E65: VC markup dynamics, Russia/US tensions over Ukraine, Altos Labs raises $3B, Stripe mafia & more

Jason Calacanis 0:00 We don't want to talk about Anduril. I think that guy, Palmer Lucky, is super fascinating, the Oculus guy.

David Sacks 0:03 Why do you want to talk about that company?

Jason Calacanis 0:05 'Cause I think an American company-

Chamath Palihapitiya 0:06 He's launching a syndicate soon.

Jason Calacanis 0:08 No. I... He-

David Sacks 0:09 Are you an investor?

Jason Calacanis 0:09 Palmer Lucky hates me. He won't come on This Week in Startups. He literally hates me.

Chamath Palihapitiya 0:12 What did you call him, Parma Lucky? (laughs)

Jason Calacanis 0:14 Palmer Lucky, cosplay Palmer.

Chamath Palihapitiya 0:18 (laughs)

Jason Calacanis 0:18 He's a cosplayer. I like the fact that he does cosplay.

Chamath Palihapitiya 0:20 What, what is that?

Jason Calacanis 0:21 That's when you dress up as comic book or like superhero characters and go to conventions with other nerds.

David Sacks 0:24 You know how you dress up in the clothes of old Italian women?

Chamath Palihapitiya 0:27 Yes.

Jason Calacanis 0:27 He dresses up like a-

David Sacks 0:29 (laughs)

Chamath Palihapitiya 0:29 (laughs)

Jason Calacanis 0:29 ... superhero.

David Sacks 0:30 (laughs)

Chamath Palihapitiya 0:30 (laughs)

Jason Calacanis 0:30 Ha ha, here's a cold open, folks. (laughs) You know, Chamath, uh-

Chamath Palihapitiya 0:34 I, I do dress like a matrona sometimes.

David Sacks 0:37 (laughs) Yeah, right.

Jason Calacanis 0:37 Oh, I'm a Chamath. I'm making you the rigatoni.

David Sacks 0:41 (laughs)

Chamath Palihapitiya 0:41 (laughs)

Jason Calacanis 0:41 You want rigatoni with the vodka sauce?

Chamath Palihapitiya 0:43 You know, in the-

Jason Calacanis 0:43 I make it for you.

David Sacks 0:44 (laughs)

Chamath Palihapitiya 0:45 ... in, in, in, in Italy, there's like a culture, like, uh, in the, in the o- olden days. Like, it's like you used to have these things called salotti, which ba- basically meant like all the decisions of the country were made by these people in the living rooms after dinner. And, you know-

Jason Calacanis 0:57 Right.

Chamath Palihapitiya 0:57 ... the, the most powerful people in the salotti were, uh, these women who were married to these men.

Jason Calacanis 1:03 Right.

Chamath Palihapitiya 1:03 And they would be the architects of all these decisions.

Jason Calacanis 1:05 Oh, the Mussolini, I don't like him.

Chamath Palihapitiya 1:06 And, and, and-

Jason Calacanis 1:07 He never finished the pasta.

Chamath Palihapitiya 1:08 ... and, you know-

Jason Calacanis 1:08 He always leave so much on the plate.

Chamath Palihapitiya 1:10 ... and people, and people would call them matronas.

David Sacks 1:12 (laughs)

Chamath Palihapitiya 1:12 Uh, so I'd-

David Sacks 1:13 Interesting.

Chamath Palihapitiya 1:13 ... I'd proudly be a matrona.

Jason Calacanis 1:14 I've always felt you were like the old Italian lady in our group. (upbeat music)

David Friedberg 1:19 So let your winners ride.

Jason Calacanis 1:22 Rain Man, David Sax.

David Friedberg 1:25 I'm going all in. And I said we open source it to the fans and they've just gone crazy with it.

Jason Calacanis 1:30 Love you guys.

David Friedberg 1:30 West Side Queen of Quinoa. I'm going all in.

Jason Calacanis 1:35 Hey, everybody, welcome to another episode of the All In podcast. Yes, we're still publishing. Yes, (laughs) we haven't been canceled, but it's early in the show, so you never know. Uh, with me again, the dictator himself, Chamath Palihapitiya.

David Sacks 1:49 (singing)

Jason Calacanis 1:49 The sultan of science, David Friedberg. Whatever beverage you like, he'll make it for you right now in his replicator. And of course, yeah, the Rain Man himself, yeah, definitely gonna win the midterms, yeah, David Sax. Everybody have a great week getting their asses kicked in the market?

Chamath Palihapitiya 2:07 I'm pretty good.

Jason Calacanis 2:09 You're okay? Everybody okay?

David Sacks 2:10 Pretty good.

Jason Calacanis 2:10 Nobody checking out of the window?

David Friedberg 2:13 I can't even look. I can't look at my portfolio anymore. I just stopped checking it. (laughs)

Chamath Palihapitiya 2:16 (laughs)

Jason Calacanis 2:18 I, uh, not a fan of the color red.

David Friedberg 2:19 (laughs)

Chamath Palihapitiya 2:20 I actually, um, I, I've been using this period to kind of desensitize myself. Um, I went back and I started to think about like all of the sort of errors of commission that I've done in like the last decade. And I, I was able to look at like four or five specific trading moments where I was like, "Wow, what did I do that for?" And I came away with two things. One was, if I confuse an investment with a trade, I'm done for. Meaning like there are things that you invest in that you just want to own forever, and then, then there are things that are trades that are just speculative. And, you know, at the end of the day, you have a sense that it could be up in the short term. If I confuse those two, I've made huge mistakes. And then the other one is, I would always get really emotional and panic at the lows. And so I was like, you know, in early December or November when I wrote that letter on Twitter, and we talked about it, and I sold a bunch of stuff after Jeff and, and Elon were selling, raised some cash, and I was like, "Okay, now I have enough buffer here. The whole point from here on out is to basically like insulate myself from my own emotional turmoil (laughs) as stocks go down." (laughs) And so far, so good. And my litmus test of when I go home, uh, at the end of every day, y- you know, I check in with Nat and I'm like, "Am I an asshole?" (laughs) 'Cause if I... When I get-

Jason Calacanis 3:40 She's like, "Yes, what does that have to do with investing?" (laughs)

Chamath Palihapitiya 3:42 ... when I, when I get crushed in the market, I tend to, I tend to take it out on my friends and my loved ones.

Jason Calacanis 3:47 Yeah, we know.

Chamath Palihapitiya 3:47 Honestly, because I, I'm just- (laughs)

Jason Calacanis 3:48 We're your friends. We know.

David Sacks 3:49 (laughs)

Jason Calacanis 3:49 We come to your poker game when your stocks are down, (laughs) and you're just like-

Chamath Palihapitiya 3:53 Oh my god.

Jason Calacanis 3:53 "That's it. Run it once. That's it. I'm popping the glides up. I can't take it anymore."

David Sacks 3:57 Do you remember last year, Chamath, during the, uh, the market collapse, uh, when, at the start of COVID, and you decided you didn't care about having nice jeans anymore? And then you fast-forwarded to December, and you were-

Chamath Palihapitiya 4:09 (laughs)

David Sacks 4:09 ... proclaiming the virtue of a $5,000 fresh alpaca sweater or whatever?

Chamath Palihapitiya 4:14 (laughs)

Jason Calacanis 4:14 (laughs)

David Sacks 4:14 I think, I think another, another indicator of sentiment in the market for you is your clothing, um, yeah-

Chamath Palihapitiya 4:19 Oh my god.

David Sacks 4:20 ... uh, choice, but-

Jason Calacanis 4:21 Well, let, let me, let me ask a question.

Chamath Palihapitiya 4:22 ... this is a, this is a really nice cashmere ribbed sweater from Loro Piana.

Jason Calacanis 4:26 Okay, well, we're back in the game. It's good to see we're back to normal now. Yeah, let me ask you then, I'm gonna put a couple of, uh, items out there. Is Bitcoin a trade for you or an investment for you? Or was it and is it now?

Chamath Palihapitiya 4:38 Well, I invested it in 2011 at $80.

Jason Calacanis 4:41 Yeah, yum yum.

Chamath Palihapitiya 4:43 I wrote an op-ed in that same year in Bloomberg, which I hope at some point they take off the paywall.

Jason Calacanis 4:50 Yeah.

Chamath Palihapitiya 4:51 And the whole thing was you should have 1% of your net worth in this thing.

Jason Calacanis 4:54 Yeah.

Chamath Palihapitiya 4:55 It's remained an investment ever since.

Jason Calacanis 4:57 So still an investment?

Chamath Palihapitiya 4:58 Yeah, I've structured it so that I don't hold any Bitcoin personally myself 'cause I don't want to have the pressure and the risk of keys and coins and wallets and this and that. But, uh, I still really believe in Bitcoin in the long term.

Jason Calacanis 5:11 Got it. Sax, how do you, how, how do you deal with the emotional turmoil of opening up your stocks, crypto, whatever wallet and seeing red and then going to work every day? Are you just curled up in a ball playing chess-

David Friedberg 5:23 (laughs)

Jason Calacanis 5:23 ... with Peter Thiel at this point?

David Friedberg 5:25 Yeah, I mean, you just got to try and ignore it.

Jason Calacanis 5:27 Okay, (laughs) tr- try was a key word in that sentence.

David Friedberg 5:30 It doesn't really affect me that much. I mean, so-

Chamath Palihapitiya 5:32 I run the avoidance acceptance function.

David Sacks 5:34 (laughs)

Jason Calacanis 5:35 I have removed my emotions.

David Friedberg 5:37 No, look, there are, there are countervailing benefits. So when exit prices are great, entry prices are lousy. And when, when entry prices are great, exit prices are lousy. So there's an inverse relationship. So in other words, all the, the companies that... I mean, the, the public markets have massively corrected, and though... and, and now finally, you know, we talked about this few, few months ago, those new price levels have trickled their way down into venture markets. And so finally, you know, venture deals are starting to price at more reasonable prices. So-In terms of harvesting gains from old investments, um, obviously it's not as attractive as it was three months ago. But in terms of making new investments, it's much more attractive. And for a relatively young venture firm, which is what we are, you know, we, yes, we do have some investments that are kind of in the harvesting stage, but, you know, we're only a four or five year old firm. We're still... The bulk of our activity is making new investments, so, you know, it's not... It's, um, it's all just kind of part of the game and I'm not really that worried about it.

Jason Calacanis 6:43 Said another way, fortunes are made in the down market, they're collected in the up market, is the way I always phrase it, but it's true. Things are gonna be on sale right now and we saw Bill Ackman, I think, uh, who I think is a friend of the pod.

Chamath Palihapitiya 6:56 Great guy.

Jason Calacanis 6:56 And if he listens, yeah, you're, you're-

Chamath Palihapitiya 6:57 Super, super, super smart, brilliant guy.

David Friedberg 6:59 Yeah, and I just, I just want to emphasize because I don't want founders to get the wrong idea. It's not like we're trying to pull one over on founders and get some sort of sweetheart deal or something like that. My view of, like, our role as VCs is just to be a price taker of whatever prices the market sets. We don't try and negotiate something better than market, really. We just take the market price and we pick the companies we want to be in. So that's our job, is really just to pick, not really to negotiate that much.

Jason Calacanis 7:28 You're not, you're not able to haggle. It's not like you can go to, like-

David Friedberg 7:30 Yeah, exactly. The markets are super competitive.

Jason Calacanis 7:31 ... the supermarket and be like, "Oh, bananas are $1 a pound? I'll take them for 50 cents." They're like-

David Friedberg 7:34 Right.

Jason Calacanis 7:35 ... "I'm sorry, this is a Whole Foods. We don't negotiate prices." (laughs)

David Friedberg 7:37 Right, so we're, we're, we're, we're a price taker in, in good markets or bad markets and, um, it's just that I think that the prices now are coming down because what I've heard is that the crossover investors like Tiger, like Coatue, who are deploying all this money, they've really, uh, slowed down now. I think they're all kind of licking their wounds. And, uh, so, like, all this money that was flooding into the venture space is kind of on pause right now and that's caused the price levels to, to drop.

Chamath Palihapitiya 8:06 The end of last year in Q4, my public portfolio really started to turn over, took a huge amount of losses going into the end of the year, and then w- I, I took an accounting, obviously, of, like, the entire book and, uh, the public portfolio, every single thing that I owned ultimately basically broke even last year. Some were up, I made some early sales, some were way down by the end of the year. Net-net, I kind of broke even. But my private book was up a billion dollars and I told the team, I'm like, "Uh, no, this is not real." So we have to take those marks because, you know, you have other venture firms that are pricing these deals and we get audited K-1s and so we have to take the up billion, but, um, I told them, "You should consider this," that we had basically a down... You know, so net-net our returns were like... You know, we were up, like, 15% and I said, "This is not real." We were at, at best break-even-

Jason Calacanis 8:59 Yeah, sometimes-

Chamath Palihapitiya 8:59 ... and probably we lost money. But you can't, you can't not take these marks because, like, you know, you have an entire fund complex that lives on these marks.

David Friedberg 9:08 Yeah, and by the way, by the way, d- d-

Chamath Palihapitiya 9:09 It doesn't affect my compensation at all, but I have to take it.

Jason Calacanis 9:11 Friedberg, then Sachs. Go ahead, Friedman.

David Sacks 9:13 No, that's a re- It's a really important point because I think we talked about this one or two episodes ago, um, but there's a significant disincentive for venture firms to take markdowns, to raise capital into a private business at a price that's lower than the prior round, because when they do that, the, the, the marked value of their portfolio goes down and then it makes it harder for that venture firm to go out and raise the next fund that they're gonna try and raise from their LPs because it looks like they're not good investors. And the reality is... And so in every round, as, as everyone on this pod knows, there's always an incentive and a push to see can you get the valuation higher even if the business performance didn't meet the objectives of the prior round and things have gone sideways a bit. Doesn't necessarily mean that it's a bad business, but it doesn't necessarily mean that it should always be getting an up round just because it's being kept alive. And there's this artificial, um, pressure, uh, in private, uh, equity, uh, in venture to always drive the value up or to run away from the company, because otherwise you're gonna have this markdown and you don't want to be putting money in a markdown that looks like a loser and so on. And if you look at the public markets, every successful company has had significant downturns in their stock for, um, significant periods of time. From Apple-

Jason Calacanis 10:26 Facebook, Amazon.

David Sacks 10:27 ... to Google to Facebook to Amazon to Netflix and all of those businesses were sound businesses, it's just that for whatever reason, there were perturbations in markets, perturbations in the business, but the long term value creation was still there. And so I think we need to kind of, you know, be really thoughtful, you know, and, and, and entrepreneurs should be very thoughtful not to give in, uh, to the venture mandate to always drive value up, but to be really thoughtful about getting the right valuation for your business and getting the capital you need with the right partners.

Chamath Palihapitiya 10:55 Can I say something about this? You... It's so important what you said. One of the tactics that I started three years ago was I run my own shadow portfolio where I don't take the marks and I just keep them at my cost basis, and I'm not allowed to use that for anything. I don't, you know, I can't use that, obviously, I would never use that for compensation with my team or anything else, but I use it in my own head to say, okay, if I invested $1, let's not think about what somebody else may think about what that dollar's worth, let's just keep it at $1, unless it's impaired, but I don't take the markups. And I look at my portfolio that way, but it's a very difficult thing to do. And the reason I do that is because I don't have the pressure to raise incremental funds, but if I did, I wouldn't be able to play that game and I'd be very focused on making sure other VCs marked up my deals. Because, to your point, it takes 10, 12 years to drive liquidity, literally.

Jason Calacanis 11:48 That's the key here, yeah.

Chamath Palihapitiya 11:49 And so what are you supposed to do if you're a venture business in year three or four except raise money on markups? Paper markups are the... They're the, they're the-

David Sacks 11:57 That's the lifeblood of, of a venture-

Chamath Palihapitiya 11:59 That's the lifeblood of, of what keeps this industry going.

David Sacks 12:01 ... of a venture industry. Yeah, totally.

Jason Calacanis 12:01 Well, I mean, it, the, the interesting thing for me is I LPd a couple of these small, like, emerging fund managers, you know, micro funds, 10 million or so, 3 million, and they were sending, like, a lot of updates. And so I'm in some top tier venture firms that some of you are in-... and they send you an audit every year, and they send you a distribution. Cash on cash, here's where you're at. And then I was getting, like, quarterly emails. Uh, as everything was going up, these new fund managers are like, "We're at 100 IRR, we're at 200% IRR, because this crypto investment we did got marked up." And I was just thinking about what Bill Gurley would always say, which I think is a Howard Marks quote, "You can't eat IRR." (laughs) Like, what are we doing here? Like, why, why is there such a focus on this? It's because you wanna raise your next fund. And then the other game people were playing was, and I got into this, um, because people were like, "Oh, you know, you're grossly undervaluing your, uh, funds because Robinhood is trading at $30 a share (laughs) on the private markets. Calm is trading at this in the private markets." On the second, people were using secondary market transactions as their mark. So I'm curious, Sacks, how do you think about if you invested in a company that Series B was $100 a share, but then somebody bought it at $150 a share in the private markets! Where do you like to mark that in your funds, or how do you think about that in getting ahead of your skis in terms of valuing your private funds?

David Friedberg 13:19 Well, to Chamath's points, uh, we have accounting rules around this, so we can't, like, subjectively decide, like, what mark to set for each company for, you know, obvious reasons. Our LPs want, like, a, a, like-

Jason Calacanis 13:32 Reality.

David Friedberg 13:32 ... predictable accounting. So, the way it generally works is that you, the mark is set by the most recent private, you know, financing. That's just the way it works and, if people want to discount it from there, they certainly can, you know?

Jason Calacanis 13:47 What about a secondary transaction? Is there any ...

David Friedberg 13:50 There's more complicated rules around that because it's a different class of stock, so, um, it's some combination of sometimes we use a 409A, sometimes it's the latest preferred round. It's, um, you know, it just, uh, there's, like, complicated rules around it.

David Sacks 14:04 By the way, I'll, I'll, just to rehash what was already said and just to say it one more time, Chamath pointed out that it typically takes 12 years to liquidity from the time a startup is initially funded to the time that you sell it or, or go public. Show me one public company that has had 12 years of consis- consistent gain in its stock price. It doesn't exist. And so, uh, again, like this, this notion that, you know, every startup is seeing some perpetual persistent increase in value, uh, is an artifice that, um, you know, doesn't really-

Chamath Palihapitiya 14:34 Well, it exists-

David Sacks 14:34 ... represent-

Chamath Palihapitiya 14:34 It doesn't, it doesn't exist in tech, and that's the, that's a feature, not a bug.

David Sacks 14:38 Right.

Chamath Palihapitiya 14:38 Meaning, the things that can go up predictably for 10 to 12 years are not necessarily businesses that-

David Sacks 14:43 They're not disruptive. They don't take risk.

Jason Calacanis 14:44 They're not dynamic.

Chamath Palihapitiya 14:46 No.

David Sacks 14:46 They don't take risk, yeah.

Jason Calacanis 14:47 Uh, Sacks, can you define perturbation for the audience? I, I heard Friedberg (laughs) say that a couple times.

David Friedberg 14:52 Perturbation-

David Sacks 14:53 Perturbation would be-

Jason Calacanis 14:54 Perturbation-

David Friedberg 14:55 ... basically-

Chamath Palihapitiya 14:55 Changes.

David Friedberg 14:55 ... what, like volatility, basically? Yeah, rapid change.

Jason Calacanis 14:58 Anxiety, mental uneasiness? Hmm, okay, a cause of anxiety or uneasiness. Okay, I got it. I thought you were saying another word.

David Sacks 15:06 You don't use the word perturbation?

Jason Calacanis 15:08 I, I thought you were (laughs) said another word. (laughs)

Chamath Palihapitiya 15:10 What word was in your brain?

David Sacks 15:12 Yeah.

Jason Calacanis 15:12 I thought I heard masturbation (laughs) . I was like-

Chamath Palihapitiya 15:14 Masturpa- but masturbation doesn't end-

Jason Calacanis 15:15 Wait a second, what exactly did he say about the markets? (laughs)

Jason Calacanis 15:20 Speaking of markets, we were on a text, on our text thread talking about if we're about to have the, uh, start of World War III, and then maybe this ha- is not in the news now? I don't... Uh, how do we look at the UK-Russia situation in the Ukraine? Obviously, 100,000 troops are amassing on a border. And what is the goal here? Um, 'cause P- Biden is saying, "Hey, listen, if anything happens we're gonna go (laughs) to war." And there's a lotta saber-rattling here. I don't exactly understand what Putin's goal or motivation is. And that, that's, I think, what I'm not hearing in the news is exactly what is his goal. What, what are your thoughts on what's happening in, uh, the Ukraine and Russia, uh, Sacks?

David Friedberg 16:10 Okay, well, I think first of all, we have to kind of level set in historical terms about how unusual and unprecedented it would be for us to send troops to fight, you know, potentially Russia in a border conflict with Ukraine. With, and by the way, the, Biden put 8,500 troops on alert for deployment this week. It's really without historical precedent. Uh, during the Cold War, you know, in 1956, Soviet tanks rolled into Hungary to crush rebels there. Eisenhower did nothing. 1968, Soviet tanks rolled into Czechoslovakia to crush the Prague Spring. LBJ did nothing. 1981, the Soviets qua- um, crushed the Solidarity movement in p- in Poland. Ronald Reagan did nothing even though he had campaigned on getting tough with the Soviets. And then in more recently in 2008, when Russia invaded, uh, Georgia, uh, George W. Bush did not intervene militarily. And in 2014 when Putin occupied Crimea, Obama did nothing. And so this idea... And, and the reason for that in all of those cases is because America has a vital national interest in avoiding war with a nuclear armed Russia, and we did not have a vital national interest in defending the territorial sovereignty of those nations. That's the bottom line. And so for us to be now beating the drums of war and talking about sending troops into a war zone with Russia is just, it's unbelievably irresponsible.

Jason Calacanis 17:46 Friedberg, uh, one might speculate, uh, if they were cynical, some sort of wag the dog situation here. Biden's not doing well, he's lowest popularity ever, midterms are coming up. I- is there any political motivation here do you think in what Biden's actions are? You know, given the context of what F- uh, Sacks just outlined?

David Sacks 18:05 I, I think that there's, um, this is like showing up to the l- you know, the last 20 minutes of a two-hour movie, and then saying, "Oh my gosh, what's this guy doing? He's so crazy." There's a long narrative that precedes the current news cycle on what's happening with Putin and the Ukraine.... you know, in large part, the United States helped to start the fuel, um, the expansion of NATO in the '90s. And, um, the intention was to make NATO as western allied, uh, kind of organization, contain Russia, step up right to their borders, get very close and, um, and ultimately make these kind of, you know, areas free l- liberal democracies that are aligned with the West, and put them right on Russia's border. And, and that is obviously antagonistic. If anyone tried to do that to the United States, like Russia did with the Cuban Missile Crisis, we would view that as a hostile act and we would react accordingly. And for years, the pressure has been building and, and has been mounting, as Putin had started to kind of solidify, uh, his political power at home and his allies abroad in trying to figure out ways to push back on this wall that has been built around him and his nation. And it... You, you know, to some degree, I think we look at this as, like, his aggressive behavior, but it... To some extent, it is a defensive behavior over a very longer cycle when, when, when viewed that way. And again, like, remember the US had this Monroe Doctrine, um, which President Monroe put in place in, I don't know, 18 something, 1800 something that said, you know, anyone that comes into our territory and tries to influence nations around us to be hostile towards us is, is a hostile act in and of itself. Anytime someone tries to influence our politics, it's hostile. And I think Russia views our behavior and NATO's behavior this way. And so his primary demand is and has always been that the Ukraine cannot and will not and should not join NATO. And the US response has and continues to be-

Chamath Palihapitiya 20:05 And, and the EU.

David Sacks 20:06 And the EU. And we're saying, "Look, we, we believe in the sovereignty of the Ukraine, and we want the Ukraine to make their own decision about where they go and what they do." But the reality is, for us, this is a key part of a very long-term strategy to keep Russia contained. Now, meanwhile, there's this beautiful backdrop of what's going on with China. And if I'm China, I would love to see the US and Russia in conflict because it will weaken the US. And if I'm Russia, I would love to see the US and China in conflict because it will weaken the US. The US is in a very precarious situation right now, and for us to actually end up in conflict, it's gonna weaken our position with one of these other two emerging, you know, challenging, you know, superpowers, and this is a, a, a really precarious time. I think to Sax's point, it's, it's highly unlikely we're gonna end up sending military, but the posturing is such that we need to kind of hold our line until the very last minute. We'll see what happens. I did say, you know, at the end of the year, I do think that we're in this kind of economic status right now that if there were an opportunity for conflict, we're probably more likely to want to engage in conflict than not, because it does create something that we all get behind, it creates, you know, kind of a, a political unity, it creates economic unity, it creates driving forces that, uh, maybe might help us through what is clearly a very volatile and difficult time at home. Um, so let's see what happens.

Chamath Palihapitiya 21:23 I think Obama's already given us the end game. I just think we have to go through the machinations to get there. He said to The Atlantic, I think it was in 2016 or '17, he said, "The fact is that Ukraine, which is a non-NATO country, is going to be vulnerable to military domination by Russia no matter what we do." And, you know, every time there was this brinksmanship, we effectively blinked and rightfully so, because it didn't necessarily make sense to, to all of a sudden engage the war machine to go to war in Eastern Europe. The thing that's interesting about what happened here though was that this was a slow moving train wreck that was really visible years and years ago. Why is that? Well, if you look at what was really happening, this is really a European issue, and you got to think, "Well, why is America being the leading actor here when..." You know, where's Europe in all of this? Well, it turns out that, you know, the strongest power in Europe, Germany is in a really difficult situation because they rely on Russian energy. 50% of, uh, the nat gas that comes in... or 50% of the energy, I think, that comes into Germany is from Russia. And they've in fact been building an entire pipeline system, um, from Russia that bypasses the Ukraine and goes straight to Germany. And so when all of this saber-rattling was happening, Germany basically had to blink because they need Russia's energy. And why did they need Russia's energy? Well, they needed Russia's energy because 20 years ago, the environmentalists in Germany won-

David Sacks 22:51 Crazy.

Chamath Palihapitiya 22:51 ... and they started to decommission all their nuclear reactors. (laughs) It's so ridiculous. There was no... So at somewhere along the way, nobody took a science class in Germany (laughs) and figured out that nuclear was both safer and cleaner, instead burning fossil fuels was the answer.

David Sacks 23:04 And geopolitically wiser to not have a dependency. And after Fukushima, they went, turned them all off. They accelerated it.

Chamath Palihapitiya 23:11 Yeah, it made more sense to burn fossil fuels, number one, and then to, to get those fossil fuels from Russia. So unfortunately, we are in this state of affairs where, you know, Germany has said, at, at least that's been reported, that they would shut down this pipeline, Nord Stream 2 if, uh, if Russia did something. But the reality is, I think Obama basically told us that, you know, it's gonna be very difficult for us to justify an act like this, especially against somebody who is fortified and clever and smart. This is not like invading the Middle East. And so-

David Sacks 23:41 This is a master chess player.

Chamath Palihapitiya 23:42 ... if this, if this happens, the, uh, the stock markets will just go (laughs) absolutely to zero. I mean, if you could have negative stock prices, this may be a good catalyst

David Friedberg 23:51 We'll pay you to take these Netflix shares, please. (laughs)

Chamath Palihapitiya 23:54 It's unbelievable. It's re- it's really, really crazy.

David Sacks 23:57 This is... It seems like a situation where we're assured not to get into, to mix it up with him. Like, I, I don't understand Putin. I don't understand Biden saying that he's absolutely going to react to this, because we're not. We can't afford to get into a war right now. That's right.

Chamath Palihapitiya 24:14 No, but-

David Sacks 24:14 And if, and, and if that is true, then, you know, US dominance, the US ability to hold the line starts to decline. And, uh, and that-

David Friedberg 24:23 Well, I, I don't, I don't, I don't know if I agree with that because-

David Sacks 24:25 Yeah.

David Friedberg 24:25 ... um, I think we could defuse this crisis very easily.

Jason Calacanis 24:29 ... yeah.

David Friedberg 24:29 Which is-

Jason Calacanis 24:29 What's the exit ramp? Yeah, tell us.

David Friedberg 24:31 Well, the, the exit ramp here is, W- what is Putin demanding? Putin is demanding that we affirm that Ukraine will not be part of NATO. In my view-

Jason Calacanis 24:41 Sure, let's do it.

David Friedberg 24:41 Na-, in my view, that's giving him the sleeves off our vest, because we should not want to add Ukraine or Georgia to NATO. Uh, that would do nothing to enhance the security of the United States. We wouldn't get anything out of it. But we would be obligated under, uh, Article V of-

Jason Calacanis 24:57 To defend them. Yeah.

David Friedberg 24:57 Exactly, to defend them. So, admitting Ukraine or Georgia or Moldova could ultimately bring us into a war-

Jason Calacanis 25:05 Invite antagonism, too.

David Friedberg 25:07 ... with Russia. Exactly. So, to Free- to Freeberg's point earlier, we have been poking the bear for two decades with our expansion of NATO, right up to Russia's front porch. And if you go all the way back to 1990, when George Herbert Walker Bush was president and James Baker was Secretary of State, there was an assurance made by James Baker that, that, you know, basically, they had gone to, to Gorbachev and said, "We wanna," you know, w- w- for help in reunifying Germany. And the promise made that, famously, that James Baker said is, that, what Gorbachev said is, "We don't want NATO expansion." And Baker apparently said, "Not one inch eastward," was the line. And, um, and we, we think back to how well, uh, Herbert Walker Bush and James Baker managed the end of the Cold War. How did they do that? They, they did that by making assurances to Russia that we would not bring NATO up to their fr- front porch, is what, which is what we did. In 2000, we've now added something like 14 countries in Eastern Europe to, um, you know, to NATO, including in 2004, the, the Baltic countries. And that decision by George W. Bush really is the thing that pretty much severed our relationship with, with Putin. You have to remember that Putin is, he is fairly popular in Russia because he stokes Russian nationalism. And what is the source of that nationalism? It is because a single tree organization, NATO, now has this huge contiguous border with Russia. They now feel encircled. And if we were to add N- uh, Ukraine to, to that organization, there'd be a 1,200-mile, again, border, which, um, that Russia would have with, with just this one, this one alliance. It would be a- akin to, imagine if we were still in the Cold War and Canada were added to the Warsaw Pact, right? I mean, we would be incredibly threatened by that. So, and so, but, but, you know, you never hear, it's, J-CAL, you never hear any of this on the news. All you hear-

Jason Calacanis 27:03 That's right.

David Friedberg 27:03 ... is the beating of the war drums-

Jason Calacanis 27:05 That's right.

David Friedberg 27:05 ... and Putin is portrayed as this mad dictator. He has no legitimate concerns. Now, look, Putin is an authoritarian, and you could describe him as a bully and a thug, and he has provoked this-

Jason Calacanis 27:15 He's a dictator. Yeah.

David Friedberg 27:15 He has provoked the situation, certainly, okay? But, you know, we treat him as if he has no valid concerns whatsoever. And I think the simplest thing to do to diffuse this crisis would simply be to say, "Yes, we have no intention of adding Ukraine to NATO," and then we will find out if Putin is a liar or not.

Jason Calacanis 27:34 Well, that would be a great move. Like, it's a, that would be like, "Hey, let's take a five-year pause. Okay, you know what? We'll negotiate with you. We'll take five years. We won't put them in NATO." Give, give a little bit of a concession because their country is not doing well. Their GDP trails China and the United States. Their GDP per, you know, uh, each citizen is incredibly low compared to the West. Like, and then we could just work with Germany to get on sustainables, which is what their goal is. I- and we could economically continue to trounce them, 'cause as you point out every week, Chamath, they're not an important economy.

Chamath Palihapitiya 28:06 Here's what Obama said about Putin. Obama said, "The truth is, actually, Putin, in all of our meetings, is scrupulously polite, very frank. Our meetings are very businesslike. He never keeps me waiting two hours like he does a bunch of these other folks. He's constantly interested in being seen as our peer and as working with us because he's not completely stupid. He understands that Russia's overall position in the world is significantly diminished."

Jason Calacanis 28:30 Yeah.

David Sacks 28:30 He's not crazy. He's not dumb. And by the way, nationalism, as Sax points out, which is a, a, a, a, a primary, you know, drum call for, for Putin, is not a novel sense. We, we are a nationalist country. (laughs) Nationalism is, um, you know, pride and, and wanting to make sure that your country is treating with, treated with respect and has sovereignty. And so I don't think that Putin is an irrational actor. His behavior is very rational in response to what's gone on for 30 years, and his requests are that he is feeling threatened and he is trying to avoid military conflict as much as he can. And we portray him as being an aggressor that's demanding military conflict. And at the end of the day, our behavior over a long period of time as a country has driven us to the brink here. And I think Sax is right. You know, the, the, the right decision may very well be to, to kind of, you know, leave the region alone and focus on issues that matter more deeply to us and are a higher priority rather than drawing us into this. But-

Jason Calacanis 29:27 A better investment would be in sustainable energy.

David Sacks 29:29 I think the economic seed is planted for us to be in some sort of conflict this year. So, you know, we're, we're gonna end up with something-

David Friedberg 29:34 Yeah, I know. Remember-

Jason Calacanis 29:34 Wait, wait. Explain what you mean by that, Freeberg. Economic seed to be in some sort of conflict.

David Sacks 29:38 I think that, you know, generally, if, if you're not gonna see homegrown, you know, uh, uh, economic productivity gains and you're suffering trade issues like we're gonna suffer this year given the supply chain problems globally, we're gonna look for some place to manufacture growth. And, uh, there's no better way to manufacture growth than through, um-

Jason Calacanis 29:56 So true. Wag the dog.

David Sacks 29:57 ... through conflict.

David Friedberg 29:58 The foreign policy establishment of Washington, you know, the neocons, the, you know, the so-called Washington Blob, I mean, here they are beating the drums for war. We haven't been in a war for, what, six months? We just got out of Afghanistan-

David Sacks 30:08 (laughs)

David Friedberg 30:08 ... and now they want us back in another war? And, and the media just keeps-

Jason Calacanis 30:12 No bueno.

David Friedberg 30:12 ... fueling and fomenting this, and they don't... You know, their, their coverage of it is, well, it's exactly what we talked about last week, J-CAL, when I pointed out that your, your rhetoric, your humanitarian rhetoric, as noble as the sentiments are, when it gets whipped up into a lather and a frenzy by the media-... it blunders us into a bunch of stupid foreign interventions.

Jason Calacanis 30:33 I, I would not call it rhetoric. Call it b- uh, let's call it beliefs. My beliefs are not rhetoric, but I, I get your point. Is there any path-

David Friedberg 30:38 But here we are one week later, and exactly what I said the risk of this is, has now materialized in-

Jason Calacanis 30:42 Okay, so clearly you're blaming my (laughs) position on human rights on the Russia conflict. (laughs)

David Friedberg 30:47 No, what I'm saying is that, what I'm saying is that this type of rhetoric is used by the military industrial complex and the Washington blob-

Jason Calacanis 30:52 Sure.

David Friedberg 30:52 ... and the neocons to stampede us into wars that don't make any sense. That's what I predicted a week ago. That's, or that was my concern.

Jason Calacanis 30:59 Well, the death that would occur in a-

David Friedberg 31:00 And here we are one week later, and we're in exactly that situation.

Chamath Palihapitiya 31:03 It is our most successful export. It is our most successful export.

David Sacks 31:07 J Cal, really important. There's a difference between, there's a difference between belief and how do you act on that belief and what are your actions based on that belief?

Jason Calacanis 31:14 100%.

David Sacks 31:15 And I think that a big part of what's gone on, and this hearkens back to a few episodes ago when we all got in trouble, uh, (laughs) or there was an attempt at canceling us after we, we spoke about this. But the, but when those beliefs are, um-

Jason Calacanis 31:26 Here we go.

David Sacks 31:26 ... as Sacks pointed out, harnessed in a way that, um-

Jason Calacanis 31:29 Co-opted.

David Sacks 31:29 ... is ultimately co-opted in a way to, to, to fuel and to drive, you know, conflict. Uh, it, uh, it obviously goes beyond belief and it starts to move into an area where there is a very wide spectrum of action.

Jason Calacanis 31:42 Yeah.

David Friedberg 31:43 Mm-hmm.

David Sacks 31:43 And, uh, it's very easy to tip yourself onto the one side of the spectrum, um, and as a result cause a lot of harm and a lot of damage, like we've done in Afghanistan, like we've done in Iraq, and so on.

Jason Calacanis 31:52 Here's a great lens. What is the cost of going to war in the Ukraine versus whatever human rights or sovereignty issues they have? Hundreds of thousands of troops going to war is gonna result in more human suffering (laughs) than what's currently happening in-

David Friedberg 32:05 Including for Ukraine. It's sort of, it's-

Jason Calacanis 32:07 Exactly. They're gonna, they're gonna be in the middle of a w- the war is gonna happen on their turf.

David Friedberg 32:11 The humanitarian interest is in diffusing the situation.

Jason Calacanis 32:15 Exactly. 100%.

David Friedberg 32:15 And, and the way, the way to do it in a way is to, is to, you know, accede to this-

Jason Calacanis 32:21 Accede.

David Friedberg 32:21 ... one demand that-

Jason Calacanis 32:22 Yes.

David Friedberg 32:23 ... that Putin has about-

Jason Calacanis 32:24 I agree.

David Friedberg 32:24 ... not admitting Ukraine to NATO, which just to say something more about why we shouldn't want that. The problem in Ukraine and Georgia and Moldova... Fi- first of all, these are not North Atlantic countries, right? This is mission creep by NATO. They're in the Caucuses. And the problem they have is they're sort of these breakaway, you know, Russian republics. But inside of these countries, there's breakaway provinces. You know, uh, they're, they're ethnically Russian areas within these countries that want to break away from them. So you have a breakaway within the breakaway. And so you've got these powerful forces-

Jason Calacanis 33:00 It's complicated.

David Friedberg 33:01 It's very complicated. So for example, in Georgia in 2008, when there was a war there, and Russia did invade Georgia, but it was on behalf of these breakaway provinces of South Ossetia and Abkhazia. And then in, uh, in Ukraine, they've got, um, the Donbass and, and Crimea, which has now been a- uh, annexed by Russia, which are these, uh, majority ethnically Russian areas, you know, and, and s- same, same problem in Moldova. So the problem is you've got these, like, incredibly complicated border disputes within these countries based on ethno-nationalist tribalism. And, you know, the-

Jason Calacanis 33:42 Sounds familiar, right?

David Friedberg 33:43 The US does not have a vital national interest in getting involved in those disputes. And by admitting these countries into NATO, they could pull us into those disputes because the key provision, Article 5 of NATO, says an attack on one is an attack on all. We're obligated to go to the defense of those nations. How is the security of the United States enhanced by that requirement? They get a lot out of it. We don't get anything out of it. So again-

Jason Calacanis 34:06 This is slightly, this is a v- distinctly different than, say, Taiwan as an issue. But let's put that aside, and, and we'll get to that in a second. If China and Russia and the United States are in this very complicated chess board, is there a way not only to diffuse the situation, but is there a way, and I know this sounds like a crazy Hail Mary, to deepen the relationship with Putin and make th- Russia and the United States, in some way, allies against this relationship with China? Because the Russia-China relationship is also very complex. Is, is there some path to us having a better relationship?

Chamath Palihapitiya 34:41 Xi's holding, Xi's holding a summit. The last person he saw in real life was the leader of Pakistan in 2020, before the pandemic started. Do you know who he's meeting with in two weeks before the Olympics start, or in a week? It's Putin.

Jason Calacanis 34:55 Yeah.

Chamath Palihapitiya 34:56 In person. And then the, there's gonna be a tripartite, uh, alliance conference between, uh, China, Russia, and Iran.

Jason Calacanis 35:06 Great.

Chamath Palihapitiya 35:07 So I think this idea that, um, that all of a sudden somebody's gonna found some holier than thou perspective on what the right thing to do is for other people is gonna be challenged. So those guys are going to think about themselves, and they're creating alliances to basically further advance their own objectives. And so I think we have to as well. The thing here, I, I think it, where, what deescalates all of this is economic sanctions and monetary impact. Because if Nord Stream 2 doesn't get turned on, which is in Germany's control, that has a huge economic impact to Russia.

Jason Calacanis 35:44 Explain what it is.

Chamath Palihapitiya 35:45 Nord Stream 2 is that pipeline that I just talked about, the nat gas pipeline that, that basically doubles the amount of nat gas flowing from Russia into Germany, and essentially into all of Europe.

Jason Calacanis 35:56 But hasn't Ger- Germany said if they invade the Ukraine, they haven't more than-

Chamath Palihapitiya 35:59 They haven't said it, they haven't said it on the record. They, it, it is, it, it is thought that Chancellor Scholz, that, that, that it's theoretically on the table, but it hasn't been officially declared. Biden today said that he's talked, or somebody in the White House, um, has talked to all the major banks in the US about crippling economic sanctions. So I, I, I do think the way this gets deescalated is through money. And if you, you know, if you severely impinge Russia's ability to sort of grow their economy, that foments a lot of, you know, anger at home. And I don't think that, you know, that'll probably weaken and destabilize Putin more than-... you know, uh, trying to sort of have a, an, I don't know, some kind of, like, get together and hug it out session with him.

David Friedberg 36:46 Yeah, I mean, so, so Jason, you raise a good point with, you know, can we improve our relationship with Putin? Obama tried, right? We had the whole reset, and ultimately it wasn't tremendously successful. But I think a lot of it has to do with the way that the foreign policy established from Washington sort of reacts. And I, Obama had some really good quotes about this. Um, I think it was in that Atlantic article where, you know, first he s- described that, uh, you know, that Russia ha- has a vital interest in Ukraine in a way we don't because it's right there, it's on their border. They've been attacked, Russia has, through the Ukraine, you know, throughout history. So again, it's just a primary interest of theirs. And, uh, so after saying that, um, Obama then, you know, he, he basically got a- attacked, you know, by, you know, in a b- it was, some of it was partisan, but, and then he responded to the attacks by saying, "If there's someone in this town, Washington DC, that would claim that we would consider going to war with Russia over Crimea and Eastern Ukraine, they should speak up and be very clear about it," he, he challenged. And then he said, "So, so, so the issu-" And no one did, right? No one was willing to just come right out and say that we should go to war over this. And that's how he diffused the attacks on himself. And then Obama continued, he said, "There's a playbook in Washington that presidents are supposed to, to follow. And the playbook prescribes responses to different events. And these responses tend to be militarized responses. You are judged harshly if you don't follow the playbook, even if there are good reasons." So what Obama is saying is that no one would defend a more militarized, uh, posture and, and going to war against Russia over the Crimea, and yet he was somehow portrayed as suspect, you know, by not being tough enough on Russia. And, um, so you know, if you're Putin and you see constantly the foreign policy establishment, you know, reacting in this way, it's, it's not a problem that even one president can just fix overnight.

Jason Calacanis 38:48 You know what would change this? Is if, when we send 100,000 troops over there, uh, it's a draft and, you know, it's not an all paid military. The fact that these people in Washington who got their kids in Georgetown or Harvard or wherever they are, Stanford, don't have to send their kids over there to fight this war is one of the reasons they can write these documents and have these doctrines that, hey, you gotta send all these troops into harm way, harm's way. Like, if they had to send their sons and daughters, it would be a much different discussion of, like, where we're gonna start a war, whether it's Afghanistan or the Ukraine.

Jason Calacanis 39:16 All right, let's go to markets. Um, Bill Ackman, uh, came over the top. He's buying a ton of, uh, Netflix. And Tesla just absolutely flipped to becoming a money printing machine, uh, and had a ridiculous quarter. Revenue's up 53, to 53 billion, up 71% year over year, Q4 revenue, 17 billion, 65% year over year. And they (laughs) increased their deliveries by 71%. And, uh, you know, now you're all of a sudden just starting to see some, uh, you know, income coming into the company. So flipping from money losing to break-even to now printing a ton of money. Microsoft had an absurd quarter. Uh, their revenue hit 51.7 billion, up 20%, uh, in the quarter, 20% year over year. Pays for $200 billion in revenue in 2022. And their net income was also up 20 plus percent at 18.8 billion. So the money printing machine in these companies is just extraordinary. Chamath, what are your thoughts?

Chamath Palihapitiya 40:20 I think you're, you're, you forgot a couple of key things, which is that the FOMC meeting happened this week and Powell basically said, "Look, we're gonna start tightening in March." I think the way that he said it, you know, all of these words tend to be so scrutinized and overanalyzed, but the, instead of figuring out what people thought, I think their actions post the FOMC are important, which is that, you know, we effectively now started to price in about five rate hikes this year. So probably five 25 point rate hikes effectively. That's what, that's what the, that's what the yield curve tells us. If you take a big step back, I just want to remind people, like, it's really hard to live through volatility, right? And we're in the phase of it now. But typically, these big drawdowns, so like, you know, when stocks go down, it actually precedes, so it comes before, the actual starting of a rate hike cycle. And so if you go back to the, you know, from 1950 onwards to today, every time the government has started to raise rates or the Federal Reserve has started to raise rates, the stock markets have actually rallied. Now, why is that? It's typically that they see through the end of the rate hike cycle and they start to price the business as if these rate hikes are done and to, to, to rebase things. And on average, I think the stock markets go up between seven and 8%, so call it 7.5, 8.5%. And so what's interesting to me is now we're finally starting the process of these hikes, and the real question is going to be, how data dependent do these guys get? And what I mean by that is, so you know, we talked about this before, but you know, China cut rates. This past weekend, actually Germany decreased their GDP forecast. And so you're starting to see two huge countries already say, "Hey, wait a minute. We need to be, you know, we need to be more realistic about what long-term growth looks like here." It's inconceivable in my mind that those countries are slowing down and we won't. And so I think what happens in these other huge GDP drivers of world GDP will affect us. And so, you know, Sax and I have said this before, but the marginal risk will be that we over-correct and actually create a recession that doesn't need to be one. So-

Jason Calacanis 42:32 We slam on the brakes too hard. And another way of saying it is, the-

Chamath Palihapitiya 42:35 I, so I don't know.

Jason Calacanis 42:35 ... rate hikes are, or the market is a leading indicator of what's gonna happen post-

Chamath Palihapitiya 42:40 ... the rate hikes.

David Friedberg 42:41 We had a nice relief rally going until, I think some of the words that Powell used was that there was plenty of room for rate hikes.

Chamath Palihapitiya 42:47 Plenty of room. Yeah.

David Friedberg 42:47 Meaning that because unemployment's at 3.5%, that, you know, we're at full employment and that means that the Fed can, that, you know, has this dual mission of keeping inflation low and, you know, keeping employment high. So if employment is high, then they've got more room to raise rate. Anyway, it was that language around the plenty of room that freaked markets out and it triggered a huge selloff. I think to Chamath's point, I don't see how you could have this much wealth destroyed so quickly and have it not impact the real economy. There's a lot of people out there who feel a lot poorer because their portfolios have gotten slashed in value. I mean, anybody with-

Chamath Palihapitiya 43:26 So they'll, they'll tightening, they'll clench, not spend as much money on a vacation-

David Friedberg 43:30 Absolutely.

Chamath Palihapitiya 43:30 ... not buy a TV or a car, so these waitlists for cars might get, you know, become ouch.

David Friedberg 43:36 The luxury markets of the economy, the optional purchases, uh, start to really slow down. And so I think that the risk of recession now is much higher than it was even a month ago. Now, you know, it's gonna be hard to know... So, so basically, I think what we're saying is, it's gonna be very hard for the Fed to engineer a soft landing here, where we don't trigger a recession, uh, in the process of stopping inflation. And, um, look, we'll, we'll judge Powell's performance, you know, at the end of this. You know, we're not gonna know. I think it's... But I, but I think that he's turned out to be much more hawkish in his statements than markets were expecting.

Chamath Palihapitiya 44:16 Again-

David Friedberg 44:16 That's pretty clear.

Chamath Palihapitiya 44:16 And in 2018, you know, he was probably overly hawkish and he actually created, effectively, a little mini recession. We, we didn't pay attention enough to it because, you know, Trump made it impossible to see the signal from the noise, but it did happen and it was Powell being a little too trigger happy. And so, you know, we have to remember that, you know, the Fed has $9 trillion of assets on their balance sheet. And so, you know, if they start to take $9 trillion of cash out of the system by selling these assets into the market, right, you're taking the money out, right, 'cause you're getting money back, that's gonna have an enormous huge impact as well. So if you think about-

David Friedberg 44:54 Stupid question, Chamath. What happens when that money comes out?

Chamath Palihapitiya 44:55 One second. Let me just finish. One second. One second.

David Friedberg 44:57 Yeah, yeah.

Chamath Palihapitiya 44:57 Let me finish, please. So, you know, so when you have these two things happening at the same time, you have a potential rate hike cycle, which makes the f- the cost of a used car more expensive, the cost of your credit card balances more expensive, the obligations you have to pay just become naturally more expensive. You feel poorer, so you spend less. And then separately, in the financial markets, you actually take liquidity out of the system, um, and so people value, you know, uh, liquidity more. It becomes, it becomes worth more. You pic- You, you value current cash more. I mean, we're putting ourselves in a really delicate position. So he's got a, a, a delicate balancing act here. He is definitely on a tightrope, I think. So if we pull 9 trillion out, we've been talking about this deficit, if he starts selling all of those assets, does that mean on the United States balance sheet, that will reduce our national debt? No. I mean, we're getting 9 tri-

David Friedberg 45:48 Where does the money go?

Chamath Palihapitiya 45:49 We're getting 9 trillion of cash, right? You sell an asset, you get cash for it. Right, and so-

David Friedberg 45:53 So it pulls money out of the economy in the same way that, uh-

Chamath Palihapitiya 45:56 Pulls money out of the economy. Yeah.

David Friedberg 45:57 It, it created liquidity when they were, um, buying assets, right? When they were buying th- this debt, it would put mon- push money out.

Chamath Palihapitiya 46:04 Yeah.

David Friedberg 46:04 If they're selling the debt, it pulls money back in.

Chamath Palihapitiya 46:07 What happens to those dollars is my point. Like, what, what is the impact-

David Friedberg 46:10 The dollars, the dollars stay on the f-

Chamath Palihapitiya 46:11 ... of those dollars sitting around in the United States Bank account?

David Friedberg 46:13 No, the dollar, the dollar stays in the US, USA's bank account, but the obligation, the note, i- exists in some financial intermediary that holds it.

Chamath Palihapitiya 46:21 Clearly, Powell does not want to be remembered as the Fed chief that let inflation slip the leash. Right? I mean, he, he's gotten religion now around the idea that this inflation is not transitory, which was his position for months. I think that now bit him and the risk is potentially an overcorrection, but he's not gonna let inflation-

David Friedberg 46:41 (laughs) He'll, then he'll be the first Fed governor to have caused two recessions.

Chamath Palihapitiya 46:45 (laughs) I think it's, like, a s- a serious risk. And, and by the way, these market levels that we're at right now, I mean, look, 60% correction in growth stocks. Okay? But this is with... That's still in a good economy in peacetime conditions. And now, we have a risk of recession and war. So, you know, there's still room for, you know, a lot more negative news here is kind of my point, and, um... But look, sentiment's also very negative. So when sentiment is this negative, there's also the potential for markets to quickly recover if there's positive news. But the, I think the sentiment, but the sentiment is there for the wrong reasons, I think. I don't think people are thinking recession. I think people are thinking, "My gosh, these rate increases. My gosh, I can't own these high growth stocks anymore." And none of those things are true. Those are just perceptions that get amplified by one's emotions when you're getting punched in the face, which is what happens-

David Friedberg 47:35 Yeah.

Chamath Palihapitiya 47:35 ... when you wake up every day and your portfolio is down-

David Sacks 47:37 And by the way-

Chamath Palihapitiya 47:38 ... five or 6%.

David Sacks 47:39 ... it generates incredible opportunity. The, uh, you know, the idea that markets bucket "growth stocks" together, I think, um, kind of obfuscates an important point, which is that some of the businesses in that category are real businesses that are gonna succeed over the long run, and some of them are speculative and are likely to fail over the short run. And, um, you know, as you saw Netflix sell off, Bill Ackman, very smart, came in and bought a bunch of the stock. I don't know if you guys remember this, but in 2011, TCV, which is traditionally a private equity investor at the time, and there wasn't a lot of crossover into public market stuff happening-

Chamath Palihapitiya 48:19 J- Ho?

David Sacks 48:20 They were, they, they were a private investor in, um, Netflix. Netflix stock tanked from, um, I think it was around $220 a share down to 70 bucks a share in a couple of months, and TCV did a $200 million pipe into Netflix. Um, and everyone was like, "Oh my God, what are they doing? It's incredible." And by the way, that was, uh, on an adjusted basis. That's $10 a share in today's share price. So that, that, that $200 million investment that they made went up 60X.... you know, at the peak of Netflix a few weeks ago. And so, you know, seeing Bill Ackman come in and, and underwrite Netflix again, and, and make a big investment at its current market price.

Chamath Palihapitiya 48:58 So, Jay Hogue?

David Sacks 49:00 I think it just really highlights that there, there... Just because the market price is down, doesn't mean that a business isn't fundamentally valuable and gonna grow and gonna generate significant returns over time as a, as an operating business. And that distinction starts to present significant opportunities in a market condition like this. And the businesses... We all talk about generally growth stocks are down 60%, but maybe most of them shouldn't have even been public companies in the first place. Maybe they should have been speculative private investments, where more than two thirds of them were likely to fail, and they shouldn't be failing as public companies. And the few that are getting damaged and hit with this market sentiment shift can be picked up cheap, and there's a lot of opportunity. And so I wouldn't view the market condition to be necessarily reflective, again, of the economy or the condition of businesses in general.

Chamath Palihapitiya 49:44 Jay Hogue was a partner at TCV. He's a founder of TCV that did that deal, and he's also the one that participated and led the billion dollar, uh, round into Peloton before they, uh, whiffed earnings and got, and got decapitated. But he's an incredible investor. That trade is probably one of the best trades of all time.

Jason Calacanis 50:02 So let's look in the good news column. Wages way up, earnings way up, 10 million job openings in the United States, pretty close to record low unemployment, and the pandemic ending, ending, and people having record savings in their bank accounts and personal balance sheets. So how does all that good news-

Chamath Palihapitiya 50:23 The pandemic hasn't ended.

Jason Calacanis 50:24 It's ending for people. I think it's over for people. Like, I mean-

David Sacks 50:27 JK, I'll tell you the thing I'm most concerned about. There's a reverberation that, that persists in supply chains. I don't know how much hardware, lab, biotech, consumer goods businesses you guys are involved in. I'm involved in a number of them. Every single one of them are crippled in some way right now by supply chain issues. I mean, I'm talking about, like, businesses that have been operating at steady state for many, many years, can't get ******.

Jason Calacanis 50:50 When do those get worked out?

David Sacks 50:51 We don't know. And everyone's getting surprised and hit upside the head every week with some new supply chain shortage, whether it's some chemical you need for some lab equipment or, you know, the, the delivery of some big piece of equipment or even plastic bottles that we use at (beep) to kind of fill up our beverages that we ship. That's a pretty sizable business. We've never had supply chain disruption like we're seeing right now. I'd like to bleep out the name of that company.

Jason Calacanis 51:14 Yeah. Beep.

David Sacks 51:14 But it... But it's, it's like, it's a (beep) . Bleep this out, but it's a significantly sized business that, um, has never had supply chain issues, it's all US based, but some of the suppliers of the suppliers have had complete failure in delivery, and all of a sudden, it's now reverberating through the supply chain. You guys saw that GM didn't deliver a single friggin' electric vehicle last quarter because they couldn't actually get the chips that they needed to make cars.

Jason Calacanis 51:38 Yeah.

David Sacks 51:38 So the, the real risk to the economy, in my opinion right now, is when and how we're gonna work our way through these supply chain issues, and it is so complex and there's a myriad of problems and it is a global problem that it's really unclear how this is gonna play out over the next six months. And what'll happen is this quarter and next quarter, businesses that you didn't realize and didn't expect are gonna get hit with supply chain problems are suddenly gonna say, "Guess what? Our revenue's off by 20, 30% because we couldn't sell this product because... And half our shelves are empty 'cause product didn't show up," or, or whatever the, the narrative might be.

Jason Calacanis 52:09 All right. So we put supply chain-

David Sacks 52:10 And it's, it's a real problem.

David Friedberg 52:11 I, I think it's a really... I think it's a great point because you don't solve these supply chain issues with rate hikes, right? It's like-

David Sacks 52:19 Has nothing to do with that.

David Friedberg 52:20 Nothing to do with it.

David Sacks 52:20 Right. Yeah.

David Friedberg 52:20 So the rate hikes slow the economy down.

David Sacks 52:22 And that's why I'm, I'm, I'm way more worried about this than rate hikes.

David Friedberg 52:25 Right.

Jason Calacanis 52:26 What does clean it up is capitalism, the end of the pandemic-

Chamath Palihapitiya 52:30 I'm less worried.

Jason Calacanis 52:30 ... time-

Chamath Palihapitiya 52:30 I'm, I'm less worried.

Jason Calacanis 52:32 ... indigestion. Yeah.

Chamath Palihapitiya 52:32 Um, and the reason I'm less worried is when you actually talk to the companies that, that are spending enormous amounts of money on CapEx, they've actually guided to the fact that by the end of this year and the beginning of next year, most of these things will be worked out.

Jason Calacanis 52:43 Yeah, it's indigestion.

Chamath Palihapitiya 52:44 So I think, I think we're, I think we're dealing with a, you know, six to nine month issue of having turned things off and are now rapidly trying to turn things back on, and we can't necessarily get that timing right. But I do think it'll work itself out faster than people expect personally. That's what I think. Because the cost of Apple and Tesla specifically guiding to that is too enormous. You're talking about, you know, collectively almost 4 trillion of market cap, so they're not gonna get something like this wrong. And they were pretty clear in the last few days that, that this will be done by 2023, early 2023.

Jason Calacanis 53:16 So, Sax Orchomoff, I just listed all the good news to counter, you know, the, the, the slog and the, and the bad news. How do you account for record low unemployment, record number of jobs, record wages going up, massive cash on people's personal balance sheet, massive amounts of sideline cash, massive amounts of venture funds being raised that have to be deployed in the next five years, all that good news, where does that, on this balance sheet of good versus bad, you know, work out for you, Sax?

David Friedberg 53:45 Well, the, the negatives are that, yes, the unemployment rate is very low, but a lot of people have dropped out of the labor force so the labor participation rate is still quite low, so.

Jason Calacanis 53:55 Because of?

David Friedberg 53:56 Well, because I think a lot of people dropped out because of COVID, you know?

Jason Calacanis 54:00 Yeah. ******.

David Friedberg 54:00 Everyone went remote. And, um, I think, you know, they got these stimu checks and I think a lot of people got used to not working.

Jason Calacanis 54:08 Okay.

David Friedberg 54:08 You know, maybe, maybe you had a household with two people who used to work and now only one of them is working. You know, maybe they moved to a cheaper part of the country. So, I mean, maybe it's a good thing, right? But a lot of people dropped out of the, the labor force and they haven't come back. And so that's the negative. And then, you know, the fact that wages are going up is good, but we don't know how much of that's inflation, right? So, you know, those would be the, the negatives. But there was a report that inventory levels did rise in Q4, and so the supply chain issues do seem to be ameliorating to some degree.

Jason Calacanis 54:44 Anecdotally, I was looking at cars, and now a lot of the people who had, you know, there's no way to get this car, now they're like, "Hey, we got a couple of these cars (laughs) available if you want them." And then if you look at the housing inventory, it does seem that maybe that's taking a plus too and people couldn't find houses and now maybe-... even though it's still a housing crisis, maybe there's more available or they're staying on the market a little bit longer.

David Friedberg 55:05 Yeah, I mean, it's, I think it's pretty clear that economic activity is slowing. Um, and again, things like rate increases, they, uh, it increases the, the cost of a mortgage, right? So that could affect house

David Friedberg 55:18 prices.

Jason Calacanis 55:18 I think there's an interesting startup story. Um, there's a private company that's doing essentially life extension that a bunch of rich people put $3 billion into. You wanna tell us, Friedberg, in your science segment what... if it's gonna make us live longer or not?

David Sacks 55:34 Well, I think I mentioned this company a few episodes ago, uh, but I think they just announced their, um, $3 billion investment. Um, and, and again, this goes back to the, um, the point I made on the prediction show. So last week, Altos Labs announced that they've landed $3 billion in funding, and this has been, uh, an ongoing funding that's been going on for quite a while into this business. But this business was set up, uh, to commercialize Yamanaka factor-based cellular reprogramming, uh, for age reversal. And there was a paper published just yesterday, I'll put a link in the show notes that if people are interested in reading a scientific paper, they can take a look. Incredible results. Scientists took mice, gave those mice short bursts of these Yamanaka factors, and then measured all the biomarkers, all of the chemical signatures in the blood of those mice, to determine their age. 'Cause there are known ways that we can measure the age of an organism by looking in their blood and measuring certain biomarkers. And with just a few short bursts for about a week of these drugs, these, um, uh, these Yamanaka factors, the mice, all of their age signals reversed to making it look like they were very young again. And it did not do what the challenge has been with Yamanaka factors in the past, is if you put too much of it in, in a body, in an organism, the cells rejuvenate to becoming stem cells, which is kind of like w- what a fetus might have, and starts to grow a lot of tumors. They were able to avoid having tumors show up in the mice, and the mice, in fact, all looked extremely young from a biomarker basis. So an incredible result, an incredible paper, whether or not it gets repeated and shown by others, but I think this speaks to the quality of the science that's underlying the $3 billion investment that was just made in Altos Labs, which is probably one of the biggest seed investments ever in, in startup-

Jason Calacanis 57:26 No, it, it clearly is the biggest seed investment ever in a startup. There are nowhere close.

David Sacks 57:29 And I think it speaks to what I highlighted as, what I, what, what, what will be the new frontier in biotech and will completely rewrite, like, you know, the course of humanity, is if we can take drugs and, for a short period of time, completely reverse the age of ourselves. And it sounds so crazy and so wacky, but it's being now proven. In, in a single week, we've now had an amazing paper published, and we've seen the startup announce their $3 billion of funding to pursue commercialization of this technology, and this is gonna be the year. I think this will be the front cover of a lot of magazines this, this year, as people realize the, that this is real and that it's getting commercialized. So really excited.

Chamath Palihapitiya 58:02 Why, why do you think, why do you think they have to start with $3 billion?

David Sacks 58:06 Uh-

Chamath Palihapitiya 58:06 And I, and I'll tell you why I ask the question.

David Sacks 58:08 Yeah.

Chamath Palihapitiya 58:08 Whenever I see these grandiose prognostications of future progress and then see these companies raise exorbitant amounts of money, I have never found a single example-

David Sacks 58:19 Never worked.

Chamath Palihapitiya 58:19 ... where it's ever worked.

David Sacks 58:20 (laughs) Yeah, right.

Chamath Palihapitiya 58:20 Ever. In fact-

David Sacks 58:21 (laughs)

Chamath Palihapitiya 58:21 ... every time I see a company raise an exorbitant amount of money in a Series A, I write them-

David Sacks 58:25 Sure.

Chamath Palihapitiya 58:25 ... off in my head.

David Sacks 58:26 Yeah, sure. Yeah.

Chamath Palihapitiya 58:28 So why, why should I not in this case?

David Sacks 58:30 So-

Chamath Palihapitiya 58:31 Or it's more, actually, actually, better question, why would somebody listening to this pod go work there and take the Series A offer?

David Sacks 58:36 Right. So I, by the way, I, by the way, the same has been done and can be said about Calico, which is Alphabet subsidiary that's, that's pursuing similar research, where billions of dollars have gone into that business, and there's a si- a similar sort of research track underway. And I think the general principle, Chamath, is they don't know what the product is, they don't know the way to market, they don't know, you know, um, what area they need to explore, but the underlying principle is proven. The underlying principle is something that people believe in. This science is proven. This science is real. We don't know the commercial path, and we have to try lots of different things and run lots of different research programs in parallel to figure it out. And each of those research programs is like $100 million biotech startup. And so I think the, the, the principle is let's put a lot of shots on goal all at once in parallel and make sure, 'cause if any of these shots on goal work, this is gonna be worth many, many billions of dollars. So I think that's generally the idea. It's almost like having a $3 billion venture fund, but the venture fund is targeted at one core area of interest that we believe is real. And I think that's the way a lot of these things are being set up.

Chamath Palihapitiya 59:37 But I'm, I'm asking this question. Have you ever seen a company try to do 30 different things and it works?

David Sacks 59:43 No.

David Friedberg 59:43 No.

Jason Calacanis 59:44 Yeah, I mean, it's not the typical capital allocation, milestone-based funding scheme. I have a th- theory about this.

David Sacks 59:50 But it's not a product market fit thing, right? It's-

Jason Calacanis 59:52 No.

David Sacks 59:52 ... it's, it's a, it's a research program, and it's a series of research programs. But I mean, look, it, you, you... L- let me reframe it for you, Chamath. Have you ever seen a $3 billion venture fund that makes 100 bets with smart people at the helm, with smart people working at the individual businesses-

Chamath Palihapitiya 1:00:06 Sure.

David Sacks 1:00:07 ... fail, right? Like...

Chamath Palihapitiya 1:00:08 Yes, and in fact, I've never seen a $3 billion venture fund do much more than return 2X the money.

David Sacks 1:00:13 Yeah. Well, look, let's see. I mean, it's a, it's a big bet, and obviously, there's some people making nice management fees and nice carry on this thing, so.

Chamath Palihapitiya 1:00:19 I'm not trying to be a wet blanket. I'm just curious, you know, why do it that way? Meaning, you know, every startup...

David Sacks 1:00:25 Let's get Bob Nelson on. He'll talk about it. He'll-

Chamath Palihapitiya 1:00:27 Yeah, so I don't-

David Sacks 1:00:28 He, he said it up. Yeah.

Chamath Palihapitiya 1:00:29 Every startup, I think, uh, h- is forced in some ways by the market to make an educated guess about where product market fit lies and to try to build some minimum viable product. That, that tends to be how value is created. I mean, you could have said that, you know, Google could have had 90 different algorithms, but you know, Larry Page started with BackRub. That's how it started. He had to make an educated guess that-

Jason Calacanis 1:00:51 He had to make decisions, and that's what startup's about.

Chamath Palihapitiya 1:00:54 You have to make decisions and you have to-

Jason Calacanis 1:00:55 Choices.

David Friedberg 1:00:56 Yeah.

Chamath Palihapitiya 1:00:56 You have to make a bet on your, on your own intellectual veracity.

David Sacks 1:00:58 But Chamath, w- why, why, why don't you put all your capital into one company?

Chamath Palihapitiya 1:01:01 Oh, because mostly the companies won't let me.... but I would if I could.

Jason Calacanis 1:01:04 Oh, interesting. So I, I, I think that what's happening here to be super honest is-

Chamath Palihapitiya 1:01:07 I mean, you're, you're absolutely right. If I could, I would, but they don't let me.

David Sacks 1:01:11 You could buy... You could put all your money back into Facebook or back into... Forget Facebook, I know you got issues, but what about Alphabet or Amazon? Just put all your capital in one bet and just, you know, ride it out.

Chamath Palihapitiya 1:01:19 Right, but then it comes to what I think where I can generate the best return, meaning, you know, I think that I could generate much higher returns than what I think Google will give me.

David Sacks 1:01:28 Yeah.

Chamath Palihapitiya 1:01:28 That's why I do it.

Jason Calacanis 1:01:29 Well, well here, here's what I think is happening here. It... There are a lot of rich people who are going to die soon and they're counting down, like Bezos, and they're saying if... "Why not, if I'm worth 100 billion, put one, two, three billion into this and have them go for it? Because I've got nothing to lose 'cause I'm dying in 20 years." This is a fear of death by billionaire bet, which is exactly what I think happened with the Google guys. They were just like-

David Sacks 1:01:55 I, I'll also say the, the team involved in these projects are not first-time founders or people that are great pitchmen. It's people that are repeated tried and true entrepreneurial success stories that have done this over and over in biotech and they're the ones that are being drawn into working on these projects. And they're saying, "Look, because we've got the people that have done it over and over, give them the capital." I mean, do you think that's a good argument, Chamath?

Chamath Palihapitiya 1:02:14 No, I believe-

David Sacks 1:02:14 Yeah.

Chamath Palihapitiya 1:02:14 No, I b- I believe in Yamanaka factors and I believe that there will be innovation. My only question is, is the innovation going to come through a small team that raises a small quantum of capital with one very focused idea that gets it right? Or this sort of, you know, Monte Carlo simulation approach to product innovation. And all I'm saying is just an observation that historically it's been very difficult for these Monte Carlo simulations to ever work, either to generate product market fit and an innovation and to make money. Now, hopefully these guys are the exception that proves the rule because I think we'd all want this to work.

David Sacks 1:02:50 No, it's a, it's a great point and I hope you're right and I hope they start that small project and wipe you guys out.

Jason Calacanis 1:02:55 I, I think it's a, it's a great point.

Chamath Palihapitiya 1:02:56 But, but sorry, sorry now, now you're saying the key thing because despite the $3 billion, you're still gonna go after it, which implicitly is your way of saying-

David Sacks 1:03:03 100%.

Chamath Palihapitiya 1:03:03 ... "I'm short that company and I'm long my own company." And this is, this is the point I was trying to get to, which is when, when w- really, really smart people see these things, they tend to ha- look at it with a grain of salt thinking it's very difficult to build a startup as it is.

David Sacks 1:03:17 Yeah.

Chamath Palihapitiya 1:03:18 Sometimes it's kind of like growing great wine. You need to have a little pain and suffering along the way. And when you have $3 billion, it's the opposite of pain and suffering.

David Sacks 1:03:27 Totally true. And I'll also say one... L- let me just support your point which is, the people I see get hired to big projects like this, and there are a number of them that get funded not just... also in, in other kind of deep tech stuff, they hire the tried and true experienced executives who generally have older kids and live in a nice house and have made a bunch of money. And the earnestness, the motivation, the hunger, uh, the fuel, the, the creativity because they know what they know and they're not willing to accept that they don't know what they don't know, um, those folks generally are less likely to succeed than the folks who are doing this maybe for the first time for that very reason, when you're doing something innovative. So I totally support your point and, uh, and I really

David Sacks 1:04:08 do hope you're right. But I, I think 00:03:42 ] Jason, when you were talking about talking about startups, I thought we were going to talk about Bolt and the Stripe mafia fiasco this week. Oh, that's a good story.

Jason Calacanis 1:04:16 It's, uh, a pretty crazy story. Bolt-

David Sacks 1:04:19 Where does everyone fall? What side does everyone fall on on that?

Jason Calacanis 1:07:06 ... and that was the big mistake. And Mark Andreessen, Sequoia, a bunch of different venture firms responded. Sacks, what's your take on this? I see you're chomping at the bit, or maybe you're biting your tongue. Which is it?

David Friedberg 1:07:17 No, I, I, so I agree with Chamath that it was kind of a brilliant PR move, if, if that's what it was. I, I do like startups punching up and he took a punch at Stripe, which is the big company in the space. So... And then, yeah, Stripe, Stripe didn't respond directly, the Colsons didn't respond, but their surrogates did. And then that looks like punching down and it draws more attention to it. So I get the PR strategy. I would say that as to the merits of the allegation, I do, I, I, I, it's interesting that, you know, he didn't get into YC because I think that he is a very talented founder and, um, you know, we, we looked at this company pretty-

Jason Calacanis 1:07:54 Oh.

David Friedberg 1:07:54 ... yeah, pretty early on. It was for, like, sort of a mid-stage growth round and it was, like, one of the toughest decisions we, uh, we fa- I'd say the toughest decisions as a VC are when you actually want to invest in the company, but the valuation-

Jason Calacanis 1:08:09 Hmm.

David Friedberg 1:08:09 ... is like 2X what you think it should be. And that was kind of the situation at the time when we looked at it, is, I think we actually would have invested, it's just the valuation was too high, so-

Jason Calacanis 1:08:20 And it would have been a great bet for you.

David Friedberg 1:08:21 Yeah, he grew into it, and so it would have been a great bet. And-

Jason Calacanis 1:08:24 So it was a bad decision on your part?

David Friedberg 1:08:26 Yeah, yeah. Clearly we should have invested. It's just that, you know, at the time you invest, you have to have some basis for valuation. And, and that's the sense in which I think, you know, maybe Ryan's accusations don't totally make sense, is that he's been able to raise a lot of rounds at really high valuations, and so he, he hasn't had a problem, you know, raising a lot of money at, you know, great prices. And, it, you know, it almost feels like a slap in the face to his investors where, like, "What's the complaint? I didn't get any tier one investors." (laughs)

Jason Calacanis 1:08:59 Or that it was just hard to meet with investors-

David Friedberg 1:09:01 Yeah.

Jason Calacanis 1:09:01 ... and that Stripe called the investors-

David Friedberg 1:09:03 Yeah.

Jason Calacanis 1:09:03 ... and told them not to invest. That, that was the allegation.

David Friedberg 1:09:07 Yeah, no, I mean, yeah. I, I, I can't, I can't really speak to that, but-

Jason Calacanis 1:09:11 Yeah.

David Friedberg 1:09:11 ... I mean, he was clearly able to raise, uh, great rounds, so...

Chamath Palihapitiya 1:09:14 Can I read to you an email exchange between me and Ryan Breslow?

Jason Calacanis 1:09:19 Oh, a dramatic reading? Here we go.

Chamath Palihapitiya 1:09:20 From 2015?

Jason Calacanis 1:09:21 Uh-oh, here we go.

Chamath Palihapitiya 1:09:23 "Hmoth hopes all, all's well. Um, FYI, things felt too rushed on our end, so we're toning down our Series A discussions for a couple of months." And this was, this was in July of 2015. I'm, I'm reading you my answer because it's so fabulous.

David Friedberg 1:09:37 (laughs)

Chamath Palihapitiya 1:09:38 "Hi Ryan, after a wholly unsuccessful few weeks of attempting to win a World Series of Poker bracelet, (laughs) I'm back at home licking my wounds."

David Friedberg 1:09:46 (laughs)

Chamath Palihapitiya 1:09:47 "How about we talk in a week or two?" So, not only did I have a chance to win a World Series of Poker bracelet, according to this exchange, which I didn't win, obviously.

Jason Calacanis 1:09:55 Duh.

Chamath Palihapitiya 1:09:56 I had a chance to do the Series A in a $14 billion company-

Jason Calacanis 1:09:59 Screwed, man.

Chamath Palihapitiya 1:09:59 ... and screwed, screwed that one up too. (laughs)

Jason Calacanis 1:10:01 Big dummies. I mean, the, the things we miss are-

Chamath Palihapitiya 1:10:04 Oh my god, so brutal.

Jason Calacanis 1:10:04 There's like 20 things you miss as an investor for everything you hit.

Chamath Palihapitiya 1:10:07 So, I might... I, I, I've interacted with Ryan back in the day and I just remember him being super, super smart, and I do think that, you know, there's a lot of very smart people now around the table at Bolt, including Joanne Bradford. So, I don't think that this was something that wasn't planned, and I just think that they executed it well and it worked. And I think a lot of people know this company that didn't know it before. Now, they still have to execute and build a product and scale it and do all of these things, but...

David Friedberg 1:10:33 Yeah, and I think that the response he provoked, I mean, since I was a little bit critical of what he said, let me just say that one of the VCs who responded said that the reason they didn't invest was because the numbers weren't good. That was not my experience. When we looked at this company, they had great numbers, it's just, the valuation was ahead of those numbers, but the numbers were always great.

Jason Calacanis 1:10:52 I actually responded to that, and that was Sequoia partner, Sean Maguire, who said that. And I responded to him like, "Hey dude, VC code is you don't reveal the numbers on things you learn confidentially. What are you doing?" Like... And, uh, he's like, "Well, they said some BS about Stripe." I was like, "Yeah, still doesn't change VC code that if you learn something under NDA, friend DA essentially, in a meeting, you're not supposed to weaponize that against-"

Chamath Palihapitiya 1:11:18 Unless, unless, unless you have a $30 billion position.

David Friedberg 1:11:22 (laughs)

Jason Calacanis 1:11:22 I still think... Well, whatever. I still think it's like, I've never seen a VC do-

Chamath Palihapitiya 1:11:25 I mean-

Jason Calacanis 1:11:25 Honestly, it's the first time I've ever seen a VC do that.

Chamath Palihapitiya 1:11:28 Hey, Jason, Jason, come on. I, I don't... I think it's pretty... I think we all knew where he was coming from. He's defending an enormous position of his in Sequoia.

Jason Calacanis 1:11:34 You did that, Jason? You've always been-

Chamath Palihapitiya 1:11:37 I've never

Narrator 1:11:37 AirCal, AirCal.

Jason Calacanis 1:11:38 ... you've always been ins- You've been, you've been-

Chamath Palihapitiya 1:11:38 You've been fired, but I've never released inside information, is my point.

Jason Calacanis 1:11:41 But he didn't say any inside information. He did!

Chamath Palihapitiya 1:11:42 How would he gonna say information if he's general investor?

Jason Calacanis 1:11:45 He made a general, he made a general statement. He's, he made a general statement.

Chamath Palihapitiya 1:11:46 He, they met with them.

David Friedberg 1:11:47 But he was conflicted out, so why would he meet with them?

Chamath Palihapitiya 1:11:50 Hey guys, Nick just texted that I, uh, had I, had I found a way to get off my lazy ass, not be playing poker and do that deal, I would have generated a 222X on my investment program. (laughs)

David Friedberg 1:12:00 (laughs)

Jason Calacanis 1:12:00 Which would have been 15 million times 222X.

Chamath Palihapitiya 1:12:02 (laughs)

Narrator 1:12:02 Well, we screwed it up too.

David Friedberg 1:12:04 Thanks, Nick. Thanks, Nick.

Chamath Palihapitiya 1:12:04 Yeah.

David Friedberg 1:12:04 I think, I think the round we looked at went at, like, a $400 million dollar valuation or something like that, or-

Jason Calacanis 1:12:08 Oh my gosh.

David Friedberg 1:12:08 ... something in that range, and so, yeah.

Chamath Palihapitiya 1:12:09 My gosh, what would the Series A have been? I mean, the Series A would have been at, like, 23 or something.

Jason Calacanis 1:12:13 63 million according to PitchBook.

Chamath Palihapitiya 1:12:15 Oh.

David Friedberg 1:12:16 63 million. Yeah.

Chamath Palihapitiya 1:12:16 Yeah, wow.

David Friedberg 1:12:17 It, it was one of those meetings we came out of where it's like, "That's a super interesting founder," so I give-

Chamath Palihapitiya 1:12:22 Yeah, me too. That's what I remember too, were from Ryan.

David Friedberg 1:12:24 Yeah.

Jason Calacanis 1:12:25 That is the lesson.

Chamath Palihapitiya 1:12:25 Super, super, super.

Jason Calacanis 1:12:26 Super interesting founder, write the check.

David Friedberg 1:12:27 I said it earlier in the program that, like, our philosophy now is just to be price takers and just to pick the companies-

Chamath Palihapitiya 1:12:33 Yep.

David Friedberg 1:12:33 ... that we want to be in and then the market sets the price.

Chamath Palihapitiya 1:12:34 That's the biggest mistakes I've made as an investor. I got too focused on price.

David Friedberg 1:12:38 Yeah, if we had just done that with Bolt. We should have done that with Bolt. This was... The decision we faced was, like, a few years ago and so we just shouldn't have worried about valuation policies.

Chamath Palihapitiya 1:12:44 By the way, sorry, JCal, as soon as you said it was 63 million, you know what my reptilian brain said? "Oh, that feels so expensive." Even now, knowing that the outcome is 14-

Jason Calacanis 1:12:53 Even now as a Series A (laughs)

Chamath Palihapitiya 1:12:53 ... billion.

Jason Calacanis 1:12:54 (laughs) And still...

Chamath Palihapitiya 1:12:55 And so, to your point, David, it's a really good lesson for, for investors to learn, is just, you're a price taker.

David Friedberg 1:13:00 Totally.

Chamath Palihapitiya 1:13:00 Get behind these really interesting people that are world beaters and just let them do the work.

Jason Calacanis 1:13:04 Just place the bet.

David Friedberg 1:13:05 Yeah.

Jason Calacanis 1:13:06 All right. So there you have it, uh, this has been another amazing episode of The All In podcast.

Chamath Palihapitiya 1:13:11 Bye bye.

David Friedberg 1:13:12 Bye bye. Love you (techno music plays)

Narrator 1:13:15 Let your winners ride.

Jason Calacanis 1:13:18 Rain Man David Sacks.

Narrator 1:13:20 I'm going all in. And I said we open source it to the fans and they've just gone crazy with it.

Jason Calacanis 1:13:26 Love you, West. Ice Queen of Quinoa.

Narrator 1:13:28 I'm going all in. Let your winners ride. Let, let your winners ride. Let your winners ride.

Jason Calacanis 1:13:35 Besties are back.

Narrator 1:13:36 (laughs) That is my, uh, dog taking an L in your driveway, Sacks. (laughs)

David Friedberg 1:13:43 (laughs) Oh, man.

Chamath Palihapitiya 1:13:44 My appetite will meet me at (techno music plays) You should all just get a room and just have one big huge orgy 'cause they're all just useless.

David Friedberg 1:13:49 (laughs)

Chamath Palihapitiya 1:13:50 It's like this, like, sexual tension that they just need to release somehow.

Narrator 1:13:54 Wet your feet. Wet your feet. Your feet. Wet... (laughs) We need to get merch. Besties are back. I'm going all in. I'm going all in.