E80: Recession deep dive: VC psychology, macro risks, Tiger Global, predictions and more
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When you're coming to miami, there ready? I'm here. You have just got her OK come tomorrow. I have a good weekend.

I made you get right on something else. Plain might reposted.

You're going to me a ride. I'll mine for at least another couple weeks.

I love, I love my commercial. You know, I love my commercial. Every fan of all in in this week start of stops me and takes the I cannot tell you the love in miami.

I SAT down. Have a meal outside where you buy yourself by myself. It's eleven thirty.

I like everything is closed. There was just one little place that open. I kid you're not. I sit down. Two guys come over.

We love the pot and i'm trying to eat my meal and they're asking me questions and they want to know where's freedoms? Ks, introduction. And i'm like, it's so bad.

Well, I show them the video and they were in stitches. I was like, guys this only like five people have seen this video. And now is youth, two to seven people. They were so over .

the moon we never cut. Well.

we could play IT. Now, he was. Thank you. IT was incredible. I said, just, we just thrown to IT right now.

Is that a good up plan?

maybe? And here we go.

Free to this is like the nerd olympics for freeport.

He's like nerd stretching.

He's having a nerd.

a freak out right now. You know what? I most excited in dunge.

Master at this guy hasn't been so happy since he ruled the thirty. On the thirty side, he died SHE, oh my god, i've got a plus step from down.

I've never played. Oh, really.

you were playing legal actions. OK, i'm going to just apologize that eventually.

IT, okay, you will. No interceptions, please. Thank you. In the voice of j hold.

they are.

Frog in your throat, what's going on there?

He's super loud and has nothing to say, but we keep him around because he is a producer. We don't have to pay one good investment in its third year career, but he wrote a book about IT and tells all the VC to kiss his rear. He's one of a kind will always come to your rescue when you're in a bind.

He calls himself mr. callis. But we all just call in is Jason colo, kate, everyone, Jason.

welcome to the show. Great to be here, to be here the kind of good his words .

are in cindi and divisive, but only if you identifies a gender fluid, progressive otherwise to you. He's a scholarly god fighting the great war against the rise of the wall mob. Hey pal, it's the seventeenth most important guy from paypal.

He's back with the same political speaking tracks, the one and only mr. David sax. David welcomed to this.

Thank you. Thank you. I think we need to work for me.

But yeah, we might need to tight that up a workshop.

You've gone.

Maybe gets Better. He contradicts .

himself self twice a week, but we're still in rap chard because this mix sweaters are so sleep. His monologues last most of the show, but he never talks anymore about I P O two point o, as he'll tell you, over and over, he drinks the world's greatest wine, but commenting other topics as a bit below his line, his silicon valley most announce dictator, our friend, the verbal mastery ata to moth, Polly, hot potato. Welcome to the show.

Great to have you here.

I'm not done. We're an increasingly notorious backpack litigated by David sacks and seed by investor hack and soon to be cancelled because of the performance of timoleon back. We are the all in pod, and you'll get this ninety minutes back and the sult in a science with the I Q of one or three and taking the throne as this podcast, new MC. Thank you everyone.

Gonna have to, and I don't want to read the youtube comments on .

this one will scrap IT.

No, no, no, no, no, no, no.

no, no, no.

You can't spite this sex commentary.

Well, I mean, I felt little bit th to me. Yeah um I thought mine was fine, but I think these other guys are little but shall shocked right now.

I went a little hard. I actually wrote this for your, for your birthday. Ck, and then I decided to thrown in.

okay, well, well.

I guess maybe we save IT for your birthday.

Yeah, you may want to tell me funny er.

for my birthday, i'll be back next week with some actually funny intro material. apologies. The audience.

We open sources to the fans .

and they just got.

All right, right. Listen, stocks and crypto to have plumbed tiger coin bay shop fy employee, R S S, mean stocks. It's all gone.

Everybody, the worlds over. So where do we start? You guys want to start with stocks. Where do we even begin?

Should we talk about what happened when rates went to zero and how financial assets inflated? And I think we talked about this during the pandemic, right when the pandemic was starting to. If I remember an early show we did, where you and I talked about how I felt like we were going into, like the roaring rapids ride, like magic mountain disney, I kind of described like that, like he feels like you're going into a rushing river.

And there was just all this capital flowing so fast, like overnight there were you like all the sun. We went from this like covet standstill to, oh my god, this rush of capital. And you could feel IT right? All the businesses were all involved and started getting term sheet and doing deals and their respecks and transactions IT.

IT was an incredible rush of capital. And so when you know the central bank made interest rates zero and then banks could lend out money at close to zero and still make money, and then people could lever up assets and then those asset values inflated and they could borrow more and keep you investing in more and buying more ultimately. Know we had bubble after bubble and uh we saw a lot of things that um you know may not have necessarily been valued based on a historical set of multiple ples or comparables or cash flow.

But really IT was just about, hey, if I invest x dollars and someone else is willing to pay White dollars for this asset, tomorrow i'm going to make money. And, you know, suddenly the frigid vacuum came out, which was like, let's take all that money back. And so when interest rates got hiked, IT was like, all that moneys coming back out of the system is like this, wishing sound like the airlock got opened and all the cash came back out.

And as a result, the bubbles just all deflated. And IT happened so quickly. That is, what was crazy to me was that for so long, everyone's been talking about how everything feel so overvalued. So everyone was just waiting for the moment when the wishing sound began, and then everyone laid off. All the risk and IT happens so fast, and I still happen. People are still try online, the things, whether you know in huge positions ons, but you know, I think IT really is just a IT really is this h this kind of incredible moment where you see all the money get poked in and all gets rushed out just as fast. And I think we're all kind of like, you know in odd how quickly the response has been.

So maybe some context is helpful. From two thousand and eight up until the beginning or not really the beginning of this year, but probably q four of last year, you could have calculated an incredibly tight correlation between the stock market and the fed money printer. So the fed is in control of how they can introduce dollars into the economy.

How do they do that? They literally manifest money. They don't actually technically printed.

But let's just assume for these purposes that they actually do printed and they literally take that money and they enter the market and they buy things with IT and they're giving you this newly created money that they just created out of the air from nineteen or from two thousand and eighteen up until about q four of last year, there was a point nine two correlation between that and the S. M. P.

Five hundred going up. What does that mean? So if you look at a negative one correlation, that means that if something goes up, this thing goes down, dollar for dollar, that would be perfectly negatively correlated.

If you look at something that has a zero correlation, that means it's just random, where the whether one thing goes up and down has no influence on the other. But a point nine two percent correlation effectively means that for every dollar, if that created, the stock market was going up by that same dollar. And that is literally what we had up until november of a two thousand and twenty one since the beginning of this year till about yesterday.

So I think the number is still going up probably by at least by a trillion dollars. We have destroyed collectively as a society um thirty five trillion dollars in global market value. Now to give you a sense of that, that's fourteen percent of all global wealth that has been destroyed in basically five months. And for reference, in two thousand and eight when we went through you a catechism c shock to the system that threatened the banking infrastructure of amErica and put a potential condition to the world that destroyed nine percent of the world's global wealth at that point.

So you know we are uh approaching some really crazy heady moments in time where in terms of the market correction in the value destruction, the difference here is at the last time around IT was really about a handful of financial institutions and some very specific assets, right, mortgage securities, you know some parts of the of the credit market and an a bunch of financial stocks. And that was largely yet this time around, as you just said, freeburg, it's literally everything that's getting smoke. There is not a place that you can effectively hide that has been safe crypto smoke.

The credit markets totally frozen. The equity markets nazi is in a pair market. The S. M.

P is basically flooding with a bear market now, and I don't really see any end in site. Meanwhile, we're waiting for CPI. Downcity inflation hasn't really done that.

IT looks like consumer Price index, how much stuff cost. So that's taking a lot longer than we thought to sort of roll over separately. Jobless claims are now starting to pick up, which means that companies are beginning to affect layoff s because they feel this pressure.

So now you're going to see an unemployment rate that starts to go up. And then meanwhile, we're fighting a proxy war in the ukraine against russia to the tune of about, you know forty billion dollars every sort of month or so when we open the paper and decide to read about IT. So you put all these things together, it's not clear that there is the momentum to create a market bottom .

real estate to months. If you look at IT was a major uh, compression in two thousand eight. Real state held up is holding up. Seems to people know a little, but I don't know how that long that's going to last with mortgage going up. So when you were talking about all the different categories, so like that's the one category that I guess hasn't fAllen yet sex.

which you're taken in this yeah I mean, look, we're in a stockmarket crash that I think of the last week sort of became a panic. I mean, I think now there's panic selling going on. That's not to say that it's all oversold, but certainly, there are names now that are certain become screaming bias, but nobody has the capital to buy.

I mean, it's easy to say you know in theory that you should be greedy when others are fearful and fearful when others are greedy. The problem is that everyone's ready, fully deployed. And then when the stock were crashed, they ve got no cash off to buy up new names. And know that's one of the things that you've noticed in this downturn. And i'd say, especially with crypto, is with all the other crypto downturns, they were always know the cyp to account, saying hodel or buy the deep that had the lizer .

zed going. I don't see .

any of that right now. This is just A A route across the board. I grees every asset class. I think home Prices is coming, Jason, because like you said.

mortgages are going up, inventories going up. So that's a leading indicator.

You can't afford the same mortals they did before because rates are going up very fast. So sellers going to drop Prices. And until they are willing to do that, ah elementaries go up.

That's a little dance that happens in real status of sellers don't want to accept reality and they don't have to sell because they are living in IT as opposed to they are crypto holdings, which they're not living in and they're not getting value from.

And Frankly, I think the consumer in general, that's the next shoot of drop here because right now it's been you had this sort of financial correction, you had this massive asset inflation and now that the sort of the ears come out of the balloon. But the consumer has generally been holding up pretty well. Obviously, we had unemployment near three percent, very low, although the participation wasn't great.

But the consumer was doing fine. I was part of holding up the economy. Now I think you've got a bunch of different factors are going to really hurt the consumer over the next several months.

Like you said, industry going up means that homeloans become more expensive. Car loans, any other personal consumption loans go up. Credit card debt now has all of a sudden skyrocketed.

So there's article anxious on this that the amount of consumer debt is surging and to the highest level of increase over a decade. So consumers returning to plasti C2Cover the soa ring cos t, everything. And then because of an inflation, that wages in real terms fell two point six percent over the past year.

So inflation, an inflation.

if you are to look at wages and real terms, people are actually making less money.

You give somebody a ten percent rays, eight percent inflation in next attitude.

No, you're giving them a six percent race.

All i'm sorry .

that or like a five point six percent raised or something like that because has a percent inflation and net net .

there down two percent .

in purchasing power. Me exactly in spending power. X X point is like, I mean, the number was sixty billion of new consumer credit last month, which is like something we haven't seen in a very long time as consumers trying bridge this gap, afford the things that you've got used to spending money on to jump up like that just indicates that we may be in the begin of a consumer credit bubble now, which is scary.

right? This this is the question is what are the next shoes to drop? So so you think about like what's happened the market, so so far, it's mainly been multilaterally pression. Like earning season was pretty good. I am was for folks.

for some folks.

the socks I got a hammer were journal. The covered stocks IT was the plots and netflix zoom, you know you don't like coin base and Robinson, who with the day traders because that was people are laying off that stuff. So but to basic, the cover stocks have been hammered, but the B2B sto cks act ually had rea lly goo d res ults.

And yet you're the test index is down like eighty percent. You are the average SaaS multiple IT was over fifteen times. You know last year in on the public combs announce down to five point six.

So the sass companies have been a hammer despite having great earnings. so. Well, if you don't know, there be to be are a little bit insulated from the consumer. But what we don't know is what happens over the next six months. If we go into a deep recession, then do even the B2B com pany is sta rting imp.

acted tha t wou ld loo k lik e sex, just to be clear, you know, people maybe start cancelling they're not flex or they don't take that vacation. That's the consumer getting hit first, a business that's laying off ten or twenty five percent of their employees, which are starting to see that content. They might also pull out their SaaS bill and say, here's twelve SaaS products playing for lets consolidate .

down to eight I T up that sells, you know, six and some of figure deals into enterprises and they close their deal with uber. The day before, Doris mo came out saying, we've been really focused on cost cutting, what wall street wants now, free cash flow. We got to a really sharply our pencils.

They were like, shoe. Good thing. We got this across the finish, even had been like two days later. IT is a bit a much tougher process.

So first, you're right, the companies I get impact to the ones with exposure to the consumer, but then those companies start shopping ing their pencils are buying less. So the question is how much our earnings now going to be impacted in the B2B spa ce and wha t sor t of rec ession do we hav e? I think like recession, Alice is inevitable. To promos point, you can't have fourteen percent of global wealth wiped out practically overnight and not have that translate into a big recession.

Monetary velocity is gonna slow dramatically. The money circulating around is feel the brakes happen. You can feel the the .

title or they were six months ago.

I just to be clear, we actually haven't started to remove the money in the system. So the process of quantitative tightening, which is the fans mechanism of removing liquidity, is going to start now to the tune of about ninety billion dollars a month. But to run off all the money that they print, IT will still take three years, right? So we have to take about three trillion dollars of access capital out of the economy.

And so if you add that three trillion as well, that's just going to disappear to the fourteen trillion we ve all you know or the fourteen percent, the thirty five trillion sorry you know you you're starting to touch numbers that are know as bad as the G, F, C. In terms of global wealth destruction, and again, you referring to the great financial crisis when you say G, F C, two thousand. And unlike the G F C, this world destruction is touching a lot of Normal, everyday folks in very broad based ways.

And that wasn't necessarily the case. There were a lot of people that unfortunately lost their home, but even that was still relatively contained to the hundreds of thousands. Here we are talking about tens of millions of people owning every kind of imaginable asset class who seen wealth destruction, you know, somewhere between twenty five to ninety percent. And that's very hard freeze. yeah.

But I just want to make the case like people keep using this term wealth destruction and IT was only wealth that was accumulated in the last few quarters since we had covered. And we released all this capital and made interest zero and flooded the market with money. So everyone kind of gets the money and then they're like, hey, i'm worth a lot more.

And then all of a sudden the free money is taken back. And you, I go, my god, i'm worthless. I've been destroyed.

You, it's crazy. The reality is this was meant to stimulate the economy. Money was released. And the idea when you release capital from a central bank is that that capital flows its way into productive assets, meaning businesses that can employ people, that can create products that people want to consume.

And ultimately, it's very hard to manage that when you're old mechanism is to raise or lower interest rates and make capital available or byblos. At the end of the day, a lot of that capital float into financial assets and inflated the value of those assets, the value of stocks, the value of crypto, the value of bonds that we own, the value of startups that we all on and all of those assets. The value of the stock went up, but the capital didn't necessarily flow into creating new jobs.

Creating your business is creating products. I want to finish this one because I think it's really important. And at the end of the day, if that capital didn't really go into create value and IT comes back out.

And all that happened was we had this kind of inflationary moments in terms of asset Prices and we didn't actually create new jobs and didn't actually stimulate the real productive economy. That's where we have a problem with tax flag and where we are inevitably going to run into a recession. And I think the biggest concern I have, let's be on for in a recession right now, this is the same quarter.

The big is the biggest concern I have, as I mention earlier, is this consumer credit problem. A lot of consumers got used to the free money over the past two years, and people took that money and they went, bought new cars and they bought a crypto where they bought or another N. F.

T. And a lot of people got used to living a life style that allowed them to spend in a way that they otherwise would not have been able to spend. And then all of a sudden, the rug god pulled out.

And now everyone's like, well, I want to keep living this lifestyle, I want to keep spending this money. I want to I had all this stuff taken away from me. Shoot, what am I onna do? And then they take on credit, and the credit markets have been tightened enough yet on the consumer side that we may find ourselves in a really ugly consumer credit bubble.

Here's a crazy statistics for you guys. In the two thousand and eight financial crisis, the median home Price to median income in in the united states with five x today is seven x so people today own homes that are significantly more expensive relative to their income and earnings. That was the case during the financial crisis that caused a massive housing bubble.

You're missing a bunch of important data here. The morant thing that happened was we changed the way that we allowed to capitalize mortgage and the borough rates. So that fundamentally is what drew that.

okay. So for example, you are not allowed, for example, to have a qualifying mortgage be over a million dollars at the end of last year. We change those rules.

So if you accept those effects that allow the fsc in all of these, you know Fanny man fried mac and all of this financial globally gook chronic infrastructure that props up the U. S. economy. If you factor in those rules, I don't think it's as extreme as you're describing.

What mean consumers have more debt for relative to the value of their home, uh, sorry, dead, uh, relative to their income that they did during the two thousand financial crisis? The fact has not me to know the structural way the market works.

But like thing is, the market allows you to to be that levered without actually getting for closed on her. You're allowed to get the borrow rates that allow you to do that. All i'm saying is it's not like access credit is being built up in the system abNormally by consumers. It's just that these products, again, are being structured in a way that, that gets people down.

And real estate is a very unique category because you have eye buyer taking stuff off the market. You have regulation not letting people build more. So I would be very reticent to extrapolate what's happening in real estate.

I don't think we have like a an issue and real estate, to be completely to be honest with I I think that we may have a looming credit crisis. But the practical issue today is I think asset wealth destruction in the financial markets, whenever that happens, generally tends to lead to what sax said, which is built tightening by companies focus on maximizing short term free cash flow, which unfortunately, the way to cut that is by cutting apex. And the way that you cut apex is by unfortunately spending less on goods and services, which affects other companies and firing employees.

And I think what you're going to start to see or a bunch of those things where these companies make these short term optimizations, then how that unfortunately impacts the consumer is what feedback ke said, which is that if the consumer was already living, you know, sort of add the live edge and using a lot of credit to basically allow them to live a lifestyle that wasn't sustainable, whether that meant not having a job or whether that meant in a vacation and staying in airbnb. Es, all of that will come to an end. Now you can say, what is the canary in the coal mine? And let me just give you one thing that hit the wire this morning, which will show you how bad the credit market is.

So there is an article in bloomberg that came out that said, instead of island taking margin loans to fund this acquisition of twitter, there is an idea being floated by more constantly to use convertible dep. Now I love this idea because I think it's an excEllent mechanism. This was the, you know, when elan had convertible dead on tesla, that was, you know, of one big escape velocity moment for me in my career in two thousand and sixteen.

So I believe in these products. I believe that they work. But the reason on bringing this up is that the what I said is not just read stute, the preferred equity may have a twenty year maturity and include a feature allowing interest to be paid in kind at a rate of fourteen percent a year. If the single greatest investors cost of capital for debt in today's market is fourteen percent, I think you have to really start to question what the credit markets really look like for market clearing Prices because if that's the Price for a risk erring asset run by is the grey entrepreneur r generation, there's a bunch of stuff freeze at your point that, that pretty misPriced.

I think one of thing that's a silver lining here is we did build up eleven million job openings. Labor's participation is really low right now, even post pandemic people, if you ask a question, I think chamar of how are people going to get out of the freeburg's point, the lifestyle issue, like I want to lisi, there's a pretty easy solution, go back to work, get a second job, start working again.

We we peak, you know, in the nineties with something around sixty seven percent, uh, labor of force participation. And then we're now you just right around sixty two. This is a large number of people who could go back to work.

Now you mention that slight take up, ever so slight in unemployment claims. We'll see if that goes up. But I think the potential way out here is.

Is that it's boden, meaning like if you look now the last we are for right, unemployment claims readings in a row have largely show shows that it's flared and IT. Looks like in the last couple of readings that is starting to take up.

what with three percent on employment, we're kind of on the floor you can possibly have, but less unemployment.

unemployment going up. I think employment has peaked, unemployment going up. And it's exactly which I said, look, all of us in our borneans last several months, this is begin the year, have been warning founders that the environment is changing.

Don't assume that we're always going of a boom in the castle. Is gonna there? However.

nobody y's taking the advice?

no. Well, because there's been resistance because people don't want to believe IT. And then in addition, it's always like, well, how do you know it's not to bounce back, right? And now I think after what's happened really since April and really in the last week or two, I think no one's really saying that anymore.

Everyone understands that weren't a new environment and they just don't die. There have experiences with how bad is going to be or they don't, but everyone understands things of change. So every company that that's acting sensibly is freezing their hiring, putting a break on the growth, you know slowing down their plans and that will absolutely translate into um you less .

job 是 yeah we've we've really push that exact plan。 I used to sit down with our founders and in these board meetings, what we will talk about is the base case. And then we would always talk about a blue sky case and a really bull case, right? So three flavors of kind of like kind of go and do what you're doing, actually put a little bit more gas on IT and you know press the gas and then really go for IT. I stopped all of that.

You know, these last five months have been me and my founders basically saying, okay, guys, what's the extreme bare case? What's the bare case? And then what's the base case? What's and what we are trying to figure out is how do we make sure that we can optimize for a contribution margin for profitability, for cash flow and when that's not possible, how do we minimize burns so that we can extend our runway as long as possible and show technical validation so that we can raise money on reasonable terms, not even great terms.

And if the boards of these private companies haven't been doing that for the last five or six months and the and the burn hasn't dramatically changed, I think that they are they've had been a little derelict in their duty. It's it's you're not doing a very good job as a board member or investor if you have enforced these conversations with your C E O. And you shouldn't expect the C E O to bring this to you in many ways because its very hard for them with the with the focus that they have every day to put this from the mind but as sax said, you have to do IT as a director if you're worth assault at all, you have to do IT.

But it's been quite the opposite. We saw with fast co was the opposite, right? People were just not even considering .

IT is your survival risk is on the table. You really have to act differently. It's kind of like the difference between at a poker termin and a cash game.

You know, like players behave very differently in a poker termin, the players are much more conservative. why? Because once you're out, you're out. So if you lose the wrong hand your bus out the tournament, whether an cash game, you can just rebuy.

Well, we've gone from basically being in a cash game where people can just rebuy de, maybe they here they can go out and raise more money. May be be some evaluation they want, maybe not as much they want. But you in a boom, you can always go raise more money. Now if there is no more money available to keep funding your plan, if it's not working, you would really have to think about survival and you have to be more conservative. You can't let yourself .

the tournament by the way, i'll say two things on that one um what your describing is exactly the condition that is now LED to the fact that roughly one third of public biotech talks are trading below cash so um yeah so their entity value um uh the biotech industry is a whole syn bio in particular but really biotech um about uh a third of companies now trade below cash baLance so you guys some like some and uh the reason is yeah forty percent of them have less than um uh twenty months of catch um sixty percent of them have less than two and half years or the cash.

And historically biotech companies, they kind of run an R N D cycle to prove that the biotech products will work. And if IT works, they'll be a farm, a company. It'll swoop in and giving some money to go through the next clinical trials, although do a secondary offering and raise more money to get through the next face.

But because the capital markets are gone now for them or the assumption is hay is not going to be any capital list, they're still burning whatever is twenty, thirty, forty, eighty hundred million dollars a quarter, they've only got a few thousand million dollars in the bank. And everyone's like, hey, look, the odds of you guys actually, even if your technology works, even if your product works, the odd s if you being able to get the funding to get through the next phase of trials is much lower. Therefore, the the describe value of your business is negative, and we're seeing that across the board.

I started working in silicon valley in two thousand, and one that when I graduated from calling, I worked at investment bank doing tech M. A. And that was right after the dot com explosion. Most of what I worked on with public companies that we're selling for less than cash today know we don't talk about that over the last twenty years because I just never seems to happen.

What a phenomenal thing to happen, right? And you could basically what that means is you could shut the company down and make a profit. And still on the IP, and that is what happened in the dark.

We saw a bunch of companies that I was on the the banking side, uh, representing the sellers, uh, the the public companies, because there no business, there was just burning money and there was no light side to making money or line of raising money. So the board said, you know what, we just got to get this up shut IT down.

And then, you know, hey, what's cheaper, shutting IT down, what's going to make us more money, shutting IT down and distributing the cash or letting a private equity firm come in and cut down for us. And in a lot of cases, they sold these public companies to private equity firms. Let's say the companies got one hundred million of cash.

They folded for sixty million. Private equity firm comes in and they like, boom, boom, boom. Everyone's fired the thing and shut down and they liquidated. They took made a twenty million dollars. Read on that thing, I will say on the on the flip side for for private market.

And I think this is a really important maybe point for us to have a conversation about over the past decade, as you guys know, there have been a more venture money raise than any time in history. The numbers have been going up every year. The number funds total capital raised.

But at the end of twenty twenty one, if you look at the total funds raised and the total deploy by venture funds, we have a two hundred and thirty billion dollar capital drive out or hangover. So there's a quarter there's a quarter trillion dollars of cash sitting in venture coffers that they can call and write and text into. So I think that provides a really interesting contrast that sets us up for a dynamic over the next few years.

And what's gonna en in private market because you're going to have the haves and have not the haves. We're going to have a lot of frequent money available to them because these venture funds need to be deployed over the next few years. They have not are the ones that don't have proof points to a viable outcome in in their business. But the haves are gonna a lot of capital .

available to them and one with one cap.

which is a so what do you guys think of two .

caveats in the contract of everyone says there's no capital available, no capital available, that's not true. There's more capital has ever been available. So how does he get allegations?

The first thing um is to your multipoint at what valuation. And so there's going to need to be discipline and they're going to right the that money will go to the winner. Other thing to remember is during the great financial crisis for about a year, maybe even too many venture firms did not want to call capital from L.

P, S, whose portfolio were crashed. And lp said, I know we're on the hook for this, but I would appreciate IT if you don't make a lot of investments right now because we don't want to clear are already demolished portfolios to then fund your venture funds. So those are commitments is not cash in the bank, and those commitments only come from harvard, yale, calpers, foreign oundle, whoever. More on clastic catering if the GPS can S, L P S for that in the last time this happened, and I don't know what happened this time, but I think you you remember a, teach me up the L P S specially said, hey, pump the breaks.

Yeah, let me build on what you say in two thousand. The more extreme measure happened with which is that most of these venture investors return the money and just cancelled and tore up the L. P.

A. Now why would they do that? Why would you tear up commitments for a quarter trillion dollars? It's because your portfolio is trash. Meaning if you have made a bunch of horrible investments that you know are now totally upside down, you have a responsibility to manage those investments to a reasonable outcome and ideally even try to get some salvage value.

And so you know, it's very hard for you to look at an aly in the eye, all of us, I and say, you know what, i'm going to deploy this fresh capital and i'm in a psychologically good state of mind to do that well. And I think that what history shows is that when you have these drawdowns, the money is made by new entrance or fresh capital, which doesn't have the legacy of a bad portfolio. The returns are not captured by the same people.

And the reason is because they have the psychological baggage of a horrible portfolio or horrible mark. So for example, there is a tweet, and all of this, you guys, this is from guiding mac turk, he said, to put the depth of the reset in context to justify a one billion dollar by value. 为什么？ One billion dollar valuation.

A cloud unit horn today would need to plan on doing one hundred and seventy eight million dollars in revenue in the next twelve months if you apply the current media cloud software multiple of five point six times forward revenue. Now let's put in a different way. If you are a company that's worth ten billion, that means that you have to come up with one point seven eight billion dollars of annual recurring revenue for the market to give you a median multiple.

How many SaaS companies in SaaS with sacks, you will notice how many SaaS companies even get close to two billion of the era, probably a lot less than the number of SaaS companies that are worth ten billion on paper. So you know, by the way, we should also talk about who's the bag holder in that transaction is the employees. And we should we should explain why that is in a second.

But just to build on what you know Jason is saying and freeport, what you're thing is in moments like this, I would ignore all of the dry powder and all of that stuff. I think that there are a lot of venture investors today who have deployed way too quickly. And if they want to have any reputation over the next ten years, we'll have to rehabilitate their portfolio and try to return money.

Let me just say one thing I saw um and analysis from one of the biggest venture firms in the valley over a fourteen fund cycle. So they they looked at data from fourteen funds and they showed that forty percent of their capital was deployed in businesses that they were chasing valuation, meaning like the business wasn't performing well and we needed to bridge the company or supported through a downwind or you know some other sort of situation.

Or at the time IT was, let's support our portfolio, forty percent of our capital on that forty percent they made like fifty percent losses. So they deployed money in a situation that was not kind of an accelerating successful up and contact business. IT was a declining business.

And in that support, they lost have their money. The other sixty percent they make like three x right? So I kind of averages out that they make kind of whatever is two, two effects on the whole portfolio.

But I think IT really speaks to the condition that a lot of venture firms may make the mistake around doing over the next couple of years, which is i've got all of these businesses that are suffering through downtown ounds or need support of capital. And I know we can get there, but that belief ultimately cost the L, P. S. And cost to the fun more. And it's why we saw such negative return cycles happen after the dog crash.

How about this since nineteen ninety four? Just cast how many funds private equity growth venture funds even existed that are greater than a billion dollars. So this is over, you know, thirty years. Say how many how many funds do you think even existed over a billion dollars since one thousand hundred and ninety four today? How many funds like how .

many funds have been raised that are individual funds.

are the brand? And yes, since nineteen and ninety four, how many people think there? fifty? One thousand two hundred and seventy six? You're .

including private .

I I V O sorry OK.

So now those one thousand two hundred and seventy private equity funds, or growth funds, or crossover funds, or direct funds, how many do you think have actually managed to return more than two point three times the money? Two point three times ten percent ten, five percent, ten percent twenty two of them fly hundred.

twenty percent hundred.

two percent. wow. So here's the point that i'm trying to make. Yeah, investing is very hard. Everybody looks like a genius. All of these funds come up with all of their nonsensical ways of showing errors and all of these fake jimnez s but the truth is in the data. And what the data says is that in the last thirty years, the minute you get over your school tips at a billion dollars, very few people know what they're doing.

Very few. It's hard. It's hard. It's the pose compressed as you get to bigger .

deals and you can see the value.

I deny .

this new miracle truth yeah. So again, I go back to, you know, the person has always been talking about this and who again may be proven right yet again, is bill early? You know, everybody would make fun.

Why is benchmark only raising four hundred and fifty million dollars? Why would they only raise five hundred million dollars? And they always were consistent because over the last thirty or forty years, over multiple cycles, we have seen that this is the best way to optimize both for return instrumental clarity and for making our peace happy.

Every variable was optimized at around five hundred hundred and fifty cus. And then you see five billion, six billion, ten billion dollar of funds funding five billion, six billion, ten billion, twenty billion dollar private companies. And I think what we have to do is put to into together and realize that it's gonna be very difficult sliding from here for a lot of folks.

And when the venture or cross up for investor has this mental baggage that they're dealing with, they're not going to be able to provide fundamentally sound advice to the C. E. O.

They're going to optimize for making that portfolio turn to getting the bleeding and the portfolio the CEO will make a bunch of subtitle decisions. You will probably lead to a bunch of layoffs, ad technology decisions. Things slow down and the cycle is reflective in that sense. And so now we're going to go through a few years of sorting this downward liquidation. Preference is nonsense.

Sex will be yes. So so look, I agree with that point that these megahits are very hard to paid because they require you to have multiple winners, not just winners of mega winners. So we have always kept our funds in that five to six hundred million dollars ge, where you really only need one winner per fund d to basically return the fund. Let me we go back to this .

point about math. Explain the matter that you typically on fifteen twenty .

percent of a winner. So even by the time .

as the right.

exactly. So you know if you own ten percent of one deca corn, that's a billion dollars in. If it's a five hundred million dollar fund, you've doubled your fund. But if it's a one or two billion dollar fund, you have going to pay back the fund yet. So that, I mean.

how hard is IT to .

hit a deco?

It's hard. So really.

really.

I hate you. I hate two. I have two in a decade. Yeah, I felt two in the exact same temperature .

point about dry powders. I think it's actually important. So this will be a little bit more of of a bright spot, so in a weird way. So there's A I think stunning article in tech lunch just two days ago that said that tiger global, you know which the hetch fund, as of the end of April, the hetch fund had lost about forty five percent, and then may, the first week of may, have been even worse.

So who knows what they are are now, but that a separate venture vehicle and their history, their venture vehicles, is that they raised three point seven five for a fund in twenty twenty, then six point six five billion in twenty twenty one. And then just this year, they closed to a tall point seven billion dollar fund in march. And I think that fund was raised as earliest of temple last year, but maybe there is some money that still trickled in and they finally closed in march.

But basically, what this article said is that this twelve points billions are fund that they just raised is already nearly depleted. It's something like two thirds of the fund has already been deployed. So this idea that they've got like a lot of dry powder sitting on the sidelines, I don't think they do.

And then meanwhile, you are the other big cross over funds done coto. They are completely risk off if I don't think they were ever aggressive as tiger. So they're not in as bad shape as tiger.

But there is basically seeing on the sidelines toll. This thing sorts itself out. So basically, all of this capital that flooded the venture markets, this growth capital that came in over the last couple years gone. I mean.

that's so fex. What was there thinking? Because you and I met with these folks, we saw them marking up our compass. Because you and I, youtube ally, do a series a that your sweets about activity you see.

And into series a, you do a and to b, they were coming in to marking up our in the bng rounds. What was their thinking? What was their mistake here?

I think the thinking was that we can create an index fund for pri po tech companies for sort of late stage private tech companies. The only problem was, and by the way, they did a, if you can, I think they did a good jobs for the protein that solution. I mean, if you second that, you are numbers in a certain format and do a meeting, they were like a term sheet generator. I mean, they speak out term sheet.

The original idea trip, you had thought you had funding as a surface. At one point.

I did this thing called capital as a service where you would send us, you would send us but, uh, you would send us your data, or we would plug in to whatever you use and would strike for shop fy. We would suck out the data. We would run IT against the bunch of models.

We would do a few simple regressions, and then we would just index you and then send you a term change. So we did do that all around the world, but we did IT on very small dollars. You know, we did IT five hundred thousand dollars checks to fifty k checks.

IT was called capital as a service. It's still a phenomenally good idea, but you would want to cure that business for probably ten years. I would wanted to do that on ten years on my own money, you know ten, fifty, 50， fifty million boxes before I would even dare raise L P. Money around that idea because it's I mean, at that point it's the machines doing the work and you have to really be sure your models are right.

The thing was wrong with I think that the the thing that was wrong with that actually was just that the public comes were all wrong, right? So they were modeling got to the public valuations.

These are have fun guys, right? Well.

no IT look hetch fun guys. So they are looking at they're looking at the public valuations. They're looking at the last private rounds, and they see a spread, a large spread.

They're like, we can arb this. So they go in with a master amount money, create tomsy generator and they are the spread. The problem is that all the public valuations, we now know we're inflated.

I actually think they did a reasonable good job in creating. A A A great approach for founders who want late stage capital. If the valuations have been correct, I think that would at work.

Here's the problem right now. Paton and coin base are both their market caps are trading at lower than their last private market valuation. So let that sink in like if you we did that last private around you're under water big time in those names or I D I don't know point .

are taking their signals from the public markets? And is the problem with the fed and the administration and congress basically flooding the zone with all this fake money is that IT distorts all the signals in the and then people start making investment decisions that don't work. And then you have this massive correction.

How long have we've been doing this too much? How long have we've been over feeding the market? IT was obviously happened underbid. And trump, did you go back to obama or no?

yeah. IT started in two thousand and eight nine .

with the people .

trouble as relief program, which is basically a fund you know to create market um liquidity essentially. But what IT also did on the heels of the great financial crisis was um we introduced comfort around this idea of quantitative easing or you know having what's called the fed put you may hear that a lot.

What does that mean which when market conditions get two minal a stiff or rigid or inflexible, the fed will generally step in with liquidity, typically into the credit market, never into the equity market. But what that does is that, that also still flows into the equity market. So everybody behaves like there's a downside Price at which the fed is guaranteed to act.

And that really is a out that really started to be in people's syn logy after the great financial crisis. And then through the you know two thousand ten, we had several instances where we had that, where we had moments of sort of like market volatility and all along the way. But we also had, for academics that started to, you know, promote things like modern monetary theory, this idea that, you know, money printing was a good idea.

And so we had this, again, very reflexive loop, where you annoying to experts, you know, you know, did talk pieces and talk pieces and books, and then suda intellectuals would parent this up. And and you know, the government infrastructure would behave like this was a reasonable thing to do. And IT built on itself for a decade.

So we've been doing this for thirteen or fourteen years now, and now we're trying to undo IT and put the genie back in the bottle. And it's proving much, much harder than we thought because people have unfortunately got addicted to the crack. They're dict to the drug. You you try to take the oxy away and that's uh and people are gonna through with a really, really, really bad withdraw.

If you have a quarter trillion dollars of dry powder, let's assume no one gives their money back. And they don't do stupid stuff like chase losing companies in their portfolio and they allocated in the smart way to winning companies.

Does that not mean that we end up seeing a significantly kind of outsized amount of capital going to a few highly successful businesses that will end up seeing this kind of super charging of a small set of businesses as opposed to the rise of the unicorn, which is what we saw over the past call IT you know eight, eight, seven, eight years um and that you have this big by vacation in the market. The VC market starts a kind of say, hey, you're not making money. You don't a de to making money. You're off the table but the you know top that I overfunded and they become, you know kind of the next the next meggie .

caps no yeah I mean.

IT IT does not happen in this moment.

Well, so look, if we look ahead two or three years.

I can I just say why? Let's take, let's take the perfect company, which is strike. Okay, so now fifty billion dollars have been to a right.

I mean, fifty billion .

dollars of horrible VS who have made horrible decisions here to four, knocking on the colors and store, saying, can you please take my fifty billion dollars? Because i'm trying to be money good. Why do the collisions want to take on this headache? Why do they want to float, you know, uh, mess, set their cap table up with all these folks and then had one Price.

So if you're sitting at the board of any really good well run company, of course, you'll take some bite size amounts of very decisive capital in these moments if you think you can market, consolidate or whatever. But I think the point that all of these companies are going through is largely the same. If if the best companies aren't doing what we just talked about, I would be shocked as well. The best companies are thinking, let's battoni down the hatches and let's not distract ourselves. And so i'm not sure this is the moment where a really horrible VC, whose that a terrible track record, who have just blunder through five billion dollars, is going to be able to put in a billion dollars to strike.

What do you think sex really speak to? Kind of the environment that I thinks going to happen over the next few years and what founders will succeed. I think you're right freeburg, that the vcs are going to come much more discriminating and there's going be a much more policed outcome here for companies. I A tweet storm that elon actually gave a nice spot st too, by saying he agreed with that where a basic said looks starts with high growth and moderate burn will get funded through this downturn starts with moderate growth and hyper n will not get funded.

So what going to happen is that the sort of mediocre ones are going to we're going to get to have very polis outcome very quickly where, you know, I think a lot of founders think that if their numbers are just OK and not great, then they'll be able to raise but the lower valuation or they'll be able to raise something, but maybe you know as much wanted to. And what will happen is the middle is, is kind of a go away in an environment like this, and everyone just wants to fund the best companies. So certain things will become absolutely fatal for startups in this environment.

One is obviously, if there is not growing, the not to raise and good growth early starts in the early stages in terms of doubling year over year. Second, negative low growth margins or absolutely fatal. Nobody wants to fund businesses that may not even be real businesses. And I would say acceptable gross margins in really started fifty percent a third cat payback. People want to know that you can pay back your cust acquisition costs in a year or less.

And then like I mentioned, the burn you know a burn multiple of one is really ideal where you're burning not more than your your net new err, but certainly not more than two, I think burn molles over two where you're spending you're burning two dollars to add one dollar of growth. That's where I think you can you start becoming unfunded able. So I think founders are going to be have to pay a lot more attention to these disqualifies you.

But I think that for companies who meet the criteria, who have good growth, low burn, good business foments, they will be able to raise. And but this is gonna en the cross of our investors are washed out the system. They're gone.

Tigers were deployed all this capital, and I don't know when they're me back. So the so called tourist money, basically the big investors who weren't in the system a few years ago, they're basically to leave the system. However, there will be the big traditional venture funds will have large funds, but they're going to deploy them much more solely these one year paced deployments.

They're gonna p it'll be back to three, exactly what we think about that even if you had the same amount of money being raised and deploy. But IT was happening over three years. Inside of one, there will be a two thirds reduction in the .

availability of capital in the system.

which you're to the best company talking about.

You're not going to go to somebody who's gonna blow through IT in nine months, who's playing every hand like you cannot play that way anymore.

exactly. So what we're telling our our founders is, number one, you're got a link thing. Your running away like the days of raising a new round every twelve once or over, you got a plan are not raising for two to three years if you can help IT. And then you really have to sharpen your pencil work on these business undamned als.

And one thing you need to do is you need to have a realistic conversation about, am I really able to raise another round in the survivor with the metrics currently have? And if the answer is no, you need to cut your burn to give yourself the time to fix the business, and that fixing a business Normally takes two to three years. So know if you got lesson two years or even two and half years of burn, and you have one of those to qualifiers I talked about. You Better like cut your burn quickly to give yourself the time to fix .

those to qualifiers. Yeah but I mean, I wish people we've been talking about this for here, folks, and some founders just are not accepting the reality of the situation. And I if you look at what happened, we have a generation that's never experienced down market and these downs markets happen so violently that they think like people are panicking. You know, somebody made a joke like bill girl is called five of the last three recessions, you know and it's like, well, I mean, we have scar issue and it's that the the velocity of the downturn.

all those kids done on early. Well, guess he is going to have the last laughter.

I think precise. I tested girly last night.

He said the last, last.

I literally, dm, unless that is, listen, the waters great. Right now I am doing deals back at six to twelve lion dollars in the city space with the to two hundred and revenue and real founders and discipline start investing again. It's great now because the deals are now taking of experience in the sex, but the deals went from taking two, three days.

Now they are back up to four to six weeks, and we're having very thoughtful discussions. We're meeting a third time with founders. We're talking about their go to market strategy. We're getting to talk to three or four customers. I had founders who said you can be in this deal if you wants to talk to my customers and that wasn't one founder. Multiple founders said, if you want to talk to our customers um then you don't get an allocation and I I said, okay, the thing to keep in line, I would do the deal, but that was how disfunctional this was a the thing .

to keep in mind is that all these late, each companies are my Price. Doesn't matter whether you're the bottom desi or the top desi, you are massively misPriced and there needs to be some correction between .

thirty .

and seventy percent ty. So so look, there's a banger difference, I think, between evaluation multiple collapse in the public markets for surprise market is gone down. The evaluation multiples have gone down seventy, eighty percent.

There's no disputing that if I want down. Look, IT used to be the public markets were trading at fifteen times A R for the media has company at five point six. So yet we're talking about two third seventy, eighty percent reductions.

If I had happened in the public stocks, IT deserves up in the private stocks to to actually right about that. A lot of people are recognizing that. However, here's the difference.

The medium SaaS company is going maybe fifteen to twenty percent. When you've lost eighty percent your value and you're only growing fifty and twenty percent, it's going to take you a decade to grow back into evaluation. However, good private companies is not all of them, but the great ones.

They're still growing three x year over a year. So if you're able to grow three x year over year and you do IT two years and row you're nine x where you were, even if the air multiple collapse eighty percent, you can still get an up round. It's not going to be the a nine x up around and might be two x up on.

I know how that's mathematically true, but listen, if you are a hundred million dollar A R R business, like to say you are able to raise at ten or eleven billion. Yes, you're mathematically right that we know one hundred million times nine is nine hundred million. But I think it's important to first say how many actual software companies are there that generate a billion dollars of A R R. Do remember when sales force first past a billion dollars of A R R.

we thought, my gosh. And then they said, get.

So this is exceptionally rare air. And I think that IT behoves people to understand that love large numbers aren't often violated.

And so, you know, before you go and do that simple math and convince yourself that it's possible, maybe you should actually not nothing that you say something that to the founder or to the board, maybe you guys should actually just go in and have somebody run a screen and say how many actual companies exist that i've actually managed to generate more than a billion dollars of A R R. Especially in a moment where people are cutting back on spend. How does that happen?

So yeah, look, I great again. From one hundred to a billion is really hard. You know.

if you're going billion dollar companies supposed to do, because in this math, they have to get to two billion dollars of A R R. To be worth ten billion.

I do think a lot of how do they do that?

How did the random fast company that you and I ve ve never heard of? How do they generate two billion of a err, I can tell you the handful of companies that generate two billion of air, there are some incredible companies today that don't even yet, you know, like look at at an incredible company like unity, incredible, the backbone of all you know, gaming and you know the move to three d this year. If they crush, they'll one point .

three billion credible .

business .

went down thirty five percent. It's trading .

at four times. Rather, you guys some of these things are hard to believe, like open door has two point three billion in cash and a three point seven billion to our market cap enterprise of how you one point they I think they also have a couple of billion in real estate company by six billion cash twill billion dollar market. So I guess in this point in the discussion, even with all .

these headwinds, can we give the protective .

mechanisms for employees again?

O when you start a company in your founder, you the most risk or the person with the idea, you should be justly rewarded for that. The way that that happens economically in the company is you get founder shares. The basis of those founder shares are effectively zero, and you are able to do a bunch of structuring when you first start a company that gives founders finally some incredible taxi advantages.

You can, you know, do an eighty three b election, which is effectively you buying the stock, starting the clock on long term capital gains at several, then you have stock that you give to employees. They're one of two kinds, non qualified stock options and incentives. I start options, eos and I asos.

And you know those have different tax treatments. But again, you know, when you're a very early employee, you get a mixture of these things, also hugely a creative and has a very low basis, your building value. But here's what people don't understand when a venture investor like myself, for Jason explained basis, by the way, for people, for most spaces, the Price of your stock is effectively zero, you know like a pandy ford or something yeah like like my stocky facebook calls, like half a penny.

You know, IT goes public. It's fifty thousand and eight years.

You get the spread gone. You get the spread and you pay long term capital gains on that. If you've been able to interact and and and shifted to long term cains, okay.

So now sax or jayson or myself come in investing your company, what happens? We actually don't get equity. We don't get common stock. We actually get a synthetic form of debt called the preferred share. okay.

And typically the way that IT works is when we invest in a company, and this is how the entire venture ecosystem works, we actually create what's called the preference stack, which means we get an instrument that is senior to the common equity. Now what does that mean? Well, that means that if your business goes out of business, we get our money back first. We also get an interest rate, and we're able to convert all of that at some point. The magical moment when the company goes public into common stock and we give up our preferred rights and we now have the same instrument, everybody else, when the company goes public.

That's the typical mechanism. Why does that exist? By the way, the prefer chairs maybe explain the why? Why do VC need that protection to be?

Honestly, I don't know why I started, but it's a historical artifact of, you know the one thousand nine hundred and sixty and seven.

I think I know why I started. Okay, so this got lawyer because let's say you start a company and this to use some round numbers, a investor wants to give you ten point short, the company and for ten percent of the company, one hundred million or evaluation, if you didn't have preferred shares, then the founders could basically on the the day after the money comes, they could say, hey, we want to liquidate the company.

We'd say, what I want to do this anymore and they are in ninety percent of the company. And they could basically then distribute out the ten million till the shareholders, and they would keep nine and one million would go back to the investor. So that's why lawyers came with this idea seniority. So that, okay, if you displaying the company with the investors money still in there, he goes back first to the people put that was the idea.

And and the second piece was if the company gets sold for less than the cash put into IT, at least the people put the cash in and get their money at first. So if IT sells for ten million, you get your ten million back. Or if eleven, you get one million after that.

So let's say, Jason does the first million. So there are others a million to preferred. Then sax does the series a and he puts in ten.

Now there's eleven million or preferred even if it's had a match evaluation. And then I come in and I gave one hundred at an even higher valuation. So now there's one hundred and eleven million dollars of preferred shares.

Now if the company goes through all kinds of um complications and mass, unless you say we have to sell IT to somebody else for two hundred million dollars, well guess what happens? The first hundred and eleven of IT comes back to myself, Jason and David lus interest. So this is why venture investors have an incentive to pay and set these crazy valuations because they don't really care what the valuation is as much as they care how much of all this preferences building. And do I rationally believe that the liquidation value of the company is at least that much money?

So if I think that three Brooks companies worth at least one hundred and eleven million dollars, how do IT and I add one hundred? Now, why is this important for employees before you join a startup, especially in this moment, I think it's very important for you to understand how much money have they raise, how much is this preference stack that exists? And do you believe that the company is gonna worth much more than that? Because that's the only way that you're gonna to participate in the equity.

And we know now what the public market says. If you go back to that tweet, you know if it's a ten or an eleven billion dollar company, okay, well, you need to generate uh, two billion dollars of revenue. And if you're at one hundred million, that means you have to x the revenue for the valuation to be worthwhile for you to believe that this valuation is real. So this is just a little guide for employees. I just think very important that you guys start to do the math and start to figure this out.

ask the hard questions. How many shares are outstanding? How many preferred chairs? What's the overhang? What's my strike preference stack?

Yes, you know how much is the total pref stack? How much revenue are regenerating? Now you should go and do the work to figure out what the public market comes are.

Those are widely available. Hopefully, somebody could actually just create a website that helps you do this. Um but all of these things are going to be very important for you. Otherwise what will happen is if you join a company in this moment at a fake valuation and the valuation gets reset, you can effectively assume your options or were zero.

So if that was an important part of how you made the decision to join that company, you're being somewhat misled in a moment like this, and you need to have your own rational sense about that company's worth. Conversely, I think boards and CEO have a real responsibility now to do the hard work of resetting this and explaining IT to their employees if they want to retain them. Because in a moment like this, if you have evaluation reset, you don't allow people to understand IT and you don't figure out way to allow them to participate in some incremental way. I think it's going to be be very problematic for .

employee attention.

You know in those contacts, there's a couple of things that I always support. You know if if you need to reprise the options, you know you can reprise the options and give employees the benefit of a new foreign a. So the company doesn't set the option Price that set by an external foreign audit. But if that foreign na goes down because of these factors were talking about, you can basically the board can vote to rePrice of one's option, so least they get the benefit.

The lowest playing with a four nine is just broad trucks.

It's basically what talk options are issued. The law require that the strike Price of the option be the fair market Price. And because of some accounting sands a while back that got companies in trouble. IT is now the case that companies don't set, don't determine their own fair market Price. They go out and they get some external auditor to do a four N N or IT and the four N A that gives you the fair market Price. And specifically, it's a fair market Price of the common stock because what investors are buying is the preferred because of the dynamic that cha ths is talking about, where the prefer gets paid back first, the common stock is worth less per share because it's got this overhang specially .

fraction a fifth. A tenth something in that range is to be. So if the shares worth a dollar of preferred, the fair market value of the common could be five cents, ten cents, fifteen cents. Depends on if the company he's going to run out of money, how many months of run way they have on a profitable. And so IT is a fair thing to do. And but if you have to know that in a downmarket like this, if you have massive confusion, boards need to look at that founders and do look again, say, you listen, if the if the sas multiple come down so much, but our fair market value should come down that much. The fair market value might be worth fifty percent less, seventy five percent less to exec.

Yeah I mean, so the way that works is that when a company ipos, you get rid of all the different classes of stock, you think basis prefer converts to comment in an IPO one .

class of shares yeah maybe you .

have like the dull stocks that found a can maintain control. But for an economic perspective, you basic collapse into common stocks. So when you IPO common to prefer to the same.

And so economically, they're converging to one to one as the company gets more, more mature and head towards and exit the earlier that you are. The risk of the company is the more that the proof stack matters, the more overhanding that creates. But the benefit employees is that creates a larger discount on their strike Prices on the foreign a.

So that is the offsetting benefit if the foreign a goes down because the mark change, then the board can vote to apply a new foreign age of the employees. That's a beneficial thing to do for everybody. So that's something, you know, i've always supported. The other thing is that if you're in a turnaround situation where you're actually worried that the pref stack is larger than the value of the company, in other words, more money is gone into the company than the company may be worth that exit. Then what you need to do because then there's nothing for the employees is no instead of any more, what you need to do is create A A A A busy um an employee participation.

You create a cord where you say, okay, thirty percent of any acquisition Price for this companies going to go to the employees, you create them a management or employee carve out, really, you should be an employee carve out, not just management, but all the employees of the company should benefit from an acquisition. And sometimes you'll see boards be either unrealistic or stinky e'll, be kind of penny wise and pound foolish. They won't create the incentive for the employee is to get that sort of over capitalized company across the finish line and could be pretty frustrating to see when that happens.

It's a good time for employees to understand this. This is a giant reset that's occurring. I think there is some good news here.

I think we have a lot more people who are going to go back to work because they need to, and that'll be good for monetary velocity. Fill these jobs, eleven million jobs. I don't know you've ever had this.

And things are record the number of jobs we've had and we're bouncing along record low unemployment. Those two days could be what saves us, could save us during this recession is something distinctly unique about this recession. His job opening, some unemployment.

We've never had a recession like this. So that that's fascinating of itself. But for employees and for companies, the new discipline might be there's not going to be four or five offers for every technology if people are going to cut tent to twenty five percent.

This is the contagion moment. And they think maybe just talking about layoff contagion attack and how that works because facebook on hiring freeze and you're starting to see the series bc companies all to tend to twenty five percent laffed. A uber dar said we going to look at hiring as a luxury.

It's probably happen. The only person who said they were gona hire into this was google sundara today said maybe as many twelve thousand people over the next couple years, couple thousand years. And apple staringly, I don't know if you're watching this.

They have told people were one day a week now, two days a week in two weeks. And then by the end of this month, may we'll be three days a week in the office Mandatory. The head of machine learning said, if that doesn't work for my team and they said, okay and they said, okay, we don't have to do IT and they said, no, okay, we accept your resignation.

So I think even the midy apple with unlimited cash reserves saying, you know what, if we have to shed some people who don't want to come back to the office, that's like a defect or off. So maybe talking about this contention because if you're in a company that doesn't lay off people, you're gonna pretty weird in this market to your investors. And we were on why renting you, laying people off go.

And I feel like an old guy now been working and sell in valley for twenty years, twenty, twenty one years. And I remember like no one there was kind of this period time when there is a bunch of layoffs, a bunch of companies reduce headcount, and you know, there were other industries and people state employed. And then in the years that followed, like what to happen and people kind of came back.

But what was interesting is like the tech, which at the time was silicon valley, but is now fairly kind of you know um well dispersed, attracted a lot of people from other industries, right? They used to be cool to get a job in financial services or just from banking out of college and then all of a sudden working at the start up was the cool thing. And there are a lot of people that move from york in the last couple years to S F um leading up to the most recent crashed after the pandemic.

Um and so you know, look, there is an event of flow in an net of this industry. I do think that this capital overhang, however, this quarter trillion dollars of dry powder that sitting in VC coffers um is going to be significantly stimulating in a very good way. Um I think that will create real jobs and and enable real progress.

It's not just about the companies that are on the break of profitability or the company that are profitable try to produce profits. If you take a step back, jack out, you said something earlier that I thought was a kind of a really important statement, which is like you're doing deals, right? You're making investments in startups .

and more excited than i've been in years. This is my time.

This is what is your is time to go. And so I talked earlier about how the capital stimulants that came out from the fed, uh, and the and the bond buying they were doing and so on, LED to an inflation in a bunch of assets that, that capital ultimately didn't find its way into productive. But it's not about all of that capital finding its way into productive assets.

If enough of IT find its way in a productive assets, productive assets, meaning businesses that create something of value for customers and make money doing so, and as a result, can grow and create new jobs and create new areas of the economy, if that happens enough times over, there is enough growth in the economy, enough new jobs that are created, that really rationalizes all of the money that was ragen wasted on speculative nonsense over the past few years. And I think the fact that we've got a quarter, a trillion dollars sitting in VC coffers more than we have had, that's a quarter trillion dollars ready to fund the next generation of technology businesses that can build new jobs and create euros of the economy, new areas of growth that we've never seen before. And that's what happened in the path.

How do you think a person, let's say, say, you're plane poker and you just get punched in the face, seven rounds in a row, your stuck three bias. How does that person make the good next decision?

Now I I will tell you three stories from my last week, because my last week has been filled with these experience.

So let me let me just talk about the, the, the business of investing in the psychology of investing. So look at probably who has been the most incredible performer this year is kenric fin insight out. And right underneath him as the sky is the england there that who runs a place called, uh, millennium.

And then, you know, a close third will probably be T V common at S. A. C. Now how do these guys run their business? They have hundreds and hundreds of teams investing in all kinds of different things. And what they figured out over time is how to dial up and dial down the volume of whose performing. And what they have realized is that when you go through a pattern of losing money, IT is very difficult for you to then make incrementally good decisions.

And so they have a dynamic system that allows them to move capital away from those folks who are psychologically not in a great place to do IT, to move capital towards other folks who wear as a result, they're always winning. And I just want you to react to that because I think there's one thing that we can say, oh, venture is a special thing. It's not like anything else.

I personally don't think so. CoOperating across the entire life cycle. And I think that there's something to be said. And I saw IT in two thousand folks who have lost a lot of money make incrementally poor decisions. I think why Jason is firing a little bit of a hot hand was he mostly let us companies get marked up. And he was mostly frustrated the last couple years in valuations.

Early stage valuations.

lack of discipline, he's Operating effectively clean slate.

but I don't think it's a binary condition to H. I think generally, what you're saying is right. I'll tell you the reaction .

i'm seeing in the market. And on top of that, there are only seven, eight people who actually made money in this entire market.

Yeah.

the early .

stage investors have done well, early stage investors .

have done.

see, i'm in the black sex.

you girly. I mean, what about all the other thousands of people that contribute? People don't distribute shores.

We've talked about this a couple of times, not like it's so hard to make money and you when you have a chance to distribute, I feel really good .

on one that some of these companies know. I have a bloomberg r get my desk. And one thing that I look at every now then is the ownership table of some of these high five stocks.

And you'll see some incredible things, which is these folks have held on and they are holding billions of dollars now of paper losses that they have to go back to their L, P. S and say, position foundation. I know you wanted to fund cancer research. You know, I had nine billion dollars of gains, and now it's two groups.

So look, I think what .

you're saying generally is right. People are psychologically tainted when they take a big hit in the face. Everyone has this experience. My observation over the past two weeks, I ve seen a lot of p ms in public, A P M uh portfolio n managers as well as private VC all react to me in the same way when opportunities have kind of been discuss, which is i'm sitting on my hands. I mean, there is A P M. I saw this week of a, uh, yeah anyway, uh, I would say i've never seen him jard like I ve never seen him just shocked like we were talking about something that was so, uh, obviously up his ali, you know, such a great foot for him but he is just not doing anything that's worried .

about careers now. So I mean, I had I had across over investor me tell me that look, I think that things are oversold right now. This is an attractive time, right? Because because look, if i'm right that they're oversold and IT goes up, great. I make a little bit of money. But if i'm wrong.

i'm not not just losing money clear.

And why would I do that?

I right now, you guys the same is true in VC. So I had several VC this week who had to share e the same point of view, which is at our partnership meetings. I don't know what you guys are doing, sax, you're fun, but they're like our partnership meetings.

We just cannot a line on whether or not we're paying the right valuation. And so we're at a stands tile. We're just waiting to see when the quote market settles out and then we will make decisions because I don't want to be the guy in the VC context catching knives. But look, that's the near term psychological phenomenon. I think the reaction is everyone sitting on.

but over time, it's not I just told you the data from the last thirty years, only twenty two out of thirteen hundred funds have returned more than two point three times a billion dollars. It's not near term.

That's not the point I was I was try to make earlier, which was there's a quarter trillion dollars a micro point about the fact that there is going to be funding available. I IT doesn't matter if these guys are gna make money or not or they're going to make city investments or not, there is gonna a stimulating effect. All you need is one of the next trillion dollar mega aps.

To emerge from the quarter. Trillions in the city for the entire industry look fantastic. And for that business to transform the landscape of some party V.

C, not getting new jobs to be created, but we've never spied the way we've never seen that in history. We've never had that much powder sitting on the sideline. And this is where the free money should go.

IT should go to creating new companies that create new jobs. And IT is its found its way there. The trillions of dollars that have fuelled crazy asset bubbles left and right.

Some amount of IT made its way into funding the creation of new companies. They're onna create jobs. And that is the good thing of what's happened over the last couple of years despite the asset explosion of all these bubble things that have happened.

Amazing, cheap. I wanted to answer your question, said, what do you do if you get punched in the face seven times? You're running bad in a poker? Me, yeah.

If you look at the helm, you there are other people who you know go through their variants. I think a break will you take a break, go for a walk around the pool and you get different small me. One thing I like to think about is, hey, I am going to play a Better, play Better cards to start your hand and maybe play in position.

And in the analogy here, playing Better cards, you backing Better founders and Better products and then playing a position knowing where in the wife cycle of a company value is created in an that cost evaluation. So I am laser focus right now on just you know worldless teams that are running their business as well and that I can invest in early. And if there are founders out there like who are trying to figure this out and they are not getting funding, I think looking I think you said this last week actually that maybe two weeks ago.

And listen, your last valuation last year is a great valuation this year. And if you had people who wanted to invest last year who couldn't get in going back to your thirty million dollar valuation last year and talking off three million with the people who couldn't get in, you told them you all come back to when it's ninety million. Go see if they still want to put that bed in.

And then for the VS are out in the early stage, you know making bets on some fifteen million dollars, some twelve million dollar companies in the seed round. Um if if they're focused on customers and product, you have got a couple of hundred k in revenue is I think it's a good bad and and i'm i'm going to increase are investing in those type of companies and twenty million under fifteen million focus teams who understand that the climate has changed. If you are not taking the medicine you have to sex is excEllent tweet storm you're d cute from funding.

And this is very important that people understand what x said. If you do not accept the reality, a VC who has lived through one, two or three of these cycles going to disqualify you. They're not telling you why. They're just qualifying you, which is not a fit, couldn't get my partners around IT. Let's keep in touch.

Let me know how to be helpful. The other thing is an intern generation of investors have been coddling entrepreneurs. And in moments like this, sometimes you need to actually have hard conversations.

And if I don't know how you tell that entrepreneurs and you need to be actually five days a week in the office, you need to do a twenty five percent with, you need to stop all the extraneous spend. Forget the exposed brick walls in the kind bars we need to get down to just once and zeros. That's also an entire generation of capital, capital allocators who don't know how to do this job in a moment like this.

You've never had those conversations.

They've never had those conversations to build on feedbacks point. The idea that you you would be at a standstill about Price in a moment like this, to me, is shocking. If I mean, if I was an lp in that venture fund, I would write IT to zero. There should be nose intellectual stance to whatsoever in a moment like this.

yes. So investing were .

so investing .

valuations.

it's no sense though. It's up.

This is the time to invest, right? I mean, yeah.

I want to say something sort of positive to gets a lot of founders watched ed the show like IT. Look what Jason said, if you need to accept the reality and if you don't, you're going to have a bucket of you very cold water dumped on your head when you've got fundraising, realized you're not to make IT. And then obvious, we packing up shop very quickly so you gotta get, you got ta get a reality check and understand.

But look, great companies are built during downturns. Paypal was built during the dot com crash. My company, em, was built during the recession.

google, uber totally.

and the this goes on and on. So downturns are great time split companies because the war for talent subsides. So, so much easy to grew people.

There's a lot fewer competence getting funded. So there's way less noise in the ecosystem. The only thing that is harder is fund raising.

So you need to make sure that your money last, you do the right things. You focus on business fundamental. You don't deco yourself, give IT. And if you do that, you'll be fine.

You just brought up something incredible. I remember we raise money from microsoft at a fifteen point three billion dollar of valuation. The great financial crisis took hold and marked his credit reset evaluation.

We were already profitable, so we didn't necessarily need to raise that money. But we I think we raise the billion dollars at like a nine billion dollar valuation. So we took you thirty three, forty percent haircut, a downward, facebook had a downward.

We patted her baLances eet. And we said we are now gonna and crush and tear point. We were really able to compete much more effectively coming out of the G F, C against google for talent and against everybody else in that moment. Yeah and so if if if this is what people like oka willing to do, you have to really hold um people feet to the fire for founders were not him.

What is the fast stock code founder willing to do? You know, like you shut IT down like like literally the some founders. I find this very disturbing, but there are some fighters who are so unwilling to make the cuts or take the medicine that they would rather run the fucking car into the wall and hit the breaks, like, hit the fucking breaks, save your company, live to fight another day if you have six months of runway, get to twelve and then try to live to find major Prices.

You're told, right? Every single company that hits the wall and goes out a business that didn't do a round of layoffs, elves months before was asleep at the wheel.

that they were just testing and driving. They were texting and driving.

Where's the round of laws a year before they ran out of money that at least gave them more runway? They even do IT.

They could go the David, if you think about IT, your series, your seed round was hard getting into why comment was hard? Your series, say. Okay, IT was hard.

You had to do twenty five meetings, but you got a term sheet. You're serious. B, you got five people offer your term sheet, your series. D, cnd, where people begging you to take their money in saying name of Price.

So what does that founder think the next round of funding is going to be each round to became less work and higher valuations? And you know what? A generation also not all founders, but there's a group of founders who became Better at selling vcs, on investing in their company than selling customers on buying their product.

You have to take the same focus you had of selling people on buying shares in your company and put that into your a product, the actual service and raise your Prices. So many people are charging so little for their sas product or software, and they are like, I can make this business work. And we say to them, if you double the triple surprise, would you lose? What percentage of customers would you lose? They say we lose like ten percent.

And I like, did you just you have a million in revenue, two million, ten percent of two million. You've got one point eight. Would you rather make eight hundred thousand more and be break even right now? And there to ATS sometimes pounders just have this amazing moment like, okay, I guess we could charge more. And if we lost some customers, that wouldn't be the end of the world and we would be profitable.

I think this speaks to the fact that, you know, IT takes a very specific skill to be a very good founder. You need a level of intellectual curiosity. You need some at some moments to listen, but at some moments to know, just want to do what you feel is right.

But IT takes a lot of skill to be in investor, and I think we've closed over how heart that businesses as well because the reality is if, if, if Michael march were to tell you that you do IT, you would be hard pressed to not do not say yes, really told you to do that, you would do that because these are these are sort of the big, the big names in our industry. But the reality is the fact that is not happening also speaks to the fact that there is probably there shouldn't be a quarter million dollars of funds that are probably stranded in the hands of really inexperienced allocators. Um who are you going to lighted on fire for the most part and they're not going have the courage to sort of lead this.

see what happens. All you need is all you need, this one.

Everybody should think about what I don't know what how you phrase IT to fend sacks. But I say to them, when I invest our companies, listen, whatever things get really hard. And you have a conversation that is the hardest conversation that's making, the most nerves that is making.

You stare at the ceiling and ground, reflection teeth to your gums. I want you to just call me. And I can tell you, like you not being in the turn here, but you know, travis call me once or twice on a saturday and said, hey, that we're struggling with x.

What what do you think? And travis knows how to want a business a thousand times Better than me, but being a sounding board and giving your founders permission to come to when things are fucked up is critically important in investor. And being able to have an intellectually honest to your point month discussion about the hardest issues is really what the job is in my mind.

What is going to send this company of the rails? What is the big fear you have? And let's just put IT on the table and let's as has say, let's have a jams session.

Let's jm on that until we solve the problem. So if you're sufficing after you, you're scared know it's got to be an investor in your group. We'll have a candidate discussion .

if I to give a punch list of things if I was a found here right now, here here are the things that I would do is I would sit down and really look at your growth and you're burn and have an honest conversation with your cofounder or with one or two of your trust sic board members and really say what is the real valuation of this business today and what could IT actually be.

And if there's a big gap between that and where you've last raise money, the right thing to do is to think about in one bucket, resetting the valuation, in a second bucket, making your employees whole, and in a third bucket, managing your turn so that you extend your runway. I think if you could do those three things and take the hard medicine now, you will be much Better off for IT. You will be appreciated by your employees. And you have shown some real metal um in a real crucible moment to use as a how do .

you guys think the markets gonna settle out? You have any predictions on the bottom. I will tell you a statistics. I think Michael burry e put this out yesterday. He did not um he he deleted his tweet every day um very interesting character by the way but um he pointed out help from top bottom uh during the kind of o two era or one year two thousand era and then during the two thousand and nine year up uh you know of those those big draw down in the market, he looked at companies like microsoft, J P.

Morgan um I forgot which others but highlighted that you know on average IT took six times their total shares outstanding for them to go from top to bottom, meaning that the shares ultimately turned over six x the total of deluded shares out. And so far in those stocks, we've only seen half of the total shares outstanding turn over since peak. So and he's been making this case for, you know kind of a few days in a few weeks now, which is like, you know, the dead cat bounce s day where the markets going to be taking for quite a while.

And these days that big update call the bottle like this is dead and moment and is like if you look at kind of the structural rotation that's necessary for these markets to ultimately find their bottom, we've got several multiple still to go with respective volume that needs to trade before you find what the true market bottom is. So you know, IT was a really interesting kind of insight, this of statistic insight, that he pull together and put on twitter. See if you guys kind of think that, that might be the right way to think about IT and how you react. You know, these conversations are around. Where is the bottom going to be?

Can I plop this one charge that kind of speak to this? So this is CPI inflation versus S A fed funds rate. So if you look at this IT goes all back to nine hundred fifty four.

I shared that with you guys in the chat. The the two have moved more, less in lockstep with each other, which makes sense because the fed raises the fed funds rate in order to combat inflation. So fed funds and inflation sort of move and locks up.

If you look at what's happened over the past year, these two things have moved violently out of sink with each other. You have inflation now going only up to eight percent. Meanwhile, the fed funds rates only down like one percent.

Even with all the rate hikes and the talk of red hikes that we've had, we're only at a one percent. You fed funds now the expectation is, is going to go higher, the ten your tables over three percent. But the point is the fed is in a really tough spot here because he feels like we're going into recession, which would Normally mean you cut rates, but then you've got inflation demanding that we jack up rates far more.

And I think this is the problem and this what's going be very tough about our current situation as if we're going to recession over the next six months. What does the fed do about that? I mean, they don't really have much dry powder here in previous recessions like the G, F, C.

And O A. I mean, interest strates around five percent. So when they saw to zero, they had some serious, that was some serious relief. Here you are at one percent.

What do you do? You drop that to zero. And then meanwhile, inflation stall, rain paging at five percent.

This is what's so hard about IT. Then look at this other chart, which is, this came from a blog. A blog was called the most reckless fed ever.

So in this most reckless fed ever, they basic just took the fed fund rate of subtracted inflation to get the real fed fund rate, the fed fund rate, that inflation. And what you could see here is that starting around two thousand eighty nineteen, the real fed fund rate started going negative. And then very, very negative to the point now where basically negative seven percent.

So you know, why is that? Because the fed waited way too long to basically take away the punch ball and start reacting to inflation. You had, pal, say a year ago that inflation was transworld and then they didn't react to IT till the end of the year.

They just stopped the QE right then and there and then gradually started raising rates instead of these violent moves that we've had this year that are punching the economy into recession, that have causes the stock market crash. Now, what a power to say. A week or two ago, he said he doesn't see a risk of recession on the horizon.

Is like, what are you smoking? I mean, this is just like his inflation is transat common a year ago. You're wondering, like do we have Better data than the that the fed chair does? Because from we're we're sitting we're sing a stock market crash, a panic and a recession and he doesn't even see IT.

It's like denial is not just a river in egypt. This is crazy. Look, I mean, we call IT is a crash, but you know some people might just say that investors are violently reacting a to the shifting tides on capital availability.

But I will tell you, i'll say this one more time because I think it's so important um and it's my kind of prediction of the week. Uh, I really think we're gona run into a consumer credit bubble here. Um I do not think that consumers are gonna slow down they're spending or change their life style as quickly as investors are changing their investing style.

We have seen investors in public markets and private markets take massive corrective hits this week and last week, and they're changing their behavior in some of the stories we share today. But consumers are taking on more credit. They're opening credit cards.

They're taking up bigger loans. Prices are going up ten percent year over a year for them. And so the concern is if we actually do hit a recession and we don't see real wage growth.

And the consumer credit problem continues to grow. We're going to face a credit crisis in call IT, nine to you know, nine months to a year. We're going to wake up and be like the second, how our consumers is going to be able to afford all this credit very at all.

End of the great resignation. That whole concept of like fun employed and i'm going to flip n fts and i'm not onna go to work that's out the window. So been enjoying that. There are more shoes to drop here.

And I think consumer is one of them. And maybe there's systemic risk in the system that haven't been flushed out yet. And meanwhile, you've got a feature and denial about t what's happening, and you ve got a president state.

So is more focus. What happened in ukraine, happening in the next states, we let we have tweed d and tweet dumb on this case. Biden and power are going to go down as the worst present that you no IT is IT is like the anti .

regan Walker combination. I mean, we've caused .

this problem.

We all want to blame someone. The reality is there was a massive leveraging that happened going in the two thousand and eight, and we got to work IT out. We thought we were delivering, and I don't think we've been delivering since two thousand and eight. And all of a sudden.

the chickens come on home to roost or whenever the term is. And we're also a recently .

consumers and all after .

fourteen years ago, it's offer for fourteen .

years ago measures in four years.

austerity measures and long cycle here.

But if you look back through time, roughly, if you look at like the average mean p for the S M P five hundred IT can go down to his lowest three thousand IT could but I think the reality is there's a fed put somewhere in between here because you know um if we see the credit markets release sees up, which we would if the equity markets continue to retrench, um the fed will be forced to step in with liquidity and we back to where we were before.

So you know I actually think we're probably close to a near bottom ish here. Thirty eight hundred is in the S M. P. Five hundred. You are actually starting to see some of these early Green shoots of a market bottom.

What are those? It's when the most heavily shorted stock start to rip up in sort of the game stop, game stop like raley. And you're seeing that actually today. So it's a it's a really interesting day when the market is roughly flat, slightly down. But some of these companies, you percent .

square five, six percent, five percent, even lift one of five percent.

So right, this is the some in .

selling yesterday.

so much in selling yesterday that the Marks bouncing up from that look at the market is a leading indicator, not a lagg indicator. And so it's IT is just first and then the real economy just after that. And the risk right now, the stockmarket is telling us something about where the real economy is headed.

And the problem is that the fed and the central government don't really have the tools to fight the recession because interest strates are already so low. And, you know, I already spent all the money. I mean, they broke the glasses c case emergency last year.

They spent that last two trillion dollars of emerge y relief when, look, Larry summer told them they didn't need to do. Remember that Larry summers told them we would lead to inflation. I know no one wants to listen.

Very summers is like one of those guys you never want, correct? But Larry summers was correct. The administration did not listen to him.

Larry, who I know very well and not I love, is like girly as well, is she's generally right in the end. And so I would just, no, you know.

he was right. I mean, we do need to get back to the clinton, you know, moderate, like, baLanced the budget, stop spending some austerity measures like we could only work out of this. And I think what we're going to learn from this is the concept of free money and printing money is not sustainable.

And the concept of americans not going to work is not going to make the economy that americans want to live in. I know this sounds fucking crazy, but if you want to spend money and you want to enjoy life, you ve got to work. You can. We can have this kind of labor participation and we can have people flipping nfs for living. That's not work.

Yeah, you're right, Jason.

you're write about that. I saw this thing where um there's there's a new product implementation on airbnb that allows you kind of like you searched by camp grounds or searched by castles or sea food.

It's by vibe. It's bib search and .

and are to it's .

it's a perfect capilla .

ation of this moment where there are folks who have all of this ability they've never enjoy before that their mindset, you know especially if you're like a social striver like you can signal that you're different from everybody else by little slight style. But that works in a in a world where there's lots of free money. And when that free money gets taken away, i'm not sure that you're renting castles to spend a week year and a week there.

Well, I mean, we all want to talk about ubi. I think it's a very virtual signal thing to do, and it's a very like world positive thing to do. All this going to be so much money that we can just drop IT from the heathens and everybodys going to get a private jet, everybody's gone to get to flip their nfs and your board apes going to become worth a million dollars.

You big is going to be a million doors each. This is not reality, folks. Value is created when you make stuff in the world, when you write code, when you build companies, when you go to work. happened. But it's going to take a long term.

I mean, at some point, maybe we'll have some energy source and and you know robots building everything for us, but we got a rapper will see everybody at the oil in summit ah they'll be a bunch of stuff dropping. Do just a couple of program me. Please, please, please.

There are no more tickets, stuff. Do not trying the party. There's going to be security there.

Everybody with a badge, we going to be checking the badge just came off. Everybody has got a photo on their badge. Please don't bring a plus one.

And please, please, please, please do not try to crash. Thank you. Love you. I love you practicing. Everybody wants see you next time on the .

all in pocket.

Bye your.

winter.

We open.

The fans and.

Sexy tea.