-

   10. NANarrator0:48

       (upbeat music) We're going all in. Let your winner slide. Rain Man David Sacks. I'm going all in. And I said we open sourced it to the fans, and they've just gone crazy with it. Love you,

   11. JCJason Calacanis1:05

       Hey, everybody. Hey, everybody. Welcome to everybody's favorite game show, Guess Who's Not in Italy. Do, do, do, do. With us today, David Sacks, wearing sunglasses, with a view of an ocean, clearly on a nautical vessel. And I am in an old apartment in the center of Florence. And Chamath is at his hideaway somewhere in the countryside. And Friedberg is f- in front of a abstract piece of art.

   12. CPChamath Palihapitiya1:43

       Two people high on crystal meth-

   13. JCJason Calacanis1:45

       (laughs)

   14. CPChamath Palihapitiya1:45

       ... trying to break into his car in San Francisco.

   15. JCJason Calacanis1:48

       (laughs)

   16. DFDavid Friedberg1:49

       (laughs) I'm no- I'm no longer a San Francisco resident, I'm proud and sad to say, after 20 years of loving this city. I have relocated, still in a nu- to, uh, a nondescript location still in California, but, uh, no longer-

   17. JCJason Calacanis2:03

       You're in the Bay Area.

   18. DFDavid Friedberg2:03

       ... in the city of Berkeley.

   19. JCJason Calacanis2:03

       Enough said.

   20. DFDavid Friedberg2:04

       I'm in the Bay Area. Yeah.

   21. JCJason Calacanis2:05

       So with us again, obviously, Rain Man, The Dictator, and back from a week off, the Queen of Quinoa. What ha- tell us, uh, Queen, you had a big week. You had, uh, some nice ink come out, some press about the production board raising some monster round, and you took the week off. Give us the feedback. What, what, what was it like taking a week off from the pod? And, uh, now you're getting press and you're becoming a public figure. Uh, what's it been like for you the past week? And, and tell everybody what went down with this new fund.

   22. DFDavid Friedberg2:36

       You know, my strategy was to take a week off from the pod and then have the ratings go up, and then I could quietly and nicely exit, um-

   23. JCJason Calacanis2:42

       (laughs)

   24. DFDavid Friedberg2:42

       ... as the, as a member of the cast. But, uh, unfortunately, I've been drawn, as Al Pacino said, "Just when I thought I was out, I am back in." So, uh, it's, I missed you guys. I actually listened to the All-In Pod for the first time ever last week. You guys did a, a great job, actually.

   25. CPChamath Palihapitiya2:57

       You mean you've been complaining these other last 41 times-

   26. DFDavid Friedberg3:00

       (laughs)

   27. CPChamath Palihapitiya3:00

       ... without even listening to it?

   28. DFDavid Friedberg3:02

       You know, um, I will say I listened to it while we're on it, but this was, um, actually really interesting-

   29. JCJason Calacanis3:07

       What-

   30. DFDavid Friedberg3:07

       ... 'cause I've, I've never actually listened to it then.
2. 16:30 – 30:44

   Innovative venture strategies: internal mark ups, venture studios, deployment strategies

   1. JCJason Calacanis16:30

      Wow.

   2. ... did with Clubhouse? Let me ask, let me get Chamath in on the conversation.

   3. Mm-hmm.

   4. Chamath, what do you think of a venture firm making a seed investment at 100 million, then a billion, then at four billion, for a product that, you know, is largely sideways? It, it, this is like internal three bets and marking it up 10X and then four X, so 40X lift over three rounds. What do we think of this?

   5. CPChamath Palihapitiya16:54

      I think the best venture firms shouldn't give a shit about any company, and I don't think that they really do, because if they're very savvy, they should be doing exactly what Andreessen, um, you've seen the articles about Tiger, you've seen all these other folks. The real question is maybe, if you want, can you please explain what they're doing? And, uh, what they're doing is, to me, if you understand the investing landscape makes a ton of sense, which is technology used to be this small niche. And so we used to only get, you know, when I started Social Capital, there was probably 25 to $30 billion a year flowing into venture, just in 2011. Fast-forward a decade, we have like $120 billion a year going into tech and it's going up like crazy. And if you're the best brands, you're gonna get the overwhelming amount of interest from people who want to get into the asset class as the asset class expands, right? So if all of a sudden, you know, you decided to invest in private equity when private equity was going bonkers, you're not gonna take as much of a shot on an emerging manager. You're gonna wanna take a shot on Blackstone or KKR, right? And that's what's allowed those folks, Carlyle, to scale AUM just unbelievably. Blackstone, I think it's past half a-

   6. JCJason Calacanis18:17

      Assets under management.

   7. CPChamath Palihapitiya18:19

      Exactly. Half a trillion dollars now at Blackstone.Similarly, there are these indelible brands in venture and when everybody realizes they need to be long tech, they jump in. Now, when they do that, you have to understand who these people are. There are two things that matter. One, they are people like pension funds and their hurdle rate, meaning, you know, what are they trying to do better than in terms of a, of a rate of return, is in the low to mid single digits. That's really important-

   8. JCJason Calacanis18:51

      Eight percent.

   9. CPChamath Palihapitiya18:51

      ... to know.

   10. JCJason Calacanis18:51

       Nine percent, 10 percent.

   11. CPChamath Palihapitiya18:52

       Not even.

   12. JCJason Calacanis18:53

       What the stock market-

   13. CPChamath Palihapitiya18:53

       Not even. Not even. Not even.

   14. JCJason Calacanis18:54

       Go ahead.

   15. CPChamath Palihapitiya18:54

       Five percent, six percent. Okay? And then the second thing you need to know is that these guys have so much money that they would rather, when they spend an hour meeting with you, they'd rather give you a $50 million check than a $5 million check. A $5 million check just compounds their problems. So if you put these two things together, it makes a ton of sense for companies like Andreessen to now focus on the velocity of money. Raise a fund, put the money to work, raise a new fund in a very systematic way that everybody can understand and can predict. So that Andreessen can tell their LPs on a calendar, "Guys, I'm gonna be back to you in 18 months. Guys, I'm gonna be back to you in a year." And be able to scale the capital. And I think if you, if you look at it in that framework, it explains Andreessen, it explains Accel, it explains Sequoia. And by the way, it's a brilliant strategy because these guys still make 2.5% on the money. They end up returning the market beta, meaning what the average market would do anyways, plus a little bit of alpha, right? So they'll still do a little bit better than the market, which means they'll be able to raise money infinitely. So if I'm Andreessen and I've had a-

   16. JCJason Calacanis20:00

       Do you mean the public market or the venture market? So venture market-

   17. CPChamath Palihapitiya20:03

       No, venture market.

   18. JCJason Calacanis20:04

       ... typically does 20%.

   19. CPChamath Palihapitiya20:04

       Venture market, no, but that'll decay, right? So that'll decay down to the, to, to 10% or 12%. But my point is, it's still better than the 5 or 6% these pension funds and other folks need to earn. So today, the goal of every fund that's successful that has a brand, David's included, should be, do good deals, make sure you're in things that, that can work. And the thing that David has, which other folks don't, is David can help make things work when they're not necessarily obvious, but then pound the money in and then raise more money as fast as you can, because then, you know, it helps the investor, that's what they want, and they're happy to pay you. And then for you, the GP, you start to make enormous fees and the whole cycle works. Um, so for Andreessen, I think that's the calculus. It's like, "Shit, if I can put 100 million in, that's 100 million less I have in my fund. Now I can go, I'm 100 million closer to raising the new fund."

   20. JCJason Calacanis21:00

       Okay. Now the criticism has been, Friedberg, I'll go to you, it's bad hygiene for the same firm to mark up the same product three times, in this case, you know, um...

   21. Klout House.

   22. What's the n- Klout House. So is that a warning sign for you that it's a bubble or it's kind of... The, the worst case I've heard is like marking up your own book, self DLing, whatever. How do you look at that issue, Friedberg? And then I'll go to you, Sax.

   23. DFDavid Friedberg21:28

       Well, if it were SpaceX, you would look like a genius. So, you know, I think we can criticize it until-

   24. JCJason Calacanis21:37

       Or WhatsApp.

   25. DFDavid Friedberg21:39

       ... we know. Or WhatsApp. And Sequoia's done this many times where they've been the lead in multiple rounds in the company and they have high conviction in the quality of a business and they don't want to bring other investors in. And when you have high conviction and you can continuously buy more of the stock and buy more of the company and be a bigger owner, and then it works out, you look like a friggin' genius. And so I don't wanna criticize the investing style of these guys. I mean, time will tell if they made good bets or not as a whole. You can kind of make the case maybe that they're trying to be asset managers and drive assets under management up and gain more fees, but I think LPs are a little shrewder than that. They'll kinda take a smarter look at that. At the end of the day, the guys that are known for doing this, like Sequoia and Founders Fund and others, have had incredible returns by doing exactly this. So the strategy does work and, um, you know, you just have to, have to do it with the right businesses and that I think that will, you know, demonstrate the quality of your investing acumen.

   26. JCJason Calacanis22:33

       All right, Sax, any further thoughts on that? The marking up your own book, is that something you plan on doing with this new fund and having the growth? And how would you look at, hey, Colin starts getting some traction. Does that mean your growth fund is gonna go mark it up and take that, those shares? Or do you think that it's better hygiene to have the market price it?

   27. Well, I guess it just depends. I mean, the growth fund does give us the ability to double down at a later stage on our own early stage companies. But you do have to be really sure when you do that because it does, you know, it, it certainly raises questions if you're wrong, right? That you wouldn't have with any other investment. So it just, it definitely raises the stakes. You have to be really certain, I guess. But, you know, if Colin's a big hit, do we go raise, you know, a growth round? Yeah, and... Now, I think what we might do in that case because we incubated it is we'd let somebody else lead the round and then we would participate. So you have some third party setting the price because we incubated the company and frankly, that's what we did with the round that you just participated in is, Craft participated but we did not set the terms. It was actually, uh, Goldcrest and Sequoia co-led the round with Craft.

   28. When you incubate a company like that... Let me ask another technical question, uh, 'cause the audience last week or/and the week before really responded well to us talking about this as opposed to (laughs) COVID and Delta variant, uh, which we'll talk about at the end of the show. For those people, you can basically turn off the show at 50 minutes or (laughs) 75 minutes where we talk about the impact of the pandemic. But, uh, and I, and I'm hoping you're thinking right now about who's not in Italy. I hope we'll get back to that at the end.

   29. (laughs)

   30. When you incubate a company like that, who owns the original founder shares? Craft the organization, David Sax the individual who came up with it? What's the inside baseball there?
3. 30:44 – 43:26

   Zymergen's implosion: role of diligence, how to make deep tech sustainable, finding frauds

   1. JCJason Calacanis30:44

   2. DFDavid Friedberg30:44

      Zymergen is so interesting. I think we should do it.

   3. JCJason Calacanis30:46

      Okay. Let's do Zymergen. I agree. Uh, all right, so for people who don't know, Zymergen went public, uh, at $31 a share in April, uh, traded as high as $48 shortly after that. Um, I had the, uh, CEO on my podcast, and, uh, I was confounded trying to understand the business. You had told me, uh, I had (laughs) asked you for some questions, Freeberg, and you gave me some choice statements of what to ask, which I... Can I say?

   4. DFDavid Friedberg31:12

      No, I don't think so, but- (laughs)

   5. JCJason Calacanis31:13

      What you t- okay. (laughs)

   6. DFDavid Friedberg31:14

      ... you can ask me. Yeah.

   7. JCJason Calacanis31:14

      Anyway, you gave me some choice questions. (laughs)

   8. DFDavid Friedberg31:16

      (laughs)

   9. JCJason Calacanis31:16

      I didn't ask them exactly the way you said them, uh, but here is the quote of what happened on Tuesday. Uh, Zymergen stated the following, "Zymergen recently became aware of issues with its commercial product pipeline that will impact the company's delivery timeline and revenue projections. Accordingly, the company no longer expects product revenue in 2021 and expects provin- pr- product revenue to be immaterial in 2022." They also announced that the founding CEO, Josh Hoffman, who was on This Week in Startups two, maybe a month ago, stepping down as CEO and will be replaced, and Zymergen stock then dropped 70% on the news. I don't know if this was a SPAC or not. SoftBank hyped them.

   10. DFDavid Friedberg31:58

       Oh, it was a str- it was a straight IPO, and the stock dropped 80%-

   11. JCJason Calacanis32:00

       Straight IPO.

   12. DFDavid Friedberg32:00

       ... yesterday, 80% in a day-

   13. JCJason Calacanis32:02

       Okay. 80%-

   14. DFDavid Friedberg32:02

       ... a- after going public three months ago. Yeah.

   15. JCJason Calacanis32:04

       So I think, Freeberg, a good way to start would be, what did they say they were gonna do? And then why has this happened?

   16. DFDavid Friedberg32:12

       So Zymergen and a couple companies like them started, uh, around the same time, which is around 2014, uh, 2013, 2012, that era, 2015 even. And, um, the, the promise of these companies is truly to be... everyone wants to be this platform for synthetic biology. And what that means is they can take cells and, in a smart way, edit the cells and get those cells to make things that humans need. Uh, and so you can kind of think about making materials like silk and leather and plastics, and you can think about making food like egg proteins and milk proteins and so on. And you can think about making industrial products, uh, you know, enzymes and things that might be used in, in laundry detergent and other applications. And so for years, you know, we've gotten DNA sequencing cheaper. We now have DNA writing and editing cheaper. We've now got other tools to basically screen cells. So we have these, this set of tools where these synthetic biology platform companies popped up and said, "You know what? We're gonna put all these tools together and build a platform for editing cells and doing a better job of making things, and we're gonna get into all these markets." And Zymergen, when they first started, were, like several other companies like them, a services business. So they would go to big partners like DuPont and say, "Hey, let us make a new enzyme for you. Pay us $25 million upfront, and then we'll get a royalty on the back end when that product eventually goes to market." And they did that for years. They went after insecticidal products, they went after plastics and s- materials and all sorts of stuff. And as is the case with a lot of deep tech, it turns out it's really frigging hard. You know, these tools (laughs) might be there, but like we saw with the clean tech era where everyone thought they could make oil from sugarcane, you know, 20 years ago, using the same sort of approach to get the unit economics, meaning can you make the product cheap enough, is really, really hard. That means you gotta get these cells to be just perfect, and you gotta get the systems to be perfect. And so at the end of the day, they went through a lot of customers at Zymergen that paid them tens of millions of dollars, and Zymergen didn't have anything at the end of the projects to say, "Here's something that works that you guys are willing to pay for, that you're gonna go take to market," 'cause it really wasn't that compelling. The, the unit economics weren't good enough, and it didn't really have big breakthroughs for any big industry. And so Zymergen, like other companies in the space, pivoted and said, "You know what? We're gonna now be a products company, so we're gonna make our own products instead of just being a services company." And as they started to get into that, they decided that their first big product would be this kind of, you know, plastic for, for, um, uh, for, for cell phones or what have you, protective philm- film. And in the meantime, what happened is it takes so much money to do all this R&D, to run all these labs, to have all these robotic arms that they have that are moving test tubes around, hundreds of people building and running these labs. And, um, and so they've had to raise money. And in order to raise money, as you guys know, you have to kind of hype a story. You have to say, "Look, we're gonna change the world. We're reinventing everything. We're using synthetic biology to rebuild everything," yada yada. And the story resonates with me, 'cause I truly do believe that the potential is there, but the timing and the sequencing of these things is hard. As is the case with a lot of deep tech companies, when you get too far ahead of the curve and you start saying, "I'm gonna do X, Y, and Z," but you can really only do A, B, and C today, you raise money saying, "I'm worth billions of dollars," you raise hundreds of millions of dollars, and the hype has to keep stepping up. And they eventually got into the trap that a lot of companies got into, which is taking money from SoftBank. And SoftBank said, "Here's $400 million at a $3 billion valuation a few years ago," and they said, "Great, let's run at it. Let's be a products company." And they burned through a lot of that money, and suddenly they didn't have any products to show, 'cause deep tech is hard, it took a lot longer than anyone thought, and "What we'll... You know, we better try and craft a narrative and get public." And so they did that, they got public, and, um, you know, a lot of what they had been telling people, "What's coming, what's coming, it's gonna be here soon," didn't really work. So they had to pivot the business, they had to become a products company. They kept telling folks they were gonna be X, Y, and Z months away, uh, and they were gonna be able to hit these targets on the product, and it turns out it was always a little bit, little bit further away, a little bit further away. And then boom, (hands clap) they have a big board review recently, and they look at the product pipeline, and they look at where they are, and they're like, "Uh-oh, this really isn't gonna work." And the whole thing, you know, um, falls apart, because everyone was banking on this massive return. And everyone missed the story, which is that they'd been doing this for many years and had to eventually abandon and pivot away from their business because no one was willing to pay them for it. So truly, they never found product market fit in their first generation of their business, and they never found product market fit in the second generation of the business. Um, and it's really worth taking a, a watchful eye based on this, this learning, which is just a fundamental basic premise for starting a company.... do you have product market fit and can you make money from your product? And if you can't answer those two things, there isn't a business. And then the third thing is how valuable is the company as a function of how much you can grow. And so, you know, um, they really hadn't even gotten past phase one and everyone kinda wanted to believe the hype. So it's a bit disappointing to see, but it's, it's really gonna impact the industry broadly, because now people are gonna say a lot of synthetic biology companies are smoke and mirrors and they're really not there yet, so a lot of folks in the industry are really concerned right now.

   17. JCJason Calacanis37:05

       So to dovetail this with the previous discussion, Sax, funding your own company over funding of companies we talked about, hey, if it goes well, like WhatsApp did, uh, well, you're a genius. But if it doesn't go well and you get ahead of your skis, you don't have product market fit and you've raised a bunch of money, then somebody becomes the bag holder.

   18. CPChamath Palihapitiya37:25

       No, Jason, it's, it's even, it's even bigger than that. It's-

   19. JCJason Calacanis37:27

       Okay.

   20. CPChamath Palihapitiya37:27

       It's not just that it happened just in the private markets and we... then you had JP Morgan and Goldman Sachs take them public, and then they raised, you know, another half a billion dollars in the public markets and then they shut the bit.

   21. JCJason Calacanis37:40

       (laughs)

   22. Right. And we see the same thing, this is the same week that Nikola's founder who went out by SPAC and was gonna compete with Tesla and Ford, there... he's now under indictment for lying and selling shares, also known as security fraud. Probably gonna go to jail. I had him on the podcast, that was underwhelming. So Sax, when we look at these, w- which is it? Should we, on a high chain (laughs) basis be throttling these companies and have milestone based financing or are... is this the sign of a top in the market that people are able to go public, people are being given large amounts of money by SoftBank and these things probably people should pump the brakes?

   23. Yeah. Look, uh, uh, SoftBank is engaged in a style of investing that we would never engage in. It's absolutely antithetical to the way that we invest, right? They're making $500 million seed investments in massively (laughs) overvalued-

   24. DFDavid Friedberg38:34

       (laughs)

   25. JCJason Calacanis38:36

       ... companies. You know, we, we are v- one of the reasons why we like SaaS and marketplace at Craft is they're very milestone based. I mean, we, you know, if we invest before you have a functional product, it's gonna be at a seed valuation, you know, like a 10 cap, $10 million valuation, not in the billions, uh, like, you know, like Zymergen. Uh, and, you know, we're gonna... i- in order to do a series A, by and large, we need to see some revenue, you know? Um, and then, you know, if we're going to do a growth round, we need to see more revenue and more customers. And so, you know, you, you, you show incremental progress, you know, we're, we're engaged in milestone b- base investing where the amount of money you raise and the valuation you're able to get scales with the amount of proof that you have delivered, you know, to investors about the company. And the crazy thing about these like spectacular implosions, and they're usually around deep tech, is because these entrepreneurs can tell a story and people just seem to suspend belief and don't demand any proof for years and years.

   26. DFDavid Friedberg39:35

       Mm-hmm.

   27. JCJason Calacanis39:35

       So it was Theranos, it was Nikola, now Zymergen.

   28. DFDavid Friedberg39:39

       And I think ba- by the way, d- deep tech is... it's, it's not that we should dismiss technically difficult problems, we should engage and fund and build great businesses that are technically difficult. We have seen-

   29. JCJason Calacanis39:50

       How much should we fund them for how many months or quarters?

   30. DFDavid Friedberg39:53

       Yeah, but... or, I mean, really what's, what's important-
4. 43:26 – 59:12

   How personal risk impacts decision making on a grand scale, narratives and fundraising

   1. DFDavid Friedberg43:26

   2. JCJason Calacanis43:26

      The later stage ones?

   3. CPChamath Palihapitiya43:27

      I think we're like, we're like evading the thing that, that we are not saying, which is that... As much as we all wanna believe that we're all doing incredibly, incredibly diligent work, there are a lot of examples where belief trumps logic, and even the smartest people just look past the obvious. And we just talked about four pretty obvious examples. In no world should a credible tech investor not be able to do a simple valuation or see a business model and brazenly believe a real estate business is a tech business. At the same time, there should be no world where, you know, your pitch something that is just so incredibly grandiose from a technical perspective and be-... And the reason you invest is actually because you don't understand it.

   4. DFDavid Friedberg44:17

      Hmm.

   5. CPChamath Palihapitiya44:17

      Because if you did, you'd be more critical.

   6. JCJason Calacanis44:19

      Hmm.

   7. CPChamath Palihapitiya44:19

      That's fucking insane.

   8. JCJason Calacanis44:21

      Well, y- this is the thing, Tamay. These, these examples that you ju-

   9. CPChamath Palihapitiya44:22

      But people are suspending dis-

   10. JCJason Calacanis44:24

       Yes, they're suspending disbelief-

   11. CPChamath Palihapitiya44:24

       These examples that you just brought up are exactly that. Yes. They're suspending disbelief out of greed.

   12. JCJason Calacanis44:30

       And then, and, and then I'm sorry-

   13. CPChamath Palihapitiya44:30

       And they're not doing the basic tenets of investing, which is milestones, talking to the customer. These are blocking and tackling, uh, you know, ideas here. I think it's more than greed, Jason. It's greed. It's, it's, it's-

   14. JCJason Calacanis44:41

       There's fraud too.

   15. CPChamath Palihapitiya44:42

       ... there's fraud. There's incompetence.

   16. JCJason Calacanis44:43

       There's fraud. There's fraud. Let's be honest, there's fraud.

   17. CPChamath Palihapitiya44:45

       Some of it is fraud. So re- read the quote, read the quote from the US attorney of Manhattan who said Milton, with respect to Nikola, lied about nearly every aspect of the business. People like that need to go to jail, okay?

   18. JCJason Calacanis44:56

       Jail. Big time.

   19. CPChamath Palihapitiya44:57

       Jail. Big time. The startup world, the investing world only works if investors can trust the information and the financial statements that are being given by operators because we have to make decisions quickly. And if they give us bogus numbers, how are we supposed to make educated decisions?

   20. JCJason Calacanis45:12

       Well, some people don't wanna do-

   21. CPChamath Palihapitiya45:14

       Somebody like that ne-

   22. JCJason Calacanis45:14

       ... diligence, Sachs. People don't wanna do diligence anymore.

   23. CPChamath Palihapitiya45:15

       No, but we, we, we look at metrics. We always look at metrics, okay? We look at, um... Look, we can get, we can do the metrics in one day.

   24. JCJason Calacanis45:22

       Churn-

   25. CPChamath Palihapitiya45:23

       We, we... Look, we look at ARR, we look at net revenue retention, we look at churn, we look at CAC, and we look at your financials.

   26. JCJason Calacanis45:29

       Yeah.

   27. CPChamath Palihapitiya45:29

       We can do it in one day, okay? It's not an invasive process. We can decide very, very quickly because we know what numbers we're looking for and how to read the statements we're given.

   28. JCJason Calacanis45:38

       All right, Sachs. So, but question for you. When the founders say, "I have a competitive process, we don't wanna do all that," has that been happening in today's crazy market where people say-

   29. CPChamath Palihapitiya45:46

       Well, look, look, uh-

   30. JCJason Calacanis45:46

       ... "The train's leaving the station and we can't do diligence, we don't have time for this." Are you in or you out?
5. 59:12 – 1:07:36

   Chamath & Jason share Theranos stories, Jason calling out frauds

   1. JCJason Calacanis59:12

      period. What's the Theranos story? Chamath, I need the Theranos story, and then I'll give you a follow-up story.

   2. CPChamath Palihapitiya59:19

      The, uh, Theranos story is... So I had, I had a co- I had a very famous investor tell me... This is like 2015, 2016, uh, and I said, "Guys," you know, uh, we were just talking, I said, "What do you like? What do you like?" Like, you know, we all kind of talk like that, uh, at some point whenever we interact, you know. Um, and he said, "This company, Theranos, you have to..." Maybe it was 2014. Anyways, 2015. Theranos, Theranos, Theranos. And, uh, I- I said, "Are you an investor?" And he said, "No, but I wish I was. It's incredible." And I tried to get an introduction and I thought, "Okay, this is, um, uh, this is gonna be-"

   3. JCJason Calacanis59:59

      Great story.

   4. CPChamath Palihapitiya1:00:00

      "... you know, really interesting." I couldn't get an introduction. But then I find out who the board is, and instantly I get turned off. So, in my mind, I had a very negative impression because the board was literally n- all 90-year-olds. And I thought, "What do 90-year-olds know about, you know, uh, blood testing and, you know, basically building a tricorder?" And at that time, you know, I think I told this story before, but I had burned f- about maybe 50, 75 million bucks on six different startups trying to do this, like, you know, in situ, kind of like, you know, finger prick, blood testing, blah, blah, blah. So, I was really fascinated with the space. A year and a half later, a guy that I worked with at Facebook, a very senior guy, says to me, "I'm thinking..." And I was trying to recruit him to come work at one of my companies as CEO. "I'm thinking of going to Theranos." And I said, "Just go to the interview and tell me what happens, uh, before I, you know, try to convince you to not go."

   5. JCJason Calacanis1:00:56

      He goes into the, to the interview to be COO of this fucking company. They don't let him past reception. They interview him in a makeshift room outside of the meeting, and he said, "Well, can I, you know, go inside and, you know, when do we have a follow-up interview? You know, I'd like to meet some of the team. I wanna see what it is." And, uh, they said, "No, no, no. We're good. Here's your offer letter. Do you wanna join?" "Well, can I see the device? Can I try it?" "No, no, no. No. We're good. Let's go." And I said to this guy, I said, "How can you fucking join this company? I mean, it's not like you're, you're coming in as like a junior flunky. You know, you're coming in as the second or third most important person in this business. You haven't been past reception. You don't even know what's past reception. You don (laughs)

   6. CPChamath Palihapitiya1:01:43

      don't even know what your office will look like. You don't even know if you like the office furniture. At that basic level, think about everything else that comes after that." And then, you know, what happened, happened, so there we go.

   7. JCJason Calacanis1:01:53

      What a disaster. William Perry, former head of Secret Defense, Henry Kissinger. (laughs) I mean, it's just... It was like-

   8. It was a bunch of Grand Poobah types. That's how you knew.

   9. Yeah.

   10. It was a red flag. If you got one-

   11. Red flag.

   12. ... of those guys, you got one guy like Kissinger on your board, it's okay. If they're all like that, it's a problem.

   13. CPChamath Palihapitiya1:02:12

       Problem. Huge red flag.

   14. JCJason Calacanis1:02:14

       So I, I go on CNBC. I just had, uh, John Carreyrou from the Wall Street Journal, who broke this thing wide open on my podcast, and I start getting all these inside tips about Theranos. And one of them was that Elizabeth Holmes and Balwani, who was the COO, were in a, a relationship together, they lived at the same address, all this nonsense. And I check with Carreyrou, and I'm like, "Hey, is this true?" And he's like, "Yeah, that's true. Yeah." I was like, "Why didn't you report it?" He's like, "Ah, I'm just chasing it down, whatever. It'll be in the next story." So I go on CNBC, and I was like, "Listen. When there's smoke, there's fire. If they had the device, my game theory is if you have the device, you show it. If you don't have the goods, you don't show it. Period, end of story. I think my gut tells me this is a total fraud, it'll be zero." And they're like, "Oh." And I was like, "Yeah, and you know, when the COO and the CEO are in a relationship, that's bad." And they're like, "What?" And they didn't know this, and I, like, they're like, "Are you sure?" And I'm like, "Yeah, that's what people are telling me. I don't know if it's true or not. I don't have firsthand knowledge, but that's what I think is going on." So this whole thing blows up. Calacanis says this, blah, blah, blah, CNBC. That night, I got invited to beep's house in the Valley for movie night. We've all been that movie night.

   15. CPChamath Palihapitiya1:03:24

       Oh, yeah, yeah, yeah, yeah, yeah, yeah.

   16. JCJason Calacanis1:03:25

       I walk in. There's Zuck, there's this famous person, there's this Googler, that person. It's, you know, it's 50 people, and the celebrities who are in the blockbuster movie are there. I think it was the movie Arrival, but I'm not gonna make any... I don't wanna give away whose house it was. I go to this secret movie night. I walk in. I get greeted. And I kid you not, 15 feet in front of me, looking directly at me, is Elizabeth Holmes. And I get within like 10 feet of her, and she just looks at me, snarls, and walks away. (laughs) It was like the most uncomfortable moment of my life. Clearly, a giant scam and fraud. And I... She's gonna go to jail too, by the way. She's going on trial this month. August, I believe, she'll be on trial. Um-

   17. It's taking way too long.

   18. ... and I hope she goes. Yeah, I mean, the justice system's a little bit screwed. Okay, where do... We gotta wrap up with one more story.

   19. I gotta say, Cal, you have a pretty good, you have a pretty good track record of calling out these frauds.

   20. Yeah.

   21. I think it's a service to the community.

   22. CPChamath Palihapitiya1:04:24

       Yeah, I agree.

   23. JCJason Calacanis1:04:25

       You're one of the few who actually does it.

   24. You got any other budding frauds that we should know about?

   25. Well, Ripple. You called out Ripple, right?

   26. Oh, let's not... Let's go easy on the Ripple to some people who are friends with people at Ripple. (laughs)

   27. (laughs)

   28. Well, I think right now-

   29. Are you backing off? Are you backing off?

   30. I'm not backing off. I just don't wanna lose-
6. 1:07:36 – 1:28:05

   Financial deplatforming, Square acquires Afterpay, Square's savvy move, fintech's future, Jack Dorsey's unique position of power

   1. JCJason Calacanis1:07:36

   2. Talk, talk to us about Afterpay, Sacks. Tell us.

   3. Okay, so, well, first, I mean, if we're going to call somebody out, first I want to call out PayPal, okay. What's going on there? I actually wrote a blog post about it, um, called The No-Buy List. Basically, PayPal is creating the equivalent of a no-fly list with respect to their service that-

   4. For terrorists?

   5. Well, for anybody who they put, does, they deem as deplorable or undesirable. Basically, they're working with the ADL, the Anti-Defamation League, and the Southern Poverty Law Center, SPLC, to create lists of people and groups-

   6. Oh, God.

   7. ... who they are gonna ban their accounts. Now, let me, I gotta say this, the ADL and the SPLC are storied institutions that did great work combating both antisemitism and racism, but they are now under new management and new leadership, and they have greatly expanded their missions. The ADL was originally about stopping antisemitism. Now it's about, um, basically opposing extremism or white supremacy in, you know, in any of the places they find it. And so for example, they've taken positions on US Supreme Court nominations, um, I mean, it's like they've gone very, very far afield, um, of their original mission. They-

   8. The SPLC has gotten sued a number of times for putting people on these lists. They put Sam Harris-

   9. Yeah.

   10. ... at some point on the list. They put another human rights person on the list. Anybody who challenges any or has any guest on their podcast that they, the Southern Poverty Law Center doesn't like, they-

   11. Right.

   12. ... they basically blacklist them.

   13. Right, right. And the lists become very expansive. They, they become very expansive. So, so here, here's the problem, is you now have... Look, before, this was just some ivory tower, you know, uh, non 501 type thing where they would basically... It was hyperbolic rhetoric. They would basically call all these people and groups names, but now PayPal is operationalizing these ban lists. They're turning it into a no-buy list, they're saying, "We're gonna cut off your account." And that's very dangerous because we've already seen the precedent with speech online that we had a bunch of social media companies banning people from participating in online speech. Now, what PayPal is potentially doing is banning people from fonet- from financial access. And losing your right to speech is bad, but losing your right to make a livelihood is even worse. And I think Republicans in Congress need to say to Dan Schulman, first of all, it'd be great for them to haul him up there in front of Congress to a hearing, like they did with Jack and Zuck and Sundar, haul him up there and say to him in no uncertain terms, "We see what you're doing. We don't like it. We oppose it. We're gonna get on our hind legs and fight this. Uh, if you try to deny Americans their right to access the new economy, we see no reason for your company to get any bigger. We're gonna oppose every acquisition you ever do. And we may not be in power today, but one day the tide will turn, we will get control of Congress, and at that point, you know, um, m- you know, elephants have long memories, so, you know, we're watching you." And, you know, it's been a long time since Republicans th- thought of their role this way. They've, for the last few decades they've been very laissez-faire with respect to the economy, but there's a very successful Republican president on Mount Rushmore, Teddy Roosevelt, and he's on Mount Rushmore because he busted up the cartels and the oligarchs of his era, and he fought for the rights of the, of the common American to make a living. That is the playbook that Republicans need to follow right now.

Episode duration: 1:31:10