E50: Crypto investing deep dive, Facebook's whistleblower fallout, Chappelle's new special & more

Chamath Palihapitiya 0:00 Our daughter's head is dropped because the, our doctor, she- she felt the head and she was like, "Yep, it's- it's-"

David Sacks 0:06 Hey, Chamath, whose head has gotten bigger? Uh, yours or your daughter's? (rimshot)

Jason Calacanis 0:12 (laughs)

David Friedberg 0:13 (laughs)

Chamath Palihapitiya 0:13 What do you mean?

Jason Calacanis 0:14 Don't quit your day job, Sacks.

David Friedberg 0:16 Yeah, Sacks.

David Sacks 0:17 That didn't quite land.

David Friedberg 0:18 That didn't land.

Chamath Palihapitiya 0:18 We need to get more respect here on the show.

David Friedberg 0:21 He's trying out material.

Chamath Palihapitiya 0:22 Nah.

David Friedberg 0:22 Total flop.

David Sacks 0:23 (laughs)

Chamath Palihapitiya 0:23 We are not in rhythm. You know why? It's Mercury retrograde. Our 50th episode is gonna suck (censored) because of this.

Jason Calacanis 0:30 Here we go. Three, two...

David Friedberg 0:33 What your winners ride.

Jason Calacanis 0:36 Rain Man, David Sacks.

David Friedberg 0:38 I'm going all in. As I said, we open sources to the fans and they've just gone crazy with it.

Jason Calacanis 0:44 Love you Betsy.

David Friedberg 0:45 Queen of Quinoa. I'm going all in.

Jason Calacanis 0:49 All right. The Facebook whistleblower hearings occurred and Facebook, um, gave a-

David Friedberg 0:54 No, but wait, wait. Where's your, "Hey everybody, hey everybody, hey everybody."

Jason Calacanis 0:56 Hi everybody. Three, two ... Hey, everybody.

David Sacks 0:58 (laughs)

Jason Calacanis 0:58 Welcome to another episode of the All In Podcast, Episode 50. We made it to 50.

Chamath Palihapitiya 1:04 Cinquanta.

Jason Calacanis 1:05 Cinquanta. Nobody expected us to make it. Here we are, we've made it, and everybody is, uh, thrilled, uh, to be here with you. And thank you for the support over the first 50 episodes.

Chamath Palihapitiya 1:15 One episode closer to getting canceled.

Jason Calacanis 1:17 One episode closer. Man, how great would it be to be canceled and never have to work again? Oh, that'd be wonderful. Okay, so, uh, Frances Haugen, uh, revealed herself on Sunday night on 60 Minutes, and then appeared before the Senate on Tuesday.

David Friedberg 1:32 Wait, don't we get our own personal intros, or no, we're done with that?

Chamath Palihapitiya 1:36 Oh.

David Sacks 1:36 (laughs)

Jason Calacanis 1:36 I mean, you're unbelievable. He-

David Sacks 1:37 Doesn't the audience know us?

Chamath Palihapitiya 1:38 Mercury retrograde. Mercury retrograde.

Jason Calacanis 1:40 He's Mercury retrograde. I'm all fucked up.

David Sacks 1:42 Doesn't the audience know us by now after 50 episodes?

Jason Calacanis 1:44 I- anyway, everybody loves the intro.

David Sacks 1:45 Do we really have to put a-

Jason Calacanis 1:45 Three, two-

David Sacks 1:46 Do we have to put a-

Jason Calacanis 1:46 All right.

David Sacks 1:46 What? What?

Jason Calacanis 1:47 With us again this week-

David Sacks 1:48 Oh, no.

Jason Calacanis 1:48 ... is the Rain Man himself-

David Sacks 1:50 Oh, no.

Jason Calacanis 1:51 ... David Sacks, and the Queen of Quinoa, David Friedberg.

Chamath Palihapitiya 1:56 I love the intro.

Jason Calacanis 1:57 Of course, the dictator, Chamath Palihapitiya, and I'm your boy, J-Cal.

Chamath Palihapitiya 2:01 Sacks, I gotta say, I think, I think your AUM is positively correlated with the bags under your eyes.

Jason Calacanis 2:06 (laughs)

David Friedberg 2:07 (laughs)

David Sacks 2:09 (laughs) If you mean it's getting bigger, you're correct.

Chamath Palihapitiya 2:11 I mean, fuck. They're hi- they're heavy.

Jason Calacanis 2:13 Good Lord.

Chamath Palihapitiya 2:14 They're heavy, dragging you down.

Jason Calacanis 2:16 That's where you're hiding all that Solana, in your fucking, under your eyes.

David Sacks 2:19 Jesus Christ.

David Friedberg 2:19 (laughs)

Jason Calacanis 2:20 Come on. You better clear that Solana position. What's your lockup, 24 months?

Chamath Palihapitiya 2:24 Fuck, no. He's trying to sell it to me in text message.

David Sacks 2:26 (laughs)

Jason Calacanis 2:26 Yeah, of course he is.

Chamath Palihapitiya 2:28 We're negotiat- we're negotiating discounts.

Jason Calacanis 2:29 I just had the fact of-

David Sacks 2:30 Hey, you're fucking the whole thing up.

Chamath Palihapitiya 2:32 Bro, you don't, you don't think to-

Jason Calacanis 2:34 The whole Ponzi scheme? (laughs)

David Sacks 2:34 I'm HODLing. I'm HODLing.

Chamath Palihapitiya 2:36 You think I buy hundreds of millions of dollars-

Jason Calacanis 2:38 You're not HODLing. You're ch-

Chamath Palihapitiya 2:38 ... of anything without a discount? Everything is a discount.

Jason Calacanis 2:41 Everything's discounted. You wanna clear that position in an LLC.

David Sacks 2:44 Are you saying I got a billion dollars of Solana?

Chamath Palihapitiya 2:46 Woo.

Jason Calacanis 2:46 Ooh.

Chamath Palihapitiya 2:46 No, bro, I'm saying I have one, but you know, I bought it at a discount.

David Sacks 2:49 But you're holding, correct?

Chamath Palihapitiya 2:51 Ish.

David Sacks 2:52 Ish, okay.

Chamath Palihapitiya 2:53 (laughs)

David Friedberg 2:53 (laughs)

David Sacks 2:53 Yeah, me too.

Chamath Palihapitiya 2:54 Bish. Well, I mean-

David Sacks 2:56 Ish.

Jason Calacanis 2:56 If something appreci- at what point is the appreciation in an asset that you've invested in early something you need to, you know, at least clear a position of and lock in a win? I mean, what- what's enough? 100X, 500X? You gotta, at some point, bank a win, right?

Chamath Palihapitiya 3:11 Well, I think you have to put things in a bucket of, like, is it an investment or is it something that represents a- an idea that you love so much? If it's the latter, you should never sell. If it's the former, yeah, you gotta manage risk and you gotta-

David Friedberg 3:24 Yeah. Or rather, you know, is it a trade or is it something you wanna own?

David Sacks 3:28 By the way, let me just clean this up because, um, it, it wa- Solana was not a direct investment for us. What we did is we invested in, um, a, in a crypto, uh, venture firm called Multicoin Capital. This is back in 2017. We realized, like, crypto was becoming, like, a full time job for us. It was a total rabbit hole. And we were like, "We don't have time to figure out this, like, 24/7 trading stuff." But we met Kyle and Tushar, who were these two young guys. Uh, we met them through Vinny Lingham, actually. And they were creating Multicoin Capital and we actually invested. We gave them a million bucks at a 20 cap to help set up their firm. And then we invested in their, they had a, both a venture fund and a hedge fund. And they were like, the first money into Solana.

Chamath Palihapitiya 4:10 Oh.

David Sacks 4:10 So, that fund, I mean, it's- it's like 100X fund. It's just like, bonkers.

David Friedberg 4:15 Crazy.

David Sacks 4:16 And so as a result of that, we are, um, indirect beneficiaries of this huge increase in Solana. It will end up being about, you know, a billion dollars of, I think, Solana for us, in terms of returns. But, um, but it's, the Multicoin guys determined the trading decisions on that.

Jason Calacanis 4:34 Yeah. And so people who don't know, Solana is a programmable, you know, Ethereum, uh, competitor, I guess. And it's at $50 billion or so, market capital. It was trading at a dollar not long ago, and now it's at 164.

David Sacks 4:48 It's an Ethereum competitor, basically-

Jason Calacanis 4:50 Yeah.

David Sacks 4:50 ... for, you know, smart contract platform. And there's a lot of people, I'd say smart money in Silicon Valley, who are betting on a flippening where Solana could ultimately overtake Ethereum as the preferred platform. But even if it doesn't overtake Ethereum, it- you know, it's the number eight cryptocurrency right now. You know, it could go, there's a lot of people betting it'll go to number three or, you know, what have you.

Jason Calacanis 5:13 Additionally, it is a fraction of a penny for a transaction, uh, and it can do many more trans- actions than Ethereum. So it's, you know, technically should be much cheaper. If you're buying NFTs right now, you're probably spending, you know, tens of dollars, you know, uh, in fees on Ethereum. Whereas if you did those same wa- uh, NFTs, which some people are starting to do on Solana, they would cost a fraction of a penny. Correct, David? Or it's, Chamath?

David Sacks 5:42 Yeah, I think the- the platform is- is known for being a faster, cheaper, you know, blockchain.

Jason Calacanis 5:47 Really, really, congratulations. And if Vinny Lingham's Instagram is any indication, he did pretty well, because his Instagram suddenly turned into a world tour on private jets. (laughs)

David Friedberg 5:58 Like which- which pro- which island should I buy? And...

David Sacks 6:00 Well, like, V- Vinny, uh, was sort of like a, I- I don't think he's full time at Multicoin, but he was sort of a venture partner to Kyle and Tushar, and he helped set them up. This is back in 2017. He helped bring us in.... as the first investors. And, I mean, for us it was sort of a founder bet combined with a, like a, a team, like sort of a space bet. Like, we knew the cryptocurrencies were starting to be traded 24/7. We knew it required more of like a hedge fund skill set than what we had and, um, so we made, you know, we made a bet on those guys and man has that ever paid off.

Jason Calacanis 6:34 It's one of the nice strategies, right, Sacks, is if you are LPing in new fund managers, uh, which I've done a couple of times now, you get to learn from them, uh, and basically dive into a data set of a new market, right? I mean, it's like one of the nice things about being an LP in a fund is you can place a small bet, whether it's 50K or 500K or 5 million, whatever it is, you, you get like this meta-education of an entire sector, correct?

David Sacks 7:02 Yeah, but I think, you know, we didn't do it to learn from them, although we have. It's more that we realized that crypto was, like I said, becoming such a rabbit hole. Like, uh, we realized we, we would either need to do crypto full-time as a fund or we would need to like partner with people who actually did.

Jason Calacanis 7:18 Yeah.

David Sacks 7:18 And you, you see that with like a lot of VC firms now is they're creating like specialized crypto funds or at least they have specialized crypto partners. There's so much to know about the crypto world. It's a hard thing to invest in unless you're like totally focused on it.

Guest 7:31 I've struggled with that. Like, I've tried to go deep on a couple topics and, like, I realize, "Holy shit, I've been in this for like four to six hours just trying to learn this stuff and I'm not like there," and then I feel uncertain about making any decisions. I t- I, I totally get it. I mean, you gotta have folks like working on this and the, the, the pace is changing, um, so rapidly, uh, you really need to kind of be up to date on, on what's next. It's, uh, it's really-

Jason Calacanis 7:52 You know what the other, the other issue with Freidberg is?

Guest 7:53 ... really challenging.

Jason Calacanis 7:55 When you look at crypto, people use the word crypto as if it's like that's all there is.

Guest 7:58 Totally.

Jason Calacanis 7:59 Crypto is like-

Guest 8:00 That's like, that's like the internet.

Jason Calacanis 8:01 ... distributed computing-

Guest 8:01 Yeah, right.

Jason Calacanis 8:02 (laughs) ... E-cash, cryptography, uh, you know, financial modeling or building new economic systems, Chamath.

Guest 8:10 There's business model innovation, there's technology innovation, there's economic innovation, it's, uh-

Jason Calacanis 8:14 Distributed computing innovation.

Guest 8:16 Yeah, in- infrastructure-

Jason Calacanis 8:17 Cryptography.

Guest 8:18 ... infrastructure, hardware. I mean, there's, there's quite a lot of, uh, layers of activity. Chamath, are you spending time in crypto yourself or do you have people doing it for you or how are you kind of understanding this thing?

Chamath Palihapitiya 8:28 Yeah, we have... Look, we have, we have a lot of it. Um, a lot of a lot of everything. So yeah, we have things and-

Guest 8:36 But do you go deep yourself, Chamath? Like, how do you spend enough time to really get up to speed on all the goings on?

Chamath Palihapitiya 8:45 I cherry pick and I snipe and, uh, opportunities where I get intellectually curious and jump in, but a lot of the credit goes to my team. There's a couple folks that spend a lot of their time in it and, you know, we've, we've had a couple people, um, do extremely well for us. Um, you know, similar, similar to David's story, back in the day, you know, I invested, uh, in Barry Silbert and, uh, DCG-

Jason Calacanis 9:15 Second market Barry Silbert.

Chamath Palihapitiya 9:16 Yeah, and, uh, you know, DCG is now, I don't know, I'm guessing, a $20 billion company. Maybe more. I don't know if it's-

Jason Calacanis 9:24 So how does it mechanically work with your team? They, they are investigating opportunities and then they come to you and bring you, you know, "Hey, we'll do a meeting and I'm gonna share four with you." And then you say, "Hey, let me get on the phone with that guy?"

Guest 9:33 Yeah, I mean, like do you know, do you basically go deep, go deep when something shows up, Chamath?

Chamath Palihapitiya 9:37 No, so, so basically what happens is they have carte blanche to do whatever they want and what they're typically doing is they're working with entrepreneurs to seed projects and, you know, to, to, to get projects off the ground and then at some point when those, when those projects become de- uh, large enough, then they'll issue tokens and, you know, w- we'll get a certain allocation of those tokens. And so we've done that for, you know, call it, I don't know, some number of projects that we think are valuable. Then along the way, you know, they'll have certain views on Bitcoin, they'll have certain views on Ethereum, they'll have certain views on Solana and we'll make capital allocation decisions. They tend to have the ability to do whatever they want and then what I tend to do is just think about when it gets above, like, I, it... To me, I need to see the chance to make at least, uh, you know, in the rough justice around, you know, 500 to a billion dollars and then I'll get involved. But otherwise, they just kind of run the whole thing.

Jason Calacanis 10:32 Let me ask you guys, um, a question here. You know, when you look at the, uh, market caps of these projects, it seems like things are changing. Uh, Cardona or Cardona, uh, is number three now and, uh, Tether still remains number five, XRP still number six, but Solana-

Chamath Palihapitiya 10:50 I would encourage people to not look at it like that. I think looking at it as a rank list betrays what it is. So, you know, I'll give you a simple example. Let, like, like compare the, the, the fate of two projects or actually right now there's a distributed form of, um, Discord that's being built.

Jason Calacanis 11:08 Discord, the chat app.

Chamath Palihapitiya 11:09 Yeah.

Jason Calacanis 11:09 Very popular amongst gamers.

Chamath Palihapitiya 11:10 Complet- in a completely distributed way with an integrated crypto wallet because if you look at Discord, it's really two cohorts of people. There's gaming and there's crypto, right? So-

Jason Calacanis 11:18 Those are the two big ones, yeah.

Chamath Palihapitiya 11:19 So, you know, that's an example of a really interesting product that has some real potential. Then if you look at something like DeSo, DeSo is a decentralized social programming framework. Then if you look at something like Helium, that's completely about building a large distributed, you know, connection of, um, of on-ramps to the internet, so internet connectivity. So those are three completely different ideas with three completely different paths to success. If to invest in those tokens, you, you have to believe in three totally different sets of things-

Jason Calacanis 11:58 Yes.

Chamath Palihapitiya 11:58 ... so to look at it on a rank list and just buy something-

Jason Calacanis 12:00 Well-

Chamath Palihapitiya 12:00 ... because it's cheap is stupid.

Jason Calacanis 12:02 Yeah. No, no my, my question was just-

Chamath Palihapitiya 12:02 No, no, no. I'm just gonna be blunt.

Jason Calacanis 12:04 Yeah.

Chamath Palihapitiya 12:04 It's stupid. Don't do that.

Jason Calacanis 12:05 Well, no, no, that wasn't really my question. My question was, you know, we, we have an extraordinary number of the public who have invested in Bitcoin and Ethereum as number one and number two and those projects...... feel maybe stagnant when compared to the dynamism of what I'll call, you know, the projects launched in the last three or four years. So-

Chamath Palihapitiya 12:24 Because they're at a different... No, no, but you're talking about confusing. Again, this is what I mean. Those are layer one protocols, right? Meaning they are at the core substrate of how all of crypto is going to work. Then you have these other projects that build on top of these things in different ways, or build around them. So my point is, if you don't have... if you don't wanna take the time to understand which layer twos you wanna own and which layer ones you wanna own and why, I think you're much better off-

Jason Calacanis 12:51 I, I, I understand your point. My, my, my point is just-

Chamath Palihapitiya 12:52 ... buying an ETF or something else, because there are, there are ways to own these things. So for example-

Jason Calacanis 12:56 But, uh, David, the, d- David, Solana is, does not need Ethereum to exist. So my point is-

David Sacks 13:03 Right.

Jason Calacanis 13:03 ... do we, do we see a day when this, you know... The past decade has been about Bitcoin and Ethereum. Do we see a day when maybe people stop buying those and start buying these new ones?

David Sacks 13:14 Anything's possible, but he- here's, here's the evolution in our thinking. I mean, the, the first step was realizing, "Okay, we need to own Bitcoin." Why? Because, you know, there's now enough evidence where, what, like, a, a decade or more than a decade into this, nobody has been able to essentially counterfeit a Bitcoin. It is, you know, new money. It is, it is better money. So if you be- so I'm not gonna convince people right now of the argument for Bitcoin, but if you believe in it, that's sort of the first step, is you realize you really need to have 1% to 2% of your portfolio in Bitcoin in the event that fiat money sort of becomes debased and eventually you move to crypto. Then you realize, well, wait a second, Bitcoin is just one application of blockchains. There's a bunch of applications of blockchains, so maybe we need to own not just, sort of, you know, digital money, but we also need to own the underlying blockchain platform, and that leads you to Ethereum. Then you realize that there's a bunch of competitors to Ethereum, and it's still very early days, and one of those guys mul- might ultimately displace Ethereum as a blockchain platform.

Jason Calacanis 14:13 Of course.

David Sacks 14:13 Then you realize that there's all these applications on top of all these blockchains. And so, you know, the conclusion I come to after all of that is, I can't figure all this out and f- well, maybe I could if I was willing to go back to school and, like, make this a full-time job, which I just don't wanna do. I mean, I'm lazy and that's why I focus on SaaS. Like, that's what I know.

Jason Calacanis 14:31 Your kill zone, yeah.

David Sacks 14:31 As, as an investor, yeah, like, I'm not gonna reinvent myself.

Jason Calacanis 14:33 It's like you playing Hold'Em versus PLO.

David Sacks 14:35 Right, right. (laughs) Right, exactly. So but this is why we partner with Multicoin Capital. So what I would just say is, like, the idea that you as an individual investor are gonna, like, you know, pick off the one cryptocurrency here or there to invest in, I mean, that's gonna be a lottery. I would l- I would find a manager, basically, who is really good, who has a track record, who understands this stuff.

Chamath Palihapitiya 14:56 Our approach is to hire very young, extremely technical computer scientists and mathematicians to basically do the work. That's, that's working.

David Sacks 15:06 Yeah, and, you know, o- one of the things that I think these guys do, and the reason why it is very helpful for them to be computer scientists, is these are all open source projects. So they go look at the repos. Just go look at it, l- go look at what-

Jason Calacanis 15:18 You can actually see the changes being made.

David Sacks 15:20 Yeah.

Jason Calacanis 15:20 And this is, like... Do you realize there's only 12 people who are actively working on Solana? In, in the-

David Sacks 15:25 But you need to, you need to look at all the code check-ins.

Jason Calacanis 15:27 It's crazy, and seven of them work for Solana.

David Sacks 15:29 Y- you need to look at all the code check-ins, you need to look at the velocity of the code check-ins.

Jason Calacanis 15:32 Yes.

David Sacks 15:32 So you, so you can see, like, how many projects are being created on these platforms.

Chamath Palihapitiya 15:36 The white papers are also really exceptional. Like, if you, if you read these white papers, they are, they're, th- they're, they're really incredibly thoughtful and, and well written, and you can really understand what their goals are, and... you can make some informed decisions there. But again, if you're not gonna be in the business of being in this ecosystem, because I think David's right, everything is moving so fast, um, what's successful today could be just a dog tomorrow and vice versa, that I think speculating in this market will, um, not only will it be super volatile, but more than likely, you're gonna lose all your money. So I would encourage people to not speculate in crypto. I would encourage you to figure out an elegant way of having an abstracted bet if, to the extent you care about it. And by the way, in the UK, for example, there are ways where you can own publicly traded mutual funds that give you exposure to this. It's just simpler.

Jason Calacanis 16:28 Like ETFs.

Chamath Palihapitiya 16:29 Yes.

Jason Calacanis 16:30 Yeah. Th- they're mutual funds of crypto.

Chamath Palihapitiya 16:32 Do the work, find these mutual funds, just own those things and let somebody else do the hard work, because it is too, it's too hard.

David Sacks 16:38 Some of the other investments we made back in 2017, 2018 timeframe, one was, uh, a company called Bitwise, which was creating an ETF for crypto. So it's a, uh, a, a, a monthly rebalanced portfolio of, I think, the top 10 cryptocurrencies. And you could buy it... They, they finally got approved by the SEC, and you can buy it like a, uh, like with a ticker symbol from your E-Trade account or Schwab account or-

Jason Calacanis 17:01 Like a Robin Hood for E-Trade, yeah.

David Sacks 17:02 Exactly. So that was, that was pretty incredible to see the progress they've made. And then the other big bet we made was just, uh, institutional custody. Back in 2017, we invested in BitGo. Actually, Bill Lee helped found that company, uh, many years ago, and then that became, last year, uh, Galaxy announced a deal to acquire them for, I think, 1.2 billion, largest crypto acquisition to date. The thesis there was just that crypto would go more institutional, and I think we're starting to see that now, where endowments and so on are realizing they need to have some portion, maybe 1% or 2% of their portfolio, in crypto. And so, you know, they need-

Chamath Palihapitiya 17:37 It's unrealistic. Look, we have two, almost $3 trillion of market cap in crypto. It's unrealistic for folks to expect people to be able to be living in Discord channels and doing all of this work. I think what that means is that the SEC is going to be asked increasingly more often to approve simpler on-ramps for this stuff. And now, in the last week, by the way, we had a pretty b- important... Two things happened. Both Jerome Powell and Gary Gensler basically said, "Crypto's here to stay and, and, you know, we're not gonna ban this stuff." And so hopefully what it means is that you get some ETFs passed in the United States. You know, Grayscale is one. There could be more, and I think that stuff makes it much easier for folks to own this stuff.

Jason Calacanis 18:18 Well, a clear regulation would be a great thing for the industry, for people to buy into it, and removing some of the, let's call them-... I don't wanna say bad actors, but people who are maybe questionable like Tether, you know. I don't know if you saw the Bloomberg story yesterday, but, you know, s- a Bloomberg reporter basically found out that Tether, he got the list of what Tether owns with their stablecoin and it looks like they're giving a lot of loans to other crypto projects and own a lot of Chinese paper, um, in that they are basically making the float on 69 billion dollars, sweeping it, which then incentivizes them to take risky bets because they get paid on them. And it's anything but a stablecoin, uh, if you think about it from that regard.

David Sacks 19:02 It's, I don't know the details on Tether. I won't speak to that. But I'll say that any stablecoin, if it's not 100% backed by dollars, if that's the currency that's going in and out or-

Jason Calacanis 19:14 Yeah.

David Sacks 19:14 ... other hard currency, that's not a stablecoin.

Jason Calacanis 19:17 Right.

David Sacks 19:17 You know, a stablecoin is supposed to be a service. It's not supposed to be a, a speculator's currency. It's basically just supposed to be a mechanism by, at the on-ramps and off-ramps of the crypto ecosystem, you can convert your dollars into a temporary, uh, like a stablecoin that will hold its value-

Jason Calacanis 19:35 Poker chip.

David Sacks 19:35 ... so you can tr- a poker chip that you can use to then buy Bitcoin or Ethereum or whatever.

Jason Calacanis 19:40 Yeah. USDC, USD t- uh, C, Jeremy Allaire's, uh-

David Sacks 19:44 Circle.

Jason Calacanis 19:45 ... competitor from Circle just said that he would switch to 100% to what you're saying, cash, cash equivalents.

Chamath Palihapitiya 19:52 You know, guys, this has, this has always been a money market fund. It should be-

David Sacks 19:56 Right.

Chamath Palihapitiya 19:56 ... treated like a money market fund and it should be regulated and managed like a money market fund.

Jason Calacanis 20:00 Which was Tether's original vision.

David Sacks 20:02 Totally agree.

Jason Calacanis 20:02 And then they flipped the script 'cause I think they got greedy and now they own, I think, three or four percent cash in-

Chamath Palihapitiya 20:05 And, and because they weren't regulated. By, by the way, by the way, it, it speaks to the role of regulation (laughs) . Like, you know, a lot of people have trust and faith because they make some claim, but there's no regulator actually checking on their claims and- The only people that want regulation are two ends of the spectrum, so young and so disruptive where they want rails to operate legally and so big and so over the top that they wanna basically entrench themselves for the rest of their lives. That's it (laughs) .

Jason Calacanis 20:28 (laughs) .

Chamath Palihapitiya 20:28 No, e- everybody in the middle doesn't really want regulation.

Jason Calacanis 20:30 W- well, what's a, what's a way to create-

Chamath Palihapitiya 20:32 If you're a crypto company or if you're big tech, you both want regulation. (laughs) .

Jason Calacanis 20:36 Well, but th-

David Sacks 20:36 Thre- yeah.

Jason Calacanis 20:37 (laughs) .

David Sacks 20:37 Yeah, well, the, there, but there, there are some narrow cases like again, you know, if, if, if a stablecoin's gonna say that we are just a money market fund, we're 100% dollar reserve, it is really nice to have a regulator, somebody we trust-

Jason Calacanis 20:49 (laughs) .

David Sacks 20:49 ... to go in there and put the stamp-

Jason Calacanis 20:51 Yeah.

David Sacks 20:51 ... of approval on it-

Jason Calacanis 20:52 FDIC.

David Sacks 20:52 ... so we can trust it. Like that is-

Jason Calacanis 20:55 Or an SRO.

David Sacks 20:55 That is a valid role, I think, for a regulator.

Chamath Palihapitiya 20:57 In traditional financial markets, you have these self, uh, regulating bodies. Um, I, I think is, FINRA's a self-regulating body, right? And so, you know-

Jason Calacanis 21:05 Yes.

Chamath Palihapitiya 21:05 ... some of these self-regulating bodies should be formed in the crypto community. I don't know if they're doing this. I'm so naive in this space. But certainly would make sense to have an SRO form that, that does self-policing effectively within the community rather than try and bring in a government regulator.

Jason Calacanis 21:17 Well, here's the thing. If you police (laughs) yourself, you can, uh, really, uh, define the execution, uh, and the ramifications of that policing.

Chamath Palihapitiya 21:26 If you have 30, call it competitors and cooperators in the, in the market space doing this together, it can be a, a highly effective model for creating a system of trust and, and reliability and not having to, you know, bring in, you know, call it outside incompetence (laughs) to overseeing the rules and regs.

David Sacks 21:43 Yeah. Another area we need standards is around the token cap tables for these projects, right? So how much, uh, how much of the token cap table goes to the founders? What are the rules around them selling? What are those vesting periods? And what are the disclosures around them selling? In public markets, we have 10b-5. So if you're an insider who runs these companies, you have to disclose when you're selling. There's no similar rule for crypto. I think there probably should be, right? Like, if you own the cr- if you own the token and you run this project as publicly traded and the public can buy it, you should really probably have to disclose your, your sales.

Jason Calacanis 22:16 Yes. And maybe, um, you know, these, the, it's very strange because they're running foundations and I had a crypto person on from a music crypto project. And he said they had like three or 400 million in this project in Panama. I was like, "Who's on the board of that?" And he's like, "I can't say."

David Sacks 22:32 (laughs) .

Jason Calacanis 22:32 I'm like, "Why can't you say?" And he said, "Security reasons." I was like, "Well, anybody who's on a public board has to be public." And of course they have secu- you know, people who are on the board of GE or IBM or Amazon, they have security issues, like, they deal with their security issues. That doesn't mean they don't disclose who they are. He's like, "Yeah, I'm not comfortable saying who they are." And it's like, "Okay, well, they sold three or 400 million." I was like, "How did they give that money out?" I'm like, he's like, "I'm not sure. I'm not on it." I'm like, "What?" Like, there's some organization in Panama that's... uh, it was really weird. And I think you're right.

Chamath Palihapitiya 23:01 So one thing that I'll say positively about, about these crypto founders is that they, uh, will never allow a single venture investor to clog up their cap table, number one. They do a great job of creating these large broad syndicates of participation when they seed their projects. And then, you know, a lot of it goes into treasury where then they issue coins as needed. And I think that that strategy actually is very pro employee and pro ecosystem. So, you know, when we see these projects, all these companies tend to raise, you know, three, four, five million bucks. It all tends to be at like 30 million pre and it all tends to be, uh, distributed. So like, you know, you know, it's us, Andris and Sequoia, and it's like, you know, we put in 200 grand each or 400 grand each. You know, that's why you're forced to then go into the market if you believe in a project and then spend hundreds of millions of dollars to buy into it after the fact. And I think that that's very, um, very powerful. It's a really important dynamic that if it comes back to, uh, traditional venture, could be really disruptive.

Jason Calacanis 24:01 Why?

Chamath Palihapitiya 24:02 Well, could you imagine a, a SaaS founder that basically all of a sudden says, "All right. You know what? I'm raising a $6 million series A. You know, Craft can take 500K. Sequoia, you can have 500K." Um, you know, blabbity blah folks g- and then you raise six million bucks that way, and you never allow anybody to have more than, call it, you know, a few percent of a company.

Jason Calacanis 24:23 So the fact that it's like a, it's like a mini IPO, it's like a private IPO on Sand Hill Road.

Chamath Palihapitiya 24:28 Yeah. And then, and then your board construction looks entirely different. And then as-

Jason Calacanis 24:31 Yep.

Chamath Palihapitiya 24:31 ... a result, you know, founder protections probably go way up.Employee protections probably go way up. It's actually-

Jason Calacanis 24:35 And governance goes way down.

Chamath Palihapitiya 24:37 Uh, no. I actually think what'll happen is you're less likely in a round like that to be okay with some dork, dingleberry joining your fucking board. You're going to actually point to some industry expert and say, "This person is joining my board. She does XYZ job at such and such a startup." And then the investors say, "Wow, well, that's a pretty great advocate for the business. Go ahead and do that."

Jason Calacanis 24:59 Uh, another thing I learned about this whole token space was when I talked to Anatoly from, uh, Solana. When they sold their three or 400 million tokens to fund, uh, the company, because they consider them utility tokens not shares, they paid taxes on it. So the IRS is getting massive-

Chamath Palihapitiya 25:17 Oh, wow.

Jason Calacanis 25:18 ... amounts of tax revenue. Well, think about it, they're selling the token. It's supposed to be for utility, well, therefore it's a taxable event.

David Sacks 25:24 That actually was really smart. That is showing, I think some wisdom because there's a lot of founders who want to have their cake and eat it too, which is to say they want to say that these are utility tokens, um, and, and they don't pay tax and then they... when they later get traded, they want to say that they're not, you know, they're not securities but... So when does the tax get paid? I think it's really smart to pay the tax upfront to establish that this is a corporate sale. They're basically paying the corporate tax, right?

Jason Calacanis 25:49 Yes.

David Sacks 25:50 That is what is... Because this is, this is the problem is if, if you wait until they're traded publicly and then say, "No, no, no, they're, they're utility tokens, not security tokens," the government's going to ask you, "Well, why didn't you pay corporate income tax when you sold them?" Right? So that, that is actually showing some perspicacity, I think.

Jason Calacanis 26:09 Uh, could somebody look up word up for me while (laughs) -

David Sacks 26:12 Do, do you, do you know that word? Four-sidedness, J-Cal.

Jason Calacanis 26:14 Okay, great, awesome.

David Sacks 26:15 (laughs)

Jason Calacanis 26:16 Uh, it's so great that you have the two producers on either side of you right now-

David Sacks 26:19 (laughs)

Jason Calacanis 26:19 ... feeding you (laughs) vocabulary words. Well done.

Jason Calacanis 26:23 So here's a, here's, um, you know, uh, another question with this. If the majority of people, Sacks, um, just put your legal hat on for a second. If the majority of people who bought a token in a, a project, we'll call it the, you know, Acme Crypto Project, they buy Acme coins. If they're buying them and they have absolutely no interest in using them for the utility and they say, "I bought these as a speculative device," and the founder says they're utility tokens, but let's say 70% of the people who bought them said, "I didn't buy them for that reason." They just came out, right, and said, "I bought this to speculate on the price." What should the government do? Should they deem them a security or should they deem them a, a utility token?

David Sacks 27:05 I think that's a, a complicated question, but I, I think that there should be an opportunity for these cryptocurrencies to establish themselves as utility tokens because they are... They do serve a purpose. It... They are designed to be part of a system, right? They, they, they're not just objects of speculation. And by the way, even if they were, we don't, we don't treat baseball cards as, you know, as, as sort of a security. So it wouldn't necessarily make them a security just because they're speculated on. They actually do serve a function in a designed computer system. So I think what's important here is that there's a safe harbor where these crypto companies know what the rules are and if they, if they can basically, um, meet the criteria, such as by paying corporate income tax when they sell the tokens and other things like that, that they won't later be deemed to be engaged in an unlawful sale of securities. I think the impor- I think the important thing is just that entrepreneurs, founders know what the rules are so they can abide by them and not be surprised-

Jason Calacanis 28:03 And they don't right now. Yeah.

David Sacks 28:04 Well, and so they don't get surprised later, they don't get whammied but-

Jason Calacanis 28:08 Mm-hmm.

David Sacks 28:08 ... with basically... You know, because th- they are building something legitimate here, you know?

Jason Calacanis 28:12 Right. But it would seem to the sniff test if the people buying the tokens have no idea, have never written a line of code, have no use for them, uh, that-

David Sacks 28:23 I don't see why that's relevant. I don't see why that's relevant.

Jason Calacanis 28:26 Well, because they're profiting off of them as if they're shares. And unlike baseball cards, which you can't sell 1,000 baseball cards for an increasingly, uh, you know, in, uh, y- you know, in a, in a very instantaneous way. You would have to put them in an auction with-

David Sacks 28:40 You kinda can't. You could still-

Jason Calacanis 28:40 There'd be a lot of friction. There'd be a lot of friction.

David Sacks 28:42 You could sell physical coins.

Jason Calacanis 28:43 You can't trade it certainly like... Yeah. Uh, Friedberg, what do you think? If the majority of people buying a token are doing it to speculate, can the founder say it's a utility token, and then those people who are trading it, like, either baseball cards, minted coins, wha- whatever analogy shares you want to use, are in it for the increase in the value, should it be a security and should they have to play by the rules we play at, in the traditional venture startup game?

Guest 29:08 I mean, the question is, what's the utility? So I mean, if you can demonstrate some utility, then maybe that's the, uh, the, the... And this will probably be litigated at some point, right? Um, I'm sure there'll be enough capital sloshing around here that someone will say, "You know what? We believe strongly." We're seeing this happen with Ripple already. But, um, someone will litigate this and we'll get some clear definition on, you know, what statutes are going to be referenced and what those statutes might say with respect to the... how this ties to the definition of utility and, and that'll become, hopefully a standard that, that people can kind of look to, to guide them in the future. But it's definitely the Wild West right now. And everyone's going to try-

Jason Calacanis 29:50 Yeah. And the reason I bring it up is because Gensler was sort of, uh, floating this argument. Chamath, what do you think?

Chamath Palihapitiya 29:57 I think that, um, you can't wipe $3 trillion of value out of the world.

Jason Calacanis 30:03 Okay.

Chamath Palihapitiya 30:03 And so, um-

Jason Calacanis 30:04 So pragmatically hard to do, got it.

Chamath Palihapitiya 30:05 So it's here to stay and it's too institutionalized now. So, you know, there's just way too many organized pools of capital that are now speculating inside of this entire ecosystem. You know, I saw a tweet today, there was a... there's a firm, I think like called Jump Trading or something. It's like a high speed frequency trading organization and they tweeted out some pictures where, you know, they're, they're, uh... They hired a bunch of folks to start at Jump and they did a coding bootcamp on Solana. That was their onboarding, as an example. So when you have people in high finance, you know, really vested in this thing-... uh, and you have $3 trillion of value that will go to six trillion and then go to 10 trillion. This can't go away. So, uh, that's why I think Powell and Gensler had to say s- some version of that on the record, which is, you know, "We're not going to ban this stuff," because they know it's not possible. So I think David's right. You have to create some rules, make folks and let folks pay their taxes. You know, I remember, for example, like I did this Bitcoin transaction in 2014 or something. I bought some land, I used BitPay, I transferred some Bitcoin-

Jason Calacanis 31:12 Oops.

Chamath Palihapitiya 31:12 ... bought the land, blah, blah, blah. Ah, it was like a, you know, whatever. But then-

Jason Calacanis 31:16 (laughs) Whatever?

David Sacks 31:18 (laughs)

Chamath Palihapitiya 31:18 I mean, I mean, I, I, I left ... I mean, I, I owned a lot at the time, so it wasn't that big of a deal. But my point is, finding a way for me to pay my taxes was a huge deal, I remember. And, you know, we filed the tax return, and we tried to make sure that we paid our taxes. These are very complicated. Even if you want to be conformant to the government, it's impossible right now. So they just need to create some rules where folks can say, "Here's what I own. Here's what it's worth. Tell me how much I owe you." And we're all willing to pay, or not maybe we're all not... I'm, I am. 'Cause I just think it's like make sure that we can, we can trade around it, hedge it, structure it, do the things that we would normally do with any other risk assets. Right now, that's very hard. And when you own lots of this stuff, it sits in your balance sheet, and you just take these enormous swings, and you're just like, "God, you can't do anything around this stuff." And that's not a, a viable financial market. That doesn't-

Jason Calacanis 32:10 Yeah. To, to, to be specific about what Gensler said, I just looked it up here. You know, he, he compared utility tokens with, you know, laundromat tokens or tickets to the opera, and he said entrepreneurs are choosing to perceive their tokens as utility to sidestep regulation, um, and that... Here's the quote, "They are highly speculative investment tokens for people who are trying to save or speculate for the fut- their future, and that's why I think it's appropriate to bring them inside the investor protection perimeter." I agree with him. I also agree with you, Chamath, that this is a can of worms that I don't know how you put the genie back in the bottle.

David Sacks 32:44 Well, but, but, no, but he's, he's partially right. I mean, he is partially right on some tokens, but he's not completely accurate on some other tokens. I think it's on a case-by-case basis-

Jason Calacanis 32:52 Yes.

David Sacks 32:52 ... and it depends. Listen, I think anybody who is buying these tokens right now knows that they're engaged in, in financial speculation. This idea that people in middle, middle America are gonna blow their retirement savings on crypto, I don't... I just don't really buy it.

Jason Calacanis 33:06 Well, no, but if they know... If they're doing speculation, then it should be a security.

Chamath Palihapitiya 33:09 No, no, no. David, I think you're totally wrong. I totally buy it. Look at the quarterly returns, uh, the filings of earnings from companies like Robinhood and how much... And Square, and how much money they make from crypto, and look at their audience. That's totally not true.

David Sacks 33:24 But don't you think that audience skews really young, and they're getting their like COVID stimulus check, and they're YOLO-ing it into meme stocks or crypto? I mean-

Jason Calacanis 33:31 What does that have to do with anything?

David Sacks 33:32 Well, because you're making it sound like they're gonna blow their retirement savings. Okay. Well, if you're talking about a 25-year-old who's got $5,000 of retirement savings, maybe. But they still got, you know... They still got 40 years of work ahead of them.

Chamath Palihapitiya 33:42 Hold on a second. Wait, no, they don't. This is gonna be the least hardworking generation of our lifetime.

David Sacks 33:48 (laughs)

Chamath Palihapitiya 33:48 Why? No, no, no. Not, not because they're not hardworking. Why? There's $70 trillion that boomers have that they're about to pass down to these folks, on average between two and three trillion a year for the next 30 years.

Jason Calacanis 34:03 Also, they know how to do gig work. Like, they're so smart this generation. They-

Chamath Palihapitiya 34:07 So, so my point is-

Jason Calacanis 34:07 ... know how to do projects for five grand and float themself.

Chamath Palihapitiya 34:09 You're gonna take one entire turn of the world's GDP and give it to 100 million people in America over the next 20 to 30 years. That is what is actually going to happen. So-

David Sacks 34:20 Yeah. Look, I think, I think-

Chamath Palihapitiya 34:22 ... of course they're gonna keep YOLO-ing this stuff.

David Sacks 34:24 Yeah, look, I think, I think we're getting off on like a little bit of a tangent here. My-

Chamath Palihapitiya 34:27 A good one.

David Sacks 34:28 ... good point. My, my point is not that there shouldn't be investor protections, but rather that I think we also need to balance another important objective, which is to create a hospitable environment for innovation And the fact of the matter is that you've got a lot of brilliant young entrepreneurs, computer scientists building this financial infrastructure of the future with crypto. It's not just speculation. There is a lot of code being written. It has functionality. There's a purpose to it. We don't, we don't necessarily want to interfere with that to- to the point where we break it.

Jason Calacanis 34:59 Well, every startup has to do their securities, though, David. Ev- all the other startups that are not in crypto are playing by the rules, so it's crypto people get a pass. It's unfair.

Chamath Palihapitiya 35:07 I agree with J Cal. People make this claim, and I just think it's so specious. Do you think that you would have made a single professional decision in your life based on tax rate? Have you ever made a single like, "I'm gonna start this company. I'm gonna make this product." You know, "I'm gonna change this job." I just think that most people-

David Sacks 35:24 No, I'm not, I'm not talking about paying taxes. I think it was smart for, for example, Solana to pay corporate taxes on their token sale. I'm... I think everyone should pay their taxes. That's not what we're talking about here. Um, and I'm not saying that Gensler shouldn't prescribe regulations. I think that part of the purpose of those regulations should be to give entrepreneurs predictability, to be able to give them a safe harbor-

Chamath Palihapitiya 35:43 No, but what I-

David Sacks 35:43 ... so they can build what they want to build.

Chamath Palihapitiya 35:45 Let me make one final point. I'm just saying, from my perspective, I just think that if you have clear, sensible taxation, that's 90% of what this industry needs, and I don't think it will, it will change anybody's real motivation to work inside this ecosystem.

Jason Calacanis 35:59 I agree with that.

Chamath Palihapitiya 35:59 Just like, just like entrepreneurship doesn't change when capital rates, capital gains rates go up.

David Sacks 36:03 Look, I, I, I've paid, I've paid taxes, um, at, you know, on, on all my crypto sales like it was any other investment since the beginning, but it-

Jason Calacanis 36:11 Well, no, that's not the issue. The issue is when you're a company and you're raising money, should you be allowed to not follow securities law because you say it's a token? Friedberg, uh, when you look at this, uh, an NFT company came out last... this past week that was selling shadow shares in startups. And anyone in the world could buy a shadow share in a private company like Stripe, et cetera, in this fantasy football league. They wound up shutting it down, uh, or changing it, because they didn't want to trade on other people's intellectual property. They were concerned about that. But just looking at it...... the public in America, 96% of them who are not accredited, cannot buy shares of Stripe in the secondary market, but you can buy NFTs in it and speculate on the NFTs, which are accelerating from, you know, $1,000 to $500,000 in these different clubs. Um, how is it fair that crypto companies get to not obey basic securities laws? Friedberg?

Guest 37:06 Well, it's not a security. There's no underlying asset.

Jason Calacanis 37:10 Okay.

Guest 37:10 It's a collectible. An NFT is clearly a collectible, J-Cal.

Jason Calacanis 37:13 Uh, okay. And-

Guest 37:14 I don't have, I don't have any legal, I don't have any legal ownership over Stripe's business.

Jason Calacanis 37:17 ... when you produce 10,000 of them and have a marketplace for people to sell them and they're appreciating... I mean, I do agree it's something different-

Guest 37:22 Sounds like art. Sounds like art to me.

37:23 Yeah, you could go draw a piece of, uh, a picture of Stripe and put it on a piece of paper and go down to downtown wherever and stand in front of the burrito shop and try and sell it to people who want to buy.

Jason Calacanis 37:31 It's qualitatively different than a security, but they're acting as securities in relation to the fundraising of these projects, so I think that's the challenge.

Guest 37:38 Not everything is a security.

37:40 Yeah, there's no secured interest.

37:41 Okay.

37:41 You don't have any secured interest. It's literally just a, uh, uh, like an image, a figure.

Chamath Palihapitiya 37:46 I was just offered a Giacometti sculpture, but I turned it down.

Guest 37:49 (laughs)

37:50 How much? 60 million? Is there even-

Chamath Palihapitiya 37:52 I'm not gonna comment on the price.

Guest 37:53 Yeah.

Chamath Palihapitiya 37:53 I had to say no.

Guest 37:54 Was Steven Cohen selling it?

Chamath Palihapitiya 37:56 I'm not commenting on the seller.

Guest 37:57 I bet Steven Cohen was selling it. That was the record deal. Uh, Steven Cohen bought that Giacometti sculpture a few years ago. It was, like, the highest, uh, price ever paid at auction for a piece of art in the US. Wasn't that right?

Chamath Palihapitiya 38:07 You know, can I, can I just tell you my problem with i- with it? I, I took the price and I divided it by the height in centimeters and it just tilted me. (laughs)

Guest 38:15 (laughs) Is price per square inch a metric in, uh, in art?

Chamath Palihapitiya 38:18 It is in my head. (laughs) Listen.

Guest 38:21 In 2016, '15, Steven Cohen paid $141 million for the Giacometti sculpture, L'Homme aux deux, aux doutes. (laughs) It was pretty, uh, incredible and I think you're right, it's about 12 inches tall or something. That's all I know.

Jason Calacanis 38:37 I totally connote if that sculpture-

Guest 38:39 If you look at the height, it'll tilt you.

Jason Calacanis 38:39 ... looks like it was done by a, uh, 12-year-old.

Chamath Palihapitiya 38:43 Oh my god, stop.

Guest 38:44 Oh, J-Cal, J-Cal, you're gonna-

Chamath Palihapitiya 38:46 Oh, God, stop.

Guest 38:47 Yeah, J-Cal.

38:47 This is the billionaire equivalent of, uh, of cr- of crypto and NFTs, right?

38:52 Totally.

38:52 I mean...

38:52 Totally. I don't know, I don't know how, I don't know how-

Jason Calacanis 38:53 I don't know what scam this guy is running, but that looks like-

Guest 38:56 I don't know how anyone can raise their hand and say, "I have an independent, objective assessment of the value of anything in the world." Um, and you can look at it from high to low and this is all, um, effectively a subjective business.

Jason Calacanis 39:08 This sculpture looks like it was a beautiful-

Guest 39:11 Sorry, I was wrong.

Jason Calacanis 39:11 ... sculpture that was in a giant fire and that somebody-

Guest 39:14 Okay.

Jason Calacanis 39:14 ... pulled out of the ashes.

Guest 39:15 It's a beautiful piece. If you wanna read-

Jason Calacanis 39:18 It is?

Guest 39:18 ... a little bit of art history, yeah, you can understand a little bit about Giacometti's work, but it's, um, it's a 70-inch piece, not 12 inches. Sorry. And, um, yeah, his work is all about kind of like, how do you capture the essence of the form? Anyway, this is a, a super ridiculous tangent.

Jason Calacanis 39:32 It looks like-

Guest 39:32 (laughs)

Jason Calacanis 39:33 ... somebody made something out of mud-

Guest 39:35 Come on, you should have bought it.

Jason Calacanis 39:35 ... and put it into a clay oven.

Guest 39:36 (laughs) You should have bought-

Chamath Palihapitiya 39:37 I have a very funny Stevie Cohen story.

Guest 39:39 (laughs) Okay, go.

Chamath Palihapitiya 39:39 So, this is like 10 years ago at Art Basel in Miami, and, uh, the day before the art fair opens, it's called the Vernissage.

Jason Calacanis 39:46 Woodstock for rich people.

Chamath Palihapitiya 39:46 And so, uh, you know, uh, it's like a day where you can go and see the, the stuff the day in advance and you can, you know, kind of buy stuff or whatever. And, uh, it's very funny. It's kind of like, um, you know, when Walmart does like a Black Friday thing? Like, everybody lines up and then they open the doors and we all run in. And I was standing side by side. We were right at the front of the line. And I noticed that he had these, uh, and this was my first time there, and he had New Balance running shoes on.

Jason Calacanis 40:12 (laughs)

Chamath Palihapitiya 40:13 And I thought, "What is he doing?" But then when the doors went open, they just took off and started running-

Guest 40:18 Ah.

Chamath Palihapitiya 40:18 ... and I was walking wearing normal loafers. And then I realized I should have been wearing running shoes.

Guest 40:21 You don't own normal loafers. You were wearing Italian loafers. Uh, I missed out on everything.

Chamath Palihapitiya 40:25 I like the balloon dog guy.

Guest 40:26 It's like the, it's like the running of the bulls. It's literally-

Chamath Palihapitiya 40:29 I missed out on... It was, it was, it was the running of the bulls.

Guest 40:30 (laughs)

Chamath Palihapitiya 40:30 I missed out on everything.

Jason Calacanis 40:31 Running of the billionaires.

Chamath Palihapitiya 40:32 I got to the things after and I was like, "Oh, sorry, I sold it to Stevie Cohen. I sold to Stevie Cohen." (laughs)

Guest 40:37 (laughs)

40:37 (laughs)

Chamath Palihapitiya 40:37 I was like, I got...

Jason Calacanis 40:38 Jesus Christ.

Chamath Palihapitiya 40:39 I had blisters on my feet. It was brutal.

Guest 40:40 Do you guys know we haven't even started our agenda?

40:43 (laughs)

Chamath Palihapitiya 40:43 No. Episode 50, off to a great start.

Jason Calacanis 40:45 Episode 50 is a train wreck. (laughs)

Guest 40:46 (laughs)

40:46 (laughs)

Jason Calacanis 40:47 Who's the moderator? (laughs) I'm fucking moderating this. Three, two, one.

Chamath Palihapitiya 40:50 (sighs) Right, Facebook whistleblowing has occurred-

Guest 40:52 Yeah.

Jason Calacanis 40:52 Yada, yada.

Guest 40:53 Hey, everybody, everybody. Welcome to The All-In Podcast. (laughs)

Chamath Palihapitiya 40:55 Mercury in retrograde.

Jason Calacanis 40:55 Jesus Christ. All right, listen, uh-

Guest 40:56 Welcome to The All-In Podcast. Let's start our show.

Jason Calacanis 40:59 I'm sure everybody by now has seen, uh, Frances Haugen, uh, on 60 Minutes and testifying. Uh, she seemed incredibly credible, um, well-spoken, and had very common, uh, sense, non-extreme views about what should be happen, what should happen with the research that Facebook has been funding. Um, that shows, like other media forms, uh, Instagram and Facebook have a, a really terrible effect on young people, specifically young girls and, uh, body dysmorphia, uh, which seems to be the one thing that is landing, uh, pretty well. Her suggestions were not to break up Facebook. Hers was to have a regulatory body and to do soft interventions. If you don't know what soft interventions-

Chamath Palihapitiya 41:41 It's worse. Her, her suggestions were worse than breaking up Facebook.

Jason Calacanis 41:43 Well, soft interventions, let's get to that. Uh, include things like, "Hey, in order to retweet the story on Twitter, you probably should read it first." She thinks she wants to reform or she's an advocate for reforming Section 230 in relation, I think, to the algorithms. Uh, and the idea here would be that the algorithms are making, uh, an actual editorial decision, uh, which is something that I remember in the YouTube early days. They said, "We will not feature your videos, uh, that you're making, but we will have the algorithm pick them because that keeps our safe harbor." Uh, Zuckerberg came back and, uh, wrote a, uh, spirited defense, uh, basically saying, "Why would we do this research if we didn't care? The people at this company care, uh, a ton." Sachs and the, uh, entire Peter Thiel cobble of, you know, acolytes and friends are coming on strong as, uh, pro-Facebook. I'll have him, uh, talk about that. He thinks it's, uh, Facebook, uh, it's, uh, laughable that people are-... addicted to Facebook, yada yada. So, uh, who wants to go first? You, Chamath, or Sax?

Chamath Palihapitiya 42:52 Well, look, here, let me, let me say a couple of things. I think that, um, I think Zuck's, the title of Zuck's, uh, internal, uh, company post could have been titled "Nuh-uh," uh, which basically is (laughs) was his way of saying th- that this is ridiculous and I don't believe it. The, the thing that she asks for in substance is a little different than what the DOJ did with Microsoft in 2000 but in form, is actually quite similar, which basically is like gumming up how the internal product development would work inside the company. And, you know, the most damaging thing you already saw, which is that they had a bunch of planned product releases, and then they put them on ice. And I think this is really where, unfortunately, the most damage gets done because engineers won't really tolerate that for some amount of time, right? They'll put with it initially, but, you know, you've had, uh, I don't know, I think like a 20% reduction in stock price, so you had, you know, you lost $200 billion of market cap. There's probably gonna be more turbulence in the company. You can sustain and get through all of it as long as the engineers hold the line. But if you basically slow down and put a pin in their ability to generate code and to put out features, on the margins enough people, I think, will get frustrated and leave. And I think the way that she, you know, what she is asking for was tantamount to that, and I think that's the really destructive part of, um, of what could go on here. So they need to get this pinned down quickly, get in front of regulators, get some laws passed, whether it's Section 230 or whatever. That's the path to salvation for Facebook.

Jason Calacanis 44:37 Sax, what do you, what do you think? I see you-

David Sacks 44:38 All right.

Jason Calacanis 44:39 ... are basically saying this is, like, ridiculous and silly on Twitter. Mike Solana's saying that. Uh, obviously Peter Thiel's on the board of, uh, Facebook and a major influence-

David Sacks 44:47 You're gonna have to, you're gonna have to give me time to unpack this, JCal-

Jason Calacanis 44:50 Yes.

David Sacks 44:50 ... without getting hysterical because there is, there's a lot to go over here.

Jason Calacanis 44:53 No, no hysterical. I want- I'm ge- I'm literally-

David Sacks 44:54 Okay, so first of all-

Jason Calacanis 44:54 ... throwing it to you in a non-hysterical way. You think that this is... There's nothing to this-

David Sacks 44:58 First of all, let's-

Jason Calacanis 44:59 ... and you think it's ridiculous. Yeah.

David Sacks 45:00 ... let's understand what this really was, okay? You have this so-called whistleblower who is working with the staff at the Senate Judiciary Committee, giving documents to the Wall Street Journal, and then appears on 60 Minutes and this great unveiling. 36 hours later, she's testifying on Capitol Hill. That does not happen. The Senate committees do not operate that fast. This was coordinated. She's got a Democra- a well-known Democratic operative named Bill Burton working for her. She's got a team of lawyers. She's got a PR team. This whole thing-

Jason Calacanis 45:29 Coordinated by who?

David Sacks 45:30 This is a coordinated hit, okay, by anti-Facebook forces starting with the Senate Judiciary Committee, who want to regulate-

Jason Calacanis 45:39 Who?

David Sacks 45:40 She's working with the staff, JCal.

Jason Calacanis 45:41 Hold on, Jason. Jason, stop. Just let-

David Sacks 45:42 You're already interrupting.

Jason Calacanis 45:43 Jason, stop. No, I'm asking you who. You said she's working with somebody else.

Chamath Palihapitiya 45:46 No, I know, but-

Jason Calacanis 45:46 I don't know who it is.

Chamath Palihapitiya 45:46 ... I told you.

Jason Calacanis 45:46 Just let him make this argument and then just stop. Let h- I wanna hear what he has to say.

David Sacks 45:51 Okay. What is the purpose of this testimony? First of all, we can go over the details of what she said. I don't think there was anything new here. This was all the same arguments we've been hearing from these s- same sort of forces who want to regulate Facebook, whether it's the, um, whether it's the senators on the committee who have hauled up Zuckerberg no fewer than four times to lecture him about the need for more censorship, uh, or it's these forces in the media who basically want Facebook t- It's all about, you know, having more censorship. Uh, but in any event, there was nothing really new there. Um, what this really was, was corroboration and, uh, of, of, of these same talking points we've been hearing for years. And where, and what it's all leading up to is there's a very important part of her testimony, which is, this is really the crux of it, is that they, that she proposed, and what Blumenthal wants, he's the chairman of the Senate Judiciary Committee, is a dedicated oversight body, this is in this clip, okay, with the power to oversee social media platforms. So, what we have here is the government is now gonna have a new agency, they're saying like the FTC, then she said, "A regulatory home where somebody like me could do a tour of duty after working at a place like this." And, and Haugen said, "Right now, the only people in the world who are trained to analyze these experiments, to understand what's happening inside of Facebook, are people who grew up inside of Facebook or Pinterest or another social media company," basically people with her experience. I mean, I have to admire the chutzpah. I mean, she's basically proposing that she be made Zuckerberg's boss, okay? That a new oversight board be created by the government, which she would be appointed to, which she presumably would run, and this board is now gonna, uh, prescribe regulations and rules for social networks in terms of how their newsfeed is gonna run. That is what was proposed on Capitol Hill. That is what this operation is all about.

Jason Calacanis 47:38 So, it's about her getting a job and being, uh, lording over Facebook, is your claim?

David Sacks 47:44 No, I think it's-

Jason Calacanis 47:45 That's her goal?

David Sacks 47:45 ... I think, I think, I think the purpose of all this is to create new regulatory oversight of social networks. I simply would note that she has proposed herself as somebody who would be on this board-

Jason Calacanis 47:55 Got it, okay.

David Sacks 47:55 ... which is pretty amazing. But what this is really about is that new oversight power.

Jason Calacanis 48:00 A- and is that a Republican or a Dem? You're, you're, are you insinuating it's Democrats who want to regulate this? Or all politicians want to regulate this because they're scared of Facebook having too much power? Which I think we all agree, Facebook has too much power in, in the public square.

David Sacks 48:13 You've had the leaders, you've had the leaders on the Senate Judiciary Committee now for months calling up Zuckerberg and Dorsey and other social media leaders and basically lecturing them on the need to censor more, to take down more material. That is their objective. This is not a conspiracy theory on my part. This is expressly what they've said, okay? Now, until now, this is-

Jason Calacanis 48:33 Is it left or right or both?

David Sacks 48:35 Let me come to that. I think the Republicans are a little bit confused on this issue, but let me get to that. So, what you've heard until now is, uh, i- is, that, is, is attacks on the supply side of the platform. So, what they've advocated is deplatforming people with heterox- heterodox views, dissenting voices, and they have been...... de-platformed in large numbers. Obviously, it started even before Trump, but certainly the sitting president of the United States was de-platformed. YouTube just took down a million COVID videos because they disagree with the official position on COVID. So until now, the censorship has been on the supply side of the platform. What they're advocating for now is censorship on the demand side of the platform, which is, "We're gonna rewrite these news feed rules, okay? We're gonna rewrite them because we can't give people what they want." W- the, the- they're making these algorithms sound like they are these incredibly evil, sinister things. All the algorithms do, at the end of the day, is give the user more of what they're looking for, okay?

Jason Calacanis 49:29 Well, hold on a second.

David Sacks 49:30 And that is, that is not, that is not good enough for these politicians. They wanna rewrite those rules.

Jason Calacanis 49:33 That's not actually what they said.

David Sacks 49:34 They, they wanna rewrite these rules to determine what people see.

Jason Calacanis 49:37 No, no, what they said about the algorithms was that the algorithm had a multiplier on it, and that this multiplier of people re-sharing it, re-engaging the content, would lead people... And this was statistically proven in Facebook's own research, that things that were either misinformation or that were supercharged, uh, you know, uh, polarizing issues, they would rise quicker, which then gave people not what they wanted in their feed. They gave people what would increase the length of a stay on Facebook, or on YouTube, or on Twitter, for that matter. And they think the antidote for this is to maybe not allow things in the algorithm to go viral, because what you're doing is saying, "Things that are either misinformation or polarizing, um, or will make things go to the top of the list, and maybe we don't want that as a society."

Guest 50:24 L- let me intervene with a, with a point of view on this, 'cause-

Jason Calacanis 50:27 Please.

Guest 50:27 ... I, I think you're head- you're headed down a path that, um, to me, I, I don't think actually speaks to what's really going on. It sounds like there's some sinister archi- uh, you know, architecture here that's driving this outcome. If you have someone-

Jason Calacanis 50:42 Oh, I never said that, yeah.

Guest 50:43 Well, I mean, it, it's implied because it's like, oh, well, they're, they're multiplying sinister stuff. What makes a good-

Jason Calacanis 50:48 No, no, I'm saying they're just care about length of stay on the site.

Guest 50:51 Okay.

Jason Calacanis 50:51 My belief is they just want it to grow.

Chamath Palihapitiya 50:52 They care about revenue. They care about revenue.

Jason Calacanis 50:53 Yes, that's my, exactly my point, Chamath. They, they care about that.

Guest 50:56 They care about what consumers want to consume, and consumers demand what they want to consume. So, think about media in the old days, right? We used to have books that an author would put out every year. And so the author would get feedback on the book, and so it would be one year on that feedback cycle. Then magazines would come out. Magazines would come out every month. And so every month, the magazine would get feedback on what sales were, and they would make decisions, editorial decisions, and they would iterate. TV shows came out every week. Newspapers came out every day. Cable TV came out every hour, and they could adjust their content, uh, accordingly. In the internet age, the media is getting a much more kind of instantaneous feedback cycle. And the, call it publisher, or editor, or curator of that media ultimately ends up putting in front of the consumer more and more of what they want as a function of what they're choosing to watch. And what we're calling kind of these "algorithms" are really just the same thing that editors and publishers and others have done in the past, which is looking at what the consumer votes by what they choose, making decisions to put more of the things that they want in front of them. The consumer consumes more of that. And here's what's messed up. We're getting a very ugly look in the mirror at what humanity and what citizens and what individuals actually want to consume and choose to consume and get turned on by. And that is what's making this all so ugly. And when we see that, we don't like to accept the fact that maybe that is just what humans are attracted to and what humans want to consume at scale, and we end up wanting to blame someone. And I could argue, and I think others could argue, that these algorithms that are effectively just recursive optimization functions. They're recursively trying to figure out what do people want to consume and then giving them more of what they want-

Chamath Palihapitiya 52:30 S- but you, you keep saying want.

Guest 52:31 ... by simply solving for those very specific n- needs and, and use cases. And, and, and I don't think-

Chamath Palihapitiya 52:36 It's not want.

Guest 52:36 ... that those algorithms are nece-

Jason Calacanis 52:38 Go ahead, Chamath. Why is it not want? I, I, I, I'm interested in that unpacking.

Chamath Palihapitiya 52:42 No, the, the- I- everything Friedberg says is absolutely right. But it's not the word want. It's not what they want. It's what they will react to the most.

Jason Calacanis 52:50 Mm-hmm.

Chamath Palihapitiya 52:51 And sometimes what they react to the most is-

Guest 52:53 Something subconsciously want.

Chamath Palihapitiya 52:54 I don't know. But my point is that there's, there's a, I guess, I don't, I don't use Facebook, but they went from thumbs up and thumbs down when I was there to, like, this nuanced, like, there's likes, there's tears, there's angry, right?

Jason Calacanis 53:04 Re-shares.

Guest 53:05 But there's also analytics-

Chamath Palihapitiya 53:06 No, no, no. I mean, like-

Guest 53:06 ... data on engagement, right? Like on how long someone's watching a video or...

Chamath Palihapitiya 53:09 What I saw in there was that there was an amplification of things that were more extreme emotional reactions-

Guest 53:16 Right.

Chamath Palihapitiya 53:16 ... now. And, and the point is that I think everything you said is absolutely right. The algorithms are amplifying... I think I'll, all I would say is I would restate what you're saying, is these algorithms tend to amplify the things that are the most extreme and elicit a reaction.

Guest 53:30 Yeah.

Chamath Palihapitiya 53:31 Those reactions aren't necessarily the things that you want. Those are the things that you will react to the most. And that-

Jason Calacanis 53:36 It's what the algorithm wants to serve you.

Chamath Palihapitiya 53:38 ... by the way, that's why you see that the top 10 things that are re-shared the most often tends to be very extreme, right?

Guest 53:44 Fundamental emotional responses are typically associated with things that I think we call hedonism. And the things that you can ignore your emotional responses and take another course of action, we typically call altruism or, or what have you. Th- this is a, a, a kind of a common reason why people would wanna watch a comedy or watch a horror film because there's some emotional response. It's not a universal response. And people aren't rushing to the theater to watch documentaries. They're not rushing to the movie theater to be like, "Oh, I want to be informed and educated on something that's factual and interesting." They want to go and have emotional experiences, and that's how humans are biologically wired. And the same is happening in these short forms of media, these little tweets or these posts on Facebook.

Jason Calacanis 54:23 David, did you understand that they won't show murders and porn on Facebook, so they're making an editorial decision to say, "Hey, we're not gonna include-"

David Sacks 54:31 They will every night on the local news. If it bleeds, it leads. That-

Jason Calacanis 54:35 Right.

David Sacks 54:35 How long has that been the motto in media? So, I'm listening-

Jason Calacanis 54:38 100%.

David Sacks 54:38 ... I'm listening to Hagen on 60 Minutes. I'm hearing her describe a corporate profit-making machine that tries to get more reach, more ratings by fueling polarization and division. And I'm thinking, "Is she talking about cable news?" That's what she's talking about, isn't she? Is she talking about The New York Times? Is she talking about traditional media? Because every single thing she said about how social media fuels polarization-

Guest 55:01 Absolutely.

David Sacks 55:01 ... and division applies to the media. And yet those same voices in the traditional media are the first ones howling about Facebook and calling for its regulation. It is completely hypocritical because...... the real purpose here is not to reduce divisiveness or polarization in our society. The regulations on Facebook will not do that. It is to seize control and influence over the machinery of social networking. Why? Because the news feed now controls the flow of information in our society.

Chamath Palihapitiya 55:31 Don't you think the damage has been done though? Meaning, in the sense that if you cripple Facebook's product velocity and you shrink the surface area of the areas in which they can operate, isn't that more damaging than any regulation?

Jason Calacanis 55:48 No, people will just stop using it and then they will find another place to get that same emotional behavior.

David Sacks 55:53 I've already stopped using Facebook. I've already stopped using Facebook, okay? I don't find it compelling at all and I'm not really on Instagram either. I- I do find Twitter rather compelling and I'm probably more addicted to that-

Jason Calacanis 56:02 (clears throat) Addicted. (clears throat)

David Sacks 56:02 ... than other things. Yeah, exactly.

Jason Calacanis 56:03 So addicted. (clears throat) Off the rails. (laughs) Off the rails.

David Sacks 56:06 (laughs) Probably not very good for me, okay? But- but- but here's the thing, I think, I think all of us on this show right now, w- none of us find Facebook particularly addictive in our own behavior, okay? W- I think we understand in our own behavior that Facebook is sort of like a mildly diverting amusement that occasionally yields information, sometimes it's useful, okay? We understand that it's sort of like a news feed with a lot of noise, okay? In our own usage. But somehow we've bought into this larger narrative that in everybody else's, uh, usage, that somehow this is a brainwashing machine that is pumping people full of disinformation and warping their thinking. In other words, there's a sharp dichotomy between how we perceive our own usage and other people's usage. And what I would submit is our own usage is what we know and what we know to be true, and what we believe about other people's usage is simply a narrative that's been fed to us over and over again by the traditional media who hate Facebook because it's disremediating them. That is what's really going on here.

Chamath Palihapitiya 57:05 You may, you may be right. I'll- I'll- I'm saying something different, which is, getting apart from all of that stuff,

Chamath Palihapitiya 57:10 what's happening practically on the ground right now is, that is a company who has to now slow way down. And what I'm saying is, that's not dissimilar to what Microsoft had to do, which was, there was this 10-year period at Microsoft where they really couldn't innovate. And that's really how the government solved the Microsoft problem.

Jason Calacanis 57:29 Yeah. They, they made them less aggressive, right?

Chamath Palihapitiya 57:31 They gummed up the internal machinery so that Microsoft couldn't really be there for the next few major ... So for example, so we just spent, we just spent 40 minutes talking about crypto. What do you think the chances are that, you know, Facebook now can land a really compelling crypto project?

Jason Calacanis 57:47 Right, they got, they got-

Chamath Palihapitiya 57:47 In my opinion, zero.

Jason Calacanis 57:48 ... totally shut down with Libra, right?

Chamath Palihapitiya 57:49 Zero.

Jason Calacanis 57:49 I mean, they went after it and the regulators-

Chamath Palihapitiya 57:51 It's been neutered.

Jason Calacanis 57:52 ... stepped in and-

Chamath Palihapitiya 57:52 It's been neutered.

Jason Calacanis 57:53 It's too bold for them to launch that after what happened-

Chamath Palihapitiya 57:55 It's, it's zero.

Jason Calacanis 57:56 ... you know, with their behavior in other a- arenas.

David Sacks 57:59 I think that like Microsoft, uh, back in the, the late '90s, I think there are, are real and legitimate concerns about the power of these big tech companies, about how, uh, power- how big and powerful they've become, about their ability to crush competitors. I think they're, those are all legitimate. And in a weird way, if this government scrutiny slows th- those companies down, that's not an altogether bad thing. But I am concerned about the, I'd say, separately, just because these companies do deserve to be scrutinized more, I do think that we have to see that the people who are engaged in this really coordinated hit campaign against Facebook, they have other ag- they have another agenda, and that is to control the flow of information online, it is to control online discourse. It's already been happening over the past year-

Jason Calacanis 58:44 Mm-hmm.

David Sacks 58:44 ... with censorship on the supply side of the news feed, and now they're trying to control the demand side. I think we have to be extremely wary about this.

Jason Calacanis 58:50 Well, D- David, isn't, you- you've been on the other side of this, 'cause on previous podcasts you've talked about Facebook being too influential, having too many users, and now you're saying, well, these tiny little news networks that get a couple of low millions-

Chamath Palihapitiya 59:04 No, he has a, he has an issue, Jason, with the way in which they're going after Facebook.

Jason Calacanis 59:09 Okay, I get that. He thinks it's a coordinated hit. Fine. But you also have had an issue with Facebook having too much power to take somebody off the platform or to promote certain ideas.

David Sacks 59:21 Yeah.

Jason Calacanis 59:22 So which is it? It seems like you're a, a little bit, um ... Both can be true.

David Sacks 59:26 No, it's perfectly, it's- it's per- it's, no, it's perfectly consistent. I've expressed concerns about the way in which Facebook is, is deplatforming people, it's summar- summarily silencing them and ghosting them, it's- it's engaged in censorship. I've expressed concern about that. But we should understand that the people on the Senate Judiciary Committee who hauled up, who had this hearing, who featured and spotlighted Haugen and turned her into this great hero, their agenda is even more censorship. They (laughs) , the- they- they are complaining about the fact that Facebook is not censoring enough, and that is what their real agenda is.

Chamath Palihapitiya 1:00:00 I- I do think it should have been disclosed that Haugen does stand to gain financially from whatever happens here.

Jason Calacanis 1:00:06 I, you know, I don't know that that's been confirmed that there is a whistleblower reward here, so we'll have to wait and see about that. I haven't heard-

David Sacks 1:00:13 There's no reward until there's a fine. But Chamath-

Jason Calacanis 1:00:15 Correct.

David Sacks 1:00:16 ... is right that she qualify, if she's a whistleblower, she qualifies for, what, a 30%-

Chamath Palihapitiya 1:00:21 Half the fine, yeah.

David Sacks 1:00:21 ... portion of, or some very large percentage of any fines?

Chamath Palihapitiya 1:00:24 What would the fine be here though? What would the fine be? How would that be framed, Chamath, i-

David Sacks 1:00:27 This whole thing is just getting started. There are gonna be m- there are gonna be government actions-

Chamath Palihapitiya 1:00:31 Just getting started.

David Sacks 1:00:31 ... and there will be settlements from those government actions. And the- the ... And Facebook, a- as you well know, will pay any kind of fine to put this behind them.

Chamath Palihapitiya 1:00:38 You- you're the one that said, Jason-

David Sacks 1:00:40 Even billions of dollars.

Chamath Palihapitiya 1:00:40 ... they s- they spent five billion just so that they wouldn't subpoena Zuck-

Jason Calacanis 1:00:44 Yeah.

Chamath Palihapitiya 1:00:44 ... and Sheryl, right? That's what you said last week.

Jason Calacanis 1:00:45 We had that, we talked about that last week. Yeah. So, I mean, I, I think there's a fine coming.

Chamath Palihapitiya 1:00:48 Let- let's, let's be honest, I- I do not think Lina Khan, uh, or Gary Gensler, or any of these other folks are going to be in the business of making a f- quick decision, nor the DOJ, nor any of these other folks. They're gonna want to really take their time to figure this out. But what I'm saying is, it's not the ultimate result of it, 'cause I th- I, again, I go back to, like, if you look at what happened in 2000 in Microsoft, the substance of what Microsoft had to agree to was, was ultimately not as bad as the way in which it was implemented.... which is that, you know, my understanding was like Microsoft had to submit feature reviews to lawyers (laughs) at the DOJ who would then approve, you know, updates and upgrades to their code base for things like Windows. That's what caused them to miss an entire wave of compute. And so this is the, this is the point which is, I think, practically speaking, at the beginning of what Microsoft went through, Facebook is going to have to navigate. And so the faster they can try to say, "All right, folks, you're right. You caught us. Let, uh, tell us what to do," may be actually the, the better path because it allows them to get past it. Because the longer this, this i- this period of, like, gray stretches out, I think, is, is actually the worst outcome.

Jason Calacanis 1:02:02 Well, let, let, let's go through what we each think would be a possible solution here to allowing free speech to occur on Facebook but maybe not having the things that m-... you know, fake news, uh, you know, misinformation, you know, maybe lowering down the rhetoric and the charged nature of the algorithm. Friedberg, do you have any common sense solution here that might address both sides of the issue, freedom of speech and maybe things being amplified to 100 million people that are fake and,

Jason Calacanis 1:02:34 and just simply not true?

Guest 1:02:35 We've talked a lot about this notion of, like, decentralized social networks. I mean, we haven't talked a lot. We've talked a little bit about it, but, um, i- if you end up putting a regulatory hammer down on Facebook and Twitter and telling them what consumers... And remember, these guys aren't media creators. They're platforms effectively for search, discovery, and access. So you, as an individual, can discover third-party content on their platform. If they start putting the regulatory hammer down on these quote unquote platforms, telling them what they can and cannot make available to their users, there will be another platform that will emerge, and that platform may end up being in this kind of decentralized model. And in that decentralized model, you're not gonna have the same degree of regulatory oversight, and that system will end up solving the same use case. Eventually, consumers will get what they want, which is, you know, what Chamath calls kind of this emotional response, this... eliciting this emotional reaction. They will consume it until they, you know, achieve one of their kind of seven deadly sins (laughs) objective, which is what's driving the emotion, underscoring their decisions on what to watch, what to consume, and, uh, and there will be an alternative. So, you know, go ahead and play Whac-A-Mole. You'll play Whac-A-Mole for a few years, maybe a few decades, but at the end of the day, digital technology and the connected world will drive consumers to exactly where they will naturally find themselves, which is consuming evermore of the things that create this emotional response in them. The consequences are unfortunate. Um, you know, I don't know what the right solution is. You know, we've, we've, we've to some degree put a regulatory hammer down on things like, uh, smoking and, uh, uh, in some places, things like sugar, things that have kind of a, a, you know, a, an obvious effect on our physical, uh, health. Uh, these other things that we're seeing now are having an effect on our mental health, and, uh, I think that there may be kind of an emerging regulatory, uh, regime around mental health standards and how much of things can be consumed. And I think what we're seeing is the leading indicator of this is what's gone on in China. Because China is the nation that I would say is probably at the forefront of research and understanding of what the consequences are of consuming more, uh, more of media and content that causes an emotional response to you and what happens down the road, isolation, loneliness, suicide rates go up, unhappiness, et cetera. It certainly is a consequence. But it's not a function of any individual companies', um, mis-conveyance of content to consumers. It's just a function of where these systems end up going because of the way humans are biologically wired. Um, and so I guess my, my first concern is maybe we end up in a decentralized system that ends up replacing all of these tools and this just doesn't end, or you end up having-

Jason Calacanis 1:05:15 Could be worse. Yeah, I mean-

Guest 1:05:16 ... or you en-... and it could be worse, or you end up having these kind of regulatory regimes emerge-

Chamath Palihapitiya 1:05:18 No, it'll be-

Guest 1:05:19 ... to, to address these kinds of things.

Chamath Palihapitiya 1:05:19 That, that would be better. A decentralized solution is actually-

Jason Calacanis 1:05:22 No.

Chamath Palihapitiya 1:05:22 ... better in one... No, it's better in one key way, which is that it's fundamentally harder to create the exact same network effect and density that you can have with one monolithic closed system. So you, you're much more likely to actually have a very fragmented ecosystem of hundreds of different solutions depending on what of the sins you wanna feed or, you know, what of the feelings you wanna feel at any one time.

Jason Calacanis 1:05:46 I think it's a big assumption that it would be a fragmented network. If you did replicate Facebook on a decentralized platform and then some piece of misinformation came out and it trended all the way to number one, like say the January 6th insurrection, and people brought-

Chamath Palihapitiya 1:05:59 No, no, no. There's not gonna be-

Jason Calacanis 1:06:00 ... guns to that. What if, like-

Chamath Palihapitiya 1:06:01 There's not one network. There's not one network.

Jason Calacanis 1:06:02 I, I understand that, but if one net-

David Sacks 1:06:04 Uh, uh-

Jason Calacanis 1:06:04 Hold on, hold on. Let me finish my point. If the, if one network became so large and there was nobody who could turn off something, what if people said, "Hey, there's a riot going on at the Capitol," and more people showed up with more guns, right? (laughs) You have nobody to sit there and say, "Hey, don't go to the Capitol. Turn those trending posts off." Go ahead, Sax.

David Sacks 1:06:20 Okay, so let's, let's talk about this problem of misinformation. Okay? I think there's an old Mark Twain quote saying that the... a lie can travel around the world faster than the-

Jason Calacanis 1:06:30 Yeah.

David Sacks 1:06:30 ... truth can put on its shoes. Okay?

Jason Calacanis 1:06:31 Correct.

David Sacks 1:06:33 There is a problem of falsehoods spreading online. I agree with you there. The question is what you do about it, and the problem we have right now is that, is that truth is in the eye, eye of the beholder. There is no, uh, truth API. And so at the end of the day, it's the people in power who get to decide what is true and what is false if you give them the power to censor misinformation. Example, we just saw, we talked about on this program, the Rolling Stone ivermectin hoax. Provably false story, and yet Rachel Maddow still had it up on her post. She was not sanctioned by MSNBC. Twitter never told her to take it down, and she was not fact-checked. However, the Hunter Biden laptop scandal or story which came out in the New York Post a couple weeks before the election turned out to be a provably true story, and yet it was taken down by Facebook and Twitter.At the end of the day, this term of misinformation is just another vector for partisan attack and it will be used by whoever we give the power to, to decide what misinformation is. So, what is the answer then to this point of s- falsehoods spreading online? Well, at the end of the day, the answer to bad speech is more speech. You try to create a free marketplace of ideas to let, to let the good speech ultimately, uh, drive out the bad speech or prove that it's wrong. That's the best you can do. That's the best you can do in a free society.

Jason Calacanis 1:07:53 Yes. But, uh, we've ... This is the first time a free society has had social networks that can reach a billion people instantly in, in, you know, an hour. So I think there's one differentiator there that we must think of.

David Sacks 1:08:05 If somebody defames you on a social network, they are absolutely liable. I mean, you can sue them. Okay? But I think it ... and you should. And I think we can-

Jason Calacanis 1:08:11 But we've talked about-

David Sacks 1:08:12 And I-

Jason Calacanis 1:08:12 ... cancel culture, people are destroyed before they even get their day in court.

David Sacks 1:08:16 Well, I think, I think that's being destroyed for something different. I think if somebody-

Jason Calacanis 1:08:19 But it's because it trends. If it didn't, if it couldn't trend to so many people, it wouldn't leave, lead to the cancellation and destruction of somebody's life. You've talked about that many times yourself.

David Sacks 1:08:29 If, if somebody libels you, I think they should be ... you, you should be able to sue them and I think we could actually ... we could have a libel regime more like the UK, where it's easier to prove these cases in court and, uh, people are much more careful about defaming other people. I would be very much in favor of that. Okay? Because defamation is not free speech. But the question really is about, really we're talking about non-defamatory statements that somebody in a position of power has decided is not true. Many of these statements are subjective. Dave Portnoy got labeled for his subjective opinion about AOC's dress. Why did that happen? And why is that kind of labeling only used to protect one side of the political spectrum? So, I mean, that, that, that's what's

David Sacks 1:09:09 really going on here.

Chamath Palihapitiya 1:09:09 Let's end with this. Uh, has anybody watched Chappelle's The Closer?

Jason Calacanis 1:09:13 I did. Incredible.

Chamath Palihapitiya 1:09:15 I, I, I watched it.

Jason Calacanis 1:09:16 Pretty incredible. I mean, fearless. Fearless is a word.

Chamath Palihapitiya 1:09:20 I was really, um ... I think that he slightly missed it, because I think he could've really actually called out cancel culture and wokeism more. I think he kind of left it a little bit to me, where I was like a little ... I don't know. I just, I just didn't think they were as good as his other ones and I felt like he didn't really make the point he wanted to make.

Jason Calacanis 1:09:42 It was a little convoluted.

Chamath Palihapitiya 1:09:44 We, we need somebody who can actually stand up and, uh, and, and actually s- you know, be more satirical and tell the story of why all this cancel culture and defamatory statements and judging people doesn't make sense, but then-

Jason Calacanis 1:09:56 Did he seem-

Chamath Palihapitiya 1:09:57 He didn't, he didn't get the job done, I felt like.

Jason Calacanis 1:09:59 Well, did ... Uh, let me ask you this about the performance. Did he seem qualitatively different than you in that the other times he seemed very light on his feet, you know, having a good time, being a comedian. And this time, it felt like-

Chamath Palihapitiya 1:10:10 It wasn't-

Jason Calacanis 1:10:10 ... he was personally hurt or he was-

Chamath Palihapitiya 1:10:12 It wasn't comedy.

Jason Calacanis 1:10:13 It was less-

Chamath Palihapitiya 1:10:13 And it wasn't comedy.

Jason Calacanis 1:10:14 It felt less comedic, I agree. It felt like he had an agenda, he was hurt, he wanted to get some stuff off his chest, and there were some jokes in between, which is very different. Like, the percentage of jokes in this is like 20% and the, like heavy-

David Sacks 1:10:27 Max.

Jason Calacanis 1:10:28 ... max. And then the other ones were 80% jokes, 20% social commentary. This felt like he, um, he was actually really hurt and, like, I, I don't wanna say bitter, but just fed up maybe, frustrated. He, he had a chip, which made it interesting to me.

Chamath Palihapitiya 1:10:43 You know, in the, in the early 2000s, Chappelle, for me, was really important because he was an advocate for minorities and I