#AIS: Bestie AMA with Valor's Antonio Gracias - Transcripts

June 07, 2022

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This talk was recorded LIVE at the All-In Summit in Miami and included slides. To watch on YouTube, check out our All-In Summit playlist:  0:00 Antonio Gracias joins to talk: Tesla's early days, investing in Elon, macroeconomic outlook, ROIC,...

Transcript

the letter winners ride to the fans and Antonio Ellen had a moment of reflection and uh, he was talking about 2000 and he's talking about the imminent um collapse as he felt it of SpaceX and Tesla at the same time in december 25th and he said uh, there were just a handful of people who came out there and and put their careers on the line for him yourself and steve Jurvetson Specifically mentioned uh, and it was an ira and it was a particularly poignant moment for him. He was getting a little choked up about it. Tell us about that bet you made in 2008 and the potentially career ending bet for you to bet in an electric car company at that moment. Take us back to that decision. But before I do that I just want to say that I left my wallet uh backstage because the last time I was with the four of you, I lost a lot of money, I realized that I better leave, I better leave all the cash somewhere where you can't get it. And then and you also made me cry. So I don't, I think I might, I might cry again now of joy. I mean, no, no, it was more like humiliation. But we're playing poker. You palmer, luckey yeah, so if I, if I cry again this time it will be from uh, from a sense of just gratitude for those moments that we got to share. So the for austin particular because you know our strategy, so operational, I was there working on supply chain in the factory and on sales in those in that period along with my partner Tim Watkins and three or four of our supply chain people and we had a major problem supply chain, the cost for a way to control. And you know, you're always doing engineering on the very expensive parts, we were doing the book called the B parts, the parts And man, it was brutal.

Um, but it was very clear to us that remember, it was also the middle of financial crisis, right? So we had a treasure portfolio. We had to decide we didn't have a lot of capital time. These are tiny funds, 100 and 23 million funds where our capital go, where people would go more importantly where people go and where I would go and we decided to focus on Tesla because first we really did believe in Milan when most people didn't and we saw in him something very special, which I think he probably saw here yesterday that not only is he is a brilliant, brilliant engineer, you know, one in 100 years engineer, he's a man of deep conviction and deep passion and deep compassion, what he is doing, is really trying to bend the arc of humanity for all of us because he really cares and that came through to us and we want to be on that mission with him and so we were privileged enough to be there in a moment time that it mattered. And it was really hard man. I mean, we had clients, I actually clients said to me, how do I know this isn't DeLorean? And I said, look, I can tell you for a fact, we're not selling cocaine out of the back of the factory in the cars. DeLorean being the famous back to the future car, exactly where the owner was trafficking cocaine to underwrite the car Exactly. I live in Miami, but we're not selling cocaine for sure. Sure. Yeah, But no, it was it was it was it was a crew betting event for us and it turned out it was the right thing to do. But yeah, for me it was um, I'm just deeply grateful with these experiences.

I mean, you really doubled down because you didn't just do Tesla, you also were there in some really critical moments at SpaceX as well. We were, although I tell you, um, you know, we doubled down at the time and we put more money into the financial crisis and then helped lead to convert around there. That was really tough for us to do and then put money in SpaceX. But I tell you operationally like in terms of capital stack, I think there were other people around and, and SpaceX is also running out of money. And so we put money to SpaceX operation. We were just basics over the years, but it was never as existential in terms of the operations. It was a Tesla. I mean, Tesla was truly, I think, truly existential. And because we were operating guys, and I myself have been a factory manager. I worked in all parts and all parts factory. I've run industrial facilities myself. We could kind of, uniquely ID value there in the rocket factory.

You know, we were just less valuable. Um, but yeah, both these companies were going down at the same time. And, you know, the amount of stress we're all under was extraordinary. But, you know, looking back on it, it's one of the greatest moments of my career. I mean, this sense of fellowship, You know, one of the, I think the great thing about being in our business, the business we are all in is that we get to back amazing people are trying to change the world, and in these dark, dark, dark, deep moments, we get to go to war for them. And in those moments I call them these moments of fellowship where you just care deeply about someone and and passionate about the mission, and you get to make a huge difference. Like, these are the highlights of my career. And if you ask my partners, they tell you the same thing, these are the best moments we've had together. Three of us have had some together, actually had some together here on the stage we had to fight for something he believed in, and it's just it's a privilege man to do it. It's a privileged situation. It's privileged with Ellen, it's been a privilege to be there with with all of you at different moments in my career and I'm very grateful for it. How do you, do you feel like you come off of a high after having huge successes like that?

Like how do you stay grounded and motivated to try to find the next one? If in the back of your mind, there must be a little piece that says, it's never gonna be as good as this guy or those two things. I mean, you know, it is, it's interesting questions. I think that there's a couple things in play for us. One is we keep going because we believe in making the world better. We invest in companies that we believe make a difference with people respect and values aligned with, and that's the that's the ethos of our firm, right? So whether it's large or small, we may never find something that's as important as SpaceX again, but we will find more great people will help them. You know, two of our company's here. I mean, we invested Andrew palmer, We have a small investment for export, which should have been one of the biggest mistakes, the last 10 years of my career is not putting more money in flesh board. Yeah, no, we we we we had we actually, it's kind of a funny story about we had um, you know, that's kind of a soft handshake on a, on a term sheet at say a price of X. And soft and came in like later and made it two X. And I had too much price memory to keep going and Khalid it.

So it was an error. But you had you have two people on the stage here, their extraordinary preneurs are trying to make the world better. Both both these companies are really, really great and and making the world much more now post covid and in times of war making it much safer for all of us. There are people like that out there. There's more of them, they may not be Ellen, you know, it was probably one Ellen in our generation, but there's lots of great people and I'm very optimistic about what's happening in the economy. We're seeing incredible, incredible innovation with tremendous entrepreneurs in our pipeline. So maybe there's another one, I don't know Antonio how do you think about the in the business as you guys invest in, there can sometimes be a very long capital deployment cycle before you see any real return in terms of business value, whether it's farming or you've done pharma, some of these hardware companies where there's a big build cycle, how much do you need to kind of think about and see a customer and revenue show up before you're willing to say, hey, let's build the big rocket ship to go to the freaking moon and how do you judge and value that business and back a team. It's really a question. I think it depends on this in this sector. Rin it depends on how we look at the world share probabilistic lee and we're looking for companies that we call pro and try to get back in the world gets worse. So in the case of pharma or something like SpaceX, we'll think about like what is our problem was our probability tree here, which probably lost probably three X. Or five X.

10 X 100 X. And then we'll think about when the capital goes in, what is the actual return on capital? I was watching the talk you guys had with Ryan about what happens to the public markets. The reality is that what a business is a machine. You put capital in one side and out the other side comes return the R. O. I see the return on invested capital really matters. And if you're a climate classically trained investor, the way I am, we think about that a lot. So even though we may be putting a lot of capital in the question is, what's the margin in the back end? A company like SpaceX, a lot of people going in. But we know that if it works, we believe it will work, we also have a company has tremendous margins, even in the industrial sector because of the industry structure is in, it lives in an oligopoly uh inside the U. S.

And outside the U. S. So it's like building. Starling same thing capital going in. But we know that the margins and the profitability of the business on the back end will be very very high. And so the R. O. I. C. will be very good. Just are you backing a lot of deep tech startups? Like company's founder shows up with a power point there.

Like I need $50 million bucks to make our prototype. I mean it depends on the business. So as an example, um, you know, we have passed on things uh that our um our view going to have margins that are often competed to a low, low level. And you know, there are, I don't wanna give examples here, but there are lots of examples of people that are doing things in, you know, like all electric aircraft, et cetera. We look at this and say this is gonna be a highly competitive market. These are not an end of one. SpaceX is an end of one. If you compare that to someone making electric vehicle that say, an electric airplane or electric kettle, That will not be the end of one of many. And in the end of many business, you're ultimately gonna have margin competition that's going to make it that return on capital goes down to basic industrial margins. You know, like it won't be that much better than going to R. I. C.

Or Airbus's because those will be ultimate competitors. You said it a little too, I think superficially so let me just double click and I think Antonio brings up, I think one of the most important principles of investing that is so utterly poorly understood, which is R. O. I. C. Roy return on invested capital. Most people don't even know what it means, how to calculate it, no pot over your weighted average cost of capital. These are enormously fundamental principles when you're running a business, especially in a moment like this because when the rubber meets the road and you need a lot of money and you run into somebody as sophisticated as him, he's already worked from first principles to understand it. It's really, really, really important to know these things because these are the core foundations evaluation, you know, So obviously DCFs are one framework, but Roy is incredibly, incredibly important, especially when you make real things and you need to spend Capex, look in the world, in the last 10 years where money is free, nobody thinks about this very much. We always have thought about it which informs our investment model. But yeah, that's right. I mean in today's world, If you're an entrepreneur and you can show up and say, listen, I have a 5067% returning capital, every dog you give me Will yield a 70, return on the back end, even though we're losing money along the way.

That's a very compelling case. Well today we're losing a bunch of money, we're not sure what's gonna happen, which we hear a lot. This also builds on the question from yesterday, which is how do you present yourself as you know a young emerging company and cut through all the noise and understanding of these things and about future value creation in a moment like this becomes really important as well. Even if people will debate whether it's right, people give you credit for the intellectual honesty of actually going there and understanding these things really. You see it a lot where companies slip away from first principle. So you know the first principles on a high margin enterprise software business. You can define A. R. R. And assume some and then people say some multiple of A. R. R.

Is your valuation comp like your, you know your multiple and then another company shows up and the margins are different. The growth profile is different, the revenue retention is different, it's a services business and they try and use a similar sort of calm and all of a sudden everyone's thinking about valuation as a function of some industry standard comp as opposed to going back to understanding how did that get created in the first place and what's the nature of the business from which that compa roads, people are doing things like calling revenue A. Are are, you know, it's not even subscription revenue and so on. And I think that happens considerably more. And then then that investing cycle just becomes, you know, hey, well the next round will be this multiple. And you know, that's how we'll get our increment evaluation and everyone just misses the core, you know, proposition of building a valuable business that can generate what's your look through into the economy just from your portfolio companies. Look, we, we think, I think we're in a session. I mean, I don't know if someone already said this, but we're in a recession. We're in recession and this will be like my, I don't know, 100 cycle or something. I'm pretty old. Like the rest of us here. We've seen it.

We've seen over and over again. You know, I see David's tweets about go race 20 years of money. This is correct. I mean, we're gonna need enough capital get through the problem. The good news about this recession. And there's some good news here, which is to me, if you look at the macro picture here, it looks like if you can look at, uh, the federal debt, the state of the consumer and kind of what's happening in business formation. It actually looks a little like post World War Two to me in that in the world, in the World War Two period we had the last massive mobilization or demobilization of their economy occurred in World War Two that happened again in Covid when we change in this case, it's like a mini version of re mobilization that we're restarting the economy. We flooded the system with with money to get the kind of buffer the problem and restart the economy and now we have inflation but we also have lots of business formation and we have new ways of doing work which is what happened at World War Two. So I'm I'm I'm very optimistic because most of these recessions you know to really get inflation down, I'm gonna have to reduce consumer demand and or change oil prices. So for sure we should go in this country. I know it's not it's controversial but that's important um to lower oil prices to get inflation down. But the reality is underneath the the numbers there's a lot of innovation happening and that's what happened kind of post World War Two.

So I would say we're in a bit of a mini retooling, it's gonna be a rough year or to hang on. It'll be a rough year or two. But the consumers in pretty good shape so they're not over lever word. We should come out okay and the U. S. Economy is so resilient man. Like you know we are all either one generation from being immigrants or immigrants here. I think most of us right it's the best place in the world live with the most innovative economy in the world which I'm super optimistic what's happening here because there's so much innovation, so many smart people working so hard to make things better. Um, I think it's gonna be great. I think we get the next couple of years, it's gonna be great to talk about this. Um, pumping more oil situation. Obviously Russia is involved in a and we talked about it earlier today, had a debate about Ukraine and then you have maybe some folks in the Middle East not pumping as much oil as we might like them too.

And then europe decided, well, we don't want to frack here, we want you to do that over there. And then we stopped here. Uh, and none of us want to see um, environmental damage done to the planet, but we also don't want to see dictators take over the planet or the economy come to a halt. What, what's a reasonable proposal for America? An american sovereignty in terms of green and renewables and maybe pumping some oil. So, look, I we were the first institutional investors as the motors. So I think I have enough to say this. I believe in green technology. Okay, absolutely, 100%. But energy and in the same fund, we did test. So we actually have fracking assets because energy independence. That's incredible really, in the same same fund.

Because then as it is today, energy independence is a nest security issue. This is not a partisan issue. Extreme important to understand this Extremely important 20's. It's not about Democrats, Republicans, it's about wars in the Middle East. And the reality is that the Saudis are not pumping. Opec is not pumping. This is terrible for America and they know it, they're squeezing the very kindly wait in the 70s and it's absolutely being done on purpose. So the answer to that in my mind is twofold one. We should have an industrial policy in this country. But the first thing we should have is an energy policy. Energy policy looks like this. We take all of the background subsidies literally make them equal And we give let's say 500 billion total 250 billion in in low cost loans.

The energy patch for drilling in places like Texas Louisiana and an equal amount of green energy and we sprint to a green future at the same time. We ensure that this country is safe and we have energy security in this country for all the people out there being hurt behind inflation, it's a security problem. What do you guys invest heavily in manufacturing? What do you see in terms of the future of manufacturing? The opportunity for ensuring manufacturing are their technologies that you guys are excited about that create an advantage for the United States built manufacturing capacity to service industry here. And yeah look I think this thing about we outsourced the entire entire manufacturer based in china because it was cheaper. But the reality is that the if we have our The productivity is between the kind of US and China right now is about 8-1. So a US workers eight times more productive than a Chinese worker. We found in in cases like Tesla where we actually help read in terms of GDP per worker yes we helped to insource the supply chain of Tesla. Why is Tesla floating grade? Because I got news for you. You actually can make stuff in America.

It's me. Well shocking. Okay let me tell you when you put what is why do we have this narrative that it can't be done And then we go to gigafactory and you see, let me tell you having been done. Let me tell you why. And boy I mean here's this, I'm probably gonna get pilloried for saying this but great companies are built by engineers like Elon musk. That's the reality of it and they know they want to control their manufacturing, we do it here so we can iterate faster and make the product better at the project. Could not feel solid for a great margin. They optimized the marketing people and destroyed by the CFO when you put the finance guy in charge and he's like oh hey we can get a lower piece part part by sending it to china but he doesn't understand the iteration cycle of making that product, that guy destroys the company and that's what happened in America. Yeah we put the Cfos in charge for God's sake don't do that. I mean can I say that? Let me say that if you if you if you calculate return on invested capital and you think about this carefully, what happens is these long supply chains to Asia they have huge capital deployed but capital is cheap. You do that because the peace part prices cheaper.

But you calculate what happened in particular when you calculate the overall cost of capital wasn't free because you didn't get me. It was actually much smarter. Bring it back. Right? So the long term cycle, you make more money in the short term cycle, you make less money. The short term cycle, you make more money. I mean is that another way to think about it? You optimize for short term outcomes, you you improve that you improve the income statement because you might improve properly in the short term but you actually hurt the balance sheet because you set all this capital on the water over to china. You're gonna bring it back and your iteration cycle goes down because you've got the products less innovative. It is but he's saying something really important which is that it's the financial ization of the P. N. L.

That in some ways led to the decline of american manufacturing in part meaning if you're a ceo of a business and you construct your employment agreement and it's based on a certain kind of earnings in a certain period, a certain earnings per share the incentive to then drive financial ization goes up now. The perfect example of this is if you compare it for example and you did this The comp package that you gave Ellen in 2018 versus the comp package that any other ceo in America got. It was completely black and white. It was it was it was it was opposite land and you basically completely said you get nothing. Now let's set these extreme goals and then if you can hit it you'll get compensated so much so that you know when you have glass Lewis and uh the the S s. Said no but they did most things and we're being sued for. It's gotta be careful what I say about it. But yeah we had a calm package fully voted on equity appreciation that required creation new products. And look, I'm gonna pick on Apple here. Apple is the first time I ever bought, I was 12 years old. My mom actually went to a bank and bought me a few shares of Apple. I still have it in my account to remind me what it takes delivery company steve jobs dies terrible.

And look, you know tim cook takes over to the supply chain guy. I mean they've really optimized profitability. It's unbelievable that you know, I don't know, $2 trillion airpods. Yeah. I mean pretty great, great product. great product, incredible free cash flow. They aggressively buy back their stock financial ization of that company has attracted I mean if you look at it, if you can look at a, the largest shareholder is the most sophisticated financial asset owner in the world, Brookshire Brookshire doesn't by technology companies, they buy incredibly well run financial assets and look at how ducks getting lambasted for the VR investment. Some might say that strategically it's not a great investment but he's saying I'm gonna spend $10 billion a year. No, no, no, he said it for a quarter and then he had to take it back and cancel it. Oh you said that they took it back. Yeah, but that's what he wanted to do. Um And so to your point like it's very hard to really build things now.

Yes, but it can be done. And look, I think one of I am what's happening in the world today, geopolitically is tragic. The war we experienced Ukraine is absolutely tragic. But from all tragedies come some some good things. There's always a silver lining and one of the server lines here I think should be the acceleration of re shoring of all these products into America to rebuild our industrial base because we actually can do it. I can tell you, I am starting my career basically the factory manager in California. It can be done. There are americans who want to make stuff between here, Mexico Canada We can make pharma, we can make high tech products. Yes. The price might be a little higher. But I gotta tell you, iteration could be better and your value will be better if the product is better, people will pay for it and resiliency and resilient. Listen for 100%,, 100%.

Alright, we are setting up a couple of microphones here, Antonio has been gracious enough to join us for some Q and A. The audience is filled with entrepreneurs, capital, allocators, artists and builders. So we're gonna put a couple of microphones out there. Hopefully some lights on the microphones. If I can see them line up and remember the rule, we don't need to know about your company. Just a tight concise question, anybody does any marketing or promotion, we're all gonna grown. Let's practice a grown three to grow no garden. You can, you can say your name, you can say your favorite. Yeah, okay, everybody, you guys may want to just know chris whenever you're in Vegas uh chris is the guy at Carbone in las Vegas which is the most, you know, reservation to get. But chris bought a bottle of wine for us that we can open now and drink. Say hi to him, get his number and text him if you're ever in las Vegas and would bring the captain of Carbone to our event. Nice to meet you.

All right, First question. Tell us your favorite bestie and then yeah, we're still doing favorite besties. Right, quick question go Alright, favorite bestie Jaeckel point out of the century to this team. So how it's off to you. Um, my question is first of all, we've been here all week in the last three days, watching these cards fall from the sky and we all know that you guys center around this poker table, this beautiful game. My question is how is that game influence both your relationships and decision making in business and your personal lives? Great question. Start us up and you can go to the back and the next person, How was poker influence friendship our lives? How is the poker game itself had an impact on our lives? I think I really do believe this, but I think it's the most incredible game and training ground for business because in any given moment you are forced to deal with the spectrum of good information to moderate information to bad information, good outcomes, moderate outcomes, bad outcomes, you're taking risk. You're learning information, you're adjusting your style and the most important thing is you're forced to anchor to your core values or not, how you behave at the table is how you behave in life. You know, you can take Yeah, you can take these winds poorly, you can take these winds well, you can take the losses poorly.

You can take the loss as well. I would encourage all of you to learn to play the game with your friends. It's, it's a beautiful, beautiful start a weekly game, sacks. Well the game at is how I got to be friends with. Right? I mean, I'm just saying been there with you guys. It's pretty freaking degenerate training. It's training for business. Well, I was just saying, I mean, didn't you invest in the Amur after I started playing in your weekly poker game and it was actually so degenerate. What really happened after that was I was in las Vegas in 2000 and 11. I had just left facebook. I moved to Vegas and I was on the phone with sacks in between playing tournaments and he like let me in invest in literally like, and you know, you did me an incredible solid because I put money in and you know what?

This is like nine months later he sells to Microsoft and I returned a third of my first fund and it really solidified my reputation. So, I mean, I owe you a big one for that. I gotta think about this though. So David sacks, I've known David for 25 years, but he did Yammer, I want to put money in. He said no, because it's a true story, True story. He said no. He said, he said no, because if this fails, you are my backup plan. Oh, my job. Yes. I was so afraid of losing everyone's money when I founded a company, you know, for me, I wanted to have like one friend whose money I didn't, I didn't lose. But you know, that was the wrong way of thinking about it. We should have, I mean how is the game?

Well before are you leaving? No, no, come, come, come come back for a second. Okay. He'll get glasses. I'll tell you guys one thing is one of the most generous people you'll ever meet. He's unbelievable. And for all of his, for all of his bluster about his freaking mink coats and ship like uh, he has brought together a group and he largely is the reason that I think the game grows and goes on and you saw some of the amazing people that we've had on stage here, some of our friends are here, that we play our game with that really that that network has been built and solidified because of and his generosity and friendship. That's, it's really something I've, I've learned to appreciate my life and yeah, I mean it's, it's a tremendous group and amazing people, like amazing people and the consistency of it has been amazing. Um, from had this like little tiny $2 million house with like a 1.5 car garage when he was at facebook and we, we would play in the garage, that little tiny place you had remember, um, you know, before you bought the two houses next door and knocked him down and gentrified. But uh true story, um, sacks uh said, hey, you know, you're doing these conferences, you should invest in the companies and this is when I put the fix in for him to win. Techcrunch 50 at Yammer with the hammer. He said, I have to win.

And then his wife told my wife he asked to win. So then I basically got the whole jury to vote for him with the hammer, he wins and he goes, hey, schmuck all of my successes. It was, it was a good fix. I put the fix in for him, but he said, listen, I want to thank you for this and you should start a fund instead of doing all this work at the conference, Why don't you just invest in the companies, I'll put 250 K into your fund, I'll be the anchor. I said, that's incredible. Really? And he said, yeah. And then I went to the poker table, I told the story and then Dave Goldberg rest in peace, One of our great friends, um, and, and certainly the best amongst us, thank you. Um he, he said, I'll put money into it, thank you. And uh, he put money in and then Billy said, I'll put money in and everybody said they put money in. Friedberg said, I'll take a pass. Um, but you know, we'll put that aside anyway, I was all locked up and other stuff.

Yeah, he's like, I got a fellowship. I this is true, this is a true story. Billy's there. He couldn't make it here. But he's one of our great friends and, and one of the island's best friends in the world. And he said, of course I'm in. Um, would you mind if I, if I tell our billionaire friend, the co founder of Ebay, Jeff Skoll and he tells him jake house doing a fun, you should do it. I meet Jeff schools money manager, uh, john. And I said, hey, here's what I'm doing. I'm a first time fund manager. You know what I'm doing? I'm a former journalist.

And he said, how much is the fun? I said 10 million. He said, I'll take half. And I said, I'm sorry. And he said, I'll take five million. And that was the biggest check ever got. And it was because ability and literally that first fund was raised around the poker table in one night and that changed the trajectory of my career and that really is the fellowship. And it started with David and you hosting and I remember it like yesterday and I think maybe also a good moment to just maybe chairs to, to Goldie, Dave Goldberg. Um, no longer with us and Tony Shea who played in the game as well. Two incredible men. Next question, Hey, um, my name's bob in. Favorite best, Great to meet you last night Antonio is also, are people too.

All right. Listen, we know question, let's go. My main question is like when you guys actually decided to manage capital for people like what really was the scariest step in taking that leap and taking that risk? I know a lot of you are gps solar gps, I mean was the scariest step? Well, I mean, even as a founder, like I mentioned before, I was like so worried about losing people's money. I mean, that was like, I mean, I don't know if like founders today even care that much that this seems, but it seems like coming didn't work move on to the next one. Um, maybe that will change now that the environment is not gonna be as free flowing, but I was always like really worried, I was gonna lose people's money and you know, something, remember when I started social capital, I I think I was playing, I was either playing golf or I had dinner with Chase Coleman in new york and Chase says to me, I'll tell you the one piece of advice Julian gave me when I started, I said, what was that? This is 2011, He said, this is a death sentence. And I was like, well what does that mean? And he said you're the only person that's gonna live with this because you're responsible, Especially based on who your LPS are for folks that if you really think about who they are, it's just gonna create this thing there. And it's like, you know, and I was I was lucky in that moment because we were we were able to get like the Knight Foundation and Mayo Clinic and these folks that are doing these good works, but then you're representing their capital, it's heavy. It's heavy because you make this decision and if it's wrong, you just feel literally like you're derelict and you're taking money away from sick Children or you know, free speech.

I mean it's it was that's a brutally stressful thing to lose money on behalf of people, by the way, I'll recommend it as a founder. If you raise money, raise money from your friends too. Yeah, I mean, I I raised the first fund from my friends and I tell you I took every single deal very seriously and I did my diligence and I was very thoughtful about it. How about you Antonio oh man, our first fund, there are two fears I had. The first one was raised from, I live in Chicago from my friends in Chicago and I literally said to one of my uh partner at the time, if this doesn't work, I have to move, you have to really do Chicago because in Chicago you might get killed if you like, it's like, no, no, no, I mean these guys money witness protection. Exactly. These guys use your money. People kind of like, I'm sad about in Chicago, like break your legs, burn your house down, man. It's a whole different thing. All right, let's take another question. Oh sorry no no the second thing I mean honestly the worst thing for me, the most scary thing for me was just the people I had I had three or four guys that worked with building comes before that and I knew that I just felt if I disappointed them if if we failed um I would have felt terrible. Yeah it certainly makes you focus on the game, it's like being staked in poker, you play better.

Uh Sir I have a question for the 17th most important person from Paypal. Okay obviously friedberg is my favorite bestie. Alright let's go. Unbelievable Friedberg love. Alright Freeburg soak it in. You've been talking about how all this increased money supply has been sending the asset prices up and now it's unwinding. I don't think we've heard you talked about Crypto specifically. Bitcoin has obviously come down but it's still over three times where it was pre pandemic curious what you think will happen in that world as this unwinds. You want me to address that or So the thing, the thing about the Crypto market to understand is that it's like a liquidity sponge, the more liquidity there is out there, the more people feel empowered to make speculative investments and crypto is like the most speculative now that's not to say um you know it's not real. I actually do believe in Bitcoin. I think there'll be a number of other um sort of currencies that work but probably the vast majority will not and there's been a tremendous amount of speculation inflation there and so that space is in the process of correcting you know, I've never been able to say like what the right price levels for any of this stuff are. Um let's say you believe in Bitcoin long term, let's say you believe it's gonna be the first non fiat currency, what price should that be today?

You know it's it's there's no like just kind of cash flow analysis you can apply to it. So it's always been very hard to know what the prices of these things should be. And so in practice the price is a function of how much liquidity is in the system. When you go through a period of liquidity getting destroyed it's no surprise goes first Antonio have you touched I mean you you were so into physical assets and building real things like spaceships and rocket ships. When you watch this crypto bubble you know grow and burst and grow and burst and now it's burst again. What's your take? Well first I want to I bought my first crypto I mean I think in 2017 because David sacks and billy were pushing the Ponzi scheme on me so they were like they were I was at a birthday party I think they were there to and they were like they were they were talking Bitcoin so I bought something something like I think it was like 100 bucks of so here's my, my general, I actually think I think that Bitcoin in particular is a bet on rising political risk And on political freedom. Economic freedom is uh is closer to political freedom and last time I looked, Ukrainians are the third largest holders of Bitcoin and if I was saying in Taiwan today I would have 1050% assets Bitcoin. So this, this removes the ability to control currency capital controls from governments. I think this is very important and it should survive price levels. I don't know, I do have a you know a reason why Bitcoin is a hedge to political risk globally and that's how we think about it. We have invested in infrastructure assets in and around Blockchain with Dave, we have a couple of assets because we believe that Blockchain itself is a platform shift in the technology of tracking assets, this is a real thing and it's gonna happen, it's gonna change the way we do finance, so we invest in infrastructure.

Got it, let's take another question. Oh I'm sorry, we're gonna take one from here, we'll alternate so tight is right yeah. Hi uh car mantra Ceo credo. Um I have to say I'm a science nerd friedberg but jake sally, it's been awesome today. Um and I want to say you guys like your courage and bravery to do what you've done with the pod and watching this today like thank you. Thank you. Yeah you've talked a lot about later stage. I'm wondering if you could like tune in a little bit more on on pre seed and seed and kind of what you're seeing In terms of valuations and metrics that that you've got to hit in the earlier stages. It's very simple. You know I invested in uber thumbtack and calm for $15 million dollars combined. That was their combined valuation post money, post money. And those all three companies had products in the market.

And then what we saw over the last five years is people wanting credit for a white paper, a prototype and M. V. P. To the tune of 15 to $50 million. And we did sit out some of those and said listen, when the product is ready let's take a look at the product and talk to the first two or three customers to David's point about 0 to 1 customers is really hard hurdle. And now it's back down to 6 to 15 million for a company that has a product in market and maybe 50 to 100 times yearly revenue for evaluation. So to the extent you can get to 200 K. And yearly revenue you can get you know a 10 to $20 million valuation. So I'd say halfway back to normal and perhaps a permanent uh you know livable reset because the outcomes have been pretty fantastic. So the early stage you go up, the only thing you really need to raise money is to build a world class product and just get a couple of customers who are absolutely blown away by what you've built. That's all you need. But everybody gets concerned with the theatrics and the performative stuff and their network and nonsense and who you are and where you came from.

None of it matters. Build a world class product that two or three people are obsessed with and you'll get the c check focus. I think right brad Gerstner had, sorry, interrupt your applause Jaeckel. I know that's important to you. I think brad Gerstner made a really important point on this. Which is the new normal is going to look like the old normal meaning the pre covid normal. We had the the, the abnormal period was this two year covid period where 10 trillion liquidity is pumped into the system. Things are going back to what they look like before all of that happened. And maybe before the feds started with this zero interest rate policy. So we're actually getting back to normal, understand that the environment we're entering now is is the normality the abnormal period was the inflation. We saw in assets over the past couple of years. That's the like reset.

That everyone's gonna have to wrap their heads around sacks. You're my boy. Finally, finally, I think there may be some preference falsification around this because people don't wanna admit they're conservative all the polling, all the polling shows this. So anyway, thank you sir. And your second favorite bestest tucker go uh, for early stage sass investors, which most of you are in an increasingly digital world where there are large SAS solutions for nearly everything. How do you think about selecting companies and founders in the early stage that are coming to market with a small amount of utility? And how do you think about they compete with companies with already established customer distribution. Yeah. So I think, you know, one of the things I really like about SAS, which is your software and service basically B two B software. It's business software Okay. That sold as a subscription is that the world's never gonna run out of new ideas for business software. Business keeps changing.

So therefore the software that businesses need will keep changing. And there will always be an opportunity there for new companies, new verticals, new new niches. They'll always be um, you know, new new ideas. And so I'm never worried about running out in terms of how we evaluate the actual idea. You know, uh, we've actually been super transparent around the metrics that we need to see. It really does start with a company hitting the metrics hurdle that we need to see for for example, series A um, you know, it's a call it your roughly more or less a million dollars a are are you want to be growing 15% month over month certain that dollar attention, certain capital efficiency. We've all we've published it you know on our website or blog. So um it's it starts with that and then once we know that like our thresholds have been hit, then we get into more qualitative or subjective factors like you know, what do we think about this founder in this market? But one thing I like about it is just it's uh it's very well defined like what we're looking for. And so you know, just go to our blog. You'll see. We'll tell you exactly there's no mystery outside of productivity tools though.

There's not a single company that can stay in one category and become really big. What does that mean? Um There's not a single public company that doesn't have now an entire strategy that says we sell at smb mid market and enterprise. And so the thing for SAs businesses unless you're like a really powerful productivity tool, like a slack or annihilation your valuation capped in the mid to high single digit billions as as it currently stands today. That's just the law of the math in the public markets on how you're rewarded. So how do you grow out of it? You have to embrace a strategy that actually does more where you become a system of record. So it's a good example is like a Zendesk they hit an upper bound, you know there are many of these examples and so if you're building a SAS business or you're investing in this business, the other thing to think about is in the absence of being a productivity tool of which again there are few. Um everything else has to find a way of being applicable to larger bodies over time in order to maintain valuation. We're going to try and move faster so we can get more people to the question here, Hi there guys favorite besties, probably four way tie, but maybe edges out just a bit. Okay, quick question. Right.

You know, you guys have done incredibly well. So What would you do if you're dropped in the middle of say, Kansas take away the resource, take away the network and take you back to age 25, what would you do and why I'm actually from michigan, I got dropped in the middle of their with no resources and not allowed to do. Uh and I wasn't 25 I was in my early twenties um I would I would find a way to make it work man, you should get, you should actually whatever scale you want to start at whatever job you have, I would try and start little company, There's always people and listen to plastic grommets michigan man, you could cut grass, I love computer company when I was 12 years old doing like networking for people in the, in the old days, I mean there's always something you can do if you had a valuable skill, build the skill, start a company and just get started, start moving and make good decisions along the way. One good decision compounds on top of the other and all four of these guys, what they have done in their careers has made very good decisions and they've kept moving when they've had problems. You start, you start early and they just want to tell you this, they may look like super accessible guys now and they are, but it wasn't easy and it wasn't linear. They've all had ups and downs, they've all had problems and they also, they also do what they, what they do and have great respect for all for them. I know them all well, they keep making good decisions, they're highly resilient and they just keep going and I will tell you the same thing. The only thing I'd add to that is to keep is to keep learning. Oh yeah, I haven't had any any, I just got here. Um, but I would just say keep learning as well, Like one of the biggest advantages I've had in my career is that I try to always learn as new stuff as often as I can and whenever I find an area of interest, I pursue it in terms of deepening my understanding of it and and that's always created opportunities for me that I wouldn't have just stumbled across or walk my way and it's such a great opportunity to have you here and Tony when I asked you to do this, you had never been on a podcast before, have you ever done this kind of thing? I've never done this kind of thing, you know, only doing it because it's the four of you and I am usually very private but I'm enjoying, you know, very like very NPR radio, it's like hey everybody you're listening to politics, culture, I'm Antonio gracias people tell me I have a voice for radio and pornography. Yeah, it works pretty well.

Hey guys I'm Samantha favorite besties friedberg. Um I run the factory automation team for a large semiconductor manufacturer in the United States, um really unimpressed with the innovation and industrial automation and so really interested to hear your thoughts on where you see the next disruptions in automation and also maybe a question for Antonio where do you see the disruptor specifically and how we get not only the technology but the economies of scale for these really capital intensive businesses in the US this is

your guide to answer for sure. And by the way, you should talk about automation. I don't know if you want to. Yeah, yeah. I mean we we we know a lot of information, one of my partners is like a genius engineer in this area and you're particularly the chip business you said right, so you know, TSMC basically took this idea of outsourcing manufacturing assets that intel did with TSMC the beginning that created that business and moved most of our high technology and chips often offshore into Taiwan is like a terrible idea. And we do, I think as I said earlier, the industrial policy this country, I think we need industrial policy to bring manufacturing back. It's very important. And the problem you have in automation, in manufacturing is you know, when you think about where all the great engineers go today, they're good automation, they're not going there because they're competing TSMC. So you have a you have a couple of in the US but we have to have some, I think actually gonna require industrial policy to force people like intel AMG to want to bring stuff back into the U. S. And to really get great talent to want to do it.

Do you think there's opportunities outside of Greenfield models to kind of reinvigorate and unlock the capacity that we have in some of our older manufacturing here in the US?

Yes, I do. I look, I we at Tesla took over the Fremont Fremont factory was a former GM Toyota factory and you know, we? Re told it was it would have been we had to do it because we have the money and it was free, basically. Um but if you if you took that approach and you got the you got really great entrepreneurs to focus on this problem through an industrial policy, they need money to do it. I think you'd get great invasion. Look, and video is actually here in the U. S. This is the reality. This is a great chip company. Uh, and the fabs they use are spread all over the world. But if you gave in video fabric to who knows what happens, it was the right price. Yeah.

Jensen's a great ceo, did you go that side favorite bestie Jason, You keep the ship together, You're the glue that keeps it together. Uh, My name is chris, my friend and I started all in talk nine months ago. The fan page for the it's really obviously I was I was at the outdoor mall near my house and my dog attacked another dog. And the guy was like, it's okay. I saw you on Tiktok. So, because you didn't get your channel, that was for his kin watch channel. It wasn't channel. So my question is in the 20-2022 predictions episode, you talked about all in media idea and starting an all in media channel maybe. And I wonder if you guys have talked about that anymore. Your your goals for the future on that. Because I'm pretty sure everyone would agree here that if you did start one, it would do a whole of a lot better than CNN plus. So, well that that may not be a very high bar.

I think we actually, we actually did get together the four of us, we sat in office, people started yelling to people walked out, sacks, sacks just started to do this at the table. Yeah, I'm definitely, it wasn't a productive conversation, but no, but we did take one key step, which is that Freeburg said I'm gonna get my team to draft the LLC agreement for the four of us box. So we're one step closer to starting it. But joking aside, I still think that uh it'll become inevitable and I think the reason is the two people, the robots, not humans that were uncomfortable with human interaction. David, David. Uh once, once, once we do the recap of this, I think it'll be, I think these two are probably the most shocked. No, I'll tell you by the way, my observation. I used to go to ted, I went to ted from 2000 and 2019 I stopped going to ted because I thought the content went to ship and it basically got overtaken with like social justice talks and like used to started like tech and interesting ideas about where the world's headed and like I listened to our speakers this week the last two days and I'm like, man, like really fantastic content. Like this could be the new ted. So I got really invigorated by that. Like I really thought, I felt like that was really, I think by the way, I think, I think it's conversations people don't really seem to want to have right like and that and those are, and let's just say you are not the earliest believer in this was going to get pulled off to, I cannot tell you how many times I've considered quitting the pod and not even showing up for this event. And I give Jason props publicly for doing a great job pulling this thing off.

So Hey guys, my name is Sarah and I really love all of you. You got me through a very tough challenging time when I started listening to you. I came here over a 16 hour flight from Abu Dhabi. Um so thank you. I have a comment and a question. The comment. Um maybe David. Um I have a lot of relatives in Sweden and um when the Ukraine war started this is very amiable, innovative, beautiful people. Um I haven't had a war over 150 years and they were putting gas in their car and supplying um cans of goods and got really really nervous about what's happening. And we're watching closely to see what would be the next step. I think if the US did not step in. Um so there's a lot of reality out there um for the US to stay, I don't know like the savior of the world in a certain way or another um finished people felt the same way moldovans.

Um so this is a real big reality out in the Western european world, not just Eastern europe. So that's on my comments. So thank you for the question. And this comes from my husband, if you're sitting on excess liquidity right now and want to invest for a long time, that was that was that was that a transition from World War Three to investment advice, stock tips, stock tips in the market? We want to say that is dynamic range right there. Well done, well done. You want you've gone from soup holes, you know, you have to know the ups and downs of my life. So yes, it is like that. Why don't we just take the first part? Because I think it would be good. So, so on Ukraine, you know, I thought it was important to have this debate today where we got both sides of the issue and we got two people who are very passionate on both sides. And um I tend to agree more with Glenn on it.

But um but that doesn't mean I don't want to help Ukraine at all. I just think we have to keep a close eye on preventing this thing from escalating into World War Three, Because the Russians have 6000 nuclear weapons and their military doctrine says they can use them if they feel that they're existentially threatened. And so, you know, if our objective here is to help the Ukrainians expel the Russians from an invasion, that's one thing. But if our objective, if we have mission creep and too destabilizing the Russian regime and to basically trying to take back Crimea, which they see as there's um if we're trying to weaken them to the point where they're no longer a great power, we're really playing with fire there. So we have to be really careful about our objectives there and make sure that we don't let this thing spiral out of control, Antonio what do you what do you have thoughts on Ukraine? And are we being too dovish or hawkish or doing it? Just right. So I think we are there, there's a lot more going on here than meets the eye. And this question was about Sweden Finland. And here's what I would say because I want to focus on that, that if our our our friends in particularly in Northwestern europe, um should actually be arming themselves and if they arm themselves, we won't have this problem. That's the reality of it. The reason Ukraine, Yes, that's the reality of it.

Yeah. So the time, the time for sitting on the sidelines in central europe is over. If you care about your country, care about your Children, care about your family's, then you should arm yourselves period. Full stop and americans were happy to sell you weapons. No problem with or without NATO. I think that's true. The reason Ukrainians are able to defend themselves is because they are they have actually been buying weapons and they bought, they built their own weapons with the Turks that the the drones are being used to destroy the Russian supply lines are not coming to America. Coming from a joint venture with the Turks. This is the reality. So should we be drawn into a war in central europe? No, I think could start World War three. Should we help these folks defend themselves?

Yes, I should. And in your particular part of the world. Yeah, for sure. Start buying some weapons. One question over here. Yeah, tough to follow. But my name is

johanna

favorite busty. I think Friedberg, I think you did a good job of being heard and hearing others equally. So I think that's an important skill. Um trying to work on it myself, wow. In terms of my question, it's a little more qualitative. But some of us are having an interesting discussion about first impressions last night and I'm curious to think one in terms of your own first impressions, how has your the way that you introduced yourself to others changed as you've grown and what have you learned about that? And on the other end, what are some of the most notable first impressions others have made on you and why have those stood out to you? It's an interesting question. Well, seeing as only two of us have emotions, maybe we can. Mhm. I'm gonna go to the bathroom, You won't find any emotions there. Turn the mic off please.

The oh my God, that goes right through you continue. I think that when I was younger, um I was more insecure. So I had to wear what few labels I had on my sleeve and use them as a weapon before others could use their labels on me. I honestly felt that way, you know, and in Silicon Valley at the time, you know it really, there is a very mono cultural aspect of you know, folks from a few schools, you know, folks having worked at a few companies. Um and I had neither, you know, I worked, I went to Waterloo which is in Canada and I worked at A. O. L. So I didn't go to stanford and I didn't work at google um or yahoo and there was a, there was a great lineage and of, of where you know the really credentialed credible folks came from and so you do what any insecure person does. You kind of throw what few things you have out there very quickly, you know, trying to one up the person in front of you and that's calmed down a lot. So that's probably the biggest thing that has and I think it's I have a similar observation. I when I was taking that our train into Manhattan, I used to say to myself, Jason Calacanis editor in chief, Jason Calacanis millionaire and I was like literally had a 16 page photo copy magazine called Silicon I reporter and I was trying to convince myself that someday I would be somebody. And I think that narrative, It was important for me and people when I would give them the 16 page photo copy, I'd say here's my magazine.

They say there's a photocopy. I'd say no, it's a magazine, it's got a picture on the cover because for me that was that why it was a magazine and it eventually became a very large magazine in fact Of 300 pages and today thank you. Um, so I think there is something about manifesting stuff and just you know, believing that you're gonna get there. But today I define myself by the things I love to do. So when people do ask me now, hey, what do you do? I say? I'm a writer and I have a podcast, an angel invest and I don't say it's the number one podcast or I'm one of the top angel investor all time. I just, I just think about what I don't say that and I don't say, you know like it's, you know, the book is in 11 languages or whatever. I got a million dollar advance. I just, there's no Ego about it. I just say writer podcaster Angel. Okay, how did it go in there?

Okay, David, you? Okay, What sort of advance are you getting $1 million? He said $1 million 12 languages now. Thank you. You have one. I'll sign it. Next question sometimes. Sometimes I think Jason's just pimping out all of us to fuel his media career. You think sometimes, Hey, David, all honesty, how is the deal flow gone since you got this podcast? 50%. That was the intent that was coming this way, that since you went on tucker go high Today, the crypto world is focused on decentralization, speculation and stores of value. Who here is excited about micropayments and whoever is most excited.

Which industries do you think will be most impacted by the newfound ability to send payments in as little as 100th of a penny favorite. Yeah, good sex. Um, so you know this, this question of micropayments has come up all the way since you know, back to when I was working on Paypal and one of the problems with micropayments is, as the name suggests, the amounts are very, very small. So you have to do a lot of them to create enough volume for them to be meaningful. And so there was always sort of this market size problem Now for crypto, there may be more of an opportunity there because um, the way that the old credit card rails network works is there's like a 25 cent charge per transaction. And so like a paypal, it just didn't make sense to facilitate micropayments because the cost of that transaction always exceeded the fee that we could get. So you're right that or I think what you're suggesting with your question is that there is sort of a crypto opportunity to do this in a different way because you can basically do a costless instantaneous transfer using a Blockchain based currency. So I'm sure someone's gonna do something interesting with that. And then the question is just how like what does that aggregate into? Is it, is it gonna be big enough to be the way there's a there's an interim step which is also pretty obvious at least to me. Which is this idea that you know for example like if stripe actually took the time to embrace one of these stable coins, there's no reason why stripe needs to actually run the interchange as well because like you can just basically swap that dollar in a ledger into U. S.

D. C. Let's just pick that as an example. Not together, not to tilt to um running on those rails for free and then basically transferred back and it's it's not it's not obvious why people do you need the gas cost to come down. So you know like running a transaction on ethereum are certainly yeah you need you need like a chain like a salon or something. Something that's like super cheap and the cognitive load of the transaction. Just the person deciding do they want to pay 1/10 of a penny? A penny is sometimes greater than the actual value of the money which then creates almost like friction to them wanting to read the article. Let's take another question. Hi, my name is kate and my favorite bestie right now is Friedberg who often plays devil's advocate and so forces a step. How many people did you pay off? So that we all admire your successes.

But we've also been hearing from our, for instance, that we need to be comfortable with failure and we need to become resilient. So when you look back on your careers thus far, what have been the toughest moments? The moments when you've made a mistake that have taught you a lot. I mean I had two huge, yeah, man. Um my biggest mistakes in life have been about people and I have over the years made errors in in judging people and how honest they were and how good they were. And as I look back on that, it's because I have a weakness for ideas that are great and sometimes those come with great people and sometimes they don't. The reality is there are some bad people out there who are acting really great and doing interesting things and we have, we've suffered from that. I mean, I know David and I were together that suffered from that and it it happens. So I would be, I've learned a lot about that. I've gone deep into neuroscience actually have a staff. We have a woman who's got a PhD in the neuroscience of emotion. Caltech now on staff that helps us learn, as you said, always learning about how to assess people and how to assess their emotional states.

That's the most important thing. I think we've updated our process and in my own thinking. So you love the idea so much that you ignored the other data that this person was not honorable? Truthful? No. I mean there are times when there are two kinds of these areas here, One type of error is we just didn't see it because the person was so good at being bad. They are. You know, one of these neuroscientists taught us is that about 5% of the population has a brain anomaly that make them actual psychopaths defined as the bagel isn't fire properly when they do something bad guilt, fear etc. And in our particular industry it's more like 10%. So we raised our baseline forecast at 10% and it's gotten better but there's something so good at it. You just can't see it. I mean, Theranos Elizabeth Holmes, okay, like lots of smart people in the company.

We didn't but it was it wasn't obvious then obviously then there are there are moments earlier on when we had yellow flags who overrode because we were so mostly committed to the idea that we we we had a business, we did was in the dental space was it was Medicaid, dental plans for kids that were black and hispanic and I'm, you know, I'm from that demographic and I wanted to make that great and the reality is we overhauled yellow lights because we wanted to make it great and we failed. We're going to add some of your had two huge fielders but they were, they were more personal moments of learning for me. One was, you know, we were in the midst of building a phone and it didn't come to pass. And if I really think about what I thought the problem was this was when I was on facebook, what the problem then versus now then, you know, I would have said, oh zack and I had a huge kind of, you know, thing and blah blah blah. Now what I would have said is, you know, I didn't really understand my own limitations and what I was really asking of him in the board in that moment. And then the second is there were all these moments that were people decisions, um, at social capital that ultimately manifested in sub quality financial and investment decisions and had I had it to do over again, I would not have ignored some of the red flags because I was so desirous to be in the game to, you know, be in it. That uh, I probably, you know, look the other way a little bit on folks that you know, just give you the practical example. I remember in a $300 million dollar fund, I put 25 or $30 million $50 a coin And when the thing went to like 150 or something, just the pressure to distribute was so high and I had conviction. I had all of these things, I had all the voting control, I had everything to just say no and I didn't have the courage to understand my role as a leader versus something, you know, my job as an investment partner. Um and so you learn, you know, you learn what you're good at, you learn where your strengths are and you try to just get better, try to fix those weaknesses. I mean at the end of the day, what we're both saying is the same thing which is ultimately, it has nothing to do with anybody else. It still comes back to you and what your skill set is in your toolbox and whether you're upgrading your toolbox, everything Freedberg sacks.

Any mistakes that you're able to access through your Cpus in your long term storage. Well, I think as you get older you learn how to pick your battles better and you just have to decide like what are the occasions that are really worth fighting for, which aren't, you know, and sometimes you just let it go and others you have to fight and just knowing when you should choose which path I think is really important. By the way the guy you really want behind you in a battle is this guy so phenomenal investor back when I was on the founder side of the table. So good brawler. Yeah, for sure. That's why I got him a samurai sword for his birthday. He did the collection samurai, my apartment start with David Saxon samurai sword. Yes. Thank you for your kids trying to play with it or something. It was not a toy friedberg, anything in that long term storage tape drives of, uh, I've made a lot of mistakes. Um, it's really hard. I'm very hard on myself.

Um, when I was young, I always said there's no limit and I always believe that and when I hit walls in my life, it was very, um, very difficult because it totally countered what I, what I felt was possible. I always thought everything was gonna be a success. Uh, there's no way I'm gonna let anything fucking fail. There's no way I'm gonna let anything not work. My voice is cracking because I'm crying because I'm losing my voice. So, um, we know all we need, if you cry now that everybody's gonna be, he actually does have emotions see. But I would say, um, he's smart and kind and a vegan, he's perfect. The biggest mistake I made, he's my dream boyfriend, maybe coming on the stage was the biggest mistake joining the pot. Oh man. But I think Antonio's point is right. You know, um, you just have to be willing to learn and um, and evolve. It's, uh, you know, I now know that my life isn't about everything I do has to work 100% of the time um and being so hard on myself cause a lot of like emotional challenges for me over time, but getting um getting to this point where I can now be much more calculated um and just move forward quickly and learn from it, um there's been a big evolution for me um it's just a general statement, but yeah, and I would say, well no, it's okay, I just, I was I was thinking about it while these guys were being so candid and I was immediately gonna punt and go to the next question, but I thought that would be unfair.

Um you know, I think two things, one, I think a lot of my decision making early on, was that a fear, fear of losing whatever I had gained up until that point, so although I was a risk taker and I was being bold in one way, I was also throttling myself because I was just so scared that I would lose whatever gains I had, and it it made me an imperfect manager of people, an imperfect person maybe on edge a little too much and maybe not picking my battles to David's point, I saw everything as a battle because those winds were so important to me because they were so hard fought. Um and then I think later in my life, I realized I never actually thought about what I enjoyed, I just thought about winning um to an extent that was not healthy and uh then after Dave Goldberg died and Tony Shay died, I really took a self assessment of what I enjoyed doing and I mentioned this yesterday, you know, hanging out with these gentlemen and into Antonio's way of phrasing it, which is just beautiful. The fellowship. I thought that's the joy, you know, my family, my kids, my wife and this fellowship with my friends that I wanted to invest in. And I made a deliberate effort to be a better friend, a better parent, a better husband. Uh and because of all the gains I got from that and the joy that I got from it. And and I just thought a little bit, God, I do like those conversations. I do like writing the book, do like throwing the events. I'm just gonna do things I enjoy, which took me 30 years of my career to actually assess what is it that I like and maybe I should enjoy the journey a little bit more. So I think it's a great question, I appreciate it. Let's take one more. Thank you, enjoy the journey.

My best is my name is aria, I was the third or fourth employee at doordash and my question is regarding, oh sorry, my favorite bestie. Yeah, that was a joke by the way, my favorite besties to meth and sex, although it's honestly Sophie's choice. Um my questions regarding the positive impact that Silicon Valley could have on the political discourse and politics, which I know, you know, there's typically an aversion to intact. Um you know, you all have done a fantastic job outlining what those problems are as well as your guests. Um what I'm wondering is what a viable path forward looks like. You know, you mentioned that people in D. C. Pay close attention to the podcast sacks has recently endorsed Michael Shellenberger, which I really hope can save our home state. And I'm wondering is is the solution something akin to a third party, like what Andrew yang is trying to do or some new, I don't know, Silicon Valley techno party or you know, is there is, you know, what does that look like? I'm curious. Well, I don't think it's set up to actually have a third party structurally in America. So what you have to do practically speaking is field more centrist, normal people on both sides, whether they're republicans or democrats.

That's a practical thing that we can all do and then we can all show up and vote for those people so that the majority voice is much clearer than it is today because right now the fringes a little bit get to hijack the process. Um and so we take things that are that should be common sense and we pervert them in a way that just makes no progress possible. I really do think that we have that impact, I'm not sure how much can be of that can be quantified but when I spend time in D. C. I think it's true what I was told and what I've heard from people it's basically required listening or viewing. It helps shapes people's opinions doesn't mean they follow it. But I think it helps people think about things in a more normal way. I think what happened today is like a perfect example like the way that Glenn Greenwald and Antonio Garcia Martinez debate like that's probably for some of you is really unsettling maybe raise your hand if you were just like you felt awkward honestly just be honest with you. Okay well you shouldn't because that's normal. My point is it helps you make it seem more normal because those guys were not saying to each other that you're worthless and your they were just debating by the way we went out for a beer after that. This is my point. The three of us.

I was like okay we need to like go out and get a drink and cool down so I'm not chastising you for feeling that way. I'm just saying this is what the culture does to folks. It makes you even afraid to hear people debate things and still have respect for each other the way that he and Palmer kind of dealt with. That was that's incredible the courage that Palmer had to say what he did and then for him to be the first guy to walk out and then to own that, that's a, I think those are really important moments and you have, you have 700 more people capable of being that way because of what it just happened. So yeah, I think it's a slow march, but I think we're doing, we're right, we're riding a small dent in a small way. 20 years ago, every political show on tv was a debate format, like going all the way back to William F buckley versus gore Vidal or versus Michael kinsley on crossfire. I mean they were all debates now, like none of them are debates. It's all this their own little echo chambers. I think it's one of the reasons why this pot is successful is we actually can have debates and there is a divergence of views. What do you think Antonio is there some? Have you ever listened to this pot? I was on one once dancing in the background.

That's right. Yes, thank you. The dancing bear. Yeah, he did dance behind him. I recorded an episode from his house when you look at politics. Any interest there? Any, any any you know, behind the scenes work you've done. And and how do you think about it? Just as we get into as gen xers boomers are going away. I mean we're gonna kind of inherit this whether we like it or not. Yes, I would, I would say a couple things first. Um, whenever you have times you look historically, I think it's important to contextualize this when you have moments of of large technological change, you always have political disruption because the means of communication have changed this, the Gutenberg press the tall ship and you just go back and look, it always leads to destruction and often to war.

And so the question of are those of us who are technologists, the top of the system, we have a responsibility to steward this technology responsibly. We absolutely do. I believe we do. And I think that has been forgotten. That's number one. Number two, I have been involved in campaigns. Um, and it's interesting right now, what I'm doing is supporting any centrist candidate that I think is good on either side of the aisle. I'm a registered democrat. I support democrats for most of my life, but the reality is now, all I care about is sensible people that I think are really good and I'm engaging in micro target efforts across the spectrum in primary races. I would encourage all of you and anyone appear who cares about american book system to engage in the primaries because the primaries are what determines the quality of the candidates that actually are up for election and they're actually decided by very few people like how many of us actually voted in a primary, like very few of you, very free of you. Okay, so rather than us just complain about the divisiveness of american politics next time please go vote in primary and go vote for the center's candidate by the way. Did I hear a lot of support from Michael Shellenberger out there?

Let's have him on the pot. Maybe high favorite bus is I heard you speak with the North coast La. I hacked the north at the University of Waterloo. Uh so my question is ma talked about these startup journey systems like stanford or Paypal. Do you see like over the pandemic? Do you see any like remote or distributed systems that have like appeared or do you see any like building that are not just centered in one geographical location? Really honest. I'm not a huge believer in this whole decentralized work movement. I don't think any high quality work can get done um on on on difficult problems. So I think that there are types of products and types of problems that can be solved in a remote way. Certain forms of software for certain kinds of products. But for example, let's just say you're trying to engineer, you know, a farm a drug.

I don't believe that unless you're sitting there collaborating, talking debating, you can do that necessarily over a zoom. If you're trying to build something physical, you know, we have a business that three D prints rockets. Those guys can't do that by just you know, zooming around and having a couple of calls that doesn't happen. So I think it's too premature to kind of say working together has no value. I also think there's a huge cultural divide that will get created in America between these companies that come together and the companies that don't. And I think that the ones that come together have a chance of having more empathy in the end because there are moments where you can actually get to know the people you're working with every day. And I think that that gives you margin for error because everybody sometimes is a little, you know, dealing with their own things in their lives sometimes can be a little rude. So, and we all have tolerances. Those tolerances are higher when you spend time with people and they're much much lower when you're just in a zoom. So I'm, you know, I'd love to believe that everybody is gonna be Airbnb ng in a castle and a tent in a country house. But I'm just not sure that that's realistic to really solve the big problems that America has. You believe in the work from home Antonio you have a strong feeling one way or the other.

Um, I'm more than not, but I will say we have some great companies are fully remote. We have kind of a coalition example in cyber security, it's fully remote run by wonderful Ceo is under the age of 35 he's found a way to make it work and I've learned a lot from him and so I'm trying to be very open algorithm about this and I think there are people who make it work but I can't make it work. I want my people in the office, we invest in pharma um we invest in biotech and we have some biotech companies that have made it work remotely and some that insists on bringing back people back if you're in a lab obviously have to be back. But it I think there'll be a mixed environment. And I also think there's an interesting retooling going on in productivity and protein numbers in american that we're seeing today are wrong because they're not capturing what's happening underneath the technology because these remote environments so I don't know yet. I think it's gonna depend on the Ceo and how good people are and the type of industry you're in. Yeah, I'm keeping an open mind towards it. I know that for investing it was so much more efficient. You know, people could do 20 minutes zooms instead of to our meetings. But I mean think of the problem that that created. Look at the overhang when you could raise tens of billions of dollars over zoom. That turned out to not be a good thing.

Well and but also if you're a capital allocator being able to meet with three times as many people you could find more companies it. So I got a friend of mine who raised billions of dollars over the last couple of years cycle and he said I was able to raise $50 million 30 minute meetings now, spending five hours for a $10 million dollar check. And my reaction to him in the back of my mind was that's probably how it should be. Well, part of the, yeah, I mean we, we raised 1.7 that are fun during Covid and it was all done doing zoom reason new fun now and fly around the world taking meetings. But part of that, just because people come into the office and the liquidity cycles gotten is reversed on us now. Right. So the denominators got, it's got a heart of the capital. But for sure, I think like being able to allocate $10 billion in a venture fund in two years over zoom. Um, and I think that's on just the metrics and not see people, I think that's a bad idea. Yeah, I'm talking about 250 K 500 checks might be okay. Take another question here. My name is Kenneth Brown the third and my favorite, the charisma is legendary.

Um, he's my favorite. Best. You too, by the way. Don't be offended. And then my question is what advice would you give to non technical people trying to fit into the tech oriented startup venture world. I'm an econ major, but this just seems exciting. Like how do I become a part of it and Tony have thus. And I think that the best way to do this is to find a company you think is great and get a job that's a reality. I mean I would just I would associate myself with the business that I really respect your respect and if the job is in the mail room, the bob is the job as a janitor, whatever just figured out because what happens to high growth companies is they need good people and you'll be surprised how much being the first person in the last person to leave, if there's an office and doing the work that people ask you to do with a smile and a great attitude like those people, they move up fast. So I would just find a way in man wherever it is, however it is make it happen and start moving up by the way, you're you're not you're not nontechnical, you're not yet technical and I think that's the opportunity that sits in front of everyone that you can become. Technical. I had a my cousin who was a music major at U.

C. L. A. Working music and then he came back from covid and he started learning how to program online, taught himself, spent six months in his parents basement teaching himself how to retool his life and got some contract jobs on reddit and boards and other stuff and he got this amazing full time job offer a few weeks ago and it was really amazing that I got to watch him transform himself in his life over the last year and a half just by taking that on himself and he became technical, it wasn't that he had a non technical degree, it's that he just wasn't yet technical and I think everyone has that opportunity. I'll tell you, I'll tell you a great quick story. He's a minority guy. Grew up in Houston um really wanted to work at Tesla, Couldn't get a job, couldn't get a job, couldn't get a job. Finally got a job on the line. He was making 16 20 bucks an hour, worked there did well transferred work there did well transferred ends up in the supply chain group ends up working in battery supply chain ends up basically being two layers between him and Ellen gets into an M. B. A. Goes there for a few years uh works on the side uh and he ended up raising a bunch of money to start a battery business recently and this is an example of what he just said which is you know, there are these jobs available and then it's just you know is your chutzpah and your hustle and he's an example but it's a very motivating example to me because it just shows it's so possible, you know and there are phenomenal organizations that identify talent and will move you up really quickly and knowledge is literally free and experience is up to you.

Yeah the the the overriding, I think advice you're getting here is that skills or acquire a Ble and my lord getting to 50 60% proficiency on the skills, just give them what's on youtube or M I. T. Open courseware, any number of websites. Um, you can do it in a matter of weeks and now of course going from 60 70 70 to 80 that might take months and then eventually years. Um, but startups are looking for generalists. They're looking for people who can say, I need somebody who's gonna do the accounting and figure out how to do an email merge and build a mailing list. And then I need somebody to help with recruiting. If you could just become 30 40 50% as you know, good at each of those things at a startup. You know, before people get specialized, eventually you have 10 people doing recruiting. But in the beginning it's 1/3 of somebody's job. So I love startups for the sign of a great culture of a company is how little the obvious labels matter. Once you're inside of it and the best companies like a Tesla can become a trillion dollar market cap because they find the kid working on the line and then four years later is running the battery supply chain.

How does that happen? It happens because you're looking at the quality of the individual and their potential where they went to school doesn't matter their gender doesn't matter. Their ethnicity doesn't matter. None of it matters because the people don't see it, they see work ethic, they see results, they see, they see integrity. So that's another litmus test for you is like in the companies, even if you're a ceo and if your building, if every other day you're reminding everybody else of like where people need to have gone to school and where they should have been. That's a road to nowhere. Let's give Antonio a big round of applause. Very nice. Thank you very much. Thank you. Thank you. Thank you.

Thank you. Next question over here. Yeah. Um, I've never been on the show before. Alright. We're gonna just take 14 to 20 more questions go, sonny lava here is my favorite bestie. You go, huh? Because of him. I because of him. I shop at laura piano only. So thank you. So I just got a question for Friedberg.

I know that you wanted to talk about this yesterday about this sort of consumer credit crisis on the horizon that you see as potentially like the next shoe to drop. So, um, I think you wanted to mention something yesterday about it, but because of time and stuff, I don't have anything more to add than what I said on the pot. I'm not like, I don't think this is like a high certainty. I'm just concerned. There's a lot of loans out there. A lot of buy now pay later. A lot of stuff that that has floating rates attached to it. If we're gonna have a recession, we're gonna see job loss, you're gonna see these. Um And by the way these auto loan portfolios have like crazy outperformed over the last few years and now that these and a lot of those auto loans are floating rate um Those asset values are inflated, people are losing jobs. You could see a bunch of these things start to create a bit of a cascading effect over the next couple of quarters depending on how this all goes. Um So I'm not, I'm not gonna put my foot down on the ground and say, oh my God, consumer credit bubble, we're totally fucked. It's gonna lead to the great next great recession.

Um But I do think it's gonna be pretty kind of surprising. Buy now pay later. I saw, I don't know if you guys saw this this week on how a lot of the people that are going on buy now pay later sites are actually maxed out on their credit cards and so they're actually fully credited out. And then all the smart algorithms are like, oh yeah, you're a good credit risk. Like here's here's $1800 lightning round five questions and we're done. One bestie will answer its question go cool. Uh David free burger, My favorite bestie. What problem do you most want to solve right now, binary lifters actually edible. Actually I've been working on the so look, I've spoken about this publicly, I think it's a big problem. I was going to talk about it in the talk that we scrapped, but I'll do it another time um which is really the opportunity for bio manufacturing as a way to replace um a lot of traditional food systems, including all of ag all of animal agriculture. Um and a lot of the systems that we use to basically make our food. Um it's a, it's a big infrastructure play, you know, a couple of square miles, you know, using Elon's analogy, you could basically recreate all the food on earth, you can distribute those systems.

Um and uh and so I think that it can be extremely carbon negative? It sucks carbon out of the atmosphere. Um it will create incredible jobs. It's an incredible infrastructure opportunity. It would return billions of acres of land back to kind of, you know, whatever form natural form we want them to be. So that's an area that I'm spending a lot of time in and um that I'm particularly excited about awesome. Thank you number two.

Hi there, I'm Katie croft, Nice of you all. Imagine a parallel timeline where I say you're all my favorite because it's all true. So I'm curious extension of the immediate question. Have you given much thought to forming a consortium or community with the all in podcast and kind of, what further applications of that. Because if you think about the forced multiplicity of any number of these mines in the same room, working towards the problems we've talked about from education to ensuring energy, it could probably be pretty considerable the impact there because we have such respect for what you guys do and how you're doing it and the discourse you're having that, you know, we're clearly all diehards here. So I'm just curious if you thought about it, I'm kind of trying to inception you here,

you want to take that? Yeah, I think so. I mean this is a ton of work, but I think it is and we all have day jobs. Um you know, step one was to try to just see, and I told, I told the best, let's just see if we can each make uh getting to the pot each week a priority and a habit. And and that took the first year or so. So now it is a habit. We all value doing this. It has had tremendous impact on our lives personally professionally. It's been very inspiring for each of us. So we had to lock into that first doing this, you know, um was a ton of work and we'll see if it's sustainable and we have some other ideas. We wanted to do a college tour was the other thing we were considering, which would be like 3000 seats or 4000 seats and just an episode of the pot in Q and A. So I think that could be the next card to fall.

Um And then maybe hiring tim urban and uh Nate silver and then having them build a media company to take on CNN. Yeah, we haven't really given it much thought, but you never know. They were totally randomly. They were totally, we're not recruiting or anything. But um you know, anything's possible. Hi besties again, I'm rejoice. I run a talent marketplace for early entry workers. We use Gamification to accelerate. Yes. I just, the question is about the great resignation which we believe is a half told narrative. So how can small businesses which are most sole proprietors democratize their own labor supply and demand? Wow.

Um I think that's a very difficult problem to solve. Um I think again if as a supporter of capitalism, I think one of the biggest things that we don't get right is how money gets to the right problems. I've said this roughly before, but like money is really just a voting way of deciding what you think is important in the world and that's why the accumulation of money as just a practical matter. Forget moral or philosophical is so important because you can vote what you want. The thing is that aggregation happens easily. Distribution is terribly broken. And so the ability for folks to solve practical problems is very hard because the r. O. I. Isn't obvious and getting money from capital pools like us to individuals and sole proprietors is a basic, I think it is a very broken problem A because the systems don't exist. B because the laws don't allow it. And until that gets solved, I'm not exactly sure how a business who can actually like build for the future well or solve their supply forecasts or demand forecast can actually get the capital you need because the lubricant that allows you to solve that problem is money has always been, will always be, but getting it to those people is legally hard and it's organizationally impractical.

Um, I don't know if you saw the last spot. I mentioned this thing, we tried this thing called capital as a service Does't get to the sole proprietor level, but it gets to like small 5-10% companies. We would send $50,000 checks. Here's how hard it is the cost of getting a $50,000 check. We did this, uh, fishery in Indonesia. It cost us 125,000 to give them 50,000. We still did it because I just wanted to prove the point. They ended up tripling our money. So we barely kind of like broke even. Um, but it just goes to show you how really complicated. Okay, fourth question and then one more after that. Hey, I'm prem as a waterloo poker player favorite besties to meth.

I'm very into next gen manufacturing. But as appreciate investor, my concern is follow on financing. How do we get more investors interested in investing in the physical world? Because at least in Canada, it seems like most investors only want to invest in software. I think, I think this is what I'm saying. I think there's a very broken part of the capitalism right now, which is that technology investors by and large and I don't mean to disparage anyone here are not well rooted in the principles of math and finance. And I think that that's a real problem because in a moment like this, that is where you can actually make safe investments of capital, you can structure the money in so that you are capital protected, You have assets to back these things. And the reason why folks don't do it is they don't understand how to put together a model to demonstrate it and then the person that is then receiving that information is unfortunately not as well instructed as they should be to understand how to make a decision from that. That's what we have today. So it's a, it's a little bit of a miseducation problem And it's gonna affect the non sexy areas, rockets will always get money, but like 3D manufacturing sale at scale may not because of this exact issue because people don't know what means sir. You have the final question. Favorite Best is friedberg and hate to end on a recession question?

Never asking that question again, why do you guys, let me ask, why do you guys think it upsets you so much? Like, well because you're the biggest pain in the ass, you are the most fucking neurotic person every time we posted episode canceled the episode, we fund everything up again. Why do we keep screwing up? We're going to destroy them. I read the first comments and the down vote on Youtube, Somebody set the amount of noise we deal with this one. It's like literally does not reward him. It's like his inner model feeding crazy. You know, if you had a two year old child who you've given too much candy too, can you shut them up? One guy can shut your mouth up. It's filled everyone. Yeah. So It seems like a common theme on this stage these last couple days.

You all feel like we're in a recession or heading towards a recession, but I get a feeling that you have the confidence that this is gonna be a quick recession like a year. So my question would be why do you feel after 13 years of market manipulation by the Fed that is gonna be cured in under a year. No, I think you're right. The average recession has measured too. Like if you look back historically is two quarters, um the problem is that we've never really figured out what it's gonna take with the distortion of money that never should have been in the system because if you think of a supply demand imbalance as being a naturally self balancing phenomenon, if you perturb one side of it by an enormous amount exactly to your point. I think the open question that the world has right now is is that really a two quarter problem? Well, the Fed has told you that they're going to take three years to get three trillion. You've heard from David that 10 trillion was put in probably another three or four trillion was productively used, but that still leaves another three trillion of sloshing around money that we don't know. So I think it's an open question, I don't know what you guys say, how many quarters quarters if you had to guess again, I just hate this definition of recession where it's about GDP decline when we had a lot of the underlines in those numbers for GDP that I feel we're like artificially inflated for a couple of quarters because of a bunch of the structural stuff we've talked about. So I don't know like if you look deeper at economic growth companies signing up more customers, like a lot of technology companies are about increasing productivity with their tools with their, with what they're selling and um those businesses are, are going to continue to do well and to grow and uh increase customers increased revenue. Um and I don't think that there's necessarily a lot of the structural stuff that we saw with the GFC, the one thing I am concerned about, which I've highlighted is this consumer credit risk. And besides that it seems like, you know, things are, you know on good footing.

So I don't know like the technical recession definition probably couple of quarters. Yeah. Um you never know. And I think the best way to to look at the future is by doing scenario planning. So we basically we could say this could be a, you know, short, medium or long recession short would be six months. Media might be 18 months and you know, long might be two years plus. And we just say, I don't know, say one third, one third, one third probability. And that kind of gives you some picture. Exactly. So now what we're telling our portfolio companies is you wanna have 2.5 years of runway right now because you gotta go raise six months before you run out of cash and you really wanna have two years of cushion because things could be choppy for two years. I'm not saying they're going to be, but they could be, you don't want your company to run out of money and die just because of macroeconomic conditions that are no fault of your own. So if you can try to engineer that amount of runway, that's better.

I also think that here's the thing about a quick recession is or the prospect for one. We don't know what other shoes are gonna drop consumer credit is still a shoe that we don't know if it's gonna drop, look six months ago. Did we think we'd be talking about Tiger Global or softening for that matter, potentially teetering on the verge of being wiped out. Yeah. Redemptive out of coin basin peloton. Just think things can change fast. We don't know what systemic risk is in the system that hasn't been flushed out yet and we won't be out of this until it feels like everything's been flushed out and then the markets back and things are sort of in an upward trajectory. Again clearly were not their real estate and crypto doesn't feel like that's rushed out yet either. So do we have a clip to play as an outro? I don't know if this was just a clip of the cut clip before, before we go. Can you please say thanks to the, that works here and the team, Jason your team and all incredible. Thanks to everybody.

All of you guys have worked so hard and they really put a lot of effort into. That's pretty incredible. I guess this is a lost clip of us uh from last week. Yes, you did not have like a dungeon dragon sleepovers and grade seven and grade eight. I was actually programming pascal and we made a water moisturizer and it was a binary lifter. Much like the ones you have a have made a complete replica of uncle water vapor rises on And that that took six years. But it was great. And then I went hilariously as C3pio, I went to see threepio to our science fair. You should have seen the look on our teachers bases. Okay, you guys have your cold open. Let's go. Let your winners ride, rain man.

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