all right everybody welcome back to your favorite podcast the Allin podcast it's episode 164 I'm down here in Miami with me again of course the dictator chairman himself J off poly hoaa and the Rainman yeah burn baby David saaks unfortunately we had a little bit of a challenge this week we don't know where freedberg is he's somewhere lost in his Apple Vision Pros but he'll be back next
week as you guys know I'm incredibly generous with my friend so I sent all the besties the Apple Pro goggles and so these Apple Pro goggles are amazing but uh you bought me a pair of the Apple Pro yeah we talked about this yeah they all you guys actually you were using them you just forgot but uh freiberg's been using them nobody can find freedberg
right now because apparently he went to Uranus I recorded in all of these sacks what's happening inside each of our Apple goggles God oh my God and so but trath here they are we actually took a picture I had Nat take a picture of you wearing them you want s you want to see what jamat was doing in his goggles yeah let's see I recorded it oh yeah look at that see he
he imagined that he did leg day look at those legs leg day oh my God he's reing he's still reving in that uh thirst trap that he posted in he I know but you see those legs the Apple Vision Pro Tim Cook can I sorry look at that can I say something funny about this which is that my legs are actually darker than my torso and my upper body it's the weirdest thing and
so you have it in reverse but it is true that my my legs are a different shade than my my trunk and my arms and my body okay well Sachs by the way saaks you know he loves his goggles CH do you have any interest in seeing what sax was doing with his goggles oh my God I can't imagine there it is s was speed running he was doing the speed run on DJ absolutely getting in there that's uh
Saving Private Ryan right yeah that's you that's you you were speedr running Saving Private Ryan there oh I got them too yes I but I didn't record myself I didn't record myself I maybe nicked it oh I was in there oh look what am I doing ohing the let your winners ride [Music] Ravid said we open source it to the fans and they've just gone crazy with it love
you queen of Quin wait you're telling me that they didn't have the third or fourth investor in Uber up at ringing the bell with them at the original moment I could tell you the backstory I was invited by TK to come to the the ringing of the Bell TK was disinvited so he was there on the floor it was very awkward and then they didn't have him go up and ring the bell
or be even there when Dar rang the bell it was because it was so controversial they didn't they banned him oh that's sad it was really it was really sad it was super sad U but anyway everybody I hope you're enjoying your so you were there or not I didn't go because okay he was like I'm we're gonna have a party but we're not gonna be able to ring the
bell and it was just all like very did you go to the party I didn't I should have I regret not going but it was unclear if there was even going to be a party or if TK was going to go because of all the drama I don't know if you remember on CNBC they were like TK's in the building but he's not on the thing and it became a big brewhaha but yeah so I missed my window
I mean if you had known that this was going to be the Big Exit in your life really the only one then you would have made every effort to attend everything right absolutely absolutely yeah I mean you're still riding on that ymer in PayPal I was I was talking to somebody about this the other day most people's careers you have like you know it's not like a smooth up upward trajectory
there's like maybe a few Pops that you get you're lucky actually if you get a few because most people only have one or maybe two yes it's like a power law it's like anything else in Venture right abolutely like I'm sure if you think back on like the big outcomes in your life it's not like there's one every year and like some sort of smooth no
gradient it's basically there's like one two or three over the course of your entire career that you remember right yeah absolutely yeah I mean it's it's good it's good to consider that because you have to enjoy every sandwich you have to enjoy every day what you're doing because those pops are out of your control you don't know when they're going to happen how they're going to
manifest so but you guys didn't get these you didn't get the goggles but these goggles came out this week I don't know if you saw it what I will say is at the poker game three of the guys were talking about these goggles huh Sammy woke up at 5: in the morning on the first day he was he got them and then and Robo were telling me that they just like bought them randomly in the
next couple of days and it was civilians there was no like waiting in line they were able to just order them is what they do yes but they're civilians just to be clear like in Silicon Valley we're kind of like H whatever you know we we played with oculus for so long but now these are out and there's a bunch of demos going around this one I thought
was interesting I don't know if you saw this but watching in a basketball game it actually is quite compelling to have all the stats on the screen with you and you can kind of move them around I maybe could see myself doing this I don't know do you think you would do this watching a game maybe so wait are you watching the TV through the goggles like what
part is real world and what part is augmented obviously all the stats are augmented reality but the TV itself is is that that's a stream that's a stream coming into the goggles yeah it's not your actual TV so you know I think he's just putting it on the TV there but you could literally be outside on your deck you could be on an airplane and do this so that's like but you can see through
the goggles right is that the idea it's you can if you want I think you can still see through the goggles yeah is the idea yeah you know that you could you can see the fact that you live in a tattered apartment without a girlfriend dressed poorly you can see the dishes in your sink you can see the cupboard being be bare you can see the spoiled milk in
your refrigerator your half-used bong that you use to soothe yourself to sleep at night whatever all of these 20 and 30 year olds do to cope you'll see all of that while still being in an immersive environment it's amazing yes I mean it is so dystopian I just think like if you take out your phone your spouse is like what are you doing on your phone I can
you imagine the audacity of being with your spouse or your family and being like hey guys I'll be right back and you put the goggles on to watch the next game with the Warriors I mean I think that's a snap divorce I don't know you said it very well about the the Oculus one which is you had a turn of phrase which I really like but basically it's like you were very quick to try it and
then there was like a period and then you lost interest I think that's just going to be the key thing with this and the fact that it costs $3,500 they have to get the price down fast enough for average folks to want and be able to buy it right yeah I call this experience try the try oh my goodbye you try it you're like oh my God this is incredible
and then you're like we put it in your draw you never use it again because there's not an application it's really a proof of concept look I think it's a great thing for Innovation that they're starting with this you know like you said expensive headset that maybe is not that ergonomic but eventually it'll come down and the form factor will be glasses
or sunglasses Facebook I don't know if the product's out yet but do you see their product where the ren yeah it has the AI built into it and you can ask it questions and it will do computer vision and give you answers based on what it's seeing it was a phenomenal demo I don't know if that's actually real yet but did you see that demo yeah these are the Facebook Rayband glasses and I I do
think these are meta smart glasses they work particularly well taking pictures and sharing them on Instagram so they're kind of single function he you know how Zuckerberg is he he cribed what Evan Spiegel did a couple years ago with the Snapchat but he put out a demo that was a little different the demo was like he was in his closet he was wearing this
and he had picked out a shirt or something and that's like give me you know tell me what I should match this with yeah what goes with a gray shirt that I've worn for the last 14 years did you guys see this thing where they all had to testify in front of the Senate yeah we might as well I guess could just jump right to that it was like a public flogging yeah once again a
public public flogging we'll just jump to it real quick since we didn't want to go too deep on that one but Josh Holly made Zuck turn around and apologize to to people in the audience it was really intense yeah so this is the name of this hearing was big Tech and online child sexual exploitation crisis Zuckerberg he was questioned along with the CEO of Tik
Tok Discord X and snap but obviously this is all around kids online safety and also section 230 which I think these senators are this is one of the few bipartisan moments I think they're honing in on it yeah they they realize this is kind of like a winning they're gonna take a run at this they're taking a run at it for sure they realize it's a winning ticket but let's
just play the clip and then I'll get your thought saaks and Jamal let me ask you this there's families of victims here today have you apologized to the victims I would you like to do so now well they're here you're on National Television would you like now to apologize to the victims who have been harmed by your product show them the pictures would you like to apologize for
what you've done to these good people I I I I'm sorry for everything that you have all gone through it's terrible no one should have to go through the things that your families have have suffered and this is why we invest so much and are going to continue doing industry leading efforts to uh to make sure that no one has to go through the types of things that your families have had to
suffer um a powerful moment and for Zuckerberg to get up and actually face the parents he turned around he faces par this a very dramatic moment and he apologized n n you respect him for for doing that and you think that was like a a powerful moment as well and and where does this all end up this was a kangaroo court I mean this was basically all
theatrics this is basically a bipartisan moral Panic where all these senators are basically grandstanding and these are the same types of accusations that we've been hearing for years remember this goes back to the whole Francis Hogan claims where she says that Facebook wasn't doing enough to prevent various kinds of online harms and I think that we're going to regret where this All
Leads because where it's going to lead if they do repeal section 230 is towards greater censorship all these companies are going to spend even more resources restricting what we can say and here online which is not the right direction listen do some harms occur online yes do I believe that Facebook is taking substantial measures to stop them yes I
mean but edge cases are always going to get through when you're operating at that kind of scale there are going to be these edge cases of kids who got harassed or content that shouldn't have getting through it's just part of the fact that the internet operates a gigantic scale and these harms have always been out there I think that these companies do their best to try and stop
them but they're always going to get through and you can't make every aspect of our society perfectly safe and harm-free somehow we have this expectation that we can eliminate 100% of every harm that occurs and I do think that these online companies have been unfairly picked on in a sense I mean if you're going to talk about these types of harms why aren't you targeting the
music industry for all their incendiary lyrics that basically encourage all sorts of violent or sexist Behavior why don't you target the advertising industry for creating unrealistic body image expectations why don't you target the Kardashians for setting unrealistic expectations around image and you could go on down the list I mean why don't you Target
Hollywood for releasing a show like Euphoria which is a hit it seems to me that the problem in our culture is not coming from the edge cases it's coming from the mainstream entertainment that is fully allowed and is popular and is our hit shows and hit records and hit products I mean that's where the toxic pollution is coming from in our culture so to turn around and now
blame the online companies for creating all of this I think is just I I think basically they're being scape coded I mean again this is a moral Panic shath do you think it's a moral Panic or you know there have been statistics and studies done about what is viral on social media the algorithms targeting users The Addictive nature of it you
spoke earlier about the addictive nature of just gamification on watches social media is a little bit different than music and some of these other things because they have these algorithms to increase watch time and engagement so I think that's what the other side would say where do you say what do you say chamat where do you stand on this let me
just give a Cod out to a couple things that sack said it is true that we've taken turns attacking other forms of media when they were ascending in their popularity so in the 1990s if you guys remember politicians and their censorship attempts around gangster rap and NWA and two life crew and certain songs Al gor's wife right what was her name TI tiate against rap lyrics what was the
NWA song you know the police that whole thing just sent off a huge fur about people potentially David being motivated to kill cops or something right in the 80s there was a trial Judas Priest went on trial right because if you played one of their records backwards supposedly it promoted devil devil worship I don't know who's playing records backwards but if you did then it promoted devil
worship and I think a kid committed suicide and so they basic prosecuted Judas Priest for it so that's comment number one which is this is not new and the reason why social media is in the crosshairs is because instead of having this really diverse ecosystem of many small players you have three or four folks and so it's easier to bring them up on stage and
sort of Piller them second is I actually thought that Zuck had a lot of moral Clarity because it's like that's a tough position to be in and the fact that he had the courage to turn around and actually apologize to those people shows he's trying to do the right thing but the reality is and saxs is right if you apply a very very small error rate to an incredibly large number so they have a
network of three and a half billion people monthly right or daily or whatever the thing is even if you say that there's one tenth of 1% of an error rate meaning things that are unintended well that's three million unintended consequences right that's a lot of unintended consequences and so there's this massive law of large numbers at place so what what do we do I
guess is the question and I think that there is enough knowledge that we have to know that the ability for a 35y old to use certain products today is very different than the ability for a 12-year-old to use that same product because of where they are physiologically right I think we we all know that to be scientifically true on the dimension of many products and I
think what we need to decide as a society is whether software and electronic products fall into that categorization and if so what does it mean so in the case of china they mandate top down what products can be used and how many hours you can use specifically video games you're referring to yeah yeah and David's right which is that if we go there and we
rewrite the law then there's going to be a different set of unintended consequences that's going to create create I think a much poorer business landscape frankly to innovate and a bunch of other things and building on your comments there's clearly an age at which kids can shouldn't be on these systems and an age where you know maybe with some guidance
they can yeah you want to add something J yeah and then I think the third thing is around the section 230 thing itself I think that Sak I'll give you a slightly different take I don't think that the section to 30 rewrite is going to be Broad and sweeping what I noticed from a bipartisan perspective by both the Democrats and the Republicans is that the one single narrow issue that
they all seem to align on is not necessarily about all of the different rules around censorship but that the lack of liability for these folks should be relieved and I think that if you were to write a narrow amendment to section 230 that said that these social media companies or other organizations that had certain characteristics were more liable where today they have no
liability I'm not saying that it's right but my read of the temperature in that room was that that is the very narrow change in section 230 that I think they all seem to want to make and so that seems like a very likely thing that will happen in the next two or three years unpack that for the audience who who might not know how they would do that
section 230 says if you're a publisher you're a common carrier you're not responsible for what people post on your your system blog web host or social media company but where these social media companies move from being just a common carrier you know like paper might be or or a website hosting company like WordPress or Squarespace is when when they flip over and they have an
algorithm and then they start picking and choosing so once you start doing editorial like the New York Times and you have editors then you're liable if you're CNN you're liable if you're Fox as we start in the Dominion case that's where the liability comes in so I guess the question to USX is you know at the end of the day now that we've seen these things that scale is there not an
argument that when you start editorializing through an algorithm and you start promoting certain content that you have some level of responsibility like Fox News CNN or the New York Times has where would you stand on that issue some liability if you're picking winners and losers in terms of what gets promoted in the system well apparently I'm the last person in America who
thinks that section 230 was a good idea and a Visionary piece of legislation that actually enabled the creation of user generated content platforms just to kind of slightly modify your description of how it works I would analogize it to a news stand where there's magazines on the new stand they're Publishers and then there's the news stand itself which
is a distributor if a a magazine engages in defamation they're liable for it but the new stand is not the new stand can't be sued so the question is when you have these massive user generated content platforms are they operating as a publisher or as a distributor and I think what section 230 made clear is look if you don't write the content if
the content is generated by users you're a distributor and that is I believe the better analogy to make for these huge ugc platforms now at the same time what section 230 said is that if you take Good Samaritan actions to reduce things like sex and violence on your platform forms then we won't make you liable because what happens in a lot of cases is that you can wave your protection
legally by basically getting involved and so the legislation didn't want to deter these platforms for taking again Good Samaritan steps I think it's a pretty good combination of legislation and that's what you see right now is that Zuckerberg doesn't want to let these edge cases through I actually believe that they are taking huge efforts at scale they have 40,000 people
to to give him some credit 40,000 people moderating stuff that's a big number yeah these are edge cases that get through and by the way you have to wonder where were the parents when all this stuff happened I mean they're acting like they're victims in the audience and I'm sorry for their particular cases but at the end of the day we do need the parents to step up
here if we want to have social media at scale at all the parents have to play a more active role but in any event to go back to section 230 I just think that Republicans in particular are going to really regret getting rid of section 230 because it's only going to lead to more censorship I think what they're going to do if I had to bet is that they're going
to write a very narrow amendment to that law and during some budget process or some other thing where you have a big Christmas tree bill this will get in there and I think it will have bipartisan support that effectively removes the liability protection that these companies have I I have that's not a small change that's the entirety of section 230 I think like these companies
will not be able to use that a massive change listen there are plaintiff's lawyers the the plaintiff's lawyers bar you know the trial lawyers bar is salivating over the possibility that would happen that's why this is going to happen you know the way this is how America Works personal injury hold on they have personal injury lawsuits and lawsuits lined up in every jurisdiction
of the United States and here's the thing is because Facebook and all these other sites operate you know across the entire nation and across the entire world they can be sued in every single jurisdiction if you allow these types of lawsuits okay Cham you go then I'm going to get my position and'll move on I'm going to say this in as unopinionated as
a way as possible whether we like it or not there's an element of American capitalism that takes companies through seasons and there are seasons where you're growing and then there are seasons where you're ere earning and then there are seasons where if it is possible the Machinery if you see that you are being you are over earning for a
long time the Machinery of the economy comes and kind of pulls you back down to earth You've Won too much and you're perceived as too powerful yeah and I'm not saying this whether or not it's right I'm just saying it if you look back in history these chapters have been written times and I and I think David what you said is the absolute single most important thing if you had to
figure out where this was going to go is exactly that the plaintiff's lawyers the class action lawsuits the amount of money that they think they can extract and they compare it to the amount of money that they were able to extract in two different kinds of cases one was tobacco and then the second was Pharma and I think that they look at this class of
app and the lack of empathy or the lack of popularity that the leaders of these companies have in Washington as a reason why they will probably be able to get this done to create this again I'm not saying I think that's good I'm saying that I think it's likely and I think when that does happen you will see a replay again it'll be slightly different in terms of how it plays out but exactly
the kinds of plaintiff's lawsuits that we saw in Pharma and in tobacco and I think it's going to play out here and David you're right that hearing to me was a setup for that yeah and if you if you look at this through that lens there will be some sort of negotiation and it might be age because when you look at this really what Americans are upset about is the impact this is having on
kids we have a limit for the age of smoking vaping Etc and when these things happen I think an easy concession that Zuckerberg and others will make is hey these products will be for 16 years old and up that's my that's the age I think it's appropriate 15 or 16 seems to be well he also said by the way Jason to to your point Lindsey Graham was the one
that brought this up and Lindsey Graham made the connection to tobacco and also to Firearms yeah and then Mark at some point in there basically said well listen like let's look at Apple and Google we should expect them to do the actual age verification not us right because they have the devices and they have the credit cards Etc that that's actually a very reasonable thing for for
Americans to come to the only thing that breaks down a little bit saxs in your argument and listen there's no perfect analogies here but if there was a repeated offense of a magazine on a news for example if there was some magazine that had underage you know an adult magazine that had underage kids in it and people knew that and a new continued
to publish it they would have liability for trafficking in child pornography or whatever it happens to be and so the new St does get some liability so there's again no perfect analogies here but I think but Facebook and all these other sites are trying to remove the child porn or whatever I don't think much of that gets through at all you know I think maybe you have a
better argument and and there is the argument that people make is that because of the feed they're making editorial judgments and that's publishing not Distributing however my counterargument to that is that the fee just gives you more what you want I mean it just looks at what you're clicking on what you're viewing the time you're spending and they just give you more of
that I don't think it's editorializing now back to Chamas point about this is the way things are headed that may well be right but I think we're going to regret it I mean first of all the democrat's interest one of their biggest donors is the trial lawyers bar and they generally will support any legislation that opens up the causes of actions and that's where this has had it and what's
going to happen is if they get rid of section 230 is that every time there's an alleged harm that occurs every time a kid gets bullied or beat up in school every time something goes wrong in their life they're going to try and pin it on social media and try to show that they embibe something on social media that led them down this dark path and these
types of companies are going to get sued in every jurisdiction in America recently we've seen huge huge judgments related to defamation where if you have say a red politically red defendant in a blue jurisdiction huge Awards I think we could probably see the opposite as well that basically you'll start seeing blue defendants taken on in red jurisdictions
we've seen completely disproportionate judgments and again around defamation disproportionate relative to the harm that would actually took place you're going to see that on steroids if we get rid of section 230 now historically it was the job of Republicans to oppose Democrats on this stuff because they knew that Democrats were Shilling for the plaintiff's
bar Republicans have not done that because they're so mad at these social media companies for censorship so remember when I talked about Good Samaritan liability these companies created content moderation to basically try and remove the violent material the pornographic material the sexual material the harassing material but in the process of doing that they started
making political judgments and and they started engaging in political censorship and that has made the Republicans so angry that they have now turned against these companies and they are willing to remove section 230 my point is I think Republicans at the end of day are going to regret that because if you remove section 230 it's going to open up this flood of litigation it'll be a
free-for-all it'll be a free-for-all and what's going to happen is that these companies just driven by simple corporate risk aversion are going to clamp down even more I mean the content moderation is going to be even stricter and because the content moderators of these companies basically are are liberals if you Empower them to take down even more content they're going to
take down Republican stuff even more and it'll be very e it'll be very easy for the plaintiffs to Target that type of content they'll say that oh that you know all of that Republican or conservative content that influenced people in a very negative direction that created all of these harms there'll be lawsuits targeting that sort of content
and Facebook and others will respond in the economically rational way which is to shut it down completely so I think Senators like Josh Holly are not going to get what they want they're not thinking straight yeah chath it's gonna backfire it's GNA backfire cham the reason why this is going to happen if it does happen and and you wanted to try to
be probabilistic about it is because when you look back at the tobacco settlement the original settlement in today's dollars is about $370 billion if you if you were the trial lawyers and you're looking at a combination of Facebook and T to and all of the all of that money I suspect that they probably think that the potential that they can extract from these companies is going to be
multiples of that number and then as a result their fees will be between 20 and 50% of that so you're talking about hundreds of billions of dollars of Revenue potential that will motivate I think these folks FKS to get the law changed and then the byproduct will not be framed in terms of dollars it's these are highly kinetic issues when you're talking about sexual
exploitation and young people and mental health and suicide and bullying the these are very kinetic issues right and so bringing these to jury trials all across the United States I think that they probably think that they're on the right side of history and winning those things so you know again I'm not saying it's right highly emotional I mean listen
it's win is to win you bring a case of say teen suicide okay horrible that it happens but there's gonna every time something like that happens there's going to be a huge Temptation I'm sure there'll be trial lawyers who specialize in this to bring a case against Facebook or some other social media company and they're going to scour through the these accounts and try to point to
examples that could have led to this result and the truth of the matter is that maybe social media contributed a little but what about popular culture and popular entertainment what about all the messages I'm not debating any of know I'm just I'm pointing out what's going to happen what about all the messages they received not not through the edge cases I got through on social
media but through the mainstream entertainment I mean all the shows they're watching on television all the music they're listening to the things that happened in their schools and day-to-day conversations with other kids but you can't really Sue any of those other things but you can sue social media the the crazy thing about all of this is that all of these lawsuits are
funded in part by these hedge funds who will do litigation finance and part of putting together a well performing litigation Finance fund is underwriting the probability of success and I think when you flow through the probabilities and you apply it to these companies largely because of their profitability and their ability to over earn and generate profits
I suspect that Wall Street is probably already involved if and if not they'll probably get involved in due course but it's it's an unfortunate thing David I agree because this is sort of like hey the rules on the field were X and folks operated by those and they are clear they are trying to do their best but again this is where capitalism the part of capitalism that can be
awkward and uncomfortable is when Industries over earn for long periods of time other folks say I am going to compete away the returns somehow and I want a share of those profits and I think that that's going to be the large motivator and it's just going to result in I think these things changing and a plethora of lawsuits and at the end of
the day this is about children and protecting children so the obvious solution here is society has to come up with a number well sadly I think that could be a veneer Jason you know what I mean hold on let me finish my thought here the the key thing is there's some age in which we all agree it's reasonable for kids to be using social media and there's a certain age when we
think it's not reasonable and back to capitalism I think a very good point you made shth these companies are going to have to saywell if we lose the 12 to 15 year olds is that better for society and better for our business and we just all agree that social media should start at 15 or 16 and then the handset manufacturers and the and the social sites all have you have to get
permission from your parents to use them period full stop and that's it and that may be where this all winds up I think and then also explaining the algorithms I think is the next thing that's going to happen people are going to have to disclose how these work I think you're making a very good point which is that is the right conversation to have my
point was that instead of having that conversation which is more societal it involves David's right parental responsibility what is our role absolutely when being actively involved and by the way the trends around family formation and the fact that there's way more single parent families make this problem even harder because now there's only one person to check in and not two
people to check in so all these things societally build on itself Jason that is the absolute right conversation to have my point is that's not going to be why the the rules need to get Rewritten the rules will get Rewritten because there's an economic argument by a different sector of the economy in this case the trial lawyers and other folks that say there's a
trillion dollars to be had if we get this law changed they are motivated enough to do that yeah a parasitic sector so there is a bill right now working its way through the California Assembly that would go to Gavin Nome that would prohibit the use of social media by under 16y olds so that is actually happening yeah I agree with you that's a better debate to have than
changing section 230 in a way that's going to lead to more censorship by the way just just on that point I think Republicans need to understand this in particular is that the anger towards these companies is bipartisan the the outrage is bipartisan the moral Panic is bipartisan you saw it on in that hearing you couldn't really tell the difference
between Republicans and Democrats okay so full display I wouldn't be surprised if they agreed like jamas said on some sort of change to section 230 but here's the catch is that Republicans and Democrats have fundamentally different objectives fundamentally Democrats want there to be more censorship they say this all the time we want you taking down more content not less Republicans
want there to be less censorship okay so if they agree on the same piece of legislation only one of them can be right okay and the question is who's going to be right my guess is that if Democrats and Republicans agree on a section 230 modification the Democrats know what they're doing and the Republicans generally being the stupid party who get outsmarted all the time by
democrats are going to agree to something that they later regret so at the end of the day I don't think that bipartisan legislation should be possible the anger is bipartisan but the objectives are not and if something gets through it's going to be because Republicans make a huge mistake and just to give a tangible example of this okay take the Second Amendment okay do you
think that in this world where there's no section 230 that Republicans are still going to be have conversations online about say gun enthusiasm no way because every time some harm happens every time there's a shooting of some kind a plainist lawyer a planus lawyer is going to Su not the person who posted the content talking about how much they
love their guns and you know and it look it could be totally innocuous okay it could be a a forum on Facebook or Reddit where people are just having conversations about reviews or could be totally innocuous conversations okay people having the right kind of conversations about guns okay but you know that every one of those websites that host those conversations will be
targeted in relation to any harm that occurs in the real world and very soon Reddit and Facebook and all the rest will feel compelled to ban any conversation related to even second amendment rights okay y this is where it will lead if Republicans get rid of section 230 you will be the ones targeted not not liberals all right great discussion you know it's important
to have the right discussion this reminds me of the abortion discussion where nobody would ever talk about the number of weeks like that's at the core of the issue we could agree on the number of weeks we can agree on the age here you know for for kids to to use these things maybe we could move forward let's move forward on the docket here we got so much to talk about and I think
the number one story of the week was elon's pay package and this ruling that occurred in Delaware let me just te this up here many of you probably know about this already but in 2018 Tesla's board approved a performance-based compensation package for Elon was approved by 73% of shareholders Elon and his brother Kimble would have put that at 80% but they were excluded obviously
this is lower than maybe some other support levels according to Reuters you typically see 95% for a executive compensation packet but this one was very unique it was all stock there's no cash bonus no salary 12 tunes of stock was very creative in how this was put together because Elon got nothing if he doubled the value of Tesla but then if
he you know increased the value of the Topline revenue and the market cap increased by $50 billion he got 1% more of the outstanding shares which is an amazing deal for shareholders obviously because the market cap of the company wenton up 50 billion the initial plan was only worth about 2.6 billion but since Tesla crushed it from 2018 to 2023
we'll throw up a chart here it's one of the great runs in the history of capitalism how revenue and sales grew at this company so it made it the largest comp package in the history of public markets and if you compare Tesla to Apple the second highest increasing stock price during that same time period Apple went up 345 per. Tesla went up 800% in 2018 a Tesla shareholder suit
Elon and Tesla's board claiming the pay package was unfair the guy had nine shares a full nine shares not 10 nine where $2,500 his stake went 10x in those six years so he made a fortune on that bet and then on Tuesday a Delaware judge voided Elon spay package siding with the investor Elon can appeal it to the Delaware Supreme Court Sachs your
thoughts on this ruling I teed it up I think I got all the details in there if I missed any please add them well I think in order to reach this ruling the judge had to find three things and all of them had to be the case in in her opinion number one that the pay package was excessive number two that the process by which they came up with the pay package was not fair meaning it was
not sufficiently adversarial enough that the directors in her opinion had too many ties to Elon and didn't again take enough of a antagonistic role in negotiating that package and number three and I think most importantly that the shareholder vote was invalid because even if the first two had been true the shareholders approved it and that would have been
good enough but she said that the shareholders weren't sufficiently informed and specifically I think this argument hung on a few internal emails where people said that they thought that they could hit the numbers I think that of the three legs of this well all three have been challenged by opponents of this verdict I mean number one yes the pay package ended up being a gargant
amount but you have to look at an ex Ane not expost nobody thought Elon could hit all these numbers back at the time this package was negotiated let's be frank it was absurd the idea that he would 10x it was a great clip with Andrew Ross sorin where they're all laughing at the idea that he's going to hit these numbers remember this was at a time when Elon
was going through what was called production hell where he was sleeping on the floor Factory yeah the model 3 hadn't come out yet and nobody nobody believed that the model 3 was going to be the hit that it was in fact all the stories were poo pooing that idea and basically saying that Tesla is basically screwed because they can't get the production line working correctly yep
you want to play this Tesla now announcing a radical new Compensation Plan it could be perhaps the most radical Compensation Plan uh in history the executive will receive no guaranteed compensation of any time of any kind at all he gets no salary cash bonus Equity uh he only gets Equity that that vests over time but only if he reaches uh these hurdle rates which are dare I say
crazy the only part of it that I think is really relevant is where sorin says that the Milestones are crazy meaning that everyone thought it was a pipe dream that the company would ever hit these numbers okay so that's Point number one on on magnitude on the second part of the ruling about the process it is true that like in most Venture back
startups there's a long-standing relationship between the founder and the investors because they work collaboratively to try and make the company a success there were emails that came out where Elon shows that I'm not trying to go for the maximum here so you know did did the investors go in with a hostile antagonistic attitude that we're going to try and pay you the least no
but did Elon go in with the attitude that I'm going to try and take the most no the the email showed that what they tried to do was come up with something that they thought was fair that would fairly reward him for outsized performance and if he had merely increased the the value of Tesla from 59 billion to a 100 billion he would have gotten nothing let's just keep that in
mind so they tried to come up with something that would reward him for outside performance and give him absolutely nothing for merely decent or good performance the third point about the shareholder vote I don't think that there was anything about the shareholder vote that the shareholders didn't know I don't think that the company didn't release Elon always said yeah we're
going to do this we're going to be one of the most valuable companies in the world he's always been super optimistic about their ability to reach these targets but if you looked at all the Wall Street analysts including sorin there they thought that these targets were unreachable well also to add to that sax this had the largest short position I believe at that time of any
company ever people were betting with their dollars that this company was going to zero there were a ton of people who the narrative was this they'll never delivered the model 3 it was two years late right or something in that range it was they they kept trying to get the model 3 out it was taking forever so yeah it's it's absurd also in that case
sorin said in that same clip there's been a lot of speculation of Elon stepping down after the model 3 is in production in the judge's ruling she said the exact opposite there is no reason to believe Elon would leave except that he was running like two or three other companies so it was actually quite possible that he would leave he never wanted to be CEO of Tesla people
forget that too he had tried three CEOs of Tesla and he only took over Tesla and I remember it was because he said Jason this thing's gonna fail if I don't take it over he he tried three different C CEOs in the beginning people forget that fact and there was scuttlebutt that he would hire somebody I remember there was like rumors about cherl Samberg maybe
getting off for the job or something like that I remember he was he was going through production Hill he was sleeping on the factory floor yeah and he was talking in interviews about how miserable his life was at that time I mean can confirm yeah exactly so look did he have leverage to basically say you know what let's just hire a CEO yeah absolutely okay shth any uh Steelman you
can do of the other side here like as an investor Public Market investor sometimes when you saw that pay package what did you think and I I don't know if you were sure holder of Tesla at the time or not in the mid teens I started investing in public stocks as well as private tech companies and I got invited to give a presentation at the iris own
conference which is like the most pre prestigious Conference of public market investors you in may you show up at um Lincoln Center and everybody in the audience is paying like 10,000 bucks a ticket or something and all the proceeds go to a uh a foundation in support of this this gentleman irone who passed away but in any event it's like Amman Tepper Einhorn and I picked Tesla and I
was a very big supporter in many ways and still am and I think that I knew the company frankly better than most people except for him obviously but I think that I studied this company quite deeply when I and I'm just setting the context when I saw the pay package I thought he's making a mistake this is unachievable I thought the probabilities were in the low single
digits and then he did it which just kinds of shows how incredibly Adept he is as a CEO and a manager and an Executor so then you know to go back five or six years later after he actually does something that so massively disproportionately positively impacted investors and then to just resend it and unwind it I think is really unamerican and unfair and I think it sets a very
poor standard for why anybody should actually build a company governed in Delaware it makes no sense anymore and just to give you that example he he and I have both now done this but like these incremental companies that I've started are in Nevada they're in different places because I find the Delaware Court slightly and increasingly unpredictable and acting with other
mandates that they weren't ever given so you what do you think that mandate is you had a place where there was highly predictable governance and they had very narrow ways in which they would act and opine and I think in a situation like this where you had every opportunity to actually vote this thing down and what little of the document that I saw about
the communication back and forth doesn't seem to support this theory that he rammed it through nobody Rams anything through over nine months where he takes month-long breaks and he tells the GC this is actually more than I wanted Nobody Does that if you're ra it's the opposite of grabing something through it was and and I suspect if you really
asked him and I haven't but I would he probably thought it was like largely crazy and so I think a lot of people thought that we that we were as shareholders and I'll tell you that I felt this way getting his hard work and that he may have just mathematically been mistaken so yes he got 55 or that package is worth 55.8 billion but you're missing the point where every other
investor made $500 billion do right and the investors investors did approve it it will have a chilling effect I think and how people think about compensation it will cause companies to be even more constipated and sclerotic and unimaginative as a result of this because the most talented individual entrepreneurs now have even more of an incentive for incorporating in other
places and also staying private and I think what that deprives is the broader shareholders including this gentleman look we live in America he had the right to sue he had nine shares and he was able to bring this lawsuit nine shares I mean David goath yeah I mean the idea that nine Shar who 10x their money unimag I I don't know if he remained a shareholder through this
whole period but even those nine shares 10x in value yes yes but he would now be deprived of that in this next iteration of Elon musk's because why would they ever go through this to put that much work into something to be so at risk personally your own mental and phys physical health we saw him in those periods and then to have it taken away I think is deeply deeply unfair sex you're
right this this deal was a win-win I mean if Elon could achieve these numbers it was good for him and it was great for shareholders and that's why I think the key point is that 73 or 80% depending on how you want to count it approved this deal I think they knew everything relevant that they needed to know when they approved it this is the deal that
most shareholders and most comp would want for the CEO the deal is you get nothing unless you deliver an outsized return for shareholders most CEOs won't sign up for this deal most CEOs work their way up through the corporate ladder they get into the CEO chair and then they pay themselves huge amounts of money regards of whether the company succeeds or fails
and that's the deal they want because they don't really have confidence in themselves to deliver what sorcin called the crazy outcome Elon had the confidence in self to deliver the crazy outcome and nobody was really complaining about this until like you said this small shareholder who's really basically just you know a name plan of for the trial lawyers bar or somebody
who wants to get Elon to bring the suit 6% to create 600 billion in value I mean it's quite a bargain folks and I think if you went to Ford or GM and said hey would you like Elon to be your CEO I think that'd often half the company Mary Barett doesn't want this deal yeah no jcal Sac said something really important that you just mentioned as well which is
that if you actually look at the average Compensation Plan of most public company CEOs it actually is very much counter to shareholder value I'll give you one simple example if you look at the number of of CEO comp packages that are tied to earnings per share growth but then if you actually look at how these CEOs achieve their EPS targets yeah they do it by raising debt so indebting the
company right increasing the Enterprise Value by by loading the company up with debt and then driving repurchase plans and what what do those do I mean look if you look at Disney where do their repurchases come from from debt so does debt help an equity shareholder it categorically does not under no world does it do that however for the CEO and for the handful of investors that that
can hold on for a long periods of time what have you they benefit from a lower share count they benefit from increased EPs and then the CEO gets compensated and so to say that tacitly what you disapprove of are performance incentives and what you are actually approving of are mechanics that saddle a company with debt and allow basically gaming of
numbers is what you've implicitly also said and this is where I think the Delaware Court used to be known for a level of intellectual Clarity that would have prevented that implicit assumption but that's now what's left on the table and I think it will have a ripple effect across how so many other companies design design their compensation plans
how CEOs think about risk no CEO as sack said will ever want an incentive Laden plan like this ever they will want because 10 years later you could do all the work and then it gets cancelled canell so why would take risk they will want something that is totally gameable right where you'll have 90 plus% support and approval because of how vanilla and benign it is on the
surface but it will actually be quite a terrible plan underneath the surface and what I mean specifically are these EPS targets for CEOs so Elon did the one thing that was crazy which was I'm just going to do it based on pure profitability and performance and he gets punished and all these CEOs in this other class who were like let me Saddle these companies with
debt that actually undermine shareholders have been rewarded there is already a mechanism for somebody who disagrees with the comp package this person who owned the nine shares could have sold their shares it's a liquid Market at any point in time that person could say I don't agree with this I'm taking my nine shares and $2500 I'm gonna put it in apple I'm gonna put it
into I like Tim Cook's pay package better I like Benny off package better and I'll make my bet there person had Choice yes SX this person was not a victim he's not a victim because he could have sold the shares and bought other shares and he's not a victim because he 10x his shares and beat the market yeah I mean look I I don't place the blame on the shareholder
per se because this is really about a judge's interpretation of Delaware law and what companies are allowed to do so whether the shareholder was harmed or not or had one share or million shares that's just the way that this case gets into court the question is the interpretation of Delaware law and again the part of this that I would go back to that that I think was the mistake is
that I think the shareholder vote was valid um I think the process was valid as well I don't know that the process has to be this extremely adversarial process where one side's pulling for the most and one side's pulling for the least I don't think either side operated that way but again I think shareholders knew what they needed to know and the
evidence of that is in all of the public coverage at that time nobody thought Elon was getting a good deal right no one thought he was getting sucessfully good they thought he was getting a delusional deal meaning delusional for him and everybody seemed to be okay with the idea that if somehow Elon could pull off this miracle that he would be entitled to this compensation
and he would get nothing if he didn't now again I would go back to do you think Mary Bara would have wanted this deal while Elon was spending the last five six years making Tesla go 10x let's look at GM GM stock price was trading more or less in a flat range I don't even think the share price doubled yeah compare it to see the compare two button there put compare two
and then put Tesla in there right so if Mary Bara GM had signed up for that comp package she would have gotten absolutely nothing which is why I'm sure that the thought in everyone crossed their mind of having an all incentive based comp package that doesn't even start until you at least double the value of the company by the way on those Milestones it wasn't just the share
price it was share price and revenue or profit targets being met so in other words if the stock just rallied because of macroeconomic condition like for example interest rates go down and then all of a sudden the whole stock market goes up that was not good enough it was also tied to the combination of stock value increases with revenue and profit targets being met it was a comp
package that couldn't be gamed I mean you have to hit the numbers in order to get the the comp package that's what she got and I don't want to pick too much on Mary Barry here I guess I'm picking her out because Joe Biden said that she created the EV Revolution yeah well done they've sold 17 cars and I think they canceled the car yeah congratulations by
the way there was there was a remarkable article in the Wall Street Journal just in December where they finally admitted that this whole idea that GM had been leading any kind of Revolution or had been a transformational company was revealed as basically a ruse but look you you have to wonder how much of this is political I mean Delaware is Joe Biden's State he's the
senator there were articles describing how this judge was connected to a law firm that had helped Joe Biden get elected and you just kind of wonder whether Biden's directive from the White House Podium that we got to get this guy or we got to look into this guy that he's an enemy which has been reflected through all these different administrative agencies sudden actions
against elon's companies for The Glass House starlink in the FCC yeah there's been a whole bunch of these issues and you just wonder is is this another manifestation of that yeah I mean the the conspiracy theories are quickly becoming closer to reality and we definitely need to investigate that for sure because the FCC thing is crazy spending $15,000 putting fiber into
people's homes when you could spend $1,500 giving them starlink makes no sense and those same people who have to wait for fiber this on our previous episode they're just get starlink anyway they're gonna buy starlink while they're waiting for the government fiber for 10 years it's absurd I do want to uplevel this just back to what I was saying and
and I'll try to I'll try to make the point better I think I think it's really really unfair what's happening to Elon but I want to take a step back and think about just the bigger picture if we want an economy of vibrant companies that do great things we're going to need to reward people to work at those companies and in order for the United States to
sort of continue to exert some amount of dominance in the areas that we think are important we need to be economically vibrant right and fair and fair and the problem is that this really perverts incentives and it's going to exacerbate a trend that I think has actually held a bunch of our companies back so the first thing I just wanted to show you guys was just this
little thing that it's just a pie chart that shows okay how do CEOs get paid right so we want CEOs go and run really important companies right we want those companies to do great things in the world we want these CEOs to be deeply motivated to go and push the boundaries of what's possible right we want all that and so we want to compensate them to do those
things this is just a representation of how CEOs have structured their pay packages and you'd say wow all of these numbers seem reasonable return on Capital total shareholder return earnings per share so what you need to do then is double click into this right so this is how CEO pay packages are made but the problem is and Jason this is my problem with a bunch of these companies
that all the returns all that shareholder return that you saw the return it's all driven by share BuyBacks Yep this is an artificial gamesmanship of performance this is not companies pushing the boundaries you know this is not Disney figuring out it's not Innovation this is this isney this is Disney creating foot faults and falling into potholes of their own making
but you can drive great compensation because you can game the way that you are paid this doesn't make America great it doesn't create American exceptionalism in fact it just creates a bunch of financial engineering that results in marginal companies and David just gave an example of one that could be considered that so the point is that when you have one person that tries to
Buck this trend I just think it has a huge impact by basically saying hey play the game like everybody else just game it just dial it in from your country club make sure that you become a member of Augusta that's more important to us than actually sleeping on the factory floor and don't take risk I mean if you think about what do you do if you're Apple
you're Google you're Microsoft you're sitting on tons of cash is the safe thing to do you see what they do you just buy back the shares buy back the shares you can't do m&a you issue debt yeah and then you buy back the shares Arbitrage you encumber the shareholders with debt and then you artificially inflate total shareholder return and earnings per share and the return on
invested Capital because of how we can play these games in America so right now what we are doing is we are not motivating CEOs to run great companies we're motivating CEOs to understand Financial Arbitrage the result will be crappier companies that dimin American exceptionalism that is the only outcome perfectly said and and there really are
two caveats there number one we have to let m&a occur as well because that's a better thing to do in some cases with this with this excess Capital profits people have sitting there and the only time really to buy shares back is when you think they're undervalued you would agree well to your point I actually think you're absolutely right if you have a bunch of CEOs that don't know
what they're doing which is what these charts kind of show let them buy whatever they want because they're going to screw it up and that's fine for us anyways great for fluid Marketplace the CEO that you don't want to have be able to buy companies is the actually motivated one to get paid when things go really well and to be you know to be more profitable so that would be the CEO
where you would be scared oh my gosh more m&a for that person may be bad but more m&a for these CEOs is who cares yeah Microsoft starts buying a bunch of stuff Google starts buying stuff at their primes man that's scary right when Bill Gates went on a heat or he bought I think he bought PowerPoint a bunch of the sweet was bought not created and then Google
and Facebook man they went on heaters YouTube Instagram WhatsApp and that was the Golden Age of m&a all right we got a couple more things on the docket I want I just found these stats go ahead sex great conversation so just while we were talking I just looked up what Mary Bear's compensation was over the past several years and according to this
Source she was paid $167 million for four years so while Elon got zero thanks to the judge's decision Mary Barett basically if you add in probably the fifth year let's call it roughly $200 million of compensation over the last five years now look at the stock chart of GM literally this it is the same price today as it was five years ago it's $38 a share today it was $38 a
share five years ago no but it's worse it's probably worse because they've issued options since then so there's dilution you have to take in so it's it's worse than that actually but at best the stock price is flat and the stock basically fluctuated in line with market trends so when there was an asset bubble in 2021 the the share price went
up about 50% and she got even more stock and options during that time but it was it was a no loose proposition basically she got paided regardless of how the stock did and then when there was simply Market volatility she did even better one of the nice things about elon's package is that unless Tesla at least doubled in value he would get nothing and it was tied to Milestones around
revenue and profit so he couldn't just Market volatility no to getting more comp if you gave this executive the same deal as Elon she would have had to double 38 so you know she would have had to get to 76 rough 80 bucks a share she have to get to 80 bucks a share before she got anything I bet you if she got zero she got paid $1 in her healthare and she had
to get to $80 a share I bet you that would be an80 stock price well I don't I don't know if she has the ability to engineer that outcome but I doubt I oh so she's saying she's unqualified no well the Wall Street Journal said it The Wall Street Journal just had this tenure no that's my where they said that she failed they they're they're hiding the incence then yeah
well look I mean I don't want to say she's incompetent I just want to say that the stock price is the same The Wall Street Journal had an article talking about all her trans all of her transformation initiatives have failed she swept roughly 200 million over just the last five years I think she's been there 10 so how is she in charge she's probably made several hundred million
dollars and and the company hasn't created any value for shareholders so how is she still in charge because Jason this is the way the Fortune 500 works it's a country club okay who gets appointed to these companies these companies are not run by Founders they're not even run by VCS who have serious skin of the game the kind of directors that this judge didn't like
okay it's run by people who play the game they basically are on other boards and it's basically a backs scratching club and they choose the CEO they choose someone who's politically Savvy who's worked their way up through the system who donates to the right people who can get Joe Biden to come to a factory and talk about how great they are and and
hold an EV Summit at the White House and invent this this fiction that they were responsible for this Innovation this is basically how the system works so corrupt I'm glad that women have been admitted to this country club it is still a country club it is still a backs scratching Club it is basically a collection of people who don't create any value but pay themselves enormous
amounts of money hob out with the right people and work their way in with the powers that be at the White House who then talk about how great they are while actually accomplishing nothing nothing 0.0 I think the common through line in these two conversations we've had this morning is about just how capitalism can be perverted if you will by a small
group of actors in the first example I think what we were talking about is the Trial Lawyers Association and their ability to impact and influence what is going to happen around section 230 and in this example I think what it speaks to is the influence that a small group of Consultants can have in having built a very thriving business in designing these compensation plans for CEOs and it
reminds me of a of a clip of Buffett and Munger and Nick if you just want to play it I think they say it in very clear plain English and not to debate their opinion just to State it but Nick if you want to we do not bring in compensation Consultants we don't have a human relations department that we don't have we don't the headquarters as you could
see we don't have any human relations department we don't have a legal department we don't have a public relations department we don't have an investor relations department we don't have those things uh because they make life way more complicated and everybody gets a vested interest in going to conferences and calling another consultants and it takes on a life of
its own well I would rather throw a Viper down my shirt front than hire a compensation consern consultant [Laughter] um tell me which kind of Consultants you actually like oh man wal darford Statler you know from uh the Muppet sacks remind me of Statler or waldor wellar yeah well you mentioned grumpy you mentioned this is a problem in capitalism I think there's
two kinds of capitalism broadly speaking there's crony capitalism and there's risk capitalism risk capitalism is the founder who starts with nothing but an idea along with the investors who are willing to write a check knowing that n9ine times out of 10 it's going to be a zero but maybe in that one out of 10 chance it's going to be an outsize return that is true risk capitalism
everyone has skin in the game they work together entrepreneur board members to try and create a great outcome and they work out an arrangement where everyone benefits it's a win-win situation okay that is risk capitalism that's the part of our economy that drives all the Innovation all of the progress all of the job creation then you got crony capitalism you got these companies that
have been around for a hundred years the value was created by people long dead and it is now managed by both directors and professional managers who work their way up through they go to like the right business schools and they join the right organizations they donate the right politicians and they somehow engineer a situation where they get in control and
then they pay them eles as much comp as they can possibly justify whether or not they create any value for the shareholder that's what we saw at GM and that's crony capitalism and you know while they're doing it the president's son is probably going to figure out a way to take a nice big chunk out of it too okay that's that's the system that
we have K Co with the great here we go now which of these two systems receives the brunt of the criticism by the mainstream media who is attacked and who is celebrated okay here we go there's your rant a great Point I've seen a zillion attacks on Elon Musk I saw one article pointing out that all of Mary Bear's transformation in General Motors was a failure created no value for
shareholders and the whole thing was basically a fraud well how's the union doing and how did the Union One article and I'm frankly shocked that the Wall Street Journal even ran that article yeah okay yeah and how did the Union do and and who did the Union get behind and vote for yeah let's maybe double click on a couple items there we'll see all
right listen I want to go over one more thing we're cooking with oil here and I just wanted to talk a little bit about IPOs possibly coming back I just interviewed Alexis Ohan and the founder of Reddit which according to Bloomberg they've been advised by potential IPO investors to Target a $5 billion valuation they're going to go public possibly in March which is wild
that's only a couple weeks away in Peak Zer Reddit had raised at a $10 billion valuation that was back in 2021 they were valued in 15 billion in the secondary Market that's where people like previous employees Angel Investors Etc might trade their shares and so if it goes out of five it's going to be between a 50% two3 haircut and it is trading at 4.5 billion
jamat we talked about this a bunch uh the down run IPOs instacart I think being the best example they got out but they've been hovering at a really low number for a long time and people have been talking about them possibly being a out candidate by door Dash or Amazon or Uber so your thoughts on the the Reddit IPO news I think that if I had to price the IPO I would be modeling two important
levers in the business the first is what is the actual attainable revenue from my audience and so what is the arpo of the average Reddit user and you can model it as a distribution and I think Facebook has the best data because they've been publishing it in their quarterly returns for a very long time now for over a decade which is there is a distribution
of value of a Facebook user economically right at the upper end you have the folks that are on Facebook proper in America in a certain age band in certain states that are probably like 3040 $50 arpus all the way down to in developing countries those users are worth low singled digigit dollars economically and I think that people will have to very much understand what is the average
Reddit user and what is the distribution of economic value that they represent that's the first thing and I think that that's really the thing that will determine whether it's worth 5 billion or 10 billion or frankly two billion and then the second key lever it will be the risk factors in the IPO because where the shareholder lawsuits will come
from which will really dictate if if the how the hedge fund Community buys this thing is going to be the potential for my ad ran against content that is deeply offensive to me that whole construct and I think that they are going to have to very carefully ring fence that liability to get this IPO to be successful but also for them to execute a scaled ad Revenue
business and not spending enough time on Reddit don't know how bad of a problem this is I don't think it's 4chan or 8chan as an example but I also don't think it's Facebook and Instagram and so it's kind of somewhere in the middle and I think that those risks are really what's going to determine its terminal valuation you naed it they they've always been under monetized $800 million
in Revenue reportedly and 400 million monthly active user so two bucks a user compared to you know 2030 40 for the prime users in yeah on Facebook's Network so it's totally underutilized part of it is it's a little bit of spicy content part of it is that that's the number including all the international users of course sax there is this concept that Reddit has
the greatest pool of data for large language models and um you know with something like say Kora Maybe YouTube amongst the great pools of data so you think there's a play here with that they have talked about they want to get paid for licensing and that if you want to use their data for your language mod you gotta get your thoughts a sure I mean that's going
to be an incremental Revenue source for sure it's hard to know exactly how valuable that is because we're still in the early Innings but um I mean they can definitely do something with that data grock's whole competitive Advantage is having exclusive access to Twitter's data which is updated in real time basically by hundreds of millions of users so yeah look that data is valuable
we don't know how much I guess the numbers I saw were that they're doing about 800 million of Revenue growing about 20% a year the $5 billion valuation seems I think pretty good I mean is it down from 10 at the peak in 2021 sure but everything is down since that Peak I mean that was definitely a bubble I mean I can tell you we we bought some shares
as a late stage investment I think in 2018 at a $2 billion valuation so you know a 2 and a half X in five years I mean it's not setting the world on fire but it's not a bad outcome yeah and you know the investment bankers will know how to price this to take it out and make it successful yeah and if it had a if it was a becomes a billion dollars in revenue and they have
a 20% profit margin 200 million you you can you can start doing your back of the envelope math there for 25 EA you know 20 times price earnings ratio so it it doesn't seem outrageous it does seem like such valuable and own under monetized uh asset do you think there's a likely acquirer here if you were to think about somebody who might want to own this do you think it's a Microsoft
for the data Google for the data yeah I think there's probably people who' like to own this but the problem is that well two problems one is they just can't get it through we've talked about this before the m&a window is even more closed than the IPO window I would say yeah and the other thing is just because of the runchy content and all of the
brand issues that come with that it's not clear to me that let's say a Microsoft would want to own that headache you know they might not want to be hauled up in front of these Congressional hearings that we talked about these kangaroo courts where it's very easy to go on Reddit and pick out well what about this post what what about that post why you let that one
through why' you let that one through well because it's a it's a platform of user generated content where hundreds of millions of people post what billions of items and you can have the best content moderation policy in the world there's always going to be edge cases that get through I think that Reddit is the Honeypot of of edge cases it is the place you go when you're just so
disaffected that you can just let loose anonymously it's not right I mean at a certain point you have to you have to realize that when people cherry-pick those edge cases what they're really saying is a platform like this shouldn't exist yeah right because there's no way to eliminate every single one or which is basically like saying if you just
take platform you just say conversation you're saying this conversation shouldn't be allowed to exist they don't want user generated content to exist they don't want un what remember what the New York Times called unfettered conversations unfettered conversations they want controlled conversations yeah yeah pretty dangerous it just reminds me of remember that Bob Iger for like 10
seconds was actually considering Disney buying Twitter can you imagine if they actually bought it what would have happened I mean it would have been chaos well it would have been it would have been content moderation on steroids where yeah they would have massively empowered and scaled up content moderation even more than what Jack dorsey's Twitter was doing so I think
Jack actually he was unable to operationalize his principles but he did have principles in favor of free speech to some degree whereas Disney I don't even think has those principles so they would have censored everything yeah you know it's paradoxically the most censored social media platform is Tik Tock like my Tik Tok is bulldogs and
sandwiches like you chamath and then Soprano's clips and every time there's a Sopranos Clips when somebody gets whacked they have to blur it out or they the person who's uploading it takes that clip and and cuts out the actual person being whacked it's crazy all right I got to give saaks his red meat we're going to now go to our war correspondent David saaks but in all serious
tragically we had a terrorist attack and the response from some of our Republican Senators was absolutely insane they want to bomb Tran and go after Iran and start World War I saak I know you have some strong feelings on this and you're always about diplomacy and pursuing peace what's your reaction to Lindsey Graham and the neocons well you had several Republican
Senators try to go Biden into striking Iran immediately it was you know not just Lindsey Graham who's in favor of every war but it was Mitch McConnell the Senate repan leader John Corin and there are some other ones who were you know demanding immediate retaliatory strikes it's very unfortunate that we had three of our troops get killed and another
dozen or so get injured this was at a a base on the border between Syria and Jordan some of us have been saying that we have no business being in Syria I mean I tweeted 10 months ago that all we were doing was putting our troops In Harm's Way and risking getting drawn into a larger configration and that's exactly where we are right now I mean you had to know and many commentators
pointed out that these bases are very exposed they're very vulnerable they don't have good enough air defense against they don't really have a good answer to the Swarms of drones that these local militias have and based on the intelligence we have right now our this base is Tower 22 was attacked by an Iraqi militia that's operating that there why did they get attacked well
these militias want the United States out of their countries they want them out of Iraq the government of Iraq has said we want the us out of Iraq the government of Syria says we want you out of Syria we are there without a congressional authorization for milit Force I mean what are we doing in Syria we're just occupying that country without again without a war being ever declared
against the Assad regime so some of us have been saying we need to get out of there for some time and if we don't it's inevitable that something like this going to happen and sure enough it did and when it does happen you get this lunatic friends who unfortunately are some of the leaders of the Republican Party calling for a larger war against
Iran and I think Biden to his credit is so far held back and he has not lot of restraint lot of rest has shown some restraint however they've been actively talking about this and all the reports are they're gaming this out and there is going to be some sort of retaliatory strike it might be focused on these militias in Syria and Iraq it could be attacking Iranian assets we don't know
if they do attack Iranian assets Iran has promised a response so I think the Biden presidency is at a little bit of a Crossroads here depending on the action they choose we could very rapidly find ourselves engaged in a wider Regional war on five different fronts I mean a war with Iran would in involve Us in Iran Iraq Syria Lebanon and Yemen where we're already bombing so this could turn
into a huge congration in the Middle East I don't think should be drawn into this yeah no the answers here and yeah the the craziness to me chath is like these people want to go bomb Tran because you have you know some militias doing these activities I mean this like would be you know some terrorist uh who's French we're going to just blow up Paris and a
bunch of civilians are going to die it's there's no proportionality here and there's and there's there's no direct relationship here it's like two or three steps removed what are your thoughts Shaman I think the thing that we've lost in this whole issue is how is it possible that a multi- decillion dollar drone system was designed by the military-industrial
complex in a way where when one of our drones is coming back and there's an inbound drone that doesn't seem like a weird Edge case where we couldn't handle it because at the at the root cause of what happened was a pretty faulty way in which we were dealing with confusion about what was our drone and what was the enemy drone and I think that that's also worth
talking about before we talk about bombing another country is we're the most sophisticated technological country in the world our weapon systems are the most sophisticated weapon systems in the world am I supposed to believe that if Palmer lucky and andril were building this system that this is what would have happened absolutely not yeah that
there's no beaconing system on these drones that you can turn on remotely that there's no way when you see the number of drones in an aerospace that are yours so that you can quickly triangulate which ones are not yours and all of this to me I think is also worth exploring because if it's really again faulty engineering because of this Monopoly oligopoly in certain sectors of our
economy that then cause us to go and make a foreign relations decision about going to war and we don't even talk about this thing as a root cause it's worth talking about a different example on the same vein of this is like it turned out that in that Alaska Airlines issue they actually ship the plane without the door plugs oops we are are the most sophisticated country in the world
guys our our most sophisticated Industries are not showing their best in this moment and I think that this is yet another example before we make totally separate decisions about war and implicating our children's safety we can also just ask wait we spent billions of dollars on this thing how is it possible that this that this like honestly like this is exception
handling this is like CS 101 type stuff guys door plugs put the plugs in the door it's it's regulatory captures the answer this is crazy there's no competition and they're they're charging Cost Plus they're not innovating anymore and they need competition right just like SpaceX was massive competition for all of the governmental agencies around
doing space extion in our industrial complex and now the way to answer that turns out to be a foreign policy decision to go to war and I think that those two things need to be decoupled for a second so that we can deescalate and say hold on a second this thing happened but why did it happen meaning of course people are going to attack us we are the bright shining beacon on a
hill people should hate us and want to attack us that's just the nature of being a winner to be fair they're not attacking us because we're The Shining city on a hill over here just minding our own business they're attacking us cuz we're I Iraq expect that we should expect that these things work we should expect it so there's a few things happening here with
our military-industrial complex so the first one is that drones have been a huge game changer we've seen this in the Ukraine war the one really new technological element has been drones has completely changed the face of war and one of the things it does it's a huge leveler because these cheap drones give these militias in Syria and Iraq or
it gives the houis in Yemen a capability to strike at us that they didn't have before and we saw that our air defenses are just not really cut out to deal with this there was that article describing how it was costing us $2 million to use an air defense missile to shoot down a drone or a cheap rocket that costs just a few thousand dollars so you have this
asymmetric Warfare now where we simply cannot afford over a sustained period to shoot down all these drones but wait sorry can I ask a question yeah our most important partner in that region is Israel Israel has what we have thought to up until now an impregnable system right the Iron Dome and which is meant to deal with all of these edge cases right projectiles of All Sorts shapes
and sizes coming in every direction yeah I've never heard of when the Iron Dome has failed and we are sending Israel billions of dollars why couldn't we actually just buy the Iron Dome system for them and say you know what we're going to secure our bases in Syria and in all of these other places yeah well I'll tell you so there's a a military
analyst named Steven Bryan who I follow he's a former under Secretary of Defense and he talked about this he has been calling now for before this attack happened to send two iron Don systems to Syria to Iraq to basically the Middle East to protect our troops sense he says he said in his article that the reason why the US Army hasn't done that is because they didn't want to buy the
Israeli system they favoring some homegrown system that hasn't corrup corruption so there's a there's a big problem there that we should be deploying Iron Dome there look I would just get out of that area I don't think we should be there but at a minimum if we are going to stay there we have to protect our troops so yes we should be deploying Iron Dome but the problem is
that again just these drones are a GameChanger and they can overwhelm a system even Iron Dome can be overwhelmed if uh Israel gets into a war with hisbah which supposedly has drone it's n equals 1 we were overwhelmed by n equals 1 well I mean I'm just I'm saying like it's true right we were overwhelmed when n equals one there was a report just the other day that one of our ships in the
uh red SE it was fired on by a a missile from Yemen and it made it through the Aegis system and they they took it down with their last line of defense these like close in guns that was kind of scary because the hoochies have missiles that are capable of making it through our main air defense system for ships so I'm just saying like these what's happening with
these cheap rockets and these drones is it's giving our opponents capabilities that level the playing field a little bit but this is what I'm saying I understand that concept but I also understand that we have people on the ground that work for Team America again I'll just I'll take Palmer lucky as the example who frankly I would bet on a thousand times over a hooti rebel he'll
outsmart and outow these guys why aren't our best and brightest people in a position to make these things because you're right the defense industry is dominated by five of these Prime defense contractors who work on Cost Plus or basically an oligopoly they're not particularly Innovative but they just keep charging more every year for the same product so we're getting less for
more money and they're led by a leadership who are motivated in a way where the returns that they generate and the success and the progress they make is not really coupled to progress right it's not really coupled to building an even better version of Iron Dome it's about as you said having a job that you've earned over many years of fty and
then getting paid an enormous amount of money to just keep it going in the same direction even if that direction means you've been a drift for decades that's the shame of it and then you're seeing every day like isn't it incredible Lindsey Graham is saying hit Iran and I bet you Lindsey Graham is to getting donations from those five companies I don't I don't know but look there's no
question that we we need to shake up the military-industrial complex we need to get a lot more startups in there there's a lot of VCS now who are funding defense startups so it is a big area andrel obviously is kind of the leader of the pack but there's a bunch of others getting funded I saw that Eric Schmidt even created a drone company so this is
going to be a huge area of innovation and I think that because of the Ukraine war the Pentagon must now realize the urgency of being able to mass produce effective drones as well as create effective drone air def counter measures yeah counter measures yeah just to give you a sense of this like we led the series a in a company called sa drone about seven years ago and they
make drones for the Seas right and what we did was we put these massive sensor arrays in these drones and because of because of these sensors it has perfect visibility into what's going on in any condition of weather right day night it doesn't matter and so these drones in the Middle East all over the waterways allows us to have perfect understanding
of what's going on but despite that it has taken years for us to be in a position to generate enough revenue and now we're finally at that scale with the Navy and and whatnot but David to your point it is incredibly hard for startups no matter how in Innovative we've been to break through this log Gem and it and the reason is because what we are at is not
what's rewarded we are good at engineering and execution but what is rewarded to your point is this very lobbying specific form of relationship management right and cultivating certain pockets of influence it's a very difficult game to play if what we come as brigh eyed bushy tailed from California with a product that we think is superior that actually helps Advance American
exceptionalism it still doesn't always land it takes a lot longer than it needs to in some cas cases yeah I mean so the Pentagon and the military industrial complex are is going to to be a lot more permeable to this type of innovation I I think that they're going to be incentivized to do it now because they have to see what's happening in Ukraine what's happening in the Middle East and
they realize that the Gap is closed and we had three innocent people that were killed these people didn't deserve to die they didn't deserve to die in an N of one it's not an edge case n of one there was a drone come on guys we're better than that and so what do you think's going to happen if we get into a war with Iran every single one of our bases in Syria
and Iraq and we have a lot are going to be sitting ducks to your point you're forcasting you're you're orchestrating a game plan for them because it's like if you if you were going to enter a war does it take a brilliant strategist to sit in the room and say wait a minute if they can't defend against one what happens when we send 12 yeah what
happens when we send 12 to every single place and and to your point Jason it's this is like the unnecessary escalation that then happens because then we have to respond with more Force energy it it was a certainty look we I've been talking on the show about how our bases in Syria and Iraq have been under attack by these militias for months I think the last time we talked
about it there had been something like 80 attacks and it was just a matter of time before Americans servicemen were were killed unfortunately and so like you said jamat this was predictable what's also predictable is that if we get in a war with Iran every single one of our bases will be attack act if we strike on their soil they will strike back and they have Hypersonic missiles
they have Precision missiles they can destroy every one of these bases unless those bases have the top-of-the line air defense which most of them don't but if you go to someone like Lindsey Graham and say listen our troops are vulnerable we need to basically either pull out of Syria and Iraq or we need to consolidate down to a few bases that have Iron Dome
or the best systems these neocons will say absolutely not we're not conceding anything yeah so and they would they would never pick up a gun theyd never wear a uniform hypoc they want us to strike Iran so these these strategies don't line up if you wanted to attack Iran the first thing you would do is basically get all of our troops out of harms way who are
currently sitting ducks for Iranian retaliation by the way I think that'd be a terrible idea but that's what You' do so they have these strategies that don't make any sense all right everybody this has been an amazing show for the dictator chairman himself sham poaa the Rainman yeah David Sachs I am the world's greatest moderator we miss you uh sultant of science David freberg
could have make the show and uh we'll see he's still in the if anybody gets into the Apple Pro Vision Vision Pro and is somewhere out in the universe by Uranus and you see him bring him back for next week somebody go find him we got to send out a search party to your Uranus love you boys byebye byebye to let your winners ride Rainman David and in said we open source it to
the fans and they've just gone crazy with it love queen [Music] of Besties are my dog taking your driveways man oh man my habiter will meet me at we should all just get a room and just have one big huge orgy cuz they're all this useless it's like this like sexual tension that they just need to release [Music] somehow we need to get [Music] mer I'm [Music] doing