Nick can you cue the tape this is now the worst form of a shot oh my God I mean the fact that he hit the ri is a miracle the most unath what is oh my God I have wish we could get slow motion down that oh like ball the ball forward no look at his hand look at the right hand look oh look at look at that he what is that about one-handed I mean that has nothing to do with basketball was the most
unnatural basketball SL athletic movement I've seen come on wasn't that bad I mean the lean forward the lean forward the kind of like sassy jump you know the sassy little Sach on the side there nice let your winners ride Rainman David and instead we open sourced it to the fans and they've just gone crazy [Music] with all right everybody Welcome to the Allin podcast with me again the chairman
dictator chamal hatia David freeberg the Sultan of Science and the Rain Man himself David Sachs our first topic we'll go to our war correspondent the US and its allies have shuck houthi Targets in Yemen sax well we talked about this two we ago on the show and we talked about it as a escalatory risk in the Middle East back then and I think that that is playing out
now we fired I don't know maybe a 100 rockets and missiles at Yemen last night the purpose of the strike is to restore deterrents and I guess try and prevent the hooes from attacking commercial shipping in the Red Sea but that deterrence is not working I mean there's already a you attack by the houes this morning of a commercial ship in the Red Sea so I don't think this is going to
have any impact other than to escalate the conflict in the Middle East and put us on a path to war with Iran which is really where the neocons want to take us you've heard obviously the warmongers like Lindsey Graham are calling for that but even speaker Mike Johnson is talking about that I think that's where this is all headed is a larger war in the Middle
East that features the US and Israel go to war with Iran I think we should all be very concerned about that actually but yeah I mean you have to be fair it's not just it's not just the US right it's now the US the UK Israel Qatar UAE and Saudi against the hotti rebels that's a big Alliance and you got to think that Iran will think very carefully about how close they want to get to the hooes in
the middle of all of this because that's a that's a huge Armada if you will of countries that I don't think you really want to cross as a group well I think Saudi Arabia and UAE are are playing this very carefully I think they did not participate in the strikes they did allow the US to fly overhead or to use its territory but they released a statement calling for restraint and
deescalation so I think they're very nervous about this blowing up into a wider Regional War I don't think they want that the Allies who participated in the the campaign of air strikes were UK Australia Canada Netherlands and Bahrain but I don't think they actually did anything I don't think they contributed any assets they just provided their names to this operation and provided
some diplomatic cover freeberg any thoughts well sex you posted a comment on Twitter which I wanted to respond to where you said China has the largest chipping volume through the Red Sea and they're staying out of this conflict letting the US do do the dirty work but the houis didn't attack Chinese ships they specifically attacked Western ships isn't that correct I mean this is a very targeted
disruptive event that the htis have been undertaking for some time now and they're using these very interesting tactics with drones that can be very destructive and very hard to block and doing it not at Chinese ships but at a very targeted enemy right well what the hoodies have said is that they're only attacking ships that are either Israeli or going to Israel but in reality
they've attacked a much wider range than that it may be true that they haven't attacked ships that are declaring themselves to be Chinese ships or Russian ships however there are more Chinese shipping containers on all of the ships that are going through the Red Sea and the Suz Canal than any other country so there's no question that if we're talking about
the disruption of global trade this is going to have a big impact on Chinese trade whe whether it's on Chinese ships or not or it could benefit them because they can get through that shipping Lane and the W their ships can get through but foreign ships European ships that have Chinese shipping containers on them are not getting through yeah so their trade is still getting disrupted never
less they don't feel the need to engage in this militaristic response or participate so in terms of understanding implications of the escalation in this conflict let's just quickly talk about number one I'm assuming chipping prices are going to go up Freight prices are going to go up but hold on a second we talked about this with Ryan remember the question that I asked him this is really
an issue for Europe it's not an issue for the United States because there are alternative routes you can go through the Pacific and you can go down through the bottom of of Africa right and all that does is ADD like a five or 10% increase so what we're really debating is what is the risk of inflation and a backup of goods and shipping rates into Europe yeah and this is why I don't
understand why America needs to even get involved I understand why the Netherlands and the UK and France and all these folks need to send resources to unclog this that makes a lot of sense but I don't see why the US needs to be involved other than providing moral support or logistical support what what is the point wellam this is exactly my point is the number one type of trade
that's going through the Red Sea are shipping containers from China going to European ports right and as a result of what the hoodies are doing it's having to go Around the Horn of Africa it's adding two or three weeks to the trip and it's raising the cost of a shipping container from China from say $1,500 to $3,000 it's Europe and China who are impacted the most but for some reason
it's the US that decides it has to take the lead in doing this and the problem is that first of all the action is futile I mean the hoochi have been at War on and off with the Saudis for a decade and the saud's been backed by Western weapons and we have not been able to defeat the htis so this missile Strike last night is not going to deter them it's not going to stop them they're
very determined very tough Fighters second they are going to be looking for retaliation they're going to be looking for blowback and CH to Chas to your point they're not goingon to be looking for retaliation against China or Europe they're going to be looking at it against the United States so we're incurring this cost and risk onto ourselves so let put this question to
you then we have no obvious economic incentive to get involved because we can sustain our economy through different shipping ports that at best raise rates five or 10 per. right we can absorb that in the economy 100% which could drive inflation is a European problem so there's no economic incentive necessarily to get involved so what is the incentive it feels like not
to play conspiracy theorists but like a Wag the Dog moment at another distraction to add to the plate what do you think about that line of thinking I tweeted something just like that this does feel it's a Wag the Dog in the sense that the Biden Administration was you want to explain the reference for folks that me movie called Wag the Dog that came out in the early 90s where the president is up for
reelection and there's a horrible Scandal that's about to come out like a Monica Linsky type Scandal this is before Monica Lewinsky by the way but um really was sort of one of those movies that kind of predicted the future but in any event the President's trying to avoid this Monica Linsky type Scandal and so the political AIDS and advisers decide the way to do that is to start a
war but they don't start a real war they basically manufacture a fake war on a sound stage and in a movie studio and it's pretty hilarious how they keep the whole thing going David Mammoth who's a brilliant brilliant writer wrote that script but this movie came out right around the time of the Linsky scandal with Clinton and so therefore it took on this larger political and cultural
significance yeah it's been used so Wag the Dog is you know you basically start a war because of the political benefits as opposed to the real necessity of going to war and I think you can make that accusation here chth because I think that the bid Administration was looking impotent I mean they were basically telling the hoodis to stop they were pleading with them to stop
interfering with international shipping the htis weren't listening by the way the reason why the hoodies are doing this is they're doing it in solidarity with the Palestinians in Gaza they've demanded that the Israeli invasion of Gaza stop and humanitarian Aid be let in and they're not going to stop interfering with global trade until that happens so that's the hooie
position the bid Administration has been telling them to stop and I think that they were looking increasingly feckless and impotent and that's why they did this strike the problem the problem is that the strike's not going to have any impact and so so what what's the point well is it that or is it that I think if you take the Wag the Dog analogy to the Limit I think maybe a different
interpretation I'm not saying that they did this but a different interpretation of that analogy would be that they are struggling domestically and I think jcal tweeted this but if you look at the polls and you look at Dean Phillips all of a sudden and you look at what's happening on the Republican side there's so much activity and momentum Frank for non Biden candidates all all across
the board that that would be the most Wag the Dog explanation in my opinion which is like to distract folks from the domestic Mala by pointing someplace far away and saying we're doing something very righteous here let's all get on the same page and support us how does that logically make sense jamath if the US is against Wars and people are tired of
Wars like what would be the this the only problem I have with the logic of the way dog theory is you America against Wars who's against Wars Jason the American people they've been very much against starting forign Wars we' talked about let's talk about the people that run the country no I know so but if you're saying they're doing it the logic here is Wag the Dog is to Curry favor
Sak you said they're rallying this is to Rally the American people around like a patriotic cause but this isn't like a you know 9111 situation where Bush got a lot of credibility we saying hey we're going to go get these terrorists Americans don't want more Wars right now the polling is very specific on that so then I guess Sachs what is the the logic there to Wag the Dog if this is
something American people don't want well I I think you're right Jason in the sense that the American people are exhausted by Wars especially Middle Eastern Wars we've just gotten out of two decades of endless forever wars in the Middle East and I don't think the majority of the American people want to get back in so I think you're right on that level and it's true that if you were to pull
the American people and ask them are you in favor of getting in more Wars they would say no the problem is that with every war the mainstream media starts propagandizing for the wars and they'll basically demonize whoever it is that we're going to go to war with and explaining why they're a huge threat they'll engage in threat inflation and so the American people end up supporting
it so we're against war in the abstract but in every particular case we end up supporting it that's what happened with Ukraine it's even happening right now if you look at polling for this hoodi conflict I think most Americans believe it's a good thing to strike the hoodies so yeah they're against it in the abstract but in each particular case the media is able to manufacture consent for
the US involvement so just to challenge that yeah as well so now our theory is or your theory is the media plus the Biden Administration are in cahoots to Wag the Dog create this support of a war in order to distract from domestic issues in order to Curry favor with the American public that doesn't really want more Wars that's where I'm saying like I think Wag the Dog might have been
something 20 years ago like you're saying that could work as a technique but I can't imagine anybody would want to do more military action at this point in time when the American public is exhausted from it well which what you said for the last months on this pod look I I I tweeted exactly that sentiment is that I don't think wagging the dog is going to work I think
there'll be a short-term rally around the flag effect but I think that overall if this conflict is still going on in November is going to weaken Biden by making him look like a president who's lost control of events so I I agree with you that ultimately the perpetuation of this conflict is not ultimately in Biden's interest now nonetheless it may factor into their political calculation that in the short
term they think this makes them look good that would seem super incompetent as like a a political strategy to me but I'm political I mean despite the fact that this Administration claimed to be the the foreign policy grown-ups they haven't shown a lot of competence they couldn't even find Lloyd Austin who's the Secretary of Defense for five days I me no one knew where he was just not
what happened but no he checked into the hospital for a procedure and no one could find them for several days and there was an article I think on CNN talking about how he was managing this hoochie strike from his hospital bed yeah that was weird I hope I hope the man's okay I don't want you know he's got he's got prostate cancer I know I it's that's sad he had a UTI he had a
UTI that's why he was in the hospital but fair enough but no one in the white house the White House couldn't find him for a couple of days is that true they couldn't find him yes I mean having a UTI is a very benign well he had he had a prostectomy and then he got discharged from the hospital and somewhere along the way he got a UTI which was severe apparently went back to Walter read and
yeah in those three or four days the handoff of power to his Deputy happened she was on vacation on a beach somewhere and you're right the and the problem was that the other person the chief of staff had the flu so they couldn't escalate to the white so it was like a comedy of errors but I I don't think it was anything but anyways I mean imagine if you were like a a sea level
executive at a company and you're going to be out of the office for a few days and unreachable you would set up a clear chain of command you'd have a deputy who the CEO could get a hold of if if necessary in this case you've got the Secretary of Defense who if the United States was attacked in some way is part of the chain of command the president would need that person in the situation
room so the fact that they couldn't find him for a couple of days is really I think unforgivable how does that even happen is that really true that they couldn't find him like they literally for a couple of days this was widely reported they but they couldn't call him on his cell phone or his chief of staff or the nobody knew where he was H wow yeah okay all right very good haven't
kept up on on on the details of his UTI and his cancer I hope he's okay so uh segueing into markets the likelihood of a q one rake cut is not looking good we had a slightly hotter than expected December CPI interest rates hit a 22-year high in July as everybody knows when the FED raised the range from 5.25 to 5.5 but they've left rates unchanged if you haven't been following it uh as
inflation has cooled but in December the CPI rose 3.4% from a year earlier that was just a slight tick above and of course markets are wondering is this going to going to be a Glide path into a soft Landing or could it be choppy going forward freeberg higher for longer interest rates you think that's still going to be the case and what are your thoughts going into the new year
Well Larry Summers put out a note saying that he thinks that the rates are going to stay higher than the market is predicting based on the yield curve right now so I think the Market's currently saying no Cuts in March and high probability of cuts in June but some folks Like Larry are saying might be longer because inflation is very sticky and if you look at the
breakdown on the drivers of inflation you start to think about what's the underlying business activity that's going on like car insurance went up by 20% Which was one of the key drivers and car insurance has always been this lagging indicator but it does ultimately Drive costs up later the reason car insurance rates go up is because the cost to repair a car goes up and the
cost for medical care goes up when that happens the insurance companies actually have to file with State Regulators to get approval to raise their rates and it can take over a year for The Regulators to then approve those raising of rates so by the time the rates get raised the other factors have maybe leveled out but you're still going to have some elements of uh costs they're going to continue to
climb for some period of time after you get the core engine tuned down so these are the sorts of things that I think we're seeing in the the current CPI data is that there are some of these lagging effects of an overheated economy or over stimulated economy that are now starting to play through and so there's a number of these it's not just car insurance but
there's a lot of things that are going to linger for a while and they're going to be very hard to work their way through the system very quickly and as a result it may be the case that rates are going to need to stay higher for longer I think the thing with inflation that is worth noting is that a couple of things are true at the same time which I think is interesting I think we were the ones in
May of 21 that started getting very ansy around inflation and we started to look at the five and 10 year break evens do you guys remember that we would like look at that chart a lot and I think it was very predictive we also used to look at the future oil curve you know not that we're macroeconomists but I think it's it's useful if average everyday people can
have a few things to look at if you look at those things today it tells you the same picture which is inflation has cooled we're going through the last kind of like throws of some of the random variables still being a little sticky but the broad trend is down I think it's indisputable at the same time even with the configurations in the Middle East if you look at what people think about the
future price of oil it's also down oil Futures are I think about 5 to 10% future prices are about 5 to 10% lower than spot right now for whatever that's worth but the third thing which I think is important is we've now started to see folks come back from the new year and start to affect some pretty big layoffs and they're across Industries right City bank today just announced
20,000 layoffs that's a huge amount of people that are going to lose their jobs so what does all of this mean it's that I think that people expect that as inflation contracts the money supply will expand but demand has yet to reset properly so that's the last thing and I think freeberg mentioned this a bunch consumer spending has always been crazy people living on credit all of this
stuff that is now finally I think the last thing that has to get sorted out so in the absence of demand back to the way you started Jason companies will cut expenses in order to maintain profitability because they don't really want to cut prices unless their product really sucks yeah and just to note that City group as you mentioned 20,000 cuts by 2026 Google also laid off hundreds of
people Amazon hundreds of people Discord laid off 17% and there's a viral video going around of a woman laid off by Cloud flare you know who was only on the team for like six months or something or five months and it does seem like yeah firing people before the holidays laying them off is considered yeah you don't do it in the fourth quarter so maybe there
was some some uh backed up layoffs that people decided to do into this year but it certainly feels like sacks people are and you said this I think in the predictions episode or the recap episode hey you know maybe it's still going to be a little bit of turbulence and the soft Landing isn't guaranteed maybe you could expand on that yeah my prediction for the year was bumpy Landing I thought
soft land in was a little too optimistic and I also thought that this big stock market rally that we had in November December was too much too soon the market starting in November started pricing in about 1 and a half% of rate Cuts this year believing that the inflation problem had been licked and now what we're seeing is first of all you had a slightly hotter than expected
inflation report and now we have this escalating situation in Yemen where this war in the Middle East might expand and just so you understand I mean the hotis have already said that if the United States attacks them and uses Saudi or UAE airspace to do it that they will consider themselves at war with Saudi Arabia and UAE and that they will try to do things like light the Saudi
oil fields on fire I don't think they have the capability to do that necessarily but it's an indication that things are very volatile another thing I think we're likely to see in the Middle East is continued attacks on US military bases in Iraq and Syria so that whole region is a powder keg and if it develops into a wider Regional War then I think you can see an oil shock and if
there's an oil shock I think you can kiss rate Cuts goodbye because that's going to percolate through the whole economy and have a big impact on inflation so I just think that there's a lot of downside to these very optimistic projections that we're going to get these huge rate cuts it might happen but but I just see a lot of risk yeah freeberg you think these oil shocks are
here for the long term or a possibility you've been talking a lot about Alternative Energy nuclear obviously uh so is is and the US has become a net exporter of oil so do you think this risk of oil disruption from the Middle East is with us for the long term or do you think that's waning now there's definitely structural risk because you have a supply chain that can get disrupted in a number of ways and
limited alternative options if you look at the chart I just shared it's the US strategic petroleum Reserve so we have about 350 million barrels in the uh strategic petroleum Reserve today that's down from call it early 21 when we were at 650 million barrels and you know it was pretty much at that level for decades after the buildup leading up to 1990 we haven't been at a level this low in the
Strategic petroleum Reserve since 1983 and so there's not a lot of levers for the government to intervene uh to support the supply as there may have been in the last couple of years in the case of some Supply shock because of a conflict that arises in a major oil producing region it's a really interesting chart isn't it because that was after the oil crisis of the 70s and
you look at how long it took to build it up and how large we built it it's a really fast I've never seen that chart before but if you look at the you know I don't know if you guys remember the oil lines did you have them in Canada chath where and I remember in Brooklyn you had an even number odd number license plate thing if you wanted to get gas you know
some days was the even number some days was the odd number I remember my parents getting online for gas and waiting for two hours or three hours to get gas yeah by the way I'll say this is not a real cost today that we're experiencing but as Sak is pointing out there's a number of ways that this can become a real cost I was in Austin this week and the thing that shocked me the most was how cheap
gas was the gas station you can get gas for like two bucks and 25 cents a gallon it's pretty awesome it's like $6 when you're in leak Lake to yeah just so everyone understands how the spr got depleted last year when inflation was the top story you know on the front page of every newspaper and gas prices were hitting what $7 or 8 the administration started releasing
crude from the spr to try and bring the price down and they did that for about a year and they were basically subsidizing the price of oil now that's why our stock p is low and that was a really great political strategy but if we end up in a real crisis we're going to have less dry powder to deal with it so you know we could have a perfect storm of things coming together here where at
precisely the time we end up getting involved in a big war in the Middle East are tools to mitigate the oil shock that would create have been reduced by what the administration's done over the past year now I don't know that that's going to happen I mean I still think we're several steps away from a regional War but you look at how many fronts now we have conflict in the Middle East there's
about five different fronts where there's conflict you've obviously got Israel's war in Gaza you've got Hezbollah in the north basically firing Rockets you've got us bases in Syria and Iraq coming under attack and now we have the US striking Yemen so there's just so many ways that this could spiral out of control isn't the spr designed so that when we have an economic crisis like
this to use it like I mean it's yeah you're the the Biden Administration just allowed to dip in by the way you have to give credit to the Biden Administration in one in one form it's not necessarily skilled per se but when you look at the spr depletion they were selling at incredible moments in the market and the energy Department I actually I think they they just announced that they're
buying another you know4 or eight billion dollars U to replenish the spr so they'll be doing that now but they were selling if you look at these price points here they were selling when prices were 80 and 90 a barrel and now they're buying it back at 70 so at least the United States can take some solace in the fact that we arbed out a few billion dollars for treasury I wonder
how the spr relates to consumption you know we see this chart but it's in the number of barrels right 350 million barrels or something like that is that what the chart says and then it peaked at 600 or 700,000 I wonder what it needs to be chth or freeberg on a as a percentage of our consumption as more EVS hit the market right and as the number of miles per gallon goes up so I
couldn't find a chart for that I tried to find if anybody in the audience knows the spr in relation to consumption that would be a very important chart no I think they're pretty independent Jason how so like we just Build It Up independent of what we need no the the Strategic petroleum Reserve is is essentially that it's it's not meant to be something that's that's meant
to bookend usage you know if in a highly functioning Market there's theoretically an infinite amount of oil that's available and so if there's more consumption you'll be able to find more oil you'll just have to pay a different price for it this is meant to be used in very different kinds of situations this interesting yeah right like when there's a disruption when when there's an acute
disruption it's supposed to be break last in case of emergency exactly yeah but how many days is supposed to last is what I'm sort of getting at like that's what I wonder because over time are we consuming more oil now as a country or are we consuming less I would think consuming more but but the thing you have to keep in mind is that even in an acute shock what you can't just look at
the spr because we have now domestic oil capability right and a lot of that developed under two presidents Obama and Trump and both of them deserve a lot of credit because we have a capability now to be self-sufficient and we are a net exporter because of the work that happened during that time yeah knas oh my gosh did you guys see all of this michiga with Carta this week crazy huh
absolutely uh actually it's on the docket so those of you who don't know Carta is Capt software if you don't know what the cap and cap table is uh which many of you might not stands for capitalization what is it it's a Google or an Excel sheet that says who owns the number of shares in a company this gets very complex in private companies and they've made quite a business out of it
wait wait wait can I pause you there there there was a lot of comments that said exactly that it gets very complicated I apologize I've I've owned equity in companies for 20 years what the hell is exactly complicated well I don't understand that statement I'm not I'm not directing it at you Jason I can tell you yeah because I I feel like that is like some BS statement yeah it's not
the thing is you as acting as a price round individual in a lot of these cases it was very simple to do a priced round but when you inserted safes into this you know a simple agreement for future Equity that y combinator created and you put Capital uh um convertible notes into this Founders started doing like dozens of these shth and at the early stages
the cleanup work and understanding how many shares people owned especially with no but jcal what I'm saying is what like okay tell let me stop let me ask a different way yeah sure we did this with spreadsheets let me answer your question okay so in a private company let's say a company issues options to an employee and they don't have a good record of that the employee executes the options
they now believe that they own shares unlike in a public company where there's a broker of record every share is registered in a public company you know who owns the shares you know what broker is holding those shares and every share is traded through a public exchange so there's a record of every transaction that takes place with every share in a public company in a private company
there's no independent legal regulator that tracks all the shares so you could issue options to an employee and forget that you did that put the document in a in a drawer and the employee shows up five years later and they're like wait or I've experienced this I've had advisor show up be like look here's my advisory agreement I was given options I'm asking a different question you're
you're saying something great I get that I'll tell you what I think the killer feature was is that complicated to implement in software I don't understand tell I I I think the killer feature for Carta it was called eshares back then was getting the shareholder to sign for their stock certificates so to freeberg point in the old world where it was all done by email and a spreadsheet they
would literally have to send you a paper stock certificate you put in a file cap if you lost it you have to sign a document say with with a lawyer say oh I lost my my certificate I promise you I lost it all that of stff I think the killer feature was digitizing the stock certificates and then you would sign for them using like a e signature you know on Carta and they would just keep it for
you I get it I'm not saying that is I'm I'm not debating the value guys you're saying why is the software complicated yeah why is the software complic this is not complicated nothing you guys have said complicated but but what happened was cuz I remember when like the market tipped right is I got one email from a company that was using eshares back then
and I would just do the digital signature and I started getting a few more and a few more pretty soon there was a network effect like I don't want to have to wonder where my digital stock certificates are I just know that they're all at Carta that's very convenient for me as an investor I think it's very convenient for the company to be able to manage all the stuff
digitally so look I mean DocuSign is not a complicated technology either and that is what a multi-billion dollar company because there's a very strong Network effect you don't want to have to have all of your signatures at a whole bunch of different companies so I think that's how it kind of got off to the races and then since then they've been able to add more workflows they've been able to add fund
management they've been able to add a number of things to make it stickier and more feature Rich and it's not that expensive it's like 10 grand a year or something like that it's kind of getting very expensive for startups we're talking 10 grand a year is is expensive I mean for a seed stage shup it's a lot and then we invested in a company called cake Equity that's doing it for like
$1,000 a year to chat's point you tweeted Why Can't This be $1,000 a year go to cake Equity you'll see well can we can we just go to my tweet like I was confused by all of this stuff we haven't even got other story yet oh just sorry Jason go yeah yeah sorry so anyway what you're hearing is this software is very integrated into startup culture we all have a lot of opinions on it because the
cap table is where all the value is recorded the cap tables have gotten much more complicated but this is not like building the Tik Tok algorithm or chat GPT to be clear to chamat point this is not really hard software to build so correct on that and saxs correct to your point it's super convenient if everybody uses the same platform and for a series a VC company spending 10 $20,000 a year
on this is not that big of a deal uh although there are cheaper options VCS and investors use it too to track their portfolios absolutely and so it grew from one to the other just to be clear so I mean first companies started using it for their cap tables then they got into the fund management business so if you were a fund you were receiving all of your stock certificates then you
started using to communicate with your LPS so we've started doing that and it's very convenient for that so it's a real it's more of a network effect business than a hard software business I think it'sa point this business has benefited from the network effect so they had such strong Network effects here's the brewhaha the Donnie Brook that came up uh this past week Donnie Brook so you
can look it up I like that word yeah so the company I bet you knew a lot of Donnie's in Brooklyn we we I was involved in a couple of Don Brooks if I'm being honest and they they they escalated from bruhaha typically not unlike an average episode of this podcast and so there are probably some Donnie Brooks involving guys named Donnie that yeah Donnie was typically
the guy start this episode is going to be named the Donnie Brook episode please so uh the company had a massive violation of trust as they were expanding to figure out other businesses to come into they got into What's called the secondary market for those of you who don't know what the secondary Market is people like to trade stocks of private companies you may have
heard people buying and selling stripe or SpaceX and so employees early investors might sell their shares to other people now this is not happening as a primary offering from the company where they raise money and and issue new shares this is people who have shares carda was in a great position to do this because they had the cap table now on your cap table might be a 100 investors
30 of them might be your friends family very quiet you know it could be Jeff Bezos who was a seed investor in Google some folks at Carta who were in the secondary business violated the trust and the privacy of companies who had Angel Investors or early stage investors on their cap table and started contacting them directly saying hey do you want to sell your shares in company
a to this person we're trying to create a market for it they got called out publicly the CEO Henry Ward who is a unique individual as uh as many CEOs are tried to do some coms it was a disaster of comms for a couple of days while they tried to explain basically breaking their own terms of service and it all ended up with them selling the secondary business which I understand was a tiny
business for them overall your thoughts gentlemen I don't know if anybody why you say he was an interesting individual you mean um he communicates directly uhhuh in a very effervescent candid way okay like some Founders do effervescent wow that's a nice nice effervescent I me I'm just TR saying's he's sparkling I think he is bad at PR but entertaining to listen to right like I
think maybe they should have had a little bit of a slightly more thoughtful approach to this but it all happened in real time so it's very difficult to deal with the crisis in real time I think I have two comments go the the first is I actually disagree with David Sachs I I think that there's literally no concept of network effects in this business and it makes no sense here and the reason is that when you
look at the public markets which are infinitely larger we have a vibrant public stock market that has no concept of this and it works where you have companies like computer shares you have companies like ssnc there's just a a plethora of providers that do fund Administration and frankly I'm glad that there's a plethora of providers I use some of them and I trade one against the other to get a
constantly cheaper price we use the distribution agents and depending on which bank I'm working with on whatever deal I have shares at multiple different agents and they also cost virtually nothing and I don't see a world where that deflationary cost reduction doesn't come to this Market either because I don't see this as a as a defensible area of software I think
it's a necessary piece of software so I kind of like randomly tweeted out just kind of like oh because I was just watching from the sidelines now in full disclosure I was a CA investor I sold all my equity in a secondary transaction actually speaking of secondary transactions was that a good trade yeah I sold yeah I sold it all two and a half years ago so I I have no opinion one way
or the other on this company I understand process automation but I don't think process automation is defensible so if you build software around process automation you will be competing in a race to the bottom on price that is and I have not seen a single example of a company that's proven this otherwise there are different companies that create real locking because of what they build that
isn't one so I tweeted this out some person sent me this and Jason to your point the two most prevalent competitors that they showed me were mantle and I think one is a YC company and and one is not but mantel and pulley I think were the two that that came up the most often and Jason to your point what they both told me was carda is like 10K a year 12K a year and these guys are 90%
discounted de a tenth of the price which again proves there is not a lot of super compelling software lock in here it's useful stuff but that useful stuff is eventually going to get as close to free as possible these guys are proving and then last night while we were at poker I got this thing somebody in two days oh built an open source competitor and just
put the code out there and said here you go take it isn't that incredible exactly guys that happened that happened in two days from that tweet right and by the way I don't know if I got how crazy is that if I got a stock certificate from what's the name of this thing open source clone byby carta.com I'd like grow gr I'd be like oh here we go I've got to like bu first of all
that's totally myir in like five different sites and this thing's probably going to go out of business in six months come on that's not true and you know it you know it you don't know where the CTS are I can actually there be seriously annoying T to deal I can actually tell you what's happening in the market with startups startups are looking at the Alternatives they want to
save money the bigger companies are probably not as price sensitive chamat so you know spending $20,000 as a Serius B company nobody cares but for the start s they tend to find the most efficient software and you're exactly right shth on that yeah my comment is less about Carta itself and its price point my observation is twofold one is software that doesn't have a fundamental lock in
yeah does not have pricing Power number one and number two we are almost at the Tipping Point of a set of tools that will allow competitors in a matter of days to compete with an 80% feature complete solution at a fraction of the price that's my that's my generalized observation as manifested in this CA example in less than a week well what do you do with some observation like this
if you have this 80% observation is there anything so then I was like well you know what I'm just G to go for it so iing it up for you here so I I'm starting this thing and I've been working on this idea for a little bit but and I've been experimenting with it with some of my companies but then I was like you know what we should just do this so the concept here is we're going
to build this incubator it's called 8090 I have a team I have a bunch of developers offshore and we are going to basically create a hit list of software that we think is relatively straightforward and mispriced and could be built much more efficiently in 2024 using all of these co-pilots and tools and our our boundary conditions will be can we deliver 80% of the functionality
at 10% of the price so at a 90% discount H so 8090 is like is what is what the name of the incubator is and what was interesting is when I tweeted this out we had 1,200 people essentially give us a product road map they told us the software that they would want they told us the features that they need they told us the things that they don't need and so the idea here Jason I think is I'm
just going to build this in the in the wild I'll create the list of companies we'll publish that out let people vote on it okay then we'll publish the prds of what the 80% version is and we're going to work backwards with my team in South Asia to try to build these things at a temp price point so SX your thoughts you're a SAS investor it's h your vertical your thoughts on chat's
plan to be the most hated person in Silicon Valley by underpricing every piece of SAS offer by 90% in real time well can he do it in your estimation well I think there probably are categories where you could do that but but in general what I would say is that it always looks easier from the outside than from the inside meaning that you look at any particular SAS category
leader and you're like this is easy like I could do this and then when you actually get into it you realize that okay the product I'm seeing is kind of an iceberg I'm just seeing the tip of the iceberg below the waterline is all the business logic that's been written into the system there's like a much deeper and longer list of features not in every category you might be right
that in some categories you don't need the product depth but in many other categories there's just a lot of subtle features usability issues that have been figured out Integrations you know with other ongoing support ongoing support train and then you have the whole sales and marketing component to it so what ends up happening is you attack a category saying oh this is going to be
easy you know a year or two into it you're like wow like the category leader we're not even close to where it is in terms of table Stakes here and it ends up being more of a slog than you thought and then you find out the market doesn't necessarily have as much of an incentive to switch I'm not saying it can't be done there are categories where I think the category leaders has become stagnant
and has stopped innovating and I think those are ripe for disruption I mean look I'm kind of trying it in a way we're going to be launching my S killer soon I feel a lot better about that because slack out acquir doesn't hasn't really innovated in a few years and Salesforce by the way just announced zero hiring in 2024 and the slack teams were like what how are we supposed to
hit our road map without more people like what's going on here so there is there is so look I definitely think it can be done but I don't know I think you got to choose carefully the categories where the iceberg isn't bigger than you think basically I want do you think that there's a shift in the business model for SAS companies that emerges from what jamat is talking about where I think
right now sales and marketing cost as a percent of Revenue on average average for a scaling enterprise software company around 55% of Revenue or something in that range does that number get compressed by bringing price down so you bring price down but you need fewer people to go in and do the selling fewer F Mar that has not been the pattern I mean look everyone was saying things
like this when enterprise software shifted from on-prem to the cloud you know we went from Oracle and seol to salesforce.com people would say oh this going to Fally change the business sales won't become that important products going to be all important it was true to some degree I mean I do think you tried to do it that was your what you pioneered at yeah you you try to do
bottom up yeah so there was product Le growth became a thing you know and a very important thing and I still think that's the best way to build a SAS company is you let the users just try it on a premium basis as opposed to having sales knock on the cio's door let the employees pull the product into the company then go close the deal so it did make important changes but it did not
get rid of sales I mean you know what I believed doing this stuff way back in 2008 is to be able to get rid of sales and just make Enterprise Products completely self-distributing that never happened people have been predicting the the death of sales for a long time and it's never happened I think your vision is absolutely right and I think this in a world of autog gpts it's going to
happen and I think the way that it's roughly going to happen is as follows I think what happens is that and Zoho is is another good example of how you can do this which is what you need are a small set of tools that provide useful capability for a company that work elegantly together now when you work elegantly together there's a bunch of things that you need you need security
you need hand offs and handshakes you need different ways of handling exceptions you need a a common kind of data model all of those things can actually be configured on the Fly dynamically by and between two sets of software if you let the AI actually run and auto configure itself and so I think the experimentation is as follows you have product a and product B you want to
adopt them both they have elements of an agent that can go and autoconfigure themselves to each other separately I think what the CFO or the CEO does is allocate a budget and that budget is an agent and what that agent does is works with these other agents to say okay great I can spend money on these features that is the thing we've not explored we've always taken software
that we build and all of a sudden pause Automation and hand it over to people to run it through a relatively archaic go to market process and I think what's worth trying to figure out in 2024 and Beyond is how to use these tools to automate all of the low-level negotiation that happens before you can adopt software I just think it's totally unnecessary and I think that this is
where software can do a very powerful job on behalf of the salesperson does it mean the salesperson is totally out of the loop no but I do think that if these tools are lightweight enough especially the young Nimble companies will actually Sayre my procurement person is actually an AI agent with a budget and it's the products that then figure out how to negotiate for the share of that budget
and then configure how to work amongst itself that is the key Innovation that I think someone will figure out that is the Zoho 2.0 right that is the Salesforce 2.0 it's sort of this app App Store common data bus kind of an idea that that I think somebody will build I would like to try to help well people have started building a chth because you're starting to see the features
overlap in many programs you're seeing HubSpot Salesforce zenes they all kind of getting into each other's businesses those those are that's a great observation but those are all closed products what I mean is like there is like a totally open protocol and set of standards for how product a integrates and interacts with product B on many levels right from security to data model and
everything in and I think that that is what needs to get figured out and be very much an open source idea the great part about this is this is going to be massive competition it will lower prices it'll add features and uh the the the team over at 37 signals is doing something similar if you look at once.com they are also going to go after slack Sachs and they're going to just
charge one time for the software I think I may have mentioned it on a previous one but their concept yeah just yeah can we can we take a moment actually Nick can you throw up my tweet can you take a moment to just say thank you to steuart Butterfield and what he pulled off thank you as a series a investor I thank you sir yeah 27 times ARR is looking like a pretty
great exit multiple oh there's my reply oh yeah look at my reply yeah I mean my gosh what a deal and at the time it was they were public and people were wondering like hm was this a good deal or not should they have stayed independent but the product velocity never seemed to get going how are you thinking about what the critical go to market MVP capability is for slack so this here's what I'm curious
about there's chat right but the problem with chat in my opinion is that slack has become totally overrun where you could be a five person company and all of a sudden you have 500 channels so there's no scarcity and that scarcity is in my opinion what makes what makes all corporate chats in this modern version teams included totally unusable so much
noise and distraction so how are you thinking about that product problem yeah I totally agree with that what you hear from every single company that has more than I don't know 50 employees is that slack doesn't scale because what happens is you have a channel get created and there's a whole bunch of conversations in there that are kind of munged together and if anybody in the company
wants to participate in any one of those conversations they have to join that entire Channel and as a result every single employee ends up in every single Channel and it's just a giant mess and there's way too much noise so I think that the channel model was beautiful in terms of letting people get started really easily you just jump into a channel and start posting that's why it
took off but it's not particular enough in terms of of addressing conversations to the right people so that's basically one of the problems that we're fixing the other thing I've heard from people is that we love chat but we also really like the feed that Yammer had as a way to quickly scroll through new stuff top level corporate feed people forget that there was like this hey if you want to
get pulse of the entire organization go to this one corporate Fe we were the first ones to figure out that like a feed should be used inside of an Enterprise not just in a consumer social network so in any event I i' say those are like two of the main Concepts is combining feed and chat in a way that actually makes sense and solving the noise the signal noise problem do you
have a name for it yet yeah it's gonna be called glue oh I love that can I remind you can I can I remind you that as a as a humble investor sir I I I think I was part of Yammer and slack so iocation I can add value you're in you're in there's just one requirement for the early investors is you guys actually have to use it you got to do a rip and replace on your slack and what
sure sure if you're willing to do that you're in perfect I'm in I'll take 250 500k yeah lock me in first place I'll take yeah I mean so I think what we're going to do is before launch we'll do like a seed round nice right now it's all been incubated by Craft so we'll do a seed round milon six million post six post I'll put 50 in at six pre 56 post that cheap but it won't be
it won't be a super expensive round because what we want to do is incentivize you know influencers to like sport the product switch to the product so it really is going to be do you have glue.com uh we have glue. a oh wow nice I was gonna get 8090 a but then I didn't like it you know what I got instead tell me if you like this 8090 in so it's just 8090 Inc yeah it's fine it doesn't
matter everybody searches I mean eventually you fake it till you make it if the 8090 domain happens you get it you put get orgo 89.com so do that before the show gets published what is it get or go like if people have an app get 890 get 890 or go 890 so you know if it's a service you say go 8090 and if it's whatever you say get if it's an app or something right like you're just
gonna go get it here at this domain name it's justas remember I also got VC sasco boom.com oh excellent well I have wet your people don't remember it's for a call back I have wyou be.com I think it just goes to wyou be. just goes to our website so that I mean that was the basic Scandal Sachs they let the sales team doing secondary apparently or somebody broke a rule they weren't exactly clear
with it it sounded to me like you know they didn't want to throw anybody under the bus exactly but how big of a violation is it to let people go sell into the cap table secondary shares without the CEO or your customer even knowing that you access that data where would you put that on a violation of trust scale I think it was a huge issue for them because the only
reason STS give their data to Carta is because they trust them to keep it private yes and I think a big part of the problem with the Carta vision of creating the secondary Marketplace is that Founders don't want it fundamentally that's the problem I mean Carta is in the perfect position to rationalize and make liquid the secondary Market the vision was correct in that sense and the reason for that is
is because carda not only has the cap table and they know who all the investors are they also have all the documents they got all of your corporate documents the buy laws all that kind of stuff they can very easily execute these transactions so CA was in a great position to replace all these secondary brokers who are running around creating books on their own the problem they have
is that at the end of the day Founders don't really want secondary markets to take place in their company shares and I think there's a few reasons for that one is is price Discovery I think a lot of these startups now if their shares were to be freely traded would be trading below bad timing below the last rounds Mark so they don't want it second the founders don't necessarily want their
investors getting out and then getting new investors on the cap table that they don't know so Founders are somewhat particular about who their shareholders are it's different than public companies in that way I mean Apple doesn't really care who it shareholders are private companies do care do you think that that's sustainable in a world where companies take 14 or 15 years and
they're trying to retain Talent well I think it would be better for everybody if there was more organized liquidity I mean one of the things I love that SpaceX has done perfect is that for the last number of years now they've had a tender offer every year and not even every year like almost every quarter right it's every six months I think was what my understanding of it is but yeah I mean
it would be think about that example so with SpaceX it's been up and to the right on a pretty consistent basis so every tender round has been a bump sometimes it's been a small bump sometimes it's been a larger bump the company I don't think has gotten greedy so they haven't tried to shoot the moon and raise the valuation too much so they've been able to keep a very organized process and they they've had
this attitude from the beginning of letting their employees and investors get liquidity when they need to so it's been great but that's very different by the way that that sort of organized tender process is very different than the secondary Market that cardo is organizing right because Carta was trying to do what all these secondary Brokers are doing which is they hit up
people one at a time and just say are you looking to buy or sell and they're trying to organize secondary transactions that are not part of an official process and I think that's a huge part of the problem here freeberg did you have thoughts on it yeah well I mean there's an element of secondary transactions in private companies that are unstructured generally being a problem the issue with
cardo was was there a violation of trust with respect to the transparency to the cap table that they have access to because they have all the data in their systems and when I was at Google in 04 or so Sergey was kind of throwing around the idea why don't we start a hedge fund because we have all this data about what people are searching for and we can see
all of this consumer behavior and we could trade on that and have a huge data advantage in the market place and ultimately whether or not there was an impro iety of the use of data and even if we excluded personal data and search data just using internet based traffic and internet data the perception of the problem would have damaged Google's brand so much first of all is there an
actual conflict where you're taking people's what they consider to be private data and using that to make money from their data without their permission or acknowledgement or explicit consent and secondly even if you are doing this in a way that doesn't use their data because you just generally have knowledge about who buyers and sellers are in the market outside of your software The View that
you may be using the the data in Conflict uh can damage your brand and damage your customer relationship so much so it seems in hindsight a little silly but I think to Jam's Point earlier it may indicate the necessity for them to think about building another business on top of this core software business that is a more true Marketplace driven business so they can make you know over
time more money and that's probably where this all came from they saw a need to build something that was more than just monthly subscription fees they weren't making money from it and they shut it down it's true that Carta is trying to become a multi-product business they started with you know startup cap tables then they added fund management then they added this broker
business but if you read Henry's last Blog the secondary Market is what he originally wanted to disrupt is he always wanted to create the secondary market and he created the cap table business the SAS software as a way to get to that yeah I think what he's realized is that the real value is in the SAS software and this Marketplace is not that valuable I mean the the SAS
business is doing something like 250 million a year of Revenue and the broker business was only doing a few million yeah three million so I think the value has turned out to be in the SAS and moreover this broker business was compromising the trust and safety or the perception of trust that the company has from customers the problem with that SAS revenue is if you look at mantle and
pulley that 250 million could could be 25 million and Cake my investment yeah and Cake sorry yeah and cake but but the point is the fact that there are there are many competitors I think is a sign of the of a low barrier to entry and a lack of a true fundamental lock in let's say you are an investor and you're looking at pulley or mantle why would you even think that's an attractive
company to invest in if success looks like you're compressing a $250 million Market down to 25 million like what's the point well I I think a lot of these competitors got funded during the whole Zer era where everything got funded I mean if you were if you were to look at that market today why would you even fund a disruptor well so look I think man there are other strategies too yeah
there's other strategies you could add on to this in adjacencies my understanding is mantle and pulley raised in the low single digit millions that gives them a lot of room to run a 25 and $50 million business profitably and never raise any more money the problem is on the opposite side if you raise money at eight or N9 or 10 billion dollar when companies trade at 20 times
and now companies trade it six times now all of a sudden you have to have $1.3 billion of Revenue a year to break even and I think that's the real problem so it's not that Henry hasn't built a great company I think he deserves a lot of credit the question is entry point and the question is upside and the upside is governed by the difficulty of the things that you're doing and how much pricing
power you have for those difficult things and so I think what we're realizing is that there are few difficult things in software few I just like it's just true and as a result every product this is not a carda thing every product will see a ton of competitors so the only thing that you can do is have an extremely leveraged Opex and an extremely low cost to serve
that is the only predictive protective mechanism one has it seems to me on the outside looking in nwork effects are also important unless you have an Instagram you're right that product is infinitely better with everybody or a Tik Tok great now you can just you can spend as much money as you want but that's I think procedural software is yeah I don't I mean look we're we're
going to just have to agree to disagree I think there is some pricing risk to carda from these competitors but my guesses it ends up being stickier than that but in any event I mean I do think that Henry at the end of they pulled off a nice save by just getting rid of the business agree altogether I think that was a smart way to respond clearly the First Response didn't work no the First
Response yeah yeah it was a very confusing denial where he said this isn't our policy but he also blamed he also got into it and blamed the person who called him out on it was like what why are you calling us out on this and then like every founder was like because you violated our trust and he was like oh yeah sorry yeah well showing people are showing like email campaigns that
have been going on for months and it seemed much more organized and it it was very hard to believe that this was just an accident instead of a deliberate strategy and you could see the whole starb Community was was you know evaluating its options in real time on X yeah and that's when he came out and hit the whole thing with a sledgehammer and just said we're going to get out of this
business smart and I think it was really smart to do that it's kind of quell the crisis like I said I don't think this is a business that startup Founders want their cap table software to be engaged in no definitely not and just by the way just a third point on that you know one reason was price Discovery another reason was having undesirable shareholders the the third reason is
just Founders don't want to create a competing fundraising process to primary financing yeah I think this is actually a really important point the reason why Founders don't want there to be a secondary Market is because their company may need to raise money yeah you want to go through the front door to the CEO and the board not the side door to get a get some uh yeah you know exposure
to the company well I think I think in the Zer era where there was all this excess funding flying around then it kind of made sense to let secondaries happen but in a world in which funding is scarce you want that money to go into the company not into the pockets of the early shareholders and so I think like the timing of this whole thing is like really off it all feels like kind of a
function of Zer in its own way agree all right sex you were in the group chat talking about this viral clip about Star Wars you wanted to chime in on it maybe you could uh queue it up Nick I mean as you may recall my pick for business loser of 2023 was Disney and it seems like they haven't learned anything from the horrible year they've just had what
is the balance of activating a force for change but also trying to permeate that patriarchy that power structure and is that a part of the calculation of your art as well and and what's been the reaction to that oh absolutely um I like to make men uncomfortable I enjoy making men uncomfortable this is the new director of Star Wars all right your thoughts there well I saw the comment on that
tweet was this is going to be the biggest Disney flop yet isn't that what it said I mean look I I don't know what Bob Iger is doing he seems to want to burn Star Wars to the ground like the rest of the Disney Brands by playing politics this director doesn't seem to have had a lifelong fandom for the franchise and she didn't really talk about how she had grown up marinating in
this universe loving its characters her background is in documentary film making and there's nothing wrong with that but there's no indication from her that she truly loves Star Wars and in fact the comments that she's making right now are indicating that she's going to politicize it the patriarchy is not why anybody is a fan of Star Wars that goes to see its movies
so nobody wants to see that movie it's the opposite it's the opposite they want to avoid it they don't go to Star Wars movies for the politics and she's also trying to solve a problem that doesn't really exist I mean science fiction May skew mail in its fanbase but it's not because sci-fi franchises don't like strong female characters I mean just stepping out to the larger world
for a second you've got Ripley and Aliens you've got Sarah Connor and the Terminator movies you've got Princess Leia Trinity in The Matrix you got Princess Leia Padme Ahsoka in Star Wars you seem to know a lot of these female Chara you're deep in Stars Wars I'm AAR you got some good PS here so not this idea that there aren't Fe strong female characters in Star Wars is that's just kind of a myth
right and yeah so it's not it's not like the universe needs to be reset in this way and you could just see the whole fan Community kind of groaned at this comment because they're just like oh here we go again St Star Wars is going to ruin another franchise by playing politics and the amazing thing is that is that you know iards doesn't seem to learn from this at all but there's
nothing wrong with having a female director either right SX I mean you're not saying that you're saying that a particular person who has a political agenda in how they want to shape the story of Star Wars is the issue right of course I'll also say I think one of the core driving narratives emotional narratives of Star Wars is the oppressor oppressed it's a highly political it's a
highly political story I've always said I think Star Wars has been like the most anti- technology affector in society since the 70s because Star Wars is all about the I've said this before but the Ewoks destroying the Death Star and like the no Tech overcoming the oppressor big Tech and so we have to destroy big Tech and anyone who has the better technology
is very likely the oppressor and uh they have all the wealth and they have all the power and they have all the control and so those who do not have the power do not have the wealth do not have the control do not have the technology have to go and destroy that whether it's the Empire or that you know kind of evil force and that's the core Narrative of Star Wars so I do think that at its
heart Star Wars in and of itself is an oppressor oppressed uh storyline that relates very deeply to technology and wealth and has helped shape the Western psyche for a couple of decades in a very meaningful way or has really reflected Maybe perhaps the Western psyche you think Andor I think you're super imposing current day terminology on a movie that was created in the first one
in the 1970s when intersectionality did not exist yes there are political overtones to Star Wars you've got the rebel alliance against the empire that is not diversity politics sorry it's about I'm not saying diversity politics I I it's really about the corruption of power I mean you know the famous phrase by Lord Acton which is power corrupts and absolute power corrupts absolutely
to me those are the political overtones of Star Wars it's not yeah so you always diving the world into intersectional categories it was about War I mean let's be honest it was Lucas was a child of the Vietnam War era and he was highly influenced as was Francis for Copa and uh yeah the Americans with all this wealth and power came into the jungle to try and destroy a peasant nation and
cause death upon a peasant nation and the peasant Nation survived W and there was a narrative to that that I think is reflected in this and is reflected very deeply in a lot of the stories that have come since and I'm not saying Dei is as a solution was the storyline out of the original Star Wars but the original Star Wars was very much driven by The Leverage that technology provides to
those in power that gives them you know extraordinary influence over those who don't have power well if there were political overtones to the original two trilogies and actually I I think there were some really interesting themes especially in that second one where pal not even not even not evenl by the way not even political let me let me just be clear social right so social systems
which I understand but my point is that Lucas didn't hit anybody over the head with those themes and his goal certainly wasn't to make anyone feel uncomfortable his goal was to entertain and whatever political or social overtones there were were very much in the background because that's what good art does one of the reasons why Hollywood produces so few really interesting movies these days is
because the political overtones are really in the Forefront and they really hit you over the head with them and so therefore they're just not very entertaining it's just not very good art and I think that's why the fan Community was like oh here we go again let me just set make sure people understand this is a 9-year-old clip and for context this is probably during like the you know
early days of the Dei movement just so we're clear on that but you had another point to make daavid go but Zach I think that Hollywood has imposed upon itself a certain degrees of restriction on the Artistry of the artists in the community because the standards now to be nominated for Best Picture Define a number of Dei representation and inclusion standards and they're listed
here so in order to and I if you guys will remember at our Summit uh in La I asked GTH paltro about this and she wasn't familiar with these changes that had been put in place but in order to qualify for a best picture nomination you have to meet some of these standards and these standards include onscreen representation beams and narratives that relate to having at least one of the
leag characters or significant supporting actors come from Min minority background including ethnic background or by gender could get nominated for an Oscar look I'm South Asian look I'm in the paren here or at least 30 or 30% of the actors in a second secondary C in the secondary group have to be women racial or ethnic group lgbtq Plus or people with cognitive or physical disabilities or
who are deaf or heart of hearing the main storyline theme or Narrative of the film is centered on an unrepresented group either women racial or ethnic group or lgbtq positive they can meet the criteria if the creative leadership team has at least two of the following creative leadership positions met by one of the underrepresented groups and so on and so forth if you're an artist a
filmmaker and you wanted to make a film a World War II biopic which uh was on the front lines in World War II and was entirely white males would you have been able to be nominated for best picture or would you have had to go and you know take some actions that have would have affected your Artistry and your freedom of expression in making that film and as
a big fan of film and you guys I think all of us are probably in the same boat at least a couple of us are are three of us are three of us are this would have limited a lot of the best pictures of all time I would say if you had to impose standards on what the artists were allowed to do or how they were allowed to make their film and that's really what's taken over Hollywood so I
sack I would say it's not just a bob Iger Disney thing but this has become a standard in Hollywood that the the Dei movement has so deeply affected the intentionality of what has historically been a truly creative talk Hollywood writers if you talk to Hollywood writers they'll tell you that things have become extremely politicized and it's a mess Iger has been a little bit contradictory about
this in April last year there's this article saying that Iger was doubling down on inclusivity and diversity and he described that a shareholders meeting by November he was saying that Disney movies had become too focused on messaging so it seemed like he was finally getting it that after the horrible year they had but then we had this Star Wars news and it seems to
suggest that they were hiring a director who really wasn't right for the material so we'll just have to see my sense is that they have not made the course correction they need if you want to see the peak of this there was a bunch of blowback on Dunkirk an absolutely T to force of a film if you haven't seen it especially go see it in IMAX just extraordinary Christopher Nolan film
that it lacked uh diversity and gender diversity it's a war film uh historically kind of hard to make it about anything else if it was just on narrowly focused on a couple of battles and so yeah this is this has gotten to the point of yeah a little bit of absurdity I I relate this very much to the point that we made a couple months ago about standup Comics being restricted and canceled based on the
things that they say that are offensive to the the narratives of social inclusion and Dei these are artists who should have freedom of expression creative freedom unlimited creative freedom if we want to have a different set of standards for how we value the art that comes out of it fine but I don't think that it ends up being true to what the peer group would otherwise
recognize and say you know is the greatest art of the year is the the most impressive achievement of the year in some particular artistic discipline it's really sad there's also been this change in live performances in Symphonies used to be that to avoid discrimination in auditions for symphony orchestras auditions were conducted behind a curtain so the director and
those who were making the election on who would get to join the orchestra would listen and they wouldn't see the person and Performing because they were behind a curtain recently that trend has changed and now those artists are required to perform not behind a curtain but in front of the curtain so that we can judge them not on their musicianship and their Artistry but on their race on
their gender and on some other standards so I think this is obviously part of a very broad narrative but it's it's very deeply affecting can I ask a question the community of Arts I'm about to bring you in on this Jal yeah is listenership of the symphony gone up or down it's been going down for a long time but Sy around the world are seeing decline in
audience but it's it happened before the changes yeah it's been happening yeah has it accelerated or has it slowed the negative Decay to zero I'm not sure I'm not sure it's difference yeah yeah to be honest well if it hasn't if it hasn't made a difference then you're then it hasn't made a difference I mean I think this is part of a wider discussion of Dei the goal of some of uh some forms of
art like these live Performing Arts may not necessarily be audience growth the goal may be you know finding the best artist I suspect but I suspect it it should be to sustain itself indefinitely I mean that was by the way that's a big Point I've had which I quality of Roads as the quality of Roads fewer people will care because there are other options that you can go to that are high
quality and then these things will die off and you know maybe that's what it's supposed to happen I mean this is part of a wider discussion about I think Dei facing the reality of whether it's like I guess this whole pilot thing with Boeing and who's getting hired to be pilots and training and what should the focus of a company board be what should the co focus of hiring be the problem I
think with the argument you guys are having in my opinion is that it's a little too premature and the reason is that there are other people who will make semi credible claims while you guys make semi credible claims and no progress is made on this whole Dei discussion as it touches Cinema and Hollywood or music what's much easier if you want to dismantle Dei which will eventually come
and cleanse Hollywood and the symphony is if you go to the jobs where it's irrefutable where even the most Ardent defender of Dei says you know what I can't take that risk with my own family or with my own life and the lives of my family and I think that we're we would be better off if we just focus in a really disciplin way on those and get the criteria to be entirely based on
skill and then eventually it'll come back in Hollywood and the symphony will also get cleansed so doctors Pilots I mean I I I would say certain doctors I would just say Pilots for sure I would say surgeons I would say that you could probably go through I haven't thought enough about it to know but you could go through and say systematically what are the categories in the
professional world that we interact with every day where skill can be the only criteria must be because otherwise innocent lives will be lost that's an important question I I agree with you that the fundamental choice that we have as Society is whether skills is going to be the determinant of success skills and Merit or whether it's going to be about something else you know and as soon as
you tell somebody that they can't get the job even though they're the most qualified because of their race or gender then I think that is racism or sexism so it's doubly bad but Jam I think the I think the reason why this happens is because people don't really have the right skin in the game so the reason why the the recent discussions about pilots and whether cockpits should have this sort
of Dei program is that everyone can relate everyone has skin in the game if your kids are going to fly on a plane the only determinant you want for who the pilot is is skill obviously because you have real skin in the game the problem is people will will falsify their preferences when they're discussing other people flying on the plane so people will start saying well
you know we need to have Dei programs you know in other words when it doesn't affect me you're willing to basically virtue signal and genu flect towards these programs and I think that that's the fundamental problem is that people will pretend to support something other than skill in all these contexts where they're not directly affected but as a society we are with respect to Aviation
specifically my thought is that this is a very easy skill to determine who is high quality versus not because you have such sophisticated training apparatus and schemes simulators simulators and all of this stuff it's easy to know how to rank people from one through n and I think that as a society if you want an efficient transportation infrastructure and Aviation infrastructure where the
consequences are really bad if things go wrong you just want the best period end of story however I think it's also fair to say that then the government owes the people a responsibility to advance the technology if they actually want to have a multifaceted hiring criteria so what do I mean we can have a lot more Automation in the cockpit the reason we don't is
because of how certain lobbies are able to affect rules inside the Federal Transportation infrastructure and we know this because our friend has been trying to our friend Sky Dayton wonderful pilot has been trying to improve Airline safety and he's talked about this a lot and these things get blocked by the pilots Union and otherwise because they don't want to get disintermediate okay
fair enough that's the game well if that's the game at some point we need to have a conversation as a as a society that says okay look if we're going to higher in on a multifaceted basis for Pilots let's also tell Boeing and Airbus you need to build even better more automated planes that's a fair tradeoff the great irony of all this saxs is it's illegal to hire based upon gender race
Etc and then at the same time people are trying to hold this contract of hey we want more diversity we want more inclusion at the same time in their heads and we're seeing lawsuits happen so they're you know want tech companies to report on their diversity they want Venture firms to report on you know you know diversity and investment but it's illegal and you can be sued if you were
to give investment dollars based on race gender Etc and fierce Founders I believe it's the name of the firm that's being sued for only investing in a certain demographic of women yeah or to ask people their sexual preference you're not allowed to ask that in an employment I don't know I've always had a problem with how do you keep these two things in your mind in our own Venture fir and I
just said to folks just this is considered a diversity Target and now to hire people whether it's on a Hollywood film set or in your company you've got to go ask them what their sexual preferences that's I mean it's crazy that we're being asked to do that and what I did in our company was I said hey if if we don't feel we're getting enough applicants for the programs founder
University the accelerator we could have you know uh efforts to increase the number of applicants but we can't make investment decisions based on anything other than the Merit of the company or we will get sued and so this is I think the problem in Corporate America with these issues is how do I try to help this problem if we think there is a diversity problem in our particular
industry which is noble and thoughtful and I wouldn't criticize anybody for that but then the rubber meets a road at legal and then performance right and and it's very hard for I think leaders to to manage those two dichotomies I could see a case for why Barbers and Priests should be multifaceted good bedside manner crack a few jokes be able to listen Rel
relatability if a pilot but the first time like the thing is now this thing is so on the front burner of people's minds that heaven forbid if there is an incident or a near incident you're going to see lawsuits that are going to focus on this issue show me the training records of the pilots and show me show me how they fared relative to alternative folks that you either did hire or didn't hire and
you know why was this selection it's going to be a mess we might even see that with Harvard in their selection of their president like why was this person selected as President right and did we check the new one or the past one like was there did we know about the plagiarism stuff you know did we not know about it and this is I think the race to Nowhere when you get into
identity politics and and I think this is why everybody and I think Coleman Hughes said it really brilliantly when he was on this pod talking about his Ted talk like we we at least want the aspiration of having a colorblind Society I think what Coleman said that was really I think profound was well well where can we actually affect change that will be important and I think
that's Early Education it could be providing prek it could be providing you know support for people with child care so that you know they could they could get into you know more job training Etc so like where do we where do we put our efforts if we do want to see a more inclusive diverse just world is I think the question backing up a second I think there's a fundamental dishonesty about
the Dei movement that's really coming to the four right now on the one hand di activists will explicitly say that their goal is to engineer job categories to explicit population numbers but like you said that's actually illegal to do so when they get in a lawsuit like the Harvard affirmative action case that went to the Supreme Court they'll deny that they discriminating against asian-americans
so when they're preaching for what they want to do when they talk about say kendi style anti-racism they will say that the explicit goal here is proportional representation but then when that results in discrimination against groups that are basically selected against they'll deny that that's what they're doing and I think it's gotten to the point now where they
just can't maintain both things being true and we I think we saw this in the dust up that just happened between Elon and Mark cubin where Elon was saying saying look we should be a colorblind meritorious Society we just shouldn't discriminate for or against anybody on the basis of race and then Cuban jumps in says oh no no that's not what de is doing de is just trying to expand the
pool of applicants and it's just not true I mean I don't know if he's being disingenuous I don't know if he's virt signaling I think they were talking through each other I mean you do want to expand the pool if you're not getting a pool of diverse applicants there's nothing wrong with that expanding the pool but what you are there was a Dei Griff that occurred I
think that's kind of what you're alluding to and I can tell you the Inside Story you look at the de movement it goes Way Way Beyond dis exping the pool of applicants it it explicitly puts its thumb on the scale in terms of what it's looking for in terms of hiring and promotion it turned into a grift and I can tell you the Inside Story on this and it's going to come out eventually but there was a I don't know
if you experienced this in any of your companies or if anybody's willing to talk about it but company has lack of diversity in their company then diversity activists and this is I think where it really started to build up resentment diversity activist comes in says hey you have problems they call them out on social media there's a there was a you know a Twitter Brigade comes
in oh my god look how horrible this company is people go oh I'm sorry we didn't want to be horrible and then they say oh well hire us and we'll teach you how to do Dei and let's build a de group and we want be Consultants pay us to come in pay us to speak at your organization to tell you what you're doing wrong and then rally a reverse support of it after you've gotten paid
for solving the problem for them and I saw this Shakedown occur and I had people ask me for advice on like hey what do we do here and you can just imagine you know you're a person of good faith who wants to do the right thing and then these Dei folks come in and then try to uh Brigade you basically publicly shame you in order to get like like Rich Dei contracts and and we saw
this with like the size of Dei groups at companies and you're wondering well what are these people actually doing are they just what what does a DI Department actually do inside of a company that is a creative or valuable it creates more bureaucracy to do more Dei right on itself and that's why it keeps getting bigger and bigger did you guys see the size of the Michigan Dei group did you
see that tweet I thought that was a I thought this was a Babylon B story when I first saw it because there are 250 people working 500 people at Michigan what theator 500 out of how many people I don't know but they're spending $3 million on payrolling benefits He Man I mean look big companies can kind of afford this stuff but startups cannot I mean this is really the kiss of death
for startups um you just can't afford to have these large bureaucracies and then also you know when you're a startup founder if you have six months of Runway 12 months of Runway you might not have the luxury to be looking at your statistics and saying you know what we've got 10 people who are of this demographic statistically we should have this so the next hire we need to make
our sales numbers has to be of this composure and I I've have seen people do this actually you've probably seen it too on boards or whatever hey we need to hire more of this type of person this profile and uh you know then hiring gets slowed and you know yeah it's it's challenging and it's also illegal so I don't know how you win in this thing other than have a colorblind
society as a goal at least you know and to are you familiar with um a Mot and Bailey tactic no tell have you heard of this this is a a rhetorical technique or fallacy no I haven heard this one yeah I love a good so this comes from medieval times the mod and Bailey was a type of Castle where the Bailey was this wider area that was just defended by a wooden wall so it's not that secure the was
basically the you know Stone fortress on the hill so a modern Bailey tactic is when you go out and stake out a very aggressive position you take the Bailey basically but then when you get challenged you Retreat into the mot and pretend like you never took the Bailey position ah the the Bailey position is basically the kendi style anti-racism where you say look we have to achieve
proportional representation in every job category and that is what the DI movement in the main advocates for but then when they get challenged by somebody like Elon or by somebody like Supreme Court they were treat into the mod and to say no no we weren't trying to do that we're just trying to expand the pool of of qualified applicants because who could be against that and
they'll claim that they were never doing the whole proportional representation thing and then on top of it they'll say well listen obviously increasing the the pool of qualified applicants is so unobjectionable that if you're against that then you must be racist and then you get all the accusations and so this is basically the rhetorical technique that the movement
uses to defend itself yeah but eventually when this stuff gets litigated as it just did at the Supreme Court you start to pick this apart and you see that there's a lot of evidence that they are actually engaged in overt discrimination against certain groups like asian-americans no easy answers here but I for one think that that's bad yeah there was something really nice about a
merit based society if there was fairness at the starting line but you know that's that's the thing I've learned is not everybody starts at the same place and so if you just look at it seems to me and listen I'm no expert but the starting line seems to matter most so if we could focus on making it as equal and fair and just when it comes to education that seems to me to be like
the quickest solution to feeling better about all this I I I just think we should have 7day 365 day a year school available Public School available competitive schools available to to to to make the world more just and give people more opportunity right skills training Etc why do you think that having school 365 days a year will make the world more just well because I do
think that if you had more competition in schools and you had Parents uh who care or students who care and they could get more education and there was more available then you could say well how many days a week did you go to school how much effort did you put in and there was just more highquality school available and If you look at Public Schools right now there's just it's very
unjust how poor the schools are and how poorly run they are what the teachers unions have done to these schools and disadvantaged communities and and if I look back on my life and I look at people who did well they had engaged parents and they had uh opportunities in education that other people didn't uh and that seems how does keeping the school open all year round change that
you think about parents who maybe don't have coverage for their kids after 2:30 or 3:00 and then those kids you know we called them we were called latchy kids I think uh in the 80s and 90s you know having the ability for them to do more enriching things to be in chess club to be in Taekwondo Club to to do a little extra math whatever it is that could be something Society could do for a very
low cost or skills training even right hey this is a a culinary school after school this is a culinary school on the weekends this is a coding school on the weekends it doesn't have to be just them it could be welding it could be like I said you know could be design whatever it is more opportunities for people to learn more skills without you know having the Benchmark be my parents can
afford Kuman my parents can afford a chess tutor right we we live in a time of incredible privilege and all of us have unlimited resources and many of the people who listen to this podcast have a lot of resources to hire tutors for their kids and give them more opportunity I didn't have that opportunity you know and if I had that opportunity I would have learned chess
faster right I would I would have had more opportunity for it just wasn't available to me and then there's a lot of people who started behind me who who certainly didn't have it available single parent you know uh in in a worse School environment than Brooklyn where I grew up grew up so I don't know do you disagree jom would you have a better idea of how to make the world more fair
and just than education and skills training I think I I think education is the probably the most important I do think that we need to find it fashionable again to have nuclear families I think that if you look at the marriage rates of 20 and 30 year olds it's meaningfully depressed relative to older cohorts including ours we're the last generation yeah where it's a
structural part of our identity is being married and I think that that has long-term implications because and when you look at the success rates of how to grow kids poverty matters a lot less than having a structural nuclear family meaning a two parent household and so I think that there's a lot of there's a lot of work we need to do to figure out how to reinen divize folks to want to commit to a
single person not this rampant promiscuity but just kind of lock down and find somebody and build a long-term partnership with them I think that that's really crucial for a functioning Society do you think tax incentives is a way to do that or just cultural norms I I haven't studied the problem to have a real I've heard this before I just don't know how that gets implemented in
society right I and I can think of ways that tutoring and having more education available vouchers Etc I mean if you gave every parent under a certain dollar amount of income a year a voucher to hire tutors man that could that could change the world right um it could change a lot of people's faith we need more two parent households that would certainly help more all right well we got we we really
got into it here in the end man what a what a great episode all right four the Rainman David Sachs with a tight haircut now the dream is over I mean it's just it's a new year I don't know who got to you it's a new year it's an election year it's a it's a big year for you clean it clean it up for I think it's just a huge critical mistake I think you were you were going to a
certain iconic look and I think you've blown it I I I'm going to take the other side of that bet and for David freeberg the CEO of ohal and ch poly hoaa the founder of the new 8090 incubator and the chairman dictator of the Allin LLC I am the world's greatest moderator yes you are and angel investor and we'll see you all next time byebye love you boys byee byee let your winners
ride and instead we open source it to the fans and they've just gone crazy with Love You Queen [Music] of Besties are that's my dog taking your driveway oh man myit meet me we should all just get a room and just have one big huge orgy cuz they're all just useless it's like this like sexual tension that they just need to release somehow what we need to get merch [Music] our I'm going [Music] in