E72: Impact of sanctions, deglobalization, food shortage risks, macroeconomic outlook and more

1. 0:00 – 2:39

   Jason's new "family office" and Sacks' new strategy

   1. JCJason Calacanis0:00

      I now have a chief of staff, he's pretty great. He's worked with me for a while, and he- he's doing a great job. But it's actually really helped, I will say that. And then I, uh, started a family office.

   2. DSDavid Sacks0:08

      Wow. Congrats.

   3. CPChamath Palihapitiya0:10

      What does that mean? You have a place in your h- home that you call an office?

   4. DSDavid Sacks0:14

      (laughs)

   5. JCJason Calacanis0:14

      Yeah, you know like the one your refrigerator, there's an office? That's a family office. Yeah. The family goes in there to talk about office stuff.

   6. CPChamath Palihapitiya0:21

      Where does Jade put the stickies that say, "We're out of granola bars"?

   7. JCJason Calacanis0:24

      In the family office. (laughs)

   8. DSDavid Sacks0:26

      (laughs)

   9. NANarrator0:27

      All in. Let your winners ride. Rain Man, David Sa- I'm going all in. And I said we open source it to the fans, and they've just gone crazy with it. Love you guys. Queen of Quinoa. I'm going all in.

   10. JCJason Calacanis0:43

       Hey, everybody. Welcome to another episode of the All In Podcast, Episode 72, Part Deux. With us today, again, the Prince of Panic Attacks, the Sultan of Science, David Friedberg.

   11. CPChamath Palihapitiya0:56

       (laughs) The Prince of Panic Attacks. (laughs)

   12. JCJason Calacanis0:59

       (laughs) Ah, yes, and also-

   13. CPChamath Palihapitiya1:00

       The Zephyr of Zoloft. (laughs)

   14. JCJason Calacanis1:03

       (laughs) Uh, and also, as you're hearing cackling, the Duke of Degeneracy, uh, the dictator himself...

   15. CPChamath Palihapitiya1:09

       Chamath Kavaliyapetiam.

   16. JCJason Calacanis1:10

       Chamath Kavaliyapetiam. And, of course, everybody's, uh, favorite, the Rain Man himself, the drunk History Channel uncle, David Sacks.

   17. CPChamath Palihapitiya1:19

       (laughs)

   18. JCJason Calacanis1:19

       I mean, David, I, I follow you on Twitter. You're tweeting 50 times a day.

   19. CPChamath Palihapitiya1:24

       Oh, I was thinking the same thing. When do you work?

   20. JCJason Calacanis1:27

       What has happened to you? You, you won't meet with startups anymore. I, I bring you startups, you say, "You know what? I'm no longer going to meet with your startups."

   21. CPChamath Palihapitiya1:32

       You're like Grey Gasby, you're like stuck in your room tweeting about the fucking world.

   22. DSDavid Sacks1:34

       I just, I don't do first meetings.

   23. JCJason Calacanis1:36

       That is the end of your career. Huge-

   24. DSDavid Sacks1:39

       No.

   25. JCJason Calacanis1:39

       ... mistake.

   26. DSDavid Sacks1:40

       No.

   27. JCJason Calacanis1:41

       No more first meetings?

   28. DSDavid Sacks1:41

       It preserves, it preserves my energy. There's nothing more draining than endlessly spending your day in first meetings.

   29. CPChamath Palihapitiya1:46

       No, why don't you just have a short first meeting, like a 15-minute first meeting?

   30. DSDavid Sacks1:50

       Well, that's what, you know, we have a team for, is that it-
2. 2:39 – 15:21

   Understanding where all sides stand in the Russia/Ukraine War three weeks in

   1. DSDavid Sacks2:39

   2. JCJason Calacanis2:39

      All right, everybody. Uh, it's been a bit, uh, of a crazy couple of weeks here. And, uh, we have to start with the war in Ukraine and, and do a bit of an update. It's been over 20 days. The death toll continues to climb. We don't know exact numbers here. It's very hard to get information. We're not experts. We're, we don't have boots on the ground. Uh, but according to, uh, the New York Times, 7,000 Russian troops have been killed. And Zelenskyy said on March 12th, 1,300 Ukrainian troops have been killed. I, I think we've got three or four angles we need to talk about here. One, I want to talk about food supply, uh, with Friedberg, since you ran climate.com and have a lot of expertise in that. And of course, Ukraine and Russia are the breadbasket of the world. Chamath, I want to talk about markets, of course. But let's go to our History Channel uncle first. Uh, Sacks, you have been going down the rabbit hole looking at the history of this. Let me just ask you, uh, just a pointed question. Is Russia losing the war? And if they are losing the war, if that is a pos-... Is that even a possibility that they're losing the war? Are they losing the war? And then what is the exit ramp here? And what does it mean on a go-forward basis?

   3. DSDavid Sacks3:53

      Right. I think great question. So here's where I think we stand three weeks into the war is that Putin clearly miscalculated. He thought this would be a cakewalk. Obviously, this turned out not to be. The Ukrainians have put up very fierce resistance. The Russians have taken very serious casualties and losses. Um, and so the war is very much, you know, up in the air. It's, uh, the, the outcome is very much in doubt. So I think, you know, Putin was overconfident, uh, made a political, economic, and, you know, obviously humanitarian mistake. But I think three weeks in, here is where I would characterize things, is it feels to me like the West might be making a similar mistake of sort of excessive overconfidence and triumphalism, meaning that we think the rest of this war is going to be a cakewalk. And the reason I say that, let me just give you some examples and then tell you why it may not be a cakewalk. So you've got Francis Fukuyama had a piece this week. Basically he's back with the end of history. He predicts that, you know, imminent Russian defeat and that there's going to be a new birth of freedom. Uh, for the West, it's going to be like the Bush doctrine and 20 years of failed policy in the Middle East never happened. You got David from, you know, all but predicting mission, uh, accomplished, just like the Iraq War. He said that springtime's going to be bad for anyone who bet on Putin. His words, which in his view is anyone who isn't a, basically a, a neocon who favors regime change. You had a piece get a lot of circulation over the last week in the US China Perception Monitor by, um, by I think a former Chinese, um, observer named Hu Wei. And he basically predicted that China would be under so much pressure by what the, the Russians have done, you know, in terms of humanitarian, uh, losses, that they would come out basically denouncing Russia, uh, and support the West. And then, of course, I think the final example of what you might call Western triumphalism right now is that absolutely no one in Washington seems to be pushing for a ceasefire. They're all, you know, they're all paying lip service at least to this no-flos, fl- no-fly zone idea. Biden and the squad seem to be the last holdouts, uh, for the idea of not imposing a n- no-fly zone. So I would say right now, the West seems to be very confident about the way th- this war is going and not inclined to make any compromises or concessions. ... I just want to flag quickly why the, you know, why there might be some clouds on this silver lining. So you had a Washington Post article, first of all, warning, it was very interesting, that Ukrainian military progress may not be as great as their, quote, "STRATCOM," their strategic communications, you know, AKA propaganda. So in other words, the Ukrainians are very effective at fighting the information war, but the, the Russians are still making progress on the ground. You also had this, um, Washington Post story about neo-Nazis flocking from all over Europe to Ukraine to fight for the cause. Again, that story got... It's, it's very troubling and it got no likes or retweets, because it just doesn't fit the great narrative here. You've got the slow motion humanitarian-

   4. JCJason Calacanis6:49

      I- is that true? Like this-

   5. DSDavid Sacks6:50

      Yeah, let's, but let's come back to it. Let me lay out all the issues-

   6. JCJason Calacanis6:52

      Okay, yeah.

   7. DSDavid Sacks6:53

      ... and we can come back to it.

   8. JCJason Calacanis6:54

      Yeah.

   9. DSDavid Sacks6:54

      You've got the slow motion humanitarian disaster of, you know, a billion people across the world potentially starving if the spring planting doesn't happen, which we should let Freiberg speak to more. You've got the fact that Russia can still escalate this war. I mean, they could still rubble cities, uh, Belarus could enter the war, and, you know, God forbid, they could even use WMD. And then we- you have this idea, this dream of toppling Putin, probably... Look, it could happen, but probably a fantasy. You had 200,000 protestors, pro-war protesters turn out in Moscow today, nationalism is still strong in Russia. Yes, there's anti-war protestors there, but the Russian people at the moment seem to be still behind Putin. And then I think you had today, um, the, uh, foreign minister of China came out with a statement really throwing cold water on the idea that they support the West, they basically denounced the West for NATO expansion. So this whole idea of, of the Chinese bowing to Western media pressure, which they, in other contexts, call the Bai Zhao influence, I think that's a fantasy, that is not gonna happen. So look, I think that, you know, w- you know, we all support the Ukrainian cause, uh, we all support their desire for freedom, to, to, their freedom from domination, from this, um, this Russian war of aggression. But what I wonder about is whether this would be the opportune time to tr- for Washington to try and push for a ceasefire instead of a no-fly zone, and we should talk more about what that might look like.

   10. CPChamath Palihapitiya8:21

       Can I give you a psychological assessment of I think what's happening right now?

   11. JCJason Calacanis8:25

       Yes, great.

   12. CPChamath Palihapitiya8:26

       Just as somebody who, as, as you know, you guys and I were just joking, but six days just being mostly off the grid with my notifications off, I was really like, honestly, like, you, you kind of like go through this dopamine fast, and what it actually helps you do is pick out better signal. And, you know, with all respect to Zacks, I think like a lot of what you said is not really a l- as meaningful signal as the following, which is the most important thing that happened was both sides basically said the surface area of a deal was very much in sight, and that they were down to three or four points. And I think that that didn't get reported nearly as much as it probably should have. And what I thought was psychologically interesting was that as soon as that was said, the next few days was when the rhetoric got ratcheted up extremely aggressively on both sides. And the way that I interpret that typically is, having done deals, that's typically when you're closest to a deal and you're trying to get the last few Ts and Cs. And in that same construct as applied to Ukraine and Russia, I suspect what's happening is they both put up the trial balloon, it was well received on both sides, the surface area is now down to a few points. I'm not saying that those are justifiable in the end, but I think that if both of these two fo- parties want to come to a ceasefire, which I think it does, we're probably much, much closer than anybody thinks. And right now, all of this rhetoric is meant to basically try to get the other side to budge a little bit more. And so I suspect, and you know, I could be completely wrong, um, is that we're much closer to a ceasefire than anybody thinks, and I suspect that you could see something in the next two to three weeks. And I think that that's really hopeful, because you want this thing to come to an end.

   13. JCJason Calacanis10:06

       The thing I'm trying to parse here, uh, and I don't know if anybody here can even answer this, is how did, how did we either underestimate or over estimate, depending on the time, Russia's ability to invade another country?

   14. CPChamath Palihapitiya10:23

       I think, I think the thing is we, we have, we can't even estimate correctly. So for example-

   15. JCJason Calacanis10:27

       Right.

   16. CPChamath Palihapitiya10:27

       ... there was something that said there was 100 out of 100... Russia has 170 battalions, apparently, I don't know if that's true or not-

   17. JCJason Calacanis10:34

       Right.

   18. CPChamath Palihapitiya10:35

       ... of which 100 were scented. We don't know if that's true or not. Of which Ukraine apparently destroyed 50, of which we don't know if that's true or not. So we're left to guess, and unfortunately what that does is it people psychologically then fit, as David has used in the past, your priors.

   19. JCJason Calacanis10:49

       Mm-hmm.

   20. CPChamath Palihapitiya10:50

       What are your biases? Right? What narrative fallacy do you want to believe? And then you're going to fit... So the pro-Russian factions will say, "That's entirely not true." The pro-Ukrainian factions will say, "Actually, it's even greater than that." Huge sustained military losses. The truth is somewhere in the middle that will only get accounted for after a ceasefire is in place. So I think we almost need to, again, we can get caught in this fog of war-

   21. JCJason Calacanis11:14

       Yeah.

   22. CPChamath Palihapitiya11:14

       ... and, and talk about this stuff in ways which we don't accurately know, or we can level up and say the thing that we both know is there was on-the-record statements by the foreign minister of Russia and the president of Ukraine that a ceasefire and the surface area of that ceasefire is within sight. And unless something is materially changed and in, in the last three days, which it hasn't, it means we are really, really close to this being done.

   23. DSDavid Sacks11:38

       So I, I agree with a lot of what Tomas said, I don't think it contradicts anything I said before. I, I agree that there was a big piece of news this week that caused markets to rally for three days, which is the announcement of a proposed 15 point peace deal. And the... We do know sort of the key features of that deal. It means... The, the three big features are Ukr- uh, Ukrainian neutrality, so they don't become members of NATO. You had Zelenskyy saying that NATO membership was off the table. Ukraine can't host foreign troops, bases or weaponry. There'd be limits on Ukraine's military, but they would get security guarantees from the allies. Uh, so it wouldn't be a complete demilitarization.And then, the- the other pieces of it were Ukraine recognizing Russia's control of Crimea, recognizing that's not coming back, and then some sort of independence recognized for the disputed territories in the Donbass. So I think you're right, Chamath, that everybody now knows the broad contours of what a peace deal would look like, and the markets are starting to price in th- them getting to that peace deal. But I'm worried that if you look at it from the point of view of what people in Washington say, that there's no pressure here, uh, coming from Washington for Zelenskyy, our- who's basically our client, he's an American client, to make a deal. You know, if you compare this to, say, the 1973 Yom Kippur War where the US was on the side of Israel but still acted as a peacemaker and got a ceasefire done, you know, Kissinger got that deal done even though we were on the Israeli side, you don't really hear anyone in Washington saying, "Let's get a deal done." So I- I hope you're right, but ...

   24. CPChamath Palihapitiya13:14

       That's because you're not- we're not- talking about the elephant in the room, which is that in the Yom Kippur War, the unitary resolve and the military dominance of America was undisputed. And so as a result, its ability to be the mediator was also undisputed. We've already talked about this. When Biden called the UAE and Saudi, they wouldn't even pick up the phone. The people that are negotiating this priest- pri- peace treaty right now are Naftali Bennett and Emmanuel Macron. So we're not at the table, so I think a lot of what we're hearing as well is just a lot of the rejection and the psychological, you know, kind of anger that we have to not being even part of the process. Like, maybe we-

   25. JCJason Calacanis13:51

       I think the world doesn't want us to have such an outsized role.

   26. CPChamath Palihapitiya13:54

       Well, the point is, it's- w- we've moved past that. Whether you wanted us to be involved in it or not, we're not involved, and we are not the principal mediators in this. And we- I hope to God that Israel and France and whoever else is at the table gets this done.

   27. JCJason Calacanis14:08

       Yeah.

   28. DSDavid Sacks14:08

       Yeah, I- I agree with that, but h- here's my concern, is that I think everyone knows the broad contours of the deal. But if you're Russia or you're Ukraine, you're getting daily reports of what's happening on the battlefield. And if you think you're winning, you have an incentive to stall the peace process to cement greater gains and get more leverage for those remaining details and negotiating points. And so if Zelenskyy thinks that the Ukrainians are making progress on the battlefield, he's gonna wait. And so neither one of them, I think, left to their own devices, can be fully trusted to make a deal. I think you need the US applying some pressure or acting in a po- in a constructive way towards the process, and I think it's a huge problem that the US is not viewed as a peacemaker. Uh, we're basically viewed as so partisan and on the side of Ukraine that no one wants to get involved.

   29. JCJason Calacanis14:57

       Yeah, but you know at the same time, David, we've talked on this pod about us not being the global police officer of the world and that other people need to stand up. So maybe the lesson here is, you know, maybe strategically-

   30. CPChamath Palihapitiya15:07

       Uh, Jason, it's not like we were called on and we didn't stand up. We weren't called on.
3. 15:21 – 34:59

   Sanctions risking a major food shortage: possible solutions, how we got here, creating distributed manufacturing and supply chains, capitalist incentives flipping

   1. JCJason Calacanis15:21

      sanctions, uh, are seeming to have a profound impact here and people are looking at them as potentially maybe cyber warfare and just, you know, actual tactical warfare on battlefields is less important than economic warfare. And Russia has been essentially canceled from the global economy, from Visa to McDonald's, uh, to exports. And these sanctions are not just, uh, government sanctions. These are people opting into them, whether it's corporations, uh, and other entities saying, "We're just not gonna do commerce with Russia." Unfortunately, uh, and this is something you have great expertise on and so we're lucky to have you here to talk about it, people may or may not know this, but-

   2. DFDavid Friedberg16:04

      I'm happy to be here. (laughs)

   3. JCJason Calacanis16:06

      ... this is the breadbasket of the world. They export more wheat than anybody, and they also export fertilizer, soybeans, and some other inputs, uh, which we talked about previously that, uh, provide meat, uh, for the world. Uh, so what can you tell us about the downstream effects of there not being potentially, uh, or half as much crops coming out next year and what would happen in places that are the beneficiaries or dependent on wheat and fertilizer from Russia?

   4. DFDavid Friedberg16:39

      So there's a number of, um, first-order and then second-order effects that are not just about sanctions but also about export controls by Russia that, um, are creating swings in food markets like we've never seen and will almost certainly lead to widespread famine by the end of this year at this point. So the first important point to note is about 15% of the world's calories come from wheat. About a third of that wheat comes from Russia-Ukraine. Russia has banned export of wheat. And, um, the- the wheat spring planting season is like now, this week, um, and there's not a lot of planting going on. You know, a lot of commodity folks are in the field trying to figure out who's actually gonna go to field and plant, but, um, no one's making, you know, the concerted effort that they normally would under normal circumstances. So not only is the current wheat supply in Russia-Ukraine blocked up and cannot make its way to countries like Africa or countries in Africa and elsewhere, but the future planting season, um, is now significantly at risk. And again, that's 15% of global calories. And I- just to take a step back, the whole planet Earth operates on a 90-day food supply. So, um, once we stop making food, humans run out of food in 90 days. So another way to think about that is our food supply excess, our capacity, um, uh, in excess is about 25% of our global production. So if our global production goes down by 12%, we've lost half of our global food supply. And that's not just linearly across all nations. What happens is the most vulnerable nations lose their food supply first, and the richer nations buy that food supply to secure their populations.... calories. And so you very quickly see a bifurcation happen when you have a shortage in a food supply like this of just a few points, where suddenly famine is a real risk. And we already have about 800 million people on Earth that are subsisting on below 1,200 calories a day. So this very quickly tips the bucket in a significant way in a number of countries that's gonna be really awful. And that's just on the wheat supply and wheat planting problem. The bigger problem is the energy price plo- problem and the phosphorus and potassium problem. All fertilizer is made up of nitrogen, phosphorous, or potassium. Those are the three major types of fertilizer that farmers around the world have to use every year in order to grow that crop. Without fertilizer, plants don't grow. Nitrogen is made from natural gas. 98% of the world's ammonia is made from natural gas. Natural gas prices, as you guys know, have doubled and the f- and the futures market looks like in some places natural gas price is going up like 4X. As a result, the price of ammonia fertilizer, nitrogen-based fertilizer, has gone from $200 a ton to $1,000 a ton. So it's five times as expensive to buy basic ammonia fertilizer today than it was a few weeks ago, or a few months ago. And so this is now leading a lot of farmers arou- And then the other big problem is, uh, phosphorus. So, phosphorus, you know, by some estimates, I mean, you know, there, there's a little variation around here, but about 10% of the world's phosphate comes out of Russia. And, um, about, you know, call it, um, 25% of the world's potassium comes out of Russia, pa- potash. Both of those markets are blocked up. They, they are, they are sanctioned and they, they have banned exports. Russia has through the rest of 2022. So around the world, the cost to make nitrogen fertilizer has skyrocketed because of natural gas prices, because of the Russia problem, and Russia is not exporting potassium and phosphorus, and as a result, the price of nitrogen's gone from 200 to 1,000. The price of potassium's gone from 200 to 700. And the price of phosphorus has gone from 250 to 700. So now it's so expensive to grow a crop that a lot of farmers around the world are pulling acres out of production, and they're actually gonna grow less this year than they would have otherwise, because it is so expensive and they cannot access fertilizer locally to plant crops. So not only do we have the, the wheat problem, we now also have the fertilizer problem and the acres coming out of production problem. And so food supplies are gonna go down even further and this is gonna become even more catastrophic. And so there's a scrambling going on right now. You know, food prices around the world, as a result, everyone starts buying up all the commodities. They buy up all the corn, they buy up the soybeans, they buy up the wheat. And the price for corn has nearly doubled, whereas, you know, from where it was in July of 2020. Uh, the pri- price of soybeans, the price of wheat are all skyrocketing. And in a lot of countries, they cannot afford to, um, acquire and individuals cannot afford to, uh, to buy food, uh, with the skyrocketing commodity prices that we're seeing.

   5. JCJason Calacanis21:15

      Wait, can I- can I ask you a question? Uh, I think it's estimated that the US food supply, if you could X out the waste, would actually feed most of the developing world, because I think 30 to 40% of all of our food is wasted. Can you do something with that?

   6. DFDavid Friedberg21:29

      Yeah, that, that is actually true. Um, a lot of that happens at the point of consumption, so it's in people's homes. So it's a reverse supply chain problem, um, where, you know, we throw away a lot of, like, stale bread and cereal that goes bad or, or whatever. Um, there's some in the fresh vegetables market, but generally the core calorie producing commodities are rice, wheat, potatoes, um, and corn. Those commodities don't go bad in the supply chain. They end up getting tossed out at the end of the supply chain, which is at the point of consumption at, at home. So, you know, I'm not sure there's a real solution there right now. The, the, the bigger issue is like, how do you get bulk commodities to the places that are gonna need them over the next 12 months? So look, we're, right now, we're reducing food supplies, stocks around the world. There's strategic reserves that are getting opened up and being released. As that starts to get deplenished, um, diminished, and as the production kind of numbers start to come out, it looks like less acres are in production. You know, and God willing, we have a good weather year everywhere this year, because, you know, a bad weather year in some markets could completely decimate the remaining supply that's coming out this year. Regardless, it is gonna be a humanitarian disaster within a year, and we will see hundreds of millions of people go starving and there will be potentially, I think-

   7. JCJason Calacanis22:44

      Ho- you said hundreds of millions of people are going to starve?

   8. DFDavid Friedberg22:45

      Hundreds of millions of people will go starving.

   9. JCJason Calacanis22:47

      That's never happened in the history of humanity, has it?

   10. DFDavid Friedberg22:48

       800 million people already live on below tw- uh, 1,200 calories a year right now. And so this is-

   11. JCJason Calacanis22:54

       So you're predicting that 100, over 100 million people will die because of this?

   12. DFDavid Friedberg22:57

       I don't know about death. Famine, like famine is this, like, you know-

   13. JCJason Calacanis23:00

       Okay.

   14. DFDavid Friedberg23:00

       ... short of calories. You know, within a, within a market it's not like, "Hey, there's no food." Like, you know, there will be strategic reserves released, there will be stuff, but it won't be enough. We just don't have enough. In the way supply chains are set up-

   15. JCJason Calacanis23:10

       Oh.

   16. DFDavid Friedberg23:10

       ... there just isn't enough. And so it, it has been-

   17. JCJason Calacanis23:12

       So once again, we found another supply chain weakness, uh, like we did in COVID over and over again, and-

   18. Boy, so, so Freeberg.

   19. ... the strategic replies will be released, but then hoarding is starting. So I'll, David, you take it after this. But the one question I had was maybe talk to me about this concept of hoarding, because there seems to be a cascading effect and you, you kind of, um-

   20. DFDavid Friedberg23:32

       Well, yeah, it's not just hoarding. I mean-

   21. JCJason Calacanis23:33

       ... talked about it a little bit.

   22. DFDavid Friedberg23:34

       ... i- i- as with any market, guys, as you know, when there's scarcity, people come in and buy at a, at a faster pace, you know, everyone. And, and so this is a market dynamic. It's not like people are physically hoarding loaves of bread, but commodity traders, uh, countries, strategic reserves, they start buying up what they can get-

   23. JCJason Calacanis23:51

       Yes.

   24. DFDavid Friedberg23:51

       ... to prepare for the famine that's coming. Then prices go even higher and then it kicks other people out of the market that couldn't afford to buy it, and the whole thing gets really ugly really fast.

   25. JCJason Calacanis23:59

       And, and there's no off-ramp here. There's no way to solve this.

   26. Well, what, uh, Freeberg, I, w- Yeah, the thing I want to ask you is if we had a peace deal right now, a ceasefire, would we avoid this outcome? I mean, like how long, how long do we have to avoid this?

   27. DFDavid Friedberg24:10

       We need Russia to reopen fertilizer export markets now. We need natural gas prices to come down now, and we need them to plant the spring wheat. Those are three things that need to happen to solve this problem.If those three things don't happen, we're going into spring right now, so around the world, in the Northern Hemisphere, farmers are making plans. They're planting. They're deciding how much fertilizer to use. And so as this market starts to kind of, um, work itself out over the next few months, uh, a lot of the commodity traders and the, uh, the ag departments, they publish these planting reports, and they talk about how many acres of what were planted, and then everyone forecasts how much the supply will be. And we're gonna start to see these uglier numbers come out over the next few weeks and months. Meanwhile, we're seeing supplies dwindle, and Russia is holding all this stuff. So, you know, they're holding hostage, uh, phosphorus, potassium, and the natural gas pricing is just what it is. Remember, there- there are ammonia plants everywhere. There are ammonia plants that I- And all ammonia plants use natural gas to cre- uh, to, you know, to create this nitrogen-based ammonia.

   28. CPChamath Palihapitiya25:09

       Let me make a statement, and I'd love your reaction. We're finding out all of these externalities that was made with underlying poor scientific ra- reasoning that has caused these issues to be exacerbated. So, we know, for example, that our overreliance on Russian hydrocarbons could have been mitigated with nuclear, but we fell for shoddy science, and we fell for, uh, a bunch of uninformed people who ran this banner of like, you know-

   29. DFDavid Friedberg25:38

       Great point.

   30. CPChamath Palihapitiya25:38

       ... environmental protection, right?
4. 34:59 – 49:26

   Breaking down the second- and third-order effects of the massive sanctions on Russia; best case/worst case outcomes for this new form of economic warfare, deglobalization

   1. JCJason Calacanis34:59

      sanctions. We saw a level of sanctions we didn't expect. They were ferocious, they were unilateral, they, they, they're, you know, undeniably having an impact. Do you think Putin would be at the table? Do you think these sanctions are really having a dramatic impact? And do you think that they'll be a tool that we should use in the future or do you think maybe we need to be more thoughtful about them? In other words, h- cancel culture comes up as a, an analogy here. People are saying, "Oh, it's like cancel culture for a country." I think it's pretty great that a country that is murdering their neighbors doesn't get to participate, but obviously, you can have some serious concerns if fertilizer a- and supply chain issues, as we just discussed, are going to cause famine. So what's the balance here? Are you handicapped-

   2. DSDavid Sacks35:46

      Yeah, I think, I think it's a gr- a great, another great example of, um, you know, ma- we're not thinking through the second or third order consequences of what we're doing. We're just reacting. And so to, to Freeberg's point, um, so, you know, first of all, we have to realize this was more than just sanctions. This was a complete severing of economic ties. I mean, basically every western country pulled up stakes out of Russia. They, I mean, they did it on their own too. I mean, they did it because for the reasons you said, because they wanted to make a statement that what Putin did was wrong. So every Russian who is working for one of these companies basically got fired and all the stores closed and, and so on. So I think, I think it is... The repercussions of it are gonna be severe. However, these things, the economics of it take time to play out. And so do I think it creates pressure on Putin to make a deal? Yes. But-... you know, if the, if this is gonna be determined on the battlefield one way or another in the next month, do I think it has time to operate i- in that timeframe? Probably not. And I think what's likely to happen here is that, um, in the same way that the real repercussions of this war are gonna be felt in grain production in six months, you know, there is an economic tsunami headed for our own economy as a result of the blowback from basically severing, you know, 144 million Russians from the global economy. Um, there's also gonna be geopolitical, uh, blowback. I mean, you know, I think it's very likely that the way this is gonna play out geopolitically is that Russia will become a Chinese client and, you know, all of those natural resources that China produces, uh, the, the gas, you know, all the, the mineral wealth, that, those resources are gonna flow on a conveyor belt, on a Belt and Road conveyor belt from Moscow to Beijing, and they're gonna f- fuel the-

   3. CPChamath Palihapitiya37:43

      Yes and no.

   4. DSDavid Sacks37:43

      ... Chinese economy.

   5. CPChamath Palihapitiya37:45

      Yeah. Yes and no, because the reality is the, the, the p- the thing we have to remember is China is still a fundamentally export-driven economy, of which 35% just alone goes to the United States. When you add in Europe and other OECD countries, it's almost 60%. So I think the idea that all of a sudden you c- uh, you, Russia will be able to backdoor all of these things through China into the rest of the world I think is not really realistic. And this is actually why I think the rhetoric is so high, because those two countries specifically are put in a very difficult situation. Like, what do you think the China calculus on Taiwan is, looking what's happening to Russia as a completely export-driven economy?

   6. JCJason Calacanis38:21

      What do you think it is?

   7. CPChamath Palihapitiya38:22

      It's completely off the table. Completely off the table.

   8. JCJason Calacanis38:25

      They would never consider invading Taiwa- Taiwan knowing that it would put Apple in a position or other companies that are entwined in the Chinese economy-

   9. CPChamath Palihapitiya38:33

      I think what's happen-

   10. JCJason Calacanis38:33

       ... they would have to pull out of-

   11. CPChamath Palihapitiya38:34

       Again, I've said this before, everybody has, was always, you know, sort of like lambasting economic sanctions, you know, even on this pod, people are like, "It's never gonna work. It doesn't do anything." And it turns out it's just not true.

   12. DSDavid Sacks38:46

       To be clear, I think, uh, sanctions are an appropriate way to create economic pressure so that we can get a ceasefire and a peace deal made, okay? So I do believe, in the same way that I believe we should arm the Ukrainians so they can defend themselves, while I'm against a no-fly zone! The, the issue is just are we actually using the leverage that we're creating to drive this process to a succes- I'm talking about the ceasefire process, to a successful resolution? Because if we just make this the new normal, which is, you know, a, basically an insurrection in Ukraine that drags on forever and, uh, the, the China, uh, and Russia cut off from the global economy and becomes a client of China, I think there's a parade of horribles that flow from that, and Friedberg just outlined one of them, which is hundreds of millions of people across the world potentially starving. So my point about sanctions is not that we shouldn't have done them, but there are gonna be big repercussions for our economy if we don't resolve this situation in Ukraine.

   13. JCJason Calacanis39:49

       Let's do best case/worst case with these new, this new economic order here and economic sanction ability that the West has now demonstrated, um, you know, quite effectively. Uh, for me, the best case scenario here is if you want to participate in the global economy and globalas- to globala- Globalization 2.0 means you're gonna have to be, hit some base, uh, behavior level of being a good actor in the world if you wanna participate in the wider economy. Therefore, as Chamath just pointed out, I think quite correctly, Taiwan's off the table. I mean, China does, already is having massive, uh, economic downturn and, and headwinds. The, the idea that they would face what Russia is facing right now in terms of sanctions globally would be cataclysmic for them. So do we think, what's the, what's the best case in your mind, Friedberg, the worst case of this new economic sanctions that we've just outlined? Best case, worst case?

   14. DFDavid Friedberg40:44

       Much of this is driven by, um, Russian decision-making, not just our decision-making. And, and so, you know, there, there's a lot of question marks around what they're gonna... Uh, they've said definitively, "We are banning all fertilizer exports through 2022." Okay, so, like, does changing a sanction model at this point get enough resolve for them to kind of come back to the table? Do we need to kind of weave that in to some discussion, peace discussion that they're having with Ukraine? I think there's gonna need to be this multilateral, like global either support or dep- or partnership model that's gonna have to kind of emerge for this to all get resolved positively. I don't think that it's just about Russia and Ukraine agreeing to a bunch of terms. We're all gonna be affected by what's going on and what Russia has chosen to do back to us. And we all think we're in the power and we've blocked them and destroyed the ruble and, you know, knocked them back to the Stone Age, yada yada. But, like, we're hurting ourselves far more than we realize, and we have to go get something back from Russia in order to resolve this.

   15. JCJason Calacanis41:49

       So, nuanced.

   16. CPChamath Palihapitiya41:50

       I'm not sure I totally agree with that. I actually think that, you know, n- necessity... What is it? M- fiend- necessity is the mother of invention? Um, I think that this has the ability, just circling back to what we said before, for us to rewrite all of these other decisions that were frankly not necessarily rooted in either first principles or long strategic thought in a way that can actually improve the state of play for everybody, not just including us, for the next 50 or 100 years. So I'm not completely convinced that it's as catastrophically bad as you think.

   17. JCJason Calacanis42:22

       Well, what about this, uh, Friedberg? If, if we were thinking about food stability, you mentioned your slurry and, you know, being able to make these calories without actually planting any food. If we, uh, am I correct-

   18. DFDavid Friedberg42:34

       It's not going anywhere if you call it a slurry, but yeah. (laughs)

   19. JCJason Calacanis42:36

       Okay. (laughs) Let's call it a protein bar, you know.

   20. DFDavid Friedberg42:39

       A protein bar. Like, ultimately, Jason, we can actually create pasta, bread-

   21. JCJason Calacanis42:44

       Great.

   22. DFDavid Friedberg42:44

       ... rice. I mean, that's where this all goes 'cause-

   23. JCJason Calacanis42:46

       Perfect.

   24. DFDavid Friedberg42:46

       By the way, just so you guys know, I wa- I wanna frame this up, it's super important, 60% of the world's calories...... come from carbohydrates, which are basically two molecules, amylose and amylopectin.

   25. JCJason Calacanis42:57

       Okay.

   26. DFDavid Friedberg42:57

       That, that's what makes up starch. So if we can synthesize amylose and amylopectin, we can make it into any plant, yeah.

   27. JCJason Calacanis43:02

       Ho- how long would it take? How long would it take, what would it cost to build your pasta-making machine (laughs) a- and rice-making machine, you know, uh, to have more food-

   28. DFDavid Friedberg43:11

       These are decade, decades long scale-

   29. JCJason Calacanis43:13

       Yeah.

   30. DFDavid Friedberg43:13

       ... up problems, right?
5. 49:26 – 1:02:06

   US economy big picture outlook: inflation, rising rates, decreasing uncertainty potentially a bullish sign in public markets; how that flows to private markets

   1. JCJason Calacanis49:26

      right. Let's segue from here into, uh, the economy, inflation and markets. In a previous episode, Chamath, you talked about the psy- the psychological cycle of, you know, ignoring good news then accepting it, being outraged by it, and then maybe not taking the good news. In the, uh, bad news column, obviously, inflation continues. Uh, last six months of CPI numbers year over year, obviously, uh, September 5.4. I'll fast-forward to November, 6.8, January, 7.5, February, 7.9. Foo- excluding food and energy, core inflation still rose 6.4%. That being said, um, we have 11 point X million jobs, uh, available (laughs) for Americans, five or six million people unemployed who are looking for work. Obviously, there will be some, uh, mismatch in terms of geography and skills there. Uh, and then corporate earnings great, but a recession possibly looming. Where are you on this? Uh, and, and obviously the market's bottomed out, so where are you at with the economy, hope, fear, and otherwise?

   2. CPChamath Palihapitiya50:32

      Um, well, I think that we're in the midst of what I would call a melt-up. So, you know, probably the next month, month and a half, there really isn't much, quote-unquote, "bad news" that hasn't been priced in. You know, the, the, the thing that I've learned over the last few years is that markets don't actually care what the news is. They, uh, they can process good news and bad news equally well. What they despise is the uncertainty of what the news could be. And so this week was really important because we had two, um, huge buckets of uncertainty taken out of the market. So the one we've already talked about, which is when, when the market saw that there was a surface area of a deal between Ukraine and Russia, that was really constructive, because neither side would have signaled something if both parties were very far apart. So that, that meant to the markets, we're a few weeks out from something getting done. And then the second thing was Jerome Powell and the Federal Reserve, they finally had their meeting, they raised rates 25 basis points, but even more importantly, they gave you a very prescriptive forecast of what the next year will look like at a minimum and possibly even two years. And once you could have that, you were able to then go and redo all of your expectations. And what people realized was, okay, you know, inflation may, uh, actually start to get tamed in the back half of the year. The economy is still quite strong, uh, and we could actually support 2%, two and a half percent interest rates and still actually grow really well. And so what you've seen in the last three or four days is a reaction to the loss of uncertainty. And so there really isn't now, uh ... The only thing the fly in the ointment could be if the war, all of a sudden escalates, not that it gets dragged on, because at that point that's also, I think, been priced in. But if something very meaningfully different and some- and, and Russia, in this case, ratchets up the intensity by going, you know, nuclear or something else, although I think that's a very long tail-

   3. JCJason Calacanis52:46

      Chemical weapons seems a possibility, uh, or carpet bombing.

   4. CPChamath Palihapitiya52:48

      ... I think these are all very, very low probability events. Um, but in the absence of these things, you basically have really constructive dynamics right now for at least the next month and a half, maybe even two months.

   5. JCJason Calacanis53:00

      How much of this has to do with retail investors who were YOLO, HODLers, speculators, stemmi chats-

   6. CPChamath Palihapitiya53:08

      I mean, I'm gonna, I'm gonna-

   7. JCJason Calacanis53:09

      ... getting super active for two years, and then maybe getting super spooked right now, and maybe needing the money to deploy in their lives?

   8. CPChamath Palihapitiya53:15

      Look, the, the, the thing to remember and, and, and I hate to be this blunt, but it's true, retail is not a very good signal of anything. In fact, um, if you actually look at retail flows, typically, you will make money by doing the exact opposite of what retail does. And I posted this in the group chat to you guys, you know, every single day of j- uh, since the beginning of this year, retail was a net buyer. In all of those days, the market got punched in the face. Finally, at the beginning of March, retail capitulated, right? And I posted that same day and I said, "Guys, this is the moment to buy." And it lo and behold what happened? The markets rallied meaningfully from that point. And the reason is because they were going into the end of Q1, you have a huge tax bill due in April 15th, people were starting to just finally give up. They were buying every single day and they finally gave up. But that capitulation was the moment that, that you buy. So if anything, retail is, is, is the, you know, you know, I've said before, you fade your fade list, you know, retail flows are something you typically will make money by fading, by doing the exact opposite of whatever retail is doing. Um, and you just need to have access to that information. If you have access to it, you can kind of, um, you know, profit from it. So where are we going from here? Probably up.

   9. JCJason Calacanis54:36

      David, you've been pessimistic. Uh, we're seeing a lot of changes in the private market, funding rounds taking longer, a lot of funds getting closed, uh, you know, venture funds that is, uh, but seems like a lot more diligence is being done, the time, meantime to closing a deal has, uh, definitely, uh, extended massively. What's your betting strategy now as a venture capitalist?

   10. DSDavid Sacks54:58

       I think that there's gonna be a trickle-down effect of what's happening in the market to, to privates, and th- the valuations are gonna go back to their pre-COVID levels. I mean, AR multiples pre-COVID were like 20, not 100. So we're seeing a massive repricing.... of deals and that's gonna continue. And I don't think it's just gonna be this, like, transient effect and everything's gonna bounce back in a few weeks. On the public markets, the defining characteristic of these markets is volatility. I mean, the VIX, which is the measure of volatility, is at one of its all-time highs. And so it's true that over the past week, we saw a nice sort of melt-up or a rally because there was, um, speculation about this peace deal. The Financial Times had that article on the 15-point plan. Chamath is right that if that peace deal gets signed, I think the market rallies strongly because, you know, it went up considerably just on hopes that it might be signed. But on the other hand, if this peace process falls apart, I think the market will give back all those gains and then some. I think we are nowhere near out of the woods on all the risky scenarios that could develop from this war. I think that if there is no peace deal, I think you can almost expect Russia to escalate in the war. They have said this is an existential issue for them. I think that would mean, at a minimum, you know, heavy bombing of Ukrainian cities and then that will step up the pressure even more on Biden and Washington to get militarily involved. This situation could still spin out of control. So, you know, I think in the absence of a peace deal... And then finally, we have all the risk of recession. We, we definitely are seeing a slowdown in the economy right now and I think if this war continues and we don't get the spring planning and things keep, you know, deteriorating, I think we're headed for a very serious, um, recession in this country. I think we'll go from slowdown to a recession. So if I were advising Biden... Of course no one's listening to me, but if I were advising Biden, I would be telling Biden, "Listen, Mr. President, we are gonna have a horrible midterms in November and, you know, we are gonna have a really hard time in 2024. If this war continues and, you know, we head down into a recession or any of the other catastrophes that could happen, we need to push for a peace deal right now." And the US should be playing a constructive role and we should be applying pressure wherever we can to make a deal because the broad contours of this deal, to Chamath's poi- point, have been set. I don't think any of the details, now that we know, look, it's about Crimea, it's about Donbass, it's about neutrality, none of the details that we're still fighting over are more important than getting a peace right now. And if I were in the White House, I'd be singularly pushing for that.

   11. JCJason Calacanis57:43

       Yeah. It's, uh, it's complicated. Uh, uh, there are... The, the counter to that, obviously, is this could be, you know, the beginning of the end for Putin and, you know, even if that's a 10% chance or 20% chance, the possibility that in our lifetime, you know, Russia could have a leadership change could be tremendous. Obviously it's a coin toss which way it goes, uh, but change could be phenomenal.

   12. DSDavid Sacks58:05

       I think the n- So, so look, that's certainly in the cards.

   13. JCJason Calacanis58:08

       Yeah.

   14. DSDavid Sacks58:08

       And, um, and look, if somehow, magically, Putin got toppled and replaced with a Democrat, that would be a wonderful thing. Um, however-

   15. JCJason Calacanis58:15

       It's happened before.

   16. DSDavid Sacks58:16

       It's, it's-

   17. JCJason Calacanis58:17

       Rare, but it happens. Yeah.

   18. DSDavid Sacks58:18

       Well, tell me when, when has it happened?

   19. JCJason Calacanis58:21

       Uh, East Germany, right? We tore down the wall.

   20. DSDavid Sacks58:24

       Yeah, I mean, that was a reunification. Here, here, here's the basic problem is-

   21. JCJason Calacanis58:28

       Yeah. No, I know where it went from-

   22. DSDavid Sacks58:28

       ... is we, we, we understand the Russians-

   23. JCJason Calacanis58:30

       ... communism, yeah.

   24. DSDavid Sacks58:30

       In the Russian system you've got all these ol- oligarchs who are basically like bosses or mob bosses and then Putin's like the boss of bosses, right? So what are the odds, if you take out the boss of bosses, that he's replaced with someone who's a Democrat versus the next biggest, baddest boss? Um, I, I think, you know... Look, that, that's certainly a possibility. But my concern is that when you play for maximalist upside like that, you're also taking maximalist downside.

   25. JCJason Calacanis58:55

       That's true.

   26. DSDavid Sacks58:55

       And a lot of people ha- have made this point that, "Look, if Putin's life is on the line, he's gonna be more willing to do anything." And I think the, the better approach, and you've, you've heard people s- mention this idea of the golden bridge from Sun Tzu-

   27. JCJason Calacanis59:08

       Yeah.

   28. DSDavid Sacks59:08

       ... which is give your enemy a golden bridge to retreat-

   29. JCJason Calacanis59:10

       Yeah, I mentioned it

   30. CPChamath Palihapitiya59:11

       That's-
6. 1:02:06 – 1:14:37

   Rewriting foreign policy playbooks

   1. JCJason Calacanis1:02:06

      side will.

   2. CPChamath Palihapitiya1:02:06

      The foreign policy playbook is going to get fundamentally rewritten after this Russia-Ukraine war, in large part because of the effectiveness of government sanctions, plus corporate social responsibility, whatever you wanna call that, CSR function.

   3. JCJason Calacanis1:02:24

      Yeah, public sentiment-

   4. CPChamath Palihapitiya1:02:25

      Wokeism, whatever you want, whatever you want to call it-

   5. JCJason Calacanis1:02:27

      ... ****** culture, whatever you want to call it. Yes, I agree.

   6. CPChamath Palihapitiya1:02:29

      But the combination of these two things has proved to be incredibly effective at setting the stage for some sort of compromise or regime change. The spectrum of outcomes is there. But the point is, that's an incredibly unique set of circumstances where before we never would've thought an economy that large or a country that important on the world stage would ever have compromised in the absence of military intervention and I think that that's important to think about as we think about what our forward-going China policy looks like. I think really, like the, the importance of like the OECD, right? The importance of all these organized nations that consume from China, um, becoming more organized now probably makes more sense. I said this before in a tweet, but the importance of the US dollar has become completely primary, which has been an incredible benef- you know, benefit of what has happened because of this war. You know, very small silver linings in the grand scheme of all of this humanitarian crisis but those are gonna be really important things that the United States can seize on so, you know, we may in some ways have, have had some diminished power in order to facilitate peace in this con- in, in this conflict, but the downstream capital that we could accumulate by organizing these countries more effectively, I think could be really important. And then separately, we have to have a moral conversation in the United States about all these things like environmental laws, like our approach to agriculture that may have been underwritten-

   7. JCJason Calacanis1:03:55

      Absolutely, yes.

   8. CPChamath Palihapitiya1:03:56

      ... with faulty logic.

   9. JCJason Calacanis1:03:58

      A little more pragmatism would go a long way.

   10. DSDavid Sacks1:04:00

       Yes, it would. I'm a little more pessimistic about our foreign policy establishment and part of the reason I say this is becau- I'm very disappointed in the Republicans. The Republicans used to be the party of vital national interest, meaning America did not get involved all over the world unless we had a vital national interest. You just never hear them making that case anymore. It's all the way back to sort of Bush doctrine and, you know, as an example, they're all pushing for the no-fly zone, they're all pushing for the delivery of the MIGs despite-

   11. CPChamath Palihapitiya1:04:27

       They want war. Just say the words.

   12. JCJason Calacanis1:04:31

       They're weird. I mean, th- the those right-wingers-

   13. CPChamath Palihapitiya1:04:33

       Just say the words, David Miller.

   14. JCJason Calacanis1:04:33

       ... are crazy. Why are they so-

   15. CPChamath Palihapitiya1:04:34

       They want war.

   16. JCJason Calacanis1:04:35

       ... wanting to go-

   17. DSDavid Sacks1:04:35

       I've been very critical. I mean, I've been-

   18. JCJason Calacanis1:04:37

       ... to war on this? I don't understand their endgame.

   19. DSDavid Sacks1:04:38

       Well, I think there's two possibilities.

   20. JCJason Calacanis1:04:40

       Is it just machoism? Machismo?

   21. DSDavid Sacks1:04:41

       I think there's-

   22. DFDavid Friedberg1:04:42

       Anxiety.

   23. DSDavid Sacks1:04:44

       I think, I think there's two possibilities. I think-

   24. CPChamath Palihapitiya1:04:45

       What is it, Freeburg? What is it?

   25. DFDavid Friedberg1:04:47

       Anxiety.

   26. CPChamath Palihapitiya1:04:48

       Yeah.

   27. DFDavid Friedberg1:04:49

       And this is why I predicted war at the end of last year but, you know.

   28. DSDavid Sacks1:04:52

       I think that turned out to be a great prediction.

   29. JCJason Calacanis1:04:54

       You got that one right.

   30. DSDavid Sacks1:04:54

       I, look, I've been, I've been very disappointed in the Republicans and I think, I think here's what I think is going on. I think if any of those Republicans, like say a Mitt Romney or something, and look, I think Lindsey Graham is just a crazy sort of warmonger, but, but you take someone like Mitt Romney who's basically saying all of these, um, sort of more, uh, bellicose and escalatory things. If he was actually in Biden's shoes, I bet he'd be making the same decisions as Biden, uh, because he would not want to risk war three, but it's such a cheap, easy, partisan, political attack to say that Biden is being weak and he's not doing everything he can.

Episode duration: 1:14:37