This Week in Startups - All-In E13: SPACsgiving Special! Plus: More promising vaccine news, innovation vs. regulation, reforming higher ed, morality of challenge trials

Episode Date: November 25, 2020

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Hey, everybody, welcome back. Besties are back, and it's a Bestie Spax-Giving. Congratulations to the Queen of Kinwa, his second company, David Freiburg, announces today hours before the taping of this special Thanksgiving pod that he is taking Metro Mile public through a SPAC, and that Bestie C, and here is the quote, that as only Chamath can twas for, Sweet, Buffett had Geico. I pick Metro Mile. Unbelievable.

I would just like to say. That's how you move markets. LeBron James has three rings. Freeberg, tell us what is Metro Mile. Well, this isn't a self-promoting podcast, is it? No, no, but I think it's just, you know, it's your second company. I started the company in 2011 when I was running climate when I was the CEO there. And, you know, climate was offering insurance at the time.

We learned a lot about the insurance markets and figured like, hey, you know, telematics or connecting cars to the internet is going to be a big deal. And we're going to be able to completely change the auto insurance industry. So we set up this company. I was the chairman from the founding in 2011. And, you know, been chairman. And I've been an active investor in the business in every round since then. So the business has built some, you know, really compelling value proposition for customers and, you know, it's got really good unit economics.

And it's, you know, needed its last round of capital to get profitable. And it turns out, you know, as we were thinking about that this summer, that a SPAC was a really good path for the business given the inflection point it's at. And the basic premise of the business is instead of paying for insurance by month or time period, The innovation here is you pay per mile. Yeah, insurance today is like, you know, you fill out a form and you get a price for insurance and you pay that rate for six months of coverage. But, you know, depending on when you're driving and how much you're driving, you should be paying a different price, right? So we kind of change the model to a rate per mile. And so if you don't drive, you save.

You know, so the average customer doesn't drive a lot with Metro Mile. They save 47% over what they were paying with like Geico or Progressive Reassurance. And you do that with that ODB port? It's like a little plug-in device. And increasingly, we're actually doing it directly by connecting to cars, direct through a Ford and a couple other big automotive OEMs now have this ability to send the data directly out of the car because they're all internet connected now. So that allows us to just basically, you know, see how many miles you're driving.

And the rate per mile is what we bill you each month times the number of miles you drove on your car. And you didn't mention how you drive. I think that was a controversial concept for a while. you know, if you speed, if you, we, is that on the roadmap or no? Yeah, that is part of it today. But frankly, 70% of the price difference you get in auto insurance is from the number of miles you drive. And only 30% is really in this variance around behavior.

You know, most people are generally pretty good drivers. So believe it or not. So the real variance in terms of, you know, your risk to the insurance company is how many miles you drive. So that really is the predominant factors. If we can accurately track that. Now, what's interesting is like in a world of autonomous car, where you're like turning on the car to be autonomous or fully self-driving at some point,

you know, it's on and off. You should be getting a different rate for those miles, right? So if the car is, if your Tesla is on autopilot on the freeway, that should be safer than you on the freeway, you shouldn't be paying as much fraud insurance. Even better. You can kind of think about how this moves into a world where everything is dynamically priced and dynamically build. Usage priced. Yeah. Usage priced. And that and also fair. So, you know, if you're a good driver and you're driving well or if you're using autonomous features, you shouldn't pay as much. And ultimately that translates, you know, into a truly kind of more dynamic service.

And that's really where the world has to go because those low mileage drivers or those good drivers or those drivers using autonomous features should be paying considerably less. So they'll start using our service. And that'll force the other guys to raise their rates. And it creates this huge, you know, kind of market mode. Great. And we're in the very early days. I mean, it's like the first inning still.

So, you know, we're just getting going. Chimav you chose to do a pipe with the SPAC. Explain to the audience what a pipe is, for people who don't know, and what you loved about Metro Mile. Sure. I think what is a pipe? A pipe is a private investment in a public enterprise.

And basically what that means is that you're making the round bigger, right? So it's kind of like Sequoia does your Series A and invests $10 million. I would come in and put another $10 million and now your Series A is $20 million. million. Same terms as the as Sequoia's round, except you're now just grossing up the amount of capital. Why is that helpful? Well, what it does is it allows somebody to price the deal. So in this case, David's SPAC sponsor, priced the deal, did the diligence and decided to underwrite Metro Mile at that price. And then they came to me and said, hey, you know, do you want to come and join this round, essentially. And I got to know the business. A lot of things that David said basically are true. The thing that I will say is like, you know, everybody talks about the value of machine learning, right, and data-oriented learning. The most obvious thing that you can do is if you learn on top of a huge subset of data, especially out in the real world, like driving data or any other kind of information, is you should be taking risk on top of it. And this is why sort of, you

these next generation insurance companies to me are so interesting because it's probably where you're going to see machine learning be used at just massive, massive scale, because you're just going to reprice risk and make it, as David said, much more dynamic. So anyways, they showed it to me. I really like the product. The metrics are really amazing. And so I joined. It's great.

I'm really excited for, I'm really excited for Freedberg. Yeah. Congratulations. Great. Chmoth and I've never worked on anything together. So it's awesome. We're doing our first project here on the All-In podcast together. All right.

Well, it sounds like a brilliant idea, and I'm just pissed so I'm not part of it. I know. I'm feeling. I read, I read that like two besties. For me and Sachs? Yeah. Jason, do you know about this? I don't know anything.

I get, I'm the last to know. You're both cut out of it. First of all, you two. I need to get my beak wet. You two. We got the wet, their beaks. I can't get my beak wet. You two narcissistic besties have been.

have been running around all the teutting every single unicorn you guys have been a bar. I miss my allocation in Robin Hood. I miss my allocation in Bird or Uber or whatever. All right. New bestie rule. New besty rule. Everybody gets a slice, even a little tasty poo.

Everybody gets their beak wet. Like the old neighborhood. Like the old neighborhood. Just take back, a little share. Let's, Jason, why don't you start an angelous syndicate for every all-in podcast listener? Yes.

All-in podcast syndicate. It will be on the syndicate.com. I left the angelist, Okay, yeah. We'll do it. We'll do with thus syndicate.com slash all-in podcast, and then we'll aggregate all these subscribers. Can I just say,

20% carry and you guys can suggest that. Can I just say, we'll do zero carry and we'll allow all the listeners to participate in our deals, which I think would be pretty cool. Listen, I love how every time you loop my business into this, whether it's podcasting or syndicates,

you take out the money and the profit. I tell you what, I have an idea. How about we SPAC this week in startups and you do it for no, participation. I'm the father of growth. You know how you grow by making things free. You want to maximize demand? Just make it free. By the way, on this topic, Saksipu had this incredible tweet this week, which was basically like, wow, this is like my 95th unicorn that filed to go

public. I mean, literally every single unicorn that filed this week to go public, Sachs was an angel investor, which is incredible. It says a good ease as an investor. But the best follow-up tweet was Zach Weinberg, the co-founder of Flatiron Health, whose tweet was, I just want to congratulate myself on nothing for having not been a part of any of these companies. I would like to congratulate myself for making no bets and taking no risk and getting no reward. I thought Zach's tweet was the best. Sachs, don't you find it tiring, like, all these investments that you've made? Like, don't these guys call you and want to do meetings and chat all the time?

I mean, you know, this has got to be like a huge amount of effort, right? Well, not, not, I mean, not really. You just put the money in and turn around? Well, you know, if you're not on the board, your obligation is basically to respond when somebody asked you for something. And as an angel investor, it is a little different when you're actually like leading around and you're a board member. I was making these investments back in 2012, 2013. That's when these seeds were planted. Right.

These were 50K, 100K,000, 250K. K checks, right? So the responsibility is proportional to the dollar amount. Somewhere a little bigger than that, actually. But I mean, I've written checks, you know, seven-figure checks in some of these companies. Well, Sax, according to your personal balance sheet that we got from your accountants this week. Yeah, Phil Helm you sent it. We see here a transaction for Howes. Is it true you did the Series B of Howes, the entire Series B? $1.403?

No, no. I heard it was you led the series to me. No, no, N-EA led that round. I mean, I invested a lot as an individual. I did co-lead the series B or C of Atapar. That was one that I did as an individual.

That's incredible. Yeah, that's amazing. It's going to be huge. I have no idea what that company is, but that sounds awesome. They manage funds. They do portfolio management software. It's coming up on, you know, 100 million to there are.

That names sounds awesome. It's pretty big. I'm just kidding. I'm totally kidding. Let's start the pod, J-Cal. Where are we going to start? Well, I mean, I think... Now that we've all self-promoted.

Exactly. Well, I'm just happy to hear that Jason was cut out of your deal as much as me. When I read about it on Twitter, I'm like, I better not be the only best to cut out this thing. All right. You're right. You're right. You're right. It is getting awkward now because people who want...

watch this podcast assume that we do everything together. Like literally they're like, well, you guys go grocery shopping together. You go on vacation together. You guys live in the same TikTok house. Yeah. Yeah. That's not how it works. I think the first thing we should we should talk about is just this amazing moment in time when because of science, you know, and this podcast started during the pandemic. We have had, as predicted by Freiburg, who gets to take two victory laps, he said by the end of the year,

we'd have vaccines, and they would have, because of this MRNA, if I remember correctly, 90, 95% efficacy. And sure enough, the week after Trump wins, I'm sorry, loses,

sorry, Sacks, he lost, actually. The week after Trump lost, I know you didn't vote for him. The week after he lost, Mederana, a Pfizer, then the next week, Moderna, and then the next week, Oxford. And I understand Johnson and Johnson is about to announce something, and all of these have 90 to 95% efficacy,

and that there are going to be 40, 50, and 60 million doses in December, January, and February, just from the first two in America alone. So Friedberg, if you were to put a number on when herd immunity hits, because probably 20 or 30% of people have had it, 20 or 30% of people have some natural immunity. How long is this going to take? And could we be doing this from, you know,

a Warriors game next year? When are we going to be able to do this in person? I think, I don't know if it was, yeah, I don't know if it was Fauci or someone that's closer to the operation shared that they do think they can get 70% of Americans immunized by May. So, my May, yeah. So, you know, if you'll remember a few podcasts ago, I think I tried to explain a big part of the budget.

that went into this operation warp speed was to parallelize production of these vaccines while they were being tested. And so we've been scaling up the production and the manufacturing of these. And if they weren't going to work, we're just going to crash them, right? A couple billion dollars. Who cares? It's a good option for the American people. So we've got a ton of doses that have been produced.

It's about packaging and distribution now. And that's supposed to be kind of underway with the plan to be that on December 11th or 12th, when they give the emergency use authorization, these doses start showing up. in care facilities. We basically went all in blind. Like we just shoved the chips in and said, we're going to make these vaccines even if they're not. It's more like a spray and prey angel investment portfolio. You know, we bought a, we bought like four different things or five different things. We made a bets in all of them and I hope that one of them pays off. And it turns out they're all going to pay off. So, you know, or a chunk of them are going to pay off. And we get

to have them ready, you know, in time to kind of make a difference here. Now, all that being said, if you look at the case numbers in the U.S. right now, we could be as high as 30% of the American people have already been infected with coronavirus based on some estimates. So as of the June 30th paper that was published from those dialysis patients, and they did a pretty good statistical interpretation of looking at antibodies in people's blood, they estimate 10% of the American population was infected by coronavirus as of June 30th. And then if you look at the number of people that have been infected since then and you apply the similar sort of multiple that you would assume based on tests, you know, there's an estimate that we could already be up to 30% of the U.S. population has been

infected. Wow. And therefore, immune. And they're theoretically, mostly immune. Let's just say that, right? And so, sure, there's anecdotes and so on. But yeah, let's just say generally, yes, immune. And so you combine that with these vaccines starting to roll out and we get, you know,

a pretty kind of comfortable position in terms of the pandemic in hopefully a couple of months here. And that's why the market's going nuts, and that's why everyone, I mean, I don't know about you guys, but I got some conference invites this last week for conferences for next year that have been canceled this year and were being put on hold. Yeah. So people are starting to lean in on this. For what time frame? Third quarter or fourth quarter? Summer, July. Yeah. So people are now assuming that and they're booking hotel spaces based on it. That is extraordinary. Sacks. You shared this New York Times story. I want to summarize it for the audience. And I'd love to get your thoughts in addition to this as to what this recovery might look like if, in fact, we have more vaccine than we need

and even, you know, a reasonable number of Americans take it and don't believe that it's a conspiracy theory by Bill Gates to control and the Illuminati and all that stuff. Yeah, I mean, this New York Times story is pretty remarkable. It's called politics science and the remarkable race for a coronavirus vaccine. This came out, I think it just came out today in the New York Times. Actually, sorry, it's published November 21st, updated November 24th. And it's pretty remarkable. It describes the effort by Operation Warp Speed, by the administration, by Pfizer, by

modern. That kind of gives you the behind the scenes play by play. And reading the article, you have to come away thinking that the Trump administration did a pretty good job with this whole Warp Speed project. I don't know if the New York Times realized. that is making the Trump administration look so good, or maybe they don't care anymore because he's lost the election. But the article does make the administration look very good.

I mean, very competent. First of all, they shoveled money to the right people. They offered Pfizer money. Pfizer didn't want it or need it, but Moderna did. So they got a few billion dollars to Moderna. They parallel processed a bunch of different attempts here so that if one company failed, the others might succeed. There was sort of a Reaganite cutting of bureaucratic red tape wherever they could.

There were examples in the story of a drug company needing something, some supplies or what have you. And they would call the administration and they would make it happen. And then finally, the administration didn't do anything to kind of mess with the science. In fact, they describe how this new experimental mRNA technique that they used to generate the vaccine. they had the code for that within two days. They actually had the vaccine sort of printed, if you will, within weeks. And really what took all this time were the human trials, you know, the three-stage human trials, which the administration did not do anything to speed up.

And probably the irony of ironies, the Supreme irony, is there's a story, there's a bit in the story. It actually begins with this guy Slawe, who's the head of the Trump administration's effort to produce the vaccine. He actually slowed down the Moderna human trials by about three weeks because they weren't including enough minorities in the, you know, in the, in the trial. And that cost them three weeks. If it weren't for those three weeks, Moderna's vaccine would have happened before Pfizer,

and it would have come out about a week before the election. So you got to wonder, like, Trump has got to be pulling out his hair about this twist of fate. David, how does it attribute? credit for warp speed. And I'm going someplace with this, so I'm just asking you the question. Well, the article's not trying to attribute credit. They're just kind of describing the behind the scenes of how Pfizer-Moderna came up with their vaccines.

And it just, but in describing, you know, Pfizer and Moderna did the work of creating the vaccine, but in describing the ways that warp speed contributed, they did things that were only helpful and nothing that was harmful. And so in that sense, it made the Trump administration look. quite good. Yeah, I think the point is that the warp speed folks, which is probably the least well-known working group working on coronavirus to the rest of the public, is because it was a lot of wonky insiders. It was a sign of almost proving the exact opposite of what Trump typically does, which is, you know, some idiotic nepotistic leaning where it's his daughter or it's his son-in-law running around,

you know, completely and effectively, you know, doing something, where they become sort of front-incentive. for taking credit. In this case, it was just a bunch of policy walks. You never heard about the project. We only know about warp speed because a handful of us have talked about it. And it turns out to actually have been good because they knew what they were doing and they knew enough to not try to seek the credit and just got out of the way. I mean, it proves almost the antithesis of how the Trump campaign, you know, manage their

time in the White House. Well, I mean, you have a point where, you know, I was kind of reading this article wondering, you know, where was Jared Kushner? because if Kushner knew about this, there's no way he slows down the Moderna vaccine by three weeks. I mean, that might have made the difference right there in whether Trump wins or not. Can you imagine the effect on the election if the vaccine had come out one week before November 3rd? I think Trump would have won decidedly if he had a vaccine or two out with 90%. But I think he had no credibility.

Even though Moderna and Pfizer were saying late November, and he said the vaccines are around the corner, his whole tenure was based on so much lying. He was the boy who cried wolf. He was the president who cried wolf. By the time he told the truth, and he was telling the truth about the vaccines. It was like, oh, my Lord, he told the truth in the final three months. Can I give you the opposite, David, of that, which is that if Moderna basically says, hey, guys, we have a vaccine that works for white people and a disease that's, you know,

disproportionately killing blacks and, you know, Hispanics and brown people, Native Americans. And all of a sudden, people are like, wait, what the fuck? Maybe they would have gone into Georgia and they would have just crushed them even more. And then you would have actually had the Senate flip too. So you could have had a whole kind of distribution of outcomes there in a different case because you could have had an angry reaction as well. We don't know, I guess is my way. Well, yeah, I mean, I think it's ironic that an administration, that was constantly accused of white supremacy

probably lost the election because they slowed down this vaccine trial group to include more minorities. No, I know, but I think what we're saying is it wasn't the actual administration. It was somebody that actually knows what they were doing. We call that redemption in the movie

when the person actually loses because they did the right thing. It's kind of redemption. Freiburg, when you look at these MRNA vaccines, you were educating us about them last night and also for a long time. Tell the audience just one more time how these work briefly and what the potential for them is in the future.

Because I think a lot of us now are starting to see the light at the end of the tunnel. This is going to be over. We're going to be at conferences or going traveling to Europe or whatever it is next summer. But we are all going to be scarred for life thinking, you know, when is the next coronavirus? just like for a decade we were on pins and needles, when is the next 9-11? So this is going to be scar tissue for a generation or two of people. When the next COVID comes, how quickly will warp speed 2.0 go? Yeah, it's the right question, because our approach to doing vaccines may have just changed permanently.

So, you know, every cell has your DNA, and DNA basically codes proteins. every three letters of DNA makes an amino acid, codes for a specific amino acid. There's 20 amino acids. The way that DNA turns into proteins is through RNA. So RNA is kind of like a mirror copy of your DNA. It floats into these things called ribosomes in your cells and outcome proteins. And it's like a printer, right? And so those ribosomes make your proteins using those amino acid sequences coded by the RNA.

So the way that the vaccines work historically is you'll get a day. dead virus, which is basically the protein of a virus, your immune system then learns to kill that or to remove that protein. Oh, man. Jesus, my dog. Your immune system then learns to remove that protein from your body. And that's how you develop this memory, your immune memory, to a specific protein. And so they put this dead vaccine, the virus in your body, and hopefully your immune system

learns a good response to it. MRNA basically puts the RNA in your body that codes for that protein. your cells then make that protein. And because it's making a lot more of the protein in a more consistent, you know, way, theoretically the idea is your body develops a much more robust immune memory and immune response without it overloading your system with all the immune cells try and wipe that protein out right away and so on. The challenge is you're putting RNA in your body.

And we've always been worried about, we don't know what the side effects of mixing RNA in your body would be. Is it going to change your DNA? Is it going to change your genetic makeup? Is it going to cause other delirious side effects? So this technology, this capability, this knowledge has been around forever. I'm not forever, but for a long time. And the idea has always been we could use RNA in this way.

But, you know, no one wanted to, and we've used it in animals and we've used it in plants and we've seen the capabilities of using RNA to do different things like this. But this is a big leap. And so, you know, we kind of leapt forward here of getting to the point that we felt comfortable with, you know, RNA as a treatment like this and it's working. So in theory, in the future, as Sacks points out, you could take any virus or any bacteria you could read its DNA. You could do that in an hour.

Then you could take chunks of that DNA and code RNA for it that your body makes those proteins that theoretically produced an immune response. So that's the science of like how do you create a new vaccine? I think that's the amazing part is the way it's described in this article is that it's almost like laser printing or 3D printing a vaccine. It's kind of like the equivalent of that. You just take the genome of the virus and, you know, boom, you've got the vaccine. and then all the other delay is about human trials and testing of it.

But imagine if that there was the next coronavirus is 10 times as deadly, you know, something that's as spreads as contagiously as smallpox and as, you know, as deadly as Ebola or something like that. We could have a vaccine the next day, you know, like you could, we could have it very very quickly. The challenge, David, would be as we'd have it the next day like we did here, but we would be going through this three-phase trial. And so I want to take a moment here and talk to Chamoth about something, which is challenge trials.

In the UK, they will start doing challenge trials for those people who don't know what a challenge trial is. Essentially, they expose you to something dangerous, i.e. a virus like COVID. And then they give you the vaccine and then they give you the virus, as opposed to how we do a three-phase trial, which is you give the vaccine to 30,000 people and a placebo to 30,000. and then you come back three months later and see how many people got affected and it takes time and money. Whereas challenge trials only take risk on the individuals who are part of it. Chimoth, hundreds of people in the science community signed a letter and in the UK they were going to be doing the first challenge trials in January. The United States is not doing these. I'm certain China is.

Do you think it's a moment in time where we need to think about the ethics and morality of challenge trials specifically. And then if so, how do you execute them without, how do you execute a challenge trial without it being unfair or too dangerous for people? Obviously, you're not going to just go into a prison and say, hey, anybody want to get 10 years off the sentence join the challenge trial? That seems morally bankrupt. But we let people climb mountains without ropes. Right. Well, I think this speaks to a whole bunch of other issues that we've talked about on the pod before. You know, another example of this was Section 230 before when we talked about it. we had a body of law that was created in a moment of time that essentially was about framing

and understanding a specific pathway and a way to use technologies that today look archaic. And we have to rewrite the laws in order to just compensate and understand for where we are. So if you double-click on trials as an example, you know, if you have a solution for a rare disease, you can go in a specific pathway with the FDA and get breakthrough and fast-track approval. But if you, for example, have a novel immunotherapy cancer drug, you probably, you cannot. You know, you have to do a multi-phase trial, a typical three-phase trial. You have to solve for very typical things like fatigue, et cetera, et cetera. All these things slow progress down.

Now, in a world where we were somewhat flying blind 40 or 50 years ago, we didn't have, you know, things like CRISPR, we didn't have, you know, a real understanding of the genome. we didn't have delivery mechanisms like Carty, you would say, okay, yeah, we should be really, really careful. But I would say that the more you know, the more you can ease up on the rules because you can actually empower people with a lot of information. And it shouldn't take a disaster scenario for us to be iterative and experimental. So I think the challenge trial is really important. I think the concept of them make a lot of sense. I think a lot of government should employ incentives to figure out who is eligible and why.

But if you're a healthy adult male or female and you want to participate in a trial for whatever set of reasons, you should be allowed to do so. And companies that want to run those trials should be allowed to run them. Similarly, if you want to find a complementary pathway through regulatory agencies to get drugs to the starting line, you should be able to do those too. And I think what we have to do is multi-path these compounds going forward because I think that's where you accelerate all these technologies as ability to actually solve these diseases. Freeberg, why is it so controversial that a rocket ship company or, you know, people who want to climb on mountains without ropes or a rocket ship company, like there are experimental pilots, we have astronauts, they take unbelievable risk. We send thousands of troops into harm's way for many different reasons, many of which sadly die.

And they volunteer for those activities. Those people are volunteering and compensated. But when we look at science and we look at a challenge trial, scientists say this is morally reprehensible to compensate somebody for taking risk. That's exactly what we do in the Army. We do it with police offers and we do it with astronauts. help us understand how scientists think so differently than say war. I don't know if it's scientists as much as it is, you know, regulatory framework like

some people would call it a nanny state and, you know, there are things that the nanny state assumes individuals don't have the capacity to understand the extent of the potential loss or the or the nature of the risk. This is true for angel investing, right? You have to be a qualified investor to invest in a private. company without appropriate disclosures. And it's true in a lot of other contexts. So, you know, to give people the authority to make decisions like this, it seems like my, I have no point of view that I'm kind of making here, but it seems like the, the, the,

the government assumes or the elected officials assume or the populace assumes that there are things that people aren't really equipped to make decisions on because they can't understand the risk because they're not qualified. And that, and they get excluded from those activities. But Sacks is the, how should we reframe this? Yeah. Well, I think

how should we frame it? I think assumption of risk is, is a, is a really good principle. And it is a way for people to engage in potentially harmful behavior. Just because a behavior is, is potentially harmful,

doesn't mean you don't get to do it. In the United States, you're allowed to do things that are manifestly harmful to yourself, like smoking. Well, you know, even worse. Even worse. If you're in Oregon, you can now do all kinds of hard drugs. I mean, you can assume that risk for yourself. So, you know, if in Portland, Oregon, you can now take heroin openly in the street with no consequence, but you can't participate in a trial that could basically cure a cancer. That's insane to me. I'll tell you, I'll tell you the flip side of it. You're allowed in Nevada to play roulette. I mean, what the fuck? Like, you know, it's got a negative expected value, statistics.

factually for individuals, but the individual doesn't have the capacity, generally speaking, that's playing roulette to recognize that every dollar they're spending at the roulette table is likely going to be taken away from them. Like there's some percentage of that that's going to be taken away. There's a five percentage for the house on that game. And so we make the argument in some cases that people don't have the capacity to understand risk, but in other cases it's okay for them to not have the capacity to take risk. And I think that there is this notion of what some people call regulatory capture that

probably encompasses both of these, which is that there is some degree of profiteering that has created some set of laws that kind of manifestly capture that system in a certain way. So there are profitable casino enterprises that say, let's get people to spend their money in a risky way that they don't understand. And that becomes the law. And then people in Nevada aren't a lot to do that. There are also pharmaceutical companies that will say, we need to have huge regulatory burdens. So once we make that big investment and we get patent approval and we can lock in that drug, we can charge a lot of money for it. So I would argue. to some extent that the regulatory capture associated with the profiteering that happens on the back end

in pharmaceuticals has in large part driven the structure around risk taking in drug trials, particularly in the U.S. I mean, you can go get whatever drug you want over the counter in Mexico, right? I mean, we have a very different system. It also happens to be the most expensive in the world. And the rationale is, well, you're the most protected, right? Well, the drug infrastructure here has created, to your point, because of regulation, the entire, you know, CRO industry, which is a multi, multi-billion dollar industry, which

basically is essentially a retardant of R&D velocity, right? Its entire job is to slow things down, create these double-blinded studies. By the way, and many of these studies are not even double-blinded. They're not even actually scientifically rigorous. They get basically blown apart after the fact. So what are they really in the business of doing? It's because they're exploiting a business model that was created by, laws, laws that were written by regulators, regulators that were in the hands of lobbyists,

none of those folks truly understood at the time, but especially today, what's really possible. So, you know, it does not make sense in the United States of America. Just writ large, simply put, that you can buy alcohol and drink yourself into the ground, buy cigarettes and smoke yourself to death, you know, jump out of... Gamble away your money. Gamble away your money where your negative EV or openly, you know, openly do illicit drugs. but you can't participate in a thoughtful trial back by scientific research. In fairness, Jamath, you can get away with smoking fentanyl in San Francisco and Oregon,

but it is illegal to use that plastic straw. So be careful, folks. The laws are very clear here. That plastic straw is going to get you in a lot of trouble. I don't know what the fine is, but it is completely. I mean, it wouldn't be so crazy if it were true, but to your point, like, you would actually get arrested for having a plastic bag, then you will for having fentanyl in San Francisco. Absolutely.

They'll arrest you for the bag that the fentanyl's in, but Chesa Boudin will not arrest you for the fentanyl in the plastic bag. Sacks, we've totally lost the script, but Chimath sort of bridged this with the 230 discussion of common carrier. And, hey, you know, we had great intent with this law, but nobody saw social networks becoming this dominant, addictive, et cetera. So we need to be more nimble as a government in changing these regulations, whether it's straws, fentanyl, challenge trials, or 230.

You wrote a blog post about it. After we had our 230 discussion, a lot of people started talking about it, have you come to some conclusion as to an exit ramp for 230 or a way to maintain it without, you know, throwing the baby with the bath of water? Yeah, yeah. Well, okay, can I make one concluding thought on this last stop? Sure, of course. So the reason why innovations happen so fast on the internet is because of, you know, one word,

permissionless, right? Permissionless innovation. Nobody who has an idea for a startup needs to go get permission from someone in the government, you know, repeatedly. That's really what makes a difference. You know, Mark Zuckerberg as a, you know, sophomore in college can just build his project. Larry and Sergei's PhD students can just build their project, ship it, start, you know, getting users.

And they don't have to get the permission of a regulator who's in the same. incentive, by the way, is just typically not to get fired by approving something that might rebound on them in some, you know, in some bad way. And to keep their job, yeah. Keep their job. I mean, imagine if, you know, imagine just to take like a random example when Elon launched Starman. Remember when he put the, like, he launched the Tesla into space and there was like a astronaut in there. And it was like this kind of really cool moment. I assume he just did it.

I assume he didn't get permission from anybody to do. do it. But could a moment like that have really happened if he did have to get permission? No way. It'd be like making it way up through the chain. No one would know what to think of it. No one would know whether they could be the one to approve it. And then what if something goes wrong? What if the Tesla comes back down to Earth and it turns into a meteor or whatever? Those are the scenarios that be running through their heads. Nobody would have allowed it. Right. And so when you just let entrepreneurs do things like good things happen, right? And that's why we've had so much progress on the internet.

And in so many of these other areas, we've had much less progress because, you know, what a system like that selects for is your ability to go lobby regulators as opposed to just building your project and shipping it. I think that one of the things that maybe happens is that, you know, we're all expecting, or maybe some of us I have definitely some version of a new deal and some grand bargain. And I wonder maybe whether the new deal and our sort of like our version of FDR over the the next, I don't know, 10 years is the person that actually says, guys, we're going to have a wholesale rewrite of the regulatory infrastructure to account for technology. Just period. We're

going to start someplace reasonable and small and we're going to make common sense reforms just observing the times as they exist today. Right. And we're going to go and systematically try to make these industries a little bit more resilient, a little bit more entrepreneurial, you know, a little bit less corrupted by regulatory capture and lobbyists and laws that just don't make sense a hundred years later. I mean, it'd be great if we could do that. The reason we can't is because how do you reform the law without the lobbyists getting their fingers in it? Right. And the problem is there's no lobbyist for the company that doesn't exist yet, right? For the founder, for the entrepreneur who's got an idea in their head, but they haven't built their company yet. There's nobody representing that

person in Washington, right? And what happens is you get new regulations in Washington. Some agency gets created. They reach out and touch an industry. Now every player that's affected has to create their own lobbying, you know, organization. Not true. And David, what do you think about this? What if the advocate for the entrepreneur or the uncreated company and uncreated product is really the same as just individual civil liberties and rights? How are they really that different because really what it's doing is saying the entrenched organizational infrastructure that runs my life gets deconstructed and then power gets pushed down to be the individual. That's tantamount to the same thing, I think.

Well, we have seen some pushback. Well, I mean, there is some silver lining here. If you look right now, the citizens of California, obviously people have been fleeing and we've been talking about California and the one-party system here causing so many problems. But we did have Prop 22 pass, and we now have 900,000 people have signed to recall Governor Newsom. And these seem to be some pushback against this sort of nanny state where people can't make decisions. And then additionally, today the SEC announced that they will allow gig working companies to give stock to, employees as part of their compensation, up to 15% of their compensation. In fact, Hester,

how do I pronounce her last name? It's not Pierce. You can't pronounce the word Pierce? Perse. Purse. No, it's spelled Pierce. But Hester Purse is it worth following on the Twitter, H-E-S-T-E-R-P-E-I-R-C-E. H-E-S-E-E-R-C-E. H-E-S-E-E-E-R-C-E. H-E-R-C-E-E-R-C-E-E-R-C-E. I had her on my podcast this weekend startups, and she, they're really getting aggressive in changing the accreditation law. So anybody's going to be able to be an accredited investor, who's become sophisticated through a testing mechanism. And now they want to let gig workers get equity conversation. But by the way, sorry, here's a perfect example of a regulatory body and infrastructure that actually has changed with the times. I think the SEC, in fact, I think we

maybe we talked about this a little bit the last time. I actually think one of the best Trump appointees has been Jay Clayton. And I actually think Jay Clayton has done an incredibly good job. And a lot of what he's done is just deconstruct this kind of nanny state and say people can become educated and make good decisions for themselves. And because it's in an area that's relatively benign, i.e. investing, people kind of just let it happen without a lot of pushback. And everybody kind of generally supports it. Democrats support it.

Republicans support it. And the outcomes are really good. To your point, Jason, which is in a world of zero rates, how do you expect any just, you know, average ordinary middle American who just works a decent job. to save for their retirement to actually make enough money. Well, they're going to have to get educated and they're going to have to find a way of putting their money to work in assets that have a better return, which literally was illegal up until very recently.

You were systematically letting the rich stay rich. And you were blocking the poor from having an opportunity to advance. Like, what if Apple Store employees could get their paycheck and say, I want to take my paycheck, 70% cash, 30% you know, restricted stock units at this discount. Like, we could let Apple Store employees make, you know, a million dollars after five or ten years of working there 10, 20 years from now and have generational wealth change. David Sachs, you had comment. Well, I was going to ask, Tomoth, do you think this type of deregulation is going to happen

in the Biden administration? Yes. Because what you're discussing is like a very, really kind of classical Republican or Reaganite idea, right? I agree. And I think what's going to happen is I think you're going to continue to see deregulation in areas that are benign and non-controversial. So I think the SEC, the FCC, I think all of these places you'll see movement. I think you'll probably actually see a lot more choice and deregulation effectively in Medicare and CMMI. I think that's those places will move first. And then I think it'll be up to some leader politician to then really rally the troops on some higher order bits.

And one of the biggest higher order bits would be sort of around the broader healthcare infrastructure, social security. Education. Education is probably the biggest one. That's like the, it's just too sacrosanct for the Democrats. You cannot get elected without the teachers. And so unless there is a startup that completely disrupts teacher, pay and teacher compensation, then the public school teachers' unions will continue to dominate

a lot of the federal and state policy, for the worst, unfortunately. Freeberg, if you had one regulation or series of regulations or regulatory body, you would most like to see change for the good of humanity and, you know, Americans and and the rest of the humans on the planet, what would it be? To listen to the rest of the podcast, search for All In with Chimoth, Jason, Sacks, and Friedberg, available across all major podcasting platforms.