he's a robot don't quit your day job jamath that's all i can say bro you don't remember baby shark i mean how many no he doesn't know his kids first names for birthdays how does he know baby sharks ride [Music] [Music] hey everybody welcome to episode 55 of the all in podcast with us again this week the dictator himself jamal paulie hoppetea the queen of quinoa david
friedberg and coming back from portugal and the solana conference riding his where heroin and prostitution are legal david said we were gonna we were gonna double click on that but you jumped the gun here on the docket so david how was the heroin in portugal great great okay there you have it folks i was i was fully drinking the kool-aid at the salana conference it wasn't heroin it
was kool-aid it was it was literally kool-aid how many people were at the solana conference in portugal why is it in portugal what happens at a solana crypto conference i think there were thousands of people there and it was i mean easily and i mean it was kind of a mad house and people were trying to get in last minute nobody could get in
because the conference was like totally sold out it was a lot of crypto developers a lot of people with projects and why portugal i think because there's a lot of conferences happening in portugal right now because they are easier on the covet restrictions and a lot of other countries so you can actually get in there and host a conference what was which stores with no masks um
um i can't remember if like maps were required or not i did see people wearing masks indoors so were you required to be vaccinated do they do i did so i think i did show a vaccine pass at one point when i checked in i just did my booster i'm going to do my booster kind of it kind of uh it was a little i would say the same kind of shitty feeling as the second one where's that
i just got fi i mean i had the first two were pfizer so i took pfizer she was the the nurse actually gave me a choice she's like you can do whatever you want physio madonna or j j i just i didn't know any better i texted my doctor so i just took um pfizer although the interesting thing is modern is the only one that's dose regulated for the third dose so there's a
they they actually give you less specifically but pfizer is the same for all i think we talked about this on the pod there's one theory which they told you get whatever one you can get was the instructions because it's more important to just get one than which one you get but they said there's a swiss cheese theory which is if you took two slices of swiss cheese from two different
bricks of it the holes would not be the same and therefore you overlap them so whichever deficiencies each one had maybe the other one doesn't so i should have gotten modern is what you're saying that would be i if you believe in the swiss cheese there i don't know fredberg you're a science guy i should ask aaron rodgers what he thinks i mean he's just straight up lied about
being vaccinated huh i think so and i think the nfl's not doing anything about it yeah that's not cool i why would you lie about it i mean he's not he would have still been allowed to play so there was no reason to lie about it i i'm not totally up on that story the rumor is that kyrie is going to be playing basketball soon because eric adams is going to lift the vaccine restrictions
uh you will not need to be show a vaccine card or wear a mask bro i don't work maybe i'll just get a pcr test every day i i don't think it's going to matter because the warriors are shooting the lights out and clay hasn't even come back yet and so that gary uh the second you see gary did you see gary payton yeah junior uh these clips oh the second i mean i mean he's like
living above the rim oh my gosh his wise men back and then uh wiggins is playing great basketball i mean the warriors are gonna win this year i don't know steph is otherworldly right now yeah i think steph's got something to prove um even though he doesn't but he's playing like he's got something to prove okay so um do we want to just cover um the elephant in the room there
the last episode i think we should get out of the way because it relates to solana there was we took something out of the last podcast so people understand we have an agreement between the four of us if there's something that somebody uh doesn't want on the pod after we record it we'll take it out because we don't want anybody i mean i think the philosophy haven't
said this out loud is we don't want anybody to say something they regret that could cause damage to other people or to themselves so if they want to take something out that they said that's fine with all of us and um basically each of us has veto right on something so last week two people took their veto right on something and we took something out you want to
explain our thinking on that sax and why we're reversing yeah okay so a few weeks weeks ago on the pod there was an oblique reference between me and chamath regarding solana and so and so some internet theorists that claimed that we were trying to engineer a pump and dump in solana which if you actually listen to what we said um it certainly is not a pump let me
explain what it was so craft is the beneficiary because we invest we're the first investors in multi-coin we were kind of like their seed investor invested in their we put in something like 40 of the money for their special opportunity fund they were one of the first investors in solana so we are the beneficiary of about a billion dollars of solana so thank you multicoin
at some point well so so they have started doing distributions by the time i texted chamoth they hadn't really started doing distributions i didn't know how deep and liquid the market for solana was i just asked jamath like i'd heard that tremont may have said something that he was long salon and wanted to accumulate so i sent him a text saying hey are you interested you
know i thought maybe we could do an otc transaction at some point we get our solana he basically you know we had a brief exchange about that and then he mentioned on the pod that was the extent of it what i didn't know at the time but learned subsequently is that the market for solana is very deep about three and a half billion notional is traded every
day so there's no need even if we wanted to fully get out of barcelona position which by the way we don't even have you know multi-coin still has most of it we it's not necessary to do an otc transaction we could just sell it explain what otc transaction is it just means over the counter it just means that instead of going to like uh an exchange you would deal with like a
trading desk or it could just be direct like for me to chem off so that was basically the exchange it chamath and i talked about it for maybe two minutes and then it came up on the pod for 20 seconds so then some internet theorists basically clipped it and try to accuse us of organizing a pump and dump well obviously if you're talking about selling something it's not a pump
it's also not a dump either so anyway the reason why we said cut it out last week is because we didn't want to give oxygen to this stupid like conspiracy theory that somebody had invented on the internet with like no basis whatsoever um because you could spend all day trying to like shoot the stuff down but then at the solana conference enough told me enough people told me that this was
becoming a meme that i thought was worth addressing and what and look what you understand with crypto is that for every cryptocurrency like solana there are haters because they're invested in tribal or everybody's talking up their books there's pump and dumps and there are armies of anonymous twitter accounts that will coordinate attacks and or memes etc
right so they're trying to spread the rumor that like vcs are big holders and solana and are going to dump it the reality is that multi-coin has a large position but they have lps they are slowly distributing their positions to lps in the forms of the tokens they're not selling them and giving you cash they're giving you the tokens you just decide what you do yes and by the way that's
what we would like to do as well we're currently working through those mechanics because it's actually complicated for a pc firm to distribute you know in kind through tokens but well you had to give them to your lp so that's what i would like to do exactly so people are doing that with coinbase so coinbase is providing that as a service now from my understanding right so we're so we have to work
through with rops that's what we're going to try to do is distribute it in kind so everyone can make their own decision i um i have a couple things to say so i've only been a buyer i've never um i haven't sold a single solana token and so we are you know net buyers and we're buying a bunch of stuff but i hate acknowledging that and this is why you know my tone was more
non-committal when we did the pod is that i really don't like this culture that's emerged via twitter mostly where you all of a sudden have to be this maximalist that basically falls on their sword and never sells in order to be legitimate and i think that that's a really dangerous place to be so you know look if i take a watch that dangerous well if
i take a much much bigger step back let me put solana in the context of crypto and let me put crypto in the context of the markets and where we are today at the end of the week after you know uh qt earnings uh in november of 2021 we have the stock market at absolute all-time highs ripping we have crypto at absolute all-time highs ripping we have the art markets i don't
know if you guys saw phillips and christie's and sotheby's this past week at absolute all-time highs sold another people for 25 million we have inflation at a 30-year high we have 10-year break-evens at a 25-year high we have you know one point somewhat trillion dollars that we just approved last week and we're still horse trading on another three you know 1.8 trillion
dollars of stimulus that we're going to put in and so when you and then you have i and i think the the most important thing which is the two most important founders of our generation the two smartest people who have really consistently won elon musk and jeff bezos have collectively sold more than 11 billion dollars of their holdings this year alone and if you can't take all of that
and decide for yourself what's right for you and your family you're doing yourself a disservice i think it's important for me to never sort of like you know be forced to tell folks whether i'm buying or selling although i'm willing to do it in moments where i think it's important but i think it's really important to understand the context and so i think
like these folks that like think derisively about individuals who are managing risk i think it's really naive and i think it's um it creates a lot of missed opportunity for them as well if the smartest people in the world are now selling their core holdings that they told you they would never sell and you are not reconsidering your position on things you're either much smarter than them
or you're being really really reckless all right there you have it yeah you know i we just people also know inside baseball we have a docket of stories that we talk about on our group chat that make up the docket for the show but i'll bring stuff up and i didn't bring that up in some way to cause trouble or anything i thought you guys would want to clear the air
about it and i understand chimao's position of hey you don't want to give these things oxygen or whatever but i think so i didn't even know that we needed to clear the air until you know i went to the conference and enough people mentioned it so but what's so funny is half the people on twitter spend all their time in crypto lens saying things like never going to make it have fun staying poor
they're extremely jason as you said tribal i'm not sure that they're doing first principles analysis of these things they've gone they've got time exceptionally lucky yeah some of them are exceptionally good but many people broadly speaking have gotten exceptionally lucky and i think a little bit of it is getting to their head where they become you know very
virulent against people that they think you know whose perspectives may actually be negatively affecting their position without actually understanding what david said which is these are incredibly deep liquid markets and one person's opinion is can't do much of anything right i mean that's a really good point i mean i'd like to give my opinion on solana but the thing or just crypto in
general the thing that's like hard about it is that it's hard to talk about the benefits of say the salon of blockchain without being seen as a pumper of soul or a dumper of eth or whatever because all these things are so intrinsically connected i mean i learned a lot of really bullish things about solana you know at this conference uh i mean the biggest thing is i mean
there's basically a a battle for the hearts and minds of developers going on right now between salon and ethereum that's why solana has raced up to you know over 200 i don't know what like seven thousand percent increase or some something incredible like that the reason is because solana as a blockchain gives confirmations back in something like 400 milliseconds whereas ethereum
takes you know minutes and you know a transaction that might cost tens of dollars 10 20 30 50 of gas on ethereum cost pennies on solana and so that's the advantage yeah yeah exactly it's also you know a lot of developers feel like the tools the developer tools that they've created are easier than building on solidity the thing that solana gives up the trade-off that it makes is decentralization
there's basically that transactions are processed by 20 validators and they're a top 20 based on holdings of souls so it's kind of like this proof-of-stake model so anyway there's some trade-offs there i can tell you that you know it's the view of you know our friends at multicoin and you know i heard a lot of this views at the conference although obviously you have
to take it with a grain of salt because these are the biggest believers but their view is that solana over the next year will flip ethereum based on developer activity that there's real companies we spend a lot of time actually before we do anything is that's the only thing we've been looking at you know and syndica fractal a lot of the stuff that we've done deso
is purely driven by developer interest when we see developers in the open source ecosystem building things on top of this stuff making stuff that's composable and usable by other people and building infrastructure you know we don't really second-guess that because they are spending their the most important currency which is not monetary capital but human capital yeah
and there's the time and their skill and they can apply for another project yeah and so when enough developers so i i've always thought you just followed the developers and as more and more projects get started you just have to unemotionally support that i think the writing is on the wall which is bitcoin is gold ethereum looks like it's trending to be silver and
solana could be the first but there will be others that come after it of real developer ecosystems that can be built on top of it the other the other thing that i would offer up to people for them to think about is before you blindly go and rush into crypto one way in which i try to think about these things is in the following way you see these projects get started all the
time and i would view each of these projects as a mini economy and really try to think what is the economic value of what's happening under the hood so simple example you know helium is an interesting project that's trying to build a completely decentralized you know 5g infrastructure right render is a really interesting project that's trying to build a completely decentralized you
know graphical processing infrastructure right gpus essentially in both of those things you can quantifiably economically measure what the value is that people get right in the case of render you're basically displacing an aws instance and so um that has a price and a value and so you know for render to be valuable there's an economic value that it replaces
if you're joining a hotspot that has an economic value where you hadn't necessarily have to pay you know to get internet connectivity if you all of a sudden are on the helium network that displaces a measurable economic quantum understanding that is probably and taking the absolute value of that is the best way of really understanding which projects have potential so if you take
those two ideas and marry them together where is their developer interest and where is their measurable economic activity at the intersection of those i think are the really compelling projects that can win well the thing that complicates all of this is that the developers are not just picking based on which language or technology or stack they think has the most potential they
also have acquired economic stakes in it so a developer who might be objective and say hey this new platform is better than ethereum might be sitting on millions of dollars in ethereum and they're like i want to keep my bet going here um and i'm going to keep talking my book possibly but i but i do think that developers in general will choose the
platform that's easiest and cheapest and fastest for them to develop on which would mean the list on coin market cap of market cap ones that has been static for a decade of crypto almost you know or largely the top 10 doesn't change that much it's xrp at stellar ethereum bitcoin tether that could be up for grabs that whole thing could change now that people are actually building
projects and the the projects are getting competitive with each other and that's that flipping we're talking about correct sex yeah i think what's tricky here again is i never want to give anyone investment advice i mean that's just not my job and if there's anyone out there listening to the show because they're trying to get like tips or tricks whatever for
investment like i'm not really comfortable telling people what to do um sure so you know everyone just has to understand that i did i do feel like what i saw at this conference over the past week in terms of developer enthusiasm activity was very bullish actually it was a lot like i went to the um ethereum conference i think was back in 2017 several years ago and it
felt a little bit like that although i would say that this time it felt less academic like several years ago it felt more like white papers now it actually feels like real projects and businesses that people are trying to create still infrastructure and less applications or more applications mentioned a couple of them um so there's helium which is creating a decentralized
network for wi-fi there's uh render which is creating a decentralized network for gpu there's one called hive mapper i met the founder it's a decentralized network for people to map the world you can think of you know the concept of a minor that bitcoin invented think of them more as like a resource provider to a network so with bitcoin you know we call them miners but they're
the validators of transactions and we're trying to incentivize them through block rewards basically through small bits of uh bitcoin that get released to uh to provide these valuable computing resources to the network and so people are figuring out now how to create massively decentralized networks where you have you know thousands or millions of resource providers provide a
little bit of something to the network for everyone's benefit in exchange they get some coin that's like a really interesting model that couldn't exist before crypto and so yeah i mean i think it's very interesting but you know in order for that to work you have to have like very you need fast efficient scalable blockchains and the feeling as i mean i'll give credit
here to to tushar um who's one of the gps of multicoin his view is that this was the iphone moment for blockchain that that what salon has built because it's massively scalable and also very cheap i mean again you can run a lot of transactions for pennies now all of that is obviously very bullish for solana the thing i wrestle with is and jamal kind of allude to this is i
think everything's kind of in a bubble right now because of monetary and fiscal policy and so you know i guess i you could say that i'm long solana versus eth but i do kind of worry that the whole world right now is very bubbly and so as a gp you're like what do you do about that i can tell you right now like this second we are sitting on solana that we have not sold so you know
i am long in that sense however sometime over the next whatever number of years we will distribute out our position of solana to illinois and the lps will make their decisions and then they will make their decisions might specialize in crypto and want to keep it other ones might not want to hold assets and need that money to fund their endowment to give scholarships to students or
whatever your lp's right particularly well yeah i mean and so i guess to the issue of hey we're not giving investment advice here we are all capital allocators and startup creators so we're talking about our day-to-day lives here nobody should interpret this as investment advice and especially not in a world now i don't know if you guys saw what happened with
rivian this week i don't know how we don't talk about a company with essentially no public sales they've sold 148 cars to their employees it's worth 120 billion dollars any at freiburg did you see this ipo any thoughts on it um it seems like you have investment advice for the audience that you'd like to give tell me what rivian does wait can you play that video that you
found that you shared with everyone you have that video you know okay well i we we do have it i can we could queue it up did you see this yet who is this guy no i haven't oh that yeah yeah well but just so i don't want to beat this point to death but i just think it's so important for the audience that what they should be getting out of the show if they're fans is maybe like advice on
how to think yeah what a critical thing critical thinking how we think about investments tips exactly so look if you want to invest in crypto first of all like go understand like what all these different projects or blockchains do and figure out what is the purpose of the token in that system what are the token economics yeah does it even make sense or is it
just a scam then if it's a if it's something like a blockchain go research how many projects are have developers on them and how much code is being checked in and maybe open a wallet and buy some nfts and buy some eath and transfer it and learn just how to set up your internet connection right right this was 1995. right exactly and then on top of all that you got to consider macro
forces because i mean and i think you know my friends at multi-coin would fully concede this that you know it could be the case that if there's a crypto bust over the next year and this thing you know crypto has gone through boom and bus cycles for many many years it's the standard so you could have a situation in which for example solana flips eth and yet still goes down in
value because there's an overall bust cycle so you know you have to consider the macroeconomic factors as well so there's a lot of things to consider here and then you also have to consider your own risk tolerance and you know what is appropriate for your portfolio and i mean when do you need your money are you a 25 year old everything is at all time highs and the
two smartest men in the world are selling not just not just them by the way there are other guys that are heavily on the other side waiting for this whole thing to go like drunken miller has been very vocal about this um and he's uh he's been the best macro trader in the last 30 years so his position is what exactly that we're printing too much money and
we're in a lot of trouble so you know look i mean generally there is um i think a good point of view being shared here uh which is you know understanding how to think about what you're investing in and what your uh your expectations are versus relying on someone's advice or opinion on what to do if you have to rely on someone else's advice or opinion on what to do you're
gonna eventually lose money you should not be in that investigation you should not be in the market because guess what anyone that's giving you advice or opinions is gonna make money if you do what they tell you to do if you do what they tell you to do end of story so at some point they're gonna all make money and you're gonna end up losing money and it's a it's you know it's it's it's
a better game to play to learn how to kind of be thoughtful about where's your money going what are you investing in and it takes a lot of time and a lot of money i've been sitting here silently as you guys have been talking deeply about solana and ethereum and bitcoin and the crypto markets because i realized so much of um you know what's needed to be successful
in entering this market is a depth of understanding a depth of knowledge my time is highly limited i have spent no time on understanding crypto markets because it's so deep and it's so fluid it's changing every day it's changing every week so if i can't get smart enough to feel confident about the opinions and decisions that i would be making as an investor i decide not to
invest and i stay out and so i'm not an active crypto investor you're a specialist and you're on the razor's edge on synthetic biology and and so many other whatever it is there are there are other areas where it's better for me to spend my time and my energy and i've chosen to do that versus being drawn into what view what feels like a very exciting kind of you know turbulent
time there are other areas that i kind of spend my time on i just kind of try to recognize that maybe i don't know what i'm doing if i were to try and get involved here and so i'd rather stay out and i think that's council forever for anyone you know if you're going to make an investment it's important to feel confident about the knowledge and the depth needed to kind of be different
than the rest i'll build on your point like when i when i started doing my spax i um started to write these one pagers and those one pages were artifacts for me to hold myself accountable for how i saw something in a moment in time and then to be able to see whether it was tracking to that and then also to share it to other people a starting point as
david said a journey where they should then if they're curious go and do their own work it turned out not enough people were doing the work so then i had to start adding disclaimers to these things saying hey guys uh i'm not telling you to buy this please be abundantly clear these next backs that i will eventually launch you're to see an entire like in red block letters like please don't buy
this right because to your point it doesn't matter what you say people want a lazy easy way out and so i just want to reiterate what all of you guys said none of us are dispensing advice we are not telling you to do anything please do your own work and please come to your conclusion it is your responsibility and if you're not sure go and look at your children in
the face or your significant other in the face you are responsible to them and so do your own work i'll say one more um point on where i sit as an investor um i i choose uh to only participate in investing in what i call productive assets that is you put some money into something and whatever that thing is is generating money in some way or is
trying to generate value through a set of activities uh like a business um or owning an apartment building where you're making rent you know anything that or you know a group of people that are trying to have some breakthrough or some discovery those are productive assets there's a lot of what's going on now that is what i would call speculative assets which is the only way you make
money is if someone else pays more in the future versus what you're paying and there isn't an underlying productive asset to what you're putting money into are you're describing every ico or every ico every nft and the art market right these are these are examples of unproductive assets they're speculative assets in the sense that you're speculating that at some point the price
of them are going to go up and someone somebody wants that nft more than someone down the road will pay more for that asset than what you paid but that underlying asset that capital that you just put in didn't go in to build something it because nobody wanted a new generation there was no ip you went into someone else's pocket that sold that asset to you and you're
eventually going to try and sell it to someone else and so you know there there's a there's a real attraction here because what we just talked about is really hard to do having fundamental analysis and understanding of businesses and a fundamental understanding of what's working and what's not and when to shift and oh my gosh you know are things different or are they not to do that is really hard
so people end up relying on opinions of others or they end up running into speculative markets and the speculative markets are easy to understand someone just paid more for x than the other person did therefore there's a trend line it's going up it's like playing roulette and you know black keeps coming up and you're like okay it's gonna be black again it has to be black there
were seven correct there were seven blacks and so i i think that that's a really important kind of takeaway for for for folks that might be new as investors we're all susceptible we're all susceptible to this like i was just looking you know at my own performance coming into the end of this year and you know um i did a lot of specs this year but i also did these pipes which are these
third-party deals private investment in public entities exactly other people's deals that they were bringing to the market where they said chmath do you want to be a part of it and um you know and i did and part of it was i was looking at these things and you know freebird doing my work but in the end it turned out i didn't do nearly as much as i probably should have
because i ended up sitting on top of other people's work versus the original or underwriting that i would do if it was my own deal itself right anyways the net net of it all is like you know that was very inefficient capital deployment and as i look at it now it's like you know i'm down well i'm i'm technically up 19 but that's really because of one deal if i take that one
deal out which is a total outlier i'm down 17 on about 200 million dollars of investment when you are a fast follower not the originator it wasn't your idea this is critically important there are many different ways to make money but you have to specialize and you have to first and your knowledge i trusted other people i did the same thing that i that i'm
saying to other people about to do do not just copy other people you have to do your own principle work and even when you do your own principle work it may not be enough and you have to be willing to basically see the forest from the trees and walk away and so all these pipes i'm in the midst of sort of cleaning up and selling down and they've
been just a kind of a disaster for me you know hold on i'm gonna build on this for a second because i think it's critically important what you said as well friedberg you have to be comfortable with the investment you're making i look at these companies and i look at the underlying customer the product you know and what kind of revenue it's going to generate and people thought i was
dunking on rivian yesterday and i said listen you know when tesla went public people forget their valuation was 1.5 billion 1.7 one point okay so 1.7 billion uh when they went public now they already had thousands of roadsters and they had already had the no they had 93 93 million of revenue in year one so this was dramatically different than what riven had riven is being valued at you know
whatever that is 120 billion i think yesterday rivien has 17 billion in cash somebody asked me at the poker game last night what i value driving at i said 17 plus three 17 million in cash plus three billion double roughly what tesla's was the market's hotter right now whatever but i put them at 20 billion and people were giving a hard time about i said i think
that's actually the realistic valuation for this company and we are in a very dangerous moment in time right now where i think people are whether it's meme stocks or crypto or nfts suspending disbelief in some cases spax because they're not all created equal and certainly in private companies we're seeing this where people are giving people an amount of credit which makes no
logical sense and is getting further and further disconnected in from reality so as an investor you have a choice either you have your fundamentals which i'm not going to change my fundamentals i'm going to focus on the fundamentals that got me where i am and i'm not going to be involved in a 100 billion dollar market cap company that hasn't launched
a product yet let alone 120 billion one i'll stay focused on startups but what you're saying is also important because you're highlighting how you value that company you individually said i think that company's worth some multiple of how many cars have been sold in the past elon sold you know thousands of cars he was worth 1.7 billion these guys have sold and other
people are coming in and looking at this company and saying they've built facilities they've built assembly lines and they've got pre-orders and bookings for lots and lots of cars down in the future and clearly they've gone in and you know some people have gone in and seen these plants and seen these cars actually working so you know it's really important to take note that your point
of view is one point of view in a very diverse market with many points of view and everyone's going to come into this market and that's why unless you individually as an investor have a strong point of view and can show that you can apply your unique insights to consistently beat the market making decisions investment decisions like that you're eventually going to lose because
those other points of view will be a bigger view of the truth and you'll lose money and that's why that and that by the way that's why picking stocks is ultimately a loser's game unless you have some unique ability and insight for most people historically and in an enough market right you need to have an edge and the public markets are hard to say that there's
i mean if we double click on what you just said as the things that would be reasons to in bet on rivian number one they have 48 000 orders of pickup trucks against the f-150 which is now electric from ford and a million i don't know why i don't know why you're arguing this right like you're just making a point that we don't have someone on the on the on the panel right now but someone else
could come in and argue okay and i would just say this is the part of the conversation to be honest jason to give you feedback i don't like because rivian just in defense of rivian for a second what i have heard is that it's a it's a well-engineered car or truck rather they've done a very smart path to market which is essentially to you know build these delivery trucks for amazon that
allowed them to even frankly you know be default alive sure versus you know to use the paul graham term instead of default dead i think the point that's more important here is that it doesn't affect you so let rivean do well you know and this is part of the so i shouldn't have an opinion publicly no no no i'm just saying this is the part of the cycle that i don't understand
where people legitimately have these zero sum points of view about companies um and this is where i think uh free burke is more right than anybody else which is there are the market is the sum of all these collective points of view sure and i think it's fine i think it's fine to have one i think it's a little superficial your point of view because it's not really
you know sitting on top of a model or anything else and i think it's the same kind of superficiality that the tesla cute guys had about tesla for many years as well it takes a long time has somebody that does this every day and i just want to point this out it takes an enormous amount of time an enormous amount of work to be 55 350 companies i meet with you in the
public markets jason it's different my companies are going public now so i take exception to what you're saying i know a fraud when i see it i've seen them before that's a really big statement no but the distance between the valuation and reality is in the 50 capabilities that's not in control of that's not in their control okay that's in a bunch of external market participants control so
you can't pin that on them my point is the market right now seems dysfunctional and jason properly measured that you then you should throw shade at t row fidelity all these people that are bidding up your companies by the way because they are the ones that are taking review into 120 billion it's not rivien's fault and jason what's really going on in the market was public
speculators no what's really going on it's not you can't sell 16 billion dollars of uh in an ipo to speculators these are much lower prices these are institutionally placed uh trade orders but regardless the market is clearly right now in in productive assets businesses the market is looking at a time horizon that it has never looked at before which is making bets
that are 10 15 20 years in the future and that's because of the condition that we're in right now from a monetary policy point of view interest rates are so low there's nowhere to get yield in other assets so you have to look further and further out to find value so the market the market is betting is making 10-year bets which is like a vc times more than a 10-year map yeah and jason
sorry can i just can i just finish my last point because before you interrupt me my issue jason is i think you are an exceptional angel investor but just the same way you derided a bunch of late stage guys remember last night at poker when we were talking about late stage folks entering into the angel market and the er series a you were extremely dismissive because you know
what the job is to be done to do that job well and they have a different skill set similarly what i would just offer for you to think about is the people that really underwrite public market stocks well do things and have a skill set that is extremely specific and it is well trained as well and i think that okay all right no i accept i'm gonna i'll just let me i'll let me jump into
that since you want to defend me and that's the people are in shock right now way to get yourself back in the game okay so here's where i think jake also i don't know anything about the derivation company but where i think jkl's right is we've seen over and over again that when a company gets when a startup gets a billion dollar plus valuation without a product
invariably it ends up somewhere between a disappointment and outright fraud whether you know it was theranose or magic leap or quibby or whatever i'm not saying they're all frauds i mean i think just theranose frauds trading arts whatever so i think it's reasonable for any let's say seed or early venture investor to develop the heuristic then i'm not going to invest in anything with a billion
dollar with basically a unicorn valuation without seeing the product first because we've learned we've got our hands burned so many times from these overhyped companies and here's why i agree if i can't see and use the product i'm not investing i'll invest in a seed stage but i will not invest in a unicorn stage no way i i agree with that but what i'm saying
is when a company is going public like that there is demonstrable proof of concept there okay the only market in which that's not true is in biotechnology well i would say for fisker and nicola two related companies those ones seem very very shaky you can debate about the scalability of these things and you can debate that people didn't do the diligence but they had to
at least put a proof of concept out there for you to judge if people don't do the work i agree with you like if you're rolling a truck down a hill sure outright fraud no but my point is if you were there and you did your work you would have seen what you needed to see what i have heard from people who were investors in both lucid and rivien is that they have sat in the cars they've
driven the cars they've spent time with them they've seen the factories and it's very much real now what they're debating is ramp and velocity and scale i don't know i don't have a position in either neither do i have the bigger macro point of view which is important to me which is it's it just because these things are in the public markets i think people think
it's easy to judge and i think actually modeling them and making good decisions is just as hard as it is for private we need to roll this clip because there is somebody who is giving exceptional advice on cnbc let's roll the clip yeah so well up starts up about 25 just in four days since we since we bought it we bought it on uh about four days ago uh so that's
actually made a nice little move in the uh short term probably a little extended right now but longer term uh that that's a that's a good looking uh name a very powerful very strong earnings these stocks are actually they do not know what do they do uh excuse me what does upstart do uh well i'm i'm sorry what kind of company is it [ __ ] god brutal who is this guy who is he i have no idea
jake how's that is that is that like your uncle or something who's that guy i listened yeah i i i mean what do you want cnbc well you know the guy's been on many times but doesn't this prove what we were saying which is that exactly you've got to do your own principle work here that that is why we wanted to play here's a talking head who's probably getting paid for selling
some books and giving advice who knows nothing about what he's telling you you can join his membership club for one thousand a month yeah i'm sure he's publishing lots of papers that show that he's a highly successful profitable investor and look how smart he is he doesn't even know the company he just promoted on cnbc it's incredible on a um mechanical basis here chamoth
you and i have been on cnbc many times in that moment uh what is going on what do you think is going on in the host's mind and the the producer who has to dump this call because they're watching this let's move on i just the breakdown where he says i'm sorry i i have no idea uh what do they do i think the point's been made i think the point's been made oh my
lord everybody should do their own work yeah do you work just actually look like you want to say something i mean i just chose the agenda yeah look i mean there is a massive agenda in corporate journalism there's an agenda by the people on these shows to promote positions there's an agenda by the reporters themselves uh and on and on and on it goes so to jamaa's point
if you just take them at face value you're and you don't do your own work then you're buying into someone else's agenda trust yourself okay uh one thing that we are trying to all understand uh is inflation the cpi uh has gone up 6.2 in october highest jump in 31 years since 1990 according to the wall street journal fifth largest straight month fifth straight month of inflation above
five percent you know somebody tweeted out we'll pull it up here uh denver bitcoin put out a year-over-year commodity chart uh we can throw up on the screen and then uh i think friedberg you shared in the chat the average weekly retail prices around fertilizer what are our thoughts uh on the nature of inflation and how that affects our investment i i think it's persistent and
the reason i think it's persistent is that there's a the all of these things are intertwined and so you know if you want to just bear with me for a second like when when this let's just go to the the entry-level economic job right so you're a barista at starbucks or you work at mcdonald's and you're making 17 to 20 dollars an hour what that does is it shifts labor
and eventually there are other people that are entering the workforce or you know may shift jobs and essentially it just causes this leaky bucket effect where everybody else has to then accommodate itself so you know you have a guy like uh you know you have a company like amazon which is now going to pay 25 or 30 dollars to keep folks right because
otherwise they may say oh you know if i make 15 or 16 an hour i'd rather work at mcdonald's it's simple it's not back breaking work blah blah so then they start to um increase the amount that they pay they increase their benefits and the like didn't i saw this thing this week there's a crazy thing that's happening though which is it's now pulling people from non-traditional job classes
into those jobs there are teachers that are leaving teaching to go work at an amazon warehouse there are firefighters that are quitting being a firefighter to go work at an amazon warehouse because you make the same or more plus you have all of these other benefits and the job is structurally a lot easier and so people are making different optimizations and to that
point i think we talked about this in nick you can put it in the group chat in reddit as an example there is more engagement in the subreddit around having a simple work life than there is now in wall street bets right so there's been a structural cultural change where people need to get paid more to do the same amount of work and then at the same time you have all
of the all of the supply side getting more expensive fertilizer makes corn more expensive lumber makes house prices more expensive chip prices makes the iphone and cars more expensive or completely backlogged you know yesterday at poker sonny was showing us he bought a tesla and the delivery period october of 2022. yeah it's great it's freaking crazy so i i think that it's a it's this is
the beginning of a persistence i think those are all like really valid points the thing i'm seeing now is i think we've moved into um what i'll call a contagion phase of inflation which is people are hearing about inflation they're seeing it in some places my gas went up a little bit my milk went up a little bit whatever and they're saying well i guess
if everybody's raising prices i need to raise the prices as well of whatever i provide in the world so i can just keep up with everybody else and they're not looking at their inputs necessary and saying i need to charge more or that's the best business decision they're just saying everything's going up around me and so they raise prices i've literally had
this happen three or four times and i went to buy a car and they wanted 15k oversticker and i didn't buy it based on principal but i'm sitting here going like maybe i'm an idiot maybe i should just pay the 15k overstick what do you thought stacks on inflation and the contact my thoughts are i told you guys like six months ago about this yeah can we just replay what i said on episode 32. it's
got his researchers in the background giving him you've written down what you said on her episode no this guy's in the [ __ ] debate club stanford debate club over some of us when we make predictions take them seriously so you know is that a dig that professor ice cold takes i'll give you guys a link to a prediction that was made here's oh i mean i just want to replay the 20
seconds here we go the two david's dueling again just like in the group chat here's freedberg january 1st 2021 if you don't think inflation is already here you missed what happened to the stock market companies aren't performing better we're just inflating everything financial assets first everything else will follow that was a good one just make your point just make your point
just add the clip i'm beginning to wonder if biden's going to be a jimmy carter here because frankly all he had to do was leave things well enough alone covid was winding down we had a vaccine all they had to do was distribute it to as many people as possible and covet let the recovery take shape and instead they pushed this insane 10 trillion dollar
agenda he's gonna backfire massively look if the economy turns we were set for a post coveted boom and right now that is all at risk because mouth like you're saying they're keeping the economy closed or parts of it way too long they then over compensate for that by printing a ton of money and then they overcome say for that by raising taxes too much just just to build on that so
that second step of their overcompensating their inability to open with money is so true because then what happens is your labor force stays impaired because people make enough money by not working it was true when i said in may it's even more true now he said it was there was inflation okay so there's inflation okay so now great good job somebody makes a prediction
yeah i made one in january that said the same thing now look you can do three things to you can do three things to curb inflation raise rates right when you raise interest rates you slow spending prices come down inflation slows but the issue when you raise rates is obviously you see things like job loss and economic growth declines and it can very quickly spiral the other way this is the big
challenge of fed tapering the other option as we've seen a significant attempt at lately is to raise revenue right so increased tax rates uh tax a broader swath of people at a higher rate or broader spot of business at a higher rate so it's very likely that you know tax revenue could kind of present itself again as a driver if inflation continues to
spiral up and the third which is the least likely is cut spending right the the federal government spending the way it does right now makes a very inefficient way of kind of putting capital into the system and inflating we've seen historically that anything the federal government spends money on like health care and education the costs very quickly spiral out of control super
inefficient why not just give that money to the free market to make decisions on how to spend it it would be more efficient etcetera and the market would effectively find balance where buyers and sellers are equivalent as opposed to having the federal government driving the price of everything up the fourth option that people don't talk about which i think may end up becoming an
important option not kind of oblique option but more kind of backdrop is to start a war and you know when you start a war dog the dog yeah when you start a war you stimulate the economy without needing to pump additional capital in so you can increase growth and avoid the risk of stagflation and you can source resources that otherwise wouldn't be kind of flowing in
the trade or basically in a land grab type situation but it doesn't necessarily mean that policymakers would say hey let's go start a war to decrease inflation taiwan but the premise that conflict can improve the economy is a important backdrop that starts to play into policy decisions that might get made over the next couple of months and quarters and that's really important whether or not
the posturing is one of partnership and and reducing the tension with foreign nations or one of increasing the tension it's more likely that we would want to increase the tension when we're in an inflationary environment so that's quite a conspiracy there so what do you think sex okay let me we gotta go back first principles on this thing we're not gonna
start a war to tame inflation okay but let me just explain what inflation is because i'm not sure people like fully understand like how this works inflation's very simple it's too much money chasing too few goods okay and we have both sides of the equation going on right now on the supply side on the good side we've got shortages we've got the ports backed up we've got
paying people not to work we still have the 2 trillion of coveted relief passed earlier this year which was responding to a problem that was largely winding down so we have these labor short we have people dropping out of the the workforce in record numbers in the number that just came out showed in more people quitting their jobs than ever before so we have a shortage in terms of the
production of goods and services that people want the same time we have this monetary and fiscal expansion coming out of washington you've got you know again they did the 1.9 trillion of coveted relief they did 1.2 trillion of infrastructure buying still talking about another 2 trillion of social welfare you have the fed still printing money with qe so you've got this massive
expansion in the amount of money so look too much money chasing too too few goods creates this problem and it was very predictable and so what i said back in may that's what i was warning about and it goes back to the druckenmiller clip that we that we were talking about all the way back in may he said the same thing that we had a reckless fiscal and monetary
expansionary policy coming out of washington at a time we didn't need it because if you looked at like retail spending back in may it was back to above trend so you know in other words like there was no demand problem the economy was back and they've just been pumping and pumping out of washington we made a we had a we had good intent we wanted to make people not suffer we
wanted to get the economy on tap we may have just made a bigger bet than we needed to we overdid it we overdid it clearly but look who wants to be the politician quite frankly yeah he's not going to get you who is the who ends the eviction moratorium right the gravy nobody wants to be the politician who says okay now you suddenly have to pay
your rent but obviously people have to pay their rent and we're taking away your bonus unemployment i mean people have to go back to work at some point when there's 10 million jobs open just as a uh i've been watching the taiwan situation like a hawk and i don't know if you saw this this week to go off on another tangent but the us is testing israelis iron dome and guam as a defense
against chinese cruise missiles obviously um for possible deployment in taiwan and i don't know if you're watching and it's cancer in the nba uh but he has been going on cnn and stuff like that now talking about china pretty amazing i i predict escalating global conflict that'll be my prediction to mark the q4 well i i think that's i think actually that's a pretty valid
prediction but i just think it's a little bit separate than inflation like i said it's not an explicit decision but i do think that in the backdrop of an inflationary environment where you have something that can temper the condition at home that at the same time you know might sell politically but we don't need but it's not going to solve anything politically okay i mean
world war ii you know famously got us out of the great depression because that did stimulate demand but in a situation we're in today we have too much demand we have retail is trending way above curve what we have is a supply shortage and devoting resources taking them away from the productive economy to go to war would only exacerbate the problem and make it even worse what we need right
now actually is for washington to back off to stop pumping demand with this with you know now they're still talking about this two trillion dollar machine so the money printing that's what we've got to get out of the way and to um to stop these disincentives for production and work so you have ma i mean mansion was exactly right about this okay do you
remember when manchin when he was resisting this two trillion dollar social welfare bill i mean the things he said are already coming true i mean he said this months ago he said that we should take a strategic pause because he said this is a quote by all accounts the threat posed by record inflation to the american people is not transitory and is instead getting worse from the grocery
store to the gas pump americans know that the inflation tax is real and dc can no longer ignore the economic pain americans feel every day that's what he was saying this past summer several months ago and they rolled right over him the psychology of this could be could be self-fulfilling as well because what's going to happen is you're going to have everybody raise prices because
it's now become an escalation you know your hairdresser your you know whatever you know services you're using whatever product you're buying whatever restaurant you're going to is going to put two dollars on every appetizer and five bucks on every entree everything is just going to keep going up and then what happens is people who in the middle class
or you know who are consumers of products in a large way will say you know what i'm going to put off buying a car then we're going to be driving all this supply up and then people are going to say you know what [ __ ] it i'll just drive this one for two more years that's going to cause stagnation and this is called it's what we have in the 1970s and
you're right it's called an inflationary spiral which is the future expectations of increasing prices means that people start increasing them now and that feeds on itself yes and that's what we had in the late 1970s and the thing that broke that was paul volcker jacking up interest rates it was very painful it caused a very severe recession in the early 1980s but then the economy came
roaring out of that by 83 it got reagan elected in 84 and you had 30 straight years of declining interest rates and that led to a stock market boom so the problem we have now okay here's the problem we have is there's going to be no paul volcker why we can't afford to jack up rates because the federal government's debt is so much bigger than it is we are not on a fixed rate we're
on a variable rate all of the debt we take the average maturity of government debt right now is five years okay so that i mean that means the whole debt rolls over within five years so if they jack up interest rates we have almost 30 trillion of us federal debt right now so every one percent that they increase interest rates that means another 300 billion a year of debt service payments
yeah exactly so there's going to be enormous pressure on the fed not to raise rates you already are hearing biden rattling the sabers saying that powell may not be his choice for a second term by the way powell is very dovish he's basically saying we can't raise rates right now because of this and that so and abide in the administration nobody in washington ever wants rates to go up
right they want to keep these low rates forever this is the problem is look at the end of the day i don't know what the inflation picture is going to look like next year but what concerns me is we don't have effective tools to fight it anymore because we've given up our ability to raise rates because it would it would increase the cost of the debt
so much and i mean so with just one article just to share with you guys is this again my one of my favorite sources of economic information is the the fred blog which is from blogs right from the st louis fed okay talking about two tales of federal debt okay and the article is about here's why there's so much disagreement on whether the federal government debt is too high
so the first chart shows debt to gdp this is always the way of looking at government debt was simply looking at the ratio of debt to gdp it's now something like 125 percent in peace time i don't think we've had a higher peacetime ratio that would tell you things are out of control but for the last decade while it's been going on you had this whole school of thought the mmt
modern monetary theory all these economists and experts and politicians in the media were eager to buy in because they want to spend the money okay and what they said is no it's not debt to gdp you should look at debt service to gdp this is the second chart on that blog and so debt service to gdp was was staying constant or even going down as the debt to gdp was going up why because
interest rates were so low the problem is what was so foolish about this point of view is it is assumed that interest rates were going to last forever well if that was your point of view why didn't you do what trump actually suggested several years ago when he suggested having 100 year t bills they should have locked in much much longer duration maturities on
the federal debt and instead and yellen rejected this okay and so you've got a five year average duration which means that if interest rates go back up the debt service cost is going to explode yeah so in 1980 we changed the goal posts for cpi so even as a measurement to know what we look at and i think jack dorsey tweeted this out so nick you may be able to find this tweet but
you know we changed the measurement of how cpi measures and so if you go back to the original measurement uh it looks like inflation in cpi is uh much more pernicious than we would otherwise think it if we just look at the the new cpi that we that we started to look at as of 1980 so um that's another sort of like point we did this we did the same thing with i
just go back to what i said early on had given up looking for two smartest people that we both know are net sellers well they're selling some yeah i mean they're not selling i'm just saying the two smartest people we know i mean we don't get financial advice here but should everybody be moving to cash no where do you put your money i don't know i'm totally confused this is i think the
admission just buy productive assets great businesses that have durability and let them ride for 20 years i i like your answer the fact is we're all confounded as to what to do at this moment in time we're all trying to figure this out and we do this for a living but then you're trading the market like everyone else all the time like you know why trade the
market where you can just buy great businesses own stakes in them and let it rest no i'm just talking about this i mean my practical issue is that i don't have infinite money and so in order to put my money into productive assets i have to sell other productive assets well if you've got other productive assets leave them in why sell well then it's like then i'm basically
you know doubling down on a world view that may be old and dated right so if i'm along a bunch of software companies and i really want to do something in climate science or biotech what am i supposed to do don't try don't try and time the market shift your assets right why do you care what the no no i'm not trying to tax this i'm not trying trying to time the market i'm just saying if if
my world view shifts to really want to double down on climate science or alternative finance or biotech i have to raise capital to do that you have to raise capital is what you're saying right but but for me i'm not raising it from other people i'm raising it for myself so to me the best place to be right now is in the company formation space because when you create a company um
like friedberg does every three months there is so much value being created at that moment in time and so much further capital getting poured into it that if you are the originator of the company and you get some big slice of the cap table for doing that which is completely valid you originated the company whether it's unique or call in or whatever it is
man that is a great moment of creation of wealth creation and when you're the person putting the money in at the billion dollar evaluation before the company whatever call in i'm sorry clubhouse went from 100 million to 4 billion with no revenue i don't know what's happening in the world but pretty crazy do you want to go on to um xi jinping and his he's going to be
speaking with biden on monday it's done he had he got it done before his his video his zoom with biden oh yeah so they're doing this now the supreme leading hasn't left china the supreme court explain what this means uh from the story um i mean i think the basic the basic takeaway is that they've been working inside the body politic inside of china to basically reflect g on the same level
as mao and um and effectively what this means is that it it allows him [Music] to remain um the leader of china indefinitely and so um there is no transition of power typically what had happened was these there were these ten-year windows and you know you you you go uh zhang you know 10 year cycles and then they pass the baton but it now looks like we'll be living
with xi jinping until um until you know he he joins the after world so uh he's a ruler for life of china basically crazy i don't think that's exactly right what an incredible feat of political maneuvering without judging it just to say how what a complicated byzantine political infrastructure he must have had to navigate i don't know how he played this three-dimensional chess with
all these people the slow systematic dismantling of the old guard placing all of his people in then slowly moving towards this this kind of recognition he's admiring yeah no the dictator got his name for a reason somewhere donald trump and steve bannon are like what did we do wrong we were so close january 6 we almost if pence would have just played ball sacks you'd still be in
power huh your guys dropped the ball and we wouldn't have inflationary just think trump was leader for life you know jason given how accurate my predictions have been you should have a little bit more respect for my uh political positions what do you guys think happens now that g basically is ruler for life you know he i think the chinese term for it is historic figure which is yeah
saying you know you're you're basically um you're a maid man basically you can't get whacked nobody can touch you you're good for life the end nobody can question you i mean can you imagine mao zedong then you know deng xiaoping and now xi jinping incredible like he is at that level well it means if you start a war and a serious military conflict that nobody
can question you right you're the supreme leader so it's sort of like putin and mbs like mbs can go kill a journalist and he's got nobody to answer to it means he has nobody dong initiated the revolution and you know deng xiaoping was really the architect of free markets that has made china the economic powerhouse that it is today their internal reflection is xi jinping
is on the same scale of that now i mean i can't claim for the future yeah what is the accomplishment that's going to really put him in that league and and you'd have to say it's the annexation of taiwan i mean that's the thing that he must be looking to do before you know his time to reunify china that's the thing that could put him in that league and so that that is the trip wire
that to friberg's point that could lead to you know a conflict i i think they you know i hate to say that freeberg is wrong uh because like i don't think in this case i can i do think that there is some left tail risk for like a crazy wag the dog moment in taiwan it would be really scary really scary right now if i was looking at the sizes of the navy's people don't know this
japan actually has a very large defensive navy the uk and the united states obviously have very large ones china's is large but not on a tonnage basis they have a lot of ships but together i don't know if you saw the military exercises going on but new zealand australia the united states uk and japan uh were basically i think south korea would were basically driving their ships
around the south china sea this is going to be i think yeah so you know i did i did a really interesting interview with um the historian and commentator neil ferguson yeah who is also a pretty avid china watcher and i did an interview with him actually on on my app uh you don't want me to say the name shall not be yeah but anyway so he he had a
really great line which is he said that the that type the issue of taiwan it's basically like the issue of cuba and berlin and the persian gulf all rolled into one so it's like cuba and the cuban missile crisis because it's right there off the shore of china it's like berlin you know because that was basically the dividing line between freedom and you know totalitarianism you know where
where the berlin wall got built and it's like the persian gulf because the new oil are the semiconductors the chips that are fabbed in taiwan at tsmc and so all the resources that we're dependent on for the new economy are all right there so super smart framing yeah it's i thought it was a clever line the thing we have to remember about g is that his father was um
was a commander uh for mao and was in a vice premier and so you know his historical he is the original princeling right remember you know there's this context of these chinese princelings but he is he is one of these originalists and so his motivation will be it seems at least to bring china back into that spectrum of power which is really about a consolidated country
um and a single nation state and that has to include taiwan it can't it can't not so to your point david it's almost more motivation for him to go off on some crazy adventure and try to reclaim it it's really interesting to look at the tonnage of ships and the number of ships the united states has over 6 000 tons of ships 949 according to globalsecurity.org china has to only 2
000 tons and a thousand ships they have a lot of smaller ships uh and then russia uk india japan france indonesia turkey germany illinois warships jason or yeah this is their their navy warships um and so they're fighting uh but japan has a very large one i wasn't aware of this because i thought they were not doing military buildup but they have what's called a defensive navy uh
which can't do offensive stuff so this is um i think this is really problematic how many of these ships are smaller than sax's yacht that he rented this year yeah saxis tonnage would kind of put the united states over the top i think in this gross cottage of sax's yachts is going to be donating his new yeah no for sure it's bigger than indonesia i
see indonesia on this list turkey i mean how big in my defense it was a starter yacht it wasn't my indefensible next stop next one next one will be bigger yeah solana is going to make sure of that right yeah you can buy yachts with solana all right i think we covered enough uh ge and toshiba can't run their businesses so they're each separating into three separate let's talk about
that that's interesting actually and johnson and johnson yeah today all right so on tuesday g announced they were splitting into three separate companies aviation healthcare and energy toshiba reported a similar plan johnson johnson today johnson johnson was today this is um in direct uh conflict with the consolidation and the creation of conglomerates and
it's not good i think this is an important point jkl um you know in the 80s and 90s it was cool to create conglomerates meaning you would kind of stick businesses together that were rjr somewhat disparate um because you could financially engineer a way to do it that would juice shareholder returns right you could borrow money add lots of scale the cost
of debt goes down you could increase your debt load et cetera um and you know the challenge is like when you're scaling a business you either need to grow your revenue organically or you need to acquire and when you're acquiring you're either acquiring horizontally or you're acquiring vertically meaning you're kind of integrating your supply chain or you're integrating um or you're
adding ancillary businesses that you can cross-sell so you're either reducing your costs or increasing your cross-selling ability so there's some inherent synergy in the acquisition the problem with conglomerates is there is very little synergy meaning like when you acquire a new business like an aviation business it doesn't create synergy for your healthcare business
and um you know there was always a rationalization that these managers of these big conglomerates had which was like oh well we could do this and we could do that at the end of the day it was financial engineering where they simply kind of used debt to reduce um you know the cost of capital and increase the shareholder returns and now everyone's kind of waking up to the fact
that you're actually decreasing value because an investor that wants to own an aviation company doesn't also want to own a healthcare company so the investor doesn't buy those shares and the investor that wants to own the healthcare company doesn't own the aviation company so they don't buy those shares so the way to increase shareholder value is to actually split
those businesses up and then the investors that want to own the aviation business will pay more and the investors that want to own the healthcare business will pay more and the overall value of those two businesses goes up by having them be separate and that's what the market's kind of waking up to and this is kind of a trend that's been going on for years now you know going back to
kind of 2013-14 where the market started to kind of rationalize some of these silly conglomerate business ideas and break them apart into more kind of you know targeted businesses that can actually spin out or or yeah or break off breakups yeah that can basically attract shareholders to bid on each one of those businesses individually and drive value up you know we saw one
business i was close to that i saw this with was dow dupont where they you know down merged with dupont and then they split into several businesses that each were focused on a particular vertical and it made a lot of sense to drive value for uh for for the for the overall shareholders so at the end of the day you know these conglomerates are about kind of driving economic outcomes and
the only folks that you see doing this well are folks like warren buffett where the job is really about capital allocation where you know you can allocate capital to the best business and that business on its own will grow organically versus taking a bunch of crappy low growth no growth businesses levering them up to kind of juice the returns on each other and we're seeing
this slow unwinding happening so i think it'll it'll continue to and you can probably go and pick a bunch of these conglomerates and you'll see the activist shareholders doing this they'll they'll buy a bunch of shares they'll instigate and say hey you guys should break up the share price will go up by 20 30 percent so if you want a stock tip of the day
you know go find the next set of conglomerates that are going to get attacked and broken up it's interesting and you know with public markets dell is spinning out uh vmware and that's going to create a massive amount of cash and shareholder value they're doing a huge dividend so i guess my question to you chamath is when do we start to see this hit not from a point of weakness but from
companies that are strong and see this as hey this is a way to just unlock shareholder value will we see an amazon spin at aws a youtube or an instagram come out of their parent companies i think it's very rare that these things happen on the offensive foot i think it's typically a defensive maneuver that's driven by really poor returns over long periods of
time or activist investors totally i was about to bring that up i mean do you remember how hard that ebay i remember like john donahoe was the ceo he like fought that so hard i remember getting a phone call from him asking if i would support them he had rounded up read off and other people support ebay and i'm like no i can't wait wait wait no do you remember this we were in vegas
and donahoe called and we were working on a plan and then you went and walked on through the plan do you remember this thing we were no what happened we were in vegas we were going to try to we were in vegas i can't i can't no no donahoe either called you or called me and i said you should talk to sax and you sketched out a plan for what paypal should do remember
oh yeah yeah i do remember that but yeah like on saturday afternoon we sketched out this plan yeah yeah so i told john no i'm sorry i can't support you because i believe it should be spun out and so in the only two the only two people from the original paypal team who said that publicly were me and elon and we said that if you could get paypal out from under
you know this you know this sort of ebay bureaucracy it could be a 100 billion dollar plus company the bar for acquisitions is extremely high like i think the the last really two acquisitions that were really done well was zuck's acquisition of what's happened instagram but since then the bar is extremely high for these conglomerates so as an example paypal was rumored to be buying pinterest
and you know it there was such an incredible shareholder revolt that they had to put out a press release saying we have absolutely no interest in acquiring pinterest but what that all that did was just you know accelerate the bleeding because then people were saying wait a minute how strategically lost must you be totally that you would want to buy
pinterest as and so then it and as a result the the paypal stock price has gotten absolutely yeah it was over 30 billion dollar company now it lost the entire value of pinterest basically here's the big issue that i think we have in american economics and company building you know we've gone through 20 or 30 years of really under investing in r d at the sake of share buybacks
um at the sake of you know market consolidation dividend private equity you know driven take privates and so all of this capital misallocation has really put us on the wrong foot and the pandemic basically showed that we were really ill position so a lot of these um conglomerates it doesn't make sense today because we've proven that the compensation schemes for ceos the incentives for
executive management are way too perverted and they just create horrible outcomes a different example i saw in the last i think 15 or 20 years ibm's market cap has gone down to 113 billion in the meantime they've bought back 132 billion dollars of stock what could you imagine the kind of r d that ibm could have affected with that 132 billion and where they could be so
we have they're not they're not good capital allocators well we have horrible capital misallocation so well look at apple i mean i don't think they know how to spend the money in the r d yeah they're not they're not good at it they're not good at it they're better off they're better off taking those massive they're better off taking those massive r d budgets and putting it into
m a budgets not for like a 50 billion dollar pinterest acquisition that doesn't make any sense has no synergies but on smaller acquisitions of teams that have built really interesting technologies ibm ibm could have bought a lot of different things to innovate or operate those guys don't seem to know how to do anything so like my point is now we're in the cycle where
these conglomerates will get ripped apart so that a brighter fresher and probably younger group of executive management can take a different the spin on these companies and actually do some so for example like the j and j spin out is really exciting because you take med devices in pharma and you separate it from a really struggling complicated consumer goods you know package business
you know the shampoo the q-tips the listerine get all that off-balance sheet now you can actually you know make drugs and med devices and that's a really interesting business that the right ceo can really do a lot of interesting things with i heard an interview with us then ceo of ge i think culp who was putting forward this plan the line that i remember that kind of
resonated with me he said the benefits of focus are immediate the benefits of synergy is are hypothetical and i think that's really the key point here and that's what's going to fuel all this sort of deconglomeration is that the benefits of focus to a company are so huge that you know that but but the reason why it doesn't happen is because of this instinct
that all these managers have for empire building right so when times are good they can keep building their empires and then something bad has to happen to force them to focus yes the motivation they're not they're not owners they're typically not founders and so what you end up seeing is their comp goes up linearly with market cap so the biggest right and this is just just to
close the thought out on that whole ebay paypal thing i mean it was so obvious that ebay should spin out paypal but for the manager history the management resisted it and it took an activist shareholder i think icon came in this icon yeah it was icon who came here when the carolinas it's in the lobby you're [ __ ] well but but icon shouldn't have to come in there the reason why there's
opportunities the managers won't do the right thing he unlocked a quarter trillion dollars of value he was incredible no i mean they spelled that out for 40 or 50 billion now it's worth five times that amount it's a quarter of a trillion dollars yeah it's crazy and just to to put this all in perspective the stock buybacks that are going on right now apple did
almost 20 billion dollars less square they've done 77 billion in last year and you want to talk about the impact of tax policy on innovation well you've got on one hand here apple is is looking at well i'm gonna have to pay all these taxes i might as well just increase the amount i'm buying back and be neutral why would i want to show any kind of a profit here i'll just
buy back as many shares as possible the company will eventually be private i mean this is you got to be really careful with how you do this because there's no incentive for people now to put money into r d or other stuff that just buy back the stock might be the most efficient thing to do correct in terms of like the shareholders you don't know how to spend the money it's the
dumbest thing to do it basically shows you're an idiot well it shows you got nothing better to spend the money on so maybe maybe that's maybe buying back the stocks better than furring it away but yeah it means you're out of ideas it means you're not here or you or or a combination of my god this core business is throwing off so much money that we can't come up with
enough ideas at that time i think that's no it just means you're not ambitious enough i mean what would you spend 20 billion on i mean zuck is having a hard time spending 10 billion on creating the metaverse a year i mean you're talking about 80 billion a year what would you put that towards what should apple put it towards no apple apple could even more
aggressively double down to enter the car market they could have done it much sooner than they have they could spend 20 a year on that sure you're right you know easily um they could actually enter i don't know power they could uh yeah i mean but they're but they're you know apple their their culture is to have very few products as a company they're always
very proud of that it's the steve jobs focus thing i mean i think it's worked pretty well for them i know you're second guessing it the thing that i hear i just don't like buybacks because i think it comes at the sake of r d for most companies i think it's going to be easy choice no the big tech companies are different but everybody else what you see is r d is like one or two
percent of of of their you know but it's it's a shame look apple could definitely be more aggressive but i wouldn't judge the tim cook era until we see what happens with glasses because this is the product that i hear is coming is going to be their you know their ar glass glasses and that's going to be a new computing platform that they open up to developers and i guess cook's
been there for what a decade but i think he doesn't want to retire until this comes out and he can see this is going to be his signature product i think but i'll tell you just the other thoughts that just went through my head as i saw this news about ge it really was kind of the end of an era you got to remember that back in the 80s 90s i think even as late as 2000 ge was the number one
company in america by market cap it was the top of the s p 500 it later subsequently got kicked out of the the dow jones but the thing that went through my head is you know when i was a kid growing up the only two business names that i even knew were jack welsh and then lee iacocca you know that was it had their posters on your watch ge and chrysler in between the two of them it was big
jacket well shania and now you don't even know the name of the the ge guy i mean like i know it because i watched some interview and i saw him up there but i mean you can't think of a business leader today who's not in tech and and really a tech founder or somebody who's handed the ball by the tech founder so we know tim cook because steve jobs handed him
the ball but otherwise it's all tech all tech founders you don't hear about any of these old like dow jones type type companies anymore is this the the business the business environment the the economy has changed so much since the 80s and 90s it's all totally dominated by tech now but i would argue that the disruptive business and the disruptive business leader are always
the icons back in the day the chemical companies were the icons and everyone knew the chemical companies and the guys running them then it was the industrial companies you know then it was kind of the financial you know then it were these guys in the 80s and 90s weren't founders you know but they were in different ways on r d spending top two companies
without looking on r d in the world yeah global in the world number one number two give me number one number two uh i would say microsoft no it depends on classification but i would say saudi aramco freeburg what do you got yeah i would probably put exxon up there you guys need to think about who was been some of the most innovative leaders uh amazon 42 billion in 2020. but jason
that's an accounting thing if you're saying in the world saudi arabia their exploration their enp budget is probably 200 billion dollars a year okay i i i guess maybe because that's not that's a is that is that a corporate entity technically it wouldn't be on the list it's a public company yeah so google no this is all companies samsung facebook some of this is just accounting
categorization anyone who because the engineering budget is is basically what goes into rnd so the more engineers you have on staff the bigger you are doesn't mean you're producing anything by the way bigger industrial companies traditional companies that list things as r d you know most of those dollars flow out to third-party companies like enterprise software companies services
businesses so it doesn't end up it gets accounted for it's quote unquote r d because they get to capitalize it but that spend is typically um uh not paying in-house salaries to engineers and that's the distinction between true tech companies and other companies that are quote-unquote going through a digital transformation or you know have a quote-unquote r d budget
they're outsourcing r d and typically paying three times as much and typically getting one temp in the return um and i think that's the maybe a good heuristic for how you might kind of want to look at what differentiates detect a true test depending depending on accounting saudi aramco spends 37 and a half billion to 50 billion depending on height all right so that puts them at
you know probably tied with amazon for all intents and that just means i was right jason that's what i care about well i mean i'm wondering well you know what the reason i think that you this might be obvious putting it aside i think the issue might be that they're recently public right so maybe they're uh you know they've only been filing public for two years or something
all right i think that's everything uh how's everybody doing otherwise how's everybody's personal life are people losing their mind what's people's plans um for the end of kovid i'm gonna go have beer and pizza on the beach nicely done so i'm ready to get out of here nice yeah i mean i'm exhausted are you guys exhausted and this has been a [ __ ] crazy run
i don't know what day it is anymore i'm like i'm ready to wind the year down i am so exhausted i mean this has been the craziest pace i've ever experienced in my life the number of deals going on the amount of inbound oh my god i tell you at that conference um every single so i have all these founders come up to me and pitch me what they're doing a couple of them like that sounds really
interesting can we participate in that he's like no no the rounds are subscribed i'm like why'd you come up to me and pitch me this though how dare you like yeah so rule number one i tweeted i tweeted a new terms of service if this is only if i'm at a conference okay if you set up an appointment in my office it's fine that's like an opt-in but like if you come to me to pitch me your idea
at a conference then and i say okay i want to invest like give me an allocation like don't come to me and pitch me if you're not going to give me an analogy no that's not cool that's like being like oh my god i know the best restaurant in the world it's open tonight they've got the greatest steak and they're like chasing no reservations guys tell saks about the
white truffles from yesterday yeah we we had dinner at jamaat's house last night it was incredible he got these white truffles from us i've had in a year i mean it was really incredible i really appreciated it it was amazing and 2000 like it was 1996 white burgundy uh leroy i'm not a wine drinker i'm not saying that your guy your chef beat saxis from two weeks ago sax is wasn't sax's chef
um your old chef uh i think one of his sessions david lives in the stratosphere he lives in a stratosphere burn that's just at a different he's next level are you eating my sloppy seconds over there no no i think we gotta beat that one i don't know that term means what you think it means anymore sex but by the way there was a there was they were gonna get
there was a dinner conversation last night tax to your point jamal it's up to you to decide if you want to disclose the dinner conversation guess but um this guy said that there was a a guy that applied to y combinator that had 750 million dollars in crypto and so he's like applying to y combinator with his 750k for 150k to give up some percent of his company
there's like all these stories of these guys they're like i will pre-fund my own series a with 15 million dollars to create this business inside of the yc machine that was incredible there was such an incredible like unexplicable inexplicable undescribed i think in the in the mainstream media story of crypto wealth creation that's been going on and these crypto um these crypto 100 millionaires
billionaires are emerging and doing their own kind of innovation completely under the radar right the smartest people that we know are selling right now yeah and i think they changed their conversions um for the yc safe they're now getting preferred shares they used to do common and um they now i think it happens post conversion so they want their seven percent
fixed you know after your next round of funding is my understanding i don't know if that's but yeah so they got it more aggressive but that's brutal it's you know what's happening is like the accelerators have to move earlier back to incubators so the idea of somebody you know grin or some of the other companies we funded coming to the accelerator with 20 000 and or 50 000 in
revenue in some cases they may be able to raise money without and certainly the crypto companies are raising 25 million dollars they're outpacing regular companies regular startups non-crypto startups and they raise it in 10 seconds from a bunch of eth for buying tokens they've created a whole shadow economy yeah that doesn't have to play by any of the do you really
need adventure anymore like well if you want to obey the law i guess you do but in a lot of these cases like i did this um this whole new economy could emerge completely offline right completely off the current do want to get this thing tightened up they don't want people doing this 20 i think it was 2015 i presented amazon at iris own and one of the things that i did was we
calculated what bezos's investment track record was right because he basically took all his free cash flow and reinvested it in the business and you could measure what his return on uh invested capital was and it was like 42 percent and on a really big number on 10 percent on the money amazon deployed in r d projects like the kindle or 42 percent over like a multi-decade
period and double what a venture firm would do or top down i mean he's in a class by itself but um my takeaway in that moment was wow this is the you know smartest investor of our generation that's what i said at bazel's at the time and you know baze has had a track record of selling roughly a billion dollars of amazon stock every year and this year he
you know snap sold 6.6 billion which you know when we talk about the percentage you're selling we're talking about selling five percent 10 so you know they're not diluting their whole positions but these are big numbers you're right i think it's a signal jkl you got to close this out all right everybody it's been another amazing episode episode 55 of the all-in podcast
from uh yeah whatever where you know where people are coming from uh the all-in summit we'll be in the spring at some point i'm gonna go to miami and look at the locations march 11th through 15th i can't because i'm playing poker yes okay you got your poker train in an undisclosed location big time if i can go listen is there anywhere poker big boys you need to have a funny
guy there i mean i'm not a great dealer but can i be a waiter or something i mean i think the game starts at two thousand four thousand but it could get a little spicier free spicy you got a good year maybe you should go yeah maybe you should have solana play because let's get the solana chips oh he can play davidson [Applause] you put it in an llc and then you buy
into the game and then that may not be enough that may not be enough all right 20 whatever 20 is enough for the queen of quinoa the dictator and rain man david sachs i'm jcal we'll see you next time on the olympics subscribe to the channel [Music] we should all just get a room and just have one big huge orgy because they're all just useless like [Music] [Music] i'm going home [Music]