SPEAKER_02: We don't want to talk about Andrew. I think that guy Palmer lucky is super fascinating. The Oculus Why do you want to talk
SPEAKER_03: about that company? Because I think he's watching a syndication No, why are you an investor? lucky hates me. He won't come on
SPEAKER_02: this weekend startups. He literally did you call him Parma lucky? Pomer lucky cosplay Palmer. He's a cosplayer. I like the fact that he does. What is that? That's when you dress up as comic book or like superhero characters and go to conventions. You dress up in the clothes of old Italian women. He dresses up
SPEAKER_03: like a superhero. I do dress like a matrona sometimes.
SPEAKER_01: In Italy, there's like a culture like in the in the olden days, like it's like used to have these things called Salotti, which basically meant like, all the decisions of the country were made by these people in the living rooms after dinner. And you know, the most powerful people in the Salotti were these women who were married to men and they would be the architects of all these decisions. I don't like him. He never finished the pasta. He was
SPEAKER_02: leaving so much on the plate.
SPEAKER_01: And people and people would call them matronas. So I proudly be a matrona.
SPEAKER_02: I've always felt you were like the old Italian lady in our group. Rain Man David Sacks. Hey, everybody, welcome to another episode of the all in
SPEAKER_02: podcast. Yes, we're still publishing. Yes, we haven't been canceled. But it's early in the show. So you never know. With me again, the dictator himself, chamath Palihapitiya, the sultan of science, David Friedberg, whatever beverage you like, he'll make it for you right now in his replicator. And of course, yeah, the rain man himself. Yeah, definitely gonna win the midterms. Yeah, David Sacks. Everybody have a great week getting their asses kicked in the market.
SPEAKER_01: I'm pretty good.
SPEAKER_02: You're okay. Everybody Okay, nobody I can't look at my portfolio anymore. I just saw
SPEAKER_02: not a fan of the color red. I actually, I've been using this period to kind of desensitize
SPEAKER_01: myself. I went back and I started to think about like all of the sort of errors of commission that I've done in like the last decade. And I, I was able to look at like four or five specific trading moments where I was like, wow, what did I do that for? And I came away with two things. One was, if I confuse an investment with a trade, I'm done for meaning like there are things that you invest in that you just want to own forever. And then then there are things that are trades that are just speculative. And, you know, at the end of the day, you have a sense that it could be up in the short term. If I confuse those two, I've made huge mistakes. And then the other one is I would always get really emotional and panic at the lows. And so I was like, you know, in early December, or November, when I wrote that letter on Twitter, and we talked about it, and I sold a bunch of stuff after Jeff and, and I was like, and Elon were selling, raise some cash. And I was like, Okay, now, I have enough buffer here. The whole point from here on out is to basically like, insulate myself from my own emotional turmoil, stocks go down. And so far, so good. And my litmus test if when I go home, at the end of every day, you know, I check in with Nat and I'm like, Am I an asshole? Because if I when I guess what does that have to do with what I get crushed in the market? I tend to I tend to take it out on my friends and my loved ones.
SPEAKER_02: When your socks are down, and you're just like, Oh, my God, it was popping the blinds up. I can't take it anymore.
SPEAKER_03: Do you remember last year, Tim off during the the market collapse, when at the start of COVID, and you decided you didn't care about having nice jeans anymore. And then you fast forward to December, and you're proclaiming the virtue of a $5,000 fresh alpaca sweater or whatever. I think another another indicator of sentiment in the market for you is your clothing. Oh my god. choice. But this is a this is a really nice cashmere ribbed sweater from the little piano.
SPEAKER_01: Okay, well, we're back in the game. It's good to see we're
SPEAKER_02: back to normal now. Yeah, let me ask you, then I'm going to put a couple of items out there is Bitcoin a trade for you or an investment for you? Or was it and is it now? Well, I invested it in 2011 at $80. Yeah, yum, yum. I wrote an
SPEAKER_01: op ed in that same year in Bloomberg, which I hope at some point they take off the paywall. Yeah. And the whole thing was you should have 1% of your net worth in this thing. Yeah. It's
SPEAKER_01: remained an investment ever since. So still an investment.
SPEAKER_02: Yeah, I've structured it so that I don't hold any Bitcoin
SPEAKER_01: personally myself, because I don't want to have the pressure and the risk of keys and coins and wallets and this and that. But I still really believe in Bitcoin in the long term. Got it. Sax, how do you how do you deal with the emotional
SPEAKER_02: turmoil of opening up your stocks, crypto, whatever wallet and seeing red, and then going to work every day? Or you just curled up in a ball playing chess with Peter,
SPEAKER_00: yeah, I mean, you just gotta try and ignore it. Okay. Try Try was
SPEAKER_02: a key word in that sentence. It doesn't really affect me that
SPEAKER_00: much. I mean, so I run the avoidance acceptance function, I
SPEAKER_01: have removed my emotions. No, look, there are there are
SPEAKER_00: countervailing benefits. So when exit prices are great entry prices are lousy. And when when entry prices are great exit prices are lousy. So there's an inverse relationship. So in other words, all the the companies that I mean, the public markets have massively corrected and though and now finally, you know, we talked about this few few months ago, those new price levels have trickled their way down into venture markets. And so finally, you know, venture deals are starting to price at more reasonable prices. So in terms of harvesting gains from old investments, obviously, it's not as attractive as it was three months ago, but in terms of making new investments is much more attractive. And for a relatively young venture firm, which is what we are, you know, we Yes, we do have some investments that are kind of in the harvesting stage. But you know, we're only a four or five year old firm. We're still the bulk of our activities making new investments. So you know, it's not, it's, it's all just kind of part of the game. And I'm not really that worried about it. Set another way fortunes are made in the down market. They're
SPEAKER_02: collected in the upmarket is the way I always phrase it. But it's true things are going to be on sale right now. We saw Bill Ackman, I think, who I think is a friend of the pod. And great lessons. Yeah, super, super, super smart. Brilliant.
SPEAKER_01: Yeah. And I just I just want to emphasize because I don't want
SPEAKER_00: founders to get the wrong idea. It's not like we're trying to pull one over on founders and get some sort of sweetheart deal or something like that. My view of like our role as VCs is just to be a price taker of whatever prices the market sets. We don't try and negotiate something better than market really, we just take the market price. And we pick the companies we want to be in. So that's our job is really just to pick not really to negotiate that much.
SPEAKER_02: You're not you're not able to haggle. It's not like you can go Yeah, exactly. The market is like, Oh, bananas are $1 a pound. I'll take them for 50 cents. They're like, this is a whole foods. We don't negotiate. Right. So we're a price taker in good markets or bad markets. And
SPEAKER_00: it's just that I think that the prices now are coming down. Because what I've heard is that the crossover investors like Tiger like co2 are deploying all this money. They've really slowed down now. I think they're all kind of licking their wounds. And so like all this money that was flooding into the venture space is kind of on pause right now. And that's caused the price levels to drop the end of last year in Q4. My public portfolio really started
SPEAKER_01: to turn over, took a huge amount of losses going into the end of the year. And then I took an accounting, obviously, of like the entire book and the public portfolio, every single thing that I owned, ultimately, basically broke even last year. Some were up, I made some early sales, some were way down by the end of the year net net, I kind of broke even. But my private book was up a billion dollars. And I told the team, I'm like, No, this is not real. So we have to take those marks. Because, you know, you have other venture firms that are pricing these deals, and we get audited k ones. And so we have to take the up billion. But I told them, you should consider this that we had basically a down, you know, so net net, our returns were like, you know, we were up like 15%. And I said, this is not real. We were at best breakeven, probably lost money. But you can't, you can't not take these marks. Because like, you know, you have an entire fund complex that lives on these marks. Yeah, and
SPEAKER_01: by the way, by the way, compensation at all, but I have to take it freeburg than sex.
SPEAKER_02: Good for that. So that's a really important point. Because I
SPEAKER_03: think we talked about this one or two episodes ago. But there's a significant disincentive for venture firms to take mark downs to raise capital into a private business at a price that's lower than the prior round. Because when they do that, the marked value of their portfolio goes down. And then it makes it harder for that venture firm to go out and raise the next fund that they're going to try and raise from their LPS, because it looks like they're not good investors. And the reality is, and so in every round, as everyone on this pod knows, there's always an incentive and a push to see, can you get the valuation higher, even if the business performance didn't meet the objectives of the prior round, and things have gone sideways a bit doesn't necessarily mean that it's a bad business. But it doesn't necessarily mean that it should always be getting an up round just because it's being kept alive. And there's this artificial pressure in private equity in venture to always drive the value up or to run away from the company. Because otherwise, you're going to have this markdown and you don't want to be putting money in a markdown that looks like a loser, and so on. And if you look at the public markets, every successful company has had significant downturns in their stock for significant periods of time, from Facebook, Amazon, to Facebook, to Amazon, to Netflix. And all of those businesses were sound businesses. It's just that for whatever reason, there were perturbations in markets, perturbations in the business, but the long term value creation was still there. And so I think we need to kind of, you know, be really thoughtful. You know,
SPEAKER_03: and entrepreneurs should be very thoughtful not to give in to the venture mandate to always drive value up, but to be really thoughtful about getting the right valuation for your business and getting the capital you need with the right partners. Can I say something about this? It's so important what you said
SPEAKER_01: one of the tactics that I started three years ago was I run my own shadow portfolio, where I don't take the marks, and I just keep them at my cost basis. And I'm not allowed to use that for anything. I don't, you know, I can't use that. Obviously, I would never use that for compensation with my team or anything else. But I use it in my own head to say, Okay, if I invested $1, let's not think about what somebody else may think about what that dollar is worth. Let's just keep it at $1 unless it's impaired, but I don't take the markups and I look at my portfolio that way. But it's a very difficult thing to do. And the reason I do that is because I don't have the pressure to raise incremental funds. But if I did, I wouldn't be able to play that game. And I'd be very focused on making sure other VCs marked up my deals because to your point, it takes 10 12 years to drive liquidity, literally. That's the key here. And so what are you supposed to do if you're a venture business in year three or four, except raise money on markups, paper markups are the they're the they're the life blood of what this industry going? Yeah, totally. Well, I
SPEAKER_02: mean, the interesting thing for me is I LP'd a couple of these small like emerging fund managers, you know, micro funds, 10 million or so 3 million. And they were sending like a lot of updates. And so I'm in some top tier venture firms that some of you are in. And they send you an audit every year. And they send you a distribution cash on cash, here's where you're at. And then
SPEAKER_02: I was getting like quarterly emails. As everything was going up, these new fund managers are like we're at 100 IRR, right? 200% IRR. Because this crypto investment we did got marked up. And I was just thinking about what Bill Gurley would always say, which I think is a Howard Marks quote, you can't eat IRR. Like, what are we doing here? Like, why is there such a focus on this is because you want to raise your next fund. And then the other game people were playing was, and I got into this because people were like, Oh, you know, you're grossly undervaluing your funds, because Robin Hood is trading at $30 a share on the private markets, comm is trading at this and the private markets and the second people were using secondary market transactions as their mark. So I'm curious, Sachs, how do you think about if you invested in a company, the series B was $100 a share, but then somebody bought it at 150 a share in the private markets? Where do you like to mark that in your funds? Or how do you think about that, and getting ahead of your skis in terms of valuing your private funds? Well, to my points, we have accounting rules around this. So
SPEAKER_00: we can't like subjectively decide like what mark to set for each company for, you know, obvious reasons our LP was one like, predictable accounting. So the way it generally works is that you the mark is set by the most recent private, you know, financing. This is the way it works. And if people want to
SPEAKER_00: discount it from there, they certainly can, you know, what about a secondary transaction? Is there any
SPEAKER_02: more complicated rules around that? Because it's a different
SPEAKER_00: class of stock. So it's some combination of sometimes we use a foreign a, sometimes it's the latest preferred round. It's, you know, it just, there's like complicated rules around it.
SPEAKER_03: By the way, I'll just to rehash what was already said. And just to say it one more time, to mark pointed out that it typically takes 12 years to liquidity from the time a startup is initially funded to the time that you sell it or go public. Show me one public company that has had 12 years of consists consistent gain in its stock price. It doesn't exist. And so again, like this, this notion that you know, every startup is seeing some perpetual persistent increase in value is an artifice that well, it doesn't it doesn't it doesn't exist in tech. And
SPEAKER_01: that's that that's a feature not a bug. Right? Meaning the things that can go up predictably for 10 to 12 years are not necessarily businesses. They don't take risk. They're not dynamic. No, they don't take
SPEAKER_03: risk. Yeah. Sax, can you define perturbation for the audience? I
SPEAKER_02: heard freeberg say that a couple of times. Perturbation would be her turbation changes what like
SPEAKER_00: volatility, basically? Yeah, rapid change anxiety, mental
SPEAKER_02: uneasiness. Okay, a cause of anxiety or uneasiness. Okay, I got it. I thought you were saying another word. You don't use the word perturbation. I thought you said another word what word was in your brain? I thought I heard masturbation. I was like, master. What exactly did he say about the markets? Speaking of markets, we were on a text on our text thread
SPEAKER_02: talking about if we're about to have the start of World War Three. And then maybe this is not in the news now. How do we look at the UK Russia situation in the Ukraine? Obviously, 100,000 troops are amassing on a border. And what is the goal here? Because Biden is saying, hey, listen, if anything happens, we're gonna go to war. And there's a lot of saber rattling here. I don't exactly understand what Putin's goal or motivation is. And that's, I think, what I'm not hearing in the news is exactly what is his goal? What are your thoughts on what's happening in the Ukraine and Russia? Sax? Okay, well, I think first of all, we have to kind of focus on the
SPEAKER_00: historical terms about how unusual and unprecedented it would be for us to send troops to fight, you know, potentially Russia in a border conflict with Ukraine, with and by the way, the bind put 8500 troops on alert for deployment this week. It's really without historical precedent. During the Cold War, you know, in 1956, Soviet tanks rolled into Hungary to crush rebels there. Eisenhower did nothing. 1968. Soviet tanks rolled to Czechoslovakia to crush the Prague Spring. LBJ did nothing. 1981. The Soviets crushed the Solidarity Movement in Poland. Ronald Reagan did nothing even though he had campaigned on getting tough with the Soviets. And then more recently in 2008, when Russia invaded Georgia, George W. Bush did not intervene militarily. And then in 2008, the Soviets intervened militarily. And then 2014, when Putin occupied Crimea, Obama did nothing. And so this idea and the reason for that in all those cases is because America has a vital national interest in avoiding war with a nuclear armed Russia. And we did not have a vital national interest in defending the territorial sovereignty of those nations. That's the bottom line. And so for us to be now beating the drums of war and talking about sending troops into a war zone with Russia is just it's unbelievably irresponsible.
SPEAKER_02: Friedberg one might speculate if they were cynical, some sort of wag the dog situation here. Biden's not doing well. He's lowest popularity ever. midterms are coming up. Is there any political motivation here? Do you think and what Biden's actions are, you know, given the context of what SAC just outlined?
SPEAKER_03: I think that there's, this is like showing up to the, you know, the last 20 minutes of a two hour movie, and then saying, Oh, my gosh, what's this guy doing? He's so crazy. There's a long narrative that precedes the current news cycle on what's happening with Putin and the Ukraine. You know, in large part, the United States helped to start the fuel, the expansion of NATO in the 90s. And the intention was to make NATO as a Western allied kind of organization contain Russia step up right to their borders, get very close and, and ultimately make these kind of, you know, areas free liberal democracies that are aligned with the West, and put them right on Russia's border. And that is obviously antagonistic. If anyone tried to do that to the United States, like Russia did with the Cuban Missile Crisis, we would view that as a hostile act, and we would react accordingly. And for years, the pressure has been building and has been mounting, as Putin has started to kind of solidify his political power at home and his allies abroad, in trying to figure out ways to push back on this wall that has been built around him and his nation. And, you know, to some degree, I think we look at this as like, his aggressive behavior, but to some extent, it is a defensive behavior over a very longer cycle when when viewed that way. And again, like, remember, the US had this Monroe Doctrine, which President Monroe put in place in, I don't know, 1800, something that said, you know, anyone that comes into our territory, and tries to influence nations around us to be hostile towards us is a hostile act in and of itself. Anytime someone tries to influence our politics, it's hostile. And I think Russia views our behavior and NATO's behavior this way. And so his primary demand is and has always been that the Ukraine cannot and will not and should not join NATO. And the US response has and continues to be and the EU and the EU. And we're saying, look, we believe in the
SPEAKER_03: sovereignty of the Ukraine. And we want the Ukraine to make their own decision about where they go and what they do. But the reality is, for us, this is a key part of a very long term strategy to keep Russia contained. Now, meanwhile, there's this beautiful backdrop of what's going on with China. And if I'm China, I would love to see the US and Russia in conflict, because it will weaken the US. And if I'm Russia, I would love to see the US and China in conflict, because it will weaken the US. The US is in a very precarious situation right now. And for us to actually end up in conflict is going to weaken our position with one of these other two emerging, you know, challenging, you know, superpowers. And this is a really precarious time. I think to Saks' point, it's highly unlikely we're gonna end up sending military. But the posturing is such that we need to kind of hold our line until the very last minute. We'll see what happens. I did say, you know, at the end of the year, I do think that we're in this kind of economic status right now that if there were an opportunity for conflict, we're probably more likely to want to engage in conflict than not, because it does create something that we all get behind to create, you know, kind of a political unity, it creates economic unity, it creates driving forces that maybe might help us through what is clearly a very volatile and difficult time at home. So let's see what happens. I think Obama's already given us the endgame. I just think we
SPEAKER_01: have to go through the machinations to get there. He said to the Atlantic, I think it was in 2016 or 17, he said, the fact is that Ukraine, which is a non NATO country is going to be vulnerable to military domination by Russia, no matter what we do. And you know, every time there was this brinksmanship, we effectively blinked and rightfully so because it didn't necessarily make sense to, to all of a sudden engage the war machine to go to war in Eastern Europe. The thing that's interesting about what happened here, though, was that this was a slow moving train wreck that was really visible years and years ago. Why is that? Well, if you look at what was really happening, this is really a European issue. And you got to think, well, why is America being the leading actor here when you know, where's Europe and all of this? Well, it turns out that, you know, the strongest power in Europe, Germany, is in a really difficult situation, because they rely on Russian energy. 50% of the net gas that comes in, or 50% of the energy I think that comes into Germany is from Russia. And they've in fact been building an entire pipeline system from Russia that bypasses the Ukraine and goes straight to Germany. And so when all of this saber rattling was happening, Germany basically had to blink because they need Russia's energy. And why did they need Russia's energy? Well, they needed Russia's energy because 20 years ago, the environmentalists in Germany won and they started to decommission all their nuclear reactors. So ridiculous. So at somewhere along the way, nobody took a science class in Germany and figured out that nuclear was both safer and cleaner. Instead, burning fuel was the wiser to not have a dependency.
SPEAKER_02: And after the Fukushima, they went turned them all off, they accelerated it. Yeah, it made more sense to burn fossil fuels,
SPEAKER_01: number one, and then to get those fossil fuels from Russia. So unfortunately, we are in the state of affairs where, you know, Germany has said, I at least it's been reported that they would shut down this pipeline Nord Stream two if if Russia did something. But the reality is, I think Obama basically told us that, you know, it's going to be very difficult for us to justify an act like this, especially against somebody who is fortified and clever and smart. This is not like invading the Middle East. And so this is a massive if this happens, the the stock markets will just go absolutely to zero. I mean, if you could have negative stock prices, this may be a good catalyst to take these Netflix shares, please. That's unbelievable. It's really, really crazy. This is it seems like a situation where we're
SPEAKER_02: assured not to get into to mix it up with him. Like I, I don't understand Putin. I don't understand Biden saying that he's absolutely going to react to this. Because we're not we can't afford to get into a war right now. That's no better. And if that is true, then, you know, us dominance,
SPEAKER_03: the US ability to hold the line starts to decline. And I don't
SPEAKER_00: know if I agree with that, because I think we could diffuse this crisis very easily. Yeah, which is the exit ramp. Yeah,
SPEAKER_02: tell us. Well, the the exit ramp here is what is Putin
SPEAKER_00: demanding? Putin is demanding that we affirm that Ukraine will not be part of NATO. In my view, in my view, that's giving him the sleeves off our vest, because we should not want to add Ukraine or Georgia to NATO. That would do nothing to enhance the security of the United States, we wouldn't get anything out of it, but we would be obligated under Article five of exactly to defend them. So admitting Ukraine or Georgia or
SPEAKER_00: Moldova could ultimately bring us into a war with Russia. Exactly. So to free to free books point earlier, we have been poking the bear for two decades with our expansion of NATO, right up to Russia's front porch. And if you go all the way back to 1990, when George Herbert Walker Bush was president and James Baker was Secretary of State, there was an assurance made by James Baker that that, you know, basically they had gone to Gorbachev and said, we want to, you know, for help in reunifying Germany. And the promise made that famously that James Baker said is that what Gorbachev said is we don't want NATO expansion. And Baker apparently said not one inch eastward was the line. And we think back to how well Herbert Walker Bush and James Baker managed the end of the Cold War. How did they do that? They did that by making assurances to Russia that we would not bring NATO up to their front porch, which is what we did. In 2000, we've now added something like 14 countries in Eastern Europe to, you know, to NATO, including in 2004 the Baltic countries. And that decision by George W. Bush really is the thing that pretty much severed our relationship with Putin. You have to remember that Putin is, he is fairly popular in Russia because he stokes Russian nationalism. And what is the source of that nationalism? It is because a single tree organization, NATO, now has this huge contiguous border with Russia. They now feel encircled. And if we were to add Ukraine to that organization, there'd be a 1,200 mile, again, border which that Russia would have with just this one alliance. It would be akin to, imagine if we were still in the Cold War and Canada were added to the Warsaw Pact, right? I mean, we would be incredibly threatened by that. But you know, you never hear, Jake, you never hear any of this on the news. All you hear is the beating of the war drums and Putin is portrayed as this mad dictator. He has no legitimate concerns. Now, look, Putin is an authoritarian and you could describe him as a bully and a thug and he has provoked the dictator. He has provoked the situation, certainly, okay? But, you know, we treat him as if he has no valid concerns whatsoever. And I think the simplest thing to do to defuse this crisis would simply be to say, yes, we have no intention of adding Ukraine to NATO. And then we will find out if Putin is a liar or not. Well, that would be a great move. Like it's a that would be
SPEAKER_02: like, hey, let's take a five year pause. Okay, you know what, we'll negotiate with you. We'll take five years, we won't put them in NATO, give give a little bit of a concession, because their country is not doing well. Their GDP trails China and the United States, their GDP per, you know, each citizen is incredibly low compared to the West. Like, and then we could just work with Germany to get on sustainables, which is what their goal is. And we could economically continue to trounce them because as you point out every week, Chammoth, they're not an important economy.
SPEAKER_01: Here's what Obama said about Putin. Obama said, The truth is actually Putin in all of our meetings is scrupulously polite, very frank. Our meetings are very businesslike. He never keeps me waiting two hours like he does a bunch of these other folks. He's constantly interested in being seen as our peer. And as working with us because he's not completely stupid. He understands that Russia's overall position in the world is significantly diminished. Yeah, he's not
SPEAKER_03: crazy. He's not dumb. And by the way, nationalism, as SAC points out, which is a primary, you know, drum call for for Putin is not a novel sense. We we are a nationalist country. nationalism is, you know, pride and wanting to make sure that your country is treated with treated with respect and has sovereignty. And so I don't think that Putin is an irrational actor. His behavior is very rational in response to what's gone on for 30 years. And his requests are that he is feeling threatened, and he's trying to avoid military conflict as much as he can. And we portray him as being an aggressor that's demanding military conflict. And at the end of the day, our behavior over a long period of time as a country has driven us to the brink here. And I think SACS is right, you know, the right decision may very well be to kind of, you know, leave the region alone and focus on issues that matter more deeply to us and are a higher priority rather than drawing us into this, but a better investment would be in sustainable energy. I think the economic seed is planted for us to be in some sort of conflict this year. So, you know, we're gonna be by that freeburg
SPEAKER_02: economic seed to be in some sort of conflict. I think that, you
SPEAKER_03: know, generally, if you're not going to see homegrown, you know, economic productivity gains, and you're suffering trade issues like we're going to suffer this year, given the supply chain problems globally, we're going to look for some place to manufacture growth. And there's no better way to manufacture growth through conflict. The foreign policy establishment in Washington, you know, the
SPEAKER_00: neocons, the, you know, the so-called Washington blob. I mean, here they are beating the drums for war. We haven't been in a war for what, six months, we just got out of Afghanistan, and now they want us back in another war. And the media just keeps fueling and fomenting this. And they don't, you know, their coverage of it is, well, it's exactly what we talked about last week, Jake out when I pointed out that your, your rhetoric, your humanitarian rhetoric, as noble as the sentiments are, when it gets whipped up into a lather and a frenzy by the media, it blunders us into a bunch of stupid foreign intervention. I would not call it rhetoric. Let's call it
SPEAKER_02: beliefs. My beliefs are not rhetoric, but I get your point. Is there one week later, and exactly what I said the risk of
SPEAKER_00: this is has now materialized, clearly you're blaming my
SPEAKER_02: position on human rights. What I'm saying is that this type of
SPEAKER_00: rhetoric is used by the military industrial complex and the Washington blob and the neocons to stampede us into wars that don't make any sense. That's what I predicted a week ago. That's or that was my concern death that later and we're in exactly that situation. It is our most successful export. It
SPEAKER_01: is our most successful export. J cal really important. There's
SPEAKER_03: a difference between there's a difference between belief. And how do you act on that belief? And what are your actions? Yeah, and I think that a big part of what's gone on and this harkens back to a few episodes ago when we all got in trouble. There was an attempt to canceling us after we spoke about this. But but when those beliefs are, are as Zach's pointed out, harnessed in a way that was ultimately co opted in a way to fuel and to drive. You know, conflict. It, it obviously
SPEAKER_03: goes beyond belief and it starts to move into an area where there is a very wide spectrum of action. Yeah. And it's very easy to tip yourself onto the one side of the spectrum. And as a result caused a lot of harm and a lot of damage like we've done in Afghanistan, like we've done in Iraq. Here's a great lens.
SPEAKER_02: What is the cost of going to war in the Ukraine versus whatever human rights or sovereignty issues they have hundreds of 1000s of troops going to war is going to result in more human suffering than what's currently happening for Ukraine. It's
SPEAKER_00: sort of exactly they're gonna they're gonna be in the middle
SPEAKER_02: of the war is going to happen on their turf, the humanitarian
SPEAKER_00: interest is in diffusing the situation. The way the way to do it in a way is to is to, you know, exceed to this one demand that yes, Putin has about not admitting Ukraine to NATO, which just to say something more about why we shouldn't want that the problem in Ukraine and Georgia and Moldova. First of all, these are not North Atlantic countries, right? This is mission creep by NATO, they're in the caucuses. And the problem they have is they're sort of these breakaway, you know, Russian republics, but inside of these countries, there's breakaway provinces, you know, they're ethnically Russian
SPEAKER_00: areas within these countries that want to break away from them. So you have a breakaway within the breakaway. And so you've got these powerful forces complicated, it's very complicated. So for example, in Georgia in 2008, when there was a war there, and Russia did invade Georgia, but it was on behalf of these breakaway provinces of South Ossetia and Abkhazia. And then in in Ukraine, they've got the Donbass and Crimea, which has now been annexed by Russia, which are these majority ethnically Russian areas. You know, and same
SPEAKER_00: problem in Moldova. So the problem is, you've got these like incredibly complicated border disputes within these countries based on ethno nationalist tribalism. And, you know, sounds familiar, right? The US does not have a vital national interest in getting involved in those disputes. And by admitting these countries into NATO, they could pull us into those disputes, because the key provision Article Five of NATO says an attack on one is an attack on all were obligated to go to the defense of those nations. How is the security of the United States enhanced by that requirement? They get a lot out of it, we don't get anything out of it. This is slightly this is a distinctly different
SPEAKER_02: than say Taiwan is an issue. But let's put that aside. And we'll get to that in a second. If China and Russia and the United States are in this very complicated chessboard, is there a way not only to diffuse the situation, but is there a way and I know this sounds like a crazy Hail Mary to deepen the relationship with Putin and make the Russia and the United States in some way allies against this relationship with China because the Russia China relationship is also very complex? Is there some path to us having a relationship?
SPEAKER_01: She's holding a summit. The last person he saw in real life was the leader of Pakistan in 2020. Before the pandemic started, do you know who he's meeting with in two weeks before the Olympic start or in a week? It's Putin. Yeah. In person. And
SPEAKER_01: then there's going to be a tripartite alliance conference between China, Russia, and Iran. Great. So I think this idea that all of a sudden somebody's going to found some holier than thou perspective on what the right thing to do is for other people is going to be challenged. So those guys are going to think about themselves and they're creating alliances to basically further advance their own objectives. And so I think we have to as well. The thing here, I think what deescalates all of this is economic sanctions and monetary impact because if Nord Stream 2 doesn't get turned on, which is in Germany's control, that has a huge economic impact to Russia. Explain what it is. Nord Stream 2 is that pipeline that I just talked about, the Nat gas pipeline that basically doubles the amount of Nat gas flowing from Russia into Germany and essentially into all of Europe. But hasn't Germany said if they invade the Ukraine,
SPEAKER_02: they haven't said it on the record. It is thought that
SPEAKER_01: Chancellor Scholz said that it's theoretically on the table, but it hasn't been officially declared. Biden today said that he's talked to somebody in the White House, has talked to all the major banks in the US about crippling economic sanctions. So I do think the way this gets deescalated is through money. And if you severely impinge Russia's ability to sort of grow their economy, that foments a lot of anger at home. And I don't think that'll probably weaken and destabilize Putin more than trying to sort of have a, I don't know, some kind of like, get together and hug it out session with him.
SPEAKER_00: Yeah, I mean, so Jason, you raise a good point with, you know, can we improve our relationship with Putin? Obama tried, right? We had the whole reset. And ultimately, it wasn't tremendously successful. But I think a lot of it has to do with the way that the foreign policy established from Washington sort of reacts. And Obama has some really good quotes about this. I think it was in that Atlantic article where, you know, first he described that, you know, that Russia has a vital interest in Ukraine in a way we don't because it's right there, it's on their border, they've been attacked, Russia has through the Ukraine, you know, throughout history. So, again, it's just a primary interest of theirs. And so after saying that, Obama then, you know, he basically got attacked, you know, by, you know, in a, but it was some of it was partisan, but and then he responded to the attacks by saying, if there's someone in this town, Washington, DC, that would claim that we would consider going to war with Russia over Crimea and Eastern Ukraine, they should speak up and be very clear about it, that he challenged. And then he said, so so so the issue and no one did, right? No one's willing to just come right out and say that we should go to war over this. And that's how he diffused the attacks on himself. And then Obama continued, he said, there's a playbook in Washington that presidents are supposed to follow. And the playbook prescribes responses to different events. And these responses tend to be militarized responses. You're judged harshly if you don't follow the playbook, even if there are good reasons. So what Obama is saying is that no one would defend a more militarized posture and going to war against Russia over the Crimea. And yet he was somehow portrayed as suspect, you know, by not being tough enough on Russia. And so, you know, if you're Putin, and you see constantly the foreign policy establishment, you know, reacting in this way, it's it's not a problem that even one president can just fix overnight, you know, what would change this is if when we send
SPEAKER_02: 100,000 troops over there, it's a draft. And, you know, it's not a all paid military, the fact that these people in Washington who got their kids in Georgetown, or Harvard, or wherever they are, Stanford, don't have to send their kids over there to fight this war is one of the reasons they can write these documents and have these doctrines that hey, you gotta send all these troops into harm way harm's way like if they had to send their sons and daughters, it would be a much different discussion of like where we're going to start a war, whether it's Afghanistan or the Ukraine. Let's go to markets. Bill Ackman came over the top, he's buying a ton of Netflix, and Tesla just absolutely flipped to becoming a money printing machine and had a ridiculous quarter revenues up 53 to 53 billion up 71% year over year, Q4 revenue 17 billion 65% year over year. And they increased their delivers by 71%. And now you're all of a sudden to start see some, you know, income coming into the company. So flipping from money losing to break even to now printing a ton of money. Microsoft had an absurd quarter, their revenue hit 51.7 billion up 20% in the quarter 20% year over year, pays for $200 billion in revenue in 2022. And their net income was also up 20 plus percent at 18.8 billion. So the money printing machine in these companies is just extraordinary. Shemath, what are your thoughts? I think you're you're you forgot a couple of
SPEAKER_01: key things, which is that the FOMC meeting happened this week and Powell basically said, look, we're going to start tightening in March. I think the way that he said it, you know, all of these words tend to be so scrutinized and over analyzed. But the instead of figuring out what people thought, I think their actions post the FOMC are important, which is that, you know, we effectively now started to price in about five rate hikes this year. So probably five 25 point rate hikes effectively. That's what that's what the that's what the yield curve tells us. If you take a big step back. I just want to remind people like, it's really hard to live through volatility, right? And we're in the phase of it now. But typically these big drawdowns are like, you know, when stocks go down, it actually precedes so it comes before the actual starting of a rate hike cycle. And so if you go back to the, you know, from 1950 onwards today, every time the government has started to raise rates, or the Federal Reserve has started to raise rates, the stock markets have actually rallied. Now, why is that? It's typically that they see through the end of the rate hike cycle. And they start to price the business as if these rate hikes are done and to rebase things. And on average, I think the stock markets go up between seven and 8%. So call it seven and a half, eight and a half percent. And so what's interesting to me is now we're finally starting the process of these hikes. And the real question is going to be how data dependent do these guys get? And what I mean by that is, so you know, we talked about this before, but you know, China cut rates. This past weekend, actually, Germany decreased their GDP forecast. And so you're starting to see two huge countries already say, hey, wait a minute, we need to be, you know, we need to be more realistic about what long term growth looks like here. It's inconceivable in my mind that those countries are slowing down and we won't. And so I think what happens in these other huge GDP drivers of world GDP will affect us. And so you know, Saxon I have said this before, but the marginal risk will be that we overcorrect and actually create a recession that doesn't need to be one. So we slam on
SPEAKER_02: the brakes too hard. And another way of saying it is, the brakes are the market is a leading indicator of what's going to happen post the rate hike, we had a nice relief rally going
SPEAKER_00: until I think some of the words that Paul used was that there was plenty of room for me. Yeah, meaning that because unemployment's at three and a half percent that you know, we're at full employment. And that means that the Fed can, you know, as this dual mission of keeping inflation low and you know, keeping employment high. So if employment is high, then they've got more room to raise rate anyway, it was that language around the plenty of room that freaked markets out and it triggered a huge sell off. I think to Jamal's point, I don't see how you can have this much wealth destroyed so quickly and have it not impact the real economy. There's a lot of people out there who feel a lot poorer, because their portfolios have gotten slashed in value. I mean, it's all
SPEAKER_02: tightening, they'll clench not spend as much money on a vacation, not buy a TV or a car. So these waitlists for cars might get, you know, become sales, the luxury markets of
SPEAKER_00: the economy, the optional purchases start to really slow down. And so I think that the risk of recession now is much higher than it was even a month ago. Now, you know, it's going to be hard to know. So basically, I think what we're saying is, it's gonna be very hard for the Fed to engineer a soft landing here, where we don't trigger a recession in the process of stopping inflation. And look, what will judge Powell's performance, you know, at the end of this, you know, we're not going to know, I think it's, but I think that he's turned out to be much more hawkish in his statements than markets were expecting. Again, in 2018, you know, he was
SPEAKER_01: probably overly hawkish, and he actually created effectively, a little mini recession, we didn't pay attention enough to it, because, you know, Trump made it impossible to see the signal from the noise. But it did happen. And it was Powell being a little too trigger happy. And so, you know, we have to remember that, you know, the Fed has $9 trillion of assets on their balance sheet. And so, you know, if they start to take $9 trillion of cash out of the system, by selling these assets into the market, right, you're taking the money out, right, because you're getting money back, that's going to have an enormous, huge impact as well. So if you think about question about what happens, let me just finish one second, one second, let me finish this. So, you know, so when you have these two things happening at the same time, you have a potential rate hike cycle, which makes the cost of a used car more expensive, the cost of your credit card balance is more expensive, the obligations you have to pay just become naturally more expensive, you feel poor, so you spend less. And then separately, in the financial markets, you actually take liquidity out of the system. And so people value, you know, liquidity more, it becomes it becomes worth more, you you value current cash more. I mean, we're putting
SPEAKER_01: ourselves in a really delicate position. So he's got a delicate balancing actor, he is definitely out of tightrope. So if we pull 9 trillion out, we've been talking about this
SPEAKER_02: deficit, if he starts selling all of those assets, does that mean on the United States balance sheet that will reduce our national debt? No, I mean, we're getting 9 trillion of
SPEAKER_01: cash, right? You sell an asset, you get cash for it, right? And so it pulls money out of the economy in the same way. Yeah, it created liquidity when they were buying assets,
SPEAKER_00: right? When they're buying this debt, it would put money push money out. If they're selling the debt, it pulls money back in. What happens to those dollars is my point like, what
SPEAKER_02: the dollars around in the United States bank account, the
SPEAKER_01: dollar stays in the US, USA bank account, but the obligation to note exists in some financial intermediary that holds it.
SPEAKER_00: Clearly, Powell does not want to be remembered as the Fed chief that let inflation slip the leash, right? I mean, he's gotten religion now around the idea that this inflation is not transitory, which was his position for months. I think that now bit him. And the risk is potentially an over correction, but he's not gonna let inflation. Then he'll be the first Fed governor to have caused two
SPEAKER_01: recessions.
SPEAKER_00: I think it's like a serious risk. And by the way, these market levels that we're at right now, we look 60% correction in growth stocks. Okay. But this is with that's still in a good economy in peacetime conditions. And now we have a risk of recession and war. So, you know, there's still room for, you know, a lot more negative news here is kind of my point. And, but look, sentiments also very negative. So when sentiment is this negative, there's also the potential for markets to quickly recover. But I think the sentiment is there for the wrong reasons. I
SPEAKER_01: think I don't think people are thinking recession. I think people are thinking my gosh, these rate increases my gosh, I can't own these high growth stocks anymore. And none of those things are true. Those are just perceptions that get amplified by one's emotions when you're getting punched in the face, which is what happens when you wake up every day in your portfolio, by the way, five or 6% it generates incredible
SPEAKER_03: opportunity. The you know, the idea that markets bucket, quote unquote, growth stocks together, I think, kind of obfuscates an important point, which is that some of the businesses in that category are real businesses that are going to succeed over the long run. And some of them are speculative and are likely to fail over the short run. And, you know, as you saw Netflix sell off the lackman very smart came in and bought a bunch of the stock. I don't know if you guys remember this, but in 2011, TCV, which is traditionally a private equity investor at the time, and there wasn't a lot of crossover and public market stuff happening, they were a private investor in Netflix, Netflix stock tanked from, I think it was around $220 a share, down to 70 bucks a share in a couple of months. And TCV did a $200 million pipe into Netflix. And everyone's like, Oh, my God, what are they doing? It's incredible. And by the way, that was on an adjusted basis, that's $10 a share in today's share price. So that that that $200 million investment that they made went up 60x. You know, at the peak of Netflix a few weeks ago. And so you know, seeing Bill Ackman come in and underwrite Netflix again, and make a big investment at its current market price. So Jay Hoge, I think it was really highlights that there just because the market prices down doesn't mean that a business isn't fundamentally valuable and going to grow and going to generate significant returns over time as a as an operating business. And that distinction starts to present significant opportunities in a market condition like this. And the businesses we all talk about generally growth stocks are down 60%. But maybe most of them shouldn't have even been public companies in the first place. Maybe they should have been speculative private investments where more than two thirds of them were likely to fail and they shouldn't be failing as public companies. And the few that are getting damaged and hit with this market sentiment shift can be picked up cheap. And there's a lot of opportunity. And so I wouldn't view the market condition to be necessarily reflective again of the economy, or the condition of businesses in general. Jay Hoge was a partner at TCV. He's a
SPEAKER_01: founder of TCV that did that deal. And he's also the one that participated and led the billion dollar round into Peloton before they whiffed earnings and got and got decapitated. But he's an incredible investor. That trade is probably one of the best trades of all time. So let's
SPEAKER_02: look in the good news column. Wages way up, earnings way up. 10 million job openings in the United States, pretty close to record low unemployment, and the pandemic ending ending and people having record savings in their bank accounts and personal balance sheets. So how does all that good news the pandemic hasn't ended? It's ending for people. I think it's over for people like I'll tell you the thing I'm most concerned about. There's a reverberation that that persists
SPEAKER_03: in supply chains. I don't know how much hardware, lab, biotech, consumer goods businesses you guys are involved in. I'm involved in a number of them. Every single one of them are crippled in some way right now by supply chain issues. I mean, I'm talking about like businesses that have been operating at steady state for many, many years. When do those get worked out? We don't know. And everyone's getting surprised and hit upside the head every week with some new supply chain shortage, whether it's some chemical you need for some lab equipment, or you know, the delivery of some big piece of equipment, or even plastic bottles that we use. It's kind of fill up our beverages that we ship. That's a pretty sizable business. We've never had supply chain disruption like we're seeing right now. I'd like to bleep out the name of that company. Yeah, but it but it's like it's bleep this out. But it's a significantly sized business that has never had supply chain issues. It's all US based. But some of the suppliers of the suppliers have had complete failure and delivery. And all of a sudden, it's now reverberating through the supply chain. You guys saw the GM didn't deliver a single friggin electric vehicle last quarter, because they couldn't actually get the chips that they needed to make cars. So the real risk to the economy, in my opinion right now, is when and how we're going to work our way through the supply chain issues. And it is so complex, and there's a myriad of problems. And it is a global problem, that it's really unclear how this is going to play out over the next six months. And what will happen is this quarter next quarter, businesses that you didn't realize and didn't expect are going to get hit with supply chain problems are suddenly going to say, guess what our revenues are going to be going to say, guess what our revenues off by 2030% because we couldn't sell this product because and half our shelves are empty, because product didn't show up or whatever the narrative might be. All right.
SPEAKER_00: I think it's a really I think it's a great point because you don't solve the supply chain issues with rate hikes. Right? It's like nothing to do with that. Nothing to do with it. So the rate hikes slow the economy down. I'm way more worried about
SPEAKER_03: this than rate hikes. Right? What does clean it up is
SPEAKER_02: capitalism, the end of the pandemic time, unless and the
SPEAKER_01: reason I'm less worried is when you actually talk to the companies that that are spending enormous amounts of money on CapEx, they've actually guided to the fact that by the end of this year, in the beginning of next year, most of these things will be worked out. It's indigestion. I think I think we're I think we're dealing with a, you know, six to nine month issue of having turned things off, and now are now rapidly trying to turn things back on. And we can't necessarily get that timing right. But I do think it'll work itself out faster than people expect personally, that's what I think because the cost of Apple and Tesla specifically guiding to that is too enormous. You're talking about, you know, collectively, almost 4 trillion of market cap, so they're not going to get something like this wrong. And they were pretty clear in the last few days that that this will be done by 2023. Early 2023.
SPEAKER_02: Sax orchimoff, I just listed all the good news to counter, you know, the the slog and the bad news. How do you account for record low unemployment record number of jobs record wages going up massive cash on people's personal balance sheet, massive amounts of sideline cash, massive amounts of venture funds being raised that have to be deployed in the next five years? All that good news? Where does that on this balance sheet of good versus bad, you know, work out for you sex? Well, the the negatives are that yes, the unemployment rate
SPEAKER_00: is very low, but a lot of people have dropped out of the labor force. So the labor participation rate is still quite low. So because of well, because I think a lot of people dropped out because of COVID, you know, everyone wants a vote. And I think, you know, they got these STEMI checks. And I think a lot of people got used to not working, you know, and maybe maybe you had a household with two people used to work. And now only one of them is working, you know, maybe they moved to a cheaper part of the country. So I mean, maybe it's a good thing, right? But a lot of people dropped out of the the labor force, and they haven't come back. And so that's the negative. And then, you know, the fact that wages are going up is good, but we don't know how much that's inflation. Right. So, you know, those would be the negatives. But there was
SPEAKER_00: a report that inventory levels did rise in q4. And so the supply chain issues do seem to be ameliorating to some totally, I was looking at cars, and now a lot of the people who
SPEAKER_02: had, you know, there's no way to get this car. Now, they're like, Hey, we got a couple of these cars available if you want them. And then if you look at the housing inventory, it does seem that maybe that's taking a plus two, and people couldn't find houses. And now maybe, even though it's still a housing crisis, maybe there's more available, or they're staying on the market a little bit longer. Yeah, I mean, it's I think it's
SPEAKER_00: pretty clear that economic activity is slowing. And again, things like rate increases, they it increases the the cost of a mortgage, right. So that could affect house prices. I think
SPEAKER_02: there's an interesting startup story. There's a private company that's doing essentially life extension that a bunch of rich people put $3 billion into you want to tell us Friedberg and your science segment? What is this going to make us live longer or not? Well, I think I mentioned this company a few
SPEAKER_03: episodes ago, but I think they just announced their $3 billion investment. And again, this goes back to the the point I made on the prediction show. So last week, Altos Labs announced that they've landed $3 billion in funding. And this has been an ongoing funding that's been going on for quite a while into this business. But this business was set up to commercialize Yamanaka factor based cellular reprogramming for age reversal. And there was a paper published just yesterday. I'll put a link in the show notes that if people are interested in reading a scientific paper, they can take a look. Incredible results. Scientists took mice, gave those mice short bursts of these Yamanaka factors, and then measured all the biomarkers, all of the chemical signatures in the blood of those mice to determine their age, because there are known ways that we can measure the age of an organism by looking in their blood at measuring certain biomarkers. And with just a few short births for about a week of these drugs, these Yamanaka factors, the mice, all of their age signals reversed to making it look like they were very young again. And it did not do what the challenge has been with Yamanaka factors in the past is if you put too much of it in in a body and an organism, the cells rejuvenate to becoming stem cells, which is kind of like what a fetus might have, and starts to grow a lot of tumors, they were able to avoid having tumors show up in the mice. And the mice, in fact, all looked extremely young from a biomarker basis. So an incredible result, an incredible paper, whether or not it gets repeated and shown by others. But I think this speaks to the quality of the science that's underlying the $3 billion investment that was just made in Altos Labs, which is probably one of the biggest seed investments ever. No, it clearly is the biggest seed investment ever in a
SPEAKER_02: startup. I think it speaks to what I highlighted is what I what will
SPEAKER_03: be the new frontier in biotech, and we'll completely rewrite like, you know, the course of humanity is if we can take drugs, and for a short period of time, completely reverse the age of ourselves. And it sounds so crazy and so wacky, but it's being now proven in a single week, we've now had an amazing paper published. And we've seen the startup announced their $3 billion of funding to pursue commercialization of this technology. And this is going to be the year I think this will be the front cover of a lot of magazines this year, as people realize that this is real, and that it's getting commercialized. Why do you think they have to start with $3 billion?
SPEAKER_01: And I'll tell you why I asked the question. Yeah, whenever I see these grandiose prognostications of future progress, and then see these companies raise exorbitant amounts of money, I have never found a single example where it's ever worked ever. In fact, every time I see a company raise an exorbitant amount of money in a series A, I write them off in my head. Yeah, sure. Yeah. So why why should I not in this case? So, or it's more actually actually a better question, why would somebody listening to this pod go work there? And by the way, I by the
SPEAKER_03: way, the same has been done and can be said about calico, which is alphabet subsidiary that's that's pursuing similar research, where billions of dollars have gone into that business. And there's a similar sort of research track underway. And I think the general principle of Chammoth is they don't know what the product is, they don't know the way to market, they don't know, you know, what area they need to explore. But the underlying principle is proven, the underlying principle is something that people believe in. This science is proven, this science is real, we don't know the commercial path. And we have to try lots of different things and run lots of different research programs in parallel to figure it out. And each of those research programs is like $100 million biotech startup. And so I think that the principle is, let's put a lot of shots on goal all at once in parallel and make sure because if any of these shots on goal work, this is going to be worth many, many billions of dollars. So I think that's generally the idea. It's almost like having a $3 billion venture fund. But the venture fund is targeted at one core area of interest that we believe is real. And I think that's the way a lot of these things are being set up. But I'm
SPEAKER_01: asking this question. Have you ever seen a company try to do 30 different things and it works? No, no. Yeah, I mean, it's not
SPEAKER_02: the typical capital allocation milestone based funding scheme. I have a very product market fit thing, right? It's, it's a
SPEAKER_03: research program. And it's a series of research programs. But I mean, look, let me reframe it for each month. Have you ever seen a $3 billion venture fund that makes 100 bets with smart people at the helm with smart people working at the individual businesses fail, right? Like, yes. And in fact,
SPEAKER_01: I've never seen a $3 billion venture fund do much more than return two x of money. Yeah, well, look, let's see. I mean,
SPEAKER_03: it's a it's a big bet. And obviously, there's some people making nice management fees and nice carry on this thing. I'm not trying to be a wet blanket. I'm just curious. You know, why
SPEAKER_01: do it that way? Meaning, you know, every startup, let's get
SPEAKER_03: Bob Nelson on. He'll talk about it. Yeah, so I set it up. Yeah,
SPEAKER_01: every startup, I think, is forced in some ways by the market, to make an educated guess about where product market fit lies and to try to build some minimum viable product that, that tends to be how value is created. I mean, you could have said that, you know, Google could have had 90 different algorithms. But you know, Larry Page started with backroom. That's how it started. He had to make an educated guess that
SPEAKER_02: they had to make decisions. And that's what startups about, you
SPEAKER_01: have to make decisions and choices. Well, you have to make a bet on your on your own. Why don't you put all your capital
SPEAKER_03: into one company? Oh, because mostly the companies won't let
SPEAKER_01: me but I would if I could. Oh, interesting. So I think that
SPEAKER_02: what's happening here to me, you're right. If I could, I
SPEAKER_01: would, but they don't let me you could buy, you could put all
SPEAKER_03: your money back into Facebook or back into Facebook. I know you got issues. But what about alphabet or Amazon, just put all your capital in one bet and just, you know, write it out.
SPEAKER_01: Right. But then it comes to what I think where I can generate the best return. Meaning, you know, I think that I could generate much higher returns and what I think Google will give me. Yeah, that's why I do it. Well, here's what I've accepted here. There
SPEAKER_02: are a lot of rich people who are going to die soon. And they're counting down like Bezos. And they're saying if why not, if I'm worth 100 billion, put 123 billion into this, and have them go for it. Because I've got nothing to lose because I'm dying in 20 years. This is a fear of death by billionaire bet, which is exactly what I think happened with the Google guys. They were just like, the team involved in these projects
SPEAKER_03: are not first time founders or people that are great pitchmen. It's people that are repeated tried and true entrepreneurs success stories that have done this over and over in biotech. And they're the ones that are being drawn into working on these projects. And they're saying, look, because we've got the people that have done it over and over, give them the capital. I mean, no argument. Yeah, I believe in Yamanaka
SPEAKER_01: factors. And I believe that there will be innovation. My only question is, is the innovation going to come through a small team that raises a small quantum of capital with one very focused idea that gets it right? Or this sort of, you know, Monte Carlo simulation approach to product innovation. And all I'm saying is just an observation that historically, it's been very difficult for these Monte Carlo simulations to ever work either to generate product market fit and an innovation, and to make money. Now, hopefully, these guys are the exception that proves the rule because I think we'd all want this to work. No, it's a it's a great point. And I hope
SPEAKER_03: you're right. And I hope to start that small project. And what now you're saying the key thing, because despite the $3
SPEAKER_01: billion, you're still going to go after it, which implicitly is your way of saying, I'm short that company, and I'm long my own company. And this is this is the point I was trying to get to, which is when when was really, really smart people see these things. They tend to look at it with a grain of salt thinking it's very difficult to build a startup as it is. Yeah, sometimes it's kind of like growing great wine, you need to have a little pain and suffering along the way. And when you have $3 billion, it's the opposite of pain and suffering totally
SPEAKER_03: true. And I'll also say, let me just support your point, which is the people I see get hired to big projects like this. And there are a number of them that get funded, not just also in other kind of deep tech stuff. They hire the tried and true experienced executives, who generally have older kids and live in a nice house and have made a bunch of money. And the earnestness, the motivation, the hunger, the fuel, the creativity, because they know what they know, and they're not willing to accept that they don't know what they don't know. Those folks generally are less likely to succeed than the folks who are doing this maybe for the first time, for that very reason when you're doing something innovative. So I totally support your point. And, and I really do hope you're right. But I thought Jason, when you were talking about talking
SPEAKER_01: about startups, I thought we were gonna talk about bolt in the stripe mafia fiasco this way. That's a pretty
SPEAKER_02: crazy story. Where does everyone follow? What side does everyone
SPEAKER_03: fall out on that? On the record? Have any equity positions in
SPEAKER_02: either company? Let's start there. No, no. stripe holders, sacks, sacks, LP in any firms that have a I am an LP in funds
SPEAKER_01: that have exposure to it. Absolutely. Yeah, for sure. An LP in a fund that has exposure. But it doesn't. Minuscule doesn't
SPEAKER_03: matter. Minuscule for me to Okay, here we go. So for people
SPEAKER_02: who don't know bolt is like one click checkout software, they compete in some ways with stripes payment API. The CEO Ryan Breslau did a tweet thread basically saying that YC and stripe are the mob bosses of Silicon Valley, it was pretty charged. Obviously, stripe and YC work together. stripe is the biggest company to come out of YC ever, I guess, along with Airbnb. He claims that a lot of the top VCs were blocked as a strategy by stripe. And I think there is some truth to this. When you invest in one company, you don't invest in the competitor. I don't know if that happened here as a strategy, but it is a viable strategy that other people have used where bolt claims stripe got all the top investors, therefore they couldn't raise money. He also was saying they were voting things up and down on Y combinators, Hacker News, as if that matters, yada yada yada, it was kind of a weak argument, in my view, I'll give you a bunch of VCs dunking on him, but I'll
SPEAKER_01: give I'll give you my hot take. So first of all, bolt is now a $14 billion company or something. Okay, so that, you know, these guys, I think this was a very brilliant PR strategy. And it worked. What do I mean by this? This is a company that most people didn't know about until this past week. They went and they punched up, which is a pretty tried and true PR strategy. Always fight up, you pick the big guy, who's an incredibly pristine, extremely well run company that is sucking up most of the talented, you know, people in Silicon Valley to work for is a, you know, center corn could be a trillion dollar company over some lifetime. So they went and they punched up. And what happened? Everybody fell for it. They baited all of these folks, and then all of these folks had to come out on Twitter and lambast them. And basically, the net result of it is if one person knew about bolt before, now hundreds and 1000s of people know about bolt afterwards. So not only do they not know them, they're now they're
SPEAKER_02: contemporary, just in terms of the practical reality, they are
SPEAKER_01: now part of a discussion, and in a framework of companies in this space that they were never a part of before. So Steve Jobs is moved with a 1984 commercial, he said, IBM, and then Microsoft,
SPEAKER_02: our big brother, we're going to attack them join the rebel alliance be part of Apple. And of course, Apple and IBM responded. And that was the big mistake. And Mark and recent Sequoia a bunch of different venture firms responded. Saks, what's your take on this? I see you're chomping at the bit or maybe you're biting your tongue, which is no, I agree with
SPEAKER_00: Jamaal that it was kind of a brilliant PR move if that's what it was. I do like startups punching up. And he took a punch at stripe, which is the big company in the space. So and then yeah, stripe stripe didn't respond directly. The callson's didn't respond, but their surrogates did. And then that looks like punching down and it draws more attention to it. So I get the PR strategy, I would say that as to the merits of the allegation, I do. I it's interesting that, you know, he didn't get into YC, because I think that he is a very talented founder. And, you know, we looked at this company, pretty, yeah, pretty early on, it was for like, sort of a mid stage growth round. And it was like one of the toughest decisions we we we I'd say the toughest decisions as a VC or when you actually want to invest in the company, but the valuation is like two x what you think it should be. And that was kind of the situation at the time, when we looked at it is I think we actually would have invested this is the valuation was too high. So it would have been a great bet for you. Yeah, he grew
SPEAKER_00: into it. And so it would have been a great bet. So it was a
SPEAKER_02: bad decision on your part. Yeah, yeah, clearly we should have
SPEAKER_00: invested. It's just that, you know, at the time you invest, you have to have some basis for valuation. And that's the sense in which I think, you know, maybe Ryan's accusations don't totally make sense is that he's been able to raise a lot of rounds at really high valuations. And so he, he hasn't had a problem, you know, raising a lot of money at, you know, great prices. And, you know, it almost feels like a slap in the face to his investors were like, what's the complaint? I didn't get any tier one investors or that it was just hard to meet
SPEAKER_02: with investors. And that stripe called the investors and told them not to invest that that was the allegation.
SPEAKER_00: Yeah, no, I mean, yeah, I can't really speak to that. But yeah, he was clearly able to raise great rounds. So
SPEAKER_01: can I read to you an email exchange between me and Ryan Breslow? Oh, dramatic reading from 2015. Oh, here we go.
SPEAKER_01: H moth hopes all all as well. FYI, things felt too rushed on our end. So we're toning down our series a discussions for a couple months. And this was this was in July of 2015. I'm reading you my answer because it's so fabulous. Hi, Ryan. After a wholly unsuccessful few weeks of attempting to win a World Series of Poker bracelet, I'm back at home licking my moons. How about we talk in a week or two. So not only did I have a chance to win a World Series of Poker bracelet, according to this exchange, which I didn't win, obviously, duh, I had a chance to do the series a in a $14 billion company screwed that one up. I mean, the things we miss are, there's like,
SPEAKER_02: oh my god, you miss as an investor for everything you hit. So I've interacted with Ryan back in the day. And I just
SPEAKER_01: remember him being super, super smart. And I do think that, you know, there's a lot of very smart people now around the table at Bolt, including Joanne Bradford. So I don't think that this was something that wasn't planned. And I just think that they executed it well, and it worked. And I think a lot of people know this company that didn't know before. Now, they still have to execute and build a product and scale it and do all of these things. But
SPEAKER_00: yeah, and I think that the response he provoked, I mean, since I was a little bit critical of what he said, I mean to say that one of the VCs responded said that the reason they didn't invest was because the numbers weren't good. That was not my experience. When we looked at this company, they had great numbers is this valuation was ahead of those numbers, but the numbers were always great. I actually
SPEAKER_02: responded to that. And that was Sequoia partner, Sean Maguire, who said that. And I responded to him like, Hey, dude, VC code is you don't reveal the numbers on things you learn confidentially. What are you doing? Like, and he's like, well, they said some BS about tribe. I was like, Yeah, still doesn't change VC code that if you learn something under NDA friend DA, essentially, in a meeting, you're not supposed to weaponize that. Unless unless you unless you have a $30
SPEAKER_01: billion position. I still think well, whatever. I still think
SPEAKER_02: it's like I've never seen a VC. Honestly, it's the first time I've ever seen a VC Jason, Jason, come on. I don't I think
SPEAKER_01: it's pretty I think we all knew where he was coming from. He's defending an enormous position of his and sequoias. Jason,
SPEAKER_03: you've always been never released inside information is
SPEAKER_02: my point. You didn't say you inside information. Information. He met with them, but he was conflicted out. So why would he
SPEAKER_00: meet with them? Hey, guys, Nick just texted that I had I had I found a way
SPEAKER_01: to get off my lazy ass not be playing poker and do that deal, I would have generated a 222 x on my investment, which would
SPEAKER_02: have been 15 million times 222. I think I think we looked at when like a $400 million
SPEAKER_00: valuation or something like that or something in that range. And so my gosh, what would the Series A have been? I mean, the
SPEAKER_01: Series A would have been like 23 million according to pitch
SPEAKER_02: book. Oh, yeah. 63 million. You know, it was one of those meetings we came out of where
SPEAKER_00: it's like, that's a super interesting founder. So yeah, me too. And that's what I remember too, from Ryan.
SPEAKER_01: Yeah, super, super, super interesting founder, right?
SPEAKER_02: The check. I said earlier in the program that like our philosophy now is
SPEAKER_00: just to be price takers and just to pick the companies that we want to be in. And then the market sets the price. The biggest mistakes I've made as an investor.
SPEAKER_01: Yeah, we should have done that with bolt. This was the
SPEAKER_00: decision we faced was like a few years ago. And so we just shouldn't have worried about valuation. By the way, sorry, Jake.
SPEAKER_01: As soon as you said it was 63 million, you know what my reptilian brain said, Oh, that feels so expensive. Even now, billion. And so to your point, David, it's a really good lesson for for investors to learn is just your price taker total get behind these really interesting people that are world beaters and just let them do the work. Place the bet.
SPEAKER_02: All right. So there you have it. This has been another amazing episode of the all in podcast. Bye bye. Bye bye.
SPEAKER_01: Bye.
