E55: Valuing crypto projects, Rivian worth $100B+, inflation: causes and corrections and more
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Hey everybody, welcome to episode fifty five of the all in podcast with us again this week the dictator himself to map poly hopeth a the queen of kenya, David friedberg and coming back from portugo and the salona conference writing his where heroin .

and prostitution or legal to double click .

on that but you have jumped the gun here on the docket. So David, how was the heroine in portrait?

Great, great.

Okay, you folks. I I was fully .

drinking the cool aid at this law conference. IT wasn't haroon.

That was cool, literally cool.

IT, how many .

people were at the sonic conference in portugal? Why is IT in portugal? What happens at a salona crypto conference? I think there are .

thousands of people there. And IT was, I mean, easily. And I mean, he was kind of a madhouse. And people are trying to get in last minute, nobody could get in because the conference was like told sold out. I was a lot of egypto developers, a lot of people projects. And why portugal, I think because um there's a lot of conference having in portugo right now because they are easier on the covered restrictions and a lot of other country so you can actually get in there and hosted conference.

What was the indoors with no masks?

S, I can't remember if, like, mass were required. Now I did see people .

wear mass indoors. So did .

what you require to be vaccine. I I .

decided my booster going .

to my booster .

kind of IT was a little, I would say, the same kind of I should feeling as the second one. Where was I just got five? I mean, I the first two reviser, so I took visor SHE was the nurse actually gave me a choice.

He said, you can do whatever you want, fires on a turn or J N J. I just I didn't know any Better. I texted my doctor, so I just took um fighter. Although the interesting thing is modern is the only one that those regulated for the third dose. So there's um they actually give you less specific the advisers the same for all that we .

talked about on the pod. There's one theory which they told you get whatever one you can get was the instructions because it's more important to just get one than which one you get. But they said there is a swiss cheese theory, which is if he took two sizes of swishes SE from two different bricks of IT, the holes would not be the same.

And that for you overlap. So whichever deficiencies each one had, maybe the other one doesn't. I have a is that would be I, if you believe in the swish .

shes there, I don't know. Free your science roers.

I mean, he just straight up blood about .

being vaccinated. Uh, I think so. And I think about not doing anything about IT.

That's not cool. I why would you lie about IT? I mean, but he's not.

He would still been allowed to play. So there was no reason to lie about IT. I am really up on that story. The rumor is that carey is going to be playing basketball soon.

Because atoms is gona lift the relaxing restrictions.

um you will not need to be show of vaccine card or or a mask.

I don't just get .

a pcr test every day. I don't think it's gonna .

ter because the warriors are shooting the lights up and clay haven't been come back at and .

so back again. Uh.

the sack, can you see you see gary pain, uh, junior, ah.

these clips wagons is playing great baseball. I mean, the words are going to win this year.

I don't know. Stuff is other worldly right now.

Yeah, I think stuff got some to prove um even though he doesn't but he's planning like has got some to prove. okay. So um do we want to just cover um the elephant in the room there the last episode? I think we should just get out of way because he relates to sona.

There was we took something out of the last podcast so people understand we have an agreement between the four of us. If there's something that somebody that does not want the after a record IT will take IT out because we don't want anybody. I mean, I think the philosophe haven't said this out loud is we don't want anybody to say something they regret that could cause damage to other people or themselves.

So if they wanted take something out that they said that's fine with all of us and um basic each of us has vital right on something. So last week, two people took their video right on something in. We took something out. You want to explain or thinking on that tax and why we're reversions?

Yeah okay. So a few weeks weeks ago on the pot is no bleak reference between me and chemosh regarding sana and so and so some internet theorists claim that we are trying to engineer a dumper dump sana, which if you actually listen to what we said, um it's certainly is not a pump. P we explain what I was.

So craft is the beneficiary because we invest where the first investors and multi coin we are kind of like they are seen investor investor put in something like forty percent of the money for the special opportunity fund. They were one of the first investors in silanus. So we are the beneficiary of about a billion dollars of sona.

So thank you. Multicolored at some point. Well, so so they have started doing distributions, but at the time I texted to mah, they hadn't really start doing distributions.

I didn't know how deep and liquid the market for sana was. I just asked him ouh like i'd heard that i've said something that he was long song, I went to accumulate. So I sent him a test, saying, air you instead, you know, I thought maybe could do A N T C transaction.

Some point we get our saana. He basically, you know, we had a brief exchange about that, and then he mentioned on the pot that was the extent of IT. What I didn't know at the time, but work subsequently is that the market for island is very deep.

About three and a half billion notional is traded every day. So there's no need even if we wanted to fully get out of our sona position, which by the way, we don't even have you multi coin still has most of bit. We is not unnecessary to do in OTC transaction. We could just sell IT.

explain what OTC transaction .

this means over the counter. This means that is still going to like, uh, an exchange you would deal with like a trading desk or IT could just be direct, like for me to charm. So that was basically the exchange IT to mother.

I talked about IT for maybe two minutes, and then I came up on the pod for twenty seconds as some interact theorists basically clipped IT and try to accuses organizing. A pump dump will obviously we are turning about selling something is on a pump. It's also how to dump p either or so anyway, the reason why we said cut out last week is because we didn't want to give oxygen to the stupid like conspiracy theory that somebody had invented on the internet.

Was like no basis whatsoever um because you could spend all day trying to like shoot the stuff down. But then that the sona conference, enough told me, enough people told me that this was becoming a mean that I thought was worth addressing. And what? And they look your way. Every thing with crypto is that for every crypto currency .

like sona, there are haters because they are invested and there are arms of anonymous twitter accounts that will coordinate attacks and our means.

X, right? So they're trying to spread the rumor that like VC are big holders and slain are going na dump IT. The reality is that multiple in has a large position, but they have L P S. They are slowly distributing their positions to L.

P S with the forms of the tokens. They are not just giving you for giving you the tokens. You, you yes. And by the way.

that's what we'd like to do as well. We're currently working through those mechanics because is actually complicated for A P, C firm to direct, you know, in kind through tokens.

But if you had to give them to your L, P.

exactly .

are.

So we have to work through with our peace. But us, we're going to try to do is distributed in kind.

So I one can make their own decision. I I have a couple things to say. So i've only been a buyer.

I've never um haven't sold a single salona token. And so weird, you know net buyers and we're buying a bunch of stuff. But I hate acknowledging that.

And this is why, you know, my tone was more noncommittal when we did the pod, is that I really don't like this culture that emerged via twitter, mostly, where you all of a sudden have to be this maximum st. That basically falls on their sound and never cells in order to be legitimate. And I think that that's a really dangerous place to be.

So, you know, look, if I take a watch, and well, if I take a much, much bigger step back, let me put salona in the context of cypher, and let me put cyp to in the context of the markets and where we are today. At the end of the week after you know, uh Q T earnings, uh in november of of twenty twenty one, we have the stock market is absolute all time high ripping. We have crypto at absolute all time highs ripping.

We have the art markets. I don't know if you guys saw phillips and Christians and other bases past week at absolute all time hires. So another people for twenty five million. We have inflation at a thirty year high. We have ten year break events at a twenty five year high. We have you know one point, some are trillion dollars that we just approve last weekend were still hor strating on another three in a one point eight trillion dollars of stimulus that we're going to put in.

And so when you and then you have and I think the the most important thing, which is the two most important founders of our generation, the two smart st people who have really consistently won elon musk, jack basel's, have collectively sold more than eleven lion dollars of their holdings this year alone. And if you can't take all of that and decide for yourself what right for you and your family you're doing yourself at this service. I think it's important for me to never sort of like you know be forced to tell folks whether i'm buying or selling, although i'm willing to do IT in moments where I think it's important, but I think it's really important to understand the context. And so I think like these folks that I think decisively about individuals who are managing risk, I think it's really naive and I think it's um IT creates a lot of missed opportunity for them as well. If the smartest people in the world are now selling their core holdings that they told you they would never sell and you are not reconsidering your position on things, you're either much smarter than them or you're being really, really reckless.

Alright, there you have IT. Yeah, right. We just should be also known inside baseball, we have a docket of stories that we talk about on our group chat that make up the docket for the show.

I bring stuff up and I didn't bring that up in some way to cause trouble or anything. I thought you guys would want to clear the error about IT. And I understand central position of, hey, you don't want to give this exocet gen whatever, but an exciting .

know that we needed to clear the air until went to the conference. Enough people mention IT.

but what's so funny have the people on twitter spend other time encrypt and saying things like make IT have on staying poor? They are extremely Jason, as you said, tribal are not sure that they're doing first principles analysis of these things. They have they've gotten exceptionally lucky. Yeah, some of them are exceptionally good. But many people, broadly speaking, i've gotten exceptional lucky. And I think a little bit of IT is getting to their head where they become you know very violent against people that they think you know whose perspectives may actually be negative, effecting the position without actually understanding what David said, which is these are incredibly deep liquid markets. And one person's opinion is can do much of anything.

right? I mean, it's a really good point. I mean, i'd like to give my opinion on a lot a bit the thing or descript to in general, the thing that's like hard about IT is that it's hard to talk about the benefits of the song of blocking ing without being seen as a pumper of soul or a dumper of eat or whatever, because all these things are so intrinsically connected.

I mean, I learned a lot of really bullish things about sana, you know, at this conference. I mean, the biggest thing is, I mean, there's basically a battle for the hearts and minds to developers going on right now between sla and a theoria. That's why sona has raised up to you know over two hundred but I don't know what like seven thousand percent increases, something incredible like that.

The reason is because sona as a blockchain gives confirmation back and being like four ign million seconds where as a theory um takes me minutes and you know transaction that might cost tens of dollars, ten, twenty, thirty, fifty dollars of gas on a theoria cos pennies on salona. And so that yeah yeah exactly. It's also you know a lot developers feel like the tools the developer tools a day if created or easier than building on salary.

The thing that sona gives up the trade off that IT makes is decentish zone is basically the transactions are processed by twenty validators and there a top twenty based on holdings of souls, which kind like this proof stake model. So anyway, there's some tradeoffs there. I can tell you that you know it's a view of you know our friends at multiple in and you know I heard a lot of this views at the conference, although obviously you have taken with a great assault because these are the biggest believer s but their view is that sa over the next year will flip a theory um based on developer activity that there is real point.

We spend a lot of time actually before we do anything is that the only thing we've been looking at you know and cinda a fractal, a lot of the stuff that we've done d so is purely driven by developer interest. When we see developers in the opensource c system building things on top of stuff, making stuff that's composer unusable by other people in building infrastructure.

You know, we don't really second guest that because they are spending their the most important currency, which is not monetary capital but human capital ah and so when enough developers, so I I i've always thought you just follow the developers and as more more projects get started, you should have to unemotionally support that. I think the writing is on the wall, which is bitcoin is gold a theory looks like it's trending to be silver and salona could be the first, but there will be others that come after IT of real developer ecosystems that can be built on top of that. The other the other thing that I would offer up to people for them to think about this before you blindly go in russia to crypto.

One way in which I try to think about these things is in the following way, you see these projects get started all the time, and I would view each of these projects as a mini economy and really try to think, what is the economic value of what's happening under the hood. So simple example, you know, helium is an interesting project, has tried to build a completely decentralized, you know, five g infrastructure, right? Render is a really interesting, uh project, is try to build a completely decentralized, you know, graphical processing infrastructure, right?

G P U, essentially in both of those things, you can quantifiably economically measure what the value is that people get, right. In the case of render, you're basically displacing an an A W S instance. And so um that has a Price in a value. And so you know for a render to be valuable, there's an economic value that IT replaces if you're joining a hot spot that as an economic value where you had necessarily have to pay you know to get internet connectivity if you all of a sudden or on the heating him network that displaces a measurable economic quantum understanding that is probably and taking the absolute value of that is the best way of really understanding which projects have potential. So if you take those ideas and marry them together, where's their developer interest and where's their measurable economic ic activity at the intersection of those, I think, are really compelling project.

Second thing that complicated all of this is that the developers are not just picking based on which language or technology or stack they think has the most potential. They also have acquired economic stakes in IT. So a developer who might be objective inside, hey, this new platform is Better than a theoria might be sitting on millions of dollars in a theory um and they're like, I want to keep my bet going here and i'm going to keep talking my book.

Possibly I but I do think that developers in general will choose the plus form, easy and cheapest and fastest for them to develop on.

which would mean the list on coin market cap of market cap ones that has been static for a decade of cypher almost, you know, or largely the top ten doesn't change that much as X R P ler thean bitcoin tether. That could be up for grabs. That whole thing could change now that people are actually building projects and the the projects are getting competitive with the each other. And that's that flippin we're talking about correct sex.

yeah. I think that what's tRicky here again is I never want to give anyone investment advice. I mean, that's just not my job. And if there's anyone out there are listening to the show because they're trying to get like tips or tricks or for investment, like i'm not really comfortable telling people what to do.

So you know, everyone just has to understand that I I do feel like what I saw at this conference over the past week and turns, the upper enthusiasm activity was very bullish. Actually A A lot like I went to the um theory um conference thing was back in two thousand seventeen, several years ago. And I felt a little bit like that. Although I would say that this time IT felt less academic like several years ago, I felt more like White papers .

now actually feels like real projects .

and businesses. And the so there's healing in which is creating a decent size network for wifi. There's a render, which is creating a decentralized network for GPU.

There's one called high map I M at the founder, the decent rise network for people to map the world. You can think of, you know, the consequence of a minor that bitcoin invented. Think of them and more as like our resource provider to a network.

So with bitcoin, you know, we call the miners, but there are the validation of transactions and we're trying to incentivize them through block rewards based through small bits of uh bitcoin that get released to um to provide these viable computing resources to the network. And so people are figuring out now how to create master decent sized networks where you have you know, thousands or millions of resource providers provide a little bit of something to the network of ones benefit and exchange. I get some coin that's like a really interesting model that couldn't exist before crypt u.

And so yeah, I mean, I think it's it's very interesting, but no, in order for that to work, you have to have like very unique, fast, efficient, scalable block chains. And the feeling as I mean I credit here to to tushar um who is one of the GPS a multi coin. His view is that this was the iphone moment for blockchain that whatsa an has built, because mostly scalable and also very cheap.

I mean, again, you can run a lot of transactions for pennies. Now all that is obviously very bullish. Ed, for lot of the thing I rustle with is in to moth kind of luu to this is I think everything is come in a bubble right now because of montaria fiscal policy.

And so, you know, I guess I you could say that i'm long song niversity eat, but I do kind of worry that the whole world right now is very bubble. And so as A G P, like what do you do about that? I can tell you right now, like this second, we are sitting on salona that we have not sold. So you know, I am long in that sense. However, sometime over the next whatever number of years, we will distribute out our position .

sala to help will make their decision. And might specializing crypto and want keep other ones might not want to hold assets and need that money to fund their in downtown in to give scholarships to students .

or whatever you're L P S .

particularly do well. Yeah in. And so I guess to the issue of, hey, we're not giving investment by here.

We are all capital allocators and start up creator. So we're talking about our day to day lives here. Nobody shouldn't interpret this as investment is fies and especially not in the world.

Now I don't know if you guys so what happened with riva this week? I don't know how we don't talk about a company with essentially no public cells have sold one hundred forty eight cars to their employees is where one hundred and twenty billion dollars any freeport? Did you see this IPO any thought on IT?

Seems like you .

have investment advice for the audience that you'd like to give. Tell me what revision does.

Can you play that video that you found that you shared with everyone?

You have that video. okay. Well, I we do have IT I can you do you see this?

I think, yeah well but so I don't want to be point to death fire to seeing is so important fully audience, that what they should be going out of .

the show .

if their fans is maybe like advice on how to think what.

If you want to invest in crypto first, all like to understand like what all these different projects are block chains do and figure out what is the purpose of the token in that system? What are the token economics does ah does that even make sensors are just a scamp? Then if it's if it's suddenly like a blockchain, go research timely projects or have developers on them and how much code is being checked .

in and maybe open a wallet and buy some N F T, and buy some eve and transferred to learn, just had to set up your internet connection, right? This was one thousand ninety five.

right? exactly. Then on top of all that, you to consider microform because I mean, and I think you, my friends are multicultural, fully concede this that you know, I could be the case that if there's a crypto bust over the next year and this thing ecri, ta has gone through boom bus cycles for many.

many years, is a standard.

is a standard. So you could have a situation in which, for example, sona flips eat and yet still goes down in value because there's overall bus cycle. So you know you can have the macroeconomic factors as well. So there's a lot of things to consider here. And then you also have to consider your own wrist tolerance and you know what is appropriate for your portfolio.

And I mean, when need your money? Are you at twenty five years old.

everything is at all time high? And the two smart tesman en in the world they're .

selling not just, not just then, by the way, there are other guys that are heavily on the other side waiting for this whole thing to go like drug. Miller has been very vocal about this. Um and he's um he's been the best macro trade in the last thirty years. So way with his position .

is what exactly that .

we're printing too much money and were in a lot of trouble. So you know look, I mean generally there is um I think a good point of view being shared here uh which is you know understanding how to think about what you're investing in and what your are your expectations are verses relying on someone's advice or opinion what to do if you have to rely on someone else's advice or opinion what to do, you're gonna eventually lose money.

You should not if you should not .

be in the market because guess what, anyone that giving me advice or opinions, it's gna make money if you do what they tell you, you what tell you do, end of story. So at some point you're going to make money and you're going end up losing money. And it's you know, it's it's it's a Better game to play to learn how to kind of be thoughtful about where's your money going, what are you investing in.

And IT takes a lot of time and a lot of money. I've been sitting here silent as you guys have been talking deeply about salona and material and bitcoin and and the crypto markets because I realize so much of um you know what's needed to be successful in entering this market is a depth of understanding, a depth of knowledge. My time is highly limited.

I have spent no time understanding crypto markets because it's so deep and it's so flue ID. It's changing every day. It's changing every week. So if I can't get smart enough to feel confident about the opinions and decisions that I would be making as an investor, I decide not to invest and I stay out. And so i'm not an .

active and you're a specialist and you're on the races edge on synthetic biology and and so many others.

whatever the areas was Better to energy to do that was being drawn into what what feels like a very exciting kind of turbulent time. Um there are other areas that I kind of spend my time on. I just kind of tried to recognize that maybe I don't know what i'm doing if I were to trying get involved here.

And so i'd rather stay out. I think that's council for for anyone know if you're going to make an investment. It's important to feel confident about the knowledge and the death needed to kind of be yeah.

i'll build on your point. Like when I when I started doing my spaces, I um started to write these one pages and those one pages were artifacts for me to hold myself accountable for how I saw something in a moment in time and then to be able to see whether IT was. Tracking to that.

And then also to share to other people a starting point, as David said, a journey where they should, then, if their curious, go do their own work. IT turned out none enough people are doing the work. So then I had to start adding disclaimers to these things saying, hey guys, um i'm not telling you to buy this.

Please be abundantly clear these next backs that I I will eventually launch you're gona see an entire like in bad block letters like please don't buy this right because to your point, IT doesn't matter what you say. People want a lazy, easy way out. And so I just want to reiterate what olive guys said.

None of us, or dispensing advice, we are not telling you to do anything. Please do your own work and please come your conclusion. IT is your responsibility, and if you're not sure, go and look at your children in the face or your significant other in the face. You are responsible to them and so do your own work.

One more point on where I said as an investor, um I choose a to only participate in investing in what I call productive assets, that is you put some money into something and whatever that thing is is generating money in some way or or is kind of generate value through a set of activities uh like a business um or owning an apartment building where you're making rent.

You know anything that or you know A A group of people that are going to have some breakthrough or some discovery. Those are productive assets. There's a lot of what's going on now that is what I would call speculative assets, which is the only way you make money is if someone else pays more in the future versus what you're paying and there isn't an in productive asset to what you're putting money into.

Are you describing every ico or every every N. F. T. And the art market, right? These are these are examples of unproductive assets. There are speculative assets in the sense that you're speculating that at some point.

the Price of them, we're going to go up and someone.

somebody wants that N F T more. Someone down the road pay more for that asset than what you paid. But that underlying at that capital that you just put in didn't go in to build something.

I want a new generation. The IP went to someone else .

s pocket that sold that asset to you and you're eventually gna try and sell IT to someone else. And so you know there's there's a real attraction here because what we just talked about is really hard to do having fundamental analysis, understanding of businesses and a fundamental understanding of what's working and what's not and went to shift. And oh my gosh, you know, are things different or are they not to do that is really hard.

So people end up for relying on opinions of others or they end up running into speculative markets. And the speculative markets are easy to understand. Someone just paid more for x than the other person did. Therefore, there's a trend going up. It's like playing rutt and you know black keepers coming up and you're like OK.

it's gonna be black.

IT has to be black. There were seven, twenty four, seven black. And so I think that that's a really important kind of take away .

for folks that might be as investors. This like I was just looking you know at at my own performance coming into the end of this year.

And you know um I did a lot of packs this year, but I also did these pipes, which are these third party deals, vate public entities, exactly other people's deals that they were bringing to the market where they said that do you want to be part of IT and you know and I did and part of IT was I was looking at these things and you know feeder doing my work but in the end, they turned out and into nearly as much as I probably should have, because I ended up sitting on top of other people's work versus the original, are underwriting that I would do. That was my own deal itself, right? Anyways, the next net of IT all is I, you know, that was very inefficient capital deployment. And as I look at IT now, it's like, you know, i'm down well, i'm tactically up nineteen percent, but that's really because of one deal. If I take that one deal out, which is a total loud lie, i'm down seventeen percent on about two hundred million dollars fast.

Follow or not. The originator IT wasn't your idea. This is critically important. There are many different ways to make money, but you have to specialize and you have and your knowledge.

I trusted other people. I did the same thing that I, that i'm saying to other people about to do, do not just copy other people. You have to do your own principal work, and even when you do your own principal work and may not be enough, and you have to be willing to basically see the force from the trees and walkway. And so all these pipes, some in the midst of start of cleaning up and selling down, and they've been a just a kind of a disaster for me.

You know that this for second, because I think is critically important, what you said as well, free bird, you have to be comfortable with the investment you're making. I look at these companies and I look at the underlying customer, the product, what kind of revenue is going to generate. And people thought I was dunning on riva yesterday and I said, listen, you know, in tesla in public, people forget the valuation was one point five billion OK. So one point seven billion when they went public. Now they already had thousands of roses, and they had already had the.

they had ninety, ninety three million of revenue in year one.

So this was dramatically different than what riviere had rivi is being valued at. You know, whatever that is, one hundred and twenty billion. I think yesterday riving has seventeen billion catch. Somebody asked me the poker game last night what I value riving that I said, seventeen plus three, seventy million a cash plus three billion, double roughly what texas was, the markets hot right now, whatever. But I put them at twenty billion, and people giving a hard time that I said, I think that's actually the realistic evaluation for this company.

And we have are in a very dangerous moment in time right now where I think people are, whether its mean stocks or cyp do or nfs suspending disbelief in some cases backs, they are not all created equal. And certainly in private companies, we're seeing this where people are giving people a an amount of credit, which makes no logical sense and is getting further and further disconnected in from reality. So as an investor, you have a choice either.

You you have your fundamentals, which I am not going to change my fundamentals. I'm going to focus on the fundamentals. I got me where I am and i'm not gonna be involved in a hundred billion dollar market cap company that hasn't launch the product yet, let alone one hundred twenty billion dollars all stay .

focused on started. But what you're saying is also important because your highlighting how you value that company, you individually said, I think that companies worth some multiple of how many cars have been sold in the past. On sold thousands of cars, he was worth one point seven billion. These guys have sold and other people are coming in and looking at this company and saying they have built facilities theyve built assembly lines and they've got pre orders and bookings for lots and lots of cars down in the future and gone in know some people gone in and see these plants and seeing these cars actually working. So you know, it's really important to take note that your point of view is one point of view in a very diverse market with many pots of view and everyone's going to come into this market.

And that's why unless you, individually as an investor, have a strong point of view and can show that you can apply your unique insights to consistently beat the market, making decisions and investment decisions like that, you are eventually gna lose because the other points of view will be a bigger, uh, view of the truth and you'll lose money. And that's why and that's, by the way, that's why picking stocks is ultimately a losers game unless you have some unique ability. And inside for most people .

historically in the up market market and the public Marks are hard to the unique percy, there's hey, that here. I mean, if we double click on what user said as the things that would be reasons to in bed on revision number one, they have forty eight thousand orders of pickup trucks against the f one fifty, which is now .

electric from forward. And I don't someone else come in and and I I would just .

say this is a part of the conversation, to be honest, ration to give you feedback I don't like because riving not just defensive driving for second. What I have heard is that it's a it's a well engineer car uh truck rather um theyve done a very smart path to market, which is essentially to you build these delivery trucks, amazon, that allowed them to even Frankly, you know B D fault alive is you to use the poggin term instead of default dead. I think the point that's more important here is that IT doesn't affect you. So let riva do well, you know and this is part of the and have an opinion.

And no no, no, i'm just .

saying this is the part of the cycle that I don't understand where people legitimately have these zero some points of view about companies um and this is where I think, uh, facebook is more right than anybody else, which is there the market is the sum of all these collective points of view. And I think it's I think it's fine to have one.

I think it's a little superficial your point of view because it's not really you know sitting on top of a model or anything else. And I think it's the same kind of superficiality that the tesla you guys had about tesler for many years as well. IT takes a long time, has somebody that does this every day. And I just want to point this out, IT takes an enormous amount of time, an enormous amount of work, to be seventy five percent.

three hundred fifty couples I meet with in the public markets. J, in is the people are going public. Now I take exception to what you're saying.

I know a fraud. I see, i've seen them before. D, no, but the distance between the valuation and .

reality is in the fifty hundred, okay, that's in a bunch of external market participants control.

So you can't pin that on them. My point is pending on is at the market right now seems .

fun and that then you should throw shade at tero fidelity, all these people that are building up your companies, by the way, because they are the ones that are taking review. Two hundred. It's not revise fault.

And Jason, what's really going on in the market latter? No, what's really going on, it's not you can sell sixteen billion dollars in an IPO to speculators. These have a much lower Price, but are in these are institutionally placed trade orders.

But regardless, the market is clearly right now in in productive assets businesses. The market is looking at a time horizon that he has never looked at before, which is making bets that are ten, fifteen, twenty years in the future. And that's because of the condition that we're in right now.

From a monetary policy point of view, interest rates are so low, there's nowhere to get yield in other asset. So you have to look further and further up to find value. So the market.

and I point because you before you know to me, my issue, Jason, is I think you aren't exceptional Angel l investor, but just the same way you derided a bunch of late stage guys. Remember last night a poker when we are talking about last stage folks entering into the Angel market and the area series a, you are extremely dismissive because you know what the job is to be done, to do that job well, and they have a different skills set. Similarly, what I would just offer for you to think about is the people that really underwrite public market stocks well do things and have the skills that that is extremely specific and IT is well trained as well. And I think that.

okay.

accept, if you want to .

defend me, that the people are in shock right now. Get yourself .

back in the game. The sky is possible, the sky uro the room, the mood said.

how is freezing right now?

Everything OK.

So here's what I think jacot. I don't know anything about the driving in company, but where I think jack OS right is we've seen over and over again that when a company gets when a start up gets a billion dollar valuation without a product, invariably it's ena storby between a disappointment and now right from whether you know IT was uh theron's s or magic leap or quip or whatever, i'm not saying they're all frauds.

I mean, I think just there are no one, but no is whatever. So I think is reasonable for any less I seed or early venture investor to develop the heroic. Then i'm not going to invest in anything with a billion dollar with basic unicorn valuation without seeing the product first because we've learned we've got our hands burnt so many times from these overhype companies.

And we hear I agree, if I can't see and use the product, i'm not investing. I will invest A C stage, but I will not invest a unique stage. No way I I .

agree with that. But what i'm saying is when the company is going public like that, there is demonstrative proof concept there. okay. The only market in which that's not truth in biotechnology.

well, I would say for fiscal and nicola, two related companies, those one seem very, very shaky.

You can debate about the scalability of these things and you can debate that people didn't do the diligence, but they had to please put a proof of concept out there for you to judge if people don't do the work. I agree with you, like if you're rolling in the problem down the hill, sure. Out right? fund? no.

But my point is, if you were there and you did your work, you we've seen what you needed to see. What I have heard from people who are investors in both Lucy and revision is that they have SAT in the cars. They've driven the cars, they've spent time with them, they've seen the factories, and it's very much real.

Now what they're debating is ramp in philology scale. I don't know. I don't have a position and either I have the bigger macropha you, which is important to me, which is it's it's just because these things are in the public markets. I think people think it's easy to judge, and I think actually modeling them and making good decisions is just as hard as .

IT is for private. And this is because there is somebody who is factional advice on C N. B. C. Let's roll the .

clip so that up about twenty five percent just in four days since since we go out. We brought about four days ago, uh, so that I actually made A A nice for a move in the short term probe, a little extended right now. But longer term, uh, that's A A good looking, a name, very powerful, very strong earnings.

These stocks are do they do do you know what do they do? Um actually, what does that start? Do well.

Sorry, what kind of company is IT?

Yeah, and you're you're breaking up. Oh, got an sorry parking .

brutal.

Who is this guy? Who is he? I have no idea what .

is like you. I just.

well, you know, the guys been on many times, but doesn't improve what we were saying, which is that you got ta do your own principle work here. That is why we wanted to put here is a talking head.

He's probably getting paid for selling some books and giving advice. Who knows nothing about what he's telling you.

You can join his membership club for one thousand a month. He shing.

lots of papers that show that these are highly successful, profitable investor. And look, as martis, you hadn't even know the company you just promoted. And C, N, B, C is incredible .

on A A mechanical basis here triathlete. B C N B C many times in that moment.

Ah what what .

is going on? What do you think is going on in the host mind? And the the producer has to dump this call. They are watching this. I just the breakdown when he says, i'm sorry.

what their .

own work yeah do your .

work so actually look like you say something I mean.

I just shows the agenda yeah I look, I mean, there is a massive agenda in corporate journalism. There's an agenda by the people on these shows positions an agenda by the reporters themselves and on on ago such a month point if you just take are you you and you don't do your own work, then you're buying to this agenda.

Trust yourself. Okay uh one thing that we are trying to all understand uh, is inflation. The C P. I, uh, has gone up six point two percent in october, highest jump in thirty one years since one thousand nine hundred and ninety, according to the water street journal of fifth largest straight months, five straight months of inflation. Shen, above five percent. You know, somebody tweet that will pull IT up here, uh denver bitcoin put out a year over your comedy chart um get them up on the screen and then uh I think freeburg you shared in the um chat the average weekly retail Prices around fertilizer. What our thoughts on the nature of inflation and how that affects .

are investment. I think it's persistent and and the reason I think it's persistent is that there's the all of these things are intertwined. And so you know, if you wanted to bear with me for a second, like when when let's go go to the the the entry level economic job, right? So you're a bruited starbuck.

Are you work in mcDonalds and you're making seventeen to twenty dollars an hour? What that does IT IT IT shifts labor. And eventually there are other people that are entering the workforce, or, you know, may shift jobs and essentially just causes this lecky bucket effect where everybody else has to then accommodate itself.

So you know, you have a guy like, uh, you know uh, you have a company like amazon, which is now going to pay twenty five or thirty dollars to keep folks right because of the wise they may say I you know if I make fifteen or sixteen dollars and now right rather work in mcDonald is college. It's not back breaking work. So they start to um increase amount that they pay, they increase their benefits.

And like I saw this thing this week, there's a crazy thing that's happening though, which is its now pulling people from non traditional job classes into those jobs. They are teachers that are leading teaching to go to work at an amaze warehouse. There are firefighters that are quitting being a firefighter to go work at an amazon warehouse because you make the same or more, plus you have all of these other benefits and the job is structurally a lot easier.

And so people are making different optimization. And at that point, I think we talked about this a neck your computer in the group chat in reit as an example. There is more engagement in the sub redit around having a simple worklife.

Then there is now in wall street bets, right? So there's been a structural cultural change where people need to get paid more to do the same amount of work. And then at the same time, you have all of the all of the supply side getting more expensive.

Fertilizer makes corn more expensive. Lumber makes house Prices more expensive. Chip Prices makes the iphone and cars more expensive or completely backlog. You know, yesterday a poker Sunny was showing us he bought a tesla and the delivery period is october of twenty twenty two.

Yeah.

I is in crazy. So I I think that it's up. It's this is the beginning of a persistence.

I think those are all look really valid points. Thing i'm saying now is I think we've moved into a what I have a content phase of inflation, which is people are hearing about inflation. They're seeing IT in some places, my guests when up a little bit, my milk when up a little bit, whatever.

And they're saying, well, I guess if everybody's raising Prices, I need to raise the Prices as well of whatever I provide in the world so I can just keep up with everybody else. And they're not looking at the input is necessary and saying I need to charge more or that's the best business decision. They're everything's going up around me and so they raise Prices. I've literally have to happen three or four times and I went to buy a car and they wanted fifteen care sticker and I didn't buy IT based on principle. But i'm sitting your going like maybe I should just pay the fifteen over stick er where .

you thought sacks on inflation and I can do my thoughts are I told you guys like six months ago about this yeah .

so we just replay what I said on episode thirty researchers .

in the background written down what .

you said on in the sky in the fuck and debate club stanford .

debate b diction take him seriously so was that .

a dig at professor ice context?

I'll give you guys a link to a prediction that was made here.

I mean, I just want to repay the twenty six I got you can make here we go.

The two David is doing again, just like in the group. Check freeburg january first, twenty twenty one. If you don't think inflation is already here.

You missed what happened to the stock market. Companies aren't performing Better. We are just inflation.

Everything financial as at first.

everything also was A D P. I'm begin to wonder if by is going to be a Jimmy Carter here because, Frankly, all he had to do was leave things well enough alone. Covered was winding down.

We had a vaccine. All they had to do was distributed to as many people as possible, encoded, let the recovery take shape. And instead they pushed. This insane ten million dollar agenda is going to backfire massively. Look, if the economy turns, we were set for a post covet boom. And right now, that is all at risk because to months like you're saying, they're keeping the economy closed or parts of IT too long, they then overcompensate for that by printing a tone of money, and then they overcompensate for that by raising times too much.

Just build on that. So that second step of their overcompensating, their inability to open with money, is so true, because then what happens is your labor for stays impair because people make enough money by not working.

IT was true when I said in may, is even more Better.

Now he said he was, there is inflation. okay? So there is inflation.

O K, so now great.

good jobs. So yeah, one a january. That's at the same thing.

I look, you can do three things to, you can do three things to curb inflation. Raise rates, right? When you raise interest rates, you slow spending. Prices come down, inflation slows.

But the issue when you raise rates is obviously, you see things like job loss and economic growth declines and IT can very quickly spiral the other way. This is the the big chAllenge of fed tapering. The other option is we've seen uh, uh, a significant attempt that lately is to raise revenue, right?

So increased tax rates, tax a broader swath of people at a higher rate or brother swap business at a higher rate。 So it's very likely that you know tax revenue could kind of present itself again as a driver of inflation continues to spiral up. And the third, which is the least likely, is cut spending, right? The federal government spending the way that does right now makes a very inefficient way of kind of putting capital into the system and inflating.

We've seen history ally, that anything the federal government spends money on, like health care and education, the cost very quickly, spiral attic control, super inefficient. Why not just give that money to the free market to make decisions on how to spend IT? IT would be more efficient at that, and the market would effectively find baLance where buyers and cellars are equivalent as opposed to having the federal government driving the Price of everything up. The fourth option that people don't talk about, which I think man, are becoming an important option, not kind of a bleak option, but more kind of backdrop, what is to start a war? And you know, when you start a war dog.

when the dog yeah .

when you start a war, you stimulate the economy um without needing to competition capitals. You can increase growth and avoid the risk staffing and you can source resources that otherwise wouldn't be kind of flowing in the trade um or basically in in a land grab tax situation um but IT doesn't necessarily mean the policymakers would say, hey, let's go start a war to decrease .

inflation taione.

But the premise that conflict um can improve the economy is a important background that starts to play into policy decisions that might get made over the next couple of months and quarters. And that's really important. Whether or not the positioning is one of partnership and and reducing the tension with foreign nations or one of increasing attention, it's more likely that we would want to increase detention when were in an inflationary environment.

So quite a conspiracy there is where you think sex.

Okay, let we ve got to go back first principles on the same, where not going to start award to tame inflation. Okay, but let me to explain what inflation is because i'm not sure people like fully understand like how this works. Inflation very simple.

It's too much money chasing too few goods. okay. And we have both sides of the equation going on right now on the supply side.

On the good side, we've got shortages. We've got the ports backed up where we've got paying people not to work. We still have the two trillion of cover relief past earlier this year, which was responding to a problem that was largely winding down.

So we have these labor story of people dropping out the the workforce and record numbers in the number that just came out showed more people quitting their jobs ever before. So we have a short age in terms of the production of goods and services that people want. The same time we have this monitor fiscal expansion coming out of washington.

You've got. And again, they did the one point nine trillion of cover relief. They did one point two trillion of infrastructure by and still talking about another two trillion of social welfare.

You have the fed still printing money with QE. So you've got this massive expansion in the amount of money. So look, too much money chasing too few good creates this problem. And I was very predictable.

And so what I said back in may, this while I was warning about and IT goes back to the drug Miller clip that we that we were talking about all way back in may, he said the same thing that we had a reckless fiscal monitor, expansionary policy coming out of washington, d. At a time we didn't need IT because if you looked at like retail spending back in may, I was back to above trend. So you know other words, like there was no demand problem. The economy was back and they're just been pumping and pumping out of washington.

We made IT. We we are good intent. We wanted to make people not suffer. We wanted to get the economy on tap. We may have just made a bigger .

bet that we needed to. Who ends the eviction?

Mrta um right now .

nobody wants to be the politician says, okay, now you something have to pay your rent, but obviously people have to pay .

their rent and we're taking away your bonus unemployment. People have to go back to work at some point when there's ten million jobs open. Just as a uh, I i've been watching the taiwan situation like a hawk and H I don't know if you saw this this week to go on another change, but the U.

S. Is testing israel's iron go and gum as a defense against chinese curse missiles, obviously for possible deployment in taiwan. Another if you're watching and is catch in the NBA. But he has been going on C, N, N and stuff like that now talking about, uh, china. Pretty amazing really.

I predict, I I predict escalating global conflict. That'll be my prediction to mark the q four.

Well, I think that I think that that's a pretty valid prediction. But I do I just think it's a little bit separate inflation. Like I said.

it's not an explicit decision. But I do think that in the backdrop of an inflationary environment where you have something that can temporary the condition at home, that at the same time, you know might sell politically, but we don't.

but is not solve anything politically. okay. I mean, were two famous.

I got us out of the great depression because I did stimulate demand. But in the situation, and today, we have too much demand. We have retail is trending way above curve.

We have as a supply shortage and devoting resources, taking them away from the productive economy to go to war, but only exacerbated problem, make IT even worse. What we need right now actually is for washington to back off to stop pumping demand with this in another is still talking about the street. So the money turning that we and to um to stop these diesen tires for production and work.

So you have I mean, mention was exactly right about this. Okay, you remember when mentioned when he was resisting this two trillion dollar social welfare bill? I mean, the things he said are ready coming true. I mean, he said this months ago, he said that we should take a strategic pause because he said, this is a quote by all accounts, the threat posed by record inflation to the american people is not transitory and is instead getting worse from the grocery store of the gas pump. Americans know that the inflation taxes real, and dc can no longer ignore the economic pain americans feel every day that he was saying this past summer, several months ago, and they rolled right over him.

The psychology of this could be could be self a filling as well, because what's gonna en is you're going to have everybody raised Prices because is now become an escalation tion. You know, your hair, dress ser you, whatever, you know, services you're using, whatever product you're buying, whatever restaurant you're going to is gonna. Two dollars on every other tires, five books on every one try.

Everything is just going to keep going up. And then what happens is people who in middle class, or you know who are consumers of products in a large way, will say, no, i'm going to put off buying a car, then we're going to be driving all the supply up and then people going to say, no, fuck, i'll just drive this one for two more years that's going to cause stagnation. And this station .

is what we have in the one thousand and seventies. And you're right, it's called inflationary spiral, which is the future expectations of increasing Prices means that people start increasing them now. And that feeds on its yeah and that's what we had in the late one thousand nine hundred and seventies.

And the thing that broke that was paul Walker jacking interest strates IT was very painful because a very severe recession in the early thousand nine hundred and eighty. But then the economy came roaring out of that. By eighty three, I got reconstructed, and eighty four, and you had thirty three years of declining interest rates, and that LED to a stock market boom. So the problem we have now, okay, here's the problem we have is there's going to be no paul Walker, why we can afford to up rates because the federal government's debt is so much bigger than I used.

We are not on a fix rate, are on a variable rate. All of the debt we take the .

average maturity of government debt right now is five years, okay? So that means, that means the whole dead rules over within five years. So if they jack up interest strates, we have almost thirty trillion of U.

S. Federal debt right now. So every one percent that they increase interest rates, that means another three hundred billion a year of of dead service payments.

Exactly, exactly. So it's going to enormous pressure on the fed not to raise rates. You already are hearing by IT radin, the sabor, saying that power may not be a choice for a second term.

By the way, power is very doubt. She's basically saying we can't raise rates right now because of this. So in the bite administration, nobody washing never wants rates to go up, right? They want to keep these low rates forever. This is the problem is, look, at the end of the day, I don't know what the inflation ent pictures is gonna a look like next year. But what turns me is we don't have effective tools to fight IT anymore because we've given up our ability race race because IT would increase the cost of the debt so much.

And I mean, so just one article just to share with you guys is this again, my one of my favorite source of economic information is the the fed blog, which is from the from the safe less that okay, we wrote talking about two tales of federal debt OK and in the articles about here's why there's so much disagreement on whether the federal government dead is too high. The first chart shows debt GDP. This is always the way of looking at government debt was simply looking at the ratio of deh.

GDP is now something like a hundred and twenty five percent in peace time. I don't think we've had a higher peace time ratio that would tell you things rather control. But for the last decade, while this been going on, you had this whole school thought, the M M.

T. Modern monetary theory. All these economists and experts and politicians in the media were eager to buy in because I want to spend the money, okay? And what they said is, no, it's not debt of GDP.

You should look at debt service of GDP is the second shark on that blog. And so debt service to GDP was was staying constant or even going down as the desk GDP was going up. why? Because the streets were so low, the problems were so foolish about this point of view is IT assume that interest rates you're going to last forever.

Well, if that was your point of view, why didn't you do what trump to actually suggest several years again, just having hundred your tables? They should have locked in much, much longer duration maturity on the federal debt. And instead, and yellow rejected this. okay. And so you've got a five year average duration, which means that if interest rates go back up, the debt service causes going to explode.

Yeah, so in one thousand .

nine hundred and eighty we change the goal posts for C. P. I. So even as a measured to know what we look at, and I think jack rosey tweed this out so that you may be able to find this tweet, but you know, we change the measured to our C P. I measures.

And so if you go back to the original measured, uh, IT, looks like inflation in C P. I is a much more pronunciation than we would otherwise think IT. If we just look at the the new C P I that we that we started to look at us of thousand nine hundred eighty.

So um that's another sort of like point. We we did the same thing with I just point what I said. Two smartest people that we both know are net sellers. Well.

they're selling. I've just say the two .

smartest people without I mean.

we don't want to get financial advice here, but should everybody be moving to cash? No, what do you put your money?

Just you this is, I think.

the admission just buy .

productive assets, great businesses that have durability and let him ride for twenty years.

I like your answer. The fact is we're all confounded as to what to do at this moment in time. We're all trying to figure this out and we do this for a living.

But then you're trading the market like everyone else all the time know why trade the market. And you can just buy great businesses on stakes in them and let IT rest.

And I mean my practical issues that I don't have infinite money. And so in order to put my money into productive assets, I have to sell other productive assets.

You've got other productive leave in. why? Well, then it's like that.

I'm basically, you know, doubling down on a world deal that may be old and dated, right? So i'm long a bunch of software companies, and I really want to do something in climate science or biota. What am I supposed to do?

Don't try time the market shift your set.

Why do you? No, i'm not trying to i'm not in trying to time the market. I'm just saying if if my world view shifts to really want to double down on climate science or alternative financial biotech, I have to raise capital to do that, I have to raise capital everything, right? But but for me, i'm not raising IT from other people. I'm raising IT for myself.

So have to something already to me, the best place to be right now is in the company formation space because when you create a company um like friedberg does every three months, there are so much value being created that moment in time and so much further capital getting poor into IT that if you are the originator of the company and and you get some big slicer of the capable for doing that which is completely violent, originated the company, whether it's unique or call in or whatever IT is man, that is a great moment of creation, of wealth creation. And when you are the person putting the money in of the billion of evaluation before the company we ever call in s our clubhouse went from one hundred million to four billion with no revenue. I don't know what's happening in the world, but pretty say you want to go on to um she's ing paying and his me speaking with by on mondays but .

it's done he he he got done for his his viola's zoo with bike ah oh yeah so .

they are doing that .

this now the supreme leading hasn't left china.

The supreme later explain what this means. H math in the story .

um I mean I think the basic the basic takeaway that theyve been working inside the body politics inside of china to basically reflect g on the same level as now and um and effectively what this means is that IT IT allows him. To remain um the leader of china indefinitely. And so um there is no transition of power.

Typically what had happened was these there were these ten year windows and you know you you you go h janzen mine who shintown you know ten year cycles and then they pass the paton but IT now looks like we'll be living with jip until um until you know he he joins the afterworld so uh he's ruler for life of china basically crazy. What an incredible feet of political maneuvering without judging IT just to say how, what a complicated business team, political infrastructure he must have had to navigate. I don't know how he played the three dimensional chess with all these people, the slow, systematic dismantling of the old guard, placing all of his people in, then surely moving towards this this kind of recognition .

from the iring.

Yeah, no. The dictor got his name for a reason somewhere. Donald drop and steam fan.

And like, what did we do wrong? We were so close january six. We almost. If pants, when to just play ball sax, you'd still be in power and your guys dropped the ball and we .

would would have inflationary.

Just think, is leader for life. You know.

Jason, given how accurate my predictions i've been, you should have a little bit more respect for my political positions.

What do you guys think happens now? The g basically is ruler for life. You know I think the chinese term for IT is historic figure, which is that more of saying, you know you you're basically um you .

are made man basically you can't get worked, nobody can touch you, you are good for life the end.

nobody can question you. I mean, can you image mais on you a dunk shopping and how thing incredible like he is at that level?

Well IT means if you start a war and in a serious military conflict that nobody can question you, right? Your the supreme leader. So it's sort of like putin and M B S, like M B S can go kill a journalist and he's got nobody took enter tive means nobody .

to mouse a dg initiative, the revolution. And you know, don shoup was really the architect of free Marks that has made china the the economic powerhouse, said, that is, today, their internal reflection division ping is on the same scale of that. Now I mean, I I can't claim to any .

decision for the future.

And what is the accomplishment that's gonna really put him in that league. And you'd have to say it's the anxious taiwan. I mean, that's the thing, is that he must be looking to do before, you know his .

time to unify china.

that that to put him in the league. And so that that is the trip wire that to freeburg point, that could lead to me know a conflict.

I I think, you know, I hate to say the freeburg it's wrong, but because I I don't think in this case, I can I do think that there is some left tail risk. Four, like a crazy wag the dog moment in taiwan. He would be really scary.

really scary right now if I was looking at the sizes of the naive. As people don't know this, japan actually has a very large defensive navy. Uh, the U. K. And the united states obvious have very large ones.

Chinese is large, but not on a tonnage basis, have a lot of ships, but together, I don't know, we saw the military exercises going on, but new zein, australia, the united states, U. K. And japan, uh, were basically, I think south korea were basically driving their ships around the south china. Say this is gonna be yeah.

I know. I I didn't really interesting interview with um the historian and commentator neil ferguson, yes, who is also a pretty abbot china watch her and I didn't even with him actually on on my APP um .

you don't want me said .

yeah but anyway so hit a really great line which is he said that the tight the issue of taiwan is basically like the issue of cuba and berlin and the person golf all rolled into one. So it's like cuba and the cuban missile crisis because that's right there off the shore of china.

It's like berlin you know, because that was basically the dividing line between freedom and totalitarian ism where the berlin wall got built, and is like the person golf, because the new oil are the semiconductors, the chips that are fabric in taiwan at tmc. And so all the resources that were dependent on for the new economy are all right there. So so .

yeah it's .

I thought a recover.

The thing we have to remember about geis that his father was um was a commander uh formal and was in a vice premier and so you know his history he is the original principle right member you know there this kind text of these chinese printings but he is he is one of these originalist and so his motivation will be IT seems at least to bring china back into that spectrum of power which is really about a consolidated country um and a single nation state and that has to include tawang IT can't IT can't not set to your point of IT it's almost more motivation for him to go off on some crazy adventure and try to reclaim IT that's good .

time for now is is really interesting to look at the ten age of ships in the number of ships. The united states, over six thousand tons of ships, nine hundred and forty nine. According to global security at org. China has two, only two thousand times and thousand ships have a lot of smaller ships 啊。 And then russia, U K, india, japan, france donegan turn germany worship yeah this is their navy warships um and so they're fighting but japan has a very large when I I was not aware of this because I thought they were not doing military build up, but they have it's called the defensive navy which can do offensive stuff so this is um I think this is really problem.

How many these ships are smaller .

than sex is yet that he went to the yeah sexy time age .

would kind .

of put the united six .

over the chap I think the word of xi is going .

to be donating. Defensive was a starter. You.

just to my indefensible.

next one will be Better.

Yeah, so on is gonna sure of that, right? Yeah, you can buy yachts with sooner, right? I think we covered enough. Uh.

g into shia .

can't run to separating .

into yeah we .

day all right.

So on tuesday, g announced they were splitting into three separate companies, aviation, health care and energy. Toshiba reported a similar plan. Johnson and Johnson today.

Johnson and Johnson was today. This is an indirect conflict with the consolidation and the creation collates. And but not I think .

this is an important point. Check out um you know in the eighties and nineties IT was cool to create conciliates meeting. You would kind of stick businesses together that somewhat sperit um because you could financial engineer a way to do IT that would juice shareholder returns, right? You could borrow money, add lots of scale, the cost of debt goes down, you can increase your debt load at setara.

Um and you know the chAllenge is like when you're scaling a business, you either need to grow your revenue organically or you need to acquire. And when you're acquiring, you're rather acquiring horriston tally or you're acquiring vertically meeting, you're kind of integrating your supply chain or you're integrating um or your adding and seller businesses that you can cross sales. You're either reducing your costs or increasing your cross selling ability.

So there's some inherent synergy. And the acquisition the problem with conglomerate is there is very little synergy, meaning like when you acquire a new business like an aviation business, IT doesn't create synergy for your health care business. And um you know there was always a rationalization that these managers of these big conglomerate, which was like, oh, well, we could do this and we could do that at the end of the day with financial engineering where they simply kind of use dead to reduce um uh you know the costa capital and increased the the shareholder returns.

And now everyone's kind of waking up to the fact that you're actually decreasing value because an investor that wants to own an aviation company doesn't also want to own a healthcare company. So the investor is shares and invest the healthcare company aviation and shares. So the way to increase shareholder value is actually split those businesses up. And then the investors that want to own the aviation business will pay more and the investors that want to own the health are business will pay more. And the overall value of those two businesses goes up by having them be separate, and that's what the markets kind of waking up to. And this is kind of a trend that's been going on for years now, you know going back to kind of twenty thirteen, fourteen um where the market started to kind of rationalize some of these silly conglomerate business ideas and break them apart into more kind of you know targeted business, actually spin out or or break up.

They can basically .

attract shareholders to bid on each one of those businesses individually and drive value up. We set one business. I was close to that.

I saw this what was out to pond where they know dammages with pon. And then they split into several businesses that each were focused on a particular vertical. And IT made a lot of sense to drive value for, for, for, for the overall shareholders. So at the end of the day, you know, these concluding parts are about kind of driving economic outcomes.

And the only folks that you see doing this well are folks like war and buffett, where the job is really about capital allocation, where you know you can allocate capital to the best business and that business on its own will grow organically versus taking a bunch of crappy low growth, no growth businesses, levering them up to kind of juice the returns on each other and what seeing this slow and winding happening. So I think IT, it'll continue and you can probably go and pick a bunch of these conglomerate and you'll see the active with shareholders doing this, buy bunch of shares. They'll instigate and say, hey, you guys should break up the share Price ago by twenty thirty percent. So if you want to start the day, go find going to have it's .

interesting, but a know with public markets deal is spinning out of the anywhere and that's going to create a massive amount of cash and shareholder of value. They doing a huge dividend. So I guess my question to huge, hugh, is when do we start to see this hit not from a point of weakness, but from companies that are strong and see this as, hey, this is a way to just unlock shareholder value. Will we see an amazon spin at A W S, uh, a youtube or an instagram come out of their apparent companies?

I think it's very rare that these things happen on the office of foot. I think it's typically a defensive manuvre that's driven by really poor returns over long periods of time or activist investors who want push .

for that like basically like hard that ebay in a memorial like john dona was the CEO. I thought that so hard, I remember getting a phone call from him asking if I would support them. He had rounded up, read, often other people. So do you remember this?

We were in vegas and donau called, and we were working on the plan. And then you went and walked on out through the plan. Do you member this thing?

We were, no what happened. We were in vg going. He talked to sax and he sketched out a plan for what paypal should do.

And very hand, oh yeah, yeah. I do remember .

that saturday afternoon sketched this.

yes, so all john, no, i'm sorry, I can support you, which should be spent out. And so in the only two, the only two people from the original paypal team who said that publicly were me in elon. And we said that if you could get paypal out from under you know, this this sort of ebay bureaucracy, IT could be a hundred billion doll plus company.

The border acquisitions is extremely high, like I think the the last really two acquisitions that were really done well with socks acquisition of what's happened instagram. But since then, the bars extremely high for this conclusion. So as an example, paypal was rumor to be buying pinches.

And you know, there was such an incredible shareholder revolt that they had to put out a press releasing. We have absolutely no interest in acquiring interest. But what that all that I did was just seen to accelerate the bleeding because then people were saying, wait me at how strategically lost must you be that you would wanna buy pinter as and so then IT. And as a result of the people.

all stock Price has gotten absolutely yeah company I E here's the big .

issue that I think we american economics and company building, you know we've gone through twenty or thirty years of really underinvestment R N D at the sake of share by backs um at the sake of market consolidation, private equity you know driven take private. And so all of this capital misallocation has really put us on the wrong foot and the pandemic basically showed that we were really opposition.

So a lot of these um conclusion IT doesn't make sense that because we've proven that the compensation schemes for CEO, the incentives for uh executive management are way too perverted and they just create horrible outcomes. A different example I saw uh in the last I think fifteen or twenty years, I bms market cap has gone down to one hundred and thirty billion. In the meantime, theyve bought back one hundred and thirty two billion dollars of stock. What could you imagine the kind of R N D that I B M could have affected with that hundred and thirty two billion and where they could be? So we have they're .

not the capital alligators.

but we have horrible capital location. So well.

look at apple.

I mean, I don't be Better off.

They're Better off taking .

those massive they're Better off taking those massive R N D budgets and putting IT into M A budgets. Ts not like a fifty billion doll ptas acquisition. That doesn't make any sense has the synergy.

but on smaller acquisitions of teams .

that are built do anything.

So like much, my point is now we're in the cycle where this conclusion will get ripped apart so that a brighter, fresher and probably Younger group of executive management can take a different the spin on these companies that actually do some.

So for example, like the J, N, J spin out is really exciting because you take mad devices in farma, and you separated from a really struggling and complicated consumer goods, no package business, you know, the shampoo o, the q tips, the listening, get all that off baLance sheet. Now you can actually know, make drugs in that devices. And that's a really interesting business at the right. C, E, O can really do .

a lot of interesting things with, I heard you with us then. C, A, F, G, I think cole, who was putting forward this plan, the line that I remember that kind of resonate, he said, the benefits of focus are immediate. The benefits of cynical gy is our hypothetical.

And I think that's really the key point here. And it's what's going to fuel all this sort of the conglomeration is that benefits of focus to a company are so huge that you know that. But the reason why IT doesn't happen is because this instinct that all these managers have for empire building, right when times are good, they can keep building their empires, and that something bad asked to happen, to force them to focus.

by the way, the motivation they are. They are not owners. They are typically not founders. And so what you end up seeing .

is their comp goes up literally with mark on the whole, ebay, paypal thing. I mean, IT was so obvious that ebay should spend out paypal, but the management, the management resisted. IT took an active shareholder. I think icon .

came in there.

I was icon who .

came in the .

living your fuck well, but I can't ouldn't have to .

come in there. The reason why .

there's A I want times that amounts of court a trillion dollars. Yeah, it's crazy. And just to put this all in perspective, the stock byblus that are going on right now, apple did almost twenty billion dollars less than they've done seventy seven billion last year.

And you want to talk about the impact of tax policy on innovation. While you ve got on one hand here, apple is looking at wrong, going to have to pay all these taxes. I might also just increase the amount on buying back and be neutral.

Why would I want to show any kind of a profit here, all just buy back as many shares possible, the company will eventually be private. I mean, this is, I be really careful with how you do this because there there's no incentive for people now to put money into R N D or other stuff there. Just buy back the sock might be the most efficient thing to do. correct? In terms of like .

the you don't know .

how to end the money is a domini do IT basically shows you in.

idiot, shows you, and Better to end the money on. So maybe, maybe, maybe back is Better than frugal IT away. But yeah, that means you out of ideas.

That means .

or or a combination of, my god, this court business is soaring off so much money that we can come up with enough ideas at that time. I think no.

I just means you're not ambitious enough.

I mean, what would you spend twenty billion on? I mean, zc is having a hard time spending ten billion on creating the metaverse a year. I mean, you talk about eighty billion a year. What would you put that towards? What should apple put the toys now?

Apple apple could even more aggressively double down to enter the car market. They could have done a much sooner than they have twenty nature, you know, easily um they could actually enter, I don't know power. They could uh no I mean but .

there but there that you know apple there their cultures to have very few proxies, a company they're always very proud of that the Steve jobs focus thing, I mean, I think it's work pretty well for them. And I know you're second guessing the thing that I hear. No.

I just don't like buybacks because I think IT comes at the sake of R N D. For most companies, I think that companies are different and everybody else. What you see is R N D is like one or two percent of of it's. It's a shame. Look, apple could actually .

be more aggressive, but I wouldn't judge the tim cooking air until we see what happens with glasses because this is the product that I hear is coming, is going to be there, there A R class classes. And that can be a new computing platform that they open up to developers. And I guess, cooks spend there for what a decade.

But I think he doesn't want to retire until this comes out. And he can see this is going to be his signatures product, I think. But i'll tell you just the other fault that this went through my head as I saw this news about g IT really was kind of the end of an era.

You ve got to remember that back in the eighties, nineties, I think even as latest two thousand, G E was the number one company in amErica by market cap was the top of the S M. P. Five pound. The later socially ally got kicked dad of the the dow Jones. But the thing that went through my head is, you know, when I was a kid growing up, the only to business names that I even knew were jack .

welsh and then .

lei a coca .

was that was in between the name. I know, because I watch some interview and I saw up there. But I mean, you can think of a business leader today who's not in tech and really a tech founder, or somebody who handed the ball by the tech founder.

So we know him cook because few jobs handed him the ball, but otherwise it's all tech, all tech founders. You don't hear by any of these old like doll Jones type type companies anymore. This is the the business, the business environment. The economy has changed so much since the eighties and nineties is all totally dominated by c.

But tax. I would argue that the disruptive business and the disruptive business leader are always the icons. Back in the day, the chemical companies were the icons, and everyone knew the chemical companies and the guys running. Then IT was the industrial companies. Then IT was kind of a financial IT .

was these guys in the eighties and nineteen?

Tell me the top two companies on R, N, D, spending top two companies without looking on r. And in the world, yes, in the world, number one, number two, give me number one.

Number two depends on classic. No, depends on classification. But outside saw .

anko freezer.

What you got A I I would probably put axes on up there.

You guys need to think about who was been some of the most innovative leaders. Uh, amazon, forty two billion in.

But just that's an accounting thing. If you're saying in the world study around their exploration, their E N P budget is probably two hundred billion dollars here.

okay. I I guess me because that's not that is that a corporate entity technically we want to be on the as is a public company. So google seven billion.

wow. Is there twenty two? Microsoft is four of nineteen, you think? No, this is all companies, samsung, facebook.

everyone who because the engineering budget is, is basically what goes into R N D. So the more engineers you have on staff, the bigger R N D, but doesn't know you're producing anything.

By the way, gure industrial companies, traditional companies that list things is R N D. You know, most of those dollars flow out to third party companies like enterprise, offer companies services businesses. So IT doesn't end up gets accounted for its court and court R N D because they get to capitalized.

But that stand is typically um uh not paying in how salary engineers and that's the distinction between true tech companies. And other companies that are quote and quote going through a digital transformation or you know have a quote and quote R N D budget. They're outsourcing R N D and typically paying three times as much and typically getting one tempt in the return. Um and I think that the maya, a good heroic for how you might kind of want to look .

at what different depending on counting sati ramco spent thirty seven and a half billion .

to fifty illy depending on I just means I was right.

Jason.

That's what I care about doing. The reason I think might no IT is it's a really good with reading a bus article and no was rents. But anyway, putting IT aside, I think there the issue might be that they are recently public, right? So maybe there uh, no, they have only been filing public for two years or something. Alright, I think that's everything. Um how is everybody doing otherwise has a base personal life for people losing their mind to what people's plans um for the end of code.

I'm going to go have beer, pizza, the beach nice that i'm really good here. nice.

yeah. I mean, i'm exhAusting. You guys exhausted and this has been a fucking in crazy run.

I don't know what day is anymore.

I'm like me to wind the year.

I am so exhausted. I mean, this has been a crazy pace i've ever experiences in my life. The number of deals going on, the amount of inbound.

oh my god, I tell you at that conference um every single so I have all these fans come up to me pitching what they're doing. A couple like that sounds really interesting. And we participate in ize.

I know the rounds described. Why do you come to me and pitch me this day? How get you? yes.

So I remember one, I tweet. I tweet a new terms of service. If this is only for that a conference, okay, if you have an appointment of my office is fine.

That's like an option. Like you come to me to pitch me your idea a conference then and I say, okay, I want to invest. Like give me an allocation. Like, don't come to the pitch if you not.

can give me. Yes, that's not cool. That's like being like, oh god, I know the best restaurant on the world.

It's open tonight. Theyve got the greatest. And like, no reservations guys tell sex about the White .

truffles from house last night.

He was incredible. He got these White profile from mazing and two thousand .

like he was nineteen ninety and a roy and eight thousand nine a wine drinking.

I'm not saying that your guy, your chef be sexes from two weeks ago.

Sexes wasn't sexes. Chef, your old chef.

uh, I think one of his.

Things I he lives .

at a strategy sphere burn that is that .

a different next level? My six seconds .

think that I .

know you give me any more sex.

There was a dinner conversation last nights. X to point to my is up to you to decide if you want to disclose the dinner conversation guest but um this guy said that there is a uh a guy that apply a White combinator that had seven hundred and fifty million dollars in critter. And so he's like applying to y combinator one hundred for one hundred and fifty k to give up some percent of his company. Is I like all these stories of these guys are like, I will preface d my own series day with fifteen million dollars to create this business inside of the White machine that this incredible there is such an incredible, like an inexplicable undescribed I think in the in the mainstream media story of cyp to wealth creation that been going on and these crypto, uh these crypto hundred millionaire billionaire are emerging and doing their own kind of innovation completely .

under right smart st people that we know are selling.

Yeah and I think they change their conversions um for the Y C. safe. They're now getting preferred is to do common.

And um they now I think that happens post conversion. So they want there seven percent fixed you after your next round. Funding is many standing.

I don't know that. But yes, so they got a more aggressive, but that's brutal. It's that you know what happening is like the accelerators have to move earlier back to incubator.

So the idea of somebody we know grand or so many other companies we funded coming to the accelerator with twenty thousand and or fifty thousand in revenue, in some cases, they may be able to raise money without. And certainly crypto companies are raising twenty five million dollars or out passing regular companies, regular startup s non crypto startups. And they raised IT in ten seconds from a bunch of ef, from tokens.

They created a whole shadow economy. And that doesn't have to play by any of the, well, if you law, I guess you do. But cases like I did this.

this whole new economy could emerge completely off, like, right, completely off the.

I mean, the S K. About cancer. Or you want to get the thing tied up. They don't want people doing this.

Twenty, twenty, I think I was twenty fifteen. I presented amazon a dios one. And one of the things that I did was we calculated what basics is. Investment track record was right, because he basically took all his free casual and reinvested in the business. You could measure what is returned on a investor capital was and IT .

was like forty two percent. And on a really big number.

amazon two over like a multi decade period and double .

what a venture firm would do or talk.

He he's in the class by itself. But um my take away in that moment was, well, this is the you know smartest investors, our generation. That's what I said the basis at the time and you know basis had a track record of selling roughly a billion dollars of amazon stock every year. And this year he you snapp sold six point six billion, which, you know.

when we talk about the percentage we're selling, we're talking about selling five percent, ten percent so in the whole position. But these are big number of I think it's .

a signal to right .

everybody it's been another amazing episode, episode five of the all in power from, uh yeah whatever where you know where people coming from uh, the all in summit will be in the spring at some point i'm going to look in, yes, okay, if you get your poker an undisclosed, the location, time I can go. This is, anyway, I can, I deal with me, you have a funny guy there. I am not a dealer, but can I .

be await? I think the game starts to two thousand. I could get a little space. Maybe you .

yeah maybe .

should a get off ten million.

And .

sala, you put that now, i'll, and then you buy into the game and .

then may twenty, whatever twenty and a queen of kwa .

the dictator and rain man David sax j next brought to the channel.

let your winners .

light, man.

We open sources to the fans and .

just got crazy with.

You try.

A B.

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