All-In with Chamath, Jason, Sacks & Friedberg - E108: Doxing debate, Nuclear fusion breakthrough, state of the markets & more

Episode Date: December 16, 2022

(0:00) Jason's new gig! (1:05) Twitter's new privacy rules, notable suspension, doxing dynamics (20:48) Nuclear fusion breakthrough and geopolitical ramifications (42:58) Jason and Sacks's big night (51:11) State of the markets: Coupa acquired by Thoma Bravo, startups at all stages seeing heavy valuation reductions, what LPs are thinking (1:22:08) TV catch up, worst person in tech bracket Follow the besties: https://twitter.com/chamath https://linktr.ee/calacanis https://twitter.com/DavidSacks https://twitter.com/friedberg Follow the pod: https://twitter.com/theallinpod https://linktr.ee/allinpodcast Intro Music Credit: https://rb.gy/tppkzl https://twitter.com/yung_spielburg Intro Video Credit: https://twitter.com/TheZachEffect Referenced in the show: https://www.finextra.com/newsarticle/41483/checkoutcom-chalks-70-off-valuation https://twitter.com/Cernovich/status/1602457619431493634 https://twitter.com/elonmusk/status/1603190155107794944 https://en.wikipedia.org/wiki/National_Ignition_Facility https://www.ft.com/content/4b6f0fab-66ef-4e33-adec-cfc345589dc7 https://www.neimagazine.com/news/newsfusion-industry-survey-shows-significant-increase-in-private-investment-9860867 https://www.reuters.com/markets/deals/thoma-bravo-buy-coupa-software-615-billion-2022-12-12 https://www.finextra.com/newsarticle/41483/checkoutcom-chalks-70-off-valuation

Captain Callacanis is here reporting for duty. Wait, is that a spirit airlines cap? Absolutely. Spirit airlines, I just wanted to say all in podcast, now sponsored by Monclair and Spirit Airlines. Or now sponsored by the village people. Why MCA? Now are you a pilot or a flight attendant, J. Count?

He's a flight attendant. I don't think he's thin enough to be a flight attendant. Are you fat shaming me? Are you body shaming me? Can't do flight attendant. I don't think he's thin enough to be a flight attendant. Are you fat shaming me? Are you body shaming me? Can't do that nowadays. I don't get you canceled. Get exact canceled at this point. Like, fat shaming would be number 72 on the list.

He can't get canceled because all the lips have left Twitter. There's nobody to this. No whole monitors left. There's no whole show. They all pretend. No, they quit every week. Yeah, it's like all the lips. You said they moved to Canada when Trump got elected. Yeah, Canada immigration go ahead

I'm going to be a queen of queen of kings. A hacker figured out a way to take all this data and track, you know, people's yachts, people's planes. Obviously, one of those people was Elon. Elon had a security issue. This is all public information. So the larger issue at stake here is the fact that the law allows for people to do this persistent tracking of planes which then becomes persistent tracking of a person. And what really is at stake here is

how we define the term doxing. For people who don't know the term doxing, it means giving a person's location. That could be your home. That could also be your at a location for some period of time. You're at a hotel for a basketball game. And it's pretty clear. You can take a picture for a basketball game. And it's pretty clear,

you can take a picture of a celebrity, say there's a celebrity here, O'Lady Gaga is at the farmer's market. What I object to here, we all understand doxing is dangerous, and in fact, is against the law to just give people's addresses and stuff like that. The issue here is a new type of doxing,

which I'll call persistent coordinated doxing, where dozens of times a month you're giving a person's location. It may not be against the first amendment, SACS, I think you would agree, but we have to ask ourselves, do we want to live in a world where whether a person is on an electric bicycle or an airplane or any device in between, somebody should be releasing dozens of times a month, a specific dedicated feed of their location. It is terrorizing as a parent when this happens. I've had doxing people on the call here have had very security concerns. We don't want to live in a world with de facto doxing. What these sites were doing was de facto doxing. But these sites were doing with de facto doxing. I think it was a bad decision and I think that it

represented you on the least generous statement would be that it represents deep hypocrisy in that not just a few weeks ago did he say he would never delete that account, but he also said he was buying Twitter to enable freedom of speech and freedom of expression and that he wouldn't come in and do the same sort of content moderation that was done by the old regime. And then he came in and did exactly what the old regime did, which is that he took the rules and he took the quote moderation policies and he found a way to use them to make some editorialized decisions that he thought was appropriate. Now the more generous thing is what you guys are saying, which I don't think is necessarily

wrong, which is that he's trying to protect people where there's some loophole or some law that doesn't seem right morally, but it is the law, and it is what it is. In those cases, I think you run into the exact same issue that the old guard at Twitter had, that the moderators and the executives at YouTube have dealt with, and that the executives at Google have dealt with and that we sit here and we criticize until you're on that side of the table. And you're forced to make these moderation decisions, you're forced to make these policy decisions and you're forced to implement these policy decisions because of some moral framework that you now think is appropriate.

And guess what? Some people will say that's not freedom of expression. That's not freedom of speech. You're taking that away from some people. You're taking this particular case away from a 15 or 16 year old kid who's built at Twitter feed. And so I think what it shows is just how hard it is to moderate these sites, these platforms, and that there is no simple, easy, idealistic, idealogue of, hey, all these things are open,

all these things can be used by anyone all the time. Because as soon as one of these edge cases start to happen, you want to come in and do something about it. Shemath, what do you think? What should happen going forward? So, I have had these issues happen to me multiple times. I'm not nearly as important as Elon is, but it feels the same when you're in the middle of it.

It feels pretty same when you're in the middle of it. It feels pretty terrorizing. That being said, I think the real decision for somebody like me is that if it's too much is frankly just to get rid of it and to find a different mode of transportation, that's a little bit more anonymous. And the reason I say that is that I just think that you would have to go and get the government to basically change the law, which they're not going to do. And so then as a result, your reaction will seem somewhat contrived and deeply personal. And in that, I think you lose credibility.

Let me just summarize this and be the first one to just state this. I think that if there's any person in the world that can figure out Twitter? It's probably Elon, but man has he taken on just a gargantuan battle, and increasingly I am not a fan of this battle, and I'll tell you why. This is a man who is essentially proven that he can bend the laws of physics on behalf of humanity. He's done it twice, once in electric cars, and once in rocketry. The problem is that the realm of decision making at Twitter has nothing to do with the laws of physics and is governed by emotions and psychology, in which there is no canonically right answer. And so he's quickly finding out that half the population will always find fault with him,

no matter what he does. And now, the implication of that becomes very important. We saw yesterday that he had to sell another $3.8 billion of Tesla stock. Why is that? It's because this transaction, which was very tight to get done, probably required lots of margin. Look, I have a margin loan at Credit Suisse, so I know how these things work. And you can very quickly get margin called. You have to sell down things that you own in order to maintain your collateral limits. We've talked about this before.

He said to do this twice down the last few weeks. And that's because, again, not because of the demand at Tesla, as far as we can tell, but because people believe he's distracted, and so people are anticipating weakness at Tesla, people are now shorting the stock. Anyways, it's causing this downward spiral. And can he fix it? I think so. Can he pull it all out?

Sure. Is it just putting himself under an enormous amount of pressure that he could have avoided somewhat? Yes, and I think that this is sort of where we're at six weeks in my god I was saying this guy learned in six weeks what it took YouTube seven years to learn how hard it is to moderate content And you know, I think this is what I disagree is your your your attributing so much good faith to these content moderators at YouTube and Twitter when the Twitter files reveal that they may no effort to suppress their bias. In fact, they were

like pretty much. Wait, can you before they're okay before you react to that? Dancing in the streets every time they booted off. So when they didn't like fair enough before you react to that dancing in the streets every time they booted off so when they didn't like fair enough Before you react to what freeberg just said at the end that Kota can you respond to what I just said? Isn't it true like it's like well look? I mean if you define what Elon is you know doing there as You know acting as a judge Arbitrating on every little content moderation decision. Is that a great use of his time? Relative to what he could be building at Tesla and SpaceX and doing on behalf of humanity, then no, clearly not.

But if you define what he's doing in the larger sense as restoring free speech to the most important town square social network, hopefully thereby inspiring other tech companies to move in the direction of opening things up, then I actually think it's a pretty good use of his time. So look, I think we can quibble about this or that decision that he makes or this or that tweet.

But I think the overall thrust of what he's doing is very important for the country and for humanity. So I get where you're coming from. Hopefully he'll find some people at Twitter who he can empower and trust to make these content moderation decisions, so he's not drawn into every single little battle, right? We do want him focused on the highest priority problems. My point is just that I get that.

I just think that what he's learning and what we're living and seeing in real time is that there is no canonically right decision ever in this space. There's only a decision where some percentage will support and some percentage will always be against. That's my point. Correct. He did say when he took over, he knew that would be the case. He said, you will know I'm doing the good job

when both sides are equally upset. Just to put a pin in it, I think it's important for people to understand what the new policy is. So I'm just going to quickly read it just to take out to hang on. Sorry, hang on once. Like before you get to because I think the philosophical point rather than the specific one is it is an important one. And I just want to respond to what Shema said and have SACs respond to this in the case

of the points you make around the Twitter files. And by the way, I don't agree with any of the moderation decisions personally. So I don't think that someone should be suspended for posting public information. I don't think someone should be suspended for saying controversial things. That's my personal opinion. Just so I'm clear on that because I know that, you know, that's described yourself as a little bit for each. Yes, libertarian.

Okay, sure. And so in this particular case, I think what really worked to me, I was trying to identify why it made me so angry. Which triggered you yesterday. It triggered me. It really did. And I think the reason was that in the case of the Twitter file points, it was a minority, it was a minority that was affected.

It was one person that was affected because the majority wanted to do that thing to that person. And I think in this case, it's that the minority wants to affect the majority in the sense that Elon has aggregated this control and this power over moderation. And he's benefiting himself and a few people that have private planes. And he's shutting down hundreds of tweet feeds, Twitter feeds, that are using publicly available information. And so it feels even more onerous of a use of power

and influence because he's doing something that benefits a small number and affecting a larger number. Whereas the other one was affecting a small number that benefited a large number. Because that's what a lot of people wanted to see happen. A lot of people wanted to see Trump suspended. And it wasn't right either. I don't know if that makes sense.

We understand your position completely. I just want to add to that in this policy, I think it's very important to understand what he is saying about this. Accounts dedicated to sharing someone else's live location are going to be suspended going forward. You can still share your own location, obviously. Content required content for public engagements, you know, the president is speaking somewhere, whatever, you just really can't be persistently,

consistently tracking an individual otherwise known in, you know, but I'm sorry, Jason, if NPR is live tweeting, sure, Jerome Powell speech. Perfect. No problem. And XYZ location. Not a problem. If they do Jerome Powell's location for the next year, for the next year, 10 times a week, on his off-duty, on-duty, that's the thing we're talking about. I'm just saying, like, let's just say he gives a speech every week. Is that illegal? No, if you're giving a speech at a public place where you've announced that you're going

to be appearing at a certain time and place, you've already made probably where you're going to be. What we're talking about is, and what Elon jet was showing, was a live stream of precision GPS coordinates over a sustained period of time. And not too dramatic about it, but if you look at the weapons that are so successfully being used in Ukraine right now, they're all precision GPS guided. Now right now, you have to be a state actor

to get a hold of those weapons, but you could imagine over the next decade that having someone's precise GPS coordinates over a sustained period of time, it would be pretty easy to target them for a not-to-be-dramatic here, but for assassination. Yeah. That is a security risk.

There's no way around that. I brought this up with Palmer Lucky, man. I'm scared. That Duke come at me anytime. When I get my jet. I don't want Palmer Lucky taking me out. That is about it. That's not good.

Yo Palmer, I'm sorry, dude. Do not take me out. Well, I'm gonna get my jet. I'll be on my first flight. And he's just gonna send a drone in. But look, let's talk about hypocrisy for a second. Okay, because, here we go. Let's talk about CNN's hypocrisy in the media's hypocrisy

because earlier in the week they were saying that any criticism of you all roth who is twitter's former head of trust and safety amounted to a threat to his safety and they had this like theatrical tweet where they claim to you is having to flee his house which a lot of people found pretty preposterous. They were basically saying that public criticism of someone who has put themselves out there

to engage in a public debate who's writing up extra New York Times. That is a threat to safety. However, publishing someone's real-time location on a continuous basis, so they can be taught. It's not in your actual existence. It's not in your actual existence. It's not a threat to safety.

I'm sorry. If one of the two things is a until I'm sure it's the safety. That is not. I'm sorry. If one of the two things is a threat to safety, it's the real time doxing of somebody. Yeah. And I think we now understand why Elon did what he did. He basically had an incident in LA in which the safety of his kid was threatened

because he's got stalkers coming after him. So his safety is a real issue. It's not like a made up issue. But why should his personal experience affect the usage of the service that hundreds of millions of people use? And that's the big issue. The decision should not be based on what affects him personally. There needs to be a principle basis. There needs to be a principle basis for any decision about content moderation or censorship. Maybe in the first few hours that decision, it wasn't handled perfectly because

there wasn't a principle basis. But since then, one has been put in place. The principal basis is what Jake has showed. And this applies to everybody. And so, you know, now it's a debate about whether that policy makes sense. Now, is Elon just as arbitrary and capricious as the former executives who are running trust and safety at Twitter?

I don't think so, for two reasons. Number one, he's promised transparency. He said that when we ban or shadow ban an account, there has to be a reason for it and you have to be alerted to it. In other words, none of the shadows stuff. We have to be informed. You get your speeding ticket, you get your ticket.

It's as there, right? No more shadow. That is different. And then the second thing is that, and again, I think you could say, they didn't do this perfectly in the first few hours, but there needs to be a principal basis for a censorship decision and it needs to be applied to everyone equally. And so far we haven't seen any basis for believing that he's not applying this principal equally.

I mean, still very early. Whereas the former rulers at Twitter were indulging their personal bias and personal preferences in who they were banning. There were two standards of justice. If you were someone who was allied with them, it was almost impossible to get censored no matter how heat-full your tweets were. But if you were somebody on the other side

of the political debate, they were eager to suppress you. And I think that at least so far, Elon has not shown that type of selectivity. He selected against someone that put him in personal risk. I think, yes. But you're saying, yeah, I do. selectivity. He selected against someone that put him at personal risk. I think yes. But here's the idea. I do. I do.

If that's where the decision had stayed, then I would agree with you. But I think that since then, they've put in place. They've undergirded that decision with a personal policy. I think those sites are, I think those tweet streams are cool. I think there's some cool tweets streams that some of these people run, and there are hundreds of them, and they're actually kind of cool.

You can see where these different places are. You're in favor of people tracking people's planes. Yeah, they show like where Air Force One is. They show all these different planes. It look, and whether or not the FAA should be publishing the state as a separate question, but it's on the open internet. It is already there.

It's like turning off the RSS feed from the open internet to protect himself. That's why it feels on earth. So here's the part I agree with, which is, I think this policy with regard to playing specifically is gonna be futile. Yeah. It's gonna be at best harm reduction.

Because as long as there's many ways to publish this information. Not on Reddit. It's pointless as well as Twitter. So listen, I think this whole policy on Twitter is a little bit of a red hearing. I think the real issue, the real underlying issue is that the FAA is publishing these I-Cal numbers.

Thereby making every plane person identifiable. I don't think there's, I haven't heard anyone explain why. If I'm necessary. I have a counter to it actually, Sachs, if I may. What we saw, whether you agree with it or not, with the mass banning of certain individuals, did actually silence them and take them out of the public square. One of the reasons, in fact, you long wanted to buy Twitter. So if you look at certain individuals,

whether it's Milo, Alex Jones, Trump himself, right on down the line, when they got banned across all systems, it was dramatic in terms of the reach of that information. So because of the size and scale of YouTube, Facebook, Twitter, et cetera, when they act in coordination, they can have a dramatic impact, not a perfect impact, but a dramatic, which is why we have this issue of,

hey, should 230 be rethought? Because when they act all mass, it is extraordinary what they can do to an individual. They took Alex Joe, how do you consume Alex Joe? Do you have to seek that out in a major way? It's distinctly different. Chimoff, last word, and then we're moving on to what could be the greatest science corner ever in the history of all in pod. Final word, Chimoff. I think this is this is a great transition we're about to talk about nuclear fusion. And my point is,

I don't care about any of this stuff. Like I said, like this is my point is like the if you take like an average person, okay, you know, we are let's say awake 16 hours a day and you know, if you take out the time with our family, David, the family is people that are related to you. Can we DM Sacks, those people one more time? We'll send you their names. But if you take that out and you take out exercising and fast-moving. We also explain that to Sacks. That's when you crease your heart rate and sweat sacks. The point is that you have lets us call it 12 hours, a functional executive time that

you can apply to a problem. And you can break that down into these blocks, right? I would really love what is basically the smartest human and the most productive human of our generation to be feeling those blocks with things that sort of like really transcend. And increasingly, and I agree that freedom of speech is important, increasingly those buckets are being filled with things that are very low level and hyper tactical and are distractions at best to the path of free speech. And so I think that hopefully he gets all this shit under control over there. He finds a good executive team. I would like to see him get back to landing rockets

on barges, getting to Mars. Let's get it. Finish subscribing. We're almost there. Shemoth definitely has a point. I just say one of the reasons why we don't care that much about this issue is because I think Something to understand that's important is there are different kinds of speech and different kinds of speech deserve different levels protection The fact that matter is like business advertising is not as protected as political speech porn is not as protected as political speech Political speech speech criticizing the people on power is the most protected category of speech because the founders of the country understood that the people in power Will always try to insulate themselves from accountability by limiting that kind of speech

But that is precisely the kind of speech that the former rulers of Twitter Suppressed the most and showed the least sensitivity to so listen I mean is Elon gonna be the perfect content moderator? No, I mean, nobody is. Nobody is, but I do not believe that puts him in the same category as, you know, Vagayagadi or Yoel Roth, who showed no sensitivity for political speech. He has indicated a desire to restore freedom of speech and I think they ultimately ended up in a place. I want him to get us tomorrow.

I want him to get us tomorrow. Let's move on to the best science corner ever. So according to sources, scientists work for the US government have achieved a net energy gain in a fusion reaction. No, not net energy gain. Get it right. We had ignition energy, which is very different from net energy gain. Hold on.

I know that you're in the ants. I can't. Please let the science nerd have you. You have to say it correctly so that people understand what you're talking about. Let me just make it even simpler then. Explain to us what fusion is, Dr. Friedberg, and explain to us why this could potentially change everything. We did this on a on a show once before, but I'll kind of do a quick kind of summary again. Basically, if you take atomic nuclei, which are made of protons and neutrons, and they repel one another, right?

Because protons are positively charged, so they want to push apart from each other. So with enough energy and enough density, meaning that they're moving fast enough and they're close enough, they'll overcome their repulsion and jam into each other. When that happens, some energy is released. Because the total mass of the fusion of those nuclei is actually less than those nuclei

when they're on their own. Some energy is released and that energy drives a chain reaction. Fusion is this concept that is fundamental to physics and fundamental to the energy driver of our universe. So the star in our sky, the sun, is driven by fusion. And only about 15% of the mass of the sun at the center is dense enough to actually drive fusion. So the big challenge with fusion is how do you get these atomic nuclei close enough together and moving fast enough that they'll actually fuse and release energy. And that's super hard. The reason it happens in the sun is because the sun has so much mass that the gravity pulls all those particles together, they get close enough, they get hot enough, they move fast enough and fusion happens. Boom, all this energy comes out and every day we're warm. Now, to do it on earth is very difficult, but if we can do it,

what happens when you fuse nuclei together is you don't release any, this isn't like a radioactive fission reaction, you release energy that can be harnessed to drive our systems, our technology. How has it done? Yeah. So in the 1950s, you know, this was BRI's, hey, we could do fusion on Earth. We got to get a really, really dense plasma, meaning the atomic nuclei and the electrons have kind of gone off the atoms. And it's just the nuclei spinning apart. You got them to move super fast, like tens of millions of degrees Celsius. And you got to get them really close together.

So how the heck can you do this? So there's a couple of concepts to do this, one of which is called inertial confinement, which is where you basically create a little pellet of the material you're going to try and get to fuse, and you put a ton of energy on the outside and you compress it really hard, really fast, and when you compress it really hard, really fast, and you can get it to be done in a perfect sphere, and you can get it to collapse on itself very quickly without kind of shooting all over the place. Enough of those particles will come close enough together fast enough hot enough and they will start to fuse.

Another way is through magnetic confinement where you use magnetic fields to create a really hot plasma get it to spin around or to move, and then the magnet brings that super hot plasma closer and closer and closer together until all those particles are moving fast and they're dense enough that they start to fuse. So one is called magnetic confinement, the other one's a inertial confinement. And so what we saw happen this week is at the National Ignition Facility, which is a facility that was built starting in 1997, and they've spent about three and a half billion dollars to date, they demonstrated a net energy output from the fusion reaction of an inertial confinement system. And what that means is they took a little pellet, and that pellet was made up of a deuterium and tritium. The atomic nuclei that they use, the particles

that they use are deuterium, which is a proton and a neutron stuck together, and then tritium, which is a proton and two neutrons stuck together. And the reason they use are deuterium, which is a proton and a neutron stuck together, and then tritium, which is a proton and two neutrons stuck together. And the reason they use those two combinations is of all the different ways you confuse nuclei together, this has the best energy output of any kind of reaction. Freeberg, yeah. What actually happened this time?

That made this work. For what, apparently only $3 billion, you said, you didn't say three trillion, is it three billion? About a third of what Sam Bankman fraud stole. We have done something here, allegedly. So what actually happened that is so dramatic that we have a press conference

everybody's losing their mind. So yeah, I just wanted to highlight one more thing about why this is so hard. You have to get such an incredible density. You have to get an incredible energy, so high temperature and high density that confining those atoms and not letting them escape and basically dissolve before they fuse is super difficult. It requires so much energy in such a controlled way, in such a perfect and precise way, that

all of the digital technology, the magnets, all the measurement systems, all the software, it's taken us decades to get everything that allows us to do this today. And now we're at the point that we may be able to start to realize production scale versions of this. So what they did is they had a small deuterium and tritium pellet and they shown 192 lasers onto this container that helped that little fuel. Both 192 lasers, the whole thing happened in a billionth of a second. The laser is pulsed, boom, here's an image of it. And as they did that, they, you know,

basically x-rays kind of hit the sphere, this little BBB, if you will. BB kind of thing, and compressed it. And it compressed so quickly, and was such heat, and it didn't dissipate because it was done so precisely. All the lasers hit at the exact right time, boom, this thing compressed, and then energy came out, and the energy that came out that was measured was one and a half times the energy that kind of went into that reaction. And here's a chart that I'll show you from the National Ignition Facility, which shows just how

inefficient the system still is. And this isn't even speaking to Chimoff's point, but basically these guys lose 90% of the energy that they put into the center of the system. Only 10% is actually used to drive the compression. The rest of it is lost and there's a lot of ways to improve the efficiency of the system from here. But basically they put two mega-jules in, they got three mega-jules out. And so it was the first proof point, production proof point, in the 70 years that we've been theorizing about nuclear fusion here on planet Earth, that this is possible and it's real. Now, this is these kind of inertial confinement systems. There are 33 private

technology companies today that have raised about three to four billion dollars so far this year to pursue several other technologies besides what the National Ignition Facility is showing to try and build production-ready versions of nuclear fusion. And so these 33 companies are using a bunch of different types of tools, one of which is the Tokamack. If you show the image, I'll show you this one.

Yeah, Tokamack, this is what we talked about. That is the magnetic spinning thing. That looks like Ironman's arc reactor. Yeah, so it's one based it on, yeah. Yeah, you create a plasma, you basically speed up the hydrogen nuclei super, super fast, theseuterium and sodium nuclei super, super fast, and then you use magnets.

And the magnetic field has to precisely squeeze the plasma, squeezing, it's squeezing, it's squeezing, and if it's slightly off in even the tiniest way, think about a balloon, right? If you put a pinhole in a balloon, everything escapes from the balloon. Yeah, you got to be a part of it. That's how technically hard this is.

You're basically trying to create a balloon with a magnetic field and you're trying to keep the guess and you're trying to make it smaller and smaller and smaller and if any tiny hole emerges, the entire plasma should have it. Now that they've done this. Is that what happens in your reigns? Like when you're trying to hold in the wagyu.

Anyway, let me ask this question then, about the consistency of this, and then we'll go to you, Chimoff. Can they do it consistently, or do you think this is like, they got lucky once, or are we gonna be sitting here a year from now, and they're like, we put into when we got out six.

And we did it five times. Yeah, so now we've proven that humans can do this. Okay. Which is, look, I mean, I want to give you guys some, and I know kind of some of Jamal's concerns, which is how to recreate the sun is what we've just come down to. Yeah, but no, guys, I want to just say one like, even close. I want to say one important thing from a historical context. All breakthrough technology starts out

seeming impossibly large, impossibly expensive, and impossibly slow. The human genome project 20 years ago cost $100 million to sequence the human genome. Today we can do it in a couple of minutes for $100. Okay, credible. The first computer, the NEA computer, had 500 flops of compute capacity. We can do it in a couple of minutes for $100. Okay. Incredible. The first computer, the NEAC computer, had 500 flops of compute capacity.

It filled a room. It cost $8 million to build. 20 years later, we had a mainframe. 20 years later, we had a run. No, this is all this emotional bullshit. You're using the wrong examples. Okay, let him finish then you go, Chema. Good.

Finish your sentence free break and then we go. And today we have an iPhone that can do two trillion flops of compute in your pocket. I think that what we're seeing with Fusion today is similar to what we saw with the Any Act computer in the 1950s, which is the demonstration that compute is possible. And now we're seeing a demonstration that Fusion is possible. And a lot of folks have anticipated this moment, and they've invested ahead of this. Now, I don't know if any of these companies that are currently kind of being built are going to be production already anytime soon. My estimate is that we will see production demonstration, fusion in the 2030s, so call it eight years from now plus, and then you'll see

grid scale scale up in the 2040s. So this isn't something that's going to happen next year or two years. It's already happening. What are you talking about? Okay. Now, Tremoth, your rebuttal. Oh my god. Knowing you're a huge fan of solar. This is the most naval gazing. Head up your ass. Scientific bullshit. I've ever. Okay. Couple of points. Let's start with the basics. The first is that there was no previous technical channel. Why are you angry at me? I'm not angry. I find this so tiring hearing this. It's all syrupy nonsense because he's right. Yeah, why? I don't get it because I don't find this intellectually honest. Okay. I find it. Let's keep it in the oceans. Let me finish. Okay. When you talk about sequencing the genome, there was no alternative.

So you're right, it was an enormous technical leap forward. When we built a computer, there was no analog. It was an enormous technical leap. And so you're right, we have a cost curve, we don't understand, and then we iterate as rapidly as possible in all these innovations where we built an entire infrastructure to ride down the cost curve. The thing is fusion energy exists today.

It's called the Sun. We actually know how to capture it at virtually no cost right now. So according to the IAEA, today you can capture grid level solar energy for about three cents a kilowatt hour. That's as close to zero as we've ever been, and over the next ten years, their forecast is it's going to get to one and a half cents. If you then want to store it, and you layer in storage costs, we'll be at a whopping three cents a kilowatt hour. That's where we are today. And so I think that fusion does exist. I do think that this is an incredible technical leap to replicate something that exists.

And I think that's where the intellectual dishonesty is. It does exist. It has been captured. It can be harnessed. And there is a positive energy equation just in a different modality that doesn't speak to these technically minded individuals. A couple of other points about what I saw. I think it's incredible what happened, okay, but just to make sure we're clear.

This is 192 lasers, the size of three football fields, that consume 322 megajoules of energy, which then ultimately deliver two mega joules to a target, which then released three. So this is why I'm saying we had positive, what's called ignition energy. We did not have positive electrical energy captured. So yeah, could we figure this out? Absolutely. Can we then shrink the three football fields down to something that looks the size of

a laptop we possibly could. Will it take 20 or 30 years possibly? But in the meanwhile, if the goal is unlimited costless energy, you're on that cost curve already. Yeah, but why can't it be both? So you said I was being intellectually de- dishonest. What was I saying? Where's the dishonest dishonest? The dishonest dishonest. Yeah. You're comparing this.

I can't say what you're saying is right. Yes, you can get. You seem to be an agreement. Industrial people like, yeah, I just think that I think that you're comparing this. You're saying it's right. Yes, you can get you. You seem to be an agreement. Industrial people. Yeah, I just think that I think that you're trying to say that this is an entirely new thing. No, it's a different approach to a thing we've already beat and basically capture. Let me bring you.

What I would argue to them off, and I think this is important, the net energy you can capture on, say, a football field-sized facility from solar, is a tiny fraction of the energy you can capture on, say, a football field sized facility from solar is, you know, a tiny fraction of the energy you could generate from a football field-sized fusion reactor. And that's why the argument would be like, hey, you know, when we were developing computers, hey, we have advocates, we shouldn't be developing computers. And I think that's the analogy I would use here.

This is why the cost per kilowatt hour is what the levelized cost of energy tries to do. It tries to normalize that argument away because everybody would say that, hey, hold on a second, you're gonna need planefuls of this or boat loads of that and people said, no, what's the levelized cost of energy? How what is the cost per kilowatt hour to generate energy?

And what I'm saying is that is an absolute scale and free is zero and we're at 1.5 cents over. Here's what I would say. Once, check out once again. Okay. Chimoffle, the opportunity here is not necessarily about cost reduction. It is about scalability. And if hydrogen is abundant, which it is on this planet. It is nearly infinitely abundant. We can take

that hydrogen and we can scale up energy and electricity production in a way that is unimaginable compared to solar. And I don't think that solar should be excluded. Solar is key today and should be scaled up. And I'm 100% agreement with you. But the scalability to go 100x, if we want to make a hundred times more electricity, I think we need need fusion and I think that it's feasible. So I think we have reached a Good settlement here. Tramoth. You're saying hey listen. We're getting solar down so cheap We can solve the problem all forms of energy. Okay, great. We are solving that so for our needs today And then what freeberg is saying, but what if you had unlimited, a thing that we can't even imagine, beautiful. Now, watch as I get sacks involved in a science conversation, he has zero interest in Mr.

David sacks. If in fact, there was 100% more free electricity available in this time, right? The next 10 to 200 X 100x, the available energy. In other words, supply of energy just becomes flooded and it's free, essentially. What would be the geopolitical reaction on planet Earth in terms of this incredible rivalry we have with China and for humanity on a political basis? Such a good question, Jacob.

Go ahead, Zach. That's a good question, Jacob. Go ahead, Zach. That's a good question. Here we go. Thank you. World's greatest moderate ATM. Why don't we let Freeberg answer it? No, no, no, you're an anti-Sex. But you're the politics guy.

Get in there. Take a second to think of it. I already has thought about this. I want to hear his answer. No, no, no, I just want to talk. I actually want to hear your answer. Yes. You know, in a world where, you know, energy becomes more abundant

and David has a bit more attention, guys. This is what he's trying to say. Do we just talk a group through it with Tucker? Michael, he's an awfulist. He becomes more abundant David has been paying attention guys I'll grow a talker Take a call your intellectual dishonesty and raise you a steel man. Go ahead I love you Great night. I'm a day died a Sunday night died great. It's fuck later. I just want to be very I think I think I think last week you call me petty too. I'm sure well, I want to be clear. I think that I'm just glad you guys are fighting not me and sex guys. Please let me finish. I think that this breakthrough is really valuable. I think it's interesting

to see that these kinds of scientific breakthroughs continue to happen in government sponsored facilities and not private companies. And I think that that's probably where a lot of these innovations will continue to come from, because look at the scale of what had to be built. Three football fields and 322 mega-jules of energy and 192 lasers, this is really complicated expensive stuff. I'm an enormous fan of these kinds of scientific breakthroughs. I want to be clear. I think that where I struggle is translating this into actually an investible area, and

I worry that this is going to consume lots of money by folks that could otherwise put money to work in things that will actually pull forward our energy independence and energy abundance sooner and faster. So for example, you know, there are all kinds of things that we could do to secondary, turnrary, third and fourth and fifth generation batteries that aren't happening today. There are a bunch of things that we could do to actually create an infrastructure of green hydrogen. And the the simplistic answer is we could do it all, but the reality is money is finite and we can't.

And all I'm observing is, I do think that more practical things that do have geopolitical ramifications, sooner, are not going to get funded because people do get enraptured by this. And my skepticism is that this is still in the realm of government-sponsored research and is not really an area that for-profit private companies can tackle. And so I would rather those for-profit companies, for example, White Compinator just today, put out something where they were, you know, call to action a request for startups in climate. And when you look at that list, those are really practical, investable areas.

And I just want to make sure that the capital allocators that listen to this weigh those equally. I am glad that the US government did this. I hope they do more of this. But if you're asking me quite honestly, I would rather the next $10 billion go into energy efficiency H-FAC than fusion because A fusion exists. And B, I think it's going to happen

at an innovative bench scale level by the government and not by a particle. Let me just respond to that real quick. Tim, I think that the idea of allocating our resources as a society should be done on a portfolio basis, 80% on the pragmatic near-term, 15% on the next gen, and 5% on the moonshot. This maybe starts to shift from the 5% to the 15%, maybe it's still in the 5%. I don't see overfunding happening. I'll tell you guys, there was a survey done.

There's 33 private companies that are fusion companies today, VC back. Eight new this year. The number has increased by 33 new this year. So the number is kind of increased by 33% this year. And so far this year those companies have raised around three to four billion dollars. Which by the way is a fraction of what was done by 15 minute delivery companies for exactly my point. And by the way, the biggest funding is happening in ITER, which is the largest construction project in Europe. And this is a $30 billion production scale fusion demonstration system that should be online by the end of the 2020 government sponsor, government sponsor.

Yeah. And so this is my point. I am a huge fan of government sponsored research. How we get finally the first science corner, everybody brace themselves. It's the first science corner where David Sacks has a cherry sucks. Here we go. Come on, you can do it. Mr. David Sacks. Your question was a little bit was not a Let me refrains. Okay, hold on. What's the geopolitical impact if this does happen? 100 acts energy is fantastic for the United States if it actually happens. And the reason is,

if you look across the world, there's this thing in politics known as resource curse, where the worst governments, the most despotic governments tend to be in the countries that have the biggest natural resources ironically. So the countries that have huge amounts of petroleum or other kinds of minerals, they've tend to have pretty corrupt governments. And the reason for that is that if you're sitting on a giant oil reserve, you don't need to make anything else work. You just fight over who gets control that oil

reserve, and that's what politics ends up being. You don't need to create policies that foster innovation or attract knowledge workers, right? You just basically mine that oil. So if all of a sudden you're talking about turning energy into a software problem or an innovation problem, that looks a lot more like the software industry,

that's an area where the United States has a huge advantage. And yeah, I think it pulled the rug out from under many countries all over the world in favor of the United States. I mean, it's a big if because where I agree with Chamoth is, this stuff still seems pretty far off and it's still pretty unproven from a commercial standpoint, but I agree with Freeberg why not try investing in it

and cultivating it and see where it goes. Okay, fantastic. This was a fantastic science corner where we actually engaged David Sacks. Which country? Did you find anything to disagree with there, J.K.O.? this was a fantastic science corner where we actually engage David Sacks, which country did you find anything to disagree with there, J. Cal? All right, take it easy. I just want to let you do that. I think you like that answer, right? Well, I love all of your intellectual. Is it still enough for you or was it more like you?

I love your intellectually. I love to. It wasn't still. No, I thought it was a steel person. It felt silver. It felt silver. Manning, but I love what you're intellectually on. Silver person. Yeah, it's your silver. Veying. You're silver. Thing. Was that platinum gold or silver? I just asked your you're in platinum with some diamond dust. I mean, I just can I just say spent a couple nights together this past week. It really does. A really good mood of the show. I mean, when you guys go out and drink together

and have fun, it's hilarious. You guys are. Saks and I left our asses off Sunday night. Can I just say, we, Saks and I had the best 48 hours together in a decade. This is Sunday night. It turns out Chris Rock and Shepel are playing

at the Chase Center, where Chimoff used to own a piece of the Warriors, right? And this incredible arena has this incredible show. And you know, me and Saks and some friends will leave it at that, go to the show. Our bestie Dreymon is out the show. So I text Drey and I'm like, hey, you're going to see Chris Rock by chance tonight with Shepho.

He said, yes sir, I said, hey, we're going to go with a couple of friends. Maybe we've rolled together, hang out after the show. We go and After the game after the show, which was incredible We go backstage and I'm sorry to the to the practice court and we're hanging out with Dreimann in the practice court with Dave Chappelle Dave Chappelle and I start shooting hoops

David Sax is talking to Chris wrong about free speech and I start shooting hoops. David Sax is talking to Chris wrong about free speech. Steph Curry comes out and starts giving Dave Chappelle and Jake how shooting lessons. Where Chappelle and I are breaking like old men, you know, on a concrete court. All of a sudden, Steph says, hey, Jake, you got it.

And by the way, he's fan of the show. Says, you're short every time. And just, you know, hit the backboard, you gotta go long. Then he calls you out, you gotta change this. All of a sudden, we start hitting shots like, you know, we're on the worries. Rainy threes, you're raining threes.

Rainy threes. It was literally like, cut into here. Over these mid-range jumpers or threes? I was a free throw line extended. Free throw line extended. Cut into here, rain man and rain dance from a long came poly rain dance I was hitting break after break recipes fill up sumo Hoffman so then we're chilling and Saxon are talking to Dave Chappelle break after brick recipes fill up some of them. So then we're chilling and

Saxon are talking to Dave Chappelle. Joe Lachem owner of the Warriors are there. The majority owner, uh, you know, as opposed to you being a minority owner. Jamatha. That's right. We're trying. That's really. I was speaking it. The only person who draws more names is Phil Helmeth.

I mean, absolutely. I'm trying to catch up anymore. No, I'm leaving. He's holding 10 names. I literally renamed sacks. I'm leaving. I'm telling you what. I'm saying it's so bad, but I'm not going to say it. Not doxing anybody. So, bro, there'll be zero doxing. Oh, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no go to, uh, after, to do a, go see me do a show at like 1 a.m. at this like local comedy club at 70 seats? I said, word. Yes. We go at 1 a.m.

She pal sits on stage, smoking cigarettes and doing 90 second pauses, and then having a beer and interacting with the audience and does a two hour set after doing this set with Chris Rock at the Chase Center, me and Sacks and Dreemont hilariously laughing. The stuff, Shepel is a genius. And when you see his show and Chris Rock, by the way, he puts a tight set together.

I mean, Shepel's got this storytelling vein where he kind of meanders a little bit and then he hits you with it. But Chris Rock is just bang, bang, bang, bang, bang, bang, bang, extraordinary. Just two incredible minds at the top of their game. Artists. Artists at the top of their game, doing what society needs, but more importantly, doing what David Sachs and I needed, which was to laugh our asses off together and remember our friendship. So it was a great night out. I want to say to Bestie, Dreimon, Dave Chappelle and Chris Rock, thank you. The David Sachs,

Jake, how Bestie friendship has never been stronger. I don't know about Freeberg and Shemaath. That seems to be on the rocks. Yeah, that's weird. We'll be in there. We'll be I will be vacationing together next week So I love I love freeberg. Yeah, well, we are going to be whatever whatever's going on. We'll take a walk and figure that well I just want to say the alliances amongst the besties people. I got I'll be honest I got matter freeberg when he edited that Google bit to say the exact opposite of what he actually said We don't bring that to the to say the exact opposite of what he actually said. That's the thing that bothered me. I have to be honest.

That's you playing to the crowd versus you being honest and telling what you think. Freeberg. That did. Let me put that in the form of question. Freeberg has your fame as the Sultan of science. Because listen, nobody knew who you were outside of Silicon Valley before this. You guys didn't have the durability to speak. No, no, not my family.

Look, I'll be honest, and I'll speak openly about this. I had said that there could probably be a significant head count reduction of like 75% at Google, and the business could keep operating. And I took it out. And I took it out because I have a lot of friends at work at Google. Google is a close partner of mine. They're an investor of mine. And frankly, I just want to be careful about that. It's not something I commonly

do. You know, as you guys know, I usually speak my mind pretty clearly, but I was just trying to be respectful. And that's the reason I did it. You know, so that was it. I think that that was fine. What I'm saying is not that. It's just that the part that you edited in actually made it seem like you were not saying that at all, but the opposite. I think if you had cut the whole thing, it would have been more honest. So to keep that other thing in,

actually led the perception of the opposite. So I would trigger five that. No, no, I don't have triggered. I'm saying, I think we should have a principle. Hold on guys, sorry, often, Tomas. Like, yeah, I know. I, I think we should have a principle. Hold on, guys. Sorry, often, Tomas. Like, yeah, I know. I think that we should just have a principle to not play to what the perception of what we

say should be, especially if it means we could be saying the opposite of what we actually mean. That's all intellectual honesty is a bestie. That's a point. Tenant. It's a bestie tenant. I think so. Absolutely. Bestie tenant always and the other bestie tenant besties always come back together. If we have a fight, we always come back together if we have a fight We always come back together Saks can I'm still mad at you?

Okay, we just talk about hypocrisy. I mean so how great was Sunday night? How they would get up there and he gives like right out the gate. He's attacking woke right out of the gate swinging came out swinging like Will Smith Shugs met you me right now the gate swinging came out swinging like Will Smith. Shook Smith, you mean? Shook Smith, he till down Will Smith. Though, I mean, the Will Smith take down, which you will see in the special is so complete. It is just chef's kiss, but how great was his set? Let's say just give Chris Rock his flowers. Did he, did he fillet and fricassay?

He did eat fillet and fricasset. Well, he did, but I thought the more important part of the set was the, he came right out, like calling out all this, you know, you know, all the other stuff. Well, woke stuff, yeah. And there was that undercurrent Tisha Pell set as well. And also he said, listen, words can't hurt you unless you write them on a piece of paper from time to a brick. These, a bigger point right now, and this does tie into our first story, is I think comedians look at Twitter as a place to get canceled, not a place to be part of the discourse. And that's a huge loss.

That's indicative of our society being broken. And it's incredibly important that these comedians be allowed to mock and to speak and to step over the line and challenge us as citizens in a free society. And we should cherish them and we should not even try to cancel them. Let them cross the line. Let them say things that make us uncomfortable so that we can understand ourselves and our society better. And I just want to say,

why can't you include libs of tech talking that? Oh, do we want to have a discussion about it? I can. That's the next conversation about it. I'm just asking you. I'm okay with mocking. I just don't start. You guys, you did so well. Come on. Let's go. Here we go. No, Jake, I'll cut it out. All right. We'll have two more science corners to get. All right. You know what? I mean, I just want to say that.

Let's talk about the Cooper deal. And Alex, this is spread up your alley. Have you? I'm paying attention to it, to be honest. Oh, really? The thing you guys asked is like, you know, what signal will Elon's moves at Twitter be for the rest of the tech industry? I think the biggest wake-up call is to actually PE companies.

So if you play this out and you think that Kupa is... Explain what Kupa is. 10-Test, please. Kupa is a software-as-a-service company that does revenue management, I guess, or expense forecasting or something in the financial realm. I don't particularly know to be honest. But anyways, this is a company that was off 70 or 80% from the high. Like a lot of SaaS companies were when rates started to go up.

And they got this offer from Toma Bravo. But here's what's so interesting about this deal. If you think that these guys bought a company, I'm just going to make up a number at 20 times EBITDA. And you see Elon at Twitter and you think, well, wait, maybe we can't cut 75%, but maybe we can cut 50% of headcount in the company can still do well. And you take half of the expenses out of the business, all of a sudden, if you're eapid to doubles, you're actually buying it at 10 times.

So I think the thing that is the real insight here is twofold. Private equity can still put out a lot of private credit to fund these deals. And SaaS companies are perfect because they have huge free cash flow. Instead of funding it based on earnings, they can fund it based on ACV and ARR. Private equity will be super active.

Two, all these rifts basically show what the efficient frontier is for the number of employees you need to run a company. If you can cut 50% of the headcount, private equity folks will do that. And so I think CUPA is like the canary in the coal mine. It is the beginning of what I suspect is a title wave of P.E. sponsor deals in tech companies, largely SaaS, but may go into other realms. Recurring. You've managed to these two things. Tap private credit markets and finance it based on ARR and then fire 50% of the team and double earnings capacity. Exactly. So on Cooper, I thought the most interesting thing was just the, we got a public comp.

Well we got a comp on what private equity is paying for public companies right now. So the deal happened at an $8 billion valuation, that was a 31% premium to the public price. It was 8.4 times next 12 months revenue, and on a trailing basis, it was about 10.4 times the last 12 months revenue. And by the way, all the comments were around how what a rich price Toma Bravo was paying. People generally thought they're paying a premium to the valuation. So I think this... Sex, it was 77% premium before the rumors came out that this was happening.

So it was a premium. Yeah, good point. And there was a bidding war with Vista. And so it was a really rich kind of deal that got done here. Right. So my point is that people thought this was a really rich deal that got done here. Right, so my point is that people thought this was a really rich deal and yet the valuation multiples are so much lower than what private company founders expect. So remember, last year at the peak, founders were thinking 100 times ARR was normal, 100 times.

You could roughly say ARR is roughly equivalent to next 12 months revenue. It's not perfect, but it's roughly the case. So these founders were expecting evaluation multiple 10 times what the public markets are paying. And actually, the public markets are half of where Tomor Bravo was in this particular deal. So the public markets right now are valuing the median SaaS company at about five and a half times. And a high growth, that'd be for like a 20% year-rear growing company.

And they're valuing the high growth companies at maybe eight times. And Tomor Bravo did this at 10 times. So that gives you a sense of what the ballpark is. And these are companies that are already public. They're at scale. They're doing roughly a billion dollars of ARR. They have already kind of won their category to some degree. Whereas private companies are sub-scale. They're, you know, typically you're talking about companies with one, five, ten, usually under 20 million dollars of ARR. They are, they are not de-risk. There's still a ton of risk. We've seen many, many SaaS companies fizzle out and plateau at 20 million of ARR, never

get to 100 million, never mind a billion. And yet these founders think that they're entitled to, you know, even in this market, 30 to 40 times ARR, no way. I mean, like, it's getting to the point now where, point now where maybe it should be 10 times, 20 times, like max. And that'd be for a company that's growing 2 and 1 half, 3X year over year. So I still think that, so I think basically what we're seeing here is even a good scenario, like a coupon acquisition that was done at a premium, like it's still a wake up call

to the private markets that the valuations are still completely and utterly out of whack. Yeah, let me ask you a question, so this company was growing 45% last year, they're growing 35% this year, and they got this multiple. Why is it not worth a significantly higher multiple if a company's growing 2.5 to 3x, which is 250%, 300% and these guys are only growing 35%. Sure, I mean, it is. And that's what you're paying a premium for. But so the, so the, here's the theory of it is that if you can invest in a private company

that's say tripling your over year and they can do that for another five years or whatever, then you're paying for that, you're paying for that outcome in a couple years. Right. Basically, well, if you're getting a discount to the outcome in a couple of years. If you're paying 30 times today and it triples next year, you're only paying 10 times next year. If you're paying three times. If that keeps going, that's where your arbitrage is. Here's the thing you have to weigh against that.

These early stage private companies, many things go wrong. They hit a plateau, they fizzle out, or their growth rate starts to the bigger they get the harder it's to grow. So they should be priced at a discount, not a premium, because there's risk. There's more risk. They're growing faster, but there's more risk. But also it's very hard. Once you get to a bigger number of ARR, 50, 100 million of ARR, it's extremely difficult to be doubling or tripling over year. Let me just point one thing out. So I looked at the numbers on Cooper. I think they had about 170 million

of stock-based comp expense in the last nine months. So those are employees that are getting $170 million in compensation in the form of shares. So they get those shares, they can then sell those shares and get cash for them. And then on the public markets and pay their bills. So when a company like this goes private, for those employees to just remain at their baseline comp, that stock-based comp needs to be replaced with something else, or else they're seeing

their salaries reduced. So there's this balancing game when these companies go private in terms of how do you give them the comp that they're earning to keep them engaged in the business? The answer is, you don't. Versus, no, but let them come and be quick because you want to do a riff anyway. Right, so, I mean, do, but for the people that stay, right, so there's a balance because it's not just, hey, cut the off-ex, you have to cut the OPEX including stock based comp. And this company generated about $100 million, sorry, $210 million of free cash flow or

operating cash flow in the last 12 months. So if you take out the stock based comp, these guys are actually break even or losing money roughly. Yeah, break even roughly. So there's a real question mark on this business and businesses like this Echo Private, break even or losing money roughly. Yeah, break even roughly. There's a real question mark on this business and businesses like this Echo Private, where if you actually cut the op-ex and you cut the salaries and you cut the headcount, but you have to find new ways to pay people because you've been paying them with stock in the past,

how do you bridge that gap? I think that's probably a little bit of the balance and the art of what these guys do well. Jamath, if I may, can you explain to the audience what a private equity firms expectation is in terms of return when they buy a company like this and then sax I saw your tweet that you want to feature and you'll go next. Good, Jamoth. Well, I think it's changed over time and this is what's so powerful about the private equity

industry. Look, you have to think about what they're incentive is because it kind of guides the out. Yes. Early on, they were very much like venture capitalists. They were out in the edges of risk taking, doing all kinds of very difficult, gnarly deals. So if you look back in the history of private equity, these huge crazy deals like RGR and Nabisco or TWA airlines were the first of the industry and they weaped enormous returns, but there was a lot of risk and it required very heavy handed management. Oftentimes what that meant was firing a lot of people.

Over time, private equity has gotten institutionalized. And they don't generally feature themselves as a place to get the best necessarily returns, but they are places where you can put enormous amounts of money, where the likelihood of loss is extremely zero and you generate very good rates of return. Now again, this depends on whether you want to look at IRR or DPI, right? So a lot of people will mark at IRR, which I think is kind of like

a gameable metric, but those IRRs can be 20, 25%. If you look at DPI, which is really how much cash do you get back, private equity firms can generate one and a half to two X of the money you give them, but they do it consistently, and they very rarely lose money. So all of that is important into understanding what's gonna happen in this cycle. These folks are going to buy a ton of these private software companies.

I think that they are going to fire lots of people. I think they are going to make these companies run hyper efficiently. And they will make sure that they generate that 1.2 to 1.7x that has been historical. Very rarely will they lose money in these things. By the way, that's going to mean that a lot of these other companies will have to reset valuation. So you saw yesterday, check out .com went from a $40 billion valuation down to $11. You're seeing some companies only go down 10 or 15%. But it's a process, isn't it, Jamoth? Isn't this just like what happens in real estate where beginning of this process?

Yes. Because in real estate, my understanding having a lift to these Boob muskicles is the person living in the home still believes their home is worth this incredible evaluation. And then the people who want to buy it are like, that doesn't match reality. And then the real estate brokers go back and forth trying to get people to go through this messy middle and come to true price discovery. A private company is hard to get true price discovery until they're on the brink of insolvency. We don't have the money. Right, we just got some data on that actually. Can we bring this cool-y data in? hard to get true price discovery until they're on the brink of insolvency. We don't have the money. Right. We just got some data on that.

Actually, can we bring this coolie data in? Let's do it. Yeah. So, coolie looked at. A law firm in Silicon Valley. Yeah. They're a prominent Silicon Valley law firm. They looked at a thousand deals over the last three quarters of this year.

And what they saw is that you're the later of the stage, the bigger the valuation correction. So, series D rounds went from 3.5 billion to 527 million. That's an 80% drop. That's an 85% drop. Series C went from 520 million to 130 million. That's a 74% drop. Series B went from 164 to 90.

That's a 45% drop. And then series A went from 58 to 45. That's only a 22% drop. There then series A went from 58 to 45. That's only a 22% drop. There's just less room to compress there. But the point is that series B roughly a 50% drop, series C roughly a 3-quarters drop, and series D roughly a 75%. Yeah, one seventh drop. So I think founders right now are just like a little bit delusional about This money they raised last year. They're still way too anchored on last year's valuation and if only they would think in terms of this capital they raised last year in terms of of

It's real delusion in terms of what the company is worth now. I think they'd be treating it more more precious So for example, for example, hold on, if you raise, it's like they won the lottery and they don't wanna, they don't realize they won the lottery. I had this conversation with the founder. And the only money they're ever gonna see is the bottom line.

And they're spending it like they're gonna win the lottery every year. So for example, let's say you take a company, yeah, let's say you take a company that raised 200 million last year at two billion. So it was 10% delusion. So in their heads, they're thinking, oh, well, this isn't that expensive. Like 10% delusions around a year, but really, probably the company is worth maybe 400 million

now, right? Because it's gone down 80%. This 200 million of your 400 million is half the value of the company. Yes. And you're squandering it. You're squandering it at a rate of 100 million a year. So you're basically burning up 25% of the value of the company. Yes, but you're squandering it. You're squandering it at a rate of 100 million a year. So you're basically burning up 25% of the value of your company this year and the next year and then by the way,

you're gonna be in crisis after that, because you're probably gonna be in crisis. Like a lottery winner buying like a giant super yacht. I had an observation that a lot of the investors that sit on the boards of these companies, they have an incentive to not see those valuations come down too quickly. Do they not? And so there is this sort of like interest in, hey, I don't want you to have to go reprice

the company or do it down round because then my portfolio gets written down. And then I'm in the middle, everyone's always in the middle of a fundraising cycle with LPs. And then I'm going to have a tough conversation with my LPs about my values. So do not see VCEs and investors playing an active role in trying to keep the valuations propped up to some extent, particularly where they have big markups, 100% either by extending bridge rounds or doing other sorts of... You know, look, nobody likes to go through a down-round and that includes founders and existing investors in the company.

That being said, we're not talking here about new financing conversations. What we're talking about is advice that is happening in board meetings. And maybe other VCs aren't pushing as hard as we are, but the advice I'm giving in board meetings is what I'm telling you publicly today, which is this is the last money you may be able to raise on attractive terms if at all you need to treat it much more preciously. The world has fundamentally changed. And by the way, we haven't even gotten into what's coming, the demand contraction that's coming next year.

Why would demand contraction, contraction is really one is please thinking. Okay, look, there's going to be three major sources of slow down for software companies next year. Number one, new business is going to dry up. Companies are just going to be spending a lot less money next year because they're all cutting costs. So you should expect your new business to be roughly 50% of what it was. Next year, it'll be 50% of what it was last year.

That's my rule of thumb for most companies. New business down 50%. Number two, churn is going to be higher. We haven't seen that much logo churn yet, but next year, a lot of companies are going to start going out of business. And it's going to happen over the next two years. So you're simply going to see logo churn rates say among small businesses go from like a historical norm of 15% to maybe 25 or 30. In other words, your customer, the logo goes,

because we're similarly not gonna exist. Yes, that's what a logo means. Yes, and the actual entity. Yes, logo turn means the entity doesn't exist. Then you've got seat contraction, which is these companies are not hiring as fast. In fact, they're doing layoffs. So they're simply not gonna buy as many seats

of your software as you need to in the past. For the last decade, we've had a tailwind, and an enormous tailwind for software companies of seat expansion, which is every year your existing customers would buy more seats of your product for their new employees. Now they're actually gonna have fewer employees or maybe head count freezes.

So they're actually buying- Oh my God. By the way, if you take all those three things, the deal of the century was figma selling to Adobe for 20 billion. Because if you take those three things, I mean, oh my God, they just absolutely top ticked before any of this stuff was known.

Totally. So today Adobe could probably buy this thing for like seven billion instead of $20 billion. So does that mean they try to do a breakup thing and get out of the deal? If I was Figma, I try to close this thing ASAP and get that money out. Yeah. Yeah, you're right about that. And by the way, what I'm seeing from founders is that they still want to grow 100% plus

over the next year. The problem is that the headwinds are going to be intense. So if you're applying a plane and the headwinds are extremely intense and you try to maintain your speed, you're going to burn an enormous amount of fuel. You're going to be incredibly inefficient. It's better to basically just moderate your speed, let the headwinds basically pass. We're going to have major economic headwinds for the next four to six quarters, call it year and a half. It's okay to have a slower growth rate. Preserve your cash. Don't burn up your fuel.

Yeah, bunker down. So we're trying to do this. Down the hatches. We're trying to give permission to our founders to grow at a slower rate because they feel this enormous pressure from their VCs to grow at insane rates. Can I build on this? I think Freeberg said it very well. The scan adventure capital is demonstrated in the following chart.

This is using Cambridge and our friend Brad Gersoner helped put this together. So what is this? This goes back all the way to 1997. And the gray bar is what venture capitalists share with their limited partners as to how well they are doing. The top quarter tile of venture capitalists. And this is the top 25%. So this is a venture capitalist.

And our returns have been consistently top quartile. So instead of cherry picking anybody else, I'll just use us, but it could be Sequoia, benchmark you name it. We would go back. We're in there. Launch, would go back to folks craft, we'll go back to folks and say, hey guys, the total value of our portfolio is three times your money in 1997's vintage, okay? It was four times your money in the 2010 vintage. It feels really good. But again, the job of the venture capitalist is to convert the gray bar into the purple bar. And historically, there's been a decay. So for every dollar of gray bar that you show, you typically only get 73 cents actually returned to people. Okay. The value of

the book value, the value of the first. the valuations that you get when you sell your company or goes public end up being 73% of what you marked at the peak. What you said they were worth it. Exactly, right. And the actual value of this purple bar going back, you know, 30 years is 1.7x. So just to put numerical numbers on this, if you were a venture capitalist, you would raise a hundred dollar fund. At the peak, you would actually show that that hundred dollars became 200 and about 28 dollars. But when when push came to shove and when it was all said and done,

you would return $170 back to your investors. That's the rough equation. So what's the problem? Well, the problem, as you can see in this chart, is right around 2015, which is all of a sudden, you know, what we've started to see are these continually elevated gray bars. Yes, this stuff is worth seven times six times five times

But we have not seen the purple bars catch up now some people will say well, yeah, but you have to give it time and you know This has to be other reasons look at and all you need to do is do what's called a regression and you need to Regress these things to the mean and make the following assumption Assume for a second that this time is not different. Assume that these historical averages 2.2x, 1.7x holds. Well, that's what the blackline here shows. You can calculate the area above the curve as the value at risk, right, the amount of money we will destroy because of all these shenanigans that FreeBurch has talked about, propping up marks, not willing to look at actual market clearing prices. Well, if you do the math, the sum of the area above this black line is almost a trillion

dollars around the world, and it is about $600 billion for US venture capitalists. This is the dynamic that the private equity industry is going to prey on. So if you saw Toma Bravo just close the $32 billion round, you know, Vista's raising a $20 billion round, everybody's stepping into tech, they are going to destroy those gray bars. Would you describe that as bottom feeding? No. No. They are the rational actor who is finding the true marketing of the truth.

Again, I will say this. I think the private equity industry is unbelievably precise and talented in being dispassionate and telling us what these things are worth. They're cut through. They're logic. Oh, no, it's not proper. That opportunity is smart. There's just optioning for the private equity industry is gonna be created by profligate founders.

And look, you could blame VCs for the high marks last year as well. They were profligate too. But look, if you're a founder, if you don't start acting in a more capital-efficient way and preserve your cash, your company's ultimately gonna be owned by a private equity firm and they're gonna make all the money.

Well, here's an important point. Because when you sell to them at a low price, all you're going to end up doing is paying back the liquidation preference. And then that private equity firm, that was willing to do or less, but that private equity firm will be willing to do what you were not willing to do,

which was simply cut your burn, cut your costs and acted in a more capital efficient way. And they will end up making all the upside for your decade of hard work, because you got basically addicted to venture capital and the high evaluations and refuse to, again, adjust to the regime change. I agree with that.

I'll give you an alternative. I'll give you an alternative. The alternative is that the majority of acquisitions made by private equity firms are not actually pure acquisitions, they're bolt-on acquisitions, meaning that these are companies that are added to existing platforms that they own. So this acquisition they're doing of CUPA, I think it's very likely over the next couple of years you will see like the playbook and private equity includes not just cost-cutting,

but also synergy building. And they typically do bolt-ons and add-ons, and this happens across all private equity platform deals of new products and services that can be sold through the existing sales channel, the existing customer base, and as an add-on to the existing service or product that's already offered. So one of the things that I think you may see in Silicon Valley over the next couple of years is a rationalization away from funding feature companies and thinking much more carefully about what can be true standalone product companies. Sure. And many of these companies that have raised a ton of capital and have gotten crazy valuations.

At the end of the day, they're more likely better equipped to be a feature of another platform than they are to be a standalone platform company of their own. And that's where the majority of these acquisitions will likely end up going in the private equity landscape. It will be vacuumed up and attached to existing platforms that these private equity guys are building out. And by the way, just look as an example at what Oracle did over the years, what Salesforce did over the years, what Google did, so many of these companies. Volt on acquisitions.

By Volt on acquisitions, by building a channel, building a platform, and then adding on top of that. And I think that's one of these guys are going to try and mimic two critical points. Number one, what about the bottom 75% of VCs? Oh, if you show that chart just for one more second, I just want to remind everybody that is the absolute cream of the crop VCs. Top 75% of the best. These are folks. I mean, again, I'll just say us Sequoia benchmark. We've consistently been crap. Thank you launch craft These are these are top chef's overturned streams. Thank the Lord. What about the bottom 75% they're not gonna be able to raise funds Man, it's over a lot of these people who raise first time funds in the last three or four years

Also, it's also the company's a lot because like like it's like the today is the milk now is the moment for the Sober founder and the sober venture capitalist to sit and say what is the moment, now is the moment for the sober founder and the sober venture capitalist to sit and say, what is the real valuation? What's going on? What do we need to do to make sure that this company has a chance? Because what SACS said is so true, otherwise, all these profit dollars will be made by the private equity. In order to win today, you're going to have to grind.

You're going to have to work 50, 60 hours a week. You're going to have to be absolutely embrace the age of austerity, and you're going to have to work 50, 60 hours a week. You're going to have to be absolutely embraced the age of austerity, and you're going to have to focus on your customer, your product, and your bottom line. The age of excess is over. If you're not working 50, 60, 70 hours a week, you're not going to cut it in Silicon Valley. Also, key second point, profligate.

Extravying in our wasteful in the use of resources, just so we get the word of the day from David Sacks. That's David Sacks's word of the day. After a very powerful bull lethal. This is a bull lethal. That went crazy. Did you see the trademark? Bull lethal.

Bull lethal. This is a lethal. We went viral. We went viral. This is, I think, Elon's biggest non-obvious impact in this moment. Jay-Towell, here's your one answer to your question about what happens to the bottom 75% of venture

firms. It's equivalent to what happens with the, you know, kind of, this is the bottom of the top, the slide that I just shared. It's the one we looked at a few weeks ago. And I keep referring to it because it's just such a staggering like demonstration of what people call the power law, which is how, you you know kind of excess returns accumulate to minority of investments. So just a few investments make up the bulk of value that the you know market cap of 43% of companies that have gone public since 2020 is $750 billion. is $750 billion. The market cap of the other 300 is only $26 billion. And the cash that went in

to the $750 billion is $136. And the cash that went into the 26 is 107. And so the cash that went in to generate that $26 billion, that 107, that's your bottom 50%. And the top 50% put in 136 to make 750. And I think it gets even narrower as you move further up to that top quartile. So, you know, it's just, I can tell you what LPs are saying. Because I'm sorry. I'm sorry. I'm sorry. And my way is this is, this is the companies that went public. So this is also of the top company, of the top funds and the top companies that were actually able to IPO.

And so it highlights how much of a power law actually plays through. And so the majority of these companies, as in Chimac, even in your chart, you show the top quartile, the bottom 75%, or the bottom 50%, I've looked at the state as well of those various ventages are below 1.0. They lose money for their LPs. Oh, absolutely. And it's a cycle. And so what ends up happening is the next generation comes through.

And LPs, they make a portfolio of bets. And they hope that they make enough bets in the right VCs that their portfolio generates greater than, you know, market returns greater than, call it 15, 20% target, 15% target. But they're going to expect that the majority are not. I have an LP report. I'm out there raising one, one, four right now. And I move from like the Accredited's, the individual investors.

Are you allowed to say that? Yeah, I'm not 60. Yeah, so I'm publicly raising it. And I've moved on from individual investors, $45 million in commits after five webinars. Amazing. Now I'm talking to you. No, it was amazing.

It's just 506C is going to change the entire industry. Letting the masses have some access to this capital and this opportunity, credit is and QB is going to change the world, I believe. Do you have to deal with everyone? One of them is easy to administer. It's incredibly complex because you have a large number of people and they all want to talk to me. So I did webinars, five webinars, and it resulted in hundreds of commits

for $45 million. But you'll be able to get all those capital commitments drawn down when you need to. Like you have to go ping a couple hundred people and get them all wire money. You need to have more operations people and we only do four. We let that one thing you may want to do

is like for these smaller slugs is you can prewire, you can set up an escrow camp where you prewire 100% of the capital. Yes, and then you also don't have to, you take it down when you're gonna deploy it so you keep your IRR correct. So we're actually looking into those solutions, I'll talk to you offline, but I just did my first two

meetings with endowments, et cetera, fund to funds. The entire discussions right now are around, what is your secondary strategy? How are you getting in earlier, not later, and how are you building a larger position? It is, and even like some of the QPs who are sophisticated in our, you know, are in over 10 venture funds.

The entire discussion, governance of these companies, are you taking board seats or not, how early are you getting in and building a larger position, over 10 percent, and what is your secondary strategy? When are you going to start taking some chips off the table? So the, and I got to say, if you're an LP who didn't sell into the upmarket at all, and you're on your first fund, you know, and you had all these great marks

and they're getting, they're coming crashing down, they're not going to deal with you. They just have too many options of top funds in the court. I don't think they've, they've started to come down yet. I don't think we know what the top courtiles were really going to look like over these last few years. I think that's going to take four or five years to really sort out. Of course.

Yeah. So I think explain why Chimath's just so people understand. Yeah. I understand. Well, I think that there are lots of valuations that have supported huge TVPIs, these paper gains that have allowed venture funds to raise enormous amounts of incremental capital and new funds. And so they are going to try to wait as long as possible before they're held accountable for that. And the best way to do that is to not change the valuation.

And so it will happen slowly. It'll be a trickle of these things. And I think that takes probably four or five years for it to really sort itself out. But in the meantime, companies will still need to get financed. Companies will still need to get built. That's why I think like the public markets, I think what SAC says is true, giving us a signal of what these true market clearing prices are, will eventually slip into these series D or E companies because

the venture capitalists who has now taken some big write downs in one part of their portfolio, I suspect will now be very open to selling to private equity for another part of their portfolio so that they can return capital. Totally agree. Yeah, it's going to be rough out there. You guys watch White Lotus? Yeah, I just started season one. I'm a third episode in.

Okay, what a treat. We won't say anything, but how great was season two? The wrap is awesome. It's just incredible. The last two episodes were extraordinary. Yeah, let's not say anything. What a great show. That and I just finished watching all of Handmaid's Tale,

which I want to talk about. It is, that is a fucking stressful show. It's like you're putting in work when you're done. Those episodes are like emotional labor. You know when they said this emotional labor, watching that show is like, it could not be more sadistic and insane. Oh my God.

It is brutal. But you can't look away, incredibly well done. All right, listen, this has been an amazing episode. And this is news for the other besties. Friedberg and I have been secretly collaborating. No. We have, you have a plan?

A plan. We're working on a joint plan for all in summer 2023 because we are both helping each other out on the secret projects. I'm ready to tip guys. I love it. The tip. I, I, the tip. That's it. We don't need to sex. I'm a permanent. No. That's all. That's fine. We know that. I love that I have sex as my anchor on this one. I can always float back. That way. This thing could flip, but Friedberg and I, I'm like, in this floating in the ocean, I'm like, in this floating in the ocean.

I'm like, in this floating in the ocean, I'm like, in this floating in the ocean, I'm like, in this floating in the ocean, I'm like, in this floating in the ocean, I'm like, in this floating in the ocean, I'm like, in this floating in the ocean, I'm like, in this floating in the ocean, I'm like, in this floating in the ocean,

I'm like, in this floating in the ocean, I'm like, in this floating in the ocean, I'm like, in this floating in the ocean, I'm like, in this floating in the ocean, I'm like, in this floating in the ocean, I'm like, in this floating in the ocean, I'm like, in this floating in the ocean, I'm like, in this floating in the ocean, I'm like, in this floating in the ocean, I'm like, in this floating in the ocean, I'm like, in this floating in the ocean,

I'm like, in this floating in the ocean, I'm like, in this floating in the ocean, I'm like, in this floating in the ocean, I'm like, in this floating in the ocean, I'm like, in this floating in the ocean, I'm like, in this floating in the ocean, that his hatred of my producer fee is less than his joy from the event and we are collaborating on super. Super got I have made up for my producer fee by using super got and becoming. Big prop time and I use the promo code to pay you for that that's the quick. Oh yes yes you listenflict no interest go along with doing the no conflict no interest super got bars The only person that you've been taken money from is sbf. I mean pretty much On the most loads from person in tech Bracken you can go through it is loads from person in tech bracket. Can we go through it?

How about that? Do not name the podcast. You got a lot of people. You got a lot of people. I'm eliminated already in the first round. This is bullshit. No, I thought you win. No, I thought you won.

No, he lost. He lost. He was talking to the podcast. Let's pull up the bracket. Do not mention the podcast. I'm on. I can't believe I lost it. How did Andy Jassy get on your jocet?

I only want the bracket. Do not mention the podcast. We're not giving them any. Just blackout that in post. I want you to blackout below them. I don't want to give these guys any credit. So here we go. The worst person in tech. This is a schemaath and schemaath and sacks. We wouldn't say it's a B podcast that's run by literal socialist. Oh well, schemaath got a very tough draw. I mean, of course, you're used to SPF. Of course, like, I mean, it was the big deal. Yeah, that's ridiculous.

That's just, you know what? You went up against the Warriors with KD. It didn't know where to win. That's tough. You had no shot. You got to be on the outside. One about sex. Easy draw.

Sacks versus in the most hated person. And you're by one percent. That's bullshit. You're going to go to Andy Jassy is. I don't get it. Andy Jassy is a complete gentleman. Andy Jassy is. I don't get it. Andy Jassy is a complete gentleman. Andy Jassy is the whiteful.

I can't be honest with you. Oh, how are we, human-comparative, Andy Jassy? Just in five. That is, I want to recount sex. No, I want it to win. I want to recount what they've been mentioned. This is election interference. This is election interference.

I guess, hold on a second. I guess it's more interesting. I guess it's worse to be a Union Busting Amazon CEO than a reactionary conservative investor. Yeah, I don't get it. This is ridiculous. I just want to point out that the biggest travesty here is that I did not make the list. There are, and you know what? These guys are trolling me. These guys shout out to producer Nick who just retreated with the only for basically you basically picked the what is it? The 30 most relatively well known people in tech. That's what tilts shake out the

most terrible worst person in tech. I don't make the list. I'm going to double down this year constantly cow telling to the media. You're right. You're right. I need to be horrible. Stop it that fast. I need to be a worse human like you, Saks. I'm gonna try my best this year to work against humanity and society and be more loathsome than you. I'm really gonna redouble my efforts.

Obviously, I can't catch up with you, Mom. You buy into all their phoning years. I'm too kind. I got a big heart. I care. I'm not your client. All their phoning years. I know my empathy, but here's the problem.

These guys left me off on purpose. If you can pull up the replies between Andreessen and Bill Gates. Oh, Andreessen, that's a lock. That's Andreessen. Of course. Andreessen Custom. A16 co-founder and Man of Care. I mean, Mark Andreessen is a bur a real class shit poster. It Bill Gates is hiding somewhere. Nobody, Bill Gates doesn't tweet. Market reason blocks, unblocks. He's shit posts with the best of them. He's up there.

I mean, that guy's a dark meme lord. Any other, I mean, I really sympathize with you, to my, that you got your ass handed to you there. That's just, that's like going up against the dream team. Hold on, hold on, slow down, bro. You're not even letting us read these things. All right, give me a chance. Okay, wait, don't look at this one.

Twitter, former idiot CEO versus the Airbnb CEO, making, I'll say more. Oh, God, so cruel. Oh my God, that's so well written. Ryan, hold on, slow down. We should stop Ryan this weekend. Is it a guy? Guy who really tried to make us believe Web 3 was going to happen versus World Coin and open

and of course critics and wins much more and then Sam Altman. Okay, I got one. Alright, listen, freeberg, you didn't even come. I want to just congratulate freeberg on an amazing the best science corner ever. An amazing product and super gut that has helped me lose weight. I feel great and for you know recovering from whatever illness you had all right everybody i love you besties.

Shout out to a day of sex love you guys and i will see you all next time on the all in podcast love your besties love you guys bye. on the all-in podcast. Love you besties. Love you guys. Bye. I'm a little bit more like a What? What? What? What? What? What? What? What? Besties are gone, go thrift That's my dog taking it I wish you drive away So, wait a minute Oh man, my hamster will meet me We should all just get a room and just have one big hug George, because they're all good It's like this like sexual tension

But we just need to release that out What? You're B What? You're B B It's like this like sexual tension that we just need to release that out. Please!