E114: Markets update: whipsaw macro picture, big tech, startup mass extinction event, VC reckoning
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Here, everybody, welcome to the all in podcast were back thanks to free berg and sax for moderating the show into the lowest ratings in its history.

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If you want cover information, click here. Thank you. Okay, let's talk about the market date.

The fed raised twenty five basis points. The market obviously has rip since then. The jobs data this morning was crazy. We added five hundred seventeen thousand jobs, more than two x december and well above the estimates of one hundred and eight thousand jobs.

The fed, I think, is starting to realize they can obviously impact inflation and slow down specular assets, but they're having very hard time with the labor market. Obviously, labor participation actually is growing. We ve talked about that many times here.

It's bumped up to sixty two point four percent. We all know IT peaked IT like maybe sixty nine percent during the two thousand time period. Wage raw though continuing to slow. So that is some good news there. And obviously, risk on assets are ripping the last couple of days, trouth, which you take on where we are with the market and the feds action, which people are starting to believe will be another twenty five basis point hike and then maybe staying high for the rest of the year. Did you to hear their comments eating David, which you take on the market?

I watch power speech and IT was really amazing because. In december, he was extremely hawkish, and he was basically like, listen, we're going to keep rights higher then you like and longer than you want. And that was pretty clear.

And the markets reacted. And then not. But thirty five, forty days later, he essentially said, we have two twenty five basis point hikes left to go, and he's going to try to stick the landing essentially.

And even though the rest of the language in his entire speech and the press conference, if you read IT in the ability of his body language, so if you just read the transcript, would seem very hawkish as well, but the reality was he basically capitulated. And then the market sentiment said, okay, we're at the end of this thing, and we ve talked about this before, but markets tend to bottom six to nine months before. It's clear that you could have done this.

And so we're a little bit off to the races in the short term. It's compounded by a couple of other factors. One is that at the end of last year, so many people were tax loss harvesting, which means if you had some gain somewhere else, you sold some things that were losing money so that you could net the two together.

You saw a lot of stocks. Tesla was probably the poster child for this trade all the way down to, like hundred eight dollars a share. And it's effectively doubled in the last thirty days, right? So everybody tax says harper said everybody degroof, nobody was really owning anything.

And then when power basically said we're mostly done, there's been so much systematic buying right now that nobody's really well position to me. This is very similar and early, reminiscent of the end of twenty eight and beginning of twenty nineteen. And if you guys remember, at the end of twenty eighteen, october, november, december, the markets just fell.

And part of IT was pill's onna, raise rates, inflation, getting out of control at sea, sea. And then we got all this data that said china may be entering a real period of, and people capitulated again, trying to stick the landing. And long story short, he didn't.

That was a head fake, and the markets just ripped higher. Then we went into the covet pandemic, and all of that stuff happen. So I think we're about to replay a little bit of that at least in the next thirty ninety days, the pain trade is to go up. So that's probably where we're go.

Here's the fed fun rates chart from two thousand and into the two thousand and eight recession. And you see just, you know, to try max point in twenty and twenty that little step up to two percent and then this dramatic step up that we've been on up to four and a half or some sex.

Is this where the fed pauses? You think they cut? And in what overall fact is this onna have on ventura capital in the start up market, which is super important to us?

I think we're in the web saw economy here just a month ago. Senate was incredibly negative on the show. We are predicting for the year that we were looking at the fed going from four and a half percent to say, five and a half percent to fifty point increases.

The belief was that we were going to have a recession later this year. I think that was pretty much consensus. And now three weeks later, you had a situation in which we got a couple of really good inflation reports.

So all of a sudden, the consensus change to we're not going to need to raise rates, need to five and half percent. Maybe we only get one or two more counter point rates and the market is ripped on. The belief that inflation was in the review mirror, the problem had been licked and now we can just kind of move forward.

And the fed seem to confirm that just yesterday with the counter point rate increase and now today we have this wild jobs report, with over half million new jobs, the expectation was only one hundred thousand. And so now all the sudden people are one of all. What is second, does this mean that labor costs are going to go back up, that the economy is overheating and now the feds can to raise more? So I would save literally from week to week, we're being web sod between expectations of whether inflation has been conquered or not, whether the economy is going up in a recession or not. And I think probably where we're sitting at this moment is you'd have to say that the risk of inflation returning are slightly higher, but the risk of a recession are lightly lower because with this kind of jobs report, Better chance of having a soft landing here.

It's very hard, in other words, sex, to have a recession if people are employed if people .

are employed and we have fifty years yeah exactly. So fifty year old.

right?

So I just think that IT, we're in a highly volatile economy and is very hard to predict the future. I'd say that real tutor we were a month ago, you'd have to say that the odds of us having a soft landing this year are quite bit Better than they were just a few weeks ago.

freeburg. We look at this employment picture, does seem people are going back to work, seems maybe indicative of people blew through their savings. We talked about this. You've been harping on and on previous episodes of our people doing personal debt by now pay later is a possible this this year that people you load for so long position that maybe they will through their savings IT. Seems like we've burned off a trillion and savings for some of that and the debt going up so that people maybe need to go back to work and they're finally and taking jobs. Do you think that's what's actually happening here?

I don't know classify that. I am obvious a lot of this stuff is on the margin, but the one chAllenge you know Larry summers has been harping on since last spring all the way through the summer and the fall and you know in multiple kind of interviews and publications, he's done his X U S. Treasury secretary, obviously brilliant economist.

Um the U S. Needs to have a five to six percent jobless rate for five years in order for us to really get to the inflation rate target of two to three percent or blow two percent. And so you know the economists and the macro o guys are tracking their jobs report today are I think the indication is we're not there yet and that the implication of a tight job market is wages go up and wages go up.

Inflation goes up and because companies need to charge more because they have to pay more to get talent. And this is obviously continues to support the escalating spiral. H, that drives inflation so that the the you know kind of downside to the job report today that I think a lot of folks are watching the .

fed mentioned over and over again deflation. So any impact there chemosh, you think we're going to see Prices start to creator? And and what, in fact, would that have on the market?

I think sax is right. I think the marginal risk is, is for this web sign. So we have a period now which is disinflationary.

But the problem is if the stock market keeps going up and all of the sudden we have less restrictive monetary conditions than we're going na be back at the same place we were before, which is money slashing around into all kinds of risky assets. More more money, you there is still an enormous amount of money sitting on the side lines that has to come into the market. Now this thing keeps going higher.

So we're in a delicate moment. And if we reignite inflation because all of a sudden, more companies have more liquidity that they can tap, right, more money, they can raise more money as a result that they can spend because we don't have this first inflationary psychology control, there could be a risk that, that we reignite inflation. And so then then they have to capitulate.

The fed has to capitulate again and start another hiking cycle. So I think it's a complicated moment. I think all of the smart money in wall street that I talk to up until this point, they forecasts like this period would be choppy and the second half of the year would be really robust than like you needed to be super long and things we're onna be incredible.

And when I talk to them this week, they are like, uh, god, we weren't position for this. We had no risk going into this. We're going to be force buyers. There's a bunch of companies that are whispers ing that they want to go public. Now .

really, the big banks .

have been calling around trying a book build quietly for some IP s and so if they try to kind of crackles capital markets open, I think IT, there's again the marginal risk will be that we do website on a sax.

When you say book build, you mean trying to see if you'll get some early takers to buy equity in an IPO? Perhaps even in a company like stripe has been sitting on the sideline.

so not strike during a complicated moment. But when they called the book bill, they basically say, hillen X, Y, Z company quite failed. Look at the s one.

What do you think wears the Price? Blub a blah. And they're trying to get an indication of whether you'd want to be in the IPO book. So I think that there's a lot of those testing the waters that are now starting again.

Would there be an appetite in your mind for an IPO in the second quarter of like a stripe type company put you know I don't know what the other candidates are. The new candidates stripe is when people talk about most.

the thing that we have to think about us, like most of the market, are not people, right? Most of the market are computers and algorithms. S, in etf, it's an extremely formulaic buying model.

Do you have components of an index? Those represent certain percentages. You have to own those percentages to be relevant as that index.

And so it's a reinforce buying loop as well as a reinforce selling loop, right? So when things start moving, those folks have to just systematically move money in. All the humans know that.

So the humans tend to front run all the computers, and they basically are the ones that sell into these guys. And then that's what inflates these Prices IT. Similarly, on the way down, humans tried to front run IT by being short into that stuff.

So we could see the capital markets open even if we don't. It's actually the worst scenario because now you have all this money going into a fewer number of names that sort of explains facebook has doubled in in thirty sixty days. Tesla has doubled in thirty in of thirty sixty days.

A lot of the text talks like hybels, a talks that we are all you know helping to build. Those companies have just absolutely ripped sixty to one hundred percent. These are not healthy and Normal moves.

And so the question is, what happens if. Inflation somehow all the sudden pokes itself back up right now. IT doesn't .

look like IT is and power was clear and it's to a deletion eleven time .

during his. And I mean, basically that was all part of a narrative where inflations on this way out, we've looked that problem and that's what the market was pricing in. And I think now the question is in lighter day's jobs report, is that actually .

true on and I think disinflation .

deflation, when I look at you shoot the chart of the fed funds rate, another chart is the yellow curve, which type the yoker for a second. This is the yield on us treasuries on rt bills. And one way to look at this is as a prediction market of where the market thinks interest strates are good because the fed sets the rate for the fed funds ate, which is the overnight rate of lending to banks.

They do not set the rate of, you know, three months, six months bonds, ten year bonds, and saw on the market does because the market trades those bonds and IT computes a yield ld that the market requires to want to hold those bonds. So what's interesting is that if you view the yell curve as a, again, as a prediction market, IT tells you at any given time what the collective wisdom is of the market. Now this thing is function moving all the time, so that collective wisdom is changing.

But where things are today is pretty interesting. IT looks like what the market is saying is that within the next six months, the rate peaks at four point seven five percent. So nick, if you just want to hold the mouse on the six month dot, you'll see it's four point seven six percent.

So basically the market is predicting we get maybe one more quarter point, roughly, not much. And then if you go to the two year, it's at four point o nine, so a little over four percent. So what the market is actually predicting is that over the next two years, rushing at a fifty basis point decrease from the fed.

And then if you go to say the five year or the ten year were at three and half percent, so the Marks basis saying that long term rates are going to a stabilized at three and half percent, we're not going back to the abNormal zero industry policy reserve that they have for ten years. Three half percent will be the long term stable, you know, cost of money. But you can see that the market, the prediction market, thinks that the fed has done enough to come back inflation because the fed funds rate now basically is where the bond market thinks this should be. And in fact, the bond market thinks is coming down over the next two years.

but coming down to what would be three and half in a world that we've made in for part of the over the fourteen years of this bull run. The majority of that was at close to zero or and that's .

why we're never going back to the bubble of twenty twenty one, where six countries were treating in a hundred times. Are we're going to go back to an environment more like a more Normal one or evaluations are more like to two thousand and seventeen valuation. Something like that is way is three percent is not a bad.

It's still a great still a great deal of your mortgage of that.

If you listen to buffet buffet ts teacher, this guide band gram in ben grams book, the way that he would look at the stock and obviously, look, things have changed. But the way that he would look at the stock as he would look at that risk free rate, he would double IT. And then the inverse of that is the maximum Priced earnings ratio that he would pay for a stock, right? That's the trade office.

If you can get more than two times the risk free rate, then it's worth wing a company what that means, he said. If if you take three and a half percent as a terminal rate, the right P E is around fourteen for the S M. P.

Five hundred. Right now. The five hundred trades at twenty two times P, E, which would mean that we are fifty percent over valued. Now again, that's a Benjamin grain model. And I think the world has pretty cleanly moved away from IT, but there's probably some rooting in that intellectual framework that's still valuable. And to your point, David IT just reinforces that man, we need to start to learn a new regime here because when rates are not zero, there's just a lot of access that you can support because the alternative trade off for investors are plentiful, you know and plowing money into a money losing start up becomes less attractive to just .

give people's background, that's the intelligent investor was that book, I believe. And he was talking about value investing, which is, hey, what's the earning per share? What's the ratio? What's the pe? And that's something that growth and momentum investing has been the opposite of.

And and this is a new, could you I think you are a blog post about this to H T. Of the regime change. If you look at the google, the facebooks, the apples, amazon is a little bit of an exception here.

Those companies printed money. They have profits. They built up large cash reserves. We look at the next cohort of companies, airbnb, s coin basis, uber, eeta. They focus on the top line growth, a much like the amazon, which was a very obscured approach correction math, uh.

in in the history of this. Next you just drop this chart. We did a little analysis over here, and IT was just basically looking back sixty years of company formation. We looked at all of the hundred most valuable public company ies startups, and we index that to the time interest rate.

So what are we looking at .

here to moth with the so basically we went back from nineteen sixty onwards. So basically, you know, sixty three years. And what this shows you is the hundred most valuable public technology companies. Then the size of the circle here is their market cap. And then it's overlaid on top of the ten year industry as well as grey bars for recessions. So what is this graphic mental illustrate? Well, I just was for us to study is a correlation between the value of companies and what the interest rates were, what the economy was doing at the time.

And to your point, Jason, the trend is pretty starkly made on this chart, which is that if you were a company that was founded in a period of austerity, you had the ability, in general to build a much larger company then that which was founded in a period of wealth and access, right? So when you look at when rates were sort of approaching zero or were zero, there is a lot of really successful companies. They are listed here in the in the light gray on the right.

But none of those things really represent the success that these other company is said that the first interesting takeaway the second interesting takeaway though from this has nothing to do with rates persae. But IT is that when rates intercept, with the emergence of huge technology trends, so in the case of the hundred and seventy, IT was the P. C.

revolution. In the case of the late nineteen ninety IT was the internet revolution, those two things which required enormous progress in both physical infrastructure, so atoms as well as software infrastructure bits. When you put those two things together, those also created big companies. And so if you add that all up, the point is that whenever ver, you see huge tectonic shifts in technology combined with periods of austerity, that's when the gargano dollars are made.

So on the one thousand nine hundred and seventy companies like microsoft and apple from the get go had to be profitable, right? And in the absence of one very important round of financing that amazon was able to close, the next big lot of companies were founded again in rising rates where they just had to get profitable or find a way to be positive free cash low or have positive working capital faster than anybody. Also, these are like really interesting trends that I think to say that as rates creep backup and if we can interact that with some improvements in technology over the next five to ten years that we've all talked about, IT could be a real boon for startups and start up .

investing IT would mean people are a little more resilient, a little more hard quarter use a term freeway where your thoughts, the analysis by social capital.

it's interesting. I mean, I think there's probably two ways you could interpret this. One is in an era of access capital, all the capital gets competed away.

And so you pay more salaries. You have, uh, is harder to get high quality talent. You make a lower margin, IT said.

It's said it's much more kind of uh, competitive on the ground. And then another one is just obviously kind of like evolutionary fitness. When there is less capital, investors are more selective.

I think what might make this era a little bit different than the past is just the amount of term dry powder sitting on the sidelines right now. The, the, the, the total V C. Capital raised last year, I think, was a record high.

That means is a lot more cash that needs to kind to be deployed in the next twelve to thirty six months, then has ever um been deployed in in the history adventure, if that holds true. So that may be kind of a counterbalancing effect here where IT may take three years before that effect plays out. Where there's more of a dirty capital is certainly the case that uh, institutional investors and downs pension funds, traditional family office L P, S and venture .

funds are making far fewer .

commitments this year to new funds, uh, as I think we all know, and that tightening will play out in the venture funds. It'll get raised for this vintage, the next advantage and so on. And so maybe that that kind of evolutionary fitness concept starts to play out later and ancient. I I think there's also dislike, you know, we talked about this on our text stream, but the venture business of the last fifteen years, everyone since two thousand and eight, everyone's been trained and all the Younger people that have come up and are now partners and running the firms on an environment of momentum investing rather than fundamental investing. And so there is also a question of how fit the investors are for a market space where valuations are flat or descending or the decision whether not to invest is no longer driven by who else is is investing and how much is the company growing and how much is the valuation going up. Uh, but it's much more about kind of the fundamental performance of the the, the, the business.

Does this match what you're seeing on the ground, sex or people being more dogmatic, pragmatic? Or are the capital allocators really sharpening the knives and looking at these businesses a different way? Is that actually hit the shets?

Yes, there's a record amount of money venture capital is raised over the last. A couple of years, but this can be deployed much more slowly and carefully over the next day, three or four years. And I was over the previous three years.

So divide that amount of money by three or four because th Epace o f d eployment i s g onna a way d own. And so yeah, I think people give me more careful going to take longer to make decisions. I think it's going to be much, much harder for new funds to get started.

All of the you know hipe around you know solo capitals and know all seat funds and microbes and all this kind of stuff, I think a lot of that's gona get washed away. I think in hind sight, a lot of that was a product to the bubble. And yeah, I think you're going to be in for a period of some retrenchment in VC, and I think that's good.

I mean, I think to the point of mos study that the count to the finding in his study was that great companies are created during times when we're not in a bubble and capital slashing around everywhere. But when you're in an environment of moderate capital availability, and I think the point is that we all have to be under some stress, right? That's what evolution requires, is if an ecosystem or an organism is not under stress, they have no pressure to evolve and become fitter and compete. And I think that's what makes our industry and our ecosystem very adaptive over time is that it's constantly IT does face survival pressures. But over last several years is all the survival pressures we're taken away because anybody could raise money.

There was always another bridge available there is and there .

no some converted to done.

There was no reckoning. Know a lot of these companies just seem to, you know, get another .

twelve months of run away ones of ra bad habits during that period of time and so much entitlement and access built up in the system during that time. And I think now we're seeing that a lot of that is working its way out. I mean, just look at the facebook results the other day.

So facebook just about facebook is an example because yeah, here you have a company where the stock over the past year bounded is like down over fifty percent and the market share and the market did not like its answers around the capital of investments IT was making. And then blacker and our friend wrote that letter encouraging them to get much more efficient. And then they did that, and they basically started doing some rifts.

And basic is getting much more efficient. And what they are doing, and specifically taking out layers and layers of metal management, I mean, that was really the big things. So they kind of a took a page of islands book in terms of what elana done at twitter may not nearly to that extent because I don't think they needed to. But they targeted the idea of we have too many layers in the company, too many middle managers, and the stock ripped just was IT like up twenty, twenty five percent.

Yeah, yes. And there up to I actually bought IT based the day they had the layoffs put in a bywater and IT was closed at ninety four dollars and now at one hundred ninety three in fedex of all places, uh, is laying off ten percent of its offers, officers and directors. So the idea now is, hey, in the senior ranks, what is the inefficiency there? How do we get, well, more doors, more people who actually are building or Operating the companies to take the rains and get rid of this, I should say, middle management, this waste that tell.

this special problem that builds up in these companies is that everybody wants to be a manager. And so you you can just come at this palm by saying we're going to increase the number of reports of each manner has from five to ten. That doesn't work because let me tell you, what happens is that every individual contributor who's a star thinks that their career advancement requires them to manage a team. So what happens if you take that star I see, and then you create a team around them, so that person then hire five people to manage, and those five people .

are not store.

They stop working. Then to start managing well, maybe you get like twenty percent more production out of that six percent unit, and you would have just out of the star, but you're spending five times more money. So that makes no sense in the problem is that scares.

So you know that icc becomes a manager. They hire five people. And those five people, one of them, the storm, says, why I want to be a manager on all the organizational pressures to keep building more, more teams and more, more layers.

Here's the quote from mark sucker berg to illustrate your point from a recent all hands meeting. I don't think you want a management structure that's just managers, managers, managers, managers, managers, managers, managers managing the people. We're doing the work.

Yes, it's the problem of infinite delegation. Every like star builds a team around them to delegate the work, but then they hire a team to delegate the work to. And pretty soon, the most junior interns in the company are doing all the work and all the best people are just management. So it's actually a huge problem.

And I think that i'd say that a lot of of years don't quite understand the problem because they think that all they have to do is increase the number of reports that managers have, is not you also have to reduce the number of layers in the company, just the ultimate ample of this, just to put a point on IT, was at twitter. What we saw is that when elon went in to basically do a ref at twitter, the first question he has an engineering partner is whose checking code and they looked at the code repository, and over fifty percent of the engineering department had not checked in code in months. And he wanted to.

The reason for that is because the engineers were told that if you want to be a manager in this company, you don't code. Managers don't code, only ics code, and no one wants to be an ice. No one ambitious wants to be in icc. They all want to get promoted.

So at this individual .

contributor, yes. So the whole thing turned upside down because of this idea that, again, ambitious people want to be managers, and managers don't do the real work.

Yes, I W, I don't know to write worse. It's like it's a dangerous precedent to said, what what do you take away? Uh, tramadol, what happened at facebook when you look at IT and the pressure that was put on the ripping of the sock, even though they're down two percent year over year um in terms of advertising revenue.

there's A A guy on my team sent me this chart. He did a pretty detailed technical analysis of facebook. And can you please put an image up there? So basically this this shows really .

go this is .

this is the first time facebook mention the word metaphors in q two of twenty one on the earnings call they mentioned at twenty times. And the grey line here is the stock Price. So as they kept mentioning at the stock Price, just in a react, but Q Q four twenty two was the first time that the word efficiency exceeded the word metaverse.

And you saw and you saw the stock Price trip up. So what's happened that facebook is really interesting because I think a transition to what's generally called an x growth company, which means that people are now looking at a business that has essentially gotten to its peak size. And now what they are looking at is its ability to generate cash low.

The cash flow generation or cash low yield of the business was like three and a half percent, but they're making enormous cuts both in capex as well as high count over time. They're getting their expenses under control, and all of that should drive up their cash free cash for yell. And so I think why people got very excited is there are a very few x growth stocks that you can own that can just compound and grunge gormers amounts of money. And these guys are an incredible position to, do IT know, more than one hundred plus billion dollars of revenue. And if you get these costs under control and get efficient, get the employ based down to thirty or forty thousand over time, this is is the thing that just spits out just jenn mous amount of cash.

And so so you investing and warn buffet, that means the earnings .

for sure yeah like like the facebook P E, is quite more and now actually put back in stocks base comp and it's P E is about a level .

reasonable if .

you go back to the to the bench in analysis. This is a company that perfectly meets the criteria of like you can buy at the P E, that basically two times the rest rate. And so I think it's an incredible stock now that you can know, because if they keep grinding out all of these kind of free casual gains, men have enormous amounts of money.

They announced a forty billion dollar by back. You know, the thing to keep in mind is apple had a moment like this. And when apple went x growth, they did the brilliant thing, which is they said we're going to borrow heavily and we're going to return cash. I may oppose in this in the group that you guys by twenty twenty five, apple will have exceeded one trillion dollars of cash distributions. I mean, that is just nuts.

Is that include buybacks in cash solutions.

backs in dividends? And so facebook now you can credibly see a path where facebook could chunk out hundreds of billions of dollars of of total shareholder value returned over the next four, five years. And so you know, for value investors, it's somewhat of a kind of a no brain mean nothing is no brainer, but yeah really, really attractive value fundamentals right now. But I mean.

you did see warn buffs buying apple and I get his largest position. You're going to see him probably the same with facebook. There was an interesting mash extinction event tweet that went on the related to all of this time, liberia, a gp.

Gentle partner at I V P, A venture firm. Tweet the following thread. There is a mass extinction of that coming for early and middle companies. Late twenty and four make the two thousand eight financial crisis will quint for startups. Below I explain when, how and why. And we will started to offer some detailed device based four and five, four and five early stage shutdown, he claims, have less than twelve months of runway, according to A Q four survey of four hundred fifty founds by january ventures.

He says, late twenty three twenty four, when this will all come home to roost mark sister from my from ventures front of the pod, reply with the following, precisely our internal analysis, five thousand seed, two point five million raised or above a and b companies. So, so three different categories funded in the last four years, we have made to percent without a business. Loss ratios and less seven years have been artificial low due to access capitals we just discussed previously with the never ending bridge we've talked about this before.

If you look back over forty years of venture capital, the average top quartile fund distributes one point six or one point seven x the capital they raise. Even though now we've gone through period where people have shown these unbelievable Marcus write T V P S, the total value a painting capital distributions have not really budged that much. Distributions are still modest.

There's below to x and so we have to go through what's called mean reversion, right? We have to go back to the historic statistical average, which means that a fifty to sixty percent mortality rate seems pretty reasonable, by the way, in the dot com bubble. That's what we went through, you know in two thousand and two .

thousand and five, we had a fifty percent talent and seventy may be a little bit less for where what are you seeing on the streets you're investing in startups?

Yeah look, I I think that there's is there an opportunity.

by the way, so in here, so what are you seeing? But is there an opportunity in this group of this coward of companies which seem to be upside down and or, uh yeah a tsunami, rena.

this cohered of companies, I think generally is overburden with feature orientation and short termism more than you would see in an era of, uh, reduce capital rather than access capital. And what I mean by that is a lot of companies, beauty business or beauty product that allow them to show traction in the market faster. And typically those products that are easier kind of paths to market end up being features.

They don't end up being platform. So it's very hard to become a big business or to become a scaling business or to differentiate a competitive market. That's a general that's a very general statement. But I think you know when you miss out on the platform play, you start betting as an investor on a lot of the derivative place that look like the real big company. Look, the platform.

You think about how many companies try to look like some iteration of stripe or try to look like some iteration of uber or try to look like some indication of you know named you're big kind of and as a result, you get all these sort of feature ish platform and plays that have maybe niche or some kind of you know narrow kind of market opportunity. They got funded. Those those businesses obviously aren't going to have the same valuation multiples of the winners in the market.

And now and they bought a lot of money to demonstrate growth because so much of investing over the last fifteen years has been momentum investing. And so they they try to grow and they try to get a high valuation, and investors plan more money. And now the problem is that so many of the series B, C, D, N, E companies have a true market value.

They are not a value less company, but the true market value of them is probably less than the total preference stack of the capital is gone IT. So there what make me understand? I just describe, yeah, so when investors invest, they have preferred stock.

So they have a right to get their money back. So they looks a one x liquidation preferences, invest hundred million dollars. The company is were three hundred and they on twenty five percent of the company after they invest, but they have a right to five hundred million dollars first before common shareholders get paid.

The problem now is that a lot of those companies may be worth less than one hundred, but not worth four hundred anymore. They're worth a hundred. And you can see this play out in the public markets with that a that data set I shared to be guys a few weeks ago, over two thirds of companies now that i've gone public since twenty twenty, are worth less than the capital that they have raised as in the venture market.

So if they were still private, they would be worth less than their preference stack. And that's where these companies start to unravel because now the investors have to totally recap the company. The founders don't want to have all of their common wiped out t now they own nothing. And there ends up being a very ugly scenario that happens with the board at that point on how do we wind this thing down, how do we recap IT what's going to happen. And that's usually when everyone starts to run for the ills the founders, one or more the founders leave.

And who I have a question view. So you mention this earlier, which I think was a really important point, but we didn't really touch IT. Do you think there's gonna be a recording inside adventure firms about we calibrating general partners?

Hundred percent. I mean.

look, and why? So I just explain why.

yeah. So I think what's happened is over the last fifteen years to become a successful venture investor, you've gotten into the hot deals. The deals were and hot deals, the valuations are typically climbing up. And when the valuations climb up, that's an indicator that the company is doing well and you should invest that in the model for Operating in the last fifteen years.

But the truth is that maybe just because the valuations have gone up and more money has gone in doesn't necessarily mean that, that's a great business or cheat points out that you ultimately get a positive net return on that investment down the road and that windows now closed. So the the investors that have been trained, this is such a generalization on my hate thing that because of somebody good, smart friends that were in venture, but generally speaking, there are a lot of folks who have come up who have been trained on this momentum investing model. And it's it's it's like day trading.

The stocks are going up. Let's all put money into the stocks going up instead of having a more fundamental approach to is a real cash generation potential and scalability and platform ability of this company. And as a result, you're gna have to see, I think, the junior partners that have come up and done well in this market, well.

they they ve done well on paper, but they haven't done well on distribution. So maybe that chaos becomes the you decide who's a good venture capital, which of these companies actually returned capital at a peak market?

Well, I think freeburg, uh, is really on to something, and he mentioned this before. So I got curious about this. And I went into pitch book and my team and I looked at all of the people, the humans in our business that i've generated more than a billion dollars in distributions on a given deal.

And there is twenty have done that in our industry, like there's people that had me hundreds of million dollars once or twice, but there's twenty people that have made more than a billion dollars more than once. okay. And if you look not a single one came up through the ranks as a pure engineer, a product manager, everybody two or one is extremely commercial in their background and their Operating experience.

Very few percentages of them were actually founders. A huge percentage of them were trained in banks and other places. So non traditional coron quote roles for what this current crop of GPS look like because we went through a face where if you were A V P of product, or A V P of design or A V P of engineering at a well known start up, that was the most obvious on boarding into a venture firm. But if you just look back at the data, that code to people has actually never made money again, according to pitch book.

fascinating.

And that's a really fascinating counter tuition take away, which is that. And and by the way, what's what's so interesting about that is pat grady. I think cat tweet and IT just sums IT up so cleanly because he just hire somebody from coto.

And the tweet was something to the effect of. This guy is the most commercial guy. We've ever seen something like that. And I thought that was so interesting because that is exactly what our hurried al analysis of this data was as well. Commercial people invented the ones that make the money.

So you look at a red Wilson, Michael.

and they were investment analysts. I can see public markets before they became venture investors or make more its who was who was a journalist here.

which is a journalist is just an analyst is another if you are good journalist is another way for analysts to him.

IT was really, really interesting looking at that list. So like know there are people in their like jim gets Alfred, danny rimer, yang hammer. And so if if you look at all of these folks that are just here, one people, and we know all of them, the one common thread amongst all those focuses that unbelievably commercial. And so Jason, in a in a moment like this, where you have to really hold the entrepreneurs feet to the fire or be their partner to make extremely hard decisions, you have to have the ability to be respected by them in those moments where you can force a very difficult decision.

And then separately, if you have to basically force liquidity so that you prioritize your limited partners, how do you do that while still aging the relationship with the entrepreneur? How do you know that you just need to culture your losses and get out? These are very difficile traders that I think folks haven't been trained in doing to David's points of it'll be really interesting few years to see how these .

organizations I think this goes discuss the sexus point about, hey, the ecosystem. If it's hard, if it's cont anker ous, if they are sand in the oyster, IT could make the purl if you have A A general relationship with, you know, your product manager PC and everybodies campaign n caviar and high five ving. Maybe that's not as good as having a bill girl, a Michael Morris and having a foil. Maybe who is putting pressure on the management team. We need to hit these numbers freeway.

And yeah, look, I think one one counter argument here may be that there is this fragrant title wave of A I companies and there is this incredible amount of luu brick ant in the dry powder that sitting on the side of the of the market right now, that all these venture funds raised in the last two years, that is gonna, lubricate all these A I companies into every vertical in every market.

So every companies wrapped up in an A I clock, like a magic invisibility cloak. Every A I companies got an A I have in a bad in attack to now, or every companies being rewritten as an A I company. And the money wants to find its way into A I and he wants to rewrite industry with every industry with A I.

So I think similar to what we saw with mobile and the social web, you know, going back ten or fifteen years, we're seeing kind of this ai rapper in this A I technology enabler rewrite the possibility of every vertical and the VC have capital, more capital than they had fifteen years ago, ten years. Or even seven years ago. So there is this counter narrative, which may be that the game, the game goes on, the beyant continue to march on, the current crop dies out, but there's immediately a new crop waiting right behind IT. Or what happens is the heart dies and everyone runs to the back letter and gets recapitalized because I can tell you every I know that's not going well. Everyone talk me about leaving to go do an A I company and then I about that.

I think the question is the actual person making the check, will they be more or less likely? And at least what history would tell you is that we've hired an entire generation of people that, and this is clear, do not map to the people in an industry that have actually generated returns. So you're right, they may take this money and misallocated into these companies that are just in a rebranding themselves, but that just goes and further proves that there is a type of person that hasn't been recruit into these venture firms yet. That was the first generation that .

made all the money. I think it's always been the case that there is some difference between the background of the VC and the background the founders. I mean, you guys mentioned girly, and like we said, maritz was a journalist who had write a book about apple.

He was a technical persue, angrily was a investment and list on wall street before he then made the transition into V, C. Isn't, yes, we both know that they are like legendary VS. No, I think what you want to see in a VC, I think the background matters a little bit less than, you know, like how curious are they? How good they about learning a new area? How good they at being like a heat seeking missiles?

I mean basic dislike zarin in on like what is the hot space and specifically, what is the best company within that space? And somehow figuring that out, be able to assess the founder. You know, that's like a very subjective thing.

So I think there's lots of qualifications that you want to see in a VC. Now at the same time, I do think that if AI is the next wave and the next part of platform opportunity, as we all think that is, I do think that places more than an emphasis on technical skills. And I was I was literally just having this conversation at craft that g maybe the next year we should make a craft should be shown as really deep technically. So they can you help go deeper on technical due diligence today?

Eye companies, they've never made money. What's that? They have never made money in the history of our business. Who those people that are type of higher has never done that on behalf of L P S R G P.

biotech, life sciences. They have the investors.

usually a techno higher who worked in the trenches at a company is not as fit. The has on the past gotten D P, I. Whether somebody who is more to analyze .

a business.

the ideal person is going to be able to get returns.

right? right? So so look, I think the ideal person would be so on, who's his family?

Great investor, but also has some technical background, is some technical chops. We also a team approach aircraft. If you know someone is very technical, they can distrigas the technical aspects in the deal. Somebody else can be responsible. You making an assessment of the founders.

how we've sold this is we have a group of third party individuals that we work with, that we keep on retainer, that we compensation. And whenever we need to do deep technical diligence, we partner with them to do that work with us. And what IT allows us to do IT is get the best of their technical thinking without also putting them in a position of trying to adjudicate whether this company is good or not.

What i'm trying to understand is, what is this technical edge? Can I understand the boundaries of that? But I I still keep the investment decision to myself in my partners because otherwise the difficulty is, in my experience, deeply, deeply technical people are extremely good at diligence, but generally are poor at making investment decisions, because there is a part of their brain that flips on, which is like, I could do with Better, or I could do with this way, or I could do with that way.

And I think like that anchoring bias can be very dangerous. And you you almost want to be a little dumb down from that depth of knowledge because you others find everything that is like not worth doing and then you can miss the market or you miss the thing that is good enough because you're like, oh, well, I would have done X, Y, Y, Z in a different way. So we kind of like use them, but we keep them at arms, saying so that they never feel the pressure of having decided on our beale how the money should be thing yeah.

The number one thing we're doing at this early stage is tracing our founders. I know this sounds crazy on accounting best practices and pricing best practices, and we literally have founders who have never made a plan. I'm talking about at the seat sage who don't know accounting.

And so we are running for seat stage startups, and i'm kicking myself that we didn't do two years ago, three years ago, but Better late than never on how to just maintain their books and understand Operations and the the Operational lack of discipline in the market. I'm seeing serious a and serious b companies that literally don't understand their own accounting. And so when we start talking to their accountants, there is a huge APP between what the accountants think of this business and what the founders think of these businesses.

And founders think they have more revenue than they have or less revenue. They really don't even know how to calculate their runway in an honest way. And so there is back to your point to us about on the on the venture side of the business, a lot of product focus, a lot of Operational focus, there's not enough focus on just the bottom line.

The reason that happened is, is what freedoms ook said before, which is like somebody would build something, there was a little bit of momentum and you'd have to go and present these boniface to these entrepreneurs to get into the deal. And so vent what venture firms thought was the I verified to present is, oh, I build X, Y, Z product at this other company, and they thought that that edge could get you into a deal, maybe, but he could turn out that that was the wrong company to be in in the first place. And so you just miss an entire generation of value creation because IT happened .

sort of piece of the trial. Yeah, you really do need to understand fundamentally because we're talking about public markets here, the facebook analogy. What is the ultimate earnings? What is the ultimate cash that is going to get thrown one of this business and and that's what the whole industry needs to, I think, piva to. And just that needs to be, be Operating principle.

You guys know how much money facebook, amazon, google and microsoft raised combined total before they went public.

It's very small. I mean, google mini than a quarter .

billion dollars believable.

Yeah, the efficiency is extraordinary. And then on top of this efficiently, I don't know you think .

they were all profitable in the public.

On top of all this inefficiency is a dependence on venture. Dad, I don't know you're seeing this sacks, but the amount of focus on adding dead to unprofitable companies over the last five years has been just extraordinary. And I don't understand .

what I ve never understood, the venture that more really hard work, I feel like it's a category that doesn't make any sense.

Say more.

I mean that well, I mean, explain to people .

what's happening. I don't really understand .

how to makes sense for lenders or for founder. To be honest, I think the whole industry doesn't make any sense for founders. I don't like IT because the money actually paid back, right? Is debt.

So founders take in the venture debt thinking like it's an equity round, but without delusion, with some warrants, and they don't realize a way to second. We got to pay this back in a year or year and half out of the next round they do. But that creates an overhang on the next round because the new VC is coming in.

They want their money to go into the company, not paying off a bag. So IT actually makes the next round less attractive. The other thing about IT is that the lender is not getting an equity reward, so they don't want to take equity risk.

They may be getting a nice you know, coupon. I might be getting nine person something like that, which sounds high for death, but they are not taking true equity years in the company. So the last thing they want to do is be your last six months of runway, right? They want to be your first six months of running way and then and then get paid off on the back end.

And I think a lot of founders think, oh, i'll take this money and I will send my runway from eighteen months to two years. But what will happen in that last six months is all of a sudden the bank will come to you and say, no, no, no, no. Like you have this or that material adverse condition called a mac out. And there's all these like terms that founders don't understand because it's highly. And so over sudden, the founder find themselves with a lot less flexibility in that last six months to a year, either a cover inet gets trigger that makes them pay back the money immediately or their business flexibility goes way down because they're consulting with their bank .

about everything. All of this is coming home to roost right now.

I think it's a terrible deal for founders. And I think that even for the lenders, I mean, I guess I assume that these banks know their business Better than I do. But but I think that the reason I don't trust IT as a category from from my lender point of view, from like an investor point of view, is that all the data about the false over the last five to ten years happened in this free flowing zero interest story environment.

And so the started mortality rates were artificially low because of so easy to race. So yeah, venture death makes sense in an environment in which founders are generally able to raise the next round and then pay back the venture debt. But let's say that that the tweet storm you mention, Jason, he bring that back on the screen.

I actually think this tweet stm is basic, correct. Is, you know, I vert on the ship before that? I think one of the things that built up during this bubble is late started mortality.

So many startups that should have died from not being able to to raise next round live because they are able to raise money. And what this tweet service predicting is that the second half of twenty, twenty three and then twenty four, you're going to have a huge brunch. Where all these companies have to go on raise, they've been waiting. So they're all going get to the point where their cash is so low, they have to go on race. And now they are going to be confront IT with .

a new market condition. I wonder how many of them have .

venture debt is an overhang and those ones and they were they have less one way than they thought because again, those banks, they are gonna try and collect the debt before the start runs out of money. Not know when he runs out .

of the falling lives?

Yes, exactly. so. So look, I just wonder, I don't is whether the return models on venture debt that were created over the last five to ten years will be a good predict of what the returns will be in the next five, ten years, when a lot of the mortality that should happen in the past now happens in the future.

What I mean, sex prick. I'm wrong here, but i'm also starting to see really early term sheet people for closing on businesses. People offering like literally had a term to come in, like we're going to forgive the last note and take this pieces over for a dollar and everybody gets wiped out.

The amount of bad feelings that you have to go through even if there is a core business to freeburg or earlier. Hey, they raised a hundred million, but there's a fifty million here that people would love to investing. Who wants to go through the hand ringing, the negotiation, the taxation of a recap? It's an extremely hard process to go through you going through any recaps and our sex.

And what is the what is the approach of the firm in terms of dealing with these kind of situations? You even want start that discussion up. Where's a too painful well.

where new company.

I don't think for most our companies .

worth the recap of researching stage. And i'm about the ones that aren't going well. People still have a fair amount cash in the being. And we ve been beating the drums for little about new opportunities.

And new opportunity comes to as one of these overhand companies that wants to restructure.

you even engage that. I at end of last year, I tried to replace three of them and every single one was able to get a convert done away from us.

Yeah so I mean, yeah, we tried to find a market .

clearing Price for the security, but nobody wants you, to David's point, because there's too much money on the side line and people are willing to give them a lifeline that doesn't force them to come to hard terms with what the reality of the moment is.

Yeah, I I agree with that. We're not quite there yet. And and I think the the reason why that, that tweet you posted traction is at saying, listen, the chunk is gonna en second half of twenty twenty three and twenty twenty four.

That's we're going to see the downward ds. That's we're going to see the restructuring, the recaps and all the rest of IT. And look, i'm sure like every VC firms, gonna be a player in that. But yes, going to a be a lot of miserable work for founders.

people's true colors when you have to react the company. And yeah, when you can really start .

to see how crappy I was in two thousand, three to be here. Member, two thousand, three painful. Oh my god.

there are lucky to raise five hundred on a three million dollar.

Oh my god, like two thousand hundred.

yeah. A lot of I think the next eighteen months or illicit the next two years is going me pretty rough for a lot of companies, and it's just that they didn't cut enough. I mean, we've been beating on the drums for a year for companies to link to the runway.

And some did to some extent, but many didn't do enough and they're getting a call in this brunch. Can we just go to that chart that bread put out? I think that what a lot of founders don't quite understand still is that things there is never going back to twenty, twenty one.

I think a lot of founders listening to the top of the show where we're talking about inflation under control, they see the market rally, facebook up twenty five percent. They maybe thinking, okay, we just have to weather the storm for six months or a year and then everything's back to Normal. And I think what's important understand is that the market did bottom m out about a months ago and is not pretty nicely.

If you see here, this is the sas index, is the media enterprise value divided by next twelve months of revenue. And IT was really beaten down about at the end of the year, at the end of last year coming into this year. You yeah I was like IT is like four to five x multiple ples of of next to al months revenue for sex companies.

That's all the way up to six point one. Now you're talking about twenty eight to fifty percent rally for a lot of companies, which is huge, were still below the long term media, which is just under eight. okay. But what people need to understand is that even if we are revert all the way to the mean of a, which I think at some point we will, that still well below the bubble of twenty one where they got to sixteen. So even if things continue to inflate, valuations will still never quite be where they were in twenty twenty one.

And if you think it's getting back to twelve or six, thirty nine high growth .

companies for high growth companies in twenty one, you are in the public markets. You are seeing multiple thirty to thirty five times now. Those companies are maybe at eight to ten or twelve.

I think the reliable way that we can look at this for the future is that we're never going to see these kinds of multiples again unless rates are zero and all kinds of tourist capital need to find a home to escape zero percent returns in every other asset class. But if even the safest dasa class now will give you three and a half four percent, this is probably the new Normal for quite a long time. And we're going to be back in that early two thousands kind of mindset, which takes a lot of hard work to build value around.

We talk about the sort of web saw economy, and there's a lot of mixed inflation data. I think founders need to understand that there's a by vacation. What's happening and the tech ecosystem is not necessary.

What's happening in the overall economy. The tech ecosystem is clearly going through a reset and a recession. Job cuts are now the rule. Valuations are much lower. Whereas in the overall economy, we saw a job s support today over five hundred thousand new jobs. So the fact of matter is that even if the overall economy avoids a recession, that doesn't mean that things just onna bounce back.

Text was depression, flash recession. Best cases recheck .

is a boom bus cycle and we have a phenomenal ten years of boom now were in a bus. And so I would just like tell founders, you know, look, it's good if we have a soft landing in the economy. I wouldn't assume that, that's going to happen.

I don't think is a really good chance a recession later this year, but IT almost doesn't matter for you. What matters is your business and the capital availability for startups, which is fundamental different and will remain different. Then IT wasn't twenty twenty one bird.

You're talking in the chat about a donny enterprises and a hindered burg doing the short research and publishing IT stock is just absolutely got a clubber. They were trading at gossip. Forty one hundred was the. Fifty two week high and this thing has just created in the last five days. I mean, I think the plain what's going on here.

well, I mean, the story that the conversation I thought I would be interesting for us to have is the role that these short seller research analysts play in driving efficient markets by identifying perhaps things that the market broadly is missing, particularly given that a few weeks ago, we were all kind of talking about the F, T, X.

Buckle and how no one was doing their diligence and no one was digging in and no one was kind of revealing publicly what was going on inside in that business that ultimately caused significant losses. You know, the claims made by hindon berg is that this company, a doni, which is founded and run by ganim gutton a di, he started the company like, I think, thirty, thirty five years ago, and he's built the thing into this, you know, the sprawling empire people would say, with own ports. He owns mining companies, he owns energy transmission businesses, he got a whole Green energy business, and he's taking a bunch of these companies and he's floated them publicly.

So they are all kind of publicly traded. They're some degree of interrelated ess between all these businesses. IT reminds me a lot of I don't know uh, if any of you guys remember I keep this to at of brazil.

You guys remember this guy where, you know, he kind of built the sprawling empire, very kind of broadly diversified industrial conglomerate with, you know, lots of different kind of segments and use a lot of leverage, a lot of debt to grow the business and a lot of interrelated and party transactions. And ultimately, the whole thing kind of came crashing down. And that is a doni business.

It's super technical and super complicated. All the kind of accounting sancian that hindon burg is claiming has been going on and capital market china against that, their claiming have been going on with this business. But there are kind of report, which I think is like four pages as long has caused the responses for pages.

There's Prices long too yeah then the markets shocked off the response to put out, didn't really care and they keep kept selling the stocks office like eight publicly traded companies, all of which which is getting destin ted. Look, I don't have any strong opinion on this business. You know I kind of skim m through the thing, but you know I really made me question like how such a big call IT accounting or capital markets fraught, if IT really is that can go on.

and how much of a role .

these sorts of players play in the market, whether you guys think that this is a good thing in the market to have these short seller reporters out there, you know, doing this analysis, publishing IT Jason, by the way, you called out a nicola, the electric car company, as you know, hidden, put out that nica report stock tank, right? They claimed there was all fraud. It's and the .

thing about to s to conver, right?

And so I mean, I guess you guys think that these guys have have a positive role net net in the market in kind of identifying and calling up this stuff because we all have friends are on the wrong side of short sellers and they complain about IT and IT can be really difficult to grow and build a business .

when people elan had these guys literally claiming he was running abroad for years and and IT was an intense amount of scrutton because when the truck when the stock was less perfecting, when we were in IT in two thousand fifteen and and seventeen, that was the constant of reframe and iron was constantly batting back folks like who would make claims and the way that these guys are allowed to Operators because they use the first moment and say, we have the right to say this stuff.

I think that shorting falls into two buckets. One is you use IT as a hedging instrument. So when we talk about spread trades like long google short facebook or long facebook short google, you should be allowed to short. I think that that's a very reasonable thing to do.

I think the the question is, if you were on the inside of a company and you say X, Y, Z is happening, for example, travel millton and IT causes the stock to go up and IT turns out to be fraudulent, he's held accountable. The question is, should there be the same responsibility for people on the outside who, if they have enough distribution, can see the exact opposite of X, Y, Z is happening? In this case, X, Y, Z is not happening, which then caused the talk to go down.

Because what the business model of these short sellers is, write a document IT looks very polished and very credible, put on some positions, then put the document out. If the stock goes down, you close IT out. In my opinion, I think that short sellers are really important part of a well functioning market with the ability to short.

But what I would like to do is take an extra step, which is you should hold these folks accountable the same way you would hold an insider accountable, which is almost the effective. Like when you put out this read, if you make money from IT, IT should sit in as grow, and the sec should actually judicael ether is true or nuts. So in the case of hindus, burger nica, they shorted the stock.

They put out a report. IT turned out they were right. All that money is completely while learned.

Now, what if this a donny thing, turns out to be not true or true? Nobody knows right now except fifty percent of the market cap has already been wiped out. So that's where things I think are are in a bit of agree area. The lasting say is that if you look at on the developing world, there's a very great line between some of the leading entrepreneurs and these governments, because these entrepreneurs are doing the work of some of these governments rather.

Is psychiatrist an brazil in one moment later on, natural resources or adani in ambonavoula a or a lot of the people that that made a lot of money in china or the people that are making money in in developing markets, turkey, russia, ett tra, the government uses very talented entrepreneurs to go in concentrate capital, to develop infrastructure progress. We did that in amErica in the eighteen hundreds as well. So that's where I think you know you have to also baLance IT because his response was basically like, this is an attack on india and in a way you can see where he's coming from, right? Because he's building ports and roads and bridges and he's like without the stuff, how is india supposed to even exist in the twenty first century? That's a reasonable claim. So I agree with you freeing. I don't know whether the report is right or not, but this extra step of actually having the S, C, C, actually tell us what the answer is, I think that would be a very important improvement to how this kind of stuff works.

The other improvement that the S. C, C has been proposing in role thirteen, affleck two, is that people would need to disclose their short positions. This proposed rule would require institutional investment managers and reading from the C C website managers exercising investment direction repositions meeting specific specifiy thread holes to report on the proposed form S H O information related to end of monitor positions.

In a certain things that absolutely pass, the commission .

would aggregate the result of data by security, therefore making, thereby maintaining confidential of the reporting managers and probably decide them in the data to all investors. This new data would supplement the short cell data.

I think this really overlanding of shock, right? I mean, this is less about like who's doing what and it's much more about are we kind of creating critical point in the system by seeing over leverage and over lending uncertain.

But they should also be certain things about the spreading of fear, uncertainty and doubt. That fun that happened with test of Q I mean, paradoxically, you know thousands .

of no but .

people that but an account.

an example of people especially lying in public, try to get the stock to move. That's a real company.

but there is a real of year while was .

on but there a al company to that company to employees that got spoke to partners that may have got to the pressure. Now we saw this, the pressure on elon in those periods of time. And he was he was like on the knife edge where there was the potential where the company may not be able to finance it's cash flow needs because of those tesler guys.

And so it's not to say that the tesla, you guys can't say IT, but they should be forced at some level to prove IT if you can create crazy stuff. I posted a link, by the way, for anybody that's interested reading this, there's a person, uh, called cars and block is being investigated. Yes, because he may have push the boundaries of how short sellers do.

This is a really fascinating read in the atlantic for anybody who wants read IT. But this is sort of where the short selling thing can a little bit go arrive and is the title of this is the man who moves markets. And it's it's quite a quite a really interesting read if you're interested in and how lot of this stuff works.

All right, everybody, that's the all in podcast for february third and for sex free bargain to moth. I'm jack. Oh, the world's great.

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World, man.

We open sources to the fans .

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Should all get a room room like sexual attention, just .

need to read some .

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