E98: Big tech starts making cuts, Fed incompetency, global debt, Russia/Ukraine & more

Jason Calacanis 0:00 Hey, everybody. Welcome to Episode 98 of the All-In Podcast. With us again, the Sultan of Science, the Queen of Quinoa, looks like he brought a trucker hat. What- what- what- are you getting jealous of the Moncler hat, or are you just not bathing anymore? This is going off to our-

David Friedberg 0:14 No, I need a haircut. I haven't had a haircut in, like, six weeks. I'm getting my hair cut this afternoon.

Jason Calacanis 0:18 It's not going to make a difference.

Chamath Palihapitiya 0:19 I think what Freeberg is trying to tell us is that he is the Zodiac Killer.

David Sacks 0:23 (laughs)

Jason Calacanis 0:24 It's long been known. All right, there it is, the uni-bar. Uh, all right, uh, and Moncler Saxe is here with his $400 Moncler hat and, of course, the dictator himself.

Chamath Palihapitiya 0:37 I asked Ron, I asked Ron to cut my hair so that the white patch is more prominent. I think he did a good job.

David Friedberg 0:43 Do you add the white patch with coloring or is it, uh...

David Sacks 0:45 (laughs)

Chamath Palihapitiya 0:45 No, it's natural. It's just there. It's just there nowhere else.

Jason Calacanis 0:48 Why would you make it look so odd if you were doing it on purpose?

David Sacks 0:51 (laughs)

Jason Calacanis 0:52 It's super random what Chamath gets to be talking about.

Chamath Palihapitiya 0:54 I like the way it looks. I like the way it looks.

David Sacks 0:56 Jay Leno had a look like that.

Chamath Palihapitiya 0:57 I'm about to go... By the way, you know this, in the fall, in truffle season, I like to grow it so that it's more wavy.

Jason Calacanis 1:03 White for white truffle season. Got it.

Chamath Palihapitiya 1:05 I needed to have a reset cut so that then we could grow it wavy for the fall for truffle season.

David Sacks 1:11 Listen, Chamath, the only thing less relevant to us than your cashmere sweaters is your (beep) haircut. (laughing)

Narrator 1:20 Going all in. Let your winners ride. Rain man, David Sacks. Going all in. And I said, we open sourced it to the fans and they've just gone crazy with it. Love you guys. Queen of Quinoa. Going all in.

Jason Calacanis 1:36 All right. Zuck announced a hiring freeze and reorg at Meta. He also said Meta will reduce headcount for the first time in its history. Meta's headcount in 2023 will be smaller than it was this year. He called it the end of an era of rapid growth. This on top of, uh, Apple reporting, and Apple got walloped in the market for the first time (laughs) in forever. Uh, Apple pulled back iPhone production, uh, for the 14 after slower than anticipated demand. As I mentioned on previous episodes, they've kind of done a gentleman's layoff, similar to, I think, Meta, in that Apple said, "You have to be back in the office three days a week." A bunch of people quit. So, uh, you don't have to pay them, I guess, huge packages when they quit that way. Google CEO Sundar Pichai also called out employees in July, as you guys all read, and he wrote, "There are real concerns that our productivity as a whole is not where it needs to be for the headcount we have." Google, of course, 174,000 employees. So, I guess, the question I have for you is, are these the last towers to fall, Chamath, in this, uh, pullback that we've seen? These are companies that don't need to do the layoffs. They have tons of cash, so they're obviously doing that to maintain earnings, uh, one would, and to maybe, uh, send a signal to employees that they need to work harder. Wh- what's your read on these, this past week's shoes to drop?

Chamath Palihapitiya 2:54 Well, it definitely is the end of an era. I think it is sort of like the- the end of this phase of big tech, where you had this, you know, unfettered growth, where these business models were largely unassailable and they, you know, were really just fighting to grow into their valuation and just generate more revenue to justify where they, um, where they traded at. And now, it's this next phase where they have to operate more like a cash cow business. And so, you know, it's an acknowledgement that the growth is tapering. It's an acknowledgement that they're going to trade on a pretty tight band in terms of multiple, which means that they have to manage expenses much more tightly, which means that they can't have a really broad-based surface area in which to operate and experiment. You have to keep the experiments small. You have to manage your expenses. You can't have employees, basically, you know, run over the place. Management has to have a firm hand in- in dictating strategy and what people work on. So I think all of that signals that I actually... Jason, I don't think this is the end. I actually think it's the beginning, because these companies, Apple, Facebook, Google, maybe a little bit Microsoft, are the most sensitive to valuation because they are the most widely held, right? These are the- these are the, you know, the equivalent of US treasuries in the equity markets, the safest, most predictable safe haven in times of stress. If you want to own big, chunky cashflow-generating businesses that, you know, are relatively unassailable, you couldn't pick four better businesses than those. And so the fact that they see enough in the horizon to say that we need to batten down the hatches should be a warning to everybody else.

Jason Calacanis 4:41 Uh, Freeberg, is it as simple as this, that the- they're moving from top line growth to bottom line and they're going to need to look at the expenses? What's your read on this for Silicon Valley and big tech?

David Friedberg 4:49 Well, I just want to zoom out for a second because I remem- I started working in Silicon Valley in 2001. You guys are a little older than me, I think, but, like, we were right at the kind of year one of the dot-com implosion and all the fallout that happened from all the funding that happened from '97 to '99 and 2000. And so from '01 to '03, it was super, like, deflationary. Everyone was cutting costs and all the money that had been raised was kind of being pissed away or companies were liquidating and, you know, so on. And then starting in 2004, which is actually when I joined Google, but there was also this big movement starting '03, '04 of, like, what people called Web2. Then kind of new business models and new businesses started to emerge that seemed to have real traction and real legs and it was a different story and a much more rational story than what you saw leading up to kind of 2000, 2001. And it was around that time when Google started offering these crazy benefits, right? It was like, there's a gym and free food and all these amazing workplace. And suddenly everyone had to do that to keep up, right? Facebook obviously mimicked it. All the other big companies mimicked it. And then it became mainstay and they also raised compensation in the Valley significantly because Google had really cracked the nut on how to extract value from the internet.And it really changed everything in Silicon Valley and changed everything in tech because suddenly every tech company, whether you were enterprise software or hardware or an internet e-commerce site, to be competitive and hire great talent you have to have the same sort of environment. High wages, great salaries, really share the value with your employees, you know, gyms and free food and all this sort of stuff. So it's the first time, I think, in a generation since like 2003, 2004 that we're seeing things start to turn the other way where instead of adding more benefits, uh, you know, making things more attractive, giving more value to employees, we're really seeing the recession hit these kind of leading indicators of how things are going to be in the Valley. And as a result, I think we should expect to see a similar impact on compensation, on benefits, on value share, and on kind of proclivity to hire, an opportunity to kind of jump jobs, and, you know, opportunities that we've all kind of taken for granted over the past 18 years. And this is going to be a real shock to a lot of people that work in tech and a lot of people that have gotten used to the idea that every company offers great benefits, m- there's always another job to jump to that'll pay you more. And that, that, as that engine of growth that was really driven by these big companies, by Google, Facebook, Apple starts to s- slow, no one needs to compete with them anymore as much. And the compensation bands get tighter, and the option value gets tighter, and the free stuff gets tighter. So it's the end of an era, and I think it's a new world, uh, for tech and, and Silicon Valley.

Jason Calacanis 7:44 Sax, what are your thoughts here in terms of startups in relation to big tech maybe having these austerity measures kick in and a, and a refocusing on profitability?

David Sacks 7:53 The big takeaway here is just that nobody is safe. And it's not just startups that have to, you know, tighten their belts, it's these big companies too. And I think we're headed for a broad-based recession. That's what it seems like. You saw Druckenmiller's comments this week predicting a hard landing in 2023. No one's talking about soft landing anymore. In fact, I think we're all wondering who's flying the plane. So I think we're headed for a pretty big recession. And, uh, just to take it in a slightly different direction, I'm down here in LA, had dinner the other night with a friend who's a showrunner in Hollywood. And so a showrunner basically is like the head writer and they basically put together the writing team and the, you know, the content for a show and then they sell 'em to, to networks. He said that, like, no one is buying anything anymore here. That last year you had, there was tremendous, you know, activity and you saw like the, the Game of Thrones guys, you know, uh, D&D, they got like a $300 million deal from Netflix and Shonda Rhimes got a $300 million-

Jason Calacanis 8:50 These are like the platform deals they did, yeah.

David Sacks 8:51 Yeah, they got like... Thi- there were massive multi-hundred million dollar deals being made last year. And that was just for, like, future writing deals. Like, Netflix wasn't even buying libraries when they did those deals.

Jason Calacanis 9:00 They were locking down talent for the next decade.

David Sacks 9:02 Yeah, exactly. So all of that has stopped and the reason is that Netflix's stock has been hammered, right? And only so they not have the capital to do those kinds of crazy deals anymore, but they know that Wall Street is watching them and so fundamentally, they're questioning whether their business model even works if they have to spend that much money on content. So then all of Netflix's competitors basically have stopped. So this whole, like, frothy environment that you had for, in Hollywood last year, that's just over. The faucet's been turned off and it's not even turned off to a trickle, it's just stopped. So you think that this, like, massive asset bubble that we had last year was just in crypto and growth stocks. It's not. I think it actually trickled down into the real economy because Netflix was one of those growth stocks. The money then flowed into writers in Hollywood and then lots of other places. This is one small example, right? That, that this asset bubble wasn't purely just something that's going to be localized to crypto. It affects real people in the real economy and we are just beginning to see the unwind of that.

Jason Calacanis 10:08 Yeah. What's abs- absolutely correct, I think, is people were more risk-taking. They had free capital, they wanted to place more bets. And sure, why wouldn't you bet on the Game of Thrones writers for the next decade? But looking at this, this is going to be fantastic for startups. I mean, the startups I've worked with over the last five years have been... They always come to me, "Oh, I got a developer, but s- sc- this person's got three offers from, you know, Facebook, Google." And they're like, "How do I land this person? They got $300 mi- thousand dollar a year offering, a million dollars in RSUs." And basically founders had to say, "No, I can't get that person." And so they had to get creative and they would hire people, Ukraine, Uruguay, everywhere in between to try to find developer talent and they had to get creative. Now all of those people are not going to have four job offers. They're going to have no job offers, so they may have gotten laid off. Uh, and those crazy unrealistic out of school deals are going to be gone, and this means massive consolidation of talent. You look at the startups, uh, community right now, tons of companies are just going out of business. They're packing it in. Those people are going to go work at the other startups that are stronger. So whoever makes it out of this as a startup, this is how the cycle restarts is talent then consolidates on the winners. It would be like taking the NBA and getting rid of the bottom, you know, 10 teams and just telling the best players there, "Move up to the other teams and, uh, everybody else, you're out of the league." So I, I think this is incredible setup for 2023 for startups to consolidate talent. So I'm, I'm actually excited to see as-

Chamath Palihapitiya 11:36 It's another, it's another data point that, again, I said it last week, I'll go out on a limb and predict my equivalent November fall predictions. Last fall it was that the markets were gonna poop the bed. My prediction now is that I think the markets are bottoming and consolidating.

Jason Calacanis 11:53 Yup, 100%.

Chamath Palihapitiya 11:55 And this is the time I think to start nibbling and start getting ready to really rip the money in. And I think there's enough signals every day that kind of, like, tell me at least that on the margin it's time because I think the markets do a reasonably good job of digesting news and then pricing the forward reality, right? Like, today's price is really everything we already know and so the real guess is what's about to happen in the future. And from my perspective...I'm actually pretty, starting to get a little constructive here. I think that, um, when, when companies like Facebook really do this and y- y- you know, like, if you think about it one way, the financial markets have always had this thing that we have called a Fed put. What does that mean? A put is essentially the right to sell something. And what market participants have always known for the last decade is that if things got very hairy, if there was uncertainty in the market, the Federal Reserve would, and they have, consistently stepped in to create a buyer of last resort. And so it always eliminated that last part of true, you know, supply-demand balance, because they would just come and say, "Don't worry." In many ways in tech, what the big tech companies were were that, you know, you could never really find what the true market clearing price for an engineer was or what the true amount of expenses you should spend on office space or, you know, free services, because you always, always had these companies, which was escalating arms race. You know, if one company had a m- massage, the next company had gyms and massage and physical therapists, and the other company would have buses to take you to the gyms and massage and therapist, and the next company would have protein shakes that were freshly made, you know, and it just kept escalating and escalating because the costs didn't matter, and they wanted, if nothing else, to get that marginal engineer or product manager or businessperson to work at their company, which eliminated the risk that they would actually start something to disrupt them.

Jason Calacanis 13:52 Blocker strategy is very real. You should unpack that. Yeah.

Chamath Palihapitiya 13:54 No, the blocker strategies are, is very real. So when you take this big tech put out of the market, you will get true price discovery, and you will find out what the real price should be for this kind of an engineer, that kind of a product manager, and you'll find out what are the real expenses you need to bear in order to build a real lasting business, and you'll be able to sort through all of that stuff out. So I think it's a really good moment. And again, it's yet another indication to me that I think broadly speaking, the markets are now starting to stabilize. All the irrational behavior is starting to exit the system. The party is in the last few hours. Volume's going down. The alcohol is being taken away. People are hanging around-

Jason Calacanis 14:39 What's going on?

Chamath Palihapitiya 14:39 ... with a little bit... Lights are coming on. They're like, "Uh, I've been here a little too long." And I think that that's a very healthy process for an economy, and I think that that's what's happening right now. So I'm constructive. I'm a little bullish. I'll go, I'll go out on a limb. I think, you know, we could be 3% to 5% from the lows, but we're more near the lows than the highs.

Jason Calacanis 14:56 It certainly feels like the double bottoming out process was th- the bouncing along the bottom. And yeah, who knows how hard the landing, uh, is. But I think this is a great setup for startups and people who want to start companies. I don't know if you saw, Girley did a great interview that trended on the Twitter, and he was just saying, "This is the best time to start a company," and I, I have to agree with him. Like, you're gonna have talent available. And, like, who are you competing against for buying ads? Like, there's so many marketing opportunities available. The first thing to go i- in a down market like this is advertising and marketing, so.

Chamath Palihapitiya 15:28 And by the way, we will, we will also relive what we have empirically known to be true, and it's been, it's been pretty well proven. The investments that one makes in this period will probably be the best for many, many years to come, because they'll have the most asymmetric upside. And that was true in 2008 and 2009 and 2010. It was true in, you know, 2002, 2003, and 2004. I mean, you're talking incredible companies, just in those two periods, think about this-

Jason Calacanis 15:57 Yep.

Chamath Palihapitiya 15:57 ... Atlassian, Tesla-

Jason Calacanis 16:00 Uber, Google.

Chamath Palihapitiya 16:01 ... Airbnb, Uber, Instagram, WhatsApp, incredible businesses that have created tremendous value. And so there are businesses that have been invested in for the first time in 2022 and will be invested in for the first time in 2023 and 2024, which will be the leading winners of this next phase and this next leg up. And so the real opportunity is to find out who those companies are and get behind them, I think.

Jason Calacanis 16:27 100%. As I always tell people, fortunes are made in the down market, they're collected in the upmarket. Freyberg, what, what are your thoughts here in terms of the startup community or company builder, uh, and talent? Because th- that seems to be the piece that, uh, could be a silver lining on all of this, uh, maelstrom that we're going through.

David Friedberg 16:45 I mean, technology always marches forward. So (laughs) there's always, you know, there's always progress to be, to be had and to be made. That's one universal truth about... It's weird that we call it an industry, (laughs) 'cause a lot of technology companies in Silicon Valley today don't sell technology to other companies, which is how Silicon Valley started. Nowadays, Silicon Valley is reinventing other industries by being technology led, and that is certainly still true because there are so many, I hate using the term, but undisrupted industries to pursue efficiency gains across, and technology built in Silicon Valley can, can, can drive that. Now, when I say Silicon Valley, I don't mean the physical location anymore, and that's the confounding factor here, which is that there does seem to be this distribution opportunity that's also emerged at the same time where people are doing remote work and work from home and distributed workforce models that seem to be highly effective. You guys talked about Atlassian. I don't think they ever had an office, right? I mean, don't, don't most of the people work from home there? And I think that the success that's been seen in software companies that have operated that model also changes th- the calculus because not only are, are wages, uh, lower, and therefore the cost of operating is lower, not needing a fancy expensive office in San Francisco is needed, but you can also access far more talent than you ever could before. You don't just need people to live in the Bay Area or New York or LA or wherever you're operating from. So from a software perspective, this is an amazing time. I'll tell you, there's a flip side to this, like in life sciences.Real estate is more expensive than it's ever been right now in the Bay Area, uh, to get lab space. There's a total dearth of space. So there's certain segments that, I think, are physical in nature-

Jason Calacanis 18:37 Why is that? Is large lab space like a specifical- a specific designation you can only build in certain places?

David Friedberg 18:40 You know what I mean? There's a revolution in genomics that's totally transforming all of biology and human health and life sciences as a whole.

Jason Calacanis 18:45 What I'm saying is, like, do you need a certain type of location that's sanctioned for that? Yeah.

David Friedberg 18:50 Yeah, lab space is a certain kind of buildout and it's not-

Jason Calacanis 18:54 Got it.

David Friedberg 18:54 ... you know. And so, there's a certain amount of, uh, square footage and it's being built out a lot around the Bay Area. But, um, the thing about life sciences companies is you do have to operate physically because you're doing some- you're- you're building something physical. And so that is an industry that continues to remain very well funded and very competitive. And, uh, I think, you know, there's still tremendous value. And by the way, there's a lot of public companies to invest in, not on the primary basis, but are... that are tools companies that are benefiting greatly from the continued demand and- and- and growth in spending in that category.

Jason Calacanis 19:28 Sax, uh, let's talk about competition. You know, a lot of talk, uh, you know, of these large companies pursuing many different verticals. We talked about anti-competitive stuff, Lina Khan, the bundling in the suite of products at Microsoft, other firms.

Chamath Palihapitiya 19:42 (laughs)

Jason Calacanis 19:43 Now you have, uh, all these being cut.

Chamath Palihapitiya 19:45 Death.

Jason Calacanis 19:46 What?

Chamath Palihapitiya 19:46 Death to the Roomba. (laughs) Death to the Roomba.

Jason Calacanis 19:50 (laughs) By the way, did you see that Elizabeth Warren, of all the things she could send a letter to the FTC about, I guess she sent a letter about the Roomba?

Chamath Palihapitiya 19:58 (laughs)

Jason Calacanis 19:59 I mean, Senator Karen is just too much, man.

Chamath Palihapitiya 20:01 I mean-

Jason Calacanis 20:02 There's a lot of other stuff going on, but you can let the Roomba slide.

Chamath Palihapitiya 20:05 The- the Roomba?

Jason Calacanis 20:05 Like, just let it slide. You... That's not important. Well, you know what? Cheap.

Chamath Palihapitiya 20:08 Of all the things that are going on right now in 2022, it's the Roomba that gets on the... that gets... that's above the line?

Jason Calacanis 20:15 I mean, at this point, the... I mean-

Chamath Palihapitiya 20:16 It's unbelievable. Oh, my gosh.

Jason Calacanis 20:17 My point, Sax, here is-

David Sacks 20:18 We are just sleepwalking.

Chamath Palihapitiya 20:19 Oh, my gosh.

David Sacks 20:20 We're sleepwalking.

Chamath Palihapitiya 20:21 What is going on?

David Sacks 20:22 The... You know, there's a fa- there's a famous history of World War I called the Sleepwalkers because that's basically what it felt like is they just sleptwalked their way to World War I. Basically, what should have been a minor regional war, the Third Balkans War, that nobody should have cared about, nobody should have cared about this Franz Ferdinand guy, except for, you know, the Austrians and the-

David Friedberg 20:43 Yugoslavia, yeah.

David Sacks 20:43 Yeah, exactly. But the whole world basically got themselves invested in this thing and it feel... and this is what we're worried about. We're worried about the Roomba when the administration is sleepwalking its way into the next world war.

Chamath Palihapitiya 20:55 Well, I do not want Amazon, okay, to control my vacuum cleaner.

Jason Calacanis 20:59 (laughs)

Chamath Palihapitiya 20:59 I'm just gonna put that on the record, okay? Because what happens if they-

Jason Calacanis 21:01 But the problem is they know where the dirt is, they know which rooms are dirty.

Chamath Palihapitiya 21:04 What happens if they get ahold of Roomba? I'll tell you what happens. The next thing is, they're gonna go after Dyson, okay? And then once they do that, they're gonna put chips in these things and, all of a sudden, they're gonna know exactly what Jason said. What are you eating? You know?

Jason Calacanis 21:16 Yes, where your dust bunnies are.

Chamath Palihapitiya 21:17 Yeah, all of this stuff. It's... This must be stopped, Lina Khan.

Jason Calacanis 21:20 Now. No, but, uh, Sax-

Chamath Palihapitiya 21:22 Stop the madness.

Jason Calacanis 21:22 ... to the point of competition, you- you- you're seeing cuts to, you know, all the, uh, non-core projects at these big companies. This is gonna be great for startups, right? Like the idea that Facebook could focus on, you know, a fourth, fifth, sixth thing i- is gonna go away, yeah?

David Sacks 21:40 Well, look, uh, you're right that great companies are built during downturns. Uh, PayPal was built largely during the downturn. The startup I created, Yammer, was built largely during a downturn. So listen, there's gonna be opportunities. Innovation doesn't stop just because we're in a recession or depression. But I gotta tell you, I- I... unlike Chamath, I'm having a hard time finding a silver lining right now. Uh, part of it is the comments that Druckenmiller just made, which... and he's been right about this stuff. We've been talking about his predictions for over a year on this podcast. And what he said-

Jason Calacanis 22:08 He famously shorted the pound, uh, for George Soros and made a massive trade. Yeah.

David Sacks 22:12 That was when he was first getting started. But yeah, since then, um, he's one of the most successful macro traders in the world and, and, you know, universally respected and I think deservedly so. Remember, he said that- that... This was in mid-2021, he said that the Fed was engaged in a radical, uh, monetary policy because even though we were starting to get inflation, it was around 5% then, that they were still engaged in this bond buying program. They still bought like $160 billion of bonds and he was the first one waving the alarm bell saying, "What are they doing?" And now his predictions have come true. I mean, we're in a, uh, inflationary spiral and his prediction now is, his central outlook is that the Dow Jones will be in the same place where it is today in 10 years. And he made the point that, yes, equity markets do go up in the long term, but how long term are you talking about? From nine- from roughly 1966 to 1982, the stock market was sideways.

Jason Calacanis 23:05 Japan had a lost decade as well. Like this is not unprecedented-

David Sacks 23:07 Right.

Jason Calacanis 23:08 ... after an asset bubble.

David Sacks 23:09 Right. And then from the Great Depression, it took until 1955 for the stock market to recover. So in the long run, the stock market will go up, but it could be, you know... we could have, um, a flat decade. Now, this is his prediction, right? But he's a very smart guy. And- and then on top of that, that's not to say that you can't be one of the ones who make money during that period because lots of people do, but we're in for, I think, a very tough economic period because of just this radical, uh, expansionary fiscal and monetary policy we've had. Basically, the Fed and the administration printed, the last two administrations, but especially this one, printed $10 trillion over the last couple of years. And the hangover from that has been-

Jason Calacanis 23:53 Just fact check on that, Sax. Most of that was under Trump, but continue.

David Sacks 23:56 No, it was not. How-

Jason Calacanis 23:58 100% was. I'll- I'll pull it up in a second. But anyway, keep going.

David Sacks 24:01 We had... Biden basically kept digging this hole. We had the $2 trillion of American Rescue Plan, which we didn't need. We just had, uh, another $2 trillion of the infrastructure bill, the Inflation Reduction Act.

Chamath Palihapitiya 24:15 500 billion for s- student debt.

David Sacks 24:17 Yeah, exactly. So Jason, what are you talking about? And this was all after the emergency was over.

Chamath Palihapitiya 24:22 But I think... I think that you guys are debating the wrong thing. I think that what Druckenmiller... I think, by the way, just to be clear, both Druckenmiller and I...... can be right, which is, he's commenting on the real world economy going into a recession. What I'm saying is that the stock market tends to be nine to 12 months ahead of where we are. Nick, throw up that chart please that I asked you guys to share. Just to give you guys a sense of what I mean by this.

David Sacks 24:44 By the way, while you're doing that, Chamath, Jason, look, I will agree with you that a lot of the stimulus-

Jason Calacanis 24:47 He did seven point, I'm just pulling up, he did $7.8 trillion.

David Sacks 24:50 Listen, a lot of the stimulus-

Jason Calacanis 24:50 So he did, he's done more than Biden, but fine.

David Sacks 24:53 A lot of the stimulus happened under Trump, you're right, because that's when basically COVID happened.

Jason Calacanis 24:56 Yeah.

David Sacks 24:56 Remember, in the, in that Q2 of 2020 quarter, the economy shrank at a 30% annualized rate, everyone thought we were going into a great depression.

Jason Calacanis 25:04 Yes.

David Sacks 25:04 And that's why they passed all the stimulus by huge bipartisan margins. Okay?

Jason Calacanis 25:08 Druckenmiller's best point is that this is all post-vaccine, right? Yeah.

David Sacks 25:11 Yeah. So, so look, and, and I think we can definitely go back and second guess what happened during the Trump administration. There's an old saying that many of the worst ideas are bipartisan.

Jason Calacanis 25:22 Yeah.

David Sacks 25:22 And so, you know, the spending that happened in 2020 was clearly bipartisan, and maybe it went way too far, but in the last two years, like Druck said, it was post-vaccine, post-emergency, and they kept spending. And it's, and not just the administration, it was the bond buying program of the Fed-

Jason Calacanis 25:38 But David, David-

David Sacks 25:38 ... where the economy was already fully back and they bought another 160 billion of bonds.

Chamath Palihapitiya 25:43 Yeah, I think, I think the thing is that, you know, I think Stan is a proven Republican, so maybe he is speaking a little bit of his book as well. I think it's fair to say that both Trump and Biden did not help, but overwhelmingly, I think where the, where the problem stands is a central bank that was the same through both of those administrations. And I think we should probably focus on them because you're right, what they did was excessive, and what they essentially said is that if there is volatility beyond a certain amount and people cry uncle, we will not allow the markets to sort themselves out in an orderly way, we will step in. And that's what, you know, again, what we just talked about, the Central Bank put, in this case, the Fed put.

Jason Calacanis 26:27 Interventions, yeah.

Chamath Palihapitiya 26:28 And, and these interventions really, uh, pervert a market because you don't know what's going on, and that has huge ramifications in the real economy. So, Nick, if you could just throw up this chart. The, the, the thing that is really important here and what this chart shows is essentially all of the hiking cycles that we've gone through since 1983, so '83, '87, eight- '94, '99, '04, '15, and the current one. And here's what, uh, I just want to call out for you guys. What's incredible is that other than the one in '83, so this is sort of, like, you know, that last big one, what we've seen is that the stock market has a tendency to immediately go to the conclusion very early on in a rate hiking cycle. And now why is that important for normal folks listening to this thing? Well, the reason why that's important is right now we're in month seven of a cycle. We obviously don't know how long it's gonna be, but the odds are improving every day that we're near the end versus the beginning. And why that's important is, again, if you're thinking about when to, you know, buy equities, for example, this is a really instructive guide because what it tells you is the closer we get to the end, or more importantly, the closer we psychologically know that the end is coming, we start buying. And that, and that's just a broad-based statement that has been true. So, you know, what you see right now I think is really interesting, which is that despite all the bad information, oh my gosh, the Nord Stream pipeline blew up, could it have been sabotage? Was it the CIA? Was it the Russians? Oh my gosh, big tech is slowing spending and firing people.

Jason Calacanis 28:13 China's in a coup. I don't know if you saw that rumor. Yeah.

Chamath Palihapitiya 28:16 Or how about something more benign, you know, the, the US, you know, US yuan is really trading in a crazy way, the US euro is trading in a crazy way, the US pound is going crazy.

Jason Calacanis 28:26 The pound, yeah.

Chamath Palihapitiya 28:26 Despite all of that, every time we trade down, the market consolidates very quickly and we sort of, like, so I think we're forming a bottom. I do think that Stan is right, we are going to see a hard landing recession. Something will break in 2023. I hope it doesn't, I hope it doesn't affect-

Jason Calacanis 28:46 What-

Chamath Palihapitiya 28:46 ... a lot of normal people, but it's likely. But at the same time-

Jason Calacanis 28:50 What literally define hard landing as to you?

Chamath Palihapitiya 28:51 So I'll tell you in a second, but at the same time, I think what's happening is in the equity and financial markets, we are consolidating a bottom because we're seeing through to that end state, and this is where cheap equity gets bought. So why is there a reason to sell now? I think a lot of the people that are selling, the smart money sellers that I talk to, are essentially right now selling to book in capital losses to offset other capital gains from this year, a term that's called tax-loss harvesting. And so if you have gains through this year, which some of us do, this is the great moment to just sell the losers, to book the loss, to net it out so that you can minimize your taxes for next year. That's probably, I think, where we are at, and I think that's why there's still consolidated buying. So what is the hard landing, Jason? If I had to predict, I think what David said is absolutely right, you're going to see unemployment get to an awkward and uncomfortable number, 5%, 6% I think could be something that we see, and I think you're gonna see a lot more companies pull way back on their spend because demand is gonna really modulate. Uh, you know, I'll give you an, uh, a crazy example. You know, what happens to all the people in the United States that are on ARM mortgages, right? Adjustable rate mortgages. When those things reset, they're gonna reset 200, 300 basis points higher, their monthly payments are going, are gonna go nuclear.

Jason Calacanis 30:17 Oh, it's already happened, Chamath. I literally had-

Chamath Palihapitiya 30:18 And-

Jason Calacanis 30:18 ... a family member call me about this and they were like, "What do I do?"

Chamath Palihapitiya 30:21 So in the UK-

Jason Calacanis 30:22 They got a mortgage. Yeah.

Chamath Palihapitiya 30:23 In the UK, 40% of all mortgage dollars are interest only ARMs that will-

Jason Calacanis 30:31 Yep.

Chamath Palihapitiya 30:32 ... reset in January to around 4%.40%. Can you imagine how upside down the UK economy is going to be when people have to spend three and four times more to keep their home?

Jason Calacanis 30:44 Well, and then people have to go to work, so people who have not been participating are going to have those bills come in and they're gonna have to go to work.

Chamath Palihapitiya 30:50 They're gonna have to go to work.

Jason Calacanis 30:51 Yeah. So Freeberg, what, what do you, what, do you think, uh, hard landing here? And then what do you think 2023 looks like in that regard?

David Friedberg 30:59 Uh, it's, uh, looking pretty bleak.

Jason Calacanis 31:02 Do you buy that we're bottoming out now as Chamath is sort of hypothesizing?

David Friedberg 31:06 I mean, I'll tell you,

David Friedberg 31:09 I was running some back of the envelope math. You know how much debt there is in the world? Take a guess.

Jason Calacanis 31:21 200 couple hundred trillion. 200 trillion.

David Friedberg 31:26 About 300 trillion.

Jason Calacanis 31:28 Yeah.

David Friedberg 31:28 That's, um, debt owed by governments, businesses and households. And if in response to the inflation, which is response to fiscal stimulus, which is a response to the entire economy of the world shutting down for a couple of months, we end up raising rates from 0 to 5%. That's, uh, 15 trillion dollars of annual debt service, which is like 18% of global GDP. (laughs) Like that, the debt service alone-

Chamath Palihapitiya 32:06 But what does that mean?

David Friedberg 32:07 ... is 18%.

Chamath Palihapitiya 32:08 What does that mean?

David Friedberg 32:08 That means that for every dollar transacted, you-

Jason Calacanis 32:11 No, it means nothing.

David Friedberg 32:12 ... have to tax it. No, it means you have to-

Jason Calacanis 32:13 But if you... What does it mean? Like, so, so what?

David Friedberg 32:16 So I'm saying that there's a massive squeeze hap- that's gonna happen, right? And so what ends up happening ultimately is... Because you could run this across, uh, local governments.

Jason Calacanis 32:25 I think it means demand destruction. I mean, if you-

David Friedberg 32:28 Sovereign debt, households.

Jason Calacanis 32:30 Yeah, I don't think it means-

David Friedberg 32:31 And, and it-

Jason Calacanis 32:31 I think... No, no. I'll tell you, I'll tell you, Chamath, what it means. The person who has-

Chamath Palihapitiya 32:34 I'm sorry to pop your bubble, but it means nothing and I'll tell you why. These people keep like-

David Friedberg 32:38 Because you can print more money?

Chamath Palihapitiya 32:39 You print more money. I'm sorry-

David Friedberg 32:40 Yes.

Chamath Palihapitiya 32:40 ... to be the bearer of bad news but like it is not as if we have a law, a constitutional law. Or it's not as if governments have collectively decided that you cannot have debt-to-GDP, uh, above a certain number. That doesn't happen, guys. We passed 100 under Obama and we've just kept printing money. So whether we like it or not, and I'm not saying I'm a fan of this or it's right, we are kicking the can down the road, and what we're doing is we're extending the maturities. You know, you'll eventually have 100-year government bonds, okay? Y- just like you have, like, now, you know, multi-decade long corporate bonds.

David Sacks 33:15 We missed the chance for that. We missed it because brilliant Yellen actually said no to that when, when rates were like near zero and we had the opportunity to refinance the US government debt w- using long-term rates, basically long-term bonds, and actually it was Trump who, you know, crazy Trump who suggested let's basically shift the debt to 100-year bonds and she said no. She does so we-

David Friedberg 33:37 So she doesn't devalue the dollar, right?

David Sacks 33:39 So the, the problem is that we have all this short-term debt and look at what, what just happened in the UK when Liz Truss tried to prop up the, uh, bond rates by basically intervening, which is basically an inflationary policy to fight inflation. The markets puked all over that and that's when their, the pound hit, you know-

Jason Calacanis 33:59 Exactly.

David Sacks 33:59 ... new lows.

Jason Calacanis 34:00 There's, there's only so... You have to have a buyer of the debt, right?

Chamath Palihapitiya 34:03 I think the Liz Truss thing is really actually a microcosm of how, unfortunately, Western governments are working, but I think there's a silver lining. Like, she basically came in a day after she got elected and said, "Okay, guess what, guys? At the same time, I'm going to massively cut taxes and I'm gonna give you fiscal stimulus. I'm gonna cap your energy bills and I'm gonna have these huge transfer payments from the government into the hands of, uh, uh, of, um, British citizens." I'm not gonna comment on whether that's right or right, right or wrong, but the financial markets, to your point, David, absolutely hated it, and within a few days, you basically saw the pound get crushed. But then what did you see? You saw the Bank of England decide that financial stability was more important than financial viability, meaning the things that she wanted to do were not viable. So you could have let the financial markets sort this out, which would have forced the Prime Minister to basically abandon the policy, but instead the BoE said, "No. We're an unlimited buyer of UK gilts," which is the name of the UK bond, and everything snapped back. We're back to where we were before her speech and before the Chancellor of the Exchequer's speech, and so it's as if nothing happened. And that's what's so insane to me, which is that even though the Bank of England, by the way, in the next week or two are gonna raise rates 140 basis points, 140 basis points, almost double what the Fed has done the last three times. They're doing both at the same time. They're both raising rates and they're acting as a backstop for bad policy. And this is what's wrong right now in the world. We do not have a real check and balance. And so my point to Friedberg is just that I'm, like, emotionally i- on your side, but the problem is with these folks keep getting bailed out, David, they're just gonna keep doing this stuff and there's no end in sight.

Jason Calacanis 35:49 Well, the... And the, the consumer doesn't get bailed out. So that, if you look at it on a micro basis instead of a macro basis, you're correct. These governments will just bail people out even if they make bad decisions, as we're seeing, but then the person who's, uh, variable interest mortgage just kicked in has $500 less a month, uh, in savings, so they're now not going to buy an iPhone 14. They're not gonna upgrade their car every six years, they're gonna do it every eight years. So the demand destruction that's happening is gonna be quite severe and that's gonna reduce mono-

Chamath Palihapitiya 36:16 And then-

Jason Calacanis 36:17 That's gonna reduce monetary velocity-

Chamath Palihapitiya 36:18 ... and then, and then, Mark my-

Jason Calacanis 36:18 And then we restart.

Chamath Palihapitiya 36:19 And then, Mark my words, the Federal Reserve will intervene. This is why I think we're in a bottoming process. I think the, the bleeding edge of the smart financial actors are actually on Sachs' side and Friedberg's side, but then they're taking that next intellectual leap and saying, "Okay. Well, what happens when Apple basically says, 'Hey, guys, I'm gonna have to fire 15% of my employees?'"I think what happens is the Fed intervenes. And I'm, I'm just using Apple as an example, but there, there is a threshold of demand destruction, Jason, I think you're right, where we have the Fed put, come back on the table, and the markets just go bonkers.

Jason Calacanis 36:53 So they, instead of doing 75 basis points two or three times, they're just going to be like, "Yeah, we'll do 50."

Chamath Palihapitiya 36:57 No, they'll, they'll, they'll, no, no-

Jason Calacanis 36:57 "We'll slow it down."

Chamath Palihapitiya 36:58 No, no, no, no, no, no, no, no. They're gonna, they're gonna get to four and a half very quickly and then th- something's gonna break, like all these guys are saying, I think they're right, and then the Fed put comes back on the table and we'll have this-

Jason Calacanis 37:10 Balanced.

Chamath Palihapitiya 37:10 We'll have the UK ... You know, the UK thing happened in, what, six days? Ours will play out over six or nine months, but it, it's gonna play out the exact same way. And Friedberg's right, you know, we should have capped debt at, you know, 100% of GDP or less, and Sachs is right, we should have issued 100-year bonds at zero rates when we had the chance. We didn't do either of those things.

Jason Calacanis 37:31 Why is the Fed so incompetent, Sachs? I mean, w- there was no need to have rates this low for that long and it, maybe they could just keep them at some average number instead of going down to zero or then spiking back up and just steering, you know, spinning the steering wheel, uh, you know, so violently. Why don't we have some basic, uh, concept of maybe not having zero rates and keeping them at 2% or something reasonable so you have some dry powder?

David Sacks 37:55 Well, if you go back and, and listen to what the Fed said, and Druck makes this point, they were all worried that they got, there was an inflation print a few years ago where it was at 1.7% and they all started panicking about not being at 2%. So for a .3% move that they tried to engineer, they opened the floodgates, okay? And that's basically what happened and that's why he's so critical of it. The other thing is, the Fed me- fed member of the Fed said, "We're gonna be data-driven." But then the data came in last summer, we got that surprise 5.1% print-

Jason Calacanis 38:25 Yeah.

David Sacks 38:25 ... and they dismissed it as transitory. So they said they were gonna be data-driven, but they weren't. They, they were dismissive. Now, on what basis did they conclude transitory? Like, what was the proof for that? There was no proof. That was a political consideration. The administration, imme- and Yellen is a big part of that, immediately reacted to basically downplay the news. I mean, they PR'd it. I mean, they didn't want to admit-

Jason Calacanis 38:49 I mean, you're right.

David Sacks 38:49 ... that there was a problem.

Jason Calacanis 38:50 They went from transitory to this is permanent to now-

David Sacks 38:54 In six months, but during-

Jason Calacanis 38:55 And now we're at hard landing. Like-

David Sacks 38:57 Right.

Jason Calacanis 38:57 ... are these people are not competent? Are they just not competent?

Chamath Palihapitiya 39:00 No, I think they're really, I think they are competent, but I think that they're a little bit fighting with one hand tied behind their back. I think if you had to take the other side, Sachs, you know, the problem is they have a very specific strain of data that they focus on and that data has all these weird anomalies to it. Like, you know, they should look at rent data, but the way that the rent data works is that, you know, you bleed it in one sixth a month over six months, just as a, as an odd example. Or, like, used car data only comes in a certain way, so-

Jason Calacanis 39:31 I think they're driving in the rear-view mirror. I think there is something to that.

David Sacks 39:34 I think it's simpler than this, which is, listen, I think all politicians do this, which is when they get bad news, they wanna spin it and they're gonna delay acknowledging the bad news as long as possible. So what happened? Last summer when this inflation started, they all dismissed it. It was all a talking point. I mean, every single one of them. And here's the crazy thing, is Jay Powell, he's the only Trump official who got reappointed by Biden by a huge majority. How do you think that happened? And when did it happen? It happened at the end of May last summer. So just when this inflation print came out and Yellen and the administration were saying it was transitory, that's when Powell was up for re-nomination. And he swept through. The only Trump appointment to basically be re-nominated without even a question by Biden. Why? Because he got on board with the talking points. He wasn't gonna basically buck them at that time, so he waited six months. He bought into the talking points. That was 100% political. 100%.

Jason Calacanis 40:29 I mean, if s- I told you, I read Paul by-

Chamath Palihapitiya 40:30 It's a very compelling argument.

David Sacks 40:32 (laughs)

Jason Calacanis 40:32 I, I read the ver-

Chamath Palihapitiya 40:33 And it's really compelling. It's really compell- it's sad, but compelling.

Jason Calacanis 40:36 Sachs, you should read the Paul Volcker, uh, book, Keeping At It. He basically says Reagan came to him offsite where they, knew they weren't being recorded (laughs) and told them, "Do not raise rates." Uh, so this idea that the Fed is independent, like, history now has shown us it is not. Like, the, the, there is massive, uh, political pressure on them. I, I think they're driving-

David Sacks 40:55 Well, especially at the time-

Jason Calacanis 40:56 They're driving in the rear-view mirror, clearly. The, the data they have is not great. And then all this data is nuanced. You know, jobs and this massive amount of jobs we've had in this country is because of y- we have a new immigration policy. We don't let people into this country and we kick out PhDs that we trained. And then housing, we have iBuyers buying this. So to your point, Chamath, I think a lot of the data has changed and they're, they've got a bad dataset. They have a bad dashboard and they're driving with bad information. They don't know their direction. They don't know their speed perfectly.

Chamath Palihapitiya 41:24 If you went to-

Jason Calacanis 41:25 They need more fidelity on the data.

Chamath Palihapitiya 41:26 You're right. If you went to a board of director's meeting for your company and said, "How's the business doing?" And the CEO says, "Well, you know, well, we're gonna have data from six months ago." And it's like, "Okay, I got that, but what about, like, last week?" Uh, you would fire that CEO, to your point, Jason.

Jason Calacanis 41:42 Me too.

Chamath Palihapitiya 41:43 Um, and these things are knowable today. Like, there are businesses, for example, that are selling billions of dollars worth of, like, IoT sensors here and there, energy sensors here. E- everything is connected to the internet. Everything is automated. Everything is running in code. Um, you would think that the government would say there's a national level directive here to get this into some kind of a system that we can use, because these im- decisions are becoming more and more important. I think that would be a wonderful idea and a project and it would add huge value.

Jason Calacanis 42:14 A Manhattan Project for understanding the economy on a very-

Chamath Palihapitiya 42:18 Yeah.

Jason Calacanis 42:18 ... granular level. We, you invested in a startup at one point. I remember I heard the pitch where they had people around the world taking pictures of food prices. I, uh, Africa, India, the United States, anywhere, and then putting them into a database, normalizing them so you could know the price of tomatoes or potatoes on a global basis, you know, a- and normalizing all that data. They don't seem to have this data. They're, they're talking about August data and it's Oct- you know, we're, we're now in October.

Chamath Palihapitiya 42:42 It's a really odd situation.

David Sacks 42:44 I think, you know, our friend, Brad Gersner, made this point, which was that, look, in this last FOMC meeting, the Fed raised their forecast for what the neutral interest rate would be from 3.5 to 4.6%. So in two months, they raised their forecast by over 100 basis points. What is that based on? Like, is there a model? I assume there is a model. I assume there's data, so why don't they just open source that? Why don't they let the markets, like, see the model they're using so we have a little more predictability? Of course, they always have the discretion to buck it or not follow it, or whatever, or change it. But like, you know, wouldn't that be a better approach, is to, like, let us see the data and the models in real time as it's happening? And then the community, like, like an open source project could actually, like, fork the model and actually create, like, better ones.

Chamath Palihapitiya 43:33 Well, to your point, to your point, like, there's, th- the Fed is actually known as the gold standard of transparency, so the IMF has kind of, like, a, a view on how all these central banks act. Last week, they actually, uh, excoriated, and this is g- this hurts me to say, Canada, because of their lack of transparency. Apparently, Canada doesn't even put out minutes. And so they were like, "Hey, Canada, you, uh," (laughs) "you guys, like..." And, you know, look, Canadians are, I mean, the Canadian government at least, like, total moral virtue signalers, but they don't value transparency apparently. But to your point, David, there is a lot of opacity in these things that really determine how the real world works, and the impacts to individual people are gonna go and get ratcheted way up. And nobody really knows what to expect, even though the data is there sitting in plain sight.

David Friedberg 44:25 I think two things can be true. I think the Fed, the process of setting central bank rates by the Federal Reserve should be reset. I also think that it could be true that the Fed is not responsible fully for a lot of the conditions we're now facing. We did have a bunch of policy decisions that the whole world got swept up in and seemed to accept as appropriate at the time when we shut the global economy down. And there was some weird assumption or belief that fiscal policy would allow us to soft land or recover out of that, and at the end of the day all that fiscal policy did... And I remember I was speaking with a smart person at the time, and he said, "All the Fed's gonna do is they're just gonna inflate everything, and it's gonna take a while and everything will inflate, and that way everyone will feel good for a while." But you can't just stop the spigot of capital moving, goods moving, and services moving for months on end and assume that the repercussions will not actually be felt extremely harshly. And at some point, things are gonna come home to roost, and that is what's happening. There was no winning solution for the Fed or for any central banker in light of the policy decisions that were made to shut the global economy down when COVID began. Not to argue whether or not that was appropriate, but that was simply a statement of fact. I said it before and I- I don't understand if you were to take a first principles point of view on this today and say, "Hey, let's create a central bank and how should it operate?" You would take all the data from Intuit, from PayPal, from Visa, from Mastercard, from the internet. You would take all of that data. You would let the algorithms or the AI or the software figure out what is most predictive of certain inflationary, recessionary-

Chamath Palihapitiya 46:18 Totally.

David Friedberg 46:19 ... and growth indicators.

Chamath Palihapitiya 46:21 Totally.

David Friedberg 46:22 And you would basically say, "Look, X percent growth, X percent inflation, solve for what the, the central bank's interest rate should be, and it should vary at a hundredth of a percent or a basis point every day. And every day the rate is reset and the software resets it." And to have, you know, some degree of human logic or oversight seems appropriate, but to have a decision made in quarter percent increments once every couple of weeks, uh, seems, seems kind of arcane. So I think both things are true. The Fed isn't necessarily fully responsible. We all want to point fingers. You know, we can point fingers at- at the- the- the mania that swept over the entire world when we started our podcast and everyone was like, "What the hell is going on? Why are we-"

Chamath Palihapitiya 47:04 Yeah.

David Friedberg 47:05 "... locking down the world?" And this is nuts, and it felt nuts.

Chamath Palihapitiya 47:08 Yeah.

David Friedberg 47:08 And the response may or may not have been appropriate, but at the end of the day there was a cost and the cost is gonna be borne for very likely a decade or more if we are able to get through it all.

Chamath Palihapitiya 47:17 A lost decade is a possibility.

David Friedberg 47:20 And c- central banks should be rewritten, so yeah.

David Sacks 47:21 Well, I think there's actually two original sins of the economic crisis we're in. One is lockdowns, you're right. Like, that was a fiasco. It didn't do anything to stop COVID. It was an economic disaster. And then we overreacted to lockdowns by then printing all of this money, both fiscally and through expansionist monetary policy. So Friedberg's right about that. I, but I think the other original sin here is the- the QE and the ZIRP, right? The Zero Interest Rate Policy that began in 2008, 2009.

David Friedberg 47:50 Totally.

David Sacks 47:50 We broke the glass in case of emergency.

David Friedberg 47:52 We normalized it. Totally.

David Sacks 47:53 Yeah, and then it just became standard, like it was on autopilot. Why did we keep printing? Why did the government keep buying bonds?

David Friedberg 47:59 It was a long tail event that became the meme. (laughs)

Chamath Palihapitiya 48:02 Yeah. Well, that's-

David Sacks 48:03 This is the problem is that every time government-

Chamath Palihapitiya 48:04 ZIRP is a bad idea. I mean, it's just...

David Sacks 48:06 Yeah. Milton Friedman once said, "There's nothing quite so permanent as a temporary government program." How many times have we seen this? Every time the government's supposed to do something on a one-off emergency basis like ZIRP, it ends up becoming institutionalized. We still have kids in schools in California wearing masks. I mean, that, it's the same crazy thing that people cannot get off these programs.

Chamath Palihapitiya 48:25 The- the thing about ZIRP, which if you look back, what really happened if you think about, like, how people live their lives every day, what- what ha- what has happened in our view of government and politicians? It's really eroded since 2007, 2008, right? There's huge amounts of rancor. Nobody gets along. Everything tends to happen on partisan lines. And the reason I think that that was allowed to happen or that accelerated is actually because of ZIRP.... because if you think about it, if you had failed policy, right, and the economy was completely broken, politicians would actually have to get together and try to solve the problem themselves. And the last time they really did that was actually in the great financial crisis. If you look at TARP, and if you look at how all of these smart people actually had to get together in a bipartisan way to figure out, "How do we bail out America and prevent a banking crisis?" That was the last real effort that touched a lot of people, but then, David, as you said, at the, on the heels of that, we broke the glass and we've been fighting ever since. And the peak of that fighting was basically Donald Trump getting elected. And so, I think like what it shows is that if you have these irrational central bankers that will... or that are willing to constantly bail people out, you will never get a high functioning government because policy is irrelevant. Good policy doesn't matter.

Jason Calacanis 49:46 I think we're-

Chamath Palihapitiya 49:46 Bad policy doesn't matter. If any of it goes wrong, the central banker will come in and bail us out.

Jason Calacanis 49:52 Well, and th- the second and third order impact of these is... can become quite acute and, and just for people who, uh, heard the word ZIRP like three times, Zero Interest Rate Policy, basically keeping interest rates very low. Very dangerous to do because you get shit like this. Like, look at the number of unemployed people per job opening, and if you just look at this, like ratio, this is the number of, uh, jobs per unemployed person, it gets way out of whack. And then if you look at this other chart just in terms of the total number of job openings, you know, we, we started... we talked about this earlier in the pod, hitting 11 million. To burn that off is crazy. Then what happens if you have too many jobs, you don't let immigration i- you, you, you don't have a functioning immigration policy? Well, then you get this great, um, you know, people quitting their jobs, quiet quitting, and then the boomers saw their net worth go up so high because of their retirement accounts because of the stock market boom and because of the housing boom. You had all these rich parents now who are bailing out their kids who refuse to go to work and labor participation goes from 70% down to 62%. These are the unintended consequences of ZIRP that, you know, now... how do you get a generation to go back to work if their parents have, you know, a $2 million home and $3 million in stocks or a million dollar home, a million in stocks?

Chamath Palihapitiya 51:09 You have to break the economy. Yeah, you-

Jason Calacanis 51:11 And that's what they're doing now.

Chamath Palihapitiya 51:12 Exactly. Exactly.

Jason Calacanis 51:12 They're like, "We're gonna break this. We're gonna, we're gonna get Google and Apple who have unlimited cash to do a RIFF." Those companies don't need to do a RIFF. They're doing it because they have no choice now because they, they want to break the economy so hard. Boomers have 71 trillion in assets over March. I mean, the wealth transfer that's going to occur between these two generations is crazy. Why would any- U- US boomers?

Chamath Palihapitiya 51:34 ... Gen X or millennial with a boomer parent even go to work if they've got a million-

Jason Calacanis 51:38 US boomers have $71 trillion in assets. Is that what you said?

Chamath Palihapitiya 51:41 Yeah. Yeah, that's the number I have here, so... An entire turn of global GDP in savings.

Jason Calacanis 51:47 That's about one-seventh of the world's total assets. It's just a lot of locked up wealth. And this monetary policy was done by boomers.

Chamath Palihapitiya 51:55 70 trillion controlled by 76.4 million people.

Jason Calacanis 52:00 Yeah.

Chamath Palihapitiya 52:01 So if you want to really talk about the, you know, the rich in a global context, the rich are very specifically US boomers.

Jason Calacanis 52:09 Yeah, that's one-seventh of the world's assets.

Chamath Palihapitiya 52:12 It's one-seventh of the world's assets. It's controlled by 76 million people.

Jason Calacanis 52:16 (laughs)

Chamath Palihapitiya 52:16 How much of it is their homes? (laughs) I mean, they were, they were at Woodstock. They, you know, they lived the best life in the best times. They enjoyed the most of the peace dividend in the 80s and the 90s and the 2000s. They are the ones that control everything.

Jason Calacanis 52:34 It's pretty crazy.

Chamath Palihapitiya 52:37 It's... I think it's less like Jeff Bezos and Gates and Musk. It's boomers (laughs) that... if you want to go and really zoom out and get it right, it is boomers. It's 1% of the global population that controls one-seventh of the global wealth, and they're all in the United States.

Jason Calacanis 52:54 US boomers?

Chamath Palihapitiya 52:55 Hiding in plain sight, US boomers. There you are.

Jason Calacanis 52:58 Well, once these housing prices decline and the stock market declines, that number is going to shift and that really is what's fundamentally happening with the fiscal policy and the effects it's happening today... it's having today, which is a redistribution of that value because we're basically deflating all those assets now. We're def- we're gonna deflate stocks-

Chamath Palihapitiya 53:15 Th- those... the average boomer was worth-

Jason Calacanis 53:17 ... 10% and we're going to deflate real estate assets. Um-

Chamath Palihapitiya 53:19 I mean if you, if you just do the math on that, back of the envelope, these boomers are worth a billion... a million dollars each. Like (laughs) think about that. Like every boomer is worth 900K, a million, something in that range.

Jason Calacanis 53:29 1.2 million.

Chamath Palihapitiya 53:30 I mean it's bonkers. (laughs) That's the average. They... that's how much wealth they have. Bonkers.

Jason Calacanis 53:38 You, you, you too are a boomer, J-CAL?

Chamath Palihapitiya 53:40 No, we're Gen X. We're Gen X clearly.

Jason Calacanis 53:43 Yeah, we had the worst... we had the... we had, we had like... we got really shafted. It's like, you know, we grew up with flannel-

Chamath Palihapitiya 53:48 We had... we, we have to look into Alanis Morissette.

Jason Calacanis 53:50 ... Pearl Jam. Alanis Morissette. No, hold on, she's Canadian. I thought it was dope.

Chamath Palihapitiya 53:53 Hold on. She's Canadian.

Jason Calacanis 53:54 I mean, uh, Nirvana. Smashing Pumpkins. I mean I thought it was dope.

Chamath Palihapitiya 53:56 Take it easy. I, I agree.

Jason Calacanis 53:56 '90s were great.

Chamath Palihapitiya 53:57 '93 was probably the best year ever for music.

Jason Calacanis 53:59 Smashing Pumpkins never did it for me. Billy Corgan's voice was always like... (growls) You know?

Chamath Palihapitiya 54:03 Yeah.

Jason Calacanis 54:03 It was great. Really annoying.

Chamath Palihapitiya 54:04 Rage Against the Machine.

Jason Calacanis 54:06 Can we do a quick shout-out for, um, Coolio? Sad to hear that he passed.

Chamath Palihapitiya 54:11 We're here for you.

Jason Calacanis 54:12 Yeah, I mean it was really sad. The guy was, uh... how old was he? 57?

Chamath Palihapitiya 54:15 Were, were you a big fan of Coolio's?

Jason Calacanis 54:17 I love Coolio.

Chamath Palihapitiya 54:18 You don't remember-

Jason Calacanis 54:18 I was... I grew up in the '90s.

Chamath Palihapitiya 54:20 This Coolio story from the pod when he said-

Jason Calacanis 54:22 Gangster's paradise.

Chamath Palihapitiya 54:24 I feel you.

Jason Calacanis 54:25 Yeah, and then when I saw him at Sax's birthday last year, I was like, "Dude, I, I love Coolio. I mean, I cannot tell you what a big fan I am."

Chamath Palihapitiya 54:33 What was the line you said to him? You said, "I feel you."

Jason Calacanis 54:35 I said, "I appreciate you" in his ear.

Chamath Palihapitiya 54:37 I appreciate you. I appreciate you. (laughs)

Jason Calacanis 54:40 I appreciate you. We fly down for the birthday. They, you know, they shuttle you on the cars from the plane to the, to the house. We get to the house, and you know, we're all waiting. Of course Sax is late, two and a half hours to his own party. We're all hanging out and starving, but then we go into the party and then they have like, uh... Coolio shows up. So we're like sitting down to dinner for course two-

David Friedberg 55:01 ... all of a sudden, pop comes out of the- the- the woodwork, Coolio. I lose my shit. I run up on the, uh, you know the little-

Jason Calacanis 55:07 Big Coolio fan?

David Friedberg 55:08 ... the dance floor. I grew up, Coolio like is like high school jams, man. I mean, that's like in the car cruising. And, uh, at this point I'm like seven tequila, watermelon tequilas in, so I'm like-

Jason Calacanis 55:18 Oh my God. You got smashed. Oh, no. (laughs)

David Friedberg 55:20 Letting loose up in here.

Jason Calacanis 55:20 Not drunk Freeberg, oh. (laughs)

David Sacks 55:22 Oh, no. (laughs)

David Friedberg 55:22 Now here, I'm- I'm on the- I'm on the dance floor, you know, jamming out to Coolio.

Jason Calacanis 55:25 (laughs) Wow.

David Friedberg 55:25 I think Coolio thought I was Sax, you know, 'cause he's like, yeah, he's like, "Oh, two South African Jews, you guys all look the same." Coolio comes up, starts high-fiving me and hugging me and I'm like, "What's up Coolio?"

Jason Calacanis 55:36 Wow.

David Sacks 55:36 (laughs)

David Friedberg 55:36 My God, this is like a dream come true. He- he's like hugging me. His face is right next to my face. I didn't know what to say. And I like, I'm- I'm all... I've had a little bit of tequila and I- and I whisper in Coolio's ear, I'm like-

Jason Calacanis 55:47 Oh, no.

David Friedberg 55:47 "I apprec- I appreciate you." I didn't know what to say.

David Sacks 55:50 Oh my God. (laughs)

Chamath Palihapitiya 55:50 (laughs)

David Friedberg 55:50 (laughs) I didn't know what to say.

Jason Calacanis 55:51 That's when Coolio went dear.

David Sacks 55:55 Oh my God.

Jason Calacanis 55:55 "What the fuck did you say?"

David Friedberg 55:55 "I appreciate you."

Jason Calacanis 55:56 Yeah. Oh my God.

David Friedberg 55:57 Wow. I stan you, Coolio. (laughs)

Jason Calacanis 56:00 Oh my God.

David Sacks 56:01 I think I saw Freeberg throw his panties on stage, too, at one point. (laughs)

Jason Calacanis 56:04 Oh my God, you are such... Wow, what a nerd.

David Friedberg 56:08 I didn't know what to say.

David Sacks 56:09 Unbelievable.

David Friedberg 56:09 I mean, what do you say when Coolio's face is in your face? You don't know-

Jason Calacanis 56:10 Well clearly, clearly you don't know what to say. (laughs)

David Friedberg 56:13 Yeah, my team, my- my team in, uh, TPB, they had a- they had a cameo made for me of, uh, that Coolio sent in. It was super heartfelt and awesome. Sax posted it on the internet, I think.

Jason Calacanis 56:23 Yes.

David Sacks 56:24 I retweeted it when-

David Friedberg 56:25 Yeah, he retweeted it and it was, uh... I don't know, man. It was, uh... He was a- he was actually a super nice guy, great guy and, uh, it was super sad.

Coolio 56:33 Yo, Dave. It's your friendly neighborhood Coolio, bruh. I'm out here on the golf course thinking about you. I appreciate you, man. So I want to wish you a very, very, very happy birthday, man. You feel me? I want you to drink good, I want you to smoke good, I want you to eat good, and I want you to have some fun, bro. Go big. Do it right. Yo, Dave. Happy birthday, man, from Coolio. Shaka zoom, man.

Jason Calacanis 57:04 Well, all the stories are coming out now and not... Your experience was not unique. He touched everybody he met. Literally these college kids were like-

David Friedberg 57:12 He was a great guy. Very genuine, very kind. Like su- su... Yeah.

Jason Calacanis 57:15 He was a real one.

David Friedberg 57:16 Super friendly and like, you know, and- and like wanted to ask about you. I mean, he's like a very like... I could have been his politician if he didn't become a (laughs) music- music superstar in the mid '90s.

Chamath Palihapitiya 57:26 An icon, man.

David Sacks 57:26 He looked incredible. (laughs)

Chamath Palihapitiya 57:28 He looked like he was 25. I mean...

Jason Calacanis 57:31 He, uh, literally went to...

Chamath Palihapitiya 57:33 He looked incredibly young.

Jason Calacanis 57:33 These college kids met him. He went back to their-

David Friedberg 57:35 He played a lot of golf.

Jason Calacanis 57:36 ... like, you know, frat house. He cooked them dinner and then he got a guitar out with them and he sang Gangster Paradise with them and he like orchestrated it with the crowd singing, whatever. He was

Chamath Palihapitiya 57:47 So was that a car-

Jason Calacanis 57:48 Then there was a video of him in Dublin on the bar singing.

Chamath Palihapitiya 57:51 Can I just say something to... I- I've given the message, uh...

Jason Calacanis 57:56 Before, yeah.

Chamath Palihapitiya 57:57 Before. But like, you know...

Jason Calacanis 57:59 Take care of your health, yeah.

Chamath Palihapitiya 58:00 Take care... Like, there- there- there are these incredible drugs I just want to call out.

Jason Calacanis 58:05 Health is wealth.

Chamath Palihapitiya 58:07 If Lipitor, for example, or Crestor or- or these statins are not working for you, there's this next generation kind of drug called the PCSK9 inhibitor which essentially is, um, effectively a gene therapy that's modeled after this very specific group of folks in the Nordics, I believe, who actually have a f- effectively immunity against heart disease. And so it's taken 20 years to refine this drug, but this drug is a wonder drug and it... You know, there are versions of it now that are injectable, you know, once every six months or whatever. So go and ask your doctor. If you're not... If statins don't work for you, look at the PCSK9 inhibitor. And then separately, after you're 45 or so, you should get, um, a CT angiogram, um, because these things are really important or, you know, a heart flow where they actually inject a dye, they characterize all your veins, they give you a calcium score. May not prevent this, but at least if it's- if it's something cardiac related, you can get to the bottom of it and- and it's a knowable thing nowadays.

Jason Calacanis 59:07 Yeah, rest in power to, um, our friend and, uh, yeah, take care of yourselves, your health. And, uh, speaking of health, shout out to Gwyneth Paltrow, uh, GPalt, uh, who in her Goop newsletter pointed out that she loves the all Inpod and has to be honest, she's obsessed with the personalities a little bit. Anybody want to handicap that?

Chamath Palihapitiya 59:32 Listen, let's be honest. Uh, one-

Jason Calacanis 59:34 (laughs)

Chamath Palihapitiya 59:34 DOCTORS say-

David Sacks 59:35 Not you. Not you, if that's what you're trying to say.

Jason Calacanis 59:36 (laughs) I've met her, actually. I've met her. She's a delightful human.

Chamath Palihapitiya 59:38 Doctors say-

Jason Calacanis 59:39 ... she's a delightful human.

Chamath Palihapitiya 59:39 ... if you want to... if you want to live in health after a meal, the best thing to eat is a little dark chocolate.

Jason Calacanis 59:45 Mm-hmm. Do you get your dark chocolate from Goop? Do you have Goop dark chocolate?

Chamath Palihapitiya 59:49 Jason, I was trying to make a story where I am the dark chocolate, where I'm saying that-

David Sacks 59:53 (laughs)

Chamath Palihapitiya 59:53 ... I am her favorite personality, you fucking moron.

Jason Calacanis 59:56 So you're handicapping that you're her favorite. She said she's obsessed with the personalities-

Chamath Palihapitiya 1:00:00 No. No, I'm going to... I'm gonna... I'm gonna pick-

Jason Calacanis 1:00:01 Where does she rank her besties? I need to know.

Chamath Palihapitiya 1:00:04 I'm going to rank as Freeberg.

Jason Calacanis 1:00:06 Oh, really? You think she's a Freeberg fan?

Chamath Palihapitiya 1:00:08 Then Sax.

Jason Calacanis 1:00:08 That makes... That sound... Yeah. Okay.

Chamath Palihapitiya 1:00:10 Then me, then you.

Jason Calacanis 1:00:12 Okay, I'll take it. The fact that Gwyneth Paltrow even understands like who we are is a win in my book. So I'll- I'll be number four on her list, but, uh, GPalt, if you could rank the besties in your next newsletter, that would be appreciated.

David Sacks 1:00:26 (laughs)

Jason Calacanis 1:00:26 And we'll- we'll take... (laughs) Rank your besties, Gwyneth Paltrow.

David Sacks 1:00:29 (laughs)

Jason Calacanis 1:00:30 GPalt. All right. Sax, you want some red meat? You... I- I saw you wrote a piece.

Chamath Palihapitiya 1:00:35 Yeah.

Jason Calacanis 1:00:35 You want your red meat? Should we throw it to you?

David Sacks 1:00:37 Yeah. Yeah.

Jason Calacanis 1:00:38 All right, you're the tiger.

David Sacks 1:00:39 Well, I mean, I think we- we need a Ukraine update because, I mean, we're talking about all the reasons that there could be a silver lining or the market's bottomed out. I don't think you can know for sure the markets are going to bottom out unless you know that there's going to be successful resolution of this Ukraine war, at least a non-escalation of it. And all the things that have happened in the last couple weeks have been on the road towards escalation.

Jason Calacanis 1:01:02 Last 48 hours.

David Sacks 1:01:03 Exactly. So in the last like just few days, you've had Zelenskyy saying that they want to be admitted to NATO.... you've got Putin basically annexing, or saying he's going to annex, the Donbass. And somebody, we don't know who, but according to Radek Sikorski, who's the Polish Foreign Minister, he thanked the US, uh, somebody blew up the Nord Pipeline. So what is the common denominator of all these things?

Jason Calacanis 1:01:24 Which Nord did they say was blown up? Was it one or two? Was this, the new one?

David Sacks 1:01:28 I think it was Nord One.

Jason Calacanis 1:01:29 Ah.

David Sacks 1:01:29 So it was the one that was actually, like, working. What is the common do- denominator of all these things? They're all eliminating key elements of what a peace deal would look like. So everyone understands that a peace deal would require, uh, Zelensky to give up on NATO, it would require Putin to make some compromises, likely in the Donbass, and it would require the sanctions to be lifted and the energy flows to be turned back on. Well, so now those things basically have been removed from the table, or at least potentially that's what's happening. So I don't see how you're gonna get a peace deal now. And so if you remove all the off-ramps, what's left? Escalation.

Jason Calacanis 1:02:10 Well, you know-

David Sacks 1:02:10 So it seems to me this thing is just gonna keep escalating.

Jason Calacanis 1:02:12 I thought you wrote a good piece in The American Conservative, Should America Go All In On Ukraine? If you haven't read it, it, it is 80% a rehash of what we've talked about here for the, for the last year, but there's 20% new in it, I think. And I thought what was interesting, uh, in terms of new stuff you put in the piece, and it's, it's a good summary of, you know, poker strategy versus what's going on here, is that we've already proven, you know, if, if you did want to prove that Russia is not a threat, with the exception of their nuclear, we now have proven (laughs) that they're really not going to be able to do a domino and go into all these different countries, with the exception of, obviously, the threat of nuclear power. So I, I thought that was a, a point, yeah.

David Sacks 1:02:50 Well, what I was really res- yeah, what I was really responding to in that piece is the assertion by the media that Putin is bluffing. How do they know that? You know, how do they know that? Like, you know, I think all of us understand poker pretty well, and none of us ever would have the confidence to assert that we know exactly what cards our opponent holds in any given hand and how exactly they'll play them. What do we do? What do smart pla- players do? We put our opponent on a range, a range of possible hands, of possibilities, and then we evaluate what did their previous actions tell us? What story are they telling through their previous actions? Well, what story has Putin been telling? This is not a guy who bluffs, in my opinion, or at least that is not the story told to this day.

Jason Calacanis 1:03:36 So you think there's a sh- there's a chance he, he would pop off a tactical nuke? It's a non-zero chance, obviously.

David Sacks 1:03:41 I think if that, if his life is on the line, he is incentivized to use every weapon at his disposal to try and prevent his violent overthrow.

Jason Calacanis 1:03:50 Well, his life isn't on the line here. He can, he can back out.

David Sacks 1:03:52 Yeah, but where's this thing headed if there's no compromise?

Jason Calacanis 1:03:55 I, I think they, you know, I, I, I'm gonna stick with my original prediction that we wanted to ankle Putin. We wanted to prove he didn't have, you know, as much strength as he did, and we wanted to exhaust his resources so we could finally basically get him out of office at some point. So I do think regime change via exhausting him. And I think it seems to have worked. We have exhausted him. Now, is it dangerous?

David Sacks 1:04:16 Well, then you're agreeing with me. You're agreeing with me.

Jason Calacanis 1:04:18 I agree that we have exhausted his... I mean, he's, he's proven he can't fight a ground war, right? I mean, that, that's a pretty-

David Sacks 1:04:24 Well, no, he's escalating now. He's escalating. You think he's just gonna roll over? He's not gonna roll over.

Jason Calacanis 1:04:28 No, I didn't say that.

David Sacks 1:04:29 He's gonna escalate.

Jason Calacanis 1:04:29 I think he... But I think what we've proven, haven't we, is that he can't fight a ground war effectively. He, he doesn't have the army, he doesn't have the weapons, uh, compared to the West, and he's been exhausted. You know, and I think his, he's spent now. The only thing he has left is what you're talking about, is the nuclear option.

David Sacks 1:04:46 Well-

Jason Calacanis 1:04:46 Literally.

David Sacks 1:04:47 No, no. Well, no, there's in- there's more intermediate options. First of all, he's just called for the, the mobilization of 300,000 more troops. So that's-

Jason Calacanis 1:04:54 That's not going for him (laughs) .

David Sacks 1:04:54 ... step one. People are gonna take-

Jason Calacanis 1:04:56 People aren't leaving the country (laughs) .

David Sacks 1:04:57 It's g- Yeah, exactly. Look, there's gonna be very high costs-

Jason Calacanis 1:04:59 Not going well for him.

David Sacks 1:05:00 ... on the Russian side.

Jason Calacanis 1:05:01 Yeah, not going well for Russia.

David Sacks 1:05:01 There are gonna be very high costs on the Russian side. I would not assume that means that there's something in it for us. So what really explains-

Jason Calacanis 1:05:07 So what I'm saying is, though, if even with this, um, you know, the, the, uh, conscription he's doing, this draft he's doing, forced draft, I mean, he is kind of redundant, but, um, this conscription or draft, whatever you wanna call it, has proven that he doesn't even actually have the standing inside his own country. People are leaving. (laughs) They're breaking, they're looking at how to break their arms. Like, it's, it's pretty dark.

David Sacks 1:05:27 I, I think you're making a lot of assumptions there, just like the media who are saying that he is definitely bluffing. What I'm saying is we cannot know that he's definitely bluffing.

Jason Calacanis 1:05:34 No, I agree with that.

David Sacks 1:05:34 Listen, the United States of America is blessed with being the most safe and secure country in the world and really in human history. And-

Jason Calacanis 1:05:43 Yes.

David Sacks 1:05:43 ... the history is full of humans constantly being at war with each other. So that is a really valuable thing that we have. Why are we so secure? We're surrounded by-

Jason Calacanis 1:05:51 (laughs) Yeah, Atlantic Ocean.

David Sacks 1:05:52 ... gigantic oceans.

Jason Calacanis 1:05:52 Yeah.

David Sacks 1:05:53 We have these gigantic moats. In addition, thanks to the wisdom of the Monroe Doctrine, for 200 years, we have prevented any great powers from getting a foothold in the Western Hemisphere. We are completely dominant here and no one could ever stage an invasion of the United States. We only have one vulnerability, just one, ICBMs. That's really it. So what are we doing? We are basically engaging in a proxy war with the person in the world who has the most ICBMs, and we are basically putting ourselves on an escalatory path with him. This would be like if Achilles had gone in front of the walls of Troy and basically taken off his armor and stuck his foot in the air-

Jason Calacanis 1:06:30 (laughs) .

David Sacks 1:06:30 ... and drawn a little bullseye around his, his heel. That is what we're doing.

Jason Calacanis 1:06:34 I'll take it. Or the other side tax is-

David Sacks 1:06:35 Why in the world, why would we do that?

Jason Calacanis 1:06:37 If they-

David Sacks 1:06:37 Why would we do that?

Jason Calacanis 1:06:37 Or, or if they are the last real, um, threat and they are the Achilles' heel, i- if we can, uh, get this guy-

David Sacks 1:06:43 They're not the last threat. They're not the last threat. We're never gonna be out of threats, okay?

Jason Calacanis 1:06:48 Well, we got two major ones with ICBMs. But anyway, it looks like the, we're in the endgame now. What, what do you think happens here in terms of-

David Sacks 1:06:53 We're not in the endgame. We're on a path towards escalation because all the off-ramps have been removed. That's my point.

Jason Calacanis 1:06:58 Didn't Putin say today-

David Sacks 1:06:59 And, and, and instead of saying, instead of trying to find a diplomatic solution, we, first of all, we keep removing off-ramps and then we c- we blithely disregard the threat to ourselves by saying he must be bluffing. This is incredibly stupid. The better question to ask is-

Jason Calacanis 1:07:13 Didn't, didn't he say today-

David Sacks 1:07:13 Hold on a second. The better question to ask is, what's in it for us? What's in it for the United States of America? What is the vital interest that compels us to risk our security?There isn't one. This Donbass region-

David Friedberg 1:07:26 I don't-

David Sacks 1:07:26 Hold on. This Donbass region is the Franz Ferdinand of this situation. It is not historically important to us. We have invested in it, all of this importance, and we are potentially turning a regional war into a world war. We are sleepwalking towards this. Unless somebody finds an off-ramp, we are escalating our way into a much larger conflict. That is my point. And I don't see how anyone, I don't see how anyone should reenter the markets with this geopolitical risk hanging over our heads.

David Friedberg 1:07:55 Yeah, this is kind of like what I said a few weeks ago, and JPMorgan put out a analyst report today saying that they were shifting from being, you know, call it roughly positive, sort of like Chamath's point earlier about being a little bit constructive in the markets right now and coming in and finding opportunities to buy, to realizing that the sum of the portfolio of tail risks right now, you know, outweighs the upside that may arise from finding these low-priced opportunities in the market. And that seems to be the prevailing market sentiment right now, is that there are too many of these moments that while each one of them is low probability, the impact is of such high severity that the aggregate value, expected value or expected loss of all of them is actually quite significant, and that is heavily weighing on the market. And so, to Chamath's point, I think, and to the question earlier about market conditions, one catalyst for upside in the market while there is fiscal strain and economic strain and growth strain, there is also this geopolitical strain in the market. If one or more of these things starts to resolve, I think that weight starts to come off the markets and you can see things move up.

David Sacks 1:09:04 Oh, yeah. Look, I can see the market taking off like a rocket if Ukraine gets resolved.

David Friedberg 1:09:08 And by the way, and, and-

David Sacks 1:09:08 You're right. It's all fat-tail risk.

David Friedberg 1:09:10 That can-

Chamath Palihapitiya 1:09:10 It's about to get resolved.

David Friedberg 1:09:11 I think that can potentially be the political motivation here, which is that enough people like Chamath and you start making the calls to your representatives pointing out how strained the market is because of this tension in the region right now, that maybe there is some path to resolution that becomes more active rather than passive because of that.

Chamath Palihapitiya 1:09:32 Chamath, this may be a little controversial, so we can talk about it, but I, um, think that the markets would have reacted much, much more negatively to a nuclear incident three months ago than now, and may not even react as much as we may think it would three months from now.

David Friedberg 1:09:52 (laughs) That's difficult.

David Sacks 1:09:53 What do you mean by nuclear incident?

David Friedberg 1:09:54 That's a good, that's a-

David Sacks 1:09:54 You mean a nuke goes off, or just a threat?

David Friedberg 1:09:57 You're saying if, if Putin blows up a nuke, the markets may not react that much?

Chamath Palihapitiya 1:10:01 I think that the markets are basically, um, ring fencing Russia-Ukraine risk in terms of, um, currency and stability, but that's sort of now gone away. Um, we've ring fenced the energy risk because it looks like, um, energy reserves in Europe are actually gonna be pretty meaningful. They're gonna spend whatever it takes. So, all of the second and third order effects, it would be a humanitarian crisis, which would be horrendous, okay? But the markets don't, whether we like it or not, react to humanitarian crises. They react to the second and third order economic impacts of those things. And if you actually try to think about what the second and third order economic impacts are, you're seeing many of those things get solved. And so what it would be, it would be a highly isolating effect. It would be a humanitarian atrocity. Um, he would be completely cornered from a, from a worldwide perspective. Um, the, the monetary and fiscal implications of that, um, may not be as meaningfully disruptive today as they would have been three months ago. That's what I'm saying.

David Sacks 1:11:13 Well, I, uh, one thing I should clarify, I like Friedberg's analysis of the, the fat-tail risk because I, I'm not saying it's likely that this conflict goes nuclear, but I don't need there to be a high likelihood in order for me to be very concerned about it because of how disastrous an outcome that would be. So if you're doing an expected value analysis, it's really hard to analyze the expected value or negative value of a d- of a low probability disastrous event, right? That's the classic fat-tail risk. Um, I do think that if the markets think they have priced in the effect of this war, then I think that's an argument for a lot of downside to this market because it seems to me that we're on a one-way ratchet here. All the off-ramps for a s- a peace or a diplomatic solution have been systematically taken away, and all that's left are potential escalations. So-

Chamath Palihapitiya 1:12:04 No, I hear you, but how do those... Translate those escalations to outside of those two countries and into economic terms for the rest of the world.

David Sacks 1:12:12 Oh, my gosh. Well, I mean, if the war spreads. Here, I'll give you a couple of scenarios. I mean, well, here's one. I think we're just assuming that China's gonna stay out of it. Imagine if you're China and you're watching what's happening and you're worried that actually Russia could lose this war so badly that it emboldens hawks in America who want to target China next, you know, who are basically on this global struggle against autocracy. You're gonna look at that and go, "Wait a second, is it really in our interest for Putin and Russia to be completely toppled by this global struggle against autocracy?" It seems to me they could enter the Russian side, not militarily, but in terms of support, so they would have an incentive, again, not to lose an ally. And then by the same token, I think the Russians could lash out. I don't think they're gonna go nuclear right away, but I think they could pull a Grozny. I mean, don't you think that the next step here-

David Friedberg 1:13:07 Explain what that is.

Chamath Palihapitiya 1:13:08 Explain what that is.

David Sacks 1:13:08 Well, when, you know, in the Chechen War, when Russia was losing, they just rubbled Grozny. I mean, they basically leveled it to the ground. So, I mean, Putin hasn't done anything like that yet, but if he's facing defeat, isn't that something that would be on the escalatory ladder, is to basically start leveling Ukrainian cities, destroying-

David Friedberg 1:13:26 Again, I, I-

David Sacks 1:13:27 ... key infrastructure, all of a sudden? And then, what is the response to the West?

Chamath Palihapitiya 1:13:30 Yeah, I know- I know, I'm-

David Sacks 1:13:31 Because the West may say, "You know what? That's unacceptable to us."

Chamath Palihapitiya 1:13:33 I agree. No, no, no. I, I... Look, I'm not debating how bad all