All-In PodcastFed Hesitates on Tariffs, The New Mag 7, Death of VC, Google's Value in a Post-Search World
EVERY SPOKEN WORD
150 min read · 30,016 words- 0:00 – 2:12
The Besties intro Philippe Laffont!
- JCJason Calacanis
We went to an amazing restaurant Friday night. Shiso is the name of this restaurant. Wonderful food. The owner of this restaurant, Chamath, is a, is a super fan as well of the All-In podcast.
- DSDavid Sacks
Is that a French restaurant, Jason?
- JCJason Calacanis
Shiso was, um, more like an Asian fusion restaurant, like great sushi. We had this incredible-
- DSDavid Sacks
It was delicious.
- JCJason Calacanis
... salmon nigiri tail. Delicious.
- DSDavid Sacks
It was delicious.
- JCJason Calacanis
Just, just aces all the way. The guy comes and, uh, we go to pay. He says-
- DSDavid Sacks
Oh, my God. Philippe, listen to this story. This is the most embarrassing-
- JCJason Calacanis
"Your money's no good here. Your money's no good here, All-In."
- DSDavid Sacks
This is the most-
- JCJason Calacanis
He refuses to let us pay after we ran up a hell of a bill, and now you see Freiberg's running. Freiberg-
- DSDavid Sacks
(laughs)
- JCJason Calacanis
... just ran off the show. Why did he run off the show, Chamath?
- CPChamath Palihapitiya
Okay, so (clears throat) Jason says to me-
- DSDavid Sacks
Unbelievable.
- CPChamath Palihapitiya
... "Chamath, we need to-"
- DSDavid Sacks
This is absolute-
- CPChamath Palihapitiya
... "guys make this shit up-"
- DSDavid Sacks
No, no, no, stop, stop.
- CPChamath Palihapitiya
"... to try and make entertainment out of me."
- DSDavid Sacks
Really? I'll tell you the truth-
- CPChamath Palihapitiya
Out of me.
- DSDavid Sacks
... because-
- JCJason Calacanis
Yeah, you tell me the truth.
- DSDavid Sacks
... yeah, I'll just tell the truth.
- CPChamath Palihapitiya
Truth, truth.
- JCJason Calacanis
Meets Freiberg.
- DSDavid Sacks
Go ahead.
- CPChamath Palihapitiya
Okay, ready? I'm gonna tell the truth.
- DSDavid Sacks
Go ahead. Yeah.
- 2:12 – 12:10
Miami F1 Recap!
- DFDavid Friedberg
and they've just gone crazy with it.
- JCJason Calacanis
Love you, West Side.
- DFDavid Friedberg
Queen of quinoa. Going all in.
- JCJason Calacanis
Hey, everybody. Hey, everybody. Welcome back to the number one podcast in the world. We're gonna have an amazing episode today. The besties are riding high. Why are we riding high? Because we went to Miami. Oh, my goodness, we had so much fun at F1.
- DSDavid Sacks
That was fun.
- JCJason Calacanis
Thanks to-
- DSDavid Sacks
That was fun.
- JCJason Calacanis
I mean, it was fun. I mean-
- DSDavid Sacks
It was awesome.
- JCJason Calacanis
Gosh, so many great stories. Uh, so much good times. We're laughing the whole time. We did a little stage show, and, uh, Tony Robbins came up. We had Nico Rosberg, he's a Formula F1 champion. Our guy Antonio Gracias, uh, who's working on Doge, Valor Capital, friend of the pod, and Mayor Francis Suarez joined us. And, uh, then at the end of the show, surprise guest, none other than Sergey Brin, who is punching a clock. He's working like 70 hours a week over at, uh, Alphabet, and we'll talk about that today a bit. Did you have a favorite speaker? Mr. Sultan of Science, the one and only David Freiberg. Did you have a favorite speaker or moment? On stage.
- DSDavid Sacks
I thought Sergey, Sergey, Sergey did a great job. He was very casual, very chill. We had a great conversation.
- JCJason Calacanis
Hmm.
- DSDavid Sacks
I think we should probably publish that as a standalone. I thought it was really good.
- JCJason Calacanis
Oh. To drop him, like a little midweek drop or something?
- DSDavid Sacks
But, but I will say-
- JCJason Calacanis
Like that? Du-du-du.
- DSDavid Sacks
... Antonio, I, I gave him a shout out just because I think the work Antonio is doing is so important. I am super impressed and I was really appreciative-
- JCJason Calacanis
Hmm.
- DSDavid Sacks
... of him taking time to come hang out with us. But obviously he's working with Elon on Doge, but he's also uncovering a lot of stuff in the government-
- JCJason Calacanis
Hmm.
- DSDavid Sacks
... that it's really powerful to see someone actually go in, do the digging, and present it the way they are with the transparency he is. And he's not doing it for any angle. There's no money, there's no benefit to him individually. He's just doing it.
- CPChamath Palihapitiya
No, it's probably net negative on the margins for him.
- DSDavid Sacks
Really hard for him. And yeah.
- CPChamath Palihapitiya
Yeah.
- DSDavid Sacks
And it's just amazing.
- JCJason Calacanis
Based on Elon's experience, it's definitely net negative. (laughs) People, uh, maybe don't like having their grift canceled. Chamath Palihapitiya, our chairman dictator. Did you have a favorite moment with the speakers or a favorite speaker? You know, highlight from the programming specifically?
- CPChamath Palihapitiya
I thought all five of them were amazing. I did, I did think that Sergey did a really good job. I like Nico Rosberg a lot.
- DSDavid Sacks
I did too. For sure.
- CPChamath Palihapitiya
I'm really excited to see what Francis does next after being the mayor of Miami.
- JCJason Calacanis
Maybe governor. We'll see what, uh-
- 12:10 – 32:47
Fed holds rates steady on tariff uncertainty
- CPChamath Palihapitiya
- JCJason Calacanis
All right, the Fed held their rates steady again this week. Uh, if you remember last year, the Fed cut 50 bps in September, then 25 bps in November and December. Uh, but so far in 2025, the Fed has kept rates in a steady range, 4.25 to 4.5%.They said they want to wait and see. They were in wait and see mode because they don't know what Trump's doing with these tariffs and how that's going to impact the economy. Here's the quote from the Fed, "Economic activity has continued to expand at a solid pace." But they warned about potential stagflation, risks of higher unemployment and higher inflation are their concerns, and I talked about that last week. I'm hearing a lot of, uh, hand-wringing about layoffs coming soon. So, what do you think, Philippe, about the Fed not taking any action, and what's your general take on the markets? You know, the, the markets have seemed to recover largely from the Trump, uh, Independence Day, um, tariff announcement, but it's, uh, feels like pretty shaky out there. A lot of M&A on hold, a lot of hiring on hold. What, what are you seeing on the streets?
- PLPhilippe Laffont
Yeah. Well, it hasn't been a boring year, has it?
- JCJason Calacanis
(laughs)
- PLPhilippe Laffont
So I would say on the Fed, right, a lot of people are saying, "Oh, you know, the Fed should cut." And this and that. I actually think that there's also the scenario that what if the Fed is cutting because things are not so great? Maybe that's actually not a good message. And what if the Fed is not cutting because actually the economy is really strong? And so, I think that the Fed not cutting is actually not that bad of a message, and I'm surprised just in general at how bad sentiment is, but how good the hard data is. And we have this ratio at Coatue where we sort of divide hard news as a numerator and sentiment as a denominator, and it's the first time where the news is so good and the sentiment is so bad. And I don't know if the sentiment is bad because just the market went down a lot or for other reasons, but I actually think the economy's doing really well, uh, and we also learned two really important things. One is when the market did go down a lot, the government did budge and said, "Hey, we need to step in here." And the second part is the Fed did something that I thought was very clever. They basically said, "We're not gonna cut just to bail out the equity market, but if the market's liquidity is no longer functioning, emphasis on liquidity, then we'll step in to restore liquidity." And I think those two things really brought the market back up, and I think it's more a little bit the case of a tariff correction or a tariff tantrum, but not a tariff crisis.
- JCJason Calacanis
Mm-mm. So, you said there was a lot of good fundamental news. What would you put at the top of that list? And you said there were things in terms of sentiment that were making people quite negative, that the, um, economy as viewed by consumers is really shaking. So, what is the sentiment news that-
- PLPhilippe Laffont
Yeah.
- JCJason Calacanis
... you are most tuned into, and what are the hard data that you're most tuned into?
- PLPhilippe Laffont
So on the, on the hard data, the part that's most surprising is that consumers have veer- very weak sentiment, but in the meantime, consumer spending is remarkably resilient. And you can see this in a number of ways. You can look at the Visa and Mastercard earnings, but I also like just to listen to, like, little quotes, little tidbits that you pick up in the transcripts of tr- of, of companies reporting earnings and stuff, and people will say like, "Even in mon- the month of April, consumer spending is very strong, and even in the last week when we adjust for the frontloading," some people are pre-buying ahead of the tariffs, even when we strip that out, consumer's really good. So I think the part that, to me, is most surprising, consumer's great. With respect to sentiment, it's really bad. But one thing that's funny is whenever the market goes down, sentiment is bad, and so I don't think sentiment is necessarily a good leading indicator. I almost think it's like a lagging indicator. I bet you that now that the market's gone up, we look at sentiment in a month from now, and it'll be like, "Oh, sentiment's getting better."
- JCJason Calacanis
Mm.
- PLPhilippe Laffont
So I think that's what's going on.
- JCJason Calacanis
Chamath, uh, our friends at Polymarket are showing, hmm, in, uh, June, 84% chance of no change. July, 51% chance of no change, and then September, 48% chance of a cut, and then Powell, obviously Trump's been mixing it up with him, saying he's gonna fire him, he's not gonna fire him. What's your take on the Fed and what they should be doing here at this moment in time? And then maybe you could respond to Philippe's sort of insight there that I think was pretty good, that there is a juxtaposition between what people are saying they're gonna do, consumers, and how they feel about the economy and then what they're actually doing.
- CPChamath Palihapitiya
I agree with Philippe's diagnosis that the Fed will really be focused on liquidity. I agree with that. In fact, Nick, I just sent you something on Signal, if you could just throw it up here, which is a really interesting view on subprime. And what it shows you is the spread between where credit acceptance is versus Capital One's... And the point in bringing this up is that when you look back historically around these subprime lenders, whenever these guys start to see price to books just start to escalate and get to highs, it tends to portend a liquidity crisis. It tends to show that things are about to roll over, and from that perspective, I think that there are some blinking yellow lights that the Fed needs to take seriously. But then, where I deviate from Philippe's perspective is, I think that the Fed is getting increasingly political in how they want to react to the conditions on the ground. I'll give you two perspectives. The first is if you actually read the press release, either the word wait, waiting, or some synonym of that word was littered in there 22 times. It just seemed like an incredible amount of verbal gymnastics-... to try to justify why they weren't cutting. And if I had to just take that at its face value, I would at least put some percentage of probability that you have to assign to this case where Powell views that if th- this lever is the only thing that he has going into the midterms, it's almost as if he's holding it back. Because I think that if you look at some of these leading indicators, particularly on the liquidity side, I agree with Felipe about how important that specific metric is. I don't believe in the Fed put. We've talked about this. But I think the liquidity measures are starting to blink yellow, and I think that if the Fed really wanted to get ahead of it, they could cut, but the political overlay is cutting helps Trump and I think there's this tension between these two people, and I think that the Fed is saying, "We're not gonna cut."
- JCJason Calacanis
So your position is, or what you're hypothesizing here, is that the Fed is saying, "Hey, we have to wait for Trump to clean up the tariff stuff, the trade war stuff," and that that's a political act by Powell in retaliation for Trump saying he wanted to fire him. Is that what you're insinuating?
- CPChamath Palihapitiya
No, no, no. That's not what I'm insinuating.
- JCJason Calacanis
Okay.
- CPChamath Palihapitiya
What I am saying very directly is that the Fed is acting in, in a matter that is as much politically motivated as financially metric motivated because the financial metrics s- some of the most critical leading indicators, particularly around liquidity and the credit health of the American consumer, are blinking yellow. So right now, they are choosing to ignore these historically useful leading indicators.
- JCJason Calacanis
Got it.
- CPChamath Palihapitiya
And the only reason that I can come up with to ignore it are political reasons.
- JCJason Calacanis
So, Freyberg, do you think there's a political beef going on here between the two parties and what do you think about subprime, uh, and maybe this being a lead indicator that maybe it's time for a cut, maybe we're gonna see people miss mortgage payments and car loans, et cetera?
- DSDavid Sacks
I was just looking at the mortgage delinquency rates. They're pretty, uh, flat right now and that's, I think, because so many people did refinance when rates were low and there's a, a tremendous amount of mortgage balance with a, with a low rate outstanding. But remember, I think the Fed has a whole bunch of data that they're still gonna need to wait on. The CPI data for March was 2.4%. Their target is 2%. The next CPI report comes out, I think, next Tuesday, and so that's gonna be an important indicator. But I do think one other data point that is now going to be part of the calculus is, what do these trade deals look like? So this morning it was announced that there's a trade deal with the UK, and in that trade deal, there are lots of provisions that relate to parity and what is expected to provide better market access for American businesses into the UK. But there's also a really important piece of data there, which is that there is a 10% tariff rate for imports from the UK into the US. So this is the first time we're seeing a trade deal that actually gets announced and finalized through this whole tariff trade negotiation process that's been underway now for several weeks with all the hoopla and all the drama attached to it. And what we're seeing is that for one of our friendliest allies, for one of our best trade partners, we are keeping in place a 10% tariff rate. So if that holds with other trade deals and that becomes kind of a standard across the board as they get more of these trade deals done, perhaps with countries that are less friendly, with more onerous, with less regulatory parity in the trade relationship between the US and that country, maybe there's higher tariff rates. What that means ultimately is that there is now maybe a pretty sizable long-term revenue stream for the federal government that didn't exist before, which means that there's room to cut taxes, which means that this is all going to be part of the calculus of the Fed's decision on whether or not and why they would need to cut rates because this is gonna drive inflation, it's gonna drive GDP growth, it's gonna drive employment. And so I think that there is a pretty dynamic situation at play right now. It's not just that there's a static tax revenue base and a static federal spending model and then CPI and employment data that is gonna follow them.
- CPChamath Palihapitiya
You think Powell thinks that this Trump thing is gonna work so he's holding bullets in the chamber because he's worried about inflation?
- DSDavid Sacks
I think they're gonna wait for data.
- JCJason Calacanis
I would agree with that.
- PLPhilippe Laffont
Yeah. Dave, in fact, uh, a couple things I was wondering your opinion on is, one, I was with this retailer, gigantic retailer in the US, and there's this sort of false narrative that when you have tariffs, like 100% of tariffs are gonna get passed through in pricing and therefore tariff is like a tax, right? That retailer told us that they think only about 50% of the tariff gets passed in pricing, so I, I sort of agree with you. There is going to be a net-net positive and that retailers have way to, uh, work things around and stuff like that. I would also say today, post this announcement, the market's very strong. And initially I was a little bit surprised because, um, we're taxing 10%, not only the most, uh, friendly country, but one where we actually have a surplus. So I was like, "Sh- if it's 10%-"
- DSDavid Sacks
How crazy is that?
- PLPhilippe Laffont
"... when we have a surplus, what is it when we have a deficit?"
- CPChamath Palihapitiya
Yeah.
- PLPhilippe Laffont
But on the other hand, the market is speaking as we speak, and I also think that, uh, there were a lot of announcements that seemed to make it like, "Hey, we're gonna make a deal with China. We want China to do well, but we need to do well too." It seems to me that at some point maybe there'll be a bit more of a win-win versus such a acrimonious, and maybe that's why the market's reacting a little bit more positively.
- CPChamath Palihapitiya
By the way, that trade deal, we also eliminated the 2%...... surtax on big tech companies, and then Howard just said today that they're gonna announce a $10 billion order from Boeing on top of that as well.
- 32:47 – 56:48
Google drops after Apple sees fall in search queries on Safari
- JCJason Calacanis
data came out because the Justice Department, as everybody probably knows, is doing this antitrust lawsuit with Google. And the key part of that lawsuit is Google paying Apple 20 billion a year to be the default search engine on iPhones. Obviously, we all know iPhones have elite customers. Those are very, uh, precious searches from people with a lot of money because iPhones are expensive. Anyway, Eddy Cue, who's been with Apple for 35 years, he said, quote, "For the first time ever last month, our search volume actually went down." Quote, "That has never happened in 20 years. If you ask what's happening, it's because people are using ChatGPT, they're using Perplexity. I use it at times." He believes that AI search is gonna replace classic search like Google. Quote again, "There's enough money now, enough large players that I don't see how it doesn't happen." Bloomberg reported on Cue's comments at 11:00 AM. An hour later, Google was down $100 billion in market cap. It bounced back a little bit. Today, when we're taping this, uh, on Thursday, here's the statement from Google responding to Cue's comments. "We continue to see overall query growth in search that includes an increase in total queries coming from Apple's devices and platforms." Freeberg, is it time for Google to panic, Google shareholders to panic? We talked last week about making bold decisions about what is the default, and how might Google get out of this classic innovator's dilemma? What do you think?
- DSDavid Sacks
We keep coming back to is search dead conversation. Everyone knows that the search, click, repeat paradigm is over, and there's a new model in what I would zoom out a little bit and say is kind of the difference in human-computer interaction for knowledge, information, and services. It may not be that I type something into a search box. It may be that I'm having a, a chat. That chat may happen in a chat window. It may happen via voice. It may happen on a screen. It may happen in an AirPod. We don't yet know where the consumer is going to go with this, but there's a lot of paradigm shifts underway. I will say Google has models that are, if not the best, competitive. So the underlying models, the underlying technology exists. They are certainly aware of the shift in the paradigm. And so the transition for Google doesn't need to happen overnight to a chat interface that looks like ChatGPT. It may be a standalone app. They have a standalone app, as Chamath has pointed out in the past. They don't do a great job promoting it. They don't do a great job integrating the chat interface into search or replacing search with the chat interface because remember, search ad revenue today is $200 billion and the cost to serve an AI query is order of magnitude higher than the cost to serve a search query. So flipping the search interface over to a chat interface overnight doesn't make sense, and they don't need to. They have the users, they have the models, they already have the product, so it's gonna be a slow kind of process of finding the optimal course for them to make the transition would be my guess on what they're doing. It's a question of at what point do you change the default on Google? Do you make it a slow one box, which is that answer section at the top of the search page, and you slowly get people used to that, and you lead them over to the chat interface? Or do you do it all at once? Or do you tell people, "Hey, go use the app instead of the search box"? So there's a lot that I think they're gonna discover, and if anything, this is an organization that is used to doing testing and then making incremental changes and then making big changes once they're, you know, kind of tested and proven.
- JCJason Calacanis
Chamath-
- DSDavid Sacks
So I'm pretty positive on their ability to respond to the shift, if there is one underway.
- JCJason Calacanis
I guess two important data points, Chamath, that I'd like you to respond to. Search is only like 56% of Google's revenue right now. People forget they have Cloud, so they have diversified. It's not a one revenue stream company anymore. And then also these Google search results at the top of the page, they're dropping precipitously the number of clicks below it. So different studies, 15 to 35% of the clicks below the box are not get- you know, are dropping. So this is significant.... but it seems manageable. Where do you stand on it right now? Time to panic or, as Freeberg was saying before, hey, maybe it's a great opportunity for Google to add yet another product line, yet another revenue stream.
- CPChamath Palihapitiya
They definitely have the best models in many domains. I would say that the code gen models from Anthropic are really good, but in many other domains, including general information and chat, I think Gemini is exceptional. So what is the problem? The problem is that they were effectively at 99% share and now we were always just waiting for that shoe to drop, which is where they started to go from 99 to something less than 99. And the point is, now that it has happened, it is very easy for anybody to build a model that precisely calculates the economic value of every single basis point of share shift that happens, and what you saw was an initiation of that process this week. So what do you do? The problem is that this is not Google's problem. This is a consumer choice issue and they have chosen something different and whether we like it or not, and whether they like it or not, the reality is that ChatGPT is running away with it. And if you look at the growth and the share that OpenAI is seeing, it's quite an incredible thing. So what does one do? I think that instead of waiting for data, I think that you have to assume that you're going to go from 99% share to 75% in the next two years as an example, and you need to start asking yourself what will go wrong. And if you can ask yourself that question honestly, and red team that, then I think the conclusion you get to is you need to start very aggressively integrating Gemini as the front-facing window to Google Inc. But again, as I sort of said last week, that requires a combination of taste and courage. Otherwise, what will happen is if you're waiting for the data, you're just going to get caught off guard because Apple will do things and then make a press release months after the fact. OpenAI will announce a press release, Facebook will do something. And what that does is it destroys the morale of the company, of the brilliant product managers, of which there are many, and the brilliant engineers, of which there are many inside of Google. If you're sitting around waiting to react to some shit sandwich served up by your competitors, that is a terrible approach.
- JCJason Calacanis
Philippe, what are your thoughts here on Google? You obviously participate in public markets. Is it a buy right now? I mean, I don't want to give investment advice, but do you think the company has the talent, the temperament to make these hard decisions and, and to turn this around or avoid the iceberg? Uh, if the iceberg being ChatGPT and-
- CPChamath Palihapitiya
Yeah.
- JCJason Calacanis
... people getting answers instead of links?
- PLPhilippe Laffont
Well, I think you guys have summarized the situation pretty well. I would just a- add just a couple small things. One is the market cap of Google is like 1.8 trillion and that of ChatGPT is, let's say 300. So Google is worth six ChatGPT. And is that the correct ratio into the future or not? The second one is, I was around sadly in the times of the Yellow Pages and I remember when the Yellow Pages, the way you go somewhere to bounce and go somewhere else, and basically these yellow links got replaced by the blue link and the Yellow Page companies went away. Now part of the reason they went away is they were very levered. Google has no leverage, sits on a lot of cash, and imagine what someone like Elon would do if he had to re-engineer Google. I think they have, um, you know, uh, it's- it's a much larger company, let's say than Twitter. So like the part that I'm wondering about, I haven't made an opinion on Google is like, hey, is this the next IBM? You're gonna stick around for a really, really long time but you're just not going to be like a company growing as fast as you used to and maybe there'll be little growth and you just sort of struggle ahead? Or can they completely re-engineer their business? And they do have two great businesses, Waymo and YouTube, and really cloud and all the cloud apps. So they have three great businesses and then they have this one search business, like you said, maybe it's 60% of the revenue, it's probably 85% of the profits because it's just so profitable and-
- CPChamath Palihapitiya
No, I would say it's a 110% of the profits.
- PLPhilippe Laffont
110, right?
- CPChamath Palihapitiya
Yeah.
- PLPhilippe Laffont
So you're right, because some of these others lose money. That's actually a good point. So, um, if you put that together, it's just a classic innovator's dilemma and imagine that they create a Gemini app and we start downloading the Gemini app. I would love to be the fly on the wall between the head of the Gemini app and then the head of like the search box and they're both fighting because one guy is stealing the business from the other and stuff like that. Personally, me, I found that these stocks, they're like a little bit too complicated for me and I think that sometimes in life you just got to say, "Hey, this is just tricky." There's like a lot of forces at work. But the one thing stepping out that I would think about is there was this concept of the Max Seven, and for the last two or three years everybody is like, "Oh you just need to own the Max Seven. Uh, it's really easy, I can do it on my own." And I think what AI is showing is that at a time of great change and like you guys said on the show, a couple of you, AI is sort of precipitating so many fast changes. To me it's a little bit like the end of the Max Seven. And what we should do is almost think like, hey, what is the next... Remember when the Max Seven used to be Fang and then Fang++ and nobody talks about Fang anymore?Uh, and now, I don't know, like, with the Max 7, the Sexy 6, uh, the Fabulous 5, uh, there's gonna be a new index that comes up. And I think we should think about, like, who's gonna be on the new index, which private companies, which public companies. And I think Google for sure has some struggles, but it's got a lot of advantages and a lot of cash-
- CPChamath Palihapitiya
You know, to your-
- PLPhilippe Laffont
... so it's going to be-
- CPChamath Palihapitiya
... to your, to your point though, to just to add one thing, which I, I love this framing. Here's another data point. If you were going to make the case that we need to go into harvest mode, right? And say, "We don't know the rate of change of the search business, so let's just have as much money on hand so that we have as much optionality." That's a very reasonable and fair strategy. You would probably not spend $75 billion a year of CapEx on making these models. The opposite is also true. If you're going to drain your cash at a rate of change that's greater than it needs to be, to the tune of an extra $75 billion a year, there's probably a case to be made, "Well, if we've made the cake, let's sell the cake." You know, "We've made the dog food, let's have the dogs eat the dog food." It's the in-the-middle strategy of both spending the money, but then stage-gating the product that is the worst outcome, in my opinion.
- PLPhilippe Laffont
I think they're right to invest. I find these companies that decide to harvest, you know, the cash cow and, uh, buy all their shares back, you know, it never really works. I think that the only chance that Google has to create an amazing company is you gotta take some risks. At the end of the day, the man in the arena, he who takes the risk usually gets the spoil, and they've got to invest in the future. It'll be interesting to see if their shareholders, you know, agree with that or not.
- CPChamath Palihapitiya
What do you do, J-Kahl? What do you think?
- JCJason Calacanis
Great question. You guys teed it up perfectly. I think they're going to cut a large number of employees, get people to return back to office and take this a little more seriously on a corporate level, 'cause you got that sense from Sergey who's in the office every day. And I use Gemini, and I have a sort of AI-first company where everybody's required to do their work on AI, two or three different, Claude, Gemini, Grok, et cetera. And what I've been noticing inside these products is they're very deeply integrated. I got surprised just the other day, I was asking it about a travel question and it referenced my G Calendar. I didn't know they could do that. Then, obviously you can use ch- uh, you can use Gemini inside of Google Docs now. They have four or five products right now that are one or two billion users per month. Obviously Chrome might get spun out, but you have YouTube, you have Google Docs, you have Android. They have such a data advantage and such a deep integration into people's lives because they use three or four services. I use YouTube TV, I use YouTube and have a subscription to that, YouTube Music. They have such integration. I think Google's gonna figure this out, and if they cut their team size down, the earnings are gonna go massively, uh, up. And they're spending $75 billion on infrastructure. I think it's gonna be...
- CPChamath Palihapitiya
Would you integrate these models more aggressively into, in front of the consumer or would you... is this the rate that makes the most sense in your mind?
- JCJason Calacanis
I think you mentioned, like, maybe go all in on certain other services. I think YouTube search is the place to go all in. Right now, when you do a YouTube search, it just gives you 10 links, right? It just gives you that rolling thing. You should be able to ask a question to YouTube and you should be able to ask questions to your calendar. You should be able to say, "Who have I met with over the last 10 years who I'm no longer in touch with, and what are they up to?" And it should do a Gemini search inside of Google Calendar. It's very light right now. And then if you did that on YouTube, "Hey, tell me everybody's opinion on CO2 and their strategy over the years and how it's changed," and you ask that on YouTube, with all their transcripts, they could make a super cut of all of that. This would train people, you know, at the point of pain in a very deep way without sacrificing Google search queries, you know, too aggressively. So there, there is... YouTube's such a secret weapon, you know?
- CPChamath Palihapitiya
I hear you. I would just remind the Google management team that very, very, very smart people like Philippe and others who control trillions of dollars-
- PLPhilippe Laffont
I wish.
- CPChamath Palihapitiya
... well, collectively, are not making the decisions about today, but are taking the trail of breadcrumbs of what they see today and guesstimating what 18 to 24 months in the future looks like. And all I'm encouraging them to do is, I think that that data point from Eddie is the beginning of a stream of such data points. And I just encourage them to inoculate them from the morale hit that will come if they don't have an explicit aggressive strategy. And instead, if they become reactive to external data, it's really demoralizing.
- NANarrator
Hmm.
- DSDavid Sacks
But what if, what if they're actually tracking the data and they're seeing their own sense of search queries driving clicks and then driving positive response to the AI-driven one box results that they show at the top?
- CPChamath Palihapitiya
Oh, I think that's exactly what they're seeing. But that does not-
- DSDavid Sacks
And they're just making the, the, they're making the requisite kind of-
- CPChamath Palihapitiya
No, no, no, that's, that-
- 56:48 – 1:07:00
Creating a new Mag 7
- JCJason Calacanis
your top 10 companies, why you love them.
- DSDavid Sacks
Oh, no, what's the number? What's it... Not top 10. What's the number, Philippe? What are the companies that matter the most?
- PLPhilippe Laffont
Yeah. So I have a li- I've thought about that a lot. I'm not sure I've, you know, great answers, but the first one is, I keep defaulting to the number 25. I can't explain you why, but there are not 100 companies. But if you think there's only five, and all these money managers, you know, they have, like, five stocks that represent 80%, I feel the level of risk that you're taking is too high, and that one has to be... You know, I started with the hum- with the public markets. I would say most French people are not known to be particularly humble, but at least-
- JCJason Calacanis
(laughs)
- PLPhilippe Laffont
... if you've been in the stock market as a French guy, you've been beaten up so bad.
- JCJason Calacanis
(laughs)
- PLPhilippe Laffont
I started January 1st, 2000, so imagine what my first three years looked at. I got reduced to, you know, ashes, just beaten up by the market. The, you know, we, we did reasonably well, uh, uh, because, uh, thank God, being a hedge fund, you know, you have different tools that you can do. And so I think you need to have a certain number of stocks. You need to know that some stuffs you get lucky, some stuffs you get unlucky, and some stuffs you get right, and some stuffs you get wrong. And then I think that there's a second phenomenon once you agree to the 25. You say, "Wait a minute, why are there no IPOs? Why are these private companies, amazing private companies, some of the best in the world, SpaceX, Stripe-
- JCJason Calacanis
Answer that question. Why?
- PLPhilippe Laffont
... OpenAI.
- JCJason Calacanis
Why, in your mind?
- PLPhilippe Laffont
I think that the cost of being public is, uh, too difficult, one.
- JCJason Calacanis
What cost?
- PLPhilippe Laffont
I think-
- JCJason Calacanis
The, like, actual-
- PLPhilippe Laffont
The re-
- JCJason Calacanis
... legal fees?
- PLPhilippe Laffont
... the, the reputation, the regulatory.
- JCJason Calacanis
Uh.
- PLPhilippe Laffont
Like, you get busted, like, left and right by, uh, agencies. And, like, when's the last time that a public company... I think that, you know, during the last administration, something like someone told me, I don't know if it's true or not, but I love the f- I love the quote so much that I'm using it without checking if it's 100% true or not. Something like 35% of the S&P had an issue with a government agency in the last few years, right? When's the last time that you guys remember a private company that has an issue with a government agency? Like, I'm sure it happens, but, like, off the top of my mind, it seems like a fraction of that, right? And then I also think that the private markets have become so sophisticated that, in essence, like, our private markets, public markets that just trade three times a year. Like, uh, you know, these companies, they do these, uh, uh, rounds, you know, once or twice. They're becoming pretty sophisticated. They match buyers and sellers, and I think that's okay. And then the last piece, which I think that's a very bad piece for the four of us and all of us on this call and many of your, uh, listeners, is that there's such a view that, like, large companies are bad, and we gotta bust them, and we're not gonna let them do any M&A. And as a result of that, small companies no longer get bought by big ones. And for me, it's a disaster because if I fund small companies, but now you take away one of the best ways that I have to monetize my investment, why should I invest in risky private companies? I can just buy the public one. And so I'm really hoping that as part of this de- deregulatory move, and you guys and Sacks will have way more influence than we. But to convince people that, in my mind, the best way to create competition is to allow these large companies to fight against each other, and the battle between OpenAI and Google is the best way to do that, but not by telling Google not to buy something or-
- JCJason Calacanis
Agreed.
- PLPhilippe Laffont
... telling OpenAI not to buy something.
- JCJason Calacanis
Let's double-click on that, Philippe. I think it's a super important point, the singles, the doubles in the industry. I've been harping about this on this program as well, so we're simpatico. What about a proposal where maybe the non-MAG 7, let's, let's pick a number, under a trillion market cap, under 750 billion, we let those companies buy and sell each other at a very vibrant pace? We saw ChatGPT buy a $3 billion company, I think, this past week in the, um, kind of, uh, coding space. Like I mentioned earlier in the program, DoorDash bought two companies. What if we said, "Hey, okay, we understand Google getting bigger, Apple getting bigger, Microsoft getting bigger-"
- DSDavid Sacks
Why? What's the rationale for that?
- JCJason Calacanis
"... that could be anti-competitive."
- DSDavid Sacks
How does- how does- how does-
- JCJason Calacanis
My rationale would be-
- DSDavid Sacks
But how does size make a difference to whether or not someone should buy a company?
- JCJason Calacanis
Very simple, because they have such a market dominant position-
- DSDavid Sacks
That's different in size.
- JCJason Calacanis
Let me just- hold on, let me finish my sentence. They have such a market dominant position when a company like, uh, Apple has, you know, half of the mobile phones, or Google has Chrome, Android, plus all these things, that they could shove that product for free down the throats of users, price dump it, which is illegal, and create less competition in the future. But if you said DoorDash and Lyft or, you know, Coinbase plus a stablecoin company, this would build the mag seven to the mag 70, and then you would have many more larger companies. What do- what do you think of this, Philippe?
- 1:07:00 – 1:17:53
Private markets: Is traditional VC dead? Philippe details Coatue's new fund structure and what makes a great investor
- JCJason Calacanis
in VC, yeah?
- CPChamath Palihapitiya
I mean, it's just so hard. It's hard to make money. And if you view making money as some derogatory thing, and you put a bunch of impediments in the way, the downstream impact is interesting ways to make money will be out of fashion and simple ways of making money will be the only things that people do. The problem is that society doesn't move forward.... if all you do are simple things. You need people who are willing to put risk capital to buy these lottery tickets, and if you marginalize the upside, you're just gonna have exactly that, a stagnant society of marginal things that doesn't move along. And unless people fundamentally embrace that idea, we're gonna lose.
- JCJason Calacanis
We being America.
- DSDavid Sacks
Yeah.
- CPChamath Palihapitiya
Yeah, if you look, for example, in the last five-year period, in China or Canada, where both of them, two totally different political regimes but they a- both had the same thing happened, which is the, the, the amount of investment capital that went into both of those countries fell off of a cliff for two totally separate reasons. What is interesting is going to be what is the downstream impact of that in 10 and 15 and 20 years? And you can look historically back, and we know what this looks like, which is countries stagnate in the absence of investment in risk capital. So you will become a marginalized also-ran country. And, you know, not to slag Europe, but part of what Europe got wrong was that compact didn't exist. Too many administrators, too many hall monitors, not enough ability to put risk capital to work and actually get gigantic outcomes. So the most important thing we can do on that dimension is to figure out how to have less regulation, have these companies fight it out, and create the incentives for, for these smaller businesses to be bought and/or to go public.
- JCJason Calacanis
So let's, uh, back this up with some data here. Nick, pull up the chart on exits. This is an important one for people to see. We've had, since the wrath of Luna Kong, last four years under Biden, you know, you had this 2021 spike of IPOs, peak ZIRP, a lot of inventory, a lot of risk capital had been put to work for 10 years, and after that 2021 spike, things have been flat-lined and companies are preferring to stay private, and now we have venture capital constricting in terms of new funds being done and people are making larger funds to do later and later stage investments and...
- CPChamath Palihapitiya
Jason-
- JCJason Calacanis
Yeah.
- CPChamath Palihapitiya
... it's constricting at the absolute worst time because what Philippe said before is we're in the midst, in the early phases of an entirely new economy that's going absolutely parabolic, but the people that are supposed to accelerate that innovation and make these companies come to life are gonna run out of gas, because if they don't return money to their limited partners, where are they gonna get the incremental capital from?
- JCJason Calacanis
I, yeah, it's th- uh, retail investors and sovereign wealth funds outside the US seem to be-
- DSDavid Sacks
But doesn't, doesn't-
- JCJason Calacanis
... the answer to that question.
- DSDavid Sacks
... this lead to a normalized market, Philippe and Chamath? So ultimately, shouldn't the exit volume define the amount of capital that LPs should invest in this asset class to get an out- a return that compensates them for the illiquidity relative to public markets with the same kind of risk levels? At the end of the day, it is what it is, and you're gonna see a reduction in venture dollars, and that's just the market normalizing. The eco- the economy-
- JCJason Calacanis
The way-
- DSDavid Sacks
... only grows and only innovates at a certain pace is, maybe is what the data shows...
- CPChamath Palihapitiya
I think the way that I think about this as an LP, and maybe Philippe can talk about this as a GP, but as an LP, when I think about putting capital into different funds, I have a base return in my mind which is, I want, after taxes, net of everything, to generate about 10% a year. That's where my risk of ruin is basically zero, it compounds to infinity. I like the profile of my return on my assets. How do I get to 10%? Well, sometimes when I'm holding short term stuff, I'm only generating four or 5% in paper, so then I have to go out on the risk curve. So I talk to a hedge fund. They're gonna give me 12 or 13% net maybe in some cases. I try to understand their risk, but I can only get so much working, so then I have to go further out on the risk curve. Then I talk to some private credit and private equity guys who tell me, "Yes, I can give you mid-teens returns." Then I do the analysis on that and I think, "Okay, I'll give you some money," but they are gonna lock me up for five or six years. It's still not enough to get to a blended rate of return of 10%. So then I go yet further out on the risk curve. I call my friends at Sequoia and all these other places, and when you talk to the venture investors, the problem is you are so illiquid for so long that the rates of return need to be in the mid to high 20s net to me. But when you look at the data of what's possible, they actually look like a three and four year hedge fund. And part of the reason is because of this strangulation of illiquidity that's caused artificially by administrations, by regulations, and by agencies like the FTC. The question is, if they didn't exist or if the regulations were a lot smaller, what would the upside return be? It's probably 500 to 1,000 basis points higher.
- JCJason Calacanis
Much higher. 100%, yeah.
- CPChamath Palihapitiya
But I think at current course and speed, with the lack of IPOs and with the lack of M&A, you can't justify that asset class on its own, in my opinion, unless you think about it as, like, something that you're doing almost philanthropically.
- DSDavid Sacks
Unless capital comes out and then prices come down and then re- mult- return multiples go up.
- JCJason Calacanis
Let me put some numbers on this. Here is the second chart, annual IPOs, and just give you some, you know, broad strokes here of how amazing 2021 was for a lot of firms. Rivian went out at 66 billion, Affirm at 24 billions, Qualtrics, 25 billion, Robinhood, which I was involved in, one of the first investors, 30 billion, Duolingo, five billion, Toast, et cetera. Roblox, 42 billion, Squarespace. And then, you had all this M&A. Square up- uh, bought Afterpay for 29 billion, Zoom acquired Five9 for 15 billion, Mailchimp, remember that one, 12 billion, Microsoft and Nuance, the, um, spoken, uh, the, um, uh, language-
- DSDavid Sacks
Jason, do you know, do you know what-
- JCJason Calacanis
... models, 20 billion. Do you know what's-
- DSDavid Sacks
It was unbelievable.
- CPChamath Palihapitiya
... the distribution?
- DSDavid Sacks
Wow.
- CPChamath Palihapitiya
Do you know what the distribution of these IPOs were by method?... SPAC versus direct listing versus traditional IPO?
- JCJason Calacanis
I don't have that here. We'd have to do it not just on the names, but also on the amount, uh, distributed. Yeah, that's a good question.
- PLPhilippe Laffont
But you know what-
- CPChamath Palihapitiya
Yeah, I'll look into it.
- PLPhilippe Laffont
... I look at that data?
Episode duration: 1:36:08
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