I’m now recording.

Jesus, you look terrible.

What’s going on? Did you sleep last night?

Do I look tired?

You do look a little tired.

You look unshaven.

Yeah, what happened last night?

I had a holiday party at my house last night from my office and-

You look destroyed.

Yeah, what’s going- I mean, did you drink?

I did drink, yeah.

What does vodka and oat milk taste like?

Does it taste good?

He had a White Russian-

A White Russian Big Lebowski style with oat milk.

He’s like, I want a White Russian with oat milk.

Oh my god.

Actually, my White Russian is made with oatmeal.

And please compliment that with a huge punch in the face.

Give me five minutes. I’m gonna go shave and-

It’s called the hair of the dog.

Yeah.

You got a little Bloody Mary.

You banana bug.

Banana man.

Can I go get a beer? I might get a beer just to beat this hangover.

Go do it. Yeah, go get a beer.

Hang on, I’ll be right back.

And they’ve just gone crazy with it.

All right, listen.

We have to start with scam, bank run, fraud.

I mean, Sam.

Freed.

I get that wrong sometimes.

He was interviewed by Andrew Orr-Sorkin, the suit, at DealBook,

who gave him softball after softball.

Then, the next day, he was on Good Morning America.

You’re being really passive-aggressive right now.

A little bit.

We got a little chip over here.

We got our friend Andrew Orr-Sorkin.

He’s sticking the knife in.

He’s sticking the knife in.

But J. Cal’s got a point.

He’s got a point.

A little bit.

A little bit.

A little bit.

Anyway, the New York Times continues to embarrass themselves

by handling Sam Bankman fraud with kid gloves.

Wow.

George Stephanopoulos, my Greek brother Stephanopoulos the Spartan,

came in and absolutely fricasseed and filleted Sam Bankman Freed

on Good Morning America.

Very important to note that Good Morning America,

the segment was between holiday cocktails and the cast of

The White Lotus.

Andrew Orr-Sorkin was at the DealBook finance conference.

But you know that Stephanopoulos interview was two hours,

but they reduced it down to 10 minutes.

Yes.

There were probably a lot of cordial conversation, banter,

and then softball questions.

Then, he does stick the knife in and does the fricassee,

but he cuts out all the other stuff,

so he just gets it down to the 10 minutes.

Absolutely.

What Stephanopoulos did to him was extraordinary in that he said over

and over again, in the FTX terms of service,

you cannot touch the user accounts,

but you at Alameda were taking them and you were loaning them out.

I don’t know who is advising Sam Bankman Freed at this point,

but why he is talking so much.

He was also on a two-hour Twitter spaces after all this.

At this point, Sax,

what do you think is going on here in the mind of Sam Bankman Freed

and also the media,

which seems to have a very variable way of dealing with this obvious

fraud and crime?

Right.

Okay.

Well, I can speculate about SPF.

I think if there is a strategy here,

it is this.

He is basically copying to criminal negligence in order to avoid the more

serious charges of fraud.

And I think, again,

if there’s a strategy here,

it is he saw himself being defined as Bernie Madoff 2.0 in the press.

And if that image,

which may well be true,

cemented around him,

then prosecutors would never stop.

They would never accept a plea that basically gave him anything less than a

Madoff-like sentence,

which would be decades in prison,

maybe a life sentence.

So he is out there doing what lawyers would tell you never to do,

which is basically incriminate yourself,

create more of a record.

But he’s doing it to change the public perception,

maybe muddy up the public perception,

get people thinking that,

okay,

he’s admitting he did something wrong,

but it wasn’t deliberate.

It wasn’t fraudulent.

It was just basically carelessness or sloppiness.

And if he succeeds in muddying the waters enough,

then maybe the prosecutors will give him a plea deal that allows him to have

his life back at some point.

I think that would be the crazy,

like a fox explanation of what’s happening.

Now,

there is,

you know,

an alternative explanation as well,

which is,

I just think that these types of guys,

you could call it,

you know,

a narcissistic fraudster.

They think they can talk their way out of anything,

you know,

because they have,

they have,

you know,

they’ve talked their way into getting hundreds of millions of dollars of

investment,

billions,

billions in some cases.

And so they just feel,

and they’ve been trained by employees,

partners,

investors,

the press that they can talk their way out of any of this stuff.

I think,

yeah,

the average person is not really used to dealing with one of these

personality types who is,

I mean,

they clearly are smart and their articulate articulate,

and they know what to say and they’re crafting their words.

What they’ve learned through their life is that if they use the precise

magic words with a person,

they can pretty much,

you know,

convince them of anything,

get them to do anything.

And in particular,

I would say investors tend to fall for this,

not because investors are dumb,

but because investors are so clear about what they’re looking for and what

they want.

They’re predictable.

Yeah.

Like we’re,

you know,

VCs,

especially we’re looking for the a hundred X outcome or whatever.

So it’s easy for this type of personality to construct a story,

to essentially stroke the erogenous zones of a VC.

Whoa.

Yeah.

And,

and,

and sort of trick them.

And so there is probably a positive reinforcement loop that gets created

in the minds of one of these people who,

and they start to think that they can basically talk their way out of any

situation.

So I think that would be part of what’s going on here.

And,

you know,

if you look at sort of the tactics that he’s using to do this,

you know,

all of a sudden,

he’s trying to portray himself,

you know,

before this,

he was portraying himself as the smartest guy in the room.

Now,

all of a sudden there’s this babe in the woods impression where I didn’t

know it was my subordinates.

I wasn’t really in control.

That was somebody else.

Each individual decision.

He says,

look sensible to him.

It’s just,

it all added up to something he didn’t anticipate.

Like really,

you know,

loaning yourself a billion dollars of,

of basically the company’s money,

which was basically customer money.

That seemed reasonable to you.

I don’t know how you defend that individual decision.

And there’s many like that,

but,

but this is sort of the narrative that he’s trying to construct.

And,

um,

let me stop there,

but I think there’s a lot more that can be said to dismantle the

narrative he’s trying to create,

but I want to let other people get in here.

What’s your take on this?

And then free bird,

can I make a comparison to SBF and Trump through the lens of the

media?

So if you go back to 2016,

you know,

Donald Trump violated every single establishment bias that these

left progressive journalist elites had.

And so they basically just attacked,

attacked,

attacked,

attacked,

but then you went into the election and there was a very clear

data point that said,

whatever you thought was that was at best limited.

And you missed the tone of the country because 50 plus percent of

the country held a very different view about this person.

And instead of taking a step back and,

and then the left media,

the mainstream media re underwriting and learning,

and then saying,

you know what,

mea culpa,

I got this wrong.

They just double down.

And they said,

no,

it still doesn’t meet our priors.

And so we’re just going to ring fence this problem.

And we’re going to just try to destroy this issue because,

you know,

we want to control the narrative and,

and,

and by result,

we want to control power.

Now you look at SBF,

it’s the exact opposite.

He went to the perfect elite private high school.

Then he went to one of the most prestigious elite private

universities,

MIT,

his parents teach governance of all things at one of the most elite

liberal institutions in America,

Stanford,

they are in the establishment of the progressive left.

And what happened was he took customer funds and all of this money.

He made tens of millions of dollars of political donations.

He wrapped himself in this blanket of a progressive left-leaning cause

called effective altruism.

And all of the mainstream media fell for it and embraced him as well

as some politicians,

because it met everything that they themselves also bought into.

Yes.

And now you have this cataclysmic event,

a multi-deck a billion dollar fraud or bankruptcy,

millions of customer accounts who are frozen,

you know,

tens of millions to hundreds of millions to billions of dollars lost and

stolen from them.

And they refuse to re underwrite this kid.

And the reason is because in order to do so,

it’s like eating your own tail and that’s why they don’t want to do it.

And so this is why you have the media basically allowing him to do an apology

tour.

Now this is his second time at manipulating them.

The first time he was able to manipulate them by basically being one of them.

And now he’s allowing them and their desire to basically protect themselves

so that he can create some kind of a defense for himself.

And I just think the whole thing is gross because it misses the entire mood

of the nation.

This is an enormous financial fraud that was perpetrated on tens of millions of

people.

And there’s no accountability because in order to do so,

the media would effectively have to admit that they missed it and they got it

wrong and they refuse to do it.

And I think that that is the really big problem that nobody is really speaking

out about is like,

well,

if these folks are meant to be the last stop to make sure that there’s truth

and honesty and transparency in society,

and you can’t count on them.

And in fact,

they’re just going to reflect their own narrative.

What is one supposed to do to learn the truth?

In a way,

what you’re saying,

and then we’ll go to your free bird is this fraud was encased in all the

gilded facade that America hates right now reflects the institutional rot of

America.

It reflects every single aspect of institutional rot that every non elite

talks about all the time.

But elites,

when they have those labels will refuse to give up.

And just to add to that,

the,

the,

the thing that’s missing the,

I’d say one of the big issues with the institutional rot in our country is

the lack of accountability.

When somebody gets it wrong,

we saw this with COVID,

right?

The health establishment is saying that they want amnesty and Atlantic

magazine was willing to give it to them.

So the point is that this,

this class of people think that when they get it wrong,

that there are the experts,

but when they get it wrong,

there should be no accountability.

And so Jamal,

to your point,

the media and these institutions are not willing to re underwrite SBF when

he’s so clearly as a fraudster,

a free bird.

What do you think the,

of this theory,

you had a large amount of donations to politicians.

Obviously you have coming from Stanford,

MIT,

et cetera.

And then you have these investments,

gifts slash advertising slash donations to ProPublica,

Vox,

this new publication,

semaphore,

the intercept that have all been uncovered.

Now,

did he do this paying off of all the elites,

you know,

splashy cashy,

giving money to everybody because he knew he was doing a fraud and that this

is evidence of this is a premeditated fraud.

Or do you think this is a deranged individual who just was seeking status?

I don’t know.

The,

the motivation,

there’s a video you can watch of this guy.

For some reason,

FTX has left up all of their videos on YouTube from three years ago called

quantitative trading seven and a half thousand cell wall of Bitcoin on

Binance.

It’s a 17 and a half minute YouTube video of SBF trading arbitrage across

markets.

I think it provides probably the best,

like natural non scripted insight into this guy’s behavior that you could see,

you know,

because it’s not like him being interviewed.

It’s just him living in his world and he’s just,

you know,

a mouth trying to get a piece of cheese.

Like he’s,

you know,

he’s like out there,

he’s,

you know,

scrambling around in the markets.

He’s finding edges,

he’s finding advantages and he’s,

and he’s clearly just taking advantage of them all day,

every day.

That’s who he is.

Now you put a person like that in an unregulated environment and there was

this clustering demand for an unregulated environment because of a lot of what

you guys are saying,

which is people have this disdain for the elitism and the,

and the institutional rot and all these things.

So Bitcoin emerged as a solution out of 2008 to the,

you know,

the,

what felt like institutional rot that,

that governments have a key role in.

But when you have no regulation and you have no trusted central authority

involved,

mice that are trying to find cheese will rule the day.

And I think that’s what happened here.

If it wasn’t this guy,

it was someone else.

It was going to be someone else.

And then all of a sudden everyone’s clamoring and saying,

Hey,

we needed the government to protect us.

No one protected us.

Someone’s got to save us.

We’re the regulators.

We’re people that are supposed to keep an eye on this stuff.

When the whole premise of so much of what was being sold was non-regulatory

regimes was openness was peer to peer trust protocols.

And it turns out that in that sort of an environment,

the mouse that is hungriest for the cheese will get the cheese.

And that’s exactly what happened.

I don’t,

I don’t know how much of it was,

I don’t agree with him saying I’m creating intentional fraud,

which certainly seems to be the case versus him saying,

I’m going to pay these guys.

I don’t know how much of it was even that intelligent,

but the guy was clearly like trying to get a piece of cheese.

Okay.

So this cheese eater,

this rat is a league of legends,

you know,

expert playing on eight different monitors at a time,

the cryptocurrency game while hopped up on speed.

I’m not saying that to be cruel.

I’m saying that because they admitted it.

They talked about it in their staff meetings,

instructing their traders and team members of how to take speed.

He admitted to it in an interview this week.

He said that it was all legal prescription drugs,

but they were taking them.

Yes.

Literally in the same videos you’re referencing,

people see speed patches,

or I don’t even understand this,

but there are patches you can put on your body to deliver speed to you at

some,

you know,

dose or whatever sacks you buy this theory.

No care that this isn’t about the elite side of it.

It’s about the non elite,

the anarchy side of it.

No.

And this cheese eating rat was just wanting to eat more cheese.

I don’t buy this narrative because I see too much design intentionality,

but behind what happened.

So in other words,

it wasn’t just a series of individual decisions that didn’t add up.

Many of those individual decisions by themselves were totally unjustifiable.

And moreover,

there were too many,

there’s too much evidence of sophisticated behavior here.

Again,

he overnight went from portraying himself as a smart guy in the room to the,

to the babe in the woods.

And so,

for example,

when you look at the construction of all these entities and the corporate

org chart,

you know,

of all the related entities,

it’s a very sophisticated attempt to obscure and construct certain,

you know,

protections.

When you look at the way that Alameda was exempted from the normal margin

requirements and FTX,

there was the so-called back doors.

There was intentionality there.

There was intentionality in terms of who was hired to staff these

organizations.

Again,

they wasn’t hired.

No board,

no CFO.

Yeah.

And the guy,

the guy who was in charge of compliance,

what,

like Tomas talked about in a previous episode was the guy who was involved

in the ultimate bet,

a poker cheating scandal,

you know,

not exactly.

Yeah,

exactly.

Right.

Or look at this goofy goofball,

Caroline Ellison,

who was put in charge of Alameda,

right?

His girlfriend.

It’s,

it’s being done for a reason,

right?

He’s setting it up in a certain way.

And you know,

the one time I interacted with him at this tech conference,

he was sitting there holding court.

And he had all of his minions around him who were following his orders.

This was a guy who was controlling his business.

He was making the decisions at,

I think a task level.

And he knew exactly what was going on here.

So look,

I just don’t buy.

I do not buy this idea that,

that he was like a blind mouse.

Who’s just stimulus response,

you know,

in the moment.

That wasn’t,

that wasn’t my point.

Sacks.

My point was whether it was him or it was going to be someone else,

it was bound to happen.

No,

I don’t agree with that.

The idea that we want to have completely free,

unregulated Bahamian based trading,

you know,

environments that we can supposedly trust because someone puts on a good

face when there is no real regulatory body and regulatory authority

overseeing it.

At some point it was going to happen.

Well,

no,

hold on.

It is.

They’re regulated.

They’re not set up in the Bahamas and they’re not unregulated.

And he set up and he had no oversight.

He had no board.

There was no regulatory regime.

There was nothing.

How was he able to.

Okay.

So first of all,

look,

I don’t think this had to happen.

I think that again,

I think that excuses too much because it implies that if it wasn’t SPF,

it’d be somebody else.

I actually think that this was a highly concerted effort.

Listen,

he courted regulators.

He donated to politicians.

He courted the media and donated to them.

Yeah.

He was really good at it.

He was really good at it.

He was unusually good at it.

No.

And I totally agree on that.

Yeah.

Super smart,

super connected,

really thoughtful design on how he committed this.

I only think an insider could have pulled off something at this scale.

I think I agree.

I think this is where Chamath,

you’re exactly right.

I think you needed to be an insider.

The level of cynicism here is he knew the playbook and he admitted it.

You pointed this out with the chats that were released where he said,

he,

he,

he,

he.

Yeah.

Look,

I mean,

just like he,

he chat,

he was always intertwined with the parents.

Yeah.

Parents apparently bundled a bunch of money to Elizabeth Warren.

You know,

he was dating the CEO of the business that he owned 90% in there.

All these other random shell companies that he owned a 100% of where they

were lending back and forth hundreds of millions to billions of dollars.

Yeah.

To David’s point,

that is a sophisticated con that you have to architect.

And the way that he was able to get away with it is that not a single

reporter or regulator thought to dig in.

And the reason I think is because he said all of the right things that

wanted them to embrace him.

And the reason is he admitted it.

This is a dumb game that we woke Westerners have to play.

We say the right shibboleths and then everyone thinks we’re a good person.

Exactly.

Imagine.

Pull that quote up on what he said,

because it’s actually a good quote.

It was what I just said.

Is that exactly what he said?

Yes.

He said it’s the game that we woke Westerners have to play.

We say the right shibboleths or everyone likes us.

He actually said the most uncomfortable thing out loud,

which is look,

by having gone to Crystal Springs High School,

by having professors,

by parents that went to Stanford,

by having gone to MIT,

I can pull this off.

That’s,

that’s what he said,

because he can go with those things because I’m a,

I’m a champion of effective altruism that I can justify any of these

decisions,

how amoral or immoral that they be,

because I’m trying to help,

you know,

my brother stand up a multimillion dollar pandemic response business.

I’m trying to do this.

I’m trying to do that.

And all of these regulators and all of these reporters said,

okay,

you get the hall pass.

Now imagine if you replaced him with some random kid in some developing

country,

or even from the United States who did went to public high school,

who went to some random state school.

Do you think that they could have pulled any of this stuff off?

No,

you need the patina of the privileged class.

The New York Times,

what he had,

the patina of the privileged class,

even after this fraud,

the New York times wrote more of a puff piece on him than the hit piece.

They wrote on Brian Armstrong last year when Brian Armstrong wouldn’t tow

the line on allowing politics at work.

Remember that?

Yeah.

Unbelievable.

Yeah.

So the big,

I think what Chamath is kind of saying here is that the big enabler here

is not crypto per se.

It’s all of these institutional biases and elite biases that he was able

to play into partly because he was a big insider.

I mean,

in a way he monetized his parents’ life work.

The problem that I think this allows us to put a fine point on is the

following,

you know,

in society we’ve confused a lot of people to think that the opposite of

liberal is conservative or Republican.

And I think that’s the cycle that drives the mind virus inside the

mainstream media.

The problem is the opposite of liberal is illiberal.

Okay.

And what illiberal means is to be narrow minded and unenlightened.

It means to be puritanical.

It means to be fundamentalist.

And this is really what it allows us to see.

Now we have now had six years of data case after case after case where

if you are woke,

if you are a social justice warrior,

if you have the right credentials that justify your upbringing,

if you have institutional,

uh,

bona fides that come from your parents,

you get to create the narrative and you get a hall pass.

And everybody else basically is at the subject and the mercy of the

mainstream media.

And so if you don’t kiss the ring and bow down to them,

they will try to destroy you or run you out of town.

But if you are one of them,

they will give you a hall pass.

And when it’s time for them to change their mind in order to tell the truth,

they won’t do it.

And so these types of grifts will continue as Friedberg said,

because there is no check and balance without a healthy independent media.

There is no way for all of us to actually know what’s really going on.

Guys,

some person in the media could have asked the question and dug in deeper

around the connections between Alameda and FTX for the last 24 months.

I had no diligence at a venture firm.

At no point could any person have asked these questions and found ex-employees

and said,

you know,

are there any unseemly connections here between FTX and Alameda?

There was no disgruntled employee.

I mean,

every company has disgruntled employee whistleblowers,

but here where there was billions of dollars being made by tens of people,

not a single person who felt on the outs said anything.

Well,

he was also giving millions of dollars to press outlets in donations.

It’s because the questions weren’t asked.

And then this kid paid hush money to the mainstream media.

Let me ask you a question of you guys.

Do you think that it’s the media’s responsibility in this context?

Or do you think that there should have been a regulatory authority that had

oversight of this business?

Like there is for every bank and every trading operation in the United States.

And every one of those businesses has a compliance officer chicken and has

regulators up the wazoo,

making sure that customers are kept safe and protected.

Or do we think that that should,

should offshore vehicles be allowed like this?

That allow people to operate?

It’s a reasonable question,

but there was a chicken and egg question.

We were all standing around holding our hands while the CFTC and the SEC were

fighting.

That’s not something that consumers can be expected to adjudicate.

So yes,

we should have legislation that clearly defines all of this,

but there were enough parameters that created regulatory frameworks where a

bunch of good actors did operate in them and are continuing to do so like

Coinbase.

So I don’t think this is a regulatory issue.

I think that if you believe there are people who are supposed to forensically

examine things and get to the bottom of things and ask hard questions,

those people did none of that here.

And,

and what’s,

what’s even more worrisome is what they’re showing is now with an massive

amount of data that shows that you could ask hard questions they don’t care to

because it makes them look bad.

I disagree with this.

I think regulators failed here because they have been reactive to crypto.

They have not been proactive and they have not been clear with the crypto

community that what they were doing was illegal and they should have put the

regulations in quicker and they’re playing catch up.

But all three groups failed.

The media failed,

the regulators failed and VCs failed.

Capital allocators failed.

I apparently to do diligence here and install proper governance.

You cannot put a company like this,

you know,

in business with billions of dollars and have no board of directors or he,

or he lied to them.

My point is that while regulators are basically fighting a territorial turf

war,

okay,

the media could have still done their job.

They chose not to.

Guys,

it was worse than that because not only,

it’s not just a case where the sec failed to exercise any oversight of him or

dig into any of these questions.

He was in the room with them crafting the next set of regulations.

He was working on the regulations that you’re talking about that are

supposedly needed,

breaking them.

They let the Fox in the hen house.

He was going to craft a,

a new type of regulatory license for these types of exchanges with the result

that he was going to get one.

And some of his competitors weren’t,

this was one of the things that triggered CZ to basically,

you know,

do what he did,

which is basically that SPF was trying to get a Binance and,

and competitors like that band while SPF would be one of the sole people to

get the license.

By the way,

he was working with the regulators.

Yeah.

Jason,

you just said something derogatory towards CZ.

He rug pulled them.

Did he do that?

Or did he actually expose the fraud?

That’s what I mean by rug pulling.

Yeah.

He was partners with him.

That’s not what rug pull means,

Jason.

Okay.

Well,

he was partners with him and then he realized he was weak and that he was

doing some stuff that was shady and he decided he would eliminate a partner

who was creating regulation.

As Zach said,

whatever you want to say,

he knifed him.

All he did was indicate a desire to liquidate his position in a token that

was supposedly perfectly liquid.

And that’s basically,

that caused the,

everything to unravel.

Yeah.

But these were partners,

right?

I mean,

these were deep business partners.

And they were partners.

They were collaborating on these tokens together.

So they weren’t competitors.

No,

they weren’t.

Jason,

like part of the big loan that,

that initiated all of this stuff like a year and a half ago was to buy FTX

off the cap table.

So,

you know,

this,

all I’m saying is like you used words and your framing of a guy,

you know,

who’s built a business is like,

he is this nefarious bad actor.

Binance was the first investor.

Hold on a second.

But,

but,

but David’s right.

All the guy did,

as far as we can tell right now is tweet,

I’m selling this token because I don’t believe in the capital structure of

this entity.

And he got those tokens by being bought out of the cap table.

I know he was partners with them.

So if,

if you,

if you don’t like rug pulled,

how about backstage business partners?

They’re not partners.

You still don’t understand.

Of course.

I understand.

They,

he was the first investor.

So to do this to a company,

you were,

no,

no,

no.

And part of the consideration,

hold on.

Part of the consideration were these tokens,

these FT tokens.

Jason,

when you,

when Uber went public.

Yes.

And you got distributed stock.

Yeah.

Did you distribute and sell Uber at any point?

Previous to that?

I had,

I sold some Tomas.

No,

no,

no,

no,

no,

no.

I’m asking you a question when Uber went public and you got distributed from Uber,

your stock.

So you’ve never sold a single share of Uber.

Not since it’s public.

No,

I sold it before.

I tried markets.

Okay.

But I’m sorry,

but that doesn’t make Jason a partner of Uber.

You’re just a stockholder.

Yeah.

This is slightly different,

I think,

but okay,

fine.

You guys,

if you guys want to consider,

no,

he was the first investor in the company.

That might’ve been a historical situation,

but it wasn’t.

They were competitors.

Okay,

fine.

I mean,

they became competitors.

I agree.

And by the way,

to Tomas point about this rug pulling language,

I think we’re getting kind of down a rabbit hole here,

but CZ,

CZ did perform a service in this sense.

Okay.

SBF claims that 4 billion more was about to come in.

I personally don’t believe that sounds like bullshit to me,

but if it is true,

that would have been a bad thing.

The more money that came in to that operation,

SBF proved that he was a very poor custodian of customer funds.

For sure.

I’m not defending SBF,

but the longer this went on.

I’m just highlighting the language that you use is sort of like,

again,

part of that establishment elite narrative.

And I’m just questioning,

you should maybe steal man.

Take a second to just steal man.

Yeah.

A more dispassionate view,

which is here’s a counterparty.

Okay.

Yeah.

Who,

when he left the cap table was given half cash,

half tokens.

Okay.

And he decided to sell his tokens.

Yeah.

Yeah.

And tweet it publicly and cause a run on the bank.

So it was not a run on the bank.

There was no bank.

Where’s the bank.

This run on the bank language.

Okay.

Is something,

this was in the semaphore coverage.

Okay.

He did it publicly.

That’s my point.

So I’ll steal man.

Okay.

No,

no,

no,

no.

These tokens are worthless.

I need to liquidate them as fast as possible,

but why would you do that publicly?

Why would you do it privately?

You’re about to move the market.

He wanted to move the market to zero.

Yes.

He’s letting people know why,

why he wanted to kill his competitor.

As Chamath was just saying,

he wanted to kill his competitor.

He was trying to kill him.

I didn’t say he was trying to do that.

We got,

we got to back up here because I think we’ve done a lot of like 30,000 foot

like lessons and like takeaways from this whole thing,

but we haven’t really established what it is that SBF did wrong.

So I think we need to sort of take a second to unmodify the waters.

Okay.

And part of that,

I think we should start with this idea of a run on the bank because the

favorite,

the press you’ve been writing puff pieces about SBF,

I’d say mainly semaphore,

which he was a big donor to.

You’ve been trying to frame it as a run on the bank.

And then that implies that it’s not really his fault.

It could happen to anybody.

Lots of banks have had this problem.

Okay.

First of all,

they’re not a bank banks actually have the legal right under certain

conditions to take customer deposits and loan them out.

Okay.

They did not,

their terms of use did not allow that as Stephanopoulos pointed out.

SBF’s answer to that was,

well,

we had this like margin account program.

There were other provisions,

other terms of use,

but most of the customers who lost money,

the vast majority did not opt into that program.

They never agreed to that.

So that’s,

that’s point number one point.

Number two is I think we need to,

to look at this language of margin account.

Okay.

SBFs explanation of how customer money was siphoned off for his own

personal use.

I eat to Alameda is that Alameda had a margin account.

So I think we could perform a service here for the customer.

Okay.

And,

and you guys understand this really well,

the way that a margin account works is the following.

Okay.

Cause I think some of us have them set up with investment banks.

You go to an investment bank,

say Morgan Stanley and you over you post collateral.

You actually over collateralized.

So for example,

you might take a hundred million dollars and put into your bank account.

And you say,

you’re gonna put $100,000 into your bank account.

So you could go to a bank and say,

I’m going to put $100,000 into my bank account.

For example,

you might take a hundred million dollars of stock posted at the investment bank.

And then they will let you loan a certain percentage,

nowhere near a hundred percent,

maybe 50%.

If you have a very,

very liquid security,

you may get 50% coverage,

which means if you posted a hundred million dollars,

you could get a $50 million loan.

Okay.

So you have a hundred million in Amazon stock.

You’re some Amazon VP,

you can get 50 million loans.

And if it’s a private asset,

it’s anywhere as high as 30%,

35%.

But typically it’s about 25%.

My expectation is in a liquid token like this,

would have basically gotten five or 10% coverage ratio at the best of it.

And then what happens is you have these maintenance values.

So if all of a sudden the value of these entities multiplied by that

percentage that you’re allowed to loan falls below,

you have to post money.

That’s how a margin account works.

It’s just,

there is no free lunch in that.

Yes,

exactly.

Let me say quite simply,

very simply what I,

it appears this guy did.

He took customer deposits in us dollars.

He then converted those dollars into some other asset.

And he had a mark on that asset.

Let’s call it a dollar,

a token.

And then those dollars were moved to somewhere else.

No,

this is someone transferred in some other token.

Listen,

we need to finish the explainer around the margin account.

Okay.

Because what SPF did is this,

he took customer deposits,

gave them to himself.

Just be clear.

No,

he gave up.

He took customer deposits in us dollars.

They were wired in.

Correct.

He took those dollars out and he put a fake token in and he called it

that.

That’s right.

He said,

therefore he said the balance sheet is good,

but the value of that token,

it turns out isn’t a dollar it’s 10 cents.

That’s right.

It was his,

it was sort of his made up token that,

that he,

that he tightly controlled the trading of and,

and artificially prompted the price.

Yeah.

Yeah.

But,

but,

but here’s the thing.

It wasn’t just the fact that his collateral was no good.

It was also the fact that,

and this is from the bankruptcy filing by the,

the new,

the Enron trustee guy.

He specifically said that Alameda,

unlike every other margin account on the platform had the auto

liquidation provisions turned off.

So wait,

we have to finish the thought around how margin works.

So like Tomas said,

you over post collateral.

And if the value of that collateral goes down or the,

the,

the,

the position,

your trading account,

the value of that goes down,

you either have to post more collateral or they will actually liquidate

your collateral to pay off the loan.

So Morgan Stanley will never lose money on a margin account.

Never.

Like the whole point is because they don’t make money on it.

They loan you the money at like,

you know,

a few percent,

it’s like very cheap.

Yeah.

Loan LIBOR plus.

So yeah,

exactly.

That is not a risk account to them.

And so in the,

in the example,

let’s use an example.

In the,

in the case of the VP at Amazon,

who’s got a hundred million in Amazon,

they have a $50 million loan.

If Amazon loses half its value,

then that triggers the automatic selling of Amazon shares to get it

back down to 50% coverage.

So now you have to sell 25 million of Amazon shares.

If the full 50 million was pulled down to get back down to 25 to 50%

leverage.

Yes.

And they don’t wait until like Amazon stock is at the exact level where

now the collateral equals a hundred percent of the loan.

They will keep that 50% loan to value and they will liquidate you,

you know,

and,

and by the way,

you can lose your entire amount,

right?

So,

you know,

this is why I’m trading a margin is so risky is that you can get wiped

out,

quickly with a small move down because they are the custodians of that

Amazon stock.

They are holding it for you now,

and they have the right to sell it to cover your margin.

You’re saying that governor,

that basic tenant,

that basic safety control was turned off by Alameda and it’s even more

sinister.

Alameda controlled like 90 or 95% of these FTT tokens and was owned by

Sam Bankman fraud.

So he owned that company.

Then he claims he had no operating position in it.

What should have happened is with that collateral is that as the value of

their position was going down and,

or as the value of the collateral was going down,

it should have been liquidated to pay off the margin loan.

And that did not happen.

And the reason it didn’t happen is that Alameda got a special exception on

the platform to turn off auto liquidation.

Therefore it was never a margin account.

If even if it was a margin account,

okay.

And,

and FTX somehow misadministered the margin account.

It should never have taken other customers deposits and use them to pay back

that money.

What should have happened is if FTX was going to lose money on a margin

account,

that would hit the FTX corporate treasury.

Okay.

And when the FTX corporate treasury ran out,

the company files for bankruptcy then,

and then all the other customers hold on,

their account is still there.

Their money is there in segregated accounts and in bankruptcy,

they get their money back.

The idea that a margin account could ever cause another customer to lose money

that like,

whatever that is,

that’s not a margin.

There was a,

there’s a great article.

There’s a great article.

This one was a journalist that did his job properly.

His name is David Z.

Morris.

He wrote an article in coin desk that summed up for anybody that’s

interested,

all of the actual fraud and all of the crimes that were committed in

excruciating detail.

And what’s so sad about all these interviews in this press tour is if

anybody would just read this article,

you can construct the right questions to ask this guy just based on this

one article.

But the point I wanted to make is that one of the most interesting

insights was these guys had lost an enormous amount of money already in

calendar year 21.

And so this is what’s so crazy,

Jason,

about,

you know,

you using language like rug pulling and like,

you know,

actually,

actually trying to like be clear,

like you guys are giving this guy a hall pass.

When I’m not getting any,

any industrious reporter could have found an employee who said,

wait a minute,

we just blew a $3 billion hole in our balance sheet and calendar year

21,

20.

And now we’re sitting here at the end of 22.

Hold on.

I need to respond.

I am not giving him a pass.

And for you to blame journalists who are reflecting the crime and not

putting any light on VCs and the capital allocators who made this

investment and who did no diligence and now put governance in it is the

height of arrogance.

Shama.

This is not the presses.

They’re not doing that.

This is the VCs.

This is the capital allocators fault.

You’re blaming the people who are telling the story after the crime.

They’re covering the story.

You can’t handle the truth.

Jason,

they’re covering the story.

Can I get in here?

Can I get in here?

All right,

listen,

Jason,

I know you’re just saying that somehow you’re,

you know,

that you’re letting SBF off the hook.

I know you don’t want to let SBF.

However,

you are letting the press off the hook.

And the reason why,

hold on a second.

The reason why you’re using this inaccurate language like rug pulling and

run on the bank when there was no run and there was no bank is because

you’ve been infected by this language that the media has inserted into the

discourse.

The media,

listen,

hold on a second.

Investors may have got it wrong last year.

Investors may have got it wrong when they did that last round,

but I think investors now understand what’s happening,

but the media is still covering for SBF by miss explaining what

happened.

Okay.

Give me a percentage tax of who’s to blame here.

VCs who invested and didn’t set up any governance regulators who did not

set rules around crypto.

And then three,

the media,

what percentage out of a hundred percent is the investors,

the regulators and the press go three numbers.

I would say that before the fraud got exposed,

one third,

one third,

one third,

one third each before the fraud got exposed,

but they were all jointly and severally liable.

But after the fraud has been exposed,

no investor is still defending SBF.

But I think that the investors who were swindled by him,

they feel bad about it.

So 30,

30,

30 is absurd.

The press had no way to know the fraud was going on.

Just like the VCs with the money.

Okay.

Jason,

are you stupid?

I’m not your stupid journalist that exposed the fraud at Theranos.

He’s the guy that went and did all the work.

John Kerry,

you should be celebrated.

Hold on a second.

John Kerry,

you went and found this thing when nobody,

when everybody else was like,

this is perfect.

It meets all of our priors.

Let me finish,

please.

It meets all of our priors.

This is great.

Hold on.

And so John Kerry was like,

this doesn’t pass the smell test to me.

Let me go do some work.

And he pulled one little string.

And over the course of 18 months,

he exposed the whole bloody thing.

So hold on a second.

So what is incredible to me is that it was possible to expose this thing before.

Nobody did.

I agree with David.

It’s about equal responsibility before,

but afterwards,

the bulk of the responsibilities now sits with regulators to clean it up and

journalists to tell the truth.

Okay.

And now may I respond to that?

Since you call me stupid,

you are delusional.

Number one,

every one of those investors in Theranos could have taken a fucking blood test

at two different places like Jean-Louis Garcia did and write a blog post and

prove that Theranos didn’t work.

And they withheld disbelief investors putting in a hundred million dollars,

including Rupert Murdoch,

didn’t even take a fucking blood test or tell one of their diligence teams to

do it.

The same thing happened here with the investors in FTX.

They did zero diligence.

They set up zero governance.

This was a failure of the investors and the governance for 99% of the problem.

And then regulators should have caught it.

And the regulators,

in fact,

did catch Theranos.

So you’re completely wrong,

Chamath.

Again,

the journalists come in after the fraud is happening.

The investors and governance is responsible for stopping these things.

FTX was a failure of governance and investors.

And so was Theranos.

The end.

You’re completely wrong.

The question is post,

post exposure.

Why are you guys obsessed with post?

How about avoiding these things?

You guys are blaming.

Because the story is ongoing.

Because the story is ongoing.

Journalists for something that is capital allocators responsibility.

It is our responsibility to do diligence.

It is our responsibility to create a board of directors that checks on

Elizabeth Holmes and Sam.

I didn’t disagree.

I did.

I disagree with that.

Just call me stupid.

You just call me stupid for pointing out something that you refuse to

accept.

What are you talking about?

I’m the biggest.

I’m the older brother.

You guys are giving a pass to the investors.

You’re doing your impression again.

I’m not doing Fredo.

I’m not doing Fredo.

You guys are being absurd.

This is why people say that we’re delusional on this podcast.

Don’t call him dumb.

The reason people say we’re delusional is that we won’t take acceptance of

this issue.

Like the guy you can’t call dumb.

Totally.

He loses it.

I’m not going berserk.

I’m not going berserk.

You guys have a blind spot.

He’s like, don’t call me dumb.

I’m not going to defend any single one of those investors.

I think that they did a horrible job too.

It’s a great episode.

But the reality is I think that if you think that you can,

it’s your decision to defend the mainstream media.

I think that that’s fine.

I’m not defending them.

No, you are.

You said they have no responsibility.

No, I’m blaming the VCs.

It’s different.

The culpability is with the investor class that has not had proper

governance and diligence.

Jason, how many articles have been written excoriating them?

Yeah, some.

A lot.

They look like fools.

Show me the Washington Post New York Times that’s like digging in to

that malfeasance or that lack of oversight and holding them

accountable in a way that you feel exposes this problem to create

change.

Well, if we look at Theranos, those people who invested,

including Draper and…

Just show me the examples.

…Rupert Murdoch, they really went after them for sure.

Yeah.

What about here?

Wall Street Journal, one day ago,

Sequoia Capital apologizes to its fund investors for FTX loss.

Wow.

Venture capital firm tells fund investors that…

That’s hard hitting.

…it will improve due diligence on future investments after a

hundred million loss.

They really got them.

They really got them.

Let me read you.

That’s a cover story in the Wall Street Journal.

I’m going to read you.

I’m going to read you a sentence from the New York Times coverage of

SBF.

Oh, I’m not defending that.

Hold on a second.

Sam Banquet-Freed is neither a visionary nor a criminal mastermind.

He is a human who made the same poor choice that generations of money

managers have made before him.

Are you effing kidding me?

No.

I’m not defending them.

That was the New York Times coverage.

Yes, you are.

I am not defending them.

Yes, you are.

I just called Andrew Orton in a suit.

And then Semaphore, who was on the take,

who received millions of dollars worth of money…

They’re on the payroll.

Yes, they’re on the payroll.

…said it was a run on the bank.

How much did they get?

Five million?

Now, where is their apology?

Hold on a second.

Where is their apology?

Sequoia has apologized.

Where is their apology?

Oh, it has to come.

I’m not defending the press.

Yes, you are.

I’m just saying.

Yes, you are.

No, you are.

You are.

No, I am not.

I am literally telling you that the New York Times has been asleep at the

wheel and throwing…

Where’s the New York Times apology?

The press is always demanding an apology from everybody else.

I’m agreeing with you.

The press has done a shit job.

Hold on a second.

The press is always demanding…

The press is so incompetent on this.

The Twitter spaces yesterday did a better job of trying to ask questions

and getting to the truth than a single journalist has done or the

collective body of all of journalists.

Absolutely.

Literally, randos on Twitter spaces did a better job than Sorkin.

Let me tell you why no one trusts the press, Jason.

First of all, they have an agenda.

I am in agreement.

But second of all, when they make a mistake, they never admit it.

When’s the last time they did an apology or retraction?

When’s the last time they did what Sequoia did?

I don’t know.

Exactly.

And they need to apologize about New York Times.

You can’t even point to it.

I am in agreement with you on that.

But I think we have to first say, and this is where you guys have a

blind spot, is what is the responsibility of capital allocators and

governance and regulators?

I think it’s one, two, three.

Our industry is responsible for setting up proper governance.

The regulators are responsible for making sure that scientific claims

are backed up.

And then press is a distant third.

You know who I think is responsible?

SVF.

Go.

Yes.

One, two, and three.

And then we can talk about four, five, and six.

Okay.

Four, five, and six.

Capital allocators, regulators, the press, a distant sixth.

I agree.

Let’s go on to China.

God, it’s so spicy today in here.

God, it’s so hot.

I mean, I do think when we attack the mainstream media, Jason feels a

little tinge of like insecurity and illegitimacy because he were a

journalist.

No.

No.

That’s bullshit.

No.

I think that you have an incredibly romantic view of the craft as you

practiced it back then, which I think was full of integrity.

Yes, I do.

That’s true.

I think that you don’t adequately realize how massively the industry

has changed in the last 20 years since you’ve become an investor.

I realize it more than you do.

I fully realize that the media has absolutely become biased.

Are they corrupt?

And they have lost, in some cases, yes.

I mean, if you’re taking money from SVF and then giving him-

Are they blinded?

Are they biased?

They are corrupt if they are taking money from SVF and then giving

him Kigalov coverage.

Absolutely.

That is the definition of corruption in my mind.

What is it called when you don’t take money necessarily like the

New York Times and still treat them with kid gloves?

What is that?

It is extreme bias.

And the New York Times became extremely biased.

Why do you think that bias exists?

They were always left-leaning, but I can tell you why.

They, when Trump came in, a generation of new journalists became

activist journalists.

They didn’t want to tell stories and take it straight down the middle

and let the facts tell the story and let the audience make their own

decision.

They felt an existential risk when Trump came into office.

They got Trump derangement syndrome.

They picked a side like MSNBC and Fox did.

And the business model became, for the New York Times, pick a side

and get the subscribers.

It was a deliberate, cynical choice on the New York Times part to go

full MSNBC or full Fox, the two extremes in mainstream media, in

order to get the subs.

And they literally rallied the troops there to do anti-tech, anti-Trump

coverage.

And they became activists.

And when journalists become activists, they are no longer journalists.

They’re activists or commentators.

And that’s the problem.

It’s being presented as journalism when in fact it’s activism.

So you’re right.

So just shout out to Matt Taibbi, who just did a monk debate.

That’s well said by the way.

Yeah, on this very topic.

And he has a great, great sub stack, basically saying what you’re

saying, Jason.

And the best quote is the story is no longer the boss.

Instead, we sell narrative.

He’s a lifelong journalist.

His father was a lifelong journalist, and he understands the way the

business has changed.

And it’s like what you’re saying.

And this is why independent media, whether it’s sub stacks, whether

it’s call-in shows, whether it’s all-in podcasts or other podcasts,

Joe Rogan, Sam Harris, whoever it is, independent voices are now

what consumers are seeking out because they can sense the bias.

They know Rachel Maddow and Tucker have an axe to grind, and they’re

left and right.

They didn’t expect the New York Times, Washington Post, and Wall

Street Journal to, you know, they knew they were leaning.

They didn’t expect them to pick a side.

Do you think we should cancel if folks, do you think folks are better

off keeping their New York Times subscription or replacing that New

York Times subscription with a basket of sub stacks?

Yeah, you answered your own question.

It’s the latter.

I think you’re on your own as a consumer now.

You’re going to have to, and I think this podcast and the nuance we

have, shout out to Freeberg for nuance.

What we’ve done on this podcast is to explain to people.

Freeberg’s not the only one with nuance, Jake.

Nobody would describe David Sachs with the word nuance.

What, he’s the nuance department on this podcast?

What am I?

100% he is, but you would know that because you leave when science

quarter starts.

I’m the truth department, okay?

Sometimes nuance.

You’re truth bombs.

All right.

I’m the truth department.

You can take the both sides department.

The point is, consumers need to become extremely literate, and they

have to do their own search for truth in today’s age.

They don’t, they shouldn’t trust New York Times.

They shouldn’t trust us.

They should trust themselves.

They shouldn’t trust necessarily the CDC or, you know, the world

health organization.

They should trust themselves and come up with their own process for

figuring out the truth in the middle of this mess.

By the way, this is a good reflection on what’s happened with the rest

of media with respect to the creator class where, right.

It used to be the movie studios and, you know, a handful of kind of

aggregated creators that made all of the content of the record labels.

And now, you know, independent artists, independent producers,

independent creators, and now independent journalists are going to

become the bulk of volume that’s going to be consumed.

It’s just a different consumption model, but we’ve already seen it

happen.

We saw it happen with movies, and we’ve seen this disruption happen

across all of these other media classes, journalism, and what we call

the press is very likely going to be kind of that next layer of

disruption.

I would trust having a conversation with you about science topics over

reading a science article.

100%.

You know, in the New York Times or Wall Street Journal, if I’m being

honest, I would much prefer to talk to you about it.

And if it was markets, I’d rather talk to Chamath.

And if it was SaaS, I would talk to Sachs or operating a company.

Speaking of operating a company.

Or politics.

We’ll see.

We’ll see.

But I think it’s about having unique inside insight, right?

Like, that wasn’t the case.

And what’s interesting is that the people who are the professionals that

have the knowledge and the touch points are also becoming journalists in

the sense that they’re also becoming speakers of their truth.

Right.

And I think Twitter is a good enabling platform for this.

We see it on YouTube where like scientists are putting out their own

videos.

Or market actors like people that are traders in the market go out and

they put out their own videos.

And they put out their own podcast.

And I think we’re probably a good reflection of that.

Yeah.

In the sense that like we are the actors in the market.

And we’re not just the independent observer that has kind of a surface

level view.

We have the depth to be able to talk about the things that we choose to

talk about.

And I think that’s where consumers find value and will continue to find

value in terms of who the journalist or speaker is that they’re going to

start to trust for their information.

I had.

I saw that interview you did with newcomer.

Oh, yeah.

Yeah.

Yeah.

I saw that coverage.

I mean.

Yeah.

He speaks a lot about the this phenomenon of going direct.

And of course he’s against it.

Now he interprets going to direct as an attempt by newsmakers to avoid

answering tough questions or take tough questions.

I think that’s ridiculous because for example,

I go on CNBC all the time.

I go on Emily Ching and Bloomberg all the time.

I submit to like really tough questions.

I actually liked those sort of sparring sessions.

Yeah.

I did hard talk this week.

Have you ever done that?

Exactly.

So that’s not what’s going on here.

I think what’s going on is we have expertise.

We want to communicate them.

And we do feel like the media has become a very unreliable narrator.

There is too much bias and sloppiness.

Not all of it is agenda.

Some of it’s just pure sloppiness.

And there’s no reason why we shouldn’t go direct.

And people want to hear from us.

The audience wants to hear from us.

Look at Draymond.

Look at Draymond and the success he’s had with his podcast.

No basketball player has ever gone direct and created content like

Draymond’s created.

And it’s totally changed the game.

And he was so clear.

He’s like, we are, I am the media now.

JJ read it.

You know, Old Man and the Three.

Amazing, amazing podcast.

I was going to tell you guys a story.

So I was in the Middle East last week, or this week, sorry.

And I had this crazy experience where I was trying to understand what

was going on in China.

And so I started on CNN.

And the whole thing was the propaganda machine around a democratic revolt,

you know, pushing for democracy and trying to depose Xi.

Then I moved to Al Arabiya.

So one channel up, I went from channel 10 to channel 11.

And instead, what they were actually doing was interviewing people on the

ground.

And what they were talking about was literally how these PCR tests have

become far too burdensome.

And they just wanted it to end and more reasonable restrictions to get in

and out of quarantine.

Then I went from there to BBC.

And in BBC, they had a China scholar who was talking about how for decades

actually the Communist Party supports local level protests and

demonstrations because they’ve realized that it is a part of their

political system to make sure that people feel like they have a say.

And I was, like, taking a step back.

And I’m, like, if you listen to the U.S. narrative and even Jason, like,

in our group chat, people fomenting for, like, revolution.

And this is Tiananmen 2.0.

And I’m, like, well, I’m reading two other channels that tell us a

completely different set of things.

And I just thought, man, people just really fit the data to fit their bias.

Yeah, we are projecting.

We want to see a revolution in China.

The people in China want to have their lives back.

Well, I would love to see more democracy in the world.

Yes, guilty as charged.

I would like to see people be more free in the world.

Dictator.

I think most people just want to improve their condition.

And I don’t think people are as tied up on the philosophy of the government

as they are about improving their condition.

And as long as their condition is improving, they’re willing to put up

with any form of government.

History shows that.

By the way, the conditions in China have improved better than everybody’s

in the last.

Better than anyone.

500 million people out of abject poverty.

And that’s the great success of engagement.

Isolationism would not have created that amazing outcome.

500 million people going out of abject.

You’re referring to.

To Apple building factories.

Hold on a second.

You’re saying.

Apple building factories is what I’m referring to.

Oh, okay, fine.

If they want to build something over there, I guess that’s better than

us throwing out open our markets and giving China MFN status to destroy

American manufacturing and build up their economy so they can become a

peer competitor to the United States.

Yeah.

I mean, this is the balance of engagement, isn’t it?

If you engage too much, you give everything up.

Which of the current Republican agenda do you disagree with most strongly?

Just as an aside.

Well, most Republicans are in favor of our Ukraine policy.

This sort of unlimited appropriation of weapons and aid to them.

Don’t you disagree with immigration policy of Republicans and Democrats?

Well, I have a more nuanced position on immigration, which is I think we need

to have a border and it can’t be just like an open border, which is the

de facto policy we have now.

But at the same time, I do think that we should have H1B visas and we want

to, like Jamal said, we want to be an all-star team for the world.

We want to have the best people want to come here.

So there’s a balance.

It’s a balance.

And then, you know, look, I think that I was happy to see the marriage

equality bill finally passed the Senate.

Yes, they did get about a dozen Republicans voted for it.

So that’s awesome.

Yeah.

But that’s not the majority, unfortunately.

You know, look on what I would categorize as the old social issues, you

know, like a marriage, like cannabis legalization.

I was on the liberal side.

Yeah.

I don’t think, you know, banning abortion.

Entirely a total abolition is going to work for this country.

I think Republicans will lose elections if they insist on that.

And I think they’re getting that message.

So.

So, yeah, I mean, look, I, I think that I’ve always considered myself to

be pretty centrist.

And so you’re not a globalist.

You don’t believe in open global markets.

But the US in general, I understand the benefits of free trade, and I

don’t think we should be isolationist with respect to trade.

I don’t think that we can be a successful country if we are we isolate

our economy.

So I do want to trade.

However, with China in particular, I think we made a mistake in throwing

open our markets to their products, giving them MFN status while most

favored nation.

Yes.

Enriching them to the point where they became a pure competitor of the

United States.

Now, look, I understand why we made that mistake 20 years ago, because

everybody thought the theory was that if we help China become rich, that

China would inevitably become more democratic and they’d be filled with

gratitude towards the United States and they’d actually become more, more

hospitable towards us more westernized.

And I think that theory is just proven to be wrong.

I mean, they have not or it’s going very slowly.

One or the other.

Let’s own our clips here.

Here is Schmott’s prediction from episode 61.

And we’ll see you on the other side of this quick clip.

My worldwide biggest political winner for 2022 is Xi Jinping.

I think this guy is he’s firing on all cylinders, and he is basically

ascendant.

So 2022 marks the first year where he’s essentially really ruler for life.

And so I don’t think we really know what he’s capable of and what he’s

going to do.

And so that’s just going to play out.

You think he’s the biggest political winner, really?

Oh, my God, I think I think it’s going to be a he’s going to run rough

shot, not just domestically, but also internationally, because you have

to remember, he controls so much of the critical supply chain that the

Western world needs to be.

I think you’re completely right.

I think you’re completely wrong.

I think he’s losing his power.

He’s scared.

That’s why he took out all these CEOs.

He’s consolidating power because he fears that they’re going to win too

big and then displace him.

And he has massive real estate problems over there that could blow up at

any moment in time.

He could face a civil war there.

I think he’s totally isolated himself.

Civil War.

They don’t even have a major country is removing their factories and

removing this dependency there.

What are you talking about?

What do they get?

What do they get a riot with?

Did you not see Tiananmen Square?

Did you not see the riots in Hong Kong?

Are you not paying attention to math?

There’s been many riots in China.

They just happen to kill.

Those were crushed.

I’m not saying it will be crushed, but he still will have massive amounts

of, I believe, protests.

And yeah, he’ll have to kill people.

I think the bigger risk is that China gets better for Xi Jinping, but

worse for everybody else in China.

It’s already worse for all the billionaires over there.

It’s worse for the tech industry.

You’ve now got Evergrande, that whole gigantic debt implosion.

I think there could be contagion from China next year.

I don’t think Xi’s going to lose his grip in any way, but I’m not sure

China’s going to have a good year next year.

Wow.

Nailed it.

I think all three of us kind of got this right.

What are you talking about?

You got none of it right.

I said there were going to be riots and they’re going to have a recession.

Jason, let’s be honest.

You said that they would be squashed.

That’s exactly what happened.

Both things happened.

I actually think I have a pretty decent ability to steel man pretty

concretely the details.

I think that at best, when it comes to things like democracy and your

belief in U.S. exceptionalism in a specific political worldview, at best

you straw man.

And I think that you get very biased without seeing the forest from the

trees.

The reason I said that is not because I’m like some huge Xi supporter.

I’m just trying to steel man what happens when one individual person

gets anointed leader for life of 1.3 billion people that then controls 20%

of the world’s GDP.

There is no other single human being as powerful as him as of this month.

Can I just say that this show is going to become insufferable if every

time you sort of said something in the past that was sort of correct,

we’re going to have to replay it.

I was actually playing that one for you.

Sacks.

I think you nailed it.

I was giving that was a softball to you.

I know it every week.

J Cal.

All right.

So it’s going to slow down.

If we play every clip that I got, right.

You guys are asking to pull clips all the time.

I just pulled one clip about China where you nailed it.

No, no, no.

Look, I think like, and also look what he did.

King of pull a clip.

The, the Evergrande thing.

Look what he did this week.

They said, okay, you know what?

The real estate industry can now issue secondary stock sales,

raise equity and equitize themselves.

So they’re going to find a soft landing for the equity part of,

for the real estate industry in China.

And now they’re reopening.

So I don’t know.

I mean, like, I’m not sure what we’re supposed to comment, but I,

what I will stand by is what I said, which is,

I don’t think we have a very clear view about what’s going on,

what the substance of these protests are and what people actually want.

If you’re only consuming us media.

And so if you find a way to get a diet from a bunch of different sources

all around the world, you may get a better sense.

I had an accidental window into that by being in a completely different

part of the world this past week,

Freeberg any final thoughts on China and what’s going on there before we

move on to chat GPT, your favorite story.

I think one of the things we often miss is that China,

the CCP does have their hand on the

throttle. Like they throttle up and down.

We always think that it’s a linear line and that it’s super dogmatic and

fixed, but there’s certainly responsiveness.

And the release of the lockdowns in Guangzhou and Beijing this week seems to

have been a pretty good indication that when things do get, when,

when things, when the tides do do change leadership,

leadership there seems to respond not always,

but enough to kind of keep things going. So

should they reopen?

I think it’s 60% of the population or so is vaccinated with obviously

vaccines that maybe aren’t as don’t have the same efficacy as the ones here

in the United States.

Do you think they should open up and just let it rip?

Or do you think they should still try to maintain the zero COVID policy?

Cause that is the debate right now.

What’s the objective?

Cause obviously from the objective of economic growth,

they need to open up and they need to keep their economy working and they need

to keep their labor force engaged or else they’re going to continue to suffer.

So if economic growth is the objective,

they need to open up, right?

If the longterm health cost of the nation balanced again,

against that is the calculus that they’re kind of weighing.

There’s probably some more nuance to that. And certainly

my understanding is there may be a precedent setting,

which is, Hey, we’ve said that it’s a zero COVID policy.

Therefore we have to hold strict to it, hold toe the line.

Else it looks like we’re weak. And so there’s also this, you know,

maintaining the authority of the CCP objective.

So there’s a lot of maybe competing objectives right now.

Certainly don’t have a sense of how they’re, they’re weighing them all.

But, but I think that once, once all those videos came out this week,

you guys saw them, but people were screaming.

There was an apartment on fire where the doors were locked with steel beams on

the, on the base of the building. At least that’s what the video said.

I don’t know how much truth there is to that, but that’s what was said.

And clearly people are extremely distraught and unhappy with the conditions of

the lockdown. At some point, enough people with enough loud voices,

you know, something’s going to change. I mean,

let’s just remember like the bargain that struck in that country and with all

countries is that, you know,

the citizenry to some extent are willing to tolerate their government so long

as their conditions continue to improve. And there’s a bargain,

there’s some bargain that struck.

And as soon as that bargain starts to go south for, for, for the citizenry,

then that, that, that governing entity is at risk.

And I think that that’s what we sort of started to see this week was the

conditions are getting far,

far worse and far less livable for so many people in that country that the

government had to shift.

Do you think Chamath, this COVID strategy,

and then we’ll move on was basically Xi Jinping wanting to get to that

Congress, his coronation. And now that that’s over,

maybe he can change gears and then like I said, I,

my belief is that I have a very poor access to enough data to have a,

to steel man what is actually going on there.

But one explanation could actually be that in the absence of enough hospital

infrastructure and ventilators and a bunch of these other things,

they had to take a pretty severe approach to this disease.

I don’t know what they know or didn’t know. Maybe they understood,

you know, the virulence of it.

Maybe that they have a slightly different aging characteristics of their

population. Maybe they genetically responded to the SARS-CoV-2 virus.

I don’t know any of these things enough to tell you, Jason.

Yeah.

But the reality is what Freebird says is right,

which is that you cannot grow an economy if people are inside locked in their

apartments.

And it looks like they have decided that that’s coming to an end and they’re

going to, you know, deconstruct all of these things.

So, you know, the, the, the Chinese growth engine is coming back.

And I think that that’s going to be an important factor economically that we’re

going to have to figure out because it’s going to have a huge implication to

American growth and American inflation.

Saks, if, in fact, the China, if the lab league theory is correct,

China might have some insights into this disease that maybe the West didn’t,

maybe that plays into their policy a bit. Any final thoughts here?

Jake,

I’m just surprised to hear that you have a problem with their lockdown policy

over there because aren’t they just implementing democratic party orthodoxy?

I mean,

isn’t this the policy that Tony Fauci and Barbara Ferrer that, you know,

that all the health experts.

I was not in favor of lockdowns. What are you talking about?

You’re the one who had all your mask and had ventilators day one.

Isn’t this the lockdown policy?

Why am I getting this? I’m just asking a question as the moderator.

Isn’t this basically, why am I getting a stray?

Isn’t this what got into the question? Yes.

I was in favor of if people wanted to stay home, stay home.

And then if people wanted to go out and take the risk, take the risk.

I was always in personal choice.

Isn’t this what Gretchen Whitmer in Michigan and Gavin Newsom in California

had subscribed to the idea that the way to fight COVID was through lockdowns.

Now, yes,

Newsom had 10 pages of exceptions for his political donors and he didn’t use

the police to lock people in apartment buildings.

He may have wanted to, but they didn’t actually do that.

But can you really tell me that this lockdown policy has been disavowed by

people like Fauci or by the health authorities like the Barbara Ferrer’s of

this world? They still subscribe to this view.

Do they really? Is there anybody doing a lot?

Well, they’re not able to do it because no one agrees anymore.

But tell me, tell me where anybody,

tell me where any of the health experts who said that lockdowns were the

correct response have repented and disavowed that view.

Yeah, I don’t know. I haven’t been, I haven’t been tracking their mea copas,

but you yourself were in favor of lockdowns for a period of time.

Yes, you were. No, you absolutely were. I’ll pull the tape.

Mass mandate. No, that’s not true.

I was in favor of a mass mandate.

And I said the mass mandate was the alternative to lockdowns.

Okay. I was saying that by May of 2020.

All right, listen, let’s move on to the next thing. I don’t represent,

I’m an independent. I don’t represent the democratic party.

I don’t represent Fauci. No, you represent mainstream media.

I do not represent mainstream media.

You just said I was an old school journalist who’s mortified with where it

is today. I’m giving you a hard time. I thought your,

I thought your explanation was fabulous. Oh, thank you. Thank you.

Obviously, Jake, I’m giving you a hard time too.

I know that you were not a big lockdown proponent,

but you understand the point I was making.

There were a lot of proponents in the US.

Let’s stop making me the democratic spokesperson.

I’m feeling a lot better after my beer. Let’s talk about open AI.

Come on. Let’s go. Let’s go. Let’s talk about open AI.

All right. Open AI is a, a company that builds

artificial intelligence software and platforms.

They have one platform called G P T.

It is on its third version as part of GPT three,

they created chat GPT,

which is a chat interface where you can ask questions to AI.

The results are nothing short of stunning when they hit.

Some of them are a little bit mixed,

but Freeberg has spent the last 48 hours drinking white Russians with Oatly

milk and playing with chat GPT,

including his question to the chat GPT,

which was write a script of Chamath Sachs and Jay Cal talking about the

future of AI in the style of a Quentin Tarantino movie.

And I have to say it was pretty great. The results go ahead.

Freeberg tell us what you discovered.

I think you guys should read this real quick.

We can cut it out if it’s stupid, but actually read the script.

I don’t think I got the Quentin Tarantino part, right?

I mean, I think it was like impressive, but there’s no F bombs.

There’s no like Tarantino S dialogue.

They took, they took out all cursing and violent,

cussing and violence from open AI.

That explains it because if this was a Tarantino script,

there would be some choice language.

But it’s interesting. It’s like the PG Tarantino script.

No cussing, no violence, no.

Yeah. You do the narrative.

The scene opens on Chamath Palihapitiya, David Sachs,

and Jason Calacanis sitting at a dimly lit table in a smoky bar.

A bottle of whiskey sits in the center of the table, half empty.

Chamath leaning forward, his eyes intense.

So what do you guys think about this chat GPT thing?

David Sachs takes a sip of his drink.

It’s impressive. No doubt about it.

A large language model trained by open AI that can generate human

like texts in a variety of styles and formats. It’s a game changer.

Jason nods. Definitely.

It’s one of the most advanced AI systems we’ve seen to date.

It’s going to have a huge impact on the way we use and interact with AI.

Chamath frowns.

That’s what I’m worried about.

With a technology like this, the possibilities are endless,

but so are the potential dangers.

Sachs leans back in his chair.

Oh, come on, Chamath. You’re not still stuck on that whole

AI is going to kill us all thing, are you?

Chamath leans forward again, his voice low and serious.

Look, I’m not saying that chat GPT is going to turn into Skynet overnight,

but we need to be careful about the way we develop and deploy AI.

We need to make sure that we’re using it for good

and not just for our own gain.

Jkal nods.

I agree.

We need to make sure that we’re responsible in the way we use AI,

and that includes making sure it’s accessible and affordable to everyone,

not just a select few.

Chamath with a dirty smirk.

And let’s not forget about the importance of regulation.

We need to make sure that we have the right laws in place

to prevent the misuse of AI.

The director’s calling cut.

Cut. That’s it, scene.

Exit scene. We’re not going to finish it.

It’s not that far off. I mean, it’s 60% of the way there.

All you have to do is put in a Biden for Sachs.

If you blame Biden, it would have been perfect.

Let me tell you guys something stunning about this platform.

So this is GPT 3.5, which is an interim model

to what people are saying is the long awaited GPT 4.0 model,

which I think they announced in 2020

and has been in development for some time.

So this GPT 3.5 model was trained in three steps.

They do a great job explaining it on the OpenAI blog site

where they collect some data.

And then there’s a supervised model,

meaning that there are humans that are involved in tagging.

And then the model kind of, you know, learns from that system.

Then you ask the model questions, you get output.

And then humans rank the output.

And so the model learns through that ranking system.

And then there’s kind of this third optimization thing,

and then it’s fine tuned.

So the model itself has several steps of kind of human involvement

and, you know, kind of it sources its own data and builds it.

You know what’s incredible about this model?

The total size of the software package that runs the model is about 100 gigabytes.

Isn’t that amazing?

Like, you could fit this model on probably what, 20% of the storage space on your iPhone.

And you could run this thing and you could probably just talk to it for the rest of your life.

And it’s really kind of an incredible milestone.

But I think what was so stunning to me about this,

I know you guys are probably expecting something to be said like this,

but you could see so many human knowledge worker roles and functions being replaced by this extraordinary interface.

So kids can do homework, that’s easy.

Software engineers can get their code optimized and can get their code written for them.

There’s great examples of how software code has been written by this interface.

You could see real estate, insurance, salespeople being replaced by some sort of software-like interface.

Copywriters.

Copywriters, you know, make me 100 versions of a commercial or an ad that I can then use.

Customer support.

Customer support completely replaced, right?

If you guys remember, there were these automated customer support companies that started, you know, two decades ago.

Never worked.

And there was this great flurry.

All BPO businesses were all about lower cost human labor.

Now the cost of human labor goes to zero.

My prediction, which is, so everyone’s got the obvious prediction,

which is there’s going to be 100,000 startups that are going to emerge.

I mean, this is kind of like this moment where the internet came along and everyone’s like, this changes everything.

I do think everyone thinks and feels that.

So the obvious next step is a bubble will form.

Can I ask a technical question though, Freeberg?

And then Chamath, you’re probably thinking the same thing here.

Let me just finish my market prediction and then we’ll do the,

but I think because everyone’s so hyped about this and we all know this,

all the VC attention, all the investor attention is shifting to this capability.

And how do you apply this sort of capability across all of these different industries and all these different applications?

And as a result, my guess is the next hype cycle, the next bubble cycle in Silicon Valley will absolutely be this generative AI business.

Okay.

This is a little technical, but how would it know the difference between like,

Y-O-U-R and U-R when it is processing natural language, if you were to do like your anus or your anus?

How would that, Freeberg, how would it know the difference between your anus and your space anus?

It’ll, it’ll learn that, you know.

It’s a joke.

It didn’t land.

It was a joke about your anus, it didn’t land.

Try again.

The AI probably would have made a better joke than that.

It would have made a better joke for sure.

Somebody did it in our group chat and said, do intros like J-Cal, and they were terrible.

So at least I have a job for another year.

I’ve only asked the AI to pretend you’re the all-in-pod besties telling Uranus jokes.

That would be pretty hilarious.

Sorry, let me just say one more thing about this OpenAI thing.

I do think that the biggest and most interesting thing to think about is how this will disrupt the search box.

The search, you know, the way search works at Google, you know, and the internet search,

is there are these kind of servers, these web crawlers that go out and gather data.

Some are structured data feeds, and some of them are just crawlers.

And then that data is indexed, or in the structured way, it’s kind of made available for serving directly on the search page.

And so much of that is indexing.

So I search for a bunch of keywords, those keywords, and perhaps some natural language context are matched to a result page,

and I click on that, and it’s linked out.

Years ago, Google started a product called the OneBox, where they could take structured data,

like what is the weather in San Francisco today,

and that top of the search result page just presented that data,

because it knows with high certainty the question you’re asking,

and it knows with high certainty the answer it can give you.

Yeah, clipped it from somebody’s website, right.

So if that starts to become everything, then that OneBox interface,

and it’s not just Google’s ability to access all this data and index it and serve it and store it,

there could be a lot of competitors to the OneBox and a lot of competitors ultimately to search.

And ultimately, you know, Google’s core product, their search engine,

could be radically disrupted by an alternative set system or set of systems

that have more of a natural language chat interface.

Which is literally why Google bought DeepMind,

and there were a collection of human-powered search engines, Mahalo included,

ChaCha, Answers.com, who were trying to do the human-based version of this.

It just didn’t scale.

We don’t want to get ahead of ourselves, because one of the things we don’t know is how much is going on in DeepMind.

They’re not very open like OpenAI is.

They talk about some of the advanced frontier stuff like AlphaFold and so on,

and they’ve been public about that,

but a lot of that is really to generate interest and hype in what’s next.

But my understanding is DeepMind’s been applied to everything from

Ads.

Ad optimization, but also the ranking on YouTube videos to get people more engagement on YouTube, etc.

So there’s all these ways that DeepMind’s been applied within Google services.

That we don’t see.

And certainly within search.

Yeah.

But the question is, is there an entirely new interface for search

Yes.

that risks Google’s core search business?

And I think that there certainly will be a lot of money thrown at this.

And if anyone has any interesting ideas, send me an email.

Saks and then Shamath.

Yeah, I think that’s a really interesting point.

I saw a thread on this where somebody was asking GPT a bunch of questions.

They were generally coding questions, and they were actually comparing the result in Google versus GPT.

And Google would just give you a reference, like a link to some page.

Whereas GPT-3 would actually construct the answer, like a multi-paragraph answer.

That was far more detailed and, in a way, user-friendly.

Yeah.

Whereas the Google page would kick you over to a reference where it was like this one, two, three,

maybe someone had created a checklist, but it just wasn’t that detailed.

It really is pretty interesting.

I thought Andreessen tweeted a really interesting example as well,

where he asked GPT to create a scene from a play starring a New York Times journalist and a Silicon Valley tech entrepreneur.

They were arguing about free speech, and each person asserts the view associated with his profession and social circle.

We don’t need to read the whole thing, but I thought this was spot on,

where I was actually like both sides are making their best arguments,

and it’s like to each other in a conversation that seems intelligible.

They’re making their points at the right time in the conversation.

It’s like they’re playing off each other.

In other words, it actually reads like a conversation.

I actually thought this one was more impressive than the one with the Bestie impersonation.

I agree.

I actually thought that the one about all-in didn’t really capture our personalities per se,

but this one actually does a pretty good job capturing the arguments in this debate.

Chamath?

Pretty impressive.

Any thoughts here?

Yeah, lots.

I’ve been spending a lot of time learning about this area.

Six years ago, a team that I partnered with who was at Google that built TPU,

we’ve been building silicon for this space,

so we’ve been kind of going from the ground up for the last six years.

A couple of things that I’ll say.

The first is that I think we’re going to replace SAS with what I call MAS,

which is Models as a Service.

A lot of what software will be, particularly in the enterprise,

will get replaced with a single-use model that allows you to solve a function.

These chat examples are one,

and you can name a bunch of SAS companies that were purveyors of SAS

that’ll get replaced by essentially GPT-3 or some other language model.

Then there’ll be a whole bunch of other things like that.

If it’s an expense management company,

they’ll have a model that’ll allow them to actually do expense management

or blah, blah, blah, forecasting better.

So I think SAS will get replaced over time with these models incrementally.

That’s phase one.

But the problem with all of these models, in my opinion,

is that they’re still largely brittle.

They are good at one thing.

They are a single-mode way of interfacing with data.

The next big leap,

and I think it will come from one of the big tech companies or from OpenAI,

is, and we talked about this, I talked about this a few episodes ago,

a multimodal model,

which then allows you to actually bring together and join

video voice data in a unique way

to answer real substantive problems.

So if I had to steel man the opposite side reaction,

so I think there’s a lot of people gushing over the novelty of GPT-3,

if I had to, or chat GPT,

if I had to steel man the opposite, what I would say is,

it’s going to get somewhere between 95% to 99%

of all of these very simple questions right

because they’re kind of cute and simple.

There is no consequence of saying,

write a play because there is no wrong answer.

You either kind of, it tickles your fancy or it doesn’t,

it kind of entertains you or it doesn’t.

When this stuff becomes very valuable

is that when you really need a precise answer

and you can guarantee that to be overwhelmingly right,

that’s the last 1% to 2% that is exceptionally hard.

And I don’t think that we’re at a place yet

where these models can do that.

But when we get there,

all of these models as a service

will be very much commoditized.

And I think the real value is finding

non-obvious sources of data that feed it.

So it’s all about training.

So meaning you can break down machine learning

and AI into two simple things.

There’s training, which is what you do asynchronously.

And then there’s inference,

which is what you’re doing in real time.

So when you’re typing something into chat API

or a chat GPT, that’s an inference that’s running

and then you’re generating an output.

But the real key is where do you find

proprietary sources of data

that you can learn on top of?

That’s the real arms race.

So one example would be,

let’s say you build a model to detect tumors.

There’s a lot of people doing that.

Well, the company that will win

may be the company that actually then

vertically integrates, buys a hospital system

and get access to patient data

that is completely proprietary to them

and covers the most number of women

of all age groups and of all ethnic categories.

Those are the kinds of moves in business

that we will see in the next five to 10 years

that I find much more exciting

and trying to figure out how to play in that space.

But I do think that chat GPT is a wonderful example

to point us in that direction.

But I’m sort of more of that case,

which is it’s a cute toy,

but we haven’t yet cracked the one to 2% of use cases

that makes it super useful.

But I think the first step,

but the first step will be

the transformation of SaaS to mass.

And then from there,

we think we can try to figure this out.

It reminds me of in a way when you give that description

of like, hey, this is really interesting,

but it’s not complete.

Is remember when GPS came out

and like people are like doing turn by turn navigation,

they drive off the road

because they were trusting it too much.

And then, you know, over 20 years of GPS,

we’re kind of like, yeah, it’s pretty bulletproof,

but keep your eyes on the road.

Same thing that’s happening.

And these changes tend to be slow.

These last 100 or 200 basis points

literally takes decades.

Exactly.

So the last 15% of self-driving

is like the decade long, you know, slog.

That may take a century.

15% may take a century,

but the last 2% will take a few decades.

It’s like the change happens very slowly

and then all at once.

For people who don’t know what a TPU is,

that’s a tensor processing unit.

This is Google’s application specific circuits, right?

And custom Silicon

that they invented for TensorFlow at the time.

Yeah.

So if you want to try to…

Although now the modality of AI,

we’ve changed that as well.

So now we’re totally in the world of transformers.

So we’re not even using,

you’re not letting the tensors flow

the way they used to.

All right, there’s been a slowdown in SaaS.

Sax, what is happening

in the software as a service world?

There was a good update by Jamin Ball

who works for Altimeter,

our friend, Brad Gerstner.

He does these really great updates

on what’s happening in the SaaS world.

The big thing this week

is that Salesforce had its quarter

and I would consider Salesforce

to be the bellwether

for the whole SaaS category.

I think they’re the largest pure SaaS company.

They were the first multi-tenant SaaS

like company at scale.

And what they’ve shown

is a huge slowdown.

Basically, their net new ARR

that they just added in the previous quarter

dropped two thirds

compared to the previous quarter.

But because their sales and marketing spend

was the same as the previous quarter,

it exploded their CAC payback,

which means the amount of time

it takes to pay back

your customer acquisition costs

for a given customer.

So you see there are 155 months.

It would take now

to pay back the customer acquisition costs.

That’s over 10 years.

That doesn’t work.

I mean, I think before this quarter,

it was more like two and a half years.

That’s something that you can afford.

A company can’t,

if you’re spending 10 years

of gross profit on a customer

to acquire them,

the business doesn’t make sense.

So now I’m not saying any of this

to pick on Salesforce.

It’s an exceptionally run company,

one of the absolute best.

Marc Benioff, fantastic CEO, founder,

great human being.

But I think the point here is

that what you’re seeing is

the whole SaaS industry

is really slowing down here.

In the first half of the year,

you saw SaaS valuations correct.

Now we’re actually seeing

SaaS top line correct.

And there’s an interesting question here.

If your CAC payback

goes from two and a half years to 10 years,

you have to bring your CAC down.

How do you do that?

You can either reduce marketing

or you can reduce sales.

So in other words, you can reduce…

You mean cut the sales team.

You can either cut people

and headcount from your own team

or you can cut spending you do

on advertising or events

or money that you spend on other companies.

Either way,

there’s going to be a big contraction

in jobs basically around this industry.

And I think that what that could do

is cause a vicious cycle

where we start seeing…

Death spiral?

I wouldn’t say death spiral.

I think this vicious cycle

for the next year or so

where seat contraction becomes the norm

instead of seat expansion.

So if you go back over the last 10 years,

a major tailwind

at the backs of SaaS startups

has been that every year,

you start with 120%,

130, 150% of last year’s revenue

just from your existing customers.

Why?

Because they were hiring more and more people

and they needed to buy more and more seats.

But now headcount growth is frozen

and in fact,

companies are doing major layoffs.

So the baseline for next year

could be seat contraction.

So instead of starting with 120%

of last year’s revenue,

you might start with 80% or 90%

because there’s going to be so much churn.

So I think that SaaS companies

need to take this into account.

This idea that growth is on autopilot,

that could start to go in reverse.

I don’t think permanently,

but I think for the next year or so.

This is why also I tweeted,

2X is the new 3X.

If you can grow 2X year over year

in this environment,

that is as good as or better

than growing 3X last year.

Oh, it’s better.

Clearly it’s better.

Like a lot of companies

that weren’t that great

could grow 3X last year

because times were so frothy,

everyone was buying everything.

But now it is going to be really hard

to even double year over year.

Companies need to take that into account

into their financial planning.

You need to restrain your burn

because a lot of the revenue

that you predict is going to be there

may not be there.

All right.

Thanks so much to the Secretary of SAS.

I think you got a board meeting.

I do. I got to run.

One of the interesting things I saw

in terms of use cases

is somebody used the chat GPT

to describe rooms.

Then they took the descriptions

of those rooms

and then they put them into like

DALI or Stable Diffusion,

one of those,

and it created the visual.

I’m curious if you think,

you know, the self-driving APIs

and machine learning that’s going on,

then you got images,

then you got chat.

Maybe you have proteins going on

with the alpha fold stuff.

When these things start talking

to each other,

is that going to be

the emergent behavior

that we see of general AI

and that’s how we’ll interpret it

in our world

is these hundred different

vertical AIs

hitting some level

of reasonableness

to Chamath’s point

on data sets

and then all of a sudden

the self-driving AI

is talking to the one

that’s looking at cancer

and tumor diagnosis

in the chat

and the image ones

and maybe Stable Diffusion,

the protein AI

and the one that’s looking

at cancer cells

start talking to each other.

Yeah, I’m not sure

that’s as likely

as the…

There’s a lot of solutions

that will emerge

within verticals

and I think you can

distinguish them.

So, I kind of gave this example

a few months ago.

If you remember

Kai’s Power Tools

was a plug-in

for Adobe Photoshop

came out in 1993,

I believe.

And Kai’s Power Tools

completely transformed

the potential

of Adobe Photoshop

because Photoshop

had all the basic

brushing and editing

capabilities within it.

Kai’s Power Tools

was statistical models

that basically took

the matrix of the pixels

and, you know,

created some evolution

of them into some

visual output

like a blur

and so you could blur

motion blur or something

and you could change

the parameters

and now your photo

looked like it was going

through a motion blur.

Ultimately, Photoshop

bought and implemented

those tools

but those were similar.

They were statistical

models that made

some representation

of the input

which was the image

and then created an output

which was an adjusted image.

I would argue that

that is very similar

although the models

behind it are very different

in terms of the

contextual application

of statistical models

in software

and you could see

stuff like, for example,

a chatbot that

replaces

help me figure out

whether my credit card

charges are correct

or not

instead of having

a customer service agent

an offshore customer

service agent

helping you

resolve that

or help me return

my item

or there are very

specific kind of

verticalized applications

that can plug in

that ultimately

replace what was

manual and human

driven before

because humans used to

manually make the

motion blur in Photoshop

and then it was

automated with these

software packages

and I think you can

kind of think about it

in that same way

because the

unknowns they don’t

require necessarily

human physical labor

or some

you know

human responsiveness

that if 95% of the

work can be handled

it will get handled

by some

verticalized solution

so I think

the physical labor

versus the non physical

labor is one way to

think about the

distinction meaning

is there some change

in the physical world

driving is absolutely

a change in the

physical world

you have to move

physically through space

so that one is a

very distinct class

all the stuff that’s

like communication

imagery

static imagery

audio

and then visual

video

there’s some stacking

that happens there

and some of those

will be kind of

siloed and then

some of them will merge

and you’ll have these

kind of unique kind of

combo models

and so look as they

start to work together

I think we’ll see them

you know completely

rewrite some of these

verticals like

movie production

or music production

right or advertising

or we’re seeing it

now with

with video and

creative arts

with

with

you know

some of the

visual stuff on

to be honest

a lot of journalism

a lot of creative arts

have become the wisdom

of the crowds over the

last two decades

where you know

artists were looking

at the collective

works of the

internet

interpreting it

and then coming up

with content

which is kind of what

these AIs are doing

and then who

legally owns

the collective content

is going to be a big

question Chamath

you talked about

data sets

and Microsoft is being

sued right now

because they

used open source

to

create tools

in AI

to help

augment programmers

like while they’re

programming and writing

code it gives them

suggestions and now

the open source

community is suing them

for using their data

sets so what do you

think about the

legality of data sets

Chamath and

should they get

some kind of

protection if you

make a GPT-3

based on Quora

or based on

Wikipedia

should you have to

get approval

to use that data

what’s

the opposite

they say that

this is actually

your work

and I think that

that’s the right

legal framework

but the answer

to your other

question is

this is why

I think the

hunt for

proprietary data

actually becomes

the hunt that

matters

all of this

other stuff I

think is a lot

less important

because I think

you have to

assume that all

of these models

will eventually

just get

commoditized

so there’ll be

on top of the

same substrate

you’ll have a

convergence

right everybody’s

chat model will

eventually look and

sound and feel like

the same thing

unless you’re

giving it a few

special ingredients

that other people

are not and so

it’s the hunt for

those ingredients

that will make

this next

generation of

of models really

valuable so to

give it an example

you’d have

Wikipedia which

is creative

commons anybody

can use but

Quora as a

data set not

advantage take an

extreme example

if Quora

didn’t allow

themselves to

be crawled

right okay

which they

don’t

yeah

but then they

and then they

develop their own

language model

which used the

best of the

internet so

call it you

know GPT

and Quora

maybe they are

slightly better in

certain domains

and others the

the other extreme

example is the

one that I used

in health care

which is you

know the

ethyl

that you

will not

license to

anybody else

you know it

stands to

reason that

that model

actually then

has much

better chances

of highly

effective clinical

outcomes versus

any other

model

apple watch

comes to

mind right

apple has

all that

watch data

if they could

pair that

with epics

it’s another

data set

the other

thing is they’ve

gotten so

methodically they’ve

never touted the

ai you know

they introduce

one or two

distinguishing

features every

year right

so like the

the the ecg

which was

introduced many

many years

ago is has

only gotten

slightly more

usable like

five or six

years later

but in the

meantime

there’s you

know tens

of millions

of watches

collecting this

oil uber

and tesla

have all this

data of the

data being

collected by

you know the

well hold on

so phone yet

or the cameras

in the cars

the other

difference though is

that you have to

be in a realm

where you don’t

need regulators

to go the last

mile so the

problem with

adas i think

or level five

autonomy is

that eventually

you get to a

point where

even if the

model becomes

quote-unquote

and what i’m saying

is i think you

have to focus on

areas of the

economy that are

not subject to

that or where

the regulatory

pathways already

defined so for

example if you

use that health

care example

let’s say that

you had the

largest corpus of

breast cancer

image data and

you could actually

build an ai that

was a much better

classifier for

tumors versus

other things

the fda

actually has a

pathway to get

that approved

so for example

a crypto example

we don’t really

know who will

govern that

decision and we

don’t know how

that will be

governed so i

think the the

thing that

investors have to

do and

entrepreneurs

entrepreneurs have

to pick their end

market very

carefully and

investors have to

realize that this

dynamic exists as

well if you’re

going to do

this right

imagine the

robin hood

trading you

know trader

data set watching

the other big but

not ai right so

then who knows

maybe they are using

on their side

they are i can tell

you as somebody who

sells we sell a

lot of machine

learning hardware

into this market

the biggest buyers

are the u.s.

government and

these ultra high

frequency trading

organizations

any final thoughts

here i’ll give you

the final word

how could this

affect astronomy

how could this

affect you know

our search of the

galaxies you know

going out past

pluto saturn

uranus any of

any of those things

how could it

impact

any

i’m trying to get a

uranus joke to land

help me out there

truman

you got

it’s not that i

think you need to

have more

uh space

related

um yeah

workshop this one

with me or

gut or gut

biome related

you know

i’ll come by him

yeah so how

would this affect

super good

use the promo

code twist

you have to trick

friedberg into

using super good

and then rug

pull him now

that’s a good

proper rug pull

exactly let’s do it

here we go let’s

workshop that’s the

rug so uh tell us

you know when you’re

doing like super

gut use promo code

twist to get 25%

off when you’re

doing super good

you’re analyzing

people’s guts

how would you then

have machine

learning in this

you know api

uh this chat

api and gpt3

how could that

help with

processing all of

that especially

when it passes

through uranus

that’s what friends

would do

if you’re free

you’re hung over

i’m hung over but i

also had like a

7am board meeting

so i’m also just

a little beat up

were you grumpy

on the board

meeting did you

get a little

cantankerous

with your

nose you’re fine

you’re crazy couple

kept the rage

and i had my

caffeine fuel

and then i kind

of cranked down

afterwards

all right everybody

we will see you

next time for

the secretary of

sas the dictator

and the sultan

we will see you

next time

bye bye

love you guys

bye bye

we’ll let your

winners ride

rain man david

sas

and it said

we open sourced

it to the fans

and they’ve just

gone crazy with

it

love you

queen of

quinoa

let your winners

ride

let your winners

ride

besties are gone

oh

my

habitat

you will

meet me

at

we should

all just get

a room and

just have

one big

huge orgy

because

they’re all

just useless

it’s like

this like

sexual tension

but they

just need

to release

some

oh

what

you’re

about

be

your

not

that

weird

you’re

my

life

in

fact

it’s

about

me

in

fact

it’s

about

me

i’m

going

all in

i’m

going

all in

i’m

going

all in

i’m

going