All-In with Chamath, Jason, Sacks & Friedberg - Break up Google, Starbucks CEO out, Kamala’s price controls, Boeing disaster, Kursk offensive

Starting point is 00:00:00 All right, everybody. Welcome to the number one podcast in the world. I am your boy, Jake Howe, the world's greatest moderator, executive producer for life with me again on the all in podcast is the Rain Man, David Sachs. Yeah, looking healthy. Looking good. Looking trim. The hair is great. How you feeling, brother? Good, good. Yeah, good. Good. Well, good. haircut looks good. Now do you go to the barber, the stylist, they come to you? Everybody wants to know. They come to me. Yeah, of course. And then with us, of course, your Sultan of science, he loves those vegetables. His name is David Friedberg from Berkeley to the Bay. Our boy. How are you doing there, brother? Are you living the lake lifestyle? You have a nice restful August?

Starting point is 00:00:45 Loving, loving the outdoors. Good for you. You look so healthy. Speaking of looking healthy. Celebrated birthday with Jason Kuhn yesterday. Happy 39th Jason Kuhn. Happy 39th Jason Kuhn. We did a long mountain bike ride with our other buddy Z and had a little family barbecue

Starting point is 00:01:03 last night. Everyone had a good time. What did you do? Little portobello mushrooms? What did you do? with our other buddies eat and family barbecue last night. Had a good time. What'd you do? Little portobello mushrooms. What'd you do? You put a little zucchini on the grill. Let's just say I show up with my own food to a barbecue. Absolutely.

Starting point is 00:01:13 You do. All right. And everybody's favorite, the chairman dictator, Chamath, Polly Hoppateer, you love him, you hate him, but you can't ignore him. How you do? Look at the number of buttons here. You got the, uh the mouth collar on and I don't think any of those buttons are button none of them are button you became a meme once again once again the all in podcast creating memes you were swirling you were swirling a little white wine last week you

Starting point is 00:01:39 were in the arena and I'm putting up all the numbers going macro and you're swirling wine the The audience loved it. What's going on today? Do you have a bottle? That was a 2019 Cadillabozco. Really, really good. Can you tell us the flavor profile? The notes? What did you get? What did you get as you were swirling? There was some plum. There's a little truffle there. Oh, the boysenberries. Little boysenberry. Fantastic. A little moth. there. Oh, the boys in there. Little boys and very, very much. It was a touch of inflation with a hint of unemployment. Rain man, David.

Starting point is 00:02:23 We open source it to the fans and they've just gone crazy with it. Love you, West. I'm the queen of Kin Wav. Well, you know, boys, I had a big week. I had a big week this week. You know, I'm at the lake still, but I made a little trip to Silicon Valley. I was hanging out with Ruloff at Sequoia. And as I'm prone to do, I love to go to Bucks.

Starting point is 00:02:41 You guys been to Bucks before in Woodside? Yeah, I went once. And I, and I've never been back since. Okay. Well, it's my favorite place to get breakfast or get my little tune them out. I've been going there for ages. It's a little bit of a legendary place where Steve Jervitsen made the hotmail investment, the Tesla investment, all kinds of famous stuff happens at bucks. Well, it's where PayPal got its first funding round where John Malloy from Nokia Ventures

Starting point is 00:03:06 beamed the money to Peter and Max at bucks. On a Palm Pilot. On a Palm Pilot way back in 1999. Yeah, for those people who don't know, Palm Pilot was the most innovative and poorly designed product. That was J.T.L.'s nickname in college. My God, well done. So good. But you know, I'm wearing my bucks hat and I got my bucks menu here.

Starting point is 00:03:29 Boys, it was like a pinnacle of my career. I've been waiting for this. If you go to bucks and you look at the side, you can get your crispy Brussels sprouts there free bird, get your sweet potato fries. But there it is. J Cal's onion rings are now on the menu at bucks. I have hit the big leagues folks. Wait, is that is that real? Did you really get that?

Starting point is 00:03:50 I did. I'm the first person but I love onion rings. I love a good tuna melt. It's a weird sandwich but they do it so great there. And I keep asking for onion rings for like a decade. And then we don't do onion rings. We don't do any rings. Yeah. And so suddenly, you know, that the team there comes out, they say, Jake, how we have two different types of onion rings, please pick which one you like best. I went with the panko crusted free bird. These are for you. Delicious panko crusted. And they put them on the menu. So I was so touched as well. We're on while we're on sandwiches. Sure. You know what I love? What do you him while we're on while we're on sandwiches. Sure. You know what I love? What do you a rubin made with turkey breast instead of the strong? Have you guys ever had a turkey? I haven't. It's incredible.

Starting point is 00:04:34 Because I think a pastrami Ruben is a little too much. It just feels too sclerotic. To fat like your arteries are. Yeah, it's terrible. But like you get a good thousand island sauce and like some sour crowds and cheese. It's amazing. I took my, I took when I was in New York a couple of weeks ago, I took my daughter to Katz's deli, I took her on a little tour of the Lower East Side. I mean, we made a stop at Katz's. What's your favorite Sammy there?

Starting point is 00:04:57 Max's deli, by the way, has a turkey with a Max's deli. Why did you do a paid promo for bucks at Woodside? I don't, they gave you a hat. Every time they sell one of those onion rings They I get one dollar on my account I don't get any podcast to sell onion rings. Perfect. Okay. I mean you're selling potatoes and tramots is So onion rings Go high we go low. I mean Jake go.K. They go high, we go low.

Starting point is 00:05:25 They go low, we go high. All right, listen, Chamath's big O outcome is on the table. The DOJ is looking at breaking up Google. This is huge news in our industry. Last week, we talked about the ruling that Google had an illegal monopoly in search and advertising.

Starting point is 00:05:39 The case was brought by Trump's DOJ back in 2020. Chamath said two outcomes are possible. Little O, big O. Little O, consent degree, you know, like Microsoft did back in 2000 with the Internet Explorer decision. The big O, we didn't think that was a major possibility, but here we are. Google getting broken up. DOJ is going big O. On Wednesday, Bloomberg reported the DOJ is considering a breakup. According to the article, the DOJ is considering a breakup, according to the article, most likely breakup targets are Android OS, Google Chrome, and AdWords. Okay. Last time the government tried to break up a monopoly was 20 years ago when they

Starting point is 00:06:15 tried and failed to dismantle Microsoft. We know how that's gone. The company's doing great. So let's talk about it. Aside from search and advertising, there's kind of five pillars at Google and then your former Google, which will go to you first, Freeberg, I think. Cloud 40 billion in revenue growing 30%, YouTube 34 billion growing 15%. Little volatile because it's advertising that doesn't include like premium YouTube TV and that stuff. But oh my Lord, YouTube is up to 2.7 billion monthly active users. World population is 8.2.

Starting point is 00:06:44 So quite significant. Netflix has 38 billion in revenue that they're worth almost 300 billion. So that's an interesting corollary. You got Waymo doing 50,000 paid trips a week now, 2.5 million a year, and that's growing quite nicely. You got Android, right? They don't disclose revenue, you got the G Suite.

Starting point is 00:07:02 So let's start with you, Freberg, and then I'll go to you Chamath, because you made the prediction. What do you think would be a creative or generally increase the market cap and be something that Google would be happy with and the government would be happy with if you had to like maybe shed one or two properties? What's a possible outcome here? Send your thoughts broadly on this. I'll just start by commenting, I'm not really sure what the improvement to consumer pricing, or competition would be in different breakup scenarios. I'd really like to understand the

Starting point is 00:07:38 DOJ's analysis on that. How does breaking up one of these things improve the consumer experience? I could see the case for Android, because Android defaults to Google search. But again, Android is an open source operating system. And so everyone has their own fork or a lot of the handset manufacturers will have their own fork of Android, obviously, the Google fork defaults to Google search. So it benefits Google services quite well.

Starting point is 00:08:05 I think that would be an analysis that the DOJ would really have to kind of prove out that there is real anti-competition associated with Google's influence over the open source Android operating system for the Bay manage and license out. I think understanding that would be good. I do think that there's a lot of value unlock in YouTube. So if Google were to just generally spin out YouTube, that is probably a business that on its own would attract an investor base that might otherwise not want to get into the conglomerate. And you know, there's always this notion of what's called a conglomerate discount. When you put

Starting point is 00:08:40 a lot of different businesses together, the businesses in aggregate get valued less than the individual parts would be valued on their own because different investors interested in a business investment thesis would like to bet on cloud, would like to bet on YouTube, would like to bet on AI. And so each one of these kind of like segments, if they can be unlocked, can actually be value creating in terms of overall market cap. The challenge is the way YouTube's infrastructure operates.

Starting point is 00:09:09 It operates on shared infrastructure with the rest of Google services. So does cloud, so does search, so does AdWords. So there's one common cloud infrastructure that everything runs on. And then there's one common advertiser pool. There are dedicated advertising salespeople within YouTube, but there's also shared infrastructure on advertising

Starting point is 00:09:30 between YouTube and Search and AdSense and so on. And there's ad sales teams that actually can sell across Search and third-party publisher sites and YouTube. And so, you know, breaking up those shared teams becomes a little more technically difficult. But YouTube certainly seems like an unlock. The question is, what happens with all the infrastructure layer? Does that go with cloud? And if it does, then YouTube, AdWords and search all become

Starting point is 00:09:54 customers of cloud. So that might be one way that this could work. But I think net net if this were to happen, there could be a lot of upside in the market cap. I'll also say it just feels like the tenor of all of this is anti-success and not anti-competition. And anything that's kind of successful or big is automatically deemed to be a monopoly. And I think we really have to kind of understand

Starting point is 00:10:20 how are consumers and the market for competition being affected by having all these things together. And that's what should really be focused on and studied, not just the fact that something is big and successful. We'll see how that all plays out. All right, Shamatha, you predicted the possibility of a big O here we are your thoughts on what this might look like chances of it happening and then just maybe if you're interested

Starting point is 00:10:44 in the anti success approach here, do you think this is more, you know, valid criticism of Google's massive search monopoly? series of outcomes, just kind of like looking forward, I really didn't think that this big O outcomes was a very large probability. I was like, you know, I would have handicapped that at single digit percentages. And I think the reason why the DOJ leaked this thing and floated this trial balloon essentially, is in part, I didn't weigh enough what Sachs was talking about, which is that there really is a massive bipartisan amount of support against Google. Now it cuts on two different dimensions. I think that there is one dimension, which is more Republican oriented, which is just about freedom of speech and putting your thumb on the scale.

Starting point is 00:11:46 But if you take the democratic point of view, it's more the anti-successful vein that Freebird just mentioned. The thing is though that it'll make strange bedfellows because it unites both sides against pushing for a big outcome. If you go back to the last big O outcome that we had in antitrust law, which was AT&T in the 70s and 80s,

Starting point is 00:12:16 that lawsuit was a decade long, right? And essentially what happened was when it looked like AT&T was going to lose the case, they were the ones that proposed splitting itself up. And so I think that this is going to start this really interesting chess game here, where obviously Google has to appeal and fight this. But if it looks like the political pressure is going to build and the courts aren't going to let them off the hook and have a little-o outcome, probably the best thing to do is

Starting point is 00:12:51 for Google to initiate it themselves because they can answer a lot of the questions that Friedberg just raised. And they'll do it in a way where going back to the people that matter along with the customers and the employees are the shareholders, you can do it in a way where the sum of the parts will be greater than the value today of Google. So I think that there is a shareholder win. It needs to be offered by Google and then negotiated. But to be really honest with you, Jason, when I when I kind of was thinking about it last week, I really thought this was a single digit probability, I still think it's a single digit probability. And if it grows, it's the most meaningful thing that's

Starting point is 00:13:35 happened in technology, quite honestly. All right, sacks from a business perspective. Well, it's actually a lot. I agree with Chamath that Google has the opportunity to do something really interesting here, which is get ahead of the curve and break itself up before the political system forces that onto it. And the advantage of doing that is that it could partition the company in ways that are economically smart. The big categories would be search, advertising, and YouTube. And I think that would have two big economic benefits for shareholders.

Starting point is 00:14:05 One is you unlock value by deconglomerating, like Freberg was saying. Second, once you break up the company into these pieces, there's less places for employees who aren't doing anything to hide, for all this bureaucracy to hide. I mean, look, Google is famous for employees who don't do anything, right?

Starting point is 00:14:24 The guys sitting on the roof, setting themselves all day. If you break up the company into three or four smaller companies, right, there's just way less room for people to hide. And I think that they could all be leaner, more efficient operations and that would accrue to the benefit of shareholders. So I think that would make a lot of sense. And then furthermore, I guess a third point is that you first all the possibility of the government doing something that could actually be very harmful. And, you know, the piece here is that I guess the DOJ is talking

Starting point is 00:14:55 about spinning up Android and Chrome. And I think it's worth pointing out that those aren't really businesses in and of themselves. The reason why Google developed Android and Chrome was to prevent anybody from getting upstream of them, right? They saw what Microsoft did in terms of capturing the operating system and then capturing the browser, and they didn't want to potentially allow Microsoft or anyone else to essentially win the high ground, capture the high ground upstream of them, and be able to divert traffic away from search to their own search engine or someone else's search engine. So they began this strategy of commoditizing

Starting point is 00:15:33 those layers of the stack, and it worked brilliantly. I mean, Android and Chrome have become very popular, and it guarantees that nobody else can get upstream of them and then dis-remediate them. But the problem is, if those things get spun out and have to become businesses on their own, how would they function as businesses? It's not clear to me that there's an obvious strategy there. I would like to ask Freeberg. Freeberg, do you see a way that Chrome and Android could be spun out and become viable businesses on their own? Or do you agree that they were essentially created to commoditize layers of the stack

Starting point is 00:16:11 rather than become profitable businesses on their own? Yeah, so they were both created to avoid third parties blocking access to Google search. That's why they were both started. And remember Sundar was the product manager on Chrome originally. That was his big kind of product that he ran for quite some time. So Android was all about making sure that the handset manufacturers didn't basically default consumers to do search and use the internet in a way that would disadvantage Google. So Google said, you know what, just like Zuck is doing currently with llama, Google said, let's make an open source mobile operating system that's better than any other mobile

Starting point is 00:16:49 operating system. And we'll make sure that consumers have choice and they have the ability to go where they want to go. And it's not just defaulted by the telcos or the handset manufacturers. So that was the reason. And obviously they ended up making their own fork of Android, which is the most popular fork of Android that has Google as a default search engine. So yeah, and they get license fees from that.

Starting point is 00:17:08 But fundamentally, it's really just in service of making sure that people go to Google search. So where that ends up sitting in a split up company, I have no idea. And Chrome, similarly, you know, Google originally supported Firefox and gave a lot of money to Firefox. And then Firefox just wasn't moving fast enough So Google started hiring Firefox engineers and built Chrome and house as a way to keep Netscape and Internet Explorer From blocking access to Google search and defaulting and they built a default to Google search. Obviously, what do you think Jekyll? You know, I have a long relationship with Google as a content creator and they do have

Starting point is 00:17:45 a massive monopoly in search. That's absolutely true. And the Justice Department, I think, is well within their rights to take a deep dive on that. They don't have it in ads. If you look at the competition for Google in advertising, you got Meta, TikTok and Amazon, which have very, very significant advertising businesses, and then like a bunch of new players, which are referred to basically as the shopping cart and networks that's Uber, Instacart,

Starting point is 00:18:09 DoorDash, et cetera. And so when you look at this, it's kind of paradoxical that it really does rhyme with what happened with Microsoft. They're two decades late on this. The search monopoly has been squeezed for every dollar and to build every subcomponent of Google's monopoly flights, shopping, all of these things put into Google search and put at the top above organic search has basically killed hundreds, hundreds of startups over the decades.

Starting point is 00:18:41 And so I actually don't think this is going to do much if they do a breakup, the easy solution for Google and I agree with I think people who said that here is to just spin out YouTube and Waymo. Those two are perfect standalone businesses. Yeah, there's some backend stuff. But like you said, Freeburg, they could become customers of the ad network of the cloud for some number of years. But YouTube and Waymo, those would be like a $400 billion company, a $50 billion company. And those are right in the zeitgeist of the cloud for some number of years. But YouTube and Waymo, those would be like a $400 billion company, a $50 billion company. And those are right in the zeitgeist of the future and what

Starting point is 00:19:10 advertisers want. So I think offering those two up would unlock massive shareholder value. The most damaging one would be Android. If they forced them to sell Android, that is going to be massively damaging because an independent Android company could then, you know, give their search default to Bing and Microsoft would happily. No, no, no, not good, not good. They, they must in order to, to capture it. It would auction it. Yeah, you're right. It would have to. It would auction it. Right. And so, I mean, losing every- On Google's fork of Android, right? Correct. And so that is the dominant player. And then they have handsets. So that Android company-

Starting point is 00:19:43 How much is that worth? How much is that worth? Because maybe that does make Android a viable business on its own. You know, it would be probably worth. It's probably 30 billion of revenue a year. Okay, great. So let's do it. I take back what I said.

Starting point is 00:19:54 It can survive as an independent business. Chrome can't, right? Chrome can't. But maybe Android and Chrome go together. That would be incredibly damaging to Google. That's the most damaging, the easiest is YouTube and Waymo in this whole mix. But I'll give you the wild card in all of this. Think about the math. Sorry, just real quick. Think about the math on that. So let's say

Starting point is 00:20:14 it spins out and it generates 30 billion of revenue a year and Google owns the majority of it. And eventually they'll sell it down. But that business will be valued on the money that Google's paying. So Google will make that equity value back because they own the shares. And they will lose one third of their revenue to that new company. Now, of course, they'll get it back in the equity, but then they don't have it because about a third of searches are mobile now and that's increasing. The big wild card in all this is Apple. When I was doing Mahalo, which was a human powered search in over 10 years ago, that's Sequoia back, I emailed it to Steve Jobs. He opened it, he played with it a bunch. I won't talk about anything else in that regard. But they had a search project in the works when Steve Jobs was in charge over there. They were

Starting point is 00:20:55 looking at search because he had such an axe to grind with Eric Schmidt because they launched Android and he kicked Eric Schmidt off the board and there was a lot of hand wringing there. I think Apple is and I've heard this from folks around Apple that they're looking at search again and there's DuckDuckGo and this a company called Brave that has their own search engine search API that's gotten very popular. I believe Apple is going to launch their own search engine and compete heads up with Google. And so I think that's gonna be the very interesting thing that happens in this market. The question then becomes, Chamath,

Starting point is 00:21:30 does this distract management to a level like it did Microsoft and you have a lost decade and it takes their eyes off the prize of AI? No. And the reason I say no is that I think that people's reaction to these things become more sophisticated in time because folks go back and actually study what happened in the Mob-L situation, AT&T in the R-Box, what happened in Microsoft. And so I suspect that they know how to shield the rank and file employee

Starting point is 00:22:06 from whatever is going to happen. So I think that that's less likely. I was referring to management, you know, but you think it to start, do you think it distracts management from running the business, Shama? I don't think so either, because I think that these things get put into a very I don't think so either because I think that these things get put into a very type group of people, mostly lawyers, who then go and deal with this issue. I think that there's an acute moment where if they think that they're going to lose an appeal or that appeal is not going to get heard, then yeah, I do think management and the board are brought together.

Starting point is 00:22:42 And again, if history is a guide, they should want to propose the terms on which they break their own company up. Because I think if the government tries to decide, there's going to be so much imprecision that they'll break the company. And I think that would be a shame because I mean, look, take a step back. The breaking up of Google is great for competition and for startups. But let's not forget, Google is an incredible company that has created enormous amounts of good, they have done way more good than bad way more like three, four or five

Starting point is 00:23:20 orders of magnitude more good than bad. And to break a company like that, I think would be a really bad outcome. From a competitive dynamics perspective and game theory, it's pretty reasonable to hobble them. That's why I think the small O outcome is much more palatable and seems more fair to me. A breakup is a really draconian action. And I'm not sure that when you look at Google

Starting point is 00:23:47 versus AT&T and the baby bells, I don't think it's anywhere near the same. But if there's the political will, they'll be able to craft and change some of the laws that allow these folks to just keep going after them. And if that happens, I think it's going to be really important for Google to define the terms of their own breakup. I want to just underline what Shamaf said real quick.

Starting point is 00:24:11 Being big can be very good in the sense that it can drive an ability to invest in innovation that is not possible without the scale and the significant cash flow that's being generated by being that big. And AT&T is a great example. Bell Labs. So the way AT&T was set up is there was all the local telephone companies under this Bell system that AT&T owned. And then Western Electric was the company that manufactured all the telephone equipment that was put into the

Starting point is 00:24:41 telephone system. And then Bell Labs was the third entity. It was the research arm. And all that they did at Bell Labs was do research and they were fully funded. They had all this cashflow pouring into them so they could discover and work on and invent whatever they wanted. With that capital, Bell Labs is so insane.

Starting point is 00:24:59 If you guys haven't read any of the books on Bell Labs and what was discovered there and how it operated, it truly is like the most innovative center ever in human history. But they invented like antenna arrays, they invented microwaves, they invented radar, they invented the transistor, they invented information theory, which was the basis for everything in the internet. There was even some efforts to try and invent a nuclear bomb before the Manhattan project started, they invented integrated circuits, and on and on and on and on. And that's because they could invest some efforts to try and invent a nuclear bomb before the Manhattan Project started. They invented integrated circuits and on and on and on and on. And that's because they could

Starting point is 00:25:29 invest all this money in doing this research that would have been very difficult for a small startup or a company that's trying to grow and is barely profitable to be able to do. At Google, they've invested billions of dollars in Waymo. And I think as we all know, Waymo really was, if not the leader, but the inspiration for a whole generation of autonomous driving that ultimately will come to market and will really transform our lives in a meaningful way. In the same way Amazon and Microsoft and Metta have all invested tens of billions of dollars in innovation. Look at what Zuck is doing at Metta with the open sourcing of the llama models.

Starting point is 00:26:01 It's incredible. That would have never been possible if you had a small company that was trying to get profitable. So I just want to highlight, these businesses, just because they're big and successful, doesn't necessarily mean that they're stifling innovation. In fact, they may be accelerating innovation and enabling progress. I'm just pointing out that the cash flows

Starting point is 00:26:18 that are being generated and the way they're investing those cash flows, is pretty impressive. And we lose that if we end up going after every big company, just cause they're big and saying, hey, we should take away their ability to do this. I'm going to take the other side of that. I think that what they can do with their massive amount of

Starting point is 00:26:35 power is destructive to competition in the marketplace. If you look at self-driving, we have had tens of billions of dollars invested without Waymo, it would have been just fine. There have been so much money, Tesla, Uber, you know, a cruise GM, there's plenty of people out there. There's plenty of capital out there from around the world. And I think when these companies and Facebook's one, I think proves my point, what you're saying here is, I think it would be better that you didn't have these companies that could put $20 billion into something and you had 50 startups go after it rather than these giant companies just steal it and overpower them, flooding them with capital. It makes the world

Starting point is 00:27:14 less dynamic that Zuck can just and Google can keep taking the next category from the marketplace. Go ahead, Sax, you had a point? If you break Google up from a conglomerate of let's call it four monopolies or duopolies or companies with extraordinary market power into four separate companies, they're still going to be generating extraordinary profits and those could still be invested in a Waymo. So I don't know that it stops the innovation. Our workshopping this issue has pretty much convinced me that it should be four companies. Search, advertising, YouTube, and Android.

Starting point is 00:27:46 Because I think Android could be a standalone business because of the value of the search default. Cloud isn't search or advertising. That's gotta be figured out. I don't know the answer to that. Yeah, so I mean, I guess it's a negotiation now. Maybe they put up one or two to be spun out and then the negotiation happens.

Starting point is 00:28:03 And who knows, you could have regime change in Washington. Okay, let's keep moving through this incredibly juicy docket Starbucks CEO is out after a year and a half of underperformance Starbiz CEO Laxman Narisham stepped down after just 16 months on the job. I'll break down what went wrong and get your reaction to all this and you have some strong feelings on it. Freeburg as well. Earlier this week, Starbucks shares were down 20% year to date compared to the S&P up 12%.

Starting point is 00:28:31 Companies are two straight quarters of declining revenue, the definition of recession. In fact, they've had to raise prices massively due to inflation that has annoyed customers and customers have been irate about the weight, which has been caused by two things. One, they have a broken staffing algorithm. That's led to massive understaffing. And then the app has become, the Starbys app is incredibly complex and you can order ridiculous drinks.

Starting point is 00:28:56 That's causing a massive- Why do you keep saying Starbys? It's what the kids call it. It's what the kids call it, Starbys. Oh, that's part of the problem. Okay. Kids are addicted to this. That's what kids are call it starbies. That's part of the Yeah, and they've added like all these like fruity drinks and stuff that would be like along the boba lines that have made and become

Starting point is 00:29:16 incredibly popular with Millennials and Gen Z so anyway Laxman was the handpicked successor by Howard Schultz and Schultz helped prep and train Laxman, but he's been super critical of him recently, kind of like the Bob Iger, Bob Chapick relationship we saw play out in 2022 over at Disney. Brian Nicol, the current CEO of Chipotle is going to take over at the end of August. Investors love this move. Shares jumped 25% on Tuesday. What did you call it? It's called Chipotle. Normal people call it the current CEO Chipotle Chipotle Chipotle CEO Chipotle. No Chipotle Chipotle

Starting point is 00:29:59 Anyway 25% on Tuesday largest day increase yada. Meanwhile, Chipotle dropped 8%. Nicole is on a heater. When he switches teams, the odds go with him. And Starbucks has a bunch of activist investors who are winning massively as part of putting pressure on this freeberg. Starbucks and Nike, both iconic global brands, both have faltered. What's your take? Well, the one argument is there's a founder led problem here, which is when the founder steps out and professional

Starting point is 00:30:29 management takes over and you have the same expectations that you had when the founder was leading things go sideways. But Starbucks faces many more kind of macro economic challenges. Nick, if you pull up Starbucks financial report, so here you can see that their net revenue growth was only a 1% year over year, but their operating margins been on the decline. So they have not really been able to boost their operating margin very much in the past five years. So while they've raised prices, they've had a really hard time making more money. And that's because the cost of food and the cost of labor

Starting point is 00:31:06 and the cost of rent and the capital expenditures needed to upgrade stores has far exceeded the ability for them to grow revenue and compete. And now revenue is flatlining because consumers are getting tapped out with respect to how much they can spend. And there's only so much innovation you can really do to charge more, get people

Starting point is 00:31:25 to come in the store more and drive up revenue. Brian nickel has an incredible reputation. Prior to Chipotle, he ran Taco Bell and he ran Taco Bell for several years and made it one of the most profitable QSR quick serve restaurants in the world. He did this by focusing on every nickel. He is notorious for being a cost cutter, for being an efficiency driver, for being a productivity hound. He goes into the business and he figures out every step in the supply chain, every step of the operating activities of the employees in the stores and figures out ways to make

Starting point is 00:32:00 sure. Wait, did you say that Brian nickel focuses on every nickel? Was that? He did say that. I didn't want to say it. Did you say that Brian Nichol focuses on every nickel? Was that? He did say that. I couldn't understand. He did say it. He did say it. Don't interrupt him.

Starting point is 00:32:11 He doesn't like to be interrupted. No, no, it's good. Okay, sorry, keep going. That was good. And so he was recruited heavily. I don't know if you guys remember, Chipotle's founder was running Chipotle. And at the time, there was a lot of investor activism

Starting point is 00:32:23 around Chipotle because they were wasting money like no was a lot of investor activism around Chipotle, because they were wasting money like no one's business. The guy had a private jet, he was flying his management team back and forth between Denver and New York. They were spending money on crazy projects. And the board fired the CEO founder of Chipotle brought in nickel, nickel came in and made Chipotle incredibly profitable growing business. And the expectation is he'll come in and do the same here, that maybe over the years, Starbucks' success has bred laziness. Starbucks' success has bred fat slowness, productivity decline, and that this guy is

Starting point is 00:32:56 the right guy to come in and find all the nickels. And Brian Nichols is probably the right guy, which is why you're seeing the stock kind of rally as hard as it has. Zach, so, Trimop, anybody have strong feelings here? Yeah, I would just add something here, which is I do think that macroeconomic forces played a huge role here. We've seen that we have had tremendous amount of inflation over the last few years and Starbucks has gotten more expensive. And if you're a worker whose wages have not kept up with inflation, do you really want to spend 10, 15 bucks on a cup of coffee

Starting point is 00:33:25 that, I mean, it's a pretty fancy cup of coffee. I'm not saying it's not, but when you could just go to your commissary at work and pour yourself a cup of coffee for free, do you really want to work roughly an hour every day to pay for your coffee fix? I think more and more consumers are just saying that this is a luxury good. I'm looking to cut costs. When I go to the grocery store and buy groceries, they're 30% more expensive than they were a few years ago. I got to cut somewhere and a luxury cup of coffee just seems like a really easy place to cut.

Starting point is 00:33:58 So I think that's a huge part of this. And I don't know how Brian Nichols is going to fix that. It's a macroeconomic force. Chamath, your thoughts? I have a couple. The first is that I think Starbucks is actually an incredible brand. And it's actually a really good business. And the mistakes here have nothing to do with the product per se, meaning Chipotle, if you remember, someone got poisoned there. There was like botulism, the chicken was bad. So there was a core

Starting point is 00:34:25 product problem, but that's not the case here. If you unpack what Starbucks is, I think that they are a premium product. And that's reinforced by what Saks said, which is they price in such a way because they believe that they are a premium product. The problem is they are not a premium brand. And the difference is Hermes, as an example, is a premium brand. They can charge whatever they want under all weather conditions. They have pricing power. So if their inputs go up, they can make sure they maintain margin by changing the final price that the customer paid. Starbucks doesn't have that power. So they charge like a premium product,

Starting point is 00:35:11 but they're not a premium brand that has pricing power. And that's why you've seen this compression. So very specifically, when the new CEO came in, he I, made one important mistake, which is he came in on the heels of a very rosy set of projections that Howard Schultz and the board put out to the street. And I think that he had an opportunity then and there to just cut it because they saw inflation, they saw what it was doing. And if you just looked around the corner, you would have seen that there would have been this compression in the product. And I think what he should have done is just cut the analyst projections and the forecast

Starting point is 00:35:54 to give him room and time. He didn't do that. And by the way, when you bring in somebody who ran Taco Bell, that is proving that this is neither a premium product nor a premium brand anymore. It is a mass market product that will ebb and flow cyclically with the vicissitudes of inflation. That doesn't mean it's a bad business.

Starting point is 00:36:15 I'm just saying it's just an observation. I expect that Brian Nicol, if he is smart, will look at this forecast and shred it to give himself time. So that's the sort of the short-term thing. The long-term thing though is in the following image which I just sent to Nick. I think there's a real question mark on this company over the medium to long-term and I think it's best represented in this graphic. Starbucks is a sugar company. So for example, a caramel macchiato, 32 grams of sugar, a mocha frappuccino, 60 grams of sugar. This is three times what you're supposed to have as a human in a day. A frappuccino, 53 grams of sugar, a caramel ribbon, French Frappuccino, 62 grams of sugar. And these products also average four to 500 calories per drink. So the real issue is that more consumers, as

Starting point is 00:37:14 they question the repercussions of consuming a lot of sugar, what will they do? As more consumers get on GLP ones, what will they do? As more consumers get on GLP-1s, what will they do? As more people think about the fact that fat was never an enemy. In fact, fats are actually really good for you. The problem was that the sugar lobby convinced us that fat was bad and sugar was okay. What will consumers do? And I think that's a really big strategic question mark because the company has to embrace where the world is going. The world is going away from sugar.

Starting point is 00:37:50 And I think it's a great insight. Smarter. They're going to have to really figure out what to do. Could Starbucks introduce a line of low calorie drinks that use sugar substitutes to achieve the same flavor? But it didn already got that. Yeah. When you open the app, they have every single syrup comes in sugar-free and regular. So when I go there, now that I'm on GLPs and I've lost all this weight and I drink less, I just get the Nitro Cold Brew.

Starting point is 00:38:16 It's got zero calories or five calories. I might throw a little cold foam on it. And then my kids- That's not what the kids want. That's not what the kids want. And with the kids is critical. What I do with my kids is I do low sweet or like one third sweet. I order one giant one. I pour it into three glasses at home with ice and I cut it with

Starting point is 00:38:35 water because it is like drinking an unbelievable amount of sugar. It is nuts. And they have, I'm going to go get an espresso after this. This is making me want coffee. It's coffee supposed to have zero calories. You put a little half and half in it and you get the fat and you're good. I mean, here's what here's what happened. The thing about Starbucks, I study Starbucks, and I've spent some time with Howard Schultz actually. You did retail, right? Maybe you could talk about your eats. I did a little retail, you do a little retail side quest. But the thing about Starbucks is they realized early on that when you can

Starting point is 00:39:06 customize a consumer experience, the consumer comes back more frequently. So when you see your name written on that cup, you feel like you're getting your product. You're not buying an off the shelf product. You're getting a custom personalized experience. What that led to is people customizing their drinks. And what did they find that they like when they customize their drinks? Sugary sweet add sweet atoms. And then that became more and more of the standard menu. And then that just kept evolving. And that's just the consumer feedback mechanism working, which is to Chimath's point, led to 60 gram sugar drinks that are now the standard product at Starbucks, not an espresso or a cappuccino, which is how they started. And it's really unfortunate. I don't think that Brian

Starting point is 00:39:44 Nichols is going gonna focus on that, to be honest, given his background with Taco Bell and Chipotle that there's never anything to focus on. To your point, he'll be able to plug the leaks. My question is just more, what does a company that's selling a product that people are learning is worse and worse for them? What do they do?

Starting point is 00:40:02 They have to embrace a different alternative, but I think it can be very hard because it may be so disruptive to the core product that they sell. Yeah. What do you think? I mean, what do you think about Starbucks? I mean, my kids love Starbucks.

Starting point is 00:40:17 We are regular consumers. The app is extraordinary. And I think the key issue here, it's obviously the inputs and inflation. That's a major driver. But wage inflation is a critical piece of this. Here's a chart for you, you know, just in terms of weekly earnings of full-time workers since Q4 2019.

Starting point is 00:40:36 Starbucks started having a lot of labor movements, a lot of unionization, a lot of complaints from the Green Aprons, and they have massively raised salaries. They were at, you know, $15, $16, $17. A lot of people were going into gig work, door dashing, you know, Uber. And so this competition for entry rung employees forced Starbucks, and I know this from the Uber experience and then DoorDash,

Starting point is 00:41:01 people wanted to set their own schedules, not be like in a shift work. And so you could make 20 bucks working for Uber and DoorDash, you're making 15, and you have to drag your ass into Starbucks at five, six, seven AM and work a shift and not be able to pick up your kids. That led them to go to like 20, $22 per hour for these baristas. And they continue to raise those rates. They've been very generous with employees. And so I think that's a key piece of it.

Starting point is 00:41:30 I think the big story here is gonna be automation. I think you're gonna see a lot more robotics in these. If you look at, I just had the CEO of, what's the salad company? That people, Sweet Greens. I just had the CEO of Sweet Greens on this week in startups, and he is all in on automation and they are making salad

Starting point is 00:41:48 robots and they've already got two or three stores with them and his whole concept is it's going to take $3 out of every salad. We have an investment in a company called Cafe X Nick you can play a clip of it. These two machines in FSO have broke a million dollars a year in revenue. They are serving a massive number of them. They've sold a dozen of these to other people. So I think automation is what's going to come to this. I don't think you can sustain it. And the money has to come out of somewhere.

Starting point is 00:42:12 And the two big costs that can come out of is the real estate and the employees. And I think that's what's going to, we're going to see in the very near future is also I will predict. Yeah, no, you were doing it at ETA, right? Were you doing? Yeah, we had automation. I actually worked on automation project with Jonathan at Sweet Green and Starbucks and Chipotle. So I knew them all. Yeah. And then the Chipotle CEO got fired.

Starting point is 00:42:34 We were going to roll out automation with Chipotle and he got fired and nickel came in and our deal blew up. It killed the deal. So explain how that might work and impact a business like unpack it. Oh my God. So it was going to take out basically these businesses today are running a call at 30% EBITDA margins at peak performance. That's like Chipotle's best class by taking out labor. You could probably take out another 20 points of cost, which could translate into lower prices for consumers, higher throughput, lower wait times.

Starting point is 00:43:04 All of these kinds of experiential differentiators are going to be significant. translate into lower prices for consumers, higher throughput, lower wait times, all of these kind of experiential differentiators are going to be significant. Certainly true for Starbucks, certainly true for Sweetgreen. I would expect that with Nickel coming in, you'll see some experimental stores, as you point out, J. Cal, that'll be more highly automated. But we'll also, I think one of the first things you're going to see from Nickel within the first year at Starbucks is a reduction in the complexity of the menu. This is something he's done historically. And he focuses, like he did at Taco Bell,

Starting point is 00:43:30 he creates a couple of key highlight products and creates these innovative product ideas. And then those become the banners that bring people into the store, but it's a simpler menu with kind of more attractive, interesting products that bring people in. And then if you couple automation to reduce some of the cost, you can bring that labor cost down. Yeah, and this that bring people in. And then if you couple automation to reduce some of the cost, you can bring that labor

Starting point is 00:43:45 cost down. So yeah, and this is a key point. You know, the order complexity is what's killing the baristas. There's four quintillion ordering options at Starbucks today. And so the expectation has always been that that is what brings people coming back to the store. But what Nickel has shown in the past with Chipotle and with Taco Bell is you can actually have a simpler menu

Starting point is 00:44:07 with a few points of customization. You don't need to have infinite customization around everything. And my guess is you'll kind of- Which is what Steve Jobs did, right? With his four quadrants when he took back over. He was like, listen, what's business? What's consumer?

Starting point is 00:44:19 What's high end? What's portable? What's desktop? I forgot what the four quadrants were, but he did it. And if you look, Freeberg, to your point of the cost savings, right now, the majority of orders in Starbucks, I believe, are coming in through the app. And what I was told, you know, in some of the buzz I heard from baristas,

Starting point is 00:44:35 was that they are they are prioritizing mobile orders to punish the people online to get them to the app, because that gets rid of cashiers. And McDonald's has no cashiers in a lot of restaurants right now. You just order at a giant touchscreen. So the cashiers will be gone. The cooks will be gone. And eventually the baristas will be gone. And it'll just be the cashier.

Starting point is 00:44:55 The cashier problem also creates a wait time problem because it's a serial ordering process. Everyone stands in line. They order one at a time and there's only one. And so the baristas just taking. All of these are really good points. I just think that the CEO would not have gotten fired had he just moved the forecast down by 20% when he came in. It's also did you see this incredible clip of him saying he doesn't want anybody working past six PM Nick play this clip? This is like,

Starting point is 00:45:18 Oh, this is the starbuck CEO, the previous Starbucks CEO. I mean, this clip is so brutal. We should talk about this in the context of Eric Schmidt's interview as well. Jake, show the clip and then let's talk. Let's show Eric Schmidt and talk about like, work culture in America. I think this is a really important point. Yeah, fantastic. Side quest. Let's do it. All right. So now there's a big culture thing going on here. Freeburg of hard

Starting point is 00:45:41 work in corporations. I don't know if you saw Eric Schmidt at Stanford, they took this talk down and Eric Schmidt is walking the comments back. But here we go folks. This is the money clip from Eric Schmidt. Google decided that work-life balance and going home early and working from home was more important than winning.

Starting point is 00:46:02 And the startups, the reason startups work is because the people work like hell. And I'm sorry to be so blunt. But the fact of the matter is if you all leave the university and go found a company, you're not going to let people work from home and only come in one day a week. Can you show the Starbucks clip? Can you show the Starbucks clip? Well, that's self-evidently true.

Starting point is 00:46:24 I mean, he's basically making a point similar to what I said about Google so large that employees can hide and not do very much and, you know, they can kind of... It's not just Google. Oh, it's pervasive. Sure, of course. Yeah, let's pull up the Starbucks CEO. I'm very disciplined about balance. If there's anything after 6 p.m. and if I'm in town,

Starting point is 00:46:46 it's gotta be a pretty high bar to keep me away from the family. Anybody who gets a minute of time after that, better be sure that it's important, because if not, it'll just wait for another day. This makes me so uncomfortable just hearing that I feel, holy f***, I mean, retire, bro. Just retire.

Starting point is 00:47:02 What does America value is the real question. Does America value success, retire, bro. Just retire. What does America value? Is the real question. Does America value success, performance, or does America value comfort? And the problem is American work culture has shifted to valuing comfort. And that is the inevitable outcome of decades of extraordinary success. And now the performance culture is losing

Starting point is 00:47:24 to the comfort culture. And I think you guys are putting a lot of things together. The problem is that I don't think that that's his truth. Actually, I think that this guy's clip sounds very inauthentic. I think what probably happened is the PR and policy group of Starbucks says, Hey, listen, here's the average age of your employee. And here's what they value. And he probably spouted some politically correct nonsense to try to inspire the troops. I think a lot of CEOs do this.

Starting point is 00:47:53 Like I think we're seeing in modern media today that a lot of CEOs have actually become the least version of their authentic self. They are being packaged by people to dress and act and say things in a certain way. I think what happens as a result of that is that you have a wayward culture where nobody knows what people stand for. That's when the corrosiveness of folks not working at all or having jobs at two different companies comes in, like that's a total moral and ethical breach that happens because people think it's acceptable.

Starting point is 00:48:34 And I think people think it's acceptable, because it's not in the talking points of how the CEOs are trying to package themselves to tens of thousands of employees. So you think this was a PR design genuflect. I like that insight. Sax, your thoughts overall? Well, it could be a genuflect. I don't know.

Starting point is 00:48:53 Look, I would say that there are a lot of Americans who do feel that way about work, but I think it's not appropriate in two cases. Number one is, if you're ambitious and you really want to rise in your organization, then you gotta have more of the J-Cal attitude, which is I'm gonna be the first to work and the last one to leave, and I'm gonna show my boss, I'm gonna get promoted. So if you wanna be ambitious in your career,

Starting point is 00:49:19 that's not a good attitude to have. And then on the other extreme, if you're the CEO of the company, your attitude has gotta be, I'm 24 seven with this shit. You know, it's like, I'm always online, I'm always reachable, the buck stops with me. Now, obviously, you're going to cut out time to be protected that you can spend with your family, but your attitude has always got to be that I'm available. You

Starting point is 00:49:40 know, I don't turn off my phone, I don't do any of that stuff. I just think that if you're running an organization, you can't take this attitude that oh at 6 p.m I'm switched off. You know, it just doesn't work that way Yeah, especially if you're running one. I don't think that's yeah Yeah, I mean, I just know there's an appropriate thing for someone like that to say when he's the CEO of a multinational corporation Yeah, I think that is the key insight Saxon with you on this which is leadership starts at the top. If the leader says, hey, listen, don't bother me after six,

Starting point is 00:50:09 I'll talk to you at 9 a.m., then that's just gonna go through the entire organization and it's already hard enough to run these organizations. Now, if you run a lifestyle business as your local cafe and you want to do that and you're running it at a break even, that's fine. This is a publicly traded company with shareholders with massive competition.

Starting point is 00:50:27 Who could get taken out by all these other brands that are trying to compete with it? You have to have, this is a war. We are at war. We have to figure out how to lower prices. We need to grind every nickel from the supply chain, rent. We have to renegotiate contracts. And then just to speak on the work ethic issue, this country is in a very

Starting point is 00:50:49 significant war about going back to work and work ethic, you mentioned over employed and the ethics around that chamoff. And then there's a group of Americans, and I've been studying this a bit, that are opting out of capitalism or hacking capitalism, there's a very interesting movement, it's called fire, financial independence, retire early. And that are opting out of capitalism or hacking capitalism. There's a very interesting movement, it's called FIRE, financial independence retire early. And if you look at the two subreddits,

Starting point is 00:51:10 over employed and the FIRE subreddit, young people are saying, capitalism is there to be hacked. And my way of hacking it is I'm gonna have two jobs. And I had a startup come to me and say, we've got this great engineer, literally from Google, who wants to work from us and he's making 400k, we can get him for a buck 50. And I said, Oh, wow, that's great. Why would he do that?

Starting point is 00:51:29 Is he independently wealthy? They said, No, he's keeping his job at Google. He says it takes 1020 hours a week, and he's gonna work 60 hours a week for us. And I said, Is that ethical or legal? And they're like, I don't know. That's why we're asking you. These are 20 year old founders we had back and I was like, this is incredibly unethical and you're going to get us in a lawsuit. Don't do

Starting point is 00:51:46 it. But that is what's, you know, the, the give and take. And if you look at what happened with Dell this past six months, have you been following that free break the Dell story? No, it's pretty incredible. They told everybody we're coming back to office. People were like, I don't want to come back to office. Okay. Reasonable. You think you'd do a better job at home. I get it. What they said was if you want to be work from home, you can't get a promotion and you can't get a salary increase. And

Starting point is 00:52:08 you know what employees said? Okay, I don't want an increase. I don't I if my choice is stay at home and have no salaries, and I don't care about a raise. I don't care about a promotion. Then they said, you know what, we're cutting 12,000 people. You have to come back to office. Jay Penske and his company told everybody to have to come back to office. So now that you have this era of being fit and you don't need as many people from AI,

Starting point is 00:52:32 I think everybody's coming back to the office unless you are part of the 20% of truly elite workers. Thanks for coming to my TED Talk. Even then though, I struggle to understand why anybody who has any ambition would think that they're going to achieve the same amount of stuff working by themselves than they will by working with a group of colleagues that you respect in a physical space together. Will influence our culture.

Starting point is 00:53:01 But I'm saying like when you look at the great things that the world needs, that we are building and should be building, I don't see many good examples where those things are done in a remote way. I see an necessity of people to be together, whether it's to design something together, to talk about something together, to debate something together, to learn from each other, to grow as a person, and you're robbing yourself of all of that. And so I just think that it is a short-term optimization that a lot of people will regret, not necessarily in the moment, but when their career doesn't go where they want to, or the company they work at doesn't go where it should go to or is capable of going to, they'll start to look for a scapegoat. But the real reason is that

Starting point is 00:53:53 they've abandoned the idea that they need to be together. And I just think that that's a tragedy. And it turns out the best of our companies, like when I rank my portfolio, the ones that are doing the best are in total different industries, but the single consistent theme is we are all back together. Isn't that interesting? Makes total sense. It's much more productive because I think innovation happens as a team. You need collaboration and it's way easier to do that

Starting point is 00:54:27 when everyone is together in the same place. There's more room for spontaneity, more spontaneous interactions. The reason why Steve Jobs designed the spaceship campus in that famous circle was because it maximized the opportunity for serendipity, right? Like there's no- Bell Labs did the same thing.

Starting point is 00:54:45 Bell Labs had a quad that you had to walk through to go from meeting to meeting. So everyone interacted, intersected. The technical term for that is collisions. And there's been a lot of research on random collisions. And I agree wholeheartedly with it. Yeah, and look, I just want to underscore this point. I think there's nothing wrong if somebody says,

Starting point is 00:55:04 look, my family is the most important thing in my life. I only want to work 40 hours a week. I'm going to do a nine to six job with an hour lunch break that's 40 hours. Don't call me after 6 PM. You can design your career that way, but that is not a career that's going to enable you to either run a company as a CEO or be a founder of a startup or be on a track to one day being a founder or a CEO. It's just not compatible. I mean- Or even just a senior executive. Right, exactly. So you have to decide what track you're going to be on. And I think there's a lot of millennial Gen Z types who are confused about this and they

Starting point is 00:55:40 have the entitlement of saying, well, I want to just do the 40 hour a week thing, but then I also expect to rise rapidly and be an executive and be a founder or be a CEO one day. And have it both ways, is the point. That's not gonna work. Yeah, it's not gonna work. And in fairness, I think a lot of young people

Starting point is 00:55:57 have not been mentored because they came up in the COVID generation and we're now four years later and they just haven't had the chance to be mentored or be in an office, and a lot of senior executives and CEOs are not coming to the office. You know, a part of my move to Austin is

Starting point is 00:56:11 I'm building a theater to record the podcast in, and I'm building an incubator space, and we're moving back to in-person. I grandfathered the existing employees, and I'm only hiring people in-person now, because I feel something very big has been lost in terms of meeting with people in person now, because I feel something very big has been lost in terms of meeting with founders in person, and young people seeing me interact and my

Starting point is 00:56:30 other senior team members with those founders in person during a pitch meeting during a product jam session during a fundraising review. Good job. Can I just say something about mentoring? I also think mentoring can be described as capital M mentoring and small M mentoring. Capital M is where some person is assigned to you and they're going to imbue some magical phrase or saying or thing and all of a sudden everything is going to work out for you. That form of capital M mentoring doesn't exist and has never worked for those that have tried it. The thing that's really productive is small and mentoring.

Starting point is 00:57:12 And that happens when you model behaviors of really smart people and really capable people, really ethical people. And again, that happens because you're seeing them on a day to day basis, not just in a meeting, but in the gaps between meeting. And they'll include you in certain things, or you'll have lunch with them. And this is what I mean by all of these people that are looking for an accelerant in their career. They've robbed themselves of the most powerful accelerant possible, which is capable people to surround themselves with. Yeah, I think it's so well said, they're going to look back on these decisions. And they're going to agree 100% and my one of my first jobs

Starting point is 00:57:56 working at land systems, my mentor Mike Savino was always working late, he was trying to move up in the organization, and I wouldn't leave before he left. And then he would walk by and he'd say was in New York City. Hey, what are you working on? I'm so I'm reading these Novell networking books, I'm trying to get my certification, I'm trying to learn more, I want to get out of hardware and get into software. And he'd say, oh, I'm going to get some dinner, you want to come? Now he was four levels above me in the organization, I was the lowest, he was second to the highest. And then I got to go to dinner with him. And then I got to hear about all the big clients, I got to hear how, you know, they were doing the pitches and then he started including me in pitches and all of a sudden I went from

Starting point is 00:58:32 four degrees from him to reporting into him. And that's how I learned, you know, look at the person on the left, look at the person. I was, I don't think I was actually I was a certified engineer. I was I was a certified novel engineer as well. I got 16 shout out Eric Schmidt. Yeah. I mean, if you had that in the 90s, you could make, you know, 5075 100k. Well, the person that helped me little and mentored me. He's like, listen, man, I'm not going to tell you how to do pictures or whatever, but I'm going to teach you how to install this. I'm going to teach you how to manage it. And that was mentoring. And that was really valuable. And I sat beside this guy.

Starting point is 00:59:17 Absolutely. And if you want to be a freelancer, be a freelancer. Okay, let's go to our little election update and some news about Kamala and a little bit of socialism coming. So here's how I set it up today. We'll see how this goes. 2024 election update is here. I'm going to do two things. Gentlemen, I'm going to just tee up the latest polls.

Starting point is 00:59:37 And then I asked our crack all in research team to just give me the top, you know, couple of issues in the principles own words, the principles being, you know, the press on either side and the four people who are running for office. So let's just go through the numbers here. Nate Silver, a friend of the pod, now has Kamala Harris at 57% favorite to win the electoral college. There's your first chart, you can compare this to what happened with Biden before the hot swap. Trump had a 73% probability to win the electoral college. So that is the the swing of all swings.

Starting point is 01:00:11 And obviously a lot has happened since then, as well as the assassination attempt on Trump. Massive swing for Harris, as you can see in Nate Silver's chart, he's doing something called Silver Bulletin. He's not a 538 anymore. But this is the most telling chart, you can see Biden Trump there there and it's, it's almost a clean sweep in red. And then you go to Harris Trump and the shift has been a hundred percent blue. Pretty dramatic. Harris has flipped according to silver, Pennsylvania, Wisconsin, Arizona, Michigan, Nevada and Virginia. Here's a couple of quotes and then we'll get into it. The big critique from Republicans this past week is that Harris won't do interviews.

Starting point is 01:00:49 God, it's just ridiculous that they have not sat for interviews. And meanwhile, Trump is doing every podcast and Twitter spaces on the planet. But the big news is that this might have changed by the time you listen to this podcast. Everybody knows we tape out Thursdays for the world's number one podcast and it comes out on Fridays. Washington Post, Jeff Stein, reported that Kamala Harris will propose the first ever federal ban on corporate price gouging for food encrosures on Friday. I'm gonna hand that off to you, Freiburg, to detail. I'm gonna throw up. Take it easy. We're gonna get there. You're gonna get your rare vegetables in a second.

Starting point is 01:01:30 So the other, you're gonna get your, you're gonna get your veggies sashimi and food. All right, from the JD Vance corner, he is questioning Tim Walz's service. Here's the quote. Well, I wonder Tim Walz, when were you ever in war? When was this Harris campaign in responding in his 24 years of service, the governor carried fired and trained others to use weapons in war in new boom, innumerable times, yada, yada, yada, a lot of back and forth there about that issue. But let's get to,

Starting point is 01:02:07 a lot of back and forth there about that issue. But let's get to and it was an incredible two hour spaces audio was a little rough. But the content was great. Elon had a conversation with Trump and they talked about nuclear power. Elon offered his services two or three times to Trump. Zach's to do efficiency in the government and maybe cut some costs. But that's what happened notably in the last week. Freberg, what's your take on this reported by the Washington Post and I think confirmed by Politico move by Kamala Harris to press fix? Thank you for asking. Do you have any feelings on it?

Starting point is 01:02:43 Yes. Yeah. I unequivocally hate socialism. Socialism destroys innovation, destroys productivity, and destroys individual liberties. Agriculture and food markets have insanely competitive dynamics because there are commodity markets, there are tons of competitors, there is no monopoly in making food, there is no monopoly in making CPG products, there is no monopoly in retail, there is no monopoly in grocery stores. It is a small margin, highly competitive, highly fragmented free market. And the free market works in that everyone is always competing with each other, creating

Starting point is 01:03:21 new productivity improvements. And as a result, over time, prices come down, except when the government intervenes and gets involved. So I would argue that the real cause of price inflation in food is not the supposed price gouging by corporate players in the ag and food industry, all of whom are deeply competitive with one another, but rather is the result of the inflation associated with government spending and stimulus coming out of COVID. Nick, exhibit one, the Fed balance sheet. From COVID to today, the Fed balance sheet grew from $4.2 trillion to $7.2 trillion,

Starting point is 01:03:59 a growth of 70%. The Federal Reserve went out and they bought assets and they issued debt to banks and introduced liquidity into the system. If you go to the next slide, as a result, the M2 money supply increased from 15 trillion to 20 21 trillion since COVID a 40% increase. Okay, so now there is more money in the system. So the cost of everything should go up, which is exactly what we've seen, we can walk through a couple of the other commodity price charts from the St. Louis Fed. Here is the price of electricity. As an example, the price of electricity has gone up a little bit less than the M2 money supply. But the truth is, when you start to

Starting point is 01:04:37 actually look at ag commodity prices over time, what's happened is there was certainly a boost coming from COVID, but the competition and the challenges in overproduction in the ag markets has started to hit and started to bring prices back down. So here's the price of strawberries. Strawberries today are selling for less than they were pre-COVID. Potatoes are now back to where they were pre-COVID. Now let me give you some statistics on some of the supposed price gouging companies in the industry.

Starting point is 01:05:09 Kraft Heinz stock pre COVID was 29 bucks a share today. Kraft Heinz stock is 34 bucks a share. 2019 revenue of 25 billion, 2023 revenue of 26 billion. EBITDA on 2019 of 6.1 billion EBITDA on 2023 of 6.3 billion. There's not a lot of profit gouging. In fact, Kraft Heinz has not been able to keep up with the inflation. Starbucks, which we just talked about, their stock was at $90 pre-COVID and today, 93 bucks.

Starting point is 01:05:34 2019 revenue of 26 billion, operating income of 4.1 billion. 2023 revenue of 36 billion, but operating income only 5.9. Margins have come down in Starbucks. Nick, if you pull up the McKinsey chart, this is a study of the grocery industry, the state of grocery in North America, 2023 by McKinsey, accelerating pressures on profitability to cope with the pandemic's upheaval. grocers have had to dramatically increase capex increased

Starting point is 01:06:00 supplies. As a result, they've seen a significant impact on margins. Here's the margin profile pre pandemic and today. Gross margin has declined by two points from 47.6 to 45.6. EBITDA margin has declined by one and a half points. And now let's just go to the final chart, which is CPG companies, the companies that make food and sell it to consumers. The companies that make food and sell it to consumers, as you can see during the COVID era, the three-year rolling TSR has declined since COVID across the board. So food companies are seeing food prices come down. So farmers are really suffering.

Starting point is 01:06:36 Labor costs have tripled since the pandemic, but they're still having to sell products at the same price. CPG companies have lower margins and supermarkets have lower margins. So there is nowhere in the ag or food supply chain that we are seeing fundamentally price gouging or profit taking happening. What has happened is the cost of labor, the cost of moving stuff around, the cost of fuel, the cost of electricity, the cost of goods has all risen with inflation because of the increase in the money supply and federal spending and the stimulus associated with the Federal Reserve buying assets onto their balance sheet.

Starting point is 01:07:09 So arguably, I would say that trying to step in and cap prices will reduce competition and as a result will reduce investment in improving productivity. And we have seen this countless times with every socialist experiment in human history has started with caps on food and it has resulted in bread lines Like you see in the image behind me today as we can see in Soviet Russia This is a mistake. It is a problem and it's anti-american. It is anti free market It is anti innovation. It's anti productivity and ultimately it's anti liberty and I cannot stand it. That's my rank Okay. Thanks for coming to freebergs TED talk. Chamathya, so you're nodding strongly in agreement.

Starting point is 01:07:47 This is just dom and pandering, am I correct? There is no sustainable solution to inflation if you cap what a company can charge. Because what they'll do is they'll just stop producing. They'll manage to the margin that they'll just stop. And the reason they can stop is that they would rather contract and maintain their profitability than lose money. And then what happened is there's less products in the market.

Starting point is 01:08:17 And so the prices go up. So I think it stands to reason that the Harris campaign has access to some reasonably smart people. They also have access to really smart people like Larry Summers. And so I think if they just make a few phone calls, they'll figure out that this is a really terrible idea. Sacks, any thoughts? Overall election and this specific issue?

Starting point is 01:08:40 You take it either way you like. Yeah. So this story was reported by The Washington Post and by Bloomberg and others. So it appears to be more than just a rumor conjecture. I mean, these are publications that are apparently well-sourced within the Harris campaign. So I think it is fair game for us to comment

Starting point is 01:08:59 on this policy proposal that she apparently will be coming out with. Look, I think Freeberg is right about the policy. The idea of price controls is widely discredited across the political spectrum. I think virtually all economists agree on this. This was pride extensively in the 1970s, not just under Jimmy Carter, but Nixon tried wage and price controls and Gerald Ford had this whole program called Whip Inflation Now, where they printed out these

Starting point is 01:09:30 buttons called these wind buttons. And then Carter extended it. That's why we had huge lines to the gas pumps is because we had price controls on gas. And those lines of the pump went away almost overnight when Ronald Reagan came in and removed the price caps on gas. So we've tried price controls before, it didn't work, and it is remarkable that she would be proposing here potentially as her first major policy proposal on the economy to go back to this 1970s era failed policy. And I think it's really tipping her hand in terms of where her economic proposals

Starting point is 01:10:11 are gonna come from and what she really thinks. Keep in mind that throughout the Biden presidency, he rhetorically would blame corporate greed for the rise in inflation we saw as like a scapegoat because he didn't want to blame himself for all the spending but she's going further now and actually instituting this as policy. Yeah and so just to be clear with everybody we don't have the actual policy here but it's been reported seems like it's true maybe it's not maybe they step it back we don't know the

Starting point is 01:10:40 details of this at all but we do know it's tried before. What we do know is there are times when you could, like in an economic emergency, like during what was the giant hurricane or wars, you can keep your eye on this. But the truth is, as we just talked about with Starbucks, Sachs is like, I got a free cup of coffee or close to free. I make my own cold brew, shout out Cafe Dumont, because I don't want to pay $8 for it. The market responds. And when you

Starting point is 01:11:11 put your thumb on capitalism, when you put 12 thumbs on capitalism and on the scale, all kinds of weird behaviors occur. It does not work. And consumers can just simply opt out, they can make breakfast at home, they can brown bag their lunch. And it's a great point. Then companies are going to be like, holy sh**. People are not buying $8 coffees. Let's make a cheaper Happy Meal. To support your point and what Chamath was messaging on our chat. Look at Walmart stocks up 7% today, because they offer lower priced solutions to consumers and Dollar General and

Starting point is 01:11:44 Dollar Tree are rallying as well. When the market competes, consumers benefit and there are companies that will win and the companies that try to price gouge and the companies that try to charge too much will lose. Starbucks has been trying to charge too much for sugar water. They have a real problem they are now tackling. Walmart is trying to bring value to consumers.

Starting point is 01:12:05 They are winning. That is how free markets work. When the government steps in and says, here's how much margin you can make, or here's how much prices should be, it ruins everything. And the entire incentive structure goes away, and you end up with bread lines.

Starting point is 01:12:18 Saxie Poo, what do you got? Well, there was a really interesting story in the Wall Street Journal this week called Kamala Harris's economic team and agenda start to take shape. And it was interesting because it said here in the first paragraph that the challenge of her economics team is, quote, differentiating the candidate, which is Harris, from her unpopular boss, which is Biden, without abandoning his policies. And the problem that they have is that for the last three and a half

Starting point is 01:12:47 years, there has been no daylight between Harris and Biden. And in fact, Corinne Jean-Pierre said exactly that in the article, there's been no daylight, they've been highly aligned. Now, in response to that, what the campaign has been trying to do is a not say anything about policy, just try to redefine the candidate based on biography. She's done no interviews with the media. She's done no sort of unscripted speaking appearances. And the media has cooperated with this so far. The most egregious example

Starting point is 01:13:16 was that Time Magazine cover story, which was this really gauzy profile that was a hagiography, even though she refused to even do an interview with Time Magazine and that story. So strategy number one has been just to kind of hide from the media in terms of what she would really do. Strategy number two was adopting some of Donald Trump's most popular policies. So she just announced no tax on tips. She was, I think, widely kind of criticized for being a copycat on that. And now we finally have strategy number three, which is to tiptoe into the campaign with her own original proposal on price controls, which I think is being roundly criticized,

Starting point is 01:13:56 but it shows where her policy instincts are coming from. I mean, this is somebody who has always been on the progressive left. When she was a member of the Senate, GovTrack rated her as the most liberal member of the Senate, even to the left of Bernie Sanders and Elizabeth Warren. And you're now seeing this come out in her policy proposals. So look, I think she's definitely gotten a bounce in the polls over the last few weeks because of this favorable media coverage, but it's a sugar high based on something that's not substantive. I mean, she didn't put forward any proposals. And I think that now that she finally is putting

Starting point is 01:14:29 out policy proposals that can be questioned or analyzed and criticized, I think this is going to be the beginning of, I would say, a big correction in her campaign. J. Cal, do you agree? Do you think her strategy is off at this point? And is it starting to hurt her to put out these proposals? You know, I am I remain undecided, moderate, left-wing and moderate, have voted Republican 35% of the time, Democrats 65% of the time, and I've been studying the strategy here. Her strategy is crushing Trump. So obviously, it's working. Now, I don't like it. I think everybody should be doing debates.

Starting point is 01:15:05 I was really upset that there wasn't a debate or a speed run primary. I don't like the fact that Trump and Biden skipped out on the primary debates. I think they should be forced to do debates, forced to do interviews. And so, on that front, I hate what this is doing to democracy.

Starting point is 01:15:21 Now, pragmatically, running out the clock as a strategy and not defining your positions too much and just, you know, selling the vibes is a brilliant strategy and it's working. And, you know, as Trump said, the VPs don't matter. What she did as VP doesn't really matter. What JD Vance thinks as VP doesn't matter. VPs don't matter. You're voting for the president. The VPs get in line. Trump's positions. JD Vance flipped a bunch of his positions to align with Trump. And I think Kamala did the same when she worked with Biden. That's your job is to align with the president. Now that she's her own, and Waltz is going to flip to her. So I think they're putting out moderate vibes. I think they're kind of socialists.

Starting point is 01:16:04 I think they're not as socialist as Bernie and Elizabeth Warren, but they're not moderates, but they're pretending to be moderates. And that is working as a strategy. They are demolishing Trump and then Trump is, you know, getting bad advice around him. I think, you know, if I always handicapped this and I wrap up it with just one more minute, I think Trump was so good on all in, he was so good at the RNC for the first half of his speech when he is presidential, when he has a big open tent, I love him. I think he's great. And I think he's like, we're all positive when he goes into grievance culture, when he goes after the race stuff like he did with the black journalists, when

Starting point is 01:16:41 he goes after gender or JD does the gender stuff and the cat stuff, I hate that stuff. Moderates hates that stuff. Women hate that stuff. And the moderates and the women in the swing states will decide the election. And Trump's campaign is loundering right now they have to get it. They have to flip it back to that Trump 2.0 I described many times, where he's serious presidential, not bullying people not doing the incel comic thing this going after waltz going after cat ladies, it's just gross and not necessary. So I think, you know, maybe Trump after the RNC after the DNC will go back to Trump 2.0, that would be much better. And I think Trump has a chance

Starting point is 01:17:16 of winning if he does that. If Kamala goes moderate, I think she's gonna win. So that that's my that's my strategic take I am under I remain undecided as a voter. But you just said she's a socialist, not a moderate. I think in her heart she's between like, if you had Clinton, and a great question, if you had Clinton and you had Bernie Sanders, I think she kind of falls between the two. But I think she's pretending to be a moderate to get votes. Right.

Starting point is 01:17:40 You know, just like Trump will pretend to be super right wing to get the, you know, who are acted up, but he's kind of a moderate to socially. I think Trump is a moderate in this race, and she's much more moderate than than she is. I think that actually is true. Look, I think that she's pretending to be a lot of things. She's pretending to be a moderate when really she was the most liberal member of the Senate. She's pretending to be a change agent when really she's the incumbent. Keep in mind that she has been in office now

Starting point is 01:18:06 for three and a half years as part of the Biden-Harris administration. And she was perceived within that administration as their emissary to the left wing of the party. I mean, remember that when she was put on the ticket, Biden was perceived as the moderate and she was perceived as the person on the left and she was gonna basically help consolidate those votes.

Starting point is 01:18:23 So she's pretending to be a lot of things that she isn't. And the reason why it's working is because the press has fully cooperated in letting her run a campaign without doing press interviews, without doing unscripted appearances. And the press frankly is embarrassing itself by revealing themselves to be effectively DNC operatives. And that Time Magazine cover story was just the latest example of that.

Starting point is 01:18:48 I do think that this strategy can only work for so long. I think that the media is starting to feel a little bit embarrassed. They're starting to get a little bit shamed about the fact they're letting her just give them the Heisman. And I don't think she can run out the clock for three months without doing interviews.

Starting point is 01:19:04 I just think that, I think she can do this for another week or so. I don't think she can run out the clock for three months without doing interviews. I just think that, I think she can do this for another week or so. I think that they're gonna run this playbook through the convention, but eventually she's gonna have to start doing interviews and she's gonna have to start putting out more substantive policy proposals. And I think the fact that this price control proposal

Starting point is 01:19:20 is their very first one that they've put out, I think this shows that this is not gonna be easy for her. It certainly jolted me awake, Zach, so I'll tell you that. Yeah, I mean, this idea that she can pretend to be a moderate and just run on vibes with no interviews and no substantive proposals, I don't think it's gonna work for three months. I think she's gonna reveal herself.

Starting point is 01:19:40 I think an educated voter base is gonna wake up to that. And particularly in that independent segment, there's going to be a lot of acknowledgement that maybe these are not going to be the right policies. I think they're preparing their policies and they're going to drop them after the DNC. Chamath, what's your take on strategy? And then we'll move on to science corner. And in the middle of the relief rally that Biden isn't in the race, I think that we had a different version of a relief rally

Starting point is 01:20:05 when everybody realized that President Trump hadn't been assassinated. So these are the pendulum swings, I think, of an electorate that still hasn't been given a clear definition of A or B. In this case, I think what's happening is there's a lot of testing of language and ideas and concepts that both sides are doing.

Starting point is 01:20:31 And I think we will not know where this election is going to go until after September the 10th and that first presidential debate, because I think that these big issues will be put to the test, the journalists asking the questions will corner both candidates, both of them will have points of view. And then I think they'll have to go into these five states that matter on these five issues that matter. And I do think that this will be one of those issues,

Starting point is 01:20:55 because this is a very aggressive proposal that has a lot of implications. And that has a lot of historical context of never having work, literally never. So it's dumb. We haven't seen it, but it seems dumb on its face. And just to be clear, there is no proposal. We're just commenting on reports of a proposal. Proposal will probably come out on Friday this weekend. So you can read it for yourselves and we'll talk about the actual proposal. If there is one, who knows? It could could be bad reporting could all be capped freeburg you wanted to talk about boeing

Starting point is 01:21:30 well i wanted to just highlight the the starliner project and the issues unbelievable give us an overview and then let's let's let's chop it up as we wrap two nasa astronauts flew on the boeing starliner capsule uh june 5th and they docked with with the ISS and they're now stuck on the ISS and they might be stuck there until February because the starliner has a number of technical issues. The astronauts cannot get back in the starliner and just fly back to earth. NASA's kind of evaluating the options here on what to do and whether to put them on a SpaceX Crew Dragon capsule in February to get them back. So I just want to talk a little bit about the history of this project and provide a little context before we highlight the particularly acute story of two astronauts being stuck

Starting point is 01:22:20 in space right now, which is an incredible story. So this is a next gen space capsule that was designed to take people to and from lower orbit, basically to the ISS. And NASA, if you guys remember in the 2000s, decided to stop making their own vessels, and they're going to start using third party contractors. So they went out and had a competitive bidding process. And ultimately, in 2010, they gave both SpaceX and Boeing the winning contracts to develop these commercial crew transportation capabilities. SpaceX obviously developed the Crew Dragon capsule. So it was unveiled in 2010 as the CST-100, Boeing's first commercially developed space capsule. The company would take on all the financial risk for developing it with a fixed price contract from NASA of $4.2 billion.

Starting point is 01:23:06 To date, by the way, Boeing has taken a $1.6 billion financial hit on the development of this program. SpaceX, by the way, won a $2.6 billion contract to develop the Crew Dragon capsule. And just to give you guys a sense, the Crew Dragon capsule has flown 13 missions thus far to the ISS. And this was the first crude mission flown by Boeing, both of which got contracts at the same time. So originally,

Starting point is 01:23:32 it was going to be a 2017 launch timeline. And I just want to hit on some of the history of the Starliner problems. 2016, it was delayed. Just to confirm, you said it was $4.2 billion, that contract, that contract with Boeing to develop this Starliner capsule. So the first issues arose in 2016 when there were design problems. The first crude flight was then pushed back to be scheduled for 2019. In 2018, they found issues with propellant leaks, which led to more delays. 2019, a test flight parachute failed. December of 2019, they had their first uncrewed test flight

Starting point is 01:24:06 and there were software errors that would have caused destruction of the spacecraft. This led to NASA and Boeing submitting 80 different changes that needed to happen before they did their next uncrewed test flight. So they then pushed that all the way out to 2021. Boeing ended up saying it cost us half a billion dollars to do that.

Starting point is 01:24:24 Then in August of 2021, Boeing ended up saying it cost us half a billion dollars to do that. Then in August of 2021, 13 propulsion system valve issues were discovered on the launch pad, the flight was aborted and the capsule was returned. They eventually got it up again in space in May of 2022 and it docked with the ISS and it returned back to earth. Even though one of the parachutes failed when it returned to Earth, it still made it down. This again led to the 2023 first crewed launch, which means people are in the capsule. This was originally supposed to be in 2017. And they kept pushing it back because of more issues of the parachute system. And then they finally got it launched in June 5th of 2024 with two astronauts on board to go to ISS and come back.

Starting point is 01:25:09 On the way, they discovered that five out of the 28 maneuvering thrusters, which is how they can move this capsule through space to get it to dock with the ISS and ultimately make its way back to Earth, were malfunctioning. They have now discovered five helium leaks. Helium is stored in a pressurized system to actually control those thrusters and make it move through space. And now they may not even be able to get this capsule to fly off of the ISS. So on June 28th, NASA announced that while the Starliner is theoretically capable of returning the astronauts to Earth in an emergency on the ISS, the capsule is not approved to fly until these thruster issues and the leaking helium are figured out or better understood. And they have now pushed the decision to the end of August.

Starting point is 01:25:52 It would be massively embarrassing for Boeing if these two astronauts had to be rescued by SpaceX. It's a crew Dragon capsule had to find its way up to the ISS. They hopped on and they came back to Earth. It's a crew Dragon capsule had to find its way up to the ISS. They hopped on and they came back to Earth. Clearly a massive problem, but it's a certainly a personal and a human story now with these two astronauts struck stuck on the ISS. And I know you've had a lot of comments on Boeing in the past. But I mean, does this feel like like a continued underscoring of the issues at Boeing?

Starting point is 01:26:19 And just to be clear, the statistics are three for Starliner two on man one manned and then for SpaceX with the dragon they did 11 eight with NASA three with commercial commercially with like other passengers yeah yeah so the NASA cargo dragon which only has a cargo on it not people has completed nine successful missions to and from the ISS there are six more planned and they've obviously done 13 missions with the crew dragon. And by the way, I don't know if you guys know this, this is a surprise, but exciting to share that we are going to have a crew dragon capsule from SpaceX at the All In Summit in

Starting point is 01:26:56 LA parked on the lawns, you can actually go inside and check it out and take a little tour. It's gonna be amazing. So thank you to the SpaceX team for bringing the crew dragon capsule to mark my gosh, I mean, where do I begin? Look, Boeing is these So thank you to the SpaceX team for bringing the Crew Dragon capsule. Jemak. My gosh, I mean, where do I begin? Look, Boeing is these three very complicated businesses that try to live as one. So you have a commercial airline business, you have a defense business, and you have the space business.

Starting point is 01:27:19 I'll be the first one to say that I think it's extremely difficult to be good at any one of those three things. And the probability of getting all of those three things right is basically next to impossible. That's just a general comment. And I think that specialization is better. The second thing that I'll say is that I observed this company about five years ago, and I wrote about it in my annual letter. And part of the reason why I wrote about it was there was a quote, I'll never be able

Starting point is 01:27:49 to judge what motivated Dennis Mullenberger, whether it was a stock price that was going to continue to go up and up, or whether it was just beating the other guy to the next rate increase. He said he added later, if anybody ran over the rainbow for a pot of gold on stock, it would have been him. Who do you think said this? It was the incoming CEO of Boeing. And I was so flabbergasted because I'd never seen something like this.

Starting point is 01:28:14 So in a company where safety has to be the number one priority, to have an individual that's characterized by the incoming CEO as solely focused on their compensation plan sort of explains why there's all these fissures in this company. Because again, back to that famous Charlie Munger quote, show me the incentive and I'll show you the outcome. If the incentive is safety and world-class engineering, that's what you'll get. But if the incentive is earnings per share growth, then that's what you will also get. And Boeing was a darling of the stock market for a very long time.

Starting point is 01:28:53 And now what happens is underneath the other things that actually should matter, i.e. safety, are slightly deprioritized. And then you have these issues. I really hope these two people get back safe. It seems like they're doing a lot of experiments and they love being up there. But it's a little bit unacceptable that they have to be there until February. But I do trust that if he wants to go and get them, SpaceX will do a great job and they'll be home soon.

Starting point is 01:29:21 Saks, one of the great things about this, thank God NASA gave two contracts out of the head, given one. Oh my God, could you imagine if that was lobby? You would be asking the Russians to go get them and then like, you know, we're in a little, I don't know if you've been watching this. This is what I thought we could discuss. It's like, you know, is there benefit in having two? But being dependent on Putin at this moment in time when Ukraine is making massive gains

Starting point is 01:29:43 into Russian territory. I know this hasn't come up all that much, but that would be really dangerous. But by the way, just back to what Friedberg said before, sorry to interrupt you before you go, Sacks, but why is this even possible? It's exactly as you said, J. Cal, we have competition, but why is competition possible? It's because of what Friedberg talked about before. We didn't have a set price. The government didn't come and say,

Starting point is 01:30:06 you will build it for X and I'm only doing it one time. The free market was able to solve this problem. And it turned out the more capable solution was 40% cheaper than the one that they thought was going to work. And the one that was 40% cheaper was also on time. And the other one was unreliable. And this other one, seven, eight, nine, 10 years delayed.

Starting point is 01:30:29 It's 100% Shima. That's a perfect example. There are examples every day of the fact that these other ideas just don't work. Yeah, I think we've pretty much beaten that capitalism is the greatest force for innovation and lowering prices. It's actual thoughts on this situation? And helping humanity.

Starting point is 01:30:47 Yeah. God forbid people will get air conditioning at a lower price, and smartphones, et cetera. Sax, your thoughts here? Yeah. I mean, look, if we're talking about capitalism, I think about what the Austrian economist Joseph Schumpeter said, which is capitalism is a process of creative destruction. The creativity happens in the early days when you've got a founder who's creating a startup and the business gets big, but then it gets older and the founder goes away and the company can drift and become bureaucratic. Sometimes it can renew itself and maybe you get a Brian Nicollin maybe to save it,

Starting point is 01:31:25 and sometimes it doesn't. And the companies that get old and don't renew themselves eventually fade away, and they get destroyed and replaced by other startups. It's a system that has worked incredibly well in America, and that's the basis for all of our prosperity and innovation. When you compare that to the political process, it's very different.

Starting point is 01:31:47 The political process has this knee-jerk resistance to change and innovation, and it has an impulse to control things. It wants to control prices. It thinks it can solve problems with just top-down mandates, and it doesn't reform itself. It creates new bureaucracies and never gets rid of them. I mean, we create new departments, they never go away, they just keep getting bigger and bigger. There's never any creative destruction.

Starting point is 01:32:11 It's just like a, it's a one-way ratchet of bureaucratic growth. So it's really clear what creates prosperity. And I do think we have now reached a point where the government has gotten so big and so out of control and so expensive that it actually is threatening this engine of creative destruction. And at some point, I think voters are going to have to make a choice about whether they're

Starting point is 01:32:35 going to try and rein in the government and create more room for capitalism innovation or they're going to allow it to get overtaken. I love your capitalism quote and reminds me of the Winston Churchill one, which I'm sure you've heard the inherent vice of capitalism is the unequal sharing of blessings. The inherent virtue of socialism is the equal sharing of miseries. It's a great quote. Winston Churchill is strong, man. Strong. He's strong with that dude. That's a guy I would like to hang out with. If I got to hang out with Teddy Roosevelt. Oh my gosh. I like to hang with that dude. That's a guy I would like to hang out with. I gotta hang out with.

Starting point is 01:33:06 Teddy Roosevelt. Oh my gosh. Drinking, cigars. I would love to go drinking with Teddy and cigars, guns. Wow. I like to go hunting. Churchill took a bath every day. Freyberg, please don't bring up this whole thing about baths because then you're going

Starting point is 01:33:19 to make me pull out of my phone the three or four times you called me from the bath and I took a screenshot. I literally, Freyberg's in the bath. He lights candles. He takes a picture of his pale stems and he sends it to me and calls me from the bathroom. You can't see him. It's always hard. I have PTSD. He's called me from the bath. I know he's in the bath because you hear this kind of like echoey kind of, you know, so it does. And it's like, Oh my God, you're in the bathtub. Yeah. It's like, it's clear that he's in the bathroom. Exactly. I'll call you from the bath. I'll call you later.

Starting point is 01:33:52 It's so disturbing. By the way, I mean, that invasion of Russia that you're talking about is not what you think it is. Here we go. So yes, we haven't had a general fact update in a while. I'm, I actually want to hear your take on the sacks. Like what is the real story? Yeah, talk about the humiliation of Putin. Yeah, tell us. Yeah, what is the real story with the Ukraine counter invasion into Russia? I think you're falling for a lot of hype. I mean, what's happening is that the stage of the war is that the fighting is in the Donbass and along a 1200 kilometer front in

Starting point is 01:34:23 Ukraine, where the Russians has just been pounding the Ukrainians. The Russians have more soldiers, they have more artillery, they have more air power, and they have air superiority. They've just been annihilating the Ukrainians. I mean, Ukrainian casualties, according to some sources, are somewhere between 30,000 and 60,000 a month. It's massive and unsustainable. What Zelensky did is he basically threw this Hail Mary where he took some of their best forces, their best reserves, and had them attack this undefended part of Russia, Kursk. And yeah, they took a few hundred miles of undefended territory, but there's nothing strategically important there. And

Starting point is 01:35:01 now Russian air power is basically creating significant casualties among those forces and the Ukrainian forces are now trying to figure out what to do. I mean, they're basically running around this part of Russia like headless chickens trying to figure out where they can dig in and find some defensive fortifications. I don't know what Zelensky is trying to accomplish. I guess it's kind of a PR offensive. A lot of people have been fooled into thinking that this is somehow a game changer in the war. It's not. All Zelensky has really done is take some of his best troops away from where the strategically important fighting is, have them attack this part of Russia, and over time Russia's just going to mop them

Starting point is 01:35:38 up. Did the Russians get caught with their pants down? Yeah, I guess they did. Is that an embarrassment to Putin? I guess it can be spun that way. Does it change the outcome of this war in any way? No, it's not. And what we're on track for is at some point, probably next year, Ukraine is going to collapse. I mean, their position in this war is unsustainable. And taking some of their top troops, feeding them into hearse where they can be easily picked off by the Russians is only going to accelerate that process. And then Sax, what about Nord Stream? What we just found out about Nord Stream?

Starting point is 01:36:13 Well, the Nord Stream story is very strange because we're on our third or fourth explanation here of what happened. I mean, it was pretty clear that somehow the US was behind it and they've been blaming, you know, first they said that the Russians did it, right? Which makes no sense. That'd be like the Russians shooting their own legs off.

Starting point is 01:36:34 That was the first cover story. Then they kind of went with, I guess, Illusioni did it from a yacht. I guess that's the story they're on now. Yeah, the Wall Street Journal report, just to give people the background of why we're talking about this, the Wall Street Journal reported that Germans investigation into this, you know, the people who were impacted by it. Here's the quote, the whole thing was

Starting point is 01:36:53 born out of a night of heavy boosting and the iron determination of a handful of people who had the guts to risk their lives for the country. The Ukraine operation costs around 300,000, according to people who participated in,, the small rented yacht with a six member crew, including trained civilian divers, one was a woman whose presence helped create the illusion. They were a group of friends on a pleasure cruise. So you're saying you don't believe that German report? Well, no. So this report about that yacht being used and how Zaluzhny was like the mastermind of this.

Starting point is 01:37:26 That support is not anything new. This has been out for, I don't know, at least six months. I've always been skeptical about this. The thing to understand about the Nord Stream pipeline is that it was a massive structure surrounded by huge amounts of concrete on the ocean floor. Blowing this thing up required some significant expertise in underwater demolition. I'm just very skeptical that it could be accomplished by six guys on a yacht under Ziluzhny. I mean, the Ukrainians have never had a Navy. This just doesn't seem like something that's in their wheelhouse of capabilities. It always made more sense to me that the US was involved somehow.

Starting point is 01:38:07 But how do you think an article this detailed that points to the Dutch intelligence community, the German intelligence community, American intelligence, how does an article like this with this much detail then get written and put into the Wall Street Journal? How does that happen? I think intelligence sources want it to happen. I mean, they have to get their sources from somewhere, right? And I'm just saying that this story about solutioning the yacht has this is not

Starting point is 01:38:34 new. This has been out there for many months. Look, I mean, it could be true. I mean, I guess I don't know for sure. But I guess I'm also just saying that I'm a little bit skeptical about this. I mean, Seymour Hersh had other reporting from different sources who claimed that the US was behind it. And President Biden himself at a press conference said that if Russia invades Ukraine, we will bring an end to the Nord Stream 2 pipeline. And when a reporter asked him, how will you do that? He said, we have ways, we'll get it done. And similarly, Victoria Nuland warned at a press conference that Nord Stream 2 will not move

Starting point is 01:39:08 forward if Russia invades and then lo and behold, the pipeline gets blown up. And if you're comparing which of these two forces has the capability to do something like this, I know for sure that the US does. Ukraine, I'm just a little more skeptical of. Just to give you some facts, to introduce some facts here. It was only 260 feet or so down where they blew it up. I've dove to 130, 140 feet many times. You can easily dive three, four, 500 feet. This is not difficult. I could dive to 260 feet with one day of training, and I've done half of that and I've only dived 25 times in my life. So this is easily accomplished, Zach. And so this sounds like it's dead on. I mean,

Starting point is 01:39:52 I know you don't dive in. What about the explosives? Yeah, it's very simple. I mean, you're literally attaching it to a pipe and you hit boom. I mean, these people are the Ukraine people. I think it required a massive amount of explosives to do something like this. No, it does not. In the face of Ukraine defending itself against Russia, one of the greatest militaries on the planet, this idea that that same group of people

Starting point is 01:40:16 who have held Russian at bay for two years, plus can't go down 260, even blow it up, is ridiculous. They could easily do this. This is not a difficult task. Super easy for the Ukraine. I don't think you're in a position to know. I don't think I am because I have facts 260 feet down. I've dove 230. It's very easy to go to 60. That's your box. I mean, it's just called reality. Chamoff. I'm sorry, Sax is the most biased person in the world when it comes to this is hysterical to hear him. him frame it. Jason, what you just said was, here are the facts. It's 260 feet down. I've gone to half that. So it's possible. So they did.

Starting point is 01:40:58 He's saying it's too deep. Sax's premise is this is beyond the capability of the Ukraine army. That's ridiculous. Sax, a lot of you'll easily know. A lot of people are dumb. Then it is the stupidest concept. You're also an explosive expert as well as an expert. I'm watching the Ukraine. No, no, no.

Starting point is 01:41:20 You want to firecrackers, fight the man. What are you talking about there as well? Dude, I bought pineapples. That's a quarter stick of dynamite. When I was in Brooklyn. You think six guys on a yacht did this? Easily. Easily. Six Ukrainians.

Starting point is 01:41:32 These are hardcore mofos. You think these Ukrainians are not hardcore? They were probably, they probably did it drunk. They did it drunk. I bet you they were half in the bag when they blew that up. That's why Russia can't beat them. I've also read the Seymour Hersh story and it just makes a lot more sense to me. That's all I'm going to say is it just makes a lot more sense to me.

Starting point is 01:41:52 And by the way, I've never taken away anything from the Ukrainians as a fighting force. I mean, clearly they are fighting bravely and they are hardcore. I've never taken that away from them. And I'm certainly not saying that they're incompetent or anything like that. And they've definitely been massively plused up by American weapons. And you'd like to see them win versus Russia and get Russia out of their country, right? I would like to see America stay out of other people's wars. And I would have liked to have seen them agree to a peace deal that would have avoided this

Starting point is 01:42:20 war. Okay. Okay. Who would you rather wins the war, Russia or Ukraine? If you had to pick who would you rather see? It's not my war. I don't think America should take sides in other people's wars.

Starting point is 01:42:28 I think we should stay out of them. And I think we should agree to peace deals when we can and not sabotage those peace deals. Yeah. One for peace deals too. I'm also for democracies beating autocracies. Okay, everybody. This has been another amazing episode. So let's get canceled elections.

Starting point is 01:42:43 This is been another amazing episode of the All In Podcast. For the Rain Man, yeah, David Sacks, the one and only, Sultan of Science, David Freberg, getting ready for the All In Summit, sold out! Great speakers, lots of surprises for y'all. And our chairman dictator, so rested, so tan, working 15 hours a day in Italy. And we'll talk about wine. I have something that I have something I have something for around 8090 that I'll be able to talk about. Hopefully soon. Oh, yum yum. I

Starting point is 01:43:20 still have a bit ski in there. All right, everybody. I am world's greatest moderator and the executive producer for life. Love you, boys. See you next time, everybody. Bye bye. I've just gone crazy with it Love you, Eski Queen of Kin Wands I'm going all in What, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, We should all just get a room and just have one big huge orgy because they're all just like this like sexual tension but they just need to release them out. What? You're the B. What?

Starting point is 01:44:11 You're a B. We need to get merch. I'm doing all in. I'm doing all in. And now the plugs the All In Summit is taking place in Los Angeles, September 8, 9 and 10. You can apply for tickets. summit.allinpodcast.co and you can subscribe to this show on YouTube. Yes, watch all the videos. Our YouTube channel has passed 500,000 subscribers.

Starting point is 01:44:45 Shout out to Donnie from Queens. Follow the show x.com slash the all in pod, tick tock, the all in pod, Instagram, the all in pod, LinkedIn search for all in podcasts. And to follow Chamath, he's x.com slash Chamath. Sign up for his weekly email. What I read this week at Chamath dot substack.com and sign up for a developer account at console.grok.com and see what all the excitement is about. Follow sax at x.com slash David Sax and sign up for glue at glue.ai follow Friedberg x.com slash Friedberg and ohalo is hiring click on the careers page at ohalo genetics.com I am the world's greatest moderator

Starting point is 01:45:24 Jason Calacanis if you are a founder and you want to come to my accelerators and my programs, founder.university, lunch.close slash apply to apply for funding from your boy, J Cal for your startup and check out athenawow.com. This is the company I am most excited about at the moment, athenawow.com to get a virtual assistant for about $3,000 a month.

Starting point is 01:45:44 I have two of them. Thanks for tuning in to the world's number one podcast. You can help by telling just two friends. That's all I ask. Forward this podcast to two friends and say, this is the world's greatest podcast. You got to check it out. It'll make you smarter and make you laugh laugh while learning. We'll see you all next time. Bye bye.

All-In with Chamath, Jason, Sacks & Friedberg - Break up Google, Starbucks CEO out, Kamala’s price controls, Boeing disaster, Kursk offensive

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