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Episode: Trump's Cabinet, Google's Quantum Chip, Apple's iOS Flop, TikTok Ban, State of VC with Keith Rabois

Author: All-In Podcast, LLC
Duration: 01:28:19

Episode Shownotes

(0:00) The Besties welcome Keith Rabois! (4:01) Keith explains why he returned to Khosla Ventures, the differences between Founders Fund and Khosla, and his husband Jacob Helberg's role in Trump Admin (13:09) Business acumen of Trump's cabinet and appointees, diversity of opinion (25:59) Google's new quantum chip: potential impact on

encryption, cryptography, and more (43:50) Apple developing new server chip for AI inference, iOS flop, why its product culture is failing (54:30) TikTok panics after appeals court upholds the "divest-or-ban" law, with a January 19th deadline (1:03:55) State of Venture Capital, why Stripe is still private, thoughts on crypto Follow the besties: https://x.com/chamath https://x.com/Jason https://x.com/DavidSacks https://x.com/friedberg Follow Keith: https://x.com/rabois Follow on X: https://x.com/theallinpod Follow on Instagram: https://www.instagram.com/theallinpod Follow on TikTok: https://www.tiktok.com/@theallinpod Follow on LinkedIn: https://www.linkedin.com/company/allinpod Intro Music Credit: https://rb.gy/tppkzl https://x.com/yung_spielburg Intro Video Credit: https://x.com/TheZachEffect Referenced in the show: https://www.tiktok.com/@frankielapenna/video/7010077215576575238 https://www.axios.com/2024/12/06/trump-billionaires-cabinet-elon-musk https://blog.google/technology/research/google-willow-quantum-chip https://www.nature.com/articles/s41586-024-08449-y https://research.google/blog/suppressing-quantum-errors-by-scaling-a-surface-code-logical-qubit https://quantumai.google/roadmap https://en.wikipedia.org/wiki/Hartmut_Neven https://en.wikipedia.org/wiki/Double-slit_experiment https://www.discovery.com/science/Double-Slit-Experiment https://en.wikipedia.org/wiki/Schr%C3%B6dinger%27s_cat https://www.theinformation.com/articles/apple-is-working-on-ai-chip-with-broadcom?rc=pxkrxo https://x.com/rabois/status/870673635375104000 https://www.amazon.com/Company-Giants-Conversations-Visionaries-Digital/dp/0070329656 https://www.cnn.com/2024/12/09/tech/bytedance-tiktok-halt-us-ban-intl/index.html https://apnews.com/article/tiktok-us-ban-sale-china-congress-de12b4d22aa8095e62cb0982a6e62235 https://apnews.com/article/tiktok-ban-congress-bill-1c48466df82f3684bd6eb21e61ebcb8d https://pitchbook.com/news/reports/q3-2024-pitchbook-nvca-venture-monitor https://www.cnbc.com/2024/12/12/servicetitan-starts-trading-on-nasdaq-after-ipo.html https://www.nytimes.com/2024/12/11/business/dealbook/ftc-trump-ferguson-khan.html https://www.ben-evans.com/benedictevans/2021/6/15/antitrust https://www.bloomberg.com/news/articles/2024-12-05/convertible-bond-arbs-are-making-microstrategy-wall-street-s-hottest-trade

Full Transcript

00:00:00 Speaker_06
All right, everybody, welcome back to the number one podcast in the world, the All In Podcast with me again today, Chamath Palihapitiya, your Chairman Dictator. How you doing, brother? How you feeling?

00:00:12 Speaker_04
Doing great. Fresh off the holiday spectacular.

00:00:15 Speaker_06
Oh, good times. And then getting ready for a little ski. You and I will be doing a little skiing together with Friedberg. That'll be quite nice.

00:00:23 Speaker_04
Yeah, I have to say, Friedberg, I don't think you've skied with me and Jason. Jason is an excellent skier. I mean, I've heard his form.

00:00:30 Speaker_05
Have I skied with you, Jason? I don't think I have.

00:00:31 Speaker_06
His brother is excellent, too. They're both like- Josh the Black Bomber is good, yeah? Yeah. Shout out to Josh the Black Bomber. It's gonna be fun.

00:00:38 Speaker_05
Jason's got those hips. He's got skiing hips. They kinda shift left, right, left, right. Childbearing. Yeah, childbearing hips. You know, it's kinda like when I went to the Tom- The hips are wider than the shoulders, yeah.

00:00:46 Speaker_06
It reminds me of when I went to the Tom Ford, when I went to Tom Ford to get my suit. I'll do that in just a second. But with us again, of course, your cackling sultan of science, Freeberg. How are you doing?

00:00:58 Speaker_04
Have you guys seen that clip of the guy with the fake bum that runs around the city?

00:01:01 Speaker_06
Yes, with security guards. It's like some sort of a crypto put on or something. It's hilarious. This guy, he's got like a big Brazilian butt and he just runs around in tight catches.

00:01:11 Speaker_04
Can you find a clip of this guy? Oh my God, it's so ridiculous.

00:01:15 Speaker_06
So funny. All right. With us, the cackling with his afterglow from the holiday spectacular. Let's call it what it is. It's the Christmas spectacular. We're going to pick a side, Friedberg. How did you like our Christmas?

00:01:27 Speaker_05
Why are you being anti-Semitic, bro?

00:01:29 Speaker_06
How dare you? How dare you? You can have the Hanukkah special with your two specials. And now with us in the Red Throne, it's Fit Sax. It is Stylish Sax. It is. Goes to work every day in Venture Sax. His name is Keith Raboy. How are you, my brother? Welcome.

00:01:49 Speaker_06
Great.

00:01:49 Speaker_09
I'm great, Jason. Thanks. Happy to be here. You know, it's great. Being more fit and more fashionable with socks is a pretty low bar. Yes. So I'm really excited and thrilled to be with y'all.

00:02:06 Speaker_03
And as we love about you, you've got a little American exceptionalism, supremacy, dare I say. You don't F with dictators. You don't F with them.

00:02:30 Speaker_08
Yeah, I don't really love dictators. They're not good for society. They're not good for America. But, you know, it's not always America's job to fix all of that.

00:02:38 Speaker_05
All right. Well, what about running companies? Should company CEOs be dictators?

00:02:43 Speaker_08
Yes, actually. So I believe in the founder mode, the Brian Chesky founder mode. I held a conference in New York recently that Brian was nice enough to speak at called Hiring, the Art of Hiring for Founder Mode.

00:02:53 Speaker_08
So specifically for people who subscribe, founders that subscribe to that view, how do you hire people and how is that different than what you would hire in a standard, you know, monstrosity of a company like Google or something?

00:03:05 Speaker_06
Yeah, good founder mode in New York, by the way, just if history is, if I remember correctly. Lots of good founder mode in New York.

00:03:11 Speaker_05
J. Cal, do you want to give Keith's background for the audience?

00:03:13 Speaker_06
Keith, of course, went to Stanford with the boys. Sax and Peter Thiel went on to do PayPal. He had a stint at Square. He started a bunch of other companies, worked at Founders Fund.

00:03:25 Speaker_04
He worked at- Hold on, hold on. He went to LinkedIn. That's how it all started.

00:03:29 Speaker_08
Yeah, LinkedIn was pretty key. Reed left PayPal, started LinkedIn.

00:03:33 Speaker_04
I joined them.

00:03:34 Speaker_08
So yes, that's true. And then after that, I went back with Max Levchin from PayPal Days to Slide, which is on the actual history. We don't have to talk about that.

00:03:42 Speaker_08
But then I did jump into Square as the 20th employee and helped build a pretty good company.

00:03:48 Speaker_06
Yeah. And then Founders Fund, Coasla, Founders Fund.

00:03:51 Speaker_08
Then I got lazy. I became a VC, became lazy, decided to be a VC in 2013, spent six years at Coasla Ventures, five at Founders Fund in the last year, almost the last year now.

00:04:01 Speaker_04
Before we jump in, I actually have a question for you. Starting already. How does that happen, Keith? How do you, you're at Founders, sorry, and then you get, what pulled you to go and work with Vinod, and then what pulled you back?

00:04:17 Speaker_04
How does that process work? Because these things are typically meant to be sort of forever jobs.

00:04:22 Speaker_08
That's true. So I had the benefit of having Vinod on the board of Square, which I think is typically how executives wind up turning into VCs, is you forge a relationship with board members.

00:04:33 Speaker_08
So like, for example, Roloff Botet, who runs Sequoia, had Mike Moritz on his board. Roloff was our CFO at PayPal and Mike recruited him. So that's a very common same thing. Ravi at Sequoia today was the COO and CFO of Instacart.

00:04:48 Speaker_08
Again, same thing, Mike recruited him into Sequoia. So I think that's typically how people become VCs. I always knew I wanted to be a VC since 2003.

00:04:56 Speaker_08
I was a very active angel investor, as you know, even when I was concentrating on all these other jobs, I was writing a lot of checks.

00:05:03 Speaker_08
And so anybody who's writing a lot of active angel checks probably has in the back of their mind, one day I might want to be a professional investor. We could talk about the merits or demerits of that, but the goal was pretty clear in my mind.

00:05:14 Speaker_08
And then at some point, I think you have to make a decision. What do you want to be in life? Venture has long time horizons. It is a job for life, like 15, 20 years is pretty much what you have to commit to.

00:05:27 Speaker_08
So you don't really want to start venture when you get too old because 20 years, you'll be like Donald Trump age.

00:05:33 Speaker_07
Yeah.

00:05:35 Speaker_04
You have to have a long horizon.

00:05:37 Speaker_08
I can run for president in 25 years or something.

00:05:39 Speaker_04
Keith, why did you leave Founders Fund to go to COSA?

00:05:43 Speaker_08
COSA was great. I spent six years there. The truthful reason why I left, it's kind of funny given COVID and how history changes, I hated commuting a Sand Hill Road every day. We were one office, period, in office every single day.

00:05:58 Speaker_08
And I felt like the future of investing was more in San Francisco, than in Palo Alto at the time. And I just despised sitting in a car 45 minutes each direction. Turns out, COVID changed everything, how people do their work.

00:06:11 Speaker_08
We're recording this by Zoom. Before COVID, we'd probably all be in the same studio recording a podcast like this. But Vinod and the team was very inflexible about it and found us photos located in the city.

00:06:22 Speaker_08
Obviously, I knew Peter since college, as Jason alluded to. And I decided that it was better for me. I remember talking to Sam Altman, And I said, am I crazy for changing funds mostly on a commute basis? And Sam said, you're human.

00:06:35 Speaker_08
And every single study of human happiness is it's inversely correlated to your commute time. It's like there's nothing wrong with being human. In any event, there are a lot of similarities between FF and KV.

00:06:47 Speaker_08
Both are great funds that have put up incredible returns, have funded iconic founders and companies, but they're very different.

00:06:54 Speaker_08
KV is involved as early as possible, and FF is a momentum investor and is maybe the best on the planet at being a momentum investor. So almost every successful investment, founders fund over eight funds.

00:07:07 Speaker_08
was invested at $500 million or more entry valuation. And almost every single investment at KV in eight funds was like the seed or series A investment with very few exceptions ever. And so Anduril and RAMP were the only exceptions at Founders Fund.

00:07:24 Speaker_08
And at KV, the only exception would be Stripe, which I led in 2013 or so, which was an order of magnitude higher valuation than any KV investment, initial investment ever.

00:07:35 Speaker_08
So KV is much more an input-driven organization, Founders Fund is much more output-driven, and there's great technology companies that are input-driven, think Amazon, Apple, and there's great technology companies that are output-driven.

00:07:46 Speaker_08
So you can choose, but certain people are going to be better in some environments and other people are going to thrive, you know, in other environments. I fit in really, really well at KV.

00:07:55 Speaker_06
You enjoy the early stage. You enjoy year zero, year one, year two, is my perception.

00:07:59 Speaker_08
Well, I am very good at it. I think I prefer to invest as early as possible on a keynote deck only. If I meet a founder and there's a keynote deck, there's no product, there's no metrics, that's my sweet spot.

00:08:09 Speaker_08
Because I also know nobody else in venture is good at that. Nobody else is still active in venture.

00:08:14 Speaker_06
What's the secret? What's the secret from a keynote to a check?

00:08:17 Speaker_08
It comes down to founder assessment. At the end of the day, the only data point is, is this founder capable of building an iconic company, period?

00:08:24 Speaker_08
And I prefer to compete when there's no metrics, because all the metrics you're going to do is confuse you. That said, there's a lot of investors who are very good once there's product metrics, financial metrics.

00:08:34 Speaker_08
And so I can compete with people who are pretty good at what they do. So I'd prefer to go as early as possible. And then secondly, I like company building. I think part of my role is to help the founder increase the amplitude or probability of success.

00:08:46 Speaker_08
And I enjoy that. At FF, that's very controversial.

00:08:49 Speaker_06
Yeah. Ah, right. Yeah. The founder reigns supreme and everybody else is there to get out of the way. Right. Yeah.

00:08:55 Speaker_05
I've had both KV and FF as investors, lead investors in both climate and at Ohalo now. So I know both firms really well. And it's really, I always, people always ask me about the difference between the two. That's always what I get to.

00:09:06 Speaker_05
It's like founder is fun. They have this kind of mantra. They find great founders and just get out of the way, let them run. And they don't want to be helpful. That's not their objective.

00:09:14 Speaker_05
They feel like if they have to be helpful, it's not the kind of founder. I mean, keep obviously speaking outside of yourself.

00:09:20 Speaker_05
And then at Coastal, as you know, Vinod has been extremely and the whole team there, especially climate and always have always been extremely helpful.

00:09:28 Speaker_05
So adding board members introducing commercial partners being like very traditionally proactive, participatory VCs on the board, very different, both very valuable when I had a board issue at founders fund.

00:09:42 Speaker_05
And there were some board members that did not like my strategy had issues with what I was doing with the company Climate Corp at the time. Founders Fund actually stepped up and protected me.

00:09:53 Speaker_05
And they got the rest of the board together to protect me in a way that was actually at a very kind of crucial moment for the business. And as a result, we had a massive exit within a year.

00:10:03 Speaker_06
I saw Brian Singerman is leaving. So does anybody know which ambassadorship he's taking? I mean, the timing's a little interesting, is it not? I don't know.

00:10:13 Speaker_08
He's got to compete with our friend Kenny Howery.

00:10:15 Speaker_06
Yeah, Ken, how are you? Where is he off to next?

00:10:18 Speaker_08
Hopefully some great destination.

00:10:20 Speaker_06
I'm sure we can all crash. Yeah, something warm this time. Okay, Sweden's a little bit much.

00:10:25 Speaker_09
I'll send him my wish list for you.

00:10:27 Speaker_06
Yeah, let's go. Like maybe like, is there like a Turks and Caicos or something? What about an embassy tour? We should do an embassy tour this year. Yeah, St.

00:10:33 Speaker_09
Bart's. Do they have an embassy there?

00:10:34 Speaker_06
St. Bart's? Yeah, that's a great idea.

00:10:36 Speaker_09
They don't, unfortunately. It's a French protectorate, but

00:10:39 Speaker_06
Hmm. Well, you know what? Everything's on the table now. We could make them the 51st, second, third or fourth state. I mean, we're in the game right now. Canada's coming on board. Did you not want to roll in the administration yourself?

00:10:50 Speaker_08
You know, the thinking I love politics. If you follow my Twitter feed, I pay a lot of attention. I used to be involved in politics before I got into tech.

00:10:58 Speaker_08
However, what I realized about where I am in my career in tech is if I stop doing what I do, I'm never going to come back. Like technology is rapidly emerging. We're going to talk about all the latest developments this week.

00:11:11 Speaker_08
Like you can't take your foot off the gas in the network building parts of venture for two to five years and come back when you're like 50 years old. And so I felt like I'm not ready to give up on venture. I'm in like the prime of my venture career.

00:11:23 Speaker_08
I'm only 12 years in actually Chamath. So figure five, 10 more years is the sweet spot. And so I'd like to see the companies that I was involved in grow up, become public companies, et cetera. And I didn't feel like I could ever come back if I quit.

00:11:37 Speaker_08
At some point, would I like to get involved in politics? Probably yes, but it's a decade out.

00:11:44 Speaker_06
Well, the households involved, a big announcement. Your husband, Jacob, is joining the administration. Can you tell us a little bit about that? Obviously, we're all very proud of that.

00:11:54 Speaker_08
Yeah. It's extremely exciting for him, obviously, for the country, I think. which is he's going to be the chief economic officer, really, for the country.

00:12:04 Speaker_08
His job is to build foreign policy from the business standpoint, which if you think about it, what's the foundation of power in the world? It's economic success. Why did the United States win World War II?

00:12:15 Speaker_08
Because we had an economic engine that could out-compete Germany plus Russia plus Japan. We could build more tanks, you know, blah, blah, blah, blah, blah, etc. And so the economic engine is critical to this administration.

00:12:26 Speaker_08
Obviously, Trump understands that we had a great three years under his first administration, as he likes to say, best economy ever before covid, which may or may be true. And we need to rebuild American strength.

00:12:37 Speaker_08
And Jacob's job is to export that, you know, philosophy. And sometimes you can build economic strength through working through foreign affairs. And so that's his main job, is to be the primary point person, undersecretary. of economic affairs.

00:12:52 Speaker_08
And then they've got a bunch, the Democrats and the woke people added a bunch of other things to the title. It used to be just Undersecretary of State for Economic Affairs.

00:13:00 Speaker_08
And they added like, you know, environment and all these politically correct things. So hopefully they'll subtract all that stuff and just go back to Undersecretary of State for Economic Affairs.

00:13:09 Speaker_06
And interestingly, what's turning out to be interesting as Trump assembles this group, I'd love to get the panel's thoughts on it, is not everybody thinks the same.

00:13:18 Speaker_06
Jacob's position on tik tok, which we'll get to in this show, very different than some other people in the administration, even Trump himself flip flopped a little bit on that.

00:13:28 Speaker_06
So what are your thoughts as we get started here just on that assembly of people, you know, including sacks, obviously, who couldn't be here this week, but will be on future episodes. your announcement, folks.

00:13:41 Speaker_06
What are your thoughts on that, the sort of diversity in opinion in the administration and how that all sorts out? Because some people- I think it's really exciting.

00:13:49 Speaker_08
I think it's very obvious watching from afar that the way Trump makes decision is he likes to ask a lot of people a lot of different questions, and then he makes the decision. That's why he's, to some people, the media

00:14:02 Speaker_08
enemies very unpredictable is he doesn't just take one source of input and so you can never totally predict the output, but he arrays an interesting cast of characters and listens to them.

00:14:15 Speaker_08
For example, I haven't spent that much time with him, but insofar as I have, he would go around the room and ask every single person at dinner, what's your view on X? And literally go around a room of 28 people and listen to every single person.

00:14:28 Speaker_08
So I think that's how he makes decisions.

00:14:30 Speaker_06
X being a topic, not the website X. Not X, yeah, everybody knows what it's opinion on X, I think he likes X. Chamath, any thoughts on this, the wider team as we see it get assembled? We obviously don't have Sax here, he joined the team.

00:14:43 Speaker_06
What's your thoughts on the collection of characters and executives?

00:14:48 Speaker_04
Here's an interesting tweet that I saw, Nick, can you just share it with the guys?

00:14:52 Speaker_06
Oh, net worth of each one.

00:14:55 Speaker_04
The reason why it was interesting to me was not the net worth per se, but I think this is the first time that I can remember in modern history, at least that I've been in the United States and following US politics where such an enormous number of business people

00:15:13 Speaker_04
have been motivated to come and work inside of the administration. And I think that it creates this very interesting contrast and compare.

00:15:24 Speaker_04
I think that the Democrats would never have assembled a group of people like this, even though the Democratic Party has a version of this chart that they could have made.

00:15:33 Speaker_04
There's a lot of extremely talented business people that support the Democratic Party. The problem is that they believe it's deeply unfashionable

00:15:43 Speaker_04
to get strong, competent business people to take a pause in their business career and come work in government. And you almost look down on people that are successful. Whereas the Republican alternative here, if it creates

00:15:57 Speaker_04
a movement, so to speak, so that subsequent presidents tap folks on the shoulder, I think we'll be much better off. And the reason is pretty simple.

00:16:06 Speaker_04
I think that the United States economy is too complicated to be managed by theoreticians, by folks with random PhDs and absolutely no working experience in the real world.

00:16:19 Speaker_04
And when you bring those people in to oversee those PhDs, I think you probably get better outcomes.

00:16:25 Speaker_04
So I hope this becomes a standard, which is ask these very talented, clearly demonstrated, successful people with judgment to hit the pause for a year or three or five, whatever it is, step into government, help the country, and then go back.

00:16:41 Speaker_06
And this was what the founding fathers Dave actually prescribed. This is what they wanted. They wanted people who are in business to do a tour of duty to serve their country and then to get out they were not interested in career politicians, correct.

00:16:57 Speaker_05
I've said this a number of times, but all of the founding fathers had jobs had professions and they stepped in to serve their country as a civic duty, participated in the process of executing the

00:17:12 Speaker_05
the responsibilities of government, and then stepped out and went back to their private lives.

00:17:16 Speaker_05
I think it is such a more powerful model for government than people who choose to be politicians, to represent people as a living, because it creates extraordinarily nasty incentive structures, if that's the model, which is, for example, to curry favor with private industry participants and then go cash that favor in after you leave.

00:17:38 Speaker_05
And I think that this alternative where you have people who are, everyone looks at them and, oh, they're all billionaires and so on, they're actually, because they're independently wealthy and they have enough money than they'll ever spend, I think Larry Page once said, you can never spend more than a billion dollars in your life no matter how hard you try.

00:17:52 Speaker_05
It's literally impossible. People think like, oh, you can spend all that money. Actually, when you buy stuff, most of the stuff you buy are capital assets that you end up selling later. It's very hard to spend at that level.

00:18:02 Speaker_05
So when you have people that are truly independently wealthy, their motivation is actually quite different than someone who's trying to make it from 100k to 500k of net worth or 50k to a million of net worth.

00:18:13 Speaker_05
And I think it actually creates a higher degree of freedom. And it aligns the people much more in the long term outcome of government rather than their own personal and

00:18:24 Speaker_04
They're just smarter. I'll give you a simple example. Maybe we'll talk about this later, Jekyll, I'm not sure. When I saw the DOJ's theoretical guidance on the Google antitrust matter, their idea is to divest the browser.

00:18:42 Speaker_04
And I kind of scratched my head thinking, would any reasonable business person think that that was the right remedy? Meanwhile, three weeks later, Google's like, here's a super chip in quantum computing that breaks the world.

00:18:58 Speaker_04
And I thought, how is it that these folks are so disconnected from reality that they don't understand what's actually sitting inside this company? And I think it's in part because they don't know the right questions to ask.

00:19:09 Speaker_04
And the reason they don't know what the right questions to ask is they've never worked in the real working world.

00:19:15 Speaker_06
We have a professional class of politicians and their understanding is 10 years old.

00:19:19 Speaker_04
But it's not just politicians, this is also bureaucrats. So my point is, these folks need to get off the sideline and work in a company for a while, know the bowels, they'll be much better able

00:19:32 Speaker_04
to guide these regulatory agencies if they actually just know what's going on.

00:19:35 Speaker_04
So if the right answer is some antitrust issue with a company where you need to divest, wouldn't it be great where like 100 smart businessmen looked at that said, that makes sense.

00:19:47 Speaker_05
But let me give you the counter to that, Chamath, because the counter to that, which it comes up a lot, just so you can like frame the response is, why are all these people coming out of pharma companies to regulate pharma?

00:19:57 Speaker_05
Why are all these people coming out of big ag companies to regulate big ag? Why are all these people that come from energy companies coming to regulate energy? The common refrain is business people

00:20:07 Speaker_05
are basically bringing business interests into the government by transporting themselves into these regulatory bodies versus having career politicians or what you call bureaucrats be kind of independent regulatory authority.

00:20:18 Speaker_05
So what's the response in that context to that, that refrain?

00:20:22 Speaker_04
They're absolutely right and that's how it should work. The United States can no longer afford to be a bleeding piggy bank for bad ideas.

00:20:32 Speaker_04
If a bureaucrat thinks the right thing to do is to divest a random browser to fix Google's monopolistic tendencies,

00:20:41 Speaker_06
That's not a remedy or spend tens of billions of dollars on a super on a high speed rail. Like we were talking about earlier this week.

00:20:48 Speaker_04
This is not logical. It's not meaningful. It's misguided. So if what we want is kindergarten soccer where everybody gets to touch the ball, that's what we are getting right now, which is it's not useful.

00:21:03 Speaker_04
So I would rather have a business person with a direct point of view. And by the way, with the level of transparency, the big issue I guess, Freebrook, that that would create is could these people advantage themselves somehow to make more wealth?

00:21:17 Speaker_04
But the reality is that would be so obvious and laid bare. What happens today is they burrow with this mid level of an organization and they do exactly this, but it's not laid bare. Yep.

00:21:28 Speaker_04
So I'd rather be a transparent where some guy tries to take the government for $500 million and we castigate that person.

00:21:35 Speaker_04
Then what's happening today, which is you slip in the back door, you get paid four or 500 grand from a company, then you come back to the government, then you go back. Nobody knows who these people are.

00:21:46 Speaker_04
Nobody knows the decisions they're making and they're altogether misguided because they're not grounded in an understanding of the real economy.

00:21:54 Speaker_05
Keith, where do you fall?

00:21:55 Speaker_04
Yeah.

00:21:56 Speaker_08
Well, I share, actually, you're both right in some ways. If you look at who's Trump's picked, these successful people, they're not typically being assigned to industries they came from.

00:22:06 Speaker_08
So it's not like he's taking drug, he's actually taking the opposite, like you figure RFK, for example, So actually, I think you can take successful people who have proven themselves through merit.

00:22:17 Speaker_08
I think that's one of the other benefits of the real world is the only way you get ahead is you're in a Darwinistic experiment with other people that are comparable. And to be successful, you have to outthink, outwork, et cetera.

00:22:30 Speaker_08
And that shows up ultimately in promotions and net worths and various other metrics. So Trump has taken a lot of successful people, and I think we want a society where we aspire for our kids to be successful. We want to emulate successful people.

00:22:43 Speaker_08
That will yield more success. Having Elon involved in the government will yield more success than if you penalize successful people, you stigmatize it, you get less of it.

00:22:54 Speaker_08
So I think if you transplant successful people into industries that they're not from, and that they have no interest in going to after the government, you might get the best of both worlds.

00:23:03 Speaker_08
Because I can see some of the critiques of, you're regulating your friends' companies, and you're going to make money later. That said, most of Trump's people are not going to do that.

00:23:13 Speaker_08
You can also pass laws, like you can't lobby, you can't work for X years after. There's also this great data point. I think it's in the last 60 years. Trump is the only president whose net worth went down after office.

00:23:25 Speaker_08
Every other president took a relatively modest net worth or mediocre net worth and turned it into a stratosphere. So you think about the president as the signature example. It's great that Trump is setting the opposite illustration.

00:23:40 Speaker_06
Well, I mean, we've discussed this on the other pod, Keith, a couple of times, which is domain expertise can be an ankle for a founder, you know, you got a founding team that works in the hotel business, they're going to look at something like Airbnb and say, this will never work.

00:23:54 Speaker_06
You got somebody who worked in transportation, they're gonna look at Uber and say, that'll never work. They'll look at PayPal, if they worked in finance, and they did say to you, and the team, that's never going to work.

00:24:04 Speaker_08
Yeah, I mean, I think it's critical in venture to not really fall for that trap. I always mention that I don't like people with expertise, typically, as founders.

00:24:15 Speaker_08
I think, and when I call due diligence or call experts, I only ask one question, which is, what is metaphysically impossible about this working? Like, is there a law of physics that I don't understand that makes this actually impossible?

00:24:29 Speaker_08
And if they can't isolate a very specific principle or fact that makes it actually impossible, then I just ignore everything they say and write a check.

00:24:39 Speaker_06
Yeah, because then it's just all vibes and opinions, et cetera.

00:24:41 Speaker_08
Well, they're experts in a prior world, right? They've learned why not. And this is actually, to combine a couple of topics here, the reason why Trump is so effective.

00:24:49 Speaker_08
So the most interesting question to me over the last year was, how is this guy who everybody in the media and everybody in the legal groups of various things is trying to attack and hate, and all these people publish these books, why is he on the precipice of being elected president of the United States twice?

00:25:04 Speaker_08
You must have a superpower or two. Most people do not get elected president of the United States twice. And most of the people who are attacked by everybody who has power in the establishment definitely do not get elected president twice.

00:25:15 Speaker_08
So what it kind of came down to, and I interviewed a lot of people who are critics of him but knew him well, like ex-cabinet people that don't like him, comes down to, he just asks a lot of why. Like, why do we do this?

00:25:26 Speaker_08
Why do we have to do it this way? Why have we done it this way? And it turns out in politics and in DC, most of the answers are pretty mediocre or weak or poor or haven't been rethought for 20, 30, 40, 50, 60, 70 years.

00:25:37 Speaker_08
And so he just constantly dives in and says, why, why, why, why? And that's actually what predicts success for founders is in a domain they don't know anything about, they're just like, why?

00:25:46 Speaker_08
Why do we take these hotel things for granted in the Airbnb case? Why should they be so expensive? Why should scarcity, you know, prevail in New York for four months of the year, etc, etc.

00:25:56 Speaker_06
All right, let's get to our docket. We got a ton of stuff to get to. Google's new quantum chip is super impressive, Freeberg, and we're talking about that on the group chat. On Monday, Google announced its latest quantum chip. It's called Willow.

00:26:09 Speaker_06
Here's the chip if you haven't seen it. It's beautiful. It was fabricated in Google's new chip plant in Santa Barbara. They started this project back in 2012, their quantum computing project, and...

00:26:21 Speaker_06
The headline basically is Willow performed a standard benchmark computation in under five minutes that would have taken today's fastest supercubers 10 septillion years, or 10 to the 25th power, which is billions of times older than the universe.

00:26:34 Speaker_06
If you don't know what quantum computing is, Freeberg will expand on it. But basically, computers are binary. You've heard this before. Ones and zeros. Quantums use qubits. You know, those are zero, one, or both at the same time. And Google got a 5% pop.

00:26:51 Speaker_06
They're up 13% in the last five days. Probably on the other news that Gemini 2.0 is out as well, which is unbelievable. I've been playing with it. What do you think, Friedbert, of this big announcement?

00:27:03 Speaker_05
Google's announcement is a paper published in Nature that follows a pre-print they actually put out in August. So this news has been out for a little bit. There's obviously a press cycle this week around it to kind of make a big thing about it.

00:27:16 Speaker_05
But it is a very kind of important milestone. in the evolution of quantum computing. So do you want me to kind of talk about quantum computing again? I think we've talked about this in the past.

00:27:28 Speaker_06
I mean, maybe a brief primer for people, but what does this mean practically? I think what people want to know is when did these things actually have an impact in the way, say, NVIDIA's GPUs have had?

00:27:39 Speaker_05
The big breakthrough here is that the whole basis of a quantum computer is called a qubit or a quantum bit. It's radically different than a bit, a binary digit, which we use in traditional

00:27:51 Speaker_05
digital computing, which is a one or a zero, a quantum bit, you can kind of think about it as a wave function, it's sort of a quantum state of a molecule. And if we can contain that quantum state, and get it to interact with other molecules,

00:28:09 Speaker_05
based on their quantum state, you can start to gather information as an output that can be the result of what we would call quantum computation.

00:28:19 Speaker_05
And that sounds complicated, but what it really means is that instead of doing kind of binary computation, where we're adding numbers together or doing kind of other traditional arithmetic, there are really interesting functions you can do with qubits.

00:28:33 Speaker_05
Qubits can, for example, be entangled. So two of these molecules can actually relate to one another at a distance. They can also interfere with each other, so canceling out the wave function.

00:28:45 Speaker_05
And then when you read it out, you get a result that is basically a very, very complex problem that is solved through this quantum interpretation. it's really hard to kind of highlight how different this is from traditional computing.

00:29:01 Speaker_05
So quantum computing creates entirely new opportunities for algorithms that can do really incredible things that really don't even make sense on a traditional computer. They're not possible to kind of resolve on a traditional computer.

00:29:13 Speaker_05
And sorry, let me just state one thing. The quantum bit needs to hold its state for a period of time in order for a computation to be done.

00:29:21 Speaker_05
And so the big challenge in quantum computing is how do you build a quantum computer that has multiple qubits that hold their state for a long enough period of time that they don't make enough errors that you can actually do a computation with them.

00:29:36 Speaker_05
So what Google was able to demonstrate here is they created these call it logical qubits. So they put several qubits together.

00:29:45 Speaker_05
And by putting several qubits together, they were able to kind of have an algorithm that sits on top of it that figures out, hey, this, this group of physical qubits is now one logical qubit may balance the results of each one of them.

00:29:56 Speaker_05
So each one of them has some error. And as they put more of these together, what they were able to demonstrate for the first time ever is that the error went down.

00:30:04 Speaker_05
So when they did a 3x3 qubit structure, the error was higher than when they went to 5x5 and then they went to 7x7 and the error rate kept going down and down and down.

00:30:13 Speaker_05
So this is an important milestone, because now it means that they have the technical architecture to build a chip or a computer using multiple qubits that can all kind of interact with each other with a low enough fault tolerance or low enough error rate that they can start to do these quantum calculations.

00:30:29 Speaker_05
This is a big area of opportunity. One of the very interesting areas that a lot of people are talking about is in cryptography. So there's an algorithm by a professor was at MIT for many years named short called shores algorithm.

00:30:43 Speaker_05
And in 1994 1995, I think around that time, he basically came up with this idea that you could use a quantum computer to factor numbers almost instantly.

00:30:54 Speaker_05
And all modern encryption standards, so all of the RSA standards, everything that bitcoins, blockchain is built on all of our browsers, all server technology, all computer

00:31:05 Speaker_05
security technology is built on algorithms that are based on number factorization. So if you can factor a very large number, a number that's 256 digits long, theoretically, you could break a code.

00:31:18 Speaker_05
And it's really impossible to do that with traditional computers at the scale that we operate our encryption standards at today. But a quantum computer can do it in seconds or minutes. And that's based on Shor's algorithm.

00:31:29 Speaker_05
And if you want, there's some great YouTube videos that describe Shor's algorithm and how it works.

00:31:34 Speaker_05
But it's like, mind blowing when you look at it, it's like, this really like non intuitive, but simple set of steps that when you put them together on a quantum computer, it's like, this thing can instantly figure out all the factors, and then you can break a code.

00:31:45 Speaker_05
One of the things that this highlights is that in a couple of years, theoretically, if Google continues on this track, and now they build a large scale qubit computer, they theoretically would be in a position to, to start to run some of these quantum algorithms like Shor's algorithm.

00:31:58 Speaker_05
And so we're now kind of spitting distance or a couple of years, it's not really clear, is it three years, five years, seven years, but a couple years away from having computers that theoretically could crack all encryption standards.

00:32:08 Speaker_05
And there are a set of encryption standards that are called post quantum encryption. And all of computing and all software is going to need to move to post quantum encryption in the next couple years.

00:32:16 Speaker_05
So there's like this big kind of push now to like, how do we do that? How do we accelerate it?

00:32:19 Speaker_04
I saw Sundar post it. I saw it in my feed. I ended up missing my next meeting because I had to figure out how long will it take for us to crack the encryption standards that we use for Bitcoin.

00:32:32 Speaker_04
Nick, here's the answer, because I was so tilted by this idea. So if you think of Willow as essentially like one stable, logical qubit equivalent in a chip, We need about 4,000 to break RSA 2048.

00:32:51 Speaker_04
And we need about 8,000 to break SHA-256, which is the underlying encryption framework for Bitcoin. So I think you're right. I think we're in the sort of like- The end game? Two to five year shot clock.

00:33:05 Speaker_04
No, I mean, I think what'll have to happen is some of these chains will need to obviously re-implement something at a pretty foundational level.

00:33:16 Speaker_04
The weird thing, as Freebrook says, is like, the willow chips error correction gets better the more of these things you start to use together.

00:33:25 Speaker_04
Now, there are some really big problems inside these chips, like logical interconnects are very complicated. If you put two chips on a board, like the C2C communication is, all this stuff that we haven't figured out how to do, but this is a big deal.

00:33:40 Speaker_04
And I was really like, my God, what's going on here?

00:33:43 Speaker_06
other projects at Google are finally landing. You have Waymo and you have this now. I mean, Project Moon might be gone, but you know, I think those projects, we're going to see a couple of them change the world. Yeah.

00:33:56 Speaker_05
Just to give you a sense on the numbers, like Google's target for fault tolerance on a quantum chip to make it logically useful is one times 10 to the negative six. Right now, this Willow chip is kind of running at 99.7%.

00:34:09 Speaker_05
So it's still a few orders of magnitude away. They have a long way to go in getting the fault tolerance low enough to actually build logical gates using qubits that can resolve kind of computational output.

00:34:23 Speaker_05
And so there's still a build cycle ahead, and that pathway's a little bit unclear. But what they've shown is, this almost feels like the Shockley transistor moment. It's like, here's this transistor, now everyone's like,

00:34:35 Speaker_04
have a lossy transistor and then you'll figure out PN junctions, you'll figure out all of these ways of just like getting the error correction down.

00:34:42 Speaker_04
But by the way, this reinforces what you said before, which is it's hard for an outsider like us to comprehend what's really happening inside of Google because the business they built was able to fund this.

00:34:53 Speaker_04
I mean, and I went down a rabbit hole because I'd never heard of who this guy was that runs his helmet, Nevin. He's in Santa Barbara.

00:35:00 Speaker_05
They have a whole team in Santa Barbara. They've been running for like 10 years.

00:35:03 Speaker_04
He has his own law and Nevin's law. And then I went down the rabbit hole of that. But what's amazing is so valuable for humanity. Google had the money to fund him for the last 12 years. Exactly.

00:35:14 Speaker_04
And the greatest money printing machine of all time is paying dividends. Yeah. But isn't it great to know that Google takes these resources from search

00:35:24 Speaker_04
And sure, maybe there's waste, or maybe they could have done better with the black George Washington, or maybe they could have done better with YouTube.

00:35:32 Speaker_04
But the other side is they've been able to like incubate and germinate these brilliant people that can toil away and create these important step function advances for humanity. It's really awesome. DeepMind is on that list as well.

00:35:49 Speaker_04
Keith, what are your thoughts about it? DeepMind, yeah.

00:35:51 Speaker_08
Yeah. First of all, I think there's a long time before this becomes a commercial product or application of any sort. So, you know, it's great that they're taking money, but think about it as like, almost like Stanford takes money or the U.S.

00:36:04 Speaker_08
government funds basic research in some ways. This is at least a decade out kind of thing.

00:36:10 Speaker_08
There's another, I mean, this area way beyond my expertise, but I've been talking to a lot of smart people, because I do do financial services innovation, and obviously encryption is pretty critical, whether it's Bitcoin or other places.

00:36:20 Speaker_08
And there's a couple of concerns. One is, it's not even clear that you can verify that this is true, by the way, like standard computing to explain sort of the magnitude of difference.

00:36:31 Speaker_08
Standard computing would take 10 to the 25th years to verify that what Google analysis is accurate. So there's a chance that it's not even true.

00:36:41 Speaker_05
For the sampling test they ran.

00:36:43 Speaker_04
Yeah. 10 to the 25th number of years. That's the big, I think, hole in the whole RCS benchmark that they use, that it's a framework that only a quantum computer could theoretically even provide a solution.

00:36:56 Speaker_06
How do you know the answer is correct is, I guess, the question, if it takes that long to solve.

00:37:01 Speaker_08
Then to be practical, assume you solve all this and it's accurate, blah, blah, blah, you make it fast.

00:37:06 Speaker_08
Second, then, there is the post-quantum computing encryption, which a lot of people, a lot of things, a lot of important things have switched over to. You have historical communications.

00:37:16 Speaker_08
that were encrypted under an old paradigm that would be vulnerable. And every year that goes by, the embarrassment level or the threatening level of old historical communications will probably have some decay function or some half-life.

00:37:28 Speaker_08
So if it takes another 10 years, communications that were drafted 20 years ago, yeah, there'll be some embarrassing things and blah, blah, blah, blah. But the more time it takes, the more safe private communications and exchanges will be.

00:37:41 Speaker_08
So I think that's positive. Third, is there's a question of order of magnitude here. You mentioned you need like three orders of magnitude sort of improvement.

00:37:51 Speaker_08
Is each step function, you know, incrementally easier and faster or is each step function, you know, 10 years? And I don't know that anybody knows the answer to that.

00:37:59 Speaker_06
That's right. That's right. Yeah, a lot more work here to be done.

00:38:04 Speaker_05
So Keith, you're not buying any quantum computing stock yet?

00:38:07 Speaker_08
Not yet. We have looked at KB, you know, talk about like technology forward, you know, VCs. Over the years, I've sat through partner presentations and we've never really pulled the trigger.

00:38:17 Speaker_08
There's other reasons, like including, like, even if you have quantum computing, you have to rewrite software on top of it from a different, it's a completely different, you know, world.

00:38:26 Speaker_05
Nothing maps, nothing maps at all.

00:38:28 Speaker_08
nothing. So you're starting from scratch. So you have an application layer, which might be actually an interesting business opportunity.

00:38:34 Speaker_06
Yeah, how are these things actually going to be coded and how are developers going to interact with them? If at all, maybe by that time, we'll just be AI.

00:38:40 Speaker_04
How do you build a compiler? Who the hell knows? How do you build a language properly? These are all complicated.

00:38:45 Speaker_08
Yeah. Who's going to write the basic? Who's going to write like the Microsoft basic?

00:38:49 Speaker_05
interesting thing is there's a lot of work that's been done in this space, like thinking about quantum computing and quantum algorithms is like an entire branch, people do spend a lot of time thinking about this and working on this.

00:38:59 Speaker_05
And there are ways you can kind of simulate and test and start to build out models for how you could utilize quantum computers. But obviously, we just don't have, you know, industrial scale systems at this point, there was one

00:39:13 Speaker_06
interstellar marvel easter egg in their announcement, but I wanted to get your thoughts on Freeberg.

00:39:20 Speaker_06
Google said that this massive jump in performance, quote, lends credence to the notion that quantum computation occurs in many parallel universes in line with the idea that we live in a multiverse. So is that somebody in PR is high AF?

00:39:39 Speaker_06
or reads too much science fiction.

00:39:41 Speaker_05
You know, you know, the crazy thing for us. So the crazy thing about quantum physics is such a mind. Have you guys taken quantum mechanics? I have not.

00:39:50 Speaker_04
I have. Yeah.

00:39:51 Speaker_05
I remember the summer I took it like the quantum, the first quantum mechanics class. And I was like, glad it was a summer course because you really have to like think pretty deeply.

00:40:01 Speaker_05
about what you've learned in quantum mechanics, there's just nothing about it that's intuitive. The way we kind of think about the world is not the way the quantum world operates.

00:40:11 Speaker_05
In the case of a qubit, as soon as you measure the qubit, it collapses to a value. If you try and measure it, if you try and look at it, it goes to zero or one.

00:40:20 Speaker_05
The probability by which it goes to zero or one is defined by the quantum state right at the moment you observe it. it's just such a mind.

00:40:28 Speaker_05
So effectively, this thing is existing in a superposition in multiple states at the same time, until you try to observe it. And that's the case of quantum mechanics. So what's kind of happening, I think, in that language

00:40:42 Speaker_05
Jekyll is nothing novel was kind of discovered or represented. That's just quantum mechanics. It's a mind.

00:40:48 Speaker_05
And you could go watch hours of YouTube videos if you want to, like, get taken down the mind rabbit hole of quantum mechanics and realize like, I think one thing I've always found fascinating about this discipline is that looking at a qubit changes it.

00:41:02 Speaker_06
Like it understands it.

00:41:05 Speaker_05
There's a slit experiment. And if you try and observe a light as a particle versus a wave, it actually changes what happens, what the outcome is of it being a particle or a wave. Same with electrons.

00:41:17 Speaker_05
The thing about quantum mechanics is the observation of a particle changes what happens.

00:41:25 Speaker_06
Here it comes, buckle in. When you look at the quantum bit, can you get a better idea of the scale of Uranus? Let's move on. I saw Chamath was doing a joke.

00:41:39 Speaker_04
He was queuing up and joking at the same time. I was thinking about Schrodinger's cat. That's like another ridiculous thought experiment that when you- It's the same concept. It's the same concept.

00:41:51 Speaker_05
The quantum state of the cat is it's both in the box and not in the box.

00:41:56 Speaker_04
You don't know whether it's in the box or not until you open the box. Exactly, until you open the box.

00:41:59 Speaker_05
And then you open the box and there's a X probability that it's in the box, X probability it's not in the box. But when you don't see it, it's both. It's both. And if you're a cat lady, you have three of those boxes, and I'm a dog person.

00:42:13 Speaker_05
Well, we got more engagement from Keith on that science corner than we have from David Sachs in four years.

00:42:19 Speaker_04
Yes, than we ever did from Sachs. He's more open to science, more stylish, better BMI, funnier. I need to defend Sachs. They both said, this is fucking stupid, and I'll never touch it, except Keith was kinder and more articulate in getting there. He did.

00:42:34 Speaker_04
That's right. Sachs would have just been snoring.

00:42:36 Speaker_05
Yeah, he would have said, He would have done his move where he goes stupid and then like... Next topic.

00:42:45 Speaker_08
There's an advantage of Monday partner meetings is I get to watch the science fiction stuff every week, even if I don't really understand it. But like a decade of watching science fiction, you pick up some tricks.

00:42:56 Speaker_06
Exactly. Do you play chess with Peter Thiel while that discussion's going on, like Sash does? I don't play chess.

00:43:01 Speaker_08
Actually, so I don't play chess at all, ever. Oh, okay. The reason why is if I do something, I want to be really proficient at it, and I don't have the time.

00:43:09 Speaker_06
Got it. Got it. Also, you have a life. You have a life, right? Yeah, I like to do other things.

00:43:13 Speaker_04
There's things in the real world, et cetera. Oh, big shout out to Gukesh D, my Indian friend, 18 years old, new world champion. I saw that. You know, chess world champion. Wow.

00:43:23 Speaker_06
Yeah, new world champion. Was he playing Magnus?

00:43:26 Speaker_04
Is that who he played? Listen, bro, listen. Every Brown guy that's done any random useful thing in the world, we all know each other. We're in a huge group chat. Oh, is it really? Yeah, it's just how it is. What's the name of the group chat?

00:43:38 Speaker_04
Isn't it like the top 10 tech companies? The group chat's name is, What Can Brown Do For You?

00:43:43 Speaker_06
What Can Brown Do For You? Okay, there it is. Also UPS. is filing a trademark infringement case.

00:43:50 Speaker_06
Hey, um, speaking of chip news, Apple is making its own AI server chips for internal use a report just came out that Broadcom and TSMC are helping them develop AI inference chips, you know, inference chips like rock, and there are obviously GPUs like NVIDIA GPUs, those are like the giant dump trucks that help you build large language models,

00:44:13 Speaker_06
These inference chips are kind of like speeder bikes, you know, motorcycles quickly getting you the results from the same ones. It's called BALTRA. BALTRA. I don't know what that's in reference to. Mass production in 2026.

00:44:25 Speaker_06
They don't plan on selling the chips. They don't plan on cloud computing.

00:44:29 Speaker_06
The reason they're doing this obviously is because they really want the iPhone to be the interface and they have planted their flag that they want to have privacy and have AI working off of your local device and not having access to your data, but having a compelling AI experience.

00:44:48 Speaker_04
My iPhone does not work. I'm sorry. I'm just going to say it. Okay.

00:44:51 Speaker_06
I don't know what happened in... You upgraded your software. That's what happened. You're on iOS 18. It doesn't work.

00:44:57 Speaker_04
After three years, I upgraded to the newest phone. I upgraded to the newest OS. The phone doesn't work, meaning like to call people, I can't call my wife anymore. I can't call my kids anymore. The phone bricks constantly. My photos app doesn't work.

00:45:10 Speaker_04
It is just really bad. And I think for a company of this scale, I don't understand how it does not go through a more complicated test harness that catches all of this. I'm not trying to complain, but because I know it's hard for them.

00:45:22 Speaker_04
I know it's complicated, but it's really bad.

00:45:25 Speaker_06
you're not the only person people are freaking out about the interface changes on photos crashing is a major thing. And Apple intelligence just doesn't work.

00:45:34 Speaker_06
So it does seem key that Apple has gotten off their game of making polished stuff to race to try and I guess catch up to their perception of you know, AI being a disruptive force at the interface level, i.e. your phone or desktop.

00:45:50 Speaker_06
What are your thoughts on this new story about them doing more chips? They've obviously had great success with the processors and phones and now the M4. Incredible if you haven't tried the Mac mini, best computer for the dollar in the world right now.

00:46:02 Speaker_06
But what are your thoughts on Apple?

00:46:04 Speaker_08
The most important thing about Apple is to remember it's vertically integrated. Vertically integrated companies, when you construct them properly, have a competitive advantage that really cannot be assaulted for a decade, 20, 30, 40, 50 years.

00:46:18 Speaker_08
Chips, classic illustration, go all the way down to the metal, in building a chip that's perfect for your desired interface, your desired use cases, your desired UI, and nobody's going to be able to compete with you.

00:46:29 Speaker_08
And if you have the resources, because you need balance sheet resources to go in the chip direction, it just gives you another five-inch hang, your competitive advantage. And so I love vertically integrated companies.

00:46:42 Speaker_08
I posted a pin tweet, I think it's still my pin tweet, about vertically integrate is the solution to the best possible companies. But it's very difficult.

00:46:50 Speaker_08
You need different teams with different skill sets, and you need probably more money, truthfully, more capital. But Apple is just going to keep going down the vertical integration, software, hardware, you know, all day long.

00:46:59 Speaker_08
And there's nobody else who does hardware and software together in the planet, which is kind of shocking in some ways. Is there a world-class company, a company that's world-class, that's both software and hardware other than Tesla? Yeah, maybe.

00:47:11 Speaker_08
NVIDIA? Google? NVIDIA, well, not really. Could they do a world-class UI? You know, maybe. Maybe there's a foundation, but you have to have a different vision, maybe a different team. Not clear. Tesla's close, I guess. I'd say the software's good.

00:47:27 Speaker_04
If you define software as it touches a consumer, Tesla, Apple, in some ways Google, maybe Meta with the MetaGlasses, trying, trying, attempting.

00:47:41 Speaker_04
You can't say NVIDIA because I think NVIDIA touches the consumer through an app that then sits on top of CUDA, which I think is that's a brilliant strategy for them. But

00:47:50 Speaker_06
It would be Apple, then Tesla, and then a long tail of people experimenting. Right. So anyway, this is the point.

00:47:56 Speaker_08
Apple has a lot of competitive advantages that they've been actually leveraging for about 15 years now. And even back then, Steve, there's some old great Steve videos.

00:48:05 Speaker_08
I'll see if I can find you a clip where he talks about this very intentionally from the 1990s. You know, he came back to Apple.

00:48:12 Speaker_08
He said, we're doing vertical integration, basically using those words of software and hardware, and there's going to be nobody else that can compete with us. I think it's in an interview he did, and it's published in the company of giants, I believe.

00:48:25 Speaker_08
And he's perfect on point. He just followed that strategy for the next 25 years.

00:48:30 Speaker_08
Now, you're seeing some of the manifestations, though, of a competitive strategy that gives you incredible advantages, is you get very sloppy in other places, especially over time.

00:48:39 Speaker_08
because you have such great competitive modes that you don't have to compete at the cutting edge of this. The Photos app is completely unusable. I'm the biggest Apple fanboy in the world.

00:48:47 Speaker_08
I remember interviewing once with a job for Tim Cook, and I walked in and he's like, why are you interested? And I said, well, you know, I own every SKU of every product you've ever produced, except I don't have every color of each iPod.

00:49:02 Speaker_08
And he was like blown away. And but now like my photos app is completely unusable. So I totally understand, you know, the frustration.

00:49:09 Speaker_08
And they are showing like the decay function, you know, culturally and otherwise, that eventually somebody will figure out an angle to rip them out.

00:49:18 Speaker_06
I'll tell you, we talked about dictators at the beginning of this, Chamath, and obviously this is your real house as a dictator yourself, is, you know, there has to be a constant fear that some a-hole is going to come to your office and be like, what did you do to the photos app?

00:49:35 Speaker_06
And that fear does not exist inside of Apple. It's not like the MobileMe, you ever hear the MobileMe story where he brought the MobileMe team in and said, how is MobileMe supposed to work? They said, well, it's supposed to back up everything.

00:49:47 Speaker_06
When you buy your new phone, you get everything. You never have to worry about losing the phone. Slammed his hand down and said, well, why the F doesn't work that way?

00:49:53 Speaker_06
Fired the person, brought the next person in and said, now make it the way he said it's supposed to be. Game over. I don't think Tim Cook's doing that. Johnny Ives not there. And obviously Steve Jobs not there to terrorize people.

00:50:05 Speaker_04
Well, I don't think, look, you don't need to necessarily terrorize people, but I do think you have to go through UAT.

00:50:11 Speaker_04
So I think it's pretty reasonable when you have a large footprint of consumers using an app to go through user acceptance testing is like first base.

00:50:19 Speaker_04
And typically what happens is you can do a process of a few months where several hundred thousand people get it all over the world. And as long as you do an okay job of getting a decent distribution of people, this would have come out.

00:50:32 Speaker_04
But I want to just talk about what Keith said as well. It's literally not just photos. It's like the phone doesn't work. So there are just core structural issues with this operating system now that makes the iPhone maybe 10 to 30% less usable.

00:50:50 Speaker_04
And that's really frustrating.

00:50:52 Speaker_06
The command center, you know, when you pull up your little command center to change the brightness and your AirPods, it's just like, what are they doing here?

00:50:59 Speaker_04
I mean, by the way, so do you need a chip?

00:51:02 Speaker_04
Do you need a machine learning chip to do inference to figure out that when you constantly run your phone at a certain level of brightness, you should just allow the phone to be at a certain level of brightness?

00:51:12 Speaker_04
Yeah, stop changing the damn brightness. Why does it read? This is not complicated software engineering, guys.

00:51:20 Speaker_06
No, but this is my point. There's no arbiter of taste anymore. Who is the backstop who says no?

00:51:28 Speaker_08
Yeah, let me pause, double click on that for a second. So I think taste is great if you have it, but there's only so many people on the planet that are going to have cutting edge taste and be right.

00:51:38 Speaker_08
If you don't have taste, what most tech companies do is they use data. Data is something that's approachable and leverageable.

00:51:45 Speaker_08
Because Apple has the antibodies to using data to measure success with the user experience to measure whatever success, if you subtract taste even by a bit, you don't have the scaffolding that every other company would use.

00:51:59 Speaker_08
And so you see the worst of both worlds.

00:52:01 Speaker_04
That's a great take. That's a great take. I mean, you just go off the rails, right? You go off the rails. So Keith, you think that what happened is when Steve Jobs isn't there and Johnny Ive isn't there,

00:52:12 Speaker_04
There's still a bunch of folks that probably think they have taste, but the real taste folks left, and there's really no scaffolding left to be more methodical.

00:52:20 Speaker_08
Yeah, but the scaffolding you had at Facebook Meta, obviously, or that Google uses, would catch some of the stuff without a doubt.

00:52:26 Speaker_04
Totally.

00:52:26 Speaker_08
No doubt about it. You'd know that users are less thrilled, and they'd use things less, and you'd fix it. And maybe even you take that too extreme, you never develop taste.

00:52:34 Speaker_08
I could argue that about Google or Meta, they don't really have taste, but you can argue the paradigms.

00:52:40 Speaker_08
But fundamentally, if you don't have that backstop, if the taste subtracts even 10%, not all the way down, you're just not going to catch this stuff.

00:52:48 Speaker_08
And I think there's only... How many people in the world really have cutting edge technology user experience taste? I don't know too many. I would fund them right away. Brian Chesky might have it. He does.

00:52:57 Speaker_04
It's an incredible point because I

00:53:01 Speaker_04
If I'm being really insecure, I would want to say, oh yeah, I know we had a lot of taste at Facebook back in the day, but actually we had so much scaffolding around data, probably because intuitively we knew that that was way more reliable for us.

00:53:16 Speaker_08
It's more predictable scale. It's certainly more scalable, right? Like you take Steve out, you don't need a dictator, but you do need a taste and taste is artistic.

00:53:24 Speaker_08
It's the same thing in venture, like scaling venture funds is really, really challenging because early stage investing is more like taste than data-driven. In later stage, you can use data and scale it and scaffolding. So I think there's just fields.

00:53:38 Speaker_08
It's a little bit also you see like the sports teams. Like this happened at Stanford when Jim Harbaugh left. It took years for the decay function. for the next coaching regime to show they were completely incompetent.

00:53:51 Speaker_08
The next year, they're pretty good. The next year, they lost one more game than they should have. The next year, they lost two more games than they should have, blah, blah, blah. And then eventually, they became horrible.

00:53:58 Speaker_08
And there's a decay function with an organization when you take out the person who is the original thinker, or the leader, or the dictator, or whatever. And so I think some of this is showing up now.

00:54:09 Speaker_08
And then playing on a field that's not favorable to them, which is there are advantages Apple has in AI. But there's some significant organizational structural disadvantages.

00:54:19 Speaker_08
And that's the field that people are going to be competing on for the next five years from a consumer perspective. And they're playing on a field where they don't have all the advantages in their favor.

00:54:29 Speaker_06
Yeah, yeah, true. Let's go to the app level here. Tick tock is scrambling right now after an appeals court upheld the January 19th deadline for a divestment. Here we go.

00:54:41 Speaker_09
Here we go. I refer you to my Twitter feed.

00:54:46 Speaker_06
I mean, you and Jacob must sit. I mean, what do you do? You just sit at dinner and feed the kids and then talk about TikTok and China.

00:54:54 Speaker_08
So it's pretty obvious, like you don't even have a conversation in my view, like TikTok is a threat. to the national security of the United States.

00:55:03 Speaker_06
And that's why people who are like, it's just an app. It's just 100%. Why? Why?

00:55:08 Speaker_08
Why? So I think there's different dimensions. One of the problems is there's so many things wrong with you.

00:55:13 Speaker_08
Actually, sometimes people get confused because there's not just one of these or sometimes it's just one that so they are definitely using the app to track data about Americans. And there's evidence that regardless of what alleged protections exist,

00:55:28 Speaker_08
There are people in China monitoring what certain people in the United States are doing. And the CEO lied under oath to congressional committees about this, and the evidence is now in the public domain.

00:55:39 Speaker_08
Hopefully, this Justice Department will prosecute him for lying under oath, I think setting a really good example that you cannot just perjure yourself before Congress.

00:55:46 Speaker_04
Sorry, Keith, can you double click into that? How did it come into the open source that what he said was a lie?

00:55:54 Speaker_08
There are people in China who on the record have said they had access and have had access to American user data, which he swore under oath to the Congress that they were storing the data in Texas somewhere

00:56:08 Speaker_08
and that there's no possibility that, you know, Chinese nationals in China could access the data. There is now several instantiations of this in the public record, let alone what's privately available.

00:56:18 Speaker_06
Yeah, I mean, the case specifically, too, back in 2022, ByteDance, the parent company of TikTok, had used an app to track locations, had used their app to track the location of journalists, because they were trying to track leaks outside. Yep.

00:56:33 Speaker_08
Then secondly, let me let me keep going here because it's worse. So there's a law, the fundamental problem is in China, there's a law that says if you're a Chinese company, upon request of the CCP, you must provide all user data.

00:56:47 Speaker_08
So any Chinese company is subject to that law, period, there's no court intervention, you don't need a subpoena, blah, blah, blah. And so any Chinese any executive at that company is subject to significant penalties,

00:57:01 Speaker_08
on the record for not providing any user data at the request of the CCP. So as long as that law exists, there's a real structural threat to the United States.

00:57:11 Speaker_08
Now, then there's the, is the app being used, manipulated on a content basis to influence policy in the United States, to disadvantage this or that or create hostilities? I don't really know the answer.

00:57:24 Speaker_08
I think there's been studies that suggest that and pretty rigorous methodologies, but that's a second level. And then third is there's the, why the hell are we allowing

00:57:36 Speaker_08
Chinese companies to compete with us when no American content-based organization is allowed into the Chinese market, whether it's Meta, Google, X. There's a strong argument there that Reddit, if you don't allow our content or non-Chinese content into your market, why should we be enabling Chinese companies to be successful in quotes in the US market?

00:58:03 Speaker_08
And that's more of a fair trade, free trade,

00:58:06 Speaker_04
Keith, do you think that the Pegasus spyware that can infiltrate WhatsApp so that you can turn on the mic and listen remotely and it has no fingerprints, it's very difficult to detect.

00:58:16 Speaker_04
Do you think an equivalent, let's call it a backdoor, exists inside of TikTok?

00:58:22 Speaker_08
Yes. So my evidence for this that I believe is an interpolation of what's in the public domain is if you looked at that vote to ban TikTok, it was extremely bipartisan despite controversy.

00:58:36 Speaker_08
And what happened was that vote was taken a week after there was an intelligence briefing to both the House and Senate intelligence committees that's confidential. And the votes, you know, all of a sudden flow through.

00:58:48 Speaker_08
I think there's things that are not in the public domain about TikTok that spooked a lot of elected officials and led to this bipartisan consensus.

00:58:56 Speaker_08
How many bipartisan votes do we see on a allegedly controversial issue that, you know, basically the vote was like, you know, like not even close in either house. 360 to 58. Yeah. When do you see a vote like that on something meaningful? Never.

00:59:13 Speaker_06
They definitely got spooked. And I mean, if you just think

00:59:16 Speaker_06
about Navy SEAL special forces, they're not allowed to use a lot of these apps, government officials aren't to use these apps, because they know that all you have to do is if you track somebody's child, and their tik tok usage, now you know what the parent is, you start thinking about the security and safety of individuals.

00:59:32 Speaker_08
It's crazy. So 352 votes for an incredibly popular product. Yeah, about how bad something has to be to get a consensus of 352 votes. on an app that's used by a huge fraction of the American public.

00:59:49 Speaker_06
Passed the Senate 79 to 18. And you are right. If you say you're going to ban TikTok, Vivek was against TikTok, but then he opened one, because that's where voters are. You're going to lose that generation of voters.

01:00:01 Speaker_08
Arguably. Arguably. In theory, there's some risk. I can see that.

01:00:07 Speaker_06
Biden can, if he's awake, extend this window by 90 days. I don't know if Grandpa is up for it, but he could extend it a bit. And obviously, this with the Trump campaign, you know, he says a lot of different things.

01:00:21 Speaker_06
Trump has flip-flopped a couple of times during his first term. He tried to ban it. Wait till he gets the readout that the rest of these guys got.

01:00:30 Speaker_06
Yeah, well, and then he had a mega donor and TikTok investor Jeff Yoss gave Pax $50 million and he owns 15% of it.

01:00:38 Speaker_04
When I had dinner with him, one of the things that I pointed out to him was this specific thing. I said, you have to look at the Pegasus-like equivalent infiltration of WhatsApp having been done on TikTok.

01:00:54 Speaker_04
Because the reality is if TikTok has 200 million users, it is true that 199,999,000 users just don't matter. So you could turn on the microphone, you're not going to hear anything. But there's probably 1000 to 10,000 to 15,000 people.

01:01:13 Speaker_04
And I do suspect that state actors are smart enough to figure out how to triangulate who you would want to be able to turn it on when that phone is in your pocket or when that phone is on a desk. And I'm sure you will hear all kinds of random things.

01:01:30 Speaker_04
And many of those things could be quite sensitive in nature. So I think that this is something that the government's going to have to look at really intensely.

01:01:39 Speaker_06
There's such a simple test here. are they doing with their own people in China, they are in a police state there, they make the Stasi jealous how much they're tracking individuals in China.

01:01:49 Speaker_06
So if they'll do it to their own people, they would have no problem doing it to an adversary. And ask yourself, if the shareholders care about money, they would be willing to divest, right? No problem. want to take the company public.

01:02:02 Speaker_06
So if you won't divest and get off the board as the CCP, it's because you see this as a valuable tool, right? I mean, just work through the basic logic, folks.

01:02:11 Speaker_08
Right. At some price point, right? What I would do if I were president, I'd say, you tell me the fair market price for TikTok, and I'll make sure that there's buyers. But because CCP won't name any price, There is no price.

01:02:25 Speaker_08
It's the greatest tool they've ever had. That would be like giving up your nukes. I don't think they should have to sell at a less than fair market price. I think that's legit. I believe in capitalism.

01:02:36 Speaker_08
But any free market should allow for some price discovery. And if they can't name any price, period, that suggests that you're doing something that's nefarious. There's a reason, by the way, Chamath, you probably know this.

01:02:50 Speaker_08
You know, if you meet, like, at least, you know, some of the times I've met with the president, they take your phone away. Why do they take your phone away?

01:02:57 Speaker_06
A hundred percent. Exactly. Pretty obvious. Yeah. Exactly. Also, there are phones that can be designed to be weapons, as we've seen. A number of people got some nut shots with their pagers recently.

01:03:08 Speaker_06
All right, let's talk about venture as we wrap up here, man, Keith for boy cooking with oil, new sacks, new red meat sacks. Are you a steak guy too? He needs to eat a steak once in a while. Oh, of course. What's your cut? What's your cut? Are you cool? Ed?

01:03:21 Speaker_06
Are you a ribeye guy?

01:03:26 Speaker_08
Eight to 1012 ounces max. Medium, you know, solid. I don't really care. Yeah, but why do you all I'll be a little non American go Wagyu. You know, like, sure.

01:03:38 Speaker_06
All right. All right. I think just shout out to my friend Kimball.

01:03:41 Speaker_08
Of course, of course.

01:03:44 Speaker_06
I'm a big fan of this cool. Let's slash the Kanye.

01:03:47 Speaker_04
Oh, you know, you know what I bought? Yes, I just bought recently a Denver cut, which I'd never tried. Incredible.

01:03:55 Speaker_06
All right, let's wrap up with a venture update here at the darkest hour Keith sometimes before the dawn VC deal activity. has getting close to pre COVID numbers in 2019. Obviously, major funding drop off happened in 2022.

01:04:11 Speaker_06
Yeah, it's been a couple of years of this, but deals, the number of deals is coming back, the amount being put to work coming back to I would say the steady state, perhaps even normal level. And But VC exits, sadly, are not keeping up.

01:04:28 Speaker_06
But we did have ServiceNow go public today, up 50%. And the wrath of Lena Khan is officially over. She's out. Andrew Ferguson is in.

01:04:38 Speaker_06
This looks like a great appointment, another one by Trump in the column of somebody who wants to allow business to occur and wants a free market. He wants to do basically everything Lena Khan didn't do, which is allow some M&A.

01:04:55 Speaker_06
Roy, what's your pulse like here? And what's your take on the venture industry? And then we'll go into M&A and exits. We'll start with just investing. Is it ramping up? You're seeing high quality companies.

01:05:07 Speaker_08
Well, I'd say that you should cut that data by AI and non-AI, and you might see it tell two different cities.

01:05:13 Speaker_08
My anecdotal experience is there's AI companies where the market's pretty hot, maybe cooling a little bit, but hot, and AI companies with the right team are getting funded frequently, quickly, et cetera.

01:05:25 Speaker_08
And then there's non-AI companies, and I think you'll see a very different chart there. I do think net-net, you're probably at a city-state that looks reasonable across 40 years, et cetera. But it would be interesting.

01:05:38 Speaker_08
You have to make some methodological decisions about what's an AI company and what's not. But if you could do that, it'd be interesting to see if the lines look similar or not. But it's pretty hot. People started companies, founders are optimistic.

01:05:52 Speaker_08
Crypto companies also are back in vogue, obviously, due to the change in administration. I think a lot of people have been hesitant to start new crypto companies, and there's a belief and confidence in the new administration, the SEC, et cetera.

01:06:04 Speaker_08
So we'll see if the innovation accelerates with all the new capital and all the new founders backing crypto. In enterprise software,

01:06:14 Speaker_08
It had been pretty cool, non-AI based enterprise software, but like as you mentioned with the IPO this week, trading very aggressively, I think maybe there should be inspiration there for more traditional, boring tech companies. Stripe.

01:06:30 Speaker_08
Stripe should go public, but they don't listen to me.

01:06:36 Speaker_06
Why aren't they going public, Keith? What's the story with the boys over there?

01:06:39 Speaker_04
They're waiting to get disrupted by crypto stablecoins. Seriously, talk about missing your window. Get out there, boys. They bought that crypto stablecoin company for like a billion dollars. Defensive, yeah.

01:06:51 Speaker_08
I personally believe and subscribe to the view that companies should go public as early as possible. I'm on the Bill Gurley sort of school of thought.

01:06:57 Speaker_06
What amount of revenue? What amount of revenue for the company?

01:06:59 Speaker_08
$50 million minimum, but predictability matters definitely, so not just $50, but $50 with line of sight to $100 and knowing $100 to $200.

01:07:08 Speaker_08
I wrote a whole chapter in Elad Gil's high-growth handbook on why companies should go public as early as possible. So I've been on this crusade forever. I like accountability, transparency, discipline. I think they're good things.

01:07:19 Speaker_08
And there's a critique that, oh, you're not going to be innovative anymore. If you look at some of the companies we've been talking about, what are some of the most innovative companies in the world? They're public companies.

01:07:29 Speaker_08
It just takes the right leader to say, I'm going to be innovative, and I don't care what the bureaucrats and lawyers, I'm just not going to get distracted with that. And so I like public companies.

01:07:40 Speaker_08
And so I think you'll see a lot of the companies I am involved in go public at a fairly rapid clip by historical standards. Different founders, though, have different views on this. It's very reasonable. Stripe, SpaceX, for example, founded in 2003.

01:07:55 Speaker_08
who knows when it's going to be a public company. So you can have a very successful company like SpaceX or Stripe. But my preference is to go public early.

01:08:07 Speaker_08
And then you have the capital resources, equity, or capital to be strategic, per your point about potentially missing window. And they were able to transact in that particular case and get ahead of the curve, or at least not miss the curve.

01:08:19 Speaker_08
But sometimes when you're a private company, there are strategic assets that you can't get your hands on. And think about Facebook buying Instagram. We talked about the taste issue. Instagram had taste at the time, like Kevin had taste.

01:08:33 Speaker_08
And think about where Meta would be had they not been able to acquire Instagram.

01:08:39 Speaker_04
Yeah. Totally, totally different timeline. For the public currency to have bought WhatsApp?

01:08:44 Speaker_08
Yeah, or WhatsApp.

01:08:46 Speaker_06
So optionality increases as you have that public currency. If you're a private buying a private, the acquired company needs to believe that you're going to get it over the finish line. They're going to have some liquidity at some point.

01:08:56 Speaker_06
Whereas with the public, I mean, they just sell within whatever their window is. Chamath, your thoughts?

01:09:00 Speaker_04
Well, I was just going to ask Keith a question, which is what is the game theory behind Stripe not going out? Like what's the, what's the strategic rationale?

01:09:10 Speaker_08
You know, honestly, yeah, without sharing like, you know, one-on-one conversation sort of stuff. I think the question, the burden, they inverted the burden, which is why should we go public?

01:09:19 Speaker_08
A lot of people ask the question the opposite way, which is, you know, why wouldn't I go public? I think their first principle thinkers, like put my point about Trump and I think true of Elon, they asked like, why?

01:09:32 Speaker_08
And they're like, well, what advantages would we get? And I actually think the M&A one is very real. But I think they've been able to construct alternatives to most of the advantages, but not every company is going to be able to do that.

01:09:47 Speaker_08
It took a lot of effort, energy. And then the question is, would you substitute that energy into something else that might be higher value creation if you weren't creating the alternatives to a public structure?

01:09:58 Speaker_06
That is a great answer. Freeberg, your thoughts here on public markets, M&A, the end of the wrath of Lena Kahn, and what we might see in the new year post-January 20th.

01:10:09 Speaker_05
I disagree with the conflation of Lena Kahn into all this stuff too much. She's a big company break apart It has nothing to do with tech M&A, like the typical kind of deal flow stuff that I think you're focused on.

01:10:21 Speaker_05
I've said this a number of times, so I'll just say it again. But I think on the general liquidity thing, I don't think that the thing holding up acquisitions and IPOs is markets.

01:10:29 Speaker_05
I actually think it's investor and board expectations on valuation relative to where they put money in the last couple of years.

01:10:36 Speaker_05
So if you look at the valuations from 21 to 23, early 23, so much money went in at such high prices, those investors can take those companies public today. There's a public market appetite at all times for anything, just depends on the valuation.

01:10:53 Speaker_05
And the real issue right now is that a lot of the VCs, the late stage private equities, the ones that did the big markups and the late stage D rounds, E rounds, et cetera, they don't want to take these things out and take a 60, 70% haircut on the IPO.

01:11:07 Speaker_05
They'd rather kind of let this thing sit private and see if they can earn their way back into the valuation that they did the mark at when they put the round together.

01:11:14 Speaker_08
So I 100% agree, 100% agree with this.

01:11:17 Speaker_05
Yeah, I mean, there is these overhangs are very real. I don't think the exit liquidity dearth fundamentally is driven by markets. I think it's just driven by the the sell side and the investor expectations.

01:11:28 Speaker_06
There's also a culture thing I have to say, like in talking to a number of like, the leaders of these public companies that were very inquisitive and M&A.

01:11:37 Speaker_06
they are taking the position, it's easier for us to build a competing function, a competing adjacency than do any tuck ins.

01:11:44 Speaker_06
They just told the the corp dev people pencils down and they are not wanting to spend a year or two on a deal when they have a breakup fee when they see what happened with Adobe, or they just think, well, why don't those are big bills ourselves?

01:11:57 Speaker_05
Yeah, those are big deals. The small deals are different.

01:11:59 Speaker_05
The small deals are more that the small deals are the fact that over a couple of years, like Google bought a cybersecurity, like there are these acquisitions that happened at 800 million that maybe should have been done at 200 250.

01:12:08 Speaker_05
And again, it's the same problem that the sellers of the high quality companies demand too high a premium, that the buyers of these rational scaled companies are like, that's not worth it, just like IPO candidates.

01:12:19 Speaker_05
So I don't know if you've got a I also agree.

01:12:23 Speaker_08
So I used to be an antitrust litigator, which I know Jason knows. And I think I hate the current leadership of the antitrust division. I called her a fraud, and I think she is intellectually a fraud.

01:12:34 Speaker_06
Why?

01:12:34 Speaker_08
Why is she intellectually a fraud? Well, she published a paper that was false. Her whole claim to fame is this paper about Amazon. And the data she used in the paper at Yale was false. She's too smart to have done it accidentally.

01:12:50 Speaker_08
Benedict Evans wrote a good critique of it if you want to read all about the data. Second thing is you look at Amazon, which is this alleged quintessential example. Have you heard of Shopify?

01:12:59 Speaker_08
Shopify is one of the biggest success stories of the last decade, right down the middle competitive with Amazon, and there was nothing Amazon could do.

01:13:06 Speaker_08
They lost the core market to a competitor that was started and went public at a very low valuation, and Shopify is dominating DTC commerce. Nobody builds a DTC commerce brand except on Shopify. So everything about her is like a fraud.

01:13:20 Speaker_08
That said, I don't believe that what she's done has affected exits very much at all. Because the truth is in high-end venture, like institutional venture capital, other than the WhatsApp and maybe a plot acquisition or something,

01:13:35 Speaker_08
you know, one every two years, you don't drive returns in venture to an institutional venture capital fund through an M&A. Like, like WhatsApp may be the only one that really drove a fund returning exit to a serious fund.

01:13:47 Speaker_08
It just doesn't happen that way. I need IPOs like to return our funds. Our funds are like billions of dollars. You don't get returns on lots of acquisitions at $50 million to $100 million. Yeah, but a $300 million fund can.

01:14:00 Speaker_08
Yeah, but most funds have ballooned for lots of reasons.

01:14:04 Speaker_06
There are a lot of big ones.

01:14:05 Speaker_08
And that's actually led to some of the perversity that David talked about. If the funds get large, their tendency to do these things also increases.

01:14:14 Speaker_08
So yes, a seed fund can drive returns on M&A acquisitions that might be deterred in a bad, hostile administration. But a venture fund of $500 million to $2 billion drive returns through M&A? No.

01:14:30 Speaker_06
I mean, they could fill in the first one X, maybe.

01:14:32 Speaker_08
I've been lobbying officials for a long time on this crusade. They come in and they expect that, oh, you know, M&A, blah, blah, blah, blah. And I'm like, no, no, no, I could care less. Only my most mediocre companies are quiet.

01:14:43 Speaker_06
And the IPO window has started to crack open. Just give me a couple more data points, gentlemen. We ride the Chinese-based self-driving car company went public on the NASDAQ last month, $4.5 billion market cap.

01:14:56 Speaker_06
Pony AI, another Chinese-based self-driving car company, went public in November. Klarna plans to go public in the U.S. I think they quietly filed Service Titan today, the taping of this on Thursday. And Sheen, the fast-fashion company.

01:15:12 Speaker_08
Well, Sheen's going to have some real problems in the new administration.

01:15:16 Speaker_06
Yeah, right tariffs. As we wrap here, that's a good place to wrap on. What do you think of, I guess, two issues, Keith, we'll end with politics as we started there. Two things seem perplexing to people in finance. One is

01:15:32 Speaker_06
tariffs and how that's going to work.

01:15:34 Speaker_06
And the other is inflation and what the impact would be on 15 million people being shipped out of the country and the impact that would have on inflation vis a vis the unemployment rate getting even lower than the historic low it's been in our lifetimes.

01:15:52 Speaker_06
What do you think of those two issues? Take either one.

01:15:54 Speaker_08
Well, I think, first of all, the Treasury Secretary understands this. I think Scott, actually, from everybody I've talked to, I don't know him, but I've interviewed about 10 or 12 people that are very successful on Wall Street.

01:16:04 Speaker_08
And every single one of them universally has a claim for him. And they've all made points to me that these kind of subtleties, he really does grok.

01:16:13 Speaker_08
And so when he says you can raise tariffs without inflation, he understands how all this substitution works and is running an equation in his brain. He's a very successful trader, and that's a really good skill.

01:16:25 Speaker_08
Also, Chamath's earlier points about Darwinistic evolution of brilliant people being successful, understanding how the economy actually works, he's perfect. So I think you're going to see real tariffs, especially against China,

01:16:39 Speaker_08
And the Trump administration is completely committed to reducing inflation, the cost of eggs and groceries. And I think those things can be reconciled. I know amateur economists with random degrees from Wharton don't think so.

01:16:52 Speaker_08
But as Trump pointed out in the debate and J.D. Vance pointed out with some research, his first administration imposed all these tariffs and there was no inflation. And then J.D.

01:17:03 Speaker_08
Vance pointed out that the Fed Reserve has a study that says, you know, housing prices, which are primary driver of affordability for a normal American, are inflated because of illegal immigration.

01:17:15 Speaker_08
So I think this administration- And not making more units, I mean. Well, I think this administration- The NIMBYism, yeah. There is substitution, right?

01:17:22 Speaker_08
If the price of one gig goes up, consumers typically have, you know, unlike people on this podcast, typically have a limited budget. And at the end of the day, if one price goes up, you have to substitute somewhere else.

01:17:32 Speaker_08
So the debt deflation might be negative even. So in any event, this administration is not naive. And the people that Trump has put in place to drive this in Treasury, the National Economic Council, absolutely understand this.

01:17:45 Speaker_08
And they're committed to driving down actual prices. The hardest area is going to be healthcare. That is really, really difficult. And it is a major driver of cost to a normal person. And Obamacare has been a disaster.

01:17:57 Speaker_08
The question is, what do you do about that? And I don't have an answer for you right away. I have some ideas.

01:18:03 Speaker_06
Chamath, your thoughts on tariffs and or immigration and inflation. And that seems to be a place where you even across the aisle, you got people debating.

01:18:11 Speaker_04
I think he said it pretty well, which is that we do have a lot of experience with how tariffs can be implemented, and that the practical experience is not what the fear mongering is about.

01:18:25 Speaker_04
That being said, I think the devil will be in the details, which markets for which goods, what is the tariff and why.

01:18:32 Speaker_04
What I hope happens is that if we can really study the second and third order degree impacts of some of these markets, what the tariff does is it acts almost as a reverse subsidy for American companies to compete.

01:18:46 Speaker_04
I'll give you one very narrow example. If you believe in electrifying the American economy, one of the underlying things that you need are electric motors, right? Electric motors and electric batteries.

01:19:01 Speaker_04
And just to double click on electric motors for a second, electric motors needs a permanent magnet. If you look inside of a permanent magnet, there are these rare earths that are just required to make these magnets.

01:19:13 Speaker_04
But as it turns out, it is impossible for any company that is not a Chinese company to be able to manufacture these magnets in an economically viable way.

01:19:26 Speaker_04
And the reason is because not only can China make it and they can make it in the absence of a lot of environmental controls, they'll also subsidize.

01:19:34 Speaker_04
So if anybody tries to compete, they'll just inject a subsidy into that economic supply chain where they're always cheaper. So what do you do, Jason? If you can observe that and realize that we want supply chain diversity,

01:19:48 Speaker_04
What the tariff does is it starts to push back on those kinds of activities because it doesn't allow it to continue to work.

01:19:56 Speaker_04
Then if you take that with what the United States government already does through the DOE, which is through subsidies and underwriting, This is what I mean by it could be a really amazing new moment for the American economy.

01:20:09 Speaker_04
And that would please a lot of people, including a lot of people on the left, if they just took the time to understand what's being proposed.

01:20:15 Speaker_06
I mean, look at Rare Earths, you mentioned them. We have some of the great deposits in the world in our country.

01:20:23 Speaker_04
Why can't we get them? We have one of the largest lithium deposits in the world.

01:20:25 Speaker_06
It's because of environmental regulations. And it's the same thing with Starship going up. We got a lot of regulations in this country. I understand people want to do the right thing, but we also have a lot of debt.

01:20:34 Speaker_06
And if we could start mining rare earth metals here,

01:20:38 Speaker_04
and maybe loosen the regulations? The lithium supply chain is another really good one that's emblematic of all of this, but there are so many other markets.

01:20:46 Speaker_04
I'm sure that if you looked in something that's a little bit more down the middle like appliances, what you would also see is the same thing where Whirlpool will try to make an appliance or Bissell will try to make a vacuum cleaner and the Chinese equivalent

01:21:02 Speaker_04
makes it almost like fighting uphill. And there has to be a way to course correct that.

01:21:08 Speaker_06
Well, I mean, look at BYD, some of these cars, they're just copying wholesale everything Tesla has done in their design and feature set, and they're half the price.

01:21:18 Speaker_06
And so they're selling really well in countries that allow them and they would decimate US automakers and German automakers.

01:21:24 Speaker_04
By the way, different different version of this. I wrote this in my weekly newsletter, but I was curious why these Chinese models are so good. And I was like, the training of these models seems to be quite fast.

01:21:36 Speaker_04
The quality of these models are really good, the Alibaba model, et cetera. And part of what you realize is when they do their training runs, the Chinese models have no guardrails in the sense that there's no copyright checks. No.

01:21:52 Speaker_04
just none of these things that otherwise slow down an American company to make a useful model. They don't have any of those things. So that's another example where maybe there's not an economic tariff, but there has to be a simple reciprocity.

01:22:05 Speaker_04
And in the absence of reciprocity, I think it's reasonable to say that there needs to be checks and balances.

01:22:11 Speaker_06
Freeberg, anything to add there on tariffs or okay, for Jamath Palihapitiya, your chairman dictator, the sultan of science, and Newsax, Better BMI, hates dictators. What's your take on Ukraine? Maybe we can fire up a Ukraine discussion.

01:22:27 Speaker_05
I can get into it.

01:22:30 Speaker_06
No, no, no, no, no.

01:22:32 Speaker_09
How do you feel about Ukraine? By the time you have me back, hopefully that's solved.

01:22:37 Speaker_06
Hopefully that's not day one. We're going to solve it on day one. Okay. Keep your excellent. Your key through boy. Excellent husband. Very, very effective. Great, great American great host. Great.

01:22:51 Speaker_04
Awesome.

01:22:51 Speaker_06
On you may have heard of two words all in. Okay, you may have heard of it. David Sachs. Brilliant crypto. I mean, we didn't even dive into crypto.

01:23:00 Speaker_04
I mean,

01:23:02 Speaker_06
People are going a little nutty on this crypto. What do you think about all this crazy crypto going on here, Keith? Everything's spiking back up, XRP, Bitcoin. What do you think of Saylor?

01:23:14 Speaker_06
I know the Saylor fans are like obsessing about him coming on the pod. What do you think of Saylor taking these loans to buy Bitcoin and then other people are following suit to put it in their treasury?

01:23:24 Speaker_08
short version on crypto generally is I still think the primary use case is speculation. And not that there's anything wrong with that. People speculate on stocks, retail trading. People speculate on football games, gambling.

01:23:34 Speaker_08
The natural tendency for humans to want to speculate is very real. The art to me is because everybody's now a node connected into these crypto, let's call it Bitcoin,

01:23:46 Speaker_08
Can you build an application on top that would have too much inertia, too much friction to start from scratch, but has real value? And I think it's possible because so many people are now connected based upon speculation initially.

01:23:59 Speaker_08
So that's what's exciting to me. But you know, We've watched speculation before in crypto markets and it's very volatile. So hopefully someone builds real layers of productivity or utility on top, but takes advantage of the network.

01:24:15 Speaker_08
It's a little bit like back in your days at Facebook, Chamath, you had the social graph and you'd say, you can build applications on top of the social graph.

01:24:22 Speaker_08
But if you had to create a social graph from scratch, that was a heroic effort and nobody else was going to do it. That was literally the Facebook monopoly story. And so I think that's true of crypto. There's lots of nodes.

01:24:31 Speaker_06
Someone's got a social... And there's no Zuckerberg to rug pull and say you can't use it.

01:24:36 Speaker_08
Someone's got to build the application on top, and then it'd be extremely exciting.

01:24:40 Speaker_06
What do you think, Freeberg? You were monitoring this sailor situation, the Mr. MicroStrategy.

01:24:46 Speaker_05
The way it seems... Well, I think the way the sailor financial structure is set up, is it looks a lot like a synthetic call option on Bitcoin, you get a convertible note, so you earn a coupon on the note.

01:25:02 Speaker_05
And then you have a conversion price, which is a premium to the stock price, which you can translate, if you look at the book value, or the net asset value of the stock, That's how much Bitcoin there is.

01:25:12 Speaker_06
And the premium is two to one, I think, or two and a half to one.

01:25:16 Speaker_05
Yeah, the premium that the conversion price is at tells you what Bitcoin needs to be for you to have equity upside. So it's effectively a convertible note, you're in a coupon, and then you have a conversion premium.

01:25:27 Speaker_05
that you can kind of convert to equity, which basically gives you a call option. You're saying the premium you're paying is the price for the call option, effectively, and you're earning this kind of coupon in the meantime.

01:25:38 Speaker_05
So it's a way for some people to kind of trade the price of Bitcoin.

01:25:42 Speaker_05
Seems like this guy said a lot of hedge funds and I don't know if you guys saw the CNBC article that it's kind of like, or Bloomberg, it's like the hottest trade in hedge fund land right now is to buy up these convertible notes that he's issuing.

01:25:53 Speaker_05
So if you actually were to sit down and do the Black-Scholes modeling of the value of the synthetic call option that he's selling you with the convertible note, there's a reason people are paying for it. They think that there's value there.

01:26:06 Speaker_05
So there's certainly something to the structure that makes sense.

01:26:09 Speaker_06
All right, so for your sultan of science, the dictator and fit sacks, fit sacks here, a low BMI, low heart rate. What's the heart rate at right now, Keith?

01:26:20 Speaker_08
40 to 42, measured by eight sleep, typical day.

01:26:25 Speaker_06
Oh, eight sleep. What do you think of our Knicks, by the way?

01:26:27 Speaker_08
Ooh, so good. Well, we'll see. I don't know if I would have made that trade, honestly, but it's complicated. For Carl Anthony Towns? Really? Yeah. Fascinating, he's playing so good. I know, but I think you had the chemistry all dialed in.

01:26:40 Speaker_08
hopefully they could build back better. You know, I'll like buy it.

01:26:43 Speaker_06
Absolutely. All right. Listen, we'll see you all next time. Don't worry, Saks isn't going anywhere. It's just a little bit busy right now. There's a transition going on. Saks is transitioning and we'll see the pod will transition as well.

01:26:55 Speaker_06
We'll see what it looks like in the new year.

01:26:58 Speaker_04
We have a good lineup of co-hosts.

01:27:00 Speaker_06
We're going to do eight weeks. It's going to be all in idle. All in idle is occurring. We're rotating people in and you get to vote audience. That was great. Thank you. You did great.

01:27:10 Speaker_05
Thank you.

01:27:10 Speaker_06
Thank you for joining us.

01:27:29 Speaker_03
to the fans and they've just gone crazy with it.

01:28:01 Speaker_02
Why did you get murky?