SPEAKER_02: My body is a wonderland.
SPEAKER_04: If that wonderland is white, soft and mushy, sure. And hairy, too.
SPEAKER_04: You know, the worst thing about skin on skin sleeping with the newborn is that, you know, sometimes she roots and she goes after the man the male nip. I know problem is my nipples covered in hair. It's really awkward for everybody.
SPEAKER_00: Just start gagging.
SPEAKER_04: I'll tell Tali that story when she's 18 or at her wedding. It'll be even better. Rain Man David.
SPEAKER_02: Hey, everybody, welcome to another episode of the all in podcast. I am wearing a blue shirt. I am a pasty white old Greek man who's balding and obnoxious. And with me today is no no no no you have to see you have to say your pronoun bro. Am I Oh, and my pronouns are oh wait, what are my pronouns? My pronouns are beep beep. And most people just call me a jerk. With me today, of course, is my Sri Lankan, Urkel looking low wearing a furry sweater.
SPEAKER_04: Hello, everybody. My name is Chamath. I have salt and pepper black hair, brown eyes. I am tall. Six foot two. I go by the pronouns we King and stud muffin. And I'm here to talk to you about internet security protocols.
SPEAKER_03: I look like Urkel. I think people should just come up and say, well, I don't look like the closest. I don't look like Urkel. I look like a Bollywood when you put
SPEAKER_04: your glass about Sri Lanka and Urkel to us. Welcome to the all
SPEAKER_03: in podcast. Two out of the four of us are canceled. Next up for cancellation sex.
SPEAKER_00: Yes, I'm coming to you here from the floor of the New York Stock Exchange, which was once land that belonged to the Mohegan, the Montauk, the Oneida, the Iroquois tribes.
SPEAKER_03: You forgot the Irish. We own the seven points. You went for it, Sax. I love you.
SPEAKER_00: Isn't it important that at any moment that we're successful, we have to flagellate ourselves or remind ourselves that one time, man was owned by somebody else. We stole it.
SPEAKER_03: Also, the Greeks conquered the Romans and so I apologize. But
SPEAKER_02: you forgot to mention you're also wearing a brother shirt that is four sizes too large.
SPEAKER_00: This is my slim fit. So that's
SPEAKER_03: slim. Oh, no, here we go. Has been upgrading the wardrobe. He's changed. Wait, wait, wait, before freebird does the intro. Jake,
SPEAKER_04: how you want to tell them why we're doing these intros like this? Yeah, I got to pause before Okay, okay. Yesterday on
SPEAKER_02: the internet emerged, a series of videos that were clipped of Microsoft presenting their new suite of developer tools, yada yada. And corporate people got up and without any explanation, started describing their physical appearance, their pronouns, their ethnicity, their skin tone, and their hairstyles. And the entire internet was like, Oh my god, this is crazy woke ism. Like what what is happening here? This? No, I
SPEAKER_04: thought it was this kid. I thought it was a Saturday. And
SPEAKER_00: so and so then as soon as they got called out by the entire internet, they claimed that they were doing this for visually impaired people, which kind of begs the question of why visually impaired people need to know what race you are like, it's still playing into this like crazy weight, race consciousness. But then on top of it, it wasn't just that we know it's not that because then they start doing this. Hold on.
SPEAKER_04: Yeah. So if you if you're blind, and technically can't see, you may not even know what blue means. Because you will have never seen the color blue or blonde. Okay, right, right. But
SPEAKER_02: they were also identifying their races, which kind of begs the
SPEAKER_00: question of why that's important. But if you were born
SPEAKER_04: blind, you would not know what that means either. You're literally color blind. Same footing as people who are not visually impaired. I'm
SPEAKER_01: saying if you're visually impaired, you're using the wrong
SPEAKER_04: language, that language is for the sighted people. Okay, but
SPEAKER_00: I'm just calling bullshit on their stated explanation that has anything to do with visually impaired because then they went on to basically recite the names of 10 tribes, Native American tribes and the ones I've heard of on which the Microsoft campus used to belong to. So which is why I was kind of making fun of that in my initial statement. But so look, this is just woke capitalism. This is woke ism out of control. Obviously, they didn't see the election results. Earlier in the week, it's
SPEAKER_02: clearly there was some level of virtue signaling, I think in their defense, they were trying to do it, I think for the visually impaired. The problem was they didn't explain the context. And they didn't give instructions to the people on what to do. So that was, but JKL that video, that was a clip
SPEAKER_01: pulled out of a broader context here, right? So like, apparently this is common on campus or common there that this is happening all over. So we just know it isn't common because I
SPEAKER_02: asked people online, but it was optional. It was optional. To the common point. I think the reason the internet reacted the way it was was I asked every single person who came at me because the woke left came at me. I just said, Can you show me another clip of this on YouTube of any event with this occurred? And nobody could. So I think this was kind of a first. When
SPEAKER_01: did you stop being a member of that woke left JKL? What was the
SPEAKER_02: moment? Like the historical site? I've never been for Bernie. I've never been for Elizabeth Warren. I've always been moderate. Oh, wait, can I freebergs intro? Yeah, freeberg. Can we hear yours?
SPEAKER_01: My identity is an illusion. It's an illusion created by the viewer. And you can call me whatever you want. I sit on the ground where during the Hadean period, there was lava and magma and nothing but co2 and methane. And I represent those gases that are now lost to the oxygenation and the cyanobacteria that swarmed over this earth and took everything over and led to the formation of eukaryotic life. And here we all sit today, our privileged existence. Thank you saying that you want to free
SPEAKER_00: burgers just electrons hitting neurons in interesting ways.
SPEAKER_04: He's like it is his pronouns are pronouns are proton.
SPEAKER_01: Biochemical quantum bath. Quantum foam is my pronoun. So would you like to formally apologize for colonizing the
SPEAKER_02: dark matter during the Big Bang now? Or would you like to resist?
SPEAKER_01: It wasn't fair when the cyanobacteria took over the face of the earth and sucked up all this and created all the oxygen and for that we all apologize for the genocide of
SPEAKER_03: the genocide of co2 and methane. I mean, those molecules were
SPEAKER_01: really happy. And they had a very kind of like peaceful existence on this earth. And, you know, we just came in and ripped it away. took it all away from that. And you know, and then the offspring ended up being us and here we are. So apologies. All right.
SPEAKER_03: Welcome to Episode 54. Everybody's canceled the final episode.
SPEAKER_01: I don't think that the Microsoft thing was bad. And when you hear the broader context, it was like, you know, that's just, you know, I think it's a reasonable thing that
SPEAKER_04: I'm still long Microsoft and Google and short the rest of the tech. So I'm fine with it. There you go. Back to the stock price.
SPEAKER_02: Did I actually I tomorrow, do you think that the Google long Netflix short play
SPEAKER_01: is the right play? I think the best trade on the best trade on the internet, the
SPEAKER_04: most obvious simple money making trade is long Microsoft, Google short, big tech short, the rest of the tech short IBM short
SPEAKER_01: Netflix. No, no, no short one. No, meaning you can you can very
SPEAKER_04: comfortably short Apple, Facebook, Amazon, Netflix, and be long Microsoft Google. So as a spread tree, right, right. It's the most it's the best risk parity trade on the internet right now. I mean, period in the markets. Can you explain explain
SPEAKER_02: a spreadsheet? Look, I tweeted this a while ago, but it's like
SPEAKER_04: and and again, the I think like, well, let me be constructive and say the people on Twitter that respond to these threads are not totally stupid, although I think they're kind of idiotic. I said, you know, here's how you can effectively you know, I said something about, you know, big tech and I said, I can comfortably put my short on. And I'm kind of trolling people when I do that, because I'm not telling them the full trade. And the real trade whenever you put anything on, in my opinion, is all about managing risk. And the best thing about the internet and the stock market is that, you know, when you're betting on internet stocks, you don't necessarily have to be naked long or naked short, which comes with a lot more risk than if you were long one security and short another against it. So for example, over the last 10 years, you would have made a lot of money by being long Amazon, and short a basket of traditional commerce companies, offline commerce, I'm going to make up a basket, but Macy's, JC Penney, you know, Kmart, Sears, right. So if you're short those and long Amazon, that's what's called a spread trade, you're basically playing the gap between your longs and your shorts. It's independent of where the market generally trades is one of
SPEAKER_01: the relevant of the market,
SPEAKER_04: where you're basically saying stocks could go up, but just
SPEAKER_02: not really near Amazon. Yeah.
SPEAKER_04: When you put that trade on, for example, it's, I'm gonna bet that if everything goes up, Amazon will go up more than Kmart, Walmart, Sears. And if the stock market goes down, Amazon won't go down that much. But these ones will go down a lot. And you you're playing the spread. So just just to be very explicit. You know, there was a very and I talked about this last week, but I that this idea wasn't mine. It's a borrowed trade from somebody who's a very well known hedge fund manager, who put it on in massive size. And you know, to be honest, not knowing much of anything, I just copied it. But he's his initial trade was long Google short Facebook. And that trade basically was at parity, which meant that the long and the short canceled each other out for about the last four years. Until the last year, it completely blew out and it returned about 80 85%. So if you had put $100 in, you would have made about 85 85 bucks on this trade by being long Google short Facebook. The the bigger trade at scale is actually long Google and Microsoft and short the rest of big tech. And there's a lot of vagaries why that this idea makes a lot of sense. But what you're saying is they'll
SPEAKER_02: outperform the other basket of tech on a relative basis on a
SPEAKER_04: relative. So so you know, like you're saying Airbnb can't go
SPEAKER_02: up, or Facebook can't go up, it could it's not going to go as he's saying that the trillion dollar market cap companies,
SPEAKER_01: yeah, not the Airbnb. Oh, okay. And the reason and the reason
SPEAKER_04: why focusing there makes sense is they're hyper liquid markets. They have tremendous ways in which you can have massive size on so you could put a trade of 10 billion long versus 10 billion short. I mean, you can put mega size on on these things, if you if you have real conviction. And then the third thing is when the banks look at that kind of position, they actually from a risk management perspective, treated differently than if you were just naked long, any one of these things or make it long would be just making one bet.
SPEAKER_04: Yeah, or you know, or naked short, which is even more dangerous. So if the market collapses by 30%, both stocks
SPEAKER_01: might go down 30, roughly, but one will go down 32. And the other one will go down 28. And so you're really on 2%, 2%, as opposed to the 30%. So all the market risk is taken out when you make trades like that. Yeah, the reason it's possible also today to do so it's such a scale, right? Chumath is interest rates are so low. So when you borrow on margin to go long, the rate is very low. And when you short the stock, if it's a highly liquid stock, it doesn't cost a lot to borrow to short. That's so your actual, you know, carrying cost on that trade ends up being pretty low relative to the upside you expect.
SPEAKER_04: So just to just to give you a sense of it, my, you know, when I tweeted that tweet out to complete the picture, I was actually long something against my proposed short. And I put it on in pretty meaningful leverage. And it's worked out really well. Because I was playing the spread, I was basically betting that, you know, the the safest company on the internet today is Google, because they're both a platform company. And to the extent that they're at risk at being an app company, the risk is to Apple, but because they pay Apple so much for search, they're inoculated. And so in many ways, Google is the safest. And it's also as we've said before, the purest money making machine on the internet,
SPEAKER_02: you're referring, of course, to Google paying Apple $10 billion to be the default search in their own Android. So one
SPEAKER_04: platform and on the other platform, they they pay them so much that they're going to be always protected. And the second best company is Microsoft. And we even saw it by the way, this past week, I don't know if you guys saw that. But Microsoft decided to take a broadside attack against notion. Yeah, that was a productivity app that's been growing very well. I felt this when I was on the board of slack. When Microsoft put its gun sights on us, we always thought that they could not out compete with us. And what it turns out is, when you have a massive distribution advantage, feature parity is enough. And you can actually be slightly less than good enough on the features, because distribution and bundling and packaging overpower a customer's desire to adopt a product. So in the case of slack, it was very difficult, I think, for us to compete against Microsoft's bundling of teams, with all this other software that they were selling, and all the discounting that they could do made it very difficult for us to compete because we had a single product. And lo and behold, 18 months later, the only real long term protective solution for slack shareholders was to basically get bought by Sales Force so that you could be part of a bigger hole. This past week, Microsoft decided to go after notion. And it's going to be I think, a very similar story where, you know, once they decide to sort of go after this product experience, they only need to be 80% is good. And then the distribution and bundling and packaging will take care of the other 20%. It doesn't kill
SPEAKER_02: the other company, but it creates headwinds that massive headwinds because because a company like notion cannot be
SPEAKER_04: fully valued over long periods of time simply being an SMB company, you add a minimum, you'll have to move into the mid market, you may necessarily never have to go to the enterprise, but you probably have to go to the mid market. And in that is a very troublesome path because Microsoft has so much, you know, tentacles, so many tentacles inside of those businesses. So anyway, basically, the long Microsoft long Google is a pretty obvious kind of like monopolistic, you know, pair trade, the question is, what do you short against it, so that you can take up the market volatility and you can play spread. Again, Apple has severe, you know, headwinds with respect to inflation pressures, and margins and supply chain issues. Amazon has pretty meaningful headwinds now, relative to pricing power and competition. Facebook has pressure with respect to regulatory oversight, I just came up with one. What about Airbnb versus
SPEAKER_02: the airline? You're talking about you're talking about
SPEAKER_04: smaller, rinky dink ideas. Listen, I'm not playing the
SPEAKER_02: same chip stack issue. I wasn't there on Tuesday night. I'm on a Thursday night. So no, no, no, be a good spread for me. No,
SPEAKER_04: that's a stupid idea. And I'll tell you what, okay, if you're going to put these things on, go to where the deepest liquid markets are, because those are the safest. Okay. Right? Like, like, don't try to be different. Being the same here. Tell me why
SPEAKER_02: Airbnb, which is an incredible margin business that's incredibly well run and growing, versus airlines, which are horribly run, and low margin, why wouldn't that be a good spread trade? I'm just thinking it's a very, I think it's a very,
SPEAKER_04: very, too. You're picking two random companies out of a hat.
SPEAKER_02: Well, no, they're both in transportation and vacation and travel completely different businesses with completely
SPEAKER_04: different motivations with different capital pools with different people that own the stock. There's no point trying to get cute on these things. My point is, if you really want to be hedged against market risk, got it, go to where it's safest, find the simplest, most obvious thing. Don't overthink it or don't put it on. So another obvious one, here's it, here's it. So obvious is within big tech, figure out which ones you want to be long, which ones you want to be short. That's a spread trade that over the next four or five years, where if you expect a lot of market volatility, it makes sense to maybe put some of this kind of stuff on right. A different version of this idea, which makes sense is in autos, again, trillions of dollars of market cap. And you can make a decision. Do I want to be long, Tesla, Lucid, and Rivian and short the traditional autos that could be a trade? You know, but trying to like trying to go after like, let me pick Airbnb versus United Airlines is too random for me. And I don't think they're correlated enough for it to make any sense.
SPEAKER_02: Right. Speaking of the stock market, sacks. You've got the background of the New York Stock Exchange as your zoom background today. What's that about?
SPEAKER_00: Yeah, so bird listed on the New York Stock Exchange. Today, this is a company that I've been involved in pretty much since the beginning, we led the series a round back in 2017. It was actually the first check I wrote as a VC to lead around at craft and four years later, public company on the New York Stock Exchange pretty amazing.
SPEAKER_02: And so you're literally at the New York Stock Exchange. First remote bestie. Yes. And you can see behind me. That is the
SPEAKER_00: floor of the New York Stock Exchange. It's not like, you know, if you've seen the movie trading places, it's not like that anymore. There are no stockbrokers. There's no like paper flying around. Got it. I'm not really sure what the purpose of all those monitors are down there. I feels to me a little bit like a movie set. It is like a movie set. Yeah. And so people like us come here to record things. But as we all know, the all the trades are really happening inside giant machines.
SPEAKER_02: Can you turn around and just start yelling Booyah Booyah.
SPEAKER_03: Security comes in. No, I'm in. I'm elevated above the floor. No one can really hear
SPEAKER_00: me. I'm in like this sort of broadcast booth.
SPEAKER_02: So take us behind the decision to go public as a four year old company. We were expecting, you know, Airbnb, Uber's and lifts took over 10 years to go public. Now here we are sitting on a four year old public company. Is that a good thing? A bad thing? Something in between? And how does the board and the management team make that decision to go public?
SPEAKER_00: I think it's a good thing. Because the company Well, the company wanted to I think it had the opportunity to it. It grew very, very quickly before COVID. Then you had COVID was like sort of a huge setback. They I mean, basically, the scooter industry just stopped for at least six months because of lockdowns. But then coming out of COVID, they bounced back really strongly, they kind of pivoted their model to what's called a fleet manager model, where basically they're putting a business in a box for a local operator or local entrepreneur to buy the scooters with financing and manage the fleet themselves. So it's a much more highly virtualized model. In so as a result of that in Q2, they just did 60 million in revenue in the last quarter. And I think it was the gross profit of something like 27%. And it was had a loss of like 12 million. So they're very, very close to getting to profitability. And the company is only four years old, you know, it took Uber 12 years or whatever to get to be public. So it's been pretty, it's been a pretty amazing ride. There's been a lot of big ups and downs. But so it's kind of a pretty sweet about it. It's trading. Switchback was like the SPAC name, right? So
SPEAKER_00: it's it today was the first day started trading under the ticker symbol br ds, I guess all birds took B I rd. So we took br ds. And, you know, there's a total number of shares outstanding of I want to say roughly 300 million. So it's about a 2.4 billion dollar market cap, you know, as it stands right now, which, you know, first series a investors pretty great, really
SPEAKER_04: happy for you, sexy. Yeah, congratulations. It's great.
SPEAKER_02: Congrats, dude. We heard last week Sequoia is going to do the Sequoia fund, this evergreen fund keep owning shares now as a VC. Do you distribute after four years of this investment, and you made multiple investments? Or do you make the decision, hey, we think it's undervalued, we have, you know, conviction in the company, we were going to be in it for 10 years, or do you just take the quick win and give everybody their shares?
SPEAKER_00: Well, I've I'm gonna agree to be on the board for the next year. So you know, I'm planning to do that. And are we have a traditional six month lockup. And so at that point, we'd have to make a decision about when or how much to distribute the shares. And it is the first time we've been confronted with decision. I mean, craft ventures is only a four year old firm. And like I said, this is actually the first round that I led as a VC. So it's the first time we've been confronted with a distribution of this magnitude, we've had some smaller distributions. So yeah, we still have to make those decisions. We haven't decided yet what we're gonna do.
SPEAKER_02: If you if the stock is up, let's say, meaningfully in the next six months, and you get to that, you know, six months in a day, and you have the ability to distribute, and it's up 25%. And you're looking at it, business is thriving, you're on the board. Do you consider holding for a year or two so that you can distribute at $16 $25, or whatever your price target is?
SPEAKER_00: Maybe, I mean, we haven't got we haven't gotten to that point yet. So yeah, I mean, I guess what I would say is that our bias would be to distribute shares to our LPS, so that they can make their own decisions about whether they're told or not. As long as we think the stock is, you know, priced fairly, if for some reason we thought it wasn't, then there be additional reason to hold on to it and make the distribution later.
SPEAKER_02: Chamath, what are your thoughts on this given it's come up before, and a number of us are going to be faced with this decision, and then we see Sequoia has got LP buy in for an evergreen fund? Well, I think an evergreen fund is different
SPEAKER_04: from having to figure out how to do distributions. So they're solving for two different ideas. The evergreen fund is really good because you don't have to do this continual fundraising process. And you can basically roll gains back into the next tranche of invested companies in an easier way. I like that idea. It was pretty rare at the time I remember when I was starting social capital, the only fund that did it really well was Sutter Hill. And for a whole host of reasons, I decided to not do an evergreen fund. In hindsight, I think for me, that turned out to be better because then it was easier for me to wind down and have a clear demarcation of when it was just myself and other LPS versus when it was just my capital. But there were some really good reasons to do it. The hardest thing I think that Sequoia is going to find in this new iteration is at some point, somebody's reputation will be on the line for judging public equities. And it's still not clear to me that people who live and breathe venture can context switch well enough to then live and breathe public equity. So just the best example I would say is like Tiger Global, when you look inside that organization, which is incredibly well run, there are two superb investors that carve the universe up, right? You have Chase Coleman that runs a public book, and you have Scott Schleifer that runs a private book. What does it prove to me it proves that it's just very hard to find a person that can do both. And the context switching is very complicated. So maybe Sequoia finds an incredible public market strategist that can then manage these positions. Otherwise, but
SPEAKER_01: they've done this for a few years, right? They've Sequoia I don't know people realize this, they set up the Heritage Fund, and they set it up with only GPS money, it's got billions under management, and it's been making late stage private, but mostly public equity investing.
SPEAKER_04: I know, but that's a fund of funds. What I'm saying is, I'll be very honest with you, if I was an LP of Sequoia, I would want the money back. And the reason is, I'm not sure that Sequoia can compound money in the public markets anywhere near what I could. So
SPEAKER_01: do you buy the point that they make that like, exiting some of these left most of the, you know, kind of value creation on the table? No, no, I think what they're saying something much more
SPEAKER_04: subtle, which is they exited, and they have regrets for selling, you have to remember, when Sequoia distributed Google, every single partner got Google shares. Now, had they held those shares, they wouldn't be saying any of this. And famously, I'll tell you when I should they held their shares.
SPEAKER_02: Well, I know that. Well, I actually do.
SPEAKER_04: Fair enough. But maybe they did. Maybe they didn't. But let's just let's just put it out there that, for example, I know explicitly when I almost merge social capital with Kleiner Perkins, like six years ago, I spent so much time with john door, the most incredible thing that I was so impressed with door was he was he told me he had never sold a single share of Amazon that was distributed to him. And he had only sold a handful of shares of Google, only to fund future capital requirements at Kleiner at the time. So I just think that ultimately, I think probably what Sequoia was saying is, man, I wish I had not sold my Google shares when they were distributed to me, because otherwise they wouldn't make that claim.
SPEAKER_02: No, I think what they're saying is more solid. I think they're saying you as our LPS should have held them. We are on the board of these companies from day one. We have better insights in the second decade that in the first production board founder David Friedberg, how do you think about early exits, distributing capital, because you do have also with a startup studio structure, which you should explain to the audience how a startup studio works, because you create companies, which is, you know, was a terrible place to be maybe five or 10 years ago, but it turns out you're in the best place, because zero to one is where all the value is created. Explain the two things. What a startup studio is for people who don't know. And then what's your view of selling early, if a company of yours goes public, I think there's a big there's a bigger kind of framing here,
SPEAKER_01: which is a lot of investors, you know, professional money managers have tried to find ways to create what is called permanent capital, which is a vehicle whereby they can continuously make investments, decide when to sell those investments and recycle the capital into new investments, with the idea being that over time, they're not at risk of capital outflows, meaning investors pull their money out. And they're not at risk of, you know, needing to kind of go out and raise more money and they can they can share in the value creation as they grow their book value over time. Years ago, a bunch of hedge funds set up public reinsurance companies. Dan Loeb did this. What's his name? Einhorn did this. And basically, Bill Ackman did it. What they did is they set up a public company and you probably company a reinsurer. And then they use that that reinsurer to underwrite reinsurance. And when you underwrite reinsurance, you get all this capital that you can then go invest. And then the hedge fund manage that investment. And because it's actually a public company, it's got a balance sheet, the shareholders can't pull their money out, right? It's just got a balance sheet. And the hedge fund was managing that balance sheet, and you know, generating good returns. And this is effectively what Warren Buffett does. And everyone looks to Berkshire Hathaway and Warren Buffett, it's kind of the, you know, the key kind of long term here, which is, hey, look, if you can keep investing and keep compounding value, this thing can grow, you know, exponentially over time. So, you know, the way we set up the
SPEAKER_01: production board, I had the option of raising a fund and being a fund manager, I chose to set up the production board because I was much more interested in I think, the similar sort of vein of what Sequoia is saying, which is like, how do you become a longer term builder and a longer term holder and where you don't have these incentives to return capital, because you only get paid if and when you return capital. And, you know, and then you're kind of making these decisions to, you know, because your shareholders are saying, well, you had a good return quickly, give me the shares back and let me and mark your profit and take your share. And I was also more interested in look, the fact is, over time, there's always going to be opportunities to chase with the capital. So if we have a great gain, if something works out really well, we can take the gain, and we can reinvest that capital and building new things. There's no shortage of opportunities to pursue for the rest of my life. So that's why I set up the production board initially in partnership with alphabet. And then later on, we brought in, you know, Bill Gates and other Alan and co and other kind of investors that have a similar sort of mindset, which is like, let's just, if we have an exit, recycle that capital and continuously, they're not looking for a quick win, they don't have pension payments to make, right, they don't have a reason to distribute cash. And so same with me, like, I don't have a reason to take cash out. So the objective was just build this thing over time and grow value over time. And that's why I set it up the way I did. And I think it allows us to make, you know, really long term bets that are super risky. Most of what we're doing is super technical and difficult and maybe very hard to pull off, many of which are still after many years in a very early, very patient capital, patient capital, and also the you know, the preference for not trying to find exits. But I have found this I'll tell you one thing, I have been through a number of circumstances where I have seen businesses I've been an investor in or involved in, that have traded long term value for short term opportunity, meaning there's an opportunity to make a business that you can then go raise capital against, you change your strategy to do that, then you go raise VC funding. And now the business looks like it's working. But the 10 x or 100 x opportunity was taken off the table, because you ended up going down this different path that was a sure thing that was more likely to work that created value in the short term that allowed you to mark up your investment or raise capital against that. But you gave up the big long term thing. And I think that's something I've been trying to avoid with the structure. And it certainly makes sense with some of these other folks and what they're trying to do.
SPEAKER_02: So what we're getting at here, Sachs is decision making by capital allocators. And on behalf of their LPS, or letting the LPS make those decisions. Inevitably, the crypto world says, Well, why aren't you just doing this in a Dow? And you know, having some decentralized authority, make the decisions. I had Vinny Ling, I had a conversation with our friend Vinny Lingam after the Solana stuff and multiclint capital. And we were talking about Dow's for early stage investing or syndicates and just brainstorming, hey, is there a way to do this? And the problem I came to every time was, should a bunch of folks be making decisions who are not meeting with the companies or meeting with 2000 companies a year? What are your thoughts on a Dow? Representing sort of what we collectively do, but we all do it, obviously in different flavors?
SPEAKER_00: Does this actually exist? Yep.
SPEAKER_02: Well, there have been downs that have existed to vote on buying NFTs. So yes, for collectibles, I mean, I kind of feel like I'll let you know when it actually
SPEAKER_00: gets here.
SPEAKER_02: So open minded to it, but who knows? Yeah, but I mean, we talked about these things as if they
SPEAKER_00: already are here, and they're not quite here. I mean, technically, I know they exist, but people haven't really figured out how to use them to, you know, to be a fund manager. For example,
SPEAKER_04: I think David's right. I think the look, I there are these three immutable features of web 3.0 that we're going to have to figure out over the next few years. So the obvious ones are decentralization, right? That makes sense. The second obvious one is the level of composability, which means that you're plug and play with everything. But the third one is this idea of democratization and governance, right? And that's where Dow's come in. And David's right, we don't really know what the boundaries of that feature is. I think it exists in some small level scale. But we need to have many iterations of companies get built to figure out what it'll mean. So I don't know, I'm taking a pretty traditional approach, Jason, which is that, you know, it's kind of like a crawl walk, run strategy. Right now, I'm in the crawling phase. And I'm kind of saying how did web 1.0 and web 2.0 develop, and I'm trying to just copying it. So you know, in web 1.0 and 2.0, you needed companies like Sun Microsystems and Cisco, and, you know, all of the plumbers, foundational stuff to build plumbing for the internet, to
SPEAKER_04: allow the thousand flowers to bloom at the application level. And, you know, we had a very good reference model, by the way, for web 1.0. For most people, if you want to look at it, it's called the OSI reference stack. And if you actually look at that OSI stack, you can translate that to all kinds of value creation over the first, you know, two arcs of the internet over 20 years, trillions of dollars was created by just following each of those substrates. And in those transitional layers was where these great, beautiful companies were built. And I think similarly, we're going to do that again, but we need a different stack to represent what web three is. So yeah, you know, this week, we did something which is pretty straightforward, which was this idea that if you're going to build all these apps, you're going to need a distributed compute infrastructure, which means you're going to need very simple building blocks like remote procedure calls RPC, that exists in web 2.0. It's kind of a not something you don't really think about, but in web three doesn't exist. And so it's all this AWS, you know, GCP like infrastructure that has to get built. And that's what syndica does. And I think that's a really very interesting observation there,
SPEAKER_02: because everybody is trying to go to the application level and talk about the consumer experience. But before you even have the ability, you know, we're talking about cars before we've even made a transmission or, you know, that's exactly right. This is why crypto comes across as so delusional and strange. Sometimes they wrote 3000 ICO papers, none of them were about infrastructure, they're all about some sort of endgame. The thing is, it's a very delicate balancing act, right?
SPEAKER_04: You need a handful of companies that capture consumer imagination, right, that then incentivize all of the plumbing companies to come in and build underneath it, right? So it's a very, it's a very delicate balancing act, right? So you needed CompuServe in order to enable a bunch of companies, then you needed AOL in order to enable another set, then you needed Yahoo, then you needed Google. And in all of that, what happened was people were pulled through, right, you needed Amazon commerce, to justify AWS. So we're in that world where it's going to be a little back and forth where the pendulum will swing back and forth between consumer experiences that capture imagination get to some level of scale, that then create incentives for the developer ecosystem and the technology infrastructure to catch up.
SPEAKER_02: Zillow, which we talked about previously, became an iBuyer. What's an iBuyer? That means you buy a bunch of single family homes in all likelihood, like Opendoor and Redfin have been doing, and then you hope to flip them, maybe improve them and maybe lower costs to the consumers by taking out real estate brokers. This has created a lot of bad feelings amongst real estate brokers, a TikTok video trended a couple of months ago where a broker said or accused Zillow of buying up these homes in order to do price fixing and to corner the market on homes. Well, it turns out that Zillow which has an incredible CEO in Rich Barton and has done tremendously over the decades. According ahead of their earnings call this week, Bloomberg reported Zillow is trying to offload 7000 homes for 2.8 billion. That's about a 400k average per home. And Zillow shares dropped 37% this week alone from 100 to 66. Their market cap has dropped 9 billion throughout the week. And they're down 70% from a peak valuation of 48 billion just in February about six months ago. Zillow is going to reduce its workforce by 25% over the next few months, I'm assuming that's all those iBuyers anecdotally, a lot of what I'm hearing is they bought homes indiscriminately. The anecdotal stories that are breaking on Twitter and other forums with real estate brokers are they would look at a home, they didn't know that it had a noisy neighbor or it was near power lines or whatever the people who came in bought them indiscriminately, maybe too fast, whereas some other companies maybe Opendoor or Redfin were more considered. I actually had Glenn from Redfin on the pod not long ago. And he said it's a very hard operational business. You have to be very careful on what you buy in your entry price that seems to have turned out to be true. What do you think? freebird rich Barton, who runs Zillow is considered a
SPEAKER_01: legend in Silicon Valley. You know, he has been involved in some of the most successful internet companies. And you know, when he stepped back in as the founder of Zillow stepped back in to run the business a few years ago, it was viewed as kind of a second, you know, resurrection of this business, and he was going to take it into new areas. And then three and a half years ago, he announced the side buyer program, which everyone thought was such a, you know, incredibly strong move, and obviously chased Opendoor, which Chamath is involved in, and I'm sure we'll share more on. But it was such an obvious opportunity that if you could add liquidity to the real estate market, the residential real estate market, there's an incredible amount of value to be had. Now, the way that they wrote about it, when they talked about it initially, and then the way that they've kind of talked about in their earnings report this week was that they were trying to be a quote, market maker in the business. And it turned out that what they were really doing was being more of a speculator, right? A market maker looks at bids and asks in the spread and then tries to create a gap in that spread and make and take some share of it. And by adding that liquidity, the idea is the spreads can narrow and they can make money. In this case, they were looking at the historical velocity of selling prices of homes, and using that as a way to kind of project what was going to happen, which makes them much more of a speculator than a market maker. And they clearly got this wrong. And they're kind of quote unquote models on, you know, where a price is headed, ended up getting them in trouble. There's also the inherent conflict where they are now competing in a way with the brokers that generate a lot of revenue for them and are a big part of their core business. And they were clearly, you know, cannibalizing their own business where the Zestimate and some of the other scoring that they provide as a data and analytics platform to both sides of the existing market starts to get blown up because they're coming in and saying, we're going to put our, you know, our foot down and say, this is what the value is. And it inevitably kind of cannibalizes a core product that they provide to both sides of the market. So, you know, one could argue this was flawed from the beginning, the execution clearly was way off. And it begs the question, you know, where was leadership and kind of tracking what was going on here is these guys were buying homes at market prices that are well above what they were actually selling for in the market, no one was actually doing on the ground work. They were all doing kind of speculative models and saying, this is what we think will happen. And then they woke up way too late, and lost way too much money. I think they lost $300 million in the quarter. So, you know, really a lot of questions and a lot of challenges on this. I'm sure to not has a point of view on, you know, what makes open door distinct from from Zillow. But there's a really important kind of, you know, underlying here, you know, the maturity of a Silicon Valley entrepreneur who's crushed it so many times, it doesn't mean that they're perfect. And this was a big mess. You can go really too fast into a turn here. And clearly
SPEAKER_02: they flip the car. Shema, I don't know how comfortable you are talking about this. And you're very comfortable. Okay, well, then here we go.
SPEAKER_04: Number one, you know, I'm not on the board of open door, of open door, maybe tell us about your history with open door tomorrow could be
SPEAKER_01: super look, I look, I am one of the largest individual shareholders
SPEAKER_04: of that company, I think somewhere between three and 4% of the business I own. We, you know, I came to own those shares with a large investment, as well as through the transaction, where we merged one of our SPACs into it and took it. Yes. A couple things to say. The first is about the CEO and
SPEAKER_04: founder of open door. Eric Wu is special, special special. So let me just leave it at that. On that topic. The second is, I think that Rich Barton is very special. But it speaks to two big mistakes that Zillow made. The first is that catching a wave of disruption is very difficult when you have an old line business that is fundamentally competitive with the new line of business. And Zillow, as David said, had this thing called Zestimate, whose entire job was to directionally drive top top of funnel traffic into the rest of their media business. Now imagine you go to a website to look up your house value or somebody else's house value. accuracy is a bug. The feature that makes this estimate work is an highly inflated house price. Right? Like if you go and you see a crazy house price number, that's interesting. That's more click worthy than if you go in there and it shows some depressed value, you think the site sucks. That's the unfortunate psychological reaction. So I think whether we believe it or not, or whether Zillow knew it or not, Zestimate over time, basically calcified this idea of price inflation. So the accuracy was never a goal. So then if you take that business, and then you try to orient it towards home buying, and you use probably Zestimate or some version of it to underpin how you buy and take risk, it creates a lot of risk. And I think this is essentially what played out where they were over buying homes, and they didn't know how to price this stuff accurately. So you know, my partner Ravi tweeted this out, but you know, the open door margin on average is about 10%. The Zillow margin on average was 3%. So they had a much more razor thin margin of safety here, which again, speaks to pricing. And then it speaks to this third thing, which is that if you start doing one thing and do it really well with software, the gains over years really compound. And so when somebody else shows up and tries to pivot their business to try to copy it, it's very, very difficult. The classic example is Google versus Yahoo. Yahoo had a beautiful directory driven business. But when Larry and Sergey really Larry invented page rank, and then invented that first version of a Google search index. As we saw it play out over the next 10 or 15 years, it was impossible for Yahoo to really invest the technical, the technical capital necessary to catch up with Google. And every day and every week and every year, as freeboard talked about last week, those technical gains compound and compound and now Google is completely unassailable with respect to search. I suspect we will look back and the ability to accurately forecast price and volatility and the ability to sell these assets at a defined margin of safety in a predictable way is something software can solve. And it seems that open door is the first doesn't necessarily mean it'll be the only one. But it has an enormous head start now. And as long as they can keep iterating, those gains will compound. So that's what I think. I just think this is a wonderful business, run by an incredible CEO to wrap up this Zillow story, Sachs. Any
SPEAKER_02: thoughts on, you know, to Matt's point here, you know, you're the rating agency, and you add this business and the business might be orthogonal to the existing money printing machine on a strategic basis. What do you think? Any lessons or mistakes here? In terms of when you handicap Zillow? Or do you want to just move on and talk about I mean, look, I'm a I was a seed investor and open door because
SPEAKER_00: Ravi invited me to the seed round. So, you know, I'm a little biased here. But I think it's pretty obvious what happened. Zillow tried to copy them, the business is much more operationally complicated than they realized it's a low business, low margin business with the top, which requires a ton of capital. So if you're off a little bit, the losses can be huge. And Zillow couldn't figure it out. They underestimate the difficulty. That's what frequently happens when a big company tries to copy a smaller sort of upstart company. So I mean, that to me is what happened in a nutshell, quite frankly, we're an hour into this pod, and we haven't discussed issues, any issue that I think is broadly relevant to most Americans. I think this is one of our worst episodes, we're gonna bore everyone to tears. I frankly don't understand what the you're doing. I don't even know why we have a topic list. When you start pulling out your ass like dowels. And I don't know what the hell's all right. All right. Fine. We'll talk about politics. The
SPEAKER_04: doubt question sucked. All right. I'm just giving you the
SPEAKER_02: opportunity.
SPEAKER_00: That we shouldn't even be talking about cut it out of the show. Cut it up. So should we cut Jesus Christ? episodes you ever done? Yeah, I agree. I think we should cut all
SPEAKER_04: that. Jason, I about Jason, I agree that that part where we cut it. That's all right. Fine. You got some loser. I'm trying to give you guys the benefit of the doubt to just because it was
SPEAKER_02: like, no one cares. All right. Fuck. Calm down, everybody. You want to talk about politics? We talk about politics. Okay, sacks. Go ahead. Tell us about the election.
SPEAKER_00: Okay, I'll just rattle off some of the key results here from blue states. We have a woke lash going on all across the country. That's the important thing. In Virginia, a state that Biden won by 10. He's cranky, huge upset Republican Glenn Youngkin beat Terry McAuliffe, a former governor there. He was this was a huge upset. McAuliffe was supposed to win. Youngkin won 5148. So that's a 13 point swing. Versus where Biden was just a year ago, in New Jersey, a state that Biden won by 16 points, the Democrat held on to it, but only by 1.5 points. And I bet you anything, the RNC is kicking itself. They didn't give any money to Chatterilly, who's the challenger, who I think almost who came very, very close. And there were down ticket seats that went Republican. So the the this is really interesting in South Jersey, which is a blue collar bastion for Democrats. Sweeney versus Burr.
SPEAKER_04: That's right. The Democratic State Senate leader Steve
SPEAKER_00: Sweeney lost to a truck driver named Ed Durr, who spent a grand total of $153 on his campaign. Okay, so those are some and then we had some writing, like he was printing on
SPEAKER_02: the list to say, write me and I think I don't think is a writing
SPEAKER_00: but but in any event, so so implications for 2022 Dave Wasserman of Cook political report calculates somewhere between a 44 and 51. See game from the GOP. They only need five seats to win the majority. So it's looking very bleak for the Democrats in 2022. And then I think you also had some very interesting local elections. In Minneapolis voters rejected a proposal to defund the police with 56% of the vote. They there was a ballot proposition to change the police department into some sort of larger public safety group voters were having none of it. In Seattle, which is a very liberal city, they voted for a literal Republican as city attorney, which is the office of prostitutes misdemeanors. So they against a police abolitionist who said she would stop prosecuting misdemeanors.
SPEAKER_04: You're forgetting that in Virginia, it wasn't just Glenn young and that one but basically it was Terry McAuliffe. And then a lieutenant governor who was some milquetoast individual, and an attorney general candidate who was caught in blackface, which by the way, there is no more racist thing you can do just to put gill at you guys that everybody should know all the non colors. Okay, guys, please don't do blackface or brownface. It's such a bad it's not it's not right. It was a
SPEAKER_00: sweep. So the lieutenant and youngkin and it was a it was a
SPEAKER_04: black female lieutenant governor and a Latino attorney general. That's right. And they swept right. That's right. That's
SPEAKER_00: right. So the lieutenant governor was Winston Sears. She's a black woman Republican. If you've seen the photo of her, she's frequently photographed with a giant assault rifle in her hands. That's her and then a Hispanic Attorney General Jason Miyari is one as well. So yeah, it was a huge sweep. And then, you know, in Long Island and Staten Island, which again, are blue counties, you had two republican prosecutors beat the local sort of incumbent democrat decarceration. Red, just, I think I think this is very clear, which is Trump was
SPEAKER_04: behaviorally extreme. And after four years, people were sick of it. Nobody wanted that behavioral extremism because it was unpredictable. And people felt frankly in danger. And I think that that was legitimate. He also turned out to be extremely lazy and probably pretty dumb. Now what we're realizing is the different form of extremism, which is policy extremism will also be met with the same response, which is that you you can't sustain election results and wins, right. So people care consistently about three things. They care about the economy. They care about the education of their children, and they care about safety. And the thing that Glenn Young can did, which I thought was at least a playbook for centrists and the right. And it's also a playbook for the democrats, if they choose to embrace it is to understand that these things are reaching a tipping point where, you know, again, we've said this before, it is possible to live in a state of mind where you believe in Black Lives Matter, and you believe in law and order, right? And and when you try to pit those two things against each other, for example, like, you would have thought the one place where they would have basically defunded the police in its entirety would have been Minneapolis after George Floyd, but instead, even they drew the line and said no, or New York,
SPEAKER_04: or New York, there was a there was a really compelling quote, actually, by this woman, I think it was in the New York Times. And what she said was, I didn't elect Joe Biden to be FDR. I elected him to tack to the middle, and just calm things down so that everybody could exhale so that we could reset. Same with me. And what's that was Abigail Spanberger.
SPEAKER_00: Actually, she's a Virginia Democrat. Yeah, she's a Virginia Democrat who won a seat in one of those blue counties that just flipped red to vote for young kin. And since she got elected, I guess she got elected last year. She's been telling the Democratic she's the one who called out Pelosi in that, you know, caucus meeting, saying I don't ever want to hear the words defund the police again, that is electoral poison. And then she said, Yes, nobody elected Biden to be FDR, they elected him to be normal and stop the chaos. And so yeah, certainly my vote. Yeah, there's a big backlash going on, because Biden has decided to start governing like Bernie Sanders. No one elected him to do that. So Sax is the lesson Dems learn learned this time around is it's
SPEAKER_02: very easy to beat Trump, but it's very hard to beat a moderate Republican. No, no, it's not that it's like you just have to be a rational
SPEAKER_04: normal person. That's what I mean by a moderate Republican.
SPEAKER_02: Well, you just have to be moderate. I don't think it
SPEAKER_04: matters. But this is the key takeaway dams, it was so easy
SPEAKER_02: for them to use Trump, you know, but these three topics are not
SPEAKER_04: a Republican tentpole nor the Democratic temple. They are the tentpole of reasonable people. Yes, meaning, which most people are reasonable. Hey, guys, get out of the way so that we can, you know, have a reasonable life in an economy. Hey, folks, please make sure my kids when I send them to school for eight hours a day, come back reasonably educated, and please keep my streets safe. And I'm not really willing to decarcerate ad hoc to such a degree that all of a sudden crime gets out of control. Those are not Democratic or Republican tentpoles. Those are just moderate centrist rational things to believe in. Yeah, being and also behave normally, like I think whatever
SPEAKER_02: happened with these progressives where they couldn't pass, you know, the stimulus bills, and things that almost everybody agreed on. Glenn Youngkin was not behaviorally extremist. Yes.
SPEAKER_04: And and from a policy perspective was pretty much down the middle. Eric Adams, Eric Adams is not behaviorally extreme. And he is politically down the middle. The mayor of Buffalo who got reelected is not behaviorally extreme. And he's politically down the middle. Do you start to see a pattern here? Yeah, nobody wants AOC, Bernie, Elizabeth Warren or Trump. I
SPEAKER_02: think it's not it's not a question of AOC or Bernie or
SPEAKER_04: Trump. It's just that right now, the temperature of America is let's just all exhale and just recenter ourselves as a country. Yeah. And so moderation and centrism is actually what calls for today. I don't know how to predict what happens in 15 or 20 years. And maybe AOC is the canary in the coal mine for where the country goes by a plurality of people in 15 or 20 years. But what's clear is it's not where it goes today. And I
SPEAKER_04: think that we it all behooves us to just take a real step back and exhale and just read the tea leaves because every single thing that the democrats tried to do to sort of like make this extreme really didn't work. The race baiting all of that stuff really kind of failed. And I think that that's important to listen to, you know, because you had a lot of black Indian Chinese families that just showed up Hispanics, you know, that again, reliable democratic voters and voted for Glenn Youngkin in a way that was surprising to me, right. And then so if you compare New Jersey and and Virginia, Biden won Virginia by 10. He the Democratic nominee lost Biden won New Jersey by 16. And Phil Murphy barely squeaked by was like 10,000 votes. Jersey's always had a republican kind of
SPEAKER_02: leaning group. They're very to buy one by 16. They should have been a cakewalk. But I think that 16 how much of that is get Trump out of office is what we I think the democrats need to parse and I blew it by radical we're repudiating behavioral
SPEAKER_04: extremism and policy extremism. So I think we just need to realize rational normal, chill people who can do reasonable things get our kids educated. So for example, on the education front, I don't know if you guys saw this because I tweeted and you can put this Nick in the group chat. But in California right now there's a battle over math class ridiculous, right? Where the title I'm just going to read the title because it sets it off California tries to close the gap in math, but sets off a backlash proposed guidelines in the state would de emphasize calculus, reject the idea that some children are naturally gifted, and build a connection to social justice. Critics say math shouldn't be political. Well, of course, the way that those articles always written, it's always about the
SPEAKER_00: backlash, you know, they don't talk about what what the people in charge are trying to do to basically degrade the curriculum. Of course, there's a backlash because parents don't like put the people on these school boards are doing. This was the sleeper issue in Virginia was the school board issue. You had the parents were already angry that the teachers unions that kept the schools closed for a year and a half during COVID. And while their kids were at home, you know, work doing classes over zoom parents got a good look at what some of their kids were learning. And then like what they saw. I mean, we're talking about lessons plans that incorporated CRT. And you know, the 1619 project view of America, singling out kids by their race, making them focus on difference. And then there were some, you know, rather explicit materials at young grade levels about, you know, LGBT issues. And so this led to a whole bunch of confrontation with the school board meetings where parents of all races objected to you know, the least lesson plans for their kids, and the school boards and administrators just dismiss their complaints out of hand. And you know, their message was, well, we're not teaching CRT to your kids. But if we were, it's a good thing and only white supremacists would object. So you know, that
SPEAKER_00: was sort of what was happening in the background. And then McAuliffe comes along and makes this gigantic gaffe in the last debates about two weeks for the election where he says, I don't think parents should be telling the schools what to teach. And what? Yes, this is the customer. No, he said that he said that on
SPEAKER_04: a debate. And he said that debate about two weeks for the
SPEAKER_00: election, McAuliffe was leading through this whole thing until that debate, where and this was sort of a Kinsley gaffe in the sense that you know, Michael Kinsley said a gaffe is when a candidate inadvertently says something true. You know, this is mccall's view is that the teachers union should be controlling the schools, not the parents. Well, yes, so this is what young can jumped all over all of his ads in the last week's campaign really focused on this issue, you know, poor gasoline on a fire. And then the most tone deaf thing McAuliffe did is he had Randy Weingarten, who is the head of the big teachers union come in and campaign for him at the 11th hour. Well, of course, that's not going to save him because people are sick and tired of the teachers unions. So that's what he did. So, you know, this was basically the big sleeper issue CRT in the schools in Virginia. And, you know, this is this, I think, specifically, is what the Democratic Party has to wake up to is that these progressive ideologies are not
SPEAKER_04: popular. The other thing I'll say about Glenn Youngkin is that this is another thing that the that the Republicans should hopefully pay attention to, which is you can look normal, act normal, be conservative, you know, this is not an extremist in any way. This guy was the co CEO of Carlisle, which is a huge and very successful private equity firm. So this is a very rational, reasonable person who, you know, didn't embrace anything that was really that pro Trump. And that should be a real wake up call to the Republicans, which is, hey, let's just run a fleet of normal people.
SPEAKER_00: I think what you saw, I think, Jamath is right that what you saw in Virginia is that the playbook that Gavin Newsom just used to defeat the recall in California did not work in Virginia, which is he tried to paint young kin as a Trump proxy. And young can very definitely, you know, avoided that he got Trump's Yes, he got Trump's endorsement. But very early in the process, he did not have Trump come to the state. And you'd have to say it also helped young can a lot that social media that Trump wasn't all over social media because he's been a Trump victim. So you know, in a weird way, Facebook and Twitter deserve an assist here, because they help keep Trump out of the Virginia race. So, you know, this playbook that that Newsom defined that would work very effectively from California, which is simply to keep running against Trump. I think Democrats thought they'd be able to win elections for years based on that that playbook didn't even last two months. So you know, so I think Democrats are gonna have to find a new playbook here.
SPEAKER_02: So Friedberg on this California issue around education, one of the key or most controversial concepts is D tracking. In other words, instead of having high performing students go to a high performing track, and then everybody else stay behind, maybe keeps in not all cases, but keep some of the students together because there is some research that shows if done right, if you track people together, the higher performing students will pull up the ones who are slightly behind. Other people say we're basically throttling people who could be the next Einstein or the next world class leader in science, math, etc. Any thoughts on the concept of D tracking since I'm assuming you were in the high speed track in science and math?
SPEAKER_01: Maybe we should get rid of like, JV and varsity sports teams as well. And you know, AAA baseball and Major League Baseball as well. And you know, any distinction of performance, or exceptionalism goes away. You know, and that is kind of the key social question is, are we going to give up exceptionalism to minimize the distance between the average and that seems to be what's happening makes people makes people feel bad. But I
SPEAKER_01: said this point before, you know, we're doing it when we try and think about, you know, the billionaire tax or what have you, as soon as you start to limit progress, you reduce inequality, but you limit progress. And the same will be true, not just in science, not just in business, but also in sports and athletics and, and any other kind of system, where you will have exceptionalism, you will have an average, you will have a distribution amongst human performance. And as soon as we try and limit the difference in that distribution, we move the entire curve to the left. Here's the counter
SPEAKER_02: Friedbert. What some studies have shown is yes, you will throttle the high performers. But we're seeing along race lines, certain demographics being left behind other ones excelling, and that you can get? Yeah, it's an ethics and values
SPEAKER_01: question, right? Like, do you think that individual freedom and the opportunity to pursue your opportunity, your your, your exceptionalism should be taken away from you, such that others who aren't as exceptional as you are given, you know, greater progress than they would have had on their own. And that's the key crux of what all of these social systems are grappling with, whether it's in sports, or business or finance, or, or, or education, is what's the right thing to do? And that ethics question is going to be defined by the social agenda of the moment. And you know, the means of the moment and what we all think is the right thing to do. And it's different all over the world. And it's different within political systems. But it's a very divisive point that I think folks who find themselves on one end of that exceptional spectrum in different aspects are going to have one point of view and folks on the other end of that exceptional spectrum are going to have other points of view. And everyone's going to be sensitively tuned to where they fall in that spectrum. I will say one thing, though, on that spectrum, exceptionalism is rarer than the average. Therefore, it is likely the case that over the next years and decades, we will see the the idea that we should remove exceptionalism in business and exceptionalism in education exceptionalism in sports, because it benefits the majority. And, and no one kind of recognizes and a lot of folks don't recognize the progress that is made by exceptionalism. And, and that's, and then we're gonna wake up one day and be like, Oh, wait a second, we don't have the best sports teams winning all the gold medals, we don't have the smartest kids, we don't have the best businesses, China and Europe and Brazil and whomever else the emerging markets are going to India are going to start to have such a good point. I think this is a very old debate. It's the debate between
SPEAKER_00: equality of opportunity and equality of results. Yeah. And the progressive left is absolutely obsessed with equality of results or outcomes, which they now call equity, which is we're going to take people at the finish line, and we're going to move them around, we're going to redistribute the outcomes to achieve a more proportional representation or something more fair as opposed to giving everybody as much opportunity at the outset as possible. That is the fixation right now. That is why they're taking out advanced math in the schools, they're trying to level people, it's not going to work, it doesn't lead to a more, we want to have an exceptional society, where I think we should be focusing is creating as much opportunity for everybody. The way to do that would be to let every child go to the school of their choosing, so that we would stop trapping kids in bad schools. But back to bring this back to the election for a second, because I think it was a very clear repudiation of this progressive mindset. And I think there's essentially two sets of reactions to it. If you look at sort of all the left wing commentators, the one who I thought seemed to get it the most was CNN's Van Jones actually had I thought, you know, a rare moment of introspection where he said it was this was the results were a five alarm fire. He says a big, big wake up call for the Democrats to stop annoying voters with woke pectoring. He actually advised Biden to start triangulating against the left in the way that Bill Clinton did. I mean, which is something that I've been suggesting on this, this pod. So you're saying something super important. The game theory now
SPEAKER_04: is for Biden to put to the test, the progressive left because now he can go firmly to the center. And he can put all of the pressure on the progressive left in the house and Warren and Bernie Sanders in the Senate. That's the first thing he should do is he should he should pull a
SPEAKER_00: sister soldier on Bernie Sanders. He can't keep delegating the domestic agenda to Bernie Sanders. He if he wants to save his presidency, he'll start triangulating in the way that Bill Clinton did. I'm not sure he's going to I think there's already a misperception that the reason why they lost selection is because they didn't deliver the goodies in this house reconciliation bill. That in other words, I think the public cares about the goodies. I mean, they care about this
SPEAKER_02: normalcy and centrism. Yeah, there's a part of the
SPEAKER_00: democratic base that does want the what's in that house reconciliation bill. But but here's the thing. Democratic turnout in this election was extremely high. The Democratic turnout for McAuliffe was higher than the Democratic turnout for years ago for the Democrat who won the turnout that in New Jersey was higher than what Murphy got four years ago when he won. The problem the Democrats have is that Republican turnout was extremely high, even without Trump, showing that Trump doesn't matter that much to turn out. And the independence came out in a big way for Republicans. So this idea that Democrats can just win elections by delivering, you know, programs for their base, that's not going to work. So I think that's a misperception. I think Van Jones has the right idea they need to triangulate. But you turn the channel to MSNBC, and they were just blaming the whole thing on white supremacy, basically hysterical. Just on the D tracking thing. This shows
SPEAKER_02: to me a severe lack of creativity. You if you look at what happened in the NBA, they had this developmental league, which they didn't kind of run then became the G League. They now have the ability to bring players fluidly from the Warriors G League team up to the Warriors or the Knicks team up to the Knicks. What this means is, you don't have to say there's two different tracks, and the two never shall meet in the season, they can move up and down. In math. A very easy solution to this would be to have the high track for high performers have the regular track and then spend with all this money we have, say, Hey, every school is going to be open from three to five o'clock, four days a week, if anybody wants to attempt to get into a higher track of math, just stay after school for two hours, anybody can go and get one on one tutoring, and just double the number of teachers, the whole
SPEAKER_00: country wants excellence. They don't want leveling, they don't want equity, they don't want a quality of results. They want to have a quality of opportunity. They don't want people to move up. They do want to see that's true. And that's students and
SPEAKER_02: immigrants do better at math. That's what you're missing. Yes.
SPEAKER_00: And that's about equality of opportunity. Absolutely. No, it's not just about equality of opportunity. They're so far
SPEAKER_02: behind statistically, that you need to do something new. What we're doing is not working, David. That's why people are picking this bad decision. They're there. They are
SPEAKER_00: eliminating advanced advanced math because they don't want to actually look at the problem. What do you see the problem is?
SPEAKER_02: Well, if there's an under performance is turning group,
SPEAKER_00: then you should work hard to raise them up, not eliminate this subject. Give me a suggestion. charters and school
SPEAKER_00: choice. Okay, look, if you're if you're going to define structural racism, as conditions that trap people of color in poverty across generations, seems like a pretty fair definition, then you have to say the number one cause of structural racism is the school system. School education. Yeah, it's the school system. Because we know poor kids are trapped in schools that aren't very good. Why? Because they're controlled by the education unions. They don't have a choice. They don't have money. So who is making that argument on the side of the left? No one Why? Because everyone knows the unions, especially the education unions are the number one donor to the Democratic Party. So the democrats won't even look at this problem. All this is the way is the white supremacy could
SPEAKER_02: build their base is by saying we want to fix education. That would be if you they are young and distant Virginia, by the way, 55% of Hispanics in
SPEAKER_00: Virginia voted for young kin. So minorities are shifting on this issue. These are the new quality of life issues. If young can has a
SPEAKER_04: good four years in Virginia, he can run for president and crush this thing. Can I show you just one chart and then we can get off the
SPEAKER_00: politics thing, which is it was this chart from this guy, Patrick Raffini, who's a pollster. And I think it really illustrates the problem that progresses the Democratic Party for the listeners. Okay, so what this chart shows is, it basically shows where the Democratic Democratic Party is in the Senate Republican Party is in relation to the center of the country. Okay. And basically, as you'd expect, in a democracy, whichever party is closer to five wins. Okay, so in 1994, when Bill Clinton was president, the Democratic Party, the center of it was smack dab as five, the Republicans weren't that far away, they were six. So the party even though there is a lot of partisan warfare, the political differences actually weren't that great. And Clinton, I think more accurately found that dead center. Okay, fast forward to 2004. So George W. Bush is president now, the Democrats are at four, Republicans are at five. That's why Republicans won. Okay, now, go to 2017. This these poll numbers he did, and this is a few years ago, the Democrats are all the way at two. Okay, and the Republicans are six and a half. So it's true that both parties have moved away from the center. But Republicans are one and a half points away from the center, whereas Democrats are three points away. So the Democrats have actually moved further away from the center. If you look at who are the activists in the Democratic Party, who is the base? Who is the energy? Who does all the work? Who does the contributions? It is the progressives, right? This is why McAuliffe ran as McAuliffe is not a progressive. He was the Clinton Democrat, you know, going way back to the 90s. Okay, he was Bill Clinton's, you know, right hand man in the party back in the 90s. But he nevertheless ran as a progressive in Virginia, who supported the teachers unions. Why? Because he was appealing to the base of the party. Gavin Newsom did the same thing in California. Gavin was never a Bernie bro. I mean, he's always been liberal, but he he has moved very far left. And Biden has moved very far left as president. Why is that because the base of the party has moved very far left. So unless that gets fixed, I see the party's base, but not the country's
SPEAKER_02: Exactly. So you're going to need a strong democrat who can
SPEAKER_00: basically give the Heisman to that part of the base. Or they're going to keep losing elections. I think this could be a republican decade. I know it doesn't seem like it right now, because you had Trump and the republicans lost but look how quickly the republicans turned around their electoral fortunes. So it's Trump on the sidelines, then that's just a
SPEAKER_02: yes. If Trump is the nominee in 2024, all bets are off. But in
SPEAKER_00: 2022, he's not the nominee. He's still censored from social nowhere. He's really nowhere in sight. And people, people have a
SPEAKER_04: very short memory, it turns out they've moved on very quickly. Young can check the box because he felt he had to to get the nomination and to run on the republican platform. But then you think young is going to talk to Trump once? No, not once. And
SPEAKER_00: I think and I honestly think this election is going to help republicans move past Trump because what republican believes in in like that the electoral system is rigged now. Right? I mean, all these blue cities and states just delivered big results for republicans. So where exactly is the ballot stuffing? Where exactly is the stall? Where are the stolen elections gonna that's gonna stop now to they're gonna stop
SPEAKER_04: overnight, right? Because I mean, by the way, Kristen
SPEAKER_04: cinema probably knows it's like, you know, the the funny thing about all of this is when Peter Thiel put in $10 million into this pack for Blake Masters, who used to work for him, and said, you know, in Arizona, I'm going to run this guy against you. Cinema tacked hard to the center instantly. So she she knew to get well, so just just a small point of correction. Blake is
SPEAKER_00: running against the other guy, the astronaut guy spacing out his name, but but yeah, but but cinema is up, so to speak, in the next election cycle. So she's got a little bit more time. But you're right, like cinema is attuned and mansion is attuned. There's some of the few democrats that are tuned to where the center of the country is. You are mentioned in the wake of this election said this is a center right country, these guys better wake up. You know, they should really now look, I think I think what's going to happen in the wake of this election is that this infrastructure bill is going to sail through. Because one of the crazier things that the progressives were doing was holding that bill hostage. It might have helped McAuliffe. I don't think what a I don't think McAuliffe would have won, but it might have helped him by a point or two if they had gotten that infrastructure bill done, because a lot of those programs are gonna be popular in a state like Virginia. Okay, but I mean, but but I think that, you know, this house reconciliation bill, they just seemed hell bent on jamming it through with all these tax increases. I don't think that's not popular. You know what the big issue in New Jersey for them? Yeah, one of the big issues in New Jersey, where you almost had this upset within one point was taxes. You know, there was a gaffe by Murphy, who said something like, you know, he said, he said that if taxes are someone's chief concern, he said, quote, maybe we're not your state, can you imagine that? Wow. And he almost lost the election because of that. So I don't think all these big tax increases are what the country wants. And, you know, if Biden insists on allowing Bernie to dominate the agenda and Warren, I think it's gonna you're gonna see 40 to 50 seat losses by the Democrats in 2022.
SPEAKER_02: Okay, moving on to our final topic. Crazy update out of China, a research team has developed a method of converting carbon dioxide into starch science magazine published this paper from a research team 100 grams of catalysts converting five grams of co2 per hour into starch. And freeburg, I saw you tweeted that this is 10 times more efficient than corn plants. What's the impact of something like this? Could it hit scale? Would it have an impact on food security, carbon, global warming? Yeah, so I tweeted this paper out because it's just it's
SPEAKER_01: a fantastic demonstration of what's possible in this new emerging, not emerging, it's been around for a long time, but kind of, you know, in the state of art in, in bio manufacturing, you know, photosynthesis is the system by which most starch is produced on planet Earth today, that is plants convert sunlight, and use water and carbon dioxide to make starches and starches and sugars, which are what carbohydrates are, account for 60% of human calories, and we get all those calories from rice, wheat, potatoes, which, you know, are grown on about 60% of our acres that we farm on planet Earth. So, you know, in plants, there's a series of these chemical reactions. And what these guys did is they isolated and created a couple of specific proteins, which are a class of proteins called enzymes. And what an enzyme is, is it's a protein that can take different molecules and combine them and reinforce them to react and make something new. And they identified a couple of enzymes and engineered a few enzymes and put them together in a cell free system, meaning there's no cells involved. It's just a tank with a bunch of fluids in it. And, and they stick in some carbon dioxide that they can suck in from the atmosphere and they they can and they have to drive it with some hydrogen gas, which we can just get from water. And the system basically converts that carbon dioxide into starch, which is being done at a rate that's almost 10 times higher than what we see with with corn plants. So it's an incredible demonstration. There's there's several steps to the system, like six steps. And I did some back of the envelope math and my back of the envelope math on what they've demonstrated. And by the way, everything they did is publicly available for reproducibility. So people are going to try and resource open source, so people are gonna try and copy this now. But my back of the envelope math is, you know, this system can produce about 10 grams of starch per liter per day, which would mean it would take about 2.7 trillion liters to suck up all of the carbon dioxide that all of humans are putting in the atmosphere every year from all of industry that would require about 27 million tanks that are about 40 feet tall and about eight feet wide. That whole all of those tanks could fit in an area about 25 by 25 miles, you could attach one nuclear reactor to it to suck up the the water and convert it into hydrogen gas and feed the system. And those tanks 25 miles by 25 miles would take out all of the carbon dioxide on planet Earth and convert it into usable starch. And that starts by the way, that system could be tuned not just to make starts for consumption, it could be used to make biofuels, it could be used to make bio plastics, it could be used to make anything that's hydrocarbon based. And so you can kind of think about this being the entry point to a series of production systems that we could use to make stuff.
SPEAKER_04: Freeburg, why did they open source it?
SPEAKER_01: So they're a research team of scientists from China, and they've been iterating on this this process. This isn't the only process, right. And so what they're showing is that this is possible. And what I think we will see is a lot of people rattling their brains now saying, not only do we use proteins and enzymes that we find in nature, but we're going to start to engineer our own proteins and our own enzymes that are even more efficient than what we see in nature. And that's what's starting to happen. This system alone, what I just described this 25 mile by 25 mile system, which is tiny, is the equivalent of starch production from 42 US corn belt. If you took all the corn growing in the United States, it's 42 times that is what it would produce. That's my back of the envelope math of kind of what these guys did. And so I think what they're showing is this is what's incredibly Yeah, yeah. And then the implications, we could go in 100 directions, and we could talk for an hour about what this means and what you could do with it. But I think it really catalyzes this point that that that we're kind of everyone's always like, how are we going to get all this carbon out of the atmosphere? What are we going to do with this? Where there's a will, there's a way the science is here today, 27 million tanks made out of plastic, you could probably get that stuff produced you know, a couple billion dollars, find a piece of land that's 25 by 25 miles, it's near some water and put a nuclear power plant there. And you could suck up all the co2 in the atmosphere. Anybody want to take anyone but I want to take a guess of how
SPEAKER_02: many people on the team were in advanced math courses.
SPEAKER_04: The funny thing about this that I think is really interesting is that it came at the same week where we were ending, you know, what was this political theater of COP 26? You know, Greta thunberg, who's, you know, how dare you? How dare you? She had this she was she had this very funny comment, which is like, you know, it was a bunch of corporate nonsense and the same old blah, blah, blah was the description of COP 26. You know, we had this great trickle of like, you know, agreements, there was like, on Monday, there was an agreement to stop deforestation. And then you realize it's a non binding agreement. And you're like, Oh, okay, well, I guess we're not going to stop deforesting. We're just going to keep doing that. And all of this stuff just kind of like took a lot of my enthusiasm. And I was a little despondent about what was going on. And then when I saw this thing, I was I was really quite impressed. I will say that there's a very tricky thing happening right now, which is that developing countries basically said, Listen, if you want us to go after climate change, we want $1.3 trillion a year to support us. And so you know, the Western world will have to figure out whether we're willing to pay, you know, what is the equivalent of, you know, six or 7% of US GDP to a whole bunch of other countries every year for them to slow down. And if we don't make these payments to India and China and a bunch of other developing nations, they they have said, we're just going to continue to do what we're gonna here's an idea, take half of that money
SPEAKER_03:
SPEAKER_02: and put it towards science. Yeah, take half that money and
SPEAKER_01: go build a plant that uses this system that was just demonstrated and put it in South Texas, and suck up ocean water and convert that ocean water into hydrogen gas, great jobs, by the way, ocean water can be turned into hydrogen gas by running electricity through it. So you're putting a nuclear power plant to make the electricity, you run it through ocean water, you create hydrogen gas, you pump it into these friggin tanks, and it sucks up all the co2 and it makes stuff that humans can consume and that we can use. And suddenly you have this abundance of material, you have this abundance of food, and you can turn this and jobs and you can turn this into a lot of different things. And you know, this kind of goes to the point I've been making for a while if we want to invest in infrastructure. This is the sort of thing that both solves climate change, creates jobs and has extraordinary economic return potential built into it. So how does it get politicians reelected? You know, I think the
SPEAKER_01: private market may come after this stuff. I'll be honest, I'm you know, I'm like, I'm talking to people looking at this being like, why don't we make a plant that we can make biofuels and bio plastics and food and other stuff out of this, this technique. And there's going to be other iterations of this technique. But it's such a no brainer cost like a functional
SPEAKER_02: prototype of this. Like a small prototype? Nothing, right? I
SPEAKER_01: mean, a couple million bucks. Yeah, like nothing. So um, you know, the other thing that happened this week, beyond this
SPEAKER_04: request for $1.3 trillion is that, you know, we're now seriously considering carbon tariffs. And we talked about this on a pod before. But you know, I've said, I think this is the most disruptive thing in the capital markets and geopolitics that can happen in the next 10 or 20 years is an effective carbon tariff, which is to say that when a good or service enters the borders of a country, they will levy some tax that they think represents its drag on the environment. And so you know, the simple example would be a car, you know, you make a car, you make a Tesla in Texas, but the minute it crosses the border to Canada, Canada says, Well, here's the true carbon intensity of this car, all of the energy that you put into the aluminum, to the batteries, you know, to the to the buildings where the engineers sat that were that we're building FSD. And, you know, I'm going to charge an $8,000 tax on this car, or iPhones coming out of China.
SPEAKER_04: Yeah, that's happening. I think that's coming. So I think that you know, the combination of tariffs, and these transfer payments is going to create a real economic incentive for folks to make these kinds of big technological leaps. So I'm pretty bullish on all of that. I'm less bullish on politicians ability to organize because unfortunately, again, this is the first time I really paid attention to cop. And it just looked like a bunch of really, you know, you know, it's just a lot of political theater. Sax is this a science conversation about saving the
SPEAKER_02: planet do anything for you? Would you like to get back? I mean, I think it's the way to solve the problem is you have
SPEAKER_00: to figure out new technologies to actually take carbon out of the atmosphere, because you're not going to do it through, you know, these political programs. I mean, you know, China, India, paying them and other developing nations 1.3 trillion a year. I mean, foreign aid already is one of the least popular parts of the government's budget. You're going to now pay 1.3 trillion to these countries so that they it's nonsense and you're going to pay put that money into our education system. Nobody's gonna stay in technology that solves the problem. Nobody's
SPEAKER_02: gonna stand for that. Yeah. And you know, the the taxes
SPEAKER_00: are education system, right? Pour it in. Yeah, I don't think
SPEAKER_00: there's a political solution to this problem. That's gonna be palatable to people. I think it's gonna have to be solved through new technology. Now, let me ask you a question.
SPEAKER_02: freeburg. They said there's a six step process. Given your experience building science and technology products. Is it possible for each of those six steps to get but 20% more efficient a year? Yeah, look, I mean, I just say that to
SPEAKER_01: describe that there's a series of steps in the system that you know, but at the end of the day, this is a demonstration of science that has been, you know, probably funded to some small amount. But you know, if you start to iterate on this approach, and think big picture and think infrastructure solution here, there's a lot of room for improvement, I'm sure. So in other words, your back of the envelope 25 by 25 mile, if
SPEAKER_02: this is getting 50% more efficient, 25% more efficient year over year, we could see it becoming, you know, twice as efficient every two to three years. And your 25 mile might be a five mile radius city. I mean, think about going to Mars, right? What are we going to do in Mars, we're not going
SPEAKER_01: to grow grow friggin fields of corn and grow cows and stuff, right, you're going to need a system that literally takes the molecules that are in the atmosphere, they're using some electricity that's probably going to be produced by a nuclear power plant, and convert those molecules into what you want to make and consume. And that's what we can do on Earth today, the systems are going to get better, they're going to get cheaper, they're going to get faster. And that's why I'm highly optimistic about solutions to climate change in the century. It's not about an if it's about a when and you know, the when is going to be defined by the willpower of how we are going to allocate our people and our capital resources to solve these problems in the near term, we have the tools to do it. I love the fact that we're sort of hitting this fork
SPEAKER_02: in the road where it's like, do we just want to give the money to a bunch of governments to pretend they're going to solve this and grifters? Or do we want to put it into science, technology, innovation and entrepreneur hands that execute execute? What'd you say? I picked the former. We should
SPEAKER_02: Yeah, let's give it to politicians who don't know what the fuck they're doing. I mean, it really is like when you know, I don't know if he's on say like, Yeah, if you want to solve world hunger, can you make us can you? Oh, my God. Let's talk
SPEAKER_04: about that. That's just so beautiful. I thought that was like, the greatest dunk of the week. Nothing. Nothing gets me
SPEAKER_01: up in the morning, like funding shenanigans. Right? Yeah, tell
SPEAKER_04: the stories. I mean, just somebody was like, Oh, Elon, you
SPEAKER_02: know, made more money as Tesla stocks, no, no, an article. It was an article that was really sure. And then he's like, Well, if you want to solve world hunger, I'm willing to sell shares. You describe it. You're doing such a shitty job today as
SPEAKER_04: a moderator. What are you talking? All I did was put a
SPEAKER_02: sis in your hands. You guys dunked everything. But dude, I'm out. But there was an article voice dude in his voice. Yeah.
SPEAKER_04: Hey, guys. And there was an article sound. There was an article that was written that basically said, you know, you
SPEAKER_04: know, $6.8 billion, which is, you know, what Elon made, like in a day or something, could cure world hunger. And then the head of the, you know, UN World Food Program retweeted that, again, trying to further dunk on the line. And then, Elon responded, Well, if you can just show me a plan, and just please reply in line here on Twitter. And it's credible and detailed. I'll just sell this talk, and I'll give it to you. And everybody was like, Oh, my God, there was this Oh, my God moment, like, wow, can this really happen? Ending world hunger sounds like a beautiful idea. It can only does only cost, you know, $6.8 billion. And obviously, it went nowhere because the guy didn't have a plan. And it was just a complete joke. But that's what happened.
SPEAKER_02: Yeah. And he's like, Yeah, just put all of your put all of your expenses out there. Show us your plan. And it was like, Oh, crickets. Nothing. Alright, everybody, on behalf of the dictator, Chumath Palihapitiya, the queen of quinoa, the Sultan of Science, David Friedberg, and for the rain man himself reporting from definitely reporting from Yeah, he's reporting from the New York Stock Exchange. Congratulations again, my bestie David Sachs on the triumphant IPO of bird. We'll see you all next time on your own podcast. Bye bye.
SPEAKER_00: Oh, man. We should all just get a room and just have one big huge door because it's like this like sexual tension, but we just need to release your feet. We need to get merges are
