E74: Market update, inverted yield curve, immigration, new SPAC rules, $FB smears TikTok and more

1. 0:00 – 5:50

   Sacks' DC trip and foreign policy speaking gig

   1. CPChamath Palihapitiya0:00

      I mean, Jason and Sax look like fucking two accountants who've just been fired from Lehman Brothers in 2008.

   2. JCJason Calacanis0:05

      Absolutely. (laughs) Absolutely. We're carrying our boxes out to the street-

   3. CPChamath Palihapitiya0:08

      Mm-hmm.

   4. JCJason Calacanis0:09

      ... and getting a taxi.

   5. DFDavid Friedberg0:10

      Sax does look appropriate for his setting.

   6. JCJason Calacanis0:12

      How long are you in DC for, S- Sax Appilio? You in and out, one day? What are you doing?

   7. DSDavid Sacks0:16

      Yeah, I'm flying back tonight for the fundraiser tomorrow morning.

   8. JCJason Calacanis0:19

      Oh, who's the fundraiser with? Do you wanna tell everybody? (beep)

   9. CPChamath Palihapitiya0:22

      Big boy?

   10. DSDavid Sacks0:23

       Yeah, it's an April Fool's joke.

   11. JCJason Calacanis0:24

       Me?

   12. DSDavid Sacks0:24

       I'm hosting a fundraiser for a Democrat.

   13. JCJason Calacanis0:26

       Blue state. He's trolling everybody with his blue state. Put your red tie on. Put your red ti- do you have a red tie with you, Sax?

   14. DSDavid Sacks0:31

       I wore a blue tie t- today.

   15. JCJason Calacanis0:33

       Really? Oh, you're trolling?

   16. CPChamath Palihapitiya0:34

       Oh, the full troll is on. Oh, the full troll is on.

   17. JCJason Calacanis0:35

       Wow. What a... (laughs) What a little troll artist. All right, let's get started.

   18. I'm going all in. Don't let your winners ride.

   19. Rain Man David Sax.

   20. I'm going all in.

   21. CPChamath Palihapitiya0:49

       And I said, we open source it to the fans, and they've just gone crazy with it.

   22. DFDavid Friedberg0:53

       Love you guys.

   23. JCJason Calacanis0:53

       What a nice-

   24. Queen of quinoa. I'm going all in.

   25. All right, everybody. Welcome to another episode of the (laughing) all in podcast, with us, back from his Tahoe vacation, you were certainly missed, even though the episode was record-setting, the queen of quinoa himself, he'll reboot your physique with his munique, puts the mana in the kana, and he's your pal from NorCal, the sultan of science, David Friedberg. How are you doing, brother?

   26. CPChamath Palihapitiya1:19

       Holy shit. You have a whole sequence-

   27. DSDavid Sacks1:21

       Wow.

   28. CPChamath Palihapitiya1:21

       ... of these things? This is great.

   29. DFDavid Friedberg1:23

       You do actually do work for this podcast now?

   30. DSDavid Sacks1:24

       If you can keep this going every week, it'll be amazing.
2. 5:50 – 26:16

   Yield curve inversion, breaking down the current state of the markets, understanding the labor market through birth rate and immigration

   1. JCJason Calacanis5:50

      uh, show, but let's talk a little bit about markets up top here. The US yield curve, uh, inversion is upon us. Maybe you could give us, uh, CP, a little primer on what this means, the inverted yield, yield curve, and why people are talking about it this week.

   2. CPChamath Palihapitiya6:03

      Well, I think people w- uh, yeah, were talking about it.The reason they were is that they believe that it, uh, predicts a recession. And specifically what they look at is the interest rate on a two-year bond and an interest rate on a 10-year bond, and you subtract one from the other. And when it inverts, what effectively... what it means is that, you know, typically in a healthy economy, you want rising interest rates over a long period of time, and the reason you would want that is that you are guessing that the economy will be healthy, there'll be a nominal amount of inflation, so things will tend to only increase in price. And as a result of that, you need to get paid more for the future than today, right? So if you want me to take 10-year risk, you need to pay me a little bit more than if you want me to take two-year risk. And so things should go up and to the right. But when all of that stuff 10 years out all of a sudden is trading for a lower yield than today-

   3. JCJason Calacanis7:07

      Hm.

   4. CPChamath Palihapitiya7:08

      ... what people think will happen is that, um, you know, governments will cut interest rates massively. They tend to do that in order to stimulate the economy, right? To get money back into the system. And they tend to do that because of a recession. And so people look at the, the difference between the two-year bond and the 10-year bond, and they try to guess what's gonna happen. Here's the problem with all of this. It turns out that it's not as correlated, um, as one thinks. The... And Nick, I posted this link, so you, you can just put it up there, but a bunch of economists at the Fed actually went and, you know, you have access to this data. They back-tested this, and what they found was that there was actually a more predictive signal of recessions, which is the difference between the three-month T-bill and the 18-month T-bill. And if you look at the threes/18 spread, they call that the forward spread at the, at the Fed. Uh, that's actually not showing a recession at all. In fact, that shows a very healthy ascent, largely taking into account the fact that the Fed has told us that they're gonna rip in a bunch of rate increases over the next year to 18 months. So what are we to do with all of this? Well, when there's been a recession, it has typically been true that both the twos/tens and the forward spread have collapsed to zero or gone negative. That's this inversion. It has never really been the case that twos/tens inverts while the forward spread stays up and you have a recession. In the past, we've mentioned that when oil has these kinds of price spikes, it typically forecasts a recession. So if you put all of this data together, it's a really murky picture. Um, so what are you supposed to do? It's not totally clear to me, but I think the, the general way that I think the market is reacting to this is probably inappropriate, and I'll tell you why. And the setup, by the way, because of this inappropriateness, is actually quite interesting. So why is the reaction inappropriate? Look, if you think about where we were in November and where we are today, almost April 1st, right? So it's been four months, five months. We've had massive, uh, exposition of inflation. We've had massive disruptions to the supply chain. We've had the beginning of a war whose end is somewhat indeterminate today that's causing a bunch of spikes in a bunch of really critical commodities the entire world needs. We've had a Federal Reserve that went from hiking 50 or 75 basis points to hiking 200 to 250 basis points, by the estimated average. And so all of these things have happened, yet the market is basically at an all-time high, plus or minus that 5%.

   5. JCJason Calacanis9:53

      Hm.

   6. CPChamath Palihapitiya9:53

      That really doesn't hang together at some really basic logical level, right? So, so what's gonna happen? Well, Brad said this last week. What has actually happened under the hood is a dispersion, which means the crappy companies have gotten crushed and the good companies have gotten whacked, but not crushed, okay? And then when they rally, they rally disproportionally in favor of the good companies. So what are we doing right now? I think we are going to see this diversion of companies, and we're about to go through earning season, right? We're at the end of Q1, and I think what's gonna happen is really interesting. You're gonna have a handful of companies who have a great handle on their business, who actually project strength. "I know what I'm doing. I know how I'm going to perform. The levers are in my control. I'm going to invest for the future. I'm gonna go and consolidate a market." Those companies will get rewarded. And then anybody else who has a whiff of indecision or whose structural business is flawed, and then they use all of these other issues as a reason to explain their flawed business, will get completely whacked. Two examples over this last week, and we had this debate, you know, uh, the people were talking about Restoration Hardware and the CEO basically saying the sky is falling and there's a huge recession. And, you know, my comment is, "Well, if you take the other side of the coin, Restoration Hardware sells overpriced, crappy furniture into a housing market that's basically shut down because refi rates are at 5%." There's the other explanation for why his business is crappy. It doesn't necessarily (laughs) have to be a recession.

   7. JCJason Calacanis11:29

      Well, and, and just to clearly define it, a recession is two quarters or more of negative growth, the, the economy contracting. And we've had about a dozen of these since World War II. We remember a couple of them in our lifetimes. Obviously, the COVID, uh, situation created a recession, uh, for a couple of quarters. And then we had, uh, the Great Recession, which lasted... I think that was almost... It was over a year, right? That was six quarters, I think? Five quarters? So these happen every 10 years or so. Uh, so if we do have a recession, and it, it seems implausible to me that we would have negative growth for two quarters, so-

   8. CPChamath Palihapitiya12:09

      Well, the other, the other interesting company, for example, was UiPath, which... UiPath got whacked today, 25 or 26%.And what they actually reported was that they thought that they were going to increase, um, ARR to, you know, 1.2 billion from, like, 900. That's a h- that's a hu- at that scale, to grow 35, 40% in ARR in a year is really quite incredible. But their ACV numbers and their revenue numbers were a little soft. They got whacked, and now they're trading, you know, like, 11 times ARR. So you have some of these companies that are gonna blame macro headwinds, but they may actually just have a, you know, a flawed business model. You'll have these other companies who actually over-perform, but may have been a little bit too highly valued, who will get valuation reset on any feint weakness. And so, you know, it's gonna be really up to these CEOs and these boards when they write their earnings releases to be very precise. Those that have a handle on their business, I think, are gonna get really rewarded, and those that don't need to blame the macro market and just get all the bad news out now, because this is the quarter. It doesn't get any better from here.

   9. JCJason Calacanis13:18

      Sax, b- best ways to fight a recession, cut spending. I'm sorry, increase government spending, uh, cut taxes. Wh- where are we at in terms of how many bullets we have left (laughs) to do these kind of things? We don't really have a, uh, you know, ability to spend more money, and I guess lowering interest rates is the other way to stimulate it. Do we even know we're going into a recession? So do you think we're going into a recession, and if we are, is there a way to reverse it through the, the normal tactics?

   10. DSDavid Sacks13:48

       We're definitely going into a slowdown, and whether it becomes a recession is to be determined. I think there's a very good chance, because we already were headed for a slowdown because of interest rate increases, because of inflation, and now on top of it, we've got all the supply chain disruptions from this war. And we know that, you know, th- unplugging the 144 million Russians in the Russian economy, we've basically unplugged that from the global economy, so that's gonna hit our economy as there's a little bit of a delayed reaction there. So these are all negative indicators, and I think we're either gonna have a recession or something cl- very close to it. Um, and, and we don't, we don't really have-

   11. JCJason Calacanis14:26

       And they typically last 11 months, right, Sax? So how long would the recession be? You think it's typically 11 months, two quarters-

   12. DSDavid Sacks14:33

       I guess normally-

   13. JCJason Calacanis14:33

       ... six quarters?

   14. DSDavid Sacks14:34

       ... yeah, normally it's, like, 18 months til you get back to where you're supposed to be or something like that. Um, but you're right. We have very limited tools to fight this because we've already spent... I mean, we've already broken the glass in case of emergency for COVID. We spent something like 10 trillion. By the way, that's what caused a lot of the problems is we flooded the zone with liquidity. Now we're trying to mop that up with interest rate increases. That's slowing down the economy. So there's nothing left to really spend. You can't really drop interest rates, uh, much more, and if you do, you'll get much worse inflation. So it seems to me that we don't have a lot of tools here, and we could end up with something like a stag- a 1970s-style stagflation, where we continue to see inflation with a slowing economy.

   15. JCJason Calacanis15:18

       Let's unpack what that experience would be like. Economy slowing, there's less job openings, people are spending less money while the prices of goods and services continue to go up?

   16. DSDavid Sacks15:29

       Well, think about it a little-

   17. DFDavid Friedberg15:29

       That's why they spend, that's why they spend less money, and that's why there's, there's, um, recession. Like, I mean, you're paying six bucks for gas. You have less money to go out for dinner every week, right? You pay, uh, you know, twice as much for an airplane ticket. You don't spend as much on the hotel. I mean, like, you know, the, the rippling effects of the rate of inflation are decreased spending, and there isn't enough time for, you know, the, the new job, uh, creation engine to catch up. And, you know, without a stimulus effect, you're in trouble. That's really the situation we're in, and that's what, you know, can kinda cause these stagflationary effects to, to, to drag on.

   18. JCJason Calacanis16:07

       Almost every other time we've had a recession, people couldn't find jobs and I r- I can remember them qualitatively. People saying, "Hey, I wanna get a job. I need more money. I can't find one." And now we're sitting here with more jobs than we can fill. There's still over 10 million jobs available and, and people are still resigning from jobs, so h- how do we factor in the labor market, Jamal?

   19. CPChamath Palihapitiya16:30

       Well, it's, I think this is, I think-

   20. JCJason Calacanis16:31

       All this. It's super confounding. It's just not like previous ones.

   21. CPChamath Palihapitiya16:34

       It is. I actually think, Jason, the explanation for all of this is, um, not necessarily about the supply-demand dynamics of labor, but our social policies related to our birth rate and immigration. I posted this article link for you guys to read in The Atlantic, but basically our birth rate in 2021 absolutely fell off a cliff. It was less than 300,000 net births in the entire country, and net birth is defined as immigration plus births minus deaths. And when you look under the covers, you know, we had two really discontinuously bad things. One that was, that has been building since Trump, and one that was acute. The thing that was acute was that in 2021 after we had vaccines, which is crazy thing to think about, we had a million deaths, basically, right? Because of COVID. So that's a million people that largely exited the workforce, plus or minus. Obviously some, not, not all of those people were working, but I think the overwhelming majority of those people-

   22. JCJason Calacanis17:33

       Well, probably 50%. We have 50, 60%-

   23. CPChamath Palihapitiya17:35

       More, more, more.

   24. JCJason Calacanis17:35

       ... labor participation, so.

   25. CPChamath Palihapitiya17:36

       I suspect, I suspect if you look at-

   26. JCJason Calacanis17:38

       Some could have been retired, right?

   27. CPChamath Palihapitiya17:40

       That's what I'm saying. I think it's probably-

   28. JCJason Calacanis17:41

       Yeah.

   29. CPChamath Palihapitiya17:41

       ... like, 70, 80% of the people that died were probably in the workforce in some way.

   30. JCJason Calacanis17:44

       Hm.
3. 26:16 – 48:54

   How the US can fix its current economic issues, reframing high-skilled immigration

   1. DSDavid Sacks26:16

      there.

   2. DFDavid Friedberg26:16

      Well, let's talk about what they should do. I mean, number one on the list for me is, we should be getting every entrepreneur from around the world, any really intelligent person who wants to go to graduate school here into this country. We need to have, like, a, a Manhattan Project to just scoop up all these mutant geniuses from around the world and get them here and get them starting companies here and then- You don't even need to do that. It, it, it was working under- ... Clinton, Bush, Obama. All you had to do was just leave it alone. Everybody who was any good at anything wanted to come to the United States, including the three of us. Yeah. And all of a sudden, it's like, "Nah, it's good. Yeah, I pass." (laughs) Yeah. "Okay, I guess." Yeah, well, I mean, if you set out that you hate entrepreneurs and you, uh, resent them for success, don't be surprised if they want to stay in a country that wants them. But I, I, I don't think that's what it was. I think it was much crueler than that. I think that we went to a posture that said, okay, you know what? Net new immigration was viewed as something that was displacing people, wasn't a net value creator, was, you know, in some cases, viewed very xenophobically, and that is really problematic because it's actually about a large population issue, and it's about how you construct a healthy, thriving population. Yeah. This was Trump's worst, yeah, worst approach. It was best approach, clearly not starting wars, worst approach, shutting the borders down for some populist reason when we actually need people in the country.

   3. DSDavid Sacks27:47

      Well, hold on, but see, the way you just framed that is why I think there's a problem, which is, look, obviously immigration's a very fraught issue, but the choice that's being presented to us by our political parties is either you're in favor of immigration, you know, like bringing in all these superstars, like we have founders in Silicon Valley, that makes sense, or you're in favor of open borders. I mean, why are those the two choices, that we either have H-1Bs or we have an open border? I mean, that makes no sense. I mean, what we should have is a sensible immigration... First of all, we should strip the border security issue out of it because whatever the number of immigrants that you want to allow-

   4. DFDavid Friedberg28:23

      Everyone should be pro border security. I mean, we need a point-based system. We need to be having a reasonable discussion between Democrats and Republicans-

   5. DSDavid Sacks28:30

      Right.

   6. DFDavid Friedberg28:30

      ... about a point-based system.

   7. DSDavid Sacks28:31

      Right.

   8. DFDavid Friedberg28:31

      There's a qualitative distance that needs massed. You, you, I've advocated that for a long time, and it works in Canada, and you're, I think you're absolutely right. Australia, New Zealand-

   9. DSDavid Sacks28:38

      I think Australia, New Zealand-

   10. DFDavid Friedberg28:39

       ... UK, they all have this. It's like-

   11. DSDavid Sacks28:41

       Yeah.

   12. DFDavid Friedberg28:41

       ... what, what does our country need right now? Okay, do we need people, you know, who are laborers, or do we need people starting companies? Do we need, you know, scientists?

   13. Yeah, I don't know if you've noticed, but to me, this is very equivalent to the removal of SAT and ACT scoring in admissions in college.

   14. Explain.

   15. The, the, the notion of merit, the notion of performance is not one-

   16. Hmm.

   17. ... that really matters in this country as much right now, as much as the notion of equity. And equity really has kind of become the mainstay of not just how we're making policy decisions on a local level, but a lot of these kind of national issues are becoming about equity. And it's about, you know, equitable consideration for wealth creation for existing citizens in the United States and the perception that a minority of people or some majority of people actually missed out on significant wealth creation over the past couple of decades as globalization and technology advances have accelerated growth in our economy and the share of that growth has been disproportionally assigned to a small percentage of people. And I think it is that same notion that drives a lot of the, the, the kind of sub-decisions, the local decisions that we're making, as well as these important policy decisions. And the point that I think is critical that's really hard to get across to everyone, or anyone for that matter, is that, you know, and I've talked about this a lot, but progress brings everyone forward, but it doesn't bring everyone forward symmetrically, right? Progress brings everyone forward, but-

   18. Give an example, Freeburg.

   19. So Amazon's a great example. I've used it a lot. Um, with Amazon, we've all g- been given access to more goods and cheaper goods than we would have had before. So we all benefit from that progress, right? Everyone can get on an app and get a friggin' inflatable swimming pool delivered to their home and the vitamins they need within 24 hours at half the price of what it would have cost them to go down to the local Ace Hardware store. That's an incredible benefit for all of us. So our share of wallet...... on that sort of goods has gone down, therefore we can spend more, get access to more stuff, and we're all prospering. And if you think back to what life was like 30 years ago, 20 years ago to those of you who, you know, were spending money 20 years ago or whatever, it's an incredibly different proposition than what we had back then. And it really has changed the world and changed all- all of us as consumers' ability to consume more. That's amazing. The problem is, Jeff Bezos is worth $160 billion, so everyone looks at that and they want to lambast Jeff Bezos and they want to say, "This is unfair." And equity becomes the discussion, which is why is one guy worth $160 billion? The reality is, he benefited everyone. Everyone got benefit from the value that he helped create in this world, in this market. And then the reaction is, we gotta stop this from happening. We can't let people be worth $160 billion without putting their eye on the point that, you know what, I'm spending three grand a year less because of this possi- because of this technology that he brought to market. And so there's a lot of these solutions that I would say are progressive. They- they progress us all as a society. Everything from biotech to technology and software to any sort of business or services innovation that people are willing to pay money for, that people are willing to embrace in an open and free market. And then what happens is the spoils of that progress aggregate in a min- in a- in a small way to a small number of people. And that's the payoff in capitalism. But when that happens over and over again for 250 years, you fast-forward, and by the way, a lot of those compound, people wake up and they say, "I don't want that anymore." And they miss the fact that progress is taken for granted. And here we are. We wanna give up progress and we wanna get equity. And it's gonna cause a real ripple effect that's gonna last for decades, and it's not the first time we've seen it, right? This has happened historically over cycles that last hundreds of years, and it's happening now in the United States and in the entire Western world. Um, and I think it's gonna be, uh, really unfortunate generally for progress, um, and all the ones, you know-

   20. CPChamath Palihapitiya32:25

       What's the solution?

   21. DFDavid Friedberg32:25

       ... and all- all- all the advocates for equity are gonna kinda raise their hand and say-

   22. CPChamath Palihapitiya32:29

       What's the solution for- Uh, I think you're totally right. What's the solution?

   23. DFDavid Friedberg32:31

       Yeah.

   24. CPChamath Palihapitiya32:31

       'Cause that's- it's just a really sad place to be.

   25. DFDavid Friedberg32:34

       I've thought about this a lot. And, you know, I look at what China did. Um, and everyone's gonna say I'm pro-China, but what was interesting about China recently is they ratchet up and they ratchet down that free market system. So they allow progress and then they disallow progress when the equity meter goes the wrong way. And so if you kind of think about an equity meter and a progress meter, you have to balance those two over time. Because otherwise what happens is you spring back (laughs) . And then the springing back is when governments change, revolutions happen, you know, democracy falls apart, au- autocracies arise, all those sorts of awful things. And, or really, I would say those cyclical things that happen, uh, I don't want to characterize any of them as good or bad, but the cyclical things that happen with society over time. And so, you know, that is effectively what's happening, guys. Like, the ultra-high tax rate, the, um, the regulatory regime, uh, you know, the- the government coming in and stopping Facebook. I mean, these sorts of behaviors are almost like an attempt to mute and ratchet down both, um, inequity as well as the, uh, you know, unfortunate side effect of progress.

   26. CPChamath Palihapitiya33:36

       Right.

   27. DFDavid Friedberg33:36

       Um, and I think, you know, look, we need-

   28. JCJason Calacanis33:37

       We're basically punishing excellence. And that is challenging for long-term growth, is sort of what you're saying.

   29. DFDavid Friedberg33:43

       You're minimizing, you're minimizing progress to improve the- the- the- the rate of equity of distribution of gains. Right? And- And- And it's- it's very hard, 'cause by the way, what you're also doing is you're relating a first derivative and a second derivative effect. Um, and so, you know, first order and second order effect. So, uh, it becomes a really difficult thing to... And- And people don't really see it this way. People see kind of the- the very, you know, myopic view of, "I gotta redistribute wealth. I gotta help people that are out of jobs. These guys are- have only seen their income go up by 10% while everyone else's income's gone up by 40%." And so, you know, politicians, you know, legislators react to that circumstance. But the zooming out is that circumstance arose as we all made progress with respect to security, with respect to health, with respect to food availability, with respect to consumables being cheaper, et cetera, et cetera, all these great things that progress has given us. Um, and, you know, there's a ratcheting effect. The- The hope I have is that that ratcheting isn't, um, too binary, it doesn't flip too far back the other way too fast, in which case you have a socialist state arise, a revolution arise, you know, all the things that we've seen kind of come out of this process

   30. JCJason Calacanis34:47

       Or people just canceling AP math in California.
4. 48:54 – 1:10:29

   SEC's new proposed rules around SPACs and climate disclosures for public companies: how will both markets be impacted

   1. DSDavid Sacks48:54

      message.

   2. JCJason Calacanis48:54

      All right, let's get into some other things happening in the market. SEC is proposing a new set of rules to regulate SPACS. Uh, I wonder if anybody here can, uh, chime in on this (laughs) -

   3. CPChamath Palihapitiya49:03

      Well, I wrote-

   4. JCJason Calacanis49:04

      ... who knows about it.

   5. CPChamath Palihapitiya49:04

      Look, I wrote a... I wrote an editorial in Bloomberg ba- basically a year ago, spelling out a bunch of new regulations that I thought the SEC should adopt. They adopted a lot of them in this draft, so I think that that's really good. They missed a couple key things, and this is again tying back to this other thing. When... We're in this phase right now where we are really questioning how capitalism should work. I think that there are two reactions that people can have. One is you pass more regulation that entrenches existing advantages, and the other is you pass regulation that either deregulates or, um, democratizes a market. And if I had to cast the half of my proposals that the SEC adopted, I would say it falls more into the first bucket than the second. And Jason, you've spoken to the second bucket of laws that the SEC could also change, which is, you know, it's in their power to give people an on-ramp to prove that they are qualified and accredited so that they can participate in some of these really, you know, vibrant ways of making money beyond just investing in the S&P 500, like investing in startups, if you, if you're educated and capable of doing. The SEC at the same time proposed a bunch of legislation around reporting requirements for ESG. And if you look at both of these two buckets of laws, I think they're rooted in good ideas, and I think that there's some good concepts in it, but who really wins? I think if you look at it, the American Bar Association had a huge victory here, because the amount of incremental regulation, uh, is going up, which means, you know, what was a 300-page filing with the SEC will now be 350 pages, right? I think that benefits lawyers. I think it benefits consultants. I think it benefits the accountants. So I think it benefits the ecosystem people that participate. It's not so clear how normal everyday folks benefit from a lot of this stuff. So I think if you strip it all away, what I would say is I think the SEC is trying to do the right thing, but I would really encourage them to do the second half of what they should be doing, which is making these on-ramps, um, better built.

   6. JCJason Calacanis51:28

      So generally speaking, what do you think happens in the SPAC space? We had 600 of them when we started this.

   7. CPChamath Palihapitiya51:32

      It's gonna consolidate-

   8. JCJason Calacanis51:33

      It's gonna con-

   9. CPChamath Palihapitiya51:33

      It's gonna consolidate-

   10. JCJason Calacanis51:34

       Yeah.

   11. CPChamath Palihapitiya51:34

       ... to the ten of us that know what we're doing.

   12. JCJason Calacanis51:35

       Got it.

   13. CPChamath Palihapitiya51:36

       Just like, you know, look, the IPO rules are extremely sophisticated. Did it hurt Morgan Stanley or Goldman Sachs' IPO business? No. It just meant that the 95 small banks that did IPOs went away, and it consolidated to six, and the league tables, you know, just churned between the six. JP Morgan one year is the top. You know, then it's Morgan Stanley, then it's Goldman Sachs, then it's BofA, then it's Credit Suisse. Similarly, SPACS will consolidate around six or seven players and, you know, will do most of the business.

   14. JCJason Calacanis52:04

       What do you think, Friedberg, of this new SEC, uh, announcement that they're considering climate disclosures for public traded companies? This would... Basically not only what they're doing in terms of, um, consuming or, you know, uh, allowing greenhouse gases emissions, but also this Scope 3 concept, your inputs, what is your supply chain doing, and what are your consumers doing? So if you're making the iPhone, what happens to the iPhone when the consumer gets rid of it, or what did it take to get those minerals out of the ground to make the iPhone? What do you think? Is this a net benefit? Is it the lawyers win? Or does measuring all this actually mean we're gonna see publicly traded companies manage it better? A lot of opting into it already, like Google and Apple are doing it on their own accord. But what do you think generally of this regulation?

   15. CPChamath Palihapitiya52:49

       Well, I'll say-

   16. JCJason Calacanis52:49

       Consensus?

   17. CPChamath Palihapitiya52:49

       L- let me just say something on the SPACS, and then I'll answer that question. Um, you know, if you read the comment, the, the, the first SEC proposed rule, it was to amend the definition of a blank check company to make the liability safe harbor for l- forward-looking statements such as business forecasts unavailable in filings by SPACS. So, you know, this was, um, you know, I think one of the primary points of appeal over the past couple of years. We've all been private market, sophisticated private market investors. When we take a pitch or hear a pitch from a company, we all have the experience and the know-how, not always correctly, but at least we know what to look for, what to ask, and, um, over time have learned through our wounds and our failures to appropriately diligence forecasts and understand what they mean and what they say. And, you know, because the public markets historically through an IPO, um, are available, uh, to retail investors, you know, generally whatever the definition is of unqualified or, you know, um, folks who may not have the level of sophistication that, you know, some regulatory body has deemed is needed to be able to do that level of diligence. Um, the statements that are made in an IPO, in an S1, need to be kind of factually referenced, referenceable. And that's not true when it comes to forecasts, and that's why they're not included in S1s in, in an IPO. But in a SPAC, the appeal was you can tell your forward-looking forecast, paint the rosy picture like you would for a startup, and then theoretically, the investors should make an assessment of the, the risk and the upside, uh, and, and the objectives that the business is saying they're gonna go shoot for and achieve. And it's pretty evident, and I think we all knew this, you know, coming out of last year, that, you know, many investors made investments on the basis of those forecasts, you know, being to some degree reasonably achievable or likely achievable, and it turns out that in many cases they were not and were not achieved. Um, and that's the big motivation here. So the real fundamental question with respect to Camaht's point about markets is, how much do you want to have the government and a regulator provi- play the role of deciding who is and who isn't sophisticated enough...

   18. DFDavid Friedberg55:01

       ... to make an assessment about a business' forward-looking prospects? Or should we simply keep all forward-looking prospects or, you know, forecasts like this-

   19. CPChamath Palihapitiya55:10

       Yeah.

   20. DFDavid Friedberg55:10

       ... you know, out of those documents? And it, it's an important conversation to have because for years people have been saying, "I want to invest in private companies, but I'm not a qualified investor, therefore I'm only gonna be able to invest in public companies." And as we're seeing, the problem with investing in private companies or speculative companies is that you're investing on the come, and more often than not, that doesn't end up happening, and that's a really hard lesson to learn. And SPACs have kind of forced the m- the retail market, that have not historically invested in private companies, to learn that lesson very fast.

   21. CPChamath Palihapitiya55:38

       This is why, by the way, in my, uh, uh, what, what I, what I was asking the SEC to do on top of the things that they already did was I said, "Make us all invest our own money." You know, make the sponsor really monetarily at risk. I've invested a minimum of $100 million in every single deal I've done as a SPAC sponsor. That's a lot of money.

   22. JCJason Calacanis55:59

       More skin in the game and disclosing that would be great, and maybe even having a clearing house where you could see the percentage of cash to the ultimate raise that the promoter has would be-

   23. CPChamath Palihapitiya56:10

       All of that stuff were great. All of that stuff, Jason, is in the spirit of disclosure and transparency. I just wish they would have done that.

   24. DFDavid Friedberg56:14

       But, Sumath, do you think, do you still think it's important to have forward-looking statements in these, um, in SPACs? I mean, if that ends up becoming, you know, the, the, the, the cornerstone of this, uh, proposed regulation when it goes through.

   25. CPChamath Palihapitiya56:25

       I don't, I don't, I don't think it's a, I don't think it's a cornerstone. I think what, I think the thing is that there are really important businesses that need good stewards to help them get into the public markets to raise money to fund their business, and there are some people who really understand that and there are many others who don't. And the thing that, that the SEC should make a decision on is whether just having a bunch of middlemen serves a market better or having a combination of some middlemen and some principals all competing is better. Because remember, what, like what is capitalism really? You have these trapped sources of money, right? When you buy an equity, right, or you buy a bond, you're putting money into a trapped asset. It's an unproductive asset. It may yield some return, but it's not really generating anything.

   26. JCJason Calacanis57:17

       It's dead money.

   27. CPChamath Palihapitiya57:18

       It is dead money. Capitalism is about creating an incentive for you to take that money out of that dead asset, that unproductive asset, and put it directly into the hands of somebody who will make it productive. "I'm gonna, you know, build some oil fields, I'm gonna make, you know-"

   28. JCJason Calacanis57:33

       A battery factory.

   29. CPChamath Palihapitiya57:34

       "... a battery factory, I'm gonna make shoes-"

   30. JCJason Calacanis57:36

       Products or service, yeah.
5. 1:10:29 – 1:19:03

   Meta used a GOP firm to run a smear campaign against TikTok in the US: dirty, necessary, or both?

   1. DSDavid Sacks1:10:29

      wanna weigh in.

   2. JCJason Calacanis1:10:29

      All right. Well, here's one you are deep in. Facebook hired a GOP lobbying firm to smear TikTok, according to the Washington Post. Taylor Lorenz and Drew Harwell-

   3. DSDavid Sacks1:10:36

      What, what did you say, Sacks?

   4. CPChamath Palihapitiya1:10:38

      He said this is-

   5. DSDavid Sacks1:10:38

      (laughs) This is it.

   6. JCJason Calacanis1:10:39

      Here's something you're deep in. It's the GOP. (laughs)

   7. DSDavid Sacks1:10:41

      I know, but before that you said, you said he's like into destroying the environment or something.

   8. JCJason Calacanis1:10:45

      Yeah, no, he doesn't care about the environment. Sack- I mean, Sacks is never going to go into the forest and even go near a tree.

   9. CPChamath Palihapitiya1:10:52

      He doesn't go outside. He's completely-

   10. JCJason Calacanis1:10:53

       So, no, he's barely... look at him.

   11. DSDavid Sacks1:10:54

       (laughs)

   12. CPChamath Palihapitiya1:10:54

       ... in his sealed bedroom through his whole life as an activist.

   13. JCJason Calacanis1:10:56

       He closed the curtains. He's like, "Oh, beautiful view of the sky. Oh, nature."

   14. DSDavid Sacks1:11:01

       (laughs)

   15. CPChamath Palihapitiya1:11:01

       He travels like the Pope. His car has one of these things. He doesn't even have to sit down. It's just enclosed. He stands up. It's bulletproof glass. You know, he just waves as he goes by.

   16. DSDavid Sacks1:11:09

       Sacks, have you taken your kids camping?

   17. JCJason Calacanis1:11:11

       (laughs)

   18. DSDavid Sacks1:11:11

       No, I, I go out. I, I go outside sometimes. I much prefer going to an outdoor shooting range than an indoor shooting range.

   19. JCJason Calacanis1:11:16

       Yes, absolutely.

   20. DSDavid Sacks1:11:16

       (laughs)

   21. CPChamath Palihapitiya1:11:16

       (laughs)

   22. JCJason Calacanis1:11:16

       So when you're going shooting, it's at an outdoor one.

   23. DSDavid Sacks1:11:19

       No.

   24. JCJason Calacanis1:11:20

       So, this is a really crazy story. Taylor Lorenz broke it. Uh, Facebook paid the GOP lobbying firm-

   25. DSDavid Sacks1:11:26

       Your friend, Taylor Lorenz.

   26. JCJason Calacanis1:11:27

       Yeah, actually, I had her on the show. Here is the exerted, uh, from the internal Targeted Victory email obtained by the Washington Post. Quote, "Get the message out that while Meta," Facebook, "is currently, uh, a punching bag, TikTok is the real threat, especially as a foreign-owned app that is number one in sharing data that young teens are using. Bonus point if we can fit this into a broader message that current bills, proposals aren't where state attorney generals or member of Congress should be focused." Uh, so, what do we think? I mean, we've talked here many times about reciprocity. We can't have our social networks in China. Why should TikTok be here? I think we all agree.

   27. DSDavid Sacks1:12:03

       It sounds like they wanna do a PR initiative around the points that you've always made on this pod.

   28. JCJason Calacanis1:12:07

       Exactly. No, I mean, that's the, that's the... they, they could be right about this, but doing a dirty tactic.

   29. DSDavid Sacks1:12:12

       Yeah. It's, it's a dirty trick.

   30. JCJason Calacanis1:12:13

       I think TikTok should be banned.

Episode duration: 1:39:10