All-In PodcastE7: California's collapse, how SPACs are opening the markets for growth stocks & more
EVERY SPOKEN WORD
150 min read · 30,410 words- 0:00 – 6:43
The gang recap their summers
- JCJason Calacanis
Hey, everybody. Welcome back to the All In Podcast. Besties have reunited. It's been a bestie summer. Chamath, how are you doing? You're back in America, yes?
- CPChamath Palihapitiya
I am back in America. Feels good.
- JCJason Calacanis
Back in America. That feels great. Uh, good summer, yes? Did you have any summer?
- CPChamath Palihapitiya
I had an incredible summer. I had, uh, seven weeks in Italy. It was really incredible.
- JCJason Calacanis
What is the vibe in Italy post-pandemic? Obviously, they had the, the roughest of any nation, I think, except for China and Wuhan, um, with-
- CPChamath Palihapitiya
Well-
- JCJason Calacanis
... with COVID-19. How h- how is the psyche there?
- CPChamath Palihapitiya
That was incredible because they're... I mean, they're so resilient. They basically decided that they don't ever want to go through it again, so everybody wore a mask and, um, people socially distanced. There was lots of dinners outside. No restaurants were really seating people indoors. You'd walk into a, a store and you'd have to put some, you know, Purell on your hands and wear a mask and, um... There was like, you know, 40, 50 cases a day. And then I, I keep looking at the news when I was there. It was 60,000 a day here. I was... It, it was just really... It was sad. And then on top of that, to see the riots, the fires. I mean, there was uh... You know.
- JCJason Calacanis
It's been a disturbing summer here.
- CPChamath Palihapitiya
Oof. Oh my gosh.
- JCJason Calacanis
Uh, uh, how are you doing, David Sacks? You're back in San Francisco and, uh, you got to spend a little bit of time in an undisclosed location, as we, we know from the pod-... last couple episodes of the podcast. How is San Francisco right now? How has your bestie summer been?
- DSDavid Sacks
Uh, it's been great. Um, yeah, I was... I guess I can now disclose that my-
- JCJason Calacanis
(laughs)
- DSDavid Sacks
... undisclosed location was, uh, was Mexico, specifically Cabo. And that was... It was a great place to be for a couple of months.
- JCJason Calacanis
Spoiler alert: Nobody cares. (laughs)
- DSDavid Sacks
Yeah. Yeah, exactly. Um, but actually, um, it, it, it was great. It was a great place to be in the early stages of the pandemic because everyone was wearing masks, you know. They did take it really seriously. And, uh, there were very few cases, and it seemed like it was, uh, under control, at least in the area I was. And then, um, you know, we came back to San Francisco for, for school, for, for the kids' school, which, um, you know, I'm not sure we have to be here. But, um, but that's, that's, you know, where we came back for-
- JCJason Calacanis
And is the kid's school actually open? Are they going to school or they keep pushing it out two weeks like my kids are?
- DSDavid Sacks
Yeah, it's... We don't... Uh, they're not going in person yet, but I think they keep trying to figure out when they're gonna be able to start doing that. So it's, it's all Zoom-based right now.
- JCJason Calacanis
Yeah, which means no learning, right? I mean, do you, do you think these kids are actually learning on Zoom or do you think it's just glorified babysitting?
- DSDavid Sacks
A little bit. I mean, a little bit. I think it's, it's, it's difficult.
- JCJason Calacanis
Yeah. We, we gave up on it. And Friedberg, are you there?
- DFDavid Friedberg
I'm here. Bay Area.
- JCJason Calacanis
Uh, h- how has your bestie summer been, uh, during this crazy time?
- DFDavid Friedberg
I've been in the Bay Area. I've been, um, uh, crossing all, all seven layers of, uh, Dante's Inferno-
- JCJason Calacanis
(laughs)
- DFDavid Friedberg
... here in California, moving from the outer layer of COVID to the, uh, middle layer of California's proposed wealth tax, to the, uh, inner layers of, uh, extreme heat, smoke, and the absolute central layer of pain. Uh, more recently, my three-year-old daughter decided 34 nights ago to not sleep anymore. So, um, yeah, we've been living, living the life. It's been glorious. And, um, you know, I wear a mask now for COVID, and then I wear another mask on top of that mask for the smoke. So we're just living the California dream. What my-
- JCJason Calacanis
Oh, God.
- DFDavid Friedberg
... parents immigrated here for, you know? Paradise.
- JCJason Calacanis
Well, I guess that's a good place to start, and, um, just if anybody cares, I spent, uh-
- CPChamath Palihapitiya
(laughs)
- 6:43 – 14:05
Is California collapsing? Why or why not? Has the one-party system failed?
- GUGuest
times.
- DSDavid Sacks
Yeah.
- GUGuest
Uh, but let's talk about California, 'cause I think, you know, we're, we're all residents currently of California. But let me just put it out there, how many people on the call are considering, uh, leaving California? Anybody? Is that going through anybody's mind right now? 'Cause it's going through mine.
- DSDavid Sacks
No. Um, for, well, it's not for me, um, but, uh, I think that California is sort of emblematic of what could happen if you actually have, um, you know, the legislative bodies plus, you know, the, the top sort of political leader up and down on one ticket. I mean, you know, you, you basically have, like, massive rife incompetence. And it's been compounded. You never... I mean, you know, if people who are Democrats would have said, "Oh, the best thing that can happen for Democrats is if you have, you know, local cities plus an assembly, plus the state senate, plus the governor as a Democrat." Republicans would have said the same thing for Republicans. But as it turns out, uh, it basically creates the worst outcomes. And so instead what you need is a little diversity of ideas and a little push and pull. Um, but California is like a bunch of clowns in a clown car right now. It's a joke. But I'm not gonna move.
- GUGuest
Yeah.
- DSDavid Sacks
Right.
- GUGuest
Now, a part of I- why I'm not gonna move is I, I, you know, my taxes, I've set up in such a way where California can't get access to most of my assets anyway, so, you know, they can pound sand.
- DSDavid Sacks
(laughs)
- GUGuest
Definitely something to say on the podcast.
- DSDavid Sacks
(laughs)
- JCJason Calacanis
Yeah. David, how are you... Uh, uh, uh, Sachs, how are you feeling about California right now? Um, and just the craziness in San Francisco, the homelessness problem in San Francisco has become acute during this. It, it's, it's really getting crazy.
- DSDavid Sacks
Well, it's a, it's a disaster.
- JCJason Calacanis
And then the wealth task on top of it. And...
- DSDavid Sacks
It's, it's a disaster. It's a disaster. Um, I mean, I'm not, uh, I'm not leaving or anything, but it's certainly a topic of conversation that's come up a lot. And I do know people who have left. Um, I know a couple of people, you- you know, prominent people in the venture community who've, who've recently moved to Austin. And, uh, it's a horrible time for the, the city and state to be proposing all these new taxes as... Just take one example, because people are already realizing that because of COVID and, and this new sort of work from home and, uh, and Zoom, uh, business culture, where you can kind of work from anywhere, that people are realizing they don't need to be in San Francisco or in Silicon Valley anymore to be, you know, in the technology industry. And so at precisely the time that people were re-evaluating where they wanted to be, realizing that they could be anywhere, California is now, you know, proposing to massively increase the cost of being here. Um, so it's, it's horrible timing. And then, you know, you do have this, uh, sort of seemingly chronic, uh, issue in San Francisco, particularly with, with the sort of homeless problem, uh, just seems to keep getting worse. Um, and there's, there's sort of this, um, weird hostility to technology and tech workers, um, here that I think it somehow uses a scapegoat to prevent the city from dealing with its real problems.
- JCJason Calacanis
And what do you perceive those real problems to be in, in the city? Um, I mean, you, you used the term homeless. I think most people looking at the problem, as one person candidly told me, "You know, what we have is not..." And I, I won't say who said this, but it's a prominent person. They said this, you know, "Jason, the, the issue here is this isn't a homeless problem, this is a junkie problem." And they use specifically said, "I'm using that term because that's the term to refer to people who are addicted to opioids, methamphetamine, fentanyl, and that if you were to actually unpack what we're calling a homeless crisis, it's actually a crisis of drug addiction, uh, and specifically fentanyl." And I don't know if you guys saw that we're gonna hit something like 500 overdose deaths this year, we're like going to double last year, and it's all fentanyl.
- DSDavid Sacks
Right.
- JCJason Calacanis
Um, which is a particularly, you know, deadly drug. So, I mean, what, how much do you think that is the problem, David?
- DSDavid Sacks
Huge, huge. I mean, it's, it's... You're right that homelessness is not the, the, the cause of the issue. The homelessness is the consequence of long-term drug addiction and mental illness. I mean, this is the, it's the end state.
- JCJason Calacanis
Yeah.
- DSDavid Sacks
And, uh, you're right, the city is, it's not really tackling the underlying issues. In fact, it's kind of aiding and abetting them. I mean, how many millions of needles does the city give away every year, and then it only collects a small fraction of them, with the remainder ending up on the streets?
- GUGuest
Yeah.
- DSDavid Sacks
Um, it's just, it's, it's bonkers. And I think part of the problem is that we keep saying that until we, uh, it, it... Is that we can't demand any, uh, improvement in the situation in terms of homeless people. You know, we have this like poop squad in, in San Francisco that's literally cleaning poop off the sidewalks because, um, homeless people are using our sidewalks as, as like a latrine, basically, as a bathroom. And it... And you, what you keep hearing is that, "Well, we can't do anything about that problem until we solve the homeless problem." And that, that's a, that, that... And certainly we should try to solve that problem, but it's a very long-term, you know, difficult and intractable problem. In the meantime, we can certainly do things like demand that homeless people not do that.
- JCJason Calacanis
Yeah, and the policing, uh, seemed to... There seems to be a distinct issue with policing right now. I, I watch the San Francisco Tenderloin Twitter account, David Freiberg, and they have arrested something like 260 meth, uh, meth and fentanyl dealers. But we have a, uh, DA, Chesa, I believe his name is, who doesn't believe in prosecuting any of those crimes, uh, related to drugs or petty crime. Freiberg, what has this city turned into for you as somebody who's been a long-term investor in the Bay Area?
- DFDavid Friedberg
Um, well, I moved here after I graduated college in 2001. And I loved San Francisco. It was, it was a, a quieter city and a quieter city. I, I honestly, um, over the years have found, uh, the traffic and the congestion and the buildup of the city to be frustrating. I'm a little bit of a anomaly in this sense, 'cause I think a lot of people, you know, think that the city should continue to grow and progress and, and build housing and so on. Those are all, uh, you know, fine objectives, but I think the quality of life has degraded for some time in the city as, as infrastructure hasn't kept up with the, uh, the changing pace of, of, uh, companies growing here. Um, and as a result, we've kind of got this ballooning, inflating budget that's been poorly managed. You've got, um ... I forgot the statistic, but there's, um, some number of thousand people plus that are city government employees in San Francisco earning over $300,000 a year. Um, and so there, there's a, there's a chronic kind of bureaucratic issue, um, that is the cancer that has caused, uh, you know, a lot of the follow-on crises that I think we're, we're now experiencing acutely y- here in the city. Now, in terms of leaving, to your earlier question, I, you know ... Um, I, I was really, like, I've just been like everyone, you know, like the, I ca- kind of talk about the li- the Dante Inferno layers. It's also like for me growing up, it's like a seven-layer burrito. It's like one layer of shit after another.
- CPChamath Palihapitiya
(laughs)
- DFDavid Friedberg
Um, start with the beans and in the middle you got the sour cream, and, um, you know, this city has just gotten, um, kind of at the state has gotten more and more difficult to live in, and I s- and I was certainly thinking and talking to my wife, like, "We gotta leave. Her family's here, so, so we're not gonna leave the state."
- 14:05 – 20:37
Understanding the bureaucratic side of California's problem
- DFDavid Friedberg
But then I get a call last week that, uh, that I think 18 of us were on with Governor Newsom, and, um, you know, he, he made a couple of really interesting points that really did honestly reset my perspective. I, you know, I, I try to take a step back and, and think a little bit more broadly about the long-term opportunity in California. The way this state operates, uh, right now, i- i- it's the fifth-largest economy in the world. They ran a surplus. They refinanced their debt. They've done a great job kind of managing kind of the fiscal gap that, that's, that's being created by the COVID crisis. Um, and, you know, Governor Newsom made a point, like we have had the California exodus story that's percolated and cycled really for decades. Uh, he pointed out an article which I've not been able to find, but I've been looking for it from Time Magazine from 1959 that would have, like, declared this is the year everyone's gonna exit us out of the state. And we hear it every couple of years, there's some crisis that precipitates the mass exodus, and it hasn't happened because it is a great place to work. There's a diversified industrial base. It's not just tech. Tech is a lot of the growth, but there's a, a lot of industry here, largest ag producer, largest, um, uh, large military aerospace industry, and on and on and on. Uh, this is a, it's a great, um, diversified economy. It's a great diversified cultural base. It, it's by the oceans, it's by the mountains. It's an incredible place to live and work, and I don't think any of us want to give that up, and, uh, and the, the, the media has done a great job kind of, um, magnifying these, these small stories that aren't really a story. Uh, Governor Newsom made the case that this wealth tax proposal, you know, was one assembly member. It didn't even get into committee. It wasn't even really being considered, but it kind of created this, this press flourish and everyone got involved, and everyone I know kind of freaked out about it, and it became this kind of another catalyzing event, but it wasn't really real. So if we kind of broaden our perspective a little bit, both in terms of space and time, I, I think we get a little more kind of comfortable with, like, of all the places to live and all the places to work, this is the best. And you negotiate some taxes and move to Austin, but, I mean, then you got to go live in Austin. You know, whatever. Uh-
- CPChamath Palihapitiya
Well, it's, it's, it's the be- it's the best ... You're, you're right that it's the best in terms of climate, geography, natural beauty, uh, resources, and the industries that have developed here and have, you know, strong network effects. But it's not the best politically. I mean, it's among the worst politically, and it seems like the politicians are doing everything they can to mess it up. I mean, I almost wonder if there's, like, a resource curse issue, particularly with San Francisco where, you know, there, there's this thing in, in, um, I mean, this, this observable w- thing with governments that, um, that sometimes you get a resource curse where if there's, like, a lot of oil in the country or something, uh, you end up with, with a government that's not very good because people just spend all their time going to war to try and capture it. And I kind of wonder if, you know, San Francisco has been the beneficiary of being proximate to Silicon Valley, this enormous, like, wealth creation, prosperity, job creation, um, ecosystem, that it had nothing to do with creating and, uh- Yeah. I would say two things to build on what you're saying. Um, the first is I think that when the economies in an environment are really, really good, all the really, really smart people want to go into those economies, and that leaves generally dumber people to do things like politics. So, uh, and that's less true in places that have shittier economies. Uh-
- DFDavid Friedberg
Yeah. Fascinating, yeah.
- CPChamath Palihapitiya
And, and I, and I actually think that that's, that's practically true. We may not want to think it and it may not, may sound a little harsh, but it's true. And, you know, the, the way that you reverse it is what Singapore does, which is you make the civil servants the highest paid people in the economy, right? And you treat them like knowledge workers and you say, "Wow, look, I'm gonna pay this person $250,000, $300,000 a year," you're shocked at the quality of the person you get. That's the, the first comment I want to make. The second one though is, is that unlike all these other times where I think people have been, um, you know, sort of, uh, prognosticating the doom and gloom of California, the, the, the thing that's different now is that because it is such a dominant political environment for the Democrats, it's much easier to judge if they actually know what they're doing and if they are going to do things that are aligned with the sort of, like, the moral code of the party that elected them. And so, like, let's just talk for example about the fact that, uh, we are not going to have police reform of any kind in California.... which is where you'd think would be the first state where people got their act together and said, "Okay, if we really believe that we need to reform police, um, we can do it in our own backyards." But that legislation is going to get blocked because, uh, Californians have decided that they care more about the alignment to police unions than they do to the right of law and to social justice for minorities and Blacks. That's crazy.
- JCJason Calacanis
We should be the most progressive is your point on this, Chamath. And the point is, to say it explicitly, is the politicians are in the pocket of the unions. And because they're in the pocket of the police unions and the education unions, we cannot make forward progress, even though we're supposed to be the most liberal of all locations. Correct? That's in summary?
- CPChamath Palihapitiya
Yeah, exactly. The, we, we, we actually, if we believe that we have, you know, up and down the ticket the ability to implement justice, right? At least justice in the vein of the Democratic Party and what that platform represents. Or, for example, all of the people that were out protesting, okay, uh, during Black Lives Matter, during that entire movement, I suspect the overwhelming majority are Democrats/Progressives. Or, you know, let's just say the majority.
- JCJason Calacanis
Yeah.
- CPChamath Palihapitiya
Or at a minimum a plurality. Okay? But then the idea that then you have a state, the most populous and the richest, filled up and down the ticket with people who are theoretically aligned with those political values, but then when push comes to shove and the legislation hits the floor, it basically gets mothballed, to me is inexcusable and disgusting.
- JCJason Calacanis
Yeah. I mean, look at the housing issue. We, we just had a bill that was an incredibly simple bill. I think it was 11... Yeah, SB-1120. I don't know if you followed this one, but I've been following it on the Twitter. And it was a very simple piece of legislation. Any single family home lot could have a duplex on it. So you could have two homes on a single lot. And they couldn't even pass that in a city where, you know, a firefighter, a teacher, et cetera, cannot live within 90 minutes of where they work. And they, they couldn't even pass that. Um,
- 20:37 – 27:11
AB-5 & the working rights of freelancers
- JCJason Calacanis
Jason-
- DSDavid Sacks
Well, also there's, there's also AB5, right? I mean, Jason, as Uber's third or fourth investor-
- JCJason Calacanis
(laughs) Yeah.
- DSDavid Sacks
I'm sure you have something to say about that, right?
- JCJason Calacanis
Well, they tell me third or fourth, but-
- DSDavid Sacks
Which, which one is it exactly?
- JCJason Calacanis
(laughs) I think third or fourth.
- DSDavid Sacks
(laughs)
- JCJason Calacanis
But, uh, (laughs) here we go to the VC brags controversy.
- DSDavid Sacks
Can we just... Yeah. Could we just, could we just pin down exactly which one it is so you could just say you were the fourth investor or something like that?
- JCJason Calacanis
It's so much better to say third or fourth, and that was my schtick obviously.
- DSDavid Sacks
(laughs)
- JCJason Calacanis
Uh, but, um, you know, AB- AB5's another one. It, look at all the careers in which you can be, David Sachs, a freelancer. And the high- the more money you make, the more you get to dictate your schedule. But if you are poor, uh, and if you are in an entry level job, the California government will not let you, even though 70% of drivers for these services want to be freelancers, and the services themselves-
- DSDavid Sacks
Right.
- JCJason Calacanis
... said they will put into a fund for healthcare. Like, they literally, Uber, you know, Dar is like, "Hey, we're gonna put money into this. Lyft is gonna put money into it." They still will not let people decide for themselves what shift they want.
- DSDavid Sacks
That's right.
- JCJason Calacanis
It makes no sense. I mean, and, and, and you see-
- DFDavid Friedberg
And it trickled into, like, journalists too. I mean, there's, they said now journalists-
- JCJason Calacanis
Freelancers can't.
- DFDavid Friedberg
... if you write, if you, if you write 30 articles a year for a single outlet, you're technically considered an employee even though you're writing the articles on your own time with your own research and you're getting paid for successful artic- for good articles that are accepted. And then there was this follow-up controversy about translators. It's like, well, translators, takes five minutes to translate an article, so why would 30 articles apply to a translator? And i- obviously when you have that degree of confusion and complexity, something's off, right?
- JCJason Calacanis
Yeah, and, and, it-
- DFDavid Friedberg
I mean, it's just such a-
- JCJason Calacanis
... it feels like virtue signaling, yeah.
- DFDavid Friedberg
Yeah.
- DSDavid Sacks
Well, I think, well, I mean, the, the reason why AB5 happened is it was at the behest of the Teamsters, right? They're trying to unionize the Uber and Lyft drivers and they can't do it unless they're employees. And so, you know, the, the author of the, the bill, L- Lorena Gonzalez, who's sort of in their back pocket, um, you know, that, that's why she put forward the bill. And then the absurdity of it was that, you know, they realized after introducing it that it would ensnare all these other occupations, like the writers and journalists and photographers and translators-
- JCJason Calacanis
Real estate brokers.
- DSDavid Sacks
... and r- yeah, even, like, people like manicurists-
- JCJason Calacanis
Stylists.
- DSDavid Sacks
... and so on.
- JCJason Calacanis
Yeah.
- 27:11 – 34:45
How would AB-5 passing impact Uber & Lyft's long-term profitability & consumer experience, could franchising fix this?
- CPChamath Palihapitiya
it won't affect them. It'll affect the long-term profitability in the margins of the companies that have to hire them as full-time employees. And they'll have to like, you know, make a bunch of rules and blah, blah, blah. But it has huge operational implications, and it has really terrible OPEX implications for a company. But for the person that wants to work 10 hours, Jason, they'll still be able to work 10 hours. So I think, I think the point is that like-
- JCJason Calacanis
On a specific shift. Like, they're going to have to come in at a certain shift time.
- CPChamath Palihapitiya
I think the point is-
- JCJason Calacanis
And that sucks.
- CPChamath Palihapitiya
... like, the entire public markets who all of a sudden think that a business looks one way has to figure out that it's really a cost plus business. And what it really means is you've... If you were comfortable with a 60% or 70% reduction in the market cap of some of these companies, you'd be okay with AB5. And I think that's where the tension is, where the people that made the law don't care about the market cap because they don't own the stock anyways.
- JCJason Calacanis
Yeah.
- CPChamath Palihapitiya
And the people that are reacting to AB5 are the ones that own the stock and are really thinking about the market cap.
- DSDavid Sacks
Well, but the drivers, the drivers obviously own the stock and they're against it. I mean, it's not-
- CPChamath Palihapitiya
No, the drivers own eight shares, David. I mean, come on.
- DSDavid Sacks
No, no, no. That's what I'm saying is they're not shareholders f- for the most part, um, but this really does reduce their flexibility to contract for their labor.
- CPChamath Palihapitiya
No, but I think what you're saying will happen, which is that they will create a, you know, AB5 Prime, which is a modification that's neither this nor what it was. Uh, but it seems that the tailwinds are pretty clear, which is that we're moving to a place where these companies have to get built in a very clever way. And even if they are super clever in capturing consumer demand, the unit economics are going to be pretty shitty. And I just think we have to own that. And, and it... Probably what it means more than anything else is it's not a real venture kind of business. And so you may be deficit financing it or building it in a very different way than we used to.
- DSDavid Sacks
Right, but it doesn't have to be that way. What you're saying is, is, I think, that this law will have very adverse consequences for their business. Okay, I mean, I grant you that. Um, but it's, it's why is the, the state interfering in the relationship between Uber and its drivers in this way when everyone's happy with it?
- CPChamath Palihapitiya
No, but it's not. I think what actually is happening is the state is effectively capturing the excess return of Uber and Lyft. Meaning, I think if you just take a pure, unemotional economic view at this, it's like any other market. If there is a huge amount of margin available and there are not many competitors, what happens is somebody comes in to take the excess margin. So-
- JCJason Calacanis
And you think that's the government who wants to take it and the unions want to take it?
- CPChamath Palihapitiya
Absolutely.
- JCJason Calacanis
Yeah.
- CPChamath Palihapitiya
Absolutely, and, and, and-
- JCJason Calacanis
So the question is, should we, should we let them then dictate what hours people work?
- CPChamath Palihapitiya
The thought exercise that I would ask guys, if there was, in a market, 90 different competitors for transportation, would AB5 have been written, passed, adopted? And my answer to you would be that it would not have been.
- JCJason Calacanis
So Uber and Lyfts and DoorDashes success is what leads to people wanting to get a cut-
- CPChamath Palihapitiya
No, the-
- JCJason Calacanis
... and get a slice.
- CPChamath Palihapitiya
The oligopolist model of success where not enough other companies are pulled through.
- JCJason Calacanis
Got it. Well, that gives us a good segue into-
- CPChamath Palihapitiya
By the way, sorry, last point on this.
- JCJason Calacanis
Yeah.
- CPChamath Palihapitiya
And the funny thing is that people who created the problem are the ones that hate it the most, which are the investors, because they pile in the incremental dollars into the winners trying to king make a winner through capital. And now what's happening is their rate of returns are basically getting taken away. And I think that in, in, in a weird way, that's also kind of fair.
- DSDavid Sacks
Well, I, uh, uh, I would just disagree slightly in the sense that just because this has big distributional consequences, like basically who, who makes the, the surplus...
- CPChamath Palihapitiya
... that doesn't mean it also doesn't have a huge deadweight loss associated with it. And whenever you prohibit people from engaging in the type of economic contracts or relationship that they want to engage in, you're reducing, um, surplus. And so I, I, and so I hear what you're saying, but ... And, and I think there is, I think this is all about regulatory capture, right? This is the Teamsters trying to capture a big piece of the value of Uber through their politicians at the legislature. So you're right about that. But I also think that we should care about it not just as Uber shareholders, but as consumers of the product, because it's gonna get worse.
- JCJason Calacanis
Well, and also, the product's gonna go away in certain jurisdictions. I mean, if Freebird wants to get a, an Uber north of the Golden Gate Bridge or in the East Bay somewhere, they're just not gonna have the economics-
- 34:45 – 46:13
California lagging in police reform, what tactical steps could be taken to stop deadly policing
- JCJason Calacanis
Um-
- CPChamath Palihapitiya
Wait, Jason, can we just talk about-
- JCJason Calacanis
Yeah.
- CPChamath Palihapitiya
... the police brutality thing in California? I just want to get your guys' take.
- DFDavid Friedberg
Sure, let's do it.
- CPChamath Palihapitiya
Like, it really bo- it really bothers me that California ... Like, I bet you there's gonna be states that are, um, diverse in its Democratic and Republican composition, and some Republican states, uh, that pass comprehensive police reform, and California will be one of the laggards.
- JCJason Calacanis
What do you think ... If you could wave a magic wand, Chamath, what are the one, two, and three things? Take a minute to think it through. And everybody on the call can. What are the one, two, and three things you would do to change policing in the United States? I have my own list, but I'm curious what you guys think. And I, and I actually put a tweet storm out about my number one thing. Um, but-
- DFDavid Friedberg
Well, the, the-
- JCJason Calacanis
... what do you ... What are the specific tactical things? Let's get tactical for a start.
- CPChamath Palihapitiya
The, I mean, th- the first one that I've always been a big fan of as I've studied it, at least from 10,000 feet, is ending qualified immunity. Um-
- JCJason Calacanis
Okay. Explain why and what that is.
- CPChamath Palihapitiya
You know, qualified immunity is essentially that there, there, there is this immunity that, uh, certain individuals have and that they, uh, that they're not subject to prosecution. And so, um, you know, they essentially have a carte blanche to behave in ways that can be good in some cases, very, very bad in other cases, gray in other cases, yet there's no adjudication of their behavior. And so you have to allow people with solid, dispassionate, detached judgment to be able to enter and say, "Hey, listen, you are way out of line here and there are consequences for it." And people coming in doing those jobs need to understand those consequences, versus you have a carte blanche to basically do whatever you want. And I think that that-
- JCJason Calacanis
Let's talk specifically about the mur ... Well, uh, the shooting involving ... I won't say murder right now, um, because I think all the facts are not in. But Jacob Blake was shot in the back. Um, he was obviously not listening to the police. The police then followed him to his car. There was a discussion of if there was a knife on the floorboard. Um, and point blank they shot him in the back multiple times. And I've heard both sides of this. You know, this person is not listening to the police, this person's going into the car, they're reaching potentially for a weapon and the cops had no choice. It seemed to me that, you know-... the training of a police officer might actually be that that was a legitimate shooting. Um, but that means maybe they have to rethink policing because you could've easily taken that person down with even the most modest of a chokehold or a tackle. Um, and when we see that, it feels like that's the Rorschach test right there of, like, how you look at shootings, um, eh, in police when... You saw that shooting, I take it, Chamath? Of Jamie Blake? And, and-
- CPChamath Palihapitiya
Uh, I, I saw it and I, I just, like, eh, I, I, I can't see these anymore. They, they send me off the rails for days. Uh, but yeah-
- JCJason Calacanis
Yeah.
- CPChamath Palihapitiya
... I did see it. I did see it.
- JCJason Calacanis
Yeah. And so, I mean, and when you, when you look at something like that, that's clearly training has to change because I, I, I believe that based on police training a- and qualified immunity, this is going to be considered even though it's shocking to see it. I think it's going to be considered, um, you know, an allowed shooting or-
- CPChamath Palihapitiya
Yeah.
- JCJason Calacanis
... and it's, there's not gonna... The person's not gonna be prosecuted because the person was clearly not listening and there was a knife on the floor and he was going for it. And, you know, it seems to me, like, we really need to change the actual training. The average is six months of training, so I think that's one of the top things that has to change is that these, these police officers have to be trained not to fire first but to, to, to use other tactics.
- CPChamath Palihapitiya
So, so for me, the first one is that. The second one for me, which I'm a really big fan of, is that there needs to be a new way to actually intercept 911 calls. And instead of, um, deploying police officers, we have a separate branch of people that we, you know, massively pay and train that are effectively, you know, social workers plus plus. And-
- JCJason Calacanis
Negotiators, yeah.
- CPChamath Palihapitiya
And, and they should be deployed in all kinds of situations, um, where I think that what, what people want is a de-escalation. And I think that sometimes the words de-escalation and police don't really sync up and in most, a lot of people's minds, they think of escalation. So-
- JCJason Calacanis
Yup.
- CPChamath Palihapitiya
... people who are trained to de-escalate, I think, uh... And so for example, like, you know, all of the, uh, mental health checks, all of the mental health issues, um, could probably be dealt with folks like this.
- JCJason Calacanis
Domestic, domestic disturbances would probably go into that category.
- CPChamath Palihapitiya
The, the third one is I would very much rationalize, uh, drug use, um, just because I think the amount of low level offenses and arrests around drug use is antiquated for people's general views on drugs. Um, and I think that it needs to sort of correlate to how society views it. And then, um, you know, the, the, the last two that I would give you is that there is a concept of no-knock warrants. That's how Breonna Taylor was killed. Um-
- JCJason Calacanis
Insane. Insane.
- CPChamath Palihapitiya
... it's, it's kind of really scary, the idea that we could all be sitting in our houses right now, as we are, and literally the police can just charge in. It's a little scary-
- JCJason Calacanis
A- I mean, totally unnecessarily. I mean, uh, th- she was being... For, for some, like, low level drug idea, they're gonna knock the doors in. And of course a person's gonna try to protect themselves. Uh, the, that's, they're going to have house... Sax, what, what are your thoughts on-
- DSDavid Sacks
Well, they knocked, they knocked the doors in and they were plain clothes wearing police officers. So people are coming in-
- 46:13 – 50:46
Chamath on the most important economic event of the last decade & why he is now bullish on the market
- JCJason Calacanis
Wh- what do you think, Chamath? You've been talking a little bit about the economy and, and the stock market ripping again, and we seem to have hit a pause. Um, but we did have, like, a massive rip with Tesla and Amaz- uh, Tesla and Apple, I guess, doing a stock split, uh, and we hit all-time records. Why are we hitting all-time records, Chamath?
- CPChamath Palihapitiya
We have the most important thing that's happened, I think, in economics in the last 10 years. Um, the Federal Reserve, Jerome Powell gave this landmark speech, and he basically said, "We are going to keep rates at zero for the next half decade." Uh, basically. And quite honestly-
- JCJason Calacanis
Five years at zero. Yeah.
- CPChamath Palihapitiya
I mean, quite honestly, it's coul- it could be a decade. But they're gonna let inflation run before they basically match it with rates. There's no path to any near-term inflation of any kind whatsoever. Um, and so, Jason, my, my honest perspective is, you know, uh, you're basically going to get paid to be long equities, because, uh, your risk-free rate is zero and will soon be negative. And what are you supposed to do if you're an asset manager? What are you supposed to do if, you know, your... Take California, back to using California. Let's just say you're CalPERS, you're the California pension system and you have hundreds of billions of dollars. Then you need to generate 5 or 6% a year to make sure that your pension isn't insolvent and the government is paying you zero.
- JCJason Calacanis
Okay. So that eliminates that option. No treasuries for you.
- CPChamath Palihapitiya
You're long equities. Um, and when everybody is in that situation, you're overwhelmingly long equities, and, you know, the, you cannot fight the Fed. And so, you cannot wait them out. It's not like you can say, "Oh, don't worry, they're gonna change their mind." Uh, they will change their mind, but in reaction to market conditions that are out of your control. So, uh, all of these opportunities, in my opinion, are generally buying opportunities. And, uh, I'm generally bullish. I'm more bullish now than I was before.
- JCJason Calacanis
So, you can't put your money into treasuries. You can't put it into a savings account, obviously. You can't put it... You, you... It doesn't seem like real estate, uh, or commercial real estate is a great bet right now. (laughs) Uh, so your options are private companies or public companies. Correct, Chamath?
- CPChamath Palihapitiya
Um, I think it really is just public companies. And I don't, I don't even think it's private companies. So meaning where- wherever capital is constrained, um, the returns, um, again, these excess returns are getting eaten up. Um, and so the, the most unimpeded market for gains right now is the public markets. I mean, like, no offense, but I think that if you are a very good stock picker in the public markets, you're generating better returns than, uh, Sequoia, Benchmark, name your best venture fund. You know, I see all these people spouting off, uh, on Twitter about how good they are in the early stage of markets. It's all kind of small dollars and not that meaningful. Uh-
- JCJason Calacanis
You know I'm on the call, right, Chamath? (laughs)
- CPChamath Palihapitiya
(laughs)
- JCJason Calacanis
I mean, (laughs) I'm on, I'm on the call. I mean, you're literally talking to the guys spouting off, about hitting home runs.
- CPChamath Palihapitiya
Uh-
- JCJason Calacanis
Uh, Sacks, what are your thoughts on this? Like, p- private markets, obviously, is the op- where we operate, both Davids, Friedberg, and Sacks. Um, and you're seeing great deals, I think. Uh, I, I'm, I've invested in twice as many companies during the pandemic as I did before in the same six-month period. What are you seeing in the private markets and where do you think... What is your take on best CCs public markets, Sacks? And what are you-
- DSDavid Sacks
I, you know, we, we saw some of the best deals that we've seen, uh, during COVID. And, um, you know, I'm, I'm very bullish about the state of entrepreneurship in the US. I mean, just the, the number of interesting companies doing interesting things. Um-... and the, the infrastructure that makes it so easy for founders to get started and create new companies, it's so much easier now to create a, to create a company than it was 10 years or 20 years ago. And of course, it's easy to point to all the ones that don't work or that don't seem like good ideas. But, uh, but there's so many more experiments that are happening, and I think it's gonna ... like, I'm, uh, you know, I'm very bullish about that part of the, the American economy.
- JCJason Calacanis
Uh, and Friedberg, what are your thoughts on private markets? And obviously, you're building private companies. You have unlimited capital to build them, I take it, um, given your track record?
- DFDavid Friedberg
I spend most of my time accepting rejections from my very close investor friends-
- JCJason Calacanis
Mm-hmm.
- DFDavid Friedberg
... in my various projects, so, um, I wouldn't say that that ever becomes true, I'll tell you the truth. Uh, I'm still selling every day, dialing for dollars. But, um, no, there are certainly more investors, more capital, uh, more risk-taking, um, more kind of valuation extending than I think is, um, it was the case, uh, pre-COVID.
- 50:46 – 1:01:23
Why technology companies should be going public sooner, how SPACs are allowing retail investors access to growth stocks
- DFDavid Friedberg
I think Chamath's point is right though. Uh, there is, uh, uh, so, so much more liquidity available through access to retail and international market, um, participants, um, in, in, in a public setting than there is in a private setting. And it is because of this liquidity premium and the easy access to, to putting capital in. Um, it's just extraordinary how much ... As I've watched close friends in companies and companies I've invested in, I'm sure you guys have done the same, transition from private to public, uh, the valuation jump is extraordinary. Like, uh, on, on, on a metrics basis, right? So what, whatever the metric might be, you get public, there is this flurry of, of market participation as a result. It drives up, there's, there's a multiple expansion-
- JCJason Calacanis
Wait, wait, I thought-
- CPChamath Palihapitiya
You're beast f- ... Sorry, can I just say something? That's such a, such an important, smart thing that Friedberg said. So Jason, for example, like, all of us r- ha- ... We're all still in the private markets. And I'm not trying to take away from the private markets, but what David said is so important. If you used to look at a SaaS deal, you'd price that SaaS deal 10 times ARR, right?
- DFDavid Friedberg
Right.
- CPChamath Palihapitiya
Then there's a little bit of inflation. You know, uh, the rates go up, um, the prices that people pay go up. Now all of a sudden we're paying 12 times, 15 times. Now it's 20 times if you're growing 100% rate of return. So what's happened? The market has become more efficient, and the excess return is getting eaten up. And so you're like, "Okay, well, that's still really good." And you wait four, five, six years, and you think you're gonna get paid. The crazy thing is, like, once that company transitions to the public markets, I mean, all of a sudden, if you actually turn the investor base over and you actually create a float so that public market guys can buy it, they'll pay 30 times.
- DSDavid Sacks
That's right. Right.
- CPChamath Palihapitiya
35 times, 40 times. So there's-
- DSDavid Sacks
A-
- CPChamath Palihapitiya
... a massive multiple expansion. So companies should be going public sooner.
- DFDavid Friedberg
If you think about this, like, if I'm trying to raise money for one of my companies, I'm gonna call on my 10, 20, 30 friends that I know that are investors in private markets and say, "Hey guys, do you wanna look at this company?" And maybe I'll get two or three interested parties, and maybe we'll kind of agree on what a fair valuation would be. If I could take that same company and instantly make it available to a million investors, and all I need to do, by the way, is raise $10 million. All I need is some small number of them to write a couple hundred dollar check, and I'm able to fill that a- that round out. The, the valuation as a result of the liquidity available in that market is so much higher, because there, everyone's gonna, there's gonna be much more participation and bidding. And so, you know, what I think Chamath has tapped into with the SPAC vehicle and, um, what Robinhood is realizing, and, and, and I don't think that we all talk about this enough, but there's this massive, massive, massive market of international investors, of small ... of international retail investors who are now rushing into US equities.
- JCJason Calacanis
Friedberg, didn't we see that in the ICO craze as well, where you, you ... I think if we took anything from the ICO craze, it was-
- DFDavid Friedberg
And the dotcom boom.
- JCJason Calacanis
... the global appetite for risk and the dotcom boom before that. And I think we have to give Best EC a lot of credit here for leading the SPAC movement. I mean, what's your take on everybody copying you down the SPAC path, Chamath, at this point? I had Desktop Metal as an early angel investment that just SPACed. Um, and then I've been-
- CPChamath Palihapitiya
I did the pipe job. I led, I co-led the pipe.
- JCJason Calacanis
Thank you.
- CPChamath Palihapitiya
Yeah.
- JCJason Calacanis
Yeah. And then they, they told me that. Thank you for the markup. Um, and I've been hearing ... Like, I b- I'm ge- if, if I'm getting inbound as an angel investor from ... I literally got a cold email from some high profile people, and they're like, "Hey, can you ... Do you have anything for us to SPAC?" I mean, I, this is like the third or fourth time people are coming down to my dipshit level of angel investing saying, "Can you introduce us to the com guys? Can you introduce them to Robinhood?" I'm like, "I think you can go direct to them." But, uh, what, what is your take on how many SPACs have been created since you s- like literally single-handedly restarted the SPAC movement, Chamath?
- CPChamath Palihapitiya
I think that-
- JCJason Calacanis
'Cause I don't think you've ever gone on record about this.
- CPChamath Palihapitiya
Uh, I'm really proud of what we did when we created this thing two years ago. I said I wanted basically create a new way of doing IPOs. I called it IPO 2.0. I reserved IPO A through Z on the NYSE. I, I hope, um, uh, to fulfill that. Um, and I think I will. Um, but taking a step back for a second, in the year 2000, there were 8,000 public companies in America on the, uh, American stock exchanges. And in the year 2020, there are 4,000. So we've shrunk in half the number of public companies, while at the same time, we've, you know, 10X'd the amount of comp- uh, the amount of capital and the number of people. So we don't have a large enough surface area in the public markets. That's why companies are better off going public, because they're going to have a much more receptive audience of people that are dying to own c- growth of any kind.
- JCJason Calacanis
What's the earliest and the median that people should go public, Chamath?
- CPChamath Palihapitiya
Well, so, so here's the thing. So like, if you're, like, one of 30 companies in a venture portfolio that's growing at 50 plus percent, you're one of 30. But when you go public, you're one of one. You know, when you're growing 50, 60%, you, you become very unique all of a sudden. You're a sort of a 1% kind of a company. You're an outlier, and so you get treated, you know, incredibly well. So that's the backdrop. I think a company should be going public around year five, year six.
- JCJason Calacanis
Um, what revenue footprint?
- CPChamath Palihapitiya
About 50 million.... you know?
- JCJason Calacanis
Wow.
- CPChamath Palihapitiya
At $50 million and when they're doubling, I think that they should be going up. And, you know, it allows them to build capital slowly. It allows them to basically contain control. It minimizes dilution. Um, I think it's a really powerful model. And then on t- on the number of SPACs, what I would say is, I think it's really good that the market is getting diversified. I think what's going to happen is like, s- the, the thing with SPACs is, it's, it's gonna be no different than in some ways the banks that preceded us, which is that there's going to be a distribution. You can go to Goldman Sachs, and that'll mean some, one thing. You can go to Merrill Lynch or BofA or UBS or Jefferies. It'll mean other things. You can go to Allen & Company. It'll mean yet another different set of things. And I'm sure there's gonna be a, a, a, you know, an, an organization that, uh, is all about cost. Some is gonna be all about relationships. Um, so I just think that's going to be the distribution. My personal perspective, it's probably us and maybe one or two other people who really dominate the space. And I'll, and I'll tell you the only reason why I say that. I think it's going to be really important when these people try to get these SPACs done, what they're going to realize is, it's really hard. And it's hard for a couple reasons. Number one is, you have to marry operational insight and public market sophistication. And the founder will get really smart about being able to figure out whether this person is just a financial arbitrager or if the person has enough operational experience to deeply understand the business. Why? You have to translate it to the public markets well. That's one huge thing that I think that people will, um, will start to, will start to hone in on. Um, anyways, there's a bunch of other things, but, um...
- JCJason Calacanis
Are you now competing with-
- DFDavid Friedberg
But I want to, I want to hear from the SPACs. S- SPACs agree with the $50 million dollar mark?
- CPChamath Palihapitiya
SPACs agree, yeah.
- JCJason Calacanis
Yeah, sure.
- 1:01:23 – 1:12:21
Election talk - who is in the lead ahead of the first debate?
- JCJason Calacanis
They're hard. Hey, let's, uh, swing to the election now, um, and, um, talk a little bit about the flip-flopping we're all doing, because we've gone from Trump's a lock to Trump's not a lock. Uh, you know, and we've had many different theories, but here we are. Uh, are we 60 days out now? How many days till the election? Is it exactly 60?
- CPChamath Palihapitiya
A little less.
- JCJason Calacanis
November 3rd.
- CPChamath Palihapitiya
September 29th?
- JCJason Calacanis
Yeah.
- CPChamath Palihapitiya
Yeah. So we're, we're, we're at the 55 or 56 days, marks the taping of this. And the first debate, I think is September 30th. So we're, we're, we're about three weeks away from Joe Biden and Trump going at it.
- JCJason Calacanis
... what's everybody's handicapping now? The, the mark- the markets seem to be saying even money, or a slight edge to Joe Biden? Uh, what, what are our thoughts?
- CPChamath Palihapitiya
I, uh, I think that, uh, I think Biden's looked the crispest he's looked.
- JCJason Calacanis
Okay.
- CPChamath Palihapitiya
And so, um...
- JCJason Calacanis
(laughs) Is that actually encouraging or not encouraging?
- CPChamath Palihapitiya
I th- I think it really is, because I think he's a really good... Like I said, he doesn't have to, uh, be better than Donald Trump. He just has to not be Donald Trump, for a lot of people. And so, you know, he becomes a very good do-no-harm alternative. Because, you know, to support Donald Trump, you have to have a view. To support Joe Biden, you can have no view.
- JCJason Calacanis
Right.
- CPChamath Palihapitiya
Um, and I think that, that... In general, that's a d- that's a demand-maximizing thing to do. So, I think he's relatively well-positioned. It's the crispest I've ever seen him on television. There's less stuttering. There's less... Not stuttering, but, like, less, like, mental gaps.
- JCJason Calacanis
Gaffes, yeah.
- CPChamath Palihapitiya
You know, the, the...
- JCJason Calacanis
What do you think of the VP choice? Kamala?
- CPChamath Palihapitiya
I think safe.
- DSDavid Sacks
So, I, I, I agree with Chamath that that was kind of the, the, the take or, or theory on Biden, like, a month or two ago is that he could just run as a protest vote against Trump. Um, and, um... And, and that's why the basement strategy appeared to make sense is that, he would say nothing, do nothing, go nowhere...
- JCJason Calacanis
(laughs)
- DSDavid Sacks
... and just, and just try to run-
- JCJason Calacanis
Yeah. (laughs)
- DSDavid Sacks
... as a protest vote against Trump. And I think that was working a couple of months ago when, you know, A, COVID seemed a lot worse. Uh, B, the economy seemed a lot worse. We're now down to about 8% unemployment. We were at 13 or 14%. Um, and, uh, C, you know, Trump had seemed to kind of mishandle the, the reaction to, to Floyd. He seemed to be inciting it. But now we have this, this issue of the, the looting and violence in predominantly Democrat-run cities. And I think, you know, Trump has sort of found his sales pitch now, um, in opposing, um, the, the... basically, the, the, the radical left, um, and these, these mobs and, and protests that seem to be, uh, you know, causing, uh, tremendous, uh, unrest and, uh, looting and violence in our cities. And I think it's... I think it's, uh... In combination with the improving conditions of the economy and COVID, I think it's a winning pitch for him, uh, unless Biden finds a more compelling way of responding, which he has not to date. Um, I think, you know... Somebody like Bill Clinton would know exactly how to respond. I think he would, you know, in the-
- JCJason Calacanis
Just better instincts. Yeah.
- DSDavid Sacks
Well, I think, you know, he would pull a Sister Souljah, to use a term from the, the, you know, political dictionary, where, you know... Maybe he would take this crazy new book, In Defense of Looting, and figure out, you know... and give a speech denouncing that. I mean, he would find somebody to his left who represents, you know, a fringe of the, the left that he presumably doesn't support, and find a way to distance himself or denounce them. And he hasn't-
- JCJason Calacanis
Like Antifa, maybe.
- DSDavid Sacks
Like Antifa, like, you know, the, the... anyone, you know, the- any of the left-wing groups in Portland.
- JCJason Calacanis
Left-wing groups in Portland.
- DSDavid Sacks
Looting in Portland. I think there's a lot of targets, certainly.
- JCJason Calacanis
Nobody wants to see... Nobody wants to support that, and so Biden comes out and says, "Hey, we don't support that," and it gives him that law-and-order vote.
Episode duration: 1:16:15
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