0:00
Sacks, the United States is maybe not going to send weapons to Ukraine indefinitely and they're asking him to sit down and negotiate something that people on the left started to do and got I got smashed for or something you've been pushing for.
Search this video
0:14
So, I guess mini victory lap for you, Sacks.
0:16
What what's the end game here? Well, yeah.
0:18
I mean, I've been talking common sense about this for months just saying that we need to be open to diplomacy because total defeat for Russia also means a a maximum risk of nuclear war.
0:27
I mean, these things go hand-in-hand.
0:28
That's the paradox of this war is that if Russia faces the prospect of a total defeat, that's when they're most likely to escalate this conflict into something much much worse.
0:37
So, therefore, we need to be open to diplomacy.
0:39
But, it was good to hear administration officials over the past weeks say things that I've been saying for months and that I've been accused of being like a Putin sympathizer for.
0:48
So, apparently, there's a bunch of Putin sympathizers in the administration.
0:52
And just to read you some of these remarks, actually, I want to play like a fun game with you guys instead of just Oh, really?
0:59
Yeah, instead of just mentioning these quotes, I want to play a game called Milley or Sacks.
1:05
So, I want you guys to guess Okay.
1:08
whether it was General Milley who said the quote or whether I said the quote. Okay.
1:12
Does that sound like a fair fair game? Yes, fair game.
1:15
let's put some game show music here. Milley or Sacks.
1:20
I'm going to read you like four or five quotes and you guys are going to say whether it was Milley or Sacks who said it.
1:24
First quote, who said it? General Milley or Sacks?
1:27
One of the lessons that should have been learned from World War I is that European powers refusal to negotiate compounded the human suffering and led to millions more dead. Milley or Sacks? Sacks. I'm going Sacks. I'm going Sacks.
1:40
It's a very historic MILLEY SAID THAT. NO, COME ON. NEXT ONE, NEXT ONE. GO, GO, GO. OKAY.
1:45
A regional war turned into the First World War because all parties made maximalist demands and assumed others were bluffing. It can happen again. Sacks. Milley or Sacks?
1:55
Sacks because of bluffing. You said bluffing.
1:56
That bluffing is a word that you would use.
1:58
All right, that was Sacks. That was Sacks.
1:59
Maximalist, yeah, it's okay.
2:01
Milley would never say maximalist.
2:03
Yes, he would never say bluffing. Yeah, go ahead.
2:04
Where there's an opportunity to negotiate, when peace can be achieved, seize it. Milley. Milley or Sacks? Milley, Milley. It's very pithy. It's pithy like Milley.
2:12
All right, that was Milley. Yes, good.
2:14
All right, I'm I'm two and one. Two and one. Me and you, let's go. Two for one.
2:17
It's deeply irresponsible not to try for diplomacy when the stakes are so high. Sacks. Sacks.
2:21
That's an emotional statement. I go Milley. That was Sacks. It was Sacks. Damn it, two and two.
2:27
Three and one for tomorrow.
2:29
There has to be a mutual recognition that military victory is probably in the true sense of the word may not be achievable through military means and therefore you need to turn to other means. Milley. It's a word salad. I go Milley, word salad. Hold on, hold on.
2:43
It's a Milley word salad.
2:43
It's too too convoluted for Sacks. Sacks. I go Milley. I go Milley. it's Milley. That's Milley.
2:49
Yeah, it's word salad Milley. That's it, I caught up.
2:53
Now, I'm three and two, tied with Chamath. Last one. Last one, okay.
2:55
It must be our objective now to help achieve a ceasefire and negotiate a peace rather than protract the conflict. Wow, it's so formal. Milley. It's so formal.
3:06
It feels like somebody said that on the steps of like a building outside. It's very formal. It's well-spoken. It's crisp.
3:12
Can we hear it one more time?
3:15
May we hear it one more time?
3:17
It must be our objective now to help achieve a ceasefire and negotiate a peace rather than protract the conflict. Milley.
3:24
It's a little too formal for a podcast, but in a tweet it wouldn't be.
3:29
So, it could be a Sacks tweet, but I'm thinking this is a podcast. I got to go Milley. I got to go Milley. SACKS. NO, GOD DAMN IT.
3:39
YOU CAN'T TELL Milley from Sacks is what we've learned. What a great game.
3:44
All right, now we're going to play the next game.
3:45
This is called Bernie Madoff or SBF. Bernie Madoff or SBF.
4:13
All right, everybody, welcome to the All-In pod.
4:15
With us again, the dictator in a beautiful purple sweater, sweater Karen.
4:21
Man, it's the fall season, so the triggering will begin.
4:24
the inside the inside of this is suede. Oh, very nice. Very nice.
4:27
So, multiple animals killed for you.
4:31
Guys, it's been a pleasure. Got it. Yeah. Got it. All right.
4:35
What animal do they kill to make suede?
4:37
Is that like a type of leather or what is that?
4:38
I hope it's an endangered one.
4:44
WELL, ACTUALLY, THAT VERSION OF SUEDE that he's wearing is from a white rhino.
4:48
So, they just take the hide and they throw everything else away. Oh my god, so horrible.
4:55
Can we take this out of the show? These are ivory buttons. IVORY BUTTONS. NO, NO, CHAMATH. Not ivory buttons.
5:03
think it's baby seal fur around the collar. Baby seal, no.
5:05
How many baby seals were killed to make your outfit?
5:10
also with us is the Sultan of Science, David Friedberg, racing from the airport.
5:14
How is that JetBlue Mint?
5:14
Yeah, I heard you upgraded to Mint. No comment.
5:19
What, you don't want to talk about the $1,200 upgrade you did to your JetBlue ticket?
5:22
Wait, you don't want to talk about JetBlue Mint? Why?
5:23
Are you embarrassed to fly commercial? What did you eat?
5:30
Are you embarrassed to fly J Cal?
5:30
Yeah, when I'm in Mint, I walk ON LIKE I'M THE PRESIDENT.
5:35
I'M LIKE, "HOLD ON, Mint coming through."
5:40
And then I start spreading out.
5:41
J Cal class is like the seat by the bathroom. In the back.
5:46
Hey, yeah, they think you save 150 bucks each way.
5:48
What is is JetBlue Mint the name of like the JetBlue Mint is their first class coast to coast. It is so delightful.
5:55
They What is that JetBlue Mint?
5:55
They just have figured out a way to make like sleeper seats, you know, that are very nice and it's upgraded service where they they put like a little wall between you and everybody else.
6:04
It's kind of like having a private plane if you didn't. And Sacks is here.
6:07
The whole crew is here, basically.
6:10
We'll have a surprise bestie guesty jumping in in the middle of this.
6:15
I'm not going to tell you who.
6:17
Cuz nothing's going on this week.
6:18
Nothing is going on this week.
6:18
I mean, there's so much to talk about.
6:19
Let's just start with the elections.
6:23
And then we have to start with my mea culpa.
6:25
Usually, this is like throwing red meat to Sacks, but I mean, at this point, all right.
6:29
So, DeSantis won by double digits in Florida.
6:30
He got a huge amount of the vote, but all the Trump high-profile Trump-backed candidates seem to have lost. Dr. Oz, Dan Cox.
6:37
Just It was a shellacking, I guess, or the red wave became like a puddle or like an eyedropper or something.
6:47
But, some of the Trump-backed candidates did win.
6:48
Some of the Peter Thiel collection, J. D. Vance won.
6:54
So, I guess that's a big win for Sacks.
6:56
a Trump candidate though cuz if you remember when Trump went to stump for J. D.
6:59
Vance, he forgot his name. He got his name wrong.
7:04
So, anybody that Trump on your side, you don't need friends.
7:06
Anybody that Trump actually cared about turned out to be just a complete dud and lost.
7:10
And everybody that kind of, you know, had to keep him somewhat around just so that he didn't throw bombs, actually did decently.
7:18
But, I mean, Trump is a just a a weight on the neck of the Republican Party and it's time to just get rid of him.
7:26
Sacks, what happened to your red wave?
7:32
Yeah, listen, I got this wrong.
7:34
I think there's a few reasons for it.
7:35
So, I think when you get an election wrong, you have to admit it and figure out what you what you what your mistake was, otherwise you're not going to improve.
7:41
I mean, number one, I was looking at, you know, the RCP polling, this RealClearPolitics where they take an average of all the different polls.
7:49
They were adding a factor to it.
7:49
They were showing, by the way, plus three or plus four in the Senate for Republicans.
7:55
But, they were adding a factor to it based on the underweighting that the pollsters did in the last election cycle and it turns out that the pollsters, I think, did a pretty decent job correcting their polls and so the RCP overweight turned out to be just basically completely wrong.
8:08
The other thing that I got wrong was I was just looking at the fundamentals.
8:11
I mean, three quarters of Americans think we're on the wrong track and we're in a recession.
8:16
So, based on that, you would think that this would be a great year for Republicans.
8:21
And in fact, the out-of-power party usually wins in a midterm and Biden's popularity is at historic lows at like 41, 42%.
8:28
So, everything was teed up for the Republicans. So, what went wrong?
8:35
I think a couple of things.
8:37
Number one, two days before the election, Trump basically comes out and pre-announces that he's running. Oh, yes.
8:43
And you know, this basically plays into the narrative that Biden has already created that this is a this is not a referendum on Biden, it's a referendum on democracy.
8:51
And basically, Trump made it into a choice election.
8:54
Who do you like better, Biden or Trump?
8:55
And the fact of the matter is, if you look at the exit polling, as unpopular as Biden is, Trump is even more unpopular.
9:01
So, that did absolutely nothing to help the Republicans and it I think it really hurt them at the margins.
9:07
The other thing that turned out, I think the other big thing that helped Democrats was Dobbs.
9:13
And I never thought that it wouldn't be a factor, but if you looked at the polling before the election, 15% of likely voters said that it was their number one issue.
9:22
If you looked at exit polling after the election, it was 28%.
9:26
So, Dobbs turned out to be twice as significant as what the early polling was showing.
9:30
And if you remember, Jason, go back to the episode we did on abortion, I said the shrewd play for Republicans here was the Roberts compromise.
9:37
What did Roberts want to do?
9:39
He basically was going to allow the 15-week restriction on abortion, but not have the headline of Roe v. Wade overturned.
9:46
And that basically is what DeSantis implemented in Florida.
9:49
He basically restricted abortion after 15 weeks.
9:53
It's the purple state compromise.
9:55
It's where I think the purple states and where most of the country is going to end up and the sooner Republicans get their heads wrapped around that fact the better they're going to be long-term.
10:05
Let me ask you one question there, Sachs. Yeah.
10:06
Who stacked the Supreme Court deliberately to turn over Roe v. Wade?
10:10
Listen, I mean, there this was a long-term priority of Republicans obviously.
10:16
That's That's not a question, J Cal. Well, no.
10:17
I mean, we do have to recognize that Trump said he would do that. He did it.
10:20
So, this is doubly Trump's fault.
10:22
Every party nominates justices that align with their values. I mean, it cycles.
10:26
Yeah, but Trump said he's going Trump said he would specifically do it in order to turn over Roe v. Wade.
10:32
doesn't choose who dies in the Supreme Court and when. Yeah. Right.
10:34
And they also There was Yeah, it it's also more complicated than that because what this Dobbs decision did is throw the issue back to the states.
10:41
And the fact of the matter is that now it's up to each of these states to determine where they're going to come out on this issue.
10:47
So, if you look at there were ballot initiatives in red states like Kansas and like Kentucky. Kentucky rejected a ban. That's right.
10:56
That's what I'm saying is there were pro-life ballot initiatives in red states that lost.
10:58
And so, you can see all over the country that the Republicans tried to go too far or they do try to go too far when they try to impose a total ban. Yeah.
11:07
What it seems to be popular is this What I'm saying is the purple state compromise.
11:14
It's what DeSantis did in Florida.
11:14
It seems like most of the country we talked about this on that episode.
11:19
Most of the country is in the messy middle.
11:21
They want abortion to be safe, legal, rare, and early.
11:25
They're willing to support it in say the first 15 weeks, but then after that there needs to be some restrictions. That's what I'm saying.
11:33
Most of the country supports that.
11:33
Now, it's also the case that Democrats though are staking out a pretty extreme position too because most of the Democrats were taking the position that abortion should be legal up until the ninth month, which is not even That's more radical than even Roe.
11:47
Roe said that you can restrict it after 23 weeks.
11:52
So, you know, what we said on that podcast, Jason, was the party that gets to the middle first on this issue is the one that's going to do well. this issue.
11:59
Yeah, and I and I think yes, I think it's true on this and I think it's true on other things.
12:02
So, look, I think the Republicans could correct you pretty easily if they listen to folks like DeSantis and Youngkin and Kemp.
12:09
Uh people who understand that they have There's a compromise here.
12:14
And the ones who basically insist on pushing a total ban are going to go down in flames.
12:21
There's a couple of things I think that are worth looking at now that we have all the exit polling and the results.
12:28
The Democrats strategy of helping to promote these extremist MAGA candidates in the primaries turned out to be a huge winning strategy because every single one that they helped put up against a Democrat, the Democrats won. Mhm.
12:44
But number two, so what that shows is the extreme right cannot field a winning candidate.
12:48
But on the other side, all of these extreme left-leaning Democrats also did not do very well either.
12:58
And so, you're back to David, what you said, which is we have been saying for a while the winning strategy is that messy middle.
13:04
It's the moderate person that kind of like tacked to the center.
13:09
And this is what you see everywhere around the country, all of the battle ballot initiatives, every time you had an extremist ballot initiative, whether it was uh a complete ban on abortion in a red state or whether it was a tax the rich policy in a blue state, they failed.
13:26
And so, I think the message that you have to take away is the extreme left doesn't work.
13:29
The extreme right doesn't work. Right?
13:31
If you look at for example, like Kathy Hochul almost lost in New in New York State because of who?
13:38
Because of like AOC and all of that extremist progressive rank and file of that party.
13:42
So, people need to really understand and look at the data on the ground.
13:46
If you want to win in '24, you got to be in the middle and you got to clean up all of this extremist rhetoric. Freeberg, any thoughts?
13:53
I think the Georgia Senate runoff race that we had in the 2020 election cost the US $10 trillion.
14:04
And I think it cuz if you'll remember, that was the race that when the Democrats won tipped the power in Senate to the Democrats and all this legislation for the last 2 years was passed including a lot of the the fiscal stimulus and spending that very likely may have faced significantly more opposition than could have been faced where the Democrats had the White House and the Senate and the House.
14:29
And so, that single seat and and the loss of that seat in the runoff to the Democrat party I think ended up allowing a lot of loose behavior over the last 2 years that's going to cost this country for a very long time.
14:44
And in part, perhaps we could argue a lot of the inflationary pressure uh and now the debt load, the US debt load increasing by $10 trillion in the last 2 years since that election by the way.
14:56
And so, I think one of the most important things that perhaps people don't cognitively recognize, but feel in some way, is that having a balance of power is really important in this country.
15:06
And so, to some degree, while there may be issues that folks can argue about and disagree about and there may be candidates that are vital to us, I think ultimately folks are recognizing the benefit and the value in having a good legislative debate and a good check and balance in this country.
15:21
And so, I think that there's a lot of what Sachs is saying that that ties into to that kind of emotional conditioning that's probably underway. Okay, Sachs.
15:29
Trump said he was going to announce.
15:32
He went after DeSantis, called him "DeSanctimonious."
15:34
Obviously, the the Trump endorsements here didn't help. Uh Roe v.
15:38
Wade didn't help the situation.
15:42
What is going to happen here?
15:42
Is the Republican party finally going to cut ties because they want to start winning or uh is Trump going to just announce next week and cause massive chaos?
15:51
What's going to happen in the Republican party in the coming weeks?
15:55
Cuz we're 14 months away from Iowa, right?
15:57
I mean, this is now the next issue.
16:00
The question comes down to do Republicans want to start winning elections? Yes or no?
16:03
And Freeberg brought up the the the right point.
16:05
In the last election cycle, he's right that the reason why we got $10 trillion of unnecessary spending is because of that Georgia runoff seat.
16:14
We're about to have another one where Purdue won that seat on election night and then Warnock won it in the runoff.
16:21
Why did things go against Purdue?
16:23
Cuz Trump had a 6-week hissy fit after the election.
16:26
The Georgia runoff happened on January 5th and then it all culminated in the riot on January 6th.
16:32
So, the fact of the matter is Trump has been having this extended hissy fit and living in denial since the loss in 2020.
16:41
And as a result of that, we lost the Georgia runoff.
16:44
I think we did worse than we had to in this midterm.
16:46
I think we're going to lose the Georgia runoff again if Trump continues with these antics.
16:50
And so, it really comes down to Republicans, do you want to win?
16:54
And look, I know that there's call it 40% of the country passionately loves Trump, but here's the problem. He's capped at 40%.
17:04
Independents and moderates, centrists will not give the guy another look.
17:06
And so, you cannot win a major national election in this country with 40% of the vote, no matter how passionate that 40% is. You know what 40% is?
17:15
40% is Charlie Crist, the guy who DeSantis beat, who wiped out in Florida.
17:21
That was a 60/40 election.
17:24
That is what a 40% of the electorate looks like. Landslide.
17:30
It's a landslide, exactly.
17:30
So, the bottom line is that who your messenger is in politics is incredibly important. Mhm.
17:38
And Trump just gives his enemies way too much to work with.
17:40
Now, if he weren't a Republican, it might be different.
17:44
Take Fetterman for example, okay?
17:45
This guy, Fetterman, okay, he's being portrayed as this man of the people.
17:49
He's got the goatee and the the tattoos and the hoodie or whatever. Who is he really?
17:54
He's a trust fund kid who never had a job until his mid-40s.
17:58
But the press completely gives him a pass on that.
17:59
They would never do that for a Republican.
18:01
If Fetterman were a Republican, the press would expose him in 2 seconds.
18:04
Now, that's a complaint, but the fact of the matter is Republicans just have to accept it.
18:09
These are the rules of the game.
18:09
If you're a Republican candidate for office, you have to be perfect. You have to be focused.
18:13
You have to be disciplined. You have to be DeSantis.
18:17
You cannot give your opponents something unnecessary to work with.
18:19
Every fight DeSantis picks has been a smart fight that he's won.
18:24
And same thing with Glenn Youngkin as well.
18:26
He doesn't give his opponents things to work with.
18:28
And unless Republicans realize that these are the kinds of candidates we need to nominate in this media environment, we're going to keep losing elections. Yeah.
18:38
Chamath, any final thoughts here as we wrap up election?
18:39
I'm going to DC next week doing the rounds, high-fiving and backslapping. Yeah.
18:44
Just to finish the thought, one other quote from uh New Hampshire Governor Chris Sununu, who's kind of a He's a Republican who's been at odds with Trump.
18:52
He said, "Listen, the message of this election is first fix crazy, then fix policy."
19:00
If you're coming across like you're crazy, the voters will reject you. Mhm.
19:04
Now, that doesn't mean you can't stand for principle.
19:06
Ron DeSantis says that Florida is where woke goes to die.
19:09
He says, "We will fight woke in the boardrooms.
19:12
We'll fight in the classrooms."
19:13
This is certainly not a liberal position.
19:15
These are pretty conservative positions he's taking, but he does it in a calculated, disciplined way.
19:20
I'll I'll say this right now.
19:20
He is a winning candidate in the scale of Reagan if the Democrats also don't figure out how to clean up their act because the other message that's so interesting that I took away is the legislative agenda that works is actually what Biden has always believed.
19:42
The problem is that Biden seems to get distracted or confused or hijacked by the left wing of his party.
19:48
And they introduce all these unbelievably crazy iterations of progressive policy that just are not popular even in blue states.
19:54
Just look at the number of bills that failed.
20:00
So, he also has to fix what he's doing, by the way, because he doesn't think that could fail.
20:05
The a US judge in Texas, I'm not sure you can tell me if this is legit or or not.
20:11
No, he they stayed that they Well, we should talk about that in the context of the economy, actually.
20:15
But that was predictable.
20:15
That was predictable that the college loan is completely unconstitutional for presidents to have a trillion dollars without Congress's approval.
20:22
Can I build on Chamath's point here?
20:23
De Santis won Miami-Dade County, which went for Hillary by 30 points, okay?
20:27
He showed that a competent executive a a an energetic youthful operator who actually runs the state well, okay, can win over moderate and independents and Democrats. No, he's a winner.
20:43
That these are the types of candidates Republicans are Yeah. He's a winner. He's a winner.
20:46
a We got a call breaking in here.
20:46
Uh we have a special best guest.
20:49
You know, it's been a big news week.
20:50
It's not just the elections.
20:51
FTX crypto exchange went belly up and uh we thought, well, let's bring somebody in who's super credible in crypto, and that's friend of the pod.
20:58
He's credible cuz he's wearing a tie. Yeah.
21:02
Hey, Brian Armstrong, how are you doing, brother?
21:04
Brian Armstrong, you look fantastic.
21:05
are you testifying today? I'm doing great.
21:07
It's not It's not Moncler and it's not uh Loro Piana, but um you know, normally I just I just wear the black T-shirt and the hoodie, but you know, when times like this, I got to go talk to media, policy makers, regulators, and it's a it's a good time to you know, spruce up the image.
21:23
This is a week to break out the tie? Yeah.
21:25
Hey, listen, Men's Wearhouse, it's never looked better. You look great. Thank you.
21:30
I see a red tie and I think fiscally responsible. All right.
21:35
I guess, Brian, just to kick it off.
21:38
FTX in spectacular fashion blew up this week, and uh it's pretty gnarly.
21:43
You run an exchange as well.
21:43
What's your take on what happened with FTX?
21:45
And then, what is your position in terms of making sure your customers understand that Coinbase is not going to have a similar fate to all the other exchanges that seem to be blowing up every couple of months. Yeah.
21:58
Well, first of all, I mean, I think we were all shocked that somebody like Sam who seemingly is so smart and and capable ended up in this really the situation where he appears to have done something quite unethical and illegal.
22:12
So, you know, my job right now this week has been to go out there and just help people understand that Coinbase is not like that.
22:17
We've been pursuing a different strategy for the last 10 years. We're a public company. We're We're regulated.
22:23
Our our financial statements are audited.
22:24
They can show that, you know, customer funds are segregated.
22:28
They're backed one-to-one.
22:28
We're not investing customer assets without their explicit direction.
22:33
And so, that's been the first step is just to make sure people understand that.
22:37
But then after that, we need to kind of think about how we go forward as an industry here and both take a long-term perspective, make sure the good companies in the space aren't allowing one or two bad actors to kind of mess it up for everybody else.
22:50
And then it's it feeds into the whole regulatory story, too, because companies like Coinbase are already regulated, but we're regulated like a traditional financial service business, but we don't have clarity about the crypto-specific regulations, like what's a commodity, what's a security.
23:04
And that lack of regulatory clarity, I believe, has pushed a lot of this business offshore to these less regulated exchanges.
23:09
That's part of what caused the blowup today.
23:11
Uh they they were based in the Bahamas, you know, and they just there's not sophisticated financial regulators overseeing what they were doing.
23:18
Brian, there's a lot to unpack, but maybe we can just take a step back and for the uninitiated or for the person who's only been just following this very superficially, can you just in a nutshell explain what happened?
23:33
Yeah, so my understanding is and again, this is from people I've talked to and I spoke with Sam and CZ briefly during this, but I didn't get details from them.
23:41
I got it from other people.
23:42
You spoke to them this week?
23:44
Yeah, I mean, this was all going down.
23:44
I mean, I I spoke to Sam about, you know, he was trying to raise emergency fund uh financing and things like that.
23:50
And I spoke to CZ about why he was considering buying the asset.
23:53
I thought it was a bad idea.
23:57
But my understanding of what happened at this point, again, I don't have all the facts.
24:00
This is just my my understanding is that you know, FTX was in a position where they had this market maker, Alameda, that was investing in risky things. And that's fine.
24:10
Like market makers, hedge funds, they're designed to take more risk.
24:14
It appears at this point that back during the last um shakeup in the crypto industry where, you know, Terra Luna and Voyager and Celsius and Three Arrows went under, it appears that uh Alameda took a big loss at that time as well.
24:28
They may have even been underwater.
24:28
And instead of just saying, "Hey, you know, this hedge fund's going to blow up, too," which would have been unfortunate, people would have you know, Sam would have lost money, it's embarrassing, but it's not illegal for a hedge fund to blow up.
24:40
It happens with some regularity.
24:40
Instead of just letting it blow up, it seems like at this point he took customer funds But you have to explain he also he owns both.
24:49
That's for the people that may not understand that. Right.
24:50
So, it's a related party.
24:54
he owns his own exchange called FTX, and he owns his own hedge fund called Alameda.
24:57
Which operates inside of FTX as well as in other places. Right.
25:00
But again, Alameda seems to have blown up.
25:04
Sorry, Brian, back to you.
25:07
Yeah, so it seems they they had this solvency issue, and instead of just letting it blow up, Sam basically said, um "Hey, we have a bunch of customer assets over here at FTX," or he somehow basically made a loan from FTX into Alameda to try to prop it up.
25:19
I don't I don't know why he did that.
25:22
I mean, that that's the moment in my mind where he crossed the line into probably committing fraud.
25:27
And I I think he probably lied to users, lied to investors, and he went around and tried to bail out these different companies like like Voyager and BlockFi and to sort of prop up this thing, and and maybe he thought he could trade his way out of it or something.
25:41
I I'm not sure, but that seems to be where the mistake was made.
25:46
Brian, can I ask one question, which I which I think will help frame the contagion risk set of questions that everyone's having?
25:53
When people have an asset, we we all talk about customer deposits and customer assets held at these exchanges, but those assets and those deposits are very often some form of coin.
26:02
I have some amount of Bitcoin, some amount of ether, some amount of something else.
26:08
Is it the case that there is an assumption of total asset value that's held in its in a portfolio of coins that doesn't necessarily match the individual users' accounts?
26:19
And then when one coin goes down in value nominally to dollars, that the whole value of the portfolio goes down, and now you can't actually make the customers whole.
26:28
make the customers whole. So, in the statements that have been made by these guys and other exchanges that we have enough liquidity to cover customers' accounts, that the assumption might be we have enough liquidity if you assume
26:42
the current market price for a whole bunch of different coins, but then if one coin tanks, the total liquidity tanks, and they don't actually have it matched up correctly because now the customer account value didn't go down as much as the exchange's total asset value. Does that make sense? It does. Does that make sense? It does.
26:57
And is that part of the contagion risk that's going on here?
26:59
Is it that they're not matched truly between customer accounts and the exchanges, you know, holding of of coins? So, not exactly.
27:07
Okay, so if you're a regulated financial service business um that's but you're not a bank, you know, we're we're regulated as a trust company, a money transmitter, etc.
27:16
You're required to hold customer assets one-for-one in denominated the the asset.
27:21
So, in other words, if you say you the customer has one Bitcoin, you have to hold one Bitcoin.
27:24
If they say they have $100, you have to hold $100.
27:28
And so, that's the case with Coinbase.
27:30
You don't have to take our word for it, by the way.
27:31
You can look at our audited public financial statements as a public company with an independent, you know, Big Four accounting firm who went to go verify all of that.
27:37
And that's what various custodians and exchanges, that's what they all should be doing.
27:42
If By the way, if you're regulated as a bank, you can actually uh go invest some of those, but there's very strict regulation around that and capital requirements and whatnot.
27:50
And we're we're not a bank.
27:50
So, we we hold one-to-one.
27:52
Now, if you're um an investment fund or a hedge fund or or something like that, then you can try to take positions in different coins and different assets, and they could go up and they could go down.
28:03
You know, you may you may lose your investors' money, but there's no such thing as the customer assets being involved in that.
28:10
There needs to be clear segregation of those customer funds and from from what an investment fund would be or a corporate funds.
28:17
And that's where they got in trouble.
28:19
They They basically commingled customer funds with their hedge fund. Classic fraud.
28:24
Yeah, can you explain the contagion, by the way, just so we can cuz everyone's been talking about the contagion and understanding what's next.
28:29
So, that's that's what I just want to Yeah, cuz I think people are going to be asking that a lot this weekend.
28:34
Yeah, so I I do think there's there is some contagion risk here.
28:36
I think there's other firms that had um First of all, there's firms that had money just sitting in FTX, and that's now going through bankruptcy court. So, that's been bad.
28:44
I mean, Multicoin came out publicly and said that they had 10% of their portfolio sorted on FTX.
28:50
Um there's other firms that Alameda may have had loans with, and those firms are probably struggling.
28:58
I You know, I don't want to say who, but we have received a couple of inbound calls from other people trying to get emergency financing.
29:04
There's people who may have just totally different from FTX and Alameda.
29:08
They may have just had their own portfolio that they took margin or leverage on to buy crypto, and now as the prices have come down a little bit, they're getting stopped out.
29:17
So, um that's all been very challenging, and I just I again, just for the sake of clarity, I I should say that Coinbase did not have any material exposure to um Alameda, FTX, or FTT token.
29:25
Can we just talk about this issue of customer deposits?
29:29
Cuz this is really the crux of the issue from a legal standpoint, right?
29:33
I mean, I remember when I was doing PayPal like 22 years ago, and the company was like 6 months away from running out of money.
29:38
I remember the lawyers told us really clearly, "You cannot use customer deposits to fund the operating expenses of your business."
29:44
In other words, "if this business ends up going bankrupt, you'll still have all the customer money there and they'll be able to get it back.
29:50
And, you know, it was really clear like, "Hey, if you use customer funds to pay for the burn of the business, to operate the business, that is a do not pass go, go directly to jail type offense."
30:04
And so, like that's really the heart of this.
30:05
Now, I read in some articles covering this that the way it worked is that Alameda had a bunch of these FTT these FTX tokens called F called FTT.
30:18
And they basically used that as like a marker, as collateral.
30:20
So, that they they basically borrowed what is it?
30:22
Like 6 billion of customer funds from FTX, and then they used their own token to then as collateral. So, stopped there. Yeah, exactly.
30:33
And then what happened is apparently like CZ got wind of this, and he owned a whole bunch of these tokens, and he signaled that he was going to dump it, and then the price basically went down, and so now the the the collateral for the customer loans was insufficient, and then there was a run on the bank, and basically this has happened This happens in the public markets a lot as well.
30:52
So, like when you see heavily shorted names, or when you know that certain hedge funds are on the brink, other hedge funds will go in and essentially force a margin call and a stop out because then it's what causes all of these runs.
31:06
And if you look actually inside of GameStop, the reason why you got all this gamification in the GameStop equity and a bunch of these other names was in part because of this dynamic.
31:14
Folks that are highly leveraged, folks that don't have the right matching of risk, and what happens is they're solvent but illiquid.
31:26
And then if you run the instrument into the ground, they both become insolvent and illiquid all at the same time, and the whole thing explodes.
31:36
So, Brian, the question is now that we know what happened, which is all of these crazy inner party related transactions, and you know, all of this stuff seems very illegal.
31:47
There was a bankruptcy filing today, and up until today it seemed like this issue was really about FTX International and Alameda, and it didn't touch FTX US, which for a lot a long time tried to position itself as, you know, well-run and regulated as Coinbase to be you know, they tried to say that.
32:09
But now, if you look inside the Wall Street Journal, all the articles say that this is actually FTX Group, so the whole thing seems to be in peril.
32:14
Can you just help us explain that because there now that's a lot of US people that were following the rules thinking that this thing was matched one-to-one, that may be also affected. Yeah.
32:27
So, look, I I don't know who inside FTX's and its orbit of companies actually knew that the the fraud had been taking place.
32:35
I I it would not surprise me.
32:36
I I've no idea, to be honest, but I it would not surprise me if FTX US people and employees had no idea that this was happening.
32:44
I I'm imagining if Sam was doing when he when he started doing this, he probably wanted to keep it to a very small group, otherwise this is the kind of thing that leaks and the whole thing blows up.
32:53
Now, that being said, I don't necessarily think FTX US is worth anything as a business right now because of the brand being so tainted, and there probably was not great separation of these entities in the sense of, you know, like did they have truly separate boards and beneficial owners and governance and it Sam seems to have, you know, it appears that they didn't really have a CFO or maybe even like a real board or anything like that.
33:19
anything like that. And so, it's hard for me to imagine We found on there was an article that appeared that said that the head of compliance at FTX was also the head of compliance at a poker site called Ultimate Bet, which in the 2010s
33:36
did this exact thing apparently, some version of this where they went in and they looked at hole cards of poker players, and then a few employees inside the business would basically play against these folks knowing what the hole cards were, ran this cheat, stole millions of dollars. Somehow that person found a way to be
33:52
Somehow that person found a way to be head of compliance at FTX. Yeah. 10 years later. Which is incredible.
33:58
But back to this question.
33:59
So, so now what happens now is you have the international business and the US business and Alameda Research all rolled up into this one frozen entity, right?
34:11
With now regulators having to So, do you know what happens in a process like this?
34:14
Like is it that the DOJ and the SEC get priority or is there some international monetary like who who's who unwinds all of this?
34:24
How How do people get their money back if at all?
34:28
Yeah, so I'm not an expert at this, but my high-level understanding is that the bankruptcy courts will essentially and I believe they filed bankruptcy in the US, which is an interesting thing.
34:36
I didn't know why they did that versus Bahamas, but anyway, the the bankruptcy court will basically go through and try to find any assets of value.
34:42
So, I mean they must they still have some tokens and value.
34:46
They have a venture portfolio.
34:47
They, you know, I think Sam owned 9% of Robinhood.
34:49
There's various things that they may own, and then they'll kind of auction those off to various bidders on distressed assets, and then try to distribute those funds to the customers.
34:59
I I don't know the exact process beyond that though.
35:01
I mean, if you remember the Madoff um wind-down took many years, and for years he was uh trying to find assets, and then he found a market, sold them.
35:09
There's this the trustee, I think he's still active.
35:13
Uh and then, you know, with tried to redistribute the funds.
35:14
Obviously, so many more customers here than there was with Madoff, but it can be a very long and winding process to identify all the assets, then run the market sale process on them, then figure out who gets what first, and then distribute.
35:25
There was an interesting thing that Larry Summers did, I think for Bloomberg, where he was asked whether this was Lehman or Enron, and he said, "It seems more like an Enron than it is a Lehman."
35:37
And Brian, I'm just curious how you think about it.
35:41
Like is this sort of a fraud perpetuated by a group of executives to essentially take advantage of a situation, or do you think that this is more like a Lehman situation, which is a well-run business, I guess, that just, you know, got caught in a liquidity trap?
35:58
I think it's My guess is it's a little more like Enron in the sense that I mean, yes, they were over-levered and that kind of thing, but the minute that they moved customer funds in some way, shape, or form to backstop the hedge fund, that that was, in my mind, fraud, and, you know, that's more like Enron.
36:15
Do you think now that we have to open the gates on regulation?
36:16
Like the whole point of crypto in some ways was, you know, trust nobody.
36:23
And, you know, decentralization is the key.
36:25
But here what we see is a lot of people were tricked into trusting FTX and having their deposits there, and it was a centralized exchange, which caused all these problems.
36:35
So, it's like it almost violates the principles of what the whole product market fit was supposed to be.
36:41
So, what what should sort of the observer expect, and what do you expect as a business in terms of how governments now react to all of this? Yeah.
36:52
I think it's really important to distinguish between the centralized players in crypto, which are custodians, exchanges, etc.
36:56
Coinbase has a big business there.
36:59
And the decentralized players, which are, you know, self-custodial wallets, DeFi protocols, Web3, that whole world.
37:06
So, the centralized players should be regulated.
37:12
And today they're regulated already like like kind of traditional financial service businesses, but they don't have the the regulation clear when it comes to the crypto aspects.
37:20
So, for instance, in the US we we actually don't still have clarity about what is a commodity, what's a security, should which one should CFTC regulate or versus SEC, that kind of thing.
37:29
And that lack of regulatory clarity and frankly the the climate of regulation by enforcement, the negative rhetoric from, you know, Chair Gensler in particular has created this sort of chilling effect in the US that has pushed a lot of that centralized actors' activity offshore.
37:43
In fact, 95% of the trading volume in crypto is now outside the United States, and it's come down a lot since the beginning of this year even.
37:52
Now, the decentralized players, self-custodial wallets, DeFi, Web3, this is where crypto really has an opportunity to make a more fair and free and transparent system because you can go look at any smart contract to see exactly what it's doing.
38:05
Anybody can audit the code.
38:07
If you have a self-custodial wallet, you you can just trust yourself.
38:10
You don't have to trust any other intermediary out there.
38:15
And um that's where you get true decentralization, and I think that's actually Now, those areas still have a couple of their own challenges, you know, sometimes people will lose their password or their phone, and they'll lose their own money.
38:25
So, you if you're if you're trusting yourself, you still have the you have to trust, you know, that you're going to do that piece correctly, but there's a lot of good things we can do there around making social recovery mechanisms and MPC wallets and things like that.
38:37
We remember just a couple of months ago Gary Gensler started saying, "Hey, these things are all securities."
38:43
And you went and visited the SEC a couple years ago, or you tried to, they wouldn't meet with you. You were very public. You did a a tweet storm.
38:48
We talked about this on the other pod that, "Hey, like we want to meet.
38:51
We want to talk about that."
38:53
Now, we're still in a position where the SEC's position is these are all securities, which means the anything that's trading it would have to be limited to accredited investors, etc.
39:03
What should the United States do here, and how close are we to getting clarity because I know you're trying to talk to the SEC directly about can we just get some clarity here?
39:11
Can people buy these tokens or not?
39:13
What is the status of are they tokens are are they securities or are they not here in the United States? Yeah.
39:21
So, luckily since then we have had a lot of productive dialogue with both the SEC and the CFTC and Treasury and all kinds of people in Congress, and I do think the US is making some steps in the right direction.
39:31
There was actually there was a bill going through Congress recently called the DCCPA or the Stabena Boozman bill, although it's having some challenges now, frankly, due to this FTX blow up because SBF was one of the people sort of pushing that bill forward.
39:44
But regardless of that, the sort of system that we should have is there should be a clear designation between what is a crypto commodity and that can be regulated by the CFTC and what is a crypto security.
39:56
Now this is one of those legal and by the way, what is also a a stable coin and artwork and other things that are not any of those things.
40:05
The challenge lies in that there's kind of a fuzzy line between what is a commodity and what is a security and a lot of this law is based around the Howie test which says a security is an investment in a common enterprise with an expectation of of profit.
40:21
And so it's basically a point-based system and in the absence of really getting a clear list between the CFTC and the SEC are in this turf battle.
40:27
I would love it if, you know, they could basically put out a list get their heads together and put out a list.
40:32
Hey, CFTC is going to do these, SEC is going to do these, a bunch maybe are in the middle, let's let the courts figure that out or whatever.
40:40
But that just hasn't happened and it's a it's a missed opportunity in the US.
40:41
So if the Howie test is not perfect given the dynamic nature of cryptocurrencies and all the innovation, if Brian Armstrong was going to say, "Hey, this is in the best interest of Americans balancing, you know, some amount of security and safety for people making bets on this currency and it allowing innovation."
41:01
What would you say is the best definition, the best way for us to regulate crypto coins?
41:10
Putting NFTs aside, putting DAOs aside, just specifically these coins. Jason, hold on hold on.
41:12
Let me just tweak your question because because we should switch to SPF as well and just talk about the person.
41:18
But to me it seems the whole issue if you come back like what is the first string that you pulled that unraveled the sweater was the fact that these tokens were created out of thin air.
41:27
They had no meaningful value.
41:30
Somebody prescribed value and all of a sudden everybody else in the economy all of a sudden said, "Yeah, I'll take that as collateral."
41:35
Look, you cannot do that in the regular world.
41:37
I can't call JP Morgan and say I've invented this thing.
41:42
It's called a share in XYZ and I'd like you to margin loan, you know, give me a loan against it.
41:47
So Brian, explain like there's a ton of these tokens that have been engineered. Right?
41:53
And there's been a ton of these tokens that have been sold.
41:54
So what should people do that own these things thinking that there was going to be some safety or value or, you know, like how do you think about all of these tokens that are that that could be as basically as as fragile and shitty and worthless as FTT? Hm.
42:14
Yeah, well there there is this concept of like an exchange token and and there's a couple other firms out there that have them and that's something we haven't done and I I do I think I think you're right like the actual utility of those things is a little questionable and so if someone's going to sort of mark those up on a on a low supply and then a low float and then somehow leverage that that that that's going to get yourself into trouble.
42:33
But look, I don't want to throw out the entire concept of people creating tokens.
42:37
I think there's actually a lot of good stuff there.
42:40
And it it comes down to this idea of if if you're trying to raise money for your company and a to through a token, that's fine.
42:47
That should be a security and there should be a regulated way to do that in the US like go register it with the SEC, you know, let it trade on broker-dealers.
42:55
That's that's what we've been wanting to do for a long time and the SEC is taking their time getting there.
43:00
They don't, you know, Gensler to be honest, he doesn't seem that um excited about the idea of this whole industry existing.
43:06
And so anyway, but it should it should exist and it should be happening in a regulated way.
43:10
So if people want to issue a token that's raising money for a company, let's regulate it as a security.
43:14
If they want to issue a token that's truly on a decentralized protocol or it has some other purpose like voting in a DAO or or rewards or something like that, then that's probably not a security and let's be honest about that and allow those things to trade in a different environment, a different regulator under the CFTC.
43:31
We're probably running out of time with you because you said you had a hard stop.
43:34
So let's ask the million-dollar question. Tell us about SPF.
43:37
Like what's who is this character?
43:39
When did you first suspect Yeah, what's your read on the psychology that this wasn't legit?
43:44
Do you think that it was his altruistic intent that allowed himself to convince himself to do this or you think this was like malicious the whole way or what what's your sense of the guy? Hm.
43:56
So again, I'm speculating here.
43:56
I mean I've spent time with I've I've met him a bunch of times and I have to say I did I did not see this coming.
44:02
Like he he appeared to me to be a very bright, credible, competent person.
44:08
Perhaps a bit young, perhaps, you know, a bit reckless at times, but not unethical and not not committing fraud.
44:15
I I definitely did not see that.
44:17
You know, if I look back to see were there any warning signs that I should have thought twice about it?
44:23
You know, one of the things I noticed was that in 2021, you know, Coinbase had a good year.
44:27
We we did 7 billion in revenue, 4 billion in positive EBITDA.
44:30
We went we became public as a company.
44:32
At that time FTX did about 1 billion in revenue.
44:36
And I knew how much money we had for our venture budget and just like different investments we wanted to make and I and I knew their revenue and I had to scratch my head a bunch of times and I was like, "Where is this guy getting all this liquidity?"
44:47
Because he was like buying 9% of Robinhood.
44:50
He was putting like a billion dollars into this.
44:52
He was donating to all these politicians.
44:55
And I was like I I it did not make sense to me where he was getting all this cash.
44:59
People would just kept telling me, "Oh, his market maker Alameda is just printing cash."
45:02
I was like, "Okay, I guess, you know, it seems like a conflict of interest to own an exchange and a market maker.
45:07
That's why we haven't done it, but more power to him, I guess."
45:09
And so I was surprised I didn't speak up.
45:12
I cannot I can't explain the psychology of it at this point whether he's a pathological liar or if he's started off good and somehow under the pressure of this whole thing went bad, but the minute you can you can go watch the interviews.
45:27
He's he's he's lying to people about why he's he's uh you know, a bailing out Voyager and and BlockFi and these and and he he knew at that time that most likely he knew at that at that time that they were not solvent. Alameda was not solvent.
45:39
And so that's where he crossed a major line in my book.
45:43
Yeah, we see it time and time again.
45:45
Elizabeth Holmes, Bernie Madoff.
45:47
I mean once the lie gets too big, you can't get out of it anymore.
45:51
Uh if that's the case, really incredible.
45:54
And the most important thing at this point, Brian, is that the United States makes a decision on do we want to be in crypto?
46:01
Do we want to have a say in this and create a regulatory framework that entrepreneurs like yourself can deal with?
46:07
That is the most important thing to happen in the next year, but you're saying the SEC is not motivated.
46:10
I guess why are they not motivated?
46:13
They're just CYA No, they're motivated now.
46:14
This is a political issue now.
46:17
So they let's hear Brian's answers here.
46:18
What do what do you think?
46:21
out who who did SPF give all this money to because he was touted as one of the future biggest donors to the Democratic Party. Democratic Party.
46:28
want signals, so if you want signals, I would say there was some pretty big signals here.
46:31
Number one, he says he's going to donate a billion dollars to the Democratic Party and he kept touting this like effective altruism whatever, the saving the world stuff.
46:39
Now, why do you need to do that unless you're reputation laundering and trying to buy political protection? Okay.
46:48
You don't think that was a little bit of a signal? Right.
46:51
I'll tell you an I'll tell you an even more explicit signal.
46:53
We he pitched us in that $17 billion round and I did a Zoom with him and after the Zoom I'm like, "This doesn't make much sense, but I'll have my team do some work."
47:04
We did some work and we sent him a two-page deck and we said, "Here are our recommendations for taking the next step."
47:11
One was the formation of a board.
47:13
The second was the creation of dual class stock.
47:15
The third was some reps and warranties around affiliated transactions and related party transactions.
47:21
And the person that worked there called us back and literally I'm I'm not I'm not kidding you said, "Go [ __ ] yourself."
47:30
Was {quote} the response to us. We're like, "Okay."
47:32
So that was the easy decision, but Message received.
47:34
Message received, but I still thought, "Okay, I'll just put that in the bucket of these guys are unbelievably arrogant and smug."
47:42
But Brian, I thought what you thought which is maybe it's because they've print they've created some money-making machine in the Bahamas and so they they have that level of it of confidence.
47:55
You know, I it but then to see this thing to the extent of which is now we're only scratching the surface, guys.
48:02
You know, we're going to find out stuff every day.
48:03
The the next four months going to be crazy.
48:05
But Brian, to the question I asked before about the SEC and what should happen.
48:09
You said I want to pick up on what you said which is the SEC doesn't seem motivated.
48:12
Why is the SEC in your mind not motivated?
48:17
Well, I think you're right that I hope that they use this as a moment to come together and help, you know, local companies in the US being built here to end up in a better place.
48:26
And I do believe, you know, David I think said it's it's right.
48:30
It is a political issue at this point.
48:32
There's going to be a major impetus to get the clarity here in the US and hopefully to help build the companies here in the US that are going to serve the rest of the world and in in every major financial hub.
48:41
So we're committed to building that together with all the regulators around the world and crypto's here to stay.
48:49
This is a temporary setback, but I'm I'm here to keep building and make this thing happen. All right.
48:54
We really appreciate you taking the time, Brian.
48:55
David, you want to get the last Yeah, and being and being so honest. Yeah.
48:59
I was going to say, mean story after story here about, you know, SPF was going to create this billion-dollar philanthropy to, you know, save the world and improve humanity's long-term prospects, number two donor to the entire Democratic Party and on and on and on.
49:13
And like quite frankly, what this shows is you want to know what effective altruism means?
49:18
It means that you steal other people's money while bragging about saving the world while taking a big chunk for yourself. That's what it means.
49:27
There was a research paper in 2011 and this research team looked at drug addicts and drug abusers, 4,000 people, and they found that the biggest addicts had the highest intelligence.
49:38
That you were twice as likely to become an abuser or an addict if you were any kind of intelligent quintile quintile that they were measuring.
49:50
And I someone explained this to me at the time that the smarter you are the more you can convince yourself that when you're doing bad things you're actually doing good things.
49:59
Uh even if you're doing bad things to yourself or bad things to other people that you really may actually care about.
50:04
You can convince yourself that there's some reason to keep doing it.
50:07
He seems like a brilliant guy.
50:10
Uh I think that to some extent he may actually I don't know the guy but he may actually believe that the um you know the the ends did justify the means and he thought that he was doing good for the world and this was something that had to be done in some way and oh it just got a little bit away from me but it's it's still worth doing.
50:30
I think the problem is bigger than FTX uh and I'll say the uncomfortable part out loud and nobody needs to necessarily comment if you don't want to.
50:38
But there were an enormous number of venture firms that talked their their way into just completely doing zero work here.
50:48
I mean and the the tip of the spear is this thing uh who's the guy that works at Founders Fund?
50:54
Bulbulgaris Bulbulgaris Zebulgaris Zebulgaris Dillian Dillian thank you. Yeah yeah yeah.
51:01
That tweet that he had where he basically took the snapshot of the Sequoia transcript was one of the funniest things that I've ever seen.
51:07
I mean this was a $215 million decision and Sequoia documented it and put it on their own website.
51:17
And I think that's an example of something that was happening which is people just looked the other way and didn't even want to do the layer of work.
51:24
Chamath let me just string together a couple of things we've talked about over the past few episodes and I think you'll agree with this point but generally speaking there seems to be a very heavy lack of governance in investing given the amount of capital and the velocity
51:38
of capital in Silicon Valley particularly in private markets of late and a lot of the stuff that's been talked about where last week we talked about super voting shares and the founder does whatever they want and there's no governance and there's no
51:49
board and there's no oversight and particularly with this FTX situation where clearly there wasn't a board that that was you know getting the necessary information that had the necessary influence that had the necessary controls the meta conversation but all of these
52:02
threads tie together the concept that maybe there's a not a lot of governance and not a lot of diligence going on and the amount of money that's flowed into Silicon Valley has allowed a lot of this loosey goosey behavior. And and here's
52:12
And and here's the consequence of it.
52:14
Let's thank Brian Armstrong for joining us.
52:16
I know he's a very busy day and uh what a great uh candid insightful Thanks again Brian.
52:21
Thanks for the candid and insightful.
52:23
Finish with that Chamath.
52:26
I just want to say the second uncomfortable thing out loud which is there was a lot of venture firms in Silicon Valley in this period of both not doing any work or diligence who also took the extra step and actually created classes and would teach teams how to create these tokens.
52:44
Okay and those artifacts those video links and artifacts are sometimes on their website they're still on YouTube they're inside of Twitter.
52:51
And what these folks would do when we talked about this the game that they played was they would get a team they would create a token they would also buy equity at some crazy valuation the equity was locked up but the tokens were not and then they would put them on an exchange and sell them to unsuspecting people and they would be able to dump these tokens.
53:14
And if you look inside of that trend what you're going to see and Brian just mentioned this those were the sale of securities except it was done in a completely unregulated way.
53:23
So if the SEC is really and the DOJ is really going to take this FTT token issue seriously and what happened to FTX they're going to start to look at a bunch of other tokens and token sales and you're going to end up looking at some very well-known venture firms inside of Silicon Valley. Hm.
53:41
This is going to be super gnarly and we talked about it before on this pod.
53:45
There are people who knew better.
53:47
So you get a bunch of kids who are living in the Bahamas in a house and and they're you know winging this thing that's one level of responsibility and they'll go to jail.
53:57
But when we talk about venture capital capital allocators who've been at it for decades to Chamath's point and they're teaching people how to do this and they're hiring attorneys and creating offshore Panama you know BVI whatever uh places to put these coins and then teaching people how to do it and then flipping them potentially th- this is we're just peeling back the onion on this.
54:18
I have a feeling that this is going to be the turning point in all of this.
54:22
guys let's be honest is not the only token that has been engineered by Silicon Valley venture firms.
54:26
And it is also not the only token that's gone to zero that was engineered by Silicon Valley venture firms.
54:34
Well I mean who knows engineered by but yeah adjacent to at the very least Jason there's videos today on some of the most well-known venture firm sites on how to do this.
54:47
Oh wow I'm going to have to see those um so they're basically your your point Chamath is they're instructing people on how to do this.
54:55
And that is a level of culpability.
54:55
It's what it's what it's what it's what they it's what they did.
55:00
Can I ask you guys a point of view on just one big macro philosophical question I'm obviously not big in the crypto world and haven't been but so much of the positioning has been that these networks get decentralized through the cryptographic verification systems that obviously enable uh you know them to operate effectively and truthfully and correctly and without centralized control or manipulation.
55:23
But ultimately while these networks themselves may be decentralized the users point of access often ends up being centralized as a point on the network.
55:32
And it is that point on the network that accrues the same level of influence power control and value as what we saw in the prior centralized network model.
55:42
You know we had Balaji on last year and you know I tried to get to this point with him we had to cut the thing up the show the conversation short but I've still not heard from anyone and I've spoken with Brian separately about this point.
55:54
And and the the the concept I use is like look media if you put all the YouTube videos on on a decentralized network and anyone can access them and they're distributed everywhere you still need to have a really good application and whoever makes the best application is going to get all the usage.
56:08
And then all the users will use that application and that becomes effectively the point of control and influence and value once again.
56:16
And so it seems to me like in this case the exchange was being used as a centralized wallet.
56:21
Certainly you can do you know exchange through the exchange but but mechanistically these guys were storing their coins their crypto currency inside of FTX's wallets.
56:35
I wonder had control over their assets and so the network centralized.
56:38
And so does the decentralized model it's a it's a question I'd love to just ask you guys your point of view on does this decentralized model actually ever manifest where everyone has their own wallet and I know there's all these new protocols and these distributed wallets and DeFi things but I don't know enough. Yeah.
56:55
That would be certainly better But this points out this points out to me just you basically recreated an exchange without a regulator and of course someone ripped you off and it blew up.
57:03
Like I mean how's it any different than what we had in version version 1.
57:04
0 and is there really a model where decentralized works or ultimately because of the network effects and the and the economy of scale answer yeah Chamath answer.
57:13
All right we we got the question. Go Chamath.
57:17
No I mean I have I have I have I don't know the answer to Free Bird's question cuz I don't I don't know this space well enough.
57:22
I mean you know I my my biggest purchase ever was Bitcoin in 2011.
57:32
You know I bought a bunch of these tokens that have massively depreciated in value.
57:36
I think lots of investors have.
57:40
You know I kind of fell into it as well like I thought wow this is incredible I get to buy these tokens they do all of this cool stuff they represent all this value and my experience has been the opposite of that.
57:50
I've lost a lot of money in these things.
57:51
Um and so you know I really hope that regulators not just obviously I hope that regulators do their do the best they can to get investors money back in FTX but I really also hope they figure out all these other tokens as well because you can just rank them in terms of market cap start at the top and work your way down and you will see that these were unregulated securities Jason that were manufactured and sold by our brethren.
58:22
People who understand the law around accredited investors and this stuff very well. Yeah.
58:28
They understand it implicitly.
58:30
Yeah do you guys think crypto investing uh is dead or what do you think how do you think people think about that risk profile now inside of I think that investing in the tokens is going to end investing in the corporation is going to begin and any of the tokens are going to be super regulated.
58:45
Building on what you said Chamath about the ultimate bet is it possible that Alameda the trading hedge fund was looking at the FTX data which they had insights into and essentially that's the same as seeing the whole cards in the ultimate bet and so they're making their trades based on what they see the consumers are making their trades front running their trades or otherwise illegal.
59:05
You know Citadel does this in the regulated market.
59:07
That's what payment for order flow is. It's Right.
59:11
It's the ability to front run retail volume and so you know in dark pools that is legal by the law in the United States and that's what allows Citadel and you know I think Jane Street and Susquehanna you know all these folks basically run these dark pool exchanges for regulated securities like options and bonds and and stocks and they get this order flow and they front run it by a millisecond and they they just take small vig, okay?
59:39
But they can't print the FTT tokens and then otherwise manipulate the market to the level that I think SBF could.
59:45
I just think that there's there's there's these really uh strict walls and segregation as you heard Brian talk about when you have those businesses in these regulated markets.
59:54
The problem here is that this is totally wild west.
59:58
unregulated wild wild west so who knows what's going on really?
1:00:03
And we're pushing the business acts off of the shores of the United States as he said 95% of this is happening offshore.
1:00:09
What do you think should happen regulatory-wise Sachs in terms of America and competitiveness or do we not to be need to be competitive in this No, I think we should be.
1:00:17
I mean what if what if crypto is in DeFi is the future of finance?
1:00:21
I mean it's an important technology that I think we should enable through some sort of constructive regulatory framework.
1:00:27
I think the regulation Let's I think the regulation should listen to Brian and help come up with a appropriate framework.
1:00:32
But to be clear look what Sam did is way worse than people going on an exchange and speculating.
1:00:39
I mean look I I think that people who speculated in the buying and selling of these tokens they're they were using it like a casino, okay?
1:00:47
Like that's different than a customer putting their money on FTX and having their money get stolen.
1:00:55
That's the big difference.
1:00:55
So I think there's levels here.
1:00:56
Now Chamath to your point about who's minting these tokens you're right that's like another category.
1:01:01
But I do think that the reason why this is on a different level is because it wasn't Sam's money to give away.
1:01:12
There is such an easy solution to the regulatory market.
1:01:14
I'm just I'm I agree with you on that point but I think don't underplay when there's an organized process to create an illegal security with special rules for them that allows the liquidity for one class of asset and not liquidity for others. right.
1:01:31
So that's a separate bucket.
1:01:31
I don't think it's the same as what Sam did and I don't think it's the same as I agree.
1:01:37
No, I'm saying the same thing that I agree with you. I'm saying it's a grift.
1:01:39
That's something that needs to be looked at and we need a constructive regulatory framework for that.
1:01:42
There is such a simple silver bullet for all of this which is these things need to be there needs to be proper governance.
1:01:52
People have to have skin in the game, insurance, people signing off on the taxes, boards not onshore here in the United States and then we need to have and I'll just keep saying this a way for Americans to become sophisticated investors.
1:02:04
Only 6% of this country fall into the qualified purchaser and accredited.
1:02:08
If you want to trade in these things or you want to trade in NFTs or private companies we should have a driver's license like test, a firearm like test I are on the same side.
1:02:19
test and let people opt into it with an education.
1:02:21
The problem is when you have guys like this it sets that desire back by a decade if not more. Okay? Because sucks. I agree.
1:02:29
Because every single every single person inside of Washington right now who's anywhere near this from a regulatory perspective or a policy perspective is meeting on Monday morning and the meeting topic is how do we defend the mom and pop folks that lost money here? Yes. That's the only thing.
1:02:49
So we took this out of you know cuz I I remember I remember I texted into the group chat hey guys what what what do we think the the legal ramifications are that drive prosecution and one of our friends said legal ramifications these are political ramifications which means that this is going to go to the utmost level and it's going to have the most scrutiny and they're going to act really quickly.
1:03:10
They're going to drop the hammer instead of having a path to accreditation.
1:03:13
I agree with you they're going to drop the hammer because their constituents and grandma and grandpa or some people put their college education to some lost everything. We just need a test.
1:03:22
Let people prove they're sophisticated and let them participate while and only if they get a license.
1:03:27
haven't you been a proponent for letting people invest in startups that are just mom and pop and and democratizing access?
1:03:34
I'm only allowed to do that with accredited investors.
1:03:36
I would like there to be a test and I actually teach a course at Angel University six times a year for charity. I do it for charity.
1:03:43
It's a four-hour course where you learn about diversification.
1:03:45
You learn about the asset class.
1:03:47
You learn about 70-80% go to zero.
1:03:50
We teach you about the power law.
1:03:51
I try to teach people about this stuff so that they can participate intelligently.
1:03:55
It would it would be the equivalent for you Burke and thank you for asking the question.
1:03:59
The it would be equivalent if we had a poker test and to play in the World Series of Poker you had to go to a five-hour seminar and you had to take a practical test and you had to say, you know, a flush beats a straight and you had to just prove that you had some level of knowledge of how to play the game.
1:04:12
It's such an obvious path to removing these problems while staying competitive as a country and instead we're letting people do this offshore like CZ with no rules or whatever rules he chooses. It's just infuriating. It's so stupid.
1:04:26
Our politicians in Washington are so dumb.
1:04:29
Can I just say something?
1:04:29
I think the challenge is there's always a spectrum of understanding and you'll always end up seeing the people on the wrong end of the spectrum getting taken advantage of.
1:04:39
There's this notion of adverse selection.
1:04:40
Distributions are not equal.
1:04:43
People will end up um you know, kind of opting in to spend money on things or making investments that they think are good investments but they're actually getting taken advantage of because they're not savvy enough or they miss an important angle or important perspective about the person or the thing that they're giving their money to.
1:04:59
And there will always be some number of those and the way that regulation has worked historically is not by first saying, "Hey, let's figure out the right way to create a framework for operating."
1:05:07
It's that some sort of people got advantage.
1:05:09
That story then becomes the regulatory framework and that story has repeated itself for 500 years across capital markets.
1:05:15
We're talking about a multi-layered thing here.
1:05:17
We want to see crypto have a framework.
1:05:19
We want it to blossom here in the United States and then there's multiple level of people who are um causing chaos in this ecosystem in this very promising technology with their goddamn grifts.
1:05:31
Whether it's VCs grifting or SBF or incompetence uh we just need to clean this framework up.
1:05:36
If people sometimes people I understand in DC listen to this podcast.
1:05:40
If they're listening it's essential that America be competitive here.
1:05:44
It's essential that everybody participate in risk capital and get educated.
1:05:47
Let's clean it up and make a framework that allows all Americans to participate and educates them and then stops these grifters from doing stupid things.
1:05:56
If people were educated that's the first step. And it's the best step. the economy? Sure.
1:06:02
You want to talk about Facebook with the 11,000?
1:06:03
You want to talk about the uh market popping?
1:06:07
the beginning of October I think what we basically said kind of generally speaking is markets up, right? Markets up.
1:06:14
nibbling to being constructively positive and basically being positioned long.
1:06:18
Here's this really interesting setup.
1:06:22
We have a bunch of very positive news that I think we all have to process.
1:06:27
First positive news was that inflation ticked down.
1:06:30
Now here's what I'll tell you there's a caveat here.
1:06:32
I talked to a bunch of pretty smart sharps on Wall Street and oh two things.
1:06:36
Number one is they all gave credit to David Sachs and they said Sachs was totally right double dip recession is coming.
1:06:42
But then they said tell Sachs that we think that these are the sharps.
1:06:47
We think that there's a double hump in inflation coming.
1:06:51
Which means it's coming down to come back up and there's a bunch of reporting vagaries that may cause that.
1:06:56
So keep that in the back of your mind but positive news number one is inflation ticking down.
1:07:02
Um number two Jason, we talked about this.
1:07:06
Uh a federal judge basically stayed Biden's attempt at giving student loan relief.
1:07:14
Now that would have been a $500 billion transfer payment from the government into the hands of individuals.
1:07:22
It is deflationary to not put give that money to people.
1:07:24
It's effectively taking stimulus away from folks.
1:07:26
Number three it looks like we're headed towards a split government which means that um we are not probably going to see any more stimulus over the next two years.
1:07:38
Number four uh Ukraine wins in Kherson.
1:07:42
I hope I'm pronouncing that right.
1:07:44
Number five, the United States uh announced yesterday through the Wall Street Journal that they had essentially said no to Ukraine's request for advanced drones.
1:07:54
And they said to Ukraine essentially you need to go and negotiate an end game here.
1:07:59
And number six China has started to relax its COVID policies and G is pivoting to economy first.
1:08:06
So if you took all of those things seven. Don't forget seven.
1:08:08
Facebook which would not take the medicine.
1:08:10
They refused Brad Garlinghouse's letter.
1:08:14
Cut 11,000 people 48 hours ago.
1:08:17
I don't I don't think Facebook matters that much to be honest with you.
1:08:19
Well, but it matters that big tech is and they're taking to us but it it doesn't matter to the economy to be completely honest.
1:08:25
I think it does if people are going to start cutting jobs but okay, keep going.
1:08:29
My my my point is these seven things are macro level things that affect everybody. Yep.
1:08:31
And I think if you take them together what it says is that wow, there's there's the potential for a lot of great positive developments over the next six or nine months. Mhm.
1:08:40
And I don't think that that was adequately priced in the market.
1:08:43
But here is the problem and this is what's why we've been rallying.
1:08:48
The problem is that most of this rallying has been because of a bunch of short covering by folks that who were pretty pessimistic and negative after the last few inflation prints.
1:09:00
So this is not really net new buying that we saw over the last couple days.
1:09:05
So you take it all together I'm like it's still going to probably trend up a little bit.
1:09:10
But then again, you know, we talked about this Jason when the VIX gets into the low 20s or the high teens that's probably the short-term top and then it turns around and unfortunately we're here Yeah. the low 20s high teens.
1:09:24
So that's kind of my thought on things right now.
1:09:26
Okay, Friedberg any thoughts the inflation print?
1:09:27
Yeah, so I think there's two things, one of which I'll give credit to a guy named Carl uh Chu.
1:09:34
Uh I hope I pronounced Carl's name right. He's from William Blair.
1:09:36
He puts out these excellent research reports.
1:09:39
And we used one of his graphics a few weeks ago, so I put it up here.
1:09:41
And basically he showed that with the the Nasdaq move that we saw this week, so you can see this here.
1:09:46
He basically tracked the move in the 10-year Treasury against the the one-day move in the Nasdaq.
1:09:53
And uh he said that it really indicates a unique sentiment shift, whereas in other times you've seen big moves in the Nasdaq that weren't really seeing significant moves in in the Treasury rate at the same on the same trading day, and that this is such an outlier what happened uh this week.
1:10:11
The only other time that we've seen anything like it was when the Bank of England issue happened back at the end of September in the last, you know, 20 times that we've seen this big of a move in the Nasdaq in a single day.
1:10:23
And so we saw a 31 basis point move in what, a seven-point move in the Nasdaq.
1:10:29
So he said because you don't normally see the bond market and equity market trade in this way together, it really speaks to a big shift in sentiment.
1:10:36
Now, And what is that what is that shift in sentiment?
1:10:41
That there is going to be less of a driver for the Fed to raise interest rates at this point because it seems like the inflation print indicates that inflation is coming under control faster than what folks had otherwise anticipated.
1:10:52
And so there may not be as many rate hikes as quickly as folks were anticipating, which will, you know, benefit benefit equities.
1:10:59
And then the bond market traded that that with that perspective as well.
1:11:04
Now, the counter narrative, which I just put a tweet by a guy who I've never heard of before, but someone shared this with me, his name's Gordon Johnson.
1:11:10
And he said the CPI surprise may actually be due to a technical print that within the CPI, one of the biggest indicators is health insurance cost.
1:11:20
And you know, it the the health insurance cost plunged by 4% October to September.
1:11:28
But he says healthcare costs didn't actually magically collapse.
1:11:32
There was just an accounting difference in how they're shifting how they're accounting for healthcare costs that that took place during the month.
1:11:38
And if you did not if you assume that that was flat month over month, you would end up actually with a 6.
1:11:45
7% year-over-year print, which was higher than expected.
1:11:48
So there is a counter narrative going on in the market.
1:11:51
I don't know how significant this guy is or how much of a voice he has, but I don't know if we're out of the woods yet, but some folks are saying that the market is saying we're feeling a lot better, but there are still analysts that are indicating that maybe there is still risk to be had ahead of us.
1:12:06
I think the sharps tend to be on that second second perspective. Yeah.
1:12:11
And by the way, I'll say this week I heard five and a half points even after that print, so it is where we're going to get to.
1:12:16
I think consensus we have here is is that we're in the end game now, maybe what, two quarters, three quarters, four quarters of choppiness?
1:12:23
Chamath, what would your gut tell you if you I I've been telling all of our startups that you need to plan to have money through the first quarter of 2025. You must Whoa. Yeah, okay. must.
1:12:37
And the the way that I of cash. Okay.
1:12:40
that I frame that out to them is nine.
1:12:43
Yeah, eight or nine quarters of cash. Ideally nine.
1:12:48
And the reason is that we have all of this positive news in the offing, but but the but the problem is again, there is still a lot of risk to the downside.
1:12:57
We haven't seen David's second, you know, dip in the recession, right?
1:13:01
So that double dip is going to be expensive.
1:13:03
And again, the sharps think that inflation will come back at some point in the next 6 months.
1:13:10
That will keep the Fed's foot on the gas.
1:13:12
Maybe it's two or three more 50 basis point hikes.
1:13:15
The point is, Jason, you could be at five and a half, again, we said this last week.
1:13:18
We're going to get to a point that's probably higher than what people expect.
1:13:22
That's probably around five and a half.
1:13:26
And we'll stay there longer than people want.
1:13:28
That's probably through the middle part of '24.
1:13:32
And if you don't prepare for that worst-case scenario, you're doing yourself a disservice.
1:13:36
I think the market can start to rebound in the second half of '24, but if you're a company, you need to balance and and plan for the first quarter of '25 because, you know, again, most venture investors are going to want to see 6 months of data on the ground that things are better before their sentiment changes. Yeah.
1:13:54
Um and we're just starting to see the drawdowns.
1:13:56
We're just starting to see the impacts in people's portfolios.
1:14:01
That will drive behavior change.
1:14:03
I mean, this SBF thing is the tip of the iceberg in terms of the money at risk.
1:14:10
You know, I went and by the way, I did an analysis.
1:14:11
I shared it in the group chat.
1:14:13
Hopefully we can show this up. Brad has a little chart.
1:14:15
Nick, maybe you can throw up the the the historic drawdowns.
1:14:18
So for people that care about early-stage technology, since 2018 through 2021 and including an an estimate for 2022, we have injected $1 trillion into venture capital.
1:14:39
And if you look at historically how money has been lost in periods like this, and you layer that into 2018 to now, what it basically tells you is about $500 billion of that trillion from '18, '19, '20, '21, and '22 is going to be destroyed.
1:14:59
We haven't even started to see that yet, right?
1:15:02
And then if you factor in another hundred billion or so from older vintages, we're talking about a six hundred or seven hundred billion-dollar destruction of paid-in capital.
1:15:14
So there's still, for all the good news, there's still a bunch of these unfortunate pieces of bad news that have to work its way through the system. Yeah.
1:15:21
And for people who are looking at the chart right now, and you can see the charts on Spotify or if you search for All-In on YouTube, we have a video version there.
1:15:28
You just take a look at 1997, that the peak TVPI was, you know, seven and a half X, seven and a half times, you know, cash on cash money.
1:15:35
And what actually got realized was five X, right?
1:15:37
So what paper said and what got distributed were two different things.
1:15:42
Anecdotally, what I'm seeing in the startup world, Chamath, is people are taking the medicine and a lot of people are shutting their companies down.
1:15:49
They're giving up on raising money and then asking me which portfolio company can I get a job at because I on my personal balance sheet have been, you know, taking a 5K draw a month and I had I have two kids. I need a job.
1:16:03
Can you get me a job at Amazon or another portfolio company?
1:16:08
And a lot of acquihires have started to happen.
1:16:10
And so what's happening is the consolidation of talent.
1:16:12
People who would be a great number three or four person, but maybe they weren't suited to be the number one person, are now consolidating into startups.
1:16:20
With these layoffs at Meta and other corporations, we're starting to see very talented people who had peak comp of 300, 700K a year are going to go to startups or going to smaller companies.
1:16:32
And and that is also positive.
1:16:34
More consolidation of talent, stronger companies.
1:16:36
Did you guys hear the story yesterday that Nick, if you could just leave out the name, told about his friend?
1:16:43
His friend basically makes $140,000 working for a tech startup and then also makes $280,000 working for Meta.
1:16:52
And so and he's been working at both of those companies virtually for the last 2 years.
1:16:56
The guy makes 400, 450,000 dollars a year and nobody knows and he says he works about 20, 22 hours a week. On both combined. So the 80 hours.
1:17:03
And and remember, when we started in startups in the late '90s and into the turn of the century, the number of hours that was expected at a startup was what, Sachs, when you were at PayPal? a week, I would say. 60, 60 to 80.
1:17:18
That was expected baseline. Yeah. That was baseline, yeah.
1:17:20
Baseline 10 hours a day plus coming on the weekend for a couple hours. Yes. Yeah. For sure, easily. He probably more. Probably more.
1:17:27
Early days of Facebook, our our our executive management meetings wouldn't start till 9:00 p. m. Yeah.
1:17:34
Well, I mean, I think Elon's going to be a trailblazer in a lot of ways on this Twitter thing.
1:17:39
You know, first he did the big headcount reduction, but then he also just this past week said everyone needs to come to the office.
1:17:46
And if you don't come to the office, you you don't have to come to the office if you have a good excuse.
1:17:48
If you're an exceptional performer and you've got a good reason, then you don't have to, but the baseline is everyone comes to the office.
1:17:56
By the way, just to put this point into focus, Nick, can you just throw up this chart for these guys to see cuz I think it's just ridiculous.
1:18:02
So this is basically what we're dealing with, which is like if you look at and these are just a couple of examples, but this is Meta, Amazon, Snowflake, DataDog versus Gilead, Raytheon, and Exxon.
1:18:14
What is the point of this?
1:18:14
The point of this is just to show you that we have had a massive rotation away from our industry is the point. Right?
1:18:20
Where normally the things that we would work on were just so well received by so many different kinds of investors that unfortunately just isn't the case anymore.
1:18:32
And I think it just goes to show you that the reason why this is happening is because people are hedging their bets about how long the economic pain lasts.
1:18:42
That's why, you know, they'd rather be long healthcare stocks, you know, industrial defense companies, and oil companies.
1:18:48
Because at the end of the day, they're banking on oil and war and sickness of, you know, versus social media and e-commerce and SaaS software.
1:18:59
And if we look at this chart, just No matter how good, by the way, so this is not an indictment on these companies.
1:19:02
Go watch the the prediction episode from last year.
1:19:05
I think that was the prediction episode.
1:19:06
Yeah, we you and I nailed it on crypto.
1:19:08
We both said crypto was going to crater.
1:19:09
These four horsemen here, DataDog, Meta, Amazon, Snowflake down 23 to 27% and then the Gilead, Raytheon, Exxon cohort 8 to 28% up.
1:19:18
I think, Chamath, what this says also is we don't think your management style and how you're running these businesses is appropriate for this moment in time.
1:19:31
Please consider uh some austerity measures and some thoughtfulness in how you treat shareholders vis-a-vie Well, I mean, I it's just watching the number uh you know, how people are running companies, I think we took it too far in Silicon Valley. We took it too far.
1:19:47
Whether I don't know, Jason.
1:19:47
I I I know that I know it's sort of a pet issue of ours because we have to deal with some incredible hubris and arrogance sometimes on the boards of these companies because folks don't want to listen to to reasonable advice and we come off as wet blankets.
1:20:03
But that chart, to be honest, is is because of what we explained last week, which is the when rates go up the value of a dollar that you earn today is just meaningly meaningfully more worthwhile than a dollar that you may earn even two or three years in the future.
1:20:19
That's why that chart looks the way that it does.
1:20:21
And if you believe that David's forecast of a double-dip recession is accurate, which again, most of the sharps do, and then you also layer in this idea that inflation could come back you have to be really defensively positioned.
1:20:36
You know, you can't take a lot of risk, which is why startups have to expect that if that's the dynamic and 600 billion dollars is going to get destroyed in venture capital portfolios how open are VCs going to be for business?
1:20:51
They're probably not going to be that open.
1:20:53
And so you have to plan I think for the middle for the early part of 25.
1:21:00
Uh if Amazon and how do you get incremental dollars in these tech companies?
1:21:04
Amazon does a riff, some austerity measures, they raise prices a little bit if they can.
1:21:08
You know, maybe you see more incremental dollars coming today.
1:21:12
And maybe that incentivizes people. Look at what happened.
1:21:13
Uh we were at $89 for Facebook shares last week, Chamath.
1:21:19
When he made the riff 107.
1:21:19
He went up like 15, 20 dollars. What does that tell you?
1:21:24
I mean, I think it tells you that a lot of people were short going into that and they were probably caught offside a little bit by the magnitude of it.
1:21:29
I think that that's good.
1:21:33
The The issue that a lot of these companies have even in the face of riffs is that you have to reset expectations now on earnings.
1:21:42
And if you do that, the problem is that when you flow that through to what people think the S&P will look like in a year there's some real issues.
1:21:51
So this is not free, you know.
1:21:54
It's really hard trading.
1:21:54
And I just I would I would just encourage people.
1:21:56
It feels wonderful to have a few days of like it's like a respite in the middle of a huge storm, right?
1:22:01
It feels like we've been getting whipped side back and forth and it feels nice. The sun came out. The sun came out.
1:22:08
I would just really encourage people in this moment to to reset your energy, which I think is good.
1:22:12
But you got to go back into that office and you got to find the money and the wherewithal, I think, to last through 24 if possible. It's grind time.
1:22:21
Facebook, by the way, is up 27%.
1:22:27
Eight 24 months is the new Yeah.
1:22:27
Eight quarters is the new six quarters.
1:22:32
And by the way, you know, the thing that employees need to do now in this moment is to hold the management teams of your companies accountable because in those Q&As, hopefully you're not just glad-handing talking about [ __ ] you actually go and ask the question, how much money do we have?
1:22:45
What decisions are you going to make to get this company to be, you know, in a position to survive?
1:22:50
That is really what's at stake here for the venture capital industry.
1:22:55
It's just survival of as many of these companies as possible through these next two years.
1:22:59
The conversation has to shift from like culture and features to like the bottom line and grinding it out and just proving it to Wall Street and to the investment community that your business is worthy of investment.
1:23:13
As you're saying, the dollars today matter. All right.
1:23:14
Yeah, it's been a crazy week.
1:23:16
Thank you to David Friedberg for showing up.
1:23:19
Unfortunately, no time for science corner.
1:23:21
Apologies to the Friedberg stans, who are many.
1:23:22
And we'll see you in the YouTube comments.
1:23:25
For the dictator himself, Chamath Palihapitiya, with just a wonderful sweater going into the strong November, strong showing for November with that purple sweater.
1:23:33
I don't know if it's mauve or purple, whatever you got going there, looks wonderful. Thank you.
1:23:37
For team Monclair the sasshole himself David Sacks.
1:23:43
People don't understand what you're saying when you say that, Jason.
1:23:47
Oh, they know you're an [ __ ] Uh they they're perfect I think you're saying.
1:23:50
They don't know or understand that.
1:23:50
Oh, they don't know that we're adding the sass to it.
1:23:52
Yeah, so uh David also is a great executive in software as a service in addition to being an [ __ ] So you put the two together and you get sasshole. No, I'm just joking.
1:24:00
David's a wonderful person.
1:24:02
People are really excited that you and I are friends again. It's a amazing moment.
1:24:09
That was your chance to make a joke, Sacks. You missed it.
1:24:10
I threw it up there for you.
1:24:12
I threw up the softball for you.
1:24:13
You didn't say you know we're not friends.
1:24:16
All right, we'll see you all next time. Bye-bye. Rain Man David Sacks.
1:24:26
And I said, we open sourced it to the fans and they've just gone crazy with it. Love you, Sacks. My queen of quinoa. Besties are back.
1:24:41
That is why dog taking a piss in your driveway, Sacks.
1:24:49
You know, y'all just get a room and just have a one big huge orgy cuz they're all just useless.
1:24:52
It's like this like sexual tension that they just need to release somehow. Wet your big feet. Wet your beer feet. Wet. We need to get merch. Besties are back.