SBF's media strategy, FTX culpability, ChatGPT, SaaS slowdown & more
Full transcript · Read the full conversation in order, with its original context.
Contents6 chapters
§01Bestie hangover!§02Analyzing SBF's media tour: his angle, media coverage, and more§03FTX culpability: media, investors, regulators§04Challenging media coverage of other countries, China's current situation, Xi Jinping's standing§05What OpenAI's new ChatGPT tool means for the future§06David Sacks on the slowdown in SaaS, use case endgame for generative AI§01Bestie hangover!
I'm now recording.
Jesus. You look terrible.
What's going on? Did you sleep last night?
Do I look tired? You do look a little tired.
You look unconshaven.
Yeah. What happened last night?
I had a holiday party at my house last night for my office and --
You look destroyed.
Yeah. What's going I mean, did you drink? I did drink. Yeah.
What does vodka and oat milk taste like
that? case.
He had a white Russian.
A white Russian picklebowski style
with oatmeal. He's like, I want a white Russian with oatmeal. Oh my god. Actually, my white rush is made with only, and please complement that with a huge punch in the face.
Give me 5 minutes. I'm gonna go I'm gonna go shave and -- It's called
the hair of the dog. Yeah. You know, a little bloody mary.
Bonadamadamad. You know, like, I'm gonna get a beer.
I'm gonna get a beer just to beat this hangover.
Go do it. I'll get it prepared.
Hang on. I'll be right back.
I'll be right back.
The way your winter's ride. Rainman,
David Saxon.
And I said We open source until the fans and they've discovered Alright. Listen. We have to start with scam, bank run, fraud. I mean, Sam, bank free. I get that wrong sometimes.
§02Analyzing SBF's media tour: his angle, media coverage, and more
He was interviewed by Andrew Warsaw in the suit at Deal Book, who gave him softball after softball. Then the next day, he was on good morning, apparently. -- passive aggressive right now. A little bit. Yeah.
I'm talking a little chilly there. --
our friend and your -- Let's shop.
He's sticking the knife in. He's sticking the knife in, but JAKow's got a point. He's got a point. A
little bit.
A little bit.
Little bit. Anyway, The New York Times continues to embarrass themselves by handling sandbanking fraud with cake gloves. Wow. George Stefanopolis, my Greek brother, Stefanopolis, the Spartan came in and absolutely frickissade and filet Sam Bank of Freed on Good Morning America. Very important to note that Good Morning America, the segment was between holiday cocktails, and the cast of the white Lotus.
And Andrew Roshorkin was at the Dealbook Finance Conference.
But you know that that that stuff inopolis interview was 2 hours, but they reduced it down to 10 minutes. So there were probably a lot of sort of cordial conversation, banter, and then softball questions. And then he does stick the knife in and and does the frequency, but he cuts out all the other stuff so he just gets it down to that 10 minutes.
What Stephanopoulos did to him was extraordinary in that He said over and over again, in the FTX terms of service, you cannot touch the user accounts, but you, at Alameda, were taking them, and you were loaning them out. I don't know who is advising Sam Bankman Friedberg this point, but why he is talking so much. He was also on a 2 hour Twitter Spaces after all this. At this point, Sachs, what do you think is going on here in the mind of Sam Bankman Friedberg also the media, which seems to have a very variable way of dealing with this obvious fraud and crime.
Right. Okay. Well, you know, I can speculate about SPF. I think if there is a strategy here, it is this. He is basically copping to criminal negligence.
in order to avoid the more serious charges of fraud. And I think, again, if there's a strategy here, it is he saw himself being defined as Bernie made off 2.0 in the press. Mhmm. And if that image, which may well be true, cemented around him, then prosecutors would never stop. They would never accept a plea that basically gave him anything less than I made off like sentence, which would be, you know, decades in prison, maybe a life sentence.
So he is out there doing what lawyers would tell you never to do, which is basically incriminate your create more of a record. But he's doing it to change the public perception, maybe muddy up the public perception, get people thinking that, okay. He you know, this that he he's a mini. He did something wrong, but it wasn't deliberate. It wasn't fraudulent.
It was just basically carelessness or sloppiness if he succeeds in muddying the what waters enough, then maybe the prosecutors will give him a plea deal that allows him to have his life back at some point. I think that would be the crazy like a fox explanation of what's happening. Now there is, you know, an alternative explanation as well, which is I just think that These types of guys, you could call it, you know, a narcissistic Friedberg,
they
think they can talk the way out of anything. You know?
Because they have.
They have. Yes. They and
they've talked their way into getting 100 of
1,000,000
of dollars of investment, 1,000,000,000. billions -- Yeah.
--
in some cases. And so they just feel and they've been trained by employees, partners, investors, the press that they can talk their way out of Yeah. Well, I
think yeah. The average person is not really used to dealing with one of these personality types who is I mean, they clearly are smart and they articulate articulate and they know what to say and they're crafting their words. What they've learned through their life is that if they use the precise magic words with a person, they can pretty much, you know, convince them if anything, get them to do anything. And in particular, I would say investors tend to fall for this, not because investors are dumb. But because investors are so clear about what they're looking for and what they want, they're predictable.
Yeah. Like, we're, you know, VCs, especially, we're looking for the 100 x Optum or whatever. So it's easy for this type of personality to construct a story to essentially stroke the erogenous zones of a v see. Woah. Yeah.
And and and sort of trick them. And so there is probably a positive reinforcement loop that gets created in the minds of one of these people who and they start to think that they can basically talk their way out of any situation. So I think that would be part of what's going on here. And know, if you look at sort of the tactics that he's using to do this, you know, all of a sudden, he's trying to portray himself, you know, before this who's restraining himself as a smart guy in the room. Now all of a sudden is this babe in the woods impression where I didn't know.
It was my subordinate. wasn't really in control. That was somebody else. Right? Each individual decision, he says, look sensible to him.
It's just it all added up to something he didn't anticipate, like, really? You know, loaning yourself a
$1,000,000,000
of of basically the the company's money which was basically customer money. That seem reasonable to you. I don't know how you defend that individual decision, and there's many like that. But but this is sort of the narrative that he's trying to construct. And let me stop there.
But I think there's a lot more that can be said to dismantle the narrative he's trying to create. But I wanna
let you know what's your take on this and Freeburn.
Can I make a comparison to SPF and Trump through the lens of the media? So if you go back to 2016, you know, Donald Trump violated every single establishment bias that these left progressive journalist elites had. And so they basically just attacked, attacked, attacked, attacked. but then you went into the election and there was a very clear data point that said whatever you thought, was at was at best limited and you missed the tone of the country because 50 plus percent of the country held a very different view about this person. And instead of taking a step back and then the left media, the mainstream media, re underwriting, and learning and then saying, you know what, I got this wrong, they just double down.
And they said, no, it's still doesn't meet our priors. And so, we're just going to ring fence this problem and we're going to just try to destroy this issue. Because we want to control the narrative and by result, we want to control power. Now you look at SPF, it's the exact opposite. He went to the perfect elite private high school, then he went to 1 of the most prestigious elite private universities.
MIT. Is parents teach governance of all things at one of the most elite liberal institutions in America? Stanford. they are in the establishment of the progressive left. And what happened was he took customer funds and all of this money.
He made tens of 1,000,000 of dollars of political donations. He wrapped himself in this blanket of a progressive left cause called effective altruism and all of the mainstream media fell for it and embraced him as well as some politicians. because it met everything that they themselves also bought into. Yes. And now you have this cataclysmic event.
a multi decabillion dollar Friedberg bankruptcy, millions of customer accounts who are frozen, you know, tens of 1,000,000 to 100 of 1,000,000 to 1,000,000,000 of dollars lost and stolen from them? And they refused to re underwrite this kit. And the reason is because in order to do so it's like eating your own tail. And that's why they don't wanna do it. And so this is why you have the media basically allowing him to do an apology tour.
Now this is his second time at manipulating them. The first time he was able to manipulate them by basically being one of them. And now he's allowing them and their desire to basically protect themselves so that he can create some kind of a defense for himself. And I just think the whole thing is gross because it misses the entire mood of the nation. This is An enormous financial fraud that was perpetrated on tens of millions of people And there's no accountability because in order to do so, the media would effectively have to admit that they missed it and they got it wrong, and they refused to do it.
And I think like that is the really big problem that nobody is really speaking out about. It's like, well, if these folks are meant to be the last stop, to make sure that there's truth and honesty and transparency in society and you can't count on them and in fact they're just going to reflect their own narrative. What is one supposed to do to learn the truth?
in a way what you're saying, and then we'll go to Friedberg, is this fraud was encased in all the gilded facade that America hates right now.
It reflects the institutional rot of America. It reflects every single aspect of institutional rot that every non elite talks about all the time. But elites when they have those labels will refuse to give up.
And just to add to that, the the the thing that's missing the the I'd say one of the big issues with the institutional rot in our country is the lack accountability when somebody gets it wrong. We saw this with COVID. Right? The health establishment is saying that they want amnesty
--
Yeah. -- and Atlantic Magazine was willing to give it to him. So the point is that this this class of people think that when they get it wrong that they were the experts, but when they get wrong, there should be no accountability. And so, Jamath, to your point, the media and these institutions are not willing to re underwrite SBF when he's so clearly as a fraudster.
Friedberg, what do you think the of this theory, you had a large amount of donations to politicians. Obviously, you have coming from Stanford, MIT, etcetera. And then you have these investments, gifts slash advertising slash donations to ProPublic of Vox, this new publication Semaphore, the intercept that have all been uncovered now, did he do this paying off of all the elites you know, splashy cashy giving money to everybody because he knew he was doing a fraud and that this is evidence of this is a premeditated fraud or do you think this is a deranged individual who just was seeking status? I don't know
the the motivate. There's a video you can watch of this guy For some reason, FTX has left up all of their videos on YouTube from 3 years ago called quantitative trading 7a half 1000 cell wall of Bitcoin on Finance. It's a 17 a half minute YouTube video of SBF Trading arbitrage across markets. I think it provides probably the best, like, natural non scripted insight into this guy's behavior. that you could see, you know, because it's not like him being interviewed.
It's just him living in his world. Mhmm. And he's just you know, a mouse trying to get a piece of cheese. Like, he's, you know, he's like out there. He's, you know, scrambling around in the markets.
He's finding edges. He's finding advantages, and he's and he's clearly just taking advantage of them all day every day. That's who he is. Now you put a person like that in an unregulated environment, and there was this clustering demand for an unregulated environment because
of a
lot of what you guys are saying, which is people have this disdain for the elitism and the and the institutional rot and all these things. So Bitcoin emerged as a solution out of 2008 to the, you know, the the what felt like institutional rot that that governments have a key role in. But when you have no regulation and you have no trusted central authority involved, mice that are trying to find cheese will rule the day. And I think that's what happened here. If it wasn't this guy, it was someone else.
It was gonna be someone else. then all of a sudden, everyone's clamoring and saying, hey. We needed the government to protect us. No one protected us. Someone's gotta save us.
We're the regulators. We're people that are supposed to keep an eye on this stuff. When the whole premise of so much of what was being sold was nonregulatory regimes, was openness, was peer to peer trust protocols, And it turns out that in that sort of an environment, the mouse that is hungriest for the cheese will get the cheese. And that's exactly what happened. And I don't I don't know how much of it was -- I
don't agree with this.
-- him saying I'm creating intentional fraud, which certainly seems to be the case versus him saying I'm gonna pay these guys. I don't know how much they it was even that intelligent. But the guy was clearly, like, trying to get a piece of cheese.
Okay. So this cheese eater, this rat, is a League of Legends, you know, expert playing on 8 different monitors at a time, the cryptocurrency game while hopped up on speed. I'm not saying that to be cruel. I'm saying that because they admitted it. They talked about it in their staff meetings, instructing their traders and team members of how to take speed?
He admitted to it in the interview this week. He said that it was all legal prescription drugs, but they were KKM. Yes.
Yes. And literally, in the same videos you're referencing, people see speed patches or I I don't even understand this, but there are patches you can put on your body to deliver speed to you at some, you know, dose or whatever. Sachs, you buy this theory? No. Care that this isn't about the elite side of it.
It's about the non elite, the anarchy side of it. No. And this cheese eating rat was just wanting to eat more cheese.
I don't buy this narrative because I see too much
design intentionality behind what happened. So in other words, it wasn't just a series of individual decisions that didn't add up. Many of those individual decisions by themselves were totally unjustifiable. And moreover, there were too many there's too much evidence of sophisticated behavior here. Again, he overnight went from portraying self as a smart guy in the room to the to the babe in the woods.
And so, for example, when you look at the construction of all these entities and the corporate org chart, you know, of all the related entities. It's a very sophisticated attempt to obscure and construct certain, you know, protections. When you look at the way that Alameda was exempted from the normal margin requirements in FTX. There was the so called back doors. There was intentionality there.
There was intentionality in terms of who was hired to staff these organizations. Again, they hired
-- --
wasn't hired. No board. No CFO. Yeah. Exactly.
And and the guy
the guy who was in charge of compliance, what, like Tremont talked about in previous episode, was the guy who was involved in the ultimate bet poker cheating scandal, you know, not not
exactly -- -- super mode.
Yeah. Exactly.
Right.
Or look at this goofy goofball Caroline Ellison who was put in charge of Alameda. Right?
His girlfriend.
It's it's being done for a reason. Right? He's setting it up in a certain way. And, you know, the one time I interacted with him at this tech conference, He was sitting there holding court and he had all of his minions around him who were following his orders. This was a guy who was controlling his business.
He was making the decisions at, I think, a task level, and he knew exactly what was going on here. So look, I just don't buy I do not buy this idea that that he was like a blind mouse whose to stimulus response you know, in the moment.
I don't think that -- That wasn't that wasn't my point, Saks. My point was whether it was him or it was gonna be someone else. it was bound to happen.
No. I don't I don't
agree with other criminal would have. The idea
that we wanna have completely free unregulated Bahamian based trading, you know, environments that we can supposedly trust because someone puts on a good face when there is no real regulatory body and regulatory authority, overseeing it, at some point, it was gonna happen.
Well, no. Hold on. It it is a look. Coinbase is a fully regulated
institution in us. They're not set up in
the Bahamas, and they're not unregulated. He set up, and he had no oversight. He had no board. There was no regulatory regime. There was nothing --
But how was he able to okay. So first of all, look. I don't think this had to happen. I think that again, I think that excuses too much because it implies that if it wasn't SPF, it'd be somebody else. I actually think that this was a highly concerted effort.
Listen, he courted regulators He donated to politicians. He courted the media and donated to them.
Yeah. He
was really
good at
it. Yeah. He was really good at it. He was unusually it.
No. And I totally agree on that. Yeah. Super smart, super connected, really thoughtful design on how he committed this on
how he did this.
--
think an insider could have pulled off something at the scale. I think -- I agree.
See, this is where Shamoff you're exactly right. He needed to be an insider. -- here is he knew the playbook, and he admitted you pointed this out with the chats that were released where he said he he.
He he.
Yeah. Look. I mean, like, just the he he chat. Look how, like, convoluted and intertwined. All these people are like Genslers intertwined with the parents.
Yeah. Parents apparently bundled a bunch of money to Elizabeth Warren. You know, he was dating the CEO of the business that he owned 90% in. There are all these other random shell companies that he owned a
100%
of where they were lending back and forth 100 of 1,000,000 to 1,000,000,000 of dollars. Yeah. To David's point, that is a sophisticated con. that you have to architect. And the way that he was able to get away with it is that not a single reporter or regulator Thought to dig in.
And the reason I think is
because he said all of the
right things that wanted them to embrace him. And the reason is, he admitted it.
This is a dumb game that we woke Westerners have
to play.
You say the right nonetheless, and then everyone thinks we're a good person.
exactly imagine pull that quote up on what he said because it's actually a good quote. --
what I just say.
Is that exactly what I said? Yes.
He said it's it's the it's the game that we woke westerns have to play. We would say the should bless everyone likes us.
He actually said the most uncomfortable thing out loud, which is, look, by having gone to Crystal Springs High School, by having professor, my parents that went to Stanford, by having gone to MIT, I can pull this off. That's that's what he said because he can go with those things because I'm a I'm a champion of effective altruism that I can justify any of these decisions how amoral or immoral that they be because I'm trying to help You know, my brother stand up a multimillion dollar pandemic response business. I'm trying to do this. I'm trying to do that. And all of these regulators and all of these reporters said, okay, you get the hall pass.
Now imagine if you replaced him with some random kid in some developing country or even from the United States who did went to public high school who went to some random state school, do you think that they could have pulled any of this stuff off?
No. You need the patina of the privilege class.
The New York Times
--
That's what he had, the patina of the privilege class.
Even after this fraud, The New York Times wrote more of a puff piece on him, then the hit piece they wrote on Brian Armstrong last year when Brian Armstrong wouldn't tow the line on allowing politics at work. Remember that?
Yeah. Unbelievable. Yeah.
So the big I think what Chamath is kinda saying here is that the big enabler here is not crypto per se. It's all these institutional biases and elite biases that he was able to play into partly because he was a big insider. I mean, in a way, he monetized his parents' life work.
§03FTX culpability: media, investors, regulators
The problem that I think this allows us to put a fine point on is the following. You know, in society, we've confused a lot of people to think that the opposite of liberal is conservative or republican. And I think that's the cycle that drives the mind virus inside the mainstream media. The problem is the opposite of liberal is illiberal. Okay?
And what illiberal means is be narrow minded and unenlightened. It means to be puritanical, it means to be fundamentalist, And this is really what it allows us to see now. We have now had 6 years of data. Case after case after case. where if you are woke, if you are a social justice warrior, if you have the right credentials that justify your upbringing, If you have institutional bona fides that come from your parents, you get to create the narrative and you get a hall pass.
And everybody else basically is at the subject and the mercy of the mainstream media. And so if you don't kiss the ring and bow down to them, they will try to destroy you or run you out of town. But if you are one of them, they will give you a hall pass. And when it's time for them to change their mind in order to tell the truth, they won't do it. And so these types of griffs will continue as Friedberg said because there is no check-in balance without a healthy independent media.
There is no way for all of us to actually know what's really going on. Guys, some person in the media could have asked the question and dug in deeper around the connections between Alameda and FTX for the last 24 months.
At no point intelligence at a venture firm?
At no point, could any person have asked these questions and found ex employees and said, you know, are there any unseemly connections here between FDX and Alameda? There was no disgruntled employee. I mean, every company has disgruntled employee whistle blowers. But here where there is 1,000,000,000 of dollars being made by tens of people, not a single person who felt on the outs said anything?
He was also giving 1,000,000 of dollars
to press outlets. Hold on. Don't Because the questions weren't asked, and then this kid paid hush money to the mainstream media.
Let me ask you a question of you guys. Do you think that it's the media's responsibility in this context, or do you think that there should have been a regulatory authority that had oversight of this business like there is for every bank and every trading operation in the United States. And every one of those businesses has a compliance officer and has regulators up the wazoo, making sure that customers are kept safe and protected. Or do we think that that should should offshore vehicles be allowed like this? that allow people to operate.
It's a reasonable question, but there is a chicken and egg question. We were all standing around holding our hands while the CFTC and the SEC were fighting. That's not something that consumers can be expected to adjudicate. So yes, we should have legislation that clearly defines all of this. But there were enough parameters that created regulatory frameworks where a bunch of good actors did operate in them and are continuing to do so like Coinbase.
So I don't think this is a regulatory issue. I think that if you believe there are people who are supposed to forensically examine things and get to the bottom of things and ask hard questions. Those people did none of that here. And what's even more worrisome is what they're showing is now with an massive amount of data that shows that you could ask hard questions. They don't care to because it makes them look bad.
I disagree with this too much. I think regulators failed here because they have been reactive to crypto. They have not been proactive, and they have not been clear with the crypto community that what they were doing was illegal, and they should have put the regulations in quicker and they're playing catch up, but all three groups fell. The media failed. The regulators failed.
and VCs failed, capital allocators failed, I apparently, to do diligence here and install proper governance. You cannot put a company like this, you know, in business with
1,800,000,000
of dollars and have no board of directors -- No.
No. I agree with you.
--
or he lied to them.
My point is that while regulators are are basically fighting a territorial turf war
--
Yeah. the media could have still done their job. They chose not to.
Guys, it was worse than that because not only it's not just a case where the SEC failed to exercise any oversight of him or dig into any of these questions. He was in the room with them crafting the next set of regulations. He was working on the regulations that you're talking about that are supposedly needed.
--
breaking them.
They let the fox in the hen house. Yeah. He was gonna crap. a a new type of regulatory license for these types of exchanges with the result that he was gonna get 1 as some of his competitors weren't. this is one of the things that triggered cz to basically, you know, do what he did, which is basically, that SPF was trying to get Binance and and competitors like that band while SPF would be one of the sole people to get the license.
By the way, with regulators. Yeah. Jason, you just said something derogatory towards easy. He rug pulled them. Did he do that, or did he actually expose the fraud?
That's what I mean by rug pulling. Yeah. He he
was partners with him.
That's not
what rug pull means, Jason.
Okay. Well, he was partners with him, and then he realized he was weak and that he was doing some stuff that was shady and decided he would eliminate a partner who was creating regulation as Saks said. Whatever you wanna say. He knife
--
All he did was indicate desire to liquidate his position in a token that -- Yeah. -- was supposedly perfectly liquid.
And that's
basically that caused the everything to unravel.
But these were partners. Right? I mean, they were these were deep business partners. Well, and they were partners. They were collaborating on these tokens together.
So they weren't -- They weren't -- No.
They were they were sort of chasing like part of the big loan that that initiated all of this stuff like a year and a half ago was to buy f t x off the cap table. So, you know, this all I'm saying is like, you used words and you're framing of a guy, you know, who's built a business. is, like, he is this nefarious bad actor.
Finance was But David's first investor.
Hold on a second. But but but David's right. all the guy did as far as we can tell right now is tweet I'm selling this token because I don't believe in the capital structure of this entity. And he got those tokens by being bought out of the cap table.
I know. He was partners with them. So if if you if you don't like Rugby pulled about vaccinated? These were business partners.
They're not partners.
They're still don't understand, Casey. I, of course,
I understand they he was the 1st investor.
So to do this, what he thought about No.
No. No. They can't come on. -- out a part of the consideration.
Hold on. Part of the consideration were these tokens, these FTT
tokens. Yeah.
Jason, when you when Uber went public, Yes. And you got distributed stock? Yep. Did you distribute and sell Uber at any point?
Previous to that, I had I sold some to Moscow. No.
No. No. No.
No. I'm asking you a question. When Uber went public and you got distributed from Uber -- I did.
--
your stock. So you've never sold a single share of Uber since it's public.
No. I sold it before in private
markets. Okay.
Yeah. But I'm sorry, but that doesn't make Jason a a partner of Uber. You're just a stockholder.
Yeah. This is slightly different, I think. But okay. Fine. You guys if you guys wanna consider no.
He was the 1st investor in the company. They were business partners.
--
situation, but their status at the time that Suzie tweeted was that they were competitors.
Okay. Fine. I mean, they became competitors. I agree.
And
by the way, to Tamas's point about this rug pulling language, I think we're getting kind of done a rabbit hole here.
But -- -- weets here.
But
--
What what cz cz did perform form a service in this sense. Okay? SPF claims that 4,000,000,000 more was about to come in. I personally believe that sounds like bullshit to me, but If it is true, that would have been a bad thing. The more money that came in -- Yeah.
--
to that operation, SPF proved that he was a very pork Stobian of customer funds.
For sure. For sure.
They're just siphoned offers on use.
Yeah. The longer the sort of -- I
I'm just highlighting the language that you use is sort of, like, again, part of that establishment elite narrative. And I'm just questioning, you should maybe Steelman. Take a second to just Steelman
--
Yeah. -- a more dispassionate view, which is Here's a counter party. Okay. Yeah. Who when he left the cap table was given half cash, half tokens.
Okay? And he decided to sell his tokens.
Yeah. And tweet it publicly and cause a run on the bank. So It was not a run on the bank.
There was no bank. Where's the bank? This run on the bank language, okay, is something this was in the Semaphore coverage. Okay?
He did it publicly. That's my point. So I'll steal management
for you.
No. No. No. We -- These tokens are worthless. I need to liquidate them as fast as possible.
But why would you do that publicly Why why would you do it private? You're about
to move the market.
He wanted to move the market to 0. Yes. He wanted to kill
-- He's letting people know why.
But he wanted to kill his competitor as Shamoff was just saying. Ceezy wanted to kill his competitor.
He's always trying to kill him. --
say he was trying to
do that.
We we got we got a backup
here because I think we we we've done a lot of, like, 30 thousand foot, like, lessons and, like, takeaways from this whole thing, but we haven't really established what it is that SBF did wrong. So I think we need to sort of take a second to un muddy the waters Okay? k. And part of that, I think we should start with this idea of a run on the bank because the the the press who've been writing puff pieces about SPF I'd say mainly Semaphore, which he was a big donor to. They've been trying to frame it as a run on the bank, and then that implies that it's not really his fault.
It could happen to anybody, lots banks have had this problem. Okay? First of all, they're not a bank. Banks actually have the legal right under certain conditions to take customer deposits and loan them out. Okay?
Yes. They did not. Their terms of use did not allow that as Stephanopoulos pointed out. SPF's answer to that. Well, as well, we had this like margin account program There are other provisions in other terms of use.
But most of the customers who lost money, the vast majority, did not opt into that program. They never agreed to that. So That's that's point number 1. Point number 2 is, I think we need to to look at this language of margin account. Okay?
SBS explanation of how customer money was siphoned off for his own personal use, i. e. to Alameda, is that Alameda had a margin account. So I think we could perform a service here by explaining why it wasn't a margin account. And, you know, Shamaz under and you guys understand really well.
The way that a margin account works is the following. Okay? because I think some of us have them set up with Investment Banks. you go to an investment bank, say Morgan Stanley, and you over you post collateral. You actually over collateralize.
So for example, you might take a $100,000,000 of stock posted at the investment bank, and then they will let you loan a certain percentage, nowhere near a
100%,
maybe 50% will divide you.
If you have a very, very liquid security You may get 50% coverage -- Right.
--
which means if you posted a $100,000,000, you could get a $50,000,000 loan.
If you have a 100,000,000 in Amazon stock, you're some Amazon VP, you can get 50,000,000 loans.
And it's and if it's a private asset, it's anywhere as high as
30%, 35%,
but typically it's about 25%. My expectation is in a liquid token like this. would have basically gotten 5 or 10 percent coverage ratio at the best of it. And then what happens is you have these maintenance values. So if all of a sudden, the value of these entities multiplied by that percentage that you're allowed to loan falls below, you have to post money.
That's how a margin account works. it's just there is no free lunch in that.
Yes. Exactly. There's Let
me just say say quite simply very simply what I it appears this guy did. He took customer deposits in US dollars. He then converted those dollars into some other asset. and he had a mark on that asset, let's call it a dollar, a token. And then those dollars were moved to somewhere else.
No. This is simple
than that.
Someone transferred in some other token. Listen. But that's it for
the but
for what we have -- --
finish the yeah. We need to finish the explainer around the margin account. Okay? Because what SBF did is this. He took customer deposits, gave them to himself by decelerated.
In in no. He gave he took customer deposits in US dollars. They were wired in. Correct. He took those dollars out and he put a fake curtain in and he called that.
That's right. He
so And therefore, he said he therefore, he said the balance sheet is good. But the value of that token it turns out isn't a dollar. It's 10¢.
That's right. It was his it was his sort of it was sort of his made up token that
--
FTT just the name of the token.
--
that he tightly controlled the training of and and artificial popped at the price.
And
by the way, it wasn't just FTT. Yeah.
Yeah. But but but here's the thing. It wasn't just the fact that his collateral was no good. It was also the fact that and this is from the bankruptcy filing by the the new the Enron trustee guy. He specifically said that Alameda, unlike every other margin account on the platform, had the auto liquidation provisions turned off.
So wait, we have to finish the thought around how margin works. So like Shamas said, you over post collateral. And if the value of that collateral goes down, or the the the the the position your trading account, the value of that goes down, you either have to post more collateral or they will actually liquidate your collateral to pay off the loan. So Morgan Stanley will never lose money on a margin account. Never.
I'm like, The whole point is because they don't make money on it, they loan you the money at, like, you know, a few percents, like, very cheap
--
Yeah. -- loan. LIBOR plus. So what
I -- Exactly. The the the that is not a risk account to them. And -- So
in the in the example, let's use an example, Bill and Joe. In the in the case of the VP at Amazon, it's $100,000,000 in Amazon that have a $50,000,000 loan. If Amazon loses half its value, then that triggers the automatic selling of Amazon shares to get it back down to 50% coverage. So now you sell 25,000,000 of Amazon shares if the full 50,000,000 was pulled down. to get back down to 25 to 50% leverage.
Yes. And they don't wait until, like, Amazon's stock is at the exact level where now the cloud equals a 100% of the loan. They will keep that 50% loan to value. Yes. And they will liquidate you, you know and and by the way, you can lose your entire amount.
Right? So
--
Yes. you know, this is why I'm trading a margin that's so risky is that -- You
can get wiped out completely.
--
wiped out very, very quickly with a small move down.
Because they are the custodians of that Amazon stock. They are holding it for you now, and they have the right to sell it to cover your margin. You're saying that governor, that basic tenant, That basic safety control was turned off by Alameda, and it's even more sinister Alameda controlled, like, 90 or 95% of these FTT tokens, and was owned by Sam Bankman Fraud. So he owned that company. Then he claims he had no operating.
The the position.
What should've happened is with that collateral is that -- Yeah.
--
as the value of their position was going down and or as the value of the collateral was going down, It should have been liquidated to pay off the margin loan. And that did not happen, and the reason it didn't happen is that Alameda got a special exception on the platform to turn off auto liquidation Therefore, it was never a margin account. If even if it was a margin account. Okay? And and FTX somehow misadministered the margin account.
it should never have taken other customers' deposits and used them to pay back that money. What should have happened is if f t x was gonna lose money, on a margin account, that would hit the FTX corporate treasury. Okay? And when the FTX corporate treasury ran out, The company follows bankruptcy then. And then all the other customers hold on.
Their account is still there. Their money is there. In segregated accounts, And in bankruptcy, they get their money back. The idea that a margin account could ever cause another customer to lose money That like, whatever that is, that's not a march
right now. There's a great article. There's a great article. This one was a journalist that did his job properly. His name is David Zmores, He wrote an article in CoinDesk that summed up for anybody that's interested, all of the actual fraud.
and all of the crimes that were committed in excruciating detail. And what's so sad about all these interviews in this press tour is If anybody would just read this article, you can construct the right questions to ask this guy just based on this one article. But The the point I wanted to make is that one of the most interesting insights was these guys had lost an enormous amount of money already in calendar year 21. And so this is what's so crazy, Jason, about, you know, you using language like rug pulling and, like, you know, nobody back's actually trying to, like, be clear. Like, you you guys are giving this guy a hall pass I'm not getting involved with this.
Any industrious reporter could have found an employee who said, wait a minute. We just blew a $3,000,000,000 hold in our balance sheet in calendar year 21. 20. And now we're sitting here at the end of
20 2.
It's Shamrockets.
There's nobody visible suggesting.
Hold on. I need to respond. I am not giving him a pass. And for you to blame journalists who are reflecting the crime and not putting any light on VCs and the capital allocators who made this investment and who did no diligence ended up with governance in it is the height of arrogance, Shamah. This is not the press's fault.
They're not doing that either.
This is the VC's fault.
This is the capital allocators fault. You're blaming the people who are telling the story After the crime story no. They're they're
covering they're covering the story up.
--
handle the truth.
Jason, they're covering the story up.
You're not telling me. Can I get in here? Can I get in here? Alright. Listen.
Jason, I will defend you against Shamal saying that somehow you're, you know, that you're letting Espial off the hook. I know you don't wanna let Espial off the hook. However, you are letting the press off the hook. And the reason why hold on a second. The reason why you're using this inaccurate language like rug pulling and run on the bank when there was no run and there was no bank is because you've been infected by this language that the media has inserted into the discourse.
The media listen. And hold on a second. Investors may have got it wrong last year. Investors may have got it wrong when they did that last round, but I think investors now understand what's happening. But the media is still covering for SPF by misexplaining what happened.
Okay. Give me a percentage, Zach, of who's to blame here. VCs who invested and didn't set up any governance, regulators who did not set rules around crypto and then 3 the media. What percentage out of a 100% is the investors, the regulators, and the press. Go.
Three numbers. I
would say that before the frog got exposed, 1 third, 1 third, 1 third.
1
third each before the frog got exposed, but they were all jointly and severally liable. But After the fraud's been exposed, no investor is still defending SPF. But I I I think that the investors who were swindled by him, they feel bad about it.
So 30, 30, 30 is absurd. The press had no way to know the fraud was going on just like the VCs would put the money in. did it -- Okay.
--
about. Jason, are you stupid? Like, wasn't wasn't was not your stupid Was it the journalist that exposed to Frodo Theranos? He's the guy that went and did all the work. John Kerry -- -- blaming the price.
Hold on a second. John Kerry went and found this thing When no when everybody else is like, this is perfect. It meets all of our priors. Let me finish, please. It meets all of our priors.
This is where you want to kill
us on.
And so John Kerry was like, this doesn't pass the smell test to me. Let me go do some work, and he pulled one little string. And over the course of 18 months, he exposed the whole bloody thing. So hold on second. So what is incredible to me is that it was possible to expose this thing before.
Nobody did. I agree with David. It's about equal responsibility before. But afterwards, the bulk of the responsibilities now sits with regulators to clean it up and journalists to tell the truth.
Okay. And now may I respond to that since you called me stupid? You are delusional. Number 1, every one of those investors in Theranos could taking a fucking blood test at two different places like Jean Louis Gasier did and write a blog post and prove that Theranos didn't work. and they withheld disbelief.
Investors putting in a $100,000,000, including Rupert Murdoch didn't even take a fucking blood test tell one of their diligence teams to do it. The same thing happened here with the investors in FTX. They did 0 diligence. They set up 0 governance. This was a failure of the investors and the governance for 99% of the problem.
And then regulators should have caught it, and the regulators, in fact, did catch there, and also you're completely wrong, Chamath again. The journalists come in after the fraud is happening The investors and governance is responsible for stopping these things. FTX was a failure of governance and investors, and so was Theranos. The end. You're completely wrong.
The question is post post exposure.
Why are you guys obsessed with post? How about avoiding these things? You guys are blaming journalists.
--
ongoing because your story is ongoing.
--
for something that is capital Calacanis responsibility. It is our responsibility to due diligence It is our responsibility to create a board of directors that checks on Elizabeth Holmes and Sam Bennett.
I didn't disagree. I did I try to agree
with that? Just calling me stupid. You would just call me stupid for pointing out something that you refused to accept.
What are you talking about? I'm the founder
of the capital allocators craters.
--
older brother.
I just know. You can
you can make me -- -- whatever job you want. You guys are giving a pass to the investors and to government. -- press
again. Come on. -- doing Fredo.
I'm not doing Fredo. You guys are being absurd. This is why people say that we're delusional in this contest.
Don't call him dumb.
The reason why we're delusional
is that we won't take acceptance
of his issues. Just call Wanda. Like, the guy, you can't call dumb.
Totally. He loses him.
He goes berserk.
No. I'm not going
to pretend you guys
have a blind spot. Help him to the counterparty responsible.
He's
like, don't don't
call me. Don't don't call me. Don't don't call me. Don't don't call me. Don't don't call me.
Don't don't call me. Don't don't call me.
Don't don't call me. Don't call me.
Don't don't call me. I I'm not gonna not gonna defend any single one of those investors. I mean, I I think that they did a horrible job there too. It's a great episode. But the reality is
-- --
just went up. But the but the reality is I think that if you think that you can if you but it's it's your decision to to defend the mainstream media. I think that that's fine.
I'm not sending them. No.
You are. You said they have no responsibility.
I'm blaming the VCs. It's different. The culpability is with the investor class that has not had proper governance
in relations. Jason, how many articles have been written excoriating them? Yes. I'm where
Oh, wow. Sounds like fools. Yeah. I mean, the show me show me show me the Washington Employees Capital. No.
Show me the Washington Post New
York
times that's like dishing in to that malfeasance or that lack of oversight and holding them accountable. In a way that you feel exposes this problem to create change?
Well, if we look at Theranos, those people who invested, including Draper,
And Just show me the examples.
Rupert Murdoch, they they really went after them. For sure. Yeah. What about here? Wall Street Journal, one day ago, Sequoia Capital apologizes to its fund investors for FTX loss.
Venture Capital Firm tells fund is that -- -- hard hitting. It will improve due diligence on future investments after -- -- really got them. They really got them.
Let me let me let me read you.
That's a cover story in Wall Street Journal.
I'm gonna I'm gonna read you I'm gonna read you a sentence from the New York Times coverage of s b f. And Sam -- Oh, I'm not saying anything now.
--
for a second, Sam banquet Freed is neither a visionary nor a criminal your mind, he is a human who made the same poor choice that generations of money managers have made before him. Are you effing kidding me? No. That wasn't your time's coverage.
Yes.
You are.
They also said
--
I am not -- -- reaching them
as you are.
I just told them this
crap in a suit.
And then Semaphore who was on the take received
$1,000,000
of money. He said he was a run on the bank. Okay.
How much do
they Now
where is their apology? Hold on a second. Where is their apology? Sequoia has apologized. Where is their apology?
Oh, it has to come. I'm not defending the press. Yes. You are. You are.
You are. I am not. I am literally telling you that the New York Times has been a seasonally weak and throwing
--
The press is always demitting and apology from everybody else.
Hold on
a second.
press so incompetent
--
The Twitter Spaces yesterday did a better job of trying to ask questions and getting to the truth. And a single journalist has done. of the collective body of all of journals?
Absolutely. Totally. Randos on Twitter Spaces did a better job than Sorko.
Let me tell you why the why no one trusted press, Jason. First of all, they have an agenda. I'm
in agreement.
When they make a mistake, they never admit it. When's the last time they did an apology or attraction. When's the last time they did what Sequoia did?
I don't know. And they need to apologize about your time, Summer. I am in agreement with you on that. But I think we have to first say, and this is where you guys have a chance on is what is the responsibility of capital allocators and governance and regulators. I think it's 1, 2, 3.
Our industry is responsible for setting up proper governance. The regulators are responsible for making sure that -- Right. -- scientific claims are backed up, and then and then press is a distant third.
You know who I think is responsible?
1, 2,
and 3. And then we can talk about 4, 5, and
6.
Okay. 4, 5, and 6. Capital allocators, regulators, the press a distant
6.
I agree. Let's go on to China. God. It's so spicy today. You know?
God. It's so hot.
I mean, I do think I do think when we attack the mainstream media, Jason feels a little twin tinge of, like, insecurity and illegitimacy because he were a journalist. I my personal perception is I think that's bullshit. No. have I think that you have a an incredibly romantic view of the craft as you practiced it back then, which I think is like full of integrity.
Yes. I do. That's true.
I I think that you you don't adequately realize how massively the industry has changed in the last 20 years since you've
covered that. I realize it more than you do? I fully realize that the media has absolutely become biased.
Are they -- Are they correct?
--
have lost in some cases, yes. I mean, if you're taking money -- Are they from SPF and then giving him they are corrupt if they're taking money from SPF and then giving him kiglove coverage. Absolutely. That is the definition of corruption in my mind.
What is -- What is it called when you don't take money necessarily like the New York Times and still treat them with kid gloves? What is that?
It is extreme bias. and the New York Times became -- Why do
you think the bias why do you think that bias exists?
They were always left leaning, but I I can tell you why. they when Trump came in, a generation of new journalists became activist journalists, they didn't wanna tell stories and take it straight down the middle and let the facts tell the story and let the audience make their own decision, they felt that existential risk when Trump came into office, they got Trump's arrangement syndrome. They picked a side like MSNBC and Fox did, and the business model became for the New York Times, pick a side and get the subscribers. It was a deliberate cynical choice on the New York Times part to go full MSNBC for full Fox, the 2 extremes in mainstream media in order to get the subs, and they literally rallied the troops there to do anti tech, anti trump coverage, and they became activists. And when journalists become activists, they are no longer journalists, they're activists or commentators.
And that's the problem. It's being presented as journalism when, in fact, it's activism.
So you're you're also just shout out to Matt Taiby who just did a month debate.
That's well said by Britney.
Yeah. On this very topic, and he has a great great sub stack, basically saying what you're saying, Jason. And the the the best quote is the story is no longer the boss. Instead, we saw narrative. He's a lifelong journalist whose father was a lifelong journalist, and he understands the way the business has changed.
And it's like what you're saying.
And and this is why independent media, whether it's sub stacks, whether it's call in shows, whether it's all in podcasts or other podcasts, Joe Rog and Sam Harris, whoever it is, independent voices are now what consumers are seeking out because they can sense the bias. They know Rachel Maddow and Tucker have an axe to grind, and they're left and right.
They didn't expect these New York
Times Washington Post And Wall Street Journal to you know, they they knew they were leaning. They didn't expect them to pick a side.
Do you think we should cancel If folks Do you think folks are better off keeping their New York Times subscription or replacing that New York Times subscription with a basket of substacks?
Yeah. You answered your own question. It's the latter. I I think you're on your own as a consumer now. You're gonna have to and I think this podcast and the Nuance we have, shout out to Friedberg for Nuance.
What we've done on this podcast is
--
What's that funny sex? -- to explain to people
--
Freightberg's not the only one with Nuance. Jake House.
Nobody would describe David Sachs with the word he wants.
--
the nuance department on this podcast. What am I?
It's a 100%. He is. But you wouldn't know that because you'd leave when signed
the truth department. Okay. Sometimes neurons bombs.
Alright.
I'm the truth department.
The point is, consumers need Consumers need to become extremely literate, and they have to do their own search for truth in today's age. They don't they shouldn't trust New York Times. They shouldn't trust us. They should trust themselves. They shouldn't trust necessarily the CDC or, you know, the World Health Organization.
They should trust themselves and come up with their own process for figuring out the truth in the middle of this mess.
By the way, this is a good reflection on what's happened with the rest of media with respect to the creator class. where right. It used to be the movie studios and, you know, a handful of kind of aggregated creators that made all of the content. The the record labels And now, you know, independent artists, independent producers, independent creators, and now independent journalists are gonna become the bulk of volume that's gonna be consumed just a different consumption model. But we've already seen
it happen in music.
We saw
it happen with movies, and we've seen this disruption happen across all of these other media classes. journalism and what we call the press is very likely gonna be kind of that next layer of disruption.
I would trust having a conversation with you about science topics over reading a science article
-- 100%. --
you know, in the New York Times Or Wall Street Journal, if I'm being honest. I would much -- 100%. prefer to talk to you about it. And if it was markets, I'd rather talk to Shamont. And if it was SaaS, I would talk to SaaS or operating a company.
Speaking of operating a company
--
Go to politics.
We'll we'll see. We'll see. But I think that I don't
it's about having unique insight insight. Right? Like, that wasn't the case. And what's interesting is that the people who are the professionals that have the knowledge and the touch points are also becoming journalists in the sense that they're also becoming speakers of their truth. Right?
And and I think Twitter is a good enabling platform for this. We see it on YouTube where, like, scientists are putting out their own videos or market actors like people that are traders in the market go out and they put out their own videos. and they put out their own podcast. And I think we're probably a good reflection of that -- Yeah. -- in the sense that, like, we are the actors in the market, and that we're not just the independent observer that has kind of a surface level view, we have the depth to be able to talk about the things that we choose to talk about.
And I think that's where consumers find value and will continue to find value in terms of who the journalist or speaker is that they're gonna start to trust for their information. I had to -- Yeah.
I saw I saw that interview you did with newcomer.
Oh, yeah. Yeah.
I saw that that coverage. I mean -- Yeah.
--
he he speaks a lot about the the phenomenon of going direct. And, of course, he's against it. Now he interprets going to direct as an attempt by newsmakers to avoid answering tough questions or take tough questions. I think it's ridiculous because, for example, I go on CNBC all the time. I go on Emily Ching and bloomer all the time.
I submit to, like, really tough questions. I actually like those sort of sparring sessions.
Yeah. I did hard talk this week. Have you ever done that?
Yeah. Exactly. So so that that's not going on here, I think what's going on is we have expertise. We wanna communicate them and we do feel like the media has become a very unreliable narrator. There is too much bias and sloppiness.
Not all of it is agenda. Some of it is just pure sloppiness, and there's no reason why we shouldn't go direct. and people wanna hear from us. Their audience wants to hear from us.
Same for look look look at Draymond. Look at Draymond
in the success he's had with his pies. I mean, no basketball player has ever gone direct. and created content like Draymond's created, and it's totally changed the game. And he was so clear. He's like, we are.
I am the media now.
J J J Reddick, you know, old man in the
3.
Amazing -- Yep. -- amazing podcast. I was gonna tell you guys a story, so I was in the Middle East last week or this week. Sorry. And I had this crazy experience where I was trying to understand what was going on in China.
§04Challenging media coverage of other countries, China's current situation, Xi Jinping's standing
And so I started on CNN. And the whole thing was the propaganda machine around a democratic revolt, pushing for democracy and trying to depose g. Then I moved to Al Arabia, so one channel up I went from channel 10 to channel 11. And instead what they were actually doing was interviewing people on the ground. And what they were talking about was literally how these PCR tests have become far too burdensome.
and they just wanted it to end and more reasonable restrictions to get in and out of quarantine. Then I went from there to BBC. And in BBC they had a China scholar who was talking about how for decades actually the Communist Party supports local level protests and demonstrations because they've realized that it is a part of their political system to make sure that people feel like they have a say. And I was like, taking a step back and I'm like, if you listen to the US narrative and even Jason like in our group chat, people fermenting for like revolution and this is TianMN 2.0, And I'm like, well, I'm reading 2 other channels that tell us a completely different set of things and I just thought, man, people just really fit the data. Such a point to fit their bias.
Yeah. When we are projecting, we want to see a revolution in China. The people in China want you to have their lives back. Well, I would love to see more democracy in the world. Yes.
Guilty has charged. I would like to see people be more free in the world. Dictator?
I think most people just wanna improve their condition, and I don't think people are as tied up on the philosophy of the government as they are about improving their condition. And as long as their condition is improving, they're willing to put up with any form of government. And history shows that.
by the way, the conditions in China have improved better than everybody's
in the lives. It's better than anyone at 500,000,000
people out of abject poverty. And that's the great success of engagement. Isolationism would not have created that amazing outcome.
500
main people going out of pocket.
You're referring to clustering article in a second. You're saying?
--
factories is what I'm referring to.
Oh, Okay. Fine.
If if
they if they wanna build something over there, I guess, that's better than us throwing open our markets and giving China MFN status to destroy American manufacturing. and build up their economies so they can become a peer competitor to the United States.
Yeah. I mean, this is the balance of engagement. Is that if you engage too much, you give everything up.
You know? Sex. Which of the current Republican agenda do you disagree with most strongly? Just as an aside.
Well, most Republicans are in favor of our Ukraine policy. This sort of unlimited appropriation of weapons an aid to them.
Don't you disagree with immigration policy of Republicans and Democrats?
Well, I I have a more nuanced position on immigration, which is I think we need to have a border And it can't be just like an open border, which is the day factor policy we have now. But at the same time, I do think that we should have h one b visas and we wanna Jamasa, we wanna be an all star team for the world. We wanna have the best people wanna come here. So there's a balance. It's a balance.
And then, you know, look, I think that I was happy to see the marriage equality bill finally passed the Senate. Yes. They did get about a dozen
-- -- 12 Republicans voted for
him. That's great. So that's great.
Yeah. But
that's not the majority, unfortunately. You know, look, on on what I would categorize as the old social issues, you know, like a marriage, like canvas legalization, I was on the liberal side. Yep. I don't think, you know, banning abortion entirely a total abolition is gonna work for this country. I think Republicans will lose elections if they insist on that, and I think they're getting that message.
So so yeah. I mean, look. I I think that I've always considered myself to be pretty centrist.
And so you're not a globalist. You don't believe in open global markets with the US.
In general, I understand the benefits of free trade. And I don't think we should be isolationist with respect to trade. I don't think that we can be a successful country if we are we isolate our economy. So I do want to trade. However, with China in particular, I think we made a mistake in throwing open our markets to their products, giving them MFN status while it
goes -- A favored nation
--
Yes.
Enriching them to the point where they a pure competitor of the United States. Now look, I understand why we made that mistake 20 years ago because everybody thought the theory was that if we help China become rich that China would inevitably become more democratic, and they'd be filled with gratitude towards the United States and that actually become more more hospitable towards us, more westernized. And I think that theory has just proven to be wrong. I mean, they have not
--
Or it's going very slowly. One or the other. Let's own our clips here. Here is Shamat's prediction from episode
61,
and we'll see you on the other side of this quick clip.
My worldwide biggest political winner for 2022 is Xi Jinping. I think this guy is He's firing on all cylinders and he is basically ascended. So 2022 marks 1st year where he's essentially really ruler for life. And so I don't think we really know what he's capable of and what he's gonna do. And so that's just gonna play out.
You think he's the biggest political winner, really?
my gosh. I think
I think it's going to be a he's gonna run rough shot, not just domestically, but also internationally because you have to remember he controls so much of the critical supply chain that the Western world needs to be -- I
I think he's completely wrong. -- life.
Little
I think you're completely wrong. I think he's losing his power. He's scared. That's why he took out all these CEOs. He's consolidating power because he fears that they're gonna win too big and then displace him.
And he has massive real estate problems over there that could blow up at any moment in time. He could face a civil war there. I think he's totally isolated himself. Civil war. They don't even have guns.
--
major country is removing their factories and removing this tendency. -- there. What are
you talking about? are they what are they gonna riot with?
Did you not see Tiananmen Square? Did you not see the riots in Hong Kong? Are you not paying attention from off? There there's been many riots in China. Jason to kill
all these. -- were crushed. I'm not saying there will be a control control.
He still will have massive amounts of I believe protests. And, yeah, he'll have
to compete.
I think
I think the the the bigger risk is is that China gets better for
Xi Jinping, but worse for everybody else in China. It's already worse for all the billionaires over there. It's worse for the tech industry.
You've now got Evergrand that whole, you know,
gigantic debt implosion. I think there could be contagion from China next year. I don't
think
she's gonna lose his grip in any way. But I'm not sure China's gonna have a good year next year.
Wow. Nailed it. I think all three of us kinda got this right. What are
you talking about? You got none of it right.
Well, I I said there were gonna be there were gonna be riots, and they're gonna they're gonna have a recession. I mean -- Listen. Let's be honest.
--
that they'd be squashed.
Look at that.
That's exactly what happened. Both things happen.
I actually think I have a pretty decent ability to steal men pretty concretely the details. I think that at best, when it comes to things like democracy, and your belief in US exceptionalism in a specific political world view, at best, you straw men. And I think that you get very biased without seeing the forest from the trees. The reason I said that is not because I'm like, you know, some huge g supporter. I'm just trying to
steal men what happens
when one individual person gets anointed leader for life of 1,300,000,000 people that then controls 20 percent of the world's GDP. There is no other single human being as powerful as him as of this month.
Can I just say that this show this show is gonna become insufferable if every time you sort of said something in the past that was sort of correct? We're gonna have to replay it.
I don't know. I was playing that one. I can't
keep playing that one for you, Saks. I didn't hear the one who nailed it. I was giving the that was a softball to you, actually.
Not me. -- every week, Jay Cal.
Alright.
This is gonna slow down if we play every clip that I got right.
Yeah. You guys are asking to pull clips all the time. I just pulled one clip about China where you nailed it.
No. No. No. Look. I I think, like and also look what he
did king of PaulaClip.
The the Evergrand thing, look
what he
did this week. They said, okay. You know what? The real estate industry can now issue secondary stock sales, raise equity and equitize themselves, so they're gonna find a soft landing for the equity part for the real estate industry in China, and now they're reopening. So I don't know.
I mean, like, I'm not sure what we're supposed to comment. What I will stand by is what I said, which is I don't think we have a very clear view about what's going on, what the substance of these protests are, and what people actually want if you're only consuming US media. And so if you find a way to get a diet from a bunch of different sources all around the world, you may get a better sense. I had an accidental window into that by being in a completely different part of the world this past week.
Friedberg, any final thoughts on China, And what's going on there before we move on to Chat GPT? Your favorite. Sorry.
I think one of the things we often miss is that China the the CCP does have their hand on the throttle. Like, they throttle up and down, We always think that it's a linear line and that it's super dogmatic and fixed, but there's certainly responsiveness in the release of the lockdowns in Guangzhou, and Beijing this week seems to have been a pretty good indication that when things do get when the when things when the tides do do change, leadership there seems to respond not always, but enough to kind of keep things going. So
Should they reopen? I think it's 60% of the or so is vaccinated with obviously vaccines that maybe aren't as don't have the same efficacy as the ones here in the United States. Do you think they should open up and just let it rip? Or do you think they should still try to maintain this 0 COVID policy? because that is the debate right now.
what point of view, what's what's what's the objective? because honestly --
Yeah. Yeah.
Well, from the objective of economic growth, they need to open up, and they need to keep their economy working and they need to keep their labor force engaged or else they're gonna continue to suffer. So if economic growth is the objective they they need to open up. Right? If the long term health cost of the nation balance again against that is the calculus that they're kind of weighing, there's probably some more nuance to that. And, certainly, my understanding is there may be a precedent setting, which is, hey.
We've said that it's a 0 COVID policy. Therefore, we have to hold strict to it, hold toe the line. else it looks like we're weak. And so there's also this, you know, maintaining the authority of the CCP objective So there's a lot of maybe competing objectives right now. Certainly don't have a sense of how they're they're weighing them all.
But but I think that once once all those videos came out this week, Yeah. You guys saw them, but people were screaming. There was an apartment on fire where the doors were locked with steel beams on the on the base of the building. At least that's what the the video said. I don't know how much truth there is to that, but that's what we said.
And clearly, people are extremely distraught and unhappy with the conditions of the lockdown. at some point enough piece people with enough loud voices, you know, something's gonna change. I mean, let's just remember, like, the bargain that struck in that country. And with all countries is that, you know, the citizenry, to some extent, are willing to tolerate. their government so long as their conditions continue to improve, and there's a bargain.
There's some bargain that's struck. And as soon as that bargain starts to go south for for for the citizenry, then that that that governing entity is at risk. And I think that that's what we sort of started to see this week was the conditions are getting far, far worse and far less livable for so many people in that country. that the government had to shift?
You think Shamoff, this COVID strategy and then we'll move on, was basically Xi Jinping wanting to get to that congress, his coronation. And now that that's over, maybe he can change gears. And then
--
Like I said, I my belief is that I have a very poor access to enough data to have to steal man what is actually going on there. But one explanation could actually be that in the absence of enough hospital infrastructure and ventilators and a bunch of these other things, they had to take a pretty severe approach to this disease. I don't know what they know or didn't know. Maybe they understood you know, the virulence of it may be that they have a slightly different aging characteristics of their population. Maybe they genetically responded to the SARS CoV to virus.
I don't know any of these things enough to tell you, Jason. Yeah. But the reality is what Friedberg says is right, which is that you cannot grow an economy if people are inside locked in their apartments. And it looks like they have decided that that's coming to an end and they're going to, you know, deconstruct all of these things. So, you know, the Chinese growth engine is coming back and I think that that's gonna be an important factor economically that we're gonna have to figure out because it's gonna have a huge implication to American Growth And American Inflation.
Sacks, if in fact
the China
if the lab league theory is correct, China might have some insights into this disease that maybe the west didn't. Maybe that plays into their policy a bit. Any follow-up here?
Jake, I'm just surprised to hear that you have problem with their lockdown policy over there. Because aren't they just implementing democratic party orthodoxy? I mean, isn't this the policy that Tony Fauci and Barbara Ferreira, that, you know, that all the health experts?
I was not in favor of lockdowns.
What are
you talking about? You're the one who had all your and had eventual haters day
1.
Isn't this the the breakout policy?
Why am I getting this?
Why am I getting this?
Because you're on the same as every party.
I'm just asking a question as the moderator.
Is it this,
basically? Why am I getting constrained?
Is it this? What Got to flinching.
I'll answer the question. Yes. I'm on my I was in favor of if people wanted to stay home, stay home, and then if people wanted to go out and take the rest, take the rest. I was always in Chrocell
isn't this what Gretchen Whitmer in Michigan and Gavin Newsom in California subscribed to the idea that the way to fight COVID was through lockdowns Now, yes, Newsom had 10 pages of exceptions for his political donors,
and he
didn't use the police to lock people in apartment buildings. He may have wanted to. But they didn't actually do that. But can you really tell me that this lockdown policy has been disavowed by people like Fauci or by the the health authorities like the Barbara Ferreras of this world. They still subscribe to this view.
Do they? Really? Is anybody doing a lot of
them now?
Show me well, they're not able to do it. because no one agrees anymore.
Yeah.
But tell me tell me where anybody tell me where any of the health experts who said that lockdowns were the correct response have repented and disavowed that view.
Yeah. I don't know. I haven't been I haven't been tracking there, Mayakopas. But I haven't tried. You yourself were in favor of lockdown.
for a period of time. You sure. No. You absolutely are a potent
table next episode. -- a mask mandate. No. It's not true. I was in favor of a mask mandate.
and I said the mask mandate was the alternative to lockdowns.
Okay.
I was saying that by May of
2020.
Alright. Listen. move on to the next thing. I I don't represent I'm an independent. I don't represent a democratic party.
I don't represent Fauci.
No. You were I said mainstream media.
I do not represent mainstream media. You just said I was an old school journalist who's mortified with where it is today.
I'm giving you a hard time. I thought your I thought your explanation was fabulous.
Oh, thank you. Thank you.
Obviously, Jake, I'm giving you a hard time too. I I know that you were not a big lockdown proponent, but you understand the point I was making,
which is -- -- your point. There were a lot of opponents let's stop making me the Democratic spokesman when you're
§05What OpenAI's new ChatGPT tool means for the future
not -- I'm feeling a lot better after my beer. Let's talk about OpenAI. Come on.
Let's go
outside. So listen. Open.
We'll talk about OpenAI.
Alright. OpenAI is a a company that builds Artificial intelligent
software and platforms. They have
one platform called GPT.
It is on it's 3rd version. As part of GPT 3, they created Chamath GPT, which is a chat interface where you can ask questions to AI The results are nothing short of stunning when they hit. Some of them are a little bit mixed, but Friedberg has spent the last 48 hours. Drinking White Russians with oatly milk and playing with Chat GPT, including His question to the Chat GPT which was write a script of Chamath, Saxx and Jay Cal talking about the future of AI in the style of a Quentin Tarantino movie. And I have to say, it was pretty great.
The result, go ahead, Freeberg, tell us what you discovered. Wait.
I think you guys should read this real quick. We can cut it out if it's stupid, but okay. Wanna actually read the script?
Yeah. Read it out. The Quinn Tarantino part right. I
know it's,
like, impressive, but it there's no f bombs. There's no, like, Tarantino s dialogue.
And by the way, they they excluded
all of
that fraud. But I they took they took out all cursing and violent cussing and violence for OpenAI.
That explains it. Because if this is a Tarantino script, there would be some choice language
in here. But it's interesting. It's like the PG Tarantino because -- Okay. -- with no cussing, no violence, no sex.
There's no popcorn differences. Yeah. You do the narrative. Go ahead.
The scene opens on Chamath Palihapitiya, David Saxx and Jason Calacanis sitting at a dimly lit table in a smoky bar. A bottle of whiskey sits in the center of the table half empty. Shamal's leaning forward, his eyes intense.
So what do you guys think about this giant GPT thing?
David Sacks takes a sip of his drink.
It's impressive. No doubt about it. A large language model trained by OpenAI that can generate human like techs in a variety of styles and Mats is a game changer.
Jason nods. Definitely. It's one of
the most advanced AI systems we've seen to date. gonna have a huge impact on the way we use and interact with AI.
Timoth Franz.
That's what I'm worried about. With a technology like this, possibilities are endless, but so are the potential dangers.
Saks leans back in his chair.
Oh, come on, Jamath. You're not still stuck on that whole AI. It's gonna kill us thing are you?
Timot leans forward again. His voice low and serious.
Look. I'm not saying. Chad GPT is going to turn into SkyNet overnight, but we need to be careful about the way we develop and deploy AI. We need to make sure that we're using it for good and not just for our own game.
J. Cal Nods. I agree.
We need to make sure that we're responsible in a way we use AI. And that includes making sure it's accessible and affordable to everyone, not just a select few. Timoth with a dirty smirk. And let's not forget about the importance of regulation. We need to make sure that we have the right laws.
in place Oh, yeah.
This is disabled. This use of AI. It's so
long. Call the director's calling cut. Cut. That's it. Seen.
accident scene. We're we're not gonna finish it.
It's not that far off. I mean, it's 60% on the way there.
I actually there the All
you have to do is put in a Biden for SaaS If you blame Biden, it would have been perfect.
Let me
tell you guys something stunning about this -- Okay. -- this platform. So this is GPT 3.5, which is an interim model. to the what people are saying is the long awaited GPT 4.0 model, which I think they announced in 2020 and has been in development for some time. So the model this GPT 3.5 model was trained in three steps.
They do a great job explaining it on the OpenAI blog. site where they collect some some data, and then there's a supervised model, meaning that there are humans that are involved in tagging. and then the model kind of, you know, learns from from that system, then you'd ask the model questions, you get output. And then humans rank the output And so the model learns through that ranking system. And then there's kind of this 3rd optimization thing, and then it's fine tuned.
So the the model itself has several steps of kind of human involvement and, you know, kind of it sources its own data and and and builds it. You know what's incredible about this model? the total size of the software package that runs the models about a 100 gigabytes, isn't that amazing? Like, you could fit this model on probably what -- I'm driving. -- 20 percent of the storage space on your iPhone.
And you could run this thing, and you could probably just talk to it for the rest of your life. And it it's really kind of an incredible milestone. But I think what what was so stunning to me about this, I I know you guys are probably expecting something to be said like this. But you could see so many human knowledge worker roles and and and and functions being replaced by this extraordinary interface. So kids can do homework.
That's easy. software engineers can get their code optimized and can get their code written for them. There's great examples of how software code has been written by this interface. You could see real estate insurance salespeople being replaced by some sort of software like interface like this. Copywriters you know, make me a 100 versions of a commercial or an ad that I can then use.
Customer support completely replace. if you guys remember, there were these automated customer support companies that started, you know, 2 decades ago, and there was this great flurry. All BPO businesses were all about lower cost human labor. Now the cost of human labor goes to 0. My prediction, which is so everyone's got the obvious prediction, which is there's gonna be a 100,000 startups that are gonna emerge.
I mean, this is kind of like this moment where the Internet came along, and everyone's like, this changes everything. I do think everyone thinks and feels that. So the obvious next step is a bubble will form.
So -- Can I ask a technical question, though, Freeport, and then Jamop would probably be thinking the same
thing here.
-- finish my market prediction and do the but I think because everyone's so hyped about this and and we all know this -- Gonna be overfunded. -- VC attention, all the investor attention is shifting to this capability, And how do you apply this sort of capability across all of these different industries and all these different applications? And as a result, my guess is the next hype cycle, the next bubble cycle, in Silicon Valley will absolutely be this generative AI business -- Okay.
But is it this is a little technical. But how would it know the difference between, like, y o u r, and u r. It when it is processing natural language, if you were to do, like, your anus or your anus, How would that Friedberg? How would it know the difference between your anus and your space anus?
It'll it'll learn that. You know?
It's joke didn't land. Yeah.
It was a joke about your end.
It's a didn't land.
I get it. I was thinking the AI. The AI probably would have made a better choke than that.
Would have
made a better jump for sure. So somebody's getting into a group chat and said -- Can I hear you?
--
like Jay Cow, and they were terrible. So I understand what you offer every
year. -- Cassie AI to pretend you're the all in pod besties telling Uranus jokes.
That would be pretty complicated. Sorry.
Let me just say one more thing about this open AI thing. I I do think that the biggest and most interesting thing to think about is how this will disrupt the search box. The the search you know, the way search works at Google, you know, and and the Internet search is there are these kind of servers, these web crawlers that go out and gather data. Someone starts your data feeds. and some of them are just crawlers.
And then that data is indexed or in the in the structured way, it's kind of made available for for serving directly on the search page. And so much of that is is indexing. So I search for a bunch of keywords, those keywords, and and perhaps some natural language context are matched to a result page, and I click on that, and it and it's linked out. Years ago, Google started a product called the OneBox where they could take structured data Like, what is the weather in San Francisco today? Yeah.
And that the top of the search result page just presented that data because it knows with high certainty. the question you're asking and it knows what high certainty the answer it can give you.
Yeah. Clifty from somebody's website. Right.
So if that starts to become everything, then that one box interface And it's not just Google's ability to access all this data and index it and serve it and store it, there could be a lot of competitors to the one box, and a lot of competitors ultimately to search. And, ultimately, you know, Google's core product, their their their search engine, could be radically disrupted by an alternative set system or set of systems that have more of a natural language chat interface, which
and I Literally, which is literally why Google bought DeepMind, and there were a collection of human powered search engines, Mahalo included chacha answers.com who were trying to do the human based version of this, It just didn't scale.
We we don't wanna get ahead of ourselves because one of the things we don't know is how much is going on in deep mind. They're they're they're not very open like OpenAI is. They they talk about some of the advance Frontier stuff like Alpha Fold and so on, and they've been public about that. But a lot of that is really to generate interest and hype in what's next. But my understanding is deep mind's been applied to everything from -- Ads.
-- ad ad optimization but also the ranking on YouTube videos to get people more engagement on YouTube, etcetera, etcetera. So there's all these ways that DeepMind's been applied within Google services. that
we don't see.
And certain and certainly within search.
Yeah.
But the question is, is there an entirely new interface for search --
Yes.
-- that risks Google's core search business? And I think that there certainly will be a lot of money thrown at this. And if anyone has any interesting ideas, send me an email. Sax and then Shamath.
Yep. Yeah. I mentioned that's a really interesting point. I saw a thread on this where somebody was asking GPT a bunch of questions. Like, they were, like, generally, like, coding questions, and they were actually comparing the result in Google versus GPT.
And Google would just give you a reference to like a link to some page whereas gpt 3 would actually construct the answer, like a multi paragraph answer. that was far more detailed and in a way user friendly. Yeah. Whereas, like, the Google page would kick you over to a reference where it was like this 123 sort of maybe someone had created a checklist, but it just wasn't that detailed. It really is pretty interesting.
I thought Andreessen tweeted a really interesting example as well where he asked GPT to create a scene from a play starring a New York Times journalist and a Silicon Valley tech entrepreneur, they're arguing about free speech in each passing it asserts the view associated with his profession and social circle We don't need to read the whole thing. But I thought this was like spot on where I was actually like both sides are making their best arguments And it's like to each other in a conversation that seems intelligible. Like, they're making their points at the right time in the conversation. It's like they're playing off each other. In other words, it actually reads like a conversation.
I actually thought this one was more impressive than the one with the best impersonation because
I agree.
I actually thought that the one about all in didn't really capture our personalities per se, but this one actually does a pretty good job capturing the arguments in this debate. So
--
Jamath? -- pretty impressive.
Any thoughts here?
Yeah. Lots. I mean, I've been spending a lot of time learning about this area. 6 years ago, a team that I partnered with who was at Google that built TPU. We've been building silicon for this space.
So we've been kind of going from the ground up for the last 6 years. Couple things that I'll say. The first is that, I think, We're going to replace SaaS with what I call mass, which is models as a service. And so, you know, a lot of what software will be particularly in the enterprise will get replaced with a single use model that allows you to solve a function. So these chat examples are 1, and you can name a bunch of SaaS companies that were purveyors of SaaS that will get replaced by essentially GPT 3 or some other language model.
And then there'll be a whole bunch of other things like that if it's an expense management company. they'll have a model that'll allow them to actually do expense management or blah blah blah forecasting better. So I think SaaS will get replaced over time with these models incrementally. That's phase 1. But the problem with all of these models, in my opinion, is that there's still largely brittle.
They are good at one thing. They are a single mode way of interfacing with data. The next big leap and I think it will come from 1 of the big tech companies or from OpenAI is and we talked about this. I talked about this few episodes ago, a multimodal model, which then allows you to actually bring together and join video voice data in a unique way to answer real substantive problems. So if I had to steal man the opposite side reaction, so I think there's a lot of people gushing over the novelty of GPT 3.
If I had to or Chamath GPT, if I had to if I had to steelman the opposite, what I would say is it's gonna get Some are between 95 to
99%
of all of these very simple questions right because they're kind of cute and simple. There there is no consequence of saying right of play because there is no wrong answer. Right? You either kind of it tickles your fancy or it doesn't. It kind of entertains you or it doesn't.
When this stuff becomes very valuable is that when you really need a precise answer and you can guarantee that to be overwhelmingly right That's the last 1 to 2% that is exceptionally hard. And I don't think that we're at a place yet where these models can do that. But when we get there, All of these models as a service will be very much commoditized. And I think the real value is finding non obvious sources of data that feed it. So it's all about training.
So meaning, you can break down machine learning and AI into 2 simple things there. training, which is what you do asynchronously. And then there's inference, which is what you're doing in real time. So when you're typing something into chat API or Chamath GPT, That's an inference that's running and then you're generating an output. But the real key is where do you find proprietary sources of data that you can learn on top of.
That's the real arms race. So one example would be, let's say you build a model to detect tumors. Right? There's a lot of people doing that. Well, the company that will win maybe the company that actually then vertically integrates buys a hospital system and get access to patient data that is completely proprietary to them and covers the most number of women of all age groups and of all ethnic categories.
Those are the kinds of moves in business that we will see in the next 5 to 10 years that I find much more exciting and trying to figure out how to play in that space. But I do think that Chad GPT is a wonderful example to point us in that direction. But I'm sort of more of that case, which is it's a cute toy, but we haven't yet cracked the 1 to 2% of use cases that makes it super useful.
But I
think the first step but just sorry. Just but the first step will be the transformation of SaaS to mass. And then from there, we think we can try to figure this out.
reminds me of in a way when you when you give that description of, like, hey. This is really interesting, but it's not complete. Is remember when GPS came out? And, like, people are, like, doing turn by turn navigation. They drive off the road because they were trusting it too much.
And then, you know, over 20 years of GPS, we're kinda like, yeah. It's pretty bulletproof, but keep your eyes on the road. Same thing that's happening. And and these changes tend to be right.
These last these last 100 or 200 basis points literally takes decades. Exactly.
So the last 15% of self driving is like the decade long, you know, slog.
That may take a century. 15% may
take a century.
But the last 2% will take a
few days. The change happens very slowly and then all at once. For people who don't know what a a TPU is, that's a tensor processing unit. This is Google's application specific circuits. Right?
And -- Custom silicon that they invented for TensorFlow at the time.
Yeah. So if you wanna
try -- Although now the modality of AI, we've changed that So now we're totally in the world of transformers. So we're not even using you know, you're not letting the tensors flow the way they used to.
§06David Sacks on the slowdown in SaaS, use case endgame for generative AI
Alright. There's been a slowdown in SaaS Sachs what is happening in the software as a service world.
There was a good update by Jamin Ball who worked Raul Timna, our friend, Brad Gersinger. He does these really great updates on what's happening in the SaaS world. The big thing this week is that Salesforce had quarter. And I I would consider Salesforce to be the bellwether for the whole SaaS category. I think they're the largest pure SaaS company.
They were the 1st multi tenant SaaS like company at scale. And what they've shown is a huge slowdown. Basically, their net new ARR that they just added in the previous quarter dropped 2 thirds compared to the previous quarter. But because their sales and marketing spend was the same as the previous quarter. It exploded their CAC payback, which means the amount of time it takes to pay back your customer acquisition costs for a given customer.
So you see there are a 155 months it would take now to pay back the customer acquisition costs, that's over 10 years. That doesn't work. I mean, I think before this quarter, it was more like two and a half years that's something that you can afford. A company can't you know, if you're spending 10 years of, you know, gross profit on a customer to acquire them, the business doesn't make sense. So now I'm not saying any of this to pick on Salesforce.
It's an exceptionally run company, you know, one of the absolute best, Mark Benioff, fantastic CEO Friedberg great human being. But I think the point here is that what you're seeing is the whole SaaS industry is really slowing down here. In the first half of the year, you saw SaaS valuations correct. Now we're actually seeing SaaS top line correct. And You know, there's an interesting question here.
If your CAC payback goes from two and a half years to 10 years, you have to bring your CAC down. How do you do that? You can either reduce marketing, or you can reduce sales. So in other words, you can reduce -- You
can cut the sales team.
You can either cut people and headcount from your own team, or you can cut spending you do on advertising or events or money that you spend on other companies. Either way, there's gonna be a big contraction in jobs basically around this industry. And I think that what that could do is cause a vicious cycle where
we
start seeing I wouldn't say death spiral. I think this vicious cycle for the next year or so where seat contraction becomes the norm instead of seat expansion. So if you go back over the last 10 years, a major tailwind at the backs of South Starfs has been that every year year you start with a 120 percent, 130, 150 percent of last year's revenue just from your existing customers. Why? Because they were hiring more and more people and they needed to buy more and more seats.
But now headcount growth is frozen, and in fact, companies are doing major layoffs. So the baseline for next year could be seat contraction. So instead of starting with a 120 percent of last year's revenue, you might start with 80 or 90 percent because there's gonna be so much churn. So I think that, you know, SaaS companies need to take this into account. This idea that, like, growth is on autopilot, that could start to go in reverse.
I don't think permanently. but I think for the next year or so. This is why I also tweeted, you know, 2 x's in the new three x. If you can grow 2 x year over year in this environment -- -- bless you. That is as good as or better than growing 3 x last year.
Clearly, it's clearly better.
Like, a lot
of companies that weren't that great could grow at 3 x last year because it was so Times are so frothy. Everyone is buying everything. But now it is gonna be really hard to even double year over year. Companies need to take that into account into their financial planning you need to restrain your burn because a lot of the revenue that you predict is gonna be there may not be there.
Alright. Thanks so much. to the Secretary of SaaS. I think you got a board meeting.
I do. I gotta run.
One of the interesting things I saw in terms of use cases is somebody used the chat GPT to describe rooms. Then they took the descriptions of those rooms, and then they put them into, like, dolly or stable diffusion in one of those. and it created the visual. I'm curious if you think, you know, the self driving APIs and machine learning that's going on then you got images, then you got Chamath. Maybe you have proteins going on with the alpha fold stuff.
When these things start talking to each other, Is that going to be the emergent behavior that we see of general AI? And that's how we'll interpret it in our world is these 100 different Vertical AIs, hitting some level of reasonableness to Chemut's point on datasets. And then all of a sudden, the driving AI is talking to the one that's looking at cancer and tumor diagnosis in the chat and the image ones. It may be stable diffusion. The protein AI and the one that's looking at cancer cells start talking to each other.
Yeah. I'm I'm not sure that's as likely as the there's a lot of solutions that will emerge within Verticals, and I think you can distinguish them. So I kinda gave this example a few months ago If you remember Kai's power tools was a plugin for Adobe Photoshop -- Yes. -- came out in 1993, I believe. Of course.
And Kai's power tools completely trans formed the potential of Adobe Photoshop. because Photoshop had all the basic brushing and editing capabilities within it. Kai's power tools with statistical models that basically took the matrix of the pixels and, you know, created some evolution of them into some visual output like a blur And so you could blur motion blur something, and you could change the parameters. And now your photo looked like it was going through a motion blur. Ultimately, Photoshop bought and implemented those tools, But those were similar.
There were statistical models that made some representation of the input, which was the image, and then created an output, which was an adjusted image. I would argue that that is very similar, although the models behind it are very different, in terms of the contextual application of statistical models in software. And you could see stuff like, for example, a chatbot that replaces help me figure out whether my credit card charges are correct or not. Instead of having a customer service agent, an offshore customer service agent helping you resolve that. or help me return my item, or there are very specific kind of verticalized applications that can plug in that ultimately replaced what was manual and human driven before.
because humans used to manually make the motion blur in Photoshop, and then it was automated with the software packages. And I think you can kinda think about it in that same way that these these are known knowns. They don't require necessarily human physical labor or some, you know, human responsiveness that if 95% of the work can be handled, it will get handled by some verticalized solution. So I think the physical versus the nonphysical labor is one way to think about the distinction meaning is there some change in the physical world? Driving is absolutely a change in the physical world.
You have to move physically through space. So that one is a very distant class. All the stuff that's like communication, imagery, static imagery, audio, and then visual video, there's some stacking that happens there. And some of those will be kind of siloed, and then some of them will merge, and you'll have these kind of unique kind of combo models. And so look.
As they start to work together, I think we'll see them you know, completely rewrite some of these verticals like movie production or music production, right, or advertising, or we're seeing it now with with video and and creative arts with, you know, some of the the the visual stuff on a And to
be honest, a lot of journalism, a lot of creative arts have become the wisdom of the crowds over the last 2 decades where, you know, artists were looking at the collective works of the Internet interpreting it and then coming up with content, which is kinda what these AIs are doing and then who legally owns the collective content is gonna be a big question, Shamoff. You talked about datasets. Microsoft is being sued right now in GitHub because they used Open Source to create tools in AI to help augment programmers, like, while they're programming code, it gives them suggestions. And now the open source community is suing them for using their dataset. So what what do you think about the legality of datasets, Jamath, and and should they get some kind of protection if you make a GPT 3 based on Cora or based on Wikipedia, should you have to get approval to use that data?
But -- We can see the exact
opposite. Yeah. It's it's the exact opposite. They say that this is actually your work, and I think that that's the right legal framework. But the the answer to your other question is this is why I think the hunt for proprietary data actually becomes the hunt that matters.
All of this other stuff I think is a lot less important because I think you have to assume that all of these models will eventually just get commoditized. So there'll be there'll be a you know, like you see like JasperAI and you see a bunch of these generative AI companies. It's really interesting. But the problem is when you sit it on top of the same substrate, you'll have a convergence. Right?
Everybody's chat model will eventually look and sound and feel like the same thing unless you're giving it a few special ingredients that other people are not. And so it's the hunt for those ingredients that will make this next generation of of models really valuable.
So to give it an example, you would have Wikipedia, which is creative comments anybody can use. But Quora, as a dataset, not everybody can use that's owned by a company, So Quora would have an advantage.
Take an extreme example. If Quora didn't allow themselves to be crawled -- Right. Okay? Which
they don't. Yeah.
But then the and then they develop their own language model, which used the best of the Internet, so call it, you know, GPT. and Quora, maybe they are slightly better in certain domains than others. The other extreme example is the one that I used in healthcare, which is if you have access to patient data that you will not license to anybody else, it stands to reason that that model actually then has much better chances of highly effective clinical outcomes versus any other model.
Apple Watch comes to mind. Right? Apple has all that watch data. If they could pair that with epics
--
It's another very good example. That's what I know.
Like, what could they do together? So this is gonna be like, this is the the new oil is gonna be data.
And by the way, like, to to to to talk about Apple for a second, the smart thing is they've gotten so methodically. They've never touted the AI. You know, they introduce 1 or 2 distinguishing features every year. Right? So like the the the ECG, which was introduced many, many years ago, is has only gotten slightly more usable, like 5 or 6 years later.
But in the meantime, there's, you know, tens of millions of watches collecting this kind of data. So to your point, it's it's using these devices as Trojan horses to collect training data. That is the oil.
Uber and Tesla have all this data of the data being collected by, you know, the
Well, hold on.
So phones or the cameras
in the cars? The other difference, though, is that you have to be in a realm where you don't need regulators. to go the last mile. So the problem with ADAS, I think, or level 5 autonomy is that eventually you get to a point where even if the model becomes quote unquote, Perfect. You still need regulatory approval.
And what I'm saying is I think you have to focus on areas of the economy. that are not subject to that or where the regulatory pathway is already defined. So for example, if you use a healthcare example, let's say that you had the largest corporate of breast cancer image data and you could actually build an AI that was a much better classifier for tumors versus other things. the FDA actually has a pathway to get that approved very quickly. The problem with level 5 autonomy is that there is no clear pathway.
It's not again, we go back to almost a a crypto example. We don't really know who will govern that decision. And we don't know how that will be governed. So I think the the thing that investors have to do and entrepreneurs, entrepreneurs have to pick their end market very carefully, and investors have to realize that this dynamic exists as well if you're gonna do Imagine
the Robinhood tradings, a, you know, trader dataset watching people sell in shares and then predicting markets with it with AI. I mean, it could be crazy.
You have that or payment for order flow that's used by Citadel and the other big
--
But not AI. Right. So then -- Well, who knows? Maybe they are losing AI.
I don't
know if
they are. I I I can tell you as somebody who sells We sell a lot of machine learning hardware into this market. The biggest buyers are the US government and these ultra
high frequency trading organizations? Freeberg any final thoughts here. I'll give you the final word. How could this affect astronomy? How could this affect you know, our search of the galaxies, you know, going out past Pluto, Saturn, breaching Uranus.
Any any of those things, how could it impact? Anyhow, I'm trying to get
a Uranus joke to lad. Help me out there, Tremont. You got me.
Oh, you're
not the I think you need to have more space related
--
Yeah. Which workshop this one with me?
Or gut or gut biome related in
you know? I'll cut biome. Yeah. So how would this affect super good. You're from a coach twist.
You have to trick Friedberg into thinking we're asking a serious question. Get him down the science path. And that's Rod Pulp. Now that's that's a good proper rug pull. Exactly.
Let's do it.
Here we go.
Let's workshop.
That's the rug pull.
So tell us, you know, when you're doing, like, super gut, use promo code twist to get 25% when you're doing super good, you're analyzing people's guts. How would you then have machine learning in this you know, API, this chat API and GPT 3. How could that help with processing all of that, especially when it passes through Uranus? Freeburg. You okay off there, Freeburg?
You are hungover. I'm hungover, but I also had Like, a 7 AM board meeting, so I'm also just a little beat up.
Were you grumpy on the board meeting? Did you get a little contango? No. It's fine. You can make a couple the rage and control.
-- had my caffeine fuel, and then I kind of crank down afterwards.
Alright, everybody. We will see you next time for The secretary of SaaS, the dictator, and the Sultan of Hung Over. We will see you next time. Bye bye. Love you guys.
Bye bye. We like your winter's ride.
Rainman, David, Saturday.
We open source it to the fans, and they've just gone crazy lately. what airliners ride.
Besty's our car. Go on 13th. That is why a
dog came know this in your driveway? We should all just get a room and have one big you, George, because they're all just useless. It's like this, like, sexual tension that they just need to release that mountain.
What? You're the bee What? Fire of
the earthy.
What what? Where did you
get Merckies are back? all.