E53: Wealth tax, inflation as a capital allocator, big tech earnings, paternity leave & more

1. 0:00 – 20:44

   Bestie intro, child update, Joe Lonsdale’s take on paternity leave

   1. JCJason Calacanis0:00

      Oh, baby. No skin-on-skin? You just gotta keep the shirt on? (laughs)

   2. CPChamath Palihapitiya0:03

      Listen to me, only the best for my daughter. This is 100% Loro Piana vicuna.

   3. JCJason Calacanis0:10

      (laughs) She's gonna puke on any minute. (laughs)

   4. CPChamath Palihapitiya0:12

      There, there is, there is not a-

   5. JCJason Calacanis0:12

      You're using Loro Piana to wipe her when she vomits. (laughs)

   6. CPChamath Palihapitiya0:16

      No, this is the sweater that she's, she's got her face on, but this is the softest material human, you know, uh, I mean, natural material on earth.

   7. JCJason Calacanis0:23

      Really?

   8. CPChamath Palihapitiya0:23

      This is not subject to any supply chain constraints, this material.

   9. JCJason Calacanis0:27

      Aw. Aw.

   10. CPChamath Palihapitiya0:28

       In fact, when you buy one from Loro Piana, they'll fly one right to you.

   11. JCJason Calacanis0:31

       (laughs)

   12. DSDavid Sacks0:33

       (music) 50s are back. Going all in. Let your winners ride. Rain man, David Satterfield. I'm going all in. And I said we open source it to the fans, and they've just gone crazy with it. Love you, besties. Queen of quinoa. I'm going all in.

   13. CPChamath Palihapitiya0:50

       Guys, isn't it amazing how people in power can not take any time off and still remain in power and engaged when you have a baby?

   14. JCJason Calacanis0:59

       (laughs)

   15. CPChamath Palihapitiya1:00

       (laughs)

   16. DSDavid Sacks1:00

       (music)

   17. JCJason Calacanis1:00

       J-Cal, t- what's the reference?

   18. CPChamath Palihapitiya1:02

       Okay, our friend, Joe Lonsdale, venture capitalist living in Austin, had a tweet that, uh, went viral, but maybe not for the best reasons. He said, uh, in response to a Dan Primack tweet, uh, Dan works at Axios, he was talking about Joe Rogan criticizing, uh, the amount of time Buttigieg was taking on paternity leave. And Joe Lonsdale responded, "Wow, great for fathers to spend time with their kids and support moms, but any man in an important position who takes six months of leave for a newborn is a loser. In the old days, men had babies and worked harder to provide for their future. That's the correct masculine response." Uh...

   19. JCJason Calacanis1:42

       Well, it was an opinion from 1957. That's either a his or his.

   20. CPChamath Palihapitiya1:45

       (laughs)

   21. DSDavid Sacks1:46

       (laughs)

   22. JCJason Calacanis1:46

       (laughs) I'm getting the way back machine. But Joe's old school. Joe is a unique individual and he just happened to... I think, in this whole, like, not get canceled debate or don't let yourself get canceled debate, the right is now saying like, "I'm just gonna tell you how I actually feel." And so Joe told us actually how he felt.

   23. CPChamath Palihapitiya2:07

       I don't think he said anything offensive. I think you can have a different opinion than what he said. But I don't think he said, "It shouldn't exist." He said, "If you're in a position of power and you check out for six months, it puts everything that you're doing under a lot of pressure." That's, I think, what he said, and he called those very specific people losers. The context is, Joe Rogan called out Pete Buttigieg because Pete Buttigieg w- uh, had two kids via surrogate, and I guess is taking six months or I don't know. I don't even know how much time he's taking off.

   24. JCJason Calacanis2:40

       He's at three months, but nobody knows if he's like working half-time or full time.

   25. CPChamath Palihapitiya2:44

       But Rogan, but Rogan had an issue with it, and then Dan Primack basically said, "What Rogan doesn't know is at his own company, i.e. Spotify, there's a six-month policy."

   26. JCJason Calacanis2:54

       Which by the way-

   27. CPChamath Palihapitiya2:55

       And, and-

   28. JCJason Calacanis2:55

       ... Joe Rogan does not work for Spotify, they license his show. So, there is no way for Joe Rogan (laughs) to know the internal policies. He is not an employee.

   29. CPChamath Palihapitiya3:03

       I mean, Jason, if you want, if you wanna hang your hat on that little fig leaf, okay.

   30. JCJason Calacanis3:08

       No, I'm just saying-
2. 20:44 – 35:13

   Proposed “Wealth Tax”

   1. JCJason Calacanis20:44

      All right. I think, I think where we have to go is it's been a crazy week of, uh, the reconciliation bill, the infrastructure bill, and how to pay for this, uh, incredible spending.

   2. CPChamath Palihapitiya20:54

      It's been a meta week.

   3. JCJason Calacanis20:55

      It's been a... it's been a meta week. (laughs) I mean, and this builds on top of our discussions about inflation, uh, as well as the supply chain issues that builds on the conversation we had about COVID and the new president. So we're trying to get the wealth... uh, we're trying to get the reconciliation bill done and part of that is, hey, how is this gonna get paid for? And in the course of one week, we've seen, uh, the tax proposals flip, I think multiple times, to ones that have never been tested and they... and may not even be legal in the United States. Of course I'm referring to a billionaire tax which was proposed, uh, which would be a penalty, uh, or a tax on assets that are liquid but that have not yet been sold and it would look back three years, essentially going after Bezos or Elon, Larry, Sergey, basically going after the top 10 billionaires in the world. And then maybe it was gonna be the top 700, then it became a millionaire tax, uh, all of this to try to pay for these bills while so much money has been poured into the system that, you know, NFTs and stocks are going through the roof. Where do we want to begin, gentlemen? Should we... does anybody have thoughts on this brief billionaire tax that was floated and what that says, uh, about where we are as a country in terms of how we think about the success of our greatest entrepreneurs? Do we want to talk about what's fair or the process?

   4. CPChamath Palihapitiya22:20

      Well, I thought the, the process was insane. And what was crazy was that, you know, Ron Wyden had been working on this proposal theoretically for the past two years, and at no point did he bother to float the trial balloon with his colleagues in the Senate to even see whether these people actually supported it beyond some, um, folks on the progressive left who are ideologically fixated on, you know, this confiscatory way of running the country. The funniest thing about that bill to me, and I let the powers that be know this, is... Hey guys, I've always been on the record, I'm happy to pay whatever tax you want. I feel super blessed to be in America, whatever. You want me to pay 30%, 80%, I don't care. But I had a real issue with the way that bill was written 'cause I'm like, um, the Democrats are writing a bill that will disproportionately tax Democratic, uh, successful billionaires and it'll leave intact the Kochs, who is literally the bogeyman to the progressive left who wants to write this bill. And I thought, "How could you even write this bill this way? It is so stupid." You're saying be-

   5. JCJason Calacanis23:29

      Because those people own private assets and this goes after public.

   6. CPChamath Palihapitiya23:32

      Guys, guys like me would have been paying billions of dollars and the Kochs would not have paid zero.

   7. JCJason Calacanis23:38

      Because their entities are private-

   8. CPChamath Palihapitiya23:40

      Yes.

   9. JCJason Calacanis23:40

      ... and yours are public.

   10. CPChamath Palihapitiya23:41

       Yes.

   11. JCJason Calacanis23:41

       Just so the audience understands.

   12. CPChamath Palihapitiya23:42

       Yes. How insane is that? And yet we're the ones supporting these people.

   13. JCJason Calacanis23:46

       That is a s- a great second order observation, that these people-

   14. CPChamath Palihapitiya23:50

       So that, that was-

   15. JCJason Calacanis23:50

       ... clearly didn't think through.

   16. CPChamath Palihapitiya23:51

       That was my only issue with the thing. It's like, if you want to try to ram and jam this thing through, go ahead and try. I'm not gonna be the one that, that, you know, files a lawsuit the day after it's passed and takes it to the Supreme Court, which will get heard and, you know, this conservative Supreme Court would not have allowed this, this tax to stand. You can't target 700 people. Uh, but by the way, the reason you can't target 700, because there is a slippery slope from 700 to 7 million to 70 million. And what it does is it allows tax and spend politicians a blank ledger to go absolutely crazy and just fund every single harebrained pork barrel scheme that they can come up with.And that's really what we stopped, was an important slippery slope. And then in its place, I think is a tax that is fair. A simple surtax on adjusted gross income. If you're above X, you pay five million and if you're above Y, you pay another three, so eight percent.

   17. JCJason Calacanis24:48

       Five percent 20%.

   18. CPChamath Palihapitiya24:50

       On every, on every kind of income. And I think like, that's a really reasonable way to get folks to pay more. That seems like a good start. But the first version of the bill was so stupid, and the thing that really angered me though, was it targeted Democratic successful people, and left alone Republican successful people, written by the Democrats.

   19. JCJason Calacanis25:07

       Freeburg, what are your thoughts on the confiscatory nature of this? I've never heard the word used that way, confiscatory. Where we're going back and saying, "Listen, you won so much, we're just gonna take 20 or 30% of it."

   20. DFDavid Friedberg25:20

       We all pay property taxes, and so we, there is a experience we've all had with paying a percentage of some of assets that we own, people of all income brackets every year, to your local government to fund local services that everyone, uh, participates in. So, you know, I don't think it's unfounded. Now, if you look at history as a guide, you know, France introduced a wealth tax to people making over, uh, I think it was 1.3 million euro per year, um, and it was shut down and came back basically 1999, 2000. And between the year 2000 and the year 2016, 25% of millionaire households emigrated out of France, uh, during this period. And the amount of tax revenue that was lost during that period of time was greater than the new revenue generated from the wealth tax that was introduced. And so France ultimately scrapped the wealth tax, um, and there have been a number of other, you know, reasonably good examples of European countries putting in place these wealth taxes and then kind of removing them, uh, later. So, um, you know, on the one hand, I, I, I think that we've all seen this experience and Switzerland does this. I think you get taxed on your total assets in Switzerland when you have to go negotiate every year, uh, with respect to how much you pay. It's a very weird process. So on the one hand, there is this kind of experience and, and precedent for paying some percentage of assets, sometimes it's a targeted asset and sometimes it's not, but the longer range consequences that we've seen is like, you know, e- emigration and people realize there's always a better choice. The cha- the question we have in the United States is if we introduce a wealth tax like this, where will successful Americans emigrate to? Um, you can see how people could leave France and go to Belgium or go to the UK or go to Switzerland or go somewhere else where they might be better off. Uh, where's, where are Americans gonna move to?

   21. CPChamath Palihapitiya27:13

       Canada.

   22. DFDavid Friedberg27:14

       If you're successful... Canada? I mean, are you gonna move to Vancouver? I mean, you're from Canada, but Zacks would you move? You know, where would you move to? You know, it's almost like there ends up being this kind of, you know, I, I think really interesting experiment that'll be run here. Now, remember, this wealth tax was introduced by Warren and others last year. So this wasn't some new concept that, that was fly by night. This has been one of those things that's been on the shelf for a while. What happened is they pulled it down from the shelf and said, "Let's try this now."

   23. DSDavid Sacks27:40

       Yeah, they've never-

   24. DFDavid Friedberg27:41

       Yeah.

   25. DSDavid Sacks27:41

       They've never had committee hearings on it. Uh, they've never had committee markups on it. It's been tried and repealed in European countries. And like you said, they pull it down at the 11th hour. Why? Because there are carefully laid plans, which they've been concocting for three months were thrown overboard when Sinema said she wouldn't support the rate increases. Now, well I don't know why they wouldn't go to her at the beginning of the process instead of waiting till the end of the process, but so because of that, they're scrambling around trying to find any source of revenue. So it's, "Oh, will a billionaire tax work?" No. "Well, what about a corporate AMT? How about that?" No. "What about a millionaire surcharge?" These guys are like burglars rummaging through the house.

   26. DFDavid Friedberg28:20

       (laughs)

   27. JCJason Calacanis28:20

       (laughs)

   28. DSDavid Sacks28:20

       They hear, they hear the sirens, they hear the sirens coming-

   29. JCJason Calacanis28:24

       Here we go. (laughs)

   30. DSDavid Sacks28:25

       ... and they're like, "What can we take? Oh, the TVs are bolted down, can't get that."
3. 35:13 – 52:30

   Inflation discussion: corporate and government reactions

   1. CPChamath Palihapitiya35:13

      is trying to come to a conclusion on inflation. My worry is that it's here, and it will be persistent. And inflation comes in two ways. Way number one is if you massively increase the supply of money. Why? Let's just say the economy at $100, and now all of a sudden, you just print another 100, so now there's $200. What will happen is all of the goods and services that make up that 100 will get repriced to absorb the 200. So prices go up, inflation goes up. The second way that inflation can happen is if middle and lower income people buy and spend. Because when rich people have extra money, they just buy financial assets. That's why you get financial bubbles. But practical goods and services are bought by average, everyday, normal working folks, and their wages are going up. And so I think what we've created is a really distortive inflationary cycle that's gonna really hurt the United States, because as Sachs talked about, we cannot print enough money to pay for the debt when interest rates go up.

   2. DSDavid Sacks36:21

      This is, this is the number one-

   3. CPChamath Palihapitiya36:22

      It's cataclysmic for them.

   4. DSDavid Sacks36:22

      This is the number one thing causing me concern as well, is that you look around, it's all-time highs for everything. It's all-time best everything. NASDAQ and S&P, all-time highs. Crypto markets, all-time highs. Shibu Inu worth 30, $40 billion bubble.Uh, I'm seeing SaaS multiples-

   5. CPChamath Palihapitiya36:42

      Real estate.

   6. DSDavid Sacks36:42

      Real esta- I'm seeing SaaS multiples at all-time highs.

   7. CPChamath Palihapitiya36:45

      Crazy.

   8. DSDavid Sacks36:45

      So you have to wonder, is this a new normal? Is this sustainable? Or is it some sort of inflated bubble? Then you look at the inflation rate's 5.1%. To Tuma's point, it might be persistent. You look at Treasury, the Treasury, uh, interest rates, the yield is 1.6% on the 10-year T-bill. Okay, so effectively, your real interest rate for savers is 1.6% minus the 5.1% inflation rate. You're at negative 3.5% if you just save your money in T-bills, in sort of, uh, risk-free, you take the risk-free return. Negative 3.5%. So now, you have everybody going out there trying to chase the yield because how do you earn a return on your money? You don't want it to be, uh, you know, eroded-

   9. CPChamath Palihapitiya37:31

      You buy s- you buy stocks or NFTs or houses.

   10. DSDavid Sacks37:33

       So, so people start going into riskier and riskier assets to basically try and make up for the loss of inflation. And so you have to wonder-

   11. CPChamath Palihapitiya37:40

       They're trying to hit the one outer.

   12. DSDavid Sacks37:42

       Yeah, so then-

   13. CPChamath Palihapitiya37:43

       Oof.

   14. DSDavid Sacks37:43

       Okay, so, so you have to ask yourself, okay, so back to this point about all-time highs, is this because everything is really this great or how much of this is driven by these sort of distortions?

   15. CPChamath Palihapitiya37:54

       50/50. I mean, I'm just putting a number on it. Like obviously, the industry and eco- and economy is doing fantastic, but seems 50/50. Here's the other thing that I wanted to make and just the last portion, which is, I think what we've realized as well at the end of this is, I- I actually again now, to use this empathy card, I'm going to give the progressives my empathy card and say, "I understand what you're trying to do. And I believe in a lot of what you're trying to do is to even the starting line for everybody." Right now, a lot of what you end up proposing distorts that goal by trying to, you know, even out the outcomes and even the finish line. But I really do think they want to even the starting line. But here's the thing that we all have to realize now. All the things that the progressives want to tax and fund are actually being done by private corporations. And I think we just have to acknowledge that and make a decision about whether as a society that's okay or not. I'll give you two examples. Number one is the federal minimum wage. We have tried for years and we have debated raising this minimum wage. It still sits today at $7.25. Just this week, McDonald's moved their minimum wage up, Starbucks moved their minimum wage up. We're talking about, you know, entry-level quick service jobs that now pay $17 to $25 per hour. Right? So two and a half to three plus times the proposed federal minimum wage. The free market And so, and so, and so what government didn't and wasn't able to do, the free markets have done. Second example, we tried to get free community college inside of one of these bills. It was dropped. Now, depending on where you go, the em- the nation's largest employer, Amazon, actually will just pay you to go to college. Right? So they are replacing that intention and a version of the GI Bill, but as a private organization. So I think what we also have to realize is that maybe some of these policy decisions is actually a little bit of, you know, getting tilted by the fact that private organizations are acting more nimbly to actually implement this progressive agenda because it actually exists in America if you're willing to take the time to look. Let me ask a question about inflation. If... Who is inflation going to, um, hurt the most and who's going to gain the most from it? Because it does seem like consumables, gas station, you know, supermarket trips, et cetera, are going through the roof. In that case, you know, that's going to have no impact on the top third of people because gallon of milk at $3, $6, $9 doesn't matter. But then you look at inflation on stocks, it's going to make it go up. So a rich person isn't impacted by their gas or their groceries, but somebody in the middle class or, uh, who's poor, that's going to dramatically impact them. So if we spend more, does that actually create a larger wealth gap, Sacks?

   16. DSDavid Sacks40:50

       Look, inflation is devastating for the middle class. Um, if you have savings, it ar- i- i- if you can afford to put all of your savings in financial assets the way that the super wealthy can, then your financial assets will go up. But if you have a good, you sort of middle class income and you don't have your, in your savings are in something more conservative, you're going to get absolutely, uh, eroded by inflation over time. It's going to kill you. And, you know, housing prices will go up. The, the, um, the, the middle class young couple that wants to buy, uh, a house for the first time, that's going to be much harder to achieve because housing prices will inflate away. So I think, you know, the- there is, there are some effects that are a wash. So for example, prices go up and then, uh, wages go up at the same time. But savings can really get hammered if you're not in financial assets.

   17. CPChamath Palihapitiya41:41

       Mm. It hurts the middle class first, but it also hurts, it hurts everybody because again, unless you're perfectly hedged going into a rising rate environment, you will own assets that are just speculative and go

   18. DFDavid Friedberg41:51

       Let me, uh, ask-

   19. CPChamath Palihapitiya41:51

       Let me ask Friedburg a scientific question here. Are we starting to go into a self-fulfilling prophecy around inflation a la what happened in the '70s, which is, we've been talking about it so much that anybody who is thinking about raising prices says, "Well, everybody else is raising prices. So even if my grilled cheese sandwich hasn't been impacted by all of this and I didn't have to, uh, give raises to my employees, they're happy at their current salaries, I'm just gonna put $2 on my grilled cheese." And we just get this cycle of everybody saying, "How much can I add to the cost of something?"

   20. DFDavid Friedberg42:21

       I am trying to remember, there was an earnings, uh, interview I saw yesterday. Uh, God, which was the company? Anyway, their, um, their company in the industrial supply chain, and he said that they're raising rates to get ahead of the supply costs going up for them-

   21. CPChamath Palihapitiya42:37

       Ah.

   22. DFDavid Friedberg42:38

       ... um, so that their margins won't get squeezed. And I think that's, uh, it's almost like that, what you're referencing is a little bit of a run on the bank.... mentality where, um, those with, uh, pricing power raise ra- raise prices, and as a result, you end up kind of seeing the- the- the trickling effects because competition can't catch up. So, if everyone's kind of raising rates and there's not enough competitive advantage, the one thing that's making this even harder right now is the gluts in the supply chain, which are reducing the competitive, um, uh, market dynamics that we might normally see where one customer raises... One company raises rates and another company says, "Wait, our rates are going to stay the same." But because so many people are challenged by getting product, there's enough demand for their product, everyone can raise rates together. We're seeing this in the energy markets now. So, um, yeah, I mean, this is kind of part of the scary, uh, scenario that everyone's trying to manage against. Um, I- I don't know what the science is, and I'm not an economist, but, uh, it certainly seems to me like the psychology of managers and business owners and- and boards is such that they're saying, "Let's get ahead of the curve. Let's raise rates." And as a result, you're seeing the trickling effect of inflation, uh, throughout the whole economy. So, um-

   23. CPChamath Palihapitiya43:47

       A little scary.

   24. JCJason Calacanis43:48

       Sax, what do you think psychologically is going on with raising prices? Yeah.

   25. DSDavid Sacks43:52

       So- so expectations are definitely part of the inflation game. People raise prices if they expect inflation in the near future, and then that feeds on itself, and that's how... If you look at countries that have had hyperinflation, that's how you get a spiral. Now, I don't think we're going to have hyperinflation here, but we're at 5.1% now, and if people think it's going to be worse next year and the Fed's not going to raise rates, it could even be higher next year. And I think people are gonna start getting upset about this, you know, when they buy their Thanksgiving turkey and their Christmas ham and those prices are way higher than they think and they're already paying gas prices that are a lot higher than they're used to. Um, I think you could see a lot of unhappiness out there.

   26. JCJason Calacanis44:32

       One other thing I'm thinking about is, is the logical thing for a person to do in this hyperinflationary, you know, market is to say, "You know what?" The- _ these... I went to look at a car that I wanted to get to drive in the snow and I was like, "You know what? I'm just going to hold off buying this because I'm not paying 15K over sticker." So... And I can pay 15 over sticker. So I was like, "Ah, do I want to do that? Ah, the other car is okay. I'll just put snow tires on it." So are a lot of people chamoffing as part of this psychological, you know, spiraling out of control situation, then some group of people might say, "You know what? I'm going to opt out of consumerism and I'm just going to lower my burn rate and stop consuming," which is also bad for the system.

   27. DSDavid Sacks45:08

       How are you going to stop consuming food? I mean, food prices-

   28. JCJason Calacanis45:11

       No, this is a thing, inflation.

   29. DSDavid Sacks45:11

       ... are going through the roof.

   30. JCJason Calacanis45:12

       Well, you might- Yeah, inflation- No.
4. 52:30 – 58:49

   Dealing with inflation as a capital allocator

   1. DSDavid Sacks52:30

      so, so one of the areas where it's sort of like best times ever are, is the SaaS market, which is where I invest in, and I'm obviously investing in very, very early-stage companies, but we're seeing valuations now, uh, go to multiples of ARR that we've never seen before, you know?

   2. JCJason Calacanis52:45

      50, 75.

   3. DSDavid Sacks52:46

      Oh, I would say 100 times-

   4. JCJason Calacanis52:47

      100?

   5. DSDavid Sacks52:47

      I'd say 100 times ARR is sort of the rule of thumb right now-

   6. JCJason Calacanis52:50

      (laughs)

   7. DSDavid Sacks52:50

      ... uh, and you're seeing-

   8. JCJason Calacanis52:51

      At what scale? A $5 million company is worth 500 million?

   9. DSDavid Sacks52:54

      Uh, anywhere from one million to 10 million. I mean, absolutely, but-

   10. JCJason Calacanis52:58

       Is worth between 100 and a billion dollars, which makes no sense.

   11. DSDavid Sacks53:02

       Yeah, but... Well, no, it does if... Well, he, I'll, he... Let me give you the argument for why it could make sense. Okay, let's say the company is expected to go 3.3X this year and-

   12. JCJason Calacanis53:11

       Mm-hmm.

   13. DSDavid Sacks53:11

       ... 3X next year. That's basically a 10X over the next two, two years. So that 100X in two years will only be a 10 times ARR multiple, and by the way, if you look at the comps for the companies that have gone public, the SaaS companies that have gone public-

   14. JCJason Calacanis53:27

       Yes.

   15. DSDavid Sacks53:27

       ... like, look at Toast being worth, what, 30, 40 billion. So they're trading at 30, 40, 50, 60 times ARR in the public markets-

   16. JCJason Calacanis53:36

       On big numbers.

   17. DSDavid Sacks53:36

       ... on big, big numbers. So my point is-

   18. JCJason Calacanis53:38

       But David, how hard is it to go 3X, 3X? That is... I mean, going 3X is hard. Going 3X, 3X back to back, that's like winning two N- uh, you know, NBA championships or being in the Finals.

   19. DSDavid Sacks53:48

       No, I, I don't-

   20. JCJason Calacanis53:49

       It's hard.

   21. DSDavid Sacks53:49

       No, I don't think it's that hard. I mean, it, it's-

   22. JCJason Calacanis53:50

       Not for you, but you're the king of SaaS.

   23. DSDavid Sacks53:52

       (laughs) You-

   24. JCJason Calacanis53:54

       Uh, you know, I'm, I'm being dead serious. For the, for a, a SaaS founder with a million to go from one to three and then three to nine, how many out of 100 actually go from one to nine?

   25. DSDavid Sacks54:02

       Yeah, I'll tell you, Yammer's trajectory, and this is back, this is over a decade old, we went from one million in our first full year selling the product to, uh, well, back in those days, we looked at total contract value as seven million of TCV, that was about five million of ARR, and then it, it tripled the year after that. So, you know, and then we tripled the year after that, and-

   26. JCJason Calacanis54:23

       Well, what, a, a category defining SaaS company, so you're taking-

   27. DSDavid Sacks54:26

       And then we got acquired by Microsoft, but, but, but I'm just saying that it's entirely possible. There's a lot more Yammers today or companies-

   28. JCJason Calacanis54:32

       Okay.

   29. DSDavid Sacks54:32

       ... with that growth trajectory. So, I mean... But look, this is what's led to, you know, our fund two, which we started investing in 2019, which has a SaaS focus, already has five unicorns in it from companies that we invested in the cedar stage A.

   30. JCJason Calacanis54:46

       That's crazy.
5. 58:49 – 1:13:17

   Big Tech’s outrageous quarterly earnings, why Google is the best business ever, Facebook’s “Meta” rebrand

   1. JCJason Calacanis58:49

      absolutely, uh-

   2. CPChamath Palihapitiya58:49

      I mean, I gotta say, when, when you saw these quarterly earnings, there is no better business in the world than Google. Single-handedly, par excellence, the most incredible money-making machine that's ever been created, and a close second, as it turns out, is Microsoft.

   3. JCJason Calacanis59:06

      Unbelievable. I mean, just to-

   4. CPChamath Palihapitiya59:08

      Which is now the most valuable company in the world, greater than Apple.

   5. JCJason Calacanis59:10

      Well, and, and Friedberg's been saying this on the podcast forever, but just to give people an idea, Q3 revenue at Google was up 41% year over year to $65 billion in a quarter.

   6. DFDavid Friedberg59:26

      And by the way, that is high margin-

   7. CPChamath Palihapitiya59:28

      High margin.

   8. DFDavid Friedberg59:28

      The incremental revenue on the core Google products, uh, generated an increment, operated at an incremental 50% EBITDA margin.

   9. CPChamath Palihapitiya59:38

      Sick.

   10. DFDavid Friedberg59:39

       And they just adjusted-

   11. CPChamath Palihapitiya59:40

       So sick.

   12. DFDavid Friedberg59:40

       ... their, their, their CapEx depreciation amortization schedule because they realized that their computers that they use in their data centers last four years-

   13. CPChamath Palihapitiya59:50

       Last longer.

   14. DFDavid Friedberg59:50

       ... instead of three, and the networking equipment lasts five years instead of three. So they're like, and, and I've been saying this since the beginning, 'cause I worked at Google and Urs is still there and he runs all the data centers and the networking infrastructure. When I worked at Google, there was this amazing project where we built a 10,000, I mean, we didn't build it, they built it, a 10,000 port switch called Firehose, which helped increase the throughput of the data centers and had these massively parallelized indexing and, um, uh, a- and, uh, and production servers. Um, and there was so much investment made from the beginning in building the infrastructure stack, the flywheel continues to move, spin faster and faster and faster. And here they are building their own servers, building their own racks, their own data centers, literally the most ver- they have their own fiber across the oceans. Um, literally the most vertically integrated business in history, with a moat that no one will ever be able to catch up on. And I read all these nonsense comments on the internet about people being like, "Why doesn't someone else go after Search?" It's so crazy to me. People fail to recognize that what we see is the tip of the iceberg at Google, and this flywheel is built by layers and layers of monopolistic, in a good way, monopolistic technical advantages that they've built into this business over the period of the past two decades.... and it is extraordinary beyond anything we've ever seen in human history how well this commercial enterprise has run. And the reinvestment of capital has been extraordinary. They've... If you look at YouTube in the quarter, uh, YouTube (laughs) generated... This is insanity. YouTube is now operating at a nearly $30 billion revenue run rate, and that's just like pure margin incremental revenue for Google layered on, um, you know, built off of the same ad- ad network, uh, that they were originally running on Google. Obviously, they have a- a different ad team now at YouTube. But YouTube now has more revenue than Netflix and is growing at likely 40 to 60% year-over-year revenue growth rate, whereas Netflix is, you know, considered one of the FAANG stocks, you know, one of the top stocks, and Netflix is only r- uh, growing at 22% a year.

   15. CPChamath Palihapitiya1:01:49

       Sure, remove Netflix and just put Google twice. It should be-

   16. DFDavid Friedberg1:01:52

       And then you look at Google Cloud-

   17. CPChamath Palihapitiya1:01:54

       ... uh, we should put You- YouTube in there on its own.

   18. DFDavid Friedberg1:01:55

       Yeah. And Google Cloud is now operating at a $20 billion (laughs) run rate. And, you know, they- they can just throw these services on top of, um, all these flywheels that they've built, and they become massive enterprises unto themselves. I mean, it is a behemoth that is effectively, uh, not a tax in a bad way, but a tax on the internet, because they are core infrastructure to service almost everything that we all consume and use over the internet in- in some way or another.

   19. CPChamath Palihapitiya1:02:17

       Yeah, but they give it to everybody for free and they built the internet for everybody.

   20. DFDavid Friedberg1:02:21

       They- they- they, they have been extre- they have been extremely smart about competitive pricing. As we saw recently, they dropped-

   21. CPChamath Palihapitiya1:02:25

       Yeah.

   22. DFDavid Friedberg1:02:25

       ... the commission in the Play Store to 15%. If I'm making an app and I'm g- giving Apple 30%, now I give Google 15%, I'm more inclined to promote my Android app and that's gonna affect users and, you know, they're putting out this Pixel 6 phone that looks like an incredible piece of equipment that's cheaper than the iPhone.

   23. CPChamath Palihapitiya1:02:41

       No, they're, they're an incredible company. The- the- the-

   24. DFDavid Friedberg1:02:43

       Everything.

   25. CPChamath Palihapitiya1:02:43

       They are so incredibly well run at the top. Sundar is an incredible CEO. Um, and they are... They're running a money printing press, uh, at Amphitheatre Parkway in- in Mountain View. I was gonna say, Jason, to your point, I was talking to somebody, and one really interesting thing that this organization did was, um, a couple of years ago, they basically went long Google and Microsoft and they shorted Apple, Amazon, and Facebook against it. And I asked them, "Why?" And they said, "It's the best inflation hedge we could come up with at massive scale that could work in a way where, you know, we're long growth, but we're hedged where, you know, the types of supply constraints that could come in and, you know, kick us in the ass would never affect Microsoft and Google the same way that it would affect Apple and Amazon." Which, by the way, in their earnings results, they said, right? Amazon has huge issues on the supply chain side. Apple has huge issues on the supply chain side. Amazon was up 15%. They missed their numbers. Uh, although Amazon Web Services is up 40% year-over-year, also on a big number, $16 billion in AWS revenue for Q3. So that, as a standalone company, is now on a- 60 billion. Oh my God. I mean, that was... Did you watch the video? I watched the whole thing. I watched two minutes of it and then I stopped watching it. PTS. (laughs)

   26. DSDavid Sacks1:04:20

       (laughs)

   27. CPChamath Palihapitiya1:04:20

       I mean, it's basically y- you have Facebook in the face of all of the things, all of the times they got their hand caught in the cookie jar, saying, "This is gonna be the new world, but instead of us doing everything wrong and screwing the users and their privacy and democracy and creating strife in the world, this time we're gonna make it open source. This time we're gonna build a coalition and partnership. And this time it's gonna be awesome." And it's- it's like a dystopian SNL skit where Zuckerberg is describing the future and he literally describes how proud he is that you're gonna be able to play Grand Theft Auto. And Nick Clegg is like, "Yeah, this is gonna be amazing. This time we are gonna bring all the regulators and the scientists in to tell us how to build it, and we'll have consensus of how to build the future." And you're like, "Did- did you just say that everybody in 3D is gonna be in a virtual space beating each other up with bats and guns and killing police officers in Grand Theft Auto?" Luckily they didn't show a clip of it. Uh, but it was s- basically Zuckerberg taking credit for every single, uh, virtual reality or augmented reality thing you've seen over the last 20 years. He literally took everything from education to HoloLens to, you know, poker games, and he took basically credit that this is gonna be the future and that instead of this time it being a closed ecosystem, it would be an open one that supports NFTs and don't worry this time. I think any developer who puts any amount of their effort into supporting in any way Zuckerberg's view of the metaverse is crazy when they could do it on a distributed, decentralized, crypto-based, open source platform. You do not want to give Zuckerberg any more power. And if there is even a 10 or 20% chance that this is the next big compute platform, Zuckerberg needs to be stopped from doing it by the market.

   28. DFDavid Friedberg1:06:11

       Wow. J-Cal.

   29. CPChamath Palihapitiya1:06:12

       I think you're cr- I think you're crazy. I think you've lost your mind.

   30. DSDavid Sacks1:06:14

       Oh my God. j-cal.

Episode duration: 1:19:16