SPEAKER_03: Captain Calacanis is here reporting for duty. Wait, is that Spirit Airlines, Cap?
SPEAKER_04: Absolutely. Spirit Airlines, I just wanted to say all in podcast now sponsored by Monclaire and Spirit Airlines.
SPEAKER_03: Or now sponsored by the Village People.
SPEAKER_00: YMCA.
SPEAKER_04: Now, are you a pilot or a flight attendant, J. Cal? He's a flight attendant.
SPEAKER_00: I don't think he's thin enough to be a flight attendant.
SPEAKER_04: Are you fat shaming me? Are you body shaming me?
SPEAKER_03: You can't do that nowadays. That'll get you cancelled.
SPEAKER_01: You're getting saxed cancelled at this point. Fat shaming would be number 72 on the list.
SPEAKER_00: He can't get cancelled because all the libs have left Twitter. There's nobody to... There's no hall monitors left?
SPEAKER_03: There's no hall monitors. They all pretend. No, they quit every week.
SPEAKER_04: Yeah, it's like all the libs that said they moved to Canada when Trump got elected. Yeah, Canada immigration.
SPEAKER_03: Go ahead. Flat.
SPEAKER_03: A hacker figured out a way to take all this data and track, you know, people's yachts, people's planes. Obviously, one of those people was Elon. Elon had a security issue. This is all public information. So the larger issue at stake here is the fact that the law allows for people to do this persistent tracking of planes, which then becomes persistent tracking of a person. And what really is at stake here is how we define the term doxing. For people who don't know the term doxing, it means giving a person's location. That could be your home. That could also be you're at a location for some period of time. You're at a hotel, you know, for a basketball game. And it's pretty clear, you can take a picture of a celebrity and say there's a celebrity here. Lady Gaga is at the farmer's market. What I object to here, we all understand doxing is dangerous. And it in fact is against the law to just give people addresses and stuff like that. The issue here is a new type of doxing, which I'll call, you know, persistent coordinated doxing, where dozens of times a month, you're giving a person's location. It may not be against the First Amendment, Sachs, I think you would agree. But we have to ask ourselves, do we want to live in a world where whether a person's on an electric bicycle or an airplane or any device in between, somebody should be releasing dozens of times a month, a specific dedicated feat of their location. It is terrorizing as a parent. When this happens, I've had doxing people on the call here have had various security concerns. We don't want to live in a world with de facto doxing. What these sites were doing was de facto doxing. I think it was a bad decision. And I think that it represented
SPEAKER_01: on the least generous statement would be that it represents deep hypocrisy, in that not just a few weeks ago, did he say he would never delete that account. But he also said he was buying Twitter to enable freedom of speech and freedom of expression, and that he wouldn't come in and do the same sort of content moderation that was done by the old regime. And then he came in and did exactly what the old regime did, which is that he took the rules and he took the quote moderation policies and he found a way to use them to make some editorialized decisions that he thought was appropriate. Now, the more generous thing is what you guys are saying, which I don't think is necessarily wrong, which is that he's trying to protect people where there's some loophole or some law that doesn't seem right morally, but it is the law. And it is what it is. In those cases, I think you run into the exact same issue that the old guard at Twitter had, that the moderators and the executives at YouTube have dealt with, and that the executives at Google have dealt with, and that we sit here and we criticize until you're on that side of the table. And you're forced to make these moderation decisions, you're forced to make these policy decisions, and you're forced to implement these policy decisions because of some moral framework that you now think is appropriate. And guess what? Some people will say that's not freedom of expression. That's not freedom of speech. You're taking that away from some people. You're taking this particular case away from a 15 or 16 year old kid who's built a Twitter feed. And so I think what it shows is just how hard it is to moderate these sites, these platforms, and that there is no simple, easy, idealistic, ideologue of, hey, all these things are open, all these things can be used by anyone all the time, because as soon as one of these edge cases start to happen, you want to come in and do something about it. Shamath, what do you think? What should happen going forward?
SPEAKER_00: So I have had these issues happen to me multiple times. I'm not nearly as important as Elon is, but it feels the same when you're in the middle of it. It feels pretty terrorizing. That being said, I think the real decision for somebody like me is that if it's too much is frankly just to get rid of it and to find a different mode of transportation that's a little bit more anonymous. And the reason I say that is that I just think that you would have to go and get the government to basically change the law, which they're not going to do. And so then as a result, your reaction will seem somewhat contrived and deeply personal. And in that, I think you lose credibility. Let me just summarize this and be the first one to just state this. I think that if
SPEAKER_00: there's any person in the world that can figure out Twitter, it's probably Elon, but man has he taken on just a gargantuan battle. And increasingly, I am not a fan of this battle and I'll tell you why. This is a man who has essentially proven that he can bend the laws of physics on behalf of humanity. He's done it twice, once in electric cars and once in rocketry. The problem is that the realm of decision-making at Twitter has nothing to do with the laws of physics and is governed by emotions and psychology in which there is no canonically right answer. And so he's quickly finding out that half the population will always find fault with him, no matter what he does. And now the implication of that becomes very important. We saw yesterday that he had to sell another 3.8 billion dollars of Tesla stock. Why is that? It's because this transaction, which was, you know, very tight to get done, probably required lots of margin. You know, there are, look, I have a margin loan at Credit Suisse, so I know how these things work. And you can very quickly get margin called. You have to sell down things that you own in order to maintain your collateral limits. We've talked about this before. He's had to do this twice now in the last few weeks. And that's because, again, not because of the demand at Tesla, as far as we can tell, but because people believe he's distracted. And so people are anticipating weakness at Tesla. People are now shorting the stock. Anyways, it's causing this downward spiral. And can he fix it? I think so. Can he pull it all out? Sure. Is it just putting himself under an enormous amount of pressure that he could have avoided? Somewhat, yes. And I think that this is sort of where we're at. Six weeks in. My gosh. I mean, I was saying this guy learned in six weeks what it took YouTube seven years to learn,
SPEAKER_01: how hard it is to moderate content. And, you know, I think this is where I disagree is you're attributing so much good faith to these content moderators at YouTube and Twitter,
SPEAKER_04: when the Twitter files reveal that they made no effort to suppress their bias. In fact, they were like pretty much like, can you do it? Okay. They were doing the equivalent of dancing in the streets every time they booted off someone they didn't like. Fair enough. Before you react to
SPEAKER_00: what Freebird just said at the end that Coda, can you respond to what I just said? Isn't it true?
SPEAKER_04: Well, look, I mean, if you define what Elon is doing there as, you know, acting as a judge, arbitrating on every little content moderation decision, is that a great use of his time relative to what he could be building at Tesla and SpaceX and doing on behalf of humanity? Then no, clearly not. But if you define what he's doing in the larger sense as restoring free speech to the most important town square social network, hopefully thereby inspiring other tech companies to move in the direction of opening things up, then I actually think it's a pretty good use of his time. So look, I think we can quibble about this or that decision that he makes or this or that tweet. But I think the overall thrust of what he's doing is very important for the country and for humanity. So I get where you're coming from. Hopefully, he'll find some people at Twitter who he can empower and trust to make these content moderation decisions. So he's not drawn into every single little battle, right? We do want him focused on the highest priority problems. My point is just that I get that I just think that what he's learning and what we're living and
SPEAKER_00: seeing in real time is that there is no canonically right decision ever. In this space, there's only a decision where some percentage will support and some percentage will always be against. That's my
SPEAKER_03: point. Correct. He did say when he took over, he knew that would be the case. He said, you will know I'm doing the good job when both sides are equally upset. Just to put a pin in it. I think it's important for people to understand what the new policy is. So I'm just going to quickly read it just to just hang on. Sorry, hang on one sec before you get to because I think the philosophical
SPEAKER_01: point rather than the specific one is an important one. And I just want to respond to what you said and have Sacks respond to this. In the case of the points you make around the Twitter files, and by the way, I don't agree with any of the moderation decisions personally. So I don't think that someone should be suspended for posting public information. I don't think someone should be suspended for saying controversial things. That's my personal opinion, just so I'm clear on that. Because I know that, you know, that describes yourself as a strong speech.
SPEAKER_03: Yeah, libertarian. Sure. And, and so in this particular case, I think what really irked me,
SPEAKER_01: I was trying to identify why it made me so angry yesterday, it triggered me, it really did. And I think the reason was that in the case of the Twitter file points, it was a minority, it was a minority that was affected, it was one person that was affected, because the majority wanted to do that thing to that person. And I think in this case, it's that the minority wants to affect the majority, in the sense that Elon has aggregated this control and this power over moderation. And he's benefiting himself and a few people that have private planes. And he's shutting down hundreds of Twitter feeds that are using publicly available information. And so it feels even more onerous of a use of power and influence, because he's taking, he's doing something that benefits a small number and affecting a large larger number, whereas the where's the other one was affecting a small number that benefited a large number, because that's what a lot of people wanted to see happen. A lot of people wanted to see Trump suspended. And it wasn't right either. Okay, I don't know if that if that makes sense. Yeah, we understand your position completely. I just want to add to that.
SPEAKER_03: In this policy, I think it's very important to understand what he is saying about this accounts dedicated to sharing someone else's live location are going to be suspended going forward, you can still share your own location, obviously, content required, you know, content for public engagements, you know, the president is speaking somewhere, whatever, you just really can't be persistently consistently tracking an individual otherwise known in, you know, talking, but Jason,
SPEAKER_00: if NPR is live tweeting, sure, Jerome Powell speech, perfect problem XYZ location, not a
SPEAKER_03: problem. If they do Jerome Powell's location for the next year, for the next year, 10 times a week,
SPEAKER_03: on his off duty on that same thing we're talking about. I'm just saying like, let's just say he
SPEAKER_00: gives a speech every week. Is that illegal? No, if you're giving a speech at a public place where
SPEAKER_04: you've announced that you're going to be appearing at a certain time and place you've already made public where you're gonna probably what we're talking about is and what what what Elon jet was showing was a live stream of precision GPS coordinates over a sustained period of time. Yes. And not to be too dramatic about it. But if you look at like the weapons are so successfully being used in Ukraine right now, they're all precision GPS guided. Now, right now, you have to be a state actor to get a hold of those weapons. But you could imagine, over the next decade, that having someone's precise GPS coordinates over a sustained period of time, it would be pretty easy to target them for and not to be dramatic here, but for assassination. Yo, that is a security risk. There's no way around that. I brought this up with Palmer
SPEAKER_03: lucky, man. I'm scared that do come at me anytime. When I get my jet. Palmer, I'm sorry, dude. Do
SPEAKER_03: not take me out. I'm gonna get my jet. I'll be on my first flight. And he's just gonna send a drone in. But look, let's talk about hypocrisy for a second. Okay, because here we go. Let's let's talk
SPEAKER_04: about CNN's hypocrisy and the media's hypocrisy. Because earlier in the week, they were saying that any criticism of yo, El Roth, who is Twitter's former head of trust and safety amounted to a threat to his safety. And they had this like theatrical tweet where they claimed he was having to flee his house, which a lot of people found pretty preposterous. They were basically saying that public criticism of someone who has put themselves out there to engage in a public debate, who's writing op eds, New York Times, that is a threat to safety. However, publishing someone's real time location on a continuous basis. So they can be taught not intellectually consistent. It's not a threat to safety. That is not sorry. If one of those two things is a threat to safety, it's the real time doxing of somebody. Yes, I think we now understand why Elon did what he did. He basically had an incident in LA in which the safety of his kid was threatened, because he's got stalkers coming after him. So his safety is a real issue. It's not like a made up issue. But why should his
SPEAKER_01: personal experience affect the usage of a service that hundreds of millions of people use? And that's the big issue. The decision should not be based on what affects him personally, there needs
SPEAKER_04: to be a principal basis, there needs to be a principal basis for any decision about content moderation or censorship. Maybe in the first few hours that decision, it wasn't handled perfectly, because there wasn't a principal basis. But since then, one has been put in place. The principal basis of what J Cal showed, and this applies to everybody. And so you know, now it's a debate about whether that policy makes sense. Now, is Elon just as arbitrary and capricious as the former executives who are running trust and safety at Twitter? I don't think so for two reasons. Number one, he's promised transparency. He said that when we ban or shadowban an account, there has to be a reason for it. And you have to be alerted to it. In other words, none of the shadows stuff. No, she had informed you get your speeding ticket, you get your ticket. It's there, right? No more
SPEAKER_04: shadow. That is different. And then the second thing is that and again, I think you could say, they didn't do this perfectly in the first few hours. But there needs to be a principal basis for some sort of decision. And it needs to be applied to everyone equally. And so far, we haven't seen any basis for believing that he's not applying this principle equally. I mean, still very early, whereas the former rulers at Twitter were indulging their personal bias and personal preferences. And who were they were banning, there are two standards of justice. If you were someone who has allied with them, it was almost impossible to get censored, no matter how hateful your tweets were. But if you were somebody on the other side of the political debate, they were eager to suppress you. And I think that at least so far, Elon has not shown that type of selectivity. He selected against someone that put him at personal risk.
SPEAKER_01: I think, yes. And if that's where the decision had stayed, then I would agree with you. But I
SPEAKER_04: think that since then, they've put in place, they've undergirded that decision. I got a principal policy. I think those sites are I think those tweet streams are cool. I think there's some
SPEAKER_01: cool tweets streams that some of these people run. And there are hundreds of them. And they're actually kind of cool. You can see where these different favor of people tracking people's planes, like where Air Force One is, they show all these different planes, it look and whether or not the FAA should be publishing this data as a separate question. But it's on the open internet, it is already there. It's like turning off the RSS feed from the open internet to protect himself. Okay. That's why it feels on earth. So here's the part I agree with, which is,
SPEAKER_04: I think this policy with regard to plane specifically is going to be futile. Yeah, it's going to be at best harm reduction, because as long as there's many ways to publish this information on Reddit, it's on Facebook. So listen, I think this whole I think this whole policy on Twitter is a little bit of a red herring. I think the real issue the real underlying issue is that the FAA is publishing these I count numbers, thereby making every plane personally identifiable. I don't think there's I have a counter to it. If I'm necessary, I have a counter to it actually, sex if I may, what we saw, whether you agree with it or not,
SPEAKER_03: with the mass banning of certain individuals, did actually silence them and take them out of the public square. One of the reasons in fact, you'll want to buy Twitter. So if you look at certain individuals, whether it's Milo, Alex Jones, Trump himself, right on down the line, when they got banned across all systems, it was dramatic in terms of the reach of the that information. So because of the size and scale of YouTube, Facebook, Twitter, etc, when they act in coordination, they can have a dramatic impact, not a perfect impact, but a dramatic, which is why we have this issue of hey, should 230 be rethought, because when they act on mass, it is extraordinary what they can do to an individual they took the Alex Jones, who how do you consume Alex Jones, you have to seek that out in a major way. It's distinctly different. Chamath, last word, and then we're moving on to what could be the greatest science corner ever in the history of all in pod. Final word, Chamath. I think this is a great transition. We're about to talk about nuclear
SPEAKER_00: fusion. And my point is, I don't care about any of this stuff. Like I said, like, this is my point is like, if you take like an average person, okay, you know, we are, let's say awake 16 hours a day, and, you know, if you take out the time with our family, David, the family is people that are related to you. Can we DM sacks those people one more time? So we'll send you their names.
SPEAKER_00: But if you take that out, and you take out, you know, exercising and, you know, we also explain that to sacks, that's when you increase your heart rate, and sweat sacks. The point is
SPEAKER_00: that you have, let's just call it 12 hours, you know, a functional executive time that you can apply to a problem. And you can break that down into these blocks, right? I would really love what is basically the smartest human and the most productive human of our generation to be filling those blocks with things that sort of like really transcend. And increasingly, and I agree that freedom of speech is important, increasingly those buckets are being filled with things that are very low level, and hyper tactical, and are distractions at best to the to the path of free speech. And so I think that, hopefully, he gets all this shit under control over there. He finds a good executive team. I would like to see him get back to landing rockets on barges, getting to Mars, let's get it, get it. I mean, finish self driving, we're almost there.
SPEAKER_04: Chamath definitely has a point. I'd say one of the reasons why we don't care that much about this issue is because I think something to understand that's important is there are different kinds of speech and different kinds of speech deserve different levels of protection. The fact of the matter is like business advertising is not as protected as political speech. Porn is not as protected as political speech. Political speech, speech criticizing the people in power is the most protected category of speech, because the founders of the country understood that the people in power will always try to insulate themselves from accountability by limiting that kind of speech. But that is precisely the kind of speech that the former rulers of Twitter suppress the most and show the least sensitivity to. So listen, I mean, is Elon going to be the perfect content moderator? No, I mean, nobody is nobody is. But I do not believe that puts him in the same category as, you know, the giant Gotti or yo El Roth, who showed no sensitivity for political speech. He has indicated a desire to restore freedom of speech. And I think they ultimately ended up in a place I want to get us tomorrow. See, I want him to get us. Okay,
SPEAKER_00: let's move on to Twitter handles best science corner ever. So according to sources, scientists
SPEAKER_03: work for the US government have achieved a net energy gain in a fusion reaction. No, no, not net
SPEAKER_00: energy game. Get it right. We had ignition energy, which is very different from net energy game. Okay, hold on. I know that you're in the anti camp, please let the science nerd have you have to you
SPEAKER_00: have to say it correctly so that people understand what you're talking about. Let me just make it
SPEAKER_03: even simpler then. Explain to us what fusion is. Dr. Friedberg, and explain to us why this could potentially change everything. We did this on a on a show once before, but I'll kind of do a quick
SPEAKER_01: kind of summary again. Basically, if you take atomic nuclei, which are made of protons and neutrons, and they repel one another, right, because protons are positively charged, so they want to push apart from each other. So with enough energy and enough density, meaning that they're moving fast enough, and they're close enough, they'll overcome their repulsion and jam into each other. When that happens, some energy is released, because the total mass of the fusion of those, those nuclei is actually less than those nuclei when they're on their own. And so some energy is released, and that energy drives a chain reaction. And so fusion is this concept that is fundamental to physics and fundamental to the energy driver of our universe. So the star in our, in our sky, the sun is driven by fusion, and only about 15% of the mass of the sun at the center is dense enough to actually drive fusion. So the big challenge with fusion is how do you get these, these atomic nuclei close enough together and moving fast enough that they'll actually fuse and release energy. And that's super hard. The reason it happens in the sun is because the sun has so much mass that the gravity pulls all those particles together, they get close enough, they get hot enough, they move fast enough, and fusion happens, boom, all this energy comes out and every day we're warm. Now, to do it on Earth is very difficult. But if we can do it, what happens when you fuse nuclei together is you don't release any This isn't like a radioactive fission reaction. You release energy that can be harnessed to drive our systems, our technology, how is it done? Yeah. So in the 1950s, you know, this was theorized, hey, we could do fusion on Earth, we got to get a really, really dense plasma, meaning the atomic nuclei and the electrons have kind of gone off the atoms. And it's just the nuclei spinning apart, you got to get them to move super fast, like 10s of millions of degrees Celsius, and you got to get them really close together. So how the heck can you do this? So there's a couple of concepts to do this, one of which is called inertial confinement, which is where you basically create a little pellet of the material, you're going to try and get to fuse, and you put a ton of energy on the outside, you compress it really hard, really fast. And when you compress it really hard, really fast, and you can get it to be done in a perfect sphere, and you can get it to collapse on itself very quickly without, you know, kind of shooting all over the place, enough of those particles will come close enough together fast enough hot enough, and they will start to fuse. Another way is through magnetic confinement, where you use magnetic fields to create a really hot plasma, get it to spin around or to move. And then the magnet brings that super hot plasma closer and closer and closer together until all those particles are moving fast, and they're dense enough that they start to fuse. So, you know, one is called magnetic confinement, the other one's inertial confinement. And so what we saw happen this week is at the National Ignition Facility, which is a facility that was built starting in 1997, and they've spent about three and a half billion dollars to date, they demonstrated a net energy output from the fusion reaction of an inertial confinement system. And what that means is they took a little pellet, and that pellet was made up of deuterium and tritium, the atomic nuclei that they use, the particles that they use are deuterium, which is a proton and a neutron stuck together, and then tritium, which is a proton and two neutrons stuck together. And the reason they use those two combinations is of all the different ways you could fuse nuclei together. This has the best energy output of any kind of reaction. Freiburg, what actually happened this time that made this work for what apparently only
SPEAKER_03: three billion dollars, you said you didn't say three trillion, said 3 billion, three, about a third of Yeah, about a third of what Sam Bankman fraud stole. We have done something here. Yeah, allegedly. So what actually happened that is so dramatic that we have a press conference, everybody's losing their mind. So yeah, I just want to highlight one more thing about why this
SPEAKER_01: is so hard. You have to get such an incredible density, you have to get incredible energy, so high temperature and high density, that confining those atoms and not letting them escape and, you know, basically dissolve before they fuse is super difficult. It requires so much energy in such a controlled way in such a perfect and precise way that all of the digital technology, the magnets, all the measurement systems, all the software, it's taken us decades to get everything that allows us to do this today. And now we're at the point that we may be able to start to realize production scale opportunity, kind of versions of this. So what they did is they had a small deuterium and tritium pellet, and they shown 192 lasers onto this container that held that little fuel, 192 lasers, the whole thing happened in a billionth of a second, the lasers pulsed, boom, here's an image of it. And as they did that, they, you know, basically x rays kind of hit this fear, this little BB, if you will, BB kind of thing and compressed it and it compressed so quickly and with such heat and it didn't dissipate because it was done so precisely, all the lasers hit at the exact right time, boom, this thing compressed, and then energy came out and the energy that came out that was measured was one and a half times the energy that kind of went into that reaction. And here's a chart that that I'll show you from the National Ignition Facility, which shows just how inefficient the system still is. And this isn't even speaking to, to Chamov's point, but basically these guys lose 90% of the energy that they put into the center of the system. Only 10% is actually used to drive the compression. The rest of it is lost. And there's a lot of ways to improve the efficiency of the system from here. But basically they put two megajoules in, they got three megajoules out. And so it was the first proof point, production proof point in the 70 years that we've been theorizing about nuclear fusion here on planet earth, that this is possible and it's real. Now this is these kind of inertial confinement systems. There are 33 private technology companies today that have raised about three to $4 billion so far this year to pursue several other technologies besides what the National Ignition Facility is showing to try and build production ready versions of nuclear fusion. And so these 33 companies are using a bunch of different types of tools. One of which is the Tokamak. If you show the image, I'll show you this one. There it is. Yeah. Tokamak. This is what we talked about. That is the magnetic spinning thing that looks like Iron Man's arc reactor, which I think they based it on.
SPEAKER_03: Yeah. Yeah. You create a plasma, you basically speed up the hydrogen nuclei super, super fast,
SPEAKER_01: these uterium and tritium nuclei, super, super fast. And then you use magnets and the magnetic field has to precisely squeeze the plasma, squeezing it, squeezing it, squeezing it. And if it's slightly off in even the tiniest way, think about a balloon, right? If you put a pinhole in a balloon, everything escapes from the balloon. That's how technically hard this is. You're basically trying to create a balloon with a magnetic field and you're trying to keep the gas and you're trying to make it smaller and smaller and smaller. And if any tiny hole emerges, the entire plasma is that what happens in your brains? Like when you're trying to hold in the
SPEAKER_03: wagyu anyway, let me ask this question then about the consistency of this and then we'll go to you chum off. Can they do it consistently? Or do you think this is like they got lucky once? Or are we going to be sitting here a year from now and they're like we put in two and we got out six. So we did it five times. Yeah. So so now we've proven that humans can do this. Okay. Which is
SPEAKER_01: look, I mean, I want to give you guys some and I know kind of some of chum off concerns, which is how we can recreate the sun is what we this comes down to. No, no, no, I want to just say one like
SPEAKER_01: in even close. I want to say one important thing from a historical context. All breakthrough
SPEAKER_01: technology starts out seeming impossibly large, impossibly expensive and impossibly slow. The human genome project 20 years ago cost $100 million to sequence the human genome. Today we can do it in a couple of minutes for $100. Okay, credible. The first computer the ENIAC computer had 500 flops of compute capacity, it filled a room, it cost $8 million to build. 20 years later, we had a mainframe. No, this is all this emotional bullshit. You're using the wrong
SPEAKER_00: examples. Okay, let him finish then you go to my good finish your sentence freeburg and then we go.
SPEAKER_01: And today we have an iPhone that can do 2 trillion flops of compute in your pocket. I think that what we're seeing with fusion today is similar to what we saw with the ENIAC computer in the 1950s, which is the demonstration that compute is possible. And now we're seeing a demonstration that fusion is possible. And a lot of folks have anticipated this moment. And they've invested ahead of this. Now, I don't know if any of these companies that are currently kind of being built are going to be production ready anytime soon. My estimate is that we will see production demonstration. Okay, fusion, here we go. 23rd in the 2030s. So call it eight years from now plus, and then you'll see grid scale scale up in the 2040s. So this isn't something that's going to happen next year or two years from already happening. What are you talking about? Okay,
SPEAKER_03: now, Chamath your rebuttal. Oh my god, knowing you're a huge fan of solar. This is the most
SPEAKER_00: navel gazing hit up your ass scientific bullshit I've ever heard. Okay, couple points. Let's start with the basics. The first is that there was no previous technical to being like, why are you angry at me? I'm not angry. I find it so tiring hearing this. It's all syrup. He's right. Yeah. Why are you like, I don't get it. Because I don't find this intellectually honest. Okay. Find it intellectually dishonest. Let's keep emotions. Let me finish. Let me finish. Okay.
SPEAKER_00: When you talk about sequencing the genome, there was no alternative. So you're right. It was an enormous technical leap forward. When we built a computer, there was no analog. It was an enormous technical leap. And so you're right, we have a cost curve we don't understand. And then we iterate as rapidly as possible and all these innovations where we built an entire infrastructure to ride down the cost curve. The thing is fusion energy exists today. It's called the sun, we actually know how to capture it at virtually no cost right now. So according to the IAEA, today you can capture grid level solar energy for about three cents a kilowatt hour. That's as close to zero as we've ever been. And over the next 10 years, their forecast is it's going to get to one and a half cents. If you then want to store it, and you layer in storage costs, we'll be at a whopping three cents a kilowatt hour. That's where we are today. And so I think that fusion does exist. I do think that this is an incredible technical leap to replicate something that exists. And I think that's where the intellectual dishonesty is. It does exist, it has been captured, it can be harnessed, and there is a positive energy equation just in a different modality that doesn't speak to these technically minded individuals. A couple of other points about what I saw. I think it's incredible what happened, okay? But just to make sure we're clear, this is 192 lasers the size of three football fields that consumed 322 megajoules of energy, which then ultimately delivered two megajoules to a target, which then released three. So this is why I'm saying we had positive what's called ignition energy. We did not have positive electrical energy captured. So yeah, could we figure this out? Absolutely. Can we then shrink the three football fields down to something that looks the size of a laptop? We possibly could. Will it take 20 or 30 years? Possibly. But in the meanwhile, if the goal is unlimited costless energy, you're on that cost curve already. Yeah, but why can't it be both? So you said I was being intellectually dishonest.
SPEAKER_01: What was I? What's dishonest? Yeah, you're comparing this. What you're saying is right. Yes, you can get you seem to be in agreement. Like, yeah, I just think that I think that you're
SPEAKER_00: trying to say that this is an entirely new thing. No, it's a different approach to a thing we've already beaten and basically captured. Let me bring what I would argue to math and I think this
SPEAKER_01: is important. The the net energy you can capture on, say a football field sized facility from solar is, you know, a tiny fraction of the energy you could generate from a football field sized fusion reactor. And that's why the argument would be like, hey, you know, when we were developing computers, hey, we have abacus is we shouldn't be developing computers. And I think that's the analogy I would use here. This is why the cost per kilowatt hour is what the the levelized cost
SPEAKER_00: of energy tries to do. It tries to normalize that argument away, because everybody would say that, hey, hold on a second, you're going to need plane fulls of this or boatloads of that. And people said, No, what's the levelized cost of energy? How what is the cost per kilowatt hour to generate energy? And what I'm saying is, that is an absolute scale, and free is zero. And we're at 1.5 cents. Here's what I would say once Jake out one sec, okay, come off. The opportunity here is
SPEAKER_01: not necessarily about cost reduction, it is about scalability. And if hydrogen is abundant, which it is on this planet, it is nearly infinitely abundant, we can take that hydrogen, and we can scale up energy and electricity production in a way that is unimaginable compared to solar. And I don't think that solar should be excluded. Solar is key today and should be scaled up. And I'm 100% agreement with you. But the scalability to go 100x if we want to make 100 times more electricity, I think we need fusion. And I think that it's feasible. So I think we have reached a good
SPEAKER_03: settlement here. Chima, you're saying, hey, listen, we're getting solar down so cheap, we can solve solar, all forms of energy. Okay, great. We are solving that. So for our needs today, and then what freeburg is saying, but what if you had unlimited a thing that we can't even imagine? Beautiful. Now, watch as I get sacks involved in a science conversation. He has zero interest in
SPEAKER_03: Mr. David sacks. If in fact, there was 100% more free electricity available in this timeframe, the next 10 to 200 x 100 x the available energy, in other words, supply of energy just becomes flooded. And it's free, essentially, what would be the geopolitical reaction on planet earth in terms of this incredible rivalry rivalry we have with China, and for humanity on a political basis?
SPEAKER_01: Such a good question. Jacob, go ahead. Here we go. Thank you. World's greatest moderator.
SPEAKER_03: Well, we let freeburg answer. No, no, you're the politics guy. Get in there. Take a second to think about this. Let's I want to hear his answer. I actually want to hear your
SPEAKER_01: answer. Yes, you know, in a world where you know, energy becomes more abundant. David hasn't been paying attention guys. This is what he's trying to say. Tucker, my boy. Can I just say,
SPEAKER_04: Jake, I'll call your intellectual dishonesty and raise you a steel man. Go ahead. Go ahead. I love
SPEAKER_03: you. I love you. You know, I do. I had a great night on Monday night, a Sunday night. It's fuck later. I just want to be together last week. You call me petty to I think we're here's what I
SPEAKER_01: want to be clear. I think that I'm just glad you guys are fighting not me and sacks guys, please.
SPEAKER_03: Let me finish. I think that this breakthrough is really valuable. I think it's interesting to see
SPEAKER_00: that these kinds of scientific breakthroughs continue to happen in government sponsored facilities and not private companies. And I think that that's probably where a lot of these innovations will continue to come from because look at the scale of what had to be built. Three football fields and 322 mega joules of energy and 192 lasers. This is really complicated expensive stuff. I'm an enormous fan of these kinds of scientific breakthroughs. I want to be clear. I think that where I struggle is translating this into actually an investable area. And I worry that this is going to consume lots of money by folks that could otherwise put money to work in things that will actually pull forward our energy independence and energy abundance sooner and faster. So for example, you know, there are all kinds of things that we could do to secondary ternary third and fourth and fifth generation batteries that aren't happening today. There are a bunch of things that we could do to actually create an infrastructure of green hydrogen. And the the simplistic answer is we could do it all. But the reality is money is finite, and we can't. And all I'm observing is I do think that more practical things that do have geopolitical ramifications sooner are not going to get funded because people do get enraptured by this. And my skepticism is that this is still in the realm of government-sponsored research and is not really an area that for-profit private companies can tackle. And so I would rather those for-profit companies, for example, Y Combinator just today put out something where they were, you know, call to action, a request for startups in climate. And when you look at that list, those are really practical, investible areas. And I just want to make sure that the capital allocators that listen to this weigh those equally. I am glad, I'm glad that the US government did this. I hope they do more of this. But if you're asking me, quite honestly, I would rather the next $10 billion go into energy efficiency HVAC than fusion because a fusion exists and b, I think it's going to happen at an innovative bench scale level by the government and not by a private company. Let me just, let me just respond to that real quick. Chamath, I think
SPEAKER_01: that the idea of allocating our resources as a society should be done on kind of, you know, on a portfolio basis, 80% on the pragmatic near term, 15% on the kind of next gen and 5% on the moonshot. And this maybe starts to shift from the 5% to the 15%. Maybe it's still in the 5%. But I don't see kind of overfunding happening. So I'll tell you guys there was a survey done. There's 33 private companies in fusion that are kind of fusion companies today, VC backed, eight new this year. So the number is kind of increased by 33% this year. And so far this year, those companies have raised around three to $4 billion, which by the way, is a fraction of
SPEAKER_03: what was done by 15 minute delivery companies. Exactly my point. And and by the way, the biggest
SPEAKER_01: funding is happening in ITER, which is the largest construction project in Europe. And this is a $30 billion production scale fusion demonstration system that should be online by the end of the 2020 government sponsored government sponsored. Yeah. And so this is my point. I'm a huge fan of
SPEAKER_00: government sponsored research. We get finally the first science corner. Everybody brace themselves.
SPEAKER_03: It's the first science corner where David Sacks has the cherry sucks. Here we go. Come on. You can come in. You can do it. Mr. David Sacks. What was your question? Your question was
SPEAKER_04: a little bit was was not a let me rephrase. Okay, hold on coming in. What's the geopolitical impact
SPEAKER_03: if this does happen? 100 acts energy is fantastic for the United States if it actually happens. And
SPEAKER_04: the reason is if you look across the world, there's this thing in politics known as resource curse, where the worst governments, the most despotic governments tend to be in the countries that have the biggest natural resources, ironically. So the countries that have huge amounts of petroleum or other kinds of minerals, they've tend to have pretty corrupt governments. And the reason for that is that if you're sitting on a giant oil reserve, you don't need to make anything else work. You just fight over who gets to control that oil reserve. And that's what politics ends up being. You don't need to create policies that foster innovation, or attract knowledge workers, right? You just basically mine that oil. So if all of a sudden you're talking about turning energy into a software problem or an innovation problem, that looks a lot more like the software industry. That's an area where the United States has a huge advantage. And yeah, I think it would pull the rug out from under many countries all over the world in favor of the United States. I mean, it's a big if because where I agree with Chamath is this stuff still seems pretty far off. And it's still pretty unproven from a commercial standpoint. But I agree with Freiburg, why not try investing in it and cultivating it and see where it goes. Okay, fantastic. This was a fantastic science corner,
SPEAKER_03: where we actually engaged David Sachs, which country? Did you disagree with their J. Cal?
SPEAKER_03: All right, take it easy. Yes, I just want to know you did. And I think you like that answer, right?
SPEAKER_03: Well, I love all of your intellectual enough for you or was I love your intellectually.
SPEAKER_04: I love steel person. It felt silver silver manning. But I love what you're intellectually
SPEAKER_03: honest, silver person. Yeah, it's your silver. They're silver thing was on a plot was that
SPEAKER_04: platinum gold or silver. I think that's your you're in platinum with some diamond dust.
SPEAKER_03: I just can I just say spent a couple nights together this past week has really really
SPEAKER_01: does mood of the show. I mean, when you guys go out and drink together and you guys are sacks and I left our asses off Sunday night. Can I just say we sacks and I had the best 48 hours
SPEAKER_03: together in a decade. This is Sunday night. It turns out Chris rock and Chappelle are playing at the Chase Center, where Chumath used to own a piece of the Warriors, right. And this incredible arena has this incredible show. And you know, me and sacks and some friends will leave it at that go to the show. Our bestie draymond is at the show. So I text Dre and I'm like, Hey, you're going to see Chris rock by chance tonight with Chappelle say yes, sir. I said, Hey, we're gonna go with a couple of friends. Maybe we roll together hang out after the show. We go and after the game after the show, which was incredible. We go backstage and I'm sorry to the to the practice court. And we're hanging out with draymond in the practice court with Dave Chappelle Dave Chappelle and I start shooting hoops. David Sachs is talking to Chris rock about free speech. Steph Curry comes out and starts giving Dave Chappelle and Jake how shooting lessons where Chappelle and I are breaking like old men, you know, you know, on a concrete court. All of a sudden, Steph says, Hey, Jake, how you got it. And by the way, he's fan of the show. He says you're short every time. And just, you know, hit the backboard. You got to go long. Then he tells Chappelle that you got to change this. All of a sudden we start hitting shots like, you know, we're raining threes. You're raining threes. It was literally like cut into here. Were these mid range jumpers or threes? I was a free throw line extended free throw line extended, cut into here rain man and rain dance from along came Polly rain dance Raymond. Right. Right. Right.
SPEAKER_00:
SPEAKER_03: I was hitting brick after brick recipes fill up some Hoffman. So then we're chilling. And Saxon are talking to Dave Chappelle. Joe Lacombe owner of the warriors are there the majority owner, you know, as opposed to you being a minority owner. That's the only person who drops more names is Phil Hellmuth. I mean,
SPEAKER_04: absolutely. I'm trying to catch up anymore. No, he's holding names. He's holding back three names.
SPEAKER_02: Sax. Sax. Am I leaving? I'm saying so bad, but I'm not gonna say not so brutal. Zero doxing. So we I kid you not. Chappelle comes over and says, Jacob, Sax, you guys want to go to, uh,
SPEAKER_03: after to do it? Go see me do a show at like 1am at this like local comedy club with 70 seats. I said word. Yes, we go at 1am Chappelle sits on stage, smoking cigarettes. And doing 90 second pauses, and then having a beer and interacting with the audience. And does a two hour set after doing this set with Chris rock at the Chase Center. Me and Sax and Draymond hilariously laughing. The stuff Chappelle is a genius. And when you see his show, and Chris rock, by the way, he puts a tight set together. I mean, Chappelle's got this storytelling thing where he kind of meanders a little bit and then he hits you with it. But Chris rock is just bang, bang, bang, bang, bang, bang, bang, bang, extraordinary. Just two incredible minds at the top of their game artists, artists at the top of their game, doing what society needs. But more importantly, doing what David Sax and I needed, which was to laugh our asses off together and remember our friendship. So it was a great night out. I want to say to bestie Draymond Dave Chappelle and Chris rock. Thank you. The David Sax J Cal bestie friendship has never been stronger. I don't know about freeberg and Chammoth that seems to be on the rocks. Yeah, it's weird. We'll be in. We'll be we'll be we'll be vacationing
SPEAKER_01: together next week. So we'll I love we'll hang out. Yeah, well, well, we are going to be whatever whatever's going on. We'll take a walk and figure it out. Well, I just want to say the alliances
SPEAKER_00:
SPEAKER_03: amongst the besties people. I'll be honest, I got mad at freeberg when he did that Google bit to say
SPEAKER_00: the exact opposite of what he actually said that. Yeah, don't bring that up. Yeah, just beep that. But yes, that is the thing that bothered me. I have to be honest. That's you playing to the crowd versus you being honest and telling what you think free. But that did. Let me put that in the form
SPEAKER_03: of a question freeberg has your fame as the Sultan of science? Because listen, you nobody knew who you were outside of Silicon Valley before this. Has it impacted your ability to speak? No, no, no, not my family. Look, I'll be I'll be honest. And I'll speak openly about this. I had said that
SPEAKER_01: there could probably be a significant headcount reduction of like 75% at Google, and the business could keep operating. And I took it out. And I took it out because I have a lot of friends that work at Google. Google's a close partner of mine, they're an investor of mine. And frankly, I just want to be careful about that. It's not something I commonly do. You know, as you guys know, I as you guys know, I usually speak my mind pretty clearly, but I was just trying to be respectful. And that's the reason I did it. You know, so that was fine. What I'm saying is not that it's just
SPEAKER_00: that the part that you edited in actually made it seem like you were not saying that at all. But the opposite. I think if you had cut the whole thing, it would have been more honest. So to keep that other thing in actually led the perception of the opposite. So you were triggered by that. No, no, I don't have triggered I'm saying I think we should have a principle very often tomorrow. I know. I think that we should just have a principle to not play to what the perception of what we say should be, especially if it means we could be saying the opposite of what we actually mean. That's all intellectual honesty is a best tenant. It's a best tenant. I think so. Absolutely. Best
SPEAKER_03: tenant always and the other best tenant besties always come back together. If we have a fight, we always come back together. Sax, can I'm still mad at you? Okay, but just talking about hypocrisy.
SPEAKER_04: I mean, so how great was Sunday night? How gets up there and he gives like round the gate. He's attacking woke right out of the gate. Swinging came out swinging like Will Smith. Shook Smith,
SPEAKER_04: you mean? Shook Smith, he took down Will Smith. I mean, the Will Smith takedown, which you will see
SPEAKER_03: in this special is so complete. It is just chef's kiss. But how great was his set? Let's say just give Chris Rock his flowers. Did he did he filet and frick a say? He did, but I thought the more
SPEAKER_04: important part of the set was the he came right out like calling out all this, you know, you know, earlier than thou woke stuff. Yeah. And there was that undercurrent to Chappelle's set as well. And also he said, Listen, words can't hurt you unless you write them on a piece of paper and
SPEAKER_03: time to a brick. We these a bigger point right now. And this does tie into our first story is I think comedians look at Twitter as a place to get canceled, not a place to be part of the discourse. And that's a huge loss that's indicative of our society being broken. And it's incredibly important that these comedians be allowed to mock and to speak and to step over the line and challenge us as citizens in a free society. And we should cherish them. And we should not even try to cancel them, let them cross the line, let them say things that make us uncomfortable so that we can understand ourselves and our society better. And I just want to say why can't you include
SPEAKER_04: lives of tech talking that up? Do we want to have a conversation about it? I'm okay with mocking.
SPEAKER_02: I just don't start you guys. You did so well. Come on. Here we go. No, Jake, I'll cut it out.
SPEAKER_03: All right. Well, we have two more science corners to get to. All right. Well, if you don't, I mean, I just want to say about the Koopa deal.
SPEAKER_01: And Saks, this is right up your alley. Have you paid a lot of attention to it, to be honest? Oh, really? The thing you guys asked is like,
SPEAKER_00: you know, what signal will Elon's moves at Twitter be for the rest of the tech industry? I think the biggest wake up call is to actually PE companies. So if you played this out and you think that Koopa is, you know, explain what it is, please. Koopa is a software as a service company that does revenue management, I guess, or expense forecasting or some something in the financial realm. I don't particularly know, to be honest. But anyways, this is a company that, you know, was off 70 or 80% from the high, like a lot of SaaS companies were when rates started to go up and they got this offer from Tomo Bravo. But here's what's so interesting about this deal. If you think that, you know, these guys bought a company, I'm just going to make up a number, at 20 times EBITDA, right? And you see Elon at Twitter
SPEAKER_00: and you think, well, wait, maybe we can't cut 75%, but maybe we can cut 50% of headcount and the company can still do well. And, you know, you take half of the expenses out of the business, all of a sudden, you know, if you're EBITDA doubles, you're actually buying it at 10 times. So I think the thing that is the real insight here is twofold. Private equity can still put out a lot of private credit to fund these deals and SaaS companies are perfect because they have huge free cash flow, right? So instead of funding it based on earnings, they can fund it based on ACV and ARR. So private equity will be super active. And two, all these rifts basically show what the efficient frontier is for the number of employees you need to run a company. And if you can cut 50% of the headcount, private equity folks will do that. And so I think Kupa is like the canary in the coal mine. It is the beginning of what I suspect is a tidal wave of PE sponsored deals in tech companies, largely SaaS, but may go into other realms. Taking advantage of these two things, tap the private credit markets and finance it based on ARR and then fire 50% of the team and double earnings capacity. SaaS, your thoughts? So on Kupa, I thought the most interesting thing was just the, we got a public comp. Well,
SPEAKER_04: we got a comp on what private equity is paying for public companies right now. So the deal happened at an $8 billion valuation. That was a 31% premium to the public price. It was 8.4 times next 12 months revenue. And on a trailing basis, it was about 10.4 times the last 12 months revenue. And by the way, all the comments were around how, what a rich price Toma Bravo was paying. People generally thought they were paying a premium to the valuation. So by the way, SaaS, it was 77% premium before the rumors came out that this was happening.
SPEAKER_01: So it was a pretty good premium. And there was a bidding war with Vista. And so it was a really
SPEAKER_01: rich kind of deal that got done here. Right. So my point is that people thought this was a really rich deal and yet the valuation
SPEAKER_04: multiples are so much lower than what private company founders expected. So remember last year at the peak, founders were thinking 100 times ARR was normal, 100 times. And you could roughly say ARR is roughly equivalent to the next 12 months revenue. It's not perfect, but it's roughly the case. So these founders were expecting a valuation multiple 10 times what the public markets are paying. And actually the public markets are half of where Toma Bravo was in this particular deal. So the public markets right now are valuing the median SaaS company at about five and a half times and a high growth, that'd be for like a 20% year over year growing company. And they're valuing the high growth companies at maybe eight times, you know, and Toma Bravo did this at 10 times. So that gives you a sense of what the ballpark is. And these are companies that are already public. They're at scale. They're doing roughly a billion dollars of ARR. They have already kind of won their category to some degree. Whereas private companies are subscale. They're, you know, typically you're talking about companies with one, five, 10, usually under $20 million of ARR. They're not de-risked. There's still a ton of risk. We've seen many, many SaaS companies fizzle out and plateau at 20 million of ARR, never get to a hundred million, nevermind a billion. And yet these founders think that they're entitled to, you know, even in this market 30 to 40 times ARR, no way. I mean, like it's getting to the point now where, you know, maybe it should be 10 times, 20 times, like max for, and that'd be for a company that's growing two and a half, three X year over year. So I still think that like, so I think basically what we're seeing here is even a good scenario, like a Coop acquisition that was done at a premium, like it's still a wake up call to the private markets that the valuations are still completely and utterly out of whack. Yeah. Let me ask you a question, Zach. So this company was
SPEAKER_01: growing 45% last year, they're growing 35% this year, and they got this multiple. Why is it not worth a significantly higher multiple if a company's growing two and a half to three X, which is 250%, 300%. And these guys are only growing 35%. Sure. I mean, it is. And that's what you're paying a
SPEAKER_04: premium for. But so the, so the, the here's the theory of it is that if you can invest in a private company that say tripling year over year, and they can do that for another five years or whatever, then you're paying for that outcome in a couple of years. You're getting a discount to the
SPEAKER_01: outcome in a couple of years. Well, if you're paying 30 times today, and it triples next year,
SPEAKER_04: you're only paying 10 times next year. And if you're only paying three times. So if that keeps going, that's where your arbitrage is. But here's the thing you have to weigh against that is that these early stage private companies, many things go wrong. And they hit a plateau, they fizzle out, or their growth rate starts to the bigger they get the harder it is to be priced at a discount,
SPEAKER_03: not a premium because there's risk. There's more risk, they're growing faster, but there's more
SPEAKER_04: risk. But also it's very hard once you get to a bigger number of ARR 50 100 million of ARR, it's extremely difficult to be doubling or tripling year over year. Let me just point one
SPEAKER_01: thing out. So I looked at the numbers on Koopa, I think they had about 170 million of stock based comp expense in the last nine months. So those are employees that are getting $170 million in compensation in the form of shares. So they get those shares, they can then sell those shares and get cash for them on the public market, and then on the public markets and pay their bills. So when a company like this goes private, for those employees to just remain at their baseline comp, that stock based comp needs to be replaced with something else, or else they're seeing their salaries reduced. So you know, there's this balancing game when these companies go private, in terms of how do you give them the comp that they're earning to keep them engaged in the business? The answer is you don't versus no, but you let them quit because you want to do a riff anyway. Right? So I mean, do you but for the people that stay, right, so there's a balance,
SPEAKER_01: right? So there's a balance because it's not just hey, cut the opex, you have to cut the opex, including stock based comp. And this company generated about $110 million of free cash flow or operating cash flow in the last 12 months. So if you if you take out the stock based comp, these guys are actually breakeven or losing money roughly. Yeah, breakeven, roughly. So there's a real question mark on this business and businesses like this that go private, where if you actually cut the opex, and you cut the salaries and you cut the headcount, but you have to find new ways to pay people, because you've been paying them with stock in the past, how do you kind of bridge that gap? And I think that's probably a little bit of the balance and the art of what these guys do. Well, Jamal, if I may, can you explain to the audience, what a private equity firm's expectation
SPEAKER_03: is in terms of return when they buy a company like this, and then sacks, I saw your tweet that you want to feature and you'll go next. Well, I think it's changed over time. And this is what's so
SPEAKER_00: powerful about the private equity industry. Look, you have to think about what their incentive is, because it kind of guides the out. Yes. Early on, they were very much like venture capitalists, they were out in the, you know, edges of risk taking, doing all kinds of very difficult, gnarly deals. So if you look back in the history of private equity, you know, these huge, crazy deals like RJR Nabisco or TWA Airlines were the first of the industry, and they reaped enormous returns. But there was a lot of risk, and it required very heavy handed management. Oftentimes, what that meant was firing a lot of people. Over time, private equity has gotten institutionalized, and they don't generally feature themselves as a place to get the best necessarily returns, but they are places where you can put enormous amounts of money, where the likelihood of loss is extremely zero, and you generate very good rates of return. Now, again, this depends on whether you want to look at IRR or DPI, right? So a lot of people will market IRR, which, you know, I think is kind of like a gameable metric. But, you know, those IRRs can be 20-25%. If you look at DPI, which is really how much cash you get back, you know, private equity firms can generate one and a half to two x of the money you give them, but they do it consistently, and they very rarely lose money. So all of that is important into understanding what's going to happen in this cycle. These folks are going to buy a ton of these private software companies. I think that they are going to fire lots of people. I think they are going to make these companies run hyper-efficiently, and they will make sure that they generate that 1.2 to 1.7x that has been historical. Very rarely will they lose money in these things. By the way, that's going to mean that a lot of these other companies will have to reset valuation. So you saw yesterday, checkout.com went from a 40 billion dollar valuation down to 11. You're seeing some companies only go down 10 or 15%. But it's a process, isn't it, Chamath?
SPEAKER_03: Isn't this just like what happens in real estate where beginning of this process? Yes, because in real estate, my understanding having lived through these boob-muff cycles is the person living in the home still believes their home is worth, you know, this incredible evaluation. And then the people who want to buy it are like, that doesn't match reality. And then the real estate brokers go back and forth trying to get people to, you know, go through this messy middle and come to true price discovery a private company, it's hard to get true price discovery until they're on the brink of insolvency. They don't have the money. Right. We just got some data on that, actually. Can we
SPEAKER_04: bring this Cooley data? Yeah. So Cooley looked at a law firm in Silicon Valley. Yeah, they're a prominent Silicon Valley law firm. They looked at 1000 deals over the last three quarters of this year. And what they saw is that you're the later the stage, the bigger the valuation corrections, the series D rounds went from three and a half billion to 527 million. That's an one seven cent. Oh, yeah, that's an 85% drop. Series C went from 502 million to 130 million to 74% drop. Series B went from 164 to 90. That's a 45% drop. And then series A went from 58 to 45. That's only a 22% drop. There's just less room to compress there. But the point is that series B roughly a 50% drop series C roughly a three quarters drop, and series D, roughly a 85%. Yeah, one seventh drop. So I think founders right now are they're just like a little bit delusional about this money they raised last year, they're still way too anchored on last year's valuation.
SPEAKER_03:
SPEAKER_04: And if only they would think in terms of this capital they raised last year in terms of of its real dilution in terms of what the company is worth. Now, I think they'd be treating it more more precious. So for example, for example, hold on, if you won the lottery, and they don't want
SPEAKER_03: to they don't realize they won the lottery. I had this conversation with the founder. This is the only money they're ever going to see is the bottom line. And they're spending like
SPEAKER_04: they're going to win the lottery every year. So for example, let's say our company. Yeah, let's say you take a company that raised 200 million last year at 2 billion. So it was 10% dilution. So in their heads, they're thinking, Oh, well, this isn't that expensive, like 10% dilutions around the era, but really, probably the company is worth maybe 400 million now, right? Because it's gone down 80%. This 200 million of your 400 million is half the value of the company. Yes, you're squandering it, you're squandering it at a rate of 100 million a year. So you're basically burning up 25% of the value of your company this year and the next year. And then by the way, you're going to be in crisis after that, because you're probably like a lottery winner buying like a giant superyacht. I had an observation that a lot of the investors that sit
SPEAKER_01: on the boards of these companies. They have an incentive to not see those valuations come down too quickly, do they not? And so there is this sort of like, interest in, hey, I don't want you to have to go reprice the company or do a down round because then my portfolio gets written down. And then I'm in the middle, everyone's always in the middle of a fundraising cycle with LPS. And then I'm going to have a tough conversation with my LP is about my, my value. So do you not see VCs and investors playing an active role in trying to keep the valuations propped up to some extent, particularly where they have big markups 100% by extending bridge rounds or doing other sorts of, you know, look, nobody, nobody likes to go through a down round. And that includes founders
SPEAKER_04: and existing investors in the company. That being said, we're not talking here about new financing conversations. We're talking about is advice that is happening in board meetings. And, you know, maybe other VCs aren't pushing as hard as we are, but the advice I'm giving in board meetings is what I'm telling you publicly today, which is this is the last money you may be able to raise on attractive terms, if at all, you need to treat it much more preciously. The world has fundamentally changed. And by the way, we haven't even gotten into what's coming, the demand contraction that's coming next year. Explain what demand contract construction is for the honest place.
SPEAKER_03: Thank you. Okay, look, there's going to be three major sources of slowdown for software companies
SPEAKER_04: next year. Number one, new business is going to dry up companies are just going to be spending a lot less money next year because they're all cutting costs. So you should expect your new business to be roughly 50% of what it was next year, it'll be 50% of what it was last year. That's my rule of thumb for most companies, new business down 50%. Number two churn is going to be higher. We haven't seen that much logo churn yet. But next year, a lot of companies are going to start going out of business, and it's going to happen over the next two years. So you're simply going to see logo churn rates, say, among small businesses go from like a historical norm of 15% to maybe 25 or 30. In other words, your customer, the logo. Yes, that's what a logo means. Yes.
SPEAKER_04: Yes, logo churn means the entity doesn't exist, then you've got seat contraction, which is these companies are not hiring as fast. In fact, they're doing layoffs. So they're simply not going to buy as many seats of your software as you need to in the past. For the last decade, we've had a tail wind, an enormous tailwind for software companies of seat expansion, which is every year your existing customers would buy more seats of your product for their new employees. Now they're actually going to have fewer employees or maybe headcount freezes. So they're actually buying fewer seats. Oh my God. By the way, if you take all those three things, the deal of the century
SPEAKER_00: was Figma selling to Adobe for $20 billion. Yes, sir. Because if you take those three things, I mean, oh my God, they just absolutely top tick before any of this stuff was known. So today Adobe could probably buy this thing for like 7 billion instead of 20 billion. So does that mean they try
SPEAKER_03: to do a breakup fee and get out of the deal? I don't know, but if I was Figma, I'd try to close
SPEAKER_00: this thing ASAP and get that money. Yeah. Yeah. Yeah. You're right about that. And by the way,
SPEAKER_04: what I'm seeing from founders is that they still want to grow 100% plus over the next year. The problem is that the headwinds are going to be intense. So if you're flying a plane and the headwinds are extremely intense and you try to maintain your speed, you're going to burn an enormous amount of fuel. You're going to be incredibly efficient. It's better to basically just moderate your speed. Let the headwinds basically pass. We're going to have major economic headwinds for the next four to six quarters, call it year and a half. It's okay to have a slower growth rate, preserve your cash, don't burn up your fuel. Yeah, bunker down.
SPEAKER_03: So what we're trying to do is we're trying to give permission to our founders to grow at a slower
SPEAKER_04: rate because they feel this enormous pressure from their VCs to grow at insane rates. Can I build on
SPEAKER_00: this? I think Freeberg said it very well. The scan in venture capital is demonstrated in the following chart. This is using Cambridge and our friend Brad Gerson helped put this together. So what is this? This goes back all the way to 1997 and the gray bar is what venture capitalists share with their limited partners as to how well they are doing. The top quartile of venture capitalists. And this is the top 25 percent. Okay, so this is a venture capitalist and you know our returns have been consistently top quartile. So instead of cherry picking anybody else, I'll just use us. But it could be Sequoia, Benchmark, you name it. We would go back. We're in there. Launch, you would go back to folks craft. We go back to folks and say, hey guys, the total value of our portfolio is three times your money in 1997's vintage. Okay, it was four times your money in the 2010 vintage. Feels really good. But again, the job of the venture capitalist is to convert the gray bar into the purple bar. And historically there's been a decay. So for every dollar of gray bar that you show, you typically only get 73 cents actually returned to people. Okay. The paper value, the book value.
SPEAKER_01: The valuations that you get when you sell your company or goes public end up being 73 percent of what you marked at the peak. What you said they were worth. Exactly right. And the actual value
SPEAKER_00: of this purple bar going back 30 years is 1.7x. So just to put numerical numbers on this, if you were a venture capitalist, you would raise a hundred dollar fund. At the peak, you would actually show that that hundred dollars became 200 and about $28. But when push came to shove and when it was all said and done, you would return $170 back to your investors. That's the rough equation. So what's the problem? Well, the problem as you can see in this chart is right around 2015. Which is all of a sudden, you know, what we've started to see are these continually elevated gray bars. Yes, this stuff is worth seven times, six times, five times. But we have not seen the purple bars catch up. Now some people will say, well, yeah, but you have to give it time and, you know, this is probably what other vintage look times. It has to bake, that's reasonable. And all you need to do is do what's called a regression. And you need to regress these things to the mean and make the following assumption. Assume for a second that this time is not different.
SPEAKER_00: Assume that these historical averages, 2.2x, 1.7x holds. Well, that's what the black line here shows. You can calculate the area above the curve as the value at risk, right? The amount of money we will destroy because of all these shenanigans that Freebird just talked about. Propping up marks, not willing to look at actual market clearing prices. Well, if you do the math, the sum of the area above this black line is almost a trillion dollars around the world. And it is about $600 billion for US venture capitalists. This is the dynamic that the private equity industry is going to prey on. So if you saw Toma Bravo just closed the $32 billion round, you know, Vista's raising a $20 billion round, everybody's stepping into tech. They are going to destroy those gray bars. Would you describe that as bottom feeding? No. No, by the way. They are the rational actor who is finding the true market clearing price. Again, I will say this. I think the private equity industry is unbelievably precise and talented in being dispassionate and telling us what these things are worth. They're cutthroat. They're logical. No, no, it's not cutthroat. They're
SPEAKER_03: just smart. The opportunity for the private equity industry is going to be created by profligate
SPEAKER_04: founders. And look, you could blame VCs for the high marks last year as well. They were profligate too. But look, if you're a founder, if you don't start acting in a more capital efficient way and preserve your cash, your company is ultimately going to be owned by a private equity firm and they're going to make all the money. Well, here's an important... Because, hold on, because when you sell to them at a low price, all you're going to end up doing is paying back the liquidation preference. And then that private equity firm that was willing to do or less, but that private equity firm will be willing to do what you were not willing to do, which was simply cut your burn, cut your costs and act in a more capital efficient way. And they will end up making all the upside for your decade of hard work because you got basically addicted to venture capital and the high valuations and refuse to, again, adjust to the regime change. I'll give you an alternative. I'll give you an alternative. The alternative is that the majority
SPEAKER_01: of acquisitions made by private equity firms are not actually pure acquisitions. They're bolt on acquisitions, meaning that these are companies that are added to existing platforms that they own. So this acquisition they're doing of Koopa, I think it's very likely over the next couple of years, you will see like the playbook and private equity includes not just cost cutting, but also synergy building. And they typically do bolt ons and add ons. And this happens across all private equity platform deals of new products and services that can be sold through the existing sales channel, the existing customer base, and as an add on to the existing service or product that's already offered. So one of the things that I think you may see in Silicon Valley over the next over the next couple of years is a rationalization away from funding feature companies and thinking much more carefully about what can be true standalone product companies. And many of these companies that have raised a ton of capital and have gotten crazy valuations at the end of the day, they're more likely better equipped to be a feature of another platform than they are to be a standalone platform company of their own. And that's where the majority of these acquisitions will likely end up going in the private equity landscape. And they will be vacuumed up and attached to existing platforms that these private equity guys are building out. And by the way, just look as an example of what Oracle did over the years, what Salesforce did over the years, what Google did so many of these companies bolt on acquisitions by bolt on acquisitions by building a channel, building a platform, and then adding on top of that. And I think that's a lot of these guys are going to try and mimic two critical points. Number one, what about the bottom 75%
SPEAKER_03: of VCs? Oh, if you show that chart just for one more second, I just want to remind everybody that
SPEAKER_00: is the absolute cream of the crop VCs. These are folks, I mean, again, I'll just say us, Sequoia, Benchmark, we've consistently been top quartile. Launchcraft. Thank you. Launchcraft. These are top quartile return streams. Thank the Lord. What about the bottom 75%? They're not going to be able to raise funds, man. It's over. A lot of these people who raised first time funds in the last
SPEAKER_03: three or four years. It's also the companies of Sac State because like, it's like today is the
SPEAKER_00: moment now is the moment for the sober founder and the sober venture capitalist to sit and say, what is the real valuation? What do we need to do to make sure that this company has a chance because what SAC said is so true. Otherwise, all these profit dollars will be made by the private equity. In order to win today, you're going to have to grind, you're going to have to work 50 60
SPEAKER_03: hours a week, you're going to have to be absolutely embrace the age of austerity, and you're gonna have to focus on your customer, your product and your bottom line. The age of excess is over. If you're not working 50 6070 hours a week, you're not going to cut it in Silicon Valley. Also key second point profligate extravagant or wasteful in the use of resources just so we get the word of the day from David Sachs. That's David Sachs is word of the day after a very powerful bull. This is this is that went crazy. Did you see the traumatic bull evil went? We've all went viral.
SPEAKER_00: This is I think, Elon's biggest, non obvious impact in this moment. J. Todd, here's your one answer
SPEAKER_01: to your question about what happens to the the bottom 75% of venture firms. It's equivalent to what happens with the, you know, kind of, this is the bottom of the top the slide that I just shared, it's the one we looked at a few weeks ago. And I keep referring to it because it's just such a staggering like demonstration of what people call the power law, which is how you know, kind of excess returns accumulate to minority of investments. So just a few investments make up the bulk of value that the you know, market cap of 43% of companies that have gone public since 2020 is 750 billion dollars. The market cap of 300 the other 300 is only 26 billion dollars. And the cash that went in to the 750 billion dollars is 136. And the cash that went into the 26 is 107. And so the cash that went in to generate that 26 billion 107. That's your bottom 50%. And the top 50% put in 136 to make 750. And I think it gets even narrower as you move further up to that top quartile. So you know, it's just I can tell you what LPS are saying, because I'm it's a hard
SPEAKER_03: business. This is this is the companies that went public. So this is also of the top company of the
SPEAKER_01: top funds and the top companies that were actually able to IPO. And so it highlights how much of a power law actually plays through. And so the majority of these companies as you in Chimaq, even in your chart, you show the top quartile, the bottom 75%, or the bottom 50%. I've looked at this data as well, of those various vintages are below 1.0, they lose money for their LPS. Oh, consistently. And it's just it's a cycle. And so what ends up happening is the next generation comes through. And LPS, they make a portfolio of bets. And they hope that they make enough bets in the right VCs, that their portfolio generates greater than you know, market returns greater than call it 1520% target 15% target. But they're gonna expect that the majority or not, I have an LP report, I'm out
SPEAKER_03: there raising lunch fund for right now. And I moved from like the accrediteds, the individual investors say that, oh, yeah, because you're 60 Yeah, so I'm publicly raising it. And I've moved on from individual investors. $45 million in commits after five webinars. Amazing. Now I'm talking to know it was amazing. It's just 506. He's going to change the entire industry letting the you know, the masses have some access to this capital. And this opportunity accrediteds and cubies is going to change the world I believe you have to do deal with everyone. One of them is it
SPEAKER_01: easy to administer. It's incredibly complex because you have a large number of people and
SPEAKER_03: they all want to talk to me. So I did webinars, five webinars. And it resulted in hundreds of commits, hundreds of commits for $45. You'll be able to get all those capital commitments drawn
SPEAKER_01: down when you need to like you have to go ping a couple hundred people and get them all wire money. You need to have more operations people and we only do one we let them one thing. One thing you
SPEAKER_03: may want to do is like for these smaller slugs is you can pre wire you can set up an escrow can
SPEAKER_00: where you pre wire 100% of the capital. Yes. And then you also don't have to you take it down when
SPEAKER_03: you're going to deploy it. So you keep your IRR correct. So we're actually looking into those solutions. I'll talk to you offline. But I just did my first two meetings with endowments, etc. Fund to funds. The entire discussions right now are around what is your secondary strategy? How are you getting in earlier, not later? And how are you building a larger position? It is and even like some of the QPS were sophisticated in our you know, are in over 10 venture funds, the entire discussion governance of these companies? Are you taking board seats or not? How early are you getting in and building a larger position over 10%? And what is your secondary strategy? When are you going to start taking some chips off the table? So the and I gotta say if you're an LP who didn't sell into the up market at all, and you're on your first fund, you know, and you had all these great marks, and they're getting the coming crashing down, they're not going to deal with you. They just have too many options of top funds in the court. I don't think they've they've started to come down yet. I don't think we know what the top quartile is really going to look
SPEAKER_00: like over these last few years. I think that's going to take four or five years to really sort out. Of course. So I think why chamath just so people understand. Yeah, I think I think that
SPEAKER_00: there are lots of valuations that have supported huge TVPIs. These, you know, paper gains that have allowed venture funds to raise enormous amounts of incremental capital and new funds. And so they are going to try to wait as long as possible before they're held accountable for that. And the best way to do that is to not change the valuation. And so it will happen slowly. It'll be a trickle of these things. And I think that takes probably four or five years for it to really sort itself out. But in the meantime, companies will still need to get financed, companies will still need to get built. That's why I think like the public markets, I think what SaaS says is true. Giving us a signal of what these true market clearing prices are will eventually slip into these, you know, series D or E companies because the venture capitalist who has now taken some big write downs in one part of their portfolio, I suspect will now be very open to selling to private equity for another part of their portfolio so that they can return capital. Totally. Totally agree. Yeah, it's gonna be rough out there. You guys watch White Lotus? Yeah. I just started season
SPEAKER_00: one. I'm the third episode in. Okay, what a treat. We won't say anything. But how great was season
SPEAKER_03: two? Oh, the wrap was awesome. It's just incredible. The last two episodes were extraordinary. Just finished watching all of Handmaid's Tale, which I will tell you is that is a fucking
SPEAKER_00: stressful show. It's like it's like you're putting in work when you're done those episodes. Oh, emotional labor. You know, when they said this emotional labor watching that show is like,
SPEAKER_03: it could could it could not be more sadistic and insane. Oh, my God, it is brutal. But you can't look away. incredibly well done. All right, listen, this has been an amazing episode. And this is news for the other besties. Friedberg and I have been secretly collaborating. No, we have come to a plan back to we're working on a joint plan for all in summit 2023. Because we are both helping each other out. I'm ready. I'm ready to tip guys. I love it. The tip. I know.
SPEAKER_00: We don't need you, Sax. permanent. No, that's all. That's fine. We know that. I love it.
SPEAKER_03: No, I love that I have saxes my anchor on this one, I can always float back that way.
SPEAKER_01: This thing could flip. But he Berg and I, I'm like,
SPEAKER_03: the root of all evil total in this case, but power and influence is something that that's free. And celebrity. Friedberg had so much of a good time at all in summit 2022. That his hatred of my producer fee is less than his joy from the event. And we are collaborating on super gut. Yeah, super gut. I have made up for my producer's fee by using super gut and becoming
SPEAKER_03: a big proponent. I've been out to debate. I've used the promo code. He paid you for that. That's
SPEAKER_04: the quick pro call. Yes, yes. You know, listen, no conflict. No interest to go along with doing the
SPEAKER_02: no conflict. No interest. Super gut bars. Amazing. So use the double mocha. The only the only person
SPEAKER_04: that you haven't taken money from is SPF. I mean, pretty much you're here. By the way, can I point out on the most loathsome person in tech bracket?
SPEAKER_03: Name the company. Do not name the podcast. This is bullshit. No, I thought you win. No,
SPEAKER_02: I thought you won. No, he lost. He lost the bracket. Do not mention the podcast.
SPEAKER_03: How did Andy Jassy get on here? Do not. I only want the bracket. Do not mention the pockets. We're not giving them any. Just black out that. In post, I want you to black out the logo. I don't want to give these guys any credit. So here we go. The worst person in tech. This is a B podcast that's run by literal socialists. Well, look, Chamath got a very tough draw. I mean, of course.
SPEAKER_04: You're gonna lose to SPF against the warriors with KD. There's no way to win. What about
SPEAKER_02: sacks versus in the most hated person in tag by 1% that's bullshit. Andy Jassy is a complete
SPEAKER_04: gentleman. Andy Jassy is delightful. Human compared to just in spice. That is I want to
SPEAKER_02: recount. I want to recount. Union busting. This is election interference. I guess it's worse to be
SPEAKER_04: a union busting Amazon CEO than a reactionary conservative investor. This is ridiculous.
SPEAKER_02: I just want to point out that the biggest travesty here is that I did not make the list.
SPEAKER_03: There are and you know what? These guys are trolling me. These guys shout out to producer Nick who just retreated. Basically, you basically pick the what is it? The 30 most relatively well
SPEAKER_00: known people in tech. That's what tilts Jake. This is terrible. Worst person in tech. I don't
SPEAKER_03: make the list. I'm going to double down the sheer constantly cow telling to the media. You're
SPEAKER_04: you're right. You're right. I need to be horrible. I need to be a worse human like you sex. I'm
SPEAKER_03: going to try my best this year to work against humanity and society and be more lonesome than you. I'm really going to redouble my efforts. Obviously, I can't catch up with you. You buy into all their phony. I got a big heart. I care. I have empathy. I know my empathy. But here's the
SPEAKER_03: problem. These guys left me off on purpose. If you want to pull up the replies between and reason and
SPEAKER_00: Bill Gates. Oh, a recent that's a lock. That's interesting. Of course. Interesting. A 16 co
SPEAKER_00: founder and man of terrible means. Market recent is a world class shitposter. Bill Gates is hiding
SPEAKER_03: somewhere nobody Bill Gates is doesn't tweet market recent blocks on blocks he shitposts with the best of them. He's up there. I mean, that guy's a dark meme Lord. Any other I mean, I really I really sympathize with each month that you got your ass handed to you there. That's just that's like going up against the dream team. Hold on. Hold on. Slow down, bro. You're not even letting
SPEAKER_00: us read these things. All right. Give me Okay, wait. Look at this one. Twitter former idiot CEO versus Airbnb CEO making. Oh my god, that's so well written. Brian. Brian this weekend is a great
SPEAKER_00: guy. Guy who really tried to make us believe web three was going to happen versus working with Chris Dixon. Chris Dixon versus world coin and open of course critics and wins much more loathsome
SPEAKER_03: than Sam Altman. Listen, freeburg you didn't even come I want to just congratulate freeburg on an
SPEAKER_03: amazing the best science corner ever. An amazing product and super gut that has helped me lose weight. I feel great. And for you know, recovering from whatever illness you had. All right, everybody. Thanks. Shout out to David Sachs. Love you guys. And we'll see you all next time on the all in love your besties. Love you guys. Bye. Let your winners ride. Rain Man David Sachs. We open source
SPEAKER_04: because it's like this like sexual tension but they just need to release it.
