hey everybody Welcome to episode 125 of the all in podcasts on a historic day we're taping 420 really excited that SpaceX was able to launch Starship and it made it off the launch pad and Incredibly successful today day today we have of course with us the Rayman David sacks the Sultan of science David Friedberg and of course the dictator tremath polyhapatia but two special
guests are here special guests Gavin Baker from a tradies how do you pronounce it a tradies house of tradies House of tradies if you know Dune and then SpaceX board member Antonio gracias one of the First Investors in SpaceX Antonio a big day for you maybe you could just tell the audience what happened today why that is so important in the history of this company well first I want to thank you guys for
letting me uh come on and have a little chat with you about this today was extraordinarily important for for SpaceX I think for America and for Humanity and the Starship is the realization of the vision hat Elon had 20 years ago 25 years ago even as a child really to to go to Mars and the engineers here at SpaceX and on the entire team working extremely hard
or really just to get this this vehicle off the pad Asiana said right this is a brand new vehicle everything about it is new so the engines the material science the structure the design all of it new and the most important thing here was to get off the pad so we acrylic data and this technology platform is the platform that allow us to go to Mars so from a non-engineer standpoint why this is
important is that what we've proven with this flight we got past a point called maxq which is the point at which the vehicle takes maximum stress that's how I think about it I'm sure Engineers would tell us a lot more description to it or David Friedberg give you a better script to it but it's the most funnest rest in the vehicle which means this vehicle will get to orbit
and this is the vehicle that's going to take us to Mars so today's the day that all of the hard-working people at SpaceX accomplished a goal of making the human race space fairing when we look back in history I believe this will be the day when you mark the the technological development that we broke through and built a vehicle that could actually go to Mars now when we look at it obviously
it didn't make it to orbit maybe you can give some context into what is the typical life cycle of a new rocket ship coming out the Falcon the original one has done I think 224 missions 222 of them successful I think 160 or so actually landed themselves yes and so you had two or three mulligans I think in the development of that maybe two actually so what can we expect here when are they
going to stack and rack and launch the next one Antonio let's see what's the timeline here to getting to orbit what would we expect versus some of the other projects that we've seen like the Russian Rockets so look this is um a brand new vehicle and whenever we develop brand new vehicle it takes a long time development you know my understanding all this is as again a Layman and sort of as a board
member non-executive year is it it'll take at least called two or three months two or three months to really get the pad rebuilt and get another vehicle back on for testing uh maybe longer but it's really important to note here that we've gotten sort of used to the idea that SpaceX launches rockets and all these Rockets come back and all those vehicles are stable because the
Falcon 99 heavy are so stable and they're so well engineered and they're amazing vehicles but the most reliable vehicles on Earth in human history this is a brand new vehicle this was a huge win I mean it was an enormous room for the company an enormous room for the country just getting it off the pad and collecting the data and now we know it works we just have to get it stable now get up to orbit
so it's it's really it's it's a hard problem but it's a soluble problem from here and the the we learned here is that this vehicle does work amazing can you guys talk about like the impact of this vehicle cost to launch payload like the big metrics that are that kind of help realize that outcome govern I think I saw you did a bunch of really good tweets on this you shared some of the metrics that
I that I thought were really succinct and really helpful yeah sure so when this is I think it's a long road to full reusability um you know the first step will be CCA Zilla catching the booster doesn't it doesn't have uh legs like the Falcon 9 and then the second step will be landing the Starship which is really hard but once you do that they should be able to send over a
hundred metric tons to orbit at a variable cost of under two million dollars per public data this these are public statements I would never confirm or deny those damages this is Gavin's map on the back of the envelope two million dollars is the cost to get 100 tons into orbit that's that's the the metric variable cost variable cost so but I think the point gav is making if I might just play
that is that it is a step function change it's not like a small change it's an enormous change right can you compare that to the numbers before for folks to understand the Falcon 9 Mass to useful orbit is 17 metric tons and the variable cost that you know I I have seen Elon tweet about is somewhere around 15 million dollars so you are lifting more than five times the mass to orbit
and based on other statements at 100 metric tons is a very conservative estimate and you're doing it I'd call it 10 to 15 of the cost so this is a you know we can all do the math but we can envelope it um you know roughly a 50x huge change in this you know massively changes needed economics for starlink for sending anything into orbit and as Antonio said it's it's great for
SpaceX it's great for America and it's great for uh for everyone we have the humanity is great for Humanity can you explain how that then translates into going to Mars so now we can get 100 tons into orbit for two million dollars what happens next in terms of like how that payload capacity and low cost enables you know full transport to Mars and you know I know that the timelines are
tough but it would be super helpful to just to translate the orbit concept into the let's go to Mars concept it's important to know that like the size of this thing it gives a sense of scale is the Interior Space of it is the size of the International Space Station so it's a huge amount of time I just think about all that's going to take to get to Mars right you gotta you have to
lift a payload into orbit you have to you know create a base either on the moon or or in um it's orb in the earth to actually refill ships and send them out into space and this same design will scale up to become the Mars Colonial transporter reverse similar design that's why it's important and look the timeline that I don't know I'm hoping that it will be um well I am still able
to go that would be great if is it able to go but that's really why it's important think of this as a small version of the same vehicle we will actually use to go to Mars and then all the stuff you have to transport to orbit it becomes more economic because as Gavin just said we've had you know 50x kind of reduction in cost can I ask you another question sorry I don't mean to monopolize the questions
but these are things that I think are like super important questions but that a lot of people often ask or I hear them asking but what happens with the space industry in the nearer term so there's this great long-term goal get tomorrow that's a that's a big project but it'll certainly be funding I'm sure to run that project but what other economies now emerge as this this cost
down of 50x happens and what else do you think happens besides you know Communications and starlink obviously there's that's already a pretty scale business what other markets can develop here in the near term what other economies do you see happening as a result of this costume yeah I mean look having to jump in here too but the reality is once you can take that much Master orbit you can move anything
around the planet very quickly you can kind of go out but or spin below even come down so Transportation generally changes you know if you want to fly to Tokyo from New York City it goes from being you know a day trip to a matter of hours it's extraordinary or a container chip in a couple hours kind of yeah everything that's rapid transport around the earth you run a package around there
everything gets faster Kevin yeah there will be no more trans-pacific or transatlantic cargo flights I think in five six seven eight ten years you're gonna need a big Starship Fleet to accomplish that but I think the um transatlantic and trans-pacific Aerospace cargo routes go away so transmission Logistics I think is a fundamental change human transport fundamental change
um and then there's all the knock-on effects of buildings kind of Technology look the space program the American space program that took us to the moon created the cell phones we use right I mean there's so much the chip designs all the technology came off of that the same kind of effects We Believe will happen here so it's hard to predict but it will be a lot of great stuff well
that's kind of the point when you can get payload up there now entrepreneurs can think of a million different crazy ideas and affordably put something up there whether they want to mine an asteroid or they have a science project now a thousand flowers a million flowers can bloom and then entrepreneurs can start thinking about it and that's already happened to a certain extent
with Falcon yes that people are able to come up with great ideas well I have to say and the inspiration it provides it does it's amazing to be here and feel the inspiration and the just the dream I think that's what I was going to ask you about if you know as we wrap here with YouTube if you could if you could take people inside mission control which were privileged enough to be in
the sense of history and the feeling in that room if you could describe it for the audience what those Engineers were feeling and what you in fact felt at that moment Antonio so I would start by juxtaposing with Monday so we were here Monday we're here Monday and Monday I think there was a real sense of concern you know the the countdown stopped around 10 minutes the vehicle we had a valve failure and without got
stuck open basically and uh we had to stop and and kind of regroup and by the way from my perspective that's like a solid success because the vehicle did not get destroyed in the pad yeah which is like the number one thing to have happen here the second and so that was kind of Monday and I think Monday was um yeah caution and intensity it was it was a very intense very intensity can
this will this will this ever happen when will it happen yeah today what I felt in that room was a sense of um there was a high sense of intensity a high sense of focus and also a sense of people were excited there was an excitement about it it felt different today it felt more electric today they were super focused but you could feel the exam in the room they believed
it was going to happen they thought it was highly probable and that it was going to work and when it did work I would say it was a sense of elation and joy and just you know this is this is 20 plus years of work and you know Elon was in the room with the engineers and it just sing him light up seeing the joy that he felt seeing the joy the engineers felt together for me and I haven't been a board member here
in investor for a long time and sort of been a bit along this company and scene develop it it brought a real sense of of Hope yeah for what's going to happen to this country and what's happening to humanity and and it's such a joy to my heart yeah Gavin do you have any emotional feelings there when you watch it you want to add yeah well I think it's also just what I
had what always strikes me when I'm here is this is a Sandy spit of land there was no power no electricity no potable water you know no sewage no utilities nothing and out of this you know Sandy spit of desert you know on the Gulf of Mexico a extremely talented group of Engineers the last five years have lived in you know these these airstreams you know a long way from a major city
and it is it is just an amazing place to visit and you know the sense of commitment and when you talk to anyone at SpaceX anyone here at Starbase you know what are you trying to accomplish make Humanity multi-planetary species yeah get to Mars so just the experience of visiting star base is amazing second I'll just say launches are very visceral it's shocking
if you have not experienced one the ground shaking yeah feeling your chest you feel it in your feel the yeah yeah you feel your body shaking like an earthquake yeah but it doesn't stop and it's incredibly dramatic you know the rocket it's going so slow at first and then it accelerates and then you hear this enormous crackling noise that's you know louder than any concert louder than any you
know Sports Stadium you then a blast of hot air hits you you feel it and I would I would say a lot of people at launches cry it's a very emotional experience often for people who are who are not yeah it's hard not to get emotional yeah I think just the human beings can accomplish something like this is amazing and then what I would just say is you know there was the rocket flew for
four minutes it went through Max Q it went to 39 kilometers the Soviet N1 which was comparable rocket only reached 12 kilometers like the team was ecstatic yeah um The Joy on their faces to be cheering I've never seen anything like it yeah it was awesome it was very inspirational and I felt very uh very grateful to be there yeah um incredible yeah okay with one thought of what I'm thinking right now
yeah the after effect the after effect after glow it's just it destroys into gratitude I mean there has been so much sacrifice here and we have witnessed it over 20 years from from Elon of course and the amount of just you know unbelievable worth going from him and the entire team at SpaceX is Engineers everyone works here yeah it's been extraordinary and it just really I'm just deeply grateful
incredible and grateful to you all for having us on thank you uh incredible it's great to hear that perspective because you would not have gotten it from off the Twitter feed you know from the mainstream media David if you'd come here with us you could have gotten yeah David you were invited you were invited you almost we almost shame everything from Miami so it's a
new term called as opposed to Shanghai we're going to Shanghai and Starship you we're gonna Starship you next time yeah I'm bummed I couldn't be there but I'm excited to see how excited you guys are and just the point I was making is that when I was reading the mainstream media coverage of this it was almost like ghoulish it was like a type of Glee it was almost like I said that the
rocket blew up but they didn't they didn't really mention any of the things you're mentioning I mean from the point of view of the people who are there it was a Triumph and it was exciting because of the data that was collected and the fact that this rocket even got off the Earth for four minutes but the media never really conveyed that so thank you for giving us perspective that you just
would not have gotten today from The New York Times or other mainstream media and just to add that just a little bit of context you know this is an inner design process with rapid Improvement this Starship had 31 engines that were made over the course of one year had different tolerances behaved unpredictable unpredictably you know this was far from the best Starship the one that's going to launch
in three months or two months or four months or five months or whatever it is they've already made over a thousand discrete improvements to it and that was before they got all the data for today and then there's a Starship after that and after that so I think it's it really is a the with the mainstream media just failed to understand is the process under which a
new rocket platform is deployed and how revolutionary this is they they are iterating at a speed here I don't think people can comprehend I mean honestly that's important they don't care and it was a way to paint somebody who they dislike and they are threatened by it a negative light the front page of the Wall Street Journal says spacex's Starship explodes shortly after launching uncrewed test
flight if you take Antonio gracias's explanation which was articulate and transparent and fair and this headline you could not be more further apart on the spectrum of the truth Antonio just said that this is a date this is for the audience of which there are millions of people now Antonio said this is the day that you look back on when we are multi-planetary as this Cambrian moment if you will this
incredible point of innovation and human Ingenuity and teamwork and sacrifice you know Gavin said it as well just giving up five years of your life to move in the middle of nowhere live in an Airstream trailer and then the Wall Street Journal was basically perspectives I mean it was just fireworks it was just a fireworks display right I said no to my own team sure he just said I said
ignore please ignore the news media yeah it's total BS this is a huge success it's a huge success and you know we should just step back for a second and enjoy a success because part of the problem with the news media is this is a moment that should Galvanize our country I think they can't see that it galvanizes potentially galvanizes support for a human being that they feel
deeply threatened by and that's what it all comes down to ultimately and that's what you see in the headlines that's why what's so interesting about this is that the behavior of the mainstream media did not paint this as something unsuccessful or a joke or rocket goes boom or fireworks when you look back on something as meaningful as this it'll just make them even less credible that's
what that's unfortunately what they're doing to themselves is shooting themselves in the foot it's pretty sad yeah Wall Street Journal this is CNN New York Times everybody just painted it as a failure and it's like oh here's a collection headlines well done producer Nick I mean literally you would think if you read the mainstream media that SpaceX failed and it really the when I
was talking to Elon months ago about this you know he said listen 50 50 we get off the launch pad yeah if we can get off the launch pad and we don't blow up the launch pad that's a huge success the fact that this thing got as far as it is in four minutes and they got all that data and they've got when you see the scale of this factor and I hope you all get to come down here and and all
Americans get to see this because for me you know and being friends with Elon for as long as I have and to watch him go from the idea of this and he showed me I went with Elon to see the the horthon factory when he was considering renting it and from that moment to now to see the suffering that he went through personally to do this and the team the amount of suffering to
get to this point has been so tremendous but when you go to the gigafactory in Texas when you see what's happening here at Starbase it should let you know that this is still the greatest country in the world with the greatest entrepreneurs and and he is truly the greatest entrepreneur of our lifetime and I'm not just saying that because he's my bestie I'm saying it because it's objectively true and when you see
headlines in the Press look at what has been accomplished look at the Teslas on the road look at what happened with this rocket ship and and judge The Man by what has been produced to date and understanding he's going to keep going and the team he has inspired is Relentless I spoke I sat there on the deck an hour or two after all this went down and I just ate some chips and salsa
with a half dozen of the people who are in Mission Control they love the podcast they listen to every episode of all in I I kid you not and they said will you talk about this on all and I said well we talk about someone thank you for what you've done for Humanity this is the most inspiring thing I've experienced in my life we love you guys we love you guys SpaceX charge ahead be relentless as you've
been and know that despite these absolutely insignificant headlines what you're doing is so meaningful to every American and every human on this planet don't stop go faster go harder be more Relentless we're all cheering and we're in awe of you this is one topic we can all agree on this is something that can Galvanize America we are leading the world again yes we're
leading the world in the space race again we're going to be on the moon we're going to be on Mars what about Uranus [Music] that was great I'm surprised I beat your mouth to the punch there yeah oh no we were all cute was having a moment he was like daydreaming about the future and not thinking about the line I was taking the number of shares of SpaceX I know and multiplying it by a billion trillion
a million trillion dollars per share wow yeah the rest of us are thinking about Humanity America inspiring people and shabbat's got his like little calculator out I'm gonna have like a Babushka of planes a plane the moment make it about you oh my God [Music] we open source it to the fans and they've just gone crazy [Music] I did have a business question about how
the Starship impacts starlink very simple there's a graphic online you can find on the SpaceX YouTube channel and they show the starship and it literally looks like a goddamn Pez dispenser shooting out the next version of starlink and these are you know without I don't want to speak about any specifics but you can you can watch it spit them out you can put out more and they're
obviously going to be more powerful and if you have seen the size of the satellite I have starlink at both houses the ski house and my main house is a backup it's getting scary how good it is and if you look at the size of them and again I don't want to speak about any future products it's not my place but if you see the size getting smaller there's one or two things that we all
know about technology cheaper faster better smaller and just so I would just say if you're if you're a fan of starlink just keep those words in mind yeah it's going to be pretty amazing what starlink's going to be able to do yeah I thought that maybe I read this somewhere that Starship can carry 600 plus satellites whereas the previous top of the line rocket the Falcon 9
could only carry was it like 50 or something or yeah maybe a little less yeah there's like 30 40. so so you're talking about 20 times the number of satellites can go up and at a lower expense yeah and I guess SpaceX has gotten permission from the FCC to put up about twelve thousand Starling satellites so you could do that you know with I guess just 20. you know 20 missions the big disruption
is going to happen by the end of 2026 because this next Generation set of licenses uh spectral licenses that the FCC sold came with a condition that you had to launch satellite capacity by the end of 2026 I think otherwise you lose it or you have to do your first launch I think by the end of 20. any the point is that the only company that actually has the capability to build and to launch is
SpaceX so they have a complete Monopoly and because they're advantaging their own solution it puts everybody else behind the eight ball so not only will they probably offer the best global internet connectivity at every single natural point in the world that you could be which is going to be a really big leap they're going to do it Jason as you said at a throughput that's going to surprise
people and it's also going to render every other existing provider in a really difficult situation who's like you know what is their alternative you can't launch with Ula because they're inconsistent you can't launch with blue origin because they're inconsistent you can't log to the Europeans in general because they're inconsistent SpaceX is the only solution but then
SpaceX is just going to Advantage themselves and there's nothing illegal about that so you're going to be left with a bunch of these existing telecommunications companies in a really difficult spot in the next couple years so it's going to be really Dynamic space I think very much worth paying attention two-line sentences regards to the all-in community stay in a nap man has not slept in the
last couple days uh he's taking a well-deserved nap right now so hopefully we'll have a mind in a future episode very quickly where are you taping from jcal just curious where are you taping from there I'm at Starbase and uh there are little tiny homes and anyone um lent us one to to stay in here and yeah it's because it's just inspiring to be here it's been it's been a great experience
and I've been this is I've been here a couple times and it the the the scale of the factory the ships and just over the last like they said the list I've been here a couple times maybe three or four years ago um it really is growing exponentially and the other really positive thing is people are driving again back to the enthusiasm in the public and what you don't see mirrored in the
Press which I think was really astute Point sax I met a guy who gave me a ride in his golf cart I was I was late to a meeting guy says hey are you going somewhere and I said yeah because I was literally running down the street trying to get catch a flight and uh the guy drives me in his golf court and I say hey he says hey are you here for the launch I said
yeah I'm here for the lunch he says so am I say can I ask you um do you work for SpaceX he says no I'm just a fan of elon's I'm a fan of SpaceX and I said can I ask who you drove for me so I drove 19 hours through somewhere in Texas Houston or something he drove 19 hours to come here to spend the week to see the launch and the crowds here have gotten bigger and bigger and there's hundreds of
people uh it's I think I call San Padre Island over here uh there's a little Beach Community kind of like a like a Las Vegas on the beach or a Reno or New Orleans and um and they're just lined up there with cameras these are Americans just Americans in RVs in cars setting up cameras to see history happen and it's it really is truly inspiring these are just softly Earth normal folk
this isn't the media this isn't like affluent people or necessarily they're just Americans who who are inspired and that's I think what all entrepreneurs who hear these stories about what's going on down here you'll overestimate what you can do in a year you're going to underestimate what you can do in 10. and I think that's you know we all know Elon pretty well here and have watched
this journey they're cooking with oil they're moving fast and the iteration process is extraordinary and they're making everything here and it's Americans making everything that the tiles I remember being here three years ago and Elon and I have two in the morning we're walking through the factory while where they were working 24 hours a day trying to figure out the tiles on Starship to get it back in and they
were making the tiles themselves and and just trying to figure out that formula that's the level of detail that's occurring here and as Gavin said there's a thousand different things changing on each iteration of this so more great stuff to come I I believe yeah has been another episode of Phil helm youth mentions his relationship with Elon thanks everybody for tuning in yeah
exactly no I mean what am I supposed to do you know like I'm sorry that my friend you know started a rocket ship company and I don't apologize for it you guys doing great stuff in the world as well so do we want to talk about AI do I want to go to this uh tiger marking down their book where would you like to go gentlemen we can talk about the fox settlement with Dominion that was something you and I
talked about last week sax I'd love to get your opinion on that they paid 787 million dollars in this settlement uh for defamation it didn't go to trial uh you were hoping it would go to trial how do you feel I mean and this is an extraordinarily large settlement so yeah but what are you what are your thoughts on this you wanted to see this go to the mat and go to the Supreme
Court and maybe see the laws in the United States change eventually um catch us up on your reaction to this ginormous find yeah yeah there's a big speeding ticket yeah yeah well it's funny you you call it a speeding ticket because when I saw this it reminded me of a scene at the beginning of Apocalypse Now where Martin Sheen says that charging a man with murder in this place is like handing out
speeding tickets at the Indianapolis 500. I mean the analogy here is that the media is so dishonest whether at CNN or MSNBC or the New York Times I mean they're constantly inaccurate or whatever and yeah so still defending Fox so for this one network to get a fine of like 800 million it's like pretty pretty incredible um I mean they should be handing out a
lot more of these in my in my view not just to Fox but yeah look I would like to see to that end I would like to see the standard in New York Times versus Sullivan revised by the Supreme Court the standard is actual malice so you have to prove not just that the Press told a lie but that there was malice behind it and that's what this trial would have been about and um which
should have changed too yeah I think we want to change too what would be a better standard in your mind I think that if the media makes a mistake they should have to correct it and I would say the correction needs to be at the same level that they publicize the original story so if they make a mistake if it's untruthful and it damages someone's reputation and they refuse to post a
correction then I think they should be liable that seems fair to me if you were to put something on page A1 if you were to give it five minutes at the start of a show on whether it's Rachel Maddow or Tucker or whoever makes the mistake it could be anybody if they made the mistake in the first five minutes top of the show they don't get to buried on the website they don't
get to buried on page seven they gotta say it up front Hey listen we made a mistake correct here's the mistake correct yeah I think it's reasonable correction she got the same level but let's see as the original story and by the way if they correct it that would be like a safe harbor but if they refuse and they publish a lie and it damages somebody then they should be liable for that I think there should
also be something that's what I think but yeah I'm in agreement with that because they there is the trick in journalism to bury the correction and and there's another trick that I think needs to be looked at and it's a little more nuanced which is somebody makes a mistake or an accusation in a in a publication and then the next publication says oh the New York Times Fox News CNN said this
but they don't check it themselves so they're using another publication as like a proxy to kind of give them some level of protection I think they should have to on a firsthand basis right no that's the game they play you're right so they start with a super Shady Source yeah that you know it just attributes it to some sort of anonymous source then the second most Shady publication quotes
that one and the third most shitty quotes that and then it just goes through the whole food chain yeah so you're right reposting something in the Echo chamber because other Publications are doing it you're right that should not be protected they have to do their own sourcing basically yeah or just some base level of fact checking if you and now if if you called it Fox opinion
that's slightly different than calling it Fox News so maybe the part of this is branding a chamoth or Freeburg Germany thoughts on this just in general Fox I think has only four billion of cash so they just spent 20 some odd percent of it paying this off and if I were a shareholder the question I would ask is did we actually make enough money to justify having to pay almost 800 million dollars of our
cash balance the answer is probably no and this is the first of a bunch of lawsuits that they have the next one which is I think is like smartomatic which is another voting machine company that's an even bigger lawsuit actually that's a two and a half billion dollar lawsuit and so it's could it be the same outcome and another settlement and so now all of a sudden you would
deplete half their cash all for a lie to do what at some point some smart business governance needs to kick in over at Fox and they need to realize that this stuff just doesn't make economic sense maybe they thought it made political and ratings sense but you can't justify that when it costs two billion dollars there's a concept here I think sax that is particularly interesting in Finland
when you get a speeding ticket speaking of speeding tickets your speeding ticket is proportional to your net worth and so these NHL players who like to speed and a Nokia executive it was given the equivalent and this is a bit excessive of a hundred and three thousand dollar fine for going 45 into 30 Zone on this motorcycle and an NHL player got a 39 000 fine two years earlier I I think
that this is part of the problem and sometimes fines don't match the crime and or the they're not proportional enough for the person to feel them and so then we kind of can Joe that they're speeding tickets one very rich person said to me you know when they would they I'd watch them parking you know incredibly illegally in a small town and I said uh you know you're gonna get
a pretty serious ticket that's in it's a pretty gnarly spot to be parking and they said Oh you mean the VIP parking charge and I was like yeah that kind of sucks but okay so there might be some concept here of um a proportional fine and I think the EU is starting to work on that as well because you know big tack was ignoring this is going to embossing a lot of people to take
matters into their own hands and Sue some of these media companies if the LIE is egregious enough and it negatively impacts them enough I think it would embolden a lot of folks so Saks is right that up until now most folks haven't done anything about this but if you feel like the media has really wronged you in a meaningful way there's probably also now a lot of private Equity organizations that would
do the lawsuit Finance or hedge funds that would do the lawsuit Finance um and so now Peter did yeah like you're free rolling it right so you you get one of these folks to pay it they get 50 of the gains you get 25 the lawyers get 25 and you go and you litigate I'm sure that you'll see more not less because this fine is it's really big and again we don't know the end of all of
these 2020 election hoax Shenanigans because this is the first not the last of these I do think it's a really big number I mean I did I did want the the case to go to all these courts so they could revise New York Times versus Sullivan but I I do wonder about the size of this settlement here it's just it seems extraordinary they paid it it was a interesting it's a settlement yeah
they they voluntarily agreed to do it yeah absolutely so so in any event look I I hope your math is right that this actually incentivizes more actions against media companies because I think their feet need to be held to the fire and they need to do a better job publishing the truth there was an interesting thread by a Twitter poster called kanakoa do you I don't know if you guys saw this
where he posted an hour of footage by democrats and uh Democratic groups and more democrat-leaning political science experts questioning whether voting machines could be hacked basically this this idea that voting machines could be hacked is not it's not an allegation that is unique to Fox so apparently there's evidence that Fox News was bogus so they definitely should not have run with it but I do
Wonder Hey why why shouldn't other people be liable for this too well I mean the the question is I think those internal text messages between the host who knowingly knew it was false and then we're doing it I think that's why they took that settlement because 800 million or whatever or so is a lot less than 1.4 or 1.5 and so there's speculation that maybe clearly they got some bad
Discovery they got some Discovery problems yeah these allegations about electronic voting machines being hackable or rigged this seems like an allegation that's been made well it's actually interesting not just in 2020 but it's been made multiple times by whichever side loses yeah and so I would wonder why more parties aren't liable for this by the way I never I never bought into I never
bought into those allegations I said so at the time I thought they were bogus I thought the whole Sydney Powell thing you know the release the Kraken or whatever was ridiculous so I don't feel too bad for Fox or anything like that but it seems to me like I'm saying they're they're not the only ones speeding here there's a lot of people who need to get speeding tickets yeah
there is a road map for the press to learn from this and to get better right like to maybe take to heart that that maybe the public now is looking at them and assuming that the Trust in Media has is at an all-time low Alex John find a billion dollars right it's a judgment judgment judgment the fox thing's a settlement right he got a judgment of over a billion from multiple
courts yeah so he said a bunch of stuff that you know was in court provable to be false and then he kind of restated it and he got you know this massive fine I think there's an interesting question here on how far this goes with respected you know maybe it invites the lawsuits like you guys say where there's things that are more on the on the line and then we really start to have kind of
a tough set of conversations that it maybe there are things that are factually debatable arguable opinionated or they were true at a certain point and then you didn't really have evidence to disprove it what are you allowed to say are you only allowed to say things that you've proven or things that haven't been disproven and that becomes a pretty tough set of conversations and what I
think might be interesting from here if so much of media over time gets replaced by chat and AI aggregating lots of different information synthesizing that and making representations back to us and that becomes our primary source of call it news or quote media in the future what happens when those models or the synthesis of data or the source of the data leads to a statement that has a
similar sort of descent around whether or not it's true or not and that you really end up kind of ending up in a pretty cloudy environment you know by started starting this process I think it's a very insightful moment we'll get to in a minute I just coming as a coming from a journalism background myself and then becoming a commentator there really needs to be three or four very
simple things that the media needs to do number one more fact checking and number two less Anonymous sources it's they were like too much on Anonymous sources and then there needs to be very clear delineation between what is a fact and what is an opinion and the public is trying to sort this out is it Fox News is an opinion and what you're saying is this an opinion or is this a fact did
you do journalism or did you just have an opinion is Rachel Maddow an opinion or did she actually have a journalist check these facts and I think this is where self-policing and maybe rebuilding their rebuilding trust is on the media it is now the news and the media's job to rebuild Trust and if not they're going to get more fines but let's get into I think some of the stuff we're seeing with AI we had
talked on this show before many times about the Corpus of data under which these models are being built well Reddit announced plans to start charging companies that use its data to train AI models the co-founder Steve Huffman who came back after contacting us Nast had bought Reddit and then sold it back to the founders and paradoxically I believe Sam Altman has a
major investment in Reddit he said more than any other place on the internet Reddit is a home for authentic conversations there's a lot of stuff on the site that you'd only ever say in therapy AAA or never at all a lot of people use pseudonyms obviously and the Reddit Corpus of data is incredibly valuable but we don't need to give all that value to some of the largest companies in the world for
free crawling Reddit generating revenue and not returning any of the value to our users or something we have a problem with it's a good time for us to tighten things up your thoughts shamoth on what we talked about two different episodes maybe we'll play drop a clip in here Nick if you want to in post it's going to be the large data sets quora Yelp the App Store reviews Amazon's reviews so
there are large corpuses of data that you would need like Craigslist has famously never allowed anybody to scrape Craigslist the amount of data inside Craigslist as but one example of a data set would be extraordinary to build chatgpt on chatgpt is not allowed to because as you brought up robots.txt last week There's going to need to be an ai.txt are you allowed to use my data
set in Ai and under and how will I be compensated for it will the rights to the data will will Google just data quora hey we'll give you a billion dollars a year for this data set you those were our previous discussions that we just played what do you think it's so incredible we are witnessing such an important moment for Silicon Valley but frankly how the world works and
it's just everything is changing that's what I'm just in awe about that you know we talked about this and we were basically spitballing something two or three months ago and not but 60 or 90 days later these things come to pass right we talk about something in one week and then you know 14 days later it's completely upended like how impressed Saks was about plugins and
then plug-ins were rendered useless and somewhat impotent Two Weeks Later by Auto gpts it's just so profound I think what's going on so Google today announced that they're going to merge two organizations that I thought were so orthogonal to each other disparate brain and Deep Mind the cultures just seem so totally different but now they're merging those two things together something that I
thought would never happen they did it so all these competitive pressures are so real I was in LA for the Breakthrough prize I was flying home with somebody on Saturday I won't say who it is but they are right at the bleeding edge of a lot of this AI stuff and they let go a third of their company replaced it with an agent Within six weeks of training it so how is this not going to affect
everybody else I guess is maybe the bigger question and then I go back to what I said last week which is that we've talked about a lot of the positive things and I think it's important to make sure that people understand that there are a bunch of non-trivial negative things and I think I shared one on Twitter which was around this company that used an AI model to build a library
of 40 000 toxic compounds that could kill all kinds of numbers of humans so there's all kinds of really really tough things going on right now that I think to me means it's the moment where I have the least sense of how to do my job and so I've tried to kind of like put a pin in everything and just go back to learning mode it's a bit humbling is what you're saying like it's incredibly
humbling the entire rule book even for us as capital allocators company formation it has you it has YouTube even as I do this as a CEO I'm like should I be using models to do parts of the workflow inside of my business inside the portfolio companies that were invested in am I supposed to go into the board meeting now on Monday and say hey XYZ person just did one two and three
and cut Opex by a third do I demand the CEO do that do I force change if they don't do it do I say so I don't I don't I don't exactly know what to do the carousel is spinning increasingly faster and we're alone I'll just say a general point which I kind of made at this event today it feels like the pace of change is so high that you're kind of in a dust storm you don't really know where you're going
to end up so it's very hard to sit as an investor right now and say I'm going to pick these things because you know two weeks later you just don't know whether that path even exists anymore because the dust storm washes it away or you know blows it away and I think that there will as a result there will be a lot of money lost by investors by companies building in this space net net
the index for investing in like.com companies the majority a large amount of money was lost during that era but from that era also emerged a handful of winners and those winners ended up creating extraordinary value I think we're at a point in time right now where we could see 10 times the value generated in this phase of Technology advancement than we saw during the internet
and the advancement of the internet and if if that is true I think you'll end up seeing certainly the same thing happen which is the index will lose money but the few winners will accrue such extraordinary gains the problem is you can't deterministically pick those winners today totally because of the dust storm problem you just don't know the path totally so if you were to meet
Jeff Bezos versus some CEO of some.com selling pet stuff back in 1995 to 97. 94 to 97 would you have recognized Jeff Bezos was going to stand out would you have recognized Larry and Sergey were going to stand out would you have recognized Bill Gates was going to stand out or Zuck at the end of the day this is harder than it has ever been in terms of predicting a technology cycle
but what we still know to be true is that the capital will be allocated within a company the operations will be run managed and driven and led by an individual or a set of individuals and that's effectively what I think a lot of investing in the cycle is going to come down to we're all going to sit here and pontificate and intellectually masturbate ourselves to some you know
genius you know path that we think is going to evolve and at the end of the day most of it won't turn out to be true and that path won't be real because this is such a dynamical system right now there are so many feedback loops one thing makes one step change and it changes every other step but but what we still know is that great leaders can lead you know and especially coming out of
this this Elon discussion and seeing the extraordinary achievements he he's delivered particularly today I think that's maybe what a lot of early stage Venture is going to shift to an AI it's really you know finding great people and and I'll tell you one thing for sure and I was kind of commenting on this earlier today was I really think a lot of series C in later companies and I know we're going to talk about this
implosion discussion later so many of those companies have a valuation that's less than their preference stack and as a result those Founders that work there and those employees that are there are getting their Equity wiped out they'll have to get restructure can you just explain what that means technically to the audience when you when you raise money into a startup the investors that
give you that money that invest that money it's effectively a loan you owe them that money back first before your shares get paid out in the in the future so if the company ends up being worth less than the money that they've invested they get the money first and ultimately if the company goes public or gets sold they can convert their what are called preferred shares into common shares and participate so
even though you only quote sold 20 of your company for let's say 200 million dollars that 200 million dollars actually has to get paid first so now you've raised this 200 million dollars the investors the company is now repriced because the market has come down by 80 and investors are saying hey your company's now worth 175 million your company is now worth less than what
you owe the pre the pro the preferred investors and if it's worth less than what you owe which I think is the case for over 70 or 80 percent of series C and later companies you know we can kind of yeah and and this but this number comes from what I shared a few months ago which is that 70 of publicly traded companies that went public in the last three years are
trading below the cash that they've raised so if you translate that on a one-to-one basis to the private Market you know and these by the way were the best companies actually got public so in the private Market you've got to assume that something in that late stage Market is on the order of 70 80 is worth less than their preference stack so a lot of those employees are going to run those
Founders don't want to go work for the VCS when they get recapped and get offered a four percent because it looks like they're going to start AI companies and I think that's fantastic and I think that's what's really shifting it right now that's kind of a big Dynamic is a lot of these I'm calling them zombie corns are going to see this kind of mass Exodus of talent and a lot of the
investors that don't know how to price stuff and don't want to deal with Recaps in the late stage or diverting their attention to seed and a and early stuff and so there's both A Rush of talent and a rush of capital to this kind of very early stage and so we'll create this massively bubalific you know index of AI stuff but some number of these things with some great leaders will emerge in
World crew extraordinary value across many Industries I really agree with a lot of what you're saying the thing to keep in mind is that the problem with the use of Auto gpts as an example is that the order of magnitude of capital that you need has now just gone down yeah yeah instead of a 10 million dollar series a so we used to be you know people in the height we're doing 30 and 40 million dollar
series A's into crazy very bubblish ideas in nfts and all this other stuff that's idiotic today because a two or three person company can now do the work of 20 to 30 people and the amount of capital that they need is really their salaries plus the cost of renting some gpus on your favorite pick your cloud and so all of a sudden you can get huge amounts of progress in weeks and
months with hundreds of thousands or low millions of dollars so if you've raised all of a sudden a five billion dollar fund because you were trying to do late stage deals and now all of a sudden said well wait we'll just pivot to early stage but what are you going to do find the next 30 person company that's not going to work because you have to know how to write 500 000 to million dollar checks
with two or three people and a lot of really and really help them and really understand their technical ability to execute right yeah but then it also quickly becomes a thing where maybe you're better off just doing 500 of these two and three person teams we tried this experiment seven years ago this thing called Capital as a service where we were doing this automated
investing I don't know if you guys remember this but it was like some machine learning that we did on all of our portfolio companies and all somebody had to do was fill out a form and send us some metrics and we would have a machined decision right so humans would not be allowed to make the investment decision the problem that we ran into was there was a lot of great companies all around
the world but the administrative burden of supporting 500 companies was unbelievably large and complicated oh you have a company in Indonesia well there's another company in South Korea and here's a company and you know they're raising a new round they have to get board approval they got to do this and signatures I mean it's hard to scale yeah so so that the VC which is a
software light people heavy artisanal business all of a sudden becomes misfactured right so you actually need to be highly automated and use software yourself in order to put 500 three-person teams on the field so this is what I mean by it's really I think Freebirds use of the term dust storm is a really good one it's extremely extremely confusing what to do and if you have
large amounts of money that may actually now what used to be a real differentiator and a key to success may actually become an impediment because you yeah you you are forced to do business in a classical way that has changed frankly in the last 90 days what do you think sax what's the question because we're touching a lot of different things here do you feel like this is a dust storm
and it's murky and it's just hard to place bets as a capital allocator because something comes out the next day or 48 hours later or the next week that takes the previous idea and wipes it out and then and how do you scale and be Capital efficient well we're at the early stages of a huge new wave and I think that creates a lot of opportunity so yeah you've gotta basically separate what's really
interesting from the Fool's Gold there's definitely going to be a lot of that but at least there's a reason now to believe that say dozens of unicorns could be created in the next couple of years so before we were getting kind of long in the tooth on some of these Tech Cycles I mean Cloud Social Mobile I mean there was a reason to believe that those earlier waves that sort of played out
that the big Winners already been determined and maybe there wouldn't be too many more big winners in those spaces but now we have a whole new Catalyst for Founders to do all sorts of new things and so I tend to think that's super exciting you know we're in the early stages and I do think there will be dozens of new unicorns minted in various aspects of AI it could be in AI
infrastructure you know whether you're seeing now there's a lot of funding that's gone into Vector databases or platforms for creating agents or it could be in AI co-pilots basically that tackle various professional categories and create a copilot for coders or co-pilot for doctors or lawyers or Architects I think there's going to be potentially multiple unicorns created in in those categories
I think there's going to be SAS software products that were just good before but now will actually be great because the incorporation of apis from you know AI Foundation models we're we'll just Turbo Charge the capabilities and so there's a whole bunch of SAS products that I think become newly interesting and and better they go from being vitamins to painkillers so you know we're looking in all those
categories and I think we'll end up making some batch but there's also going to be a lot of companies there are flashes in the pan or get undermined you know there'll be SAS companies that actually become less attractive because of disruption from AI but look I think all of this this Maelstrom is great for an investor I mean if you're going to spray and pray it's not good you've got
to be selective about where you take your shots but I think this is the most exciting environment we've been in in a number of years I mean it makes me want to go to work every day and see it's so funny you say that sex because I literally am looking for an office space in San Mateo to start like doing the incubator in person again and on Monday I'm having 60 companies come to San Francisco we'll be
at my attorney's office and we're having like a Foundry University with just all these new startups that we invested in to just hang out for a day the enthusiasm right now is amazing and what's really unique is the developers who had three out of seven companies they interviewed with offer them 150 or 250k packages rsus whatever now there's no offer from Facebook
there's no apple there's no Twitter there's no Google or Microsoft offer coming in to be the backstop against starting a company so what are they doing they're saying you know what I got two friends who got laid off I got one friend who's halfway at the door let's just start something let's just start something who can give me 100k who can give me 500k and it's uh it's it's so invigorating to see the talented people
not people who've learned how to you know hack a pitch deck together and tell a story but people were actually coding and making MVPs it's it's truly exhilarating right now the amount of two and three person startups I'm seeing yeah and so while you'll have this and it's and it's an incredible I've never seen this amount of Destruction and creation occurring simultaneously I love
this zombie concept you have one half of your portfolio coming apart at the seams layoffs reducing their targets while people are coming in the door with products that are absolutely awe-inspiring I just give one example I I had a company come out of our founder University I gave them twenty five thousand dollars to incorporate a developer and his brother who's a screenplay writer they're taking
screenplay writing software Sac so you'll appreciate this having produced two amazing movies thank you for smoking and the dolly film is called Dolly land dollyland yeah two months coming on two months congratulations to uh Emmy award-winning oscar-winning producer he's gonna win an Oscar this time he's you know the screenplay writing tools that have existed they're like what word
processors with formatting what they're doing is they're saying hey write some dialogue and then you can have dialogue and say hey make it a little snappier make it a little tarantino-ish make it a little more you know sorkinish and then make a storyboard with you know uh stable diffusion and I was like well this is the genius idea I mean it's unbelievable of course
I'll give you 25 000 for your incorporation and then they're coming to the Excel I'm gonna give another 100K and and every single piece of software will that company and success Ever Raised 25 or 30 million dollars do you think no I think there'll be 12 people I think it'll be 12 people I'll I'll give them 2500k and then a million our industry raises 100 billion dollars a year on the
premise that each company before they become a unicorn will absorb between 500 and a billion dollars yeah no I'm gonna own 20 10 to 20 of the company for low millions and and we'll see mid-journey is 12 people and no it's totally bootstrap like I guess what I'm saying is because in the world of AI so much work is done for you for free this is why I'm asking maybe we will
have to change how we do business on the Hollywood example there's about to be a writer's Guild strike and they may want to think twice about that because this is not the time where you want to be encouraging the industry to find alternatives to writers okay you want to get back in the office and you want to say hey can I could is there any other work I can do this weekend boss did you
see the news about BuzzFeed today they had won a Pulitzer they just shut down BuzzFeed news the entire news division gone another 15 gone the layoffs and then there was a report this week that Zuckerberg's doing his third round of layoffs another 4 000 people that puts him at 24 000. yeah with a hiring freeze so the way I described the current funding environment is It's A Tale of Two Cities
it's the best of times it's the worst of times if you're a hot AI startup that's able to tap into the Zeitgeist that's doing something that's perceived as Cutting Edge or relevant there's a strong why now and you're early you know your early stage you're able to raise money for that the spigot is turned back on there's a lot of funding for those types of early State startups but if
you're a series sea Sage start you're a late stage startup with a it's called a pre-ai model the spigot is just turned off completely I mean let's look at that chart from French base where the amount of serious C funding has gone from something like 10 billion a quarter last year or to like zero I mean this is hardly I thought this was an error in the chart look at this chart everybody it's
seriously funding to U.S companies by quarter there is just no growth stage funding it's just completely dried up I mean look at that I mean it got cut in a half and then it got cut in half again and then it just flatlined and so when you see this is your thesis let me ask you this actually sure thesis here that people aren't trying to raise money and they're just
busy cutting their companies down to a smaller team size and they'll come back out in the second half of the year or that anybody with that amount of dry powder is out of the game now yeah I think that we're in this awkward stage where the the companies who raise money and call it 2020 and 2021 all those valuations are obsolete and you've had a lot of late stage players leave the game
or they're in the Penalty Box they're in timeout I mean look at Tiger for example the single most active funder at late stage is trying to figure out how much to mark down his portfolio so I just think that a lot of the funding has dried up there this idea that there's tons of dry powdersing out there I think is a myth or maybe it's there but there's no willingness to deploy it the
valuations are all out of whack and VCS generally would rather lead around in a new startup with a fresh cap table than in a cap table they got to restructure because no one would want to talk about a year ago that's what we talked about a year ago I asked you point blank would you if they cut the valuation and you know they redid everything and said Hey listen we understand this is reality
would you get involved and cut a check and you're like I don't want to deal with that kind of amount you know that kind of hard bucket too hard too hard bucket for you yeah and so now once again a year six months or a year after we talk about this it has now manifested this is metastasized into no it hasn't even started I think we are going to get started okay I think I think we're still
being really prescient like the tiger thing was very important because they are in many ways at the front of the line in terms of the number of companies they've touched the amount of capital they've written and because they're in the middle of a very large fundraise their need to Mark the market quite accurately so that their existing LPS know what they're signing up for in this
next fund so they're the ones that have the most incentive to move the marks but it still leaves an entire industry of folks that don't necessarily need to do that because they have whether it's dry powder that dry powder is real or not the point is that there's a lot of money that hasn't been deployed and so again I've asked this question before what is their incentive
to really mark their book down 50 percent they don't have an incentive why would they do that they would rather let it decay down naturally I'll give you an example of this or do you converts that keep it alive that basically allow them to delay yeah but even the convert Market Freebird that was hot for about six months and then it just yeah no nobody's doing that stuff either but I'll give
you one example there's a very good company that we are investors in along with every kind of Big Blue Chip tier one marketing muck organization we did the A and they stacked on afterwards and when we thought about what our valuation should be we did something we got to a number which was a third of what the Mark was and we're like well if we think the price is two-thirds off we should
probably just sell it now and we actually went and got some term sheets from some private Equity firms to validate it and what they it was incredible they both independently got to that same number and so while the deal was closing we went through the end of quarter we moved the markdown and we pointed to that valuation and we said look this is what these two other very well known firms
have said this is what we've said so this is what our new valuation is and you know we're trying to sell it and we ended up selling it but every other organization didn't touch their their valuation that valuation folks maybe you could explain to the audience why the private Equity folks are such a good backstop in terms of valuation versus say Venture capitalists well I think
that Venture capitalists we tend to be glass half full and we are conditioned especially if you do your job well to be smart buyers of deep out of the money options what does that mean it's like when you meet an entrepreneur and you give them three or four million bucks or five hundred thousand dollars or whatever at some nominal valuation you're not trying to get your money back
you're trying to figure out whether he is a zoc or an Elon or Larry Page and all of a sudden you get a thousand X on your money back right so we are buying these deep out of the money options most of them don't hit but when they do they can just have these crazy statistical outlier outcomes yum yum so we're trying to buy the future and we tend to be Believers of what can go right
private Equity has refined a very powerful toolkit of putting two or three orders of magnitude of the money we put into companies to work on the premise that the glasses actually half empty and what can go wrong and how do we mitigate that risk and so they tend to be much more sober I think in my experience dealing with them in what is the true valuation of a business what
are the upsides of a business what are the warts on a business they they really kind of see the truth the ground truth much better than VCS do in general because they're closer to public markets and they're they flip these things two or three years their margins are much thinner they're they're trying to make 1.5 1.6 X their money 2x is a huge outcome for them yes so they they have a
much more sober version of reality a bunch of this tiger stuff yeah got released and I mean their funds underwater just like masi yoshi-san's fund is underwater and uh it's gonna be years of pain and suffering to get out from under this and so again I think sax nailed it with tal of Two Cities anybody else want to chime on this before we talk a little bit about well for us our
friend of the Pod Brian Armstrong I've been I've been investing off balance sheet since 2018 and six months ago we started to explore whether we should raise a fund and I think it was like two weeks ago we brought the senior Partners In Me and the five other guys that run our business and we said we're not going to raise a fund and the biggest reason is this Dynamic which is that you know we have
dollars of private assets I don't actually know what they're really worth but I have a responsibility to try to get as much of that Capital out and so I thought the best thing to do is just to take our time and try to figure it out because I I have way more questions and answers right now and that's really the first time since I've moved to Silicon Valley where I've had that sensation is a
sensation humility I think it's like I mean I'm joking but it is it is for somebody like you who has done extremely well placing bets deeply I mean I I say this a joke but I mean it as like a point of self-awareness for you because listen you've placed some amazing bets whether it's the Warriors or Facebook or Bitcoin or whatever or slack or whatever I don't know whether I should
be writing 200 million dollar checks or 200 000 checks and I don't know whether I should be doing that sort of as an incubator actually as an accelerator that's what I'm doing or actually just as a series a detached investor so I don't know I'm trying to take the time to figure it out and my thought was if I raise a fund right now I could barely stand the idea of me
putting money to work right now of my own Capital without any answers but then the idea of like having a bunch of sovereign wealth funds and folks that were ready to work with us I don't know I just I just about the right time just to tell you my fundraising story I um I'm publicly raising launch fund 4. I get over 50 million dollars in just you know High net worth individuals uh you know and
family offices who are interested immediately close uh I don't know 26 27 28 of it and then I'm gonna go out on the road to meet with LPS and Silicon Valley Bank blows up nobody's can take a meeting that month right and so now thank the Lord I said I'm going to have a one-year window to raise the fund and I talked to some old school VCS Fred Wilson Bill Gurley these people would
take a year to raise a fund it used to be or I'm sorry in the height of this uh bubble you tell me a sacks the the quickest you closed one of the the crafts funds but I was hearing people saying they're closing funds within two or three months I think we're back to it's a year on the road to close a fund what's your experience accent listen you're an All-Star so yeah I think it's just depends on your
situation to be honest but but I I think the important thing for Founders to know is just that the way that late stage financing is dried up is very real I'll give you like two data points just this week so I got my first notification from a portfolio company this is a company I invested in before craft it's not a craft investment but my personal Investments and they're doing a pay to
play round you know what that is explain what that is that means pain yeah Yeah so basically the way it works is they say they're going to raise 20 million dollars well by the way they said they went out to raise growth funding weren't able to get a term sheet from anybody and no takers and this is a good product I mean a lot of startups use this product
I think they're ARS in the 20 something million maybe 30 something million it's not like doubling over years growing like let's call it 50 year over year this is a company that should have been able to raise money I don't understand why they weren't maybe because they're burning too much money so instead of cutting costs the way they should they're doing like a 20 million pay to
play around and what that means is that everybody is an investor in the company you either have to do your prorated share of the 20 million or you get diluted ten to one if you had 10 percent of the company you have to put in two million dollars for your 10 of the company is now one percent no it'd be it'd be more because you would look at let's say 50 of the companies owned by the investors and the
other 50 is common just to take round numbers okay if you own 10 of the company that would actually be twenty percent of the preferred yes yeah the employees are not buying shares in this 20 of the of the of the 24 million so it's four minutes yeah exactly so basically you have to own one percent right right so basically it's almost like a capital call where you just have to Pony up more
money in order to preserve your ownership in the company if it makes you feel alternative but yeah I had one of those just happen to me as well and I was just like we'll put in the bare minimum because like the thing that it puts you in it paints you in a corner where you're like well I've been with this thing for eight or nine years is this the moment to basically lose all of that
compounding or value or work that you've put in or seen their team do and it's just a really tough position right yeah so look I'm not on the board so I don't know what reasoning went into this but what they should be sending out to all the shareholders is look here are all of our metrics here's our burn you know here's the steps we took to reduce our burn I don't really like the idea of
having to do essentially a capital call from your existing investors when you haven't reduced your own burn I mean why can't the company operate at break even if you're at 30 something million of ARR you should be able to operate you may not want to operate at break even but you but they should be able to but sax this is what I mean I'll tell you after we stop taping who it was that
that told me this about their company but they were basically able to let go a third of their Workforce by moving a bunch of work to models and let me guess the founders get to keep their shares or they get re-upped in this whole mashugana no no but wait hold on can we can I just finish this yeah so so the point is like if you can cut off X by a third by using all of these
new AI you know models and gpts and auto gpts what are you as a board member or shareholder supposed to do and also as a Founder don't you have to go there first before you start to ask people for more money and why aren't people doing that first much more aggressively and so this is what doesn't make any sense to me that's exactly my point is what steps were taken to cut costs before you just went
to the investors to Pony up more money that's what I want to know if they actually did that work and this is like the last money they need okay then you know I'll Pony up my share and by the way we need investors no we don't and we need investors to be much more aggressive in holding folks accountable because these examples need to be better discussed well if XYZ
company was able to do it why aren't you able to do it and if it's because we're not technically capable mad that's maybe a plausible answer but even that reason will go away in a few months I suspect but if it's that we just have such institutional rot we're incapable of doing it well then you might as well just not write the check because that company is going to get undercut by some new white sheet
version of that business that doesn't have any of these impediments that yeah in a way to mop and sacks management has told you they're incapable of running this business this concern in a in a thoughtful way I had this happen to us as well and the the question I have used access in these situations where this pay to play happens you basically everybody gets wiped out except those who who play but the
founders and the management team always seem to get re-up and they're whole because the new investor doesn't want the management team not incentivized so in these kind of situations it's kind of like the management team gets to reboot the cap table and they don't get penis no I I actually I don't I don't have those details yet yeah remember I didn't lead around I was just
uh angel investor in the company so I checked with one of the VC firms that led around and I'm like are you gonna do this and they said probably not you know and so like the round might fail I mean they can make it as punitive as they want but if the shareholders don't believe that the company has fixed its problems they're not gonna Pony up the money let's get free bargain yeah I
think one of the problems that a lot of folks are facing is it becomes less about the fundamental value of a business in a lot of these conversations as you guys know and it's becoming a lot more about who will fund the next round if the company is still burning money and so you're making a social Market bet not a bet on the team or the business or the value it's that
there's someone else that's going to lead the next round and this is fundamentally why he's called the greater fool that's called the greater pool Theory look I mean it's historically we wouldn't call him a fool if it's just about progress towards profitability but right now there's so much trepidation it's almost like a self-fulfilling prophecy that there's so much trepidation in doing late stage
rounds that no one wants to be the last guy in because you're not sure if the next guy is going to be there to fund the last round to get to profitability and that's why half of biotechs that are public are trading below cash because historically the way biotech companies which is a really good pointed example of this they make progress to hit milestones and then the next round of capital comes in
they make progress hit Milestones next round of capital comes in and then eventually you get you know phase three approvals and you go sell the company or or whatever you get profitable and they almost always get Acquired and in the case of other technology companies if the business has to do three or four things it's got three or four Milestones it has to hit in your case tax it might
be that they got to get to 50 million ARR and they got to get you know the certain cost function down in the business and if they can do those two things then the business profitable but it's going to take us around a 20 and we'll get the first chunk down and then another round of 30 to get the last chunk done and no one knows if the next 30 is going to be there and that's
really where a lot of these market dynamics are falling apart that there's historically been a model in the market of hit Milestones next round shows up hit Milestones next round shows up and now no one knows if the next round will show up so no one wants to fund this round particularly where there's High burn it requires a lot of capital to make that bed so the social you know the
self-fulfilling problem the social Market bed right now is you know it it's self-fulfills and and we're um you know we're sitting here kind of spinning our thumbs wondering if the next guy's gonna find it do you think that only 10 or 15 percent of companies have now properly reset value like you said 70 of these unicorns are actually zombie corns yeah that's why I think the number from
I I don't I don't know Tiger's book at all but when I hear numbers like 20 for a for a fully invested mature book that invested during the peak of the cycle it doesn't sound right that it's 20 percent it sounds like it should be a lot lower like I think that 20 by the way you know comes after like two other smaller write Downs so they might be cumulative I don't want to talk about tiger I think
like sure the statistic of 70 of these public companies trading below their cash the cash that they've burnt that they've raised in their lifetime and again just to for anyone that's Analyst at home trying to figure out how we get to that number you look at the um retained earnings on the balance sheet and so the cumulative retained earnings tells you if it's negative tells you how
much money they've burnt over their lifetime and that tells you effectively how much money has been invested so when you look at the Enterprise Value which is the market cap minus the cash they have today you get their Enterprise Value if their Enterprise Value is less than their cumulative retained earnings it means that they're currently worth less than the money they've spent
and that's a statistic that is a fact right now in public markets in technology gone public in the last three years and then you compare that to private markets and I don't think we've seen a 70 write down yet or you know 70 of these things being worth less than the cash so it's um you know it's still yeah I think you're right Jamaica is probably a another Hammer to drop multiple hammers
multiple times before we move on to a different topic so I think one of the interesting differences in opinion in Silicon Valley is the way that Founders in VCC see the nature of the relationship and I've been on both sides of this I've been on the side of being a founder and I've been on the side being a VC and what you'll see is that VCS always talk about it as a partnership
but a lot of Founders will talk about it as if the money is just a commodity and frankly when everything is up and to the right and everything's going great and you're in a bull market and you can just keep raising money and definitely because there's always someone willing to lead the next round then the money is a commodity but when you're in a in a down market and all of a sudden there is
no market like you can't raise your next round all of a sudden it is a partnership because you've got to go to your investors and ask them to do something that they may not otherwise want to do is this was purely a transactional decision as opposed to a relationship they might not want to to fund your next round and you're asking them to say no actually believe in our
long-term relationship and I think that you know this is the type of environment which you find out it is more of a partnership and it should have always been it should have always been it should have been but it but it wasn't and look I don't know what happened with that other company and all of a sudden I get a notification out of the blue well I want to understand the thinking that went into
that before you know I'm just gonna this is where trust comes in right and like I think in a zero interest rate environment you know there's no need for trust you just this cash splashing around just grab whoever the latest person in town is who wants to drop a couple of bags you just take one of their bags the most important thing to me like what make it a partnership is for me to know that the
founders have done everything in their power to reduce costs and put the company on the right trajectory before going out and basically issuing Capital calls to the investors I want to know they've done that work all right listen Freeburg I know you got to go take care of something of science I'll just wrap up with the other boys here with uh one piece of breaking news stack Overflow
says they will join the parade of data providers like Reddit and Twitter that will require permission and payment to use their data sets and stack Overflow has a lot of answers to a lot of developers questions in there I was just curious to get your thoughts SEC obviously sent to Wells notice we talked about this before to Brian Armstrong of coinbase he said he's thinking about uh or
considering relocating out of the U.S if the regulatory Clarity does not improve crypto's dead in America it is done in America crypto's dead in America I mean now you have you had ganster even blaming the banking crisis on crypto so they've the the United States authorities have firmly pointed their guns at crypto is it a scapegoat or was it a around find out moment
for crypto in your mind or a little bit of both I I don't know I just think that they were probably the ones that were the most threatening to The Establishment okay and they were the ones that In fairness to The Regulators did push the boundaries more than any other sector of the startup economy and yeah so now they're paying the price for the the bill has come due for them
Saks is it a around find out moment is it uh protecting the American dollar somewhere in between or incompetence on Regulators part the more I think about it the more I think it's probably not a coincidence that you're seeing all these concerns about dedolarization at the same time they're cracking down on crypto so look there were a bunch of crypto companies that might have done shitty
things but I think we all agree that coinbase was not one of them coinbase was the gold standard in terms of doing everything right and they've just agreed asked over and over again for a regulatory framework they're just like tell us how to operate and we'll do it so I think jamatha is right that they're effectively Banning crypto in the United States they're going to drive all these
companies overseas which is terrible for American innovation I don't know exactly where blockchain and crypto are going to go from here but I think that we should find that out in America you know we don't want that Innovation going offshore you bring up a really good point too it's just like coinbase played by the rules stood in line tried to do the right things it
seems that every step along the way right everything from board composition to Executive composition to how they try to interact with the Regulators yet they were probably the furthest away from getting a license the one that came the closest was the one that was the most fraudulent which is FDX fascinating how is that even possible I mean because he had skills in gaming
the system yeah he's splashy cashy splashy cashy well he he ponied up large amounts of money because it wasn't his money so it was easy for him to make huge donations but he knew how to play the game to quote SPF he said this is the dumb game we woke westerners play we say the right Chevrolet so Everyone likes us that's the game he was playing which is my my whole concern about if we jump the
gun on regulating AI too quickly it'll turn into another you know woke game that everyone's gonna play so here's uh here's how the world Works regulate yourself behave yourself act in the interest of consumers or get regulated or smashed and I think we've we've gone over this we talked about it in fact last week whether the movie industry crypto AI regulate yourself behave properly don't push the
boundaries too far you can bend the rules but you don't want to break them I think they regulate yourself that you use the MPAA I don't think that's the right example I think if you're going to regulate yourself look at the tobacco industry they tried to regulate themselves but what they did was just lie to maximize profit in an area that was much less benign than
movies and content maybe you could have some lascivious content in a movie or a video game or an album but that was a lot less harmful than smoking which not just impacted the smoker but it turned out the secondhand smoker as well or the secondhand smoke so it touched everybody right you could be in a restaurant not smoke and yet have years of your life taken so I think that the
self-regulation for areas that impact everybody independent of whether you participate in the system or not is where you have to look for good examples Jason and I'm not sure there are many good examples of separate allegations those kinds of systems I mean I like your workshopping it here I mean some restaurants would have a smoking section in a non-smoking section before there was regulation right and I think if
crypto had just thought had been more thoughtful about hey which tokens nft projects were going to support which ones we're not going to that maybe they would have avoided a little bit of this I'm not sure you know it's it's hindsight's 2020 here but a little more regulation I don't think those smoking non-smoking sections work too well the smoke went all over the place can you woke up
then you'd have to you'd have to take a shower when you went to a bar or a restaurant or a club you would have to come home take a shower because your hair and your clothes the smell of smoke you couldn't sleep in a bed then your bed had to get to change your sheets disgusting remember when you went on a space on a commercial flight they had a smoking section yeah it's a tube the Smoke Gets
fine when they have the welded shut ash trays they used to have an ashtray in every seat in between in the armrest was a friend a friend of mine this is like such a throwback but a friend of mine well-known guy that you know I'll say the name you can bleep it out very important we don't want to he's a notorious smoker and so I've flown with him oh that's the worst and we get in
there on his plane and then we he shuts the door and I'm like smells a little odd in here smells a little clovy stuff seven hours I'm gonna have to be in this job do the pilots get Hazard pay I mean how do you compensate I mean this is not a turbo prop he's on he can't crack the window no uh it's Global the huge Global it was it was at least it has three cabins you could go to the back cabin
felt so sick I mean it's the worst it's just smoking's the worst worst smoking is the worst all right well we didn't uh so long to the uh Sultan of Silence as a science rather there polling update here sucks I don't mean to poke the bear I know it was a rough week with the Fox News News bring it up bring it up no go for it quick polling update between putting her on I'm sorry
DeSantis and Trump not gonna happen the santis is not happening in late March news of Trump's indictment boosted him over to Santa's by 26 percentage points among Republicans and Republican Independence but earlier this week the same poll showed that Trump's lead shrunk by 10 points in the last two weeks to just a 16 point Advantage which is still significant but there's more University of New
Hampshire Survey Center poll I don't know if any of these polls are reasonable or not it seems like call people on the phone I don't know who's got a landline released Wednesday showed a 20-point DeSantis this deficit what's going on here sex did your boy uh Peak too early no I don't think so if you if you look at the Republican primary field DeSantis is the only person who's got a shot
other than Trump you look at Nikki Haley she's polling in the three four five percent range all the others are one or two percent there's not a candidate other than DeSantis that has over five percent so in my view this is a trump DeSantis race now what you saw is that when Alvin Bragg pressed charges and indicted trump it created a lot of sympathy for Trump
among Republicans effectively what happened is Republicans registered their displeasure with Alvin Bragg by indicating support for Trump let's go and that's that's what you'd expect to happen and a lot of people speculated that might be the purpose of Brax prosecution is to make Trump the candidate so we knew that was happening but I think this this new poll that you
just mentioned is really interesting because it shows that that Sugar High of Trump's poll ratings was a temporary bounce and it's coming down somewhat and so you know what you saw actually is that this huge uh pole bounce that Trump got is somewhat normalizing now there's no question that DeSantis is running behind Trump and he's got his work cut out for him if he's going to upset Trump
as the nominee but this thing is just getting started I mean DeSantis isn't even formally announced yet and remember we're still very very early in this race the primary battle that this most reminds me of would be Obama versus Hillary in 2007 and at this time in 2007 Hillary had a huge advantage over Obama she was considered the favorite she was considered the the one who couldn't lose
and it was Obama that pulled off a huge upset and he did it by out fundraising her out hustling her especially in building organization and some of those early primary States and then he eventually created a narrative that it was time to turn the page but he didn't do that until much later in the year much closer to the the primary the first Republican primary is not till
February so there's plenty of time here and I you know we'll see what happens I think Nikki Haley is going to win the Republican nomination the more people here here's the things the number of people that have told me the most impressive moment with DeSantis was before they met him the second most impressive moment was their first meeting and then it just falls off a cliff where he becomes more and more
unimpressive the more and more time to spend with this guy hey Nikki Haley come on the pond Nick Haley is the opposite Nikki Haley announced that in all of q1 in all of q1 she raised five million dollars extremely unimpressive you're probably 20 of that shamoth and Nikki Haley come on the Pod we'll double it how much should Nike at least five million was was you listen
zero I can say definitively you said q1 zero yeah okay here we go zero but let me ask a question here because I I'm not informed on it but you you are a master strategist here uh 1600 rated chess player sax that's not that good well I mean it's double 800 but where I'm at you you're killing me in 27 moves on average DeSantis is fighting with Disney over and over again he's getting a little
involved in the lgbtq everything and he just seems to be getting involved in the culture wars is that like a primary strategy and then he moves to the center when he comes to the general or and do you agree with this General fighting with Disney and the culture War stuff I was talking strategically not your personal opinion on these issues I know that you're a very tolerant person yeah
so I think this is an issue that works for him certainly in the Republican primary but I also think it's going to work for him in the general and you have to remember that this bill that they're fighting over was a parental rights bill that basically it gave parents the right to know what their kids were being taught in schools and it basically prohibited the teaching of this sort of
gender ideology in in schools and I think most parents are on board with that now yeah he didn't go yeah he didn't go looking to pick a fight with Disney Disney then got involved and took the side they're calling this a don't say gay bill which I think just factually is not true the bill doesn't mention you know gay or homosexuality or anything like that it was really about
this trans issue and Disney got involved and this is Bob chapac and Bob chapek lost his job and Iger came in and Iger has said that he he had basically lectured the Disney employees saying that we need to stay out of politics and we need to respect our audience's views so I think that it was Disney who kind of interfered I think this is overall played to desensis benefit and and look
the problem for Disney they may win the battle over this or that tax benefit that they're fighting over but they've lost the war over this issue because parents used to be able to trust that they could just pop their kid down in front of a Disney movie or a Disney show like Disney was like the babysitter and they just 100 absolutely trusted all Disney content and if you look at polling now Disney's
brand it used to have like a NPS of like in the 50s is now in the single digits because let's call it half the country's parents the more Republican ones don't fully trust Disney's content and programming anymore implicitly well could they ever do that subjection line I've never seen anything objectionable a lot of parents are questioning what content Disney might be putting in their their recent
programming obviously we're not talking about the stuff that we grew up on so look whether you believe that is a problem or not what I'm saying is this has been a Brand disaster for Disney getting involved with DeSantis this way they should really I think just try to patch this thing up I don't understand the benefits it's a bad look for both it's a bad look for both people yeah
well I I think I understand the benefit for DeSantis I don't understand the benefit for Disney if I were them I'd be trying to patch this up I think there's a really valid discussion to be had about representation in movies and all that stuff and I'm very Pro that the the thing I think all parents agree is we should just at least know what's being taught to our kids and we can have
a thoughtful discussion about it there seems to be some small group of people that thinks we should hide from parents what they're actually getting what's being taught and I find that's very strange um I think just a little bit of like transparency and what's being taught in schools is and obviously that nobody should be disagreeing on it to Sax's point I think
it was Pew that put out a study recently it is the most polarizing issue amongst Americans where Democrats and Republicans are literally on opposite sides of the spectrum well this is going to be a big issue on the whole trans issue now despite the polarization in terms of the quantity of the number of people it's actually an important issue for a small percentage of both sides so
it's a highly complicated political dynamic in America very so this is where DeSantis clearly has taken the approach that not only is this important to the base to win the nomination but it's going to scale into the general and it could very well be but it's a very divisive issue yeah I wish people were given a little bit more uh consideration and maybe they could have I feel like maybe we're covering this
issue too much I you know I've heard some other folks in the community said like maybe people could be given a little bit of their privacy and to handle these things I think you're right Jake how in this sense I think this issue has become a lightning rod and um and whenever you have a lightning rod issue the amount of attention paid to it it seems disproportionate to the
attention on that issue however I would say that this is a lightning rod for a larger issue which is the quality of Education in this country which I think is shockingly bad and it's bad because of the decline of Standards uh they're getting rid of advanced math they're getting rid of greens chest taking competition and and the schools are run by these unions who are managing it for
their own benefit not for the benefit of the students and look there is a significant ideological component that's crept into these schools as well so look I think that overall I think that when you get into the general you have to uplevel the issue and talk about it in broader terms that every kid in our country deserves a high quality non-ideological education I think if you
can do that you will get 70 80 percent of the public on your site on this issue yeah I feel like yeah it's I think that's right yeah I think we can all agree on that Democrats Republicans everybody in between if you're a parent you're not looking for an ideological battle at school you're looking for math science technology history creativity you know there's a whole bunch of other
things that we should be really focused on all right listen it's been another amazing episode of the online podcast to people going to the episode 125 meetups you can type in all in meetups our team over there we have super fans are doing it in over 50 cities uh the day this comes out so you may miss it but you can sign up for the next one I'll be uh phoning in and zooming into
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