E77: Tech work culture, crypto regulation, stablecoins, $NFLX & more w/ Coinbase CEO Brian Armstrong

Jason Calacanis 0:00 Brian Armstrong, what's up, bro?

Brian Armstrong 0:02 (laughs) What's up?

Jason Calacanis 0:03 How are you?

Brian Armstrong 0:03 Good to see you.

Jason Calacanis 0:04 It's good to see you as well.

Brian Armstrong 0:06 Yeah, Jason just pinged me yesterday and he was like, "Why don't you just come on as a guest randomly?" And I was like, "Okay, great. Let's do it."

Chamath Palihapitiya 0:11 That's so good. I'm really excited to hear what J Cal's intro is for you.

Brian Armstrong 0:15 Oh, man. Yeah, you guys keep- you keep getting wild and wild around this. (upbeat music)

David Sacks 0:20 Let your winners ride.

Jason Calacanis 0:23 Rain Man, David Sacks.

David Sacks 0:27 I'm going all in. And I said- We open sourced it to the fans and they've just gone crazy with it.

Chamath Palihapitiya 0:31 Love you, man. Nice.

David Sacks 0:32 Queen of Quinoa. I'm going all in.

Jason Calacanis 0:35 Hey, everybody. Welcome to Episode 77 of the All In podcast. Less than 30 days for the sold out All In summit and, uh, there's a wait list, but, uh, sadly, I don't think we're gonna get to anybody on the wait list. We've got a great, great episode for you. I thought I'd bring a bestie-guestie in, but not tell my bestie. So we'll see if they can figure out who's coming on the pod today. Uh, but let's get the intros over with. He's investing in SaaS at different stages, coming off a Miami bender for the ages, doing shots with Riboy and Vanilla Ice, the Rain Man is back, he's twice as nice, David Sacks, everybody. How are you, sir? How was your adventures, uh, with Vanilla Ice?

David Sacks 1:17 Good. I'm still here.

Jason Calacanis 1:18 You're still here. And so Vanilla Ice, uh, that cost $1,600 to get him to show up?

David Friedberg 1:23 (laughs)

Chamath Palihapitiya 1:23 (laughs)

Jason Calacanis 1:23 What does, uh, Vanilla Ice cost to show up for a party?

David Sacks 1:26 (laughs)

Jason Calacanis 1:27 That's about 10K. I think it's about 10 to 20K.

Chamath Palihapitiya 1:29 Uh-

David Sacks 1:29 No.

Jason Calacanis 1:30 A little bit more? Really?

David Sacks 1:32 A little more.

Jason Calacanis 1:32 And did you go on stage and do Ice Ice Baby with him?

David Sacks 1:36 I didn't, but, uh, there was some, like, Teenage Mutant Ninja Turtles type dancing around with him.

Jason Calacanis 1:41 Got it.

David Sacks 1:42 Uh, whatever, it was interesting.

Jason Calacanis 1:43 It was interesting.

David Sacks 1:43 People liked it. It was fun. It was fun.

Jason Calacanis 1:45 Oh, very nice, very nice. And you're, uh, still in Miami for, uh-

David Sacks 1:50 Tech Week.

Jason Calacanis 1:50 ... whatever. Tech Week, okay. So he won't eat your meat, but he'll take your MDMA. He's very interested in your DNA. When he's in the lab he's in heaven. He hasn't been the same since that rave in 1997. The lord of the laboratory, the sultan of science, David Freiberg. How are you, sir?

David Friedberg 2:06 That was my favorite one. I like that one.

Jason Calacanis 2:08 Yeah. Well, I'll add a few new ones.

David Friedberg 2:10 That was good.

Jason Calacanis 2:10 You peaked in '97-

David Friedberg 2:12 I peaked, yeah.

Jason Calacanis 2:12 ... at about 2:00 AM.

David Friedberg 2:13 (laughs)

Jason Calacanis 2:13 You were peaking at about 2:00 AM.

Chamath Palihapitiya 2:15 Did you say he doesn't want your meat, but he wants your MDMA?

Jason Calacanis 2:18 Yes. He won't eat your meat, but he'll take your MDMA.

Chamath Palihapitiya 2:21 He won't eat your meat.

Jason Calacanis 2:21 (laughs) Shout out to, uh, producer Nick who really crushed it this week. Uh, his bank of... (laughs) This one is too funny. Uh... (laughs)

David Friedberg 2:31 (laughs)

Jason Calacanis 2:32 It's hard to keep it together for these sometimes. His bank account would make a crowned prince jealous, his knitwear collection is overzealous.

Chamath Palihapitiya 2:38 (laughs)

Jason Calacanis 2:38 When he's on CNBC he makes a scene. The last time he did leg day was 2019.

Chamath Palihapitiya 2:44 (laughs)

David Friedberg 2:44 (laughs)

Jason Calacanis 2:44 Supreme leader of SPACs, the dictator himself, Chamath Palihapitiya.

Chamath Palihapitiya 2:47 I've been actually spending a lot of time working out on my legs.

Jason Calacanis 2:50 Really? I have been working on, uh, shoulders and chest, and my legs have always been diesel. I will be doing a shirt off selfie this summer.

David Friedberg 2:57 J Cal, it looks like you have not, uh, bought new shirts since you lost all the weight, 'cause that shirt looks about five sizes too big.

Jason Calacanis 3:03 Here's what... I bought this one halfway through the weight loss and now it's still too big. So I got another slimmer. I got the slim fit. No, I got the normal fit, and then I got the slim fit.

David Friedberg 3:13 From peak to now you've lost, what, like, 50 pounds?

Jason Calacanis 3:16 213 pounds was my peak, like, four years ago. And I was 167, 168 the other day.

David Friedberg 3:22 Yeah.

Jason Calacanis 3:22 So whatever that is.

David Friedberg 3:24 45 pounds? That's awesome.

Jason Calacanis 3:25 Something. I feel incredible. I've started running again. And, you know, I did 40 days of skiing this year, and I'm gonna take up kite surfing, I think, this summer. I want another sport to do, you know, in the summers.

David Friedberg 3:34 Are the people around you annoyed at your increased energy levels?

Jason Calacanis 3:37 Yes.

David Friedberg 3:38 Yeah.

Jason Calacanis 3:38 People who work for me are annoyed. Uh, I'm sleeping better. Uh, everything's just going better.

David Friedberg 3:42 Yeah.

Jason Calacanis 3:42 I highly recommend everybody, you know, just try to lose some weight. A lot of options out there for you. (laughs) Including Munique. All right, we have a very special bestie-guestie today. He's a lean, mean crypto machine who sort of looks like Mr. Clean.

David Friedberg 3:56 (laughs)

Jason Calacanis 3:56 If you need some tokens, you know who to call.

David Friedberg 3:58 Oh!

Jason Calacanis 3:58 Satoshi has his picture hanging on his wall. His NFT game is never lacking. If you talk about politics at work, he might send you packing. The king of coins, the tycoon of tokens.

David Friedberg 4:08 (laughs)

Jason Calacanis 4:08 Who is he?

Chamath Palihapitiya 4:09 Brian Armstrong. (laughs)

David Friedberg 4:11 Brian Armstrong.

Chamath Palihapitiya 4:12 Brian Armstrong. That's good.

Jason Calacanis 4:13 You guys got it. Brian Armstrong is with us. Hey, Brian. How are you?

Brian Armstrong 4:17 What's up, y'all?

Chamath Palihapitiya 4:18 You could have gone Vita- Vitalik, uh, at the first part, but became-

Brian Armstrong 4:22 Yes.

Chamath Palihapitiya 4:22 ... Brian by the office part.

Jason Calacanis 4:24 Anyway, uh, welcome to the show, Brian. Uh, we've obviously talked about you a whole bunch. And you've been on This Week in Startups, and I think you know all the fellas here. Uh, but thanks for, for joining the pod.

Brian Armstrong 4:33 Thanks for having me. This is awesome. I, I listen to your show every week.

Jason Calacanis 4:36 Aw, thanks

Jason Calacanis 4:37 for that. So I guess, you know, the, the topic we all have talked about a whole bunch is, um, work and keeping people focused at work. You took a very bold step, uh, which Tobi at Shopify I think followed, uh, and you said, "Listen, if you're coming to work, our mission is crypto. Uh, can we stop talking about every other thing in the world and, and just stay focused on that?" And I think that was, maybe, was that a year and a half ago, uh, that-

Brian Armstrong 5:03 Something like that.

Jason Calacanis 5:04 ... you, you did that. Everybody wants to know, uh, how that worked out for the company. So maybe you could tell us what it was like to go through that, 'cause, I mean, you were a target for, for, for a period of time. We all thought seems reasonable. And then how has that actually impacted day-to-day life for the people who decided to opt in to working at a single focused Coinbase?

Brian Armstrong 5:27 Yeah, so I would say, you know, short term, it was quite a painful transition. I think it created a lot of consternation. There was, you know, some folks in the media decided to go call a bunch of people who'd left the company and, you know, write hit pieces and all that kind of thing. And frankly, you know, about 5% of the company opted into the exit pack- package. So there was some teams that were shorthanded, a lot of people had to work extra time to fill in the gaps. But long term, I think it turned out to be an incredibly positive decision for the company. I do think there's a lot of companies in Silicon Valley right now, and probably elsewheres, that, you know, the CEOs and the, the management team almost feel like they're being held hostage by the employees. And I feel for some of these organizations. You know, Sundar probably has an incredibly difficult job right now. We saw that, that video from Microsoft, I think, last year with, with Satya and kind of was, with people talking about their hair color and stuff. And I...... i, they don't feel like that they can really lean in and move the company in the direction they want, and they're, they're fearful of kind of all these internal dynamics. So, you know, I think there's probably a better way to do it than what I did, which is if you're starting a company today, just make that clear up front. I didn't make it clear up front, and so the company culture started to diverge and drift, and I had to kind of realign it, which was, which was a painful process. If, if I was doing it over again, I'd probably just set that as the expectation up front, and then there wouldn't be this, you know, public awkward realignment. But yeah, I think I'm, I'm really glad that I did it. I think Coinbase has been very productive since then, and we've been able to attract a lot of the best and brightest people from some of these other companies that are like, "I don't want to be in those companies anymore. I want to work at a company where we just focus on the work and the mission, 'cause that's actually important." So I'd b- I'd say it's been positive.

David Friedberg 7:00 Brian, I've always talked about this as being, like, the difference between a hard culture and a soft culture, where hard cultures are companies that really define what they do and what they don't do, and what they spend time on and what they don't spend time on. And sometimes what you don't spend time on can relate to product. Sometimes it can relate to things outside, or externalities to the business. Do you think that that's become kind of a trend, where, you know, soft culture in Silicon Valley is more about, like, appeasing a very fickle employee base, and as a result you kind of aren't as clear about what you're not going to talk about and are going to talk about, and suddenly the troops rule the day and things get kind of sidetracked and productivity goes down? I mean, can you talk a little bit about what you've seen, you know, with other cultures around the Valley and how that's kind of affecting work and then what employees are choosing to go to and not go to?

Brian Armstrong 7:49 Yeah. So I think, you know, Ben Horowitz always talked about, like, wartime CEO, peacetime CEO, and frankly, you know, I'm kind of a conflict avoidant person, right? I never thought of myself as, like, wartime CEO, or just like, "We're all going in this direction, let's go, go, go." You know, I never really thought of myself like that. But I think what I'm trying to do now is find the happy medium between these two. So you- the company should have a really ambitious mission, and then I think you as a CEO, you do have to say no to things which are off track from that. You do have to part ways with people who are not helping raise the, the talent bar in the company. And so in some ways you have to be, I guess, hard in that sense. But I don't think it's ... It's not like, you know, we're only here to make money and it's like, it's bonus time or you're out or whatever. It's like we actually have a much softer culture than that, I think, in Silicon Valley, which is most of the missions of these companies are trying to do great humanitarian efforts, and they're trying to improve the biggest problems in the world. And so people sign up for those 'cause they wanna have a real impact. And, you know, we take time to, like, go for exec ops sites, and we walk in nature and (laughs) you know, we have, like, coaching. We do all this touchy-feely stuff. So I think it's kind of a mix of both is the right balance. I don't think of myself as, like, you know, a Wall Street hedge fund or, like, the most touchy-feely culture (laughs) you can imagine.

David Friedberg 9:02 Why do you think companies now have sort of veered into this place where they have to kind of appease these fringes on either side? How ... Do, do, did you spend time trying to figure out, like, how did we evolve there from just being mission focused to having to deal with all this other stuff?

Brian Armstrong 9:16 Yeah, I mean, one theory I have on this is that in Silicon Valley, especially pre-pandemic, we were all s- it was so competitive to get talent, right? You know, Google and Facebook, they were just kind of one-upping each other on, like, higher and higher salaries. And so I, I know as a CEO of a company that was rising at that time, I felt incredible scarcity. Like, I had people leave to get oth- who got better offers, and it was, like, a real issue. And so I was doing anything I could to retain people and keep them. And so if a c- if an employee said, "Hey, I want, you know, (laughs) another flavor of water in the kitchen or whatever," I was like, "Okay, maybe we should do it, right?" But I think, you know, during the pandemic, we removed, we moved to remote first as a culture. The, the talent, like, the talent we could get opened up by 100X, uh, people all over the world who were really hungry and, like, frankly thankful for these jobs. And that actually changed the scarcity mindset a little bit to say, "Hey, you know, if you don't want to be here, that's fine. We can ... We have other people we can go recruit and hire in who really are gonna value it." That's probably just one piece of it. It's, it's a much more complex issue than that. I think one other, one other thing is that, you know, like, Google and Facebook, I think, kind of made this a common trend in the Valley where companies would host these open mic Q&As on every Friday or every two weeks or whatever, and it was almost like a town hall. It felt like a democracy, right? And in a democracy, like, the leader, you know, v- works for the people. They're elected by the people. Um, but what got very awkward was at these open mic Q&As, it became, you know, this kind of, like, hostile thing of, like, how can we make the person squirm? And let's ask them these difficult societal issue questions that aren't actually related to the company and what we're all building. And you know, I think that was actually a mistake in Silicon Valley. Pe- we, we've since gotten rid of the, these open mic Q&As because it, it really encourages people ... I'd say one, we, we were like a 150, 200 people. Everyone was on the same page. Everyone was asking good questions. Once we got to like 500, 700 people, it started to feel like there was a little bit of an us versus them, and then, you know, the questions got very off track. And I, I realized at a certain point, this is not a democracy. Um, I want everyone's input. I'm not gonna rule, like, with an iron fist, but ultimately, you know, I'm the CEO, I need to, I need to help guide this company in one direction and force the hard decisions. Not everyone's gonna like them, so we're not gonna allow people to do grandstanding open mic stuff. There's just a little bit of a risk for that. You know, 99% of people don't do it, but if one person does it and it kind of creates this snowball effect. So we got rid of the open mics. People can still submit questions, but they're, they're ... Nobody else can see them. We read them ahead of the Q&A, and if there's a good theme in the questions, we address it. But we- you can't, like, grandstand with an open mic.

David Friedberg 11:41 I saw this, um ... saw it was in Twitter, Nick, maybe you can find it, but it was, like, this general that had commanded all of these different battalions. And he was talking about what it was like in all the different theaters in which he's operated, and he basically said, "You know, 80% of the men and women that served for me were just absolutely incredible. You could always rely on them 100% of the time. They were 100% aligned." And then he said, "There was 15% that was wishy-washy, and what they were looking for was how you managed and dealt with the 5%."... and the five percent of folks were always trying to push the boundaries and try to figure out where the escape valve was, or where the exception was, or, you know, whether they would be grandstanding or whether they tried to bl- break a rule. And he said his entire energy was focused on keeping those folks extremely focused and on point, or out, because that was what solved for the 15%, because the 80% would be fine, but if you didn't deal with the five, the 15 would go crazy, and then the 80 would get dejected, and it just kind of... The whole thing would rot. And it was a really interesting reminder that there's these people that come into these companies almost with a desire to see these companies go sideways or just waste their time, which is completely counterintuitive because you'd think you'd join for the mission, but they don't, all the time.

Jason Calacanis 13:00 And to be fair, you, I think, told people, "Listen, you, you could, as a group of people, off-hours, create your own, you know, uh, dinner party and talk about whatever topics you want. This is just when I'm paying you to come to work. For those eight hours, you know, on the company servers, if you're using Slack or whatever, you know, communication platform you're using, l- let's just stay focused on getting the work done so this could be a viable enterprise." But you were fine with people if they wanted to self-organize and do that on their own time, correct? You weren't saying-

David Friedberg 13:32 Of course, yeah.

Jason Calacanis 13:32 ... you can't have political beliefs, you can't care or not care about BLM or some right-wing thing or left-wing-

David Sacks 13:38 That was one of the biggest, um, sort of misnomers or mis-, uh, you know, delib-

Jason Calacanis 13:44 Mischaracterizations.

David Sacks 13:44 Y- yeah, exactly, deliberate mischaracterizations about the policy, is that it somehow silenced people or prevented them from, you know, taking positions on issues or donating to causes they cared about. The policy never said that. It just said that while we're in the office together, on Coinbase time, we're gonna engage in Coinbase's mission and avoid fractious debates that divide us.

Jason Calacanis 14:04 Yeah.

Brian Armstrong 14:05 That's right.

Jason Calacanis 14:06 A- and there's a time for those debates, and it just might not... I- I think a lot of this has to do with Slack, I'll be totally honest.

Brian Armstrong 14:12 Yeah.

Jason Calacanis 14:13 When people are in a Slack room... And they're frustrated, and people can have valid frustrations. Like, there are things in the world that are horrible and yeah, you want to talk about it, and yeah, you build friendships at work. It's c- completely understandable that people would want to blow off steam and... But just, people have to look at Slack as not an AOL chat room. It's not Reddit, it's not AOL Chat. I mean, maybe you could talk a little bit about electronic communications, and then I think David has a follow-up.

Brian Armstrong 14:34 Yes, I agree with you. Slack, I think, you know, is an amazing tool, but it does start to turn into social media once you get more than, I don't know, 500 people in a- in a room, or 1,000 people. A lot of CEOs I've been talking to, we're all trying to figure this out because we still think Slack is a net positive to productivity, but it has a huge negative in terms of des- both distracting people with lots of things popping up all the time, but also these kind of, uh, social media flame wars that e- that emerge, and mob-like behavior. So, some of the things, I mean, we've been trying is, for instance, if y- if we get any kind of a Slack room that has, say, more than 500 or 1,000 people, we'll often try to limit it so only... You know, you can on- You have to be a VP or... Level nine and above can only post in there and otherwa- otherwise it's read-only. So we're trying to... You know, Dunbar's number is 150 people, right? You're trying to think who, who can you remember everyone's name and have some sort of group affinity with them, and any too much above Dunbar's number, we try to, like, cap it so it's, it's a read-only chat room, but I think these tools need to keep evolving and I hope some... I know s- there's a couple startups, y'all might have funded some of them, um, that are working on this.

Jason Calacanis 15:33 Yeah, there's an actual neat feature you can do in Slack now where, like, that level nine person can post and everybody else can post in the thread. Like, you can reply to the thread, but the opening salvos in thread have to be started by somebody in that sort of group, so... But the... Slack definitely needs to double down on this. I also think they put that random room in there, and you put the random room, it's like basically waving the flag like, "It's random, put stuff in there." I think you got to delete that if you're running... I tell all startups, delete the random room and tell people, "Do not post memes and jokes." David, you had a follow-up?

David Sacks 16:03 One thing I was gonna say is... So, Brian, I agree with everything you said. The, the one place maybe where I would, uh, nitpick in a way that gives you a little more credit is, you founded Coinbase back in 2012, right?

Brian Armstrong 16:14 Yeah.

David Sacks 16:14 So, if you had created this policy on day one, I don't think you or anybody could have predicted th- that these issues would arise the way they have. I remember 2012 was the year I sold my company to Microsoft. We never had to deal with any of this stuff, and we were using... We didn't have Slack back then. We were using Yammer. Very open culture, people could communicate on anything. We never had sort of hyper activist employees. The word woke didn't even exist yet and, um, it just wasn't an issue, so it would have required you, I think, to see ahead so many years. And I think what's happened is, over the last several years, there's been this drift towards, you know, employee activism inside these companies. I don't think it's coming from both sides of the political spectrum, to be honest. I think it's coming from the sort of hyper woke employees and they engage in petitions and letter writing campaigns and threats of boycotts and they sort of hector and mao mao these CEOs to basically give into them and we've seen it at Apple, the way that the- Apple was pressured to fire Antonio Garcia Martinez and they gave in and now they have a letter writing campaign every month and you just saw it in Florida. I think Bob, um... What's his name? Bob Chapek at Disney.

David Friedberg 17:22 Chapek, yeah.

David Sacks 17:23 I don't think he's gonna survive the year after what just happened at Disney and it's because he gave into the employees, took sides against the, you know, governor in Florida and the legislature, and they just ripped away Disney's special privileges in Florida. You saw it at, at, uh, Netflix where Ted Sarandos was sort of mao maod by these employees who wanted to cancel Dave Chappelle. He ultimately stuck by Chappelle, but only after groveling to these employees and so I think we're seeing... These issues did not exist even five years ago, I would say, and I think the reason why the Coinbase story is so relevant to a broader au- audience and what you did with your policy is so relevant is... I just think every company's gonna have to make a decision sooner or later o- on where they stand. Do you give into these petitions and mobs and boycotts? Do you allow unlimited activism inside the four walls of your company?... or do you take some sort of more neutral stance where you say, "Listen, we're all gonna leave our politics at the door so we can effectively work together on the company's mission"? I think every company eventually is gonna have to either be Coinbase or be Apple. You're gonna have to be Coinbase or be Disney. You're either gonna have to give in to the mob and suffer the consequences, or you take the short-term pain of doing what Brian did and you basically realign everyone around the mission. And a year later, you're very happy with where you are.

David Friedberg 18:45 The good thing with Netflix and Disney though is that they're gonna be very clear examples of the business impact of getting distracted. And I think that, you know, look, Brian took leadership but the business impact, at least from the outside looking in, was not really measurable. Obviously he felt it, the team felt it, whatever they did, and that business is working, but it wasn't done as a public company pre and post so the counterfactual's hard to measure. In the case of Disney and Netflix, it's really clear to measure, right? Meaning in all of this confusion, Netflix has completely botched their business model. In all of this fighting now internally inside of Disney, not only are they gonna lose essentially a fiefdom inside of Florida but it's gonna have repercussions with respect to taxes, with respect to debt, with respect to the quality of the service they can deploy. And that'll eventually flow through the business and that'll be measurable by investors. And I think David, uh, I think probably what I think, which is a slighter sort of more modified version of what you just said, is in the next few quarters I think CEOs will actually be better equipped to numerically point to why taking Brian's path is the value creating path for shareholders and for stakeholders. And the cost of getting distracted, quote unquote, can be really expensive if you, if you are a, a for-profit company.

Jason Calacanis 20:04 Well, and y- you also have the option to run your company and say, "You know what? We care about this issue a whole bunch. We really care about human rights here. We really care about communications and freedom of speech, and I'm gonna run Twitter as a freedom of speech company and everybody has to align behind that."

David Friedberg 20:20 That's right.

Jason Calacanis 20:21 If you believe in censoring, this is not the right company for you. If you f- believe in policing speech or you're uncomfortable with uncomfortable speech, uh, or speech that makes you feel uncomfortable, you, you don't have to work at Twitter. So it's not like you have to, uh, you know, do what Brian did and say, "Hey, we're just gonna-"

David Friedberg 20:37 No, you gotta decide.

Jason Calacanis 20:37 "... focus on this."

David Friedberg 20:38 You gotta decide.

Jason Calacanis 20:38 You have to make a decision and be-

David Friedberg 20:39 No, no. My-

Jason Calacanis 20:39 ... intentional about it. I think it's the higher order bet.

David Friedberg 20:41 No, my, I was just gonna say, my only point is in the absence of intentionality, Jason, you'll slip into one realm or the other and not really know what you're trying to do.

Jason Calacanis 20:48 Yes.

David Friedberg 20:48 I agree with you. And a- my only point is that you'll be able to measure the impact of unintentionally slipping and sliding around-

Jason Calacanis 20:54 Yeah.

David Friedberg 20:54 ... versus picking a course and sticking to it.

20:56 Let me ask you guys a question. If you're an individual and you want to effect social change, where is the forum and the theater that you think you would go to first? You spend most of your time at work and, um, maybe you don't have as much free time to go march and protest in the streets, and if you did, no one would pay attention to you there anyway. So Sacks, like, I know that you'll probably have a point of view on this but like, if you're giving a 19-year-old who has a strong point of view or a 25-year-old who has a strong point of view about something that they wanna see change in society, what's the right forum for them to have their protest and to make their voice heard?

David Sacks 21:35 I think that companies are a great change agent. I think we all do, being in Silicon Valley, creating startups, we all believe that startups are a great way to change the world. Those startups have missions. Brian's company has a mission around crypto and ex- and, um, expanding, democratizing access to the financial system based on crypto. Elon has a company that is accelerating the world towards sustainable transport and sustainable energy. He wants to make, where I quibble a little bit with what Jason said about free speech, I think Elon wants to make free speech restore its place back in Twitter's mission. So it's not like a separate thing, it's actually like, should be very core to what they do. I think that there's a mission-driven company out there for any young person who cares about that issue.

David Friedberg 22:21 Right.

David Sacks 22:21 And if there's not, if there's not a for-profit vehicle, there's a 501, you can go join a nonprofit company-

David Friedberg 22:26 Or, or start-

David Sacks 22:27 ... or a philanthropy.

David Friedberg 22:27 Or start one.

David Sacks 22:28 Exactly. So that-

Jason Calacanis 22:28 Start one, donate money-

David Sacks 22:29 Right.

Jason Calacanis 22:29 ... to a cause. You have the whole weekend, you got Media.

David Sacks 22:32 Right.

Jason Calacanis 22:32 You can write a blog post.

David Sacks 22:33 What I don't think would work is when you have people who don't, who aren't really mission driven. Their mission is whatever the current thing is. And so they're just kind of like oscillating from the, the one, the curr- you know, from one current thing to the next current thing.

Jason Calacanis 22:48 Yes.

David Sacks 22:48 And every three months there's an issue du jour that, that, you know, they care about more than anything else in the world. Look, there's not gonna be a company that can accommodate that sort of fickle activism.

David Friedberg 22:57 Brian, can I ask you a question? Are there, um, any, um, systems, decentralized systems that, uh, kind of give individuals, you know, that, that you've viewed i- interesting models that give people the ability to effect social change, um, in a way that kind of historically may have been more of a hill to climb, where people can kind of aggregate resources and aggregate a voice in a way that can kind of affect outcomes? And do we think that that kind of becomes a mechanism for social change in the future?

Brian Armstrong 23:25 You make, you're making me think of DOWS and things like that, but I think a lot of that is kinda unproven. Like DOWS are probably good ways to get, um, new kind of governance systems in place for allocating capital or maybe even managing a city or, or a society. But I k- you know, I kinda agree with David, I think the best way to effect change right now today is for young people is start a company or join a company. I think young people are sometimes a little enamored with like becoming an activist, but I think fundamentally that's, you're, you're sort of giving up your power by saying like, "Well, they have the power and I don't and so I'm gonna speak truth to power." But I think, and you know, it's some- there's context in, for that historically whether that may have been more true, but I think today a lot of people, they have more power than they realize. And if you go start a company, which by the way, companies are decentralized too. You can have lots of little companies all over the world. Um, they're not like, you know, monolithic usually. And so if they start a company, they can have a good impact, I think, on the biggest issues out there.

David Friedberg 24:18 And I think over time as well, the way that you have real impact is that you prove yourself in the market of ideas to have a high reputation and to be really reliable. And that is not something that you can just overpower, you know, because you're 19 or 20 and you're really upset by something. At some point, you're going to have to really invest your time and dedicate yourself to something that you really, really care about, and then the world tends to move to the good ideas. So, I think part of, like, what we also need to remind folks is that this is a h- like, if you wanna make real sustainable change, it's hard. It doesn't matter in which area you pick. It is just really hard. But if it's really worth it, you should give your life to it. But what I think people push back on is the more superficial forms of just virtue signaling and saying, "Yeah, in this moment, I really want to pretend I care about something, but when push comes to shove, I'm not really willing to take the next step." I don't... I think that most people find that very unreliable.

David Sacks 25:15 Yeah, I think a good question to ask for somebody who purports to really care is, like, "What do you care about that's not currently in the news?" You know, that's not like the hot thing that everyone is basically obsessed with?

David Friedberg 25:27 Well, and then how are you changing it and-

David Sacks 25:29 Right.

David Friedberg 25:29 ... what is your plan to change it over the next decade or two? Like, do you have a-

David Sacks 25:32 Yeah, because it takes-

David Friedberg 25:33 ... nice long life?

David Sacks 25:33 ... it takes, it takes many years to effectively create a startup. You know, 5 years, 10 years. And so if your issue du jour is whatever's in the news, you're not gonna be able to create that kind of change. You know, I do think there are a lot of similarities between mission-driven startups and political movements. You know, I wrote a blog post, uh, called Your Startup as a Movement, where I s- basically say that, you know, good marketing is about evangelism. It is... It has everything in common with what good political leaders do. Basically, they critique the status quo. They tell you what the world likes, looks like today, what the problem with that is, and where the world needs to get to, what the solution is, and then how they're going to deliver that solution. So, you can, I think, as the leader of a company, be very mission-driven. You can, um, bring about that change you want to see in the world. You just have to attach a business model to it. If you don't have a business model, you're just collecting donations.

Jason Calacanis 26:24 Le-

Jason Calacanis 26:25 let's build on that. Brian, what is the stated mission today of Coinbase?

Brian Armstrong 26:29 Yeah, our mission is to increase economic freedom in the world. And if... for people who aren't familiar with that term, economic freedom is kind of a- an economics term like GDP, but it looks at the measures of different countries of the world, and it looks at factors like, are their property rights enforced? How stable is the currency? How easy is it to start a business? You know, is there corruption and bribery prevalent and things like that? And what's really cool about economic freedom is that it... basically countries with higher economic freedom, um, you know, like Singapore and, um, the United States and Ireland, like, they tend to correlate with all kinds of things we want in society, not just better economic growth, but even higher self-reported happiness of citizens, better treatment of the environment, better income for the, the lowest 10% in society.

Jason Calacanis 27:10 Gender equality.

Brian Armstrong 27:11 And then-

David Friedberg 27:11 All that stuff.

Brian Armstrong 27:12 Yeah, gender equality. And then, yeah, countries with n- low economic freedom, you know, Cuba, North Korea, Sudan, these are some of the lowest, they tend to have, you know, even things we don't want, like higher corruption, higher war, higher infant mortality. So, it's... basically when I read the Bitcoin whitepaper back in 2010, I had this thought eventually that was like, maybe cryptocurrency is this unique moment in history, this us- unique technology that allows us to inject economic freedom into the countries all over the world, especially now that more and more people have a smartphone. And we can basically put good financial infrastructure, good property rights, you know, global trade, a stable currency into 200 countries all over the world as one small group, relatively small group of people. And hopefully it has all these positive downstream impacts. So that's the mission of Coinbase.

Jason Calacanis 27:58 When you look at the regulatory environment, uh, it has been far from clear, um, what's allowed here in the United States. Uh, in fact, you had a pretty, um, strongly worded, uh, tweet storm back in September of, uh, 2021. Some really sketchy behavior coming out of the SEC re- recently, story time. Maybe you could talk a little bit about the SEC's approach to cryptocurrency versus securities. Uh, XRP comes to mind. And knowing your customer, you've obviously taken a very conservative approach to what tokens you, uh, put on the platform, and then you have competitors who are offshore who it's kind of YOLO, anything goes. Um, what is the current administration doing right, wrong, and, and what needs to happen here in the US to... for us to be competitive in crypto while still protecting citizens from, you know, being bag holders?

Brian Armstrong 28:53 Yeah. It's a big question. So, you know, as a startup, you're always trying to thread the needle here. You don't want to wait too long for clarity because sometimes these things take five, 10 years, and so you'll just never launch a product. But if you, if you're too aggressive, you, you can blow the place up. And so what we always did in the early days of Coinbase is we said, "We wanna go do what we think is going to be required in the future, go get licenses, go do KYC, go, go, go do AML, anti-money laundering." And so we tried to basically do the right thing, go and talk to these regulators proactively. Now, the US has actually been pretty forward-thinking on this. I'd say every year, we get more and more clarity. So Coinbase is now a very regulated financial service business. You know, I, I can go through the whole list. We have a license from the CFTC, a federal leg- regulator. We acquired some broker-dealer licenses, which the SEC regulates. We have money transmission licenses. We're a BitLicense in New York, et cetera, going... and that's just in the United States. So we're, we're in many, many countries around the world. So, how do we get more clarity? Well, one thing I'll just say is, it's actually better for there to be lack of clarity than to be clarity that is, um, punitive or bad. (laughs) So, it's good that there's a little bit of lack of clarity as long as it's not, uh, curtailing the industry. But would be even better is to have clarity that does provide that right balance of good consumer protection, you know, make sure that there's a fair level tr- playing field for all the players, and then it allows innovation to flourish. And so what's good now is that in the US, um, you know, the Biden administration put out an executive order recently kind of asking all the different agencies and departments to come back with a clear plan. And they did recognize the potential innovation in crypto in that, in that executive order, which I was really-... pleasantly surprised to see. Um, so what's happening now is that there was a little bit of jockeying, I think, there, where the SEC said, "Hey, these all look like securities to us," and I don't think that's quite true. You know, the CFTC is- regulates commodities. Well, some cryptos are gonna be commodities. I think here's- here's what I'm realizing, is that crypto is gonna be many different things. It's not just gonna be one regulator, um, doing it. So, you know, think about cryptocurrencies like Bitcoin. That's pretty clearly a commodity. Or- or Ethereum, right? Like, many of these are Ether- uh, commodities that probably should be regulated by the commodities regulator, the C- the CFTC. Now, if people wanna raise money for their company, a security token, that should be regulated as a security by the SEC. That'd be great to have more clarity on that. Let's have... uh, we- we would love to keep working with the SEC to make that a well-trodden path, that any company can go raise money and that's how it would get listed on an exchange like ours, and we could register as a broker-dealer or whatever license is needed. Um, separately, there's also some cryptocurrencies that are gonna be currencies, like stablecoins, and, you know, maybe the Treasury should regulate those. And finally, there's gonna be cryptocurrencies that are none of the above. They're artwork or something that's probably shouldn't even be regulated. And so the US, with various financial, you know, international bodies like G20 and FATF and all these... IMF are probably gonna put some policy papers together. We're gonna eventually end up with some kind of a test that says, "Is this cryptocurrency a commodity, a security, a currency, or something art- else, like artwork?" And then maybe... and by the way, maybe five more things we haven't even thought of that'll end up being in the future, like-

Jason Calacanis 31:57 What would you make the test for this is a utility token versus specula- speculative, uh, security? Because that seems to be the one that's really hard for people to figure out. If 99% of people are buying a token on Coinbase because they wanna see it appreciate and they wanna see it gain value, and only 1% are using it for the actual utility of it, is it then a security? Is it by the percentage of people who use it? How- how would you, as the- the, you know, the leader in this industry, you know, uh, actually define it? What's your definition?

Brian Armstrong 32:33 Yeah, so I think... Look, I- I don't wanna be presumptuous here. I do- I think that we can pro- we can put some policy papers together, but I don't wanna be... You know, i- it's the policymaker's job to- to come up with the policy, so I don't wanna step on anyo- anyone's toes. But that being said, I think there's some existing case law out there, like, you know, the Howey test is something from a long time ago. We could probably build upon that. So the Howey test kind of says, you know, is this an investment in a common enterprise, uh, with an expectation of profit? And that would make it a- that would make it a security. So there's a lot of pieces to that. You know, is it an investment? Well, if you're just giving the tokens away, I guess people aren't investing, right? Is it a common enterprise? Well, maybe if it's decentralized and you don't actually control this entity, like, um, you own, you know, less than a majority share or something, maybe then that's not a security, right? Or if there's not an expectation of profit and people are using it for something. So every startup right now in the space has basically had to hire a bunch of expensive lawyers to go tease apart these old, old rules that some of them were created in, like, the 1930s, you know, before the internet (laughs) and every- everything, and try to understand where they're falling. And so I think building upon that Howey test, but it could be something that includes a- a commodities definition, something, a currency definition. Uh, you know, I think we should... uh, basically it's on us and the other crypto companies out there to go hire a really smart lawyer who has drafted legislation before, and a bill, and actually get a draft of it out there. And then we can start to circulate it with various policymakers and get their feedback, and maybe they take it and run with it, maybe they say, "Thanks, we have it- we've got it from here." But that's our next step.

Jason Calacanis 33:58 Friedberg, Sacks, Chamath, would you go with the Howey test? Um, or do you have thoughts on how to... how the government here in the US should say, "This is a security. This is a utility token"?

David Friedberg 34:10 I think what the EO did was basically kind of give people enough regulatory safety in the sense that something reasonable will probably happen in the reasonable future so that people could keep building and iterating. My big takeaway in the last sort of, like, nine months is that this thing is now too big to fail, and the government basically has to just find a reasonable framework to enable something, because the ult- the- the real big issue, Jason, would be if they did something crazy and now, you know, retail would just get completely smoked, 'cause I think they are the overwhelming-

Jason Calacanis 34:43 What do you think is reasonable?

David Friedberg 34:44 I think Congress has to basically pass a sensible set of legislations that clearly demarcate exactly what Brian said. This realm of stuff goes to the CFTC. This realm of stuff goes to the SEC. Now you guys go and implement. And if left to their own devices, those two will use these arcane laws and try to negotiate amongst each other who should be covering what, but they can't arbitrate that decision. And so as a result, nothing will... nothing reasonable will happen. Um, so I think that's what has to happen. Congress has to get together and write something reasonable to get it passed.

Jason Calacanis 35:10 Friedberg, you are building companies at the production board. Every year, you build a couple companies. Uh, you have to go through securities law. You have to w- you know, raise money from accredited investors. You do it in the traditional way. Um, but you must be looking at crypto saying, "Well, I could launch Kana, Unique, whatever project, and have a token associated with it and raise money and raise it globally, or start a DAO." What do you think is a reasonable way for people like yourself who are playing by the existing rules to be able to embrace this new technology and these new platforms and paradigms? Uh-

David Friedberg 35:45 I think a little pr-

Jason Calacanis 35:46 How should the government handle it?

David Friedberg 35:47 Well, some perspectives important, which is, you know, go back to kind of the 1920s in the United States, and there were pre-1920s, folks would go around and tell tall tales about interesting business ideas or business concepts or things that they were gonna do with... if they got a bunch of money from investors. And investors gave them money, and they didn't actually deliver on what they said they were gonna do, and they got swindled. And there was swindle story after swindle story that you can read about. And we saw this even with the ICO craze of a few years ago, right, where people tell a tall tale, you expect some value or some asset that you're kind of putting capital into that will pay off over time, and there's a swindle behind it. And that's really the origin of securities laws, i- in large part is to protect the individual from being swindled, to protect the storyteller that can take money away from people and figure out how to kind of rip them off.... um, and create a s- a set of laws that the government can then enforce through the risk of imprisonment against doing those things. The challenge becomes when there's this more thoughtful way of running capital markets on the other side, and how do we actually resolve to some medium ground here? I'm not sure that you're gonna have as quick of a resolution to say, "Well, let's go back to the old way where anyone can say anything to anyone they want and anyone can put money into any project that they want," because the role of the arbiter is to protect those from being taken advantage of. If 85% of those projects are great and 85% of the investors are intelligent and know what they're doing, it's the 15... It doesn't matter. It's the 15% that the government is here to protect, and that's the reason we have an institution called the government, is to create systems of protection for those who are otherwise unable to protect themselves. Now, a free market libertarian might say, "We should have at it," but the problem is, we all have a m- we all feel as a group at some point a moral obligation to protect those who are unprotected. And that's why these systems emerge over time and that's why these institutions exist. That's why the government exists and it's why these securities laws exist. And so it's difficult to assume that we can just go back to the kind of, you know, um, uh, prototypical days of, you know, "Let me raise money for anything, with any story, without any regulation," and assume that it's gonna work out well. 'Cause all it's gonna take is a few of these stories before you have folks standing up in, in Congress saying, "This is unbelievable. We can't let this happen anymore. Let's go shut down the miners. Let's go shut down the data centers. Let's go after every asset we can." And by the way, they will, 'cause look at what just happened with Russia. The way that governments can kind of coalesce around digital systems now and make significant change and block things from happening, I don't know if there is a world where we can assume that even with a free and open internet, that these systems can truly be decentralized given the reach that governments have. And it is gonna be, in my mind, I've said this in the past, kind of the great tension of the 21st century socially, is the decentralized systems that really wanna challenge what we believe to be a lot of overreach that's happening by governments against the government's believed role to be protecting those who are, who need the protection. And so, I don't know, that's a very long-winded (laughs) moral statement.

Jason Calacanis 38:56 Well, I mean, I think it's a, a very interesting one. Bryan, what do you, what do you think of this?

Brian Armstrong 38:59 I get it. Th- th- these are complicated issues, right? We wanna balance protecting people, but we also wanna not have the government be in a position where it's picking winners and losers. And so, you know, (laughs) y- y- just because something is legal doesn't make it s- make it a good investment. I guess, you know, you could've, you could've owned Netflix last week or something like that, and we'll, we'll... (laughs) you guys might talk about that in a minute. But look, I think we all wanna get rid of fraud, right? So if you commit fraud, meaning you lied to investors, then that's gonna be a crime, right? Like, we, I wanna, I wanna work with anybody in government to go put that, make that stuff not happen. The danger is if we ever get into a place where we say, "Well, only wealthy people can now invest, because somehow there's an accredited investor test," that's inherently exclusionary. I don't, I don't like the accredited investor laws. If we ever get into a place where the government is saying, you know, "Well, you have to, you have to have X, Y, Z criteria and a person with this many years of experience on their resume," and then now we get into, like, the government sort of design by committee to pick winners and losers. And that's, that's inherently flawed because, you know, a lot of true breakthrough innovation, they look like bad ideas at the beginning. They're the kind of things that a government body would never invest in or put money into, right? So that's the inherent tension we have to worry about. We're protecting people, but not putting the government in the role of picking winners and losers.

Jason Calacanis 40:14 Sax, do you have any, uh, input on this sort of framework? You are investing traditionally in stocks, but you have also, um, allocated some money to Multicoin Capital and other folks who are buying tokens, and then you have to distribute them and you have to deal with these downstream legal issues. How are you dealing with them? And then what do you think is a, is a proper framework here in the US for protecting consumers while allowing innovation?

David Sacks 40:36 I think the big picture framework that we have is correct, which is, you kinda have this dichotomy between security tokens and utility tokens. So security tokens, basically it's a token that's issued that it's basically like a share of stock or sh- or a fractional ownership in some business. Doesn't really have a lot of functionality associated with it. That's kind of an end run around the securities laws. They should be treated like securities. On the other hand, though, there are a lot of tokens that are issued, um, as part of creating a new kind of technology network, and those tokens have real functionality. And if you were to subject them to securities laws and impose KYC and accreditation, you have to go through all these hoops just to add one to your wallet, it would destroy the potential functionality created by these systems. So where there's real utility like that, I think the government should foster innovation by having a lighter hand. Don't subject them to securities laws. And really what entrepreneurs need in the space are some safe harbors and really clear lines around what would trip them up and, and have them cross over from utility token and security token so they know to avoid those things, so they can continue innovating on their core project.

Jason Calacanis 41:48 I think that's well said. I, I have, uh, three ideas, Bryan, I wanna run by you. Number one, a sophisticated test for investors in crypto and in startups. So just like you get a gun test or, you know, you test for a driver's license, we come up with a way for people to become sophisticated. They take a simple test. Maybe it's a, you know, whatever number of questions. And then second, maybe some safe harbors around the scale of a project. So any crypto project under 10 million can be an experiment and, you know, it's kinda like n- no need to have rules. People just have to sign a disclaimer or waiver this is an experiment. Then things maybe between 10 and 100 million, you implement KYC and maybe throttle the number of-

David Sacks 42:28 Jason, th- tho- those are some good ideas for when you're talking about the bucket of security tokens. If you wanna start imposing those kinds of rules on utility tokens, you can't have a functioning network with, like, all these sort of frictional-

Jason Calacanis 42:40 Well, hold on. But if, then if the project gets scale, then you just have to file a little more, have a little more KYC, and then finally...... the founders of these projects, they can just launch them and disappear. They have no director-like duty to the project. Do you think there needs to be something similar to directors and corporations? So just three ideas there that I, I've heard other people talk about or I've been thinking about, Brian.

Brian Armstrong 43:07 Those are pretty good. I, I like those actually. I mean, the nice thing about a driver's license test for financial literacy is that it doesn't measure how much money you have. So it would allow smart, you know, aspiring people who didn't start with a lot of money, um, like a lot of us, to, to also be able to participate early on in these, which would be really great. Um, yeah. I think, and s- you know, some kind of a safe harbor or sandbox provision I think is a s- is a really great idea as well. And lastly, yeah, I mean, if you were able to, um... I, I basically, I think your three ideas are great. (laughs) So th- those are good.

David Sacks 43:37 I think that they're, they're good for securities but, I mean, should... If you just wanna buy gas on a blockchain to run your program, or you're a user of a, of a application that's being run on a blockchain and you just wanna buy a token for gas, do you really have to go through all these, like, KYC type hoops?

Brian Armstrong 43:53 Hopefully not. Especially if it's a, if it's a utility. I mean, self-custodial wallets and dapps, or decentralized apps, are this huge area of innovation that, you know, you wouldn't wanna, like... Imagine if the US government had said, "You need to come in and register to make a website," or something like that. That, that would have been a terrible thing for innovation globally. So, and you have to remember too that a lot of this is gonna flow to the country with the most permissive laws. So a lot of governments around the world... Not the most permissive, but the most well-structured that balances all the, all the pros and cons.

Jason Calacanis 44:20 Maybe clear?

Brian Armstrong 44:21 Yeah.

David Friedberg 44:22 The thing that I would just add to this, though, is that there's a lot more than just AML and KYC, guys, that has to happen for this to be a functioning ecosystem. We average, I think, one hack a week in the crypto ecosystem, right? There's Beanstalk ha- h- happened, what, just a few days ago, that was almost $200 million. Last month, Axie Infinity, what was that, almost $600 million. So there's a lot of stuff where in the, in the normal securities world, like if you're a, a director of a company, and you don't have these adequate procedures, and Brian you live this every day, where there's, like, an audit committee and there's somebody that chairs audit that has to go and think about information security and blah blah blah, and all these disclosures have to happen.

Jason Calacanis 45:04 Insurance.

David Friedberg 45:05 But all these disclosures are really about actual work being done. If you don't do that work and then you get hacked, you're actually liable, right? There's no version of this in a world where it is a little bit of the Wild West. So that stuff also has to exist. This is what I, what I mean by I actually think Congress just needs to kind of, like, update the set of laws that actually allow the CFTC and the SEC to do their job to include this and say, "Now go and incrementally figure this out." Because even if you get the AML and KYC stuff right, then there's all this other stuff where, you know, th- these folks that had their, basically, you know, all this, all this value deprived, who do they go to to try to get the money back? You know, in, in the case of Axie, I mean, this is a, it's an incredible thing but, like, you know, they went to Andreessen and they raised a new round. They're like, "We're just gonna make everybody whole." But that's insane, right? That's, like, not... You can't expect that to happen with every single project or every single company. It's not gonna be possible.

Brian Armstrong 45:57 Yeah. Well, I think a couple of things will happen. I mean, in the c- in the custodial world of crypto, there'll be more regulation. There already is, right? Like, we, we have a New York trust company that we get audited for various, um, control environments and safety and things like that. But in the self-custodial world, everyone is gonna start to be in control of their own assets. And I think that, you know, the tools are getting better and better for that, like, you know, social recovery of keys if you, if you forget your password, and these kind of smart contract wallets. And so, you know, both are growing, um, and I think in the future people may actually start to take more responsibilities for storing their own, uh, wealth, if, if they wanna choose to do that, and that'll allow them to kind of access a broader ecosystem of, of

Brian Armstrong 46:37 things.

Jason Calacanis 46:37 Let me ask you a question, Brian. Uh, everybody seems to be very concerned about Tether. Um, you, I don't believe, participate in the Tether ecosystem at Coinbase. Is that correct?

Brian Armstrong 46:48 Uh, well, we're not participating directly, but we support-

Jason Calacanis 46:51 Yeah.

Brian Armstrong 46:51 ... as many assets as people wanna use and th- that is one of the ones that we've supported people to w- deposit and withdraw in Coinbase.

Jason Calacanis 46:57 They've been, um, banned in New York. They've had, uh, regulatory action in Canada. Uh, people are concerned about their attestations or lack of clarity on their commercial paper. Wh- what do you think of these stable coins getting very big, and maybe USDC seems to have it pretty tightly, um, covered, but there's all these concerns and regulatory actions against Tether. Is that a, a big nothing burger or does it concern you that there's a lack of, um, transparency into their holdings?

Brian Armstrong 47:31 Yeah, so I would say, you know, some of the early stable coin efforts definitely didn't have all their ducks in a row from a reputational point of view. You know, I'm not an, I'm not an expert on Tether. My understanding is that there have been some, um, investigations and enforcement actions which have co- required them to go in there and clean up some things. And, um, you know, our, our digital asset listing group kind of looked at a lot of this in depth and made that judgment call that where they, where they were and where they are now. But yeah, I do think that we're seeing the emergence of new groups like, you know, USD Coin is, is one of those that I think has some better controls around it, and there's actually a bunch of, um, s- stable coins now that are decentralized. You know, DAI and FRAX and, and-

Jason Calacanis 48:12 Explain what that is and why it's important.

Brian Armstrong 48:15 Well, so, okay, so it really comes down to trust. I mean, you know, you can trust... Uh, you can decide to trust something like USDC that has kind of audit requirements and, you know, a Big Four accounting firm come in and, and look at it and things like that. Or you can look at smart contract code and, uh, you know, thousands of people around the world can look at that, and there's an inherent bug bounty if you find an issue there. And if it hasn't been found, then you can start to think about trusting that. Now, I think stable coins like, like DAI and, and others...... they've been able to create these, um, relatively complex systems that have sort of, um, the one asset which is intended to be stable, but another one which is sort of the collateral. And you could imagine various black swan events where, you know, the peg would get broken and things like that. But it really hasn't happened yet in DAI, and it's shown a lot of resiliency, which I've been very impressed by. There, there's one, actually one other, um, type of coin which I think is even maybe more interesting than just wrapping a fiat, uh, like a dollar or a rupee or something like that, because frankly, you know, the dollar is seeing a lot of inflation. You guys have talked about it many times on this show. So do you really want them to have a stable, a, quote, "stable coin" that is inflating, you know-

Jason Calacanis 49:20 (laughs)

Brian Armstrong 49:20 ... 8%-

Jason Calacanis 49:20 Right.

Brian Armstrong 49:20 ... a year?

Jason Calacanis 49:21 Exactly.

Brian Armstrong 49:21 There's- there's some new coins coming out which I've been really excited to see, which are, I think... You know, Balaji calls them flat coins, but they're basically looking at the consumer price index and they're trying to lo- the- basically have flat purchasing power and assume that the dollar and- and various fiat currencies around the world are actually gonna go through more inflation. That's a pretty cool idea. And you can do that in a creative way on a blockchain by having various oracles, which are these sources of truth. And if enough of 'em, you know, 51% of 'em tell you, "The CPI we think is this this year," it- it can kind of keep pr- keep pace with CPI, which is a really cool innovation, I think.

Jason Calacanis 49:54 Thank you so much for Brian Armstrong for joining us for the first hour, and now we'll continue on with our Netflix discussion. Brian's fantastic. He was, uh, very honest. He answered a lot of questions very honestly, and he's a super fan of the show.

David Friedberg 50:05 That business is a great business. That business would be a great business.

Jason Calacanis 50:08 He's thoughtful. Uh, we like somebody who's thoughtful.

David Sacks 50:10 I really think that the challenge that Brian faced a year and a half ago and the policy decision he faced is now being faced by every CEO across America.

David Friedberg 50:18 100%.

David Sacks 50:18 And that's the broad relevance is, you know, what are they gonna do? Did you see this- this quote by the McDonald's CEO? The former McDonald's CEO, Ed Rensi, on Wednesday said, "Companies have no business being in politics," and has launched a new advocacy coalition to fight woke corporate politics. He said, "Corporations have no business being on the right or the left because they represent everybody there and their sole job is to build equity for their investors."

Jason Calacanis 50:44 Wait, the people who make Filet-O-Fish are not gonna chime in on Ukraine anymore?

David Sacks 50:48 Yeah, but- but think about that because that actually-

Jason Calacanis 50:51 No, no, that is a line in the sand.

David Sacks 50:51 ... is a pretty radical ...

Jason Calacanis 50:53 It is a line in the sand, yeah. It- he's standing on Brian's shoulders, let's be honest. I think, you know they-

David Sacks 50:58 The CEO of McDonald's, I mean, that's like a big, uh, you know, traditional Fortune 500 type corporation, and they're saying like, "We're not doing this anymore."

Jason Calacanis 51:05 Well, you know what? They were more than willing to do it if it scored them points. What they realized was it's gonna be a never... Once you engage that, you're never gonna be able to disengage

Jason Calacanis 51:14 from it. All right, let's pivot over to, uh, Netflix. They reported a drop in net subscribers for the first time in 10 years, uh, and the stock dropped 35%, market cap from 155 billion to about 98 billion. According to Bloomberg, as of Wednesday, Netflix was the worst performing S&P 500 so far in 2022. Stock down 63% year-to-date. Ackman, uh, dumped his entire stake and booked a $430 million loss, and a- a large part of this was because they didn't hit their 2.5 million or so, uh, target, uh, increase in subscribers and they, in fact, lost all 700,000 Russian subscribers as part of, uh, boycotting, um, uh, Russia because of the Ukraine war. What do we think is happening here? Is this a bellwether, Chamath, for something more important going on? Or is this just Netflix not executing well?

David Friedberg 52:18 I think there- there's a macro thing and then there's a Netflix-specific thing. The macro thing is that we are learning the broad sweeping impact of Apple's privacy changes, in my opinion. You first saw it flow through into Facebook's earnings and basically them saying, "This is gonna be really tough." And you had Netflix, even if you add back the Russian subscribers, basically spend almost $600 million in the quarter on customer acquisition to effectively... They would have generated 500,000 subscribers net of churn, right, which was still about a million and a half under where they needed to be. So the point is that I think Netflix, in some ways, was a little bit of a canary in the coal mine for the- the shrinking, um, effectiveness of online advertising. And I think that's why you then saw two days later Facebook got taken to the woodshed in two days, was down, you know, now it's down, I don't know, 15%, 20%. Google, I think, has been down a lot today. It's just getting absolutely smoked relative to the market. So that's the macro issue, which is, I think, um, it's really hard for these ads to be as effective as they used to be. And it's only gonna get worse because Google has also said that they're gonna implement a lot of the same versions of what Apple did inside of Android. So customer acquisition is going up. So if you look at then all the companies that have to live and die on CAC, it's gonna be, uh, an expensive, um, road. That's the macro thing, I think, that not enough people are talking about. I think the micro thing inside of Netflix is that, you know, people churn out of a service when there isn't enough value. And I think that's the most basic explanation of why so many people are leaving Netflix, is that it's not that valuable, so when you're spending $20 billion a year on content but people more than ever are leaving the service, you have to inspect how much are you really spending in these areas and what is it actually creating in terms of, like, library value. You know, Disney+, I think, has gotten- has done an incredible job in a much shorter period of time. Apple, after only a few years, wins the first Oscar of any of the streamers, right, beating Netflix even though they've been in there and spent 100-

Jason Calacanis 54:30 For best picture, for best picture.

David Friedberg 54:31 For best picture, but I'm saying-

Jason Calacanis 54:32 Yeah. Yeah.

David Friedberg 54:32 So when you put all these things together, uh, I think Netflix probably has lost a little bit of the script, but they're also suffering from a really macro headwind which is the advertising business is broken.

Jason Calacanis 54:42 I would imagine that, like, total...

David Friedberg 54:44 ... subscribers to streaming services, and if you were to add up total subscription service dollars, it's probably growing a lot.

Jason Calacanis 54:51 Oh, for sure.

David Friedberg 54:51 N- Netflix's relative share is going down because the quality of the competitors is improving so much. Even companies that are not able to deliver, like CNN shut down CNN+ this week after investing $300 million in trying to build out the service. I mean, folks are putting serious dollars behind these projects, um, and so the competition is fierce and they've got deep content libraries behind them. I personally think HBO Max is the best streaming service now-

Jason Calacanis 55:17 Awesome.

David Friedberg 55:18 ... F- followed by Disney+, followed by maybe a mix of Amazon, Netflix and, um, you know, uh, Prime. And so, like, Netflix's relative value is going down because there's so much other content. When I'm kind of thinking about what to watch, I'm looking at Disney+, I'm looking at HBO Max and I'm like, "Hey, you know, what should I watch tonight?" And then I look at Netflix, Netflix doesn't have a monopoly in content anymore, and so when I've got limited dollars, I'm, I- I- I personally, I looked at this after we were texting about it, I subscribe to seven streaming services right now, and if I didn't care as much about how much I was spending per month, I would probably cut three of them, and Netflix would probably be-

Jason Calacanis 55:56 Yeah, but it's under 100.

David Friedberg 55:58 Yeah.

55:58 You're- you're also then highlighting the second, I think, macro thing that is- is actually equally important, maybe even more important, which is, you know, the- the first rule of capitalism says that excess returns will always get competed away.

56:11 Yeah.

56:11 So, you know, Netflix had the run of the place where they were an effective monopoly-

56:16 Totally.

56:16 ... and now when everybody else woke up and got religion, they decided to invest and they've created some really compelling content, and so all of those returns will now get spread across seven or eight or nine competitors, which means that, just by definition, mathematically Netflix can't win the way that they used to.

56:32 And the network advantage in the streaming model is content and consumers. So you have better content, you get more consumers, you sp- you get more money from consumers, you spend more on content, at some point you get diminishing returns in that network model, and now we're seeing those diminishing returns hit Netflix. They haven't built advantages in search and discovery or in other, or in social sharing or other features into the app or into the service that will give them more of a lock-in value, because all I'm doing is buying con- is- is watching content-

Jason Calacanis 56:59 They're also three times the price.

David Friedberg 57:00 ... and I can go do that elsewhere.

Jason Calacanis 57:01 They're also three times the price of Disney+ and other services, so they're, i- in the competition space people are starting to look at it and go, "Is this worth, you know-"

David Friedberg 57:09 Right.

Jason Calacanis 57:09 ... "a Disney and an NBC? Or is this worth a Hulu and an NBC, uh, streaming service?" Sax, you had something to add?

David Sacks 57:16 Well, I mean, I agree with that. I would just add one factor to this, which is what Elan said, which is he said the woke mind virus is making Netflix unwatchable.

Jason Calacanis 57:25 (laughs)

David Sacks 57:25 I mean, the quality of the programming has gone down. I mean, Netflix used to be really good. I can't think of, like, a show now that I watch on Netflix, and I do watch HBO Max right now and, uh, Disney+ 'cause they got some shows that I like. So I think somehow the programming people at Netflix have gotten out of touch.

David Friedberg 57:45 Yeah. Are they pandering to that audience, Sax, do you think? And, you know, similar to kind of how Disney ended up pandering, and do you think that there's broadly this kind of media problem of trying to pander to the wrong audience?

David Sacks 57:56 I mean, they almost threw Chappelle off, who's the number-

Jason Calacanis 57:58 Right.

David Sacks 57:58 ... by far the number one comic in, you know, in- in American comedy, and they absolutely would have thrown Chappelle off and done what a lot of those employees wanted if they didn't have such a big deal with him, if he wasn't such a big deal.

Jason Calacanis 58:09 No, I think they held the line pretty- pretty formidably.

David Sacks 58:12 There was a lot of groveling. There was a lot of groveling, JCal.

Jason Calacanis 58:14 Well, I- I mean, I think they reasonably heard the concerns of their employees and said, "We reasonably disagree. You can work at a different company."

David Friedberg 58:20 Can I ask you guys a question? You guys-

David Sacks 58:21 Yeah, but Jason, it showed-

David Friedberg 58:23 I think that they held the line, right?

David Sacks 58:23 It showed, but yes, but, what I... Look, yes, maybe, but what I'm saying is that that episode revealed that the people who are doing the programming at Netflix obviously-

David Friedberg 58:33 Ah.

David Sacks 58:33 ... uh, like, they're not, like, I think they've lost touch with where most of the country is, but-

David Friedberg 58:37 I will give a shout out, I have not watched a series on Netflix in probably a year.

Jason Calacanis 58:42 Ozark? No?

David Friedberg 58:43 No.

Jason Calacanis 58:43 Not even Ozark?

David Friedberg 58:44 No. But I will give a shout out to Never Have I Ever, which Mindy Kaling created. She's amazing, and that series is incredibly funny and poignant and cool and awesome, but outside of that series, I cannot think of a single reason why I would actually pay for Netflix right now.

59:01 So you guys, let me ask you guys a question. So going back to, 'cause you know there was the whole Disney pandering-

59:05 HBO Max, however, oh my God, so good.

David Sacks 59:08 The whole industry is suffering this problem. Do you remember the Oscars?

David Friedberg 59:10 But Sax-

David Sacks 59:11 We don't even watch it anymore.

David Friedberg 59:12 This is the question I have for you. Do you guys think that there's a difference culturally in the management of the media companies? So let's go through them. Warner Media, Disney, Netflix-

59:24 Mm.

59:24 ... Amazon, and do you think that that cultural difference may create an advantage in success? Do you think that Warner Media is operating HBO Max differently because they're culturally different?

Jason Calacanis 59:35 A 100%.

David Friedberg 59:35 Yeah. Right.

59:35 Because they're culturally different. HBO has always been culturally different. They have been-

David Sacks 59:39 No.

Jason Calacanis 59:39 ... for authors.

David Friedberg 59:41 HBO has al- has had-

David Sacks 59:42 HBO sucked for years, they got a few good shows now. It's- it's more like luck I think.

Jason Calacanis 59:45 No, they've always been for authors, they always have gone with the-

David Sacks 59:48 No, JCal, like I'm telling-

Jason Calacanis 59:49 ... vision of the director, the vision of the writer, and taken a lot of risks. When you hear that HBO logo, you know it's gonna be-

David Friedberg 59:56 I- I agree with Jason.

Jason Calacanis 59:56 ... a high end, authors driven content.

David Sacks 59:58 I- I agree with you they have some really good shows right now, but until the last couple of years-

Jason Calacanis 1:00:01 I mean, it is a hit based business-

David Sacks 1:00:01 ... it was, like, pretty dismal.

Jason Calacanis 1:00:03 ... but, I mean, to Freeburg's point, you know that Netflix is-

David Sacks 1:00:06 I would say, I would say Disney has Marvel and that's why... Uh, they have Marvel and Star Wars.

David Friedberg 1:00:10 Star Wars, yeah.

David Sacks 1:00:11 And that's, and that's kept them extremely relevant.

David Friedberg 1:00:13 And Pixar, and Pixar.

Jason Calacanis 1:00:13 Well, uh, yes, the IP, their IP in general-

David Friedberg 1:00:16 I cannot tell you how- how much... A- and w- the advantage Disney has is the, uh, rewatchability of their content. I don't know how many times-

Jason Calacanis 1:00:24 Absolutely.

David Friedberg 1:00:24 ... your- your kids have all watched Moana. My kids have watched m- I've had to watch Moana 107 times already.

Jason Calacanis 1:00:29 Go ahead, let's hear it. Let's hear you belt out on a Moana song.

David Friedberg 1:00:32 (laughs) And, and, and, uh, the w-

Jason Calacanis 1:00:34 You're welcome.

David Friedberg 1:00:35 Yeah. You're welcome. And the, um, and the Star Wars content, as you guys know, you can rewatch Star Wars and Marvel. I mean, like, the c- the content is very different on-

Jason Calacanis 1:00:42 Right.

David Friedberg 1:00:42 ... Pixar movies too, you can watch 100 times over. That's very different content. HBO Max is thrilling and engaging and doesn't feel like it's pandering.

1:00:51 HBO right now is operating at the next level. I mean-

Jason Calacanis 1:00:53 So many good shows.

David Friedberg 1:00:54 I- i- it, for me-

David Sacks 1:00:55 But Netflix was five years ago, so...

Chamath Palihapitiya 1:00:57 I understand, but we're not talking about the past, we're talking about today.

Jason Calacanis 1:00:59 Well, here's the thing.

Chamath Palihapitiya 1:01:00 Yeah. Go ahead.

Jason Calacanis 1:01:00 Netflix went with these very big deals with big celebrity names, and, y- you know, I think they just lost their uniqueness in terms of take, risk-taking. So they went with Adam Sandler, no offense to Adam Sandler fans, and they're doing a lot of reality TV now. And if you look at Hulu, like Dopesick and then The Dropout. If you look at Apple TV, Ted Lasso, WeCrashed, uh, and then you look at HBO Max with just, uh, you know, Euphoria and some of the other great shows.

Chamath Palihapitiya 1:01:27 By the way, yeah, even, even, I, like, I can actually-

1:01:30 Oh my god, Euphoria. Can you imagine Euphoria-

1:01:31 Euphoria is incredible.

1:01:32 ... on, on Netflix? It would never be on Netflix, right?

1:01:34 It would never get made. It would never get made on Netflix.

1:01:36 Yeah, yeah, that's the point, right?

Jason Calacanis 1:01:36 I don't think they... Yeah, they don't wanna take risk. HBO is like, for adults, it's paid, and they're gonna take risk. And Disney doesn't, can't touch that. I think Hulu is a sleeper. I mean-

Chamath Palihapitiya 1:01:45 Hulu's great. Have you guys watched a series called The Great on Hulu?

1:01:49 No.

1:01:49 It's about Catherine the Great. It is incredible.

1:01:52 There's too many good shows.

Jason Calacanis 1:01:53 I canceled my Hulu. I can't stop.

Chamath Palihapitiya 1:01:54 It's so good.

1:01:54 I canceled my Hulu subscription.

1:01:55 So good.

Jason Calacanis 1:01:56 I'm watching Severance right now. That's amazing. It's like really, like, you know, ephemeral and sci-fi.

Chamath Palihapitiya 1:02:00 By the way, I started paying for YouTube TV so that I could get streaming cable.

1:02:04 Oh, yeah. I do YouTube TV-

Jason Calacanis 1:02:05 I do, I do Hulu, I do Hulu streaming.

Chamath Palihapitiya 1:02:06 That's my number one, my number one watched thing is YouTube TV 'cause I don't...

Jason Calacanis 1:02:09 But you have YouTube without ads?

Chamath Palihapitiya 1:02:11 Yeah. You, I do YouTube Premium and then YouTube TV.

Jason Calacanis 1:02:13 YouTube without ads is such a game changer.

Chamath Palihapitiya 1:02:13 Wait, how, how do you do that?

Jason Calacanis 1:02:15 What is it called? YouTube Red or Premium? YouTube Premium it's called.

Chamath Palihapitiya 1:02:18 It's nine bucks a month, Chamath, you can afford it.

Jason Calacanis 1:02:21 You see no ads on YouTube. How do you-

Chamath Palihapitiya 1:02:23 Ask your assistant to ask her assistant to sign you up and, and y- you won't have to watch ads on YouTube anymore.

Jason Calacanis 1:02:27 Are you functionally-

Chamath Palihapitiya 1:02:28 I'm gonna do that.

Jason Calacanis 1:02:28 ... not able to use the internet now, Chamath? (laughs)

Chamath Palihapitiya 1:02:31 I actually have people that do it for me. (laughs)

1:02:33 Do they type in your email password for you?

1:02:35 Yes. (laughs)

1:02:36 (laughs)

Jason Calacanis 1:02:36 You're like, "How does this work?" And they're like-

Chamath Palihapitiya 1:02:38 There's a person right there-

Jason Calacanis 1:02:39 ... "You press the Netflix button on the remote."

Chamath Palihapitiya 1:02:40 ... that'll jump in if I can't get the mouse to work. (laughs)

Jason Calacanis 1:02:43 He's got the VP of Product from Questron who lives in a little shack in the house next door-

Chamath Palihapitiya 1:02:47 Oh my god.

Jason Calacanis 1:02:47 ... who comes over and uses the remote for him.

Chamath Palihapitiya 1:02:49 Yeah.

Jason Calacanis 1:02:50 Thanks for tuning in, everybody, for the dictator himself, the sultan of science, uh, David Sacks. We have a jam packed agenda. My god, the summit is gonna be amazing. Let's just do a little recap here of what's happening. Um, we've got some pretty great speakers, Ryan Petersen, Nate Silver, uh, Clara Fickel, uh, Brad Gerstner, uh, Palmer Luckey's coming, Elon's coming, Keith Rabois is coming, Joe Lonsdale, Tim Urban from Way3d Alive.

David Sacks 1:03:16 Wait, did you say Elon's coming?

Jason Calacanis 1:03:19 Oh, is that what it says on the website? Yeah, he's on the website now.

Chamath Palihapitiya 1:03:21 Elon Musk?

David Sacks 1:03:21 Elon's coming?

Jason Calacanis 1:03:22 Elon Musk is coming.

David Sacks 1:03:22 Nice.

Chamath Palihapitiya 1:03:23 Of PayPal?

Jason Calacanis 1:03:25 Uh, Antonio Gracias. I mean, we've got, uh, just an all-star, uh, group here.

David Sacks 1:03:29 You're kinda very delayed there. And I think, uh, Glenn Greenwald and Matt Taibbi are coming.

Jason Calacanis 1:03:32 Yeah, that's gonna be amazing. And so it's gonna be really great. All right, everybody, uh, we'll see you next time on the All In podcast. Bye-bye.

Narrator 1:03:42 We'll let your winners ride.

Jason Calacanis 1:03:45 Rain Man David Sacks.

Narrator 1:03:49 And I said we open sourced it to the fans and they've just gone crazy with it.

Chamath Palihapitiya 1:03:53 Love you, Wes.

Jason Calacanis 1:03:54 Hi, Queen of Quinoa.

Narrator 1:03:57 What your winners ride. What, what your winners ride. What your winners ride.

Jason Calacanis 1:04:02 Besties are back.

Chamath Palihapitiya 1:04:03 Let's go 2013.

Narrator 1:04:05 (laughs) That is my, uh, dog taking a noise in your driveway, Sacks. Oh man.

Jason Calacanis 1:04:10 Oh man. My happy measher will meet me at Blink. We should all just get a room and just have one big huge orgy 'cause they're all just useless. It's like this, like, sexual tension that they just need to release somehow. Wet the bed. Wet your bed.

David Sacks 1:04:23 Wet with your pee.

Jason Calacanis 1:04:25 We need to get merch.

Narrator 1:04:27 Besties are back. I'm going all in. I'm going all in.