All-In PodcastE45: Theranos & VC fraud risks, China bans video games, Texas SB8, Apple app store, CA fires, Rogan
EVERY SPOKEN WORD
150 min read · 30,159 words- 0:00 – 8:58
Besties recap, it's Chamath's Birthday, Callin app
- JCJason Calacanis
Hold on, let's see if we can get Sax on the line. (phone ringing) All right, guys, I guess Sax isn't... I guess Sax is blowing it off because he's too busy with his app.
- CPChamath Palihapitiya
Okay, Sax. No, fuck Sax.
- JCJason Calacanis
So we'll just, we'll start without Sax.
- CPChamath Palihapitiya
Let's start.
- DSDavid Sacks
We kill him better.
- JCJason Calacanis
We'll start without Sax. Okay, three, two...
- DFDavid Friedberg
What's going on? Don't let your winner slide. Rain Man, David Sax. What's going on? And I said... We open sourced it to the fans and they've just gone crazy with it. Love you, guys. Queen of Quinoa. What's going on?
- JCJason Calacanis
Hey everybody, hey everybody welcome to the All-In Podcast. With us today, the Queen of Quinoa, on fire in California, which is also happens to be on fire sadly. Uh, and the Dictator, Chamath Palihapitiya. Uh, David Sax will not be joining us today. He's too busy with his Aw... Call-In... All-In app. Oh, I'm sorry, it's actually Call-In. He put a C in front of it-
- CPChamath Palihapitiya
No, no, no. It's Cal-... It's, it's Callen. Callen.
- JCJason Calacanis
Callen, his Call-In app.
- DSDavid Sacks
(laughs)
- JCJason Calacanis
Which has, uh, debuted this week. Um, but Sax will be, uh... If you're a Sax stan, I think Sax is, uh...
- CPChamath Palihapitiya
No, we've done one show without Friedberg, now we're doing one without Sax too.
- JCJason Calacanis
Yeah, this will be the Sax-free episode.
- CPChamath Palihapitiya
It is what it is.
- JCJason Calacanis
Sax-free episode. All right. So we got a lot going on.
- DSDavid Sacks
I'm here. I'm here. I'm here. I'm here.
- CPChamath Palihapitiya
Oh.
- JCJason Calacanis
Oh.
- CPChamath Palihapitiya
Oh.
- DSDavid Sacks
Oh.
- JCJason Calacanis
Look who joined, though. Look who joined.
- CPChamath Palihapitiya
And, um, I'm all too eager to take credit for Call-In on Twitter. Yeah.
- DSDavid Sacks
(laughs)
- CPChamath Palihapitiya
So don't pretend like you're not part of it now. (laughs)
- JCJason Calacanis
The All-In App. Oh, I'm sorry, I meant Call-In App.
- CPChamath Palihapitiya
Oh, no.
- DSDavid Sacks
(laughs)
- JCJason Calacanis
The All-In App. Talk about this guy creates some...
- CPChamath Palihapitiya
I hope, I hope, I hope Call-In is worth a trillion dollars.
- 8:58 – 12:58
What should protocol be for conferences & live events?
- DFDavid Friedberg
doing our first all together recording of the All-In Pod a week from Monday.
- JCJason Calacanis
At? At?
- DFDavid Friedberg
At the, at the TPB Symposium. No reason to-
- JCJason Calacanis
The Production Board. You are-
- DFDavid Friedberg
The Production Board. No reason to publicize it, but I'm excited, 'cause it, we're all getting kinda-
- JCJason Calacanis
It's a closed event. What is the purpose of the event?
- DFDavid Friedberg
I just get together a bunch of scientists, investors, e- entrepreneurs, and CEOs, and, um, it's, it's a day of science talks mostly, and then some business talks on the next day. But we're having a really fun event the night before with poker. Our friends are all coming to play poker and we're gonna record-
- CPChamath Palihapitiya
I'm coming for the science day. I'm there for the full science day.
- DFDavid Friedberg
Yes, you're gonna love it.
- JCJason Calacanis
Yeah, I'm staying for the science day too. I wanna learn. Uh, so-
- DFDavid Friedberg
But the, uh, but the poke- the poker night's gonna have poker, and, and we're gonna record the All-In Pod live, or, or together in person for the first time, which is gonna be cool.
- JCJason Calacanis
First time, yeah. That should be really cool. Um, and for those of you wondering, you know, we're going to do our own All-In Summit, which will be probably like 100 or 200 iconoclastic people. Uh, and we're gonna probably do that in the first quarter or second quarter of next year, uh, post-pandemic.
- DSDavid Sacks
We gotta choose a date. You know, my people are going crazy 'cause you won't give them a date.
- JCJason Calacanis
Well, you guys were-
- CPChamath Palihapitiya
I still think, I still think we should do it in, uh, in, in Rome. Here we go.
- JCJason Calacanis
Okay, so-
- CPChamath Palihapitiya
At, at tomorrow's going-
- JCJason Calacanis
Dickey Dater wants Italy, Rome. Sacks wants Miami.
- DSDavid Sacks
Miami.
- CPChamath Palihapitiya
I'm telling you guys, they're... Hotel du Lucie-
- DSDavid Sacks
Miami, Miami's always fun.
- CPChamath Palihapitiya
Maybe the sickest hotel in the world, and I'll tell you why. The people, you have never seen these people ever.
- JCJason Calacanis
Okay.
- DFDavid Friedberg
It's-
- JCJason Calacanis
These people are amazing.
- DFDavid Friedberg
Amazing.
- JCJason Calacanis
Tremendous people in Rome.
- DFDavid Friedberg
They, they are...
- JCJason Calacanis
Okay.
- DFDavid Friedberg
But it attracts the hottest people. I, I mean it's fucking crazy.
- 12:58 – 31:28
Fake it before you make it, the Elizabeth Holmes Theranos trial & implications for fraud in VC
- CPChamath Palihapitiya
- JCJason Calacanis
All right, listen, I think the most interesting-
- DFDavid Friedberg
It's just... Yeah.
- JCJason Calacanis
... thing going on in our industry this week is Elizabeth Holmes' trial.... has begun, um, jury selection, uh, started this week and it's gonna cover 12 counts of fraud and conspiracy to commit wire fraud over false claims she made about the blood test results from Theranos. Um, they, uh, have now selected a jury of 12 northern California residents consisting of seven men and five women. It took two days to question around 100 potential jurors about their answers to a 28-page questionnaire, uh, that included news outlets they read, uh, what news out- outlets they read, if they knew any witnesses, and if they had any negative medical experiencing, uh, experiences. And, um, it was complicated, um, to get these because it is impossible to not know about it and, um, now it seems the, uh, interesting thing is Elizabeth Holmes, uh, who worked with this company for two de- close to two decades and was involved in this fraud from start to finish, is now, uh, taking the position that she, uh, was under the control of her business partner, Sunny Balwani, uh, and that he, uh, had been abusing her and, uh, controlling her. Uh, what are your thoughts on... A- and so he's being tried separately, by the way. They're going to be tried in sequential order, so whenever this trial ends then he gets to, um, get tried. What are your thoughts on, uh, if she will be convicted and her defense strategy?
- DFDavid Friedberg
I, I think this is more, this is, like, less about the specific, um, evidence against her as much as it's, um, and, and it's much more right now about the, um, whole Silicon Valley fake it before you make it, um, approach to entrepreneurship. And, you know, we all hear this from, um, you know, all the entrepreneurial kind of advisors and, you know, experience, stories of experience and stories of success that in order to kind of achieve success as an entrepreneur, you really have to oversell and promise and create an incredible narrative about where your business is headed, and in many cases, that gets, uh, ahead of you. Now, the public, the general public that doesn't operate within Silicon Valley with as much breadth as we do, I think they hear the stories of the Adam Neumanns and WeWork and the collapse and Elizabeth Holmes and this, this Trevor Milton guy and, and Nikola, but, um, there's thousands of these other sorts of smaller stories where a VC rolls his eyes where the first board meeting after raising money is like, "Wait a second, we're actually gonna be half our forecast when we raised money." Or the numbers are gonna be way below or the product doesn't actually work as we presented it to you guys in the estimates.
- JCJason Calacanis
Sorry, I don't think I've ever funded a company where that hasn't been the case.
- DFDavid Friedberg
Exactly. And so I think that's the, that's the, the, the big question, right, Chamath, is like, does this trail, does this trial kind of indict the way Silicon Valley operates and the storytelling models and the narrative models? There are examples of these people getting a little too far ahead of their skis and maybe you can argue they could perceive something to be non-fraudulent while other people can, you know, kind of perceive it to be fraudulent. But don't we see this kind of broadly in Silicon Valley and doesn't this kind of bring up a question on like, are all startups now or is the industry gonna have a shift as a result of this trial in terms of behavior as investors and as entrepreneurs and how you tell stories, how you diligence, et cetera, et cetera?
- JCJason Calacanis
This is, this is only gonna get meaningfully worse. Um, I don't know if Elizabeth Holmes committed fraud or not. I think that, you know, these folks will be able to, um, figure that out in detail. But here's something that I do know pretty precisely which is the amount of money that's trying to get into Silicon Valley is going exponentially up.
- DFDavid Friedberg
Yeah.
- JCJason Calacanis
And as that happens, you guys now see it at every day where there are firms whose entire business now is just to literally write a check every day. They are closing deals every single day. They are doing zero diligence. And so what that's going to create is an incentive for founders, particularly those whose backs are against the wall or who's doing something that's highly speculative and hard to diligence to stretch the truth to get the capital. And it's impossible for guys like us to actually step in and do diligence on a lot of these companies even if you actually have time, but then if the competitive dynamic is such that you don't even have the time because somebody else beside you is gonna write, rip in a check by just meeting somebody, um, and, you know, quote-unquote having done the work on their own, which is impossible 'cause they're not, you, you don't have access to somebody's, you know, financial books, this problem is only gonna get worse. And so I think we as an industry just have to realize that there's going to be an incentive to lie, there's going to be an incentive to stretch the truth, and it's because of the amount of money that's available and- Yes. 100%.
- DFDavid Friedberg
... the lack of diligence that's happening.
- JCJason Calacanis
Sacks, is this an example, uh, in the case of Elizabeth Holmes, of somebody being delusional as a strength or somebody committing fraud as a crime?
- DSDavid Sacks
It's probably both. Now look, I think you guys are giving a little bit too much credence to the media narrative that Theranos is a, quote-unquote, "Silicon Valley failure." The truth of the matter is there was no major Silicon Valley VC firm, in fact, not even a minor one, that had invested in Theranos as far as I know. There was no VC on the board of Theranos. We've talked about this before. It was a bunch of-
- JCJason Calacanis
Right.
- DSDavid Sacks
... kind of Grand Poobah types. And there was no one who actually had the technical competence to do diligence. And so Elizabeth Holmes isn't so much an example of Silicon Valley as somebody who was selling Silicon Valley. She was selling the promise of Silicon Valley. She was selling the idea that this was gonna be a decacorn or a centacorn to people who were too unwitting to know. And I see, you know, Tim Draper a lot, people are really hanging their hat on the fact that Tim Draper wrote a seed investment to Elizabeth Holmes. I, you know, that, that really is very different. You know, when you write a seed investment, apparently Elizabeth Holmes was like a neighbor of his. She clearly-
- JCJason Calacanis
Yeah, their daughters were friends is my understanding.
- DSDavid Sacks
Yeah. And she clearly was an impressive...... person, you know, she came across impressively in person. She obviously cast a pretty big reality distortion field to a lot of, you know, smart people. So, you know, she's the type of person who you would write potentially a C-check to just based on, you know, a talent bet. The fact that she la- later chose to engage in, in fraud, I don't think that's like Tim Draper's fault and it doesn't make this like a Silicon Valley fraud. Again, um, you know, show us the VC firm that was hoodwinked by this. Um-
- JCJason Calacanis
But you are seeing, David, this trend of the, the firms coming in and not doing diligence, not having audit rights, not having information rights, not doing proper diligence-
- DSDavid Sacks
Yes.
- JCJason Calacanis
... and basically relying on the previous investors.
- DSDavid Sacks
Right.
- JCJason Calacanis
How troubling is that? And what are you doing to protect crafts LPs?
- DSDavid Sacks
Yeah. So, so look, I think there's a big difference between going into, uh, a board meeting and finding out the projections were inflated because, like frankly, we all take projections with a grain of salt, right? But versus the founder lying about the past, right? So people are always gonna put the rosiest picture or they're gonna puff up what the future's gonna look like and it's up to you as the investor to determine if that's true or not. But they cannot lie about the past. They cannot lie about what their revenue was last year, what contracts they signed before you invested. That is fraud, right? And that is what, that's where Elizabeth Holmes crossed the line. She wasn't just painting a rosy picture of, you know, what the technology would look like, you know, years from now. She was lying about their capabilities at the time people were investing. That is the line you cannot cross. Um, look, we conduct diligence. We, you know, try to look at we- financials. We try to make sure that the numbers are all true. Um, you know, frankly, we're not investing in things that involve a tremendous amount of technical risk, law of technology risk. So, we always use the product before we invest. The idea that the product would be faked, I think it would be hard to perpetrate that kind of fraud with a SaaS company. But, um, so look, I mean, that's what we look out for.
- JCJason Calacanis
Well, it's interesting you bring that up. I just dropped a link into the, uh, Zoom chat. Co-founder and former CEO of Palo Alto based startup technology company, Headspin, charged with securities fraud and wire fraud. And, uh, this guy Lakhani, 45, from Santa Clara County, basically was lying about their ARR in a SaaS company and-
- CPChamath Palihapitiya
This is, this is, this is my point.
- JCJason Calacanis
... they raised a bunch of money. So-
- DSDavid Sacks
Right.
- JCJason Calacanis
... this is an example of somebody-
- CPChamath Palihapitiya
It can happen in every company.
- JCJason Calacanis
Yeah. It can happen at any stage.
- 31:28 – 39:34
China's video game ban, is it a good move?
- DSDavid Sacks
eyes here.
- CPChamath Palihapitiya
What, uh, what are our kids gonna get in jail if we were Chinese right now and they played video games?
- DSDavid Sacks
(laughs)
- CPChamath Palihapitiya
How many months are they gonna get?
- JCJason Calacanis
Basically, I think you would-
- DFDavid Friedberg
Yeah, what is the consequence?
- JCJason Calacanis
... you would do harder time. Uh, so moving on to our next story-
- CPChamath Palihapitiya
Well, the, no, the consequences is to be Chinese internet companies.
- JCJason Calacanis
No, well, of course.
- DFDavid Friedberg
Then what's the consequence to the kids if they're caught on video games?
- CPChamath Palihapitiya
No, no, no. You're not, you're- oh, I don't know.
- DFDavid Friedberg
Like, the companies have to turn it off, right. Right, right.
- JCJason Calacanis
All right, here we go. China bans young people from playing video games. This is for kids who are under the age of 18. They are now restricted from playing games on weekdays, can only play for three hours most weekends. And these were set as a response to China's physical and mental health being affected by gaming, according to Reuters. Uh, it limits, um-
- CPChamath Palihapitiya
I think they're doing what all American parents would want, uh, our government to do for our kids.
- JCJason Calacanis
I don't disagree with that. Uh, gamers are now penalized if they don't obey and the gaming companies will be as well. Gaming companies will have to prove they have an identification system in place, like requiring-
- CPChamath Palihapitiya
Do you, do you, do you know how fucking hard it is?
- JCJason Calacanis
... monitors to use their real names.
- CPChamath Palihapitiya
I have, I have, I have three kids in that age, age range. I am sweating who they're texting, who they're talking to, what game they're playing, the new game they wanna download. Fuck that. This is the only thing I've ever said that would make me wanna move to China.
- DSDavid Sacks
(laughs)
- CPChamath Palihapitiya
This one rule (laughs)
- DSDavid Sacks
This is, this-
- CPChamath Palihapitiya
... is the most incredible thing I've ever heard. And I, and, and they're so smart. By the way, what's so beautiful is, they, they send fentanyl and TikTok to us so that we get addicted to that shit.
- DSDavid Sacks
(laughs)
- DFDavid Friedberg
Totally. Totally.
- CPChamath Palihapitiya
You know what I'm saying?
- JCJason Calacanis
Yeah.
- CPChamath Palihapitiya
And they're like, "No, you guys are gonna learn STEM so that you can, you know, take over the world." It's beauti- it's brilliant.
- DFDavid Friedberg
Yeah, I, I would say, like, everything about China is, is a measured decision, right? The, the, the politburo, the decision-makers are not sitting there randomly shooting from the hip based on intuition and saying, "Hey, I think we should stop video games. They seem bad for kids." There is clearly evidence and data and statistical models that are driving this decision, and their objective function is improve the health, the longevity, and the economic prosperity of our society as a whole-
- CPChamath Palihapitiya
I'm sorry, did you get this statement from China? What are you doing? (laughs) Continue, comrade. (laughs) Continue.
- DFDavid Friedberg
I'm pointing out, these guys are, these guys generally don't make decisions based on someone's kind of like flippant intuition. They make decisions based on what they believe to be in the better interest, and I'm not saying it's right or wrong, but in the better interest of economic prosperity and longevity.
- 39:34 – 55:09
Texas Senate Bill 8, allowing suing for aiding an abetting abortion
- DFDavid Friedberg
- DSDavid Sacks
All right. Should we go to Texas? Do you guys wanna talk about that?
- JCJason Calacanis
Speaking of social unrest- I mean, I'm gonna, I'm gonna lose my mind here. Uh, all right, here we go. SB8 creates a private cause of action that enables Texans to sue those who perform or aid and abet the performance of abortions after a fetal heartbeat has been detected. The ban comes two years after abortion restrictions were proposed in Georgia, Mississippi, Kentucky, and Louisiana. The previous propositions were spoken out publicly against by progressive tech companies, companies with a female customer base and women-led businesses. That proposed bill never became law. Uh, Sax, you wanna just, uh, frame for us the, the legal sort of case here? Uh-
- DSDavid Sacks
Yeah.
- JCJason Calacanis
... and then let's go to- Well, do you wanna, do you wanna go back and actually frame, uh, Roe v. Wade and, and Planned Parenthood versus Casey? I think those are important to understand what the hell's going on here.
- DSDavid Sacks
Sure. Okay. Well, so, you know, Roe obviously gave women the, the right to choose, um, you know, uh, o- the reproductive freedom over, you know, invalidated abortion laws very ver- in a very, very sweeping way. Casey sort of modified, uh, Roe. It upheld it, but modified it saying that the state could impose some restrictions as long as it didn't place an undue burden, that was a key term, undue burden, on a woman's right to, to choose. And I think what was at issue in that case was, um, I think it was Pennsylvania, the state of Pennsylvania imposed a waiting period and some consultation with an advisor, and so it delayed the abortion, but it didn't restrict or didn't-
- JCJason Calacanis
Yeah, let me, let me, let me add-
- DSDavid Sacks
... otherwise eliminate... Yeah.
- JCJason Calacanis
No, no-
- DSDavid Sacks
So, so, so, so Casey, Casey... Roe as modified by Casey is really the und- i- i- is really the law of the land right now, which is the undue burden. Then Texas comes along, and do you want me to explain this law?
- JCJason Calacanis
Yeah.
- DSDavid Sacks
So thi- this law is, um, regardless of what you think about abortion, it's a really, um, bizarre law because what it does is it doesn't just, um, ban, it, it doesn't ban abortion outright. What it does is create a private right of action, basically a right to sue, uh, in civil court anyone who aids and abets an abortion after about five or six weeks. So-
- JCJason Calacanis
Six weeks.
- DSDavid Sacks
... six weeks, basically after a fetal heartbeat can be detected. So which is about six weeks into the pregnancy. And the way the, the law works is that, um... Okay, so point one, abortion providers are prohibited from performing an abortion if they can detect fetal heart tones. Um, again, that's six weeks. There's no exception for rape and incest. I think that's really explosive politically. Um, the law-
- JCJason Calacanis
And horrible? Do you think it's horrible as a human?
- DSDavid Sacks
Yeah, I think that it's-
- JCJason Calacanis
I'm curious to your personal position.
- DSDavid Sacks
Yeah. Well, let, let, let's get to that. Let me just explain the, the law. So the, the, the law puts the onus of enforcement on private citizens, not government officials, okay? They do that to avoid, to make it harder to legally challenge this under Roe and Casey, okay? So what the, what the government has done here, what Texas has done is it gives private citizens the ability to sue abortion providers or anyone who aids and abets someone to, to get an abortion. So it could be an Uber driver. It could be a friend who simply drives someone to the abortion clinic. It could be a person who provides financial assistance. It could be a secretary who works at the abortion clinic. They can all be sued now under aiding and abetting. And here's, here's really the, the, the, the, the person who had the abortion cannot be sued, but, but anyone who aided and abetted can be. That's how they're getting around the r- the right to choose. And here's the craziest part is the citizens who choose to sue don't need to show any connection to the person they're suing, and, uh, they don't even have to live in the state, right? So there's no connection to them. There's no personal injury to them, but they're basically suing under a personal injury, under a civil right of action. And if they succeed, the law states that they're entitled to at least $10,000-
- JCJason Calacanis
$10,000, yeah.
- DSDavid Sacks
... in damages in addition to their legal costs. So if they win...... their legal costs got, legal costs get paid, but if they lose, they don't have to cover the defendant's legal fees. So they just get a free shot here, which is also, I've never seen a loser pay rule like this. I mean, there are loser pay rules, but they're symmetric. So we have an asymmetric loser pays rule, but I don't think we've ever had a civil law like this where, um, where somebody can sue where there's no injury to them. There's no standing here. This is the thing that's fundamentally, I think, at odds with our entire legal tradition, and I think regardless of what you think about abortion, this law will eventually be invalidated by the Supreme Court or a lower court on that ground, that they're allowing people to sue without standing. Um, and, and it's a horrible precedent because can you imagine if- what, what the, what Texas is basically doing is deputizing private citizens to enforce in civil courts a prohibition that they cannot or will not pass directly. Um-
- JCJason Calacanis
Is this the best they could come up- i- in your, uh-
- CPChamath Palihapitiya
Well hold on, let, let's, let's just state a couple more, uh, facts. Like, this was an extremely well thought out law. Um, I think that they, the, the pro-life faction in Texas clearly had some very smart constitutional thinkers that were able to navigate around Roe V. Wade and, and Planned Parenthood versus Casey to get something written that could be passed in a way where, you know, Sam Alito just basically punted and said, "We're not gonna give a stay," and so this is gonna have to meander through the courts. There is still a risk that it could just get kicked down to Texas and it could s- remain a state issue, which there is a big risk. And if that's true then, you know, other states could basically take a run at copying this, this law. What I, what I wanted to talk about was, if you bring it all together, you know, Friedberg said something about like, you know, we really value personal freedom and this is where I was like cynically like, actually, that's not true. This is an example in my, in my opinion of where this is just like, we are very hypocritical, where, you know, if we talk about a vaccine mandate, you know, there's just a, an entire fiery, you know, up in arms of people usually typically in the same states that are very anti-abortion that are like, you know, d- you know, "Tread on me lightly, you can't touch my body." You know, "I have the right to decide." But when it comes to this topic, they abandon all of that and they go to the extreme opposite si- uh, side, which is the government mandates. And to be able to say that to 50% of the population, that just because you are born with reproductive organs that you're treated different, or, uh, uh, specifically, you know, a uterus, ovaries and a vagina, you're treated differently than a man, to me just seems absolutely insane and just like fundamentally just erodes this idea of equality, like at a just a very principled level. And th- the even worse thing is that then, you know, the corporations that actually used to be on the front lines of helping to drive social justice so far have been completely absent, right? You have to remember in 2019 when we had these very repressive abortion laws, I think it was in Mississippi or Alabama, you had all of these companies come out and say, "Hey, no, not here, not under our watch." Then when you had all these voter suppression laws in Georgia, right, you had all these companies come out and say, "Hey, absolutely not. Not on our watch. We will leave the state if you implement these things." But so far what you've seen in this law is complete radio silence in Texas. And this is, you know, you have to remember Texas is the ninth-largest economy in the world, right? In the world. So you have every single kind of company from technology to otherwise who have chosen to either start or relocate their businesses in this state. And I got to think that, you know, these employees and these leaders of these businesses should be saying something and they haven't said a damn thing.
- DSDavid Sacks
L- let me-
- JCJason Calacanis
Friedberg? Friedberg, you have thoughts? And then we'll go to you, Sax.
- DFDavid Friedberg
Um, look, I feel like, um, everyone has a limit to what they believe, um, defines individual liberty. Um, you know, should everyone have complete freedom to the point that they can take a gun and go shoot anyone that they want? The answer is no. I think even the most diehard libertarians would argue that there's some degree of, what is it, John Stuart Mill's sex, um, you know, you should have the ability to do whatever you want within your sphere of influence as long as it doesn't intersect with the sphere of influence of others. And so the philosophical argument that I believe the pro-life movement made, which is really a, a different point of view on values, is that the sphere of influence of a fetus exists at some point in time and therefore shouldn't be invaded by the, by the, by the mother. Now, I'm not speaking obviously my point of view. My point of view is, uh, extremely pro-choice, um, just to be very clear. But the argument is, um, it's I think one that we, we all kind of blush over and assume that it's, it's about taking away a woman's right without recognizing the voice on the other side which says that there is a, uh, a right to, to life by a fetus at a certain point in time. And so to me there, there's almost like this principle debate that arises and it probably certainly falls more along religious lines than it does along, on, on a religious spectrum than it does on a, um, uh, kind of a libertarian spectrum or a spectrum of liberties, um, that, that kind of defines that, that crossover point for people. But clearly Texas is a really interestingly confused state, right? (laughs) There's this argument about individual freedom but now what comes across is a highly kind of conservative point of view with respect to, uh, the freedom of, of, uh, of a, of a pregnant woman. Um, and so, you know, I, I don't know if there really is an easy answer. It certainly seems to me nowadays that the pro-choice movement is in the majority, the, the pro-life movement is the minority and maybe I'm off on that, Sax. You probably know better. Um, but, you know, I'm not sure this truly does set a precedent that becomes kind of a, a widespread recognition of a new way of addressing kind of the pro-life movement or giving the pro-life movement some additional movement. I still think that the pro-life movement remains...... a, a minority and, um, and, and over time, that, that will, you know, it, there will be perturbations but there will certainly be some resolution over time in favor of what I think the majority-
- CPChamath Palihapitiya
Where, where are all the politically correct people? Where are they? Where are they right now? Where are all the politically, I mean, like, I guess they were, they were happy to get Mike Richards, or whatever the guy's name was, fired from Jeopardy last week, but where are they now when we really need them?
- DSDavid Sacks
But, but, Ch- Chamath, are you really saying there's not enough outrage about this? I mean, I'm seeing a ton of outrage on social media about this.
- DFDavid Friedberg
Yeah, I see everything, but I see nothing but outrage.
- CPChamath Palihapitiya
I see, I see a lot of useless virtue signaling. I don't see anything that's actually organized and effective.
- JCJason Calacanis
Well, I think what we're talking about here is the leadership of companies-
- 55:09 – 1:03:06
Apple alters their payment policies
- CPChamath Palihapitiya
a st- he's a, he's a tool.
- JCJason Calacanis
All right. Do we wanna move on and talk about, uh, Apple allowing people to, uh, link to their own websites?
- CPChamath Palihapitiya
The, the Apple thing is really big news because it, it kinda goes to show you that you had, you had a pretty progressive legislative framework in South Korea. I don't think it's particularly a huge market for Apple because the, most of the, most of the, um, um, app activity I think is Android more than it is Apple. Um, but they basically just seeded the market and by deciding to basically conform to this law, then, then-... they started with these reader apps and allowing, uh, payments, um, a- allowing you to link outside-
- JCJason Calacanis
Just so people under-
- CPChamath Palihapitiya
I mean, it's the beginning of the beginning for, you know, the app stores to be deconstructed and opened.
- JCJason Calacanis
This, uh ... Just so people understand, um, Apple said it would, uh, allow media apps to create in-app links to sign up pages on those companies' websites, allowing the likes of Spotify and Netflix to bypass the iPhone maker's cut of subscriptions. Now of course, you can use Spotify and Netflix on your phone but you may have ... Probably people haven't experienced this because they've already become members of it and did it on their site, but you can't actually pay through your phone and you can't sign up through the app. They're not ... They were technically not allowed to link to it, so this is a small, small concession only to media folks. So what do you think, Sacks?
- DSDavid Sacks
Um, well, I think Ch- Chamath has kind of said this is the beginning of the end. Um, I think there's some truth to that. Um, look, I think the, the, the, the root of this is the fact that Apple has this 30% rake, uh, on any in-app purchases. And like Bill Gurley said, "It's a rake too far," right? Just because you can charge 30% doesn't mean you should charge 30%. Ultimately, this is why the whole ecosystem has been up in arms. They formed an industry coalition to challenge Apple that resulted in a lot of legal, uh, challenges, uh, lawsuits and, um ... You know, a lot of these companies like Spotify and Tile, they testified against (laughs) Apple, uh, in hearings. Um, so I think this 30% rake has ultimately backfired on Apple. Um, it's created a huge backlash and now they're paying the price. They've already had to roll it back for these so-called reader apps. So, you know, if what you're doing is buying a subscription to, say, Netflix, Netflix will now be able to redirect you to their website. You can buy it there and then consume the content, you know, on your iOS app without, uh, Apple getting a sp- you know, part of, uh, the split. But, uh, this now opens the door for, uh, th- this type of thing to apply to, uh, to games as well, where there's a lot more in-app purchases, like, like Fortnite, right? So, um, I, I just think this is a case where ... You know, what's the old line? That pigs get fat and hogs get slaughtered? Uh, Apple has been a hog and, and now it's getting slaughtered.
- CPChamath Palihapitiya
Yeah.
- DFDavid Friedberg
And by the way, I want to point out, like, this is a really interesting experience of the free market. You know, clearly consumers and the, um, uh, developers on the apps, in the App Store ecosystem were vocal and angry enough that, that, um, that this behavioral change from Apple, this structural change kind of came to bear. It didn't require regulatory intervention. I just want to point out how important and relevant that is (laughs) that, you know, having regulators-
- JCJason Calacanis
Yes, the market is functional.
- DFDavid Friedberg
The m- The market is functional, and having-
- JCJason Calacanis
Yeah.
- DFDavid Friedberg
... the government and regulators come in and, you know, people complaining to s- the Senate about Google and Apple monopolizing them out of their businesses, um, ultimately gets resolved when enough- there's enough kind of collective mass from the consumer/partner that says to the, the, the, the big incumbent player, "We're not going to play by these games anymore, by these rules anymore. Change the rules of the game."
- JCJason Calacanis
I gotta think Lena Khan being appointed did make Apple think maybe-
- DFDavid Friedberg
It made them instigate it, right?
- JCJason Calacanis
... we should stop. Yeah.
- DFDavid Friedberg
It made them instigate enough fear here, right? To kind of, to, to kind of get the, the change to go there.
- JCJason Calacanis
Start giving concessions, right.
- DFDavid Friedberg
Yeah.
- JCJason Calacanis
Some modest concession that, yeah, if you're a Spotify or a Netflix or Audible, we're gonna let you buy through the app.
- DFDavid Friedberg
I mean, Sacks, you're all about government regulation and, and monopolies and antitrust.
- JCJason Calacanis
Well, yeah.
- DFDavid Friedberg
Uh, don't you think this is a nice win for the free market?
- DSDavid Sacks
Yeah, I do. Well, look, I, I don't think m- monopolies are ... I, I, I don't think letting monopolies do whatever they want is free market, okay? I mean, uh, monopolies and competition, they will squash innovation. They will, you know ... They will basically, uh, get in the way of permissionalist innovation. So I ... You know, I'm in favor of reigning in these monopolies, and the two big issues, I think, with Apple and Google, well, Apple especially, is number one, side loading of apps, so the idea that they have total control over what app, what apps get loaded onto your iOS device. People want the ability, uh, to create alternative app stores. That already exists for Android, right? So I think that is coming for Apple. Apple claims it's a security issue, but ...
- JCJason Calacanis
It is.
- DSDavid Sacks
Uh-
- JCJason Calacanis
I mean, what they should do is if you click on load- side load apps, it should just give you a warning, "You are no longer protected by us." You know, you're-
- DSDavid Sacks
Right.
- JCJason Calacanis
... you're subjecting yourself to phishing scams, your information-
- DSDavid Sacks
Right.
- 1:03:06 – 1:12:48
Fires continue in CA, $1T of homes can't be insured & the impacts on real estate values
- CPChamath Palihapitiya
Uh, California is on fire. This is what, the third or fourth year in a row, uh, this has gotten acute for the Bay Area? People are now making plans, as Friedberg mentioned on the last pod, I think, that there's, or two pods ago, there was like two or three weeks of the year, maybe even a month, where you just can't really be outside in-
- DFDavid Friedberg
Can't do stuff.
- CPChamath Palihapitiya
... Northern California. You can't-
- DFDavid Friedberg
I don't think-
- CPChamath Palihapitiya
If you can't be outside-
- DSDavid Sacks
Have any of you guys-
- DFDavid Friedberg
Have any of you guys seen the snow?
- DSDavid Sacks
... moved in? Yeah.
- CPChamath Palihapitiya
Three of the, three of our friends have been evacuated because, you know, they, they moved up there in the middle of the pandemic. They had to come down. They said it was raining ash. You know, one of our friends' homes is, is literally threatened. Um, it's, it's, it's just like... And then the fire season is moving up earlier and earlier in the year. You know, my kids were in camp in Tahoe this, this July and they had to be evacuated and fortunately for us, you know, we had a really good friend of ours, a neighbor here, who's, whose kids were also at that camp be able to drive up in the... Um, but my God, like that was, um-
- DFDavid Friedberg
You, there's-
- CPChamath Palihapitiya
What's going on?
- DFDavid Friedberg
There's about eight trillion dollars of real estate value, um, in California. And, you know, if you assume a tenth of that is exposed in the middle of this kind of dense fire, um, uh, these dense fire regions. Let's say it's a, let's say it's a trillion dollars. There's a trillion dollars of real estate value that you cannot insure anymore. So, I don't know if you-
- CPChamath Palihapitiya
I had an idea about this, Friedberg. I, I was looking two or three years ago when these fires started, maybe it was four or five years ago now, for a blanket that could go over a home, could be installed or dropped over a home with helicopters. I know this sounds crazy, but is there a material that's light enough that you could put it on a helicopter and drop it over one of these-
- DFDavid Friedberg
Yeah, asbestos would work.
- CPChamath Palihapitiya
... two, three million... Yeah. Well, why doesn't this-
- DFDavid Friedberg
But the-
- CPChamath Palihapitiya
... startup exist? I mean, this would be amazing. Imagine if these homes had on the roof some sort of a system that when fire or heat got there, it just deployed the blanket and protected the home?
- DFDavid Friedberg
Like, I don't know if you guys know this, but right now in Marin County in California, it's nearly impossible to get fire insurance. And, um, this is becoming kind of a predominant factor in California, particularly in all the areas with lots of, of forest land. There's 100 million acres of forest land in California. So, if a trillion dollars of real estate is actually exposed to fires, and you can't get fire insurance, ask yourselves the question, "What's gonna happen when hundreds of billions of dollars of real estate literally goes up in smoke or, um, or gets sold off? Who ultimately bears the cost? Where does that cost have its economic flow?" And that's just the tip of the iceberg of the effects that may arise as these things start to take hold. You know, we had this huge upswing in real estate in Tahoe as everyone moved out of California and went to Tahoe during the pandemic. Now, we're seeing Tahoe real estate sell off like crazy. This happened in wine country, in Sonoma and Napa County last year after the big fires they had there. And so there are counties where you start to have these massive fires causing this massive real estate sell off and/or the real estate burns and it's uninsured. And guess what happens? FEMA steps in, right? The federal government steps in and ultimately the federal government's gonna have these like Katrina events four or five times a year that we're gonna be underwriting losses for people's real estate that's valued in a way that doesn't account for the effects of climate change.
- CPChamath Palihapitiya
You know, I started, um-
- DFDavid Friedberg
This is a massive shift in economic value that we're gonna, someone's gonna have to pay for over the next decade-
- CPChamath Palihapitiya
So, I-
- DFDavid Friedberg
... and this is just the t- the beginning of it all. It's my, it's my strong belief.
- CPChamath Palihapitiya
I, I, I tweeted this out about s- maybe six or seven months ago but with a, another, with this fabulous entrepreneur named David Soloff, I co-founded an insurance company called OTT Risk. And, you know, we've been trying to build models and price, um, uh, this kind of insurance, climate insurance, you know, social media kinds of like disruptions, um, civil unrest insurance, thi- things that are very typical, uh, atypical, sorry. And, uh, to your point, Friedberg, it is really, really hard to try to forecast what's going on in a way where you can actually ins- insure these things with a margin of safety. And so just as the, as the person who would be the provider of this kind of insurance, what I'm telling, you know, what I'm learning is, man, these... And we're negotiating multi-hundred million dollar policies with these big corporates. Um, and, you know, for example, like, you know, they want, uh, pandemic insurance. If there's the next Delta variant or whatever, and I have to shut down my facility and here's my economic loss, I want to, you know, you to insure that. And okay, uh, it's impossible. And so I can only imagine what it's like then on the ground floor, somebody to just buy some insurance that says if my house burns down, it's, uh, it's very hard.
- DFDavid Friedberg
Yeah, you, you, you can't get it, so, so when you're gonna, you're-
- CPChamath Palihapitiya
And this kind of parametric insurance doesn't exist, which means that if you live in any of these areas, like I basically, I think what it means is that climate change is gonna ravage, um, uh, suburbs. And it's gonna ravage these sort of like far-flung communities because, um, nobody's gonna want to step in there and insure the parametric risk that allows people to live there safely. You know what I just realized when you-
- DFDavid Friedberg
This, this was my, my last company, right? Climate Corp., we were a wh- we started out in 2006, we offered parametric weather insurance online. And so it was all about our, our mission was to manage and adapt to climate change.
- JCJason Calacanis
... and so you could buy weather insurance online and, and you underwrite the risk. And the way you underwrite risk like this, and, and auto insurance and any kind of insurance, is you look at past data, you build a statistical model that's represented by the past data and the frequency of certain things happening, and that's how you price the insurance. The problem now is the past data has absolutely no bearing on what's going on.
- CPChamath Palihapitiya
Yeah.
- JCJason Calacanis
And so you have to basically create more fundamental deterministic models of fires, which is something no one's really good at, no one has any ability to do because we've never seen this kind of environment before. We've never seen hot year after hot year, dry year after dry year, and so there's no historical data to draw from to build the model. So all the insurers throw their hands in the air and they say, "We can't take on that risk. We don't know how to price it."
- CPChamath Palihapitiya
Well-
Episode duration: 1:23:59
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