E64: Antitrust standards & enforcement, tech repricing, lab leak obfuscation, E63 reactions & more

Jason Calacanis 0:00 Is Chamath in a room with his PR crew right now like rehearsing and practicing and-

Chamath Palihapitiya 0:05 Ugh. This pod is ruined. (upbeat music) Let your winners ride.

Jason Calacanis 0:11 Rain Man David Sachs. And I said... We opened source to the fans, and they've just gone crazy with it. Love US 90. Queen of

David Friedberg 0:21 Hey,

David Friedberg 0:25 everybody. So I just wanted to make sure based on last week's pod it was absolutely clear, I care about human rights. Um, many of you know my origin story, but for those of you that don't, I was born in a country that's no stranger to civil war and religious and political persecution. Growing up, my family and I felt those effects. It affected our safety. It's in part what led my family to file for refugee status and stay in Canada. So this is a real part of my lived experience. That said, you know, I realize that what I said last week lacked empathy, particularly towards others who are dealing with persecution, in this case, uh, the Uighurs. And based on what I read this week, I think what's happening to them in Western China is a terrible situation. Um, I also wanna talk about this idea about nobody caring. Look, if we take a step back and replace Uighur with other really important issues, like the conflict in Yemen, the potential war in the Ukraine, gun control, school shootings, healthcare equity, we're faced with horrible events every day. However, the unfortunate state of the world today is that we've also normalized this routine of being confronted with something tragic or horrible or unjust and being allowed to react with thoughts and prayers. And this was the real intent of what I was trying to get across. So when I talk about my line, it's not about whether something matters or not, it's about which issues, of all the important issues we face every day, where I have the expertise and I believe I have the ability to have a real impact, even if just by a little. For me, those areas happen to be climate change, life sciences, and deep tech. But just because this is where I spend my time, it's not to take away from any of the real work any of you are doing in other areas. And then lastly, I just wanted to explain to people who may be new to the pod because of last week, that this is a place where four of us, four friends, talk about a whole wide range of things. We explore our curiosities. We try to learn from each other. We challenge each other. But we've always done it in a really supportive space, and I hope you keep that in mind as you listen and watch going forward, um, and hopefully can, you can bring some of that to your own conversations. That's all I have to say.

Chamath Palihapitiya 2:34 Well said.

Jason Calacanis 2:35 Uh, Sachs, I mean, I know you have something to say. But I'll say, um, I got a lot of messages this past week after the show where, um, which, which I felt a little bit hurt by and mischaracterized, and maybe it was simply I said the wrong thing at the wrong time. Um, and so I- I wanna just be very clear about a couple of points if I can take a minute, if that's all right with you guys. Yeah, so I said, um, I, I just wanted to, I was gonna actually send this out on Twitter and I decided it was better just to address it on the pod. So to be clear, I strongly believe in and support absolute freedom of all people. And this means de facto, I strongly disagree with the suppression of free speech, denial of religious freedom, imprisonment, harm, capital punishment, slavery, and genocide. I thought this was obvious when we were having our conversation. I did not know I needed to be-

Chamath Palihapitiya 3:25 So to be clear, you're not in favor of genocide.

Jason Calacanis 3:27 I'm not in favor of genocide.

Chamath Palihapitiya 3:28 Okay.

Jason Calacanis 3:28 I'm not in favor of slavery or capital punishment or suppression of religious freedom. I thought this was obvious. The conversation I tried to have was the wrong conversation at the wrong time, which was to try to talk about the broader China v US narrative, uh, that is swelling and will continue to swell this decade. I think that the primary function of civilized society or any advanced social system is to take care of and protect those that cannot take care of or protect themselves. And this is usually done by government. But when government fails and government is in fact the oppressor, I think it is the responsibility of other governments and other peoples to step in and have a voice and to take action. And so that is, um, that is kind of my moral framework. I think it's important. I don't deny any of the harm being done to the Uighur population in China. I don't agree with it on a principled basis, and I don't think that what the Chinese government is doing is right. Um, and the point that I was trying to make during our conversation was a very different one that I think got completely lost in the moment, uh, which was really just about what's going on with the China-US narrative right now. I'm not pro-China, I'm also not anti-China. I am particularly interested in understanding the broader China-US dynamic and what it means for the world over the coming decade and decades. I think it's really important for us when we evaluate these things and to understand them, to not just take sides, but to understand the context in the broadest way possible. And that's why I am trying to get both sides and understand the mindset of the peoples that are involved in running these governments and the way that this, uh, this world is gonna evolve as this economic tension continues to mount. Um, and so that, that's where I was trying to go. Um, and I was just trying to highlight where I think everything is headed over the next decade or two, independent of what are obvious human rights issues going on. So let me just stop there and say thanks for letting me say that, but that was important for me to just be really clear on, 'cause clearly I wasn't clear last week (laughs) . So...

Chamath Palihapitiya 5:26 Yeah, well, and I, I, I'll, I'll just add to what you said, that I also thought it was implied that you care about these things and that you're not in favor of them. I, I didn't think that needed to be spoken.

Jason Calacanis 5:35 Yeah.

Chamath Palihapitiya 5:35 So I think it's, it's nice that you're clarifying it, but I think any reasonable person would understand that if you care deeply as a vegan about factory farming, that you also care about humans and, you know, genocide and, and torture or, or whatever issue. So I, I think it's like an, uh, uh, your statement is so obvious that I, I wonder if you even had to have made it, but I'm glad you did. Sachs? Okay, so, uh, I guess first I, I, I should say that, um...

David Sacks 6:05 You know, what's happening to the Uighurs in China is indefensible. You've got reports of upwards of a million, you know, of these people being held in detention camps. There's reports of mass sterilization and rape. It's like ethnic cleansing over there. So, that's absolutely wrong and it's one of a growing list of issues that we have serious problems with China on, uh, which include theft of our intellectual property, cyber espionage, the bullying of their neighbors, uh, their crackdown on dissidents. The list goes on and on. I mean, I think we have to be clear-eyed about the challenge and the threat that China represents, and we've discussed that on this pod many times. That being said, you know, what I think we saw this week, uh, was really about cancel culture, right? You had, in response to last week's pod, you have this online mob form and, uh, they wanna take what Chamath said and interpret it in the worst possible light so they can turn the outrage meter up to 11. And everyone gets to basically go on Twitter and virtue signal and say what great people they are e- because Chamath is a bad person. Um, and I just wanna speak to that issue. I mean, th- there is a huge amount of hypocrisy going on in that, because how many of the people who are tweeting their outrage and their denunciation of Chamath are doing it from a device made by forced labor in China, wearing their Nikes, made by forced labor in China, on their way to Target to buy cheap goods made in China? How many of those people have actually lifted a finger in the real world to help the Uighurs? How many of them have sacrificed an economic benefit, uh, in any way? And so when Chamath said nobody cares, I thought it was a really startling statement by him. But if you define caring as doing something more than just virtue signaling and expressing your feelings, as actually making a sacrifice or taking a risk in the r- real world, I thought he was frankly telling us a very uncomfortable truth. We haven't really, most of us, done anything. And in that sense, I think the reason why his comments hit such a nerve, I don't think you get the kind of pile-on that we got unless he's saying something that's hitting a nerve. And I think the nerve, the thing that he exposed, is that we're not really doing more than virtue signaling on this issue. And then came all the, you know, all the hypocrites. You've got the NBA denouncing him, issuing a statement, when what have they done? I mean, when Daryl Morey spoke up, uh, on behalf of the protesters in Hong Kong, the NBA shut down and sanctioned him. And, uh, you know, LeBron James said he was uneducated. Actually, I think Daryl Morey was pretty educated about what was going on. So you've got those hypocrites. You've got the White House issuing a statement disavowing Chamath, but Hunter Biden went over to China to manage billions of dollars for them and profited by his business dealings over there. So there are a bunch of hypocrites, and the list goes on and on. And so, you know, I think that if, i- in order for the mob to summon the outrage that it summons, it requires them to, I would say, first put the worst possible light on what Chamath is saying and to ignore, I'd say, the fundamental truth of it, and second, to engage in this massive hypocrisy. And that is the way that cancel culture operates, and I don't think we should buy into it. Um, so I appreciate what, what Chamath said. I think he's clarifying his remarks. He's showing that he does care and he does have empathy, as we all should, but I think there was a fundamental truth in what Chamath said last week, and that is what people are so uncomfortable with.

Chamath Palihapitiya 9:38 Okay. Well said. Um, I have feelings. Um, and most of all, I'm, I'm thankful we had the discussion. The goal of this pod, I think what makes it special and why y'all who are listening come here every week is because you know we're gonna be honest with you and we're gonna tackle these hard discussions. And I think Friedberg's, uh, comments and Sax's comments, uh, really, uh, explain that and what our intent here is. And is, human rights is one of the hardest issues to discuss. That's why you don't hear it being discussed, and there are not easy answers. And I think, you know, I was challenged, uh, by my besties on the episode and their questions and their challenges were absolutely critical. Y- yes, how can we care about one group of people when the people in our backyard we're not caring about? How, are we going to invade countries? These are very nuanced, difficult questions, but we must have this discussion. And if we try to cancel people with a 20-second clip that looks completely different if you look at the two-minute clip or you take the time to have a 40-minute listen of the, the whole segment, you get a totally different picture. And I, I think it's very important to raise awareness about human rights, and it is an issue that I have been passionate about my whole life. Uh, and I'm not trying to virtue signal or score any points here, but I know firsthand that raising awareness and having the discussions reduces the violations, because dictators, despots, and people doing this kinda stuff do not want the heat of what happened this past week. And what happened this past week is that more awareness was raised about the Uighurs and the situation that they're going through, I think than, you know, as somebody who's monitored the situation, than I've seen in the last couple of years. Perhaps this was a tipping point, uh, and that is something good that can come out of that discussion. Now, on a personal basis, I have, uh, had some feelings of guilt, um, because I, it was very hard for me to watch what happened to Chamath this week and to watch people dunking on him. Um, and then, let's face it, I brought the topic up and I dug in with my feelings and it got a little heated and, and I'm suddenly being portrayed as, you know, like a hero in this discussion now. Th- that was not the intent, and there's, there's no hero or villain in this. There is a hard discussion in this, and I am extremely proud of my friendship with each of you, especially you, Chamath. I'm extremely proud of your candidness and tackling these issues and making people think about them-... and, you know, I- I'm just so proud to be friends with each of you. And I'm so proud of the work we hear- we do here every week. And I think it's important work, um, and I feel like I get smarter every week, and- and I hope the audience does too. And I hope we can keep having these discussions, um, and, uh-

Jason Calacanis 12:23 Can we now make fun of each other?

Chamath Palihapitiya 12:24 Yeah, now let's-

David Sacks 12:25 Yeah.

Chamath Palihapitiya 12:25 ... make fun of each other. I mean, I don't know if we're allowed to laugh. This is like, so serious and heavy, but-

David Sacks 12:31 So what you're saying is, thank you, Chamath.

Jason Calacanis 12:34 (laughs)

David Sacks 12:34 (laughs)

Chamath Palihapitiya 12:34 That to- now that's gonna be clipped for 20 seconds. I'm gonna get canceled this week.

Jason Calacanis 12:38 Jason of Ark.

Chamath Palihapitiya 12:39 Jason Calacanis, thanks for this (angelic music plays)

Jason Calacanis 12:43 But Sacks' point about... I mean, look, we've talked about cancel culture a lot on this show. And w- you know, we've always been, I think, generally able to be third party observers to what's happened, and it was really interesting to go through the cycle this week, where, um, you know, there was just kind of a- an- an echoing narrative, uh, on one thing that was said with one direction. There were a few pieces, though, Chamath, right? I mean, wasn't there a piece from The Atlantic and some other pieces that kind of highlighted that things that you said were things that a lot of people won't say, and that's what was really so shocking for so many people-

David Sacks 13:17 What's the-

Jason Calacanis 13:17 ... and, you know-

David Sacks 13:17 ... what's the Peter Thiel comment on this whole- on all of this stuff?

Jason Calacanis 13:21 Yeah. He said there's- if- if no one's saying it, it's probably true.

David Sacks 13:24 Or if you're not allowed to say it, it's probably true.

Jason Calacanis 13:27 Yep. If you're not allowed to say it, yeah. But, um, yeah, it was, uh, it was really-

David Sacks 13:32 Well, you would think based on the- the mob that formed, and, you know, it's already kind of blown over, and that's the way this kind of cancel culture starts. But for that sort of, uh, that white hot, really intense day or two, you would think that, like, Chamath had practiced genocide himself. You know, it-

Chamath Palihapitiya 13:48 It-

David Sacks 13:48 ... it, you know, because everybody comes out, and the way that they make themselves feel better is by virtue signaling on this issue, and again, I would just say that w- I think we should be thinking about what do we do, um, you know, h- how do we actually make a difference because I don't think just virtue signaling on the issue is- is gonna do it. Um, and, you know, at the same time that this mob was forming against Chamath, we had a two-hour Biden press conference in which Biden never mentioned the Uighurs once, the press corps never mentioned the Uighurs once, so does that mean the Uighurs are below their line? Um, you know, why wasn't it mentioned? You know, shouldn't be ganging up on Biden? W- why is, you know, why is the press ganging up on Chamath when they're not ganging up on Biden for that? So, there is a fair amount of hypocrisy here. I actually think, Jason, I think you make an excellent point, that by discussing these issues and raising these issues, it creates a little bit of a check on the people perpetrating these atrocities because they don't like to be exposed that way, and, you know, maybe we should be boycotting the Beijing Olympics. I mean, maybe that should be on the table. Maybe we should be boycotting the NBA. I mean, let's have that conversation.

Chamath Palihapitiya 14:59 Yeah, or maybe everybody who goes there, I wouldn't wanna see the athletes miss the Olympics, but maybe they could each just raise their hand and- and do a you, uh, or some sort of a signal to show they support the situation or they're aware of it, uh, with the Uighurs. Th- there could be some, you know, modest protest or statement they could make without ruining, you know, their life's work. I- I always hate when the Olympics get canceled for some political reason, 'cause I think those people work so hard for it, um, but raising awareness, you know, i- is a noble goal in all of this, and then also doing things is a noble goal, um, and, um, yeah. I mean, I- I- I, it was very weird to watch the- the mob form and then dissipate and- and just who was, you know, taking the time to actually listen to the full episodes. It was clear from that Atlantic article and some of the nuanced takes that they listened to the full discussion because there are bullet points here like-

Jason Calacanis 15:54 Yeah.

Chamath Palihapitiya 15:54 ... like, there was, somebody asked me a very challenging question, I think it might have been you, Freeburg, like, are we going to start invading countries over human rights? And then there's more suffering and death and pain from the wars, and- and- and when do you decide, as the- the democracies of the world, to invade the dictatorships of the world to promote human rights? Like, this is a very difficult issue, uh, that the world has had to deal with, sadly, before, a- and there is no easy answer there, you know? And I-

David Sacks 16:21 Right. Well, you're right.

Chamath Palihapitiya 16:22 I- I think that-

David Sacks 16:22 And this is- this is a point that I also tried to make on the last episode, like Freeburg did, which is, um, I- I think it's- I think it's actually great to have these ideals, and we should have moral clarity about what's happening. And I think it- it, what's happening is wrong, it's outrageous, it's an atrocity, um, but- but the question is what we do about it. And, um, and- and the- the- the reality is, even though it's important to speak out about human rights, these types of fulminations about human rights when they become this sort of, you know, when- when people- when we get into this, like, frenzy, it's been the prelude and pretext for every misguided foreign intervention that we've had over the last 20 years. And the t-

Chamath Palihapitiya 17:03 Example?

David Sacks 17:05 ... the Iraq War, I mean, Saddam Hussein was suddenly Hitler, um, you know, the- the goals of nation building Afghanistan for 20 years, our invasion of, uh, Libya-

Jason Calacanis 17:15 Correct, yes.

David Sacks 17:15 ... we got rid of Gaddafi and we replaced it with chaos, um-

Jason Calacanis 17:18 I mean, for years we were talking about how evil the Taliban and their social system was, and then we just handed Afghanistan back to them a few weeks ago.

David Sacks 17:25 Exactly. So, you know, a- and so these types of, um, you know, when- when you kind of- you whip people up over human rights, I mean, I agree with the sentiment and I agree with the moral clarity, but I also can't help but recognize that neocons and the military industrial complex and the Washington blob have used this type of rhetoric for decades to corral us and stampede us into wars and foreign interventions that don't make any sense. And we all recognize, after the whole project has gone wrong, like Afghanistan, we become suddenly more realistic about the whole thing, and suddenly, you know, we're not talking about, you know, th- the- the- the- sort of the moral atrocities of the Taliban anymore. But the discipline is to-

Jason Calacanis 18:10 And they're still there.

David Sacks 18:11 They're still there. The discipline, though, is to be able to check ourselves...... before we get into these interventions.

Chamath Palihapitiya 18:17 Yes.

David Sacks 18:17 And I don't think we do a good job of that. We're whipping ourselves up into these mobs-

Chamath Palihapitiya 18:21 Yeah.

David Sacks 18:21 ... and we're in a frenzy.

Chamath Palihapitiya 18:23 A- and th- the raising awareness i- is something that has been lacking, th- you know, certain organizations. And I- I think it's very important that we don't take organizations that have engaged with a country, let's say China or Saudi Arabia. It- they may have engaged in good faith with the goal of, you know, engagement is a positive for humanity and the world. Okay, if we engage with China and we are co-dependent on each other, um, that will lead to a better arc for human rights and for humanity a- and less wars, because our- our economies are entangled and we do business together. Okay, this is a- a fine premise. W- what the dictators and despots want you to do is to fight each other and not look at the human rights atrocities. So it's easier for us to say, oh, the NBA, oh, Apple, oh, you know, pi- pick the, uh, the- the- the company or corporate interest or organization that has engaged. Um, but by raising awareness, um, e- consistently, it- it gives other people the ability to talk about this. Some organizations weren't willing to even talk about this or say the name Uighurs. And if we keep talking about the Uighurs, the chances that that situation improves, I think there is a chance it does improve.

Jason Calacanis 19:31 But I do think this, like, notion that the four of us can get together on a podcast and not get canceled, because, you know, we- we don't collect money from advertisers and we started having these conversations amongst friends and we just put it on the internet, um, first of all, it's a great kind of reflection of what you can do in the United States- (laughs) with the freedom of speech that we have. And we can just put this on the internet and anyone can watch it around the world. Uh, I don't know how many people are watching it, but-

David Friedberg 19:52 Moi- mostly freedom of speech.

Jason Calacanis 19:54 Mostly freedom of speech.

Chamath Palihapitiya 19:55 Mostly.

Jason Calacanis 19:56 Um, uh, but I do think that it's- it's pretty valuable. And I do think that that's, you know, an important point for us is, you know, as much as Chamath got completely destroyed this week, um, you know, the-

David Friedberg 20:08 I gotta- I gotta say, other than COVID, I'm, uh, I'm feeling pretty good.

Jason Calacanis 20:11 You feel better? You were pretty bummed for a day or two?

David Friedberg 20:15 I mean, I think the- the COVID thing was scary because four of my five kids got it.

Jason Calacanis 20:19 Okay.

David Friedberg 20:19 Um, so I was just like, "Oh my God, this is-"

Jason Calacanis 20:22 That's terrible. How's everyone doing by the way?

David Friedberg 20:25 I'll b- I'll be very honest with you. So, uh, between both houses, um, you know, mine and my ex-wife's, four of the five kids got it, our nanny got it, Nat did not, and the youngest baby did not. Uh, there's a real difference between, in a- my house, how the boys experienced COVID and how the girls experienced COVID, quite honestly.

Jason Calacanis 20:48 Huh.

David Friedberg 20:49 It... Like, we ex- you know, we've expressed certain symptoms, specifically a really bad sore throat and a cough, that the girls in our house did not. The girls had more intestinal issues, the boys roughly did not. So it all manifested kind of in odd ways. Uh, but g- my God, I mean, what a pain in the ass.

Chamath Palihapitiya 21:06 Well, to be going through that and then also, like, monitoring Twitter and inbound, your phone must have been blowing up and that's like-

Jason Calacanis 21:11 I- I wasn't doing any of that.

David Friedberg 21:13 Okay, Jason, start the pod. Let's go.

Chamath Palihapitiya 21:14 All right. Well, okay, everybody. Welcome to the (laughs) All-In podcast. With us, uh, the sultan of science who's got a new startup he launched, we'll hear about that later in the show, the Rain Man himself, and dare I say, The Dictator, Chamath Palihapitiya. (laughs)

Jason Calacanis 21:30 (laughs)

Chamath Palihapitiya 21:30 I (laughs) I was like, "Guys."

David Sacks 21:32 Yeah, it's not like we- it's not like we didn't warn you.

Chamath Palihapitiya 21:34 We gotta 63 episodes, we called him The Dictator. We... This was bound to happen. Let's start the show, everybody.

Jason Calacanis 21:39 I- I mean, you guys were like, "After 20 years of friendship, it's like, I don't..." The list is like 9,000 items long. (laughs)

Chamath Palihapitiya 21:45 I was like, "Yeah, if you're gonna cancel him, we got a long list." (laughs)

Jason Calacanis 21:48 (laughs)

Chamath Palihapitiya 21:49 All right.

Chamath Palihapitiya 21:50 Uh, so first up, I think we should start with, um, a- a- a duo of stories that relate to each other. Microsoft announced it's buying Activision Blizzard for $68 billion of cash. Microsoft's got a lot of cash. Um, and I- I think we all understand like why this is a great idea for Microsoft with Xbox. And obviously, Activision owns Call of Duty, which has 120 million or so monthly active users. They also own a bunch of nerd stuff, uh, from Blizzard, like Diablo, World of Warcraft, my favorite, StarCraft. A- and those have upwards of 40 million. They also had bought King, if you remember that. They make Candy Crush and those kinda casual games, which have a quarter billion users. Uh, but even with all these, uh, it's a highly fragmented market. But in related news, uh, Lina Khan, the, I believe, 32-year-old head of the FTC, uh, who has written a bunch of pieces, we talked about this on All-In episode 36, sat down with Kara Swisher and Andrew Ross Sorkin for an interview and, uh, basically, we're moving, or she intends to move the goalpost on antitrust. I wanna play three clips and have you each react to them. Here's the first one. Uh, and this is her take on changing the antitrust from consumer harm to, uh, now shift to, does this deal... And we'll take the Activision deal here as, uh, but one example, but you could take the Instagram and the YouTube deals as well. Uh, do these deals substantially reduce competition in the future? Let's watch the first clip.

Lina Khan 23:20 In certain cases, maybe too much success. And so the question is, when is the regulator supposed to say, "Hmm, this could work, and if it works, it's actually worked too well?"

23:32 It's an interesting question, and I think, you know, for enforcers, the- the real question is, is this a deal that could lessen competition? And in hindsight-

23:41 But don't all deals to some d-

Jason Calacanis 23:42 (laughs)

Lina Khan 23:42 All deals to some degree are gonna lessen competition.

David Friedberg 23:45 Yes, yes.

Lina Khan 23:45 ... uh, substantially lessen competition or tend to create a monopoly.

David Friedberg 23:48 Mm-hmm.

Lina Khan 23:48 Um, and there's also indication that Congress wanted enforcers not just to act when, you know, the third and fourth companies are merging or the first and second, but actually in the incipiency, when you said... see trends towards concentration, that those can also be important moments for enforcers to jump in.

Chamath Palihapitiya 24:04 So, uh, what do we think, uh, Friedberg, about this sort of new rubric? Not consumer harm, 'cause obviously if Microsoft buys Activision and makes those part of Game Pass and you get Call of Duty for free with your Game Pass and the Candy Crush games and Blizzard games, that's good for consumers. They get a whole bunch of more games. It would be like Disney buying Star Wars, you get all the Star Wars stuff in Disney+ for the same low price.

Jason Calacanis 24:27 Yeah. Look, Sax is our legal eagle here.

David Friedberg 24:30 I think ...

Jason Calacanis 24:31 But, uh, but I'll just say, um, before, uh, you know, he probably speaks better informed than, than me, um, if it's not about consumer harm and it's about decreasing competition in this broadly, I would argue, subjective sense, then, um, what's scary is that there are going to be decisions made by interpreters of what is and isn't competitive. And ultimately, if they're not trying to keep in mind the best interests of the consumer, then it is in fact ca- going to cause consumer harm at some point.

David Friedberg 24:58 That's a good point.

Jason Calacanis 24:58 Not necessarily in all deals that they block, but there will be deals that they may block that may have benefited consumers, meaning prices go down. Imagine having all of your products integrated in one streaming service instead of having to pay for three streaming services. So instead of paying $70 across HBO Max and Disney+ and Netflix, you get everything in one. But today, the regulators would not let those businesses merge because that would be anti-competitive under this context. And so this is gonna be a touchy debate and it's gonna be difficult, I think, ultimately, to rationalize this if there is gonna be a point in the future where we can actually show that consumer harm would be caused by decreasing competition in a marketplace. And so I would be nervous about that subjectivity and the slippery slope it enables.

David Friedberg 25:40 I think it's a great point. Think about it. If you had to pay... Instead of for Disney+, you paid for Pixar+, Disney+, Marvel+, and Star Wars+, it'd be chaos in your household to manage all those accounts. It's a much better offering.

Jason Calacanis 25:51 Better consumer experience, yeah.

David Friedberg 25:52 Much better consumer experience and, and cheaper. And sax, what do you think?

Jason Calacanis 25:54 And this is why, by the way, I said... Sorry, I'll say it. This is why I said in the past, it's... We use the term monopoly as if it's de facto evil and bad. But not all monopolies or businesses that have very big moats, is another way to kind of describe them-

David Friedberg 26:06 Yeah.

Jason Calacanis 26:06 ... are necessarily bad for the customer.

David Friedberg 26:08 Right.

Jason Calacanis 26:08 You get cheaper products, you get better products, you get more of an advantage. They may ultimately be yielded to be anti-competitive in a harmful way.

David Friedberg 26:16 Let me, let me, let me just-

Jason Calacanis 26:16 But not necessarily always.

David Friedberg 26:17 But let me explain to you where she's coming from. Like, there's a fundamental pillar of capitalism that says that excess returns must get competed away. So if a capitalist system is to be efficient, if a company has profit margins of 99%, competitors emerge pushing those profit margins down to something reasonable where you get to some sort of equilibrium. And the whole principle of what she's saying is, in, in the absence of competition, we don't really know what the equilibrium return really looks like. And she's not saying that, but that is the implicitness of what she's saying. And so in the... If you allow all of this stuff to aggregate, maybe Google shouldn't have 45% EBITDA margins. Maybe in a really competitive society they would only have 18%, and that's actually better net net for the system. The problem is that counterfactual, to your point, Freidberg, is impossible to measure. How do you know and how much value do you need to take away of the panoply of things that Google does to figure that out? And that's, I think, where the problem with it. But, you know, let's be clear. Uh, I... In 2019, I wrote in my annual letter, there's a section called The, The Tightening of the Regulatory Noose, and meaning it was a framework for how to basically dismantle big tech, and element number one of that was a changing regulatory landscape. And it's really incredible to see it in front of our eyes. We got a bill that just left judiciary, right, that was effectively voted across the aisle, that's now gonna go to the floor of the Senate, which is gonna rewrite some of these anti-competitiveness bills. It was like 75/25, and it was a 50/50 committee of Democrats and Republicans, so clearly across the aisle. Clearly across the aisle. Uh, and, I mean, the funny thing about that was Feinstein and Padilla, the two Democratic senators from California where most of these companies are, in, in the Wall Street Journal article that I read, railed against it, but still voted for it to go to the floor. So it's... I think some version of that is gonna pass. She's gonna go and scrutinize these companies. I still think this Microsoft-Activision deal, on balance, gets done, because if you take the absolute values away from it, the reality is that it's an adjacent part of Microsoft's core business and there's nothing fundamentally monopolistic about what would happen if you let Microsoft and Activision come together. Could it reduce competition in the future, I think would be her new lens. And if Xbox has Call of Duty and Sony PlayStation doesn't or the next console doesn't, maybe it does, uh, you could make the argument. Sax, what are your takes on this very hard to apply standard of reducing future competition? Because as-

David Sacks 28:47 Yeah.

David Friedberg 28:47 ... Aaron Ross Sorkin said very clearly, all of these reduced competition, it's now we gotta get into what does the word substantially mean in this context.

David Sacks 28:56 Yeah. So m- my take on, on Lina Khan is that she's got some worthwhile observations on the problems posed by these big tech monopolies, but I don't think she's got the right remedies. So on the observations, I think she's correct, broadly speaking, that these big tech companies, the FAANGs, they have way too much power in the marketplace. There are now gatekeepers over the internet that control all these powerful platforms. And broadly speaking, it is time, I think, to, uh, to basically have some limits on those powers, make sure they don't abuse it. I think she's also right that the traditional standard of consumer harm doesn't really capture that sort of concept of market power for these free ad-based services, right, because there is no pricing. Um, and furthermore, I think she's got a point when she says that, you know, a deal-

David Friedberg 29:45 When you say no pricing, you mean Facebook and Google don't charge.

David Sacks 29:48 The consumer doesn't pay, so how can there be consumer harm, right?

David Friedberg 29:50 Right.

David Sacks 29:50 So clearly that... There's... That, that standard of consumer harm doesn't really capture the market power dynamic. And then I think the, the last observation she makes, which I think is pretty, pretty valid, is this idea that, you know, when Facebook bought Instagram, at that time, it didn't seem to be a problem, but it definitely allowed them to extend their monopoly from the desktop into mobile, and it probably should be scrutinized harder. My problem is with her remedies. I mean, what she's basically saying is, first of all, like you said, any deal that could decrease competition in the future is a problem. Well, the whole goal of business and making business moves like an acquisition is to build your moat, is to-

David Friedberg 30:30 It's to win.

David Sacks 30:30 ... is to win, create a more competitive offering. So there's no limiting factor. There's no bright line test-... there. At least with consumer harm, there's a bright line test which is about pricing, right?

Chamath Palihapitiya 30:41 Mm-hmm.

David Sacks 30:41 It's mathematically measurable, so you could create a model around it. Here, there's absolutely nothing, and so what it's gonna do is completely politicize the process of getting a- an M&A deal approved. And you can see this when she's talking about l- the i- impact on labor. I mean, this is a total s- uh, sop to the-

Chamath Palihapitiya 30:58 Okay, yeah. So, let's, let's go to that clip, yeah.

David Sacks 31:00 Hold on a second. This is a total sop to the labor constituency in the Democratic Party, because look, Facebook and Google, no matter how powerful monopolies they may be, they don't have a dominant position in the labor market. It's just not true. They're competing for the same engineers that every tech company is competing for. So, she's bringing a purely political consideration in now. And so again, you're- there's no bright line rule. It's gonna be heavily political. Companies trying to get a merger approval never know whether they're good or not, and even after they get approved, they'll never know they were good. And I have a big problem with her saying that any deal that they approve can be reopened and reevaluated-

Chamath Palihapitiya 31:36 Right.

David Sacks 31:36 ... a decade into the future and reversed. Companies-

Chamath Palihapitiya 31:39 i.e. the actions they're taking against Instagram now.

David Sacks 31:40 Yes, companies need certainty. People need certainty.

David Friedberg 31:42 So, tha- that's the, that's the real issue. It's the, the rules of capitalism have been that the smarter/more strategic s- you know, entity, if they can run their plays more efficiently, has the right to win. Um, this is almost trying to say, actually, not really, and that is very problematic.

Chamath Palihapitiya 32:02 Yeah, so we could change the rules-

David Sacks 32:03 You never know you're good. You never know you're good.

David Friedberg 32:05 You never, you never know you're good. And then the problem that it'll create in the equity market specifically is-

Chamath Palihapitiya 32:10 Chaos.

David Friedberg 32:10 ... how do you actually drive shareholder returns? And then what do all these shareholders-

Chamath Palihapitiya 32:16 Yeah.

David Friedberg 32:16 ... then do if these companies are rendered to basically stay where they are?

Chamath Palihapitiya 32:20 So, the breaking up-

David Friedberg 32:20 And you take a snapshot-

Chamath Palihapitiya 32:21 I mean, wh-

David Friedberg 32:21 You take a snapshot of the economy and you say, "This was what it will be from now on."

Jason Calacanis 32:25 But it's in- Sax's point is really interesting. It's gonna require M&A to become kind of, a political maneuvering process, similar, you know, create sort of, these, uh, you know, um, obfuscated gates where you don't really know what it's gonna take to get through there. And then you've gotta go do what you do when you try and convince foreign governments to work with you or allow you to do a transaction in a foreign government, in a foreign country, where you gotta go in and you gotta go figure out the politicians, who they want, who they are, what they want, and then put together a political consortium that's gonna approve the deal, given that there's now gonna be subjective, uh, you know, validation. Whereas before, I think the, the, the criteria were, were much more objective.

Chamath Palihapitiya 33:01 Let me play this other clip. This is the clip that Sax was referencing. Uh, Lina Khan also talks about how labor, uh, i.e. unions, are trying to get in on the action/grift. See you on the other side.

Lina Khan 33:12 Some of this research has showed that labor markets are significantly concentrated, um, and it's led to, you know, additional thinking at the policy level of how this should be affecting what antitrust enforcers are doing.

Chamath Palihapitiya 33:25 Mm-hmm.

Lina Khan 33:25 So, the Justice Department, um, including in the last administration, started looking at no-poach agreements, uh, more closely, instances in which employers may be colluding to suppress wages. Um, both agencies have been looking at the ways in which mergers, in particular, may lessen competition for labor, um, and have downstream effects on workers in ways that are harmful and that also be- needs to be on our radar. So, I think this is an ongoing conversation, but increasingly, the question is, you know, how we implement some of these priorities and not, you know, whether they're important.

33:58 This is the first time you've included labor. This is something labor's wanted for a long time, the idea of looking at antitrust through the lens of unemployment, essentially.

34:07 Yeah, there's an interesting history here. I mean, um, you know, there were cases in which, uh, you know, unions were supportive of transactions because they thought they would lead to more downstream benefits. But I think, um, we started to see, uh, through retrospective studies, instances in which, you know, mergers actually ended up having a harmful effect. And so I think that is what's significantly contributing to this.

David Friedberg 34:26 Look, this is, this is also part of what I said in 2019. The third element of that plan was you have to change the rules on stock-based compensation. So instead of her talking about it as labor, I think the, the more accurate way to say it is, like, there's very valuable human capital in technology business. A few people have, you know, discontinuous impact on these businesses. And it has been a stated strategy of all of big tech to use their balance sheets to buy small companies in their incipiency, to use her words, not because it helps advantage their monopoly, but it prevents the leakage of human capital into other ideas and it prevents those other ideas from literally flourishing. That's really what's been happening for years in Silicon Valley, and we all know that. You know, all the acqui-hiring we see is about hoarding talent, and you'd rather pay these people millions of dollars a year, if you're big tech, to basically work on next to nothing than take the risk of them going across the street to a competitor and then having them build something that disrupts you.

Chamath Palihapitiya 35:24 Or starting their own company.

David Friedberg 35:25 Yeah.

Chamath Palihapitiya 35:25 And this was such a-

David Friedberg 35:26 Yeah.

Chamath Palihapitiya 35:26 This is such a known thing-

David Friedberg 35:27 But the only way... But the... Oh, sorry. Just to finish, the on- one of the ways that you can change it is you have to change the way that stock-based compensation works, how it's accounted for, how you know, how you can actually deal with it on a GAAP basis, how, uh, capitalists then treat that in terms of their earnings. If you don't do that, none of the models change.

Chamath Palihapitiya 35:46 Yeah.

David Friedberg 35:46 People look past it. People f- look through it. They don't think it's a real cost, which it is, and then you're allowed to continue to do it. That's really the underlying issue here.

Chamath Palihapitiya 35:55 And so much so, Chamath, that the human, the hoarding of human capital was a reoccurring theme on the Silicon Valley HBO show where people in Hooli were getting paid millions of dollars and hanging out on the roof. Uh, Freiberg, when you look at this, uh, human capital and labor being brought into it, isn't the point of a lot of M&A to, um, eliminate jobs and eliminate redundancy? So, if you brought in YouTube at Google, I'm not sure if you were there at that time period, the distinct concept was, "Hey, we already have an advanced ad network. We already have accounting, and we already have servers around the world and storage. You don't need to hire those people. We can get rid of them or whatever, and we get rid of that redundancy and we out of scale."

Jason Calacanis 36:36 No, look, I mean, I-... large scale consolidation, that's certainly true. Most M&A in technology is the opposite, where an acquisition takes place and the acquisition gets fueled by further investment after the acquisition is made. When YouTube was acquired, there was a few dozen employees there and then very quickly, Google scaled that team, the engineering team, the infrastructure team, they even had their own independent ad sales team, um, to thousands of employees. And without that, it would have been very difficult for YouTube to achieve that scale, both from a product success perspective, an infrastructure perspective, but also an employee based perspective, with the amount of capital it would have taken to go and raise that from venture capitalists.

David Friedberg 37:14 Got it.

Jason Calacanis 37:14 Maybe nowadays-

David Friedberg 37:15 Yeah.

Jason Calacanis 37:15 ... where there's billions of dollars floating around, it would be different. But back then, it would have been very hard. And so what it-

David Friedberg 37:19 I think that's the same for, uh, WhatsApp and Instagram and Face-

Jason Calacanis 37:22 Yes, exactly. WhatsApp was 19 people when it was acquired, and now it's thousands, I'm certain. And, and Instagram's the same. And so what we've seen traditionally, or not traditionally, but over the last 10, 15 years, with internet based acquisitions, is not about consolidation and reduction in costs, but about taking and enabling technology and accelerating it on an existing platform. Now, number one, it makes that new technology or product far more successful, far more far reaching, and more consumers benefit from it. Number two is it now makes that platform harder to compete with. So as a platform, it's gonna be a lot harder to catch up with the cash flows being generated at Google and at Facebook, given how quickly they reinvest that capital in new technology to further their advancement.

David Friedberg 38:02 And to your point-

Jason Calacanis 38:03 Yeah.

David Friedberg 38:04 ... j-

Jason Calacanis 38:04 But, but I would say what, what's, what's been so significant over the past 15 years that people are lifting their head up, is that it has been both beneficial to consumers and anti-competitive.

David Friedberg 38:14 So, that was exactly what I was gonna get to here. Your YouTube example is the perfect one, because if you look at YouTube, think about all the joy, education, communication it has created on a global basis as a juggernaut-

Jason Calacanis 38:26 Better product, and it's free. Yeah.

David Friedberg 38:26 ... and it's free. That has, helps humanity so much in this new lens.

Jason Calacanis 38:30 But no one else can make a video ad site like you (laughs) .

David Friedberg 38:33 Exactly. So we're now-

Jason Calacanis 38:34 There's no competition.

David Friedberg 38:34 ... looking at all the benefit that YouTube has created for humanity, versus the fact that it's gonna be impossible to depl- displace YouTube now. To your point, Sachs, how do you get past the bright line? Do you have a suggestion for a way? And would you now look at something like YouTube and say, "We shouldn't have, uh, allowed that to happen"? YouTube was on death's door because of the lawsuits and the server bills. We all know that.

David Sacks 38:57 Right. Well, I, this is the uncertainty that's gonna be created, and, um, I think this administration is creating tremendous business uncertainty. I think the reaction of a lot of big tech companies is just gonna be to stop doing M&A until the situation gets clarified, because they just don't know. Um, you know, targets are, target companies are gonna want to have huge breakup fees, and it's just gonna have a chilling effect on the market for M&A. I mean, business needs certainty, and they're not giving it in this business environment. Um, Chamath, before we get to you, just let me, can I make one point about that last clip-

David Friedberg 39:28 Yes.

David Sacks 39:28 ... on, uh, on the labor point? Listen, this feels to me just like when the administration, uh, talked about clean tech and clean energy and electric vehicles, but then they only gave the subsidy to the, uh, car companies that were, uh, that were basically union shops. And so-

David Friedberg 39:46 They didn't give Tesla the same-

David Sacks 39:47 Yeah, that's right. They excluded Tesla. They excluded Tesla from the EV segment.

David Friedberg 39:50 Laughable, yeah.

David Sacks 39:50 They tried to pretend that Ford and GM were the ones driving the EV revolution in the US. It was-

David Friedberg 39:55 Walkers.

David Sacks 39:55 ... laughable. What they were trying to do there is they were shoehorning a union agenda into clean tech. And I think that's what Lena Horne was doing in that clip. She was shoehorning a union agenda into antitrust law. And it's a bit absurd, because Facebook and Google, even though they are very powerful companies, when it comes to talent, they are in a war for talent, just like everybody else. They compete-

David Friedberg 40:17 There's not a union issue there.

David Sacks 40:19 ... against each other.

David Friedberg 40:19 These are not factories or employees.

David Sacks 40:20 These are not mistreated employees. These are very well paid employees. And moreover, the market is highly competitive, and we don't need them trying to insert this union agenda into antitrust law.

David Friedberg 40:30 You got to think that, for example, going back to Microsoft Activision, obviously the bankers would have called Apple and Facebook and Google as well. I mean, it's absurd-

Jason Calacanis 40:42 Of course.

David Friedberg 40:42 ... that they wouldn't have.

Jason Calacanis 40:42 It's a process. Yeah, they

Narrator 40:43 Have it in the packet.

David Friedberg 40:44 Every, the minute that you think you have a bonafide offer, one of the things you have to do is essentially, you know, get an opinion letter, and also to make sure that as a public market shareholder, you can justify that you've evaluated all the other options, right?

Jason Calacanis 40:55 Sure.

David Friedberg 40:56 Um, but it's really quite telling, to David's point, I don't think that if you were Facebook or Google or Apple, you could have credibly made an offer because the calculus in the back of your head was not whether it had business logic, but whether you could actually get it through the FTC.

Chamath Palihapitiya 41:11 That's a good point. But Microsoft did, because Microsoft is no longer seen as a threat.

David Friedberg 41:15 And look, we said this, we said this in our awards show two or three episodes ago. You know, they have really been the most untouched, uh, in the last decade by antitrust scrutiny, whether domestically or internationally, they've largely skated under the radar after paying the price for an entire decade.

David Sacks 41:35 I think a lot of that has to do with the fact that Microsoft's effectively pivoted, with the exception of this gaming, into being an enterprise software company, and the politicians just care a lot less about enterprise software. It doesn't capture the public's imagination. It's the big consumer, you know, companies that get all of that attention.

Chamath Palihapitiya 41:51 Fascin- fascinating point. Like, literally, the consumer and the bread and circuses of this (laughs) is what's driving it. Like, people hate big tech and Trump got banned from it, yada yada. Uh...

David Sacks 42:02 But, but I got to say, you know, these, um, increasing restrictions on big tech and, uh, these prohibitions and the chilling effect, the uncertainty, it's one thing to do it when the market is just completely ripping and we can sort of afford to run these experiments and tinker with these, these rules. But I got to

David Sacks 42:21 say, I'm, I'm starting to get pretty worried here that... You know, we had Jeremy Grantham, who's sort of a-

Chamath Palihapitiya 42:26 Old school?

David Sacks 42:27 Yeah, old school, kind of bearish type market commentator. He had this expression that the... Yeah. I mean, it's one of these stopped clock, right twice a day things, but-

David Friedberg 42:36 Jeremy Grantham has never found a market he didn't name.

David Sacks 42:39 Yeah. Yeah, exactly. But, but, but his stopped clock can be right twice a day. And, um, the, the line he had today is that we're seeing the popping of a super bubble.And you know, we've been talking about-

David Friedberg 42:48 Super bubble.

David Sacks 42:49 Yeah. Exactly. Basically-

David Friedberg 42:50 But that's not, that's not true, but, I mean, it's good (overlapping 00:09:52) . Yes, well- It's evocative.

David Sacks 42:53 Well, the, the sense in which it's, it might be true-

David Friedberg 42:56 Super bubble.

David Sacks 42:57 ... is that, I mean, we talked about this last few months, is that you had the Fed and the, the, the federal government pump a 10 trillion of liquidity into the market over the past two years because of COVID. Now, they're starting to pull that back and there was, I think, a general asset inflation across asset classes-

David Friedberg 43:16 You think? (laughs)

David Sacks 43:16 Certain types of assets clearly got more inflated than others. We've seen a huge correction in growth stocks. We've seen a huge correction in, uh, in crypto. Basically, anything long dated as the fear of interest rates increasing has gone up, they've massively corrected. But... So the concern is that, you know, with the losses we're seeing, and I mean, every day, it just keeps, I keep seeing more red, that this could turn into a recession. You know, popping of bubbles is usually followed by, uh, by recessions or... So I think, you know, the fortunes of the economy could turn really quickly here, and, uh-

David Friedberg 43:52 That is, that is the marginal risk. The marginal risk is actually for a recession. We, we, we talked about this before. By the way, just to your point, you're right that we pumped in $10 trillion, but over the last three weeks, and really over the last two and a half months, we have actually eviscerated $10 trillion of value as well. So if you wanna measure it, we put 10 trillion of excess capital in, but we've now destroyed $10 trillion of equity across the board. Destroyed it by lowering the prices or repricing stuff. Across all markets. Yeah, yeah, equity- We've repriced everything. I mean, crypto, I mean, crypto, in the last couple of days has just been shellacked. Smoked. Yeah. Uh, growth stocks have been shellacked. Um, biotech stocks have been just absolutely smoked. Meme stocks. Everything is getting crushed. But the- Uh, COVID stocks. But David is saying something really important. The risk, in my opinion, is not of runaway inflation anymore. And the reason was what happened this weekend was incredibly important. And we have seen this happen just a few years ago. So this weekend, uh, China cut interest rates. Hm. Now, as we know, we are dealing in the United States with this issue of whether we should raise rates and by how much, because we're worried about inflation. Well, if you're cutting rates, it's because you're worried about the other problem, which is that the economy has basically turned over and you need to become more accommodating, right? You need to incentivize businesses to spend by lowering- By turned over, you mean it, it slowed down. People are not building, companies not doing- Yeah. ... new projects. So you wanna insight... You wanna give them an incentive or, or maybe some catalyst to start some new company or start some new project because- Yeah, so by the way- ... all the real estate projects have wound down. In 2018, here's exactly what happened. The setup was the Fed... We were, everybody was worried about what the Fed was going to do on interest rates. The Fed was looking at China as the canary in the coal mine, the leading indicator of what we should do. And at the end of 2018, uh, Jerome Powell decided to raise rates, and we raised rates. And then enter 2019, and, uh, the Chinese economy turned over. And, uh, we realized that their economy was not nearly as strong as we thought it would be. Mm. And so our reaction was disproportionate to what the actual data on the ground said. We entered a recession in 2019. That's when you guys probably saw Trump going crazy, blaming Powell. Hm. I mean, most of us ignored it because, you know, we were all dealing with, you know, Trump derangement syndrome. But the underlying thing of what he was saying was, "Hey, hold on a second. Uh, you just caused a recession in America by raising too quickly." The Fed is now in this really delicate situation where China cut rates last week. We have an FOMC meeting, the Open Markets Committee that sets rates on Wednesday, I think, of this coming week. What is he supposed to do? You know, Bill Ackman two weeks ago was advocating for a 50 basis point raise in this meeting. So that's way beyond what people even thought is supposed to happen.

David Sacks 46:45 We, we should just remember that Bill Ackman has bets, macroeconomic bets in the market. If he's calling for a 50 point raise, I guarantee you, he would bet-

David Friedberg 46:52 He's gonna make a lot of money.

David Sacks 46:53 ... he'll make a lot of money if there is a 50 point raise.

David Friedberg 46:54 Yeah. No, no conflict, no interest. Yeah.

David Sacks 46:56 Yeah, exactly.

David Friedberg 46:56 But my, my, my only point is the setup is a very complicated one for the Fed coming into this week, and the risk is to a recession, because if we overcorrect- Yes. ... and the leading indicators all around the world tell us that their economies are weak, then inflation may have actually been much more transitory than we thought. And right now, we have to decide because if we overcorrect, we're gonna plunge the United States economy into a recession. This is why, uh, I think, Friedberg, when you look at this, when you have so many different things happening at once and you're trying to pilot a plane or a car (laughs) , you know, in rain, on ice, going really fast, maybe there's something wrong with the brakes, I mean, you gotta be very delicate with, you know, how you steer into this. What is the right strategy here on a policy basis coming out of Omicron? Um, should we just take a pause on raising rates? What, what, what do you think the right situation here? Obviously, putting a bunch of regulation on top of big, you know, mergers and acquisitions, uh, and that's gonna create headwinds. I, I don't know how many different variables we wanna add to the mix of an economy that feels like we're in a perfect storm. I don't know. Look, a lot of us kind of talk about the valuation of things in markets as being the economy, but it's not. The economy is the productivity of businesses that are valued in the market. And as long as the productivity of the businesses in the market continues to improve, that businesses continue to grow, that there's stability to pricing that's not run away or, or declining, neither inflationary or too deflationary, um, you know, I think those are the, the indicators that matter most. Now, the reality is, over the last couple of years, we've had trillions of dollars that have flowed into these markets for free, and those trillions of dollars have created lots of mini asset bubbles. Lots of little new markets have emerged, NFTs-

Jason Calacanis 48:47 ... random cryptocurrencies that don't actually do anything. The collectibles market, the art market, there are lots of-

Chamath Palihapitiya 48:53 Peloton (laughs) .

Jason Calacanis 48:53 Pele- I mean, there are... And, and lots of examples of these speculative early stage businesses that have gone public, and, uh, people backed them. And they, they said, "Look, when there's this much money around, I'm gonna start making more risky bets. I'm gonna make more speculative bets." And, uh, regardless, the money's coming out of the markets, the money's gonna come out in one way or another. And as it starts to come out, these little bubbles are the first that are gonna pop. And that doesn't necessarily mean that the economy is at risk. It means that there are valuation bubbles that are gonna burst, they're gonna decline. And no interest rate policy is gonna change that because the inevitable growth in the underlying economy, the inevitable end to the pandemic, is what's ultimately gonna drive capital out of these markets and back into, ultimately, more productive assets and less speculative assets. And so this is a transition that I'm not sure you can really, kind of manage, I think, underlying businesses and the growth of the economy and the ability for people to get jobs. There's an incredible number of open jobs that are in the US right now. 3 million open job listings, go apply for a job.

Chamath Palihapitiya 49:53 No, 11 million. 11 million.

Jason Calacanis 49:54 11 million, whatever it is, go, go, go sign up for a new job.

Chamath Palihapitiya 49:56 11 million, three point... What is it, Sax? 3.7 million-

Jason Calacanis 49:59 There are, there are very-

Chamath Palihapitiya 49:59 ... 3.7% are unemployed?

Jason Calacanis 50:00 There are not a lot of people-

David Sacks 50:01 3.9%

Jason Calacanis 50:01 Yeah, there are not a lot of people in the US that don't have an option to go out right now and go improve their, their working condition. There are a lot of open jobs in the US. And so-

Chamath Palihapitiya 50:10 And salaries have gone up.

Jason Calacanis 50:11 Tha- that's what I mean. Your working condition, you can go make more money.

Chamath Palihapitiya 50:14 Yeah.

Jason Calacanis 50:14 And, um, and so, you know, the economy underlying, there are lots of great businesses that are growing and doing well, and there's stability that's emerging. And then there's a bunch that aren't, and there are a bunch that were always speculative, and that they were hyped and overvalued. And, you know, as those assets get devalued, a lot of us that have most of our worth and income coming from capital are, uh, are gonna feel the burn. (laughs)

Chamath Palihapitiya 50:36 I have two questions, uh, that we-

Jason Calacanis 50:39 By the way, uh-

Chamath Palihapitiya 50:39 ... I wanna go around the horn on. Uh, first, Chamath, if we could do, if each of you could do one thing to, one or two things, uh, to manage this economic policy in the next year, what would it be? Like, what two things do you think we should do, David? One or two things would be the top of the list that regulators should do in terms of managing this seemingly chaotic situation?

David Sacks 51:01 Just feels to me-

Chamath Palihapitiya 51:02 Or not do.

David Sacks 51:02 It just feels to me like we're pinballing from one overreaction to another.

Chamath Palihapitiya 51:07 Okay, yeah.

David Sacks 51:07 So we overreacted in terms of flooding the zone with liquidity because of COVID. I mean, remember, like Druckenmiller w- w- was, like, the, one of the only voices about a year ago when they did that two, that last $2 trillion stimulus bill, the COVID relief bill.

Chamath Palihapitiya 51:22 Yep.

David Sacks 51:23 And he said, "Look, retail's already 15% above trend." Meaning, if you looked at demand, the, the demand side of the economy, it had fully recovered and was actually above trend. People were spending more money. And then we flood the zone with another 2 trillion. And then lo and behold, six months later, we have this inflation. And then in response to that inflation, we're now jacking up rates so quickly that I think we're risking, to Chamath's point, a recession. So we're pinballing from one overreaction to another. And I just, the big meta thought I had this week was just how many of our problems are just self-inflicted right now? I mean, even on COVID, right? We could live with this variant of COVID, Omicron, you know, Chamath and all of our friends, we've... Everyone I know in the last few weeks basically has had it, and it's been very mild. It's basically been a cold. But in large swaths of the country, we're not choosing to live with it. We're at each other's throats about these vaccine mandates, these other restrictions and school closures.

Chamath Palihapitiya 52:18 Okay, so your number one is stop overreacting.

David Sacks 52:19 And similarly, and, and the same thing, just to make it even more local, we've got a crime wave in America going on right now. Why? Because we emptied the jails last year and stopped prosecuting, totally self-inflicted. So-

Chamath Palihapitiya 52:30 Okay, so what things do we need to do? Just if you had to, one or two things that you think we should do? One, you said we're ping-ponging, so do you think more consistent policy, communicating better?

David Friedberg 52:38 I don't, I don't... I think that you want some neat little answer that's tweetable and there is none.

Chamath Palihapitiya 52:42 No, I just, I wanted your-

David Friedberg 52:44 Let me, let me explain.

Chamath Palihapitiya 52:44 ... if you had actually thought that was a good idea.

David Friedberg 52:46 There, there, there's no one or two things anybody can do. I think there's a collective set of things that we have to do in an organized way.

Chamath Palihapitiya 52:51 Let's hear it, yeah.

David Friedberg 52:51 So look, just to set up, right? Um, we have had more activity and hedging than in any other period in recent memory, except the great financial crisis. Just to set the tone of where we are in terms of volatility in the capital markets. Mutual funds who don't short stocks, right? The multi-trillion dollar mutual fund complex whose only job is to buy, has been a net seller. Hasn't even started buying a single thing yet. We have an FOMC meeting that's gonna happen next week where Jerome Powell and the, you know, the Fed has to decide what to do in the face of incomplete data. It's not as if we've even stopped all of the purchasing, uh, of assets that we've been doing. We're still putting money in the system. I just wanna be clear. We were debating when we stop the spigot. We're not even debating when we shrink our balance sheet as a country. So we are in a really complicated moment, and I think the risk is that there is, uh, an overreaction to incomplete data, and we plunge the US economy into a recession. And I just think that that, that has to be really thoughtfully measured. And we, guys, we've seen this in 2019, 2018, '19.

Chamath Palihapitiya 54:10 Uh, Friedberg, any thoughts on-

Jason Calacanis 54:12 No, I'm not an economist and I'm not a central banker, and so I have no clue.

Chamath Palihapitiya 54:16 Okay. Um, the, the next thing I-

David Sacks 54:18 Well, but, but there is... But, but to Mamath's point, I mean, we are dealing with balancing the risks of inflation against the risks of recession. I think that is fundamental. And right now, all the statements have been so hawkish that, you know, the markets have been just flowing red now for months. And it's starting... I think, I think the, the balance of risks is starting to make recession possible in a way that didn't seem possible two or three months ago.

Chamath Palihapitiya 54:45 Doesn't the repricing of assets though, like, we look at Peloton, you know, it's down whatever, 80%. You look at Zoom, it's down 70, 80%. When you see those things that were obviously mispriced-... uh, Rivian, uh, which we talked about on a previous episode.

Jason Calacanis 54:56 Uh, I, I wouldn't use the term mispriced.

Chamath Palihapitiya 54:59 They were-

David Friedberg 54:59 Repriced. I would say they're repriced.

Chamath Palihapitiya 55:01 They're repr-

Jason Calacanis 55:01 Yeah.

Chamath Palihapitiya 55:01 They were mispriced, they're now repriced, whatever.

Jason Calacanis 55:03 No, they were, they were, they, someone paid-

Chamath Palihapitiya 55:04 They were priced.

Jason Calacanis 55:05 ... someone paid for them and someone s- someone sold them to him for something.

Chamath Palihapitiya 55:07 Okay.

Jason Calacanis 55:07 And nowadays-

Chamath Palihapitiya 55:07 They were, they were priced against gravity-

David Friedberg 55:08 Yeah, but free bur- if, if yesterday they paid 25% more and then today they're paying 25% less, it was mispr-

Jason Calacanis 55:14 What difference does it make whether it's yesterday, an hour ago, or a year ago?

Chamath Palihapitiya 55:16 Well, I mean, listen-

David Friedberg 55:17 It was mispriced.

Jason Calacanis 55:18 Every, every day pricing changes.

Chamath Palihapitiya 55:20 Well, no, here's the thing about the pricing. The pricing was based on people with a lot of money placing a lot of bets, uh, maybe who are new to the market every day.

David Friedberg 55:26 But what's, what's the, okay fine, what's the point, Jason?

Jason Calacanis 55:28 The mar- the mar- the market condition changed.

Chamath Palihapitiya 55:31 Uh, well, I think maybe we had enthusiastic people betting things up without looking at fundamentals, is my point. I think Sax agrees with me here on this. So, I think if we-

David Friedberg 55:39 I think you're right about that. Yeah, you're right about that.

Chamath Palihapitiya 55:40 Yeah, yeah. So now you have market participants who were gambling on, like, momentum. Now we're repricing stuff. Do we think... Where are we at in this repricing or correct pricing of assets?

David Friedberg 55:51 We're in the, we're in the eighth... In my opinion, I think we're in the eighth inning of, of the tech drawdown.

Chamath Palihapitiya 55:57 Got it.

David Friedberg 55:57 So, if you're a high growth tech company, you've been smashed for three months in a row.

Chamath Palihapitiya 56:01 Yes.

David Friedberg 56:01 As you said, Jason, we're off, some stocks are off 80... You know, s- 50% to 80% of their highs, okay?

Chamath Palihapitiya 56:07 That's like dot-com era corrections.

David Friedberg 56:09 Yes.

Chamath Palihapitiya 56:09 Yeah, I mean that, that's crash, that's dot-com era crash occurring.

David Friedberg 56:12 It really is. Yes, yes. If you're, if you're, uh, if you're in other areas like value, you've had a pretty good rally. If you're in crypto, you're just starting to get smoked now. If you're in, um-

Chamath Palihapitiya 56:23 Why isn't crypto... This is... I want your thoughts on this, Chamath. Why isn't crypto getting smoked like Peloton and Zoom? Is it because those people are HODLers or something?

David Friedberg 56:31 Well, crypto, I think, has slightly different dynamics than, than individual stocks like a Peloton. But I think that you're gonna see-

Jason Calacanis 56:37 There, there's no earnings release, for one.

David Friedberg 56:39 Right, but you're gonna... 'Cause like you have to understand what Pelo-

Jason Calacanis 56:41 All that, all that, all that the market is, is who's bidding and who's coming into the market.

David Friedberg 56:44 Yeah.

Jason Calacanis 56:44 I mean, there's still thousands of, millions of people from around the world stepping into the crypto markets each day that are putting more money into these markets and that balances out the withdrawals. And that's all that crypto is. There's no fundamental-

David Friedberg 56:54 And in fairness-

Jason Calacanis 56:54 ... underlying business that you're valuing.

David Friedberg 56:56 The Peloton release was really bad. Okay, I mean, really, really bad.

Chamath Palihapitiya 56:59 It was very strange, yeah. They... Well, I think they overpaid, but-

David Friedberg 57:01 Well, I don't think it was strange. It was just like, uh, "We're just gonna basically stop producing anything because all of our inventory will meet our demand for the foreseeable future." That's a, that's not a good statement if you're a grow- supposed to be a high growth public business."

Chamath Palihapitiya 57:13 Okay. So if we're seeing 50% to 80% sacks in-

David Friedberg 57:16 Gavin Baker had a tweet that said-

Chamath Palihapitiya 57:17 Capital allocator, yep.

David Friedberg 57:19 ... yeah, the bottom of the market, he... And it was a phrase, something like, "When we shoot the generals." And his comment was, "The generals are big tech. When those things trade down 25%, the bottom is in." And I think that collectively most people think that, uh, we're a little bit oversold in all areas except big tech. I think big tech is down 10%, 11%, 12%. When you see this thing really get cracked is when those folks, you know, trade down another 10% or 15%. And then I think we're kind of through most of the pain.

Chamath Palihapitiya 57:50 So Peloton and Zoom were kind of mid-tech. I don't know what we call those, but I would call them like mid-tech. They're obviously not big tech, but they're not small either. Mid-tech gets their asses kicked 50% to 80%, big tech 15%. But if big tech goes down 30%, then we start really seeing a bottom. And we consider Netflix part of that?

David Friedberg 58:06 I don't, I don't think you ever see that because I think big tech, you have to remember, is basically the index. And in the last 10 or 20 years, you've never seen drawdowns more than 15% to 25%. You've never seen it.

Chamath Palihapitiya 58:16 Yeah.

David Friedberg 58:16 And, and when you've ever had a 15% to 25% drawdown, meaning the market goes off 15% or 25%, you have to remember, the thing that we have also done over the last 20 years is created so much money on the sidelines, always looking for a cheap buying opportunity.

Chamath Palihapitiya 58:31 Mm-hmm.

David Friedberg 58:31 And so the minute that these things... So even, you know, March of 2020, remember when we r- started to do this pod and it literally looked like the world was ending?

Chamath Palihapitiya 58:38 Yeah.

David Friedberg 58:39 The bottom existed for a week.

Chamath Palihapitiya 58:41 Yep.

David Friedberg 58:42 And then within a week, the entire 25% loss in the stock market was wiped out and we were back to normal, so.

Jason Calacanis 58:48 That's when, that's when I sold. (laughs)

Chamath Palihapitiya 58:50 (laughs) We do, don't take our advice, folks. Okay, well, let's talk specifically about Neff.

Jason Calacanis 58:54 Okay, go ahead.

Chamath Palihapitiya 58:54 I think it was good that we talked about Peloton.

David Friedberg 58:56 I panicked at the lows, oh my God.

Jason Calacanis 58:57 Oh my God, I did too.

David Friedberg 58:58 I remember selling, I remember selling Slack going, "This is the dumbest thing but I have no choice 'cause I was literally ready to puke."

Chamath Palihapitiya 59:04 How about when Uber goes to $15? How about when Uber goes to $15 from $45?

David Friedberg 59:07 I, I was ready to puke-

Chamath Palihapitiya 59:08 I basic curled up in a ball and said, "I'm not selling, but I'm not feeling good right now." (laughs)

Jason Calacanis 59:12 By the way, this is why I was saying, Jason, like any comment you made earlier, I think you made a comment about, um, you know, what do you do right now to drive or make change in these markets? And I'm not sure that at the end of the day, the drive or the change is being made as much as the change that's being made is being driven by the market itself. There are... It's just so many dynamics at play that it's very difficult to kind of ascertain where things are headed next, what's going on. And we're all gonna sit here and we're all gonna speculate. We're gonna flip a coin. It's gonna come up heads, it's gonna come up tails. We're gonna be right, we're gonna be wrong. It's really difficult to kind of put, put our foot down and for any of us to put our foot down and say, "This is what I think needs to happen and this is what I think should happen or could happen or will happen."

Chamath Palihapitiya 59:51 Right.

Jason Calacanis 59:51 Half of us will be right, half of us will be wrong, but man-

Chamath Palihapitiya 59:54 L- Let's take another stock I think is interesting to talk about is Netflix was at $700, uh-

David Friedberg 59:58 Good Lord.

Chamath Palihapitiya 59:59 ... just a couple months ago. It's at $390 today. Um, this is an incredible large cap business.

Jason Calacanis 1:00:03 You talked about the incredible large cap business. Yeah, that's like a real business that you can assess what's going on with the business itself.

Chamath Palihapitiya 1:00:08 Well, they think they're not gonna grow, uh-

Jason Calacanis 1:00:11 Right.

Chamath Palihapitiya 1:00:11 ... 20%, 30% a year. They think they're gonna grow eight, nine, 10% a year. But a, a fabulous business, right? Like, uh...

Jason Calacanis 1:00:17 Great business.

David Friedberg 1:00:18 Incredible business.

Chamath Palihapitiya 1:00:19 Is that now the time?

Jason Calacanis 1:00:20 But they've grown so much.

Chamath Palihapitiya 1:00:20 So is this becoming a buy anytime?

Jason Calacanis 1:00:22 I mean, Netflix is so saturated-

Chamath Palihapitiya 1:00:25 It is...

Jason Calacanis 1:00:25 ... it is, it has achieved such incredible market share by growing so quickly every year for years and years on end. At some point, the growth was gonna slow down.

Chamath Palihapitiya 1:00:33 They hit their natural audience -

Jason Calacanis 1:00:34 I think Netflix-

Chamath Palihapitiya 1:00:35 They saturated.

Jason Calacanis 1:00:35 I think Netflix is gonna be the best example of consumer surplus at scale. And what I mean by that is they have given so much value away for an incredibly small amount of money. Like if you think about the value you get from Netflix as compared to what you would get from Comcast and you spend-

Chamath Palihapitiya 1:00:53 $18 bucks a month.

Jason Calacanis 1:00:54 ... $10 or $15 for Netflix-

Chamath Palihapitiya 1:00:56 $15 a month.

Jason Calacanis 1:00:56 ... versus 100 bucks for Comcast, there was such a huge gap in value.

David Friedberg 1:01:01 Um, but Netflix had to spend so much money to keep people entertained. The real question is, at what point do they start to sort of like run out of the things that they can do to keep people, um, engaged? And otherwise, they, Jason, do what you did, which is you have a subscription to HBO Max, you have a subscription to Disney+.

Chamath Palihapitiya 1:01:19 Yeah, I mean the headwinds are the competition.

David Friedberg 1:01:20 Everybody gets in the game. The only real winner is the consumer.

Chamath Palihapitiya 1:01:23 Yeah.

David Friedberg 1:01:24 Uh, and any individual company, I think, gets, gets into a real tough spot. And I think what you saw was their earnings release basically said just that. "Disney's doing a great job competing against us. HBO Max is doing a great job competing against us. So we're not sure with the incremental dollar that we can give you the growth that we've given you before when we had no competition."

Chamath Palihapitiya 1:01:41 And, and-

David Friedberg 1:01:41 That's, by the way, Lena's, Lena Khan's comment, which is the other side of the coin, which is when you have more competition, the consumer does win, it contains prices, it just doesn't contain asset inflation, which does impact the shareholders of these companies.

Chamath Palihapitiya 1:01:55 Uh, yeah, and still, even at this level, $172 billion, they have a 35 XP ratio.

Jason Calacanis 1:02:01 I do- I mean, one, one, one way that, to look at this ... Your, I, I think your point is an interesting one, Chamath, where you talk about how much value they've given away over the years and what they have today. You can always look at the balance sheet of a business, a public company. And in the balance sheet, there's this, um, this line.

David Friedberg 1:02:18 Goodwill.

Jason Calacanis 1:02:19 Um, uh, no, not ... Well, not even goodwill, just the, um, uh, the accumulated loss. Um, uh, the accumulated deficit. And if you look at that, um, on Netflix, they basically run the business right now at, as of their last earning statement, which was December 31st, negative $40 million. So in terms of the total net cash that they've generated as a business, since their founding as a business, they've lost $40 million (laughs) . So, you know, a- and meanwhile, the question is, okay, what's the ... You know, so, so they're not necessarily, uh, at a stage where they've been generating cash. But for many, many years, Amazon had a similar strategy where they were reinvesting all their capital.

David Friedberg 1:02:56 Yup.

Jason Calacanis 1:02:56 And that capital was going into building the business and growing the platform and adding the next layer of growth. The question is, has Netflix, from a fundamental business perspective, not a valuation perspective, have they added enough growth platforms into the business? Have they grow- found enough other products, services, or ways to build customers to grow the business?

David Friedberg 1:03:12 No, they have, they have one product.

Chamath Palihapitiya 1:03:13 They have one product, yeah.

David Friedberg 1:03:14 They, they have linear video.

Chamath Palihapitiya 1:03:15 Right.

David Friedberg 1:03:15 They don't have gaming, they don't have anything else.

Chamath Palihapitiya 1:03:16 Right. They don't have sports, they don't have comedy, really.

David Friedberg 1:03:19 They did start doing s- ... They just ... They, they, they are dabbling. They dabbled with doing a couple of podcasts. They dabbled with doing a couple of games. And there's rumors that they might try to get the other 20 or 30% of people who don't pay by creating a lighter version that was ad supported. In other words, you're not gonna get the new season of Ozark, but maybe you can get the first two or three. Uh, you're a year behind the production schedule, but you could watch it all with ads. So the, the- But why isn't Netflix in video games and sports?

Chamath Palihapitiya 1:03:44 It's such an obvious one. And that's why I think they released a series of games based on their IP. So as their IP grows, and I think that's what you'll see with Disney+ is, think about it, app store inside of Disney+, a merch store inside of Disney+.

Jason Calacanis 1:03:57 I wonder, I wonder-

Chamath Palihapitiya 1:03:57 I think there's so many verticals next to them.

David Friedberg 1:03:59 ... why don't they own, uh ... Why isn't there a merch store inside of it?

Jason Calacanis 1:04:00 Why don't they, why don't they own Spotify or have a Spotify competitor?

Chamath Palihapitiya 1:04:04 Well, I think Spotify sees themselves as a, you know-

David Friedberg 1:04:06 That's a, that's a really good point. You know, when you look at the Peloton. I was looking at the Peloton, um, earnings when, you know, they said it was down 25% yesterday or the day before. And I was like, "This is an incredible business because they have 2.1 million subscribers that pay for-"

Chamath Palihapitiya 1:04:22 They pay 40 bucks a month.

David Friedberg 1:04:23 It's incredible. I mean, and-

Chamath Palihapitiya 1:04:24 It's a money printing machine.

David Friedberg 1:04:25 Money printing machine. I actually have a subscription. I don't even have a Peloton, Peloton. I don't have any of them.

Chamath Palihapitiya 1:04:29 Or you just pay $500 a year to use the, the classes.

David Friedberg 1:04:32 I have the app, it's crazy.

Chamath Palihapitiya 1:04:33 Yeah.

David Friedberg 1:04:33 I don't even use the app, but I-

Chamath Palihapitiya 1:04:34 I think that's 20 bucks for the, just that app, yeah.

David Friedberg 1:04:36 But the point I was trying to make is when you look at it, you know, there's about 30% of that revenue that goes right back to the music labels for the music. So, you know, to your point, like, uh, there's just an enormous value in actually music. You know, so-

Chamath Palihapitiya 1:04:49 Well, one of the, one of the great-

David Friedberg 1:04:49 ... as Netflix builds library values-

Chamath Palihapitiya 1:04:50 Right.

David Friedberg 1:04:50 ... and content, they could be, they could point it to music as well. There's all these things they could do to reignite growth.

Jason Calacanis 1:04:55 Oh, a lot of people discount the, the value of having a subscription consumer business. When you have a consumer's credit card on file and they're paying every month for something, it's an incredible point because you don't have the friction of getting the sale done, you've already done the sale.

Chamath Palihapitiya 1:05:09 Yup.

Jason Calacanis 1:05:09 Now the question is, can you upsell them some new service or some new addition that they're not paying for today?

David Friedberg 1:05:13 It's so obvious, yeah.

Jason Calacanis 1:05:14 It's so obvious, right? And so like, by the way, I'll say this, like for years Google struggled with this question, which is, "What is Google's consumer subscription business?" Because con- Google did not have consumer credit cards across its platform-

David Friedberg 1:05:25 Nope.

Jason Calacanis 1:05:25 ... despite a billion daily users. And so Google for years was strategically trying to figure out what business can or should we be in to have a subscription model with consumers. Because once you have that, then you can charge for all sorts of stuff. You can charge for storing photos, you can charge for-

Chamath Palihapitiya 1:05:39 Yup.

Jason Calacanis 1:05:39 ... accessing audio, you can charge for-

Chamath Palihapitiya 1:05:40 Well-

Jason Calacanis 1:05:40 ... accessing unlimited video.

Chamath Palihapitiya 1:05:41 ... imagine if at the-

David Sacks 1:05:42 I'll, I'll be the, I'll take the contrarian side of this.

Chamath Palihapitiya 1:05:44 Okay, here we go.

Jason Calacanis 1:05:45 Yeah, go ahead.

Chamath Palihapitiya 1:05:46 Go ahead, Peter Thiel.

David Sacks 1:05:47 Well, no, I, look, I, I-

Jason Calacanis 1:05:48 (laughs)

David Sacks 1:05:48 ... invest in B2B subscription businesses. I hate B2C subscription businesses. And the reason is just the churn rates.

Chamath Palihapitiya 1:05:54 Yeah.

David Sacks 1:05:54 What we see when we look at B2C subscription businesses is 5% monthly churn is not uncommon, it's pretty much the standard. So, call that 50, 60% churn in the subscription base every year. So effectively, you're rebuilding the company from scratch every two years. I don't see like how you can build a successful business that way.

Chamath Palihapitiya 1:06:12 Yeah, no, it's, but well I'll tell you why you're wrong about this.

David Sacks 1:06:14 Hold on, hold on, let me, let me, but do we contrast that to B2B?

Chamath Palihapitiya 1:06:16 Yeah.

David Sacks 1:06:16 With B2B subscription businesses, you do lo- lose some customers, but the ones who stick with you keep adding seats for more employees usually. And so actually-

Chamath Palihapitiya 1:06:25 Land and expense stuff.

David Sacks 1:06:26 ... your co- your land and expense, your cohorts actually, your cohorts are growing 20% every year instead of shrinking 50%. Now obviously, there are some of these B2C subscription businesses like Netflix and Peloton. They are obviously valuable. They've defied gravity. Well, Netflix has done it because they spend billions of dollars on content. And Peloton's got it be- because they plop a expensive machine in your house so you can't forget about it and that keeps you a little bit more recurring than like a lot of these subscriptions which are just very easy to cancel. But, so look, they've been able to make it work, but I'm, most of these B2C-

Chamath Palihapitiya 1:06:58 Here, here's why I, I think you're wrong.

David Sacks 1:07:00 Okay.

Chamath Palihapitiya 1:07:00 It, it turns out these are so low priced, these subscriptions, that you get a lot of consumers te- trialing them-So because it's only five or 10 bucks a month to use something, like a Spotify or a Disney, um, because they're so low price, you, you do get a little bit of, uh, sampling, and that's why the rate's higher. Whereas in business, there is a massive onboarding of people have to take their time to set up the software, learn how to use it. So if you're going to commit to it, it does reduce it. And you do have land and expand. But what we're talking about with product expansion is the equivalent in SaaS of land and expand. So imagine if Disney+ or Spotify, after you listen to an album, or it's in your top rotation, they showed you the merch for that band. Or after you completed this season of Mandalorian or Book of Boba Fett, they showed you the merchandise and said, "Here's a limited edition of, um, Grogu, Baby Yoda." When they. We tried to get Baby Yoda stuff last Christmas, they. Disney dropped the ball. They didn't have any. Uh, and they could've had all that made, and they would've sold millions of them. We were buying stuff on Etsy.

David Sacks 1:08:01 The reason Baby Yoda works is 'cause it's leveraged off a platform, th- this massive Disney platform of which this B2C subscription service is just one piece.

Chamath Palihapitiya 1:08:09 Yeah.

David Sacks 1:08:09 I mean, look, obviously there are valuable consumer subscription businesses. So the way I'm approaching it can't be right in all cases. However, I think people really get themselves in trouble when they start to value these B2C subscription businesses the same as the B2B ones. In one case, you. In the B2C case, churn is the predominant characteristic, and it means that you're gonna have to spend more on marketing or cogs or content or what have you to keep rebuilding the user base, whereas in the B2B context, the user base is compounding on its own, and that'll. That just makes for, uh, I think, a more fundamentally-

Chamath Palihapitiya 1:08:45 Yes.

David Sacks 1:08:45 ... attractive business opportunity.

Chamath Palihapitiya 1:08:46 Yes, but it grows slower. Again, just. At the end of the day, these are all variables, just the weights just change. I agree with David that consumer churn businesses or consumer businesses have much higher churn than enterprise, and enterprises have negative churn, which means that they just naturally grow. But the reality is consumers just have an unbounded TAM that enterprises do not. And-

David Sacks 1:09:08 Billions.

Chamath Palihapitiya 1:09:08 ... the way that. The way that the LTVs work, uh, just tend to be different. And the cash flow cycle of these companies tend to be very different. And that's why you see Netflix get these enormous valuations that enterprise subscription businesses do not. What some people are now doing when they look at consu- consumer businesses and they look at churn is they take out the ones that are based on credit card to look at, like people who actually unsubscribe because they don't want it, but not because their credit card changed.

David Sacks 1:09:30 Right. So, so basically. So if you think about like Netflix's business, if it's churning 2.5% per month, let's call that 30% of the user base is attriding every year, they've got to rebuild their user base from scratch every three or four years. Now, they can do that. Um, I guess at some point, though, they may run out of, you know, greenfield opportunity to grow their customer base. Um, but, you know, it's gonna pressurize their margins 'cause they're gonna have to constantly spend on content, original content, to retain you. They're gonna have to spend on marketing to keep going after the portion of the market they haven't acquired yet.

Chamath Palihapitiya 1:10:06 Yeah, but the archive. You. You're leaving out the archive. These archives are gonna be super valuable, and I don't think we even know how to value these archives yet because if you look at the Marvel archive or the Star Wars archive, these things just keep printing money year after year, and then you'll see Netflix and HBO Max will keep being able to go back to them, HBO Max being the canonical example now, because you didn't think that that business would have, you know, a lot of IP to build on, but suddenly you have The Many Saints of Newark, um, and the, uh, Sex and the City reboot. I mean, they're going right down the line.

David Sacks 1:10:35 Yeah, IP has value.

Chamath Palihapitiya 1:10:35 There's gonna be an Entourage reboot.

David Sacks 1:10:36 When you own the franchise, it has value. Disney has shown that.

Chamath Palihapitiya 1:10:39 Yeah, but-

David Sacks 1:10:39 You own the best franchises, and you have value, but-

Chamath Palihapitiya 1:10:41 And HBO Max is. HBO Max is now showing it, and then that means Netflix will show it next.

David Sacks 1:10:45 Yeah, but how much of Netflix's content do they even own? Are they licensed 100%?

Chamath Palihapitiya 1:10:48 Now. No, now it's 100%. Netflix is 100%. They stopped, and that's why Disney started taking it off. Their, their whole spend. That. I think they're spending 20 billion or something. It's all on original content. So that, that's why they made that move is because they knew they were gonna have the Disney content and the Marvel content pulled. Where do we wanna

Chamath Palihapitiya 1:11:04 go next?

David Sacks 1:11:04 Guys.

Chamath Palihapitiya 1:11:05 Big wild flames?

David Sacks 1:11:05 Because I have COVID, uh, I want to.

Chamath Palihapitiya 1:11:07 Are you dying?

David Sacks 1:11:08 I want Sachs to, to talk to me about his. What, what's going on with Fauci? Oh my gosh. This is quite