This Week in Startups - Altimeter’s Brad Gerstner on taking Grab public in largest SPAC ever, fixing broken IPOs | E1203

Episode Date: April 23, 2021

Crossover technology investor Brad Gerstner discussed Altimeter Capital taking Grab public in the largest SPAC ever (38:55), why the IPO process is broken and how to fix it (12:55), and the responsibility of people with platforms to encourage responsible retail investing (22:12). As well as, how $2000 for every American invested in the public markets at birth would display the power of capitalism to improve lives (50:50) and more!

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He's doing amazing things in the world, including the largest SPAC in history. Nope, not Chamoth. Another bestie. Brad Gersner is here. Welcome to the pod. Brad from Altimeter Group. Or Altimeter Capital, right? Altimiter Capital.

So, I can be here. Capital, not group. So let's get right into it. You've been a fan of the Uber and on-demand economy for a while. You and I talked about this. And I think you have a pretty big Uber holding. Is that correct? We do.

We do. And you were in that when it was a private company. We were. And then I see you raise a SPAC. And then I see news two weeks ago. Altimeter is taking grab public. Give us the broad strokes about your thesis on this deal and how you decided to do a SPAC to begin with. Yeah, well, let's really start with the second one, Jason, because, you know, when I went on CNBC, whatever, last October, I said, you know, we're doing the unspac.

And everybody's that, what's the unspac? You know, I started my career 25 years ago as an IPO lawyer. And, you know, I was fascinated in 2001, 2002 with the idea of a Dutch auction, Hombach and Quist, Google hired 75 engineers to try to build a better IPO. And then we had a stasis. Really, nothing changed. You know, part of the reason is because we had an IPO winter for like a decade, right? No company's coming public.

But during that period of time, our friends, you know, Bill Gurley and Rich Barton, We spent a lot of time thinking about the fact that the IPO is just a broken, a fatally broken process. Why? Why is it so broken? Here's what I would say. Most companies you and I invest in by the time they hit Series C if they're going to make it to the public markets, which as we know is very few companies. Those late stage rounds of financing, they sell 10% of their companies. They call up 5 to 10 people. It takes them about two weeks. they handpick the people they want in their cap table, very little distraction, set the price away you go. They get back to work.

You're talking about a private market. I'm talking about a series D, E and F. They raise, maybe raising 200 million, 500 million a billion. Now they want to do the exact same thing in the public market. But instead of selling it to maybe Dragonere or Tiger or Ultimiter, they want to sell it to Fidelity to your own capital. But the exact same transaction. They want to sell 10% of their company, raise a billion dollars, and step into the public markets.

And instead of it feeling like that late stage private round, we embark on this Byzantine 12-month process. Okay. Rich Barton calls it a cap table randomization event, right? Because now the people who are taking you public, they're agents, not owners. They're collecting an agency commission, five and a half, six per person. for taking you public. So they are serving different interests than just your interests. So for Rich or for Bill, who come at this from different angles, in the case of Bill, he just says, listen, it's an overnight wealth transfer, right? Because we know that banks have a structural

interest in underpricing so that they can have an exchange of value to their best clients. We can debate how much the underpricing is, but I think most people understand the incentives there. I think in the case of a founder like Rich Barton, he says, you know, I spent a lot of time hand selecting each of the people in my private cap table. And yet when it came to my IPO, all of a sudden it was this randomization event. I didn't have control over the people who were in my cap table. So when we think about choice, right, a direct list for some companies is an opportunity to have an IPO that helps to eliminate that structural underpricing.

it has some advantages, some disadvantages. When we thought about building a capital markets platform at Altimeter, this wasn't like a one-off SPAC. This was like, can we use the SPAC as effectively an open source API into the public markets? Nice. And we build a service layer on top of that called a capital markets business where we provide a full turnkey solution from the book build all the way through. the IR up to the data.

Investor relations. Correct. Yeah. Got it. And so what was significant about this week wasn't the fact that we did a big SPAC, right? What was significant about this week is that a company that clearly could have gone public with any of the major investment banks in the world chose an alternative capital markets platform to step into the public markets.

And the issue here is incentives matter. as Charlie Munger, I think was the, I think he was the original who said it, you know, show me the incentive and I'll show you the outcome. The incentive for these banks when they do the traditional IPO is I have these reoccurring customers, high net worth individuals, etc. And I'm servicing them by giving them a low price stock that they can flip. And they don't have to be locked up for any period of time. So the last person to get on the train now can do whatever they want. The company that built this, all the employees, founders, angel investors, venture funds, they all get locked up for six months, a year? This makes no sense. And it reminds me of the experience I had when I was first buying homes. And I just became so resentful and angry about being worked by real estate brokers, where they, I felt so manipulated and I realized, wait a second,

they work with each other all day to just get a deal closed. It doesn't matter if I buy this home for a million. It doesn't matter to them. A million, a million to $900K doesn't matter. It matters to me, but it doesn't matter to them because 6% of 900 or 6% of 1.2 is basically the same thing. They just want that fee. And that's what they're doing here, isn't it? It's so funny to use that analogy because my partner in crime on all this has been Rich Barton.

Right. From Zillow. Who's going to come on the podcast? You know, you've got to put a word in with Rich. I've been asking him, he sent me to his people. he sends me to his PR people. The PR people give me four other executives, and I'm like, no, I want the Rich Martin.

He is one of the world's great founders, one of the great product thinkers, one of the great marketers. When we started talking about this 18 months ago, you know, in the case of online travel, which is where Rich and I, and frankly, Dara all met, back in 1999, 2000. Dara from Uber.

Dara, who's now running Uber, who at the time was the head of M&A for Barry Diller. And he bought Rich's company and my company. That's how we all met in 2001. Okay. And back then, if you wanted to book an airline ticket, there was a monopoly called an airline reservation system, a GDS, a global distribution system. And the monopolist in that case was folks like Sabre.

And if you wanted to book a ticket on United, it had to go through their proprietary reservation system. And so not surprisingly, they charged 20 bucks a ticket, right? When Expedia and Orbit showed up, they said, well, we don't need to go through. through you, we can build a direct connect. We can build an API directly to United Airlines or American Airlines. Yeah. They're not that many airlines, right?

And we can reduce the cost to a dollar a ticket, not $20 a ticket. Well, lo and behold, when you drove competition into the market, what do you think happened to the price of a GDS? It went down by 75%. Right? When you think about real estate, when Rich called me, we led the series B in Zillow. And I went on the board, you know, Jayhogue, Bill Gurley, incredible group around that. You know, Gregies say around that table.

And we said we need an API like we did in the case of Sabre because the MLS, you know, Rich calls this power to the people, right? Don't you remember? Like what frustrates us with travel agents and real estate agents back in the day is they were looking at the green screen. And we just wanted to see what they were looking at. Yeah, just show it to us. And they wanted to control the data, Bloomberg terminals, whatever.

And so the idea in the case of Zillow was like, The unfortunate thing is there was no API. It wasn't because it was fragmented, right? And so it took them, the stroke of brilliance by Lloyd and Rich was the Zestimate. We can crowdsource an API. Oh, that was, the Zestimate was very controversial. In the past, selling your business was a miserable, miserable task. Months of negotiations, tons of legal fees.

And sometimes you'd have to sit there and watch the new owners. Yes, sadly, trash your business. I saw this. I saw Weblogs Inc. to AOL, and they were good stewards for a period of time. And then, all of a sudden, 98 blogs turned it to 10, 5, 3, 2. The only thing left, auto blog and gadget. I wish they had been better to those bloggers at the end. Oh, all my effort. But now there's Tiny. That's right.

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acquirer to protect your team and the brand. Get in touch. Tinycapital.com slash this week. Tiny, capital, t-in-y-y-N-Y, capital.com slash this week. And they're going to let you know in a couple of days. That's tinycapital.com slash this week. Okay, let's get back to this amazing episode. Explain to me the moment when the estimate was suggested in the board and the controversy because somebody brings that up and says, I'm going to put a price on this home and we're going to make an estimate.

And that is going to tweak the homeowner. And if we're too high, too low, whatever, it's going to cost chaos. that was a bold move, was it not? Well, it was a stroke of genius that predated me, actually. I, you know, I talked to Lloyd and Rich early on. What are you going to do after Expedia? And, you know, they had a very simple thing. Like, we discovered power to the people turning the green screen around.

So let's go find another trillion dollar industry where we can turn the screen around. But the idea, you know, originally was like, well, buy and sell homes. Like, how do we create the Expedia effectively for real estate? The problem was the realtors had the information. And so they had to discover how to get the information. I think it was Lloyd, actually. Remember back in the day, Jason, like mashups with Google Maps were all the rage. Yes.

Okay. And so I think it was Lloyd who had this idea. What if we mashed up mortgage pricing data with a Google map? And we put a price on the roof of every home in America. That would get everybody's attention. Sure. Right. But, you know, the analogy and the reason we bring it up is because they now, 15 years later,

and Open Doors doing the same, and Eric and Chamath are doing a great effort there. They're trying to drive down the cost of buying and selling a home, leveraging that information democratization. Okay? And they're doing it. So when you look at a traditional IPO, you know, a traditional IPO, there's an upfront cash cost to all the companies. and as Bill would argue, there's a big indirect cost in the form of structural underpricing. So I'm just a big believer in choice. I'm a big believer in competition.

How did you get that deal? How did you get the deal? Because now Grab probably has their choice like you're saying. So, you know, take us into, you know, what none of us have access to is how does that board decide to go with Brad as opposed to Goldman? They hire advisors to advise them. Like an Allen and company? like a bank? Yeah. And ultimately, it takes courage on the part of a board because if you think about what a board, you know, you know the old saying, you don't get fired hiring McKinsey, right? You

don't get fired hiring Goldman Sachs. You don't get fired hiring Morgan Stanley. And let me be very clear. Goldman and Morgan Stanley are great partners of us. They're extremely smart. They're extremely capable. And they will have important roles to play in the process. It doesn't mean that their roles should not evolve. We're going to re-architect this in a way my North Star is very clear. What is in the best interest of founders, companies, and employees of the ecosystem that has been so good to me? I mean, that's where it should start, right? Those are the people who got the product, got the opportunity to your desk. So why are we giving all the spoils to some other group of people? So when they said to you, hey, Brad, why should we go with you as opposed to, you know, one of these

banks and you're talking to the advisors, what was your pitch? Because I do know you offered some very specific things that maybe some other SPACs have not offered. So you've, and each of these spacks, correct me if I'm wrong, you as the promoter, which is a weird term, but it is what it is. Sponsor. Sponsor. Okay, you as the sponsor, sort of a weird term, but better. You as a sponsor, you get to define the terms. So it's not a standard term. So what were the terms you pitched? Well, first, like any great product, like what we've done over the last year is to deconstruct the entire value chain of an IPO and to say, like, this isn't about flipping a SPAC. This is about building a product like I've built in three other companies, like Riches build it. We took a Zillow approach.

What is the I buy of the IPO? How can you deconstruct that? So part of it, right, Chris Conforti joined our team. Chris built over 100 IPO books for Goldman Sachs. Right. So the guts of an IPO is, right, to bring together two sides of the marketplace, the company and the world's best public market investors. So knowing those public market investors, you know, Will Danoff and Sanu at Fidelity,

knowing Tony Kim at BlackRock, knowing, you know, just go through the list. Those are your buyers. So having trust and relationships. And Altimiter has 15 years of trust and relationships with these portfolio managers because we sit on the same side. We compare notes with them about public companies that we're looking at. Chris Conforti has a decade of experience with them building books at Goldman Sachs. So we know how to build a better book, how to price, how to allocate, how to do those things. And so from our perspective, right, that is the guts.

But now you can expand the aperture, Jason, right, on the capital market. team. So I brought, you know, we brought Derek Wong, for example, on board. Derek was the head of IR and PR for Tableau, right? So helping these companies understand how to tell the narrative, how to present the narrative, right? But the important thing is this, like why? Number one, what is the objective of most companies? Give me the best possible public market investors at the fairest price with the least amount of distraction. And that's what we delivered. We delivered a better cap table at a fairer price with a hell of a lot less distraction than they would have gotten in a typical experience. So we're, I think, a great partner to them. I noticed two points.

You locked up your shares for three years? So our sponsor promote is locked up for three years. I'm never going to bring a company public that I'm not willing to lock up my sponsor promote in because, frankly, I want to bring the best of the best, right? I'm not trying, there are a lot of places that SPACs will offer great alternatives to companies. right like for example you think of you know lucid you know which is an interesting company that went public by way of spec with michael klein right or you think of you know these vertical takeoff companies you know reed hoffman's doing just incredible stuff jobe you know with really interesting companies companies that i would love to see exist but that's not what altimeter does

so the really fanciful moonshots no right and they'll be and guess what chumath is better at that Reed is better at that. So they will own that category in the capital markets. What we're very focused on is what we've done for, I've done for 20 years, which is focused on the world's best internet and software companies, gaming and fintech. And for a select few every year, we're going to help them go full stack on the altimeter platform. But we'll participate in 40 other IPOs where we'll be an expert advisor on their traditional bank IPO like we did with Snowflake, where we helped anchor that, or like Roblox where we helped cornerstone the direct list and we're close with Dave and Mike as they brought that company public by way of direct list.

We do not, we're not a SPAC hammer, only trying to pound a SPAC nail. We are. What do you think of this, what I'll call questionable inventory that are going out by SPACs, you know, for every, you know, company that seems really legitimate. you're going to have a Fisker, you're going to have a Nicola. I'm saying these names. I'm not going to put it to you to say these names, but I think those two are, you know, either frauds or destined to be zeros or just disastrous investments.

That's my personal belief. But you are doing a SPAC. Chimot's doing SPACs. And so people put these all in one bucket. Totally. So how do you think about the low quality, you can pick which ones you think are low quality? I just gave two names that I think are extremely low quality that I think wouldn't go from,

you could take a zero off their value. and I wouldn't buy them at $500 million, let alone $5 billion. The first thing I would say is, and I heard you said on CNBC earlier today, right, that stocks are not lottery tickets. I've said this on CNBC, I've tweeted about it.

There's not enough diligence going on by way of investors. They think this is all get rich quick schemes. Spacks are dangerous. I said on CNBC a few weeks ago, I got a lot of grief for it that were short, a lot of SPACs and a lot of DSPACs, because we run a hedge fund. Because you have misalignment, you have average companies at best that are overpriced.

This is buyer beware, right? Buyer beware. And I am 100% in your camp on, you know, we need to have full and fair disclosure, right? We need to have enforcement. I started, you know, back in 1997, 98, little in fact, I was the regulator of the Indiana securities division. I ran the Indiana Secretary of State's office. and some of the stuff I see going on, you know, promoting, etc., I just think is on the line or crossing the line.

So Altimiter is exclusively focused on taking the best companies in the world public and partnering them with the world's best institutional investors. Right. Institutional investors and giving a more curated IPO to the best companies. I think about like Mongo, Twilio, Octa, companies that were in our private port. portfolio, right, that I wanted to own more of as they went public. I wanted to be a great partner as they went public. But now we can. Now we can to those types of companies that are in our portfolio or our friends' portfolios. Let's face it, this new world of remote work is here to stay. We all know that. And so are all of the HR and IT headaches that come with it. Like, how do you register your startup with dozens of state tax agencies, right? You had some employees, they were living right near your office. And then, they decided, you know what, Yolo, I'm going to move somewhere else during the pandemic. Well, you are going to need to have your startup register with dozens of state tax agencies now,

or you have to comply with a gazillion different local labor laws. Well, Rippling, which I use for my fully remote team over at Inside, can answer those questions for you. They make it super easy to manage all of your local and remote employees and contractors, whether they work from HQ or Timbuktu. When you hire people in new states, Rippling can automatically register your startup with each state tax agency and keep you compliant with all the different local labor laws. You know, the stuff that no one likes to deal with, all that headache, they're there for you. Rippling also let you onboard your new hires in literally 90 seconds.

You can instantly set up their payroll benefits and, of course, apps like Slack and GitHub. You can even ship them a work laptop with all the software and security they need all installed. We love Rippling because it takes a lot of complexity off our plate, so the team can focus on important stuff like creating great newsletters. which is what they do over there. And now, thanks to Rippling's new P-E-O option, your employees can likely access better Fortune 500-level benefits for less than other platforms.

So if you're looking for an easier way to run your startup remotely or just a better way to manage your HR and IT, visit rippling.com slash twist. That's Rippling, R-I-P-L-I-N-G dot com slash twist. Altimeter started 2008, am I right? Correct. $3 million fund was the first fund. Correct.

A micro fund. That's 75 million. Fund two, three, and four. You get up to about 400 million. You just launched Fund five, from what I understand. You have $15 billion under management. Of that $15 billion under management, how much was created in the last two years? Ballpark.

Well, I would say in terms of well over 50% of our total capital is profits that we've generated. Got it. Let's talk about the biggest one, which I think is Snowflake. You have an $8 billion position in Snowflake. Is that accurate? Day to day it changes. Oh, got it. It has retreated a little bit.

Right. That feels about accurate as of today. Got it. So in no part of this conversation, did I hear you bring up retail investors? Retail investors, when you started back in 2008, were gone. Not only were they gone. I mean, they were absolutely cantankerous and upset and felt burnt by the, one-two punch of the dot-com bust and the Great Recession Real Estate bust. So now they're back.

They're back in force. Is it a good thing? Is it a bad thing? Or is it a mixed bag? And how do you look at it? Because you're not saying I'm appealing to retail investors, our best each month, has a big retail following. My third best investment in my career, Robin Hood, is about retail. So how do you feel about retail? Is this a good thing or a bad thing? Well, I know a bit about your background. And I think you know mine. I grew up poor. Grandfather never could afford college, saved his whole life so that he could leave this kid 10 grand when he died. Wow.

And I used that. I heard you get choked up there. Yeah, I used that 10 grand to, you know, I started my first stock I ever invested in was IBM. And I put myself through law school and business school and college, you know, investing. And so I know firsthand the power. of the democratization of markets. I know what I learned. I know the confidence I gained.

More importantly, I know the education. It helped me buy. Right. And so I am all for the democratization of markets. I am all for retail investors investing. In fact, I was on CNBC with Chamath and I proposed an idea called Invest America. I think we should give $2,000 to every child born in America and make every everybody part of the ownership society.

The freedom dividend, right? I mean, this is a no-brainer. And so, you know, so you and I ought to talk more about that because I think, you know, I want to build the pilot around this because we're not, you know, the way for us to help people understand that capitalism is a force for good is for everybody to actually participate in it. Yes. So yes.

But getting back to your question, that doesn't mean that there aren't moments of excess. that doesn't mean that there aren't moments of hucksters, right, whether they're on Clubhouse or whether they're on Reddit or whether they're on Twitter that are doing nothing more than what the boiler room operations in Florida were doing 25 years ago when I was regulating the Indiana Department of Securities and they were calling up grandmothers and grandfathers in Indiana and trying to promote, you know, these nonsensical companies and stealing their money. So we have laws for enforcement, right? And I'm confident the SEC will enforce those laws. That doesn't mean you can't hold two simultaneous truths. The innovation, disruption on behalf of founders in the capital markets, choice and competition is a great thing. And at the same time, there will always be people who try to take advantage of that, right?

And I have confidence in the market, right? You'll already see the differentiation occurring in the market. Spacks are not getting done. They're trading down. Pipes are not getting done. Great. The markets are pretty efficient mechanisms. Why?

Because there are just as many people out there willing to short a stock is there are willing to go long. And the market gets to be the ultimate arbiter, right? On whether or not what you're bringing to market is fair price. And there is a learning curve, right? So this whole generation that's coming on, they have to learn. And part of learning is witnessing garbage product being put out alongside extraordinary product.

Tesla is an extraordinary product, extraordinary company. Elon is an extraordinary executive. Fisker is a horrible executive, a terrible car, and a terrible company, in my opinion. But they get bucketed into the same category. And so it's up to those retail investors

to start to learn to identify somebody with a 20-year head start to somebody who's failed three times. Let's talk about this line of promotion. I have been, warning people about crypto, hey, you know, be careful. You know, this is virtual money. It's not controlled by anybody, no regulations. I mean, if you want to do one to five percent of your net worth, maybe other people are putting 95 percent of their net worth in one crypto. And then you had

Einhorn saying Chamath and Elon or maybe when they joke about Dogecoin or, you know, or buying GameStop that this is market manipulation or close to market manipulation. What do you think? Do you think people should be able to tweet about Dogecoin or Bitcoin and being enthusiastic about it and share memes about AMC? Or do you think that this is market manipulation? Well, listen, I think that market manipulation requires two things. It requires you doing that. And on the other side of that, profiting from it. Got it.

Right. And so I think I would love to see you, me, Chimath, and others, right? really setting the gold standard for disclosure and reminders around investor education, ownership society, and encouraging people, you know, like you did today on CNBC. I was grateful for that, you know, doing your own work, reminding people of the dangers. These are not lottery tickets. Like, we have that responsibility. At the same time, right, I do believe that, you know, in fact, there's a famous Supreme Court

decision. It must have been back in the 30s about the securities laws. And it said, you know, the securities laws are not meant to be an insurance policy. Right. And so what our securities laws do demand is full and fair disclosure. And so I don't care what path to the IPO market. Altimeter intends to set the gold standard around alignment of interest, around transparency, around disclosure. We're not going to market questionable companies to retail investors.

We're going to take the world's best companies. And we're going to partner him with the world's best institutional investors. I think, you know, listen, disruption is always a little bit messy. And like you said, we got some messiness now. I think Gensler and the new SEC are going to bring some real different approach to enforcement, not just as it pertains to SPACs, but across the board. Because frankly, we do have a situation where technology and platforms like Reddit and Twitter and, you know, all of the stuff going, conversations going on have evolved way faster than our system.

of regulation. This is the really important point that you don't see at a Senate hearing or, you know, on CNBC enough, which is we've never had, you know, an instant communication mechanism that took the Bloomberg chat system. I don't know what they call the chat system on Bloomberg, but that was where the back channel was and that could impact stocks from what I understand. I've never been on it. But now you have a version of that on Reddit and Twitter where people have a million followers, 50 million followers. They say something, it moves markets. Well, those people are making choices, and it is, you know, to buy those stocks, but it's the, it's Bloomberg chat that's completely transparent. So I think that's kind of what we want. Anybody can go on Reddit,

anybody can go on Discord, anybody can have a Twitter account. And if I tweeted, because I've been joke tweeting this whole morning about, I just bought $4,000 worth of Doge, and I just said, Doge is oxygen, it's air. You breathe air all day. Therefore, you should own Doge because it's got the best meme army and it has zero value in the world. I tweeted it. My Doge immediately went up 10%.

Yeah. So I made $400 or $500 and my $4,000 making fun of Doge. Yeah. Now, am I breaking securities laws? Literally making fun of Doge and saying I'm buying it because I think it's oxygen. I mean. Well, I would say this. You should be careful.

Right. Because they're, listen, the SEC will ultimately be the arbiter as to whether or not that was a joke. Yeah. Right. And I think Chimath, when, you know, he got involved in the GameStop, controversy, I think it was very smart of him to donate his profits to charity. I'm doing that. And right. And to the extent you do this, Jason, it's also important for you to come back on and make clear to people that was intended as a joke in an effort to educate. them on the silliness of markets, right? That's what I'm doing. I know that's what you're doing and I know that's...

I'm going to be really explicit about it. I know that's the intention. Unfortunately, there are people out there with millions of people following them for whom that's not the intention. And they are saying things and they are going on the other side of the trade. That is illegal for professional investors. It is illegal for a retail investor. Unfortunately, I don't think retail investors even know what they're doing in certain

situations is a violation of security loss. You know, my favorite part of this, you know, or most notable part for me was watching the Reddit discussion on cryptocurrency when people realized when they were trading crypto that even though they had swapped their crypto five times in 2018, that they had to pay tax on it. Right. They didn't understand short-term capital gains. And they're like, well, I didn't take the money.

And it's like, yeah, but you made the trades and there were profits at that time. Like, you're going to need to, like, actually understand, you know, what the tax implications of your insane trading are. But when you look at that GameStop situation, putting aside, like, the pausing of trading and the chaos, you got to think that the people who were manipulating it or taking positions on Reddit under anonymous accounts and then doing that on Twitter, they could have flipped their position. We would never know. They could have been, you know, long and then they could have gone short. Of course they were. So we're hedge funds. So are lots of other people involved in that.

You know, and you know, you and I've talked about this a little bit. I'm a fan of Robin Hood because of the democratization that they're bringing to markets. Here's the piece I struggle with a little bit. When you reduce friction, you enable activity. Okay? So they have dramatically unleashed activity. Unfortunately, right, when you enable activity like trading in margin, right? Trading, trading calls, buying put, sell.

inputs, right? And you make it way easier on your mobile phone. Without simultaneous education, right, of the danger, without people understanding that I can't tweet about something and then go sell the other side of that trade. Without people understanding that, oh, when I sell my crypto, I have a short-term capital gains. Like the challenge is for all of us, regulators got to catch up, but platforms like Robin Hood and so far I have to catch up with the education. It's not enough to have, you know, a page that says, oh. Let me take the, sorry, the argument. You've been to Las Vegas? Sure. You ever get stopped and somebody say, here's how you play blackjack, here's how poker works, here's how the slot machine works, here's, here's an education for you on gambling.

Right. It's a fair point, but I think there is a general understanding when you go to Las Vegas, right, that you're gambling. And I think there's a general misunderstanding that when you're in the stock market, that somebody else has. said that this is okay. Like there's an imprimatur of safety intrinsic in the stock market. And I think what the SEC realizes is that they are the imprimatur because retail investors expect that they're making sure that the game is fair. Right.

And so I think it's a slightly different situation. But yes. That's interesting, though. The expectation is a good rebuttal to the rebuttal I gave you. So if they said when you let's just, you know, if a trading app said, hey, you want to do puts in calls,

which I've never done in my life. I buy stocks and hold them for 10 or 20 years. I still own a, I don't know if I own the majority, but a significant portion of my Uber to this day. Awesome. And I plan on holding it for another 10 years. I mean,

why would I not? It's a great company. Look, you probably keep hearing about SOC2 compliance. And you might think, is this really relevant to me? Well, if you're targeting any large enterprise as a customer,

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$2,000 bucks right in your pocket. Go to secureframe.com slash offer slash twist. That's secureframe.com slash offer slash twist for $2,000 off. Okay, let's get back to this great episode. When you look at these apps, whether it trade, Robin Hood or anything in between so far, what should that look like, that training? What would you do? if you were the head of the SEC, would you say,

here's a video and answer these five questions and make it like a mini, what was that the series seven? Like, would that satisfy you if they had to watch a three minute video and ask five questions? I think it is, like, I had to take the series seven. Yeah. Right? And so,

like, I do think whatever it is, we can gamify these systems. Listen, we should all share the same objectives. Right? I'm all for, do, like what? Caviard am Sure. It's not the state's responsibility to protect you from yourself. However, we should make sure that we endeavor to educate people, right? We endeavor to remind people of the risk. So, for example, is it a good idea for a first time investor to have their default screen on Robin Hood or SoFi be to a options screen as opposed to a stock screen? Right? Like, I'm not sure I would make the default way to trade in something. option, which is intrinsically levered and risky relative to the stock. That's not sending the signal

that we want you to be a long-term investor, right? By its very nature, 100% of the gains on those is going to be short-term capital gains because they exist for trading. And so I think when you deconstruct the entire thing, it's not just about education, right? I've heard you go on at length about, you know, decisions that Facebook and Google make inherent in the algorithm. Yep. Right? They're making the decision already on your behalf, right? Yep.

And I would say the same thing about UI design choices for places like SoFi and Robin Hood, right? If they default me to an option screen, then you are putting your imprimatur on it. This is somehow the default option. We have a term for this. Defaults matter. Yeah. When you're building product, the defaults really matter. Let's talk for a second about grab.

Great. Grab is about a seventh, sixth of the size of Uber? Well, it depends whether you look at over the next 12 months on a run rate or over the last 12 months. But yeah, that sounds about right. And it's going to go out for 40 or something like that is the idea. Uber's worth 110. Is Uber undervalued? Grab overvalued? What's the what's the disconnect? Yeah. Well, first, you know, we're big investors in Uber. We, we, we, we, we, we, we, we, we, we, like you have been there. Like I became an even bigger investor. In fact, we bought almost all of our Uber last March. You know,

Yum, yum, when it was $15, $20? Exactly. And, you know, I went on. By the way, that was a moment for me. Right. It took a big gulf. Right. For sure.

As did Dara and others. White knuckles. Right. But, you know, and I, listen, you should be rewarded because, you know, the real, the cash register really rings in the public markets when you, not when you're with the consensus. when you're outside the consensus. And I remember being mocked, you know, last April about that position.

Everybody was saying, can it ever be profitable? But let me just fast forward. Yeah. Talk about Grab for a second. First, 650 million people. That's the size of the market. Very early in its digital adoption, right? And most investors now have seen the success of C, the big e-commerce gaming company

in Southeast Asia. Southeast Asia is having its renaissance. Okay. And so every part of the planet will digitize. So when you think about what are the big opportunities within those regions, obviously e-commerce and gaming are one of them, right? But Rideshare is another big one. Delivery or what I call instant commerce is another.

And payments is another. So let me just break down those three quickly for you on them. They have the best segmentebit. Atop margins in the world for Rideshare and they are the dominant player in the markets they serve, right? They're the Uber of their market. Correct. And what's beautiful about the market, by the way, is they employ 5 million people who might not otherwise have job, including thousands and thousands of disabled drivers in the region, right? The pay is two to three times what the minimum wage is in these countries. And so the relationship with regulators is quite tight because there's not

enough car ownership in these parts of the world. In fact, the cost of a new Honda accord in Singapore is over $100,000 U.S. Oh, wow. And so people just can't afford cars. On top of that, right, these are crowded streets, right? They don't have the infrastructure. So the fact that they have two-wheeler's, three-wheeler's, tuck-tucks, cars, you know, it's a game-changer. Number two, so that is just already a great business.

The delivery business. So they're in the delivery of everything. Restaurants, convenience store item. groceries and increasingly all things commerce like one of the biggest trends in the world jason and you'll appreciate this is back to the future right i was a huge believer fan customer of cosmo and an urban fetch 20 years ago me too guess what it's all coming back pink dot it's all coming back and the reason it makes a lot of sense because if i can get the same product i want from amazon but i can get it in an hour at the same price rather than get it in a day, where do you think I'll order it?

Of course. You push a button and magic happens. That's a huge. Uber announced last week, $52 billion global delivery run rate, 52 billion. Compared to $30 billion for the rides. And they're barely scratching the surface on the delivery opportunity on a global basis. Let's unpack that for a second, because I have a question. Everybody thinks Amazon has run away with e-commerce because it's full stack.

But then you look at, you know, Uber. eats and their delivery business, postmates, and then grab. You need shaving cream, whatever. You need a headset. You need a magazine. Nobody reads magazines, but you get the idea. You want some bagels, whatever it is. Because it's a marketplace that's asset light, you don't have to run the stores.

And you have all these stores and retailers everywhere. They're not going away. Uber is just a transport layer. Who wins in that? Is it the convenience of Amazon having the full stack? Is it, you know, the Uber last mile provider? Does that mean Uber and Grab are now just heads up against Amazon? You know, you look at other parts of the world that are ahead of us, China, Southeast Asia.

Like, it's pretty clear. E-commerce, Jeff had to build everything he built at Amazon, right? Because it was magic to order a book and get it in a week. It was magic. Yeah. Okay. He says he built AWS. because he had to build an infrastructure to serve himself.

And that's right. Logistics has a service because he had to serve himself. And that was magical. But we built this command and control supply chain infrastructure to support a world that didn't have on-demand commerce. The reality is we would, you know, if you think about the things we buy, the things we want immediately, it's a lot of the commerce, right? Whether it's, oh, I forgot my iPhone charger or I went ahead of it. lettuce or, you know, I want some new speakers or whatever. So we're believers on a global basis

that we're going to move from this command of control, heavy CAP-X supply chain laid to a lot more instant commerce, which will be supportive of the local stores that you talked about. But increasingly, it's going to be one P. It will be all of these companies, they know the 50 or 100 skews you want. They don't have to have a million skews, right? So you have these mini warehouses. Right, everywhere. You can have tens of thousands. You can embed them everywhere so that you get what you're looking for in 10 minutes. 10 minutes.

This is happening in Europe with guerrilla. This is happening in Southeast Asia with crab. Instant commerce is going to be. And by the way, from an environmental perspective, delivery on bikes rather than in these huge packages that get delivered by trucks. I think there are a lot of arguments why this is better for the consumer. It's better for farm to table, local commerce. you know, enabled by the fact that we now have this infrastructure. Everybody's got these things in our pockets.

I mean, the reason Cosmo and Urban Fetch didn't work is because we had 30 million people connected to the web, but they were all connected to a desk, desktop computer, right? God, yeah. And they also were, they were taking the growth thing too far. They were charging half as much for products and no delivery fee. So when I was a journalist, we would do a joke. We would all go on Urban Fetch and Cosmo, and there was no minimum. We would all order one item.

Totally. And then just see how many urban fetch and Cosmo deliveries could come. We had 20 people in the office. We did this and we each ordered off both services. And we literally had 40 different people come with a pack of M&Ms for a story. And I remember in Cambridge, Massachusetts, I was in business school at the time. The guy came with a pint of Ben and Jerry's and the CD I ordered. And then he offered me some weed.

Yes, that was the secret. That there was always a little extra, which now, Dara said he's. considering going for weed. Okay, so the second business... He's got to buy that. He's got to buy that. So the second... He's got to buy Meadow.

The second business, Southeast Asia, delivery of everything. They have the lowest cost delivery infrastructure. And, you know, it's a very, very big opportunity. What about payments? That's the big one. So payments, this is the one I'm most excited about. And again, let me just be clear to all your audience. Do your own homework.

You may very well lose all your money if you invest in grab. And there are a lot of people who disagree with me. I place my bet. You guys do your homework and do yours, but I just want to share authentically as somebody who invests in a lot of money. Yeah, you're 15 years in the business. This is your biggest bet today. You know, why we're doing it.

Is that right? Is this your biggest bet today? No. Snowflake, Uber. Yeah, so we got bigger bets. But at any rate, it's big. The payments business, okay, in this part of the world, credit card penetration very low.

Cash-based economies. The governments desperately need to move off cash to a digital economy. Okay. So that's just the context. There is no PayPal. There is no buy now pay later a firm. There is no Venmo. None of this exists.

So they're the cash app of Southeast Asia. None of this exists. Right. So there are two players, right, who basically, you know, these guys have brilliantly spent three years building full stack, buy now, pay later, loans, insurance, digi banking license, everything. So what you're saying is grab is essentially lift, postmates, cash app, Klarna, And Uber eats.

Yeah, I said Uber plus DoorDash, right? Plus either take your pick, square or Ant Financial. Yeah. Let's be clear. The payments business is losing a lot of money. We're going to continue investing a ton of money in it because I think the opportunity to transform Southeast Asia with a full digital payment stack is very large. There's no reason for them not to invest aggressively.

and there'll be competition. We'll see what happens. Uber owns 10% of the company still? Yeah, on a pro forma basis, about 10. Wow. So that was a great move by Travis and Emil Michaels when they cut those deals. They're going to put $4 billion there. You think somebody's going to roll up the world, D.D. or Grab or Uber?

Is this going to be like one of these things where Uber got out of those markets, but then there's consolidation that comes in the future? The local player, I mean, DEDY is going to be dominant in China and, you know, grabs winning Southeast Asia and whether or not there's somebody who ultimately comes in from an M&A perspective. That's a separate question. It's going to be very difficult, just the capital required to do it. And frankly, as you understand, these are local synergies.

Like being great in Jakarta doesn't make you great in San Francisco. That's quite the opposite. Right. And so part of the reason that I got so excited about this is Dara sold Uber to grab. And when I asked Dara, you know, why do it? He said because they're going to win. Yeah. Very simple.

Pretty simple. I mean, Travis is early on. The way he explained it to me was, we're going for the gold. We'll take the silver. But if we're going to be bronze, we're out. Let me be clear. And Dara would say the same thing. What Travis and Emil did was so bold, so audacious, so crazy by any conventional standards.

They literally were going to own the globe. for all of RiteShare. And it was brilliant. They probably created $20 to $25 billion of enterprise value, right, by coming in second. Right?

Exactly. By losing in the finals, they made billions. They made more in their losing bets than most people make in the one. 100%. You know, I want to talk at the,

as we get wrapping here, and we're going to have to have one. I mean, aren't you just going to transition? I can go right into the besties. We can just go right into the besties. We can just go right into the best. The all in pod. Let's do this.

Yeah. Oh, God. Actually, you would, you would fit right. Don't you remember election night? You were great. People loved you and they hated Philhelmuth. And then Chimoth banned Phil Helmuth from ever being on the podcast again. And then after we had Vlad on the podcast, it almost blew up our friendships.

I saw that. I'm sitting there defending it. I was just, so then we just said, okay, we had a bestie summit with our wives. The wives were like, okay, no more guests. You guys just do it yourself. I think that's a good idea. So socialism versus capitalism. Elizabeth Warren, Bernie Sanders, very upset that people are making so much money, very upset about the minimum wage, they want to redistribute wealth, but they lost. And they don't have a seat at the table anymore. They don't have cabinet positions, I believe, nor will they, in this administration, they lost in the battlefield of ideals. But yet we do have an anti-capitalism movement in the United States. We have a socialist movement. But at the same time, you have on doubling the minimum wage and then saying to Bernie, what more do you want us to do? We doubled it.

You asked for 15. We gave you 15. You won. And now you still hate us? Yeah. What is this? Is this a real thing in the United States or is it just a bunch of loud Bernie bros on Twitter? Or is this something where America needs to rethink capitalism or we're just not appreciating how good everybody has it in America and that actually people who are coming up are actually doing pretty well? There seems to be a massive competition for entry-level workers to the point at which the lifts and the ubers and the hotel chains and red lobster are having to give people bonuses to get them to come back to work. I mean, this is the most important topic of our time, the most important topic of our time.

And I said on CNBC this week, I believe deeply in my heart that capitalism is the greatest force for good in the world. We have to have capitalism to save the planet from economic. economic crisis or from environmental crisis. We have to have capitalism to lift people out of poverty. I encourage everybody to read the Gates Foundation annual letter, right? Bill Gates is no Anne Rand capitalists, but Bill Gates understands that the prosperity that exists in the world. I'm not talking wealth of the rich people. I'm talking, you know, mothers who are not dying in childbirth, people educated, vaccines developed in record time. That is all the bi-prudely.

product, right, of capitalism. And so, you know, or the Amazon, you know, annual letter that I just read last night. But it's our responsibility to acknowledge. There are a lot of people. In fact, probably more than half of the citizens of this country who feel totally disenfranchised and disconnected to the ownership society. Right. When, if they're being shot in the street, if they have no investment account, right, what does CNBC have to do with? them, right? And so if we are going to use capitalism as a force for good, that those of us who have platforms, right, that have ability to leverage our relationships, we need to be clear about this. We're not doing good enough. Whether it's Mark Benioff doing the amazing things he's doing

around, you know, gun control, et cetera, or you doing the things you're doing today around, you know, investor education, right? I'm, you know, for me, the board challenge bringing diversity, you know, complete diversity into the corporate boardroom of every corporation in America. We got some exciting things. We're going to be- Explain to people what your mission there was as we wrap here and you got some blowback for it.

Yeah. People were a little upset. Hey, how dare you tell us how the board should be composed. This is overreaching. Maybe even some people in our circle feel it's overreaching. I'll leave it at that. Explain what your mandate was there and why. I mean, it's very simple.

We can't change America. if the room in where it happens doesn't look like America. Pretty straightforward. Right. And that's, it's, you know, it's not a pipeline problem. It's not a talent problem. Right. I've been in all these boardrooms, public, private, etc.

It's a matter of will. It's a matter of being part of the solution and part of the problem. And I'm going to use the decades I have remaining with altimeter as my platform to give voice to these issues that like they're really not up for debate, Jason, right? It's not that that issue should not be up for debate, right? And by the way, we have over 70 companies taking the pledge, right?

The companies- So it's opt-in. It's not like, is it California that's saying now you're mandating certain composure of the boards? Right. So you're not necessarily in favor of a mandate. You want people to opt into it because it's good for society, business. It's the right thing to do.

It's a no-brainer. People should just opt in. to this. See, this is why Bezos did a good job with just going to $15 an hour and he shamed Walmart, you know, and Starbucks and everybody else who was paying under 15. Just pay

the 15. Forget about what the minimum wage is. Just do the right thing, people. You and I can either spend $10 million lobbying Congress to do, launch and invest America program, or you and I can go hire a bunch of engineers and spend

a million, build the platform, take the other nine million, seed it, give it to families, $2,000 a pop, and we can prove and demonstrate as we do as founders, the power, right? Like what we prove in time and time again, right? It was Moderna that in three weeks came up with the vaccine. Incredible. It wasn't the National Institutes of Health. It was Moderna that came up with the vaccine.

And so for me and you and all the other, you know, of our besties, what I want is us to whatever you're lane, leverage, like don't waste it. One life, you know, use the privilege that we have. We're all privileged. Use the privilege we have to demonstrate with our actions that capitalism is the greatest force for good. It's so simple. And I just love your idea of giving everybody a little taste of the equities.

And it's so easy to implement, you know, I just was setting up 529s, you know, those college funds for some nieces and nephews. It's really plug and playing easy. I do it on wealth front, boom, a little plug for wealth front. And then they don't touch it for 15 years. And then boom, they wake up and they got, you know, whatever, 50K of their college or whatever trade school they want to go to. If we did that for every American and we just put a thousand dollars in the stock market for them, and you can test this, just pick California or pick a city and you say, hey, everybody in Oakland who's under this amount of household income, we're going to put $500 in each kid's $529 and $500 in their 401k.

They can't touch it until college and they can't touch it until retirement. Let's see what happens. Such a no-brainer. So let's you and I, after we get off the pod, let's debrief on this. I've tweeted a lot about it. I got a lot of work going on it. This to me is the single most powerful idea in America today. Right.

And one is the fact that $2,000 turns into $500,000 over the course of 50, years, right? That's one powerful concept. But you know what's even more powerful? Behavioral economists will tell us this. You know, Buffett will tell us the idea of the snowball. When you see the-so you open up, you open your phone and you see that I'm part of the system. I'm part of the game. Yes. I own my tiny little slice of Tesla and Apple and Google and Walmart. I'm part of the American dream. Guess what? The dialogue will change. But we've got to change it for everybody, not just those that are entitled and leading in the capitalist system today. Well, you know, if we have, you know, just think about it, we have 330 million Americans.

If you had 10 million kids born every year. It's 4 million. It's 4 million. Four million kids born every year. Dude, this is like, this is the cheapest thing. You give each $500 is $2 billion. We're printing $9 trillion. This is a fraction of a fraction of a fraction.

Can I tell you, in the stimulus bill just passed, estimates were one to $300 billion, just a pure fluff. One to 300 billion. It would finance this program for a hundred years. Okay. We're so dumb. We're so dumb. We are so dumb.

Okay. So how about this? So how about this? Here's what we're going to do. We're going to go raise a hundred million from our friends and we're going to do it. We're going to do it. We're not going to rely on government to do it. And then by the way, once we've done it and proven that it works, we're going to hand it to the government.

Right? Yeah. And we're just going to say it's done. Like, let's roll. Invest America. Every child in America now is an investment account. Such a brilliant idea. Hey, will you come back on in like three or four months

and catch up with us? Yeah, let's do it. All right, love you, brother. Love seeing you, man. Good seeing you. All right, we'll see you all next time on this week and startups. Bye-bye.