All-In PodcastTrump Rally or Bessent Put? Elon Back at Tesla, Google's Gemini Problem, China's Thorium Discovery
EVERY SPOKEN WORD
150 min read · 30,055 words- 0:00 – 2:04
The Besties intro Andrew Ross Sorkin
- DSDavid Sacks
Okay. Welcome back to the All-In podcast. J-CAL is not here this week. He is off in Detroit at the Knicks game. Congrats to the Knicks. Here's a photo of our boy J-CAL hanging out with... Who's that? Ben Stiller?
- JCJason Calacanis
Man, what happened to Ben Stiller?
- ASAndrew Ross Sorkin
That looks like, uh, Chalamet right next to him.
- CPChamath Palihapitiya
Timothée Chalamet.
- DFDavid Friedberg
That's Chalamet.
- ASAndrew Ross Sorkin
Is that Chalamet? I think so.
- DSDavid Sacks
Chalamet. Chalamet. Chalamet.
- DFDavid Friedberg
Chalamet. Chalamet.
- JCJason Calacanis
You know, Ben Stiller was once referred to as the Jewish Tom Cruise.
- DSDavid Sacks
(laughs)
- DFDavid Friedberg
(laughs)
- JCJason Calacanis
But he, he has not held up like Tom Cruise, I gotta say that.
- DSDavid Sacks
He should have joined the Church of Scientology.
- JCJason Calacanis
Come on, man. Keep, keep it up. You gotta-
- DSDavid Sacks
Yeah.
- JCJason Calacanis
... represent for us a little better.
- DFDavid Friedberg
(laughs)
- JCJason Calacanis
(laughs)
- NANarrator
I'm going all in. Let your winners ride.
- DSDavid Sacks
Rain Man, David Sacks.
- NANarrator
I'm going all in.
- JCJason Calacanis
And I said we open source it to the fans and they've just gone crazy with it.
- DSDavid Sacks
WSI.
- JCJason Calacanis
Queen of quinoa.
- NANarrator
I'm going all in.
- DSDavid Sacks
Sitting in this week is our boy, Andrew Ross Sorkin, journalist, author extraordinaire. Andrew, welcome to the show.
- ASAndrew Ross Sorkin
Longtime listener, first-time caller. Thank you for having me.
- DSDavid Sacks
Andrew, I'm gonna do just a couple of quick plugs and I'm gonna give it over to the pro to do his work, take us through the docket today. I think this is gonna be really fun.
- DFDavid Friedberg
The world's greatest moderator.
- DSDavid Sacks
The world's greatest moderator is here today.
- 2:04 – 18:04
Market bump: Trump rally or a Bessent put?
- DSDavid Sacks
- ASAndrew Ross Sorkin
Okay, boys, here we go.
- DSDavid Sacks
Yeah. All right.
- ASAndrew Ross Sorkin
I, I'm curious what... I wanna get your take on all this stuff because I'm fascinated by-
- DFDavid Friedberg
Yeah.
- ASAndrew Ross Sorkin
... by what's going on in these markets this week. Let's start on the markets because we got a rally. The question I think behind the rally is, is this a Besant put? Is this a Jay Powell's in the job, he's got a put on this thing? I don't know what you think is going on. We're, uh, up three to 7%, uh, for the week. There's been a she loves me, she loves me not situation with what Trump's been saying about China and whether there's a deal or not a deal. China's saying nobody's talking. He says everybody's talking. What do you guys think is really happening? And then we got to get into Alphabet, we got Tesla, got a lot of earnings here that's also moving this around.
- DFDavid Friedberg
I think that the most important piece of financial logic that we have to break is this idea that there is always a put. A put is this weird thing, just for the folks that don't understand it, is that when the market goes down, somebody can belly ache and cry (laughs) and somebody in the government will say, "Okay, we'll buy your shitty securities at your bad prices." So that's what the put is. So typically, what's happened is, you can cry to the White House and they'll call the Federal Reserve and they will buy it. That's the Fed put. And in some very rare cases when things get really calamitous, like in 2008, Treasury will set up a program and start to buy things. That's what was called TARP back in the GFC. So the question is, is there a put here? I mean, my honest answer is no, and the simple reason is, if you look at where we are, the stock market's back to where we were in like May or August of last year. And if you had said that we would have upended 50 years of economic policy and the markets would only be off 500 or 600 basis points, I would have been shocked. So there's no reason for a put. Maybe the more interesting question is, w- who's asking for the put? The ones that have suffered from the volatility and a lot of those are the active market traders. So if you trace the feedback, who has been the most negative? Ackman's been negative. Ken Griffin recently turned negative. And that probably comes from the fact that they're not monetizing the vol the way that they used to monetize the vol. More than the market has speared down to such a degree that the world is coming to an end because it isn't.
- ASAndrew Ross Sorkin
Okay. Stacks.
- JCJason Calacanis
Can I build on that? So-
- ASAndrew Ross Sorkin
Please.
- JCJason Calacanis
... there was a tweet two weeks ago when all this started by Nick Carter that I retweeted because I thought it was really interesting, which was, if you think a market sell-off delegitimizes Trump's presidency, you're going to give him unconditional credit when it rallies, right? Because those are the rules now. And that's exactly what's happened is that the market has rallied. Like you said, it's up 7% this week, but the media doesn't want to give Trump any credit for it. So it's kind of created this narrative of a Besant put. In other words, Besant is entirely responsible for it. Look, Scott is a very smart man. He understands markets. He understands the bond markets. And he is a sh- reassuring voice to those markets and I think he's doing a great job. But I think part of what's going on with this Besant put narrative is that no one ever wants to give Trump or his administration as a whole credit. So what they do on any particular week is valorize a particular member of the administration that they can then say, "Well, this is the person who's really responsible for this, not Trump," because they don't want to give Trump that credit. Next week, they'll be tearing Scott down and there'll be some other member of the administration they'll be trying to valorize to basically prevent the administration as a whole from getting credit for doing something good. So again, I think Scott's doing a great job. I think he's doing a great job making these deals and he's saying a lot of correct and reassuring things to the markets. But I think if the media is going to tear Trump down every time the market goes down, you have to give him credit when the market goes back up. And I think there's just a general reluctance to do that.
- ASAndrew Ross Sorkin
Where do you land, Dave?
- DSDavid Sacks
I think that there is, is he crazy enough to let it all fall apart signal that kind of got wiped out this week. That's really what it was. It was the fact that everyone realized that Besant, Trump are not gonna let-
- DFDavid Friedberg
... trade come to a standstill. They're not gonna let the whole global economy grind to a halt, that they're gonna have to do something. And I think that the read is that they're making the indications that they're gonna get deals done, which means that their intention is to make sure that the market doesn't tank, that the-
- JCJason Calacanis
But, uh, Dave, Dave-
- DFDavid Friedberg
... and more importantly that the economy doesn't tank.
- JCJason Calacanis
... three weeks ago, uh, uh, roughly-
- DFDavid Friedberg
Yeah.
- JCJason Calacanis
... three weeks when we started talking about this, I think I made the point, Chamath made the point that part of the art of the deal here, so to speak, is an opening salvo-
- DFDavid Friedberg
Right.
- JCJason Calacanis
... which is bold and some people would say maybe it's too extreme, but it's, it's basically an opening bid to shift the conversation completely.
- DFDavid Friedberg
Yeah.
- JCJason Calacanis
And that, that would create tremendous leverage to get deals done. And isn't that exactly what's happened? Isn't that the way it's played out?
- DFDavid Friedberg
Yeah. I remember there was a guy from Harvard who used to teach a class on negotiation. He put out all these videos. And what he always said is, like, "Set your anchor point as far away as you possibly can if you wanna get maximal leverage in a negotiation." I don't know what's farther away than 145% tariff. So it's clearly, you know, a point for, as Sachs said, for negotiating to a deal that seems like one that would've been impossible or implausible if you started from a 0% tariff beginning point in negotiating and there was some percentage of the market or some probability that people were assigning to the fact that this administration could be crazy enough to tank the global economy by leaving tariffs really high and letting this kind of run. And I think that that's kind of being taken out of the market now.
- ASAndrew Ross Sorkin
Right. But now that it's-
- DFDavid Friedberg
And that's why.
- ASAndrew Ross Sorkin
... out of the market, that means that the leverage, uh, th- there's less leverage. There's less-
- DFDavid Friedberg
Yeah.
- ASAndrew Ross Sorkin
... leverage in the conversation. And if the goal is to-
- DFDavid Friedberg
No, that's not true. That you're saying a critical thing, and that is not true.
- 18:04 – 38:18
Are tariffs damaging the American "brand"? Apple's investment in India
- ASAndrew Ross Sorkin
Chamath raised, uh, the issue of Ken Griffin, who made some comments this week about the brand that is America, and effectively said there was sort of a Sell America situation going on. And my question about the brand that is America is whether you think after these tariff, whatever deals get done...
- DFDavid Friedberg
... that you can put the toothpaste back in the tube, that you can get the trust back, that there's not gonna still be some kinda toothpaste on the rim of the tube that you, that you can't stick back. It gets all nasty-
- JCJason Calacanis
Right.
- DFDavid Friedberg
... and crusty, right? That, to me, is a fundamental question. I wanna read to you what Ken had to say. I think Ken was probably a, a bit of a reluctant, uh, Trumper the second term, but nonetheless, uh, he's been outspoken on a couple of things. He says, "If you think of your behavior as a consumer, how many times do you buy a product with a brand on it because you trust that brand? In the financial markets, no brand compares to the brand of US Treasuries, the strength of the US dollar, the strength- the creditworthiness of US Treasuries. No brand comes close. We put that brand at risk." What say you?
- JCJason Calacanis
Well-
- DFDavid Friedberg
Who won?
- JCJason Calacanis
Look, I, I think there's a fundamental question here about whether you think there's a problem with the status quo or not. Ken Griffin is one of the biggest winners in our economy under the current status quo and I don't think he sees a big problem that needs to get fixed. But I think, like we just talked about, I think there are some big problems. I mean, Friedberg just laid out the way in which trade with China is non-reciprocal, like our companies cannot participate in their markets the same way that they can participate in ours. But it's worse than that. Like I talked about, these WTO rules gave China the opportunity to strategically annihilate our core industries that are critical in the supply chain. And there's one other piece of this, which I think is really important, which is the race to the bottom. I mean, if you're an American company and you are still producing in America and your competitor is able to go to China and undercut you, obviously you have to do the same thing, because, I mean, those are just the rules of the game. And so we've had this race to the bottom where if you're an American company operating under these rules, you have no choice- It's worse. ... but to export your manufacturing, your supply chains. So, you know, we've had these rules that, again, under the status quo, I, I would say they're not free trade, it's unfair trade, it has all these perverse consequences, is bad for middle America and this manufacturing belt of the country, and it's created massive strategic dependencies on an American adversary.
- DFDavid Friedberg
I'll say- I'll say three things. Lemme just say three things quickly. Number one, I think Ken is massively long Pax America. I mean, he's built a $42 billion empire, he owns a billion dollars of American real estate. So, I don't see him investing in Ecuador anytime soon, relative to the opportunity set in the United States. And I think that's what speaks to the second point, which is investing is always a relative exercise. On Wednesday, I had a meeting with a Brazilian multi-deca billionaire, very, very, very successful guy, and we were talking about the tariffs and the investing posture, and he's like, "There's still no other country other than America that I can really put my money to work and that makes any sense." And I kind of pushed him, "What about China? What about India?" And in all of these markets, there are, as Friedberg mentioned, ??? in China, there's different problems in India, there's different problems in these other markets. Europe is roughly uninvestable. So, the more generalized answer is, is on a relative basis, the United States is still the shining beacon on a hill. There is no investable alternative for scaled capital except the US. The, the last thing I wanna say is, just to build on what Zach said, Andrew, the, the thing that we keep forgetting is when economic leverage spills over to political leverage, what happens to the United States. And specifically what happened this week was on the rare earth side, not only did China constrain rare earths into the supply chain, what they then did was tell South Korea what they could do with the rare earths that they gave them. And now all of a sudden you have this geopolitical spillover where it's not just a country constraining supply, it's a country now dictating-
- JCJason Calacanis
Right.
- DFDavid Friedberg
... the political and trade practices of another country. So let me ask you a question. How do you think America is in the best position to make its own decisions? For example, let's say that there's a China-Taiwan situation and we need to decide one way or the other, and I'm not saying which way is right or wrong, but for the purposes of this, the thought exercise is China and Taiwan get into some spat, we have to take a side, and China says, "We're gonna constrain all the pharmaceutical APIs into the supply chain, we're gonna constrain all the battery cathode into the supply chain, and we're gonna constrain all of the rare earths to anyone who doesn't take our side." Now, how is America in a position to actually decide for ourselves what is in our best interest if that's looming over us? And I think that this is the big problem that this has exposed. This rush to globalism, the race to the bottom, has actually created a level of dependence that doesn't allow you to do what's in your best interest. So real quick, I agree with you in so many ways. I think the question that I have is not in what the ultimate goal is, it's how you get there, and is there a way to do this with a, a velvet glove, if you will. And maybe there's no way to do it in a- in a- in a better, in a better way.
- JCJason Calacanis
But what is to say... No, but what is to say this isn't the velvet glove?
- DFDavid Friedberg
But I'll tell you, it should-
- JCJason Calacanis
This could be... It's that the stock market is down 6%. Like it's not down 60%. But this- this is what I think is so interesting, Andrew, is, is the way that Trump has already shifted the conversation. Because the truth of the matter is that before Liberation Day on April 2nd, just three weeks ago, no one was talking about the unfair trade practices, no one was talking about the dependencies on rare earths, no one was talking about the race to the bottom, and Trump has shifted the conversation. 100%. When Jared Kushner was on the show, he talked about how the Trumpian approach is controversy elevates message, and we said at the beginning that by having this Liberation Day, by planting this flag in the ground, Trump was creating leverage to then have these negotiations, and he completely shifted the conversation. Now where I will agree with you is that the administration has to stick the landing here, right?... Bessen, and it's not just Bessen, also Lutnick, these are all smart, talented people. They do have to then negotiate these deals and we have to basically stick the landing. But I think the fact that you're saying that you don't disagree with where Trump is trying to get to, but it's mostly just tactical, is a huge shift in the conversation.
- ASAndrew Ross Sorkin
You know, because I think it should. It may, it may raise the issue the way you're describing, but at some level it's also undermining a semblance of trust. I just wanna, uh, relay two stories. One is, you know, I've been talking to a whole number of, of multinational CEOs who do business in China, I'm talking about the McDonald's of the world, the Starbucks of the world, the Nikes of the world, and so many of them now talk about not just how consumers, uh, aren't going necessarily in their stores the way they used to, but really about the American dream, the American brand. And they talk about the idea that, you know, if you were a young kid and you got a job at Starbucks, you used to go home to your family in China and say, a- and your family would go, "Wow, that's amazing." They're not doing that right now. Uh, so many of these companies are even trying to reestablish how they market and advertise their companies almost as if they're a local business, not an American brand. And I don't know what that ultimately means, but I also was talking to this, uh, a Chinese CEO who made a, I thought it just a fascinating comment to me, which was, you know, "We're cool with the US being the leader. We were always cool with that. We're okay with that. We don't love it, but we're okay with it. It gets a lot more complicated when you have to be the winner." And I think that's an interesting sort of construct, this idea that we're first and we're, we have to win. And I know we're telling, it's, you know, Trump is telling, you know, citizens in the US that we're gonna win, but he's also telling the world that, and I think that's a-
- DFDavid Friedberg
I think that Chinese CEO should have written that memo to Xi Jinping and see if he agreed because I think he would say, "No, we are the winner." Look, you gotta remember, in 2003, three years after China was admitted to the WTO, Hu Jintao became premier. He had this incredible speech, and in it what he said is, "There are these 10 boxes, and I've written inside these 10 boxes all the critical industries that in 25 to 30 years from now will dictate supremacy in the world. We are going to create national champions," he said, "in those 10 areas." And what's interesting about Xi, despite the ideological differences to Hu, he followed through with it. This is a group of people, so we can say what the CEOs are gonna say, but at the end of the day, the CEO of China Inc is one man, and he and his C-suite have been pretty resolute, which is even when he inherited a political ideology that he didn't completely agree with, he followed through with it, which is these guys in these 10 areas now own the critical inputs that make the world go around. And I think it's pretty reasonable to do a risk assessment to say, well, how do you stand up to that and actually have your own point of view if you don't have your own method of having access to those things? I think that is the most important question. Everything else about, you know, brand and all of this other stuff I think comes after this question. This is the critical question because if they can tell you what to think, that is not winning.
- JCJason Calacanis
Yeah, I would just add to that-
- DFDavid Friedberg
(laughs)
- JCJason Calacanis
... that you hear this criticism of Trump a lot, which is that, "Okay, he's right on the issue or his instincts are correct, but there should be a, a nicer way of doing it." And I guess I would give that story more credence if the people making that criticism had actually been advocating for a change in the status quo prior to Trump, and they weren't. I mean, we had this bipartisan globalist consensus that pretty much all trade practices with China, no matter how unfair they got, was basically good for the United States, and no one was really doing anything about it until President Trump made it this issue-
- ASAndrew Ross Sorkin
Right.
- JCJason Calacanis
... and made the unfair trade practices conspicuous. So if somebody else had been willing to take that on, then I maybe would give credence to this idea that there's some non-Trumpian way of doing this, but I just don't think that's the way our political system works. I think that the way our political system works is that you have to completely shift the conversation first to create a new consensus, and then you work out the deals, and that process can be a little bit disruptive.
- ASAndrew Ross Sorkin
Okay, one tiny follow-up. So I don't know if you guys saw the news this morning, a report out that Apple is gonna move its manufacturing of iPhones that are exported to the US or imported here in the US, but they're gonna manufacture all that stuff in India, not in China anymore. So they're gonna move all the manufacturing to India. What do you think-
- DFDavid Friedberg
See you in 20- See you in 2035.
- ASAndrew Ross Sorkin
They say they can do it supposedly in 18 months by the end of '26.
- DFDavid Friedberg
Bet.
- ASAndrew Ross Sorkin
You say no way.
- DFDavid Friedberg
Bet.
- JCJason Calacanis
Well, if- I think this is geopolitically smart.
- DFDavid Friedberg
Yeah, they should do it, but I'm just saying that's a, it's very smart. It's not gonna get done (laughs) in 18 months.
- JCJason Calacanis
I don't know how long it's gonna take, but look, I think one of the big lessons here over the past 25 years is that you have security first. Security has to be worked out first, then you have trade. If you build your whole, um, supply chain and all your trading relationships with countries that are fundamentally adversarial to your interests, and we can get into that part of the, the US China relationship, but I think most people would say that we're in some version of a new cold war with, with China, obviously you're gonna have to revise your trade relationships because again, we can't be dependent on an adversary for core components that then go into our military-
- ASAndrew Ross Sorkin
Mm-hmm.
- 38:18 – 50:00
Balance of power politics, Ukraine/Russia ceasefire negotiation halted over Crimea
- JCJason Calacanis
Andrew, w- I mean, what do you think about this sort of what I would call balance of, of powers logic 101?
- ASAndrew Ross Sorkin
I get, I get the idea that you, you go to your, you know, least, uh, I don't know, uh, if the, their, your, your-
- JCJason Calacanis
Your least path. (laughs)
- DFDavid Friedberg
Enemies, friend's friend, your f-
- ASAndrew Ross Sorkin
Right. (laughs)
- DFDavid Friedberg
... your enemy's enemy is your friend. Is that-
- DSDavid Sacks
Yeah.
- JCJason Calacanis
No, the enemy of your enemy is your friend or whatever it is. Yeah, no, that is balance of power logic.
- ASAndrew Ross Sorkin
Whatever it is, um... W- I, I get, I get where you're going with this. I just think that Russia, given all that they have done, I'm not... it's hard, it's hard to look at Russia and China, and maybe Russia, on the margins, e- on a relative basis in life is better than China in certain ways, but in other ways, it's not. And so it's very complicated to sort of, for me to look at it and go, "Okay," um... It's actually interesting. Who, I mean, there's a, I was gonna use a real loaded word. Who's more evil, right? Is China more evil or is Russia more evil?
- DFDavid Friedberg
I mean, I think it's very-
- ASAndrew Ross Sorkin
I think there would be a big debate about that in the world.
- DFDavid Friedberg
Well, I think it's-
- DSDavid Sacks
Depends who you ask.
- DFDavid Friedberg
... it's unnecessarily judgmental. Yeah.
- ASAndrew Ross Sorkin
Right?
- JCJason Calacanis
I think it's dangerous to look at foreign policy, eh, from, eh, uh, a position of extreme moralism because ultimately the purpose of our foreign policy is to ensure American security. And we can't rectify every injustice in the world, and over the past 25 years, we've become hyper-interventionist, you know, in an attempt, th- so we've claimed, to do that, right? We keep saying that we, we've gotten involved in all these places 'cause we wanna promote our values and spread democracy. And by the way, we did the opposite. I mean, you look at the forever wars in the Middle East. We had interventions and occupations in Iraq, Afghanistan, Libya, Syria. How did all those things work out? They did not promote our values or spread democracy. So, my point is just, I don't think we should look at foreign policy from an i- a position of extreme moralism. I'd prefer to think of neither of those countries as, as quote-unquote "evil," and I would prefer to think of them as countries which have their own interests. I think that with respect to China, the real issue is that it is a revisionist great power. It has made clear that it wants to basically annex Taiwan. It wants to turn the South China Sea into, effectively, a Chinese lake. It does not respect international waters. It has territorial disputes with Japan, and if we don't play a role in containing China, then China will revise the balance of power in East Asia in a major way. And I think that would have, I think, profound consequence for United States.
- ASAndrew Ross Sorkin
That may be there, but I don't know if the Chinese are gonna throw you off a roof in-
- JCJason Calacanis
I just, I just don't think Russia-
- ASAndrew Ross Sorkin
... one day and you won't even know it. I mean, that's the difference. And I don't know if that's a moral argument or-
- JCJason Calacanis
I'm not worried about-
- ASAndrew Ross Sorkin
... something else.
- JCJason Calacanis
The United States is not gonna be thrown off a roof by, by Russia, and that's the level at which we should think about these things. If you look at Russia's behavior, Russia actually is not a revisionist great power. What it wants is just security on its borders. The revisionist power actually in Europe over the past 25 years was the United States because we pushed NATO right up to Russia's borders despite the promises that were made to Gorbachev in the '90s. So, we're the ones who've revised the balance of power in a way that was profoundly threatening to the Russians. And I think it'd be far better from the American standpoint to just work out a security architecture for Europe with Russia that gives the Russians the security they-
- ASAndrew Ross Sorkin
Right.
- JCJason Calacanis
... crave on their western border and gives Europe the security it craves. And I think if we had had that mentality as opposed to this highly moralistic mentality where we basically wanna spread American-style democracy everywhere-
- ASAndrew Ross Sorkin
You don't think that American-style democracy, though, has helped the world in some way? I'm not saying we did it right everywhere.
- JCJason Calacanis
I bel- I believe, I, I beli-
- ASAndrew Ross Sorkin
Eh, I think we've lost a lot of, lot of wars that we should not have attempted. But-
- DSDavid Sacks
If it could be done, you're right. But the problem is, Andrew, the failure rate is too high. Look at what happened in Afghanistan, in Syria, in Iraq. As we've gone in to make, you know, regime change, we actually a- put those people in a worse condition than they were before. They don't end up with American democracy.
- JCJason Calacanis
Right.
- DSDavid Sacks
After a trillion dollars in Afghanistan, the Taliban is back in charge doing-
- 50:00 – 1:05:40
Alphabet earnings: Massive resiliency, Google's Gemini Problem
- JCJason Calacanis
- ASAndrew Ross Sorkin
I wanna talk Alphabet. So, everybody thought the Blue Lake economy was dead. OpenAI, Perplexity, all of it was, you know, gonna take the search market. They come out with earnings. Sundar, uh, does way better than everybody expected. Revenue up $90.2 billion. It was up 12%. Net income was up, up almost 50% year over year, and you got the cloud still ripping. You got a big buyback program. He starts talking about Waymo on the call for the first time in a long time, if ever. Uh, stock's up about 5% on the news. What do we think?
- DFDavid Friedberg
Buy. Buy. What an incredible business, my gosh. Oh. (laughs) There's- there's a lot of resiliency in Alphabet that I don't think people-
- ASAndrew Ross Sorkin
(laughs)
- DFDavid Friedberg
... have given the company credit for. First of all, I'll just highlight, with the dividends they're paying, plus the share buyback, you're basically getting a 4 or 5% yield on the stock. So, the dividends are like 10 billion a year, and they're announcing 70 billion backed on 2 trillion in market cap. So, you're making 4% a year just by owning the stock and the dividends and the buybacks. Then if you look at the revenues, 90 billion, 77 in services, 12 in cloud. So the 90 billion, about half of it was ads on search. And a lot of people have been talking about the decline in search due to AI, that's the end of- of Alphabet. Here you can kinda see the breakdown. What this shows is that there's such significant growth, nine billion in YouTube, seven and a half billion in non-Google ads, 10 billion in subscriptions with 270 million subscribers across subscription businesses, 12 billion in cloud revenue, which is growing 30% year over year. There's a lot of resiliency even if you take out search. And so the question is, what's the downside? What's the upside? Well, the downside is, what's the worst that could happen to search? What, they lose half of the market due to- uh, to ChatGPT? If they lost half the market to ChatGPT and the rest of the business keeps growing the way it is, you get back to parity pretty quick. What's the upside? Well, the upside is they're able to use AI to actually reinvent search, retain the audience, and create an entirely new search experience that's chat-based or has some chat integration into search. So, it seems to me trading at 18 times free cash flow, which is where this thing's at right now, plus the 4% yield on dividends and buybacks, plus the kind of seemingly pretty significant gap between the downside and the upside here, it's just such a powerful business. It just seems like it highlighted that this is not a business that's in decline and is about to die as everyone's been kinda proclaiming. There's enough growth engines here and there's enough resilience, and the price is so good. I don't- I feel quite good about the company.
- ASAndrew Ross Sorkin
I think there's $100 billion of hidden value called Waymo in this business. It-
- DFDavid Friedberg
And Waymo, 250,000 rides a week now, growing like crazy, and they're only in like four cities. It's crazy.
- ASAndrew Ross Sorkin
And I think it's-
- DFDavid Friedberg
Have you taken-
- ASAndrew Ross Sorkin
... I think the market's giving them-
- DFDavid Friedberg
Have you taken a Waymo-
- ASAndrew Ross Sorkin
... zero for that right now.
- DFDavid Friedberg
Have you? Zero.
- ASAndrew Ross Sorkin
Zero.
- DFDavid Friedberg
Yeah. I think the most interesting stat that I saw from the earnings results- And they own 10% of SpaceX, by the way, (laughs) which is crazy. Yeah, sorry. The most interesting stat in the earnings was that I think they said that they had 270 million total paid subscriptions across YouTube and Google One. And my initial thought was, "Well, when are you just gonna stick Gemini as the most obvious interface in front of it?" Like, I think that these companies now need to confront that this OpenAI behemoth is growing at a rate that was probably a hindrance before, and now it's a real strategic risk. And so if you have 270 million paid subs, come on, guys. Stuff Gemini right in front of these guys. That's- that's- that was- Totally. ... my first takeaway. But it's, again- Totally. ... they're doing it from a position of strength, but they need to get going 'cause they're- they're probably hemming and hawing, and there's probably all kinds of people, all kinds of cooks in that kitchen, but- I've heard a lot of stories about this question. Yeah, I think Sundar, Larry, and Sergey just need to take the equity and the political capital they have as the CEO and the two largest shareholders and just stuff the decision down people's throats.
- JCJason Calacanis
Yeah.
- DFDavid Friedberg
So that's- that- that's number one. The other thing that I think about actually relates to what I spoke about last week about NVIDIA. So, just to give you guys a little bit of a cleanup, you know, after we spoke about NVIDIA, the NVIDIA team reached out to me and they were like, "Hey, Chamath, here's a bunch of stuff that will help you unpack what you spoke about in a little bit more detail." So let me tell you what NVIDIA told me, and then it- I think it relates to GCP. So, what they told me, when you look at the SEC filings for NVIDIA, and you add up all the revenue, it says that about 47% of the revenue goes to China, Singapore, Taiwan, I think it was. And what these guys educated me on is that they've been trying to refine how this is described, but it's not what it seems. Meaning, they report revenue on what's called the Billing...... or the invoicing address. So meaning you are an entity, you'll buy a huge amount of chips or compute power, and you issue the invoice out of Taiwan or Singapore or China. That's what represents 47% of NVIDIA's reported revenue. So, it turns out that that's actually not where the silicon gets shipped. So there's a Singaporean office that handles the invoicing. So then I said, "Well, who are these companies that are using these, these places?" And it turns out that it's a bunch of major U.S. companies, including U.S. OEMs and clouds that use Singapore for invoicing their suppliers, but that the, you know, what industry sources have told us is that all of these products are almost always shipped elsewhere, including U.S., Mexico, Taiwan, et cetera, all over the place. So why is this interesting? There was a study by Artificial Analysis, Nick, I will send you the link, but basically what it showed was that the clouds were not doing any real form of KYC on who was using their stuff. So now I think we get to this next place which is like, I think the Google business is profoundly amazing. I think they need to do something with the subscriptions that they have and put Gemini right in front and really do a head-on attack against ChatGBT. Those are the pluses. The minuses or the risks that I think now will get uncovered is are the clouds doing enough to make sure that China and other folks aren't getting access to compute that they should not get access to? And that could have an impact on some of their revenue. So that's a GCP problem, I think it's an Azure problem, it's an AWS problem, and that's gonna need to get sorted out in the next couple of quarters because if Western governments basically say to the clouds, "Hey, you need to KYC your customers," so that it's not somebody distilling the best of our models into a place we don't agree with, I think there could be some blowback.
- ASAndrew Ross Sorkin
All these numbers obviously backward-looking. Do we think, and I know we've been talking too much about tariffs, but do we think that the tariff story is gonna impact, uh, Google next quarter? Do we think it's gonna impact, uh, Meta next quarter? And to the extent that Google are saying, "Look, we're gonna keep our big infrastructure spend, $75 billion, you know, full steam ahead," which is great for the ecosystem, great for NVIDIA, great for, great for everybody in that world, do we think that holds up if we think there's a hiccup between now and whenever all of this tariff stuff gets sorted, if it does?
- JCJason Calacanis
I think it's gonna hold up. I mean, look, I just think that this investment in- in CapEx and the data center build-outs is so strategic right now. I mean, I think that the hyperscalers, it's only good for their- their businesses, but I think they see it as so strategic to their survival that they just have to do it, no matter what. In other words, I think they're totally inelastic on this. But let me just go back to Google. Nick, can you throw up this chart? I mean, I think the problem that Google has with respect to ChatGBT is that Gemini's just not getting the usage and ChatGBT's just growing like crazy. If you look at how these models perform, according to the benchmarks, Gemini's actually really good. I mean, Gemini has made substantial progress-
- DFDavid Friedberg
It's accident. It's accident.
- JCJason Calacanis
... catching up to ChatGBT.
- DFDavid Friedberg
Yeah.
- JCJason Calacanis
But they have not caught up on the usage side. Now to Chamath's point, you could just make Gemini the default interface in Google Search, but that is true innovator's dilemma because if you do that, you could be giving up more than half the search revenue. So, I do think Google is- is in a really tough spot, and the longer they wait to make Gemini front and center, the worse this usage problem gets. I mean what's-
- DFDavid Friedberg
I mean-
- JCJason Calacanis
... basically happening right now is users are learning a new habit. I mean they're-
- DFDavid Friedberg
Totally.
- JCJason Calacanis
They're learning to go to ChatGBT to get their questions answered or just their searches-
- DFDavid Friedberg
And-
- JCJason Calacanis
... answered in a completely different way.
- DFDavid Friedberg
And let's be honest, they make using Gemini impossible. And they can do a, just a much better job, at a minimum give the best leading-edge Gemini model to the 270 million people that are already paying you for a subscription. Just do that. Do something so that you can start to blunt the growth of- of OpenAI. Otherwise, you're gonna look back in four years and regret hemming and hawing today.
- 1:05:40 – 1:18:35
Tesla jumps on Elon's return, pulling back from DOGE
- ASAndrew Ross Sorkin
a second. Tesla's out with earnings this week. Stock is up 8% on the back of that, back of that news, 23% up in the last five days, in large part because Elon basically said, "I'm getting out of Doge and I'm going back into Tesla." So, the question is, what can he actually do to fix Tesla at this point? What does he have to do? And is he really out of Doge?
- JCJason Calacanis
No, I don't, I don't think he's out of Doge. He didn't say he was out of Doge. It was just a matter of how much time he could allocate to each thing. I mean, look, I saw this before when I was part of the Twitter transition, is that for the first three months or so, he was basically full time at Twitter HQ learning the business down to the database level. I mean, every nook and cranny of that business he learned about. Once he felt like he had a mental model and he had the people in place that he trusted, he could move to more of a maintenance mode. And I think that's the only way he can manage five companies is that he has these intense bursts where he focuses on something, gets the right people and structure in place, feels like he understands it, and then he can delegate more. And I think that he has reached that point with Doge but he was also clear that he's gonna keep doing it because if he doesn't, there's gonna be a huge backsliding where, you know, all the corrupt interests will basically put back all his corrupt spending. So, he's gonna stay involved, but as an SGE, he's limited to 130 days a year anyway and so it makes sense for him to kind of now ration his days a little more closely. But he's got the people in place. Remember, Doge...It wasn't just him, it was also the US Digital Service, which is basically the IT branch of the executive branch, which got put under Doge. So, my sense is that Doge is gonna continue, it's just that Elon is shifting to a mode where he can manage it one day a week or two days a week, as opposed to being there five days a week.
- ASAndrew Ross Sorkin
Steve Bannon says he wants the receipts. He says, "There are no receipts, we don't have the receipts." He says, "We need itemized receipts to see what has actually happened." What do you think?
- JCJason Calacanis
Why wouldn't we wanna cut as much of this corruption as possible? I mean-
- ASAndrew Ross Sorkin
Oh, I think we have to.
- JCJason Calacanis
Yeah.
- ASAndrew Ross Sorkin
We have to. The question is, should the public get to see exactly what's been cut and what hasn't?
- JCJason Calacanis
Why wouldn't they? Of course. And what we really need is for Congress to now embrace all of the corruption that Elon has found and eliminate it from the budget. Because at the end of the day, in order to capture the savings here, we do need those appropriations eliminated from the budget. And my biggest concern is not something that, that Doge is gonna do or not d- it's not up to Doge to do that. It's up to, k- frankly, these old bulls in Congress who control the appropriations process. Are they gonna basically backslide and just put the spending back in, 'cause it's easier to just do that, engage in this log rolling? Or do we take advantage of this, I think, incredible sacrifice that Elon has made? I mean, look, this has cost him enormously. One of the reasons why Tesla is down is 'cause you've had crazy leftists engaging in terrorism, firebombing Tesla dealerships. In any event, he's made this enormous sacrifice in order to expose the corruption. And look at what we've learned. We've basically learned that this whole NGO thing is a giant scam, where, you know, the people in government give enormous amounts of money to their friends, probably with the expectation that when they leave government, they're gonna be next in line at the trough. And I think Elon's done an enormous service exposing this. But, you know, it's not entirely up to him. In order for us to realize the benefit, we need Congress now to act on that.
- ASAndrew Ross Sorkin
So what kind of, what do you think the-
- JCJason Calacanis
And I'm, I'm just afraid that's not gonna happen.
- ASAndrew Ross Sorkin
What kind of total number do you think we get? I always say, "A dollar saved is a dollar made." And we should s- we should say amen to that. The question is, what do you think the total number's ultimately gonna be?
- JCJason Calacanis
Well, he says they're at 160 billion right now. I think that's, by the way, that's an annual number, as far as I understand it. So, you know, what I always hear with spending is, they always multiply everything by 10 because they assume it's gonna be 10 years. So, if it is 160 billion a year, that would be 1.6 trillion over 10 years, probably more because the spending always grows. And look, that's 160 billion that we weren't planning on saving before Elon got involved in the government. So, if that's all it is, that would be great. I think there could be more, and it really comes down to whether Doge continues to be supported by the political process. And, um, look, Elon can't, he can't force that, right? I mean, ultimately, it's up to legislators to take advantage of the work that he did, and ultimately, it's up to the people to put pressure on those legislators to embrace what he did. He's done an enormous amount, you know, but there's an old saying that you can bring a horse to water, but you can't make it drink. If the entrenched political interests, at the end of the day, aren't, you know (laughs) , if they're not gonna, uh, embrace the, the savings that Elon has found, I, I, you know, I don't know what we can do about that.
- DSDavid Sacks
Yeah, I mean, there's, there's the administrative and discretionary aspect, but, you know, I've said for a while, it's gonna be necessary to have statutory resolve to actually fix the deficit problem in the United States, and that means getting Congress to act. And Congress has not shown a willingness to act. And every time I go to DC, I come back d- more disappointed. I share the stories on this show, and I talk about the fact that there are very few members of Congress that are standing up and saying, "At the end of the day, the first thing we need to solve is how do we reduce the deficit? Then we can address all of the policy issues that we wanna talk about." But if we don't solve the deficit problem, there is no policy. There is nothing-
- JCJason Calacanis
Yeah.
- DSDavid Sacks
... we're going to be able to do because the Treasury rates are gonna spike. There's gonna be no capital, there's gonna be no funding. We're gonna go through a debt death spiral. So at the end of the day, we really do need Congress to stand up and lead here. It is not on one man's shoulders. There's only so much Elon can do without statutory authority from Congress.
- JCJason Calacanis
Right.
- DSDavid Sacks
And I think that's really important in this, in this budget reconciliation process, and it's really important for the president to also help lead Congress to where we need to go on this. Members of Congress are elected because they get stuff for their constituents. The more they get, the more likely they are to get elected. And next cycle, they gotta get their constituents more stuff. So it creates an escalating spiral staircase. It's a problem in how democracy operates.
- JCJason Calacanis
It creates a tragedy of the commons. There's a collective action problem, because like you said, each individual congressman or senator primarily wants to get stuff for their district or their state, for their special interests, and there's no one really looking out for the public interest, the overall common good. And these appropriators are basically engaged in log rolling, where they're willing to give, you know, their, their colleagues their pork if they get their pork, and this is why we have a $2 trillion deficit. It's a really hard thing to fix. I mean-
- DSDavid Sacks
It's really hard. This is the problem with democracy-
- JCJason Calacanis
Uh, that's why we need a line item veto.
- DSDavid Sacks
... is eventually-
- JCJason Calacanis
I mean, people are calling-
- DSDavid Sacks
Eventually you realize, you realize you can vote yourself all the money, and that's what you do.
- JCJason Calacanis
Well, I, I think, you know, this has been something that I remember, uh, Bush 41 in his State of the Union called for a line item veto. This was like 30 years ago, and we still need that, you know, because I do think that if the president had more authority over this process, it'd be less of a tragedy of the commons.
- DSDavid Sacks
In my naive youth, I was very against that and I felt like it was giving too much power to the president, and I never really understood the wisdom of it until we find ourselves at the end of the cycle, which is where we are here. That's, you know-
- JCJason Calacanis
Yeah, and unfortunately, Congress will never, I think, change its ways until they're forced to by some sort of crisis, which, Friedberg, I think is your point about eventually we'll be in a debt crisis, and then Congress will finally see the wisdom-
- DSDavid Sacks
As soon as this crisis, yeah.
- JCJason Calacanis
... and they'll finally appreciate what Elon did. You know, there's all these entrenched...... political interests complaining about Elon. I mean, again, he undertook an enormous sacrifice to try and fix our fiscal situation, which is unsustainable, before there's a crisis. One day there'll be a crisis, everyone will see that he's right.
- DSDavid Sacks
But to answer your question, Andrew, uh, Nick, you wanna pull up this Polymarket? So this is the Polymarket and how much spending will Doge cut in 2025.
- JCJason Calacanis
All right, guys, unfortunately I gotta go.
Episode duration: 1:29:45
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