E54: Spread trading big tech, capital allocation, Zillow's misfire, Progressives suffer losses

David Friedberg 0:00 My body is a wonderland.

Chamath Palihapitiya 0:03 If that wonderland is white, soft and mushy, sure.

David Friedberg 0:07 And hairy too.

Chamath Palihapitiya 0:11 (laughs) You know, the worst thing about skin on skin sleeping with a newborn is that, you know, sometimes she roots and she goes after the ma- the male nip.

David Friedberg 0:18 I know.

Chamath Palihapitiya 0:18 The problem is, my nipple's covered in hair. (laughs) It's really awkward for everybody. (laughs)

David Sacks 0:24 Just start gagging.

Chamath Palihapitiya 0:25 I'll tell Tally that story when she's 18. Or at her wedding, it'll be even better.

Narrator 0:29 (instrumental music plays) We're going all in. Don't let your winners ride. Rainman, David Sacks. We're going all in. And I said- We open sourced it to the fans and they have just gone crazy with it. Love you, Vespa. Queen of Quinoa. Going all in.

Jason Calacanis 0:46 Hey, everybody, welcome to another episode of the All In podcast. I am wearing a blue shirt. I am a pasty white old Greek-

Chamath Palihapitiya 0:55 (laughs)

Jason Calacanis 0:55 ... man, uh, who's balding and obnoxious, and, uh, with me today is, uh-

Chamath Palihapitiya 1:03 No, no, no, no, you have to, you have to say your pronoun, bro.

Jason Calacanis 1:05 ... M- oh, and my pronouns are, uh... Oh wait, what are my pronouns? My pronouns are beep, beep. And most people just call me a jerk. With me today, of course, is my Sri Lankan Urkel looking-

Chamath Palihapitiya 1:20 Hello, hello, hello.

Jason Calacanis 1:20 ... wearing a furry sweater-

Chamath Palihapitiya 1:22 Hello, everybody. My name is Chamath. I have, uh, salt and pepper black hair, brown eyes. Uh, I am tall, uh, six foot two. I go by the pronouns we, king, and studmuffin.

Jason Calacanis 1:36 (laughs)

Chamath Palihapitiya 1:37 And, uh, uh, I'm here to talk to you about, uh, internet security protocols. Wah, wah, wah, wah.

Jason Calacanis 1:43 (laughs) I look like Urkel. I think people should just come up and say which celebrity they look-

Chamath Palihapitiya 1:47 Whoa, I don't look like Urkel?

Jason Calacanis 1:48 ... the closest like.

Chamath Palihapitiya 1:49 I don't, I don't look like Urkel.

Jason Calacanis 1:50 You look like a Bollywood movie star.

Chamath Palihapitiya 1:51 When you put your gla- Oh, bam. It's a...

Jason Calacanis 1:53 (laughs)

Chamath Palihapitiya 1:54 You're kind of like the Sri Lankan Urkel to us.

Jason Calacanis 1:56 Welcome to the All In podcast. Two out of the four of us are canceled. Next up for cancellation, Sacks.

David Sacks 2:03 Yes, I am coming to you here from the floor of the New York Stock Exchange, which was once land that belonged to the Mohegan, the Montauk-

Jason Calacanis 2:11 (laughs)

David Sacks 2:11 ... the Oneida, the Erie, and the Iroquois tribes.

Chamath Palihapitiya 2:16 Oh, we're all canceled.

David Sacks 2:17 Since time immemorial.

David Friedberg 2:20 Oh my god. (laughs)

Jason Calacanis 2:20 You forgot the Irish. We own the seven points.

David Friedberg 2:24 Oh my god. You really did it. You went for it, Sacks. I love you.

David Sacks 2:29 I-

Jason Calacanis 2:29 Uh.

David Sacks 2:29 Isn't it important that we-

Jason Calacanis 2:32 (laughs)

David Friedberg 2:32 (laughs)

David Sacks 2:32 ... at any moment that we're successful, we have to flagellate ourselves or remind ourselves-

Jason Calacanis 2:39 About what happened.

David Sacks 2:40 ... that at one time, all this land was owned by somebody else and we stole it.

Jason Calacanis 2:44 Also, the Greeks conquered the Romans and stuff.

David Sacks 2:47 Right.

Jason Calacanis 2:47 So I'd like to apologize for that.

David Sacks 2:49 (laughs)

Jason Calacanis 2:49 But you forgot to mention you're also wearing a, uh-

Chamath Palihapitiya 2:52 Blue shirt.

Jason Calacanis 2:52 ... Brooks Brothers shirt that is four sizes too large. (laughs)

David Sacks 2:57 This is my slim fit, so...

Jason Calacanis 2:58 That's slim fit? Oh, no. Here we go again.

Chamath Palihapitiya 3:01 Sacks has, Sacks has been upgrading the wardrobe. He's changing it up.

Jason Calacanis 3:02 Can we- Can we, b- b- before Freeburg does the intro, uh, J Cal, you want to tell them why we're, we're doing these intros like this? Yeah, I got, I gotta stop and pause before all gets... Okay, yesterday on the internet emerged a series of videos that were clipped of Microsoft presenting their new suite of developer tools, yada yada. And corporate people got up and without any explanation started describing their physical appearance, their pronouns, their ethnicity, their skin tone, and their hairstyles. And the entire internet was like, "Oh my god, this is crazy. Wokeism. Like, what, what is happening here? This..."

Chamath Palihapitiya 3:41 No, I thought it was a skit. I thought it was a Saturday Night Live skit.

Jason Calacanis 3:44 And so-

David Sacks 3:44 Right, and so then as soon as they got called out by the entire internet, they claimed that they were doing this for visually impaired people, which kind of begs the question of why visually impaired people need to know what race you are. Like, it's still playing into this like crazy weight race consciousness. But then on top of it, it wasn't just that. We, we know it's not that because then they started doing this whole-

Chamath Palihapitiya 4:03 Uh, no, no, no, but hold on.

David Sacks 4:03 Yeah.

Chamath Palihapitiya 4:04 Also, if you, if you're blind and technically can't see, you may not even know what blue means because you will have never seen the color blue or blonde.

Jason Calacanis 4:12 Okay.

Chamath Palihapitiya 4:13 Right?

David Sacks 4:13 Right, but they-

Chamath Palihapitiya 4:13 So-

David Sacks 4:13 ... were also identifying their races, which kind of begs the question of why that's important.

Chamath Palihapitiya 4:17 But if you were born blind-

David Sacks 4:18 But-

Chamath Palihapitiya 4:18 ... you would not know what that means either. You're literally colorblind.

Jason Calacanis 4:21 Well, I think that people have explained to people-

Chamath Palihapitiya 4:22 Well, I think, I think it's about putting, putting, yeah, it's putting you on the same footing as people who are not visually impaired. Yeah, but I'm saying, I'm saying if you're, if you're-

David Sacks 4:27 Go ahead, go ahead.

Chamath Palihapitiya 4:27 ... visually impaired, you're using the wrong language. That language is for the sighted people.

Jason Calacanis 4:32 Okay, so-

David Sacks 4:33 But I, I, I'm just calling bullshit on their stated explanation that it has anything to do with the visually impaired, because then they went on to basically recite the names of 10 tribes, Native American tribes that no one's ever heard of-

Jason Calacanis 4:45 I, I-

David Sacks 4:45 ... on, on which the Microsoft campus used to belong to. So, which is why I was kind of making fun of that in my initial statement, but... So look, this is just woke capitalism. This is wokeism out of control. Obviously they didn't see the election results earlier in the week.

Jason Calacanis 5:01 I, it's clearly there was some level of virtue signaling. I think, in their defense, they were trying to do it, I think, for the visually impaired. The problem was they didn't explain the context and they didn't give instructions to the people on what to do. So the people came out-

David Friedberg 5:14 Well, that, that was, but, but J Cal, that video cl- that was a clip pulled out of a broader context, too, right? So like-

Jason Calacanis 5:19 Right.

David Friedberg 5:19 ... a- a- apparently this is common on campus or common there that this is happening all over. So we just saw a snippet-

Jason Calacanis 5:24 Well, no, it isn't common because I asked people online just who-

David Friedberg 5:27 But it was optional, it was optional. It's optional, apparently.

Jason Calacanis 5:29 ... but to the common point, I think the reason the internet reacted the way it was was I asked every single person who came at me, because the woke left came at me, I just said, "Can you show me another clip of this on YouTube of any event where this occurred?" And nobody could. So I think this was kind of a first.

David Friedberg 5:44 When did you stop being a member of that, that woke left, J Cal? What was the moment?

Jason Calacanis 5:48 I've never liked the hysterical side. I've never been for Bernie. I've never been for Elizabeth Warren. I've always been moderate.

David Friedberg 5:53 Mm-hmm.

Jason Calacanis 5:53 Always been moderate.

Chamath Palihapitiya 5:53 Wait, can I hear Freeburg's intro?

Jason Calacanis 5:55 Yeah, Freeburg, can we hear yours?

David Sacks 5:57 (laughs)

David Friedberg 5:58 My identity is an illusion.

Jason Calacanis 6:00 My- my voice is like Kermit the Frog. (laughs)

David Friedberg 6:00 It's an illusion created by the viewer and you can call me whatever you want. I sit on the ground where during the Hadean pe- period, there was lava and magma and nothing but CO2 and methane, and I-

Jason Calacanis 6:13 (laughs)

David Friedberg 6:13 ... represent those gases that are now lost to the oxygenation-

Jason Calacanis 6:17 (laughs)

David Friedberg 6:17 ... and the cyanobacteria that swarmed over this earth-

Jason Calacanis 6:20 (laughs)

David Friedberg 6:20 ... and took everything over.

Chamath Palihapitiya 6:21 (laughs)

David Friedberg 6:21 And led to the formation of eukaryotic life, and here we all sit today-

Jason Calacanis 6:25 (laughs)

David Friedberg 6:25 ... in our privileged e- existence. Thank you.

Jason Calacanis 6:27 Are you saying that you wanna f-

Chamath Palihapitiya 6:29 Freeberg is just electrons hitting neurons in interesting ways.

David Friedberg 6:32 Yeah, no, he's like-

Chamath Palihapitiya 6:32 That's it.

Jason Calacanis 6:33 Yeah.

David Friedberg 6:33 Yeah. (laughs) He's like, it's it.

Chamath Palihapitiya 6:34 Yeah.

David Friedberg 6:34 His- his pronouns are it/its.

Jason Calacanis 6:35 His pronouns are proton, atom, dark matter-

David Friedberg 6:39 My- my- yeah.

Chamath Palihapitiya 6:39 (laughs)

David Friedberg 6:39 It's biochemical quantum bath, fuzz-

Chamath Palihapitiya 6:41 (laughs)

David Friedberg 6:42 ... quantum foam is my pronon.

Jason Calacanis 6:44 So would you like to formally apologize for colonizing the dark matter during the Big Bang now? Or would you like to-

Chamath Palihapitiya 6:51 (laughs)

David Friedberg 6:51 I feel- I feel it was inappropriate.

Jason Calacanis 6:52 ... have your lawyer release a statement? (laughs)

Chamath Palihapitiya 6:54 (laughs)

David Friedberg 6:54 It wasn't fair when the cyanobacteria took over the- the face of the earth and sucked up all the CO2-

Jason Calacanis 6:59 (laughs)

David Friedberg 6:59 ... and created all the oxygen. And- and for that, we all apologize.

Jason Calacanis 7:03 For- for the genocide of (laughs) the-

David Friedberg 7:06 For the genocide of, uh-

Jason Calacanis 7:07 ... phytoplankton.

David Friedberg 7:08 ... of- of CO2 and methane. I mean, those molecules-

Jason Calacanis 7:10 Yes.

David Friedberg 7:10 ... were really happy and they had a-

Jason Calacanis 7:12 (laughs)

David Friedberg 7:12 ... you know, they had a- a very kind of like peaceful existence on this earth. And, you know, cyanobacteria just-

Chamath Palihapitiya 7:17 Just came in and ripped it away.

David Friedberg 7:19 ... cyanobacteria just took it all away from them. And, you know, and then the offspring ended up being us, and here we are. So, apologies. All right.

Jason Calacanis 7:28 All right. (laughs) Welcome to episode 54. Everybody's canceled.

Chamath Palihapitiya 7:33 The final episode. (laughs)

Jason Calacanis 7:34 Everybody's horrible.

David Friedberg 7:36 (laughs)

Jason Calacanis 7:37 Nobody wins.

David Friedberg 7:37 I- I- I don't think that the Microsoft thing was bad in, when you hear the broader context, it was like, you know, that's just, you know, I think it's a reasonable thing that visually impaired people use

Chamath Palihapitiya 7:46 I- I actually

Jason Calacanis 7:46 ... on a computer.

Chamath Palihapitiya 7:46 ... am so concerned.

David Friedberg 7:47 I'm still long Microsoft and Google and short the rest of big tech, so I'm fine with it.

Chamath Palihapitiya 7:51 (laughs)

Jason Calacanis 7:51 Yes.

David Friedberg 7:51 There you go.

Jason Calacanis 7:52 Back to the stock price. The,

Jason Calacanis 7:53 I actually, I- I-

David Friedberg 7:53 Jemmat, do you think that the Google long, Netflix short play is the right play? See, someone's going on the internet too?

Chamath Palihapitiya 7:58 I think the best, I think the best trade on, the best trade on the internet, the most obvious, simple, money-making trade is long Microsoft, Google, short big tech, short the rest of big tech.

David Friedberg 8:05 Short IBM, short Netflix. Short everything.

Chamath Palihapitiya 8:07 No- no- no- no, sh- short, no- no- no, meaning you can- you can c- very comfortably short Apple, Facebook, Amazon, Netflix and be long Microsoft, Google. So as a spread trade-

David Friedberg 8:16 Right, right.

Chamath Palihapitiya 8:17 ... it's the most, it's the best risk parity trade on the internet right now. I mean, period, in the markets.

Jason Calacanis 8:21 Can you expla- explain the spread sh- trade to me

Chamath Palihapitiya 8:23 Yes.

8:23 So look, look, I- I tweeted this a while ago but it's like, and- and again, the, I- I think like, well, let- let me be constructive and say the people on Twitter that respond to these threads are not totally stupid, although I think they're kind of idiotic.

Jason Calacanis 8:37 (laughs)

Chamath Palihapitiya 8:37 Um, I said, you know, "Here's how you can effectively..." you know, I- I said something about, you know, big tech and I said, "Oh, I can comfortably put my short on." And I'm kind of trolling people when I do that because I'm not telling them the full trade. The- the real trade, whenever you put anything on, in my opinion, is all about managing risk. And the best thing about the internet and the stock market is that, you know, when you're betting on internet stocks, you don't necessarily have to be naked long or naked short, which comes with a lot more risk than if you are long one security and short another against it. So for example, over the last 10 years, you would have made a lot of money by being long Amazon and short a basket of traditional commerce companies, offline commerce. I'm gonna make up a basket, but Macy's, JCPenney, you know, Kmart, Sears, right? So if you're short those and long Amazon, that's what's called a spread trade. You're- you're basically playing the gap between your longs and your shorts.

David Friedberg 9:36 It's independent of where the market generally trades is- is one of the key points.

Chamath Palihapitiya 9:39 I- irrelevant of the market. You're- you're basically saying-

Jason Calacanis 9:41 Because those stocks could go up, but just not anywhere near Amazon.

David Friedberg 9:45 But everything could go... Right. Yeah.

Chamath Palihapitiya 9:47 When you put that trade on, for example, it's, ah, I'm gonna bet that if everything goes up, Amazon will go up more than-

Jason Calacanis 9:54 Yes.

Chamath Palihapitiya 9:54 ... Kmart, Walmart, Sears. And if the stock market goes down, Amazon won't go down that much, but these ones will go down a lot, and you pl- you're playing the spread. So to just ex- just to be-

Jason Calacanis 10:05 Got it. Yes.

Chamath Palihapitiya 10:05 ... very explicit. You know, there is a very, and I talked about this last week, but, uh, I, that, this idea wasn't mine, it's a borrowed trade from somebody who's a very well-known hedge fund manager who put it on in massive size and, you know, to be honest, not knowing much of anything, I just copied it. But he's, his initial trade was long Google, short Facebook. And that trade basically was at parity, which meant that the long and the short canceled each other out for about the last four years. Until the last year, it completely blew out and it returned about 80%, 85%. So if you had put in $100 in, you would have made about 85, uh, 85 bucks on this trade by being long Google, short Facebook. The- the bigger trade at scale is actually long Google and Microsoft and short the rest of big tech. And there's a lot of vagueries why that this idea makes a lot of sense. But basic-

Jason Calacanis 10:57 What you're saying is they'll outperform the other basket of tech stocks.

Chamath Palihapitiya 11:00 On a relative basis.

Jason Calacanis 11:01 On a relative basis.

Chamath Palihapitiya 11:02 On a...

Jason Calacanis 11:02 So- so it's not like you're saying-

David Friedberg 11:03 You know-

Jason Calacanis 11:03 ... Airbnb can't go up or Facebook can't go up. It could, it's not gonna go as up as much as those other two.

David Friedberg 11:09 Well, he's saying big, he's saying big two. He's- he's saying that the- the- the trillion dollar market cap companies.

Chamath Palihapitiya 11:13 Yeah. And- and-

David Friedberg 11:13 Not- not- not the Airbnbs.

Jason Calacanis 11:14 Oh, okay. Well-

Chamath Palihapitiya 11:15 And- and the reason- and the reason why focusing there makes sense is they're hyper liquid markets. They have tremendous ways in which you can have massive size on. So you could put a trade of 10 billion long versus 10 billion short. I mean, you can put mega size on on these things if you- if you have real conviction. And then the third thing is, when the banks look at that kind of position, they actually, from a risk management perspective, treat it differently than if you were just naked long any one of these things or-

Jason Calacanis 11:45 Naked long would be just making one bet.

Chamath Palihapitiya 11:47 Yeah. Or, you know, or naked short, which is even more dangerous. So the-

David Friedberg 11:51 'Cause if the market collapses by 30%, both stocks might go down 30 roughly, but one will go down 32 and the other one will go down 28. And so you're really only exposed-

Chamath Palihapitiya 12:00 You're down 2%.

David Friedberg 12:02 ... 2% as opposed to the 30% of the... So all the market risk is taken out when you make trades like that.

Chamath Palihapitiya 12:07 Yeah.

David Friedberg 12:07 The, the reason it's possible also today to do so at such a scale, right, Chamath, is interest rates are so low, so when you borrow on margin to go long, the rate is very low and when you short the stock, if it's a highly liquid stock, it doesn't cost a lot to borrow to short.

Chamath Palihapitiya 12:21 That's right.

David Friedberg 12:22 So your, your actual, you know, uh, carrying cost on that trade ends up being pretty low relative to the upside you expect.

Chamath Palihapitiya 12:29 So just to, just to give you a sense of it, my, um, you know, when I tweeted that tweet out, the, to complete the picture, I was actually long something against my proposed short and I put it on in, in pretty meaningful leverage. And, um, it's worked out really well because I was playing the spread. I was basically betting that, you know, the, the safest company on the internet today is Google because they're both a platform company and to the extent that they're at risk at being an app company, the risk is to Apple but because they pay Apple so much for search, they're inoculated. And so in many ways Google is the safest and it's also, as we've said before, the purest money-making machine on the internet.

Jason Calacanis 13:08 You're referring, of course, to A- Google paying Apple $10 billion to be the-

Chamath Palihapitiya 13:13 Correct.

Jason Calacanis 13:13 ... default search in their phone.

Chamath Palihapitiya 13:14 They own Android, so one platform, and on the other platform, they, they pay them so much that they're going to be always protected. And the second-best company is Microsoft and you, we even saw it, by the way, this past week, I don't know if you guys saw, but, but Microsoft decided to take a broadside attack against Notion.

Jason Calacanis 13:30 Yeah, that was-

Chamath Palihapitiya 13:30 Which is a-

Jason Calacanis 13:31 Wild.

Chamath Palihapitiya 13:31 ... productivity app that's been growing very well. I felt this when I was on the board of Slack. When Microsoft put its gun sights on us, we always thought that they could not out-compete with us. And what it turns out is when you have a massive distribution advantage, feature parody is enough and you can actually be slightly less than good enough on the features because distribution and bundling and packaging overpower a customer's desire to adopt a product. So in the case of Slack, it was very difficult, I think, for us to compete against Microsoft's bundling of Teams with all this other software that they were selling and all the discounting that they could do made it very difficult for us to compete because we had a single product. And lo and behold, 18 months later, the only real long-term protective solution for Slack shareholders was to basically get bought by Salesforce so that you could be part of a bigger whole. This past week, Microsoft decided to go after Notion and it's going to be, I think, a very similar story where, you know, once they decide to sort of go after this, uh, uh, a product experience, they only need to be 80% as good and then the distribution and bundling and packaging will take care of the other 20%.

Jason Calacanis 14:38 It doesn't kill the other company, but it creates headwinds that basically-

Chamath Palihapitiya 14:41 Massive headwinds because, because a company like Notion cannot be fully valued over long periods of time simply being an SMB company. You, at a minimum, you'll have to move into the mid-market. You may necessarily never have to go to the enterprise, but you probably have to go to the mid-market and in that is a very troublesome path because Microsoft has so much, you know, uh, tentac- so many tentacles inside of those businesses. So anyways-

Jason Calacanis 15:03 They're basically bundling-

Chamath Palihapitiya 15:04 ... the long Microsoft, long Google is a pretty obvious kind of, like, monopolistic, you know, pair trade. The question is what are you short against it so that you can take out the market volatility and you can place bread? Again, Apple has severe, you know, headwinds with respect to inflation pressures, um, and margins and supply chain issues. Amazon has pretty meaningful headwinds now relative to, uh, pricing power and competition. Facebook has pressure with respect to regulatory oversight.

Jason Calacanis 15:35 Oh, I think I just came up with one. What about Airbnb versus the airlines? Would that be a spread trade?

Chamath Palihapitiya 15:40 No. You're, again, you're talking about s- You're talking about smaller, rinky-dink ideas.

Jason Calacanis 15:43 Well, I, listen, I'm not playing on the same chip stack as you. I wasn't there on Tuesday night. I'm, I'm on a Thursday night, so would that be-

Chamath Palihapitiya 15:48 No, I'm saying... No, no, no.

Jason Calacanis 15:48 ... a good spread for me?

Chamath Palihapitiya 15:50 No, that's a stupid idea and I'll tell you why.

Jason Calacanis 15:52 Okay.

Chamath Palihapitiya 15:52 If you're gonna put these things on, go to where the deepest liquid markets are because those are the safest.

Jason Calacanis 15:57 Okay.

Chamath Palihapitiya 15:58 Right? Like, d- like, don't try to be different. Being the same here-

Jason Calacanis 16:02 Well, tell me why Airbnb, which is a incredible margin business that's incredibly well run and growing versus airlines which are horribly run and low margin, why wouldn't that be a good spread trade? I'm just thinking out loud here.

Chamath Palihapitiya 16:15 I think it's a very, I think it's a very, very, two, you're picking two random companies out of a hat.

Jason Calacanis 16:20 Well, no, I, they're both in, uh, transportation-

Chamath Palihapitiya 16:22 No.

Jason Calacanis 16:22 ... and vacation and travel.

Chamath Palihapitiya 16:23 No. They're completely different businesses with-

Jason Calacanis 16:25 Okay.

Chamath Palihapitiya 16:25 ... completely different motivations, with different capital pools, with different people that own the stock. There's no point trying to get cute on these things. My point is, if you really wanna be hedged against market risk-

Jason Calacanis 16:36 Got it.

Chamath Palihapitiya 16:37 ... go to where it's safest, find the simplest, most obvious thing, don't overthink it, or don't put it on. So another obvious one, here's a, here's a, so obvious is within big tech, figure out which ones you wanna be long, which ones you wanna be short. That's a spread trade that over the next four or five years, where if you expect a lot of market volatility, it makes sense to maybe put some of this kinda stuff on, right? Uh, a different version of this idea which makes sense is in autos. Again, trillions of dollars of market cap and you can make a decision. Do I wanna be long Tesla, Lucid, and, um, Rivian and short the traditional autos? That could be a trade.

Jason Calacanis 17:17 Hm.

Chamath Palihapitiya 17:18 You know? But trying to ch- like, trying to go after, like, let me pick Airbnb versus United Airlines is too random for me and I don't think they're correlated enough for it to make any sense.

Jason Calacanis 17:28 All right, speaking of the stock market, uh, Sacks, um, you've got the background of the New York Stock Exchange as your Zoom background today. What's that about?

David Sacks 17:36 Yeah, so Bird listed on the New York Stock Exchange today. This is a company that I've been involved in pretty much since the beginning. We led the Series A round back in 2017. It was actually the first check I wrote as a VC to lead a round, uh, at Craft and four years later, public company on the New York Stock Exchange. Pretty amazing.

Jason Calacanis 17:56 And so you're literally at the New York Stock Exchange-

David Sacks 17:58 Yes.

Jason Calacanis 17:59 ... as we speak.

David Sacks 17:59 I am in-

Jason Calacanis 18:00 So he's a first remote bestie.

David Sacks 18:01 Yes. And you can see behind me, um, that is the floor of the New York Stock Exchange. It's not like, you know, if you've seen the movie Trading Places, it's not like that anymore. There are no stock brokers. There's no, like, paper flying around.

Jason Calacanis 18:14 Got it.

David Sacks 18:15 I'm not really sure what the purpose of all those monitors are down there. It feels to me a little bit like a movie set.You know? (laughs)

Jason Calacanis 18:21 It is like a movie set, yes. It's-

David Sacks 18:22 Yeah. And so people like us-

Jason Calacanis 18:23 So they're setting up.

David Sacks 18:23 ... come here to record things but, um, a- as we all know, the, all the trades are really happening inside giant machines.

Jason Calacanis 18:30 Can you turn around and just start yelling, "Booya?"

David Sacks 18:33 (laughs)

Jason Calacanis 18:34 Just, just yell, "Booya," and let's see if security comes and removes you from the go-

David Sacks 18:39 No, I'm, um, I'm, I'm in, I'm, I'm elevated above the floor. No one can really hear me here. I'm in, like, this, uh, sort of broadcast booth.

Jason Calacanis 18:45 Uh, so take us behind the decision to go public as a four-year-old company. We were expecting, you know, uh, Airbnb, Ubers, and Lyfts took over 10 years to go public. Now, here we are sitting on a four-year-old public company. I- is that a good thing, a bad thing, something in between? And how does the, the board and the management team make that decision to go public?

David Sacks 19:06 I think it's a good thing, um, uh, because the company-

Jason Calacanis 19:08 Why?

David Sacks 19:08 Well, the company wanted to. I think it had the opportunity to. It, um, it grew very, very quickly before COVID. Then you had COVID was, like, sort of a huge setback. They, I mean, basically, the scooter industry just stopped for at least six months because of lockdowns. But then coming out of COVID, they bounced back really strongly. They kind of pivoted their model to, uh, what's called a fleet manager model, where basically they're putting a business in a box for a local operator or local entrepreneur-

Jason Calacanis 19:35 Mm-hmm.

David Sacks 19:35 ... to buy the scooters with financing and manage it, the fleet themselves. So it's a much more highly virtualized model. Uh, and so as a result of that, in Q2, they just did 60 million in revenue in the last quarter. And I think, um, you know, it was a gross profit of something like 27% and, uh, it was, had a, a loss of, like, 12 million. So they're very, very close to getting to profitability. And, uh, you know, the company's only four years old. You know, it took Uber 12 years or whatever to get to be public. So it's been pretty, it's been a pretty amazing ride. There have been a lot of big ups and downs but, uh, so it's kind of this pretty sweet event that they've gotten to be a public-

Jason Calacanis 20:16 What is it trading under now? I know it was Switchback was, like, the SPAC name.

David Sacks 20:20 Right, so it, today was the first day it started trading under the ticker symbol BRDS. I guess all birds took BIRD, so we took BRDS. And, um, you know, there's a, a total number of shares outstanding of I want to say roughly 300 million. So it's about a $2.4 billion market cap, you know, as it stands right now. Which, you know-

Jason Calacanis 20:44 Hey.

David Sacks 20:44 ... for a Series A investor's pretty great.

Chamath Palihapitiya 20:46 Really happy for you at Sexa.

David Sacks 20:47 Yeah.

Jason Calacanis 20:47 Yeah.

Chamath Palihapitiya 20:47 Congrats, man.

Jason Calacanis 20:47 Congratulations. That's great.

Chamath Palihapitiya 20:49 Congrats, dude.

Jason Calacanis 20:49 We heard last week Sequoia's going to do the Sequoia Fund, this evergreen fund, keep owning shares. Now, as a VC, um, do you distribute after four years of this investment and you made multiple investments, or do you make the decision, "Hey, we think it's undervalued. We have, you know, conviction in the company. We were going to be in it for 10 years." Or do you just take the quick win and give everybody their shares?

David Sacks 21:11 Well, I've, I'm going to, I've agreed to be on the board for the next year. So, you know, I'm planning to do that, and, uh, we have a traditional six-month lockup. And so at that point, we'd have to make a decision about when or how much to distribute the shares. And it is the first time we've been confronted with the decision. I mean, Craft Ventures is only a four-year-old firm. And like I said, this is actually the first round that I led as a VC. So it's the first time we've been confronted with a distribution of this magnitude. We've had some smaller distributions. So yeah, we still have to make those decisions. We haven't decided yet what we're going to do.

Jason Calacanis 21:45 If you, if the stock is up, let's say, meaningfully in the next six months, and you get to that, you know, six months and a day, and you have the ability to distribute, and it's up 25% and you're looking at it, business is thriving, you're on the board, do you consider holding for a year or two so that you can distribute at $16, $25, or whatever your price target is?

David Sacks 22:07 Maybe. I mean, we haven't got, we haven't gotten to that point yet. So yeah, I mean, I guess what I would say is that our bias would be to distribute shares to our LPs so that they can make their own decisions about whether to hold it or not, um, as long as we think the stock is, you know, priced fairly. If for some reason we thought it wasn't, then there'd be an additional reason to hold onto it and make the distribution later.

Jason Calacanis 22:32 Chamath, what are your thoughts on this given it's come up before, and a number of us are going to be faced with this decision, and then we see Sequoia has got LP buy-in for an evergreen fund?

Chamath Palihapitiya 22:42 Well, I think an evergreen fund is different from having to figure out how to do distributions. So, um, they're, they're solving for two different ideas. The evergreen fund is really good because you don't have to do this continual fundraising process, and you can basically roll gains back into, um, the next tranche of invested companies in an easier way. I like that idea. Um, it was pretty rare at the time. I remember when I was starting Social Capital, the only fund that did it really well was Sutter Hill. Um, and for a whole host of reasons, I decided to not do an evergreen fund. In hindsight, I think for me, that turned out to be better because then it was easier for me to wind down and have a clear demarcation of when it was just myself and other LPs versus when it was just my capital. But there were some really good reasons to do it. The hardest thing I think that Sequoia is going to find in this new iteration is at some point, somebody's reputation will be on the line for judging public equities. And it's still not clear to me that people who live and breathe venture can context switch well enough to then live and breathe public equities. So just the best example I would say is, like, Tiger Global. When you look inside that organization, which is incredibly well run, there are two superb investors that carved the universe up, right? You have Chase Coleman that runs the public book, and you have Scott Schleifer that runs the private book. What does it prove? To me, it proves that it's just very hard to find a person that can do both. And the context switching is very complicated. So maybe Sequoia finds an incredible public market strategist that can then manage these positions.... otherwise, I think that-

David Friedberg 24:25 But Chamath, they've- they've done this for a few years, right? They- they, um, Sequoia, I don't know if people realize this, they set up an in-

Chamath Palihapitiya 24:31 Heritage Fund.

David Friedberg 24:31 ... the Heritage Fund, and they set it up with only GP's money. It's got billions under management, and it's been making late stage private but mostly public equity investing.

Chamath Palihapitiya 24:41 I know, but that's a fund of funds. What I'm saying is, I'll be very honest with you, if I was an LP of Sequoia, I would want the money back. And the reason is, I'm not sure that Sequoia can compound money in the public markets anywhere near what I could. So-

David Friedberg 24:57 Do you buy the point that they make that, like, exiting some of these left most of the, you know, kind of value creation on the table?

Chamath Palihapitiya 25:03 No, no.

David Friedberg 25:03 Is when they-

Chamath Palihapitiya 25:04 I think what, they're saying something much more subtle, which is they exited, and they have regrets for selling. You have to remember, when Sequoia distributed Google, every single partner got Google shares. Now, had they held those shares, they wouldn't be saying any of this.

Jason Calacanis 25:20 They did hold them, by the way.

Chamath Palihapitiya 25:20 And famously, I'll tell you, when I-

Jason Calacanis 25:21 Just a point of correction, they held their shares.

Chamath Palihapitiya 25:22 Well, we knew that we-

Jason Calacanis 25:23 I know that.

David Friedberg 25:24 Well-

Jason Calacanis 25:24 I actually do.

David Friedberg 25:25 Fair enough. But maybe they did, maybe they didn't. But let's just, let's just put it out there that, for example, I know explicitly, when I almost merged Social Capital with Kleiner Perkins, like s- six years ago, I spent so much time with John Doerr. The most incredible thing that I was so impressed with Doerr was he was, he told me he had never sold a single share of Amazon that was distributed to him, and he had only sold a handful of shares of Google only to fund future capital requirements of, at Kleiner at the time. So, I just think that ultimately, I think probably what Sequoia was saying is, "Man, I wish I had not sold my Google shares when they were distributed to me." Because otherwise, they wouldn't make that claim.

Jason Calacanis 26:04 No, I think what they're saying is more subtle. I think they're saying, "You as our LPs should have held them. We are on the board of these companies from day one. We have better insights in the second decade than in the first." Production Board, uh, founder David Friedberg, how do you think about early exits, distributing capital? Because you do have also with a startup studio structure, which you should explain to the audience how a startup studio works, 'cause you create companies, which is, you know, was a terrible place to be maybe five or 10 years ago. But it turns out, you're in the best place because zero to one is where all the value is created. Explain the, two things, what a startup studio is for people who don't know, and then what's your view of selling early if a company of yours goes, uh, public?

David Friedberg 26:45 I think there's a big, um, there's a bigger kind of framing here, which is a lot of, um, investors, uh, you know, professional money managers have tried to find ways to create what is called permanent capital, which is a vehicle whereby they can continuously make investments, decide when to sell those investments, and recycle the capital into new investments, with the idea being that over time, they're not at risk of capital outflows, meaning investors pull their money out, and they're not at risk of, uh, you know, needing to kind of go out and, and raise more money. And they can, they can share in the value creation as they grow their book value over time. Years ago, a bunch of hedge funds set up public reinsurance companies. Dan Loeb did this, um, uh, what's his name?

Jason Calacanis 27:30 Bill Ackman.

David Friedberg 27:30 Ein- Einhor did this.

Jason Calacanis 27:31 Bill Ackman did it.

David Friedberg 27:32 And basically, Bill Ackman did it. What they did is they set up a public company, a new public company, a reinsurer, and then they used that, that reinsurer to underwrite reinsurance. And when you underwrite reinsurance, you get all this capital that you can then go invest, and then the hedge fund managed that investment. And because it's actually a public company, it's got a balance sheet. The, um, the shareholders can't pull their money out, right? It's just got a balance sheet. And the hedge fund was managing that balance sheet, and, you know, generating good returns. And this is effectively what Warren Buffett does. And everyone looks to Berkshire Hathaway and Warren Buffett as kind of the, you know, the, the, the, the key kind of long term here, um, which is, uh, hey, look, if you can keep investing and keep compounding value, this thing can grow, you know, exponentially over time. So, you know, the, the way we set up the production board, I had the option of raising a fund and being a fund manager. I chose to set up the production board 'cause I was much more interested in, I think, the similar sort of vein of what Sequoia is saying, which is like, how do you become a longer term, uh, builder and a longer term holder, and where you don't have these incentives to return capital because you only get paid if and when you return capital. And, um, you know, and then you're kind of making these decisions to, you know, 'cause your shareholders are saying, "Well, you had a good return. Quickly give me the shares back and let me, and, and mark your profit and take your share." And I was also more interested in, look, the fact is, over time, there's always gonna be opportunities to chase with the capital. So, if we have a great gain, if something works out really well, we can take the, the, the gain and we can reinvest that capital in building new things. There's no shortage of opportunities to pursue for the rest of my life. So, that's why I set up the production board initially in partnership with Alphabet, and then later on, we brought in, you know, Bill Gates and other, Allen & Co., and other kind of investors that have a similar sort of mindset, which is like, let's just, if we have an, an exit, recycle that capital and continuously kind of build value.

Jason Calacanis 29:19 Because they're not looking for a quick win.

David Friedberg 29:21 They don't have pension payments to make, right? They don't have a reason to distribute cash. And so same with me, like, I don't have a reason to take cash out, so the objective was just build this thing over time and grow value over time, and that's why I set it up the way I did. And I think it allows us to make, you know, really long-term bets that are super risky. Uh, most of what we're doing is super technical and, and difficult and may be very hard to pull off, uh, many of which are still, after many years, in, in a very early state.

Jason Calacanis 29:46 So you need very patient capital.

David Friedberg 29:48 Patient capital-

Jason Calacanis 29:49 And-

David Friedberg 29:49 And also the, the, you know, the preference for not trying to find exits. But I, I have found this, I'll tell you one thing, I have been through a number of circumstances where I have seen businesses I've been an investor in or involved in that have traded long-term value for short-term opportunity, meaning there's an opportunity to make a business that you can then go raise capital against. You change your strategy to do that, then you go raise VC funding, and now the business looks like it's working. But the 10X or 100X opportunity was taken off the table, because you ended up going down this different path that was a sure thing that was more likely to work, that created value in the short term that allowed you to mark up your investment or raise capital against that, but you gave up the big long term thing. And I, I think that's something I've been trying to avoid with the structure, and it certainly makes sense with some of these other folks and what they're trying to do.

Jason Calacanis 30:36 So, what we're getting at here, Sacks, is decision-making by capital allocators-... and on behalf of their LPs or letting the LPs make those decisions, inevitably the crypto world says, "Well, why aren't you just doing this in a Dow and, you know, having some decentralized authority make the decisions?" I had Vini Ling ... I've had a conversation with our friend Vini Lingam, uh, after the Solana stuff and, and, and, uh, Multicoin Capital and we were talking about Dow's for earl- early stage investing or syndicates and just brainstorming, "Hey, is there a way to do this?" And the problem I came to every time was, should a bunch of folks be making decisions who are not meeting with the companies or meeting with 2,000 companies a year? What are your thoughts on a Dow, um, representing sort of what we collectively do, but we all do it obvi- obviously in different flavors?

31:30 Does this actually exist yet?

31:33 Well, there have been-

31:34 (laughs)

31:34 ... Dow's that have existed to vote on-

31:36 Right.

31:36 ... buying NFTs. So yes, for collectables.

31:39 I mean, I kind of feel like I'll let you know when it actually gets here.

31:42 So open minded to it, but who knows?

31:44 Yeah. But I mean, we talk about these things as if they already are here and they're not quite here. I mean, technically, I know they, they exist, but people haven't really figured out how to use them to, you know, to be a fund manager, for example.

Chamath Palihapitiya 31:57 I think David's right. I think the ... Look, I, I ... There, there are these three immutable features of Web 3.0 that we're gonna have to figure out over the next few years, so the obvious ones are decentralization, right, if that makes sense. The second obvious one th- is the level of composability, which means that you're plug and play with everything. Um, but the third one is this idea of democratization and governance, right? And that's where Dow's come in. And David's right, we don't really know what the boundaries of that feature is. Um, I think it exists in some small level scale, um, but we need to have many iterations of companies get built to figure out what it'll mean. So I don't know, I'm taking a pretty traditional approach, Jason, which is that, you know, it's kind of like a crawl, walk, run strategy. Right now I'm in the crawling phase and I'm kind of saying how did Web 1.0 and Web 2.0 develop? And I'm try- just copying it. So, you know, in Web 1.0 and 2.0 you needed companies like Sun Microsystems and Cisco and, you know, all of the plumbers.

Jason Calacanis 33:04 Foundational stuff.

Chamath Palihapitiya 33:05 To, to build plumbing for the internet to allow the thousand flowers to bloom at the application level. And, you know, we had a very good reference model, by the way, for Web 1.0 for most people if you want to look at it, it's called the OSI reference stack. And if you actually look at that OSI stack, you can translate that to all kinds of value creation over the first, you know, two arcs of the internet. Over 20 years trillions of dollars was created by just following each of those substrates. Um, and in those transitional layers was where these great, beautiful companies were built. Um, and I think similarly we're gonna do that again, but we need a different stack to represent what Web 3.0 is. So, yeah, you know, this week we did something which was pretty straightforward which was this idea that if you're gonna build all these apps, you're gonna need, uh, a distributed compute infrastructure, which means you're gonna need very simple building blocks like remote procedure calls, RPC, that exists in Web 2.0. It's kind of a n- something you don't really think about, but in Web 3.0 it doesn't exist, and so it's all this AWS, you know, GCP-like infrastructure that has to get built and that's what Syndica does and-

Jason Calacanis 34:10 I al-

Chamath Palihapitiya 34:11 ... that's cool. We'll see.

Jason Calacanis 34:11 I think that's, um, a really very interesting, uh, observation there because everybody is trying to go to the application level and talk about the consumer experience, but before you even have the ability, you know ... We're talking about cars before we've even made a transmission or, uh, you know, an engine.

Chamath Palihapitiya 34:28 That's exactly right.

Jason Calacanis 34:29 This is why crypto comes across as so delusional and strange sometimes. They wrote 3,000 ICO papers, none of them were about infrastructure. They were all about some sort of end game.

Chamath Palihapitiya 34:38 The, the thing is, it's a very delicate balancing act, right? You need a handful of companies that capture consumer imagination-

Jason Calacanis 34:45 Right.

Chamath Palihapitiya 34:45 ... that then incentivize all of the plumbing companies to come in and build underneath it, right? So it's a-

Jason Calacanis 34:50 They have a customer.

Chamath Palihapitiya 34:50 It's a very delicate balancing act, right? So you needed CompuServe in order to enable a bunch of companies. Then you needed AOL in order to enable another set. Then you needed Yahoo. Then you needed Google. And in all of that what happened was people were pulled through, right? You needed Amazon Commerce to justify AWS. So we're in that world where it's going to be a little back and forth where the pendulum will swing back and forth between consumer experiences that capture imagination, get to some level of scale, that then create incentives for the developer ecosystem and the technology infrastructure to catch up.

Jason Calacanis 35:24 Uh, Zillow, uh, which we talked about previously became an iBuyer. What's an iBuyer? That means you buy a bunch of single family homes in all likelihood like Opendoor and Redfin have been doing, and then you hope to flip them, uh, maybe improve them and, uh, maybe lower costs to the consumers by taking out real estate brokers. This has created a lot of bad feelings amongst real estate brokers. A TikTok video trended a couple of months ago where a broker said or accused Zillow, uh, of buying up these homes in order to do price fixing and to corner the market on homes. Well, uh, it turns out that Zillow, which has an incredible CEO, uh, in Rich Barton, and has done tremendously over the decades, according... Ahead of their earnings call this week Bloomberg reported Zillow is trying to offload 7,000, 7,000 homes for 2.8 billion, that's about a 400K average per home, and, uh, Zillow shares dropped 37% this week alone from 100 to 66. Their market cap has dropped nine billion throughout the week. Uh, and they're down 70% from a peak valuation of 48 billion just in February about six months ago. Uh, Zillow is gonna reduce its workforce by 25% over the next few months. I'm assuming that's all those iBuyers. Anecdotally, a lot of what I'm hearing is they bought homes indiscriminately. The anecdotal stories that are breaking on Twitter and other forums with real estate brokers are-... they would look at a home, they didn't know that it had a noisy neighbor or where it was near power lines or whatever, the people who came in bought them indiscriminately, maybe too fast. Whereas some other companies, maybe Opendoor or Redfin, were more considered. I actually had Glenn from Redfin on the pod not long ago and he said, "It's a very hard operational business, you have to be very careful on what you buy and your entry price." That seems to have turned out to be true. What do you think, Friedberg?

David Friedberg 37:14 Rich Barton, who runs Zillow, is considered a legend in Silicon Valley. You know, he, um, uh, has been involved in some of the most successful internet companies, um, and you know, when he stepped back in as the founder of Zillow, stepped back in to, to run the business a few years ago, it was viewed as kind of a second, you know, resurrection of this business and he was gonna take it into new areas. And then three and a half years ago, he announced this iBuyer program which everyone thought was such a, a, you know, incredibly strong move, and obviously chased Opendoor, which Chamath is, is, uh, involved in and I'm sure will share more on. Um, but it was such an obvious opportunity that if you could add liquidity to the real estate market, the com- the residential real estate market, there's an incredible amount of value to be had. Now, the way that they wrote about it, when they talked about it initially and then the way that they've kind of talked about it in their earnings report this week was that they were trying to be a, quote, "market maker" in the business. And it turned out that what they were really doing was being more of a speculator, right? A market maker looks at bids and asks and the spread and then tries to, to, to create a gap in that spread and make, and take some share of it. And, and by adding that liquidity, the idea is the spreads can narrow and they can make money. In this case, they were looking at the historical velocity of selling prices of homes and using that as a way (laughs) to kind of project what was gonna happen, which makes them much more of a speculator than a market maker. Um, and they clearly got this wrong and their kind of quote/unquote models on, you know, where a price is headed ended up getting them in trouble. There's also the inherent conflict where they are now competing in a way with the brokers that generate a lot of revenue for them and are a big part of their core business, and they were clearly, um, you know, cannibalizing their own business where the Zestimate and some of the other scoring that they provide as a data and analytics platform to both sides of the existing market starts to get blown up, because they're coming in and saying, "We're gonna put our, you know, our, our foot down and say this is what the value is." And it inevitably kind of cannibalizes the core product that they provide to, to, to both sides of the market. So, you know, one could argue this was flawed from the beginning. The execution clearly was way off and it, it begs the question, you know, where was leadership in kind of tracking what was going on here as these guys were buying homes at market prices that are well above what they were actually selling for in the market? No one was actually doing on-the-ground work. They were all doing kind of speculative models and saying, "This is what we think will happen." And then they woke up way too late and, um, lost way too much money. I think they lost $300 million in the quarter. So, um, you know, really a lot of questions and, and a lot of challenges on this. Um, I'm sure Chamath has a point of view on, you know, what makes Opendoor distinct from, from Zillow, um, but th- there's a really important kind of, you know, um, underlying here, you know, the, the, the ma-

Jason Calacanis 39:56 That they were maturing.

David Friedberg 39:56 ... the, yeah, the maturity of a Silicon Valley, uh, entrepreneur who's crushed it so many times, uh, doesn't mean that they're perfect and (laughs) you know-

Jason Calacanis 40:04 Yeah.

David Friedberg 40:04 ... this was a big miss.

Jason Calacanis 40:05 Y- you can go really too fast into a turn here and clearly they flipped the car. Chamath, I, I, I don't know how comfortable you are talking about this since you have a very-

Chamath Palihapitiya 40:12 Oh, I'm very comfortable.

Jason Calacanis 40:13 Oh, okay, well then here we go.

Chamath Palihapitiya 40:16 Number one, you know, I'm not on the board, um...

Jason Calacanis 40:18 Of Opendoor.

Chamath Palihapitiya 40:20 Of Opendoor.

David Friedberg 40:20 Maybe tell us about your history with Opendoor, Chamath, would be super, yeah.

Chamath Palihapitiya 40:23 Well, look, I, look, I, I am one of the largest individual shareholders of that company. I think somewhere between 3 and 4% of the business I own. We, you know, I came to own those shares with a large investment, uh, as well as through the transaction, uh, where we merged one of our SPACs into it and took it publicly.

Jason Calacanis 40:44 Was that IPOB?

Chamath Palihapitiya 40:46 Yes. Couple things to say. The first is about the CEO and founder of Opendoor. Eric Wu is special, special, special. So, let me just leave it at that, uh, on that topic. The second is I think that Rich Barton is very special, but it speaks to two big mistakes that Zillow made. The first is that catching a wave of disruption is very difficult when you have an old line business that is fundamentally competitive with a new line of business. And Zillow, as David said, had this thing called Zestimate whose entire job was to directionally drive drop top of funnel traffic into the rest of their media business. Now, imagine you go to a website to look up your house value or somebody else's house value. Accuracy is a bug. The feature that makes this estimate work is a highly inflated house price, right? Like if you go and you see a crazy house price number, that's interesting.

Jason Calacanis 41:50 Hm.

Chamath Palihapitiya 41:50 That's more, um, click-worthy than if you go in there and it shows some depressed value, you'd think the site sucks. That's the unfortunate psychological reaction. So I think whether we believe it or not or whether Zillow knew it or not, Zestimate over time basically calcified this idea of, of price inflation. So the accuracy was never a goal. So then if you take that business and then you try to orient it towards home buying and you use probably Zestimate or some version of it to underpin how you buy and take risk, it creates a lot of risk and I think this is essentially what played out, where they were over-buying homes and they didn't know how to price the stuff accurately. So you know, my partner Ravi tweeted this out, but you know, uh, the Opendoor margin on average is about 10%. The Zillow margin on average was 3%. So they had a much more razor thin margin of safety here, which again speaks to pricing. And then it speaks to this third thing, which is that if you start doing one thing and do it really well with software...... the gains over years really compound. And so when somebody else shows up and tries to pivot their business to try to copy it, it's very, very difficult. The classic example is Google versus Yahoo. Yahoo had a beautiful directory-driven business, but when Larry and Sergey, really Larry, invented PageRank and then invented that first version of a Google search index, as we saw it play out over the next 10 or 15 years, it was impossible for Yahoo to really invest the technolo- the, the technical capital necessary to catch up with Google. And every day and every week and every year, as Friedberg talked about last week, those technical gains compound and compound, and now Google is completely unassailable with respect to search. I suspect we will look back and the ability to accurately forecast price and volatility and the ability to sell these assets at a defined margin of safety in a predictable way is something software can solve, and it seems that Opendoor is the first. It doesn't necessarily mean it'll be the only one, but it has an enormous headstart now. And as long as they can keep iterating, those gains will compound. Um, so th- that's what I think, I just think this is a wonderful business run by an incredible CEO.

Jason Calacanis 44:14 To wrap up this, uh, Zillow story, Sacks, uh, any thoughts on, you know, Chamath's point here, you know, you're the rating agency and you had this business and the business, uh, might be orthogonal to the existing money printing machine. On a strategic basis, what do you think, any lessons or mistakes here, uh, in terms of when you handicapped Zillow or do you wanna just move on and talk politics?

David Sacks 44:36 I mean, look, I'm a, I was a seed investor in Opendoor because Raboy invited me into the seed round, so, you know, I'm, I'm a little biased here, but I think it's pretty obvious what happened. Uh, Zillow tried to copy them. The business is much more operationally complicated than they realized. It's a low business, low margin business with a t- which requires a ton of capital. So if you're off a little bit, the losses can be huge. And Zillow couldn't figure it out. They underestimated the difficulty. That's what frequently happens when a big company tries to copy a smaller sort of upstart company. So, I mean, that to me is what happened in a nutshell. Quite frankly, we're an hour into this pod and we haven't discussed issues, any issue that I think is broadly relevant to most Americans. I think this is one of our worst episodes and we're going to bore everyone to tears.

Jason Calacanis 45:20 (laughs)

David Sacks 45:20 I frankly don't understand what the (beep) you're doing. I don't even know why we have a topic list when you start pulling (beep) out of your ass like Dows and I don't know what the (beep) else.

Jason Calacanis 45:27 All right. All right. Fine, we'll talk about politics.

Chamath Palihapitiya 45:29 Yeah, I thought the Dow question sucked.

Jason Calacanis 45:31 All right, I'm just giving you the opportunity-

David Sacks 45:36 That we shouldn't even be talking about.

Jason Calacanis 45:37 Cut it out on this show. Cut it out.

David Sacks 45:38 This whole episode should be cut. I-

Jason Calacanis 45:40 Jesus Christ, you guys.

Chamath Palihapitiya 45:41 I actually, I actually-

David Sacks 45:41 I think this is like one of the stupidest (beep) episodes we've ever done.

Chamath Palihapitiya 45:44 Yeah, I agree. I think we should cut all that.

Jason Calacanis 45:46 But this episode is going great. What are you talking about?

Chamath Palihapitiya 45:47 No, Jason, I- Jason, I agree, that, that part where we cut it. That's-

Jason Calacanis 45:51 All right, fine you got-

Chamath Palihapitiya 45:52 Some (beep) loser.

Jason Calacanis 45:53 I'm trying to give you guys the benefit of the doubt to just... 'Cause it was a-

David Sacks 45:57 No one cares.

Jason Calacanis 45:58 All right, fi- calm down, everybody. You wanna talk about politics? We talk about politics. It's okay, Sacks. Go ahead, tell us about the election.

David Sacks 46:05 Okay. I'll just rattle off some of the key results here. From blue states, we have a woke lash going on all across the country.

Jason Calacanis 46:11 (laughs)

David Sacks 46:11 That's the important thing.

Jason Calacanis 46:12 What? (bleep)

David Sacks 46:13 In Virginia-

Jason Calacanis 46:14 Here we go.

David Sacks 46:14 ... a state that Biden won by 10.

Jason Calacanis 46:16 He's cranky.

David Sacks 46:17 Huge upset. Republican Glenn Youngkin beat Terry McAuliffe, the former governor there. He was... This was a huge upset. McAuliffe was supposed to win. Youngkin won 51-48, so that's a 13 point swing, uh, versus where Biden was, uh, just a year ago. In New Jersey, a state that Biden won by 16 points, the Democrat held onto it, but only by 1.5 points. And I bet you anything the RNC is kicking itself they didn't give any money to Ciattarelli, who is the challenger, who I think almost... who came very, very close. And there were down ticket seats that went Republican. So the, the, um... Thi- this is really interesting. In South Jersey, which is a blue collar bastion for Democrats historically-

Chamath Palihapitiya 47:02 Sweeney, Sweeney versus Burr.

David Sacks 47:04 That's right. The Democratic State Senate leader, Steve Sweeney, lost to a truck driver named Ed Derr, who spent a grand total of $153 on his campaign. Okay? So those were some... And then we had some other-

Jason Calacanis 47:16 And was he a write-in? Like he was printing out cards-

David Sacks 47:18 I don't know if it was-

Jason Calacanis 47:18 ... to say, "Write me in," I think.

David Sacks 47:19 I don't think it was a write-in. But, but any event, so, so implications for 2022, Dave Wasman of Cook Political Report calculates somewhere between a 44 and 51 seat gain from the GOP. They only need five seats to win the majority, so it's looking very bleak for the Democrats in 2022. And then y- I think you also had some very interesting local elections. In Minneapolis, voters rejected a proposal to defund the police with 56% of the vote. Uh, they... There was a ballot proposition to change the police department into some sort of larger public safety group. Voters were having none of it. In Seattle, which is a very liberal city, they voted for a literal Republican as city attorney, which is the office that prosecutes misdemeanors. So ba- a- against a police abolitionist who said she would stop prosecuting misdemeanors.

Chamath Palihapitiya 48:11 You're forgetting that in Virginia, it wasn't just Glenn Youngkin that won, but basically it was Terry McAuliffe and then a lieutenant governor who was some milk toast individual and an attorney general candidate who was caught in blackface. Which, by the way, there is no more racist thing you can do, just to pu- let you guys, let (laughs) everybody-

Jason Calacanis 48:31 Shout out Justin Trudeau.

Chamath Palihapitiya 48:32 All the non-coloreds. Okay, that are... Guys, please don't do blackface or brownface.

Jason Calacanis 48:36 Yeah, I know.

Chamath Palihapitiya 48:36 It's such a bad... It's just not... It's not the best.

David Sacks 48:38 No, you're right, it was a sweep. So, so the lieutenant-

Chamath Palihapitiya 48:40 And, and, and Youngkin, and it was a, it was a Black female lieutenant governor and a Latino attorney general.

David Sacks 48:45 That's right.

Chamath Palihapitiya 48:46 And they swept, right? So-

David Sacks 48:47 That's right. That's right. So the lieutenant governor was Winsome Sears. Uh, she's uh, uh, a Black woman Republican. If you've seen the photo of her, she's frequently photographed with a giant assault rifle in her hands.... uh, that's her, and then, uh, a Hispanic attorney general, Jason M- Miyares, uh, won as well. So yeah, it was a huge sweep. And then, you know, in Long Island and Staten Island, which again, are blue counties, you had two Republican prosecutors beat the local sort of, uh, incumbent Democrat decarcerationist DAs.

Jason Calacanis 49:17 Staten Island bit red just-

Chamath Palihapitiya 49:18 I think, I think this is very clear.

Jason Calacanis 49:20 ... for the clarification. Yeah.

Chamath Palihapitiya 49:20 Which is, um, Trump was behaviorally extreme and after four years, people were sick of it.

Jason Calacanis 49:29 It's awesome.

Chamath Palihapitiya 49:29 Nobody wanted that behavioral extremism because it was unpredictable and people felt, frankly, in danger. And I think that that was legitimate. He also turned out to be extremely lazy and probably pretty dumb. Now, what we're realizing is a different form of extremism, which is policy extremism will also be met with the same response, which is that you, you can't sustain election results in wins, right? So, people care consistently about three things. They care about the economy, they care about the education of their children, and they care about safety. And the thing that Glenn Youngkin did, which I thought was at least a playbook for centrists and the right, and it's also a playbook for the Democrats if they choose to embrace it, is to understand that these things are reaching a tipping point where, you know, again, we've said this before, it is possible to live in a state of mind where you believe in Black Lives Matter and you believe in law and order, right?

Jason Calacanis 50:26 Shocking.

Chamath Palihapitiya 50:27 And, and when you try to pit those two things against each other, for example, like, you would have thought the one place where they would have basically defunded the police in its entirety would have been Minneapolis after George Floyd but instead even they drew the line and said, "No."

Jason Calacanis 50:42 Or New York.

Chamath Palihapitiya 50:44 Or New York. There was a, there was a really compelling quote actually by this woman, I think it was in the New York Times, um, and what she said was, "I didn't elect Joe Biden to be FDR. I elected him to tack to the middle and just calm things down so that everybody could exhale-"

Jason Calacanis 51:00 Sure.

Chamath Palihapitiya 51:00 "... so that we could reset."

Jason Calacanis 51:02 Same with me.

Chamath Palihapitiya 51:02 And what's also-

David Sacks 51:03 Yeah, that, that was Abigail Spanberger actually. She's a Virginia Democ-

Chamath Palihapitiya 51:06 Oh, okay.

David Sacks 51:06 Yeah. She's a Virginia Democrat who won a seat in one of those blue counties that just flipped red to vote for Youngkin. And since she got elected, I guess she got elected last year, she's been telling the Democratic Party... She's the one who called out Pelosi in that, you know, caucus meeting saying, "I don't ever want to hear the words defund the police again. That is electoral poison." And then she said, "Yes, nobody elected Biden to be FDR. They elected him to be normal and stop the chaos." And so, yeah-

Jason Calacanis 51:33 That was certainly my vote, yeah.

David Sacks 51:34 Yeah. There's a big backlash going on because Biden has decided to start-

Jason Calacanis 51:37 So-

David Sacks 51:37 ... governing like Bernie Sanders.

Jason Calacanis 51:39 So, Sax-

David Sacks 51:39 No one elected him to do that.

Jason Calacanis 51:40 So, Sax, is the lesson Dems lear- learned this time around is it's very easy to beat Trump, but it's very hard to beat a moderate Republican?

Chamath Palihapitiya 51:50 No, no, it's not that. It's that you just have to be a rational, normal person...

Jason Calacanis 51:55 That's what I mean by a moderate Republican.

Chamath Palihapitiya 51:57 Well, you just have to be moderate. I don't think it matters-

Jason Calacanis 51:59 Okay, just moderate.

Chamath Palihapitiya 52:00 ... which is... But this is the key takeaway.

Jason Calacanis 52:01 But that's the thing. Dems, it was so easy for them to use Trump and be Trump, you know.

Chamath Palihapitiya 52:05 These three topics... But these three topics are not a Republican tent pole nor are they a Democratic tent pole. They are the tent pole of reasonable people.

Jason Calacanis 52:12 Yes.

Chamath Palihapitiya 52:13 Meaning-

Jason Calacanis 52:13 Which most people are reasonable.

Chamath Palihapitiya 52:15 "Hey guys, get out of the way so that we can, you know, have a reasonable life and an economy." "Hey folks, please make sure my kids, when I send them to school for eight hours a day come back reasonably educated and please keep my streets safe. And I'm not really willing to decarcerate ad hoc to such a degree that all of a sudden crime gets out of control." Those are not Democratic or Republican tent poles, those are just moderate, centrist, rational things to believe in.

Jason Calacanis 52:39 Yeah. Be- and also behave normally. Like, I, I, I think whatever happened with these progressives where they couldn't pass, you know, the stimulus bills and things that almost everybody agreed on-

Chamath Palihapitiya 52:49 Glenn Youngkin was not behaviorally extremist.

Jason Calacanis 52:52 Yes.

Chamath Palihapitiya 52:52 And, and from a policy-

Jason Calacanis 52:53 And he didn't win.

Chamath Palihapitiya 52:54 ... perspective was pretty much down the middle.

Jason Calacanis 52:56 He didn't win.

Chamath Palihapitiya 52:56 Eric Adams, Eric Adams is not behaviorally extreme and he is-

Jason Calacanis 53:01 No.

Chamath Palihapitiya 53:01 ... politically down the middle. The mayor of Buffalo who got reelected is not behaviorally extreme and he's politically down the middle. Do you start to see a pattern here?

Jason Calacanis 53:11 Yeah, nobody wants AOC, Bernie, Elizabeth Warren, or Trump.

Chamath Palihapitiya 53:15 I think it's not, it's not a question of AOC or Bernie or Trump, it's just that right now the temperature of America is, let's just all exhale and just recenter ourselves as a country.

Jason Calacanis 53:26 Yeah.

Chamath Palihapitiya 53:26 And so moderation and centrism is actually what calls for today. I don't know how to predict what happens in 15 or 20 years, and maybe AOC is the canary in the coal mine for where the country goes by a plurality of people in 15 or 20 years. But what's clear is it's not where it goes today. And I think that we, it all behooves us to just take a real step back and exhale and just read the tea leaves. Because every single thing that the Democrats tried to do to sort of like make this extreme really didn't work. The race-baiting, all of that stuff really kind of failed and, uh, I think that that's important to listen to. You know, because you had a lot of Black, Indian, Chinese families that just showed up, Hispanics, you know, that, again, reliable Democratic voters and voted for Glenn Youngkin in a way that was surprising to me, right? And then, so if you compare New Jersey and, and, um, Virginia, Biden won Virginia by 10. He lo- the, the Democratic nominee lost. Biden won New Jersey by 16 and Phil Murphy barely squeaked by. It was like 10,000 votes.

Jason Calacanis 54:34 Jersey's always had a, uh, a Republican kind of, uh, leaning group. Uh, they're very, uh, attuned to taxes and their conservatives.

Chamath Palihapitiya 54:40 Biden won by 16. This should have been a cakewalk.

Jason Calacanis 54:42 Yeah, but I think that 16... How much of that is, get Trump out of office, is what we, I think the Democrats need to parse. And they blew it by going too radical with these-

Chamath Palihapitiya 54:50 Guys, we've repudiated... We're repudiating behavioral extremism and policy extremism.

Jason Calacanis 54:54 Yes.

David Sacks 54:54 Mm-hmm. So, I think we just need to realize rational, normal, chill people...

Chamath Palihapitiya 55:00 ... who can do reasonable things, get our kids educated. So for example, on the education front, um, I don't know if you guys saw this 'cause I tweeted, and you can put this, Nick, in the group chat, but in California right now-

Jason Calacanis 55:10 Oh, yeah.

Chamath Palihapitiya 55:10 ... there's a battle over math class.

Jason Calacanis 55:11 Ridiculous.

Chamath Palihapitiya 55:12 Right? Where the title, I'm just going to read the title because it sets it off, "California tries to close the gap in math, but sets off a backlash. Proposed guidelines in the state would de-emphasize calculus, reject the idea that some children are naturally gifted, and build a connection to social justice. Critics say math shouldn't be political."

David Sacks 55:32 Well, of course, the way the- those articles are always written, it's always about the backlash, you know. They don't talk about what- what the people in charge are trying to do to basically degrade the curriculum. Of course, there's a backlash because parents don't like what the people on these school boards are doing. This was the sleeper issue in Virginia, was the school board issue. You had, um, you know, parents were already angry that the teachers unions had kept the schools closed for a year and a half during COVID, and th- while their kids were at home, you know, work, doing classes over Zoom, parents got a good look at what some of their kids were learning, they didn't like what they saw. I mean, we're talking about lessons plans that incorporated CRT and, you know, the 1619 Project view of America, singling out kids by their race, making them focus on difference. And then there were some, you know, rather explicit materials at young grade levels about, you know, LGBT issues, and so this led to a whole bunch of confrontations at school board meetings where parents of all races objected to, you know, the- these lesson plans for- for their kids. And the school boards and administrators just dismissed their complaints out of hand and, you know, their message was, "Well, we're- we're not teaching CRT to your kids, uh, but if we were, it's a good thing and only white supremacists would object." So, you know, that was sort of what was happening in the background, and then McAuliffe comes along and makes this gigantic gaffe in the last debate, it's about two weeks before the election, where he says, "I don't think parents should be telling the schools what to teach." And-

Chamath Palihapitiya 56:59 What?

David Sacks 56:59 Y- yes, this was-

Jason Calacanis 57:00 Who's the customer? (laughs) No, he said that in the, he said that on a debate and it was like-

David Sacks 57:04 No, McAuliffe, McA- he said that on a debate about two weeks before the election. McAuliffe was leading through this whole thing until that debate where, and this was sort of a- a Kinsley gaffe in the sense that, you know, Michael Kinsley said a gaffe is when a candidate inadvertently r- uh, says something true. You know, this is McAuliffe's view is that the teachers union should be controlling the schools, not the parents. Well, um...

Chamath Palihapitiya 57:23 Duh.

David Sacks 57:24 Yes.

Chamath Palihapitiya 57:24 So dumb.

David Sacks 57:24 So th- this is what Youngkin, uh, jumped all over. All of his ads in the last two weeks of the campaign really focused on this issue. It, it, you know, poured gasoline on a fire. And then the most tone-deaf thing McAuliffe did is he had R- Randy Weingarten, who was the head of the, uh, the big teachers union, come in and campaign for him at the 11th hour. Well, of course that's not going to save him because people are sick and tired of the teachers unions. So, you know, this was basically the big sleeper issue, CRT in the schools in Virginia and, you know, this is, this, I think, specifically is what the Democratic Party has to wake up to is that these progressive ideologies are not popular.

Chamath Palihapitiya 58:04 The other thing I'll say about Glenn Youngkin is that this is another thing that the D- that the Republicans should hopefully pay attention to, which is you can look normal, act normal, be normal, you know, this is not an extremist in any way. This guy was the co-CEO of Carlyle, which is a huge and very successful private equity firm, so this is a very rational, reasonable person who, um, you know, didn't embrace anything that was really that pro-Trump. And that should be a real wake-up call to the Republicans which is, "Hey, let's just run a fleet of normal people."

David Sacks 58:39 I think what you saw, it, I think Chamath is right that what you saw in Virginia is that the playbook that Gavin Newsom just used to defeat the recall in California did not work in Virginia, which is he tried to, uh, paint Youngkin as a Trump proxy, and Youngkin very deftly, you know, avoided that. He got Trump's, yes, he got Trump's endorsement, but very early in the process. He did not have Trump come to the state, um, and you'd have to say it also helped Youngkin a lot that social media, that Trump wasn't all over social media because he's been banned. So, you know, in a weird way, Facebook and Twitter deserve an assist here, um, because they helped keep Trump out of the Virginia race. So, you know, this playbook that- that Newsom defined that w- worked very effectively from California, which is simply to keep running against Trump, I think Democrats thought they'd be able to win elections for years based on that. That playbook didn't even last two months. So, you know, r- so I think Democrats are gonna have to find a new playbook here.

Jason Calacanis 59:38 Okay, so Friedberg, uh, on this California issue around education, one of the key or most controversial, um, concepts is detracking. In other words, instead of having high-performing students go to a high-performing track and then everybody else stay behind, maybe keep, in not all cases, but keep some of the students together because there is some research that shows, if done right, if you track people together, the higher, uh, performing students will pull up the ones who are slightly behind. Other people say we're basically, uh, throttling people who could be the next Einstein or- or the next, uh, world-class leader in science, math, et cetera. Uh, any thoughts on the concept of detracking since I'm assuming you were, uh, in the high school track in science and math?

David Friedberg 1:00:25 Maybe we should get rid of, like, JV and varsity sports teams as well and, you know, triple-A baseball and Major League Baseball as well, and, you know, any distinction of performance, um, or exceptionalism goes away. You know, and- and that is kind of the- the key social question is are we gonna give up exceptionalism, um, to minimize, uh, the distance, uh, between-

Chamath Palihapitiya 1:00:52 Appa- apparently.

David Friedberg 1:00:52 ... the exceptional and the average. And that seems to be what's happening.

Chamath Palihapitiya 1:00:54 Apparently if it makes people, makes people feel bad.

David Friedberg 1:00:56 But I've said this point before, uh, you know, we're doing it when we try and think about, you know, the- the billionaire tax or what have you, as soon as you start to limit progress, um, you reduce inequality.... but you limit progress. And the same will be true, not just in science, not just in business, uh, but also in sports and athletics and, um, and any other kind of system where you will have exceptionalism, you will have an average, you will have a, a distribution, uh, amongst human performance. And as soon as we try and, uh, limit the difference in that distribution, um, we move the entire curve to the left.

Jason Calacanis 1:01:34 Here's the, uh, counter Freedberg. Um, what some studies have shown is, yes, you will, uh, throttle the high performers, but we're seeing, uh, along race lines, certain demographics being left behind, other ones excelling, and that you can get-

David Friedberg 1:01:49 Yeah, it's an ethics and values question, right? Like, do you think that individual freedom and the opportunity to pursue your opportunity, your, your, your exceptionalism, um, should be taken away from you, such that others who aren't as exceptional as you are given, um, you know, greater progress than they would have had on their own? Um, and that's the, the key crux of what all of these social systems are grappling with, whether it's in sports or business or finance or, or, um, uh, or education, is what's the right thing to do? And that ethics question is gonna be defined by the social agenda of the moment and, you know, the means of the moment and what we all think is, is the right thing to do. And it's different all over the world and it's different within piti- political systems, but it's a very divisive point that I think folks who find themselves on one end of that exceptional spectrum in different aspects are gonna have one point of view, and folks on the other end of that exceptional spectrum are gonna have other points of view, and everyone's gonna be sensitively tuned to where they fall on that spectrum. I will say one thing though. On that spectrum, exceptionalism is rarer than the average. Therefore, it is likely the case that over the next years and decades, we will see the, um, the idea that we should remove exceptionalism in business and exceptionalism in education and exceptionalism in sports, because it benefits the majority and, um, and, and no one kind of recognizes and a lot of folks don't recognize the progress that is made by exceptionalism.

Jason Calacanis 1:03:13 Right.

David Friedberg 1:03:13 And, um, and, and that's ... And then we're gonna wake up one day and be like, "Oh, wait a second, we don't have the, the best sports teams winning all the gold medals. We don't have the smartest kids, we don't have the best businesses." China and Europe and Brazil and whomever else the emerging markets are gonna-

Jason Calacanis 1:03:27 Yeah.

David Friedberg 1:03:28 ... India, are gonna start to have them.

Jason Calacanis 1:03:29 Such a good point.

David Sacks 1:03:30 I think this is a very old debate. It's the debate between equality of opportunity and equality of results.

David Friedberg 1:03:35 Yeah.

David Sacks 1:03:35 And the progressive left is absolutely obsessed with equality of results or outcomes, which they now call equity, which is, we're gonna take people at the finish line and we're gonna move them around, we're gonna redistribute the, the outcomes to achieve a more proportional representation or something more fair, as opposed to giving everybody as much opportunity at the outset as possible. That is the fixation right now. That is why they're taking out advanced math from the schools, they're trying to level people. It's not gonna work. It doesn't lead to a more ... We wanna have an exceptional society. Where I think we should be focusing is creating as much opportunity for everybody. The way to do that would be to let every child go to this- to the school of their choosing, so that we would stop trapping kids in bad schools. But b- back to ... Can I just b- bring this back to the election for a second, because I think there's a very clear repudiation of this progressive mindset, and I think there's essentially two sets of reactions to it. If you look at sort of all the left-wing commentators, the, the one who I thought seemed to get it the most was CNN's, uh, Van Jones actually had, I thought, you know, a, a (laughs) rare moment-

Jason Calacanis 1:04:45 Yes, he did.

David Sacks 1:04:45 ... of introspection where he said it was, this was, the, the results were a five alarm fire. He said it was a big, big wake-up call for the Democrats to stop annoying voters with woke hectoring. Um, he, he actually advised Biden to start triangulating against the woke left i- in the way that Bill Clinton did. I mean, which is something that I've been suggesting on this, this pod.

Jason Calacanis 1:05:03 So, you're saying something super important. The game theory now is for Biden to put to the test the progressive left, because now he can go firmly to the center and he can put all of the pressure on the progressive left in the House and, uh, Warren and Bernie Sanders in the Senate, basically-

David Sacks 1:05:24 Well, he's right, that's the first thing he should do-

Jason Calacanis 1:05:26 ... tackle the middle.

David Sacks 1:05:26 ... is he should pull a sister s- he should pull a sister soldier on Bernie Sanders. He, he can't keep delegating the domestic agenda to Bernie Sanders. He, if he wants to save his presidency, he'll start triangulating in the way that Bill Clinton did. I'm not sure he's going to. I think there's already a misperception that the reason why they lost this election is because they didn't deliver the goodies in this House reconciliation bill. Um, that in other words, they-

Jason Calacanis 1:05:49 Yeah, I don't think the public cares about the goodies. I mean, they care about this normalcy and centrism, yeah.

David Sacks 1:05:54 There, there, there's a part of the Democratic base that does want the, what's in that House reconciliation bill, but, but here's the thing. Democratic turnout in this election was extremely high. The Democratic turnout for McAuliffe was higher than the Democratic turnout four years ago for the Democrat who won. The, the turnout that, uh, in New Jersey was higher than what Murphy got four years ago when he won. The problem that Democrats have is that Republican turnout was extremely high, even without Trump, showing that Trump doesn't matter that much, uh, to turnout, and the independents came out in a big way for Republicans. So, this idea that Democrats can just win elections by delivering, you know, uh, programs for their base, that's not gonna work. So I think that's a misperception. I think Van Jones has the right idea. They need to triangulate, but you g- turn the channel to MSNBC and they were just blaming the whole thing on white supremacy.

Jason Calacanis 1:06:46 Oh, God, they were basically hysterical. Um, just on the de-tracking thing, this shows to me a, a severe lack of creativity. You, if you look at what happened in the NBA, they had this developmental league, which they didn't kind of run, then became the G League. They now have the ability to bring players fluidly from the Warrior's G League team up to the Warriors or the Knicks team up to the Knicks. What this means is, you don't have to say there's two different tracks and, and the, the two never shall meet. In the season, they can move up and down. In math-... a very easy solution to this would be to have the high track for high performers, have the regular track, and then spend, with all this money we have, say, "Hey, every school's gonna be open from 3:00 to 5:00, four days a week. If anybody wants to attempt to get into a higher track of math, just stay after school for two hours. Anybody can go and get one-on-one tutoring and just double-

David Sacks 1:07:37 Jason-

Jason Calacanis 1:07:37 ... and double the number of teachers."

David Sacks 1:07:38 ... like, the whole country wants excellence. They don't want leveling, they don't want equity, they don't want equality of results. They wanna have an equality of opportunity.

Jason Calacanis 1:07:45 No, but, David-

David Sacks 1:07:46 The whole country wants it-

Jason Calacanis 1:07:47 ... they want other people to move up. They do wanna see-

David Sacks 1:07:49 Yeah. That's true. And that's-

Jason Calacanis 1:07:50 ... Black and brown students and immigrants do better at math. That's what you're missing.

David Sacks 1:07:53 Yes, and that's about equality of opportunity. Absolutely.

Jason Calacanis 1:07:56 No, it's not just about equality of opportunity. They're so far behind statistically that you need to do something new. What we're doing is not working, David. That's why people are picking this bad decision.

David Sacks 1:08:05 Yeah, but they're, they're, they're, they are eliminating advan- advanced math because they don't wanna actually look at the, the problem.

Jason Calacanis 1:08:12 What do you see the problem as?

David Sacks 1:08:13 Well, if there's an underperformance concern group, then you should work harder to raise them up, not eliminate the subject-

Jason Calacanis 1:08:19 How would you do that? Give me a suggestion.

David Sacks 1:08:20 Charters and school choice.

Jason Calacanis 1:08:22 Okay, yeah.

David Sacks 1:08:23 Look, I mean, if you're, if, if you're gonna define structural racism as conditions that k- that trap people of color in poverty across generations, which seems like a pretty fair definition-

Jason Calacanis 1:08:33 Yes.

David Sacks 1:08:33 ... then you have to say the number one cause of structural racism is-

Jason Calacanis 1:08:37 100%.

David Sacks 1:08:37 ... the school system. School system.

Jason Calacanis 1:08:38 100% education, yeah.

David Sacks 1:08:39 It's the school system because we know poor kids are trapped in schools that aren't very good. Why?

Jason Calacanis 1:08:44 Yes.

David Sacks 1:08:45 Because they're controlled by the education unions-

Jason Calacanis 1:08:46 They don't have a choice.

David Sacks 1:08:47 ... and the parents have no choice.

Jason Calacanis 1:08:48 They don't have money.

David Sacks 1:08:49 Exactly. So who is making that argument, uh, on the, on the side of the left? No one. Why? Because everyone knows the unions, especially the education unions, are the number one donor to the Democratic Party. So the Democrats won't even look at this problem. All they'll do-

Jason Calacanis 1:09:01 And this is the way-

David Sacks 1:09:02 ... is blame white supremacy.

Jason Calacanis 1:09:03 ... that Republicans could build their base, is by saying, "We want to fix education." That would be, if you fixed education for immigration-

David Sacks 1:09:09 They are. What, what do you think Youngkin just did in Virginia?

Jason Calacanis 1:09:10 Yeah.

David Sacks 1:09:10 By the way, 55% of Hispanics in Virginia voted for Youngkin. So minorities are shifting on this issue of charters-

Jason Calacanis 1:09:19 Based on crime and education.

David Sacks 1:09:19 ... and school choice.

Jason Calacanis 1:09:21 Those are the issues.

David Sacks 1:09:21 So if you-

Jason Calacanis 1:09:21 I think Youngkin's in a private chat, Jamal.

David Sacks 1:09:22 These are the new quality of life issues.

Chamath Palihapitiya 1:09:24 If Youngkin has a, a good four years in Virginia, he c- he can run for president and crush this thing.

David Sacks 1:09:29 Can I show you just one, one chart and then we can get off the politics thing? Which is, it was this chart from this guy Patrick, uh, Ruffini, who's a pollster. And I think it really illustrates the problem that progressives, the Democratic Party has.

Jason Calacanis 1:09:41 Describe the chart for the listeners.

David Sacks 1:09:42 Okay. So what this chart shows is, it basically shows where the Democratic, the Democratic Party is and the center of the Republican Party is in relation to the center of the country, okay? And basically, as you'd expect in a democracy, whichever party is closer to five wins. Okay. So in 1994, when Bill Clinton was president, the Democratic Party, the center of it was smack dab as five. The Republicans weren't that far away, they were a six. So the party, even though there was a lot of partisan warfare, the, the, the political differences actually weren't that great. And Clinton, I think more accurately found that dead center. Okay. Fast forward to 2004. So George W. Bush is president now. The Democrats are at four, Republicans are at five. That's why Republicans won. Okay. Now go to 2017. This, these poll numbers he did, and this is a few years ago. The Democrats are all the way at two, okay? And the Republicans are at six and a half. So it's true that both parties have moved, uh, away from the center, but Republicans are one and a half points away from, from the center, whereas Democrats are three points away. So the Democrats have actually moved further away from the center. If you look at who are the activists in the Democratic Party, who is the base, who is the energy, who does all the work, who does the contributions? It is the progressives, right? This is why McAuliffe ran as ... McAuliffe is not a progressive. He was the Clinton Democrat, you know, going way back to the '90s, okay? He was Bill Clinton's, you know, uh, right-hand man in the party back in the '90s. But he nevertheless ran as a progressive in Virginia who supported the teachers' unions. Why? Because he was appealing to the base of the party. Gavin Newsom did the same thing in California. Gavin was never a Bernie bro. I mean, he's always been liberal, but he, he has moved very far left and Biden has moved very far left as president. Why is that? Because the base of the party has moved very far left. So unless that gets fixed, I see maybe a decade-

Jason Calacanis 1:11:40 So you're appealing to the party's base, but not the country's base.

David Sacks 1:11:43 Exactly. So you're gonna need a strong Democrat who can basically give the Heisman to that part of the base, or they're gonna keep losing elections. I think this could be a Republican decade. I know it doesn't seem like it right now because you had Trump and the Republicans lost, but look how quickly the Republicans turned around their electoral fortunes with Trump on the sidelines.

Jason Calacanis 1:12:04 So if Trump shows up, then that's just a huge detriment-

David Sacks 1:12:06 If, if Trump... Yeah.

Jason Calacanis 1:12:07 ... to the Republicans.

David Sacks 1:12:07 Look, if Trump is the nominee in 2024, all bets are off. But in 2022, he's not the nominee. He's still censored from social networks.

Chamath Palihapitiya 1:12:15 He's, he's toxic. He's gotta stop overnight, right? Because, I mean- By the way, Kyrsten Sinema probably knows this. Like, you know, the, the, the, the funny thing about all of this is when Peter Thiel put in $10 million into this PAC for Blake Masters, who used to work for him and said, you know, "T- in Arizona, I'm gonna run this guy against you." Sinema tacked Hart to the center instantly.

Jason Calacanis 1:13:17 So she, she knew too.

David Sacks 1:13:19 Yeah. Well, so, so just, just a small point of correction. So Blake is running against, uh, the other guy, um, the astronaut guy. I'm, I'm spacing on his name, but... But yeah, but, but Sinema is up-

Jason Calacanis 1:13:28 So to speak.

David Sacks 1:13:29 ... uh, in the next election cycle, so she's got a little bit more time. But you're right, like Sinema is attuned and Manchin is attuned. They are some of the few Democrats that are attuned to where the cent- center of the country is. You heard Manchin in the wake of this election said, "This is a center-right country. These guys better wake up." Um, you know, they should really... Now look, I