E108: Doxing debate, Nuclear fusion breakthrough, state of the markets & more - Transcripts

December 16, 2022

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(0:00) Jason's new gig! (1:05) Twitter's new privacy rules, notable suspension, doxing dynamics (20:48) Nuclear fusion breakthrough and geopolitical ramifications (42:58) Jason and Sacks's big night (51:11) State of the markets: Coupa acquired by...


captain Calacanis is here reporting for duty. Absolutely. Spirit Airlines. I just wanted to say all in podcast now sponsored by montclair and Spirit Airlines or now sponsored by the village people, Y. M. C. A.

Are you a pilot or a flight attendant jake?

He's a flight attendant. I

don't think it's thin enough to be a flight attendant.

Are you fat shaming me? Are you body shaming

do that nowadays? That'll get you canceled.

Getting sacks canceled at this point like fat shaming would The number 72 on the list? He can't get canceled because all the Libs have left Twitter, there's nobody to, there's no hole monitors

left. They all pretend

no, they quit every week.

It's like you said, they moved to Canada when trump got elected.

Canada immigration hacker figured out a way to take all this data and track, you know, people's yachts, people's planes. Obviously one of those people was Ellen. Ellen had a security issue. This is all public information. So the larger issue at stake here is the fact that the law allows for people to do this persistent tracking of planes, which then becomes persistent tracking of a person. And what really is at stake here is how we define the term doxing for people who don't know the term doxing. It means giving a person's location that could be your home, that could also be your at a location for some period of time. You're you're at a hotel, you know, for a basketball game. Uh and it's pretty clear you can take a picture of a Celebrity, say there's a Celebrity Hero. Lady gaga is at the farmer's market. What I object to here. We all understand doxing is dangerous and it in fact is against the law to just get people's addresses and stuff like that.

The issue here is a new type of doxing, which I'll call, you know, persistent coordinated doxing where dozens of times a month you're giving a person's location. It may not be against the First Amendment sacks. I think you would agree. But we have to ask ourselves, do we want to live in a world where whether a person is on an electric bicycle or an airplane or any device in between. Somebody should be releasing dozens of times a month, a specific dedicated feet of their location. It is terrorizing as a parent. When this happens, I've had doxing people on the call here have had various security concerns. We don't want to live in a world with de facto doxing what these sites were doing was de facto doxing.

I think it was a bad decision and I think that it um, represented on the least generous statement would be that it represents deep hypocrisy in that not just a few weeks ago did he say he would never delete that account, but he also said he was buying twitter to enable freedom of speech and freedom of expression and that he wouldn't come in and do the same sort of content moderation that was done by the old regime and then he came in and did exactly what the old regime did, which is that he took the rules and he took the quote moderation policies and he found a way to use them to make some editorialized decisions that he thought was appropriate. Now the more generous thing is what you guys are saying, which I don't think is necessarily wrong, which is that he's trying to protect people where there's some loophole or some law that doesn't seem right morally, but it is the law and it is what it is in those cases. I think you run into the exact same issue that the old guard at twitter had that the moderators and the executives that youtube have dealt with and that the executives at google have dealt with and that we sit here and we criticize Until you're on that side of the table and you're forced to make these moderation decisions, you're forced to make these policy decisions and you're forced to implement these policy decisions because of some moral framework that you now think is appropriate. And guess what some people will say that's not freedom of expression, that's not freedom of speech. You're taking that away from some people, you're taking this particular case away from a 15 or 16 year old kid who's built a Twitter and so I think what it shows is just how hard it is to moderate these sites, these platforms and that there is no simple easy idealistic ideologue of hey, all these things are open, all these things can be used by anyone all the time because as soon as one of these edge cases start to happen, you want to come in and do something about it.

What do you think, what should happen going forward? So I, I have had these issues happen to me multiple times. I'm not nearly as important um, as Ellen is, but it feels the same when you're in the middle of it. It feels pretty terrorizing that being said. I think the real decision for somebody like me is that if, if it's too much is frankly just to get rid of it and you know, to find a different mode of transportation that's a little bit more anonymous and, and the, and the reason I say that is that I just think that you would have to go and get the government to basically change the law, which they're not going to do. And so then as a result, your reaction will seem somewhat contrived and deeply personal and in that I think you lose credibility, let me just summarize this and be the first one to just state this, I think that if there's any person in the world that can figure out twitter, it's probably Ellen, but man has he taken on just a gargantuan battle and increasingly I am not a fan of this battle and I'll tell you why this is a man who is essentially proven that he can bend the laws of physics on behalf of humanity. He's done it twice, once in electric cars and once in Rocketry. The problem is that the realm of decision making at twitter has nothing to do with the laws of physics and is governed by emotions and psychology in which there is no canonical right answer. And so he's quickly finding out that half the population will always find fault with him, no matter what he does. And now the implication of that becomes very important. We saw yesterday that he had to sell another $3.8 billion tesla stock. Why is that?

It's because this transaction which was you know, very tight to get done, probably required lots of margin, you know, there look, I have a margin loan at Credit Suisse, so I know how these things work and you can very quickly get margin called, you have to sell down things that you own in order to maintain your collateral limits. We've talked about this before, he's had to do this twice now in the last few weeks. And that's because again, not because of the demand that Tesla as far as we can tell, but because people believe he's distracted and so people are anticipating weakness at Tesla, people are now shorting the stock anyways, it's causing this downward spiral and can he fix it? I think so can he pull it all out? Sure. Is it just putting himself under an enormous amount of pressure that he could have avoided somewhat. Yes, and I think that this is sort of where we're at um six weeks in my gosh,

I mean I was saying this guy learned in six weeks, what it took Youtube seven years to learn how hard it is to moderate content.

This is where I disagree is you're you're attributing so much good faith to these content moderators at youtube and twitter when the twitter files reveal that they made no effort to suppress their bias. In fact, they were like pretty much can you before,

before you react

dancing, dancing in the streets every time they booted off someone, they didn't like

their enough before you react to what you just said at the end that coda, can you respond to what I just said? Isn't it true? Like it's like,

well look, I mean if you define what Elon is, you know, doing there as you know, acting as a judge arbitrating on every little content moderation decision is that a great use of his time relative to what he could be building at Tesla and SpaceX and doing on behalf humanity then No, clearly not. But if you define what he's doing in the larger sense as restoring free speech to the most important town square social network, hopefully thereby inspiring other tech companies to move in the direction of opening things up then I actually think it's a pretty good use of his time. So look, I think we can quibble about this or that decision that he makes or this or that tweet, but I think the overall thrust of what he's doing is very important for the country and for humanity. So I get where you're coming from. Hopefully he'll find some people at twitter who he can empower and trust to make these content moderation decisions. So he's not drawn into every single little battle, right? We do want him focused on the highest priority problems.

My point is just that I get that. I just think that what he's learning and what we're living and seeing in real time is that there is no canonical right decision ever in this space, there's only a decision where some percentage will support and some percentage will always be against. That's my

point. He

did say when he took over, he knew that would be the case. He said, you will know I'm doing a good job when both sides are equally upset just to put a pin in it. I think it's important for people to understand what the new policy is. So I'm just gonna quickly read it. Just,

just hang on, sorry, hang on one second before you get too, because I think the philosophical point rather than the specific one is an important one and I just want to respond to what thomas said and and have sacks respond to this in the case of the the points you make around the twitter files and by the way, I don't agree with any of the moderation decisions personally. So I don't think that someone should be suspended for posting public information. I don't think someone should be suspended for saying controversial things. That's my personal opinion. Just so I'm clear on that because I know that you know that

a strong

yeah and um and so in this particular case I think what really irked me, I was trying to identify why it made me so angry yesterday. It triggered me. It really did. And I think the reason was that in the case of the twitter file points um it was a minority, it was a minority that was affected, it was one person that was affected because the majority wanted to do that thing to that person and I think in this case it's that the minority wants to affect the majority in the sense that Ellen has aggregated this control and this power over moderation and he's benefiting himself and a few people that have private planes and he's shutting down hundreds of tweet feeds, twitter feeds that are using publicly available information. And so it feels even more onerous of a of a the use of power um and influence because he's taking um he's doing something that benefits a small number and affecting a large larger number. Where's the where's the other one was affecting a small number that benefited a large number because that's what a lot of people wanted to see happen. A lot of people wanted to see trump suspended and it wasn't right either. Okay. I don't know if that, if that makes

sense. We understand your position completely. I just want to add to that in this policy. I think it's very important to understand what he is saying about this accounts dedicated to sharing someone else's live location are going to be suspended going forward. You can still share your own location. Obviously, content required, uh, you know, content for public engagements. You know, the president is speaking somewhere, whatever, you just really can't be persistently consistently tracking an individual otherwise known and you know, stalking. But Jason if NPR is live tweeting Jerome Powell speech, X Y Z location. If they do Jerome pals location for the next year for the next year, 10 times a week


his off duty on duty, we're talking about, I'm just saying like, let's just say he gives a speech every week. Is that illegal?

No. If you're, if you're giving a speech at a public place where you've announced that you're gonna be appearing at a certain time and place you've already made public where you're going

to what

we're talking about is and what what Ellen Jet was showing was a livestream of precision GPS coordinates over a sustained period of time and not to be too dramatic about it. But if you look at like the weapons are so successfully being used in Ukraine right now, they're all precision GPS guided now right now you have to be a state actor to get ahold of those weapons. But you could imagine over the next decade that having someone's precise GPS coordinates over a sustained period of time, it would be pretty easy to target them for and not to be dramatic here, but for assassination, that is a security risk. There's no way around that.

I brought this up with Palmer, lucky man, I'm scared that dude could come at me anytime when I get my jet. I don't want Palmer,

Luckey taking me out.


Palmer, I'm sorry dude, do not take me out, I'm gonna get my jet, I'll be on my first flight and he's just gonna send a drone in. But

look, let's talk about hypocrisy for a second. Okay, because here we go, let's let's talk about CNN's hypocrisy and the media hypocrisy because earlier in the week they were saying that any criticism of Yoel Roth who is twitter's former head of trust and safety amounted to a threat to his safety and they had this like theatrical tweet where they claimed he was having to flee his house, which a lot of people found pretty preposterous. They were basically saying that public criticism of someone who has put themselves out there to engage in a public debate who's writing op EDS for new york times that is a threat to safety. However, publishing someone's real time location on a continuous basis. So they could be

intellectually consistent

safety. I'm sorry if one of the things that threat to safety, it's the real time doxy of somebody. I think we now understand why Ellen did what he did. He basically had an incident in L. A. In which the safety of his kid was threatened because he's got stalkers coming after him. So his safety is a real issue. It's not like a made up issue. But yeah,

why should his personal experience affect the usage of the service that hundreds of millions of people use?

The decision should not be based on what affects him personally. There needs to be a principal basis. There needs to be a principal basis for any decision about content moderation or censorship maybe in the first few hours, that decision, it wasn't handled perfectly because there wasn't a principle basis, but since then one has been put in place, the principal basis what Jaeckel showed and this applies to everybody. And so, you know, now it's a debate about whether that policy makes sense. Now is Ellen just as arbitrary and capricious as the former executives who are running trust and safety at twitter. I don't think so for two reasons. Number one, he's promised transparency. He said that when we band or shadow banned an account, there has to be a reason for it and you have to be alerted to it. In other words, none of the shadow stuff should be informed

your speeding ticket, you get your ticket no more shadow.

That is different. And then the second thing is that and again I think you could say they didn't do this perfectly in the first few hours but there needs to be a principal basis for a sensor decision and it needs to be applied to everyone equally. And so far we haven't seen any basis for believing that he's not applying this principle equally. I mean still very early whereas the former rulers at twitter were indulging their personal bias and personal preferences and who were they were banning. There were two standards of justice. If you're someone who is allied with them, it was almost impossible to get censored no matter how hateful your tweets were. But if you were somebody on the other side of the political debate, they were eager to suppress you. And I think that at least so far Ellen has not shown that type of selectivity.

He selected against someone that put him at personal risk.

I think yes,

I do. That if that's where the decision had stayed, then I would agree with you. But I think that since then they've put in place that undergirded that decision principal policy.

I think those sites, I think those tweet streams are cool. I think there's some cool tweet streams that some of these people run and there are hundreds of them and they're actually kind of cool, you can see where these

different favor of people tracking

Where Air Force one is. They show all these different planes look and whether or not the FAA should be publishing the state as a separate question but it's on the open internet, it is already there, it's like turning off the rss feed from the open internet to protect himself. That's why it feels

so here's the part I agree with which is I think this policy with regard to planes specifically is going to be futile, it's going to be at best harm reduction because as long as there's many ways to publish this


I think this whole this whole policy on twitter is a little bit of a red hearing. I think the real issue, the real underlying issue is that the FAA is publishing these account numbers, thereby making every plane personally identifiable. I don't think I have a necessary

counter to it. Actually, if I may what we saw whether you agree with it or not with the mass banning of certain individuals did actually silence them and take them out of the public square. One of the reasons in fact, Ellen wanted to buy twitter, so if you look at certain individuals, whether it's milo Alex jones trump himself right on down the line when they got banned across all systems, it was dramatic in terms of the reach of the that information. So because of the size and scale of youtube facebook twitter etcetera when they act in coordination, they can have a dramatic impact. Not a perfect impact but a dramatic, which is why we have this issue of, hey should 2 30 be rethought because when they act all mass it is extraordinary what they can do to an individual. They


Alex joe how do you consume Alex jones? You have to seek that out in a major way. It's it's distinctly different last word. And then we're moving on to what could be the greatest science corner ever in the history of all in pod final word. I think this is this is a great transition. We're about to talk about nuclear fusion. And my point is I don't care about any of this stuff. Like I said


this is my point is like the if you if you take like an average person okay, you know we are let's say awake 16 hours a day. And you know, if you take out the time with our family, David, the family is people that are related to you can we d m sacks those people one more time, we'll send you their names. Um but if you take that out and you take out, you know exercising and you know, we also explain that two sacks that's when you create your heart rate and sweat sacks. The point is that you have, let's just call it 12 hours, you know, a functional executive time that you can apply to a problem and you can break that down into these blocks. Right? I would really love what is basically the smartest human and the most productive human of our generation to be filling those blocks with things that sort of like really transcend and increasingly and I agree that freedom of speech is important. Increasingly those buckets are being filled with things that are very low level and hyper tactical and our distractions at best to the to the path of free speech. And so I think that hopefully he gets all this ship under control over there. He finds a good executive team. I would like to see him get back to landing rockets on barges, getting to mars getting finished self driving. We're almost

there definitely has a point. I just say one of the reasons why we don't care that much about this issue is because I think something to understand that's important is there are different kinds of speech and different kinds of speech deserve different levels of protection. The fact of the matter is like business advertising is not as protected as political speech porn is not as protected as political speech. Political speech speech criticizing the people in power is the most protected category of speech because the founders of the country understood that the people in power, we'll always try to insulate themselves from accountability by limiting that kind of speech. But that is precisely the kind of speech that the former rulers of twitter suppress the most and show the least sensitivity to. So listen I mean is Ellen gonna be the perfect content moderator? No I mean

nobody nobody

is but I do not believe that puts him in the same category as you know Vijaya Gotti or Yoel Roth who showed no sensitivity for political speech. He has indicated a desire to restore freedom of speech and I think they ultimately ended up in

the best science corner ever. So according to sources, scientists work for the U. S. Government have achieved a net energy gain in a fusion reaction. The first net energy gain get it right. We have ignition energy which is very different from that energy game. Okay hold on. I know that you're in the anti camp. Please let the science nerd have you you have to you have to say it correctly so that people understand what you're talking about. Let me just make it even simpler then explain to us what fusion is dr friedberg and explain to us why this could potentially change everything.

We did this on a on a show once before. But I'll kind of do a quick kind of summary again basically if you take atomic nuclei which are made of protons and neutrons and they repel one another right? Because protons are positively charged so they want to push apart from each other. So with enough energy and enough density meaning that they're moving fast enough and they're close enough. They'll overcome their repulsion and and jam into each other. When that happens, some energy is released because the total mass of the fusion of those, um those nuclei is actually less than those nuclear when they're on their own. And so some energy is released and that energy drives a chain reaction. And so fusion is this concept that is fundamental to physics and fundamental to the energy driver of our universe. So the star in our, in our sky, the sun is driven by fusion and only about 15% of the mass of the sun at the center is dense enough to actually drive fusion. So the big challenge with fusion is how do you get these, these atomic nuclei close enough together and moving fast enough that they'll actually fuse and release energy. And that's super hard. The reason it happens in the sun is because the sun has so much mass that the gravity pulls all those particles together.

They get close enough to get hot, they move fast enough and fusion happens boom. All this energy comes out and every day we're warm now to do it on earth is very difficult. But if we can do it, what happens when you fuse nuclei together is you don't release any. This isn't like a radioactive fission reaction. You release energy that can be harnessed to drive our systems are our technology.

How is it done?

Yeah. So in the 19 fifties, you know, this was B arrived. Hey, we could do fusion on earth. We got to get a really, really dense plasma, meaning the atomic nuclei and the electrons have kind of gone off the atoms and it's just the nuclear spinning apart. You got to get them to move super fast, like tens of millions of degrees Celsius and you got to get them really close together. So how the heck can you do this? So there's a couple of concepts to do this, One of which is called inertial confinement, which is where you basically create a little pellet of the material. You're gonna try and get to fuse and you put a ton of energy on the outside and you can press it really hard, really fast. And when you compress it really hard, really fast and you can get it to be done in a perfect sphere and you can get it to collapse on itself very quickly without, you know, kind of shooting all over the place enough of those particles will come close enough to get, they're fast enough hot enough and they will start to fuse. Another way is through magnetic confinement where you use magnetic fields to create a really hot plasma, get it to spin around or to move and then the magnet brings that super hot plasma closer and closer and closer together until all those particles are moving fast and their dense enough that they start to fuse. So you know, one is called magnetic confinement, the other one's inertial confinement. And so what we saw happen this week is at the national Ignition facility which is a facility that was built starting in 1997.

And they spent about $3.5 billion to date. They demonstrated a net energy output from the fusion reaction governor inertial confinement system. And what that means is they took a little pellet and that pellet was made up of deuterium and tritium, the atomic nuclei that they used the particles that they use our deuterium which is a proton and a neutron stuck together and then trillium which is a proton and two neutrons stuck together. And the reason they use those two combinations is of all the different ways you can fuse nuclei together. This has the best energy output of any kind of reaction. What

actually happened this time that made

this work

for what? Apparently only $3 billion. You said you didn't say three trillion three billion

three. About a third

of about a third of what Sam Blankman fraud stole. We have

done something here

allegedly. So what actually happened. That is so dramatic that we have a press conference. Everybody's losing their mind.

So yeah, I just want to highlight one more thing about why this is so hard, you have to get such an incredible density. You have to get an incredible energy. So high temperature and high density that confining those atoms and not letting them escape and you know, basically dissolve before they fuse is super difficult. It requires so much energy in such a controlled way. In such a perfect and precise way that all of the digital technology, the magnets, all the measurement systems, all the software, it's taken us decades to get everything that allows us to do this today. And now we're at the point that we may be able to start to realize production scale kind of versions of. So what they did is they had a small deuterium and tritium pellet and they've shown 192 lasers onto this container that held that little fuel. 192 lasers. The whole thing happened in a billionth of a second. The lasers pulsed boom, here's an image of it and as they did that they, you know, basically x rays kind of hit the sphere this little BB if you will be, be kind of thing. And compressed it and it compressed so quickly and with such heat and it didn't dissipate because it was done so precisely all the lasers hit at the exact right time boom. This thing compressed.

And then energy came out and the energy that came out that was measured was 1.5 times the energy that kind of went into that reaction. And here's a chart that, that I'll show you from the national ignition facility, which shows just how inefficient the system still is. And this isn't even speaking to two point. But basically these guys Um lose 90% of the energy that they put into the center of the system, only 10% is actually used to drive the compression, the rest of it is lost. And there's a lot of ways to improve the efficiency of the system from here. But basically they put two mega jewels in, they got three mega jewels out. And so it was the first proof point production proof point in the 70 years that we've been theorizing about nuclear fusion here on planet Earth, that this is possible and it's real. Now this is these kind of inertial confinement systems. There are 33 private technology companies today that have raised about 3 to $4 billion so far this year to pursue several other technologies besides what the national ignition facility is showing to try and build production ready versions of nuclear fusion. And so these 33 companies are using a bunch of different types of tools, one of which is the token MAC. If you show the image, I'll show you this one. Yeah, this is what we talked about thing that

looks like Iron Man's arc reactor, you

create a plasma, you basically speed up the hydrogen nuclei super super fast, These deuterium and tritium nuclei super super fast. And then you use magnets and the magnetic field has to precisely squeeze the plasma, squeezing and squeezing and squeezing it. And if it's slightly off even the tiniest way, think about a balloon, right. If you put a pinhole in a balloon, everything escapes from the balloon. That's how technically hard this is. You're basically trying to create a balloon with a magnetic field and you're trying to keep the gas and you're trying to make it smaller and smaller and smaller. And if any tiny hole emerges the entire plasma,

Is that what happens in uranus? Like when you're trying to hold in the wag? Ooh, anyway, let me ask this question then about the consistency of this and then we go to you, can they do it consistently or do you think this is like they got lucky once or are we going to be sitting here a year from now? And they're like we put into when we got out

six and we did it

five times.

Yeah. So so now we've proven that humans can do this. Okay. Which is look, I mean, I was I wanna give you guys some and I know kind of some of these concerns, which

is what this comes down to.

Yeah. But I want to just say one like I want to say one important thing from a historical context. All breakthrough technology starts out seeming impossibly large, impossibly expensive and impossibly slow the human genome project 20 years ago, cost $100 million to sequence the human genome Today. We can do it in a couple of minutes for $100. Okay. The first computer the eniac computer had 500 flops of compute capacity. It filled a room. It cost $8 million 20 years later. We had a mainframe 20

years later. The wrong No, this is all this emotional bullshit. You're using the wrong examples. Okay, let him finish. Then you got a good finish your sentence. Freeburg. And then we go

and today we have an iphone that can do two trillion flops of compute in your pocket. I think that what we're seeing with fusion today is similar to what we saw with the eniac computer in the 1950s, which is the demonstration that compute is possible. And now we're seeing a demonstration that fusion is possible. And a lot of folks have anticipated this moment and they've invested ahead of this. Now, I don't know if any of these companies that are currently kind of being built are going to be production ready anytime soon. My estimate is that we will see production demonstration confusion in the 23rd in the 20s 30s. So call it eight years from now plus. And then you'll see grid scale scale up in the 2040s. So this isn't something that's going to happen next year or two years already

happening. What are you talking about? Okay, now your rebuttal. Oh my God. Knowing you're a huge fan of solar. This is the most navel gazing head up your ass. Scientific bullshit. I've ever couple of points. Let's start with the basics. The first is that there was no previous technical

being like, why are you angry at me?

I'm not angry. I find this so tiring hearing this. It's all syrup and

it's not

because I because I don't find this intellectually honest. I find it deeply intellectually dishonest.

Let me finish. Let

me finish. Okay, when you talk about sequencing the genome, there was no alternative. So you're right. It was an enormous technical leap forward when we built a computer, there was no analog. It was an enormous technical leap. And so you're right, we have a cost curve. We don't understand. And then we iterate as rapidly as possible. And all these innovations where we built an entire infrastructure to ride down the cost curve. The thing is, fusion energy exists today, it's called the Sun. We actually know how to capture it at virtually no cost right now. So according to the I.

E A today you can capture grid level solar energy for about three cents a kilowatt hour. That's as close to zero as we've ever been. And over the next 10 years, their forecast is it's going to get to 1.5 cents if you then want to store it. And you layer in storage costs will be at a whopping three cents a kilowatt hour. That's where we are today. And so I think that fusion does exist. I do think that this is an incredible technical leap to replicate something that exists. And I think that's where the intellectual dishonesty is. It? It does exist, it has been captured, it can be harnessed and there is a positive energy equation just in a different modality. That doesn't speak to these technically minded individuals. A couple of other points about what I saw.

I think it's incredible what happened. Okay, but just to make sure we're clear this is 192 lasers The size of three football fields that consumed 322 mega joules of energy which then ultimately delivered to mega jewels to a target which then released three. So this is why I'm saying we had positive what's called ignition energy. We did not have a positive electrical energy captured. So yeah, could we figure this out? Absolute. Can we then shrink the three football fields down to something that looks the size of a laptop? We possibly could, will it take 20 or 30 years possibly. But in the meanwhile, if the goal is unlimited costless energy, you're on that cost curve already? Yeah,

but why can't it be both? So you you said I was being intellectually dishonest dishonest? Yeah,

you're comparing this to

what you're saying is right? Yes, you can get

you seem to be an agreement

industrial like

I just think that I think that you're trying to say that this is an entirely new thing. No, it's a different approach to a thing we've already beaten and basically captured

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

This is why the cost per kilowatt hour is what the level Ized cost of energy tries to do. It tries to to normalize that argument away because everybody would say that, hey, hold on a second, you're gonna need plane falls of this or boatloads of that. And people said, no, what's the level Ized cost of energy? How what is the cost per kilowatt hour to generate energy? And what I'm saying is that is an absolute scale and free is zero. And we're at 1.5 cents,

Here's what I would say, 1, 1


the opportunity here is not necessarily about cost reduction, It is about


And if hydrogen is abundant, which it is on this planet, it is nearly infinitely abundant. We can take that hydrogen And we can scale up energy and electricity production in a way that is unimaginable compared to solar and I don't think that solar should be excluded. Solar is key today and should be scaled up. And I'm 100% agreement with you, but the scalability to go 100 x, if we want to make 100 times more electricity, I think we need fusion and I think that it's feasible.

So I think we have reached a good settlement here. You're saying, hey listen, we're getting solar down so cheap, we can solve this. Okay, great. We were solving that. So for our needs today and then what Freeburg is saying, but what if you had unlimited, a thing that we can't even imagine. Beautiful. Now watch as I get sacks involved in a science

conversation, he

has zero interest in Mr David Sacks if in fact there was 100% more free electricity available in this timeframe. The next 10

to 20

100 x. The available energy in other words, supply of energy just becomes flooded and it's free, essentially what would be the geopolitical reaction on planet Earth? In terms of uh this incredible rivalry rivalry we have with china and for humanity on a political basis.

Such a good question, Jacob, go ahead. Good question.

Here we go, thank you. World modern a Tm

Freeburg answered,

you are the politics

guy, get in there and take a second

to think it through. Already has thought about this. I want to hear his

we want you, I actually want to hear your answer. You know, in a world where, you know, energy becomes more abundant.

David hasn't been paying attention group with tucker,

I'll call your intellectual dishonesty and raise you a steel man.

Go ahead, go ahead, I love you. I love you know, I had a great night on

monday night, sunday

night, let's talk later. I just want to be

together last week.

Well, here's what I want to be clear. I think that I'm just glad you guys are fighting guys. Please let me finish. I think that this breakthrough is really valuable. I think it's interesting to see that these kinds of scientific breakthroughs continue to happen in government sponsored facilities and not private companies. Um and I think that that's probably where a lot of these innovations will continue to come from. Because look at the scale of what had to be built three football fields and 322 mega joules of energy and 100 and 92 lasers. This is really complicated, expensive stuff. I'm an enormous fan of these kinds of scientific breakthroughs. I want to be clear. I think that where I struggle is translating this into actually an investable area and I worry that this is going to consume lots of money by folks that could otherwise put money to work in things that will actually pull forward our energy independence and energy abundance sooner and faster. So for example, you know there are all kinds of things that we could do to secondary turn every 3rd and 4th and 5th generation batteries that aren't happening today.

There are a bunch of things that we could do to actually create an infrastructure of green hydrogen and the simplistic answers. We could do it all. But the reality is money is finite and we can't. And all I'm observing is I do think that more practical things that do have geopolitical ramifications sooner are not going to get funded because people do get enraptured by this. And my skepticism is that this is still in the realm of government sponsored research and is not really an area that for profit private companies can tackle. And so I would rather those for profit companies for example why Combinator just today put out something where they were you know, call to action a request for startups in climate and when you look at that list, those are really practical investable areas and I just want to make sure that the capital allocators that listen to this way those equally I am glad I'm glad that the U. S. Government did this. I hope they do more of this. But if you're asking me quite honestly I would rather the next $10 billion go into energy efficiency h fact than fusion because a fusion exists and B. I think it's going to happen at an innovative bench scale level by the government and not by a particle. Let

ME, let me just respond to that real quick tomorrow. I think that the idea of allocating our resources as a society should be done on kind of you know on a portfolio basis 80% on the pragmatic near term 15% on the kind of next gen and 5% on the moon shot. And this maybe starts to shift from the 5% to the 15%, maybe it's still in the 5% but I don't see kind of over funding happening. So I'll tell you guys there was a survey done there's 33 private companies infusion that are kind of fusion companies today. VC backed eight new this year. So the numbers kind of increased by 33% this year. And um so far this year those companies have raised around 3 to $4 billion. Which is

A fraction of what was done by 15 minute delivery companies

from convenience store. Exactly my point and and by the The biggest funding is happening in care which is the largest construction project in Europe. And this is a $30 billion 2020

government sponsored

government sponsored. Yeah,

this is my point. I am a huge fan of government sponsored research. Finally the first science corner, everybody brace themselves. It's the first science corner where David Sachs has Mr Davis.

Your question was a little bit, was not?

Let me rephrase what's the geopolitical impact if this does happen, 100

energy, it's fantastic for the United States if it actually happens. And the reason is if you look across the world, there's this thing in politics known as the resource curse, where the worst governments, the most despotic governments tend to be in the countries that have the biggest natural resources, ironically, so the countries that have huge amounts of petroleum or other kinds of minerals, they tend to have pretty corrupt governments. And the reason for that is that if you're sitting on a giant oil reserve, you don't need to make anything else work. You just fight over who gets to control that oil reserve and that's what politics ends up being. You don't need to create policies that foster innovation or attract knowledge workers, right? You just basically mine that oil. So if all of a sudden you're talking about turning energy into a software problem or an innovation problem that looks a lot more like the software industry. That's an area where the United States has a huge advantage. And yeah, I think it would pull the rug out from under many countries all over the world in favor of the United States. I mean, it's a big if because where I agree with mammoth is this stuff still seems pretty far often. It's still pretty unproven from a commercial standpoint. but I agree with Freeburg, why not try investing in it and cultivating it and see where it goes.

Okay, fantastic. This was a fantastic science corner where we actually engage David sacks. Which country?

Uh, did you find anything to disagree with their Jaeckel?

All right, take it easy. I just want to

let people know that. I think you're right.

Well, I love all of your


I love your intellectually. I know I was a steel person felt silver, silver, silver manning, but I love when you're intellectually honest silver person


A ng your silver thing.

I think that's

your urine platinum with some diamond dust. I just, can I just say

I spent a couple nights together this past week, has really, really mood of the show. I mean when you guys go out and drink together and hilarious sacks

And I left our asses off Sunday night, can I just say we sacks and I had the best 48 hours together in a decade. This is Sunday night, it turns out chris rock and chappelle are playing at the chase center where she used to own a piece of the warriors,


And this incredible arena has this incredible show and you know me and sacks and some friends, we'll leave it at that, go to the show. Our bestie Draymond is at the show. So I text dre and I'm like, hey, you're going to see chris rock by chance tonight with shape oh, said yes sir, I said, hey, we're gonna go with a couple friends, maybe we roll together, hang out after the show, we go and after the game after the show, which was incredible,


go backstage and I'm sorry to the, to the practice court


we're hanging out with Draymond on the practice court with Dave chappelle. Dave chappelle and I start shooting hoops, David sacks is talking to chris rock about free speech, Steph curry comes out and starts giving Dave chappelle and jay cow uh shooting lessons where chappelle and I are breaking like old men, you know, you know, on a concrete court all of a sudden Steph says, hey jake, you gotta, and by the way, he's a fan of the show, says, you're short every time and just, you know, hit the backboard, you gotta go along, then he tells chappelle, you gotta change this all of a sudden we start hitting shots like, you know, we're on, it was literally like cut into here, there were these mid range jumpers or I was free throw line extended, free throw line

extended, cut

into here, rain man and rain dance from along came Polly Rain dance, Rainman,


it right rain dance, let it rain literary. I was hitting brick after brick recipes, Philip Seymour Hoffman, so then we're chilling and uh Sax and I are talking to Dave chappelle, joe lake, um, owner of the Warriors are there, the majority owner uh you know as opposed to you being a minority owner was the

only person who

literally anybody. So we, I kid you not, chappelle comes over and says Jacob sacks you guys want to go to uh after to do a go, go see me do a show at like one am at this like local comedy club with 70 seats. I said word

yes, we

Go at one a.m. Chappelle sits on stage smoking cigarettes and Doing 92nd pauses and then having a beer and interacting with the audience and does a two hour set after doing this set with Chris Rock at the Chase Center. Me and Saxon Draymond hilariously laughing the stuff, chappelle is a genius and when you see his show and chris rock, by the way, he puts a tight set together. I mean chappelle's got this storytelling thing where he kind of meanders a little bit and then he hits you with it. But chris rock is just bang bang bang bang bang bang bang extraordinary. Just two incredible minds at the top of their game artists at the top of their game, doing what society needs. But more importantly doing what David Saxon I needed, which was to laugh our asses off together and remember our friendship. So it was a great night out, I want to say to bestie Draymond. Dave chappelle and chris rock, Thank you. That David Sachs J cale, Bestie friendship has never been stronger, I don't know about Friedberg and that seems to be on the rocks.

Yeah, it's weird. We'll be in there,

we'll be

vacationing together next week. So


yeah, well

we are going to be

whatever, whatever's going on, we'll take a walk and figure it out.

I just want to say the alliances amongst the best these people to be honest. I got mad at Freeburg when he edited that google bit to say the exact opposite of what he actually said. That just beat that. But yes, that is the thing that bothered me. I have to be honest, that's you playing to the crowd versus you being honest and telling what you think Friedberg friedberg. Let me put that in the form of a question. Freeburg has your fame as the Sultan of science because listen, you, nobody knew who you were outside of Silicon Valley before. This hasn't impacted your ability to

speak. No, no, no, not my family. Look, I'll be, I'll be honest And I'll speak openly about this. I had said that there could probably be a significant headcount reduction of like 75% of Google and the business could keep operating and I took it out and I took it out because I have a lot of friends that work at google google is a close partner of mine. They're an investor of mine and um, frankly, I just want to be careful about that. It's not something I commonly do You know, as you guys know, I usually speak my mind pretty clearly, but I was just trying to be respectful and that's the reason I did it. You know,

I think that that was fine. What I'm saying is not that it's just that the part that you edited in actually made it seem like you were not saying that at all but the opposite. I think if you would cut

the whole thing

it would have been more honest. So to keep that other thing in actually led the perception of the opposite. So you were triggered. No, no, I don't have triggered. I'm saying I think we should have a


I know, I think that we should just have a principle to not play to what the perception of what we say should be, especially if it means we could be saying the opposite of what we actually mean. That's all intellectual honesty is the best T Tennant. It's the best. Absolutely best always. And the other bestie tenant besties always come back together If we have a fight, we always come back together. I'm

still mad at

you. I'm just

talking about hypocrisy. I mean

it was sunday night gets

up there and he gives like right out of the gate, he's attacking, woke right out the gate

swinging. Came out swinging like will

smith Sure sure

smith. He took down will smith. I mean the will smith takedown, which you will see in this special is so complete. It is just chef's kiss. But how great was his set? Let's say. Just give chris rock his flowers. Did he? Did he filet and free to say


did. But I thought the more important part of the set was the he came right out like calling out all this, you know, you know, holier than thou woke stuff. Yeah. And and there was an undercurrent Tish apples set as well.

And also he said, listen, words can't hurt you unless you write them on a piece of paper and time to a brick. We these a bigger point right now. And this does tie into our first story is I think comedians look at twitter as a place to get canceled. Not a place to be part of the discourse and that's a huge loss that's indicative of our society being broken. And it's incredibly important that these comedians be allowed


mock and to speak and to step over the line and challenge us as citizens in a free society and we should cherish them and we should not even try to cancel them. Let them cross the line. Let them say things that make us uncomfortable so that we can understand ourselves and our society better. And I just want to say,

why can't you include lives of Tiktok in


Do we want to have a discourse about it next time. Okay, with mocking. I just

don't start. You guys. You did so

well, come on, let's go. Here we go,

cut it out.

All right, well, we have two more science corners to get

alright, if you know what

I mean. I just want to talk

about the Koopa deal and sacks this is right up your alley. Have you really the

thing you guys asked is like, you know what signal will Elon's moves at twitter be for the rest of the tech industry? I think the biggest wake up call is to actually pe companies. So if you played this out and you think that Koopa is, you know, Koopa is a is a software as a service company that does revenue management I guess or expense forecasting or some something in the financial realm. I don't particularly know to be honest. But anyways, this is a company that you know was off 70 or 80% from the high. Like a lot of Saas companies were when rates started to go up And they got this offer from, from Thoma Bravo. But here's what's so interesting about this deal, if you think that you know these guys bought a company, I'm just gonna make up a number at 20 times Ebitda, right? And you see Ellen at Twitter and you think, well, wait, maybe we can't cut 75%, but maybe we can cut 50%. Head count in the company can still do well. And you know, you take half of the expenses out of the business all of a sudden you know if you're a bit too doubles, you're actually buying it at 10 times. So I think the thing that is the that is the real insight here is twofold private equity um can still put out a lot of private credit to fund these deals and sas companies are perfect because they have huge free cash flow, right? So instead of funding it based on earnings, they can fund it based on a CV and A.

R. R. So private equity will be super active. And to all these rifts basically show what the efficient frontier is for the number of employees you need to run a company. And if you can cut 50% of the headcount private equity folks will do that.


so I think Koopa is like the canary in the coal mine. It is the beginning of what I suspect is a tidal wave of pe sponsored deals in tech companies largely sass but may go into other realms.


Taking advantage of these two things tap the private credit markets and finance it based on a. r. r. and then fire 50% of the team and double earnings capacity.

So on Koopa. I thought the most interesting thing was just the we got a public comp well we got a comp on what private equity is paying for pub Companies right now. So the deal happened at an $8 billion 31% premium to the public price. It was 8.4 times next 12 months revenue. And on a trailing basis it was about 10.4 times the last 12 months revenue. And by the way all the comments were around how what a rich price Thoma Bravo was paying. People generally thought they were paying a premium to the valuation. By the way sacks

Sacks. It was 77% premium. Before the rumors came out that this was happening. It was a pretty big

premium and

there was and there was there was a bidding war with vista. And so it was it was a really rich kind of deal that that got done here.

Right? So so my my point is that people thought this was a really rich deal. And yet the valuation multiples are so much lower than what private company founders expect. So remember last year at you know the peak founders were thinking 100 times A. R. R. Was normal 100 times. And you know, you could roughly say you know, A. R. R. Is roughly equivalent to the next 12 months revenue. It's not perfect but roughly the case.

So these founders were expecting evaluation Multiple 10 times what the public markets are paying and the public more and and and actually the public markets are are are half of where tomorrow Bravo was in this particular deal. So the public markets right now are valuing uh the median sas company at about 5.5 times and a high growth, will that be for like a 20% of your growing company? And they're valuing the high growth companies that maybe eight times, you know Antonio bravo did this at 10 times. So that gives you a sense of what the ballpark is. And these are companies that are already public there at scale. They're doing roughly a billion dollars of a. R. R. They have already, they kind of won their category to some degree. Whereas private companies are sub scale there. You know, typically you're talking about companies with 15, 10 usually under $20 million of are are they are they're not dearest, there's still a ton of risk. We've seen many, many SAs companies fizzle out and plateau at 20 million of our our never get to 100 million never mind a billion.

And yet these founders think that they're entitled to, You know, even in this market 30 to 40 times, there are no way I mean like it's getting to the point now where you know, maybe it should be 10 times 20 times like max for and that would be for a company that's growing 2.5 3 x year over year. So I still think that like, so I think basically what we're seeing here is even a good scenario, like a coupe acquisition that was done at a premium. Like it's still a wake up call to the private markets that the valuations are still completely and utterly out of whack.

Yeah. Let me ask you a question sack. So this company was growing 45% last year, growing 35% this year And they got this multiple, why is it not worth a significantly higher multiple if a company is growing 2.5 to 3 x, which is 250%, And these guys are only growing 35%.

Sure. I mean it is um and that's what you're paying a premium for. But so the so the here's the theory of it is that if you can invest in a private company that's a tripling year over year and they can do that for another five years or whatever, then you're

paying for that outcome in a couple of

years, basically we'll think about

getting a discount to the outcome in a couple of years.

Well if you're paying 30 times today and it triples next year, you're only paying 10 times next year. And again you're only paying three times. So if that keeps going, that's where your arbitrage is. But here's the thing, you have to weigh against that is that these early stage private companies, many things go wrong and they hit a plateau, they fizzle out or their growth rate starts to, the bigger they get, the harder.

So they should be priced at a discount, not a premium because there's risk,

there's more risk, they're growing faster but there's more risk. But also it's very hard once you get to a bigger number of a. R. R. 50 100 million of A. R. R. It's extremely difficult to be doubling or tripling year over year.

Let me just .1 thing out. So I looked at the numbers on Koopa. I think they had about 100 70 million of stock-based comp expense in the last nine months. So those are employees that are getting $170 million dollars in compensation in the form of shares. So they get those shares, they can then sell those shares and get cash for them on the market and then on the public markets and pay their bills. So when a company like this goes private for those employees to just remain at their baseline comp that stock based comp needs to be replaced with something else or else they're seeing their salaries reduced. So you know, there's this balancing game when these companies go private in terms of how do you give them the comp that they're earning to keep them engaged in the business




So I mean, but for the people that stay right? So so there's a balance because it's not just, hey cut the op ex you have to cut the optics including stock based comp and this company generated About $100 million, sorry, $210 million 12 months. So if you if you take out the stock based comp these guys are actually break even or losing money roughly. Um So

yeah break

even roughly. So there's a real question mark on this business and businesses like this Taco private, where if you actually cut the apex and you cut the salaries and you cut the head count, but you have to find new ways to pay people because you've been paying them with stock in the past. How do you kind of bridge that gap? And I think that's probably a little bit of the balance and the art of what these guys do. Well

if I may, can you explain to the audience what a private equity firms expectation is in terms of return when they buy a company like this and then sacks. I saw your tweet that you want to feature and you'll go next month. Well I think it's changed over time and this is what's so powerful about the private equity industry. Um Look you have to think about what their incentive is because it kind of guides the outcome. Um Early on they were very much like venture capitalists, they were out in the you know edges of risk taking um doing all kinds of very difficult gnarly deals. So if you look back in the history of private equity, you know these huge crazy deals like R. J. R. Nabisco or T. W. A. Airlines were the first um of the industry and they reaped enormous returns but there was a lot of risk and it required very heavy handed management.

Oftentimes what that meant was firing a lot of people over time. Private equity has gotten institutionalized and they don't generally feature themselves as a place to get the best necessarily returns. But there are places where you can put enormous amounts of money where the likelihood of loss is extremely zero and you generate very good rates of return. Now again this depends on whether you want to look at I. R. R. Or D. P. I. Right? So a lot of people will market I. R.

R. Which you know I think is kind of like a game a ble metric but you know those Ir rs can be 2025% if you look at D. P. I. Which is really how much cash you get back. You know private equity firms can generate 1.5 to 2 X. Of the money you give them. Um But they do it consistently and they very rarely lose money. So all of that is important to understanding what's going to happen in this cycle. These folks are going to buy a ton of these private software companies. I think that they are going to fire lots of people I think they are going to make these companies run hyper efficiently. And they will make sure that they generate that 1.2 to 1.7 X.

That has been historical very rarely will they lose money in these things by the way that's going to mean that a lot of these other companies will have to reset valuation. So you saw yesterday check out dot com went from a $40 billion valuation down to 11. You're seeing some companies only go down 10 or 15%. It's a process isn't it? Isn't this just like what happens in real estate beginning of this process? Yes because in in real estate my understanding having lifted these boom cycles is the person living in the home still believes their home is worth. You know this incredible evaluation and then the people who want to buy it are like that doesn't match reality. And then the real estate brokers go back and forth trying to get people to you know go through this messy middle and come to true price discovery. A private company. It's hard to get true price discovery until they're on the brink of insolvency. They don't have the money. We

just got some data on that. Actually. Can we bring this coolie

data? Let's do it.

Yeah. So Cooley looked at

Silicon Valley.

Yeah they're prominent Silicon Valley law firm. They looked at 1000 deals over the last three quarters of this year. And what they saw is that you're the later the stage. the bigger the valuation corrections. The series D. Rounds went from 3.5 billion to 527 million. That's an


Yeah, that's an 85% drop. Series C. Went from 502 million. 230 million. That's a 74% drop. Series B went from 1 64 to 90. That's a 45% drop. And then series A went from 58 to 45. That's only 22% drop. There's just less room to compress there. But the point is that series be roughly a 50% drop. Series C roughly a three quarters drop and series D roughly a 85%.

Yeah, 1/7 drop. So I think founders right now, are there just like a little bit delusional about this money they raised last year, They're still way too anchored on last year's valuation. And if only they would think in terms of this capital they raised last year, in terms of of its real dilution in terms of what the company is worth. Now, I think they'll be treating it more more precious. So for


for example, hold on. If it's like they

won the lottery and they don't want they don't realize they won the lottery. I had this conversation with the founder. This

is the only money they're ever going to see is the bottom line and they're spending like they're going to win the lottery every year. So for example, let's say company? Yeah, let's say you take a company that raised 200 million last year at two billion. So it was 10% dilution. So in their heads they're thinking, oh, well this isn't that expensive, like 10% dilution surrounding era, but really,


The company is worth maybe 400 million now, right? Because it's gone down 80%. This 200 million of your 400 million is half the value of the company.

Yes, you're

squandering it, you're squandering it at a rate of 100 year. So you're basically burning up 25% of the value of company this year and the next year. And then by the way, you're going to be in crisis after that because you're probably

like a lottery winner buying like a giant Superyacht

had an observation that a lot of the investors that sit on the boards of these companies, they have an incentive to not see those valuations come down too quickly, do they not? And so there is this sort of like interest in, hey, I don't want you to have to go re price the company or do a down round because then my portfolio gets written down and then I'm in the middle, Everyone's always in the middle of a fundraising cycle without PS and then I'm gonna have a tough conversation with LP, it's about my, my value. So do you not see VCS and investors playing an active role in trying to keep the valuations propped up to some extent, particularly where they have big mark ups either by extending bridge rounds or doing other sorts of, you know,

look, nobody, nobody likes to go through a down round and that includes founders and existing investors in the company. That being said, we're not talking here about new financing conversations we're talking about is advice that is happening in board meetings and you know, maybe other VCS aren't pushing as hard as we are. But the advice I'm giving in board meetings is what I'm telling you publicly today, which is, this is the last money you'll be able to raise on attractive terms if at all, you need to treat it much more preciously. The world has fundamentally changed and by the way, we haven't even gotten into what's coming the demand contraction that's coming next year. Okay, look, there's gonna be three major sources of slowdown for software companies next year. No one new business is going to dry up. Companies are just going to be spending a lot less money next year because they're all cutting costs. So you should expect your new business to be roughly 50% of what it was next year. It'll be 50% of what it was last. That's my rule of thumb for most companies, new business down 50% number to Churn is going to be higher. We haven't seen that much logo churn yet but next year a lot of companies are going to start going out of business and it's going to happen over the next two years. So you're simply gonna see logo churn rates say among small businesses go from like historical norm of 15% to maybe 25 or 30 exist.

Yes. Yes. Yes, logo turn means the entity doesn't exist, then you've got


contraction which is these companies are not hiring as fast. In fact they're doing layoffs so they're simply not going to buy as many seats of your software as you need to in the past for the last decade we've had a tailwind, an enormous tailwind for software companies of seat expansion which is every year your existing customers would buy more seats of your product for their new employees. Now they're actually going to have fewer employees or maybe headcount freezes. So they're actually buying by

The way, if you if you take all those three things, the deal of the century was fig MMA selling to adobe for 12 Sir because if you take those three things, I mean, oh my God, they just absolutely top tick before any of this stuff was no. So today adobe could probably buy this thing for like seven billion instead of 20 billion. So does that mean they try to do a breakup and get out of the deal.

I don't know but

if I was if I was a I try to close this thing ASap and get that money. Yeah, yeah,

Yeah, you're right about that. And by the way, what I'm seeing from founders is that they still want to grow 100% plus over the next year. The problem is that the headwinds are going to be intense. So if you're applying a plane and the headwinds are extremely intense and you try to maintain your speed, you're going to burn an enormous amount of fuel. You're going to be incredibly inefficient. It's better to basically just moderate your speed. Let the headwinds basically pass. We're gonna have major economic headwinds for the next 4-6 quarters, call a year and a half. It's okay to have a slower growth rate, preserve your cash, don't burn up your fuel. So we're trying to do

is we're

trying to give permission to our founders to grow at a slower rate because they feel this enormous pressure from their Vcs to grow at, at, at insane rates.

Can I build on this? I think Friedberg said it very well the scam and venture capital is demonstrated in the following chart. This is using Cambridge and our friend Brad Gerstner helped put this together. So what is this? This goes back all the way to 1997 and the gray bar is what venture capitalists share with their limited partners as to how well they are doing and this is the top 25% okay. So this is, this is a venture capitalist and you know, our, our returns have been consistently top quartile. So instead of cherry picking anybody else, I'll just use us. But it could be sequoia benchmark, you name it, we would go back launch, you would go back to folks craft, go back to folks and say, hey guys, The total value of our portfolio is three times your money in 1997 vintage. Okay, it was four times your money in the 2010 Vintage. Feels really good. But again, the job of the venture capitalist is to convert the gray bar Into the purple bar. And historically there has been a decay.

So for every dollar of gray bar that you show, you typically only get 73 cents, actually return to people. Okay.

The valuations that you get when you sell your company or goes public End up being 73% of what you marked at the peak, what you said, they

were exactly right. And the actual value of this purple bar going back, you know, 30 years is 1.7 X. So just to put numerical numbers on this, if you were a venture capitalist, you would raise $100 fund at the peak, You would actually show that that $100 became $200 and about $28. But when, when push came to shove and when it was all said and done, you would return $170 back to your investors. That's the rough equation. So what's the problem? Well, the problem as you can see in this charge is right around 2015 which is all of a sudden, you know what we've started to see are these continually elevated gray bars? Yes, this stuff is worth seven times six times five times, but we have not seen the purple bars catch up. Now. Some people will say, well, yeah, but you have to give it time. And you know, this is probably what other times and all you need to do is do what's called a regression. And you need to regress these things to the mean and make the following assumption,


for a second that this time is not different, Assume that these historical averages 2.2 x 1.7 X holds. Well, that's what the black line here shows. You can calculate the area above the curve as the value at risk, right? The amount of money we will destroy because of all these shenanigans that Freeburg just talked about propping up. Mark's not willing to look at actual market clearing prices. Well, if you do the math, the some of the area above this black line is almost a trillion dollars around the world and it is about $600 billion dollars for us, venture capitalists. This is the dynamic that the private equity industry is going to prey on. So if you saw Tony bravo just close the $32 billion round. You know, vistas raising a $20 billion around everybody's stepping into tech. They are going to destroy those gray bars. You know, they are, they are the rational actor who is finding the true market price. Again, I will say this.

I think the private equity industry is unbelievably precise and talented in being dispassionate and telling us what these things are

not. They're just smart for the private equity industry is going to be created by profligate founders. And look, you can blame VCS for the high marks last year as well. They were profligate too. But look, if you're a founder, if you don't start acting in a more capital efficient way and preserve your cash, your company's ultimately be owned by a private equity firm and they're gonna make all the money


because because because when you sell to them at a low price, all you're going to end up doing is paying back the liquidation preference. And then that private equity firm that was willing to do or less. But that private equity firm will be willing to do what you were not willing to do, which was simply cut your burn, cut your costs and act in a more capital efficient way. And they will end up making all the upside for your decades of hard work because you got basically addicted to venture capital and the high evaluations and refused to again adjust to the regime change.

I'll give you an alternative, I'll give you an alternative. The alternative is that the majority of acquisitions made by private equity firms are not actually pure acquisitions. Their bolt on acquisitions, meaning that these are companies that are added to existing platforms that they own. So this acquisition they're doing of Koopa, I think it's very likely over the next couple of years you will see like the playbook and private equity includes, not just cost cutting, but also synergy building and they typically do bolt ons and add ons. And this happens across all private equity platform deals of new products and services that can be sold through the existing sales channel, the existing customer base. Um, and as an add on to the existing service or product that's already offered. So one of the, one of the things that I think you may see in Silicon Valley over the next couple of years is a rationalization away from funding feature companies and thinking much more carefully about what can be true standalone product companies and many of these companies that have raised a ton of capital, um, and have gotten crazy valuations at the end of the day, they're more likely better equipped to be a feature of another platform than they are to be a standalone platform company of their own. And that's where the majority of these acquisitions will likely end up going in the private equity lance, we will be vacuumed up and attached to existing platforms that these private equity guys are building out. And by the way, just look at an example of what oracle did over the years, What salesforce did over the years. What google did So many of these companies bolt

on acquisitions

by bolt on acquisitions by building a channel, building a platform and then adding on top of that. And I think that's a lot of these guys are going to try and mimic

two critical points. Number one. What about the bottom 75% of VCS. If you show that chart, just for one more second, I just want to remind everybody that is the absolute cream of the crop. VCS, 25%. The best these are folks. I mean again, I'll just say sequoia benchmark. We've consistently launch craft. These are, these are top chef, thank the Lord. What about the bottom 75%. Not gonna be able to raise funds over a lot of these people who raise first time funds in the last three or four years. It's also the companies of Saxe said because like, like it's like the today is the most, now is the moment for the sober founder and the sober venture capitalist to sit and say, what is the real valuation?

What do we need to do to make sure that this company has a chance because what Saxe said is so true. Otherwise all these profit dollars will be made by the private equity in order to win today. You're gonna have to grind, You're gonna have to work 50 60 hours a week. You're gonna have to be absolutely embrace the age of austerity and you're gonna have to focus on your customer, your product and your bottom line, the age of excess is over. If you're not working 50 60 70 hours a week, you're not gonna cut it in Silicon Valley. Also, Key Second point profligate extravagant or wasteful in the use of resources. Just so we get the word of the day from David sacks. That's David Sachs's word of the day after a very powerful bull. This is that went great. Did you see the trauma level went, we went, we went viral. This is I think Elon's biggest non obvious impact in this moment.

So here's your one answer to your question about what happens to the, the bottom 75% of venture firms. It's equivalent to what happens with the, you know, kind of, this is the bottom of the top, the slide that I just shared. It's the one we looked at a few weeks ago and I keep referring to it because it's just such a staggering, like demonstration of what people call the power law, which is how, you know, kind of excess returns accumulate to minority of investment. So just a few investments make up the bulk of value, that the, you know, market cap of 43% of companies that have gone public since 2020 is $750 billion. The market cap of three. The other 300 is only $26 billion. And the cash that went in to the $750 billion is 100 36. And the cash that went into the 26 is 100 and seven. And so the cash that went in to generate that 26,107, that's your bottom 50%. And the top 50% put in 136 to make 750. And I think it gets even narrower as you move further up to that top quartile. So you know, it's just

I can tell you what LPS are saying. This

is this is the companies that went public. So this is also of the top company of the top fund. And the top companies that were actually able to I. P. O. And so it highlights how much of a power law actually play through. And so the majority of these companies, as in even in your chart, you show the top quartile, the the bottom 75% of the bottom 50%. I've looked at this data as well, of those various vintages are below one point, oh they lose money for their LPS. It's a cycle. And so what ends up happening is the next generation comes through and LPS they make a portfolio of bets and they hope that they make enough bets in the right vcs that their portfolio generates greater than, you know, market returns greater than call it 15 20% target, 15% target. Um, but they're going to expect that the

majority's, I have an L. P. Report. I'm out there raising lunch one for right now and I moved from like the accredited, the individual investors


I'm on 5 60. Yeah. So I'm, I'm publicly raising it and I've moved on from individual investors, $45 million in commits after five webinars. Amazing. Now I'm talking to, you know, it was amazing. It's just five oh 60 is going to change the entire industry letting the, you know, the masses have some access to this capital and this opportunity accredited and QB is going to change the world. I believe

you have to do deal with everyone, one of them. Is it easy to administer?

It's incredibly complex because you have a large number of people and they all want to talk to me. So I did webinars, five webinars And it resulted in 100 commits hundreds of commits for 45

dollars. You'll be able to get all those capital commitments drawn down when you need to like you have to go paying a couple 100 people and get all the money you need to have more

operations people and we only do four. We let that one thing. One thing you may want to do like for these smaller slugs is you can pre wire you can set up an escrow account where you pre wired 100% of the capital. Yes and then you also don't have to take it down when you're going to deploy it so you keep your eye are are correct. So we're actually looking into those solutions. I'll talk to you offline but I just did my first two meetings with endowments etcetera. Fund of funds. The entire discussions right now are around um what is your secondary strategy? How are you getting in earlier? Not later and how are you building a larger position? It is and and even like some of the Q. P.

S who are sophisticated in our you know our in over 10 venture funds the entire discussion governance of these companies, are you taking board seats or not? How early are you getting in and building a larger position over 10%. And what is your secondary strategy? When are you going to start taking some chips off the table? So the and I gotta say if you're an LP who didn't sell into the up market at all and you're on your first fund you know and you had all these great marks and they're getting they're coming crashing down there not going to deal with you, they just have too many options of top funds and I don't think they've they've started to come down yet. I don't think we know what the top quartile is really going to look like over these last few years. I think that's going to take four or five years to really sort out of course. Um So I explain why just so people understand. Well I think I think that there are lots of valuations um that have supported huge T. V. P. I.

S. These you know paper gains that have allowed venture funds to raise enormous amounts of incremental capital and new funds. And so they are going to try to wait as long as possible before they're held accountable for that. And the best way to do that is to not change the valuation. And so it will happen slowly. It'll be a trickle of these things. Um And I think that takes probably four or five years for it to really sort itself out. But in the meantime companies will still need to get financed. Companies will still need to get built. Um That's why I think like the public markets, I think what Sachs says is true giving us a signal of what these true market clearing prices are will eventually slip into these you know Series D. Or E. Companies because a venture capitalist who has now taken some big writedowns in one part of their portfolio I suspect will now be very open to selling to private equity for another part of their portfolio so that they can return capital

totally. I totally agree.

Yeah it's gonna be rough out there. You guys watch white lotus. Just started season one. I'm uh third episode in

what a

Treat. We won't say anything but how great was season 2? uh

It's just incredible. The

last the last two episodes of extraordinary just finished watching all of handmade still which is that is a stressful show. Uh It's like it's like you're putting in work when you're done those episodes emotional labor, you know when they said this emotional labor watching that show is like it could could it could not be more sadistic and insane. Uh It is brutal but you can't look away incredibly well done. Alright listen this has been an amazing episode and this is news for the other besties Friedberg and I have been secretly collaborating.


have come to a

plan that

We're working on a joint plan for all in summer 2023 because we are both helping each other out our secret projects. I'm ready to tip guys. I love it. The tip the

tip that's

it, we don't need the sacks that's all that's fine. We know that you know

I love that I have sacks is my anchor on this one. I can always this thing could flip but

friedberg and I

like in this case

but power and influence

is something

That that Freeburg and celebrity Freedberg had so much of a good time at all in summit 2022 that his hatred of my producer fee is less than his joy from the event and we are collaborating on super


super gut. I have made up for my producer's fee by using super gut and becoming use the promo code.

Listen, no conflict, no

conflict, no interest. Super gut bars, double mocha


by the way. Can I point

out on

the most loathsome person in tech brackett However, do not

name the company. Do not

name the podcast. This is bullsh. Let's pull up the bracket. Do not mention the


Andy Jassy do not, I only want the bracket do not mention the podcast. We're not giving them any just black out that in post. I want you to black out. I don't want to give these guys any credit. So here we

go. The worst

person in tech and Sachs, we won't say it's a B podcast that's run by literal socialists. That's ridiculous.

You went up

against the warriors with K. D. There's no way to

win. You

have no shot.

What about sacks? Easy

draw sacks verses in the most hated person. That's bullshit. Andy Jassy is a complete gentleman Andy Jassy is delightful human compared to just that

is I want to



is election


This is election interference.


you're a specialist in.

I guess it's worse to be a union busting amazon ceo than a reactionary conservative investor. I

don't get it. This is ridiculous. I just want to point out that the biggest travesty here is that I did not make the list. There are. And you know what? These guys are trolling me. Yes. Guys shout out to producer Nick who just retreated with basically. You basically pick the what is it the 30 most relatively well known people attack. That's what this is terrible. Worst person in tech. I don't make the list.

I'm going to double down

on the media. You're right, you're right.

I need to be horrible that I need to be a war first human like you sex. I'm going to try my best this year to work against humanity and society and be more loathsome than you. I'm really going to redouble my efforts. Obviously. I can't catch up with you. I'm too kind. I got a big heart. I care. I have empathy.


know my empathy, but here's the problem. These guys left me off on purpose. If you want the replies between and reason and Bill Gates.

Oh and

the reason. That's a lock. That's in reason. Of course, interesting question. A 16 market treason is a world class ship poster. Bill Gates is hiding somewhere. Nobody Bill Gates is doesn't tweet market reason blocks on blocks. He shipped posts with the best of him. He's up there. I mean, that guy's a dark meme Lord any other. I mean, I really, I really sympathize with each month that you got your ass handed to you there. That's just that's like going up against the dream team.

Hold on, hold on, slow down bro, you're not even letting us read these things. Alright, twitter, former idiot Ceo versus the Airbnb Ceo making Oh God, oh my God, that's so well written this weekend. He's a great guy. Guy who really tried to make us believe Web three was going to happen versus world coin and of course chris Dixon wins much more lows than than Sam Altman. Listen Freeburg, you didn't even come, I want to just congratulate Freeburg on an amazing, the best science corner ever, an amazing product and super gut that has helped me lose weight, I feel great and for uh you know, recovering from whatever illness you had. Alright everybody, I love you besties shout out to David sacks, Love you guys and we'll see you all next time on the all in podcast, Love you besties, Love you guys. Bye


one big huge George like your

your we

need to get