E108: Doxing debate, Nuclear fusion breakthrough, state of the markets & more
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Captain in kalani this year reporting .

for duty with .

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Y, M, C.

A. Now you a pilot flight attention check .

is a flight attention.

I know. And if you be five ten.

are you at shaming me?

Are you body cancelled?

Get exact cases that this point, like fat Jimmy would be number seventy two on the list.

He can't get cancel because all the lives have twitter.

There's nobody to no whole .

monitors left.

No, they IT every week.

It's like all the lives said they moved to .

canada and trump got elected yeah kind of immigration.

We only resort to the fans and.

A hacker figured out a way to take all this data and track, you know, people's, yet people's planes. Obviously, one of those people was elan. Elan had a security issue. This is a public information. So the larger issue at stake .

here is the .

fact that the law allows for people to uh do this persistent tracking of planes, which then becomes persistent tracking of a person. And what really is at stake here is how we define the term doxy. For people don't know, the term doxy IT means giving a person's location that could be your home, that could also be your other location for some period time, you you're at a hotel for a basketball game.

And it's pretty clear you can take a picture of a celebrity and say there's a celebrity here, a lady gaga at the farmers market. What I object to hear, uh, we all understand boxing is dangerous and IT, uh in fact, is against the law to just give people's addresses and stuff like that. The issue here is a new type of doxy which alcohol, you know persistent coordinated doxy where dozens of times a month you're giving a personal location IT may not be against the the first element sax, I think you would degree.

But we have to ask ourselves, do we want to live in a world where whether a persons on an electric pipes ago or an airplane or any device between somebody should be releasing, dozens of times a month a specific, dedicated feet of their location? IT is terrorizing as a parent. When this happens.

I've had dozing people on the call here. I've had, vous, security concerns. We don't want to live in a world with the factor boxing but these sites were doing with defector doxy.

I think that was a bad decision and I think that IT um uh represented you on the least generous statement would be that IT represents deep in the not just a few weeks ago, he said he would never delete that account but he also said he was buying twitter to enable freedom of speech and freedom of expression and that he wouldn't come in and do the same sort of content moderation that was done by the regime.

And many came in and did exactly what the older regime did, which is that he took the rules and he took the quote moderation policies, and he found a way to use them to make some editorial life decisions that he thought was appropriate. Now, the more generous thing is what you guys are saying, which I don't think is necessarily wrong, which is that he's trying to protect people where there are some loophole or some law that doesn't seem right morally. But IT is the law and IT is what IT is in those cases, I think you run into the exact same issue that the old guard twitter head, that the moderators and the executive that youtube have dealt with and that the executives that google have dealt with and that we sit here and we criticize until you're on that side of the table and you're forced to make these moderation decisions.

You're forced to make these policy decisions and you're forced to implement these policy decisions because of some moral framework that you now think is appropriate. And guess what, some people will say that's not freedom of expression. That's not freedom of speech.

You're taking that away from some people. You're taking this particular case away from a fifty or year old d he's built a uh a twitter food. And so I think what IT shows is just how hard IT is to moderate these sites, these platforms, and that there is no simple, easy, idealistic ideology of, hey, all these things are open. All these things can be used by anyone all the time. Because as soon as one of these h cases start to happen, you want to come and do something about IT.

Sure about. What do you think?

What should happen going forward? So I I have have these issues happen to me multiple times. I'm not nearly as important um as elon is um but IT feels the same when you're in the middle IT IT feels pretty terrorizing.

That being said, I think the real decision for somebody like me is that if if it's too much is Frankly just to get rid of IT and you know to find a different motive transportation, that's a little bit more anonymous and you are prey about IT. And and the reason I say that is that I just think that you you'd have to go and get the government to basically change the law, which you're not going to do. And so then as a result, your reaction will seem somewhat contrived and deeply personal.

And in that, I think you lose credibility. Let me just summarize this and be the first one to just state this. I think that if there is any person in the world that can figure out twitter, it's probably elon.

But man, has he taken on just a garden to and battle? And increasingly, I am not a fan of this battle, and i'll tell you why. This is a man who is essentially proven that he can bend the laws of physics on behalf of humanity.

He is done twice, once in electric cars and once in rocketry. The problem is that the realm of decision making, a twitter, has nothing to do with the laws of physics and is governed by emotions and psychology in which there is no canonically right answer. And so he's quickly finding now that half the population will always find fault with him no matter what he does.

And now the implication of that becomes very important. We saw yesterday that he had to sell another three point eight billion dollars of tesla stock. Why is that? It's because this transaction, which was in a very tight to get done, probably required lots of margin.

You know, there I look, I have a margin loan at credit tweet. So I know how these things work, and you can very quickly get margin called. You have to sell down things that you own in order to maintain your collateral limits.

We've talked about this before, he said to do this twice down the last few weeks. And that's because again, not because of the demand that tests as far as we can tell, but because people believe he's distracted. And so people are anticipating weakness at tesla.

People are now shorting the stock anyways. It's causing this downward spiral. And can you fix IT? I think so.

Can he pull IT all out? sure. Is IT just putting himself under an enormous amount of pressure that he could have avoided somewhat? yes. And I think that this is sort of where were .

at um six weeks in my god was .

saying this guy learned in six weeks what I took youtube seven years to learn how hard IT is to .

mother content and you know I think disagree your tribute so much good faith to these context. Moderators at youtube and twitter when the twitter falls revealed that they made no effort to suppress their bias. In fact, they were like pretty .

much before before .

you react to dances.

dancing in the streets every time .

they boot IT off. So they didn't before you react.

What if I can? T I I an what elon is, you know, doing there as you acting as a job arbitrating on every little content moderation decision. Is that a great use of this time related to what he could be building a tesla space x on doing on behalf humanity then? No, clearly not.

But if you define what he's doing in the larger sense, as we're storing free speech to the most important town square social network, hopefully thereby inspiring other tech companies to move in the direction of the opening things up, then I actually think it's a pretty good, useful time. So look, I think we can quibble about this or that decision that he makes or this or that tweet. But I think the overall thus of what he's doing is very important for the country and for humanity.

So I get where you're coming from. Hopefully he'll find some people at twitter who we can empower and trust to make these content of moderation decisions. So he's not drawn into every single little battle, right? We do want him focus on the highest priority problems.

My point is that I get that. I just think that what he's learning and what we're living and seeing in real 材料 is that there is no canonically right decision ever in this space。 There is only a decision where some percentage will support and some percentage will always be again, that's my point, correct?

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

out to hang hang on, sorry, hang on once before you get because I think the philosophical point, rather than the the specific one, is an important one. And I just want to respond what you have said and have sex respond to this in the case of the the points you make around the twitter files.

And by the way, I don't agree with any of the moderation decisions personally, so I don't think that someone should be suspended for posting public information. I don't think someone should be suspended for saying controversial things. That's my personal opinion just so clear on that because I know that describes .

yeah liberty and um .

and and so in this particular case, I think what really worked to me, I was me angry. And I think the reason was that in the case of the twitter file points, um IT was a minority. IT was a minority that was affected.

IT was one person that was affected because the majority wanted to do that thing to that person. And I think in this case is that the minority wants to affect the majority in the sense that elon has aggregated this control and this power over moderation. And he's benefiting himself and a few people that have private planes and he shutting down hundreds of twit feeds, toter feeds, they're using publicly available information.

And so IT feels even more ownership of of A M A use of power um and influence because he's taking um he's doing something that benefits a small number and affecting a large larger number. Where's the where's the other one? Where is affecting a small number that benefit of a large number.

A lot of people wanted to see happen. A lot of people wanted to see trumps suspended and IT wasn't right either. OK, I don't know that.

that makes you know we understand your position completely. I just want to add to that in this policy. I think it's very important.

Understand what he is saying about this. Accounts dedicated to sharing someone else's live location are going to be suspending going forward. You can still share your own location. Obviously, content required a content for public engagements. Know the president speaking somewhere, whatever you just really can be persistently, consistently tracking in individual, otherwise known and you pecking.

But just if M, P, R is live, tweet, sure. Jan, power speech.

perfect. No problem. Location, a problem. If they do jero pals location for the next year, for the next year, ten times a week on his off duty on duty.

i'm just saying we're talking. I'm i'm just saying, like, like to say he gave a speech every week. Is that illegal? no.

If you give if you're giving a speech at a public place where you've announced ah that you're going be appearing at a certain time and place you've ready made where you're going. What we're talking about is what elon jet was showing was a live stream of precision GPS corporate over a sustained period of time. Yes, and not too, too dramatic about IT.

But if you look at like the weapons are so successful being used in ukraine right now, they're all precision GPS guided. Now right now you'd be a state actor to get to hold those weapons. But you could imagine over the next decade that having someone precise GPS coordinate over the same period of time, it'll be pretty easy to target them for and not be drawn here. But for assassination, that is a security risk.

There's no way around that. I brought this up with palmer. Lucky man.

I'm scared that do come at me anytime when I get my jet. I don't want pm, I take me out. you.

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

But look, let's talk about hypocras y for a second. Okay, because here we let's let's talk about CNN hypocras y in the media. Hycy's y because earlier in the week they were saying that any criticism of U L.

Roth, who is twitters former head of trust and safety, amounted to a threat to his safety. And they had this psychiatric tweet where they claimed to you as having to flee his house, which a lot of people found pretty preposterous. They were basically saying that public criticism of someone who has put themselves out there to engage in a public debate, whose writing up at to new york times, that is a threat to safety. However, publishing someone's real time location on a continuous basis so they could be .

not consistent. It's consist safety.

sorry, the great things, the threat to safety. It's the real time boxing of somebody. Yes, I think we now understand what you want.

Did what he did. He basically had an incident in L. A. In which the safety of his kid was threatened because he's got stockers coming after him. So his safety is a real issue, is not like a made .

up issue. Why yeah, why should his personal a experience effect the usage of a service that hundreds of million of people use?

And that's the big issue. The decision should not be based on what affects him personally. There need be a pencil basis to be a principle basis for any decision been done to moderately or censorship.

Maybe in the first few hours that decision IT wasn't him look perfectly because there wasn't a principle basis. But since then, one has been put in place the principal basis of what jack house showed, and this applies to everybody. And so you know now is a debate about whether that policy makes sense.

Now is elon justice arbitrary, capricious as the former uh, executives who are running trust and safety at twitter. I don't think so for two reasons. Number one, he's promised transparency. He said that when we banned or shut up in an account, there has be a reason for IT and you have been alerted to IT. Other words.

none of the shadow stuff, you be informed. You get your speeding ticket. You get your ticket.

It's so red shadow. And the second thing is that and again, I think you could say they didn't do this perfectly in the first few hours, but there needs to be a principal basis for some step decision and and easily applied to everyone equally. And so far, we haven't seen any basis for believing that is not applying this principle equally.

I mean, still very early whether the former rulers at twitter, we're indulging their personal bias and personal preferences and who are they were banning. There are two standards of justice. If you were someone who was allied with them, IT was almost impossible to get censored no matter how hateful your tweet were. But if you were somebody in other side, the political bate, they were eager to suppress you. And I think that, at least so far, elan has not shown that type of selectivity .

he selected against someone that put him at personal risk.

I think yes.

And so yes, that's I do like that if that's where the decision had stayed and then I would agree with you. But I think that since then, they've put in place they've undergraded that decision with the principle policy.

Think those sites, I think those tweet um streams are cool. I think there's some cool tweet streams that some of these people run in there, hundreds of them and and they're actually .

you can see where these different of people .

track their force is they show these different place IT and whether or not B, F, A should be publishing the state as a separate question. But it's on the open internet. IT is already there. It's like turning off the R, S, S, feed from the open internet to protect himself. So that's why fears owners.

Here's the part I agree with, which is I think this policy with a lot to plan specifically is going to be futile ah is going to be at best harm reduction. Because as long as there's many ways to publish this information.

this is just so listen.

I think I think this whole, I think this whole policy on twitter is a little b of a red hearing. I think the real issue, the real underlying issue is that the faa is publishing these icon numbers, thereby making every plane person identifiable. I don't I have a .

counter tude if I say I have a counter tude x sex, if I may. What we saw, you agree with IT or not, with the mass banning of certain individuals, did actually silence them and take them out of the public, where one of the reasons, in fact, you, I wanted to buy twitter. So if you look at certain individuals, whether it's meo, alex Jones, trump himself right on down the line when they got banned across all systems.

IT was dramatic in terms of the reach of that information. So because of the size and scale of youtube, facebook, twitter, eta, when they act in coordination, they can uh have a dramatic impact, not a perfect impact, but a dramatic, which is why we have this issue of hash two thirty b. We thought because when they act on mass IT is extraordinary, what they can do to an individual.

They took their alex joe, how do you consume alex joe? You have to seek that out in a major ways. It's distinctly different trim's less word. And we're moving on to what could be the greatest science quarter ever in the history of wall in pod. Final work you up.

I think this is this is a great transition. We're about to talk about nuclear fusion. In my point is I don't care about any this stuff like I said here like this is my point is like the if you if you take like an average person, okay, you know we are let's say awake sixteen hours a day and you know if you take out the time with our family, David, the family is people that are .

related to you, can we D M sex those people one more time?

We'll send you their names um but if you take that out and you take out you know exercising and you we also explain that sex.

that's when you create heart rate and sweat. X the point .

is that you have lets just call IT twelve hours, you know a functional executive time that you can apply to a problem, and you can break that down into these blocks, right? I would really love what is basically the smart as human and the most productive human of our generation to be filling those blocks with things that sort of like really transcend. And increasingly, and I agree that freedom of speech is important.

Increasingly, those buckets are being filled with things that are very low level and hyper tactical and are distractions at best to the to the path of free speech. And so I think that hopefully he gets all this should under control over there. He finds a good executive team. I would like to see him get back to landing rockets on bargees getting tomorrow. Let get getting .

to finish self driving. We're almost there .

is to say one of the reasons why we don't care that much about this is is because I think something to understand that important is there are different kinds of speech, and different kinds of speech deserve a different levels protection. The fact matter is, like business advertising is not as protected as political speech. Porn is not as protected as political speech.

Political speech, speech criticizing the people on power is the most protective category speech, because the founders of the country understood that the people in power, we will always try to insulate themselves from accountability by limiting that kind of speech. But that is precisely the kind of speech that the former rulers of twitter suppress the most and shows the least sensitivity to. So listen, I mean, is you long can be the perfect context.

Moderator, no, I mean, nobody is. Nobody, nobody is. But I do not believe that puts them in the same category as vaga oi or ul roth, who showed no sensitivity for political speech. He has indicated a desire to restore famous speech. And I think they ultimately .

ended up in A I to tomorrow. Let's move on to .

the science quarter ever. So according to sources, scientists work for the years. Government have achieved a net energy gain in a fusion reaction.

No, not that energy game. Get right. We had ignition energy, which is very different from that energy again.

okay. Now I know that you're in the end. I can please let the .

science now please let .

me explain to us what fusion is. Doctor freedman g, and explain to us why this could potentially change everything.

We did this on on a show once before, but i'll kind of do a quick kind of summary again. Basically, if you take atomic, nuclear, which are made of protons and neutrons ons, and, uh, they repel one another, right? Because protons are positively charged, so they wants to push apart from each other.

So we are enough energy and enough density, meaning that they are moving fast enough, they're close enough. They'll overcome the repulsion and and jam into each other. When that happens, some energy is released because the total mass of the fusion of those um those nuclei h is actually less than those nuclear. I went y're on, they're on and so some energy is released and that energy drives A A chain reaction.

And so fusion is this concept that uh is fundamental to physics and fundamental to the energy driver of our universe of the star and earth uh in our sky uh the sun uh, is driven by fusion, and only about fifteen percent of the mass of the sun at the center is dense enough to actually drive fusion. So the big chAllenge with fusion is how do you get these these atomic, nuclear I close enough together and moving fast enough that they'll actually fuse and release energy. And that super heart, the reason that happens in the sun is because the sun has so much mass that the gravity pulls all those particles together.

They get close enough to get hot enough, they move fast enough, and fusion happens. boom. All the energy comes out in every day will warm.

Now, to do IT on earth is very difficult, but if we can do IT, what happens to when you fuse nuclear together, you don't release, uh, and this isn't like A A radio active vision reaction. You released energy that can be honest, drive our, our systems, our, our technology. How is IT? yeah.

So in the one thousand nine hundred and fifties, you know, this will be right. Hey, we could do fusion on earth. We ve got to get a really, really dense plasma, meaning the atomic, nuclear and the electron's have kind of gone off the atoms and IT just a nuclear S A part. You got get to move super fast, like tens of millions of degree salus, and you gotta get really close together.

So how the hat can you do this? So there is a couple of um concepts to do this, one of which is called inertial confinement, which is where you basically create a little pellet of the uh the material you're going to try and get the fuse and you put a ton of energy on the outside. You can press IT really hard, really fast.

And when you can press IT really hard, really fast, you can get that to be done in a perfect sphere, and you can get IT to collapse on itself very quickly without, you know, of cutting all over the place. Enough of those particles will come close enough together, fast enough, and they will start to fuse. Another way is through magnetic confinement, where you use magnetic fields, create a really hot plasma, get IT to spin around her to move, and then the magnet brings that super hot plasma closer and closer and closer together, until all those particles are moving fast and they're ced enough that they started to views.

So, you know, one is called magnetic confinement, the other ones and nurture confinement. And so what we saw happen this week is at the national ignition facility, which is a facility that was built starting in ninety ninety seven, and they've spent about three and a half billion dollars to date. They demonstrated a net energy output from the fusion reaction government nurtured confinement system and what that means is they took a little pallet and that pellet was made up of uh uti um and fredia the atomic nuclear ie that they use the particles that they use are dutch um which is a proton and a utrum stuck together and then tritium which is a proton and two new tron steck together and the reason they use those two combinations is of all the different ways you confuse um nuclear together this has the best energy output of any kind of reaction yeah what actually .

happened this time that made this word for what? Apparently only three billion dollars you said you say three trillion in three billion a third about a third of seven bank fraud d stole. We have done something here ah allegedly so what actually happened that is so dramatic that we have a press conference that was losing their mind?

So yeah, I just wanted to highlight one more thing about why this is so hard. You have to get such an incredible density. You have to get an incredible energy, so high temperature and density that confining those atoms are not letting them escape and and you know um basically dissolve before they fears is super difficult.

IT requires so much energy in such a controlled way, in such a perfect and precise way that all of the digital technology, the magnets, all the measurement systems, all the software, is taken us decades to get everything that allows us to do this today. And now we're at the point that we may be able to start to realize production scale op, uh, kind of versions of this. So what they did is they had a small tuition and tritium pellet, and they shown one hundred and ninety two lasers onto this container that helped that little fuel.

Hundred and ninety two lasers, the whole thing happened in a billion of a second. The laser's pulsed boom is an image of IT. And as they did that, they, you know, basically x rays kind of hit the sphere, the little B, B, if you will, B, B kind of thing, and compressed, IT and IT compressed so quickly, and was such heat.

And I didn't dissipate because I was done so precisely. All the lasers hit at the exact right time, boom, this thing compressed, and then energy came out. And the energy that came out, that was measured was one and a half times the energy that kind of went into net reaction.

And here's a chart that that i'll show you from the national ignition tion facility, which shows just how inefficient the system still is and this doesn't even speaking to um to cham's point but basically these guys um loose ninety percent of the energy that they put into the the center of the system are only ten percent is actually used to drive the compression. The rest of IT is lost. And there is a lot of ways to improve the efficiency of the system from here.

But basically they put two meals in, they got deals out. And so IT was the first proof point, production proof point in the seventy years that we've been theorizing about nuclear fusion here on planet earth, that this is possible in its real. Now this is these kind of a nurse confinement systems.

There are thirty three private technology companies today that have raised about three to four billion dollars so far this year to pursue several other technologies, besides what the national ignition facility is showing, to try and build production ready versions of nuclear fusion. And so these thirty three companies are using a bunch of different types of tools, one of which is the tokamak. If you show the image.

i'll show you this one. We talked about that in, think that looks like our .

man's art reactor. E yeah, you create a plasma. You basically speed up the hydrogen en nuclei, super, super fast. These nutria nuclear super, super fast. And then you use magnets, and the magnetic field has to precisely squaze the plasma, squeeze, squeeze and squeeze IT.

And if it's slightly off and even the tiny st way, think about a balloon, right? If you put a pin hole in a balloon, everything escaped from the balloon. That's how technically hard this is. You're basically trying to create a balloon with a magnetic c field and you're going to keep the gas and you're trying to make a smaller and smaller and smaller. If any tiny hole emerges.

the entire plasma does. Is that what happens in your ins.

like when you're trying to hold in the war? Guo, anyway, uh, let me ask this question then um about the consistency of this. Never go to ultra h.

Can they do IT consistently? Or do you think this is like they got lucky once? Or are we going to be here a year from now? And the like we put into when we got out six and we get five times.

yes. So so now we've proven that humans can do this. Okay, which is look, I mean, I I wanted give you guys some uh and I I know kind of some of chaos concerns, which is how production .

ate the sun .

is what we this comes down to yeah but I want .

to to say one I want .

to say one important thing from a historical context, all breakthrough technology starts out seeming impossibly large, impossibly expensive and impossibly slow. The human genome project twenty years ago cost one hundred million dollars to sequence the human genome. Today we can do IT in a couple of minutes for a hundred dollars.

okay? The first computer, the N A computer, had five hundred flops of computer capacity. IT filled the room. IT cost eight million dollars to build. Twenty years later.

We had a main frame, twenty years. And now this is all this emotional bullshit. You're using the wrong examples. OK.

let finish. Then you go. Good finish. You that it's A C in them.

go. And today we have an iphone that can do two truly and fox of computer in your pocket. I think that what we're seeing with um fusion today is similar to what we saw with the any computer in the thousand nine hundred and fifties, which is the demonstration that compute is possible.

And now we're seeing a demonstration that fusion is possible, and a lot of folks have anticipated this moment and they've invested ahead of this. Now I don't know if any of these companies that are currently kind of being built are gonna production ready anytime soon. My estimate is that we will see production demonstration of confusion in twenty in the twenty thirties.

So call IT eight years from now plus. And then you'll see gid scale, scale up in the twenty four ties. So this .

isn't something that's gonna happen next year. And talking about, no, knowing a huge fan, this is the most naval gazing, head up your ass. Scientific bullshit.

Couple points. Let's start with the basics. The first is that there was no previous technical genre being.

why? Why are you angry at me?

But I find this so tiring. Hearing this is all here, not .

because .

I .

don't actually.

I think let me .

finish, let me finish, kay, when you talk about sequencing the genome, there was no alternative. So you're right, IT was an enormous technical leap forward. When we built a computer, there was no analog.

IT was an enormous technical leap. And so you're right, we have a cost car we don't understand, and then we iterate as rapidly as possible. And all these innovations where we built an entire infrastructure to write down the cost of the thing is fusion energy exists today.

It's called the sun. We actually know how to capture IT had virtually no cost right now. So according to the I A E A today you can capture great level solar energy for about three cents a killer hour. That's as close to zero as we've ever been.

And over the next ten years, their forecasts is is gonna get to one and a half sense if you then wanted store IT and you layer in storage costs will be at a wapping three cents a kilo water hour. That's where we are today. And so I think that fusion does exist.

I do think that this is an incredible technical leap to replicate something that exists. And I think that's where the intellectual dishonest is IT. IT does exist.

IT has been captured. IT can be hardest. And there is a positive energy equation just in a different modality that doesn't speak to these technically minded individuals.

A couple of other points about what I saw. I think it's incredible what happened. okay. But just to make sure we're clear, this is one hundred and ninety two lasers.

The size of three football fields that consumed three hundred and twenty two mechanical jewels of energy, which then ultimately deliver two, Michael jules to a target, which then release three. So this one, m sing, we had positive, what's called ignite, an energy. We did not have positive electrical energy captured.

So yeah, could we figure red this out? absolutely. Can we then shrink the three football fields down to something that looks the size of A A laptop? We possibly could, will IT take twenty or thirty years, possibly. But in the meanwhile, if the goal is unlimited costless energy, you're on that cost curve already.

Yeah, but why can I be both? So you you said I was being intellectualist comparing yes, seem to be an agreement.

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

I would argue you up and I think is important. Beat the net energy you can capture on, say, a football field sized facility from solar is, you know, a tiny fraction of the energy you can generate from a football field size fusion reactor. And that's why the argument would be like, k, you know, when we were developing computers, hey, we have about this. We shouldn't be developing computers. And I that the G, I.

this is why the cost per hilo, what hour is, what the, uh, the levelized cost of energy tries to do. IT tries to to Normalize that argument away, because everybody would say that, hey, hold on a second, you're gonna need plain full of this, or boatloads of that.

And people say, no, what's the level ze cost of energy? how? What is the cost per kilo a generator? And what i'm saying is that is an absolute scale and free is zero and we're at one point five cents.

I say, jack, I wants like you. The opportunity here is not necessarily about cost reduction. IT is about scalability. And if hydrogen is abundant, which IT is on this planet, IT is nearly infinitely abundant.

We can take that hydrogen and we can scale up energy and electricity production in a way that is not imaginable compared to solar. And I don't think that solar should be excluded. Solar is key today and should be scaled up. And i'm one hundred percent agreement with you. But the scalability to go one hundred x if we want to make a hundred times more electricity, I think we need fusion.

and I think that is feasible. So I think we have uh, reached, uh, a good settled here to math. You're saying, hey, listen, we're getting solar down so cheap we can solve the solar all forms energy.

Okay, great. We we are solving that so for our needs today. And then what free burger say? But what if you had unlimited a thing that we can even imagine beautiful? Now watch as I get sacks involved in a science conversation.

He has zero interest in mr. David sax, if, in fact, there was one hundred percent more free electricity available in this time, we have the next ten, one hundred x the available energy. In other words, supply of energy just becomes flooded and it's free. Essentially, what would be the geopolitical reaction on planet earth in terms of, uh, this incredible river rivalry we have with china .

and for humanity .

on a political basis? Politics guy, get in there.

Take a second to take a through. I .

actually want to hear you your answer. In world where energy becomes more abundant.

they has been .

paying .

the group .

broker.

Take a call your intellect al dishonesty and raise e you a steel man.

I love you, I love you 小 title， you know, I I like to go have a great day.

died a sunday, die and later to i'm just .

glad that you guys are .

fighting.

not me in sex guys, please let me finish OK. I think that this breakthrough is really valuable. I think it's interesting to see that these kinds of scientific breakthroughs continue to happen in government sponsored facilities and not private companies.

Um and I think that that's probably where a lot of these innovations will continue to come from because look at the scale of what had to be built three football fields and three hundred and forty two mega duals of energy and one hundred and ninety two lasers. This is really complicated, expensive stuff. I'm an enormous fan of these kinds of scientific breath is going to be clear.

I think that where I struggle is translating this into actually an investable area. And I worry that this is going to consume lots of money by folks that could otherwise put money to work in things that will actually pull for their energy independence and energy abundance sooner and faster. So for example, you know, there are all kinds of things that we could do to secondary turny, third forth and fifty generation batteries that aren't happening today.

There are a bunch of things that we could do to actually create an infrastructure Green hydrogen. And the the symbolistic answers, we could do IT all. But the reality is money is finite, and we can't.

And all i'm observing is, I do think that more practical things that do have geopolitical rather ation super are not gna get funded because people do get enraptured by this. And my scepticism is that this is still in the realm of government sponsored research. And it's not really an area that four profit private companies can tackle.

And so I would rather those four profit companies, for example, White combination just today put out something where they were, you know, call to action a request for startups in limit. And when you look at that list, those are really practical table areas. And I just want to make sure that the capital allocators that listen to this, wait those equally.

I'm lad. I'm glad the U. S. Government did this. I hope they do more of this.

But if you're asking me, quite honestly, I would rather the next ten billion dollars going to energy efficiency. H, fact, then fusion, because a fusion exists. And B, I think it's gonna happen at an innovative bench scale level by the government.

And not to responded that very quick to M I, I think that the idea of allocating our resources as a society should be done on kind of, you know, on a portfolio basis, eighty percent. On the pragmatic near term, fifteen percent on the kind of next year and five percent on the moon shot. And this maybe good starts to shift from the five percent to the fifteen percent, maybe still in the five percent, but I don't see kind of over funding happening.

So i'll tell you guys, there was a survey done, there's thirty three private companies in fusion uh that are kind of fusion companies today. Uh, V C back eight new this year. So the numbers kind of increased by thirty three percent this year. And um so far this year, those companies have raised around three to four billion dollars.

which is a fraction of what was done by fifty minute delivery coffees.

Exactly my point. And and by the way, the biggest funding is happening in I which is the largest construction project in europe and this is a thirty billion dollar production scale fusion demonstration system that should be online by the end of the twenty twenty sponge government sponsor again. So I am a huge fan of government .

sponsor research. We get, finally the first science corner. Everybody braced themselves. It's the first .

science corner where David sacks has A X here .

we thought .

on this question, question a little bit.

Let me refrain. What's the geopolitical impact .

if this does happen? Hundred and gas. And the reason is, if you look across the world, there is a thing in politics known as resource curse, where the worst governments, the most despotic governments, tend to be in the countries that have the biggest natural resources, ironically so the countries that have huge mouse urol um or other kinds of minerals, they've tend to have pretty corrupt governments.

And the reason for that is that if you sitting on a giant oil reserve, you don't need to make anything else work. You just fight over who gets control that oil reserve. And that's what politics ends up being.

You don't need to create policies that Foster innovation or attract knowledge workers, right? You just basically mine that oil. So if all of a sudden you're talking about turning energy into a software problem or an innovation problem that looks a lot more like the software industry, that's an area where the, I say says a huge vantage.

And yeah, I think that would pulled the rug out from under many countries all over the world in favor of the united states. I mean, a big if, because where I agree with Timothy is the stuff still seems pretty far often is so pretty unproven from a commercial standpoint. But I A freeburg. Why not try investing in cultivating and see where IT goes?

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

did you have to .

disagree with the g.

right? Take IT easy.

I just want to.

I think .

you like, and I love .

all I think .

was a steal person.

I felt like he felt money. But I love what .

you're intellective in your .

soa G A .

golder silver and you're in plant .

with some diamond st.

I just can I just say, spent a couple nights together this past week, has really mood of the show. I mean, you guys go out and drink together and have .

I left our as of sunday night? Can I just say we sax, I had the best forty eight hours together in a decade. This is sunday night IT.

Turns out Chris rock and shop eller are playing at the chase center where um cheap used to own a piece of the warriors, right? And this incredible arena has this incredible show. And you don't mean sax and some friends will leave IT at that.

Go to the show. Our our best y dRaymond is at the show. So I text jay and am I K, you're going to see Chris rock by chance and night with a shapu say, yes, sir.

I said, hey, we're onna. Go with a couple of friends. Maybe we've roll together, hang out after the show. We go. And after the game, after the show, which was incredible, we go back stage and i'm sorry to the to the practice court and we're hanging out with dream on the practice court with dave shape, dave shapes and I start shooting hoops. David sax is talking to Chris rock about free speech.

Steff curry comes out and starts giving dave chapel and J L, uh, shooting lessons where chapel I are breaking like old men on a concrete court. All of the some stuff says, hey, jacket and you got IT and by by his final shop says, you're short every time and just, you know, hit the backward. You're got to go along. They cause shape yet you got to change this. All the sudden we start hitting shots like you.

We're raining. You're raining.

IT was literally like cut into here over .

these middle in jumpers or trees.

I was free thrill line extended, free through line extended cut into here, rain man and rain dance from a long cam poli rain dance rainman.

right?

I was hitting brick after brick recipe pees filled up to manhattan so then we're chilling. And um sax and I were talking to dave shaped joe lam, owner of the warriors. Are there the majority owner? Uh you know I supposed to you being a minority owner.

speak .

time .

anymore.

names I am .

I D. Shaped comes over, says jacka fact, you can't want to go to a after to do. Go see me do a show like one. I M at this like local comedy club at seventy seats as a word, yes, we go at one m SHE passes on stage, smoking cigarettes .

and .

doing eighty second passes, and then having a beer and interacting with the audience, and does a two hour set after doing the set with Chris rock at the chase center, mean sex and draymen hilariously laughing the the stuff shaped is a genius. And when you see his show and Chris rock, by the way, he puts the tight set together, I mean, shapes got this story telling them where he kind of me Andrews a little bit. And then he he hit you with IT.

But Chris rock is just bang, bang and bang, bang, bang, bang. Extraordinary, just too incredible. Minds at the top of their game, artist, artist at the top of their game, doing what society needs, but more importantly, doing what David sacks and I needed, which was to laugh our asses, rock together, remember our friendship.

So IT was a great night out, I want to say, to best day dream on, dave shaped and Chris rock, thank you. The David sax j health bey friendship has never been stronger. I don't know about freeburg and .

tramp that seems to be on the rocks. Swear to .

get next yeah.

well, we are going to be as what what on a walk.

And I just want to .

say the alliances a google. Is that actually? But yes, that is the thing that me, I have to be honest, that you playing to the crowd veris you being honest and telling what you think freeze that freeze .

er can let me if put in the form of a question freeburg has your fame as the sultans of science. Listen you nobody knew who you are outside some value before .

this is in the your ability speak. No, no, no, I honest and i'll speak openly about this. I had said that there could probably a significant headcount reduction of like seventy five percent google and the business could keep Operating.

And I took IT out. And I took IT out because I have a lot of friends that work at google. Google S A close a partner of mine.

They're investor of mine. And um Frankly, I just want to be careful about that. It's not something I commonly do.

You know, as you guys know, I usually speak my mind prety clearly, but I was just trying to be respectful. That's reason I did IT you. So I think .

that was fine. What i'm saying is not that is, is that the part that you added IT in actually made IT seem like you are not saying that at all. But the opposite, I think give you a couple of whole IT would have been more honest. So to keep that other thing in, actually let the perception .

of the opposite. So I would trigger.

no, I don't trigger that.

I think we should have principle. No, I think that we should .

just have a principal to not play to what the perception of what we say should be, especially if IT means we could be saying the opposite of what we actually mean. That's all .

intellectual honesty is a busy tenant, is a beste tenant, I think. So absolutely best ten and the other best tenant, best is always come back together. We have a fight. We always come back together.

Sex, I still matter. You .

is .

okay. I talk you about hcrm.

Y how was under .

that gets like right of the gate. He's attacking walke right .

out the gate swinging came out .

swinging like wills ith kmh .

h he took down wild smith. I mean, the wall Smith take down, which you will see in this special is so complete IT is just chef kiss. But how great was a set? But say, give Chris rock .

is a fully and freaky he he did .

but I thought the more important part of the set was the, he came right out like calling out all this. We then work, stop here. And there was an under current tish pal set as well.

And also he said, listen, words can hurt you unless you write them on a piece paper. Time to a break. We these a bigger point right now, and this does time into our fur story, is I think comedian's look at twitter as a place to get cancelled, not a place to be part of the discourse.

And that's a huge loss. That's indicative of our society being broken. And it's incredibly important that these comedians be allowed to mark and to speak and to step over the wine and chAllenge us as citizens in a free society.

And we should cherish them. And we should not even try to cancel them, let them cross the line, let them say things that make us uncomfortable, so that we can understand ourselves and our society Better. And I just want to say.

why can't you include limbs of tiktok in that?

K, do we want to have a to change .

about IT?

I can see next time OK with mocking, I just don't we have two more science .

corners to get.

right.

You know, I really I just let's .

talk about the coupon deal and sex. This is bad of your ally. Have you like .

attention to to be honest?

Really the thing you guys asked is like, you know what signal will islands move at twitter? Uh, b for the rest of uh, the tech industry, I think the biggest wake up call is to actually P E companies. So if you play this out and you think that Cooper is.

you know explain coop a .

is a is a software, a service company that uh, does revenue management, I guess, or expense forecasting or something in the finances? I don't particularly know, to be honest. But anyways, this is a company that you know was off seventy, eighty percent from the high like a lot of other companies were when rates started to go up and they got this offer from from toma bravo.

But here's what's so interesting about this deal. If you think that you know these guys bought a company, i'm just going to make up a number at twenty times ebata marine. And and you see elon at twitter and you think, well, wait, maybe we can cut seventy five percent, but maybe we can cut fifty percent.

Had count, the company can still do well. And you know you take half of the expenses out of the business all of a sudden. You know, if you're ebit to doubles, you're actually buying IT at ten types.

So I think the thing that is the that is the real insight here is toothful private equity um can still put out a lot of private credit to fund these deals. And SaaS companies are perfect because they have huge free cash though, right? So instead of funding IT based on earnings, they can fund IT based on A C B N A R R.

So private equity will be super active. And to all these rifts, basically show what the efficient frontiers for the number of employees you need to own a company. And if you can cut fifty percent of the headcount, private equity folks will do that.

And so I think cuba is like the canary in the commode. IT is the beginning of what I suspect is a title wave of P. E. Sponsor deals in tech companies, largely SaaS, but may go into other around .

recording advances.

These two things tap private credit markets and financed based on A R R, and then fire fifty percent of the team and double earnings capacity.

So on. Cooper, I thought the most interesting thing was got a public b well comp on what private equity is paying for public companies right now. So the deal happened at an a million dar evaluation that was a thirty one percent premium to the public Price.

IT was eight point four times next twelve months revenue and on a trAiling basis is about ten point four times the last twelve months revenue. By the way, all the comments were around how what a rich Price toma aba was paying. People generally thought they were paying premium to evaluation.

So we sex IT was seventy seven percent premium. Uh, before the rumors came out that this was happening premium yeah I and and a bitting war with this a and so IT was a IT was a really rich kind of deal that they got done here, right?

So so my point is that people thought this was a really rich deal and yet the valuation most pulls are so much lower than what private company founders expect to remember. Last year at year, the peak founders were thinking a hundred times. A R was Normal a hundred times.

And you you could roughly say A R is roughly go into next months. Revenue is not perfect, but roughly the case. So these founders were expecting evaluation multiple ten times what the public markets are paying and the public more. And actually, the public markets are half of where Tommy brother was in this particular deal.

So the public markets right now are valuing the median SaaS company at about five and half times and a high growth with that before like a twenty percent year or we are a growing company and they're valuing the hy growth companies that maybe eight times until rava did this at ten times. So that is you a sense of what the ball park is. And these are companies that are already public.

They're at scale. They're doing roughly a billion dollars there are they have already kind of won their category to some degree, whether private companies are subscale there. You know typically you're talking about companies with one, five, ten, usually under twenty million dollars of err.

They are they're not dear. They're still a tonne risk. We've seen many, many such companies fizzle out and play toe at twenty million of A R R. Never get to one hundred million, never mind a billion. And yet these founders think that they're entitled to you know, even in this market thirty to forty times, there are no way. I mean, like it's going to the point now where you maybe you should be ten times, ten times like max, and that be for a company that's growing two and a half three x year over year. So I still think that like so I think basically what we're seeing here is even a good scenario like a cup acquisition that was done at a premium, like it's still a wake up call to the private markets that the valuations are still completely and uterine out to wake.

Yeah, let me ask you a question. sex. So this company was growing forty five percent last year, the growing thirty five percent this year, and they got this multiple. Why is IT not worth a significantly higher multiple of the companies growing two and half to three x which is two hundred fifty percent, three or percent and and these guys are only growing thirty five percent.

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

for that outcome in .

a couple years. But you pay well.

you're going discount to the outcome in a couple years.

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

the harder. So they should be Priced at discount, not a premium, because there's risk.

there's more risk. They're growing faster, but there's more risk. But also it's very hard once you get to a bigger number of A R, fifty hundred million of A R R, it's extremely difficult be doubling in your triple year over year.

Let me just point one thing out. So I look at the number on coop A, I think they had about one hundred and seventy million of stock days comics pense in the last nine months. So those are employees that are getting one hundred seventy million dollars in compensation in the form of shares.

So they get those shares, they can then sell those shares and get cash for them on the public and then on the public markets and paid their built. So when a company like this goes private for those employees to just remain at their baseline comp, that stocks base comp needs to be replaced with something else or else they're seeing their salaries reduced. So you know, there's this balancing game when these companies go private in terms of how do you give them the count they're earning to keep them engaged in the business. The if you don't no.

but that look because you want to do a rif anyway.

right? So I mean but for the people that stay right, so so there's a baLance because it's not just hay cut the OPEC. You have to cut P Y OPEC, including sock base comp.

And this company generated about one hundred million dollars, thirty two hundred and ten million dollars, the free cash flow or Operating cash flow in the last cell's months. So if you if you take out the talk base comb, these guys are actually break even or losing money. You roughly, yes. So yeah, break even roughly.

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

I may can you explain to the audience, uh, what a private equity firms expectation is in terms of return when they buy a company like this? And then sax, I saw your tweet that you want to feature and you'll go next. Good mop.

Well, I think it's changed over time. And this is what's so powerful about the private equity industry. Um look, you have to think about what they're incentive is because IT kind of guides the out um early on they were very much like venture capitalists.

They were out in the you know edges of risk taking um doing all kinds are very difficult nearly deal. So if you look back in the history, could you know these huge crazy deals like R G R in a bis o or T W A airlines were the first um of the industry and they wiped enormous returns. But there is a lot of risk and IT required very heavy handed management.

Often times of that man was firing a lot of people over time, private equity gotten institutionalize ed and they don't generally. Feature themselves as a place to get the best necessarily returns. But there are places where you can put enormous amounts of money, where the the likelihood loss is extremely zero and you generate very good rates of return.

Now again, this depends on whether you want to look at I R R or D P I, right? So a lot of people will market I R R, which you know, I think is kind of like a game able metric. But you know, those hours can be twenty, twenty five percent.

If you look at D P, I, which is really how much cash you get back, you know, private equity firms can generate one and a half to two x of the money you give them. Um but they do IT consistently and they very rarely lose money. So all of that is important to understanding what's gonna en in this cycle.

These folks are going to buy a ton of these private software companies. I think that they are going to fire lots of people having. They are going to make these companies run hyper efficiently, and they will make sure that they generate that one point two to one point seven x that has been historical.

Very rarely will they lose money in these things. Um by the way, that's going to mean that a lot of these other companies will have to reset valuation. So you saw yesterday check out that com went from a forty billion dollar valuation down to eleven. You're seeing some companies only go down ten or fifteen percent.

but it's a process is in moth. Isn't this just like what happens to the .

really beginning of this process? Yes.

in real estate, my understanding having a lift to these boom cycles is the person living in the home still believes their home is worth this incredibly valuation, and then the people who wants to buy IT are like that doesn't match reality. And then the real estate brokers go back and forth trying to get people go through this messy middle and come to true Price discovery. A private companies hard to get true Price discovery .

until they're on the Price of actually bring data. Yeah so cooly looked at law from sound valley. Yeah there are a prominent .

silvery .

law from they looked at a thousand deals over the last three quarters of this year. And what they saw is that your the later of the stage, the bigger evaluation corrections, the series d rds went from three and half billion to five hundred and twenty seven million. That's an eighty five percent.

Yeah, that's an eighty five percent drop. Series c went from five hundred, hundred and two million, hundred and thirty million. That's the seventy four percent drop.

Series b went from one, sixty four and ninety. That's a forty five percent drop. And then series they went from fifty eight to forty five.

That's only a twenty two percent drop. There's just less room to compressed there. But the point is that series be roughly a fifty percent drop, serc roughly at three quarters drop.

And series d, roughly a hundred eighty five percent. Yeah, one seventh, the drop. So I think founders right now are they're just like a little bit delusional about this money.

They raise, ed last year. There's still way to anchor on last year s valuation. And if only they would think in terms of this couple, they raise last year in terms of of its real delusion, in terms of what the company is worth. Now I think they will be treating IT more more precious.

So for example.

for example, hold on.

if that they on the lottery, and don't they don't realize they won the lotto, I had this conversation with the founder.

This is the only money they're ever going to see is the bottom line and they're spending like you're going to in lottery every year. So for example, this is a new company. Yeah listen, you take a company that raised two hundred million last year or two billion, so is ten percent illusion.

So in their heads are thinking, oh, well, this isn't that expensive, like ten percent solutions around in era. But really probably the company is worth maybe four liner million now, right, because has gone down eighty percent. This two hundred million of your foreign lion is half the value of the company. yes.

And you're squaring IT.

You're squandering IT at a rate of one hundred million a year. So you're basically burning up twenty five percent of the value company this year and the next year. And then by the way, you're going to be in crisis after .

that is like a lottery. When are buying like a giant super ot?

Had an observation. A lot of the investors that sit on the board to these companies, they have an incentive to not see those valuations come down too quickly, do they not? And so there is this sort of like interest in, hey, I don't want you to have to go replace the company or do a downside because then my portfolio gets written down and then i'm in the meal, everyone always in the middle with L P S. And then i'm going to have a tough conversation, my L, P, S, about my, my value. So do you not see vcs and investors playing an active role in trying to keep the valuations prop up to some extent, particularly when they have big maps hundred by extending bridge rounds, are doing other sorts of look, nobody.

nobody likes to go through a downward, and that includes founders and existing investors in the company. That being said, we're not talking here about new financing conversations. We're talking about is advice that are is happening in board meetings.

And you know maybe other vcs aren't pushing as hard as we are, but you advice i'm giving in board meetings is what i'm telling you publicly today, which is this is the last money you may raise on attractive terms, if at all. You need to treat that much more preciously. The world is formally ly changed. And by the way, we haven't gotten into what's coming, the demand contraction that's coming next year.

Explain what demand construction struction.

okay. Look, there's going to be three major sources of slowdown for software companies next year. Number one, new business is going to dry up, companies argued going to be spending a lot less money next year because they are all cutting costs.

So you should expect your new business to be roughly fifty percent of what IT was next year. It'll be fifty percent of what IT was last year. That's my world of thun.

For most companies, new business than fifty percent. Number two turn is going to be higher. We haven't seen that much logo turn yet. But next year, a lot of companies are going to start going out of business, and it's going to happen over the next two years. So you are simply going to see logo turn rates, say, among small business ses go from like a historically norm of fifteen percent to maybe twenty five .

or thirty words. Your customer.

the logo goes proof, yes.

that's what in the logo means, yes. And the factual interest.

yes. Logo turn means the energy doesn't exist. Then you've got seat contraction, which is these companies are not hiring as fast. In fact, they're doing layoffs. There's simply not going to buy as many seats of your software as you need to. In the past, for the last decade, we've had a tailwind, an enormous tailwind for software companies of seed expansion, which is every year, you're existing customers to buy more seats of your product for their new employees. Now they're actually going to have fewer employees or maybe headcount freezes.

So they are actually buying god.

if you take all those three things, the deal of the century was fig. My selling to adobe for twenty years, because if you take those three things, I mean, oh my god, they d just absolutely top tic before any of this stuff was. no. So today adobe could probably buy this thing for like seven billion inside twenty billion.

So does that mean they tried to do a break of thing? Get out of the deal?

I think I, I was figment. I tried to close this thing. A S, A, P.

and get their money. Yeah, yeah.

yeah. You're write about that and Better way. What i'm seen from founders is that we still want to grow a hundred percent plus over the next year. The problem is that the headwinds are going to be intense.

So if if you're applying a plane and the headwinds are extremely intense and you try to maintain your speed, you're gna burn in an enormous amount fuel, you're going to be incredible efficient ah is Better to basically just moderate your speed, let the headwinds basically pass. We're going to have major economic headwinds for the next four to six quarters, call a year and a half. It's okay to have a slower growth rate. Preserve your cash.

don't burn up your fuel bunker down.

So we're trying .

to do we're trying .

to give permission to our founders to grow at a slower rate because they feel this Normal pressure from their v to grow at at insane rates.

Can I build on this? I think freebooters that very well. The can adventure capital is demonstrated in the following chart.

This is using cambridge and our friend, right person, or help put this together. So what is this? This goes back all the way to nineteen ninety seven.

And the gray bar is what venture capitalists share with their limited partners. Asked to how well they are doing. What's top? Venture top? And this is the top twenty five percent.

okay? So is this is a venture capitalist, and, you know, our turn ship because the top court inside of Cherry picking anybody else I just use us. But IT could be the koa benchmark you named.

We would go back where there launch. You would go back to folks, craft to google back to folks and say, hey, guys, the total value of our portfolio is three times your money in ninety ninety seven vintage. Okay, if IT was uh four times your money in the two thousand and ten vintage feels really good.

But again, the job of the venture capitalist is to convert the gray bar into the purple bar. And historically, there's been a decay. So for every dollar of gray bar that you show, you typically only get seventy three cents.

Actually return to people. OK evaluations .

that you get when you sell your company goes public, end up being seventy three percent of what you marked the peak.

what you said. And the actual value of this purple bar going back to thirty years is one point seven x. So just to put numerical numbers on this, if you are a venture capitalist, you would raise a hundred dollar fund at the peak.

You would actually show that that hundred dollars became two hundred and about twenty eight dollars, but when when push came to shop, and when I was all said and done, you would return one hundred and seventy dollars back to your investors. That's the rough equation. So what's the problem? Well, the problem, as you can see in this church, is right around twenty fifteen, which is all of a sudden, you know, what we've started to see are these continually elevated gray bars.

Yes, this stuff is worth seven times, six times, five times. But we have not seen the purple bars catch up. Now some people will say, why? Yeah, but you have to give a time. And, you know.

this is the other.

And all you need to do is do what's called a regression. And you need to regress these things to the mean and make the following consumption. Assume for a second that this time is not different. Assume that these historical averages, two point two x, one point seven x holds. Well, that's what the the black line here shows.

You can calculate the area above the curve as the value at risk, the amount of money we will destroy because of all dish and gans that freeburg just talked about, propping up Marks, not willing to look at actual market clearing Prices. Well, if you do the math, the sum of the area above this black line is almost the trillion dollars around the world, and that is about six hundred billion dollars for U. S.

Venture capitalists. This is the dynamic that the private equity industries gonna crayon. So if you saw toma broo just closed the thirty two billion dollars, you know, this is raising a twenty billion dollars. Every boy's stepping in, detect they are going to destroy those graybill.

Would you describe that as bottom feeding?

No, no, they are. They are the rational actor. yeah. OK. Who is finding the true market is I think the private equity industry is unbelievably precise and talented in being a onate and telling us what these things are.

are cut. No.

no, for the private equity industries can be created by profit founders. And look, you could blame VC for the highmark last year as well. They were profit too. But look, if you're a founder, if you don't start acting in a more couple efficient way and preserve your cash, your companies also been get me owned by a private equity firm and they're going to make all the money because because when you sell to them at a low Price, all you're going end of doing is paying back the liquidation preference and then that private equity firm that was willing to do or less. But that private equity firm will be willing to do what you were not willing to do, which was simply act, cut your burn, cut your costs and acting a more capital efficient way, and they will end up making all the upside for your decade hard work because you got basically addicted to venture capital in the high valuations and refused to again adjust the regime change. I alternative.

i'll give you an alternative. The alternative is that the majority of acquisitions made by private equity firms are not actually pure acquisitions. They are bolt on acquisitions, meaning that bees are companies that are added to existing platforms that they own. So this acquisition they're doing of cuba, I think it's very likely over the next couple of years, you will see like the playbook and private equity includes not just cost cutting but also energy building, and they typically do boltons and add on s. And this happens across all private equity platform deals of new products and services that can be sold through the existing sales channel, existing customer base um and as an add on to the existing service or product is already offered.

So one of the free one of the things that I think you may see in silicon valley over the next couple of years is a rationalization away from funding feature companies and thinking much more carefully about what can be true standard and product companies and many of these companies that have raised the tonic capital um and have gotten crazy valuations. At the end of the day, there are more likely Better equip to be a feature of another platform, then they are to be a standalone platform company of their own. And that's where the majority of these acquisitions will likely end up going on in, in the private escape, and they will be vacuum up and attached to existing platforms that these private quality guys are building out. And by the way, just look as an example at what oracle did over the years, what sales forced over the years, what google did. So many of these companies built on acquisitions by belt, on acquisitions by channel, building a platform and then um adding on top of that, I think of these guys are going to .

try mimic two critical points. Number one, what about the bottom seventy five percent of V.

C, O, if you show that charge just for one more second, I just want to remind everybody that is the absolute cream of the crop of the best. These are folks. I mean, again.

how to say .

a benchmark. We've just thank the lord. What about the bottom seventy five?

Is not to be able to raise funds minutes over there. A lot of these .

people who raise first time funds in the last like it's like the the today is the moment, now is the moment for the sober founder and the sober venture capitalists and say, what is the real valuation? What do we need to do to make sure that this company has a chance? Because what tax set is so true, otherwise all these profit dollars will be made by the private equity.

For me, in order to win today, you're gonna to grind. You're gna have to work fifty, sixty hours a week. You're gonna to be absolutely embrace the age of austerity.

And you're going have to focus on your customer, your product in your bottom line. The age of access is over. If you're not working fifty, sixty, seventy hours a week, you're not going to cut IT.

In silicon valley also key second point, profit IT extravert wasteful in the use of resources. Just so we get the word of the day from David sex. That's David. Sex is word of the day after us. A very powerful .

bowl .

vive ball that craft. You see the trade bully went, we went, went viral.

This is I think island's biggest, uh, non obvious impact in this moment.

J, K, here's your, uh, one answer to your question about what happens to the the the bottom seventy five percent of venture firms is equivalent to what happens with the, you know, kind of this is the bottom of the top.

The slide that I just shared this when we looked at a few weeks ago, and I keep referring to IT because it's just such a staggering like strain of what people call the power law, which is how you know kind of access returns accumulate to minority of investments. So just a few investments make up the book of value that the you know market cap of forty three percent of companies that have gone public since twenty twenty, uh, is seven hundred and fifty billion dollars. The market cap of three, the other three hundred is only twenty six billion dollars.

And the cash that went in to the seven hundred and fifty billion dollars is one hundred thirty six and the cash that when into the twenty six is one hundred and seven. And so the cash that went into generate that twenty six billion, one hundred and seven, that's your bottom fifty percent. And the top fifty percent put in one thirty six to make seven fifty.

And I think IT gets even narrowed. Rs, you move further up to that top cortile. So you know.

it's just I can tell you what L P S. Are saying because I mean, hard business and this .

this is the companies that went public. So this is also of the top company, of the top funds and the top companies that were actually able to IPO. And so at highlights how much of a power law actually plays through.

And so the majority of these companies as to not even in your chart, you show the top cortile, the bottom uh, seventy five percent at the bottom fifty percent. I've looked at the data as well uh of those various vintages are below one point out. They lose money for their L, P, S, sisters.

And it's it's a cycle. And what end up happening is the next generation comes through and L, P, they make a portfolio of bets. And they hope that they make enough bet in the right VC that their portfolio generates greater than market returns, greater than called IT fifty twenty percent target, fifty percent target um but they are going .

to expect the majority I have an lp report. I'm amount that raising once one four. I now I moved from like the action, the individual product ising and i've moved on from individual investors forty five million dollars in commit after five weapon's.

amazing. Now i'm talking to know what was amazing. It's just five or six. Is onna change in the entire industry, letting the the, you know, the masses have some access to this capital and this opportunity? He credited and cubes is going to change the world.

I believe you have to do deal with everyone. One of them is that easy to administer.

It's incredibly complex because you have a large number people. They all want to talk to me. So I did webinars five webinars and IT resulted in hundreds of commit.

hundreds of commits for forty five years. You be able to be able to get all those capital .

commitments drawn down when you one thing.

one thing you may want to do is like for for these smaller slugs is you can pre wire or you can set up an ice cat where you pre a hundred person of the capital.

yes. And then you also don't have you take IT down when you're going to deploy to hugger I R, correct? So we're actually looking into those solutions. I touch line, but I just did my first two meetings with endometrial ccea, a fund of funds.

The entire discussions right now are around um what is your secondary strategy? How are you getting in earlier, not later? And how are you building a larger position? IT is and even like some of the cubs who are sophisticated in our r in over ten venture funds, the entire discussion governance of these companies, are you taking board seats or not? How earlier are you getting in in building a larger position over ten percent? And what is your secondary strategy? What are you gona start taking some chips off the table? So the and I got to say, if you're an lp who didn't sell into the up market at all, uh, and you're on your first fund, you know and you had all these great Marks and they're getting the coming croning down, they are not going to deal with you. They just have too many options of .

top ones in the court started to come down yet. I don't think we know what the top quartiles really gonna look like over these last few years. I think that's gna take four or .

five years to really sort of course so I think explain why .

chouse to show people understand I so I I think I think that there are lots of valuations um that have supported huge T V P S these you know paper gains that have allowed venture funds to raise enormous amounts of incremental capital and new funds. And so they are going to try to wait as long as possible before they are held accountable for that. And the best way to do that is do not change the valuation.

And so IT will happen slowly. It'll be a trickle of these things. Um and I think that takes probably four, five years preferred to really sort itself out. But in the meantime, companies will still need to get financed. Companies will still need to get built. Um that's why I think like the public markets, I think what sax as is true, giving us a signal of all these true market clearing Prices are will eventually slip into these in a serious dear e companies because the venture capital to has now taken some big right downs in one part of their portfolio, I suspect will now be very open to selling to private equity for another their portfolio so that they can return table.

Totally, totally great. Yeah.

it's gonna be ref out there. You guys watch White los.

Yes, I just started season one, uh, third episode in what a treat .

won't say anything, but how great with season .

to a the rap is awesome.

The the last two episodes .

finish watch the hand that is a fuck and stressful show. Uh, it's like it's like you're put in work when you're done. Those episodes do like own motion labor.

Motion labor. Watching that show is IT IT could not be more statistics and insane. Oh, a IT IT is brutal. Uh, but you can't look away incredibly well done or at, listen, this has been an an amazing episode, and this is news for the other bees. Fried berger and I have been secretly collaborating now we have to a plan that we're working on, a join plan for all in summer twenty twenty three because we .

are both helping each other out where .

oh that that that .

we don't need your sex. That's all that's fine.

We know that you're but free .

bergin.

I I ever .

in this case, but power .

and influence is something that you that freeburg had celebrity freeburg had so much of a good time at all in summit twenty twenty two that his hatred of my production fy is less than his joy from the event. And we are collaborating a super uh super gut um I have made up for my producer state by using super gut and becoming a big .

for prime promote in the oh yes.

yes.

you this is no conflict, knows no conflict.

no super god, double person. You take .

money from S, B, F, I mean, pretty much. Yeah, how come on?

By the way, I point out on the most lowest person in tech, right? You, however, do not name the country. Do not .

name the pockets.

SHE win. I I like the.

I do not mention the how. I only want the bracket do pockets not giving them many just black out that um imposed. I want you to black out below the I don't want to give these guys any credit. So here we go. The worst person tech cha cha thin sax women say it's A B pocket that's run by literal socialist.

Look, you got a very tough draw. I mean, of course.

you to S.

Went up against the warriors .

with k to .

sex .

is in the most hated person by one percent .

that .

that is a .

complete gentleman. Andy jc is the with .

human compared .

to engage just .

in place.

That is, I .

want to .

recount .

election.

I guess is worse to be a union busting amazon CEO than a reactionary conservative investor.

Yeah, I don't get IT. This is ridiculous. I just want to point out that the biggest travesty here is that I did not make the there are, you know what, these guys are trolling me. These guys should not to produce your nicors retreated.

Basically you basically pick the, what is that? The thirty most relatively? Well, no people attack. That's what till to check.

This is terrible. Worst person in tech. I don't make the list. I am going to a double .

down machine constantly calling to the media, right?

I need to be horrible that that. I need to be a worse human like you sex. I'm going to try my best this year to work against humanity and society and be IT more votes than than you. I'm really gonna double my effort.

Obviously I can catch up with.

you know, too kind. I got a big heart. I care.

I have empathy.

I know my empathy. But here's a problem. These guys left me off on purpose, if you want to. The reply between .

and recon and bill gates.

I reason that's a luck. That's in reason, of course.

in recent times a sixteen cofounder.

I mean, market reason is a world clash hit poster. A bill gates is hiding somewhere nobody. A bill gates doesn't tweet market recent blocks on blocks.

He shit posts with the best of them. He is up there. I mean, that guys a dark mean lord, any other? I mean, I I really simple size with each month that you got your best handy there. That's just that's .

like going up .

against .

the dream. C, R, B, B, C, O, making more.

good. Oh my god, that's so well.

Week guy, guy who really tried to .

make us believe web three was going to happen versus world coin. And .

course, much more lose .

than sam altman.

Listen, freeburg, I didn't even come. I want to just congratulate freeze g on an amazing, the best science corta ever, an amazing product in super gott that has helped me lose weight. I feel great.

And for, you know, recovering from whatever illness he had. All right, everybody, I love you. Best shout out to a different sex lovey guys, and we will see you all next time on the all in pockets. lovey.

Best love you guys. bye.

Rainman give IT out.

We open sources to the fans and .

they .

just got .

crazy with.

get.

A room or.

Sexual .

attention release B.