0:00
My stance really took over the comment board.
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0:02
Yeah, Sachs, how was your week off when you you gave up on the pod for a week and then did four media appearances for 90 minutes each on other pods.
0:10
You did six hours of pod You took off from this pod to give your ratings to Megyn Kelly and Dave Rubin.
0:16
Yeah, I did 45-minute hit with Dave Rubin on Ukraine.
0:20
So, be sure to check that out.
0:22
And then Yeah, did I do No, Megyn Megyn Kelly Freeberg and I did that Was this week or okay.
0:29
Surprisingly, she didn't invite you back. Yeah, I don't know.
0:30
What could have happened? It was so great. It was so great. That was awesome. I love Megyn Kelly.
0:37
Didn't she call you a prick? Yeah, she did. She did.
0:38
And she only knew me for 45 minutes.
0:40
Usually, that takes like three or four days.
0:42
She just got right to it.
1:01
Sachs, we have not had such negative panning comments on YouTube since J Cal got brigadooned for his pro-Ukraine video Not getting brigadooned for Sachs not showing up.
1:12
I get brigadooned for asking him a question.
1:14
Then I get brigadooned for him not showing up. brigadooned. I don't know.
1:17
Maybe it's just honest commentary from the market.
1:20
realize that there are three to five million people a week that listen to this podcast?
1:24
100 nitwits who comment on YouTube, they're neither right nor wrong.
1:30
They should just be completely ignored. Turn the comments off.
1:32
The only thing that matters are the ratings.
1:34
If you care about that at all, and last week was one of the best rated shows we've ever done.
1:39
I think it was highest rated after Elon's episode.
1:41
It would have been even better with David.
1:43
So, we should brigadoon the brigadooners.
1:45
Those nitwits should be ignored.
1:48
I think this is a little bit like a band where like you can't mess with the chemistry of the band and even though there's a lot of infighting in the band, like it just works. It works.
2:00
And so, you don't want to second-guess it too much.
2:04
Well, then and then if somebody from the band gets sick and somebody sits in, even if it's like you get some incredible guitar player to sit in, people are like, "THAT'S NOT THE GUITAR PLAYER WHO I HAVE THE t-shirt of.
2:11
I need my guitar player back." All right.
2:16
Anyway, well, I'm just glad Ringo showed up 22 minutes late. Welcome back, Freeberg. Let's get started.
2:23
Sachs, Sachs, I just I DON'T MEAN TO [ __ ] WITH THE BAND.
2:25
I'M NOT GOING TO [ __ ] WITH THE BAND.
2:28
Ringo was an underrated drummer.
2:31
Freeberg, you have a role here. That's amazing.
2:34
I think you're more like the drummer, J Cal.
2:36
Freeberg, maybe bass, maybe bass player. Bass guitar player.
2:41
George Harrison, George Harrison. Yeah.
2:43
Actually, George Harrison, very underrated.
2:44
But I you know, I'm I'm pretty clear.
2:46
Have you guys ever heard of the version of Blackbird that Paul McCartney did just with a ukulele?
2:51
No, I'd like to hear that.
2:54
Maybe one of the best songs ever recorded.
2:56
One of the best records I've ever heard. Fantastic. Incredible. All right, listen.
3:00
There's so much to start with, but I think Blackbird singing in the dead of night.
3:05
Take these broken wings and learn to fly. All Sachs life.
3:13
Sachs, were you at a building on Market Street yesterday by any chance? No fly zone. The homeless shelter?
3:21
Well, I think you talked about an abandoned homeless shelter.
3:25
Freeberg, I think it's fair to say that there will be a lot of people that we know that will go and help make Market Street better.
3:33
Make Market Street great again.
3:35
Make Market Street great again. Absolutely, absolutely.
3:37
I'm I'm looking forward to some tofu salads and meditation. Namaste.
3:45
No, literally, I think 8,000 square feet is meditation rooms that haven't been used in 5 years.
3:49
Quite honestly though, like on the other side of this, I would say Parag Agrawal does deserve a statue for shareholder value creation.
3:54
What he What 5420 a share, which by the way we said was going to happen and it did happen, was ginormous in this market.
4:04
And I just want to see the look on that barista's face when they're warming up the oat milk when a band a very, very tough-knuckled company builders walks through that door.
4:19
Yeah, the oatly has left the building.
4:21
Let's just leave it at that. Wow.
4:21
So, I guess we can talk about it now.
4:24
Elon has clo- closed the deal.
4:27
we can talk about it now.
4:27
No, I'm just saying Sachs and I could not talk about this because we had, you know, we we couldn't talk about it for legal reasons.
4:35
They deserve a statue in front of the bronze statue for shareholder value creation in front of that Twitter building.
4:42
Best tech CEO of the year. Parag Agrawal. Hold on a second.
4:46
So, your theory is that he did such a bad job in terms of suppressing viewpoints and and censorship that he actually induced Elon to want to buy the company so he could fix their censorship problem.
5:00
No, my theory my theory is simpler than this, which is they got great representation to do a very bulletproof deal and it turns out that contract law still matters in the United States.
5:17
And Elon did the right thing and just said, "You know what?
5:19
I'm going to own this thing and probably double or triple my money.
5:22
So, I'm just going to go and do it and I'll do it for the benefit of everybody else."
5:27
But my point is more that they and the board had the wherewithal to fight because, you know, that they could have easily gotten intimidated and capitulated.
5:37
And in doing that whether they were right or wrong or good or bad is irrelevant to me they represented shareholder values well and they got shareholders paid in a moment where the stock market is still down 20, 30, 40% where big tech is down 50%.
5:52
Some of these big tech companies are down 80%.
5:55
These guys sold the company at a premium.
5:56
And so, that just, you know, we just have to acknowledge that that happened. That's all.
6:00
Well, let me just give you a little bit of background on Twitter historically.
6:03
You know, in 2013, the stock was trading at $69. And it got sold for 54.
6:10
Like this company has been sideways for a decade essentially in terms of its market cap.
6:17
And so, but there's no doubt that I think Elon can turn this around pretty quickly and make it massively profitable, I think, and clean up the bot problem very quickly.
6:30
If you can land two rockets at a time, create self-driving cars, I think you can figure this out.
6:34
This isn't rocket science and Elon's done rocket science.
6:39
So, I think he's going to figure it out right quick.
6:42
Yeah, for what it's worth, I think Elon's really excited about it.
6:43
And there is tremendous potential at Twitter.
6:47
I mean, the company's been sideways cuz it hasn't done that much in 10 years.
6:51
But there's so much you can do with that product.
6:53
It's just you know, there's a ton of potential.
6:55
I think the best way to think about it is he bought a quarter of a billion MAUs for $44 billion.
7:04
And in the grand scheme of things, that is I think going to turn out to be pretty reasonably cheap especially if he can layer in a few of his bigger ideas and uh and I think that those MAUs, the value of those monthly active users could probably double or triple pretty quickly.
7:23
I think that was the So, I just sent you guys this link from this analyst.
7:27
And he said that Twitter was bought at $172 per monthly active user compared to $81 per monthly active user at Meta where they sit today.
7:39
So, but that's but that's for a very different point which we can double-click into cuz Meta is its own bag of you know, it's a little bit of it unfortunately you know, a bit of a dumpster fire.
7:51
Well, and and I'll explain why because the the Meta problem is it's it's a deep and a very dangerous situation that they've put themselves in, which is why their MAU values are this low.
8:05
But you know, if you had done this analysis a few years ago the trade was looking at Meta's MAU values being so high where you would have said, "Why isn't Twitter doing more?"
8:15
So, I know that this is this is a little bit, in my opinion, cherry-picking. Yeah.
8:21
Well, I think making everything verified and a path to verification, which Elon has talked about publicly many times, and payments, uh you know, he's talked about publicly many times.
8:29
Just those two things alone could make the experience of being on Twitter absolutely delightful.
8:35
If everybody could verify themselves, this thing could turn around so quickly.
8:39
I'll say I'll say what you're saying in a slightly more I think the most powerful change that Twitter could make today is there are two classes of users.
8:49
People who are verified real-world identity Yeah.
8:51
and people who want to stay anonymous. Correct.
8:54
There is a 100% distribution firehose for people who are real Mhm.
8:59
and there is a firehose for fake people or fake names that you need to pay to amplify.
9:07
Just that one simple change will cut through all the nonsense because if you want to see where the money is being spent, you will be able to see very quickly because otherwise there'll be virtually no distribution for anonymous fake people and it'll force those people, if they really want to be heard that and that there's something valuable to say, to spend against it.
9:28
Well, this this really is about the brigadoons and Elon's been very clear about this.
9:31
You know, it's pretty easy to get rid of the bots.
9:33
And if people are opting in to putting themselves into the top class of verified users, well, that's a revenue stream, right?
9:39
And so, all of a sudden, you know, I don't know how many millions of people would instantly say, "I'll pay for this for five or 10 bucks a month to be verified." think you're right.
9:48
And I think like what we want to do is like you know, no offense to all the people out there, although I don't really care, but no offense, but you cannot use Twitter as a coping mechanism, okay?
9:58
Like, I get that life is hard or that, you know, life hasn't lived out to your expectations or, you know, there's envy and whatever of other people, but to go out there and spew hate doesn't solve anything.
10:12
Are you talking about the Brigadoons?
10:13
Well, there's also just a lot of people that are just in general they're just they're just mean.
10:17
And I'll give you a perfect example.
10:20
There's a woman that I saw on TikTok.
10:22
And she's like, uh, you know, been married for 13 years, mother of two kids.
10:29
And she was she had a thing that went viral where she was talking about who's in charge, her or her husband.
10:34
And it was a very funny little thing.
10:36
And so I I followed a couple of her videos just to see what else she had posted.
10:39
And one of the videos was how she has some complicated health issues which she was very public about, PCOS. Mhm.
10:47
And how it causes, you know, issues in losing weight.
10:49
And she posted a pre and post picture of her.
10:51
Which takes a lot of courage. Mhm.
10:56
And she was like Brigadooned. Mhm.
10:58
And it's like what is wrong with these broken people Yeah.
11:02
that have to give this woman a hard time?
11:03
And it just it to so to me, these social media channels are not coping mechanisms.
11:09
They were never meant to be.
11:10
And so, you know, if they have to go to 4chan or 8chan or Reddit or whatever, better to sort of create these honey pots of hatred than to have it spew everywhere because it makes for the rest of us these platforms to be unusable.
11:26
Well, Sachs, you were the COO of PayPal with Elon and Roelof and TL and everybody in that crew over 20 years ago.
11:33
Uh, and verified you understand pretty well because you yourself have been Brigadooned of late and you've you've experienced this first hand, the psychological torture that made you take a week off from the show, in fact, cuz you were so under duress. I'm kidding.
11:48
You had a planned week off.
11:48
You're allowed to have a vacation.
11:50
Um, which of the two ideas is the bigger idea?
11:53
Payments, making Twitter into PayPal, uh, including that x.
11:56
com which was the original name of uh, that was Elon's payment company and he owns the domain x. com. Which is a bigger idea?
12:03
The payments or the verification?
12:08
Which is the bigger idea for increasing shareholder value?
12:10
Which would you do first?
12:13
payments is an entire road map, right?
12:16
So, there's a lot that could be done there. Explain that.
12:18
Well, I mean, it's it's about I mean, you could layer on a lot of services on top of that.
12:23
So, it's not just like one feature.
12:27
Look, I think they're both compelling in terms of where they could lead.
12:28
I think what's amazing about Elon as an entrepreneur is he always starts with a mission and then he figures out how to turn it into a great product and a great business.
12:38
So, for example, with SpaceX, the mission was to get to Mars to make life multi-planetary.
12:43
You would think that'd be a spectacularly unprofitable business, but in the course of pursuing that mission, he figured out the launch business and then the satellite business was Starlink and I think Starlink's going to be a phenomenal business. Phenomenal.
12:57
and likewise with Tesla, he started with the mission of moving the world to sustainable energy. Yeah.
13:01
And in the process of doing that, he created the world's best car, not just the world's best electric car, but I just think it's the best car in the world.
13:08
And Tesla is this amazing business today.
13:10
It's so far ahead of every other car company.
13:12
So, look, I think what's cool about what Elon is doing is he's starting with this mission of restoring Twitter to being a free speech platform, of being the town square it was always meant to be.
13:23
And in the process of doing that, he's going to figure out how to make Twitter into an even better product and into a great business, which is not today.
13:31
I think Twitter's losing, you know, a few hundred million dollars a quarter.
13:35
So, there's work to do on all those fronts, but um, I think, you know, it's really impressive to see.
13:42
And you know, he's still operating at the top of his game.
13:43
I mean, 20 years after PayPal, some of us are just doing a podcast, but he is uh he's still like operating at the top of his some of us are exhausted.
13:51
I know I know, we're tired, but We're tired and he's like working 16-hour days.
13:55
He's been leveling up for 20 years and at this point he's like a level 99 mage or something.
14:00
No, he's like a crazy It's it's amazing to to see.
14:06
Freeberg, the biggest issue I perceive in the short term for Twitter is going to be what to do with people like Trump and Kanye West or Ye.
14:17
And of course that's all going to seem like Elon is making those decisions as an individual as opposed to for the platform, etc.
14:23
Should he let somebody like Kanye West, I'm sorry, Ye, is it like to call himself, who is in the middle of an obvious manic episode, back on the platform?
14:32
Should he let Trump back on the platform?
14:35
How do you think he should handle those two polarizing individuals specifically?
14:40
Look, I mean, I think this is what's going to be really interesting to watch because there have been very successful, very inspirational, very intelligent, very creative entrepreneurs that have started and built generally kind of open platforms at the beginning only to over time be challenged with the content that doesn't feel appropriate.
15:03
And then they come back and they make the necessary kind of moderation guidelines and they make the necessary edits to the way the platform operates.
15:09
This is how Google operated originally, you know, and then they ended up saying, you know what, if we're going to be in China, we do have to create a censored version of the internet and they did that and that was controversial.
15:17
With YouTube, they've got a lot of censoring and it was supposed to be just a generally open platform for anyone to use and they were even Larry and Sergey were kind of flouting DMCA at the at the beginning and they were like, it's not our job to monitor copyright, you have to file a takedown notice.
15:31
And they kind of waved their hands in the air.
15:33
Over time, they realized that that could actually damage and completely ruin the platform and they had to go in and create guidelines and moderation systems.
15:42
And um, the same was true of Ev and Jack at Twitter.
15:44
Uh, the same was true of the founders at Reddit.
15:46
And I don't know if you guys, you know, remember that period of time when Ellen Pao was CEO of Reddit and she went in and cleaned up a lot of the bullying and harassment and nastiness that was going on on Reddit and she got a lot of controversy for why are you closing it down?
15:59
Why are you censoring it?
16:00
Elon is a reasonable person and he's going to be faced with unreasonable people on this platform.
16:07
And when that happens, he's going to have very tough decisions to make about what kind of platform he wants to have, what's the quality of that platform going to need to look like.
16:13
And then all of a sudden he's going to have to look in the mirror and say, did I step on the wrong side?
16:18
And, you know, he's he's idealistic and it's great and it's wonderful and I hope that he's successful, but to some degree, some amount of moderation is going to be necessary to create a high quality product for all people.
16:30
would you, if you were in charge yourself, Freeberg, would you put Trump back on the platform and under what circumstances and would you allow somebody like Kanye West back on the platform at some point? Me me personally? Yeah, you personally.
16:42
I'm trying to get an answer from you personally on those two.
16:45
Yeah, look, my content moderation guidelines, I you know, it gets very nuanced very quick.
16:51
What do you allow people to say?
16:51
What do you not allow them to say?
16:52
And then if they violate them, is there the opportunity for a lifetime ban? I don't think so.
16:57
I don't think anyone should have a lifetime ban on these platforms.
17:00
So, I'm totally fine with that.
17:02
for Kanye West who has been saying crazy anti-Semitic stuff which has real world danger?
17:06
That's already started to spill over where people are putting up banners like Kanye's right about the Jews and they're putting up banners like over the, you know, 10 freeway as you may have seen in Los Angeles.
17:15
How would you deal with Kanye specifically in a manic anti-Semitic episode that he's been in?
17:20
Look, I think I think the question is anyone that's saying anything racist or what, you know, whatever might be deemed kind of to fall in that category.
17:29
There is a tagging mechanism.
17:29
You have to figure out how to create the tagging mechanism.
17:33
Based on that tagging mechanism, the default is it's like when you go to Google and you search for stuff, they exclude porn.
17:38
So, all porn content that's indexed on Google's index servers, um, is indexed as porn and it's default off.
17:47
There's a safe search thing you got to turn, um, I think off or something to access stuff that Google deems inappropriate.
17:54
So, how how do you how do you how do you do that?
18:00
No, but I think I I And by the way, I'll tell you when I worked at Google, we used to have uh, pizza weekends where you would go into the office on the weekends, they'd give you free pizza and everyone would tag you know, you'd watch porn and you would tag porn.
18:08
And so you'd basically go through the indexing servers, they'd show you images in Google images and you'd click porn or not porn.
18:15
And it was just like, hey, come and volunteer, come and help us do it.
18:18
And there was all these engineers sitting in the freaking cafeteria tagging porn.
18:21
But Actually, you know, that happened to Sachs and he saw Tucker Carlson and he said, yeah, that's porn.
18:26
That's that's my PERSONAL PORN. YES.
18:31
I THINK THE SAME MECHANISM is needed on these social networks.
18:33
Which is that you have to figure out a Well, you have to figure out a way to use AI to tag content and then think about them as cable Just let me finish for one second.
18:41
You think about them as cable cable stations on a cable company.
18:43
So, they're the cable company and there's different stations.
18:46
And you as a user decide what do you not want to opt into and what do you want to opt into?
18:50
What content do you want to exclude from your version and your experience of Twitter?
18:54
And if you're okay with the stuff Kanye says, you're okay with the stuff Trump says, you can keep that stuff in.
18:59
If you want to exclude that type of content, it's it's excluded for you.
19:03
And I think that's what Twitter ultimately has to become.
19:07
What do you think, Chamath?
19:07
Would you put Trump back on the platform and seeing, you know, Kanye West having this manic episode and saying, you know, basically participating in hate speech explicitly?
19:17
How how do you how would you handle those two specific instances in 2022 going into 2023?
19:23
I think that there has to be a way where nobody is banned forever. Okay.
19:29
that if when somebody is banned temporarily, they can be banned for any reason that violates a term of service that's well understood and uniformly enforced. Got it.
19:37
And I think that's the right of a private company.
19:42
But there has to be a way to get back on.
19:45
In the case of both of these folks, there should be a way to basically, you know, have because of the the step uh the the quantity of their reach some sort of almost like tribunal or, you know, mediator that can understand what's going on.
20:06
Because if somebody's going through a manic episode, it's absolutely right to turn that off.
20:10
I mean, these guys should have turned him off much, much sooner.
20:15
Because when you're in the middle of a mania and I and I said this last week, like you know, like for example, like this this relative of mine, when they're in a manic episode, it's 60, 70, 80 emails a day and text messages, 100 texts that I get.
20:30
And they're honestly they're vile. Yeah. Okay?
20:35
And they don't even remember them half the time, right?
20:36
They don't even remember the episode.
20:37
And and, you know, they go through paranoia, they go through mania, they go through these periods where they think they're completely right.
20:43
They go through these periods where they look completely sane and normal. Yeah. So that's a tough one.
20:49
The most important thing when you have a family member in mental health crisis is to get the phone away from them.
20:55
That is a weapon that only continues the loop and to reregulate this person.
21:01
And then there should be a way to prove that you're back in a reregulated state to get these tools back.
21:07
But I think that that needs to we just need to acknowledge that there's just a lot of people with mental health issues.
21:13
There's a lot of social media.
21:13
There's a lot of damage that can be done.
21:18
It's not to forgive these people, but it's to explain that in moments you got to shut these channels down and then give them a way to come back when they've reregulated.
21:24
Sacks, how do you think about it?
21:28
Well, with regard to Trump, I don't know what the continuing reason is for him not being allowed on the platform.
21:35
Remember that when he was banned, it was considered to be a temporary measure because he was supposedly inciting a riot, right?
21:43
So I think incitement to violence is legitimate grounds for taking down speech, but once that breach of the peace is over, I don't know why it would become a permanent ban as opposed to a time out.
21:55
So I don't even know how the companies continue to justify the ban on Trump except for the fact that they just think that he's a threat to democracy.
22:04
Well, I don't think that's for social networks to determine is that who gets to participate in our political process.
22:12
So it's not necessarily the first thing I would do, but do I think that Trump should be allowed back? Yeah, I do.
22:19
With regard to Kanye, it's a little more complicated because like you're saying, it's hard to know whether he's having a manic episode or he's just you know, being Kanye.
22:28
What he's saying right now is probably not in his own interest and probably it would be in his best interest to have a time out.
22:33
But what I would look for guidance here is there is a a Supreme Court decision and my my general view on on the content moderation is that these social networking companies should be looking to for inspiration to Supreme Court decisions because Supreme Court's been wrestling for these with these issues for hundreds of years, whereas social networks are just making it up as they go along.
22:55
And there are nine major categories of speech that the Supreme Court has said are not protected because they actually are dangerous speech.
23:02
So for example, in this decision called Chaplinsky versus New Hampshire, which came out in 1942, the Supreme Court held that so-called fighting words were not protected and they defined fighting words as speech that tends to incite an immediate breach of the peace through the use of quote personally abusive language that when addressed the ordinary citizen is as a matter of common knowledge inherently likely to provoke a violent reaction.
23:29
So, you know, I would use that type of decision by the Supreme Court as inspiration to say that racist, misogynistic, homophobic, and other And divisive racial racial and ethnic slurs Yeah.
23:44
shouldn't be allowed on these networks because it doesn't do anything to enhance the public debate.
23:48
Now, there is a question like could Kanye frame his arguments in a way that is still incredibly offensive to us, but doesn't He could say use slurs.
23:58
Yeah, for example, he could say, "Hey, here are the top 10 media companies, here are the executives, here's the percentage that are Jewish, and this is, you know, my concern is that this is a and here's the percentage people are Jewish in the population."
24:09
You could some [ __ ] like that.
24:10
And then you're like, "Okay, did he say something anti-Semitic?" Right.
24:14
You know, and you're kind of in this bubble area.
24:17
And there's always going to be edge cases and people are going to be pushing the envelope.
24:20
And so, listen, just because we find it offensive and, you know, it's specifically offensive to me, that doesn't mean that it should automatically be banned.
24:28
So I think slurs, slurs banned or out, but but arguments, I don't know that we should be banning entire categories of arguments.
24:36
And and look, part of the problem here is that lots of people are hearing the arguments that Ye is making, whether he's making them on Twitter or not.
24:43
And because he's there's a total ban, people can't really engage with him on Twitter.
24:49
And so he's not getting off-ramped from this rabbit hole he's falling into.
24:54
And nobody else who might be a fan of his is hearing the other side of the argument.
24:58
So I don't know that it's ultimately in the long-term interest of the town square to be banning, you know, the you know, ACLU and other people have is like, "Hey, you put a little sunlight on these bad opinions, at least everybody knows who has the bad opinions and you can fight them."
25:15
Paradoxically while we're talking do you really want these folks going to the dark web and, you know, being untraceable?
25:21
There is some value in kind of knowing who's getting radicalized and hopefully exposing them to other opinions in the same conversation that can off-ramp them.
25:28
Yeah, I mean, paradoxically while we're talking, Elon just tweeted at 11:18 a. m.
25:32
, "Twitter will be forming a content moderation council with widely diverse viewpoints.
25:38
No matter no major content decisions or account reinstatements will happen before that council convenes."
25:42
So he's going to take the same approach that Facebook has.
25:46
They have a council as well that Zuckerberg tried to set up.
25:50
So I think he realizes there should be a thoughtful discussion.
25:53
Sacks, are you going to be on that council? I have no idea.
25:54
That sounds like a the worst purgatory you could ever be in is to be the person who has to make these decisions.
26:01
Like talk about a no-win situation.
26:03
I'm curious, Chamath, we talked last week about Kanye and then Lex Friedman dropped his episode.
26:09
Lex came at it with uh he pushed back on Kanye.
26:13
I don't know if you watched some of the highlights.
26:15
I saw some of the highlights.
26:16
He pushed back pretty hard. the whole thing.
26:17
Okay, so he pushed back really hard on the anti-Semitic stuff and we had a discussion last week.
26:22
I said, "Hey, you can't platform this guy."
26:24
But it looks like Lex had a specific point of view, which is he has a friendship with Kanye of some level and he wanted to try to convince him in this manicness that he's wrong about things.
26:36
Did Do you think Lex succeeded and he should have done it?
26:39
I obviously we won't question Lex's intent. We know it's good.
26:42
I have had replace Lex with me and Kanye with my relative. Mhm.
26:49
Wasn't on television or whatever, but I've had these same kinds of I'll call them interventions.
26:55
And like I said, this person goes through periods of lucidity, periods of mania, periods of paranoia, periods of anger.
27:05
And so that's all I saw when I was watching this thing is just what a lot of people in the United States deal in the world deal with when they have relatives who are suffering from one of these things.
27:16
And, you know, my relative has said the same thing.
27:19
Uh there's nothing wrong with me.
27:21
You know, I don't need medication.
27:22
I'm not on these meds, blah, blah, blah.
27:24
And I don't want to judge cuz I don't know him.
27:27
But I'll tell you in my situation trying to Like, you know, for example, like this person thinks that, you know, myself and one other person, like we hacked into a computer system of the place that they worked to manipulate the financial records to point to this person as a having committed a fraud and has and then thinks that people are now listening and bugging the phone.
27:53
I mean, there's all kinds of stuff over and over again.
27:56
And then sometimes they don't think that and sometimes they do and it's like It's maddening.
28:00
So what I'm trying to tell you is like, you know, when you're not when you're in a normal state, regulated state, and you're talking to somebody who's disregulated, it's not two normal people having a conversation where you're trying to get them to see the logic of your ways.
28:16
So again, I just think that it's not it's not a thing that should be litigated in the media.
28:19
I think it is a thing that is where people that care for this person need to surround them and get them with a doctor to help them rebalance.
28:28
In in in the in the case of our family, what it turns out is that this person needs to constantly be retitrated the drugs for them to be regulated.
28:40
That may be different for other people and I don't know Kanye's situation.
28:41
So anyways, I see I see all that and I and I and I and I go to my own family situation, which I'm which we actively deal with today and I don't have much of an idea of what to do about Kanye cuz it brings up too much stuff about what I'm dealing with in the real time with my own family.
28:59
I'm sorry you're going through that and I uh yeah, like I said, I mean, I think Lex had good intent.
29:03
I don't think it's worth doing No, he's he's he's incredible.
29:07
You know, he's a really beautiful empathetic person. Lex is in general. Yeah.
29:11
So I think he tried to do the best job he could.
29:14
So I saw I saw part of the the Lex interview.
29:16
It was 2 and 1/2 hours and I wasn't going to sit through 2 and 1/2 hours of it, you know. That's painful.
29:21
I went to the chapter titles and I was in the middle it was like Holocaust and like and I was like, "Okay, let's just go right to the train wreck." Yeah. So I skipped to there.
29:28
But anyway, I think the argument that that Lex should have made or pointed out to Kanye is like go see the the new Elvis movie, which is all about how an artist basically got taken advantage of by his business manager.
29:45
And you'll see that this idea is a very familiar trope in the music business.
29:51
But that manager, Colonel Tom Parker, he wasn't Jewish.
29:54
He was a Dutch con man pretending to be a Southern hick.
29:56
So this can happen and it's a very common story and it's got nothing to do with the religion or race or whatever of the the business people.
30:08
So and in fact the person in that movie who has the best advice for Elvis is BB King who says to Elvis at a very early point in the movie he says if you don't do the business, the business will do you.
30:21
And so look, I think Kanye again if I was to sort of steel man it respond to it is listen you know, what you're describing is a pretty common of artists being taken advantage of is is a common issue.
30:32
It goes back a long time and it's got nothing to do with religion.
30:35
And quite frankly, you know, there's probably a lot of other Jews in your life who helped you.
30:41
I mean, I wonder the last time you went to a doctor, did you notice whether they were Jewish or not, you know, and so he's developed a little bit of a fixation here of noticing that some people are Jewish but probably he's not noticing when other people are Jewish who probably helped him.
30:56
So that's probably like the argument I would have made with him, you know, if I were conducting that interview.
31:03
And you make the argument to a person who's in a manic episode and they you just there's no way to reach them and they don't even realize what they're saying.
31:10
They forget what they say when they get through the manic episode.
31:13
These paranoia's don't tend to come up when you're in a regulated normal state. Exactly.
31:18
All right, let's talk about meta.
31:20
Brad Gerstner was on last week.
31:22
We've had an ongoing discussion about big tech entitlement spending, the number of employees at these companies.
31:28
On Monday Brad I I think you know, got a little worked up on the last pod maybe and dropped an open letter.
31:33
Some might say activist he would say constructivist.
31:38
To Zuckerberg and the team over there.
31:40
Hey, maybe pump the brakes on the cap backs.
31:42
Maybe do a riff maybe become profitable.
31:45
Anyway, the revenue and the the third quarter was a complete utter disaster for meta and the stock has plummeted and been under $100 a share.
32:00
I don't know who wants to start on this one but Okay, look there's a lot to unpack here.
32:04
So I think I think we should take our time because I think one part of it is meta but one part of it is actually about what we talked about a few episodes ago which is like this big tech put right where they define the rules of the game
32:20
on the field for every other startup and I think the third part is just about like the era of big tech being over and what it means for the stock market if if I think if you section it out in those three ways Jason, we can have a pretty rich convo. I'd love to tease some of this up.
32:33
I'd love to tease some of this up.
32:36
Okay, so let's let's start with meta.
32:36
So Nick, can you please throw up Apple versus meta for a second and let me just give you guys the the talk track and then maybe we can go from there.
32:46
So when you look at Apple versus meta there's this really interesting thing that comes up which is in 2016, you know, and we've said this before, you could not give Apple stock away.
33:00
They were generating a ton of cash.
33:00
It was sitting on the balance sheet.
33:02
In many ways Facebook was doing the same thing and there was this famous dinner.
33:07
I don't know if it was a dinner that ever happened but that's how the the lore is told between Tim Cook, Carl Icahn and I think Luca Maestri the CFO.
33:18
And in it what Carl Icahn said is listen, I have a below the line suggestion for Apple. And what does that mean?
33:27
If you look at a P&L, you have your revenues, that's above the line.
33:31
You have costs, that's also above the line and then you have your profits and then it's what you do with the profits.
33:37
So what he was suggesting is below the line after the fact.
33:39
He had no suggestions for how the business should be run.
33:44
He just said give us back the money and we will reward you, the stock price will go up.
33:50
And what's interesting to note here is the black line is the performance of Apple stock as as they've given back and they've used a ton of their own balance sheet cash to buy back the stock. Okay?
34:02
So they've spent 396 billion dollars since 2016 to buy back stock.
34:08
In the same time Facebook has spent almost 100 billion.
34:14
Now here is here's where you start to see the divergence.
34:17
So you would have said well, shouldn't Facebook's stock have reacted in the same way?
34:21
And for a very long time it actually looked like it was right until about September 21 and then obviously this thing fell off a cliff.
34:32
And the reason why it started to fall off a cliff was somebody started to notice that hold on a second.
34:39
Even though you're buying back all these shares the bottom of the funnel, right?
34:42
You're leaking all of these shares to all of these new employees.
34:45
Why are you hiring so many people?
34:48
And this is when people started to uncover what was happening above the line at Facebook and is what caused this massive dispersion.
34:55
So Nick, if you go to the first chart.
34:58
So what has actually been going on above the line? Here's what's going on.
35:06
If you look at the light purple bar Facebook in the last two years have spent 25 billion dollars on reality labs and they said that they're going to spend, you know, meaningfully more in 2023 and then sustain that investment for a while.
35:21
So if you do a little bit of math, if they spent, you know, they spend around 4 billion a quarter right now.
35:25
So 16 billion a year, that'll go to 25 billion in 2023 and then they'll sustain that.
35:32
What that means is that over this, you know, 12 or 13 year life of reality labs as we've seen it these guys will have spent a quarter of a trillion dollars.
35:42
And what I did here was I just wanted to understand I wanted to understand a quarter of a trillion dollars in the context of other major leaps in humanity.
35:52
So at the left is what Apple spent in its entirety.
35:55
By the way, these are all inflation adjusted dollars for today. Apple spent 3.
35:58
6 billion dollars to create the first iPhone.
36:04
And what they did was they said every subsequent version of the iPhone would only be funded from the cash flow and profits of the generation before it. Right?
36:14
So they used consumer demand as their guiding principle.
36:17
So it was a very incremental approach.
36:18
iPhone 1, iPhone 2 and now we're at iPhone, you know, 14 or whatever, 13.
36:24
But the point is it took 3.
36:24
6 billion to get that juggernaut off the ground.
36:29
Um the Manhattan Project will cost 23 billion in today's dollars to create the atomic bomb.
36:36
Tesla in its entire life spent 25 billion to get free cash flow profitability and they took this incremental approach as well.
36:45
We'll create the you know, the the coupe, the roadster, then the Model S, then the Model X. They iterated their way.
36:53
They used customer demand and all of that revenue to fund future growth.
36:55
The [ __ ] spend on Tesla was 25 billion. Boeing spent 32.
37:01
Google and other bets has spent 40.
37:03
The only thing that I could find in history that is comparable to what meta has basically said they're going to spend is the entire Apollo program which cost in today's dollars a quarter of a trillion as well.
37:16
So the problem is that below the line meta was doing the right things.
37:22
Above the line they've created I think an enormous set of pressures for themselves which is, you know, if you think about the Apollo program, this was 13 years of building rockets, getting to low earth orbit, then getting to be able to, you know, orbit the earth, then eventually building an entire infrastructure and capability to land on the moon and get back.
37:42
So there was a lot of incremental progress there.
37:44
I think what people don't understand is where is this quarter of a trillion dollars going and is it going to be a leap in humanity at the scale of the Apollo program?
37:54
Because it now is becoming the single largest capital allocation program in capitalism history. Nothing comes close.
38:05
So I think that that is a really interesting maybe jumping off point to talk about what's going on inside of this business.
38:11
It's I think they're doing all the right things below the line but there's this one major big red flag above the line that has to be probably better explained by them if they want to have long-term shareholders.
38:23
And basically what happened was when people heard this they said this is a dumpster fire. We're out of here.
38:27
Sacks, what do you Okay, so question, what happened with the whole Brad Gerstner's proposal?
38:30
Was that actually discussed on the call? On the earnings call?
38:35
They you know, they ignored.
38:38
Well, I I I don't want to say it was totally ignored because I I do think that they should be given credit for a couple of things.
38:45
I think that the core business continues to march forward and they basically said look, we're going to slow head count growth. Some teams will shrink.
38:55
I think the problem is really in this reality labs.
38:57
The amount of investment that they're making is so outsized and so abnormal and doesn't compare to anything anybody's ever seen.
39:06
I think everything else in the business seems to be actually quite functional.
39:12
So the problem is that this above the line thing though has become so big it could sink the business.
39:18
You know, it's very very hard to see an investment case for a quarter of a trillion dollars of money in the door before you really start to see something magical.
39:27
Now they may have something super magical that nobody knows about that they're going to unveil and say ha, see told you.
39:36
And maybe there should be a set of outcomes where we plan for that.
39:40
But the reality is it's, you know, $25 billion a year for the next umpteen years and it's it's and I think people billion.
39:48
Where did the 25 billion come from?
39:50
No, it's 4 billion a quarter right now, so 16 billion a year and they said that they're going to significantly increase it to 2023.
39:56
So, I just assumed it was a 50% increase.
39:59
Maybe significant means 100, but 16 goes to 25 and they said they're going to keep going at that pace.
40:05
And so, if you run that out till 2030, that's how you get to 250 billion dollars.
40:11
You think there's a business here in VR AR, Sachs?
40:13
You think this will be the next platform?
40:15
I guess that's a a key question to ask here.
40:18
Yeah, I mean I I like I actually like these Oculus products.
40:20
I think it's a very cool product.
40:25
The question is really just about the magnitude of the investment level, but I think there is a future in VR and AR and it is a You've You've tried the Oculus headset before.
40:36
It is like a very magical you know, experience with software.
40:40
One of the most magical that I've had.
40:43
The question is just we're talking about magnitude and time frame.
40:47
And and use case I think also comes to mind for me, Sachs.
40:52
Uh everybody seems to, you know, try and then say, "Oh my."
40:54
And then say goodbye to these headsets.
40:56
Like I people buy them, they try them and they're like, "This is incredible."
41:00
They But there's no use case for them.
41:01
I see very few people who use them on a regular basis.
41:04
We just invested in a company that is creating professional flight simulators using VR as a component. So, education. Yeah.
41:13
I think training is actually a huge use case. Huge. Huge.
41:18
And By the way, these are not like video game flight simulator programs.
41:22
These are actual They create physical cockpits with knobs and dials and stuff.
41:27
It's just that the pilot is using a professional grade VR headset.
41:33
And so, they're able to load, you know, a lot more training programs and scenarios and they're able to train on more planes.
41:39
They can like change up the cockpit.
41:42
By the way, the the cockpits are on gyros, so it actually moves around.
41:47
Let me put a different way.
41:47
I think that we should assume that VR and AR is going to be a really important part of our existence.
41:53
And I do think that as David said, many of these experiences are magical.
41:57
I think what investors reacted to was spending $25 billion a year needs to be measurable somehow.
42:06
And I think what they said is the things that we're seeing don't necessarily tell us that this bet is going to make any sense at that level of spend.
42:12
So, if you were spending 2 billion a year or 3 billion a year, I don't think people would have said anything.
42:19
Um it's just the magnitude relative to the progress that's being demonstrated publicly.
42:23
And and that's the thing that I think the Tesla program got right, the Apple phone program got right, the Boeing program, even the Apollo 13 program for that quantum of spend.
42:33
So, it's not to say that you can't spend a quarter trillion dollars over the next decade, but you got to eat what you kill.
42:39
You have to be able to show progress in a way that says, "Oh, this this investment is tracking." Yeah. Freeberg.
42:45
I think the biggest issue he's having is he's trying to build a moonshot that you'll only get to see when I'm done.
42:54
It's like, "Hey, I'm behind the curtain over here. I'm Willy Wonka.
42:55
I'm going to come out with the most amazing chocolate bar in 10 years and after I spend 100 billion dollars, but don't worry, it's going to be awesome. Trust me, shareholders.
43:03
It's going to be amazing."
43:05
And with consumer products in particular No, no, guys, you keep saying 100, it's 250.
43:10
Yeah, whatever it ends up being.
43:10
I In general I think consumer products you want to see them in the market and you want to iterate to success.
43:17
Tell me one consumer product that launched and didn't iterate after launch and didn't kind of evolve over time in a way that responded to what the market was telling the builder of the needs of that product.
43:29
in fairness to them, they're doing that, too.
43:31
It's just I think what people can't square is we see the next gen Oculus's and then we see the spend and we think that they're upside down relative to what we're seeing in terms of progress.
43:43
I think that's what people are reacting to.
43:44
were spending 5 billion a year, this wouldn't be an issue, Chamath, right? A nothingburger. A nothingburger.
43:47
People would say, "Good idea. Throw a long ball."
43:52
I think that there's two kind of ways to think about the distinct things that they're building.
43:56
One is this hardware platform with Oculus and a better kind of experience for immersive experiences, whether that's VR or AR.
44:05
The second is what's all the software layer look like and what goes on in that platform.
44:08
That's where this thing seems to be pretty short and where people seem to have a lack of confidence and conviction.
44:14
The hardware seems super interesting.
44:16
But I got to tell you, Epic Games just raised money earlier this year to $31 billion valuation.
44:20
If Zuck was a smart guy, he would go to Tencent and cut him a check and buy the whole thing for 50 billion and, you know, buy those guys cuz that's a platform that has a couple hundred million active users, is making money, has a really deep immersive, but two-dimensional experience.
44:37
It's not 3D, it's not on VR. Right.
44:40
And on top of Fortnite and on top of their their engine that they've built, um there are just countless experiences and worlds and interactions and models that exist today that are already active, that are being iterated, that have been evolving for years.
44:56
And if you look at where Fortnite and some of the tools and experiences that have been built into Fortnite over the past couple of years sit relative to when Fortnite was first launched, I don't think that Tim Sweeney and that team would have ever said, "Hey, this is where we're going to be in a couple of years.
45:10
This is what we're going to be doing."
45:11
It was part of an evolutionary experience of building a great platform and having an engaged user base.
45:16
And unfortunately, there doesn't seem to be a great engaged user base in the software layer of what he's built here today, making it very difficult to track a path to get consumer feedback and to identify where that goes over time.
45:27
The hardware experience, totally understand that.
45:31
That takes time to build something incredible.
45:32
Also should be in the market and getting iterative feedback.
45:34
But really that that that software piece is what what fell short.
45:37
To your point, I think that that's another great example of a a below the line decision that they could have made with all of this money.
45:46
You know, if you compare what Brad asked Facebook to do on Monday versus what I can't ask Apple to do in 2016, you know, I can't basically said, "Just make this below the line change and everybody will be happy."
45:56
It's a do no harm solution.
45:58
None of us are getting in the way.
46:00
We're not telling you how to run the business.
46:03
The thing that I think that, you know, what Facebook had to react to was Brad's suggestions were fundamentally above the line.
46:08
It's like, you know, firing 20% of the people or 30% or changing the capital allocation would require some changes to strategy.
46:14
And I think this is a a good moment to recognize that as as much clarity as Brad's letter had and as much sense as it probably makes to outsiders looking in, the minute you have to tell companies how to change above the line, it's just a good reminder to me that no, it's not going to happen because these folks will not want to make those changes.
46:32
They don't want to Zuck won't make the changes?
46:35
I think it's natural human psychology.
46:36
I think you want to make those changes yourself.
46:40
You don't want to be told what to do. Got it.
46:42
Sachs, what do you think this is going to do to governance in Silicon Valley writ large? Probably nothing. Really?
46:49
So, you're saying it's not going to change anything? it is it is interesting.
46:51
If you look at Elon's Twitter deal, there is no dual class.
46:55
Everybody has there's just one class of security.
47:01
There's just one type of stock.
47:01
So, it's simple majority voting.
47:04
Elon actually had the choice of doing dual class and he decided not to.
47:11
So, that's pretty interesting.
47:11
So, if people want to follow Elon's example, then they would, you know, not not actually go for dual class.
47:19
Tesla doesn't have super shares, either, and he's said it many times.
47:20
If you want to vote me out, you can vote me out. Right.
47:23
Yeah, I mean he's so He's putting his SpaceX either.
47:28
Yeah, he's putting his neck on the line. I don't know.
47:31
I As a SpaceX holder, I have no idea.
47:32
I don't know the SpaceX class structure. Yeah. I can't remember.
47:36
SpaceX isn't public yet, so maybe it doesn't matter.
47:38
Like they haven't reached that decision point. yeah, yeah, yeah.
47:40
I will tell you, I just I think Starlink has such a huge opportunity.
47:44
I just got Starlink for two locations as a backup because, you know, you lose your internet a couple times a year and you can get these routers now that will fail over.
47:53
So, since I'm doing business, like I can't really lose the internet.
47:57
So, for a thousand bucks a year, I can have Starlink as a backup and I started using it and uh the speed is getting pretty compelling already.
48:03
Uh like Zoom calls, you can't tell the difference right now most of the time and certainly for web browsing or watching a movie, you know, it just works.
48:13
So, I I I could see many companies putting in Starlink even if they have a fiber line or whatever just as a backup.
48:18
That business alone could be ginormous.
48:22
provide both sides of the story here.
48:22
I mean, the reason why dual class emerged and was seen as viable is that if you look at the historic performance of internet companies, the ones that have done the best, performed the best are the ones where the founder stays involved for a long time.
48:37
And the ones where the founder checked out like after a few years and hired a professional CEO, those are the ones that went off the rails.
48:45
It happened again and again.
48:47
So, there there is an argument for dual class in the sense that you keep the founder involved and you avoid you avoid a power struggle.
48:56
That's not what happened.
48:57
Well, but that was why it was considered acceptable.
48:59
Well, I think it was considered acceptable because in the Google bake-off, all these banks were clamoring so hard and, you know, there were two vectors of iteration.
49:06
One vector was on the way that, you know, Google wanted to do this IPO process.
49:13
They picked Credit Suisse, they did this Dutch auction.
49:14
The other one was the bankers basically pitched them on a dual class voting control structure. And once Stanley. Morgan Stanley.
49:19
And once Google got it, everybody else was able to copy because all the bankers realized that if you want to win a bake-off, you're not trying to win over the CEFO, you're actually trying to win over the CEO and giving that person control turned out to be an incredible commitment and a way to win the deal.
49:36
And so, I actually think it was never a governance issue or a reflection of how value was created.
49:40
It was just basically a feature that you that one banker used in an IPO bake-off to try to differentiate versus another.
49:50
This is why, you know, like I said, like Elon has never cared about that stuff because it's like, if I'm not doing well, vote me out.
49:55
Which is so clarifying because he realizes that that's actually the best check on him making bad decisions.
50:02
You know, and I think part of it is why he's done so well.
50:04
You know, one class of stock he was able to negotiate an incredible compensation package, and it's he's he has clarity on the few things of the business that matter.
50:13
But I think he's also more compelling than some of these other guys.
50:17
And there may be some degree of feeling like this is a mechanism that other people need, that Elon has a degree of confidence and a degree of of charisma and and salesmanship that gets him what he wants.
50:29
I just want to read you guys the excerpt from Larry and Sergey's founders' letter from the IPO in 2004.
50:35
As a private company, we've concentrated on the long term, and this has served us well.
50:38
As a public company, we will do the same.
50:39
In our opinion, outside pressures too often tempt companies to sacrifice long-term opportunities to meet quarterly market expectations.
50:49
Sometimes this has caused opportunities to manipulate financial results in order to make their quarter, and they go on and on and on, and they say, "Look, you might ask us how long is long term?
50:58
Usually we expect them in a couple of years." And they go on.
51:00
"Many companies are under pressure to keep their earnings in line with analyst forecasts.
51:06
Therefore, they often accept smaller, predictable earnings rather than larger and less predictable returns.
51:10
Sergey and I feel this is harmful, and we intend to steer in the opposite direction."
51:14
I think that the statement that they made really resonated in Silicon Valley at the time, particularly during this era of what people were calling Web 2 and the internet was being rebuilt, and all these businesses were starting to thrive, and it was like, we have this massive road ahead of us, this long road ahead of us, and we can really change the world.
51:32
But in order to do it well, in order to do it effectively, we have to, as entrepreneurs, as engineers, be able to have the freedom to operate for the long term.
51:40
I don't think it had anything to do with that. in the short term.
51:45
It had nothing to do with anything.
51:47
There was no pressure on them.
51:47
It's not like they shied away It's not like that super voting control allowed them to make one seminal decision.
51:53
There were quarters, Chamath, where Google was getting a lot of heat for the amount of money they were spending on capex because they were building their own data centers, they were building their own uh servers, they were building their own um eventually DRAM.
52:03
They started to build their own switches.
52:05
Every element of how Google built a competitive advantage over time was difficult for analysts to understand, not saying But you're not saying the obvious thing.
52:15
The reason why they were allowed to do it in the end was because more and more users used their product because it was better and better, and they consistently meet and beat every expectation.
52:24
This was not a They literally didn't need to use this option.
52:27
This was not They didn't need to call this option.
52:30
This is not a company that went back and forth between meeting and missing expectations, okay?
52:34
They were up and to the right. They were.
52:37
They were up and to the right is correct.
52:39
That is the general principle.
52:40
But the time to return, the ROIC, the time frame to hit their ROIC targets was long, and it was hard for people to get that.
52:47
When they bought YouTube, That is not They bought YouTube, and they spent tens of billions of dollars investing in YouTube before generated cash. I get it.
52:57
But you're But you're not math You're not What you're saying is not true.
52:59
It is not mathematically true what you're saying.
53:02
There was no 13-year ROIC play that they executed on. Not true.
53:08
And you can just look I I disagree.
53:11
They put their own They put their own fiber optic lines across the oceans.
53:12
The capex at Google I get it.
53:19
But Chamath, you can read the analyst reports and see how difficult this was.
53:22
asking for you to do is look at that they had voting shares is what gave them the ability to do this.
53:25
[ __ ] I think that if you look at their performance, their EBITDA margins and their ROIC was exceptional when they were making those investments.
53:32
In fact, I would say the opposite.
53:34
I would say that they were surprised by high how by how high quality their business model was.
53:41
They were generating so much cash, what they were probably thinking back in the day was, "Oh my gosh, we need to make sure that we are actually making long-term investments, and now we have the ability to do it because we have all this cash we didn't expect, and we should probably bleed off cash so that we don't show 50% gross margins to raise all of the attention of regulators and everybody else."
54:01
And so, what do you think Zuck has done? What's different today?
54:06
I think that they have an incredible core business, Cuz he's got good business, good EBITDA margins, good revenue growth. What's different?
54:13
They have an incredible core business, and they have decided, for whatever reason, to make an enormous bet.
54:19
And that bet could be a very good bet.
54:25
But the way that you make a bet, and you've said this well, is you have to look at incremental progress.
54:30
And you have to demonstrate that all of these bets make sense because the problem is when you get compared to the Tesla program, look, Tesla is reinventing an entire category, trillions of dollars of energy generation and transportation, but they did it on in one year of Meta Reality Labs spend.
54:53
Apple reinvented an entire compute platform on one quarter of Meta's Reality Labs spend.
54:58
That's not a judgment, that's just a numerical observation.
55:02
So, if you want to get people on your side, you just have to be able to double-click into that in an elegant, articulate way and say, "Here are all of these things that justify $25 billion a year."
55:16
Hey guys, let me show you a chart.
55:18
Here's a chart of Alphabet's capital expenditures by quarter, and here is their revenue.
55:26
The blue line at $7 billion right now. This is my point. Yeah.
55:29
They have They struggled.
55:30
They struggled They struggled to find ways to spend money. Exactly.
55:35
I mean, literally, they they created Project Loon, they were going to do balloons.
55:40
Guys, they wanted to build They wanted to build They wanted to build They wanted to build, at one point, a ladder to the moon. A ladder.
55:46
He thought they could build.
55:49
It was It was an elevator, Whatever, an elevator is in that seven point.
55:54
The elevator was in the purple line. Yeah.
55:56
And somewhere in there they spent a billion or whatever on maps, and it ended up being a phenomenal asset when the whole world moved to mobile, and it was the obvious thing.
56:06
We're not We're not We're not saying the obvious thing, which is great leaps of progress in humanity are not correlated to dollars all the time.
56:13
In fact, most examples are the exact opposite, which is it's more about small and extremely nimble and talented management teams that generate human progress.
56:22
And again, if you go back to that first chart of Apple versus Meta, you know, the fact that you've hired so many people to work on a category with so much money, it just violates a lot of pattern recognition that people have historically seen.
56:38
So, all I'm saying is, maybe this is a great bet.
56:40
They just need to do a better job of explaining it.
56:44
This would have been so much easier if he had just put Sheryl Sandberg in and told her how to Just I'm saying this could be This could have been such a better transition.
56:51
He should have put Sheryl Sandberg as CEO of the Facebook corporation.
56:54
He should have became CEO of Meta, and then he should have ran that other business to print even more profits, and then if you look at some of their forays into building a super app, they added Facebook Marketplace to Facebook, and it was a huge hit.
57:07
They started to pull the e-commerce string over at Instagram, it started to work.
57:13
There's just no focus on those products.
57:15
If you look at the Facebook collection of billions of users, what apps could you add to that?
57:19
You know, whether it's payments, they did the whole crypto thing, they gave up on that.
57:22
It seems like there's no leadership on the Facebook side that actually wants to take swings over there.
57:28
They just are obsessed with this one thing. It makes no sense to me.
57:32
I I think that there's probably part of it, which is that, you know, when you're working on a thing for a long time, Mhm.
57:38
there's a certain personality type that loves the mastery that comes from working on the thing for a long, long time. Yep.
57:44
And then there's a different personality type that likes more shiny, new things. Yeah.
57:47
And you kind of have to have a balance of all of those different people.
57:54
Um and so, maybe what we're seeing as well is that, you know, you're right, maybe the boring business was just labeled too boring internally, and there wasn't enough heat around wanting to work on it forever.
58:04
Nobody wanted to keep growing And so, you wanted to throw these big Hail Marys.
58:06
All I'm saying is you just need to explain the Hail Mary.
58:10
All right, let's So, just By the way, let me just ping you on this.
58:11
So, the um Meta spend in the quarter relative to the revenue, it's about 15 uh the the virtual reality stuff, it's about 15 bi- 15%. Does that sound right?
58:20
I don't know, but they said it was 4 billion this quarter.
58:23
Yeah, so 4 billion out of 27 of revenue, so it's about 15%, and Alphabet's last quarter revenue was 70 billion, and they spent about a billion billion 500 million I actually I actually have this chart handy cuz I was talking about it on This Week in Startups. 1. 4%.
58:41
So, on a relative basis, Alphabet is spending 1/10 of what Meta is per dollar earned or top-line revenue earned um on their other bets category.
58:51
So, Chamath, do you think it's a relative spend problem that because they're spending 10 times as much as a percent of revenue that it's causing so much heartache, even if it is directionally correct?
59:02
If you want to see the capex versus revenue, here's that uh on the screen right now. See this? we know what it's doing.
59:08
this is Google and Meta on the same chart.
59:11
The blue line on the red on the bottom, 9 billion in capex for Facebook, 7 billion Google?
59:17
Is this your new like charting tool that you guys built? Yeah, no, no.
59:20
We just I've been doing it on This Week in Startups all the time, yeah. What What do you use? What is this?
59:27
Yeah, actually beep it out cuz I don't want to give them a free sponsor for this.
59:31
I'm not giving them a free promo.
59:32
Oh, they didn't let you invest? Whatever.
59:34
I mean, they wanted to sponsor, man.
59:39
No, no, they've been around forever.
59:40
They've been around forever.
59:40
Anyway, it's a good product. I've used it before. Yeah, just a beep. It's a good product.
59:44
Listen, if we're going to promo something, it's going to be call-in or Nick, can you throw up the Uh super gut. Super gut.
59:49
This is super gut charts.
59:49
So, look, I said the new charting feature on call-in.
59:53
I think the problem is Look, here's the problem.
59:55
Let's just say that you're an analyst that works at a large hedge fund or a mutual fund.
1:00:00
And you woke up on Wednesday and you, you know, had a decent day and then you went into the earnings call believing that, you know, there's a This is There's a value play here and there's a lot of upside, which I think there is actually.
1:00:10
You know, this company can throw off a an enormous amount of cash.
1:00:16
But then what you hear is Okay, we're spending 4 billion a quarter.
1:00:20
That's going to go up materially.
1:00:22
And then we're going to keep 23 spending levels roughly the same in the to the future.
1:00:27
So, then you have to go back and build a model.
1:00:28
You're going to be hard-pressed to not get to this number.
1:00:31
Maybe you don't get to 250. Maybe you get to 200.
1:00:33
My point is all of a sudden you have to go back into your, you know, portfolio manager and say, uh you know, they're going to spend all of this, you know, after-tax cash flow on this stuff.
1:00:46
Or sorry, not after-tax cash flow, but, you know, below the you know, above the line spending on this stuff, which won't come back to us as shareholders.
1:00:53
And we're going to dilute the stock 2% or 3% a year.
1:00:55
So, that's another 20% dilution.
1:00:57
And it just becomes what I Again, I've said this before.
1:00:59
It You you move the stock into what's called the too hard bucket.
1:01:04
You know, from the it's obvious to wow, that's really tough and I'll just take a wait and see approach.
1:01:08
You know, I think yesterday there was a quarter of a I think a quarter billion shares that traded hands uh of Facebook. Just a ginormous number.
1:01:21
And so, you know, I think it's that's tax loss harvesting, too?
1:01:23
Where at the end of the year maybe some people want to take the loss.
1:01:25
So, there's tax loss harvesting for individuals.
1:01:27
By the way, there was a couple comments which we should talk about and explain what tax loss harvesting is.
1:01:31
But a bunch of these mutual funds year-ends are actually October 31st.
1:01:35
So, to your point, Jason, you know, the stock basically gets decimated 20, you know, 25% in a day. The T.
1:01:44
Rowe's and the Fidelity's are like, all right, book the tax loss and be done.
1:01:47
We'll we'll look at it next year. Quote unquote next year.
1:01:49
So, you know, if you put on the spread trade So, we talked about the spread trade.
1:01:53
There was a big hedge fund manager that you know, on November 6th, right, when we were basically calling the top of the market and told people to sell.
1:02:02
One of the trades that he put on, Nick, if you want to just throw it up, was this long Google short meta spread trade.
1:02:07
He called to tell me that, you know, he closed it out yesterday.
1:02:11
This is how that trade did.
1:02:15
So, yeah, there was just a lot of folks that just kind of like went to the exits and said, you know what?
1:02:20
We're kind of done for the short term.
1:02:20
I just think that it's it's a it's a moment in time where those folks have to realize that they just have to explain a little bit better how they want to spend the money.
1:02:33
And show a little bit more incremental progress that justifies that level of spend.
1:02:36
Otherwise, people will be a little skeptical.
1:02:38
They'll build their own histogram.
1:02:41
And it'll violate too many rules.
1:02:41
And so, it goes into the too hard bucket.
1:02:46
Okay, we got macro, we got Ukraine, and Well, I think I think that you should talk about big tech because Amazon puked as well, Jason.
1:02:52
The Can you just throw up the big tech chart cuz I think like you guys should see this cuz I think this is very important for Silicon Valley.
1:02:59
Amazon reported their Q3 earnings yesterday, Thursday.
1:03:01
Total revenue 127 billion up 15% year over year, 5% quarter over quarter. Net income was 2. 9 billion.
1:03:09
And they're predicting They're They're giving slower guidance going forward.
1:03:11
I mean, what's incredible on this chart is that, you know, when when everybody talks about being long the S&P 500, it was always really a proxy for being long Amazon, Facebook, Google, Microsoft, and Apple.
1:03:24
And at the peak, you know, in May of this year, it was still, you know, 25 cents of every single dollar of the S&P 500 were these five companies.
1:03:34
And, you know, we always said the market bottom will be when the generals quote unquote get shot, you know, to to borrow a phrase from Gavyn Baker.
1:03:41
And it looks like the generals have been shot. Yeah.
1:03:42
And what's incredible is this week every single one of those companies, other than Apple really, reported pretty crappy earnings.
1:03:50
They got totally taken to the woodshed.
1:03:53
The percentage of the of these companies as a percentage of the S&P is now, you know, off by 500 basis points. It's down to 20%.
1:03:59
Yet the markets are ripping higher today.
1:04:04
So, I think it's kind of what we talked about 3 weeks ago.
1:04:06
Like the bottom is kind of in for the short term.
1:04:08
You know, so it's really exciting actually to see.
1:04:11
I think this is the point where you have to now start to get pretty constructive about where things are going because if this stuff could not bring the market down, it's hard to see something other than an exogenous event, probably some Russia-Ukraine event, really having a negative impact.
1:04:27
So, to me, I'm kind of like, I don't know, it seems like pretty bullish for me. Well, also GDP was 2. 6%.
1:04:31
So, I mean, the this this very weird conflicting data.
1:04:37
We had two negative quarters of growth. We're in a recession.
1:04:39
Then we have a The third quarter is up 2. 6%.
1:04:40
So, okay, No, but remember, Jason, I I said that we were going to have a double dip.
1:04:44
That was I That was the most likely thing.
1:04:46
So, we had this sort of mild technical recession based on nominal GDP growth not being bad, but simply not quite keeping up with the inflation rate. Yeah.
1:04:57
Now, things are a little bit better, but I still think the huge recession is to come next year because all the interest rate increases we've seen.
1:05:05
So, the Fed is, you know, pedal to the metal on interest rate increases just like they were pedal to the metal on printing money.
1:05:12
And so, at first they, you know, they were too loose and now they're probably being too tight too fast.
1:05:17
So, I think we're headed for a huge recession next year.
1:05:19
And I think you're seeing that in in the softness of all these forecasts. Yeah.
1:05:25
But look at the Look at Look at the Look at the mortgage rates right now. Something like 7.
1:05:28
1% The mortgage rates are crazy.
1:05:31
They they broke the backs of the housing market.
1:05:34
The inventory and prices Inventory shot up. Prices have shot up.
1:05:38
New mortgages have gone down.
1:05:42
And, you know, we we talked about job openings.
1:05:44
Here's the the FRED chart for job openings real quick.
1:05:46
You can see the the peak we were talking about.
1:05:48
We were wondering if that would come plummeting down. Well, here it is, folks.
1:05:51
Yeah, plummeting down from 11 million.
1:05:53
Losing a million in a month.
1:05:56
Yeah, job openings coming smashing down.
1:05:58
There's the Fed fund rate.
1:06:01
You know, that's a pretty high ramp.
1:06:01
So, you think double dip recession.
1:06:02
What do you think, Freeberg, Chamath, in terms of what 2023 looks like?
1:06:07
You're You're sort of saying, Chamath, a bottom is forming.
1:06:10
I kind of agree with that.
1:06:13
I think the stock market is going up.
1:06:17
Then it'll go back down because I think what David said is right.
1:06:18
But for the short term, this thing is going up. Short term up.
1:06:23
You know, we've we've generally been positioned for it to go up.
1:06:26
And And at some point we will reverse and position for it to go back down. But it's going up.
1:06:32
Sacks, it seems like you took a week off from the All-In podcast and people stopped talking about Ukraine.
1:06:38
You want to give us an update?
1:06:38
I mean, obviously the war is not over, but it does seem like it it somehow has fallen out of the public's consciousness a bit.
1:06:45
I don't know if you disagree. I go that far.
1:06:48
There was The big event in the Ukraine war debate this week was that the House Progressive Caucus put out a letter signed by 30 progressive members to merely suggest that while we continue to fund Ukraine on a virtually unlimited basis, we also in parallel open up a diplomatic track with Russia to mitigate against the threat of us being drawn into a the war and specifically a nuclear war.
1:07:17
And just that very, I'd say, anodyne letter, that very um tepid sentiment really.
1:07:24
They weren't questioning in any way the providing again of virtually unlimited support to Ukraine.
1:07:29
That met with such a fierce reaction on social media and in the traditional media that I think all but one of the signatories recanted or walked back the letter.
1:07:42
And kudos to Representative Ro Khanna for not being one of the people who recanted.
1:07:47
He stood tall and gave an interview on CNN and MSNBC saying, "Why has diplomacy become a dirty word?
1:07:55
I voted for every single appropriation to give aid and weapons to Ukraine.
1:08:00
I'll continue to do that, but I don't see a problem with us maintaining diplomatic relations.
1:08:04
We might need those to avoid an unwanted escalation." Well, and here we are.
1:08:09
Kudos to him for standing tall, but it's amazing to me that the Progressive Caucus, which used to be one of the groups in Congress that questioned American involvement in foreign wars like the Iraq War.
1:08:22
They basically They They have moved off that.
1:08:27
And they they threw in the towel so quickly on this.
1:08:29
It was really kind of pathetic to see.
1:08:31
I mean, it really like This is back to Shakespeare.
1:08:34
Like politics makes for strange bedfellows.
1:08:37
You find yourself aligned with the most left part of the Democratic Party in trying to just say, "Hey, maybe we should negotiate peace a little more formally."
1:08:46
us to pursue the right foreign policy and I don't really care which party has the right idea.
1:08:51
would you would actually donate to anybody who is pushing for that.
1:08:53
So, did you actually make any I mean, I I I I I happened, but I I I plan to donate to members of both party who push for a correct foreign policy, which I believe needs to be a little bit more restrained, a little bit more questioning of what is in it for the United States.
1:09:11
And we need to be careful about overextending ourselves.
1:09:15
And we need to ask what is in America's vital interest.
1:09:18
And listen, you can support be coming to the Would they AOC be doing a Oh, she She's proud. She recanted.
1:09:25
So, she's one of the ones that recanted.
1:09:27
What do you think happens in a situation like that?
1:09:29
Well, how do they get them to recant? Yeah.
1:09:31
why what is the point of recanting something that was so benign? It's not Totally.
1:09:36
No, but what what do you think like what what's happening behind the scenes?
1:09:40
Like why are people so afraid to say that, you know, you can be in support of Ukraine, but also still try to find a res- Why was that turned into such a scarlet letter?
1:09:49
Uh it's a great point, and I think it just shows the heat right now on the issue.
1:09:53
Here here here's what I I think.
1:09:55
Does it does it do that, or does it just show how the progressives as just kind of clown towns?
1:09:59
I mean, it's it's kind of sad.
1:09:59
I mean, Jayapal, who was sort of the leader who put out the letter, threw her own staff under the bus.
1:10:06
And I guess there was this snafu where the members all signed this letter in July and then held it for a few months, and then they put it out 2 weeks before the election.
1:10:14
I can see why that timing didn't make sense.
1:10:16
I don't know why like they released it now, not 2 months ago, not 3 weeks from now, after the election.
1:10:23
I can understand all those political considerations.
1:10:25
But, once you put the letter out, just stand by it.
1:10:29
Don't throw your own staff under the bus because like you're saying, the letter was really a pretty anodine statement of hey, listen, do you think we can just have diplomacy on a parallel track at the same time that we're arming Ukraine?
1:10:42
I just don't see the downside.
1:10:44
But, look, here's why I think they took so much heat is there's a lot of people on this issue who start with the end result of what they want.
1:10:51
And the end result that they want is that Putin and Russia leave Ukraine with their tail tucked between their legs, and they basically don't get 1 square inch of Ukraine.
1:11:01
They believe that is the only acceptable moral outcome here.
1:11:06
And they may be right about that.
1:11:08
But, then what they're doing is they're kind of reverse engineering all the beliefs that they have based on that outcome, that moral outcome they want to get to.
1:11:16
So, for example, for the longest time, you heard things like Putin is definitely bluffing about using nuclear weapons.
1:11:22
Well, how do they know that? They don't know that.
1:11:26
They can't say that for sure, but it's what they want to believe because if you believe that nuclear war is a possibility, you might not go all the way for that maximalist position of the only acceptable outcome here is Russia leaving with his tail tucked between its legs.
1:11:40
And I hold on and and I think I think the same thing is happening here with diplomacy is people who want a certain result in the war are afraid that diplomacy might result in something less than that.
1:11:52
But, that's not a reason not to engage in diplomacy, and it's not a reason to deny the potential of this war to spin out of control potentially into a nuclear war.
1:12:03
Sachs Sachs is like a walking thesaurus.
1:12:05
So, J Cal, for you, I looked up anodine, and it means not likely to provoke dissent or offense, inoffensive, often deliberately so.
1:12:14
Yeah, like It's like oh I know you were looking you were looking at the screen like a confused little puppy when he said anodine.
1:12:20
So, I just wanted to listen, I got a thesaurus over here.
1:12:23
Also, I didn't know what it meant. So, thank you.
1:12:27
Uh but, seriously, what is the I want to know the fallout from two things, and then we're going to do science corner.
1:12:34
So, number one, what is the I've been getting a lot of oat milk stands emailing me different brands of oat milk have been emailing me this week.
1:12:40
Just give us an update generally speaking on the alt milk milk crowd and your inbox, Chamath.
1:12:47
Oh, they're trying to they're trying definitely trying to brigadoon me.
1:12:48
But, what these people like You know what's so funny about these folks?
1:12:54
They have no judgement, clearly. Mhm.
1:12:56
Because they can't even say, "You know what?
1:12:59
It actually tastes much crappier than these alternatives, but I choose to for XYZ reasons." That I could respect.
1:13:05
It's the "Oh my god, it's incredible.
1:13:07
And it tastes so much better."
1:13:09
You know, look at my little mustache. It's disgusting.
1:13:12
It doesn't foam properly.
1:13:14
It tastes like dishwater.
1:13:14
It's like Uh and then Sachs Disgusting.
1:13:18
this horrific uh illustration of you in the New Republic I saw.
1:13:22
Um looked like Dolly broke, and they used Dolly to make that illustration.
1:13:25
No offense to the illustrator who got paid a thousand bucks for it.
1:13:28
Well, it was like pre- it was pre-Ozempic, Sachs, I thought.
1:13:31
It was yeah, that's the problem.
1:13:33
If you're chubby Sachs or chubby J Cal, it sucks when people base an illustration on a previous one.
1:13:38
But, Sachs looks like a deranged sociopath.
1:13:43
I mean, you look like Alex Jones in a suit.
1:13:44
Well, look, they got Elon and Peter up there, too.
1:13:46
It's such a stupid hit piece.
1:13:48
Elon looks like Hugh Grant.
1:13:50
Uh Peter Thiel looks like he's rolling on uh free bird's molly.
1:13:52
He's got rolling on free bird's molly. He's got molly jaw.
1:13:56
And also, he's uh he he he you show a lot of stubble, which you also don't have.
1:14:02
But, look how fat they make you look. Look at your chin. Look like Jay Leno. Yeah, the chin is Jesus. My lord.
1:14:05
But, what I mean, what's going on in terms of the general reaction to the amount of attention you're getting for political commentary now?
1:14:15
Sachs David Sachs will be our next Secretary of State. Well, no. I'm I'm here for it. I can't wait.
1:14:19
I'll go long that David Sachs will be our Secretary of State within two or three presidents. 100% I'll I'll take it.
1:14:24
He's got to make a little more cash.
1:14:28
My my views my views are so out of step with the foreign policy establishment. That's why you will win.
1:14:32
That's why you That's why you feel the need to be so out there on this issue if the foreign policy establishment was doing its job.
1:14:38
If you actually had, you know, people from the policy elite going out there saying sensible things about Ukraine, it wouldn't fall on me or other people like Like Elon basically posted that straw poll on Twitter, which was totally reasonable, got condemned for it.
1:14:57
And then Bill Ackman actually, who's been in Twitter spats with me before, we've been on opposite sides of issues, actually came out and retweeted something I wrote as basically being supportive.
1:15:08
Because The weird thing us want this war to escalate out of control.
1:15:13
I think the weird thing is people are there's a group in the in the media class, other podcasters, other journalists, who are saying you have no right to talk about this topic.
1:15:22
And I What I said is, you know, hey, listen, Sachs and I could disagree about things on the margin here or there.
1:15:27
But, I'm glad we're having the discussion.
1:15:30
Shouldn't all Americans be having a discussion about our foreign policy and what our goals are?
1:15:33
That's our civic duty is to have this discussion.
1:15:35
So, whenever you hear the political class, the podcasting class, the coastal elites, which we are part of, when they tell you you can't participate or this person can't participate in the discussion because they're successful in this other aspect of life, that's complete [ __ ] Everybody should talk about this and disagree or agree and try to work towards some common understanding. You're right.
1:15:55
So, first of all, whenever they say listen to the experts and you're not an expert, first of all, they're expressing an opinion themselves, and they are expressing equally passionate opinions on the other side about this whole Ukraine war.
1:16:06
So, first of all, why are they allowed to have an opinion?
1:16:09
So, whenever somebody uses this you're not allowed to have an opinion argument, it's always very selective, and it's only applied to people they disagree with, not to people who are equally inexpert on their side of the debate.
1:16:21
So, that's point number one.
1:16:22
Hold on, point number two is I've listened to plenty of experts, okay?
1:16:27
I've listened to the IR scholar John Mearsheimer.
1:16:28
I've listened to the international development economist Jeffrey Sachs.
1:16:31
I've gone back and listened to our former ambassador to the Soviet Union Jack Matlock.
1:16:35
I've read George Kennan's interviews.
1:16:37
I've read Bill Burns, our current CIA director, on this matter.
1:16:41
There are plenty of experts who warned that our policy of trying to bring NATO right up to Russia's border would eventually blow up in our faces.
1:16:51
It would poison our relations with them and lead to conflict and this war.
1:16:54
So, there are plenty of authoritative sources going back many years on this topic.
1:17:01
And the problem is that the people on the other side of this debate simply want to memory hole all of these warnings and deny that they that this war was ever predicted because if this war was predicted, it means it could have been avoided.
1:17:14
And they don't want to admit that this war could have been avoided. Or how about this?
1:17:16
How about war is messy, resolving things internationally with dictators can be very hard, and nobody wins in some of these cases.
1:17:26
No there's no perfect outcome here.
1:17:27
And you could hold in your head two things.
1:17:30
Number one, Putin's a dictator, we need to hold the line and make sure he doesn't invade other countries.
1:17:34
And number two, yeah, you probably want to keep normal relations with these people and negotiate with them to resolve conflict.
1:17:41
I'm I'm getting a little concerned about the saber rattling on both sides in China.
1:17:46
You know, we're escalating all this chip stuff.
1:17:48
We're escalating, and Xi Jinping is taking complete control.
1:17:50
I'm wondering who's going to meet with him?
1:17:53
Who's going to talk to Xi Jinping about how we could collaborate together?
1:17:55
Who's left to talk to him? Tim Cook?
1:17:58
a there's a bunch of unforced errors happening in China. we de-escalate?
1:18:02
Well, there's a bunch of unforced errors that you have to let play out because they have huge economic implications. So, Mhm.
1:18:09
I don't think this I don't think this is a time for again, I think David's generally right.
1:18:12
We do not have time for adventurism right now because even before we engage in some of these other places, there are a lot of, you know, uh headwinds that are working against.
1:18:22
For so, for example, in China, you have these massive demographic headwinds that are just building.
1:18:28
Um we have to see what the CHIPS Act does in terms of follow-through to China's ability to expand militarily or technologically.
1:18:38
There are all of these things that that you owe as a citizen of the United States to see some more data on the ground in terms of its empirical impact before you re-underwrite a different strategy.
1:18:48
Right now, the strategy is working.
1:18:50
You know, we we we are observing this, you know, one China policy.
1:18:53
I think that's the right thing to do, and now let all of this other stuff play out.
1:18:58
Can I say one thing about the the China So, what the administration did in banning China from buying from us or any of our allied countries these advanced semiconductor chips, that's what they did.
1:19:09
They not only banned the sale of chips to China, they banned the sale of equipment that can make the chips, and they even prohibited American citizens and companies from working in China to basically help them set up their own foundries and chip fabrication.
1:19:21
So, they are essentially cutting off China from advanced chips. That's the goal here.
1:19:29
And you know, we've talked about on this pod before how chips are the new oil, right?
1:19:33
These advanced semiconductors are the new oil.
1:19:36
So, this is almost like an oil embargo of China.
1:19:38
If you go back and look at Yeah, if you go back and look at history why?
1:19:45
The reason why is they don't want these in weapons, correct?
1:19:46
That is the stated reason. No, it's I got to go.
1:19:50
They know they said this.
1:19:51
That's the tip of the spear, but I think the more impactful mechanism is to prevent an entire layer of infrastructure to be built in China that allows them to advance all of these next generation cyber capabilities including a whole bunch of things in AI that we want to make sure that as often and as often as possible is is for the United States and our allies as we choose.
1:20:19
So, all this next generation silicon will do a lot more to push that forward.
1:20:23
And so, if you put that in the hands of Chinese technology companies or Chinese governments the Chinese government in the parts that are actually technological, you actually increase the surface area in which you compete.
1:20:38
By preventing that technology to go to them, you decrease the service area in which you're competitive and they are one or two steps behind and have and are forced to build it themselves.
1:20:45
So, Freeberg, if that happens, do you think that China escalates and says, "Well, why are we building iPhones here?" No.
1:20:53
I think China makes decisions a little differently than perhaps US policy makers and foreign policy makers make decisions.
1:21:03
They think forward and calculate the series of events that will follow from that decision, whereas we are typically reacting to some event that's happened in the past.
1:21:15
Not necessarily always thinking through the second and third order third order effects and consequences of our decisions.
1:21:22
So, the China calculus would likely look something more like, "If we were to say stop making iPhones here, we would estimate that the US would do the following to retaliate back against us."
1:21:31
And as they do through that calculation, you end up realizing pretty quickly that there isn't as much to gain as there is more to lose by doing that. That would be my guess. I'm no China expert.
1:21:41
I'm no foreign policy expert.
1:21:44
But from my understanding of how Chinese policy makers do think and do make decisions, it's much more about what's the rational calculated set of outcomes that will emerge and evolve from this decision.
1:21:54
And in my experience talking with people in the United States that are in various communities of influence, it's much more about let's do what we consider to be the right or moral thing right now and in response and in retaliation and let's do an eye for an eye.
1:22:08
So, that's why I don't think that they're likely to be the first step in an escalation escalatory ladder.
1:22:16
There'll probably be a few more series of provocations before that may happen, at which point it may need to be kind of an inevitable step that they'd have to take, but What do you think, Sachs? I don't know.
1:22:25
I mean, so so so in terms of the motivation for this, I think it's pretty clear.
1:22:29
This is an attempt to hobble the Chinese economy, not just the all their weapons programs, but their economy itself and hold them back and slow down their rise and their rapid growth.
1:22:40
Now, is that a good idea?
1:22:40
I mean, I think what this shows is we've moved from sort of economic logic, which is about finding trade surplus and win-win scenarios, to geopolitical logic, which is about balance of power.
1:22:54
And this sort of ban on sales of semiconductors to them, it's very much geopolitical because it's hurting our companies, but it hurts China more.
1:23:00
And so, it's about it's about it's about increasing our balance of power against them.
1:23:07
And now, listen, I think you can make the argument that we were overdue to be thinking in terms of great power competition and geopolitical rivalry.
1:23:17
And this is an attempt now to correct the bad decisions that were made 20 years ago in terms of how we fed the Chinese economy until it became a pure competitor of the United States.
1:23:27
So, I think you can make those arguments.
1:23:29
The The thing that concerns me most about it is do our leaders really have the bandwidth to manage a second front in the sort of great power competition right now.
1:23:42
While we've got Russia and Ukraine going on on the one hand, are they really ready to manage an escalation of the competition with China?
1:23:51
And to Freeberg's point, have they really thought through all the second, third, fourth order consequences of this?
1:23:57
Have they thought through the incentives this may create on China for example to take Taiwan?
1:24:02
I mean, if Taiwan is the place that makes all these chips through TSMC for example, and we have now cut them off, we've now embargoed them from these chips, does it strengthen China's incentive to go after Taiwan?
1:24:16
Does it strengthen China's incentives right now to help Russia in its war in Ukraine in retaliation because they don't want to see they don't want to see Russia decisively defeated and then they will solely be in the gun sights of of US hawks.
1:24:31
So, I think there's a lot of things that could go wrong here when the US is now escalating geopolitical tensions and competition not just on one front, but on two fronts.
1:24:44
And and especially given how weak the US economy is and that we're headed into a major recession next year, it just feels to me like they are you know, they are kind of putting their foot on the accelerator in terms of geopolitical risk at a time when we're not really in a great spot to be taking those risks.
1:25:05
Well, also on a foreign policy basis, there is there no common ground?
1:25:08
Are there no things we could collaborate on and work on together, right?
1:25:11
And that's the thing that seems to be missing in the foreign policy for the last couple of administrations is are there things that we could be building together?
1:25:19
Are there things that we could be working on?
1:25:21
The environment, energy, sustainability, education.
1:25:24
I don't know what it is, but it felt like you know, with China for a couple decades, we we felt like we were working in a very collaborative way and now it feels like every single instance is adversarial.
1:25:35
Right, because the problem is that those policies of constructive engagement that you're talking about fed the Chinese tiger until it became a dragon. Yeah.
1:25:45
Now it's the size of Vagar or something. Vagar level three. Yeah, it's a dragon.
1:25:52
And the US policy establishment in the Pentagon look at the rise of China and they're like, "What have we done?
1:25:59
We have created a pure competitor of the United States.
1:26:00
We need to stop their economic rise."
1:26:02
And I think that again, I think there is a geopolitical logic and strategy to what the administration has done, but I question the timing of doing it at the same time that we have this unresolved war in Eastern Europe.
1:26:15
Well, it is nice that we seem to be getting some of the onshoring of chips and that money is actually starting to flow.
1:26:21
It does seem like we're thinking a little bit like in decades in strategy.
1:26:25
Wait, say the other part.
1:26:25
I think Biden and Blinken have done a good job.
1:26:28
They've done a good job on this right now.
1:26:29
They they played it well.
1:26:31
Well, I don't know about that.
1:26:33
I think they played it well. Come on.
1:26:35
First of all, I think Biden and Blinken did a horrible job. Hold on a second.
1:26:39
Biden and Blinken did a horrible job. tiger. Hold on. Hold on. You poked the tiger. No, hold on.
1:26:43
They did I'll tell you where they did a bad job is last year they had a whole year to negotiate to avoid this Ukraine war from happening.
1:26:50
Biden even had a summit with Putin on June 16th last year.
1:26:55
They never engaged in diplomacy and now they have stacked this geopolitical risk with China on top of the risk they've already created in Ukraine.
1:27:02
I This policy may or may not ultimately turn out to be correct.
1:27:06
I Like I said, I can see the strategy behind it, but I do not believe that Biden and Blinken have thought through the second, third, and fourth order consequences just like Freeberg said.
1:27:17
So, I think it's a little early to be giving them credit on this. All right.
1:27:20
Uh Freeberg, you got anything in the science corner?
1:27:21
We gave we gave Sachs his red meat and he ripped it to shreds.
1:27:25
Now it's time to give you your soy tofu burger.
1:27:29
you guys a quick a quick science corner. Please, please.
1:27:31
So, we've talked in the past about the human gut biome, 10 trillion bacterial cells living in our gut biome.
1:27:37
And it turns out and there has been this theory for many years that a lot of human disease actually originates in the gut.
1:27:42
And there's increasingly evidence of how and why this happens.
1:27:46
So, it turns out that your immune cells can sometimes see a protein on the outside of a bacteria that sits in your gut and it attacks that bacteria and it tries to get rid of it.
1:27:55
That protein can look a little bit like a human protein at some cell in your body.
1:28:01
And so, that then triggers an autoimmune reaction, meaning you are now making these antibodies to proteins that look a lot like your proteins in other parts of your body and then your cells start to destroy yourself and you end up having inflammation and disease.
1:28:15
And they found evidence of this across a lot of disease states.
1:28:18
So, just the other day published in the journal Science Translational Medicine was a really interesting paper by a team that identified a very specific bacteria that we find in the gut that can actually trigger rheumatoid arthritis.
1:28:33
And so, you know, I think 2 million Americans have rheumatoid arthritis.
1:28:37
It's a really debilitating inflammatory disease and we never understood where the inflammation comes from.
1:28:42
Why is the human immune cell creating antibodies to attack its own protein in the joints of the body?
1:28:47
And now it looks like that the protein that we find in the joints of the body has some overlap or three-dimensional structure that looks similar to the protein we'll find on this very specific gut bacteria that they found, which creates obviously a path now for if we can stop that gut bacteria from proliferating or you know, existing in the gut over time, that can have a reduction in the incidence rate of rheumatoid arthritis.
1:29:13
Did they guess what the mechanism of action was?
1:29:15
So so, this techno this So, the mechanism of action is typically what's called, generally speaking, protein mimicry.
1:29:20
And so, protein mimicry means that there's some So, think about a protein as being like, you know, a clumpy rock.
1:29:28
And there's some part of the clumpy rock that looks a little bit like the part of another clumpy rock, and that's the protein.
1:29:34
Think about that as being the protein on the bacterial cell and the protein in your joint cells.
1:29:39
And so, your body makes an antibody to that little part of the rock on the bacterial cell to get rid of it.
1:29:46
And then it that there's some overlap that looks a little bit like your own cell.
1:29:48
And so, that's called protein mimicry.
1:29:50
mimicry. And because of the ability now to do DNA sequencing and now with uh you know, some of the AlphaFold technology, we can actually take the genome from that bacteria, predict the 3D structure of the proteins created that by that
1:30:06
bacteria, and then potentially identify that there's a mimicry or an overlap between our own protein in our cells and the protein of the bacteria, which is why we're having autoimmunity, which now our immune cells are not just attacking the bacteria but solve arthritis. We solve for arthritis. We solve for arthritis.
1:30:21
And so, there's a lot of disease states that are starting to look like this.
1:30:22
So, the combination of DNA sequencing and our ability to identify organisms in the gut biome.
1:30:27
And by the way, so much of this goes back to the gut biome.
1:30:28
We're finding all these disease states from lupus to Sjogren's to rheumatoid arthritis that have some linkage back to some bacteria that shows up in your gut.
1:30:38
And so, now we can be very targeted, potentially, about eradicating that bacteria from the gut or, you know, kind of changing our gut biome in a way that ultimately resolves to eliminating that disease risk.
1:30:47
Um and so, it's really fascinating. Yeah.
1:30:49
Chamath, any thoughts on this gut biome?
1:30:51
I mean, I always knew the solution was either in Friedberg's gut, you know, OR HIS ANUS. IN HIS GUT OR ON URANUS.
1:31:05
OH, FRIEDBERG'S anus corner. All right. Hey, Friedberg. Do it again. The joke didn't land.
1:31:09
All right, here we go, one more time.
1:31:11
Uh so, Chamath, any any feedback on this?
1:31:13
It's pretty pretty great science going on here.
1:31:15
I mean, it was always 50/50 that the solution was either your gut or your anus.
1:31:22
Okay, you can't laugh till after you land the joke. Come on, do it again. I saw IT COMING.
1:31:26
IT WAS COMING AROUND THE CORNER and By the way, I think you guys can leave this leave leave this all in.
1:31:31
peeking out of Let's get this right for the fans. Come on. we go. Three, two.
1:31:34
All right, Chamath, this seems like very interesting science uh there are coming in the SCIENCE CORNER.
1:31:40
50/50 50/50 YOUR GUT OR YOUR ANUS. I CAN'T EVEN GET IT OUT.
1:31:47
I MEAN, UH YOU TRIED TO GET IT OUT OF HIS ANUS. IT WAS POKING.
1:31:52
IT WAS like a little turd coming out of his anus, but you couldn't get it out.
1:31:57
50/50/50, your gut or your anus.
1:32:00
IT'S LIKE THE ENTIRE SCIENCE corner is just here for us to beat up the nerd and throw him in a locker. OH MY GOD. MY STOMACH IS HURTING. OH MY GOD. POOR GUY. OH, I needed that laugh.
1:32:13
You ever see Smokey and the Bandit where they have the the reals at the end, Sacks? Yeah.
1:32:16
With Dom DeLuise and Burt Reynolds? Yeah. I just keep losing it.
1:32:20
That's what this is turning Oh my god.
1:32:22
It's like I'm going to say science corner and people are going to just start laughing and thinking about Friedberg's anus. All right, listen. Welcome home, Sacks.
1:32:34
We missed you for your week off. Uh and you, Dave. We missed you, David. Thanks, guys. Thanks.
1:32:41
And uh we'll see you over on Market Street.
1:32:44
No announcements right now.
1:32:45
No testimonials, no announcements. I'll see you at yoga.
1:32:48
We're going to do a doing our silent homeless shelter where we're volunteering today, right? Yeah, volunteering.
1:32:53
We'll see you over at the homeless shelter. You brought your suit.
1:32:57
Yeah, get get If you could get me a tofu salad with extra tempeh before uh Friedberg eats it all. Tempeh.
1:33:00
Don't don't go don't get me started on tempeh.
1:33:04
I'm going to go I'm going to pour all the oat milk out.
1:33:06
I'm going right to the cafeteria I'm going right to the cafe.
1:33:09
I'm getting the all the oat milk right down the drain.
1:33:10
I think there should be there should be there should be one milk non-lactose alternative and then one milk coffee. And then black coffee. That's it.
1:33:20
If you're lactose intolerant Yeah, lactose intolerant No, have one have one thing without lactose, so whatever that is.
1:33:26
we wrap the Can we wrap the show now?
1:33:28
No, we're having too much fun.
1:33:30
What's a what's a what Okay.
1:33:30
Can you imagine Can you imagine the distribution of gluten-free I mean, there you should have a few, but, you know, all kinds of different snacks.
1:33:38
And by the way, the keto snacks have horrendous amounts of chemicals in it.
1:33:42
The xylitol What is xylitol? Here's the thing. Here's the thing.
1:33:46
Xylitol will screw up your stomach, man. Do not have that.
1:33:49
Friedberg, you want to tell everybody about xylitol and the impact it has ON YOUR ANUS? NO, IT SERIOUSLY DOES.
1:33:57
THAT'S I THINK xylitol is a big ma gives you a lot of gas and you just keep ripping.
1:34:04
I think it's really bad for you. HERE'S AN IDEA. WAY TO GO, JAY CAL.
1:34:12
YEAH, NOW HE'S GOING to turn into a school shooter. that's your fault. You were mean to him.
1:34:16
You came up with the anus jokes.
1:34:16
That was all I've I've been doing that joke for five years of him. I'm not. No, no, no.
1:34:23
You bullied Friedberg off the show. You brigadooned him.
1:34:26
I did not brigadoon him off the show. We brigadooned him. him.
1:34:29
We brigadooned our bestie. Sorry, bestie. All right. Four.
1:34:32
The dictator himself, Chamath Palihapitiya, going into sweater season. I might know.
1:34:36
It's going to be a big, big Q4 for us. Big Q4.
1:34:39
And the beep of the beep corporation, David Sacks.
1:34:42
Oh, if you mean the general partner of Craft Ventures.
1:34:47
Yes, the general partner of Craft Ventures. That's it.
1:34:49
And the queen of quinoa, the prince of panic attacks, the ambassador of Uranus, David Friedberg.
1:34:56
We will see you next time.
1:34:58
I'm Jay Cal Love you, boys. Love you, moderator. Love you, Bye-bye.
1:35:02
We let your winners ride. Rain Man, David Sacks.
1:35:09
And I said, we open sourced it to the fans and they've just gone crazy with it. Love you, Sacks. Queen of quinoa. Let your winners ride. Besties are back.
1:35:25
That is my dog taking a piss in your driveway, Sacks. Oh, man.
1:35:31
The guy sure will meet me at the wedding.
1:35:33
We should all just get a room and just have a one big huge orgy cuz they're all just useless.
1:35:36
It's like this like sexual tension that they just need to release somehow. Let your beep beep. Let your beep. Let your beep beep. Speak.
1:35:45
Let your We need to get merch. I'm going all in.