Doxing debate, Nuclear fusion breakthrough, state of the markets & more
Full transcript · Read the full conversation in order, with its original context.
Contents6 chapters
§01Jason's new gig!§02Twitter's new privacy rules, notable suspension, doxing dynamics§03Nuclear fusion breakthrough and geopolitical ramifications§04Jason and Sacks's big night§05State of the markets: Coupa acquired by Thoma Bravo, startups at all stages seeing heavy valuation reductions, what LPs are thinking§06TV catch up, worst person in tech bracket§01Jason's new gig!
Captain Calacanis is here reporting for duty.
What's that Spirit Airlines cup?
Absolutely. Spirit Airlines. I just wanted to say, All in podcast now sponsored by Moncler And Spirit Airlines.
Or now sponsored by The Village People.
y m c a.
Now are you a pilot or a flight attendant, Jay Kown?
He's a flight attendant.
I don't
think he's thin enough to be a flight attendant.
Are you fat shaming me? Are you body shaming?
Can't do that nowadays. I'll get you canceled.
Getting sacks canceled at this point. Like, fat shaming would be number 72 on the list.
He can't get canceled because all the libs have left Twitter. There's nobody to there's no whole monitors left.
That's not true.
They all pretend.
No. They quit every week. Yeah.
It's like all the libs said they moved to Canada when Trump got elected.
Yeah. Canada immigration.
Go ahead. Flat.
The weather winner's wide. Rainman, David Sachs. And I said -- We open source it to the fans in a a hacker figured out a way to take all this data, Entrack, you know, people's yachts, people's planes. Obviously, one of those people was Elon. Elon had a security issue.
§02Twitter's new privacy rules, notable suspension, doxing dynamics
This is all public information. So the larger issue at stake here is the fact that the law allows for people to do this persistent tracking of planes, which then becomes persistent tracking of a person. And what really is at stake here is how we find the term doxing. For people who don't know the term doxing, it means giving a person's location. That could be your home.
That could also be your at a location for some period of time. You're you're at a hotel. you know, for a basketball game. And it's pretty clear. You can take a picture of a celebrity.
Say, there's a celebrity here, a lady Gaga at the farmer's market. What I object to here, we all understand dachshund is dangerous, and it, in fact, is against the law to just give people's addresses and stuff like that. The issue here is a new type of dosing, which I I'll call, you know, persistent coordinated dosing where dozens of times a month, you're giving a person's location. It may not be against the the 1st amendment, Saks. I think you would agree.
But we have to ask ourselves, do we wanna live in a world where whether a person's on an electric bicycle or an airplane or any device in between, somebody should be releasing dozens of times a month a specific dedicated feed of their location. It is terrorizing as a parent when this happens. I've had doxing people on the call here have had various security concerns. We don't wanna live in a world with de facto doxing. What these sites were doing was de facto doxing.
I think it was a bad decision. And I think that it represented on the least generous statement would be that it represents deep hypocrisy. in that not just a few weeks ago did he say he would never delete that account, but he also said he was buying Twitter to enable freedom of speech and freedom of expression and that he wouldn't come in and do the same sort of content moderation that was done by the old regime. And then he came in and did exactly what the old regime did. which is that he took the rules, and he took the, quote, moderation policies, and he found a way to use them to make some editorialized decisions that he thought was appropriate.
Now the more generous thing is what you guys are saying, which I don't think is necessarily wrong, which is that he's trying to protect people where there's some loophole or some law that doesn't seem right morally, but it is the law, and it is what it is. In those cases, I think you run into the exact same issue that the old guard at Twitter had that the moderators and the executives at YouTube have dealt with and that the executives Google have dealt with and that we sit here and we criticize until you're on that side of the table. And you're forced to make these moderation decisions you're forced to make these policy decisions, and you're forced to implement these policy decisions because of some moral framework that you now think is appropriate. And guess what? Some people will say that's not freedom of expression.
That's not freedom of speech. You're taking that away from some people. You're taking this particular case away from a fifteen or sixteen year old kid who's built it at a a Twitter feed. And so I think what it shows is just how hard it is to moderate these sites, these platforms and that there is no simple, easy, idealistic, ideologue, of, hey. All these things are open, all these things can be used by anyone all the time.
Because as soon as one of these edge cases start to happen, you wanna come in and do something about it.
Shamal, do you think? What should happen going forward?
So I I have had these issues happen to me multiple times. I'm not nearly as important as Elon is. but it feels the same when you're in the middle of it. It feels pretty terrorizing. That being said, I think the real decision for somebody like me is that if if it's too much is frankly just to get rid of it and, you know, to find a different mode of transportation, that's a little bit more anonymous.
And -- You're pragmatic about it. And the and the reason I say that is that I just think that you you would have to go and get the government to basically change the law, which you're not going to do. And so then as a result, your reaction will seem somewhat contrived and deeply personal. And in that, I think you lose credibility. Let me just summarize this and be the first one to just state this.
I think that if there's any person in the world that can figure out Twitter, it's probably Elon. But man has he taken on just a gargantuan battle. And increasingly, I am not a fan of this battle. And I'll tell you why. This is a man who has essentially proven that he can bend the laws of physics on behalf of humanity.
He's done it twice. once in electric cars and once in rocketry. The problem is that the realm of decision making at Twitter has nothing to do with the laws of physics and is governed by emotions and psychology. In which there is no canonically right answer. And so he's quickly finding out that half the population will always find fault with him no matter what he does.
And now the implication of that becomes very important. We saw yesterday that he had to sell another $3,800,000,000 of Tesla stock. Why is that? It's because this transaction which was very tight to get done probably required lots of margin. you know, there are look.
I have a margin loan at Credit Suisse, so I know how these things work. And you can very quickly get margin called. You have to sell down things that you own in order to tain your collateral limits. We've talked about this before. He's had to do this twice now in the last few weeks.
And that's because, again, not because of the demand at Tesla as far as we can tell, but because people believe he's distracted. And so people are anticipating weakness at Tesla. People are now shorting the stock. Anyways, it's causing this downward spiral. And can you fix it?
I think so. Can you pull it all out? Sure. Is it just putting himself under an enormous amount of pressure that he could have avoided? Somewhat yes.
And I think that this is sort of where we're at. 6 weeks in. My god.
I mean, I mean, I
was saying this guy learned In 6 weeks, what it took YouTube 7 years to learn, how hard it is to moderate content. And, you know, I think the thing
that This is right to agree is -- Okay.
--
you're you're
you're attributing so much good faith to these content moderators at YouTube and Twitter when the Twitter files reveal that they made no effort to suppress their bias. In fact, they were, like, pretty much
Wait.
Can you before okay. They're dealing with dancing
it dancing in the streets every time they boot it off so when they didn't lie.
Fair enough. Before you react to what FreeBird just said at the end that Coda, can you respond to what I just said? Isn't it true? it's like
Well, look. I mean, if you define what Elon is, you know, doing there as, you know, acting as a a judge arbitrating on every little content moderation decision. Is that a great use of his time? relative to what he could be building at Test And SpaceX and doing on behalf of humanity, then no. Clearly not.
But if you define what he's doing in the larger sense as restoring free speech to the most important Townsquare social network, hopefully, thereby inspiring other tech companies to move in the direction of opening things up, then I actually think it's a pretty good use for his time. So look, I think we can quibble about this or that decision that he makes or this or that sweet. But I think the overall thrust of what he's doing is very important for the country and for humanity. So I get where you're coming from, hopefully, he'll find some people at Twitter who he can empower and trust to make these content moderation decisions so he's not drawn into every single little battle. Right?
We do want him focused on the highest priority problems.
My point is just that I get that. I just think that what he's learning and what we're living and seeing in real time is that there is no canonically right decision ever in this space. There's only a decision where some percentage will support and some percentage will always be against. That's my point. Correct.
He did say
when he took over, he knew that would be the case. He said, you will know I'm doing the good job when both sides are equally upset. Just to to put a pin in it, I think it's important for people to understand what the new policy is. So I'm just gonna quickly read it just to --
Jake, Alex. Hang on. Sorry. Hang on one sec. Before you get to because I think the the philosophical point rather than the the specific one is a is an important one.
And I just wanna respond to what Shamas said and and and have Saks respond to this. In the case of the the points you make around the Twitter files and by the way, I don't agree with any of the moderation decisions personally. So I don't think that someone should be suspended for posting public information. I don't think someone should suspended for saying controversial things. That's my personal opinion just so I'm clear on that because I know that, you know, that that's
-- We've described yourself as
A strong first speech.
Yes. Libertary insurance. Okay. Got it.
Sure. And and and so in this particular case, I think what really irked me. I was trying to identify why it made me so angry about it yesterday. It triggered me. It really did.
And I think the reason was that in the case of the Twitter file points, It was a minority it was a minority that was affected. It was one person that was affected because the majority wanted to do that thing to that person. And I think in this case, it's that the minority wants to affect the majority. In the sense that Elon has aggregated this control and this power over moderation. And he's benefiting himself and a few people that have private planes, and he's shutting down hundreds of tweet feeds, Twitter feeds, they're using publicly available information.
And so it feels even more onerous of a of a a use of power an influence because he's taking he's doing something that benefits a small number and affecting a large larger number. Whereas the alt whereas the other one, was affecting a small number that benefited a large number because that's what a lot of people wanted to see happen. A lot of people wanted to see Trump suspended. and it wasn't right either.
Okay. I don't
know if that if if that makes sense. Yeah.
You know what? We understand your position completely. I I just wanna add to that. In this policy, I think it's very important to understand what he is saying about this. Accounts dedicated to sharing someone else's live location are gonna be suspended going forward You can still share your own location, obviously.
Content re required you know, content for public engagements, you know, the president is speaking somewhere, whatever. You just really can't be persistently, consistently tracking an individual otherwise known. And, you know, I'm starting to see the NPR. -- stalking.
But, Jason, if NPR is live tweeting
-- Sure. --
Jerome Powell speech
-- Perfect.
No problem. -- x y z location.
Not a problem. If they do Jerome Powell's location for the next year for for the next year, ten times a week, On his off duty on duty, that's the same thing we're talking about.
I'm just saying, like, let's just say he gives a speech every week. Is that illegal?
No. If you're giving us if you're giving a speech at a public place where you've announced
-- Yes. -- that
you're gonna be appearing at a certain time in place. You've already made a public where you're gonna be. What we're talking about is and what what what Elonjet was showing was a livestream of precision GPS coordinates over sustained period of time. Yes. And not to be too dramatic about it, but if you look at, like, the weapons are so successfully being used in Ukraine right now, they're all Precision GPS guided.
Now right now, you have to be a state actor to get a hold of those weapons. But you could imagine over the next decade that having someone's precise GPS coordinates over a sustained period of time, it would be pretty easy to target them for and not to be the dramatic here, but for assassination. Yo. That is a security risk. There's no way around that.
I brought this up with Palmer Lucky, man. I'm scared. That dude could come at me anytime when I get my jet. I don't want Palmer lucky to take me out. That's not But Yo, Palmer.
I'm sorry, dude. Do not take me out. I'm gonna get my jet. I'll be on my first flight, and he's just gonna send a drone in.
But look, let's talk about hypocrisy for a second. Okay? Because -- Oh,
here we go. --
let's let's talk about CNN's hypocrisy and the media's hypocrisy. Because earlier in the week, they were saying that any criticism of Joel Roth, who is Twitter's former head of trust and safety, amounted to a threat to his safety. And they had this, like, theatrical tweet where they claimed he was having to flee his house, which A lot of people found pretty preposterous. They were basically saying that public criticism of someone who has put themselves out there to engage in a public debate who's writing op eds to New York Times. That is a threat to safety.
However, publishing someone's real time location on a continuous basis, So they can be
targeted -- It's not intellectually consistent. It's not intellectually consistent. -- to safety. That is not -- Yeah. -- if one of those
two things is a threat to safety. it's the real time doxing of somebody.
Yes.
And I
think we now understand why Elon did what he did. He basically had an incident in LA in which the safety of his kid was threatened because he's got stalkers coming after him. So his safety is a real issue. It's not like a made up issue.
But why should his
yeah. Why should his personal experience affect the usage of a service that hundreds of millions of people use, and that's the big issue.
So the decision should not be based on what affects him personally. There needs to be a principle basis
It needs to
be a principal basis for any decision about content moderation or censorship. Maybe in the first few hours of that decision, it wasn't handled perfectly because there wasn't a principal basis. But since then, one has been put in place. The principal basis is what Jake House showed, and this applies to everybody. And so, you know, now it's a debate about whether that policy may sense.
Now is Elon just as arbitrary and capricious as the former executives who are running truss trust the safety of Twitter? I don't think so for two reasons. Number
1,
he's promised transparency. He said that when we ban or shadow ban an account, there has to be a reason for it, and you have to be alerted to it. In other words, none of the shadow stuff No shadow. -- informed.
You you get your you get your speeding ticket. You get your ticket. It's it's it's there. Right. No more shadow.
That is different. And then the second thing is that and, again, I think you could say, They didn't do this perfectly in the first few hours. But there needs to be a principal basis for some decision, and it needs to be applied to everyone equally. And so far, we haven't seen any basis for believing that he's not applying this principle equally. I mean, it's still very early.
Whereas the former rulers at Twitter were indulging their personal bias and personal preferences and who were they were banning. There are 2 standards of justice. If you were someone who has allied with them, it was almost impossible to get censored no matter how hateful your tweets were. But if you were somebody on the other side of the political bait, they were eager to suppress you. And I think that at least so far, Elon has not shown that type of selectivity.
He selected against someone that put him at personal risk.
He I think yes. But you're here's about yeah. If that's where I do. I do. Like, if that
if that's where the decision had stayed,
Yeah.
Then I would agree with you. But I think that since then, they've put in place. They've undergirded that decision with a principal policy.
I think those sites are I
think those tweet screens are cool. I think there's some cool tweets screens that some of these people run, and there are hundreds of them, and and they're actually kinda cool. You can see where different planes
-- --
favor of people tracking
people's planes. --
like where Air Force 1 is, they show all these different planes. It look. And whether or not the FAA should be publishing the state as a separate question, but it's on the open Internet. It is already there. It's like turning off the RSS feed from the open Internet to protect himself.
Okay. That's why it feels onerous.
So here's the part I agree with. which is I think this policy with regard to playing specifically is gonna be futile. Yeah. It's gonna be at bestharma because as long as there's many ways to publish this information.
It's on Reddit. It's on Facebook.
So listen. I I think this whole I think this whole policy on Twitter is a little bit of a red herring. I think the real issue the real underlying issue is that the FAA is publishing these Ical numbers, thereby making every plain person identifiable. I don't think there's I have a harder to explain why it's necessary.
I have a counter to it, actually, sex, if I may. What we saw, whether you agree with it or not, with the mass banning of certain individuals did actually silence them and take them out of the public square. One of the reasons, in fact, Elon wanted to buy Twitter. So if you look at certain individuals, whether it's Milo, Alex Jones, Trump himself, right on down the line, when they got banned across all systems, it was dramatic in terms of the reach of that information. So because of the size and scale of YouTube, Facebook, Twitter, etcetera, when they act in coordination, they can have a dramatic impact, not a perfect impact, but a dramatic, which is why we have this issue of, hey.
Should 230 be rethought? Because when they act en masse, It is extraordinary what they can do to an individual. They took -- Yeah. -- Alex Joe who who how do you assume Alex Jones, you have to seek that out in a major way. It's it's distinctly different.
Chamath, last word, and then we're moving on to what could be the greatest science corner ever in the history of all in pod. Final words are up.
I think this is this is a great transition. We're about to talk about nuclear fusion. And my point is, I don't care about any of this stuff. Like I said
--
Yeah.
--
like, this is my point is, like, the if you if you take, like, an average person, okay, We are, let's say, awake 16 hours a day. And you know, if you take out the time with our family, David, the family is people that are related to you.
Look at that.
Can we DM Sacks those people one more time? So it has that.
We'll send you their names. But if you take that out and you take out, you know, exercising and, you know -- Could we also explain that
to Saks? That's when you increase your
heart rate. and sweatsacks. The point is that you have, let's just call it, 12 hours, you know, a functional executive time that you can apply to a problem. And you can break that down into these blocks. Right?
I would really love what is basically the smartest human and the most productive human of our generation to be filling those blocks with things that sort of like really transcend and increasingly and I agree that freedom of speech is important. Increasingly, those buckets are being filled with things that are very low level and hyper tactical and are distractions at best to the path of free speech. And so, I think that hopefully, he gets all this shit under control over there. He finds a good executive team. I would like to see him get back to landing rockets on barges getting to Mars.
Let's think. Getting difficult
to finish self driving. We're almost there.
Shamont definitely has a point. I I just say one of the reasons why we don't care that much about this issue is because I think something to understand that's important is there are different kinds of speech and different kinds of speech deserve different levels of protection. The fact of the matter is, like, business advertising is not as protected as political speech. Porn is not as protected as political speech. Political speech, speech criticizing the people on power, is the most protected category of speech because the founders of the country understood that the people in power will always try to insulate themselves from accountability by limiting that kind of speech.
But that is precisely the kind of speech that the former rulers of Twitter suppressed the most and show the least sensitivity to. So listen. I mean, is Elon gonna be the perfect content moderator? No. I mean,
nobody is. Nobody is.
But I do not believe that puts him in the same category as, you know, Vijayagotti or Joel Roth who showed no sensitivity for political speech. He has indicated a desire to restore freedom of speech, and I think they ultimately ended up in at the place -- I want
I want him to get us tomorrow. -- policy. I want him to get us tomorrow. Let's move on to Twitter handles.
Beth, science Corner ever. So according to sources, scientists work for the US government have achieved a energy gain in a fusion reaction
§03Nuclear fusion breakthrough and geopolitical ramifications
for the first time.
Not net energy gain. Get it right. We had ignition energy which is very different from Net Energy
Games. Okay. Hold on. I know that you're in the ads. I can't.
Please let the science nerd help you.
You have to you have to say it correctly so that people understand what you're talking
Let let me just make it even simpler then. Explain to us what Fusion is, Doctor Friedberg, and explain to us why this could potentially change everything.
We did this on a on a show once before, but I'll kind of do a quick kind of summary again. Basically, if you take atomic nuclei which are made of protons and neutrons, And they repel one another, right, because protons are positively charged, so they want to push apart from each other. So with enough energy and enough density, meaning that they're moving fast enough and they're close enough, they'll overcome their repulsion and and jam into each other. When that happens, some energy is released because the total mass of the fusion of those those nuclei is actually less than those nuclei when they're on their own. And so some energy is released, and that energy drives a a a chain reaction.
And so fusion is this concept that is fundamental to physics and fundamental to the energy driver of our universe. So the star in our in our sky, the sun is driven by fusion, and only about 15% of the mass of the sun at the center is dense enough to actually drive fusion. So the big challenge with fusion is how do you get these these atomic nuclei close enough together and moving fast enough that they'll actually fuse and release energy. And that's super hard. The reason it happens in the sun is because the sun has so much mass that the gravity pulls all those particles together.
They get close enough. They get hot enough. They move fast enough, and fusion happens. Boom. All this energy comes out and every day we're warm.
Now to do it on Earth is very difficult. But if we can do it, what happens when you fuse nuclei together is you don't release And you this isn't like a a radioactive fission reaction. You release energy that can be harnessed to drive our our systems, our our technology.
How is it done?
Yeah. So in the 19 fifties, you know, this was theorized, hey. We could do fusion on earth. We gotta get a really, really dense plasma, meaning the atomic nuclei and the electrons have kind of gone off the atoms. And it's just the nuclei spinning part.
You gotta get them to move super fast, like tens of millions of degrees Celsius. and you gotta get them really close together. So how the heck can you do this? So there's a couple of concepts to do this. One of which is called inertial confinement.
which is where you basically create a little pellet of the the material you're gonna try and get to fuse. And you put a ton of energy on the outside, and you compress really hard really fast. And when you compress it really hard really fast, then you can get it to be done in a perfect sphere, and you can get it to collapse on itself. very quickly without, you know, kind of shooting all over the place. Enough of those particles will come close enough together, fast enough, hot enough, and they will start to fuse.
Another way is through magnetic confinement where you use magnetic fields to create a really hot plasma, get it to spin around or to move, and then the magnet brings that super hot plasma closer and closer and closer together until all those particles are moving fast and they're dense enough that they start to fuse. So, you know, one is called magnetic confinement, the other one is inertial confinement. And so what we saw happen this week is at the National Ignition Facility, which is a facility that was built starting in 1997, and they've spent about $3,500,000,000 to date. They demonstrated a net energy output from the fusion reaction, go from a inertial confinement system. And what that means is they took a little pellet and that pellet was made up of deuterium and fritium, the atomic nuclei that they use, the particles that they use are deuterium, which is a proton and a neutron stuck together, and then tritium, which is a proton and 2 neutrons stuck together.
And the reason they use those 2 combinations is of all the different ways you could fuse nuclei together, this has the best energy output of any kind of reaction. Friedberg. Yeah.
What actually happened this time that made this work for what apparently, only $3,000,000,000, you said. You didn't say 3,000,000,000. You said 3,000,000,000. About a third of, yeah, about a third of what Sam Bankman fraud stole. We have done something here -- Yeah.
-- allegedly. So what actually happened that is so dramatic that we have a press conference, everybody's losing their mind.
So, yeah, I just wanna highlight one more thing about why this is so hard. You have to get such an incredible density. You have to get in incredible energy, so high temperature and high density that confining those atoms and not letting them escape and and, you know, basically dissolve before they fuse is super difficult. It requires so much energy in such a controlled way in such a perfect and precise way that all of the digital technology, the magnets, all the measurement systems, all the software, it's taken us decades to get everything that allows us to do this today. And now we're at the point that we may be able to start to realize production scale kind of versions of this.
So what they did is they had a small deuterium and tritium pellet and they've shown a 192 lasers onto this container that helped that little fuel. Those 192 lasers, the whole thing happened in a billionth of a second, The lasers pulsed. Boom. Here's an image of it. And as they did that, they, you know, basically x rays kind of hit the sphere, this little b b, if you will, BB kind of thing and compressed it.
And it compressed so quickly and with such heat, and it didn't dissipate because it was done so precisely All the lasers hit at the exact right time. Boom. This thing compressed. And then energy came out, and the energy that came out that was measured was one and a half times the energy that kind of went into that reaction. And here's a chart that that I'll show you from the national ignition facility which shows just how inefficient the system still is.
And this isn't even speaking to to Shamal's point, but basically, these guys lose 90% of the energy that they put into the the center of the system. Only 10% is actually used to drive the compression. The rest of it is lost and there's a lot of ways to improve the efficiency of the system from here. But basically, they put 2 megajoules in. They got 3 megajoules out.
And so it was the 1st proof point, production proof point in the 70 years that we've been theorizing about nuclear fusion. here on planet Earth that this is possible and it's real. Now this is these kind of inertial confinement systems. There are 33 private technology companies today that have raised about 3 to $4,000,000,000 so far this year to pursue several other technologies besides what the national ignition facility is showing to try and build production
ready versions of nuclear
fusion. And so these 33 companies are using a bunch of different types of tools, one of which is the Tokamak. If you show the image, I'll show you this
1. There it is.
Yeah. Tokamak, this is what we talked that is
the magnetic spinning thing that looks like Ironman's arc reactor, which I think they -- -- one based it on. Yeah.
Yeah. You create a plasma. You you basically speed up the hydrogen nuclei super, super fast. These these deuterium and trinity nuclei super, super fast. and then you use magnets.
And the magnetic field has to precisely squeeze the plasma squeezing it squeezing it squeezing it squeezing it. And if it's slightly off in even the tiniest way, Think about a a balloon. Right? If you put a pinhole in a balloon, everything escapes from the balloon.
Yeah. You gotta do a part.
That's how technically hard this is. You're basically trying to create a balloon with a magnetic field, and you're trying to keep the gas, and you're trying to make it smaller and smaller and smaller. And if any tiny hole emerges, the entire plasma shoots
out and it's done this. Is that what happens in your brains?
Like, when you're trying to hold in the wahoo anyway, let me ask this question then about the consistency of this, and then we'll go to Yuchamov. Can they do it consistently, or do you think this is like they got lucky once? or are we gonna be sitting here a year from now? And they're like, we put in 2 when we got out 6. So the And we did it five times.
Yeah. So so now we've proven that humans can do this. Okay? Which is look. I mean, I I wanna give you guys some and I I know kind of some of Shamov's concerns, which is how
production -- -- recreate the sun is what we this comes down to?
No. Yeah. But, like, guys -- No. I I wanna just say one, like, even close. I wanna say one important thing from a historical context.
all breakthrough technology starts out seeming impossibly large, impossibly expensive, and impossibly slow. The human genome project 20 years ago cost a
$100,000,000
to sequence the human genome. Today, we can do it in a couple of minutes for a
$100.
Okay?
Incredible.
The first computer, the eniac computer, had 500 flops of compute capacity. It filled a room It cost $8,000,000 to build. 20 years later, we had a mainframe.
And what are usually -- -- all the wrong no. This is all this emotional bullshit. You're using the wrong examples.
Okay. Let him finish then you go, Shamak. Good. Finish your sentence, Friedberg, and then we go.
And today, we have an iPhone that can do 2,000,000,000,000 flops of compute in your pocket. I think that what we're seeing with Fusion today is similar to what we saw with the NES computer in the 19 fifties. which is the demonstration that compute is possible, and now we're seeing a demonstration that fusion is possible. k. And a lot of folks have anticipated this moment and they've invested ahead of this.
Now I don't know if any of these companies that are currently kind of being built are gonna be production ready anytime soon. My estimate is that we will see production demonstration
--
Okay. -- of fusion in the 20 in the 20 thirties. So call it 8 years from now plus. and then you'll see grid scale scale up in the 20 forties. So this isn't something that's gonna happen next year or 2 years
for now.
What are you talking about?
Okay. Now, Chomat, your rebuttal? Oh my god. Knowing you're a huge fan of solar.
This is the most naval gazing head up your ass scientific bullshit I've ever heard.
Okay. Global.
A couple of points. Let's start with the basics. The first is that there was no previous technical turmoil.
being like, why are you angry at me? I'm not angry.
I find this so tiring hearing this. It's all syrup nonsense. He's right.
Yeah. Why are you?
Like, I don't get because I find
I don't because I don't find this intellectually honest. Okay. -- to find it visually intellectually designed.
Let's keep
the invoices.
Let me finish. Let me finish. k. When you talk about sequencing the genome there was no alternative. So you're right.
It was an enormous technical leap forward. When we built a computer, there was no analog. It was an enormous technical leap. And so you're right, we have a cost curve we don't understand. and then we iterate as rapidly as possible in all these innovations where we built an entire infrastructure to ride down the cost curve.
The thing is, fusion energy exists today. It's called the sun. We actually know how to capture it at virtually no cost right now. So according to the IAEA, today you can capture grid level solar energy for about 3¢ a kilowatt hour. That's as close to 0 as we've ever been and over the next 10 years their forecast is it's going to get to 1 and a half cents.
If you then want to store it and you layer in storage costs, we'll be at a whopping 3¢ a kilowatt hour. That's where we are today. And so I think that fusion does exist. I do think that this is an incredible technical leap to replicate something that exists. And I think that's where the intellectual dishonesty is.
It it does exist. It has been captured. It can be harnessed. And there is a positive energy equation just in a different modality that doesn't speak to these technically minded individuals. A couple of other points about what I saw.
I think it's incredible what happened. Okay? But just to make sure we're clear. This is a 192 lasers. the size of 3 football fields that consume 322 megajoules of energy.
which then ultimately delivered 2 megajoules to a target which then released 3. So this is why I'm saying we had positive what's called ignition energy. We did not have positive electrical energy captured. So, yeah. Could we figure this out?
Absolutely. Can we then shrink the 3 football fields down to something that looks the size of a laptop, we possibly could. Will it take 20 or 30 years possibly? But in the meanwhile, if the goal is unlimited costless energy, you're on that cost curve already.
Yeah. But why can't it be both? So you're you said I was being intellectually dishonest. What was
I You said dishonest? dishonest. Yeah. you're comparing this.
What what you're saying is right. Yes. You can get
--
You seem to be in agreement. Industrial. Like yeah. I I I just think that I think that you're trying to say that this is an entirely new thing. No.
It's a different approach to a thing we've already beaten and basically capture.
Let me bring it up.
What what I would argue, Shamab, and I think this is important. The the net energy you can capture on, say, a football field sized facility from solar is you know, a tiny fraction of the energy you could generate from a football field sized fusion reactor. And that's why the argument would be like, hey. when we were developing computers, hey. We have avocuses.
We shouldn't be developing computers. And I think that's that's the analogy I would use here.
This is why the cost per kilowatt hour is what the the levelized cost of energy tries to do. It tries to to normalize that argument away because everybody would say that. hey, hold on a second. You're gonna need plane fulls of this or boatloads of that. And people said, no.
What's the levelized cost of energy? How what is the cost per kilowatt hour to generate energy? And what I'm saying is that is an absolute scale and free is 0, and we're at 1.5¢. So I
here's here's what I would say once Jake had one
sec. Okay.
Come off. The opportunity here is not necessarily about cost reduction, it is about scalability. And if hydrogen is abundant, which it is on this planet, It is nearly infinitely abundant. We can take that hydrogen, and we can scale up energy and electricity production in a way that is unimaginable compared to solar.
And I
don't think that solar should be excluded. Solar is key today and should be scaled up, and I'm a 100% agreement with you. But the scalability to go a 100 x, if we wanna make a 100 times more electricity, I think we need fusion, and I think that it's feasible.
So I think we have reached a good settlement here. Chamath, you're saying, hey. Listen. We're getting solar down so cheap. We can solve
this problem. All forms of energy.
Okay. Great. We we are solving that So for our needs today and then what Friedberg is saying, but what if you had unlimited a thing that we can't even imagine. Beautiful. Now watch as I get Saks involved in a science conversation, he has zero interest in.
Mister David Sacks, If in fact, there was 100 percent more free electricity available in this time frame, the next 10 -- 100 x. -- 100 x. 100 x, the available energy. In other words, supply of energy just becomes flooded, and it's free essentially. What would be the geopolitical reaction on planet Earth in terms of this incredible rivalry we have with China and for humanity on a political basis.
Such a good question, J. C. Go ahead, Seth. That's a good question.
Here we go. Thank you. World's great spotter ATM.
While we let Friedberg answer
No. But you are the politics guy. Get in there. Yeah. Take a second to think it through.
--
already has thought about this. Let's I wanna hear his answer.
No. No. I actually wanna hear your are, like, you know, in in a world where, you know, energy becomes more abundant. David has a bit paying attention, guys.
This is what he's trying
to say.
You would just we just thought groups throwing with Tucker, Michael, get out of the list.
Can I just say
Jake, I'll I'll call your intellectual dishonesty and raise you a steel, ma'am.
Go ahead. Go ahead. I love you. I love you. You know I do.
I like you to have a
great night out. Monday night, a Sunday night. Great night. It's truck mater. I just wanna be talking about that.
I need to get
Trump together. Last week, he called me petty too. I think we're
--
Well, here here's what
I wanna be clear.
I I think that I'm just glad that you guys are fighting that mean sex.
Guys, please let me finish.
Okay. I
think that this breakthrough is really valuable. I think it's interesting to see that these kinds of scientific breakthroughs continue to happen in government sponsored facilities and not private companies. And I think that that's probably where a lot of these innovations will continue to come from because look at the scale of what had to be built, 3 football fields, and 322 megajoules of energy and a 192 lasers. This is really complicated expensive stuff. I'm an enormous fan of these kinds of scientific breakthroughs.
I want to be clear. I think that where I struggle is translating this into actually an investable area. And I worry that this is going to consume lots of money by folks that could otherwise put money to work in things that will actually pull forward our energy independence and energy abundance sooner and faster. So for example, You know, there are all kinds of things that we could do to secondary, turmeric, 3rd, 4th, and 5th generation batteries that aren't happening today. There are a bunch of things that we could do to actually create an infrastructure of green hydrogen.
And the the simplistic answer is we could do it all. But the reality is money is finite and we can't. And all I'm observing is I do think that more practical things that do have geopolitical ramifications sooner are not going to get funded because people do get enraptured by this. And my skepticism is that this is still in the realm of government sponsored research and is not really an area that for profit private companies can tap And so I would rather those 4 profit companies. For example, why combinator just today?
Put out something where they were, you know, call to action or request for startups in climate. And when you look at that list, those are really practical investable areas. And I just wanna make sure that the capital allocators that listen to this weigh those equally. I am glad I'm glad that the US government did this. I hope they do more of this.
But if you're asking me quite honestly, I would rather the next $10,000,000,000. Go into energy efficiency, HVAC, then fusion because a, fusion exists and b, I think it's going to happen at an innovative bench scale level by the government and not by a party.
Let me just let me just respond to that real quick. Timoth, I think that the idea of allocating our resources as a society should be done on kind of, you know, on a portfolio basis, 80% on the pragmatic near term 15% on the kind of next gen and 5% on the moonshot. And this maybe go starts to shift from the 5% to the 15%, maybe it's still in the 5%. But I don't see kind of over funding happening. So I'll tell you guys there was a survey done.
There's 33 private companies in fusion that are kind of fusion companies today. VC back 8 new this year. So the numbers kind of increased by 33% this year. And so far this year, those companies have raised around $3,000,000,000 to
$4,000,000,000. Which, by the way, is a fraction of what was done by 15 minute delivery copies from convenience stores.
Exactly my point. And and by the way, the biggest funding is happening in Eye Care, which is the largest construction project in Europe, And this is a $30,000,000,000 production scale fusion demonstration system that should be online by the end of the 2020s -- Government sponsor. government sponsored again. So to your point
--
I am a huge fan of government sponsored research, how we get finally
the 1st science corner Everybody braced themselves. It's the first science corner where David Sachs has a opinion. --
cherry sucks. Here we go. Come on. You can you can do it. Mister David Sachs,
What was your question? Your question
your your question was a little bit was was not a
very hard question. It was just -- Hold on coming in. What's the geopolitical impact if this does happen? A 100 energy value.
It's fantastic for the United States if it actually happens. And the reason is, if you look across the world, there's this thing in politics known as resource curse. where the worst governments, the most despotic governments tend to be in the countries that have the biggest natural resources ironically. So the countries that have huge amounts of petroleum or other kinds of minerals, they've tend to have pretty corrupt governments. And the reason for that is that if you're sitting on a giant oil reserve, you don't need to make anything else work.
You just fight over who gets control that oil reserve, and that's where politics ends up being. You don't need to create policies that foster innovation or attract knowledge workers. Right? You just basically mine that oil. So if all of a sudden you're talking about turning energy into a software problem or an innovation problem that looks a lot more like the software industry.
That's an area where the United States has a huge advantage. And, yeah, I think it would pull the rug out from under many countries all over the world in favor of the United States. I mean, it's a big if because where I agree with Chamath is this stuff still seems pretty far off, and it's still pretty unproven from a commercial standpoint. But I agree with Friedberg why not try investing in it and cultivating it and see where it goes.
Okay. Fantastic. This was a fantastic science corner where we actually engaged David Sachs. Which country?
Did you find anything to disagree with there, Jake Howell?
Alright. Take it easy. This I just wanna let
people know.
I think you you like that answer. Right?
Well, I I love all of your intellectual -- --
enough for you, or was it more
like -- -- your intellectually. I love to --
It wasn't stupid.
No. It's it's I was a steel person. Felt Silverish.
You felt silver silver manning, but I love what your angel actually on. -- silver personing. Yes. You're silver vaying. You're silver vang.
Was that a plat was that platinum gold or silver
per seal? You're in platinum with some diamond dust.
I think the fact that
§04Jason and Sacks's big night
you -- I just kinda just say -- --
spent a couple nights together this week because really
-- --
really does.
--
mood of the show. I mean, when you guys go out and drink together and have fun, Larry. You guys are -- Sax
that I laughed our asses off Sunday night. Can I just say, We Saxon and I had the best 48 hours together in a decade. This is Sunday night. It turns out Chris Rock and Chappelle are playing at the Chase Center. where Chabat used to own a piece of the warriors.
Right? And this incredible arena has this incredible show And, you know, me and Saks and some friends will leave it at that, go to the show. Our our bestie Draymond is at the show. So I text Dre, and I'm like, hey. You go and see Chris Rock by chance tonight with Chappelle?
He say, yes, sir. I said, hey. We're gonna go with a couple friends. Maybe we roll together, hang out after the show. We go.
And after the game after the show, which was incredible, we go backstage and I'm sorry, to the to the practice court. And we're hanging out with Draymond in the practice court with Dave Chappell. Dave Chappell and I start shooting hoops. David Sachs is talking to Chris Rock about free speech. Steph Curry comes out and starts giving Dave Chapelle and Jay Cow shooting lessons.
where Chappelle and I are bricking like old men, you know, you know, on a concrete court. All of a sudden, Steph says, hey, Jake, how you got it? And by the way, he's fan of the show. He says, you you're short every time. And just, you know, hit the backboard.
You gotta go long. Then he tells Chapelle that you gotta change this. all of a sudden, we start hitting shots like, you know, we're on
the warriors. -- threes. You're raining threes.
Raining threes. It was literally, like, cut into here. Were
were these midrange jumpers or threes?
I was -- Yeah. -- free throw line extended. Free throw line extended. Cut into here rain man and rain dance from along came Polly. Rain dance, Raymond.
Let it ride. Rain dance. Let it ride. I was hitting break after break, recipes Philip Sumer Hoffman. So then we're chilling.
And Saxon and I are talking to Dave Chappell. Joe Lakum, owner of the Warriors are there, the majority owner. know, as opposed to you being a minority owner, Shamatah, that's very helpful.
That's really -- No. No. I was speaking at -- The
only person who Rassmoor names is Phil Hellmuth. I mean -- Absolutely. -- didn't even
try to catch up. --
drop any more.
No. He's he's only got names. He's only got 3 names, Jack.
Sachs, am I leaving?
You want
to say it
so bad, but
I'm not gonna say it.
Not dachshund anybody. -- so rude.
There'll be zero dachsy.
Oh, like, not getting uncomfortable.
The small one.
I kid you not. Chappell comes over and says, Jacob. Fact? You guys wanna go to after to do a go see me do a show at, like, 1 AM at this, like, local comedy club with seventy seats? I said, word?
Yes. We go at 1 AM Chappell sits on stage. Smoking cigarettes and doing 92nd pauses and then having a beer and interacting with the audience and does a 2 hour set after doing this set with Chris Rock at the Chase Center. me and Saxon Draymond, hilariously laughing. The the stuff Chappelle is a genius.
And when you see his show and Chris Rock, by the way, he puts a tight set together. I mean, Chapelle's got this storytelling thing where he kinda meanders a little bit, and then he he hits you with it. But Chris Rock is just bang, bang, bang, bang, bang, bang, bang, extraordinary. Just two incredible minds at the top of their game -- Artists. Artists at the top of their game doing what society needs, but more importantly, doing what David Saxon I needed.
which was to laugh our asses altogether and remember our friendship. So it was a great night out. I wanna say to bestie, Draymond, Dave Chappell, and Chris Rock, thank you. the David Sachs Jake House bestie friendship has never been stronger. I don't know about Friedberg and Chamath.
That seems to be on the rocks.
Yeah. It's weird. We'll be in there. We'll be we'll be we'll be vacationing together next week. So we'll -- I
I love -- We'll hang up. -- feedback.
Yeah. Well, well, we are going to be. Whatever whatever's going on, we'll take a walk and figure it out.
Well, I
just wanna say, the alliances amongst the besties, people give us a bath.
I'll be honest. I got mad at Friedberg when he edited that Google bit to say the exact opposite of what he actually said. Well, you don't bring dishonest and disingenuous.
Yeah. Just beep that.
But yes. That is the thing that bothered me. I have to be honest. That's you playing to the crowd versus you being honest and telling what you think. Friedberg.
That did
-- -- can I alright. Let me put that in the form of question. Friedberg has your fame as the Sultan of Science because, listen, you nobody knew who you were outside of Silicon Valley before this.
Look. You you guys didn't impacted your ability to speak.
No. No. No. Not my stamp. Look.
I I'll be I'll be honest. And I'll speak openly about this. I had said that there could probably be a significant headcount reduction of, like, 75% at Google, and the business could keep operating. And I took it out. And I took it out because I have a lot of friends at work at Google, Google's a close partner of mine.
They're an investor of mine. And frankly, I just wanna be careful about that. It's not something commonly do. You know, as you guys know, I usually speak my mind pretty clearly, but I was just trying to be respectful. And that's the reason I did it.
You know? So that
was it. That that was fine. What I'm saying is not that. It's just that The part that you edited in actually made it seem like you were not saying that at all, but the opposite. I think if you had cut the whole thing, it would have been more honest.
So to keep that other thing in actually led the perception of the opposite. So you were triggered by that. No. No. No.
I don't have triggered. I'm saying, I think you should have your principal don't end up
very often, Jamath. Yeah. Like yeah. I know.
I think that we should just have a principle to not play to what the perception of what we say should be, especially if it means we could be saying the opposite of what we actually mean. That's all.
Intellectual honesty. is a besty tenant. It's a besty tenant.
I think so.
Absolutely. Besty tenant. Always and the other besty tenant, besties always come back together. If we have a fight, we always come back together. Sachs, can I -- I'm
still mad at you.
Yeah. A little bit.
No. I'm just kidding.
Didn't okay. Wait. Just --
But talking about hypocrisy, I mean so first
one gets something hurt. How do they -- Chris
gets up there, and he gives, like, right out the gate. He's attacking woke right out of the gate.
Swinging. Came out swinging like Will Smith.
Schug Smith, you mean?
Schug Smith. He took down Will Smith. The I mean, the Will Smith takedown, which you will see in this special. is so complete. It is just Chef's Kiss.
But how great was his scent? Let's say just give give Chris Rock his flowers. He
did he did he fillet and frick a say?
He did. But I thought the more important part of the set was the he came right out, like, calling out all this, you know, you know, older than thou, woke stuff. Yeah. And and there was that undercurrent Tyshapells set as well.
And, also, he said, listen. Words can hurt you unless you write them on a piece of paper from time to a brick. We these a a a bigger point right now, and this does tie into our first story, is I think comedians look at Twitter, as a place to get canceled, not a place to be part of the discourse. And that's a huge loss that's indicative of our society being broken. And it's incredibly important that these comedians be allowed to mock and to speak and to step over the line and challenge us as citizens in a free society, and we should cherish them and we should not even try to cancel them.
Let them cross the line. Let them say things that make us uncomfortable so that we can understand ourselves and our society better. And I just wanna say -- Why
can't you include Elizabeth TikTok in that?
Oh, do we wanna have a discussion
about it? I can go
up to the next conversation out and
--
What's the next
time I'm okay with mocking. I just don't start. You guys, you did so well.
Come on, man. Go.
Here we go. No. JKL, cut it out. Alright.
Well, we have 2 more science corners to get.
Oh, really?
If you know what? I mean, I just -- No.
Let's talk about the Coupa deal. And, Zach, this is right up your alley. Have you
§05State of the markets: Coupa acquired by Thoma Bravo, startups at all stages seeing heavy valuation reductions, what LPs are thinking
--
I'm available in connection to it, to be honest.
Oh, really?
The thing you guys asked is, like, you know, what Signal will Elon's moves at Twitter be for the rest of the tech industry?
Mhmm.
I think the biggest wake up call is to actually PE Companies. So if you played this out and you think that Coupa is, you know Explain more campaigns. please. Coupa is a is a software as a service company that does revenue management, I guess. or expense forecasting or some something in the financial realm.
I don't particularly know, to be honest. But anyways, this is a company that, you know, was off 70% or 80% from the high like a lot of SaaS companies were when rates started to go up. And they got this offer from from Thoma Bravo. But here's what's so interesting about this deal. If you think that, you know, these guys bought a company, I'm just gonna make up a number.
at 20 times EBITDA. Right? And and you see Elon at Twitter and you think, well, wait. maybe we can't cut 75%, but maybe we can cut 50% of headcount and the company can still do well. And you take half of the expenses out of the business, all of a sudden, you know, if you're EBITDA doubles, you're actually buying it at 10 times.
So I think the thing that is the that is the real insight Here is twofold. Private equity can still put out a lot of private credit to fund these deals. And SaaS companies are perfect because they have huge free cash flow. Right? So instead of funding it based on earnings, they can fund it based on ACV and ARR.
So private equity will be super active. And 2, All these rifts basically show what the efficient frontier is for the number of employees you need to run a company. And if you can cut 50% of the headcount, Private Equity folks will do that. And so I think Coupa is like the canary in the coal mine. It is the beginning of what I suspect is a title wave of PE sponsor deals in Tech Companies.
largely SaaS, but may go into other realms.
Yeah. Recurring revenue.
They're taking advantage of these two things. Tap to private credit markets and finance it based on ARR? and then fire 50% of the team and double earnings capacity. Saks, your thoughts.
So on on Coupa, I thought the most interesting thing was just the we we got a public comp. Well, we got a comp on what private equity is paying for public companies right now. So the deal happened at an $8,000,000,000 valuation. That was a 31 percent premium to the public price. It was 8.4 times next 12 months.
revenue. And on a trailing basis, it was about 10.4 times the last 12 months' revenue. And by the way, all the comments were around how what a rich price Toma Bravo was paying. People generally thought they're paying a premium to the valuation.
So -- By the way,
Saks, it was 77% premium before the rumors came out that this was happening. So it's a pretty good premium.
Yeah. Good point. And there
was and there was a there was a bidding war with Vista. And so it was a it was a really rich kind of deal that that got done here.
Right. So so my my point is that people thought this was a really rich deal, and yet the valuation multiples are so much lower than what private company founders expect. So remember, last year, at, you know, the peak, founders were thinking a hundred times ARR was normal, a hundred times. And, you know, you could run roughly say, you know, ARR is is roughly equivalent to next 12 months revenue. It's not perfect, but it's roughly the case.
So these founders were expecting evaluation multiple ten times what the public markets are paying. And the public more and and and, actually, the the public markets are are are half of where Toma Bravo was in this particular deal. So the public markets right now are valuing the median SaaS company at about five and a half times. and a high growth wait. That'd be for, like, a 20% year over year growing company.
And they're valuing the high growth companies that may be eight times, you know, until RAVO did this at 10 times. So that gives you a sense of what the ballpark is. And these are companies that are already public. They're at scale. They're doing roughly a
$1,000,000,000
of ARR. they have already kind of won their category to some degree. Whereas private companies are subscale, they're you know, typically, you're talking about companies with 1, 5, 10, usually under $20,000,000 of ARR. They are they're not derisked. There's still a ton of risk.
We've seen many many SaaS companies fizzle out and plateau at 20,000,000 of ARR, never get to a 100,000,000, never mind a 1,000,000,000. And yet these founders think that they're entitled to, you know, even in this market, 30 to 40 times ARR. No way. I mean, like, it's getting to the point now where, you know, maybe it should be 10 times, 20 times like Max for and that'd be for a company that's growing two and a half, three x year over year. So I still think that like, so I think basically what we're seeing here is even a good scenario, like a Coupa acquisition that was done at a premium, like, it's still a wake up call to the private markets that the valuations are still completely and utterly out of whack.
Yeah. Let me ask you a question Sachs. So this company was growing 45% last year. They're growing 35% this year, and they got this multiple Why is it not worth a significantly higher multiple if a company is growing two and a half to three x, which is
250%, 300%
And these guys are only growing
35%.
Sure. I mean, it it it is, and that's what you're paying a premium for. Yep. But so the so the the here's the theory of it is that if you can invest in a private company that's, say, tripling year over year, and they can do that for another 5 years or whatever -- Yep. then your -- You're
paying for that
you're paying for that outcome in a couple years. Right?
You're paying -- Basically. Well, think about it. You're paying
for that outcome in a couple years.
Well, you're paying 30 times today and it triples next year, you're only paying 10 times next year. And if it triples again, you're only paying 3 times. So if that keeps going, that's where your arbitrage is. But here's the thing you have to weigh against that is that these early stage private companies, many things go wrong.
Yep.
And they hit a plateau, they fizzle out, or their growth rate starts to the bigger they get, the harder
it is to grow. -- be priced at a discount, not a premium because there's risk.
there's more risk. They're growing faster, but there's more risk. But, also, it's very hard once you get to a bigger number of ARR, 50, a100,000,000 of ARR, it's extremely difficult to be doubling or tripling year over year. Let
me just point one thing out. So I looked at the numbers on Coupa. I think they had about a
170,000,000
of stock comp expense in the last 9 months. So those are employees that are getting a $170,000,000 in compensation in the form of shares. So they get those shares. They can then sell those shares and get cash for them.
On the public markets.
Pay and then on the public markets and pay their bills. So when a company like this goes private, for those employees to just remain at their baseline comp, that stock based comp needs to be replaced with something else or else they're seeing their salaries reduced. So, you know, there's this balancing game when these companies go private in terms of how do you give them the comp that they're earning to keep them engaged in the business?
The answer is we don't.
Versus no. But -- You let them kind of make them quick
because you wanna do a riff anyway.
Right. So, I mean, do you but for the people that stay, Right? So so there's a balance because it's not just, hey, cut the OpEx. You have to cut the OpEx including stock based comp. And this company generated about a
$100,000,000
sorry, $210,000,000 of free cash flow or operating cash flow in the last 12 months. Yep. So if you if you take out the stock based comp, these guys are actually breakeven or losing money roughly. Yeah. Breakeven.
Yeah. and breakeven roughly. So there's a real question mark on this business and businesses like this type of private where if you actually cut the OpEx and you cut the salaries and you cut the headcount, But you have to find new ways to pay people because you've been paying them with stock in the past. How do you kind of bridge that gap? And I think that's probably a little bit of the balance and the art of what these guys do well.
Jamath, if I may, can you explain to the audience what a private equity firm's expectation is in terms of return when they buy a company like this and then Saks, I saw your tweet that you wanna feature and you'll go next. Go ahead, Jman?
Well, I think it's changed over time, and this is what's so powerful about the private equity industry. Look. You have to think about what their incentive is because it kind of guides the outcome. Early on, they were very much like venture capitalists. They were out in the edges of risk taking, doing all kinds of very difficult gnarly deals.
So if you look back in the history of private equity, these huge crazy deals like RJR Nabisco Or TWA Airlines were the 1st of the industry. and they reaped enormous returns, but there was a lot of risk. And it required very heavy handed management. Oftentimes, what that meant was firing a lot of people. Over time, private equity has gotten institutionalized and they don't generally Feature themselves as a place to get the best necessarily returns, but they are places where you can put enormous amounts of money where the likelihood of loss is extremely 0 and you generate very good rates of return.
Now again, this depends on whether you want to look at IRR or DPI, right? So a lot of people will market IRR. which you know I think is kind of like a game able metric, but you know those IRRs can be 20%, 25%. If you look at DPI which is really how much cash you get back, you know, private equity firms can generate 1a half to 2 x of the money you give them. but they do it consistently, and they very rarely lose money.
So all of that is important into understanding what's going to happen in this cycle. These folks are going to buy a ton of these private software companies. I think that they are going to fire lots of people I think they are going to make these companies run hyper efficiently. And they will make sure that they generate that 1.2to1.7x that has been historical, very rarely will they lose money in these things. By the way, that's gonna mean that a lot of these other companies will have to reset valuation So you saw yesterday check out.com went from a $40,000,000,000 valuation down to
11.
You're seeing some companies only go down 10% or
15%. But it's all profit. Isn't it Shamont? Isn't this just like what happens in real estate where --
Beginning of this process?
Yes. because in in real estate, my understanding, having a lift of these Booma cycles is the person living in the home still believes their home is worth, you know, this incredible evaluation. And then the people who wanna buy it are like, that doesn't match reality. And then the real estate brokers go back and forth trying to get people to, you know, go through this messy middle and come to true price discovery. A private company, it's hard to get true price discovery until they're on the brink of insolvency.
They don't have the money. Right. Well, we
we just got some data on that, actually. Can we put bring this COOLI data in? Yeah. Yeah. So Cooley looked at
-- A law firm in Silicon Valley?
Yeah. They're a prominent Silicon Valley law firm. They looked at a 1000 deals over the last three quarters of this year. And what they saw is that your the later the stage, the bigger the valuation correction. So series d rounds went from 3 and a half 1000000000.
to 527,000,000. That's an 85% -- Oh. Yeah. That's an 85% drop. Series c went from 502,000,000 to 130,000,000.
That's a 74% drop. Series b went from 164 to
90.
That's a 45% drop. And then series a went from 58 45. It's only a 22% drop. There's just less room to compress there. But the point is that series b roughly a 50% drop series c roughly a 3 quarters drop.
And series d, roughly a, I would say,
85%,
yeah, 1 7th drop. So I think founders right now are they're just, like, a little bit delusional about this money they raised last year. They're still way too anchored on last year's valuation. And if only they would think in terms of this capital they raised last year, in terms of of its real dilution in terms of what the company is worth now, I think they'd be treating it more more precious. So for example
--
It sucks.
Yeah. For example, hold on. it's like
they won the lottery, and they they don't wanna they don't realize they won the lottery. I had this conversation with the founder.
This is the only money they're ever gonna see is the bottom line, and they're like they're gonna win the lottery every year. So for example, let's say you take a company yeah. Let's say you take a company that raised 200,000,000 last year at 2,000,000,000. So it was 10% dilution. So in their heads they're thinking, oh, well, this isn't that expensive, like 10% dilutions around the era.
But really, probably the company is worth maybe 400,000,000 now. Right? because it's gone down
80%. Yes.
This 200,000,000 of your 400,000,000 is half the value of the company.
Yes. And you're squandering
it you're squandering it at a rate of a 100,000,000 a So you're basically burning up 25 percent of the value of your company this year and the next year. And then by the way, you're gonna be in Christ's for that because you're probably
It's like a lottery winner buying like a giant super yacht.
I had had an observation that a lot of the investors that sit on the boards of these companies they have an incentive to not see those valuations come down too quickly. Do they not? And so there is this sort of, like, interest in, hey. I don't want you to have to go reprice the company or do a down round because then my portfolio gets written down. And then I'm in the middle everyone's always in the middle of a fundraising Michael with LPs, and then I'm gonna have a tough conversation with Meli LPs about my my values.
So do you not see VCs and investors playing an active role in trying to keep the valuations propped up to some extent, particularly where they have big markups, 100 either by extending bridge rounds or doing other sorts of you know
--
Look. Nobody nobody likes to go through a down round, and that includes founders and existing investors in the company. That being said, we're not talking here about new financing conversations. What we're talking about is advice that are is happening in board meetings. And you know, maybe other VCs aren't pushing as hard as we are.
But the advice I'm giving in board meetings is what I'm telling you publicly today, which is This is the last money you may be able to raise on attractive terms. If at all, you need to treat it much more preciously. The world has fundamentally changed. And by the way, we haven't even gotten into what's coming. The demand contraction that's coming next year
-- Explain what demand contract contraction is for the audience, please.
Okay. Look. There's gonna be 3 major sources of slowdown for software companies next year. Number 1, new business is gonna dry up companies are just gonna be spending a lot less money next year because they're all cutting costs. So you should expect your new business to be roughly 50% of what it was.
Next year, it'll be 50% of of what it was last year. That's my rule of thumb for most companies. New business down 50%. Number 2, churn is gonna be higher. We haven't seen that much logo churn yet, but next year, a lot of companies are gonna start going out of business, and it's gonna happen over the next 2 years.
So you're simply gonna see logo churn rates, say, among small businesses go from, like, a historical norm of 15% to maybe
25
or 30. In
other words, your customer
The logo goes poof.
Yes. That's what a logo means. Yes.
Yes. And the actual entity yes. Logo churn means the energy doesn't exist. Then you've got seat contraction, which is these companies are not hiring as fast. In fact, they're doing layoffs.
So they're simply not gonna buy as many seats of your softwares you need to in the past. For the last decade, we've had a tailwind, an enormous tailwind for software companies of seat expansion. which is every year your existing customers would buy more seats of your product for their new employees. Now they're actually gonna have fewer employees or maybe headcount freezes. So they're actually buying
fewer seats. By the way, if you if you take all those 3 things, the deal of the century was Figma selling to Adobe for 20 Builders. Because if you take those 3 things, I mean, oh my god. They just absolutely top ticked before any of this stuff was known.
Totally.
So today, Adobe could probably buy this thing for, like, 7,000,000,000 instead of 20,000,000,000. So does that
mean they try to do a breakup fee and get out of the deal? I thought if I was if
I was Figma, I try to close this thing ASAP and get that money out. Yeah.
Yeah. You're right about And and by the way, what I'm seeing from founders is that they still want to grow a 100% plus over the next year. The problem is that the headwinds are gonna be intense. So if if you're flying a plane and the headwinds are extremely intense and you try to maintain your speed, you're gonna burn an enormous amount of fuel. You're gonna be incredibly inefficient.
Yeah. It's better to basically just moderate your speed let the headwinds basically pass. We're gonna have major economic headwinds for the next 4 to 6 quarters. Call it year and a half. it's okay to have a slower growth rate.
Preserve your cash. Don't burn up your
fuel. Bunker down.
So what we're trying
to do is get -- Down the hatches.
We're trying to give permission to our founders. to grow at a slower rate because they feel this enormous pressure from their VCs to grow at at at insane rates.
Can I build on this? I think Friedrich said it very well. The Scan Adventure Capital is demonstrated in the following chart. This is using Cambridge and our friend Brad Dersner help put this together. So what is this?
This goes back all the way to 1997 and the gray bar is what venture capitalists share with their limited partners as to how well they are doing.
what's called? -- quartile of venture capitalists.
And this is the top 25%. Okay? So this is this is a venture capitalist and, you know, our our returns have been consistently top quartile. So instead of cherry picking anybody else, I'll just use us, but it could be Sequoia, benchmark, you name it. We would go
back. We're in there.
launch, you would go back to folks craft, you would go back to folks and say, hey, guys. The total value of our portfolio is three times your money in 1997 vintage. Okay. It it was four times your money in the 2010 vintage. Feels really good.
But again, the job of the venture capitalist is to convert the gray bar into the purple bar. And historically, there has been a decay. So for every dollar of gray bar that you show, you typically only get 73¢ actually returned to people. Okay?
The for the value, the book value versus you.
The valuations that you get when you sell your company or goes public end up being
73%
of what you marked at the peak, what you said they were worth.
Exactly right. Exactly right. And the actual value of this purple bar, going back Feno 30 years is 1.7x. So just to put numerical numbers on this, if you were a venture capitalist, you would raise a $100 fund. At the peak, you would actually show that that $100 became $200 and about
$28.
But when when push came to shove and when it was all said and done, you would return a $170 back to your investors. That's the rough equation. So what's the problem? Well, the problem as you can see in this chart is right around
2015.
which is all of a sudden, you know, what we've started to see are these continually elevated gray bars. Yes. This stuff is worth 7 times, 6 times, 5 times. But we have not seen the purple bars catch up. Now some people will say, well, yeah, but you have to give it time and, you know, this is how we look other vintage look times.
And all you need to do is do what's called a regression. And you need to regress these things to the mean and make the following assumption. Assume for a second that this time is not different. Assume that these historical averages 2.2x,1.7x holds. Well, that's what the black line here shows.
You can calculate the area above the curve as the value at risk, right, the amount of money we will destroy because of all these shenanigans that Free Birch just talked about. propping up marks not willing to look at actual market clearing prices. Well, if you do the math, the sum of the area above this black line is almost a $1,000,000,000,000 around the world, and it is about
$600,000,000,000
for US Venture Capitalists. This is the dynamic that the private equity industry is going to prey on. So if you saw Thoma Bravo just close to
$32,000,000,000
round, Vista's raising a $20,000,000,000 round. Everybody's stepping into tech. They are going to destroy those gray bars.
Would you describe that as bottom feeding?
No. No. Why not? They are the rational actor
--
Yeah.
--
who is finding the true market leader. I think the private equity industry is unbelievably precise and talented in being -- Okay.
--
compassionate and telling us what these things are worth.
They're cutthroat. They're logical. No.
No. It's not that process.
I'm gonna say that opportunity for the private equity industry is gonna be created by ProFligate Founders. and look, you could blame VCs for the high marks last year as well. They were profligate too. But look, if you're a founder if you don't start acting in a more capital efficient way and preserve your cash, your company is ultimately gonna be owned by a private equity firm, and they're gonna make all the money.
Well, here's Because
because because because hard because when you sell to them at a low price, all you're gonna end up doing is paying back the liquidation preference. And then that private equity firm, that will
be willing
to do or less, but that private equity firm will be willing to do what you were not willing to do which was simply act cut your burn, cut your costs, and act in a more capital efficient way. And they will end up making all the upside for your decade of hard work because you got basically addicted to venture capital on the high evaluations and refused to, again, adjust to the regime
change -- I agree.
I'll I'll give you an alternative. I'll give you an alternative. The alternative is that the majority of acquisitions made by Private Equity Firms are not actually pure acquisitions. They're bolt on acquisitions, meaning that these are companies that are added to existing platforms that they own. So this acquisition they're doing of Coupa I think it's very likely over the next couple of years, you will see, like, the playbook and private equity includes not just cost cutting, but also synergy building.
And they typically do bolt ons and add ons, and this happens across all private equity platform deals of new products and services that can be sold through the existing sales channel, the existing customer base, and as an add on to the existing service or product that's already offered. So one of the one of the things that I think you may see in Silicon Valley over the next couple of years is a rationalization away from funding feature companies and thinking much more carefully about what can be true standalone product companies. Sure. many of these companies that have raised a ton of capital likely better equipped to be a feature of another platform than they are to be a standalone platform company of their own. And that's where the majority of these acquisitions will likely end up going
--
Yep. -- in in in the private equity landscape. And they will be vacuumed up and attached to existing platforms that these private equity guys are building out And by the way, just look as an example at what Oracle did over the years, what Salesforce did over the years, what Google did, so many of these companies -- BOLT on acquisitions.
--
by bolt on acquisitions, by building us tail channel, building a platform, and then adding on top of that. And I think that
a lot
of these guys are gonna try and mimic.
Two critical points. Number 1, what about the bottom 70 percent of VCs. Oh, wait.
If you show that chart just for one more second, I just wanna remind everybody that is the absolute cream of the crop VCs. This is the best. These are folks I mean, again, I'll just say, us Sequoia Benchmark. We've consistently been just crap your time.
Thank you.
Launch Craft. These are these are top short term returns. Thank the lord. What about the bottom 75%? They're
not gonna
be able to raise funds, man. It's over. A lot of these people who raise first time funds in the last 3 or 4 years.
It's also the company's exact set because, like, Like, it's like that today is the now is the moment for the sober founder and the sober venture Calacanis to sit and say, what is the real valuation?
What do
we need to do to make sure that this company has a chance? Because what Saks said is so true. Otherwise, all these profit dollars will be made by the private equity force.
In order to win today, you're gonna have to grind. You're gonna have to work 50, 60 hours a week You're gonna have to be absolutely embrace the age of austerity, and you're gonna have to focus on your customer, your product, and your bottom line the age of excess is over. If you're not working 50, 60, 70 hours a week, you're not gonna cut it in Silicon Valley. Also key second point, propagate extravagant or wasteful in the use of resources just so we get the word of the day from David Sachs. That's David Sachs's word of the day.
after a a very powerful bullwhip.
This is this
is -- That went crazy. Did you see it, Tremok? Bullwaver went -- Bullwaver. -- went we we went viral.
This is I think Elon's biggest non obvious impact in this moment.
Jay Kal, here's your one answer to your question about what happens to the bottom
75%
of venture firms. It's equivalent to what happens with the, you know, kind of this is the bottom of the top, the slide I just shared. It's the one we looked at a few weeks ago. And I keep referring to it because it's just such a staggering, like, demonstration of what people call the power law, which is how, you know, kind of excess returns accumulate to minority of investments. So just a few investments make up the bulk of value.
that the, you know, market cap of 43 percent of companies that have gone public since 2020 is
$750,000,000,000.
The market cap of 3 the other 300 is only $26,000,000,000. And the cash that went in to the $750,000,000,000 is a 136, and the cash that went into the 26th is a 107. And so the cash that went in to generate that 26,000,000,000, that 107, that's your bottom 50%. And the top 50% put in 136 to make 750 And I think it gets even narrower as you move further up to that top quartile. So, you know, it's just -- I
can tell you what LPs are saying. because I mean, it's a hard business to
try to shift. This is this is the companies that went public. So this is also of the top company of the top funds and the top companies that were actually able to IPO And so it highlights how much of a power law actually plays through. And so the majority of these companies, as in Chamath, even in your chart, you show the top quartile. The bottom 75% or the bottom 50%, I've looked at this data as well of those various vintages are below 1.0.
They lose money for their LPs. poke consistently. And it's a it's it's a cycle.
And so
what ends up happening is the next generation comes through. NLP's, they make a portfolio of bets. And they hope that they make enough bets in the right VCs that their portfolio generates greater than, you know, market returns greater than, call it,
15, 20%
target, 15% target. But they're gonna expect the majority
or not. I I have an LP report. I'm I'm out there raising launch fund 4 right now, and I moved from, like, the accrediteds, the individual investors
Oh, yeah. because you're -- Yeah. I'm not 5 or 6 feet.
Yeah. Yeah. So I'm I'm publicly raising it. And I've moved on from individual investors, $45,000,000 in commits after 5 webinars. Amazing.
Now I'm talking to no. It was amazing. It's just 5060 is gonna change the entire industry. Letting the the, you know, the masses have some access to this capital. And this opportunity, Accredited's and Cubias is gonna change the world, I believe.
Do you have to deal with everyone one of them or is it easy to administer?
It's incredibly complex because you have a large number of people and they all wanna talk to me. So I did webinars, 5 webinars, and it resulted in 100 of 100 of commits for $45,000,000 from the side.
You'll be able to get all those capital commitments drawn down when you need to. Like, you have to go ping a couple hundred people and get them all wired money. Do you remember us?
-- operations people, and we only do four. We we like that.
One thing
one thing you may wanna do is, like, for for these smaller slugs, is you can prewire you can set up an escrow account where you prewire a 100% of the capital.
Yes.
And then you also don't have to you take it down when you're gonna deploy it so you keep your IRR correct. we're actually looking into those solutions. I'll talk offline. But I just did my first two meetings with endowments, etcetera, fund to funds. The entire discussions right now are around What is your secondary strategy?
How are you getting in earlier, not later? And how are you building a larger position? it is and and even like some of the QPs who are sophisticated and are, you know, are in over 10 venture funds. The entire discussion, governance of these companies, Are you taking board seats or not? How early are you getting in and building a larger position over 10%?
And what is your secondary strategy, when are you gonna start taking some chips off the table? So the and and I gotta say, if you're an LP who didn't sell into the upmarket at all and you're on your first fund, know, and you had all these great marks and they're getting they're coming crashing down, they're not gonna deal with you. They just had too many options of top funds in the courtroom. --
think they've they've started to come down yet. I don't think we know what the top quartile's really gonna look like over these last few years. I think that's gonna take
4
or 5 years to really sort out.
Yeah. Of course. Yeah.
So I think Explain
why Jamaz just so people understand. Yeah.
I understand. Well, I I think I think that there are lots of valuations that have supported huge TV PIs. These you know paper gains that have allowed venture funds to raise enormous amounts of incremental capital in new funds. And so they are going to try to wait as long as possible before they're held accountable for that. And the best way to do that is to not change the valuation.
And so it will happen slowly. It'll be a trickle of these things. And I think that takes probably 4 or 5 years for it to really sort itself out. But In the meantime, companies will still need to get financed. Companies will still need to get built.
That's why I think, like, the public markets, I think what Saks says is true. Giving us a signal of what these true market clearing prices are. We'll eventually slip into these series d or e companies because venture capitalists who has now taken some big write downs in one part of their portfolio, I suspect will now be very open to selling to private equity for another part of their portfolio so that they can return capital. Totally. Totally agree.
Yeah. It's gonna be rough out there. You guys watch White Lotus?
Yeah. I
§06TV catch up, worst person in tech bracket
just started season 1. I'm it's like a 3rd episode in.
Okay. We'll see.
What a treat.
We won't say anything, but how great was season 2?
Oh, the wrap is awesome. It's just incredible. The last
the last two episodes were extraordinary. Yeah.
Let's not say anything.
--
and I just finished watching all of the handmaids too. which I will tell you is that is a fucking stressful show. It's like it's like you're putting in work. When you're done those episodes, you're like, oh.
A more labor. You know when they said this emotional labor? Watching that show is like -- Oh my god. -- it could could it could not be more sadistic and insane. Oh my god.
It is brutal. But you can't look away. Incredibly well done. Alright. Listen.
This has been an amazing episode and This is news for the other besties. Friedberg and I have been secretly collaborating.
No. We have Come
to a plan that we're working on a joint plan for all in summit 2023 because we are both helping each other out. Our secret
project I'm ready to tip, guys. Oh. Gotta just Love it. The tip.
Are you are you oh, the tip. I don't
even know.
That's it. That's we don't need you, Saxx.
I'm a permanent, no.
Perfect. That's all that's fine. We know that.
You're blocking now. I love that I have Saxe as my anchor on this one. I can always float back that
way anyway. -- flip, but Friedberg and I
I'm like -- I'm not fucking close floating in the air right now.
-- root of
all evil.
Totally.
In this case, but power and influence is something that you that Friedberg that celebrity, Friedberg had so much of a good time at all in Summit 2022. that his hatred of my producer fee is less than his joy from the event, and we are collaborating on Supa Cup. Yeah. Supergut, I have made up for my producers' faith by using Supergut and becoming a big proponent.
debate. I've used the promo code twist.
--
has he paid you for that? That's the quid pro
quo on here.
Yes.
You listen. No conflict. No interest. --
to go
along with doing the -- No conflict. No interest. super got bars and amazing. So just abuse the double bokeh.
The only the only person that you haven't taken money from is SPF. I mean, pretty much you're
-- How come on again? By the way, can I point out on the most loads from person in tech bracket.
Oh, wait. Can we go through it? How about this?
Do not name the com do not name the podcast.
I'm eliminated already, and the now.
This is bullshit.
Oh, yeah. Anchum up is on it. win. No. I thought you won.
No. He lost. He was posh again. Let's pull
up the bracket. Do not mention the podcast.
completely hung up.
How did Sandy get on you? Not I I only want the bracket. Do not mention the pockets. We're not giving them any Just black out that in post. I want you to black out the logo.
-- easy. I don't wanna give these guys any credit. So here we go. Okay. Yeah.
It's cool then. -- person in tech This is Shamat and Sacks, we wouldn't say it's a b podcast that's run by literal socialist.
Oh, well, look, Shamat's got a very tough draw. I mean, of course, you're used to SPF. I mean
--
Of course, I'm gonna just yeah.
How do you that's ridiculous. That's just you know what? -- of the basketball. We went up against the warriors with KD. There's no way to win.
That's tough. that's a tough draw.
You have no shot. You guys have no shot on
the side.
What about Saks Draw? Easy Draw, Saks versus in the most hated percentage. -- by 1%. That's bullshit. --
who Andy Jassy is. I don't
care that. Andy Jassy is a complete gentleman. Andy Jassy is delightful. I could
be honest with you.
Oh, hell. David Lachman compare it
to Amber Chasson. Just improvise.
That is I wanna recount. No. I
want it to win. Sachs.
I wanna recap what they said. They mentioned
Union busting.
This is election interference. I get hold on a second. I get this more. -- in.
I guess, it's worse to be a Union busting Amazon CEO than a reactionary conservative investor.
Yeah. I don't get it. This is ridiculous. I just wanna point out that the biggest travesty here is that I did not make the list. There aren't you know what?
These guys are trolling me. These guys shout out to producer Nick who just retreated With the elephant.
Basically, you basically pick the, what is it, the 30 most relatively well known people in tech. That's what Tilt's Shake this is terrible.
Worst person in tag. I don't make the list. I am gonna double down this year. --
constantly ciao telling to the media. You're you're -- You're right. You're right.
I need to be horrible. How about that stuff? I need to be a worst human like Yusex. I'm gonna try my best this year to work against humanity and society and be more loathsome than you. really gonna redouble my efforts.
Obviously, I can't catch up with Shamab.
You buy into all their phoneme areas?
I'm too kind. I got a big heart. I care to have empathy. --
buy into all their phoneme areas.
My empathy. But here's the problem. These guys left me off on purpose. If you can pull up the
replies -- -- between Andreessen and Bill Gates,
Oh, Andreessen. That's a lock. That's Andreessen. Of course. Wow.
Enjoy some questions.
A a 16 cofounder and man of terrible teams.
Mark entry is a world class shit poster. Bill Gates is hiding somewhere. Nobody Bill Gates doesn't tweet. Market drinks and blocks, unblocks, he shit posts with the best of them. He's up there.
I mean, that guy's a a dark meme lord. Any other I mean, I really I really sympathize with each month. That you got your ass handed to you there. That's just that's like going up against the dream team.
Hold on. Hold on. down, bro. You're not even letting us read these things. Alright.
Give me a second. Wait. Don't show this one.
Twitter, former idiot CEO versus Airbnb CEO making Oh,
god. It's so cruel.
Oh my god. That's so well.
Brian --
Hold on. -- this weekend. He's a great guy. guy who really tried to make us believe Web 3 was going to happen versus World coin and opening Of course,
critics and wins, much more loose than than Sam Altman. Right. Oh, yeah. Go on. Alright.
Listen. Friedberg, you didn't even come I I wanna just congratulate Friedberg on an amazing, the best science corner ever, an amazing product and supergut that has helped me lose weight. I feel great. And for You know, recovering from whatever illness you had? Alright, everybody.
I love you besties. I'm doing -- Shout out to David Sachs. Love you guys, and we'll see you all next I'm on the all in podcast. Love you besties.
Love you, guys. Bye.
We'll let your winners ride. Rainman David Sanders. And I said -- We open source it to the fans, and they've just gone crazy like that. besties our call. I don't have 13.
That is my dog taking it. I'm missing your driveway.
You should all just get a room and just have one big huge ordeal because they're all just useless. It's like it's like sexual tension, but they just need
to release that amount. What? You're a thief. What? What?
Where did you get mercies I'm going