E158: Global trade disrupted, Adobe/Figma canceled, realtors sued, Trump blocked

SPEAKER_06: Do I care? I'm coming in hot. By quick time, I told you seven times, fuck you Nick, you don't work for me. You work for her, you're on your own. Good luck working for Chamath. Do not attack my employees, Jason. SPEAKER_06: You guys are going to billionaire me and that's going to be the greatest revenge of all. You want to run the show in year four? Go fucking ahead, chairman. You guys won the vote. Guess what J-Cal's going to do? I'm going to fucking ski and you're going to make my 25% worth 500 million. Get to work, bitches. Deal. SPEAKER_02: Let's go. Deal. Title's been upgraded from dictator to chairman. Chairman dictator. That is very funny, chairman dictator. Chairman dictator. SPEAKER_06: He's got the super voting. I have no say in anything. I've fucking built this entire empire and I have nothing. I built the empire. I came up with the name of the show. I came up with the fucking format. I invited you miserable pricks. Make me rich, bitch. Let's go. Distribution checks. Daddy needs new skis. Three, two. All right, everybody. Welcome back to the All In Podcast. If you can believe it, we're almost at four years of this, Meshuggana episode 158 today. SPEAKER_06: And we've got a full docket. I'm at half speed. I got a little bit of the sniffles, but we're going to power through the docket. With me again today. Oh, you got the sniffles? SPEAKER_02: I got a little bit. Can I get you a tissue? SPEAKER_06: Give me a little tissue and some juicy juice box and I'll be fine. Some cough drops? SPEAKER_02: I'll be fine. I'll be fine. You'll tough it out. You'll tough it out. SPEAKER_06: Well, listen, I just want to say- SPEAKER_02: You can make it through this pod. SPEAKER_06: Of course. Of course. I'm a professional with me again today. The King of beep. Can't say what he's working on. It's a crop. I don't think people understand that. SPEAKER_02: Like what the beep. There were so many beeps last time that people couldn't even understand it. We didn't beep the beep out of the show. It was crazy. SPEAKER_02: It's a crop. He's genetically engineering, right? SPEAKER_02: But it's top secret. SPEAKER_06: Which one is going to- They already figured it out in the comments, by the way. SPEAKER_06: Oh yeah, the comms just figure everything out. I don't know what's so secret. SPEAKER_02: They already figured it out. So can we say what it is? SPEAKER_02: The horse out of the barn, Freeburg. SPEAKER_05: Can we get through introductions? Go ahead. Keep going. And Chairman Dictator, Chamath Palihapitiya is with us. SPEAKER_06: Welcome back to the program. SPEAKER_04: Thank you. By the way, I was feeling pretty bad about your sore throat. So I went on Google and I found something that may be the cause of it. Nick, can you just throw up this article? Pre-strike. SPEAKER_00: You can't pre-strike. SPEAKER_05: Let him land the joke. SPEAKER_02: Come on. SPEAKER_05: Jesus. This isn't a Tom Cruise movie. You can't pre-strike. Go ahead. SPEAKER_04: I found an article that may be the source of your sore throat. Oh God. SPEAKER_00: Oh God. Oh God. SPEAKER_00: Oh God. Oh God. SPEAKER_00: Oh God. Oh God. Oh God. SPEAKER_03: Oh God. Oh God. Oh no. Oh no. We're all going to get canceled. SPEAKER_01: Oh God. Oh God. Oh God. Oh God. Oh God. I'm the queen man David Sacks. I'm the queen. I'm going all in. And it said. We open sourced it to the fans and they've just gone crazy with it. W.S. is queen of kinwah. I'm going all in. SPEAKER_04: I am your BIPOC chairman and I'm here to do the best job I can. Serving all of you. SPEAKER_06: What do you mean BIPOC chairman? SPEAKER_06: Explain to the audience what these two words mean. Person of color, bro. SPEAKER_02: Billionaire, person of color. SPEAKER_06: Oh, is that what it is? Yeah. So according to, we checked the DEI manifesto and it said we needed to make a chairman of the organization. So Sacks is leading the all in DEI group and they voted Chamath to be the first chairman of all in as we get our CEO ready to come on board. And so you did a diversity token candidate, Sacks. Explain the process. SPEAKER_02: Well, it's more like, you know, Chamath was getting a little bit touchy about being called dictator all the time. And you were kind of playing the Biden role of needlessly offending him. He's kind of playing the Xi Jinping role. So we've elected him chairman SPEAKER_02: so that you can stop calling him dictator. SPEAKER_06: Right, because you want to soften it. We got to be more diplomatic, more sensitive. SPEAKER_06: Yeah, I think it's great. I'm all about the diplomatic. Listen, he's- There was a Politburo. SPEAKER_05: There was a process. It was meritocratic. Smoke came from the chimney. And now for year one, through year- SPEAKER_06: SPEAKER_02: There's a Politburo consisting of me, Freeburg and Chamath. SPEAKER_02: And the Politburo has selected Chamath as chairman. SPEAKER_06: Get to work, get to work. Let's make my 25% worth a billion dollars, please. And of course with us, Hot Off is hosting of the absolute best party of the season. Well, top two. You're a distant two, man. SPEAKER_04: It was a top meat protein party. SPEAKER_06: Chamath and I went to Sax's. SPEAKER_02: I hope you got enough food. I did. It was good. SPEAKER_05: Yeah, I mean- That dessert table was crazy. No, the dessert table I had to- SPEAKER_04: I was like, I found myself beside it. And I was like, why am I near this dessert table after the fiasco at Freeburg? So I had to go to the other side. SPEAKER_06: Well, here's what Chamath and I did. SPEAKER_06: We got in there and we sniffed out the caviar. And this was top shelf caviar on potato chips. Creme fraiche and also on Bellini's. We parked it there. SPEAKER_06: And then- On Pringles. SPEAKER_02: That actually is a great way to- You know, those Bellini's are too like bready. I don't think it's a good combination with caviar, but on a Pringles chip- Say more about your caviar. SPEAKER_02: High and low. They call it high and low in the business. Yeah, you go high and low. Caviar should always be served on Pringles. SPEAKER_06: The most important thing, Nick, I'm sure you have it queued up, is our annual awkward hug. This is a tradition amongst the all-in. Every year, to celebrate the holiday seasons, we engage in the awkward all-in hug. Let me explain how the hug went down. We're at the caviar and Chamath is on his eighth Pringle. I'm about 15 in. I've eaten half the tin of caviar at this point. I'm getting my money's worth for coming all the way up to the city and risking my life. And then here it is. We got to break this down. First, Chamath is in a loving embrace with Sax. What you see there from Sax is not a cry of joy. Fear. It's absolute fear. Abject fear. Abject fear. SPEAKER_02: Chamath did not let go. It was going on a little bit too long. That was my link. Chamath refused to let go. It went on for a while. That's what you guys don't, I'm not saying that. Because if you look at the- This is the minute two of the hugs. Look at the studies and Friedberg can attest to this. SPEAKER_04: When men hug for two minutes, there's a release of oxytocin and it's an incredible anti-inflammatory, anti-anxiety. So I was giving you therapy. That's like the carapuna cup. It's a gift. That was your Christmas gift. SPEAKER_06: Sax, tell us what you're feeling here. We see this blood curdling scream and or cry of joy. What was going through your mind when you got to minute two of the hug? Take us to the moment. SPEAKER_02: I'll show you what I was thinking of here. Hold on. Okay. Because you can see here also if we break this down, SPEAKER_06: Friedberg comes in with an Asperger's side hug. I don't know if you can see that there in the photo. But let's see the, because you know, he got to zoom over to the left. Friedberg looking at his shoes is like, I'm going to express joy and love with my three besties through a man hug. And he gets enough of the shoulder in there that he doesn't have to have full frontal. Part of the hug, but he's not really. Cannot make eye contact. And he says, I have to. Now me, I'm like, this is hilarious. So I just jump and I grab all three guys. And I just said, that's just me. Pure joy. Hilarious. Friendship is great. Good to have good friends. Friendship is great. I love you guys. I love you guys too. Yeah. SPEAKER_02: Back at you. This is what I was thinking. This is what it reminded me of. SPEAKER_06: This is Sax's personal Vietnam. This is. SPEAKER_06: Yeah. SPEAKER_02: It's a great scene. SPEAKER_06: Great scene. It's a great scene. That's a great scene. SPEAKER_04: That's Meat Loaf, right? Yeah. It's a great scene. That's a great movie. He's on estrogen therapy in the scene SPEAKER_05: and he grows man boobs. And then he stuffs Edward Norton into his man boobs. It's a great scene. SPEAKER_02: We're men. Men is what we are. SPEAKER_06: Let's get to work. We've got a full docket here and the world continues to spin into chaos apparently. Members of the hootie movement have been attacking commercial ships in the Red Sea with drones and with missiles. This is largely underreported in the mainstream press. So we thought we would tackle it here. They are calling this revenge for Israel's military campaign in Gaza. The hooties say they will only stop once Israel begins allowing food and medicine to freely enter Gaza. Like something we'd all like to see. Critics suggest this is a power play for more legitimacy in the reason. US allies, including the UK, Canada, France are reportedly preparing to deploy naval vessels to the region to deter more strikes. Obviously, there's a lot of geopolitics here. And this is a business story. We can link this back because the attacks have interrupted one of the world's busiest trade routes. As you know, all five of the world's largest shipping conglomerates have paused transfers through the Red Sea. And that means they've got to go around Cape Horn. They've got to go around South Africa to get things to Europe from Asia, thousands of extra miles from what I understand. And this has caused oil and gas prices to rise. And if this becomes acute, it could be really, really impactful to the economy on a global basis. So in order to understand what's happening, of course, we go to our foreign war correspondent. Yes, he's got his military cap on. He's now at a total of zero tours of duty. Sax, can you please, with your infinite wisdom SPEAKER_06: and experience in the field, tell us what is happening SPEAKER_02: in this matchbox situation. SPEAKER_02: Yeah, what's happening is, gee, yeah, what's happening? Come on, you're an expert. Yeah, I'm really struggling with this one, J. Cal. Can I use a lifeline? SPEAKER_02: ["The Star-Spangled Banner"] I'd like to phone a friend, phone a friend to answer this one. SPEAKER_06: For the first time, Sax is unable to give us a competent answer. He's chosen to phone a friend, which we allow here on the All In Podcast. Who would you like to phone? Have you thought about that? Who are you gonna phone? SPEAKER_02: Since this is involving impact on global trade. Steve Bannon? Zuckerberg? SPEAKER_02: No, I'd like to phone Ryan Peterson, the founder of Flexport. SPEAKER_06: All right, here we go. We're going to the AT&T phone call. Phone a friend. Zoom, we're gonna click through on Zoom. And can we get Ryan Peterson from Flexport? Ryan Peterson, you're here. It's Jason Kalkanis from the All In Podcast. It's your boy, J. Cal. Let's go skiing soon. SPEAKER_00: Are we live? This is recording. SPEAKER_06: We're live, we're live. You're on the All In Podcast live. We've got an official phone a friend moment here. You understand what's going on there better than anybody. Ryan obviously runs Flexport and he is in the business of shipping containers. So, Sax, you wanna ask him for some help? SPEAKER_02: What is the impact on global trade here from what's happening in the Red Sea? SPEAKER_03: Well, it's massive. About 30% of all ocean container traffic flows through the Suez and through the Red Sea. Most of that is going Asia to Europe. So, the biggest impact here is gonna be felt on those two areas. It's gonna make Chinese manufacturing that much more challenging. You have to go around the Southern tip of Africa. It's adding about 20% 20 to 25% longer journey. And now in a network business, a longer journey means less capacity. So, you're talking about a 20, 25% cut in shipping capacity on the 30% of all containers. SPEAKER_02: So, that's containers. I also understand that about 12% of global oil goes through and about 8% of liquefied natural gas. And just to explain what we're talking about there, can we zoom in? There's a very narrow straight there called the Bab El Mandeb Street. I hope I didn't massacre that pronunciation. So, you go around the Gulf of Aden through that Bab El Mandeb Strait into the Red Sea. And then from there, you can go through the Suez Canal at the Mediterranean. SPEAKER_03: Yeah, and so it's a maritime choke point. By the way, this is going back, it always has been. There's documentation, Caesar Augustus invaded Yemen in like 63 B, forget 63 AD, no, I forgot the dates. But it was during the reign of Caesar Augustus. So, it would have been right around the birth of Jesus Christ. And you're talking about thousands of years of this being a really important choke point. Even the Egyptians actually built a canal. The ancient Egyptians had a canal that connected the Nile River. So, this has always been the place to connect East and West, an incredibly important maritime choke point. And the rebel forces in Yemen have been firing missiles at ships. And what that does is spike the insurance costs. Obviously, it puts the crews lives in danger, of which they can't tolerate, but it also really spikes the insurance costs. If you sail a ship into a region that's got missiles being fired, the insurers just won't cover it. And so you can't operate a ship without insurance, because if it sinks, you go out, you are bankrupt. And so, they're just taking the long way around, SPEAKER_03: which as I said, is a 20% reduction in capacity. What we've seen, remember with COVID, you had all those ships off the port. You guys brought me onto the show. The last time I think was when that happened. That was about a 20% reduction in capacity. But at the same, what happened during COVID was there was also a 20% increase in demand. So this time there's not an increase of demand. So I don't think it's as impactful as what we saw to shipping prices during COVID, where you had like a 10X run up in price. But you're already seeing prices are coming out now for January freight, for ocean freight, Asia to Europe. You're seeing about a 3X increase in the price of ocean freight, versus where we were a month or two ago, which was very, very cheap a month or two ago. So I wouldn't read too much into this. And frankly, the Suez Canal is too valuable, in my opinion, too valuable to civilization, to the modern world, to believe that a group of rebels, no matter how well funded they may be, is gonna be able to disrupt that for any long period of time. I think there's too many interests aligned here to say, to keep this thing flowing. SPEAKER_02: Well, okay, two points on that. So we call them a rebel group, and I guess they are. It's a Shia group in Yemen that rose up in 2014 and deposed the monarch there. And they basically control large swaths of the country, but they're not internationally recognized. So that's why they're called rebels. But make no mistake, they basically control the vast majority of Yemen. It's a Shia group. They're, you could say, sponsored by Iran, but I'm not sure they're controlled by Iran. People call them proxies, and that's true to some degree, but they also have agency. Like you said, J. Cal, they are doing this, they say, in solidarity with the Palestinians. When the invasion of Gaza first began, they were firing rockets at Israel, but they had to go all the way over Saudi Arabia. They didn't make it. So now they've started firing on ships that are going through the strait. They started mining the strait. And so, like Ryan's saying, this has basically put a damper on commerce. Unless you're a country that the hoodie's like, apparently Russia's been able to move ships through still. They claim they're only targeting ships that are transacting with Israel, but that's not true. I mean, a lot of ships have been targeted that don't have a relationship with Israel. So let's just say, broadly speaking, for Western ships, they can't get through. Now, what the US has done in response to Ryan's point is that we've announced this Operation Prosperity Guardian, which is to restore the flow of trade through the Red Sea. But the question is what that's gonna involve, and I think we are bracing now for the US to start taking military action against the hoodies. The problem is, I think, Ryan, when you're saying this is gonna be resolved maybe quickly, is that the US was already backing the Saudis in a war against the hoodies that started in 2015. It only got sort of resolved with a ceasefire that's still pretty fragile last year. And so the hoodies have already survived almost a decade of Western-sponsored attacks on them. It's not clear what we have to do to basically stop them from taking these actions. And I think if the US starts a war, basically, against the hoodies in Yemen, we're talking about an expansion of this conflict in the Middle East from beyond what's happening in Gaza to now another front that directly involves the US. Moreover, this is, I think, very underreported, but there have been almost 80 attacks on US bases in Syria and Iraq by Shia militias, again, sponsored by Iran, over the last couple of months. So this whole region is a powder keg. And it's not clear to me that if the US attacks the hoodies, that this is gonna lead to a quick resolution. So I guess my question back to Ryan is, let's say there is a war here. Let's say the hoodies don't stop. I don't think they will. And let's say the US gets in a war there, but isn't really able to bring it to a decisive conclusion. And let's say that this blockade of the Red Sea continues for all of 2024. What does that do to global prices? Because I think right now the market is pricing in rate cuts next year on the theory that inflation is coming down as a solved problem. SPEAKER_03: It's the right question. It'll be a big impact. And if you listen to like retailer earnings calls, they're all talking about, hey, we've had six, 12 months of deflationary environment, prices are coming down. A lot of what they cite is the lower ocean freight prices. And if that goes back, and if it goes back anywhere near, I mean, we're already seeing a three X, but even that three X is sort of, well, is this gonna last? Do I need to price it all in? Do I need to... And it hasn't really taken hold of like, that's not a true market dynamic of what is the supply and what is the demand. Freight is very inelastic. Like you're gonna ship the product regardless of the price of freight. You know, unless your business model has the tiniest of margins, the price of freight goes up, it doesn't impact how many products you ship. You're gonna go sell as many products as you can. Does it impact America as much as it impacts Europe? Absolutely not. Now this is the fastest route for many parts of Asia to the East coast of the United States. And especially with the Panama canals also congested at the same moment right now. Because of, they say it's because of a drought, but actually they built a bigger canal and it's just draining the lake faster. And that's my hypothesis, but I'd like to look into it a little further. But the Panama canals only going at about 2 thirds capacity. So if you're going Asia to the East coast, those are your options. But to go around the Southern tip of Africa, around the Cape of Good Hope to get to the East coast, it's like an 8% increase in transit time versus 20 to Europe and there's alternatives. So definitely impacts Europe much more. It impacts China. Like the reason I think that this, there's so many people lined up here. This is not good for China. China wants to be able to ship stuff quickly to Europe and get it to market. So to the extent that they have any impact, I think they're gonna be clearly on the same side as the United States here. Europe obviously has a thing. And the other thing that I haven't heard anyone talk about is like, if you look at that map, they're blockading not just the Suez, but they're blockading Saudi Arabia. The Saudis biggest port is in Jeddah right up there. Well, I don't think they're gonna tolerate being cut off from the world. And I know they- Yemen taking on Saudi seems like an unwise idea. They've been at war in the past as David pointed out. And I'm certainly no expert. By the way, I find this ship to be amazing. It's since transited, but this is one of the ships that was there yesterday, just going for it. And if you look at the destination, it says armed guard on board. SPEAKER_03: They set that in the AIS GPS transponder so that if anyone comes after him, you know what you're gonna get. SPEAKER_03: I have two comments. SPEAKER_04: When I looked at this in the last couple of days, that was sort of my takeaway, which is that the really significant impacts are downstream to Europe consumer prices. So I think like European inflation has more chance of upticking again than America does. Because I think the practical reality is what you said, Ryan. They'll just, the need to ship is inelastic. And so they'll just pay 8% more and they'll just go to the East Coast in a more, in a longer way through the Cape of Good Hope or whatever. The second comment, I think to me, is a little bit more macro in nature, which is if you look at what's happening now, there's a hot war in Israel and Gaza. And theoretically now there's a hot war in Yemen. I think the positive take on this is that it actually puts the Middle East in a position to resolve all of these things. And what I mean is the following. If you're Saudi Arabia or if you're the UAE or if you're Qatar, what you really wanna do is build for the next 30 to 40 years. They've said it as much. They want to pull trillions of dollars of oil and that gas out of the ground. They wanna monetize it. And then they wanna invest in their people. The last thing they need is to be bookended by two hot wars, largely propagated by a third party actor in Iran. And so I think if there was not resolve for them to get aligned, I think that the resolve now really amps up. Saudi Arabia doesn't wanna be in the middle of this nonsense. Qatar doesn't wanna be in the middle of this nonsense. UAE does not. And then the fact that Canada, America, Britain, France are now all of a sudden pulled in. And China, as you said, Ryan, I didn't even think about the implications of China as a supplier of record for most of these goods. All roads, I think, lead, in my opinion, to a coming together of folks to say, okay, let's use this as a definitive moment to just clean the decks here. And I think that that'll put a lot of pressure on Iran, a lot of pressure on the money flows. I suspect that both of these two hot wars get resolved quickly because the larger multi-decade implications for the Middle East are too big to let it be subsumed by the Houthi rebels or Hamas. SPEAKER_03: It's interesting here how you see, Israel is a relatively small economy in the world. But you start to see, in the same way that Ukraine is not a big economy, Russia is not that big, but it has a massive, the war there has just a massive impact via the commodities markets because Russia is such an important supplier of commodities. And now you see what Israel and Gaza are relatively small, potentially a small regional conflict, big global implications because of everything that goes behind it. But now you see the spread to something that really could impact, if this is an extension of that conflict, now you're seeing, wow, this actually has the ability to extend to global markets in a way that's similar to what happened in Russia and Ukraine where all of a sudden commodity markets are impacted and you're seeing that inflation. But I don't know, Chamat, your view is, hey, we're gonna have progress because progress is good or something. I don't know that that's necessarily the direction that the world follows. Like you can have terrible stuff. I think if you're sitting in Dubai or Saudi or Qatar, SPEAKER_04: you're thinking this is the last thing we need. For sure. SPEAKER_02: Well, I think that's definitely true. SPEAKER_04: Multi-decade, multi-trillion dollar investment plans and we're gonna let the Houthi rebels derail that? SPEAKER_03: And literally on ports, like Saudi's trying to build a big port as part of the NEOM project there in the northwest of the country on the Red Sea, which would be cut out. I mean, it's not gonna fly. SPEAKER_02: Yeah, look, Saudi Arabia's in a really tough spot here because what happened is after the Houthis deposed the monarch there in 2014, Saudi Arabia started fighting a war to restore the leader in 2015. And that war went on for almost a decade, created a huge humanitarian crisis, really underreported compared to other crises. There were hundreds of thousands of civilians that were killed, millions of people displaced, went hungry. Finally, that war again got paused by a fragile ceasefire that was negotiated, I guess, in the last year or so. And then simultaneous to that, there was a rapprochement between Saudi Arabia and Iran that was brokered by China. And so the last thing Saudi Arabia wants to do is get involved in restarting this war or restarting hostile relations with Iran. I mean, they would like to move beyond that, which is why they're not participating in this Operation Prosperity Guardian. The problem they have is that the Houthis aren't gonna stop doing what they're doing until Israel's war in Gaza stops. And Netanyahu, just in the last 24 hours, made it clear that Israel won't stop fighting. They will not agree to another ceasefire until Hamas is eliminated. So, Chamath, I think you're right that if there were a ceasefire, that this situation would go away very, very quickly and shipping, normal shipping would be restored. However, I'm not sure you're gonna get the parties to agree to a ceasefire anytime soon. I mean, the Israelis seem pretty determined not to agree to a ceasefire. I think the Biden administration clearly would like that. I think they would like this problem to be over. But with the continuation of hostilities in Gaza, you continue to have the potential for these second order effects, these kind of knock-on effects. And like I mentioned, one is the Houthis, another are all these American bases that are under attack right now by these Shia militias. So I think this has the potential to be a black swan in 2024, meaning that somehow the Israel-Hamas War spirals into a larger regional war that pulls the US in. I'm not saying that's gonna happen, but I think the potential is there the longer this goes on. And I think that if that does happen, there could be the potential for an oil shock. By the way, the Houthis have said that if the US attacks Yemen, they will light the Saudi oil fields on fire. Now, I'm not sure they have the potential to do that. I mean, presumably if they had the potential to do it, they would have done it during their long war. So that probably is just hyperbolic rhetoric. But there's so many ways for this to somehow turn into a larger Middle Eastern war. SPEAKER_06: To your point, Shamath, I think, I've been meeting with folks in Doha and Riyadh and Abu Dhabi and Dubai for the last six months. And I was talking to people this past weekend. You're absolutely right. There are a group of people with an agenda, which is to modernize the economies there, to move off Petro and to move into technology and to move into hospitality with the NEOM project, as you pointed out, Ryan. And that's not gonna get derailed. And those are the most powerful, deep-pocketed influential forces there. And so, yeah, they're working with the United States. And any of these rebels, et cetera, I think they're going to be dealt with because people want prosperity and they want to keep evolving these societies and moving them forward. And normalization. Normalization, yeah. I mean, have you ever, who's been to Riyadh here? SPEAKER_06: I have. Yeah, I think Freeburg or Saks, have you been to Riyadh? Never? No. SPEAKER_06: Freeburg? Never, I mean. No, it's beautiful. And it's changing rapidly, massively. And obviously Dubai's already been changed. And then Delhi. I'm not arguing that. SPEAKER_06: Yeah. SPEAKER_02: Saudi Arabia isn't a great place and they want to do the right thing here, but you're acting like the Houthis can just be dealt with. What does that mean to you? SPEAKER_06: Well, I think that the larger forces are united in wanting to have prosperity for their people, education for their people, and to build deep ties with the West and the East to do commerce. And so I think those forces are greater than maybe some of the traditional forces that are at work and these longer term conflicts maybe are not as important to the leaders and the citizens of these countries as prosperity is. And so when I say dealt with, I think they're gonna just focus on developing their economies over these skirmishes. SPEAKER_02: Are you saying there's gonna be a diplomatic solution here? Cause I don't see it. I mean, here's the problem. Israel is not stopping its war in Gaza. The Houthis aren't gonna stop until Israel stops. So how do you make them stop? SPEAKER_06: That's a great question. Containing these conflicts is probably the likely scenario. I've asked that same question to the people who are in those regions. And when I spoke to them, they're all about containment. They don't think there's a resolution. Like we might think about it here in the West that there's not gonna be a conflict between Palestinians and Israelis. They just think containing it and having it not be an all out war is success. SPEAKER_06: What do you think is gonna happen? I mean, at some point the US isn't gonna support- We have two sides who are implacably resolved. SPEAKER_02: The Israelis to continuing their fight against Hamas and the Houthis to continuing to lash out at Israel or the West in general until that stops. SPEAKER_06: The likely scenario is that Netanyahu is losing support. That's what every Israeli and every person in the region says is that Netanyahu is not gonna last long term. So what have you heard, Sax? What do you think the resolution is? Well, I think it's interesting. SPEAKER_02: If you look at Israeli domestic politics, it's true that Netanyahu is unpopular, but something like 90% of the Israeli public favors the continuation of this war until Hamas is eliminated. I mean, the Israeli people are really, I think, hardened on this question. Those tapes of Hamas atrocities on October 7th were compiled into a film. They were recorded by the Hamas fighters own GoPros. And the Israeli people have watched all those things and they are resolved to destroy Hamas. Now you can argue with their tactics and I'm just stating the fact, okay, I'm not judging it. And the point is just whether Netanyahu survives or not, I think the Israeli public wants to eliminate Hamas. So I think they are resolved. I think the Houthis are resolved and the Houthis control this choke point so they can stop or interfere with global trade. And I think, look, there could be a ceasefire. I mean, I think Biden clearly would like there to be a ceasefire, certainly before the election. And that would bring all this to a rapid end. But if there's not a ceasefire, I don't understand how you just stop the Houthis. I mean, the only way to stop them is if you wanna go to war with them. That's what we're talking about. So we're talking about the US using its naval assets to go get the Houthis. Or the regions Shammath mentioned could use diplomacy SPEAKER_06: and or financial measures. And so those are other actions on the table. That's not gonna work with the Houthis. SPEAKER_06: Well, no easy solutions here. Ryan, thanks for jumping on the pod with us once again. One question, how much more resilient post COVID, if at all, our supply chains? Because you talked about wanting to make them more resilient and that was a major focus for Flexport. Is it better now post COVID? Have we done any work? SPEAKER_03: No, I think at the physical infrastructure layer, nothing's really changed. I don't think, you know, the bottlenecks have gone away just because demand went back down. The US had like a 20% increase in container volume. It created all these bottlenecks. We couldn't process that many containers in our ports. And then the containers now are back at 2019 levels and everything's flowing normally. But I wouldn't say that makes us more resilient. It's the same as before. And situations like this, you learn just how amazing and resilient the global trading network is, the global logistics infrastructure, but also it's pretty fragile. If a small group of rebels can fire missiles and you go, well, even the US Navy, what are we gonna do? I mean, this kind of an asymmetric warfare type thing. They shoot a $20,000 drone and we need a $2 million missile to shoot it down. Like it's not a great setup and it's not clear that firing missiles back is gonna open it back up. And so, yeah, I think it's much more fragile than we realize as civilization always has been. You know, it takes 100 years to develop a civilization SPEAKER_03: and an afternoon to go back to barbarisms. And air freight, you had talked about previously, SPEAKER_06: that's still four or five times more expensive than sea freight, is that about right? Is that multiple? SPEAKER_03: In general, that's a reasonable assumption is about four times more. The air freight networks are very small in proportion. To give you a sense, like one of these container ships that flows through the Ever Given is the world's most famous container ship that got stuck in the Suez Canal a few years ago. That one holds about 10,000 40-foot containers. 747, this is basically the biggest cargo plane out there, can hold seven 40-foot containers. And so if you have a diversion of global ocean freight will rapidly flow over to, it doesn't take a lot of freight going, hey, I'm gonna ship this by air instead to suddenly have the air freight markets get impacted. So as of yet, the airlines are a little bit less connected to this market and haven't instantly said, hey, we're raising prices in January, but I suspect if this lasts another week or two, you're gonna see big run-ups in air freight prices. And these are global markets. The price of freight from Asia to the US gets impacted because they're pulling ships off, the supply gets redirected, the planes get rerouted. It is a global market. So an impact here will affect prices of shipping Asia to US as well. SPEAKER_06: Thanks so much for coming back on the program, Ryan. Peterson, great to have you here. And oh, congratulations on being CEO of the company you founded, Flexport, again. We didn't get a chance to talk about all the craziness with the CEO and turnover, but you're back in the home. And Ryan, you're back. I'm back. SPEAKER_03: It's amazing, it's amazing having the time of my life back here and work at the Flexport office every day. SPEAKER_06: All right, we'll see you soon. And thanks for coming on as Saks' Lifeline. Well done. SPEAKER_02: All right, guys, take care. Ryan did bring up a really interesting point there that you don't hear enough, which was the asymmetry of the warfare, that the hoodies can launch a drone or a cheap missile that costs thousands of dollars and it costs us millions of dollars to shoot it down. That is just not sustainable for the US. We see this happening in Ukraine as well. All these multimillion dollar expensive tanks get taken out by a landmine or by a cheap RPG or something like that that costs a few thousand dollars. SPEAKER_05: It's also the fact that if you send a drone and it blows up on a ship and it costs you a couple thousand bucks to do that, the lack of risk tolerance, the fact that the insurance companies won't insure the ship anymore means that now that ship can't travel and that's tens of millions of dollars of commerce that gets shut down off of a few thousand dollar investment. So there's a deep asymmetry in the sensitivity we also have to loss. We won't take, hey, well, maybe one in 10 ships can blow up. Let's keep going. It's the fact that there's no margin for loss. There's no allowance for loss. As a result, any sort of threat of loss means that the whole system shuts down. I'm not advocating that we should, but it's just the condition we're in. I also think the other point I didn't make, I would imagine that this behavior with the Houthis is driven in part by the emboldenment that arises following October 7th and the praise that Hamas has received globally. And if you believe that to be true, there are many other groups like this that may get emboldened and you start to see more activity in other regions as well that you can have these kind of outsized impacts and folks suddenly start to take action. But I think that's why we're between SPEAKER_02: a rock and a hard place here is that on the one hand, if we don't do anything, then you're emboldening that behavior. And if you do do something, you're escalating the war. SPEAKER_05: Yeah, and to your point, saying like, hey, the US is gonna enter the war, I think that there may be this moment where it's not even an option, that the US is being provoked in a way that you can't say no. You have to, maybe they end up having to act. SPEAKER_06: The guerrilla warfare aspect of this is super fascinating because you can really do incredible damage to very expensive airplanes with hypersonic missiles that go incredibly fast or like Mach 5 or something insane, and they're cheap. So a $100 million or a $20 million fighter jet can just be annihilated by a couple of hundred thousand dollars in hypersonic missiles. All right, there's been a ton of M&A activity and M&A deals that have been canceled. Adobe Figma has been called off and Illumina and GRAIL has been unwound as well. The big headline is that after a 15 month review process, Adobe and Figma called off their merger. We talked about it here multiple times. It was a $20 billion cash in stock merger that was agreed to back in September of 2022. And there's tons to unpack here. Shareholders, employees, a startup ecosystem, and of course, limited partners who were expecting huge paydays from Figma being sold to Adobe are now back to a waiting game of figuring out if this company can go public, et cetera. Chamath, you had tons of thoughts on this and maybe you could educate everybody on the Illumina GRAIL deal. Since I don't think people understand that. SPEAKER_04: I think there are three deals or almost deals that got essentially called off or canceled or never consummated in the last few weeks, which show a pretty interesting trend. So the first, as you said, Jason, was Adobe Figma. The second was Cigna and Humana. They were proposing a multi-deck a billion dollar merger. And it was very clear that the FTC was going to have a huge fit around it. So they said that we're not even gonna do it. And then Cigna just said they'll do a $10 billion buyback instead. And then in the craziest example, Illumina and GRAIL. So Illumina makes these gene sequencing machines and GRAIL makes one of the leading tests for free DNA cancer detection. And at the time Illumina owned almost half the company. They bought the other half, they merged it in, even though the regulators said, hey, hold on, we have an issue with this. And now they're being forced to unwind the merger. So to pull this company back out and divest it. I think the point of this is two things. One is that there is no viable M&A path for early stage venture capital businesses. So if you can't have a $20 billion merger or a $40 billion merger or a 15 or $20 billion M&A with a high degree of confidence, then the path to liquidity through M&A is less than 20% of the outcomes. Which means that the overwhelming path to get liquid is what you said, Jason, which is IPO. But the problem is the second part, which is that the capital markets in the United States are not ready or not in a position to support all this IPO liquidity, why? The banks won't underwrite. There aren't enough researchers, research analysts that'll cover these stocks. The ways in which the banks make money have become so constrained. And so I'm kind of left pondering to myself, how do you go back to a world of like the 90s where startups four and five years old would go public to raise capital? I don't think that that's gonna happen. So I don't know exactly what happens to us except that we'll have companies just shading for 15 and 20 years. And I think that just has a chilling effect because it's like what investor wants to put money away locked up in highly liquid stuff for 20 years? What rate of return do you need to give them that makes them wanna do that? So something has to change because if the M&A market can't exist, then we need to change the rules of the capital market so that there's incentives for these banks to underwrite these companies to go public. SPEAKER_06: Well, I guess there's two things, Sax, that could change this dramatically. One is if we put in more conservative, Republican, libertarian, et cetera, less regulatory regime in Washington, that could open up M&A as soon as 2025, perhaps. And then the second is direct listings, dare I say SPACs and alternative ways to get companies public. It may not be the gold standard as a traditional IPO, but at least if we get those liquidity started, and I guess third, Sax, I'm gonna get your thoughts on this, for private investors and their LPs, everybody seems to be focused on building strong, stable, cash-flowing businesses, and we've seen all the companies that went public, whether it's Airbnb or Uber, are now focused on ringing the cash register and being profitable. So ultimately, maybe this log jam and M&A blockage makes everybody focused on sustainable, profitable companies and that's a good thing long-term. What do you think, Sax? SPEAKER_02: Look, like I said last week in relation to the Figma-Adobe deal, the fact that regulators took 15 months to analyze the deal only to come to the conclusion that they basically weren't gonna allow it and then Adobe finally killed it is gonna have a chilling effect on M&A and Silicon Valley. I mean, if acquirers and targets can't have confidence that the deal will be approved, and in fact, they're gonna be left in limbo for over a year waiting for speculative approval, they're gonna be less likely to do deals in the first place. And I'm sure Adobe's not happy about the fact they gotta pay a billion dollar breakup fee, which by the way, was a really smart thing for Figma to negotiate. I mean, if you're a company that started that's gonna get acquired, you need a pretty big breakup fee now as insurance on the deal, because there's a very good chance that regulators aren't gonna allow it. So yeah, absolutely, the fact that regulators got in the way of the Adobe deal and moreover, the way that they did it with this protracted delay is absolutely gonna have a chilling effect on M&A and Silicon Valley. And look, there are only two good outcomes for a startup. You can either IPO or you can get acquired, that's it. The third is basically you go out of business. That's the third outcome. So when you take half the potential exits off the table, you're absolutely making it tougher for VCs and founders to get a good return. It's that simple. And that is gonna have a depressing effect on the investing of risk capital in Silicon Valley. I don't think it's a good thing for anyone. And by the way, even if the US sort of fixes this, even if we get a regime that's more friendly towards M&A, you still have the EU to worry about. And you also have the UK to worry about because they're not part of the EU thanks to Brexit. The UK, like I said last week, they're like the chihuahua who's leading the pack. They're the smallest market, but they're the most aggressive on antitrust enforcement. SPEAKER_04: Sachs, they may just be the beard SPEAKER_02: for the US and the Europeans. It's possible, but in any event, now you got three regulators to worry about, not just one. And like I said last week, I think if you're a startup and you're trying to consider where to put your Europe office, I would not choose the UK anymore. I used to think that the UK was number one because it was so easy, but you don't want to create that nexus if you can help it. It might subject you to a competition authority you don't want to deal with later when you get acquired. SPEAKER_06: Yeah, I would have just opted out of the UK. I would have called their bluff, as I said last week. Freeberg, any solutions here you think to solving this problem in VC land? Or do we just have to build stronger, more profitable companies and be more patient about taking them public since M&A is not on the table? SPEAKER_05: I don't know if I'd take the antitrust regime as being the core driver of M&A not being on the table. I mean, there's a couple of these examples, but I don't think there's a predominance of this going on. I think that there's a lot of smaller deals that still end up being good outcomes. I mean, we've also talked a lot about the lower cost of capital in starting software businesses and the era of AI type tools. And that leads to being able to hit 100X. If you put small enough amount of capital in and have a decent outcome where you're not building the market monopoly in some particular market, it doesn't feel to me like that's the biggest driver of concern here. The biggest driver of concern is just all the return on capital metrics that the big buyers are having to face. Return on invested capital is becoming more important than it's ever been because we're talking about trillion dollar market cap buyers. And so that's how they're measured. And so they have to be really thoughtful about how they're deploying capital. In a high interest rate environment, there's a greater sensitivity to a faster path to cash returns than there has been historically. So it feels to me like that's, and I would imagine if I'm Adobe and I'm looking at this Figma deal, do I keep fighting it? Or at this point, paying a billion dollars is probably net accretive to them. I think the stock price went up when they called the deal off, which highlights that it was probably a better investment for them to say, I'm gonna pay a billion dollars to actually get out of this deal at this point. And I think we see more of that happening, which is this rationalization of timelines to ROIC in a high interest rate environment. Shammah, deals do get done. There's a lot more tolerance for smaller deals, obviously. SPEAKER_06: Yeah, I mean, Salesforce was able to acquire Slack, that was 2020. Amazon was able to acquire Whole Foods, Walt Disney, 21st Century Fox with the X-Men. SPEAKER_04: So those are a different era. I really think that the large- So these are all 2016 to 2020, you're right. SPEAKER_04: Those are all in the chart. Yeah, but those are very different era. I don't think that that's what you can expect anymore. SPEAKER_04: I don't think you can underwrite to get a $20 billion deal done in any industry. SPEAKER_02: Yeah. Remember, Matter or Facebook buying WhatsApp for what was it, 17 billion? I mean, that was one of the biggest venture returns ever. SPEAKER_04: Yeah. Today that could never happen. Never happened. Today that could never happen today. SPEAKER_02: And that Figma Adobe deal, it was a $20 billion deal, but with the rise in Adobe stock, it's really a $30 billion deal if it would have been consummated, because half the consideration was in Adobe stock and that has basically doubled. All of those investors and employees were looking at a $30 billion exit. And look, Figma is gonna do great. I think the numbers that came out about Figma where they're gonna do about 700 million of ARR growing 40%. So I don't know, they'll be able to IPO anytime based on that, but what's the multiple they're gonna get? Probably 12 to 15 times. SPEAKER_04: Eight to 10. SPEAKER_02: Maybe it's like a $10 billion company in the public markets. I mean, growing nicely, but it's just not as good an exit. I mean, it's a big haircut. SPEAKER_06: The positive to this is consumers, or retail investors haven't been able to buy IPOs and get into companies earlier. So if people build stronger companies that are more capital efficient, then companies can go public earlier. As you alluded to Chamath, where Microsoft, Apple, a lot of these companies back in the PC era, they used to go public in under a decade and now it's always over a decade. So maybe this will make stronger companies that go public. And then if there's a regime change and maybe people feel more frisky, SPEAKER_04: they still have to get through Europe. Biotech is the only market that's always viewed going public as a transitory capital raising moment. Every biotech company that goes public, in America at least, are startups. They're pure startups. It's pure risk capital. But the technology side has viewed it very differently. It used to be the same. And then it went to like, oh, we must be mature and then it has to be growing really fast and it has to be profitable. There were so many ands, ands, ands that at the end of all of that, there were just very few companies that qualified. And then by the time they did go public, they're 12, 13, 14, 15 years in, they're so long in the tooth that their best growth periods are beyond them. Now, a couple of companies have bucked that trend, but by and large, that's the case. And I don't think that's, to support what David, what Zach said, that's just unsustainable. You cannot, you will not have risk capital flow into the United States if this is going to continue. SPEAKER_06: Yeah, this is gonna be super challenging for founders, the out of bill companies that are sustainable and can go public, because that's really the only path right now. SPEAKER_04: And it's exacerbated by what Friedberg said, which is then that family office or that endowment who can rip in a check as an LP to a fund can still get five, six, 7%, can get corporate bond at corporate yields at like 8, 9, 10%. SPEAKER_04: Why take on 15 year illiquidity for oftentimes funds that return less than the S&P, which is the dirty little secret of Silicon Valley? SPEAKER_04: It makes no sense. SPEAKER_06: It is gonna be a challenging environment for some time to come, I think, as we work this out. I mean, the thing that I find super interesting with the SPACs was like, you got to invest in some companies that were very early and speculative like Joby. Now, how could a consumer ever make that kind of bet you're about to bet on? And that wasn't one of yours, I know. But it was one of these like incredible moments where you could bet on flying cars, literally as a consumer. And I think they're actually gonna figure it out. I was tempted to buy it. I've been tracking the stock and I'm like, wow, if they actually make air taxis work, and it's kind of cool that the public can participate in that and that's what they were saying when there weren't enough IPOs and we had half the number of public companies. So I don't know if you have thoughts on it. SPEAKER_04: The number of public companies I think has halved in the last 20 years. So are more public companies better than less? I don't know. I think that's kind of like a random statement. I think what is true is that the public markets used to be used for raising risk capital. But the public markets at the time also had a ton of research analysts. There would be a lot more coverage of these companies. There would be a lot more visibility, a lot more checks and balances because people would be meeting with management on a regular basis, writing thoughtful research reports. All of that is constrained as the business of being on Wall Street has changed. So it's not enough to just all of a sudden have a bunch of companies go public if all of that supporting infrastructure isn't there. So this is what I mean by it's a catch 22. On the one hand, there's no M&A, so you need to have more IPOs, but the banks will need to hire more people. That comes at a cost, which means that they're gonna have to generate more revenue somehow. That comes at a cost to somebody else. And until that's figured out, you're not gonna solve this problem. And instead what's gonna happen is folks will be less motivated to invest in the innovation economy because there'll be no path to liquidity. And when you do invest, you'll invest much smaller amounts of money and you'll make it as part of your risk allocation, a smaller piece of the overall pie. What it also means is that if you're an entrepreneur and you haven't started a company yet, you may want to seriously consider raising a friends and family around using these AI tools and trying to build a very different kind of business, slow and steady, profitable from day one. And that's never been rewarded by Silicon Valley VCs. But if the reward for VCs don't exist, then the VCs themselves won't exist. And so you may want to start thinking about different ways to capitalize your business. SPEAKER_06: And it's interesting point you make that is very subtle. So I just want to restate it here. The analysts who are covering companies like say, Joby, I'm just picking this air taxi company because I'm obsessed with it. If there's not an infrastructure, those analysts act in a way as a backstop for a bit of pressure on management, I think is what you're saying, to, hey, perform. And we're checking on you and we're meeting with you. So without that, there's just a company sitting out there and nobody is asking them hard questions and then making decisions to put a buy or a sell rating on. And is that correct? SPEAKER_04: Maybe you could expand on that missing piece. There was an evolution in the public market. So look, the public markets back in the 90s was a bit of a rigged game where you could call a CEO if you had his or her number, and they could tell you things that they didn't tell everybody else. And when you look at the folks in their 60s and 70s and 80s who really turned it, I'm sorry, folks, but they profited massively from that information arbitrage. And that changed when there was a regulation called Reg FD that got passed in America, which said regulation full disclosure, what you tell one, you have to tell everybody, right? And that was an attempt by the SEC to level the playing field. It was a very smart piece of legislation. But what that did was it constrained the touch points that a company would have with the public markets to a few organized events, right? Analyst conferences, research days, actually banks are allowed to organize formal company dinners. And you'll get all these people together, analysts across the entire spectrum from Fidelity to Goldman Sachs to Morgan Stanley. And the company has to perform to them. And those folks will write both internal and external reports that say buy, neutral or sell, right? That became the only check and balance to make sure that management was held accountable to the large swath of public shareholders. Because otherwise it's not Jason Yu as a shareholder of Joby, quite honestly, have any say, right? You exert your pressure through the analyst who then represents the ability to influence your buying and selling decision. But if those analysts don't even exist, there is no feedback loop between management and the people that own the stock. And that's the problem we have today. There's not enough research coverage, there's not enough analysts, there's no organized way to keep companies held accountable. And so if you have a bunch more companies that go public without that infrastructure, it's very difficult. Seems like there's an opportunity somewhere in there. You know the big opportunity that I think should happen is that a bunch of these banks should actually use these AI tools, Jason, to be crawling all these 8Ks and 10Ks and all these filings and generate statistical measurements of all of these public companies that they make free and available to everybody. These things should be a bunch of dashboards and charts that are just out there for anybody to subscribe to so that you can just do the initial work of having to parse through all of these filings, have it done by an AI, by an agent, from a bank who can train it properly. I think that would be an immense value to all shareholders. And I don't think it costs that much money and I think it would be goodwill, Robinhood could do this, it would be great goodwill to build a lot of trust and credibility with investors. SPEAKER_06: So now that you're CEO of a company, how do you look long-term at potential exits going public? What is the thoughts you have on this as you architect the company, Freiburg, as the CEO? SPEAKER_05: Do not care about exits. SPEAKER_06: Don't care about exits, expand on that, yeah, explain. SPEAKER_05: I just wanna build a great business that makes great products for our customers, that's it. So if you do that, all these discussions around giving shareholders liquidity, I'm the main shareholder, so I don't need liquidity. I just wanna build the business. So it's a little different. SPEAKER_06: How do you think about profitability then? Because if you have to fund it or funding might be harder to come by, SPEAKER_06: how do you think about funding over the next decade, this vision, Joe? SPEAKER_05: It freaks me out. You gotta keep businesses capitalized. So there's definitely, across businesses I'm on the board of or involved in, universally a bias towards profitability. I've seen a couple of decisions we've made at some companies to shift from making longer time cycles investments that may not pay off for many years, where you had the luxury of doing that in a zerp environment and you could always get capital to fund anything that's multiple years away from realizing any sort of return, to shifting towards a bias, towards making things that can generate real revenue and real profitability in the near term, keeping costs low and building from there. So it's definitely, I'd say, been a flip-flop in the environment. It's why the biotech landscape has largely dried up, the funding landscape has dried up significantly because most of the investment opportunities are those multi-year out before you know if you have a return on your investment kind of investment cycles. And so the ones that do get funded are those that have a near path to profitability and where you can build some sort of cash generative service in the near term on the path to building a bigger product down the road. SPEAKER_06: So as you're strategizing, you're thinking, how can we get to cashflow positive, break even whatever quicker? You're not strategizing, how do I get a huge multiple and get some dumb tiger money, whatever, no addicted tiger, but they paid the highest prices at the end of the cycle. SPEAKER_05: I've got enough wisdom at this point to tell you that if you don't have to raise venture capital, you're better off. SPEAKER_06: Chamath, you also became a CEO. You have the, I think it's Hustle is your company and that's profitable and you're running it, SPEAKER_06: I'm assuming for growth, but maybe profit first then growth. How do you think about those two dials? How much growth, how much profits? SPEAKER_04: We have the same beliefs that Freebrook has, which is our job is just to make really great products for our customers. When I took over the business, we had to go through a difficult layoff and a rebasing of the business, but it's a business that's growing kind of 45% a year and it's profitable. And what I talked to the team is that, we will reinvest our profits. And so we have an ambitious plan. And as long as we meet that, we'll take some percentage of that profit and reinvest it. But I, like Freeburg also have no plans for liquidity. I just wanna build this thing to be as big as possible. And I don't want one single shred of pressure that isn't defined by our customers. And so by being profitable, we have complete control of the cap table. We can do whatever we want. And the people that benefit frankly are the employees cause they can get paid and our ability to hire people without being subject to like pressure to raise a new round and set a new random valuation. So no unnatural acts, just customer profits. And so by the way, if I can grow for 10 years, if we can grow for 10 years at 40% a year, this will be a ginormous business. So trying to three acts and do it on naturally. SPEAKER_05: Jason, just to chime back on the question you asked a couple of minutes ago, number one, if you can avoid raising capital, you're better off. Cause then you don't have any shareholder pressure to get liquid and that can create contortions in what you do and how you operate the business. And second is if you're gonna raise capital, if you set too high a valuation, if that becomes the bogey, you set yourself up for challenges because now you've got to have a multiple on that valuation to satisfy investor return hurdles. And the higher the valuation and you apply a multiple to that, the higher the exit has to be. And suddenly all the options start to fade away. You can no longer have a modest exit that can do really well for employees and the founders and early investors and it becomes a necessity that you have a massive outcome. And by the way, we see this now in this post-ZERP environment that a lot of businesses that raised a lot of capital at a very high valuation and then you have this multiple compression that's just happened in the last two years, their valuation effectively, if they were to go public today or get sold is less than the capital they've raised. And that's the most extreme scenario where, suddenly all the common shareholders get wiped out in terms of their return. SPEAKER_04: It's such a great point. Like the thing that people used to say was, oh, it's a tech company. So we need to give it a premium. The problem is now everything's a tech company. To say you're a tech company is a meaningless statement that means nothing. You're a company. So that you're a company. So then there's no premium for being a company. SPEAKER_02: No, there's a premium for profits. Well, there's a premium based on quality of revenue, which has to do with gross margins. I mean, obviously economics. And union economics, obviously a company that has 80% gross margins is different SPEAKER_02: than a company that has 20% gross margins. Not if it's unprofitable. SPEAKER_02: Well, no, no, I totally get that. I'm just saying that you can normalize based on gross margin as opposed to the type of company it is. Sometimes we'll see a company that markets itself as a tech company and only has 20% gross margins. That's an indication that something is wrong usually, or it's not truly a software company. It's just a company. That's just a company. SPEAKER_06: Yeah, I think that's the way to look at it. High gross margin versus lower gross margin. SPEAKER_02: Just to go back and answer your question, J. Cal, about how do you decide how much money to put into growth versus being profitable? I think the right answer to that is not to say there's some absolute amount of money you should burn given your round. It's to look at growth on an ROI basis or union economics basis. What is the return on the growth dollars you're spending? And probably the best way to do that is to look at the payback on customer acquisition. How long does it take you to pay back your customer acquisition costs? I think a lot of people don't do that analysis correctly because they just look at the revenue they make from that customer, but you actually have to look at the marginal profit. So this is how the gross margin ties in. SPEAKER_06: Easy example is something like Spotify. Spotify, it costs $100 a year, and they were to acquire somebody for $100 a year. Hey, they get to year two. It looks like you made $100. Except Spotify has to pay a massive amount to the record label, so their margin isn't as high as maybe a SaaS company, and that's where the devil's in the details. Hand overhead, hand overhead. SPEAKER_02: You gotta look at churn as well. So if that customer only lasts two years, and half the margin goes to the record companies, well, you can't count 100% of revenue. Now you're looking at, I don't know what's that. It's like you're dividing by two twice. So it's effectively a quarter. 50 bucks of the 200, let's say. SPEAKER_04: What are you seeing in the companies you're funding? You're seeing profitable companies or revenue-generating companies? Like, are you telling folks you gotta grow and raise a big Series A? Or are you telling folks, hey, take your time and- Yeah, it's a great question. SPEAKER_06: We invested in 100 companies this year. It's more than I've ever done. That's the same amount I did in the first seven years of my career. And 100% of the time, they are not expecting to raise like some giant seed or Series A. They're raising just the amount of money they need, and they're keeping their expenses absurdly low. The biggest trend I'm seeing is outsourcing of talent. And so Americans, and I'm not gonna make this like a huge anti-American thing, but the level of entitlement and the effort Americans are putting into jobs, expecting 150K, let's say, and then offshoring a developer, Latin America, Portugal keeps coming up, Canada. They're all looking for what's the most efficient way for me to build a 10-person team. And then I'll see a burn rate of $30,000 with 10 people. I'm like, how is that possible? Like, oh, our developers cost 22,000. Our SDRs are 10. I'm like, how is that possible? Oh, we have two people in Manila, et cetera. Long way of saying efficiency, efficiency, efficiency. We have to get to break even with the money that we just got. We're not expecting a second round of funding. And a lot of them are raising but 500K to 1.5 million. And if this was 2020, it would be three to 10. SPEAKER_04: We talk about like AI as like a big disruptor to like the big companies and this and that, but AI may be the biggest disruptor to VC. Big time. In the end. SPEAKER_06: Explain what you mean. I know what you mean, but I want the audience to understand this. Let's just say you raise a $2 million seed round. SPEAKER_04: In the past, what you would do, to your point, Jason, is you would hire seven people at $200,000 each. So now you have a $1.4 million burn. So you basically have, and let's just say you co-work someplace, you have a year and a half. And so you're a pedal to the metal. You're basically trying to throw as much spaghetti against the wall as possible. See what sticks, buy as many ads, do whatever it takes. The money basically goes to AWS and Facebook and a couple of other companies to Google. And then you hope that there's enough traction where somebody then writes you a 10 or $15 million series A check. Now, if you take that same $2 million, you could have a three person team, four person team, half of them offshore, where they also use things like Copilot, which is like a two to three X lever. Now, all of a sudden they have the same 10 person team and it costs $40,000. Exactly. And so now all of a sudden they have four years. So why wouldn't they do that where they would still own 80% of that company and all of a sudden there is a potential to exit it for 50 million or a hundred million and they've made more money than in a traditional outcome if you sold it for 2 billion. Precisely the case. SPEAKER_06: This is literally what founders are modeling right now. They previously wanted to beat the record of the person in their cohort who raised the most money at the highest valuation. Now they're just like, how do I get to profitability and how do I own as much of my company as possible? So Saks, you've got under over a billion dollars under management. You've been one of the most successful new venture firms in Silicon Valley in the last decade. You got a lot of cash you could deploy. How do you deploy it intelligently given the circumstance of people maybe raising less or being more efficient? And what do you think of the AI's impact on venture? SPEAKER_02: Well, the most important thing is to have opportunities to invest in. And the fact is that before this AI wave, the whole cloud social mobile wave had kind of petered out. I mean, the pond of opportunities had kind of been fished out. And AI is great because it restocks the pond. I mean, there is a lot of new ways for founders to use these advancements to solve problems that they weren't addressing before. So I think you guys are being a little too gloomy. I mean, I think that the impact on capital efficiency will take some time to play out. But I think that for the first time in a number of years, it feels, everything's feeling fresh again. And there's just, I think, a lot more opportunities for founders to go after now. It's like this at the beginning of any big new tech wave, right, is this is a new platform opportunity. Same thing was true with the App Store when the iPhone launched. Same thing was true when the internet launched. Now, I understand a lot of these opportunities are gonna be taken by big companies that already exist. But there's always gonna be an opportunity for founders when you have a big disruption. SPEAKER_04: David, I agree with you. My comment is less about the pond. I agree with you that the pond is getting restocked. My comment is that the economic impact of AI is so massively deflationary. It may be an order or two orders of magnitude more deflationary than AWS was. And that was massively accretive to the startup economy. So if this is a 10X-ing or 100X-ing of that economic impact, my only point is that the breakeven threshold for a founder will have gone way down. And then as a result, it's only a matter of time until they can put two and two together in an Excel spreadsheet to figure out that owning 50% of a $100 million company is greater than owning 18% of some other company when you're massively diluted or 8% or whatever. It's just like, that's all I'm saying is like the effective breakeven goes way down in a world where AI proliferates. And I think that's positive for founders. SPEAKER_04: If you look at what founders do with the money SPEAKER_02: when we invest in a series A or B, the number one thing is go to market, right? So they wanna basically triple their sales. Let's say they wanna grow from 5 million of ARR to 15 million of ARR. They have to staff up the quota capacity to hit that number. And for every AE, you're gonna need some number of FCR, some sort of management, you're gonna need some sort of operations overhead. So you've gotta hire all of that. And then they want there to be a cushion in case they miss their numbers, right? Because there's no guarantee you're gonna hit that. So founders still need to raise the money to staff up to go after that opportunity. Now, does sales become more efficient over time because of AI or does lead gen? Yeah, I think that's possible. But in order for that to happen, you're gonna need to see a rise in quota capacity, right? I mean, that's what we're talking about is that that same AE can now hit a greater level of sales because they have better tooling. We're just not there yet. Maybe that happens over time. But I think your typical SaaS start- But it's inevitable. SPEAKER_04: Maybe it's inevitable. SPEAKER_02: I just think your typical SaaS start right now is spending the money on more prosaic things. I mean, yeah. SPEAKER_04: No, I think you're right. All I'm saying is I think what it means is that the $200 million fund today becomes 50. The $500 million fund needs to be 100 and the billion dollar fund needs to be 200. It's basically back to the future. It's like back to the 1990s style, 2012. By the way, I'll show you a table here. Nick, I need you to blur out the names, okay? I just think it's super interesting. I walked free broke through this, but this was like a list of all these funds that I've invested in. These are venture funds you've invested. These are all the venture funds I've invested in. If you look at this, what do you notice about like the mega funds that just clock out DPI? Look, this is a $100 million fund, right? Look at clocked it. SPEAKER_04: This was a $220 million fund. My point in all of this is like, if I look at my returns as an LP, I've never had success when I've invested in big funds. I've only had success in small funds. SPEAKER_02: It's true that smaller funds do perform better and larger funds become more of an index and achieve more average returns. When you got a multi-billion dollar fund, it's way harder to achieve a outsize return. So yeah, I agree with you. I think this dynamic would be healthy. I mean, our funds actually are not that big in the grand scheme of things. SPEAKER_06: It's definitely the game is changing dynamically. And this podcast is gonna be great in 2024 because we went from four capital allocators to two capital allocators. I've got to introduce myself and Saks to two in the arena CEO. So we're gonna be having this discussion, I think in a very granular way, now that we got two players on the field, Saks, that we can watch what they're doing. Well, I've got a new incubation SPEAKER_02: that's gonna be launching soon. SPEAKER_06: Ooh. But I'm not gonna be CEO of it, SPEAKER_02: but I'm kind of executive chairman. SPEAKER_02: Oh, is it a SaaS company? SPEAKER_02: Yeah, it's a SaaS company. SPEAKER_05: What kind of company is SaaS? It's basically Yammer 2.0. You have our attention. SPEAKER_05: Wait, so you say Yammer 2.0? SPEAKER_02: Yeah. SPEAKER_04: I thought that was Slack, so this would be- Yeah, you gotta say Yammer 3.0. SPEAKER_04: Yeah, yeah, yeah. SPEAKER_02: We're Yammer 3.0. SPEAKER_06: Okay, let's go. Let's get a little, yeah, I think we had a push on call-in, so now we need to get our 50X on Yammer 3.0. SPEAKER_02: Give us a little tasty poo for your besties. SPEAKER_06: No, you're right, we sold call-in, SPEAKER_02: so now we've cleared the decks, and I can't work on multiple incubations. I can only work on one at a time. SPEAKER_04: Can you have your person that runs that SaaS Grid thing email me? Because I want to onboard my company into SaaS Grid. Yeah, dude, it's so good. SPEAKER_02: Well, by the way, that was the last one. So I've done, I guess, three of these now. There's Colin, SaaS Grid. So SaaS Grid has now spun out completely of Kraft, and the founder of SaaS Grid was our VP of analytics at Kraft, and now he's going full-time to SaaS Grid. So I think it's gonna be very successful. SPEAKER_04: But can I get onboarded, and can I get a friends and family discount? SPEAKER_04: Yeah, of course. I'm not playing this concept to the audience, SPEAKER_06: since it's unique in the world, and we should maybe double-click on the economics, not on a specific company, SaaS, but just generally of why VCs are doing this. You're incubating a company, you're a former founder, you have that itch, you have ideas. So instead of investing in a company, you say, hey, let's all get to the office, I have an idea, let's make this ourselves as Kraft, and then we'll put some of Kraft's LP's money into it, and then there's some slug of capital saved for the new team that comes. So how does the economics on something like this work, and why do LP's love it, or do they love it, and then why is it good for your internal team, or for you to incubate a company, as opposed to just finding them? SPEAKER_02: Well, when I first set up Kraft, we actually wrote into our LPA that we had the ability to incubate companies, and we had a prearranged economic deal with our LP's on those incubations, because I didn't want it to come up later, and then there's some conflict of interest between the management company and the LP's. So it's a predetermined deal, SPEAKER_02: and we don't do a lot of these. Like I said, I guess there's been three. There's been SAS Grid, Call In and Out, this Yammer 3.0 we're talking about. But really, I gotta give the credit for SAS Grid to our VP of analytics, who really, I think, pushed this idea, and it started with a simple way for us to analyze deals and dashboard deals. It started as a spreadsheet that we would give founders that would crank out their charts, and then we turned it into a website that was free, and then we realized- You needed it as an investor, right? SPEAKER_06: You needed it as an investor. Yeah, we just needed this as an investor. SPEAKER_02: And then what happened is that we saw founders started using SAS Grid as their dashboard to manage their companies between funding rounds, and we're like, oh, okay. That's a big aha moment. SPEAKER_02: So basically, there was no dedicated, verticalized business intelligence tool or dashboarding tool just for SAS companies. And the advantages of verticalizing are massive, because when you know what kind of company it is, you can just give them all the dashboards out of the box, and all the formulas can be calculated exactly the right way. This is gonna be less room for error. SPEAKER_06: They don't have to reinvent the wheel every time. Yeah, so if you use them like Tableau or Looker, SPEAKER_02: whatever, you're reinventing the wheel, you're writing all the formulas yourself, it doesn't make any sense. So back to the deal. SPEAKER_02: Yeah. SPEAKER_06: You pre-did the deal, so LPs wouldn't be surprised. That's awesome. So the management, there's a predetermined valuation, I guess, at that seed stage. A certain amount of money goes in, and your holding company gets some equity, which is like a nice little extra icing on the cake for incubating it. And then the LPs get a sweetheart deal or a better deal. Is that why they would be in favor of it? SPEAKER_02: Yeah, the LPs get like basically a VIG in the startup. Got it. We kind of modeled it after YC's original deal, right? Where YC got, was it 7% for $100,000? Yeah. SPEAKER_02: And then on top of that, the fund can invest in the seed round at the market valuation, whatever the market. SPEAKER_06: Ah, okay. So they get basically 7% for free or something in that range. 7% for $100,000, then plus whatever the seed round's SPEAKER_02: gonna be. SPEAKER_06: Brilliant. SPEAKER_02: Yeah, I think it's a good deal for them. SPEAKER_06: And also it's good for you, because you have to want to come to work every day, and this keeps you mentally engaged. Like Shamat said, he felt like he was becoming a talking head and just not, I don't know how you phrased it exactly in your newsletter. SPEAKER_02: Well, like you said, it scratches an itch. It's nice to be able to, if you have an idea for a product, you can work creatively on it. Yeah. I don't want to run companies anymore. I don't have any desire to be CEO, but it is fun to work on products if you have an idea. SPEAKER_06: Shamat, how has it been for the first couple of months now? Are you really feeling more intellectually curious and challenged? Is it annoying to deal with employees and customers and all that kind of stuff? What's it been like? I think you've been at six months, I think. SPEAKER_04: It's been really challenging. The first part of it was quite honestly, we had to rebase the cost basis of the company and get costs under control. That's hard. And we had to lay some good people off. And then we had to kind of like reset the strategy, write goals, get our values kind of in a good place, reorient the organizational design, like who will do what, right? All of these things require just enormous amounts of time where you don't see necessarily the obvious impact in a metric or a dashboard right away. And so you just have to commit to this process and really follow through in it. You have to find the people that have this real potential, elevate them, make decisions quickly, find out you made some wrong, undo them, find out you made some right, double down on them. So it's been a real learning process. The thing, and then on top of all that, I've tried to start coding again. Sunny helped me a lot. I built a couple of models. Repair programming. SPEAKER_04: Yeah, but then I did that to go back into our all hands, which we do every week. And I wanted to demo some stuff, mostly just to set the values that we're all grinding here. And I'm here grinding and learning this stuff like anybody else. And it's embarrassing because like it's janky code, it doesn't work and blah, blah, blah. It was, but it's been really, I think in the long run, I think the company is a lovely business and I want them to be successful because I think they deserve to be successful. And for me, it's been a great outlet to just get back to the basics of like, what really matters in running a company in 2023? I don't think I really knew the details. SPEAKER_06: That's good. And I'm finding that- A little humbling perhaps, a little humbling to get in there and be in the cockpit. Really, really humbling. Yeah, it's good. SPEAKER_04: Yesterday, we were sitting there in E-Team, which is our executive team and we're in the middle of a big deal. And the seven of us were red lining a contract back. And I know that may sound like really tactical stuff, but it was, for me, it was amazing. I'm like, this is great work. And I felt like I accomplished something when it was done. And maybe the deal gets closed today. The team is on the call. And I just think it's wonderful. I get a real- That's awesome. SPEAKER_06: Yeah. All right, listen, there's another story that is under reported. We try to find these under reported stories, things people are talking about in their group chats, but maybe not reading about or hearing about in the mainstream media or even on social media. There are a couple of unbelievable bombshell class action lawsuits that are dropping in the United States regarding our real estate industry. In October, a federal jury in Missouri found the NAR, that's the National Association of Realtors and several of the brokerages that have those brokers working for them guilty of conspiring to artificially inflate commissions for home sales. They now have to pay at least $1.8 billion in damages to sellers of more than 260,000 homes between 2015 and 2022. Let's get back up the NAR. And if you don't know what a racket this is, people selling homes in the United States pay 6% commissions on average, 3% for the seller. That's if you own the home and you're selling it, you give them 3% of the sale. And then the buyer, you also give them 3%. And there have been a number of companies like Redfin who have tried to change this. I actually used Redfin on a transaction and tried to use them on sale. And I was faced with brokers who I kid you not, literally said, I'm not going to show your home because it's a lower commission rate. And they have been working in unison to try to stop this kind of innovation. But the 6% is a tradition. It's not a rule. You can actually negotiate it. And now since this case got won, another couple of cases have been dropped and these new class action lawsuits all put together, could be $13 billion in damages. I don't know who's been following this in the group, but I have a lot to say about it. Yeah, I mean, I spent a bunch of time looking at this SPEAKER_05: cause I've done several, no broker real estate transactions. Oh, just lawyers. SPEAKER_05: Yeah, just lawyers. And then in California, I don't know if you guys know this thing called MLS, the multiple listing service. Yes. Which feeds the data into Redfin and Zillow. And in order to list a property on MLS, you have to have one of these real estate licenses and be a member of National Association of Realtors. Part of the monopolistic racket that goes on is that you have to be a licensed broker in order to list your home on the service that is the monopoly in the listing of homes, which everyone looks at. So there's a bunch of folks who have set up a listing service where you can list your home directly on MLS. And basically it's a guy who has a brokerage license and you pay him a hundred bucks and he just has a website set up and then you'll list it. And so you can kind of just list your own home, post the photos and all the docs. And then when the agent asks for disclosures, every disclosure they want to see on a National Association of Realtors form and the NAR forms are only available if you're a member. So there's a whole bunch of ways that they've tied up the market and made it impossible for the system to operate without the NAR members being a key principle in the transaction process. When at the end of the day, having gone through this a number of times myself, there's just all these templates and data that flows into this. There's no reason why you necessarily need to have an individual that needs to be involved here. But if you did, it's actually a data entry service. The process of entering this data could probably reduce down to a fixed fee of call it a couple thousand bucks per home rather than a percentage of the home value. And by the way, think about the craziness around this. If you buy a home and you sell it, in most parts of the United States, you actually have a tax that you have to pay that's a percentage of the gross. And most people have most of their net worth tied up in their real estate. So it's one of the few places where you will actually see a large chunk of your net worth actually taxed on a gross basis and taken away from you if you end up selling it rather than on a net basis, meaning net of the profit you make. And then the brokers want to get paid a percentage of the gross as well. These are the commissions they get paid. From a first principles perspective, it doesn't make sense that we're paying a percentage of the gross to agencies to transact this volume. The total volume in the US is an incredible number. It's $100 billion a year in residential real estate commissions. And there's 1.6 million folks who are real estate agents that are licensed, making their living doing this. So it's not an inconsequential industry and it's not an inconsequential verdict. Nick, if you could pull up that chart of the different countries, here's a good comparison. So in the US, we pay about 5.5% brokerage commission split between the buyer and the seller's broker. And again, legally, you don't need a buyer's broker. You don't need a seller's broker. You're allowed to sell your home without a broker. There's nothing in the law that prevents you from doing that. So this is just an industry that's popped up to service this need. And their pricing model is to take a percentage of the gross. And that's just the way the market's developed. But in a competitive market, that should be competed away. And it hasn't been because of this behavior that's gone on with institutions like the NAR. And you can see across different countries, different pricing systems as a percentage of gross. In the UK, you only pay about 1.3% total brokerage commission on buy side and sell side. In China, 2.5%. In Russia, 3.5%. Some countries like Japan and Argentina are comparable to the US at 6%. France is at 5%. Germany's at 4.5%. SPEAKER_04: Can I ask a question, Preet Bhat? Yeah. I only own one house, so I don't, I've never gone through this experience, really, that I can remember, because that was more than a decade ago. But today, if I wanted to sell a home, okay, I could sell it to you, right? But if you have a broker, do I have to pay you 3% as well? No, you could sell your home to me. SPEAKER_05: And then if I have signed, who pays your brokers 3%? I do or you do? The seller pays SPEAKER_06: the buyer's broker, but they don't have to. SPEAKER_05: Yeah, no, here, it's really important to understand this. If you're gonna go buy a home, SPEAKER_05: you're typically not signing a contract with an agent when you go home hunting. The seller has an agent, and in the agent listing, they say, hey, if you're a buyer's agent, you show up, we'll give you 3% commission. And so the buyer's agents, who don't actually have a contract with the buyer, are like, well, let me show you around homes. Let me show you around homes. And then they get to a home, and they're like, okay, this home's listed, let's buy it. And they're gonna make a 3% commission, which, by the way, I just wanna point out the disincentive there. They're not looking out for my best interest as a buyer. They're looking out for their commission. And the higher the price they get you to pay, the more they make. The more money they make. What I wanna understand though is SPEAKER_04: if I'm gonna sell my house to you guys, and you guys have a buyer's agent, can I just refuse to pay the 3%? SPEAKER_05: No one gets paid, because the buyer's agent has no contract with anyone. SPEAKER_04: Yeah, you can just refuse. SPEAKER_05: And you don't have a contract with anyone. The place where you end up paying a commission as a seller is if you sign a seller agent listing, and where you sign a contract itself to the seller's agent, I'll pay you 3%, and I'm also gonna pay a buyer 3% if they show up with an agent. How do I list my house on MLS without a seller's agent? SPEAKER_04: You cannot. SPEAKER_05: In California, I mentioned, I recently went through this. I paid $99. I did it all myself. And I listed it on MLS without an agent. I've done a bunch of person-to-person sales of real estate where I haven't had any agents involved, but I knew the people on both sides, and we just did a transaction. What was your legal cost per transaction? SPEAKER_05: Oh, like 15 grand to do that? That was my exact number. SPEAKER_06: It was 15,000. So just to give you a comparison here, Chamath, if you were to have a million dollar house, that would be 6%, it'd be $60,000. SPEAKER_06: So that's 15,000 in legal costs for you to sell it, right, if I wanted to sell it to you directly. And that's what happened. My friend owned a really nice house. We did it off market, and now all the brokers in my neighborhood hate me. Like, they are really upset about it. Imagine it was a $5 million house, or a $10 million, or a $20 million house. Is it true for commercial real estate as well? SPEAKER_04: Is this how it works? I don't know commercial real estate. SPEAKER_05: Commercial real estate is the same situation. So there's an agent that represents the building, the landlord, and Saxon talked about this. Then the buy side agent. So what is Buffett? SPEAKER_04: Buffett owns Berkshire Realty. What is that? That's just basically- It's a residential broker, SPEAKER_05: just like Coldwell Banker, just like all these other brokers. So it's sweeping up this 6% vig. SPEAKER_05: Yep. They were part of the lawsuit. They were named, yeah. They were named. And if you listen to Buffett's earnings reports, he often talks about how many sides of a transaction they were on. And that's kind of the key measure of revenue in that piece of the business. And he was super ecstatic, I think in 2020 or 21, when real estate boomed. And he's like, we got this many sides of the business. It's a great business. It's cash generative, such a great business. But that's the business. You want to get as many sides as you can. You want to get on a sell side and buy side in the market, and you just get 3%, depending on which side you're on. SPEAKER_04: But now the courts basically said, hey, this is illegal? SPEAKER_02: Here's how you'll know that the monopoly has ended, is when the buy side commission goes away. SPEAKER_00: Yeah. SPEAKER_02: I mean, the sell side 3% may be excessive, but I do think that the sell side brokers do work in terms of having to market the property. Whereas on the buy side, the vast majority of the value is created by MLS, like you're saying, Freeberg. SPEAKER_05: I think it's flipped, but in terms of where the value is. But anyway, go ahead. No, you have to stage the house, take pictures. SPEAKER_05: Yeah, as a buyer, I just want someone to look out for me and make sure I'm not, like, all the diligence that goes into researching a home and reading all the disclosures and going through them. I don't know if you guys have gone through this. It's hundreds of pages. Yeah, I have gone through it, SPEAKER_02: but I'm a lawyer for that stuff, who I pay by the hour. SPEAKER_02: Right. That's what I do. I'm not saying that the buy side broker does nothing, but I'm saying that most of what they do is just schedule appointments, or tours for you, after you've gone through MLS yourself and picked out what you want to see. You give them the list, SPEAKER_06: and then they just put it on your calendar. You know what I would analogize it to is travel agents. SPEAKER_02: I don't know if you remember, like, I mean, most people watch this show probably don't remember, but in order to book an airline ticket a long time ago, before the internet, you call up a travel agent, because they have proprietary access. They print it out and bring it to your house. They have proprietary access to Sabre, which is the online ticketing system. Totally, totally. But then what happened is with the internet, you had sites like Expedia just give you direct access to Sabre, and so you could book the ticket yourself. There's no reason to have a travel agent. Same thing has happened with MLS. It used to be proprietary access by the brokers to MLS. You couldn't even see it. Then you had sites like Zillow basically give you direct access to MLS. So you can just go on there and find what you're looking for. SPEAKER_02: And again, the main thing that the buy side brokers do is to schedule the appointments, because you can't get a tour typically unless you're represented. And if you're not represented and you reach out, then the seller's agent will try to basically enlist you. SPEAKER_06: Have you done a direct transaction, Sax? I'm curious. SPEAKER_02: You can, I don't think you can residentially. I mean, it's very hard. Oh no, I've done it. SPEAKER_06: I mean, if you happen to already have pre-identified SPEAKER_02: the buyer, then yeah, I guess you could do it. SPEAKER_06: But basically it happened in our case, in Freiburg, I'm curious how yours went down. I had told the person, or my wife had told the person, we love your home, if you ever sell it, let us know. And then they let us know, and then we bought it with them off market. And they said, we don't want to use brokers. We don't want to pay this huge commission, which would have been hundreds of thousands of dollars. And would you agree to this price? And we're like, yes. And then done. How did yours come about, Freiburg? How did you find a buyer if you were on the sell side? SPEAKER_05: This is all like relationship driven people that I know and that kind of stuff. So it's like, hey. I think this is the future. SPEAKER_06: If two of the four people here have done it, I think this is the future. It's just- I don't know if that's the common model. SPEAKER_05: I don't think that's true. I do think- You need a marketplace. You need a marketplace. I do agree with Zach. And the brokers control the marketplace. SPEAKER_02: It's a one-off, it's a fluke. When you actually happen to know your buyer. SPEAKER_05: The MLS is the de facto market. Cause I mean, ask anyone in the country who's bought a home in the last year, five years, almost everyone I'm sure went on Zillow or Redfin or Trulia and looked at homes. And the place that those marketplaces get their data is from MLS. They sweep the MLS. So the real kind of monopolistic breaking is can you break that marketplace? Can you break MLS? And can you get some other alternative listing services going that enable this to be a better place for this brokerage commission to get competed away? Cause it's currently locked up SPEAKER_05: in the monopoly they have on the MLS. SPEAKER_02: What's so perverse, here's where the monopoly comes from. Is that if the buyer had to pay the 3% directly to the buyer's agent and that was a choice you could make, nobody would pay that much. Of course. I'm not saying that the buyer's agent doesn't provide some value, but there's no way you pay 3%. But the reason they get it is because the brokers tell you, well, you're not paying that. The seller's paying that. But of course you're indirectly paying that because the transaction fees are so much higher. And when the seller goes to list their house, if you tell your seller's agent, hey, I don't wanna pay the buyer's agent 3%, make it half a percent, they won't do it. You know, they will always make it equal. So this is the game. This is where the locking comes from is the buyer doesn't have a choice and the seller doesn't really have a choice either. SPEAKER_06: As we wrap here, just real quick, pull up that link, Nick and go to number five. So that is the key issue. I don't have a horse in this race. I don't own Redfin stock or anything, but here's Redfin explaining exactly what you talked about. It's FSBO, for sale by owner, and there's now these third-party sites and they kind of allude to it there. SPEAKER_05: But you know what those are? Those FSBO sites are actual real estate agents that are registered in the state and are members of NAR. And so they have a right to list on MLS. So what they're doing is they've basically set up a super simple website, and then they're posting your listing on MLS for you. For a flat fee. For a flat fee, rather than getting a commission on the sale. SPEAKER_06: Awesome. Yeah. SPEAKER_05: And that's kind of interesting, but for most people, they're like, well, I don't know. Now, I don't want to disparage the value of folks that are in this industry. There's obviously a lot of value for agents and brokers in this industry. But the real point is that if the monopoly breaks on the marketplace, then the business model will get competed away and there will start to be a change here. And I think that this lawsuit and the settlement ultimately leads to a change, a shift in the industry that could certainly benefit consumers, but could have a negative economic impact because of the number of people that depend on brokerage fees as their job. The settlement is likely to be SPEAKER_06: that when you hire a broker, they will give you a form and you'll pick what percentage you want to pay. I'll pay you 2% and I'll pay the buyers agent 1.5. I'll pay you 1.5. I'll pay the buyers agent two. Or they should be caps on it, right? Or you should have, because of the incentives, it doesn't matter if I sell my home, if it's a $5 million home, it may matter to me, 5 million, 5.5 or six. It doesn't matter to the broker. They're commission, they just want to sell it as quick as possible. If it sells for 4.5, 5.5, it's relatively the same commission. So it really should be based upon a flat rate, up to a number, and then a percentage above that number to align interests. Anyway, keep an eye on this one, folks, because it's going to have a massive impact. All right, Colorado Supreme Court has removed Trump from the state's presidential primary ballot. This was decided in a split, four to three decision by the court. It's worth noting that all of the justices were appointed by democratic governance, the democratic state. The court based its decision on section three of the 14th Amendment. This bars anyone from joining Congress, the military, or any federal state offices, if they have previously taken an oath to support the constitution, then engaged in insurrection against the US. This is the first time in US history that the 14th Amendment has been used to legally disqualify a presidential candidate. The 14th Amendment was originally passed after the Civil War and was aimed at former Confederates. SPEAKER_04: I'll say a couple of things. The first is that I thought that the Democrats were going out of their way to give Trump the election with the documents case. But now I think that they've basically made his winning the Republican nomination a foregone conclusion, and he is the overwhelming favorite to win the presidency after this. The reason is pretty simple, which is if you take Donald Trump out of this, the idea that you haven't been convicted of a crime, but now a government agency or a government court in this case can deprive you of what really is a pretty momentous sign of liberty and freedom, which is to run for president of the United States, to deprive an American citizen unconvicted of that crime of that right, I think is really a bad step in the wrong direction. And so there just needed to be a lot more prudence and thought about this, and I think that it will do nothing except embolden the base. It'll get Republicans out to vote. I think it creates a deep wave of momentum in the direction of Donald Trump. And so this to me was just an absolute complete head scratcher that makes no sense, and I think is surely to get overturned in the Supreme Court. SPEAKER_06: Freeburg, your thoughts? SPEAKER_06: Okay, for those of you not watching, Freeburg put both hands up in the air, gave a shrug like a shrug emoji. So if you wanna understand Freeburg's position on Trump, it is shrug emoji. Coming around the Hornsacks, red meat, what are your thoughts? On the Colorado Supreme Court banning Trump from the ballot. SPEAKER_02: I agree with what Chamasa said. Democracy now means the right of the people to vote for candidates approved by liberal judges. And yes, J. Cal, all these judges were Democratic appointments. I think this case makes clear that the point of all of this lawfare against Trump is to keep them off the ballot. Until now, they've been pretending it's about something else. And I think this decision rips the mask of all the legalistic bullsh-t that we've heard throughout 2023. I mean, Democrats don't really give a damn whether he paid off a porn star or kept classified documents or supposedly led a racketeering conspiracy. They just don't want him standing for a vote that he might win. And I feel like all the time we spent on this pod earnestly debating the details and the legalities of the documents case, it was a total sucker's game. That's the narrative they want us engaging in. It never had anything to do with documents. They just want to keep them off the ballot. And I think that by being so naked about this, by ripping the mask off what they're trying to do, the Colorado Supreme Court has really done us all a favor. I mean, the Supreme Court of the United States is surely gonna reject this decision. But the lasting impact is gonna be in revealing liberalism's true face. They are the real authoritarians. And while restricting the right of the people to vote for the candidate who is leading the polls right now, they claim that they're saving democracy. I mean, they self glorify and engage in this self righteous rhetoric that they're saving democracy. I mean, the rest of the country, any normal person is looking at this and saying these people have completely lost touch with reality, completely lost touch. SPEAKER_04: The other unfortunate outcome of this is that there will be a wave where people will talk about the big steal as this. And what people will say is that there was an attempt by the Democrats to really roadblock Trump's ability to be voted up and down by the American people. And that's disenfranchising the ability for people to vote. And I think that that's really unfortunate and I wish that the Democrats would have thought about that in their calculus before engaging in what is really a deeply partisan thing to do. This will get overturned. But the damage will be long lasting, unfortunately. SPEAKER_02: That's a shame. Totally. And Matt Aibi had a good line. He said that only people who live in a bubble, within a bubble, within a bubble could ever think a decision like this is a good idea. Here are the three bubbles. Number one, all of these judges were Democratic appointments because they're living within the Democratic Party is the first bubble. The second bubble was the fact that they all went to Ivy League schools. This was actually a four, three decision. The four justices who went to the Ivy Leagues all voted for it. They thought this was a good idea. The three that went to Denver Law School, the non-Ivy League school, were all against it and wrote scathing dissents against it. So that tells you the second bubble is the Ivy League. The third bubble is people who've been totally marinating in the mainstream media and their coverage of this because they think that they can just conclude that Trump is guilty of an insurrection because it's just a fact according to the media they listen to. Trump has never been convicted of that crime. He's never even been charged with it. SPEAKER_05: Right, so I think that's an important distinction that the 14th Amendment, which my understanding came about to keep members of the Confederate Army out of Congress because they had rebelled against the government. And so the whole point was this amendment was passed to keep anyone who'd- No, that's right. Who engaged in insurrection or rebellion or given aid or comfort to the enemies thereof. They may not be elected a member of the Senate, Congress, or President, or Vice President. So, Sax, if that's the case, that is still the 14th Amendment. That's the claim being made here. It doesn't define whether or not there needs to have been a conviction of a charge of insurrection. Is that what will ultimately be the Supreme Court decision, do you think, is that he was or wasn't actually found in a court of law to have been guilty of insurrection? SPEAKER_04: No, it's that the actual Article III of the 14th Amendment doesn't even define the presidency as applying in terms of where this applies. So even before you get to that legal threshold of the fact that he's never been tried for this thing, there is a simpler threshold, which is most legal scholars say it doesn't even point to the fact that you can actually hold the president to that standard. So there's like all these layers in which- What do you mean? SPEAKER_05: It says no person shall be- Well, it's unclear if officers of the United States SPEAKER_02: includes the presidency. I think that's one way you could overturn this. Another way is to point out that there was no due process. The dissents really harped on this issue of due process. You had a district court decide after a five-day hearing in which Trump was not allowed to subpoena, no subpoena power, no calling of witnesses, no cross-examination. They basically just looked at tape of the January 6th hearing, which was itself biased because Republicans didn't even get a chance to cross-examine. So basically they just looked at MSNBC coverage. And this district court concluded on that basis that Trump was guilty of an insurrection. Again, that is a crime for which he's never been convicted and he's never even been charged with and he's never even had the chance to answer those charges in court. SPEAKER_04: And there was a special counsel at the federal level that declined to prosecute. SPEAKER_02: That's right. That's exactly right. SPEAKER_05: So, Sacked, if a prosecutor had taken up the case and he had been convicted, would you support him being disqualified from the state ballots for being the nominee for a party for president? SPEAKER_02: Well, there was a very simple way to disqualify Trump from running again, which was to impeach him, was to convict him in the impeachment trial. Remember, the second impeachment was all about January 6th. And he was basically- I'm just talking about the courts. I'm talking about the courts. He was exonerated. That was the time to do it. SPEAKER_00: SPEAKER_02: Now, I don't know if a conviction for incitement to insurrection would hold up in that way, Freberg, I don't know. But the point is they didn't even try. And the reason is, because when Merrick Garland first came in, they actually did an analysis of January 6th, and there was a memo written. And it said that if we, the DOJ, try to prosecute Trump for either incitement or for insurrection, we will lose that case. And so Merrick Garland didn't bring those charges. Then there was a story in the New York Times saying that Biden reacted really negatively to that. And he told his inner circle that Garland needed to stop acting like a ponderous judge. This is the New York Times words. And that he needed to take decisive action. And Biden made clear to his inner circle, I'm gonna provide the receipt on this, that he thought Trump should be prosecuted. So all of this lawfare ultimately flows from that. It flows from the top. Biden is the most vindictive president we've ever had. I cannot think of another time in American history where a president incited his own aides and advisors to basically go prosecute the leading alternative for the presidency that he's likely to face in four years. That is what happened. By the way, we've seen this behavior before. Remember, this is also the president who said, we need to go look at this guy, meaning Elon. I mean, I can't believe that this behavior is just accepted by so many Americans. This is petty vindictive, un-American behavior, and it's anti-democratic. And the people who are engaging in it the most, again, are glorifying themselves as somehow standing up for democracy. This is a joke. And I think the average American is gonna rebel against this. And I said, I think it was like last year, that all of this lawfare, all these tactics, it's shenanigans that the Democrats were trying, it's either gonna put Trump in the big house or the White House. And I think he's headed for the White House on this basis right now. SPEAKER_04: I agree. SPEAKER_05: You would say that it's reasonable that if he got convicted in a court of law for in charge of insurrection, that he should not be allowed on the ballot? SPEAKER_02: If the Supreme Court then decided that that's what the 14th Amendment meant, sure. But that's not what happened here. There's zero due process. SPEAKER_05: I get it. I'm just trying to understand where your threshold is. So you think this will certainly go to the Supreme Court and they'll adjudicate what the 14th Amendment really means. Cause it's never been tried, the 14th Amendment. SPEAKER_02: Well, again, it was written, think about why that statute came about. Chamath is right. It was written for the Confederacy. SPEAKER_03: Right. SPEAKER_02: The only other time it was used SPEAKER_04: was in 1919 against one person that was about to enter Congress who had given comfort to the Germans in World War I. That's the only time we've actually invoked Article III, Section III of the 14th Amendment. SPEAKER_04: Were they allowed to run? No. They were not allowed to take the seat. SPEAKER_04: Now that's at the federal level and at the state level it's been used a couple of times. The point of this is for me, again, take Trump out of it. You do not, I think, I'm pretty sure, we do not want to find ourselves in a country No, of course. where you can all of a sudden be deprived your liberty and your rights for random acts where somebody believes that you are a threat to them and that person is in a position of power to affect your liberty. That can't happen. SPEAKER_02: Vote the man up or down. SPEAKER_02: Yeah, and I agree with that. And I would say that, I mean, what you're speaking to is due process. These judges basically believe that because the mainstream media says something is the case that we don't need to go through a legitimate court procedure to determine that as a legal finding. SPEAKER_02: They just declare that, okay, he's guilty of insurrection. That was never proven. People don't realize this thing can go SPEAKER_04: the opposite direction so quickly. Imagine that there's a Democratic candidate that is running against a Republican incumbent. Is this the standard we want to create where there's this political warfare that happens where each party is trying to essentially prevent the leading candidate of the other party from running in every election from here on out? Because that's the precedent that is being created. That's why I have such an allergic reaction to this. SPEAKER_02: That's totally true. SPEAKER_04: Why wouldn't every president from here try to do this? SPEAKER_02: I mean, it's already the case that every president that loses Congress is probably gonna face an impeachment hearing. That's happening too. And now we're gonna have a situation where every presidential candidate can be potentially excluded from the ballot based on a local court's findings. SPEAKER_04: From the Democrats' point of view, this was deeply short-sighted, and I think it has a very high chance of blowing up in their face. SPEAKER_02: We haven't heard from J. Cal. SPEAKER_04: I get my information from two really good sources. SPEAKER_06: The first one I recommend for our listeners is Cafe.com. It's a podcast by Preet Bharara. Fantastic, he does really deep dives on these cases against Trump. Cafe.com. SPEAKER_06: Yeah, Cafe.com is his podcast. Cafe.com. It's a paid podcast, but it's really detailed. And then there's actually, speaking of lawfare, there's a lawfare podcast, and so I listen to those, and they're covering this, and also the two other cases that are of note, the federal election interference case and the Georgia case. Highly recommend that our listeners go to those experts and get a really well-balanced view of the cases against the 45th president. All right, for chairman, Jamath Palihapitiya, SPEAKER_06: the new chairman of the All-In LLC. I like chairman dictator, I don't wanna lose a dictator. Chairman, dictator, authoritarian. Nope, nope, J. Cal. BIPOC. SPEAKER_02: Chairman, BIPOC. Chairman of the Politburo, dictator of the All-In pod. SPEAKER_06: You have my proxy vote too. All hail the chairman, dictator. And for the king of beep, and Rain Man himself, I am the world's greatest moderator. Love you boys, and we'll see you next time. ["I'm Going All In"] SPEAKER_02: We'll let your winners ride. SPEAKER_01: Rain Man, David Saks. ["I'm Going All In"] And it said, we open sourced it to the fans and they've just gone crazy with it. Love you, Saks. I'm the queen of K'Nwa. ["I'm Going All In"] Besties are gone. Cold 13. That is my dog taking a notice in your driveway. Saks. We're in an affair. Oh man. Oh man. My haberdasher will meet me at a place. SPEAKER_04: We should all just get a room and just have one big huge orgy because they're all just useless. It's like this sexual tension because they just need to release them now. SPEAKER_01: Let your beep beep. SPEAKER_01: Let your beep beep. We need to get merch. ["I'm Going All In"] SPEAKER_00: ["I'm Going All In"]