Spread trading big tech, capital allocation, Zillow's misfire, Progressives suffer losses

The episode opens with crude banter about skin-to-skin sleeping with a newborn, with one host joking that the baby roots toward his hair-covered chest. The hosts riff that they will save the story for the child's wedding. It is pure comic throat-clearing with no substance, setting the show's self-mocking tone.

The hosts then launch into exaggerated self-introductions, each describing his appearance, pronouns and ethnicity in a parody voice. One calls himself a pasty, balding, obnoxious man; Chamath gives joke pronouns and claims to be there to discuss internet security protocols; Friedberg delivers a mock cosmic identity about being the lost gases of an early Earth. The bit is a running joke rather than any statement of fact.

A host explains why they are doing the intros this way: a clip had gone around of Microsoft employees presenting new developer tools who, without explanation, described their physical appearance, pronouns, ethnicity, skin tone and hairstyles, which much of the internet mocked as wokeism. He says that when called out, Microsoft claimed it was for visually impaired viewers, which he argues makes little sense, since a blind person would not need to know someone's race or even what a color like blue means. He adds that presenters also recited the names of Native American tribes said to have once owned the campus land, which is what he was lampooning in his own intro.

The hosts disagree on how to read it. One calls it woke capitalism out of control, and virtue signaling that ignored the week's election results. Another defends it as a reasonable accommodation for visually impaired users that simply lacked context and instructions. A host notes the clip was pulled from a broader context and that participation was apparently optional rather than universal. Jason says the reason the internet reacted so strongly is that when he asked critics to show another example of this happening at any event, nobody could, so he thinks it was a first. Asked when he left the "woke left," Jason says he never did, describing himself as always a moderate who never backed Bernie or Elizabeth.

The conversation turns to markets. A host jokes he is still long Microsoft and Google and short the rest of big tech. Chamath calls this the most obvious money-making trade on the internet: long Microsoft and Google, short the rest of big tech, meaning you can comfortably short Apple, Facebook, Amazon and Netflix while being long Microsoft and Google. He frames it as a spread trade and calls it the best risk-parity trade in the markets. These are his opinions, not advice.

Asked to explain a spread trade, Chamath says he had tweeted a version of this partly to troll people, since putting on any position is really about managing risk. The advantage of the stock market, he says, is that you need not be naked long or naked short, which carries more risk than being long one security and short another against it. His example: over the last decade you would have made a lot of money being long Amazon and short a basket of traditional offline commerce companies like Macy's, JCPenney, Kmart and Sears, playing the gap between the longs and the shorts independent of where the overall market trades. The source breaks off here as he continues the explanation.

Chamath makes the logic explicit: in a spread trade you bet that if everything rises, Amazon rises more than Kmart, Walmart or Sears, and if the market falls, Amazon falls less, so you play the gap regardless of market direction. He credits the idea to a well-known hedge fund manager rather than himself, saying he copied it without knowing much. The manager's original trade was long Google, short Facebook; it sat at parity for about four years before blowing out in the last year to return roughly 80-85%, so $100 would have made about $85. He says the bigger, scalable version is long Google and Microsoft, short the rest of big tech, meaning on a relative basis those trillion-dollar companies outperform the others, not that Airbnb or Facebook cannot rise. These figures are his account.

He explains why mega-caps make sense: they are hyper-liquid, so you can put on enormous size, such as $10 billion long against $10 billion short, and banks treat a hedged position differently from a naked long or short for risk purposes. If the market collapses 30%, both stocks fall roughly 30% but one might fall 32% and the other 20%, so you capture only the few-percent spread and strip out market risk. A host adds that low interest rates make this possible at scale, since borrowing on margin to go long is cheap and shorting a highly liquid stock costs little to borrow, keeping the carrying cost low relative to the expected upside.

Chamath says he put the trade on with meaningful leverage and it has worked. He calls Google the safest company on the internet because it is a platform company; to the extent it is exposed as an app company, the risk is to Apple, but since Google pays Apple so much to be the default search, it is inoculated. A host notes this refers to Google paying Apple around $10 billion to be the default search, and Chamath adds that Google owns Android as one platform and pays Apple enough on the other to stay protected, making it the purest money-making machine on the internet.