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00:00:00 Speaker 2
How mad is that’s gonna get when?
00:00:01 Speaker 2
He sees my button situations.
00:00:03 Speaker 2
This I’m going to join.
00:00:04 Speaker 2
You know how?
00:00:05 Speaker 2
You doing?
00:00:05 Speaker 2
Oh my God, look at the caller situation looking for.
00:00:10 Speaker 1
Look at that.
00:00:18 Speaker 1
Come on.
00:00:21 Speaker 2
I was still awake, forwarding tower, yet still waiting.
00:00:24 Speaker 2
I mean, that’s of all five kids and we navigated the entire island of Sardinia for eight days.
00:00:32 Speaker 2
And by we think we navigated union, the crew navigated, and great seafood.
00:00:40 Speaker 3
Let your winners slide.
00:00:56 Speaker 2
Alright everybody, welcome to episode 91, episode 91 of the All in podcast.
00:01:01 Speaker 2
Yet we’re still.
00:01:01 Speaker 2
Here, lots of news to discuss this week.
00:01:03 Speaker 2
With me, of course, to chop it up from his deposition room, the war room to Raymond himself.
00:01:09 Speaker 2
David sacks.
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How you doing, brother?
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Big week for you.
00:01:13 Speaker 3
They’re all big weeks for figures.
00:01:14 Speaker 2
At all big weeks?
00:01:15 Speaker 2
Yeah, you look tired.
00:01:17 Speaker 3
Or recording pretty early today.
00:01:20 Speaker 3
You actually look really tired.
00:01:22 Speaker 2
We talked about still off the lake.
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I feel fresh.
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I was just wakeboarding this morning.
00:01:26 Speaker 2
Only Thomas, I feel refreshed.
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I’m refresh.
00:01:29 Speaker 2
And of course, in front of his $9 clip art that he blew up on easyprints.org the filter of science himself.
00:01:37 Speaker 2
His in freeburg.
00:01:37 Speaker 2
How are you, Sir?
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Always great.
00:01:38 Speaker 1
How many?
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To hear DJ Khaled.
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Are you working?
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It boosts myself.
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Esteem in my.
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Morale to be with you every morning that we get to connect over zoom.
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But I’m glad that your performance has been stratospheric.
00:01:49 Speaker 2
The last three weeks we’re going on a hot streak with this, he continued on episode 91 and missing many buttons this week.
00:01:57 Speaker 2
Got we’ve got at least a 3 or 4 button August going.
00:02:01 Speaker 2
How are you doing a dictator from your remote island?
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Did you you invaded an island market scope.
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Another 5% of 1 more button comes.
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I’m done.
00:02:10 Speaker 2
Under oh, I love it. So this is starting to set up, so we should go to 25. It’s a ********
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Not enough the more.
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Bullish he gets on the market, the Morung.
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Buttons handy.
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What are the low ride teams on right now?
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Of the button.
00:02:22 Speaker 2
Or are you wearing shorts?
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What are?
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You wearing shorts so?
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I’m wearing a beautiful leaning shorts can.
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You stand up and show us.
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Let’s see.
00:02:33 Speaker 3
Very interesting.
00:02:36 Speaker 4
That’s a.
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Little too much size, yeah?
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It’s like a chicken wing.
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They look tight too.
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Very tight.
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Are you? Yeah, those.
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Are definitely your?
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Are you wearing like a?
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Children, science or something about a junior.
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I like, you know, I like the tighter sizes.
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Like the tighter sizes I can say.
00:02:53 Speaker 1
Here’s my boss.
00:02:53 Speaker 2
Make one part of Valley High.
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Accentuate all the little bumps and not doing much information.
00:02:59 Speaker 2
Alright, let’s start with there’s a lot to talk about this week.
00:03:03 Speaker 2
I think one of.
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The most interesting things.
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Lastly, we’re talking about it in the.
00:03:07 Speaker 2
Group chat that doesn’t exist vision funds $21 billion investment loss for the quarter. Masayoshi Son did a really great YouTube video. I sent it, right. Did he get any rest? Watch the video. Yeah. No.
00:03:21 Speaker 2
OK, it’s it’s.
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Really interesting to watch we put it in.
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The show notes it’s like.
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A 6 minute interview he put on.
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His earnings.
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Page, right, like right when they put out quarterly earnings, he’s like.
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Here’s my Internet.
00:03:31 Speaker 2
He comes to a podium and basically talks about the vision fund. Obviously, if people don’t know, the Vision fund one was $100 billion largest venture fund ever raised.
00:03:39 Speaker 2
And soft expert market CAP is 66 billion.
00:03:43 Speaker 2
Here’s the quote from the article sunset on Monday, that SoftBank would now subject itself to product cost cutting exercise after a $59 billion investment gain at the two vision funds, almost completely reversed over the past six months.
00:03:58 Speaker 2
They were up almost $60 billion at the peak, and it came crashing down. Massa kicked off the presentation.
00:04:04 Speaker 2
Portraits of chugga Choo.
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Agawa Yawkey this is the founding.
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Logan, Japan took Agawa shogunate and.
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You look at them, killing them.
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It’s so hard. Yeah, I.
00:04:21 Speaker 2
Mean it, but it was still great.
00:04:23 Speaker 2
Let me just play a.
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Clip for you.
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Here’s a 68 second clip, and we’ll talk about it right after, and then we’ll get into what all this means.
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This is a portrait of Tokugawa.
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He actually made a big loss against Takeda and came back in the background.
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Failed to cover years.
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Had to face.
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Target the single which is much, much larger army than theirs and most of the others.
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Actually fits additions to not be damaging, but also that they should not go for it.
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Actually these are the same as the castle, however.
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Didn’t want to lose his face so that he get out from the castle, had a battle, made a complete loss and suffer and came back and that.
00:05:08 Speaker 4
Actually one lesson he tried to remember and remind her she’s wrong learnings and put it into this join. So since the foundation of custom groups are made-up of two consecutive quarters loss for previous quarter and this time quarter consecutive.
00:05:25 Speaker 4
We we made 3 trillion level of the loss.
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So in total 6 trillion those was made in the past six months.
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So I did.
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I need to remind that myself.
00:05:39 Speaker 2
Pretty spectacular loss. And then he goes on to take some Q&A and this is the I.
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Guess the the killer quote.
00:05:45 Speaker 2
When we were turning out big profits I became somewhat delirious and looking back at myself I am quite embarrassed and remorseful.
00:05:51 Speaker 2
You remember, of course, that he complained a little bit in the in this whole thing about how there was a giant bubble without ever recognizing that.
00:05:58 Speaker 2
He kind of created the bubble.
00:06:00 Speaker 2
With a $4 billion check to we worked at a $47 billion valuation after it’s running state meeting with Adam Newman.
00:06:07 Speaker 2
This chart is pretty incredible.
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This is the net income quarterly.
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You can think of the SoftBank as like a holding company of a bunch of different assets, including Alibaba, previously Uber, and all of his vision fund stuff.
00:06:20 Speaker 2
97% decrease in terms of deployment of capital. So if we look at capital deployment as well, nobody ever put this much money to.
00:06:27 Speaker 2
Work especially in private.
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The second chart to look in Q1 of 2021 they put 20 billion into work and then Q1 this year they’re.
00:06:38 Speaker 2
Putting 600 millions to work.
00:06:40 Speaker 2
At just quick reflections on this, what we saw here with Masayoshi Son deploying $100 billion at the top of the market into and he’s basically creating the market option.
00:06:50 Speaker 2
Are there lessons here or takeaways for?
00:06:53 Speaker 2
I mean, I think that people don’t seem to understand that.
00:06:59 Speaker 2
If you’re gonna attempt to be great, there are gonna be moments where you look the exact opposite of great.
00:07:06 Speaker 2
They know the guy that takes the final shot as a team guy that can miss the final shot.
00:07:11 Speaker 2
And here the guy over his, you know, 15 year career has had some huge ups and downs. This is also the same guy that found a way to return 25 or $30 million and made 125 billion off of Alibaba.
00:07:27 Speaker 2
That’s the same kind of person who has that kind of risk tolerance. He was, for seven minutes or something, the richest person in the world, and then lost 99% of his wealth from the.com bubble.
00:07:38 Speaker 2
I have enormous respect for personalized this because I feel like it takes enormous amounts of courage.
00:07:43 Speaker 2
I’ve said this before.
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Most people jibber jabber about investing in all of this stuff, and push comes to shove, they crumble like little ******* and run into Monique Hotel.
00:07:54 Speaker 2
It’s hard to put lots of money to work and this.
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Is the guy that’s done it.
00:07:58 Speaker 2
So the same person that can make 125 billion turns out is the same person.
00:08:03 Speaker 2
That can lose 30 days.
00:08:06 Speaker 2
And so one thing is I would just keep in mind that this is a resilient guy who seems to land on his feet.
00:08:13 Speaker 2
And the second thing that nobody talks about is how smart Saudi Arabia and Abu Dhabi were in how they structured the investment into the Vision Fund, because half, more than half their investment is in preferred equity, which is effectively dead.
00:08:25 Speaker 2
That pays a coupon.
00:08:27 Speaker 2
And you see it now where SoftBank by the way, who has been pretty smart in how they manage their Alibaba positions, have been using these derivatives and forward swaps to be able to sell and manage their liquidity.
00:08:39 Speaker 2
So it turns out that, you know, even if the visions on grace, even Saudi Arabia and Abu Dhabi will have made money because.
00:08:47 Speaker 2
I think they can pay the 6% coupon.
00:08:50 Speaker 2
On, you know, $50 billion is a lot of money. Over 6789 years, it’s a lot.
00:08:56 Speaker 2
Process has found a way to sell down 25% of Alibaba, which is no trivial feat for half a trillion dollar company.
00:09:04 Speaker 2
And this guy gets to keep swinging.
00:09:06 Speaker 2
And if he, you know, hits it one more.
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Time he’ll end.
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Up with happiness.
00:09:09 Speaker 2
This part is pretty great.
00:09:11 Speaker 2
Sassy look at this.
00:09:12 Speaker 2
This is the gamer loss on investments at the Vision Fund.
00:09:15 Speaker 2
You can see the first vision fundraising up, then coming down, I think after that summer of IPO’s that we had in the Airbnb.
00:09:23 Speaker 2
Huber days and then a huge peak run up in 2021 and then coming crashing down. Partly he wasn’t selling any portion of this, but to me with the big lesson is like maybe playing some of these winners who they sold 10 or 20% on the way up.
00:09:39 Speaker 2
This could look like a completely different outcome, but I agree with this Marty. He swung for the fences and there was downside protection built in for the LP’s into somebody’s saxbury or thoughts.
00:09:49 Speaker 2
Any lessons here in terms of the impact on our overall ecosystem or that you can take as a capital allocator yourself?
00:09:56 Speaker 3
Well, Jason, I think Massa did something you could never do, which is.
00:10:01 Speaker 3
They made a mistake.
00:10:04 Speaker 2
Personal question.
00:10:07 Speaker 2
Well, when I have my first mistake, I’m certainly willing to admit it.
00:10:09 Speaker 3
Second measure that you ran 100 billions of sovereigns instead of 100 thousands for doctors and dentists and.
00:10:10 Speaker 2
I’m waiting.
00:10:18 Speaker 3
So you can put yourself in master traditions, yes.
00:10:22 Speaker 2
Well, back in the morning.
00:10:30 Speaker 4
He’s coming.
00:10:30 Speaker 2
But there have been hibernating.
00:10:34 Speaker 3
Wow, you know, look, I think that.
00:10:36 Speaker 3
Prospect obviously basing.
00:10:37 Speaker 3
Decisions that were, you know, they were they.
00:10:40 Speaker 3
Were sort of Peach.
00:10:40 Speaker 3
Decisions they were, they were a.
00:10:42 Speaker 3
Little bit bubble, even taking chips off.
00:10:44 Speaker 3
The table when they published for them.
00:10:45 Speaker 3
It’s easy to fall into these bubbles because the psychology of it is so powerful.
00:10:50 Speaker 3
And as you know, Bill Gurley pointed out these bull markets.
00:10:53 Speaker 3
Or more like a sawtooth, which is they gradually go.
00:10:56 Speaker 3
Up for 9 and 1112 years. And then when they end, they just, you know, it’s like an elevator going down.
00:11:02 Speaker 3
So you know if the market it continued for another couple of years master, I would have made a lot of money.
00:11:09 Speaker 3
Today that lucky took her phosphorylation losses.
00:11:11 Speaker 3
This was a very.
00:11:14 Speaker 3
You for culturally Japanese speech.
00:11:17 Speaker 3
I mean, he didn’t.
00:11:18 Speaker 3
Commit super at the end, but it was kind of the.
00:11:20 Speaker 2
Yeah, he was heading that direction.
00:11:22 Speaker 2
They might have moved the camera off.
00:11:24 Speaker 2
Oh my God.
00:11:25 Speaker 2
What is he doing with that?
00:11:26 Speaker 3
Sword verbal equivalent, basically.
00:11:29 Speaker 3
And look, he took responsibility.
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What else can you do now?
00:11:33 Speaker 3
One thing I would.
00:11:33 Speaker 3
Quibble about is the idea that.
00:11:36 Speaker 3
That SoftBank calls this bubble, you know, once it’s just SoftBank.
00:11:40 Speaker 3
We had tons of new money.
00:11:41 Speaker 2
Tiger comes to mind. Sample.
00:11:42 Speaker 3
Tiger had huge funds that were deployed very quickly, but there was a lot of.
00:11:46 Speaker 3
So-called tourist money, basically money, some crossover funds, investors who are not primarily diseased came as the ecosystem of the last years and a lot of that was driven by sovereigns and by liquidity.
00:11:58 Speaker 3
So you know, you can’t forget that we had $10 trillion of liquidity pumped into the system over the last couple years and many.
00:12:06 Speaker 3
Billions of that found its way into the tech ecosystem, and fundamentally.
00:12:10 Speaker 3
You know VC?
00:12:11 Speaker 2
Is not that.
00:12:12 Speaker 3
Scalable there was an attempt to make it scalable.
00:12:15 Speaker 3
There’s nothing to push more.
00:12:17 Speaker 3
Money into VC Chase on.
00:12:18 Speaker 2
Why do you think it’s scalable?
00:12:20 Speaker 2
Why isn’t it scalable ’cause people have?
00:12:21 Speaker 2
Tried right this.
00:12:22 Speaker 3
Well, it’s across business.
00:12:22 Speaker 2
Work around the first time.
00:12:24 Speaker 3
I mean this one.
00:12:25 Speaker 1
What is it doing?
00:12:26 Speaker 2
It is cable which is that if you try to scale it.
00:12:29 Speaker 2
Will return will.
00:12:30 Speaker 2
Go to 0.
00:12:32 Speaker 3
So it’s kind of the.
00:12:33 Speaker 3
Same thing right like I want.
00:12:34 Speaker 2
To I want to just critique the strategy for a second because you know, we’re talking about as this market conditions caused these massive write down and that is the only reason that these funds have suffered.
00:12:46 Speaker 2
But you know.
00:12:46 Speaker 2
If you read a lot of the stories of Moss’s investments in a number of these companies and the full list is available and how?
00:12:53 Speaker 2
Much he invested.
00:12:54 Speaker 2
There are many, many stories that I’ve heard, many of them personally, from CEOs that have met with Masa and.
00:12:59 Speaker 2
Raised money from him.
00:13:00
You go into.
00:13:01 Speaker 2
Masa, you tell them the bigger the story you tell.
00:13:03 Speaker 2
Them more excited.
00:13:04 Speaker 2
He gets the more of the.
00:13:05 Speaker 2
World you can capture.
00:13:06 Speaker 2
And you go, when you’re raising $100 million, he’s like, I’ll invest 400 million.
00:13:10 Speaker 2
You think you’re raising 25 million? He’s like I.
00:13:11 Speaker 2
Want to give you?
00:13:12 Speaker 2
150 million and his his motivation was always give you more capital so you can go capture the market.
00:13:20 Speaker 2
And the problem in that model is that by giving you so much money, capital becomes your primary asset as a business and capital needs to be the fuel that enables your assets as a business to accelerate.
00:13:33 Speaker 2
But as soon as capital itself becomes your primary asset, the business is doomed to fail.
00:13:38 Speaker 2
And that’s a really key point if you let’s say.
00:13:40 Speaker 2
And let me, let me be very specific about what I mean.
00:13:43 Speaker 2
Let’s say you have a directed consumer business that requires online marketing.
00:13:47 Speaker 2
And your business grows well and you spend $100 to acquire a customer. Suddenly someone says, here’s a billion dollars to spend on acquiring customers.
00:13:55 Speaker 2
As soon as you have to start deploying a billion dollars, your cost of acquisition goes up, the number of customers per dollar spent goes down, and the business itself starts to look upside down and fail.
00:14:04 Speaker 2
And that’s what happened with a number of these businesses that must have put in here.
00:14:07 Speaker 2
But over 5 checks and we work is a really well documented example in terms of what happened when they started to accelerate their growth beyond the natural course of the business because of the amount of capital that they took.
00:14:18 Speaker 2
It really started to.
00:14:19 Speaker 2
Hurt the fundamental profitability in your in.
00:14:20 Speaker 2
Economics of the core assets of the bit.
00:14:23 Speaker 2
And this strategy theoretically can work to a degree, but Massa took it to a level that had not been seen before.
00:14:31 Speaker 2
I think I highlighted three guys.
00:14:32 Speaker 2
Like back in 20.
00:14:35 Speaker 2
11 I think when Andreessen Horowitz, they picked me on this idea of trying to raise $25 million in my company, Mark was like, we’ll give you $40 million, you can accelerate your growth and he’s like, we want you to go capture the market and Peter Thiel always used these terms. Look after tomorrow.
00:14:47 Speaker 2
And these bullets?
00:14:50 Speaker 2
Let’s chill.
00:14:50 Speaker 2
Yeah, Reid Hoffman with Blitzscaling and and the mode of instant is look we’ll give you more money because the the core asset of the business were the core aspects of business work.
00:14:59 Speaker 2
So the money could be more fuel for the fire.
00:15:01 Speaker 2
The problem is if you overindulge if you put too much money and the asset cannot handle that much capital.
00:15:07 Speaker 2
The whole thing collapses and we take even met examples of this in his portfolio.
00:15:12 Speaker 2
And I think that the strategy is worth highlighting that there are some issues with that strategy across all these business categories.
00:15:18 Speaker 2
It doesn’t always work.
00:15:19 Speaker 2
The core issue here I think is and then I’ll go to use accents.
00:15:23 Speaker 2
The core issue here that you’re describing is exactly correct, and it really is up to the founder to decide what they’re going to do with that capital.
00:15:28 Speaker 2
The work example is so instructive because they were buying undermarket buildings in the in the tenderloin and then marking them up to, you know, Class A office space and getting those prices.
00:15:39 Speaker 2
Once they got them off the money, he started buying Class A and offering sits.
00:15:43 Speaker 2
At Class B prices and set the whole business outside in rates in which you can deploy capital?
00:15:44 Speaker 1
Like, yeah.
00:15:47 Speaker 2
Yeah, does.
00:15:48 Speaker 2
Not flex, right?
00:15:49 Speaker 2
And so in all businesses, understanding the rate at which you can deploy capital to grow is critical to understand how much capital you can.
00:15:56 Speaker 2
In raise.
00:15:57 Speaker 2
And this.
00:15:58 Speaker 2
Too much money and you can you flex beyond.
00:16:00 Speaker 2
What their natural condition of the businesses?
00:16:02 Speaker 2
In terms of capital deployment?
00:16:03 Speaker 2
The economic fall apart and the business itself looks terrible and eventually you will have a write down and the distraction on the foundry.
00:16:10 Speaker 2
Sticky analyst Adam Newman.
00:16:12 Speaker 2
He was easily distracted for buying surf machines and companies and started kinda priorities.
00:16:15 Speaker 2
Send out when we deploy that much capital so you find unnatural.
00:16:19 Speaker 2
Ways to rebuild.
00:16:20 Speaker 3
On that point.
00:16:21 Speaker 3
I think there is a belief on the part of SoftBank, but they did publicly espoused, which is that they could be the Kingmaker totally.
00:16:26 Speaker 3
And in fact.
00:16:27 Speaker 3
You know, we had some startups that were in competitive markets and SoftBank would basically announced that we’re going to be.
00:16:32 Speaker 3
Annoying, we’re going.
00:16:33 Speaker 3
To be picking a winner.
00:16:34 Speaker 3
Annoying though.
00:16:35 Speaker 3
Dinner and writing them reviews? Check. And everyone kind of had to play along because if your competitor got that 100 or $500 million check, then you would be presumably way behind.
00:16:45 Speaker 3
So there was this belief that they could be a kingmaker and make the difference, and I think that what we saw is that, for whatever reason, partnerships are the dynamics of papers talking.
00:16:54 Speaker 3
About that that.
00:16:55 Speaker 3
Strategy just didn’t really work that well and it what it really goes down.
00:16:59 Speaker 3
To is that.
00:17:00 Speaker 3
These can be helpful, but they don’t ultimately cause the the the winning companies to be the winner.
00:17:07 Speaker 3
So this idea that you could be a kingmaker, I think was a little bit flawed.
00:17:11 Speaker 3
I think one way that tiger actually improves on this model.
00:17:15 Speaker 3
Was it?
00:17:16 Speaker 3
They never tried to be a kingmaker.
00:17:17 Speaker 3
They just they actually went the other direction, which is we’re going to own less your company.
00:17:21 Speaker 3
We try to be passive.
00:17:22 Speaker 3
Non diluted capital and they would do high price rounds but.
00:17:27 Speaker 3
You know, with with reasonably sized checks.
00:17:29 Speaker 3
But they didn’t try.
00:17:30 Speaker 3
To go for 2530.
00:17:31 Speaker 3
Percent ownership at a.
00:17:32 Speaker 3
Late stage and founders did like that model better.
00:17:35 Speaker 3
Now as it turned out, they both had the market timing wrong, but I think this kingmaker aspect was was a problem and one other.
00:17:44 Speaker 3
The aspect of that, I think, is that.
00:17:46 Speaker 3
And I don’t want to beat up on something too much last night slept in those records, but I think one of the mistakes they made is you see them writing multi $100 million checks into companies that were at a very, very early stage.
00:17:59 Speaker 3
Sweetheart, three companies frankly that we saw were.
00:17:59 Speaker 2
Free product market said.
00:18:03 Speaker 3
Like see investments.
00:18:03 Speaker 2
Brandless was the perfect example.
00:18:05 Speaker 2
There was a company that made like soaps and dishwashers and cereal, but they had no brand on it with like Uniqlo of this.
00:18:11 Speaker 2
And it gave stickies and I think.
00:18:13 Speaker 2
$200 million.
00:18:14 Speaker 2
And I was like this is.
00:18:14 Speaker 2
A seed stage company makes no sense.
00:18:15 Speaker 4
Right, right. They were I.
00:18:17 Speaker 3
Mean? Like they were like $500 million? He checked into robotics companies effectively.
00:18:22 Speaker 3
It is because that you know the stopping kind of thesis, and I think sometimes it again.
00:18:27 Speaker 3
This looks like a kingmaker.
00:18:28 Speaker 3
If if you’re a VC and you think you’re the one with the thesis and you’re the one who’s going to make the difference, it’s actually a seductive fallacy to fall into.
00:18:38 Speaker 3
It’s the founder rested thesis, and you can’t.
00:18:41 Speaker 3
You can only do so much to help.
00:18:42 Speaker 3
And you can’t really force it.
00:18:44 Speaker 3
And so I think they ended up making.
00:18:46 Speaker 3
Some having some really big chests into.
00:18:48 Speaker 3
Companies that were really risky.
00:18:50 Speaker 3
And you know the way that we do growth investing is that you know it’s milestone based.
00:18:55 Speaker 3
We’re writing the the size of the check is proportional.
00:18:58 Speaker 3
So they’re not a proof.
00:19:00 Speaker 3
That the company has and and.
00:19:00 Speaker 1
Right.
00:19:02 Speaker 3
Look, there’s nicely I’ll say about Softbank’s.
00:19:04 Speaker 3
Recently we’ve actually done some fast deals with them, but I think there are some really good deals.
00:19:08 Speaker 3
And they’ve written checks.
00:19:09 Speaker 3
That I think are appropriate to the size of the of the company and the amount.
00:19:12 Speaker 3
Of proofs they have.
00:19:13 Speaker 3
And they’ve been really easy to work with and I look forward to doing more deals with them, but I think it would be lose them to do more deals like that where.
00:19:21 Speaker 3
Again, check size is related to proof.
00:19:22 Speaker 2
I think, said SoftBank in hindsight.
00:19:25 Speaker 2
Made one.
00:19:27 Speaker 2
Critical. Critical.
00:19:28 Speaker 2
Error and only one.
00:19:30 Speaker 2
And everything else was sort of ascetical fee with that one error, which is at in their fund documents.
00:19:36 Speaker 2
They need this, a 10 year fund.
00:19:38 Speaker 2
Now let me explain blithering error.
00:19:42 Speaker 2
That is the status quo for all these funds, and the more nuanced part of that.
00:19:48 Speaker 2
Decision to make.
00:19:48 Speaker 2
It a 10 year fund, is that your investment?
00:19:50 Speaker 2
Period is only 5.
00:19:52 Speaker 2
So you’re only allowed to put the money in for the 1st 5.
00:19:56 Speaker 2
And then you have to basically manage the portfolio because there’s an expectation that you’re raising funds. So you follow the presence of $100 billion in a five year in dressing, right?
00:20:05 Speaker 2
The math says, Oh my gosh, OK, well, I need to put 20 billion out per year and then you try to look for, I don’t know let’s say 50 companies a year while the mean check size now a little.
00:20:16 Speaker 2
I don’t believe the 400 million.
00:20:18 Speaker 2
That was he.
00:20:20 Speaker 2
You see afterwards the very, very smart private equity folks who saw the fabulous here fix it.
00:20:29 Speaker 2
So Blackstone Silver Lakes when they came on the heels of soft and what they did was they raise funds with a 15.
00:20:36 Speaker 2
And 20 year life.
00:20:38 Speaker 2
And what that allows them to do with what would it would have allowed massive you in this situation was just slow it way way down, face yourself and do more deals with much more capital and then be patient and say I’m going to have a 10 year investment.
00:20:54 Speaker 2
And I think that that would have faced and they would have looked incredible right now because they would be the Kingmaker in Loma where there is no money flowing into venture, an early stage step.
00:21:03 Speaker 2
So in my opinion, I think it was just that it was such an ambitious feat that when it came time to execute, whoever was really in charge of those details kind of talked to them and they should have realized the math.
00:21:14 Speaker 2
Didn’t work.
00:21:16 Speaker 2
For a 5 year fund life and they should have made it a 10 year fund light or.
00:21:20 Speaker 2
10 year investment.
00:21:21 Speaker 2
Life, which would have put a 20 year fund life.
00:21:23 Speaker 2
On those injured.
00:21:24 Speaker 2
I think it would have been fun. Yeah. I mean, if you look at it as 60 months, maybe you take out August and like the holidays, you got basically 50 months or 400 hundred billion, 2 billion a month, 500 million a week. I mean, how do you even process that many deals?
00:21:31 Speaker 1
Welcome.
00:21:37 Speaker 2
But already in.
00:21:38 Speaker 2
The diligence by buying a strategy has to go.
00:21:40 Speaker 2
To zero, yeah, it was a crazy strategy.
00:21:44 Speaker 2
If you can breathe, you didn’t need if.
00:21:46 Speaker 1
You can get a meeting you.
00:21:47 Speaker 2
Get some money.
00:21:48 Speaker 2
I mean basically I mean and and if they had just I I’ll say there’s there was one tradition.
00:21:53 Speaker 2
Once you know.
00:21:55 Speaker 2
No, and he’s forcing him to have a team that is so.
00:21:58 Speaker 2
Broad and large and.
00:22:00 Speaker 2
Diffuse that is not the scheme.
00:22:02 Speaker 2
This is another thing that was lost to.
00:22:04 Speaker 2
You know, for.
00:22:04 Speaker 2
Us to talk about Rex, correct?
00:22:07 Speaker 2
Never will, never and is not ever assuming stories.
00:22:14 Speaker 2
OK.
00:22:14 Speaker 2
It is like basketball.
00:22:16 Speaker 2
You can be on a team, but you are temporary or you’re not Steph Curry.
00:22:21 Speaker 2
You are Draymond Green or you’re not Draymond Green.
00:22:23 Speaker 2
You are LeBron James or you’re not there, Garris.
00:22:26 Speaker 2
Miss on a team there?
00:22:27 Speaker 2
Tristan Thompson, Bronski Beat and you come together and the team can win a championship.
00:22:33 Speaker 2
But there are these exceptional individuals, yes, and the firms that have really done well consistently over decades embrace that philosophy benchmark Sequoia, you know, these guys don’t try to feed their team oriented, glad handing approach, but they also don’t allow the team to get through diffuse that.
00:22:53 Speaker 2
There’s 500 people in round working money because you basically then returned the beta of the market.
00:22:58 Speaker 2
And if the market doesn’t look good in that vintage, then all of the returns look pretty crap.
00:23:03 Speaker 2
The lesson for me in all of this is I think we we talk about riding the winners on the show that came from just so people understand.
00:23:09 Speaker 2
When he said ride winners in this, famously in the in the opening song here, what we were talking about was like, don’t sell your entire position like when Sequoia sold their entire apple.
00:23:18 Speaker 2
Position or or other people have done, but pairing your position would have changed. The whole story is he had paired 1020% of some of these names that were breaking out, but along the way oh why. Go ahead ’cause I I think it’s.
00:23:30 Speaker 2
So I think the opposite he.
00:23:32 Speaker 2
Would have had about a year of those.
00:23:33 Speaker 2
Sequoia just put out an entire document and a road map for becoming an Evergreen fund.
00:23:39 Speaker 2
But, and I looked at them and what I thought to myself is all of this looks incredible unless the market goes down and mental health.
00:23:48 Speaker 2
And then the market went way, way down wise because there will be systems work in a park and hold money.
00:23:52 Speaker 2
Well, OK.
00:23:53 Speaker 2
But they also allowed the revolving liquidity mechanism for their LD.
00:23:57 Speaker 2
So you know, you’re a Cancer Foundation and you want to fund Cancer Research.
00:24:01 Speaker 2
And you expect that way to give you back money.
00:24:03 Speaker 2
You fill out a form, then Sequoia basically shrunk.
00:24:06 Speaker 2
To the money.
00:24:08 Speaker 2
Well, excuse me, but you can see how all of a sudden this thing very quickly get out of control, because then we’re disappointed that that money they’ll have to borrow it or liquidate some positions.
00:24:16 Speaker 2
But the whole point is synonymous.
00:24:17 Speaker 2
Winning positions, and this is what?
00:24:19 Speaker 2
They said yeah, so my.
00:24:20 Speaker 2
My point is, I really think that.
00:24:21 Speaker 2
David said this.
00:24:22 Speaker 2
Before, I think this VC job is to be easy.
00:24:25 Speaker 2
It’s hard enough to do that job well.
00:24:27 Speaker 2
And if you think that you’re going to cascade across all asset classes and do better.
00:24:32 Speaker 2
Than the market.
00:24:33 Speaker 2
It’s an extremely high bar that creates tremendous pressure.
00:24:36 Speaker 2
And forcing you.
00:24:38 Speaker 2
The briefings on like death and all of these leverage lines which when markets go up will work in your favor but can very quickly turn against you.
00:24:47 Speaker 2
I I disagree completely.
00:24:48 Speaker 2
’cause when if you look at where you’re at a private company and you’re you own some private shares, you know the graph and you you know the velocity, you know the management team, you have more insights than everybody.
00:24:56 Speaker 2
You got a massive information edge, ’cause.
00:24:58 Speaker 2
It’s all based on insider.
00:24:59 Speaker 2
Information before it’s public and pairing their positions in private.
00:25:02 Speaker 2
It can be amazing because you have some overvalued company because someone like Marco Tiger comes along that overvalues it.
00:25:09 Speaker 2
So for venture funds, I think when you start hitting these 1500 X is turning 10%, turned 20% along the way, which master could have done in these private names especially would have been brilliant. You’re saying don’t distribute and just hold on and?
00:25:22 Speaker 2
You don’t give people give.
00:25:24 Speaker 2
You healthy for one liquidity, no, no, no.
00:25:26 Speaker 2
I’m saying if you have the opportunity to sell in secondary.
00:25:30 Speaker 2
You should spare your position in your Windows 10 or 20% two or three times. That’s what I thought about after I did that.
00:25:32 Speaker 1
So I’m not.
00:25:32 Speaker 1
I’m not saying that.
00:25:36 Speaker 2
This would be a different position, so.
00:25:38 Speaker 2
But like you’re using SaaS, you’re using Apple and Sequoia as an example.
00:25:42 Speaker 2
You do remember the trajectory of Apple basically went to a $4 billion market cap for years languishing I.
00:25:48 Speaker 2
Mean the idea that.
00:25:50 Speaker 2
This quarter would have held those shares since they had some proprietary views.
00:25:54 Speaker 2
Why the user what?
00:25:56 Speaker 2
They just had a property in 20?
00:25:57 Speaker 2
Was on depth.
00:25:59 Speaker 2
Four steps you can.
00:26:00 Speaker 2
See the YouTube videos when Steve Jobs came back.
00:26:02 Speaker 2
And said we may not make it.
00:26:04 Speaker 2
Yes, but comma that in that.
00:26:07 Speaker 2
That is part of the opportunity.
00:26:08 Speaker 2
But putting that aside, that’s exactly what the career duties are saying.
00:26:11 Speaker 2
We want to hold the legendary companies or legendary grants with the great.
00:26:15 Speaker 2
That LE in hindsight. How do?
00:26:18 Speaker 2
You do it today.
00:26:19 Speaker 2
Is you is unity a legendary company or should we have distributed at $165?
00:26:25 Speaker 2
Sure, well.
00:26:26 Speaker 2
That’s an extremely hard question.
00:26:28 Speaker 2
And I’m saying you can mitigate that question by pairing your position 1020% so you have the best of both worlds. So ask what do you think?
00:26:34 Speaker 3
Well, I think it’s it’s hard to pare down a position while the company is still private, because the companies don’t don’t want you to buy in March.
00:26:43 Speaker 3
But once they do become public, then the question is when you distribute it.
00:26:47 Speaker 3
We talked about this.
00:26:48 Speaker 3
I think it sounds like something was sitting on quite a few large public positions and could have distributed it.
00:26:55 Speaker 3
I’m not fully familiar with their structure, but.
00:26:56 Speaker 3
Given that they had.
00:26:57 Speaker 3
All this.
00:26:57 Speaker 3
Debt seems like you’d want to pay off all the.
00:27:00 Speaker 3
Debt as soon as you.
00:27:03 Speaker 3
And missing that you have to do that.
00:27:05 Speaker 2
They had a preferred, better preferred coupon matchup, APS and and Adia, every year. I think it’s like 3 or $4 billion.
00:27:12 Speaker 2
It’s well, it’s documented, but that’s the 6% to face that they were owed on their $50 billion.
00:27:18 Speaker 3
But do they pay it off?
00:27:20 Speaker 2
The estate of Ear dissipater group.
00:27:22 Speaker 1
Yeah, OK. So.
00:27:23 Speaker 3
I mean like I would just say this bubble it’s.
00:27:25 Speaker 3
Easy, you know.
00:27:26 Speaker 3
High size 2020 it’s really easy to point out these mistakes after the market.
00:27:30 Speaker 3
Creator, you know my experience with these bubbles, whether you go back to 1989 or 2021, is when you’re in them.
00:27:37 Speaker 3
They’re very powerful psychologically. You know, everyone’s talking about how everything is going up and we, I think actually had some really good commentary on the show about back in November about how it.
00:27:47 Speaker 3
Could be the peak.
00:27:48 Speaker 3
How it could be all liquidity?
00:27:50 Speaker 3
People we didn’t know for sure, but there were some pretty good predictions on the spot.
00:27:54 Speaker 3
But by and large, it’s it’s pretty hard to know whether you’re, you know.
00:27:59 Speaker 3
Whether you’re in.
00:27:59 Speaker 2
Is there a grounding metric that you use open up to Freeburg and then everybody?
00:28:04 Speaker 2
We need to know that the market is overheated, free burgers or something.
00:28:09 Speaker 2
We look at and go OK, we’ve disconnected from reality press there any sense of sales.
00:28:14 Speaker 2
Some valuation metrics are the things you look for, so you know that this is overheated and maybe it is time to pair positions.
00:28:21 Speaker 2
What have you learned over now our third collective down market valuation?
00:28:27 Speaker 2
Trophy hunting?
00:28:29 Speaker 2
I would.
00:28:29
Say is a.
00:28:30 Speaker 2
Pretty good indicator of things being things being.
00:28:35 Speaker 2
It’s almost as in the heated market, like it’s the.
00:28:41 Speaker 2
The businesses, their CEO, the founder of the venture firms, everyone is.
00:28:46 Speaker 2
All about how.
00:28:48 Speaker 2
Much you can market your investment as opposed to talking about the quality of the business and the quality.
00:28:53 Speaker 3
Of the earnings.
00:28:55 Speaker 2
And then you revert back that we just recently did, so now people talking about, OK.
00:29:00 Speaker 2
How strong are the gross margins of this business?
00:29:03 Speaker 2
How effectively can they deploy capital?
00:29:05 Speaker 2
What’s the return on invested capital, key metrics around the fundamentals of the business versus the value that the market is?
00:29:13 Speaker 2
Willing to pay for the business.
00:29:14 Speaker 2
And the more heated the market gets, the more everyone focuses on terms like Unicorn checkered corn, you know?
00:29:22 Speaker 2
And and that becomes the key metric as opposed to saying this.
00:29:24 Speaker 2
Business is so good.
00:29:26 Speaker 2
For every dollar they spend, they make $3 in gross profit in 12 months. That’s what fundamentally says that’s a high quality.
00:29:35 Speaker 2
Grow a you know, a valuable business over time, as opposed to here’s what the market is telling you is worth today.
00:29:42 Speaker 2
And if the market is telling you it’s worth that much today and you’re and that’s what you focus on, you inevitably end up in these kind of bubbling moments where you miss out on focusing on core value creation, which will actually pay off much, much more over time.
00:29:57 Speaker 2
Matthew pointed out another signal Palin smart people.
00:30:02 Speaker 2
Who have the largest amount of capital in the markets are clearing positions?
00:30:06 Speaker 2
Maybe that’s a signal of a top.
00:30:09 Speaker 2
And then I think it’s a really good insight by free bird when the conversation and the narrative is about the evaluation and the status of vanity metrics as opposed to the quality of the earnings state, that’s a really good indicator.
00:30:18 Speaker 2
We’re in a bubble.
00:30:19 Speaker 2
Maybe should start clearing positions.
00:30:20 Speaker 2
Water indications for you that we’re either in a bubble or.
00:30:23 Speaker 2
The market is undervalued.
00:30:26 Speaker 2
’cause, we’re really talking about this timing, right?
00:30:27 Speaker 2
Timing is very.
00:30:28 Speaker 2
It’s not possible.
00:30:30 Speaker 2
This is why I think that.
00:30:33 Speaker 2
You have to define what game you want to play before you start.
00:30:36 Speaker 2
Playing the game, OK.
00:30:39 Speaker 2
This is why I think it’s.
00:30:41 Speaker 2
Kind of nonsensical.
00:30:43 Speaker 2
So for example.
00:30:45 Speaker 2
I believe that at best.
00:30:48 Speaker 2
I am an equity investor.
00:30:51 Speaker 2
In technology companies or things that have a technology bias ’cause, I can generally understand them.
00:30:58 Speaker 2
Maybe, you know, a few seconds faster than everybody else, which allows you to make a decision a.
00:31:04 Speaker 2
Little bit quicker.
00:31:06 Speaker 2
But if all of a sudden I started investing in.
00:31:08 Speaker 2
Debt you should expect about losing money.
00:31:11 Speaker 2
Because I don’t know what I’m doing and that’s not the games where I have any advantage.
00:31:16 Speaker 2
So I think the most important thing to do is to not try to do all of this crazy stuff, because this is what happens.
00:31:24 Speaker 2
In moments where either things are very, very good or things are very, very bad, people try to create all.
00:31:28 Speaker 2
These stupid rules.
00:31:30 Speaker 2
And the rule the.
00:31:32 Speaker 2
Only rule is there are no.
00:31:34 Speaker 2
So I don’t know, I just think it’s like fix your knitting, it’s your product builder, build products.
00:31:39 Speaker 2
If you’re an early stage investor trip through that, it’s hard enough to do any one of those things really, really, really well.
00:31:47 Speaker 2
But this idea that you know you’re going to come up with, like some mosaic in the system, I think it’s just highly suspect.
00:31:53 Speaker 2
And I think the market returns have.
00:31:55 Speaker 2
Showed that everybody.
00:31:56 Speaker 2
Describes has failed except for maybe one or two factories.
00:32:00 Speaker 2
Work? What’s the point so?
00:32:01 Speaker 2
I don’t know if you.
00:32:02 Speaker 2
Really see compressor made good deals and he’s the.
00:32:05 Speaker 2
Shares and booked the win.
00:32:06 Speaker 2
That’s right. Yeah, that’s right.
00:32:09 Speaker 2
Factory? Other?
00:32:10 Speaker 3
There’s a couple of metrics.
00:32:11 Speaker 3
That I’ll be looking at from now on that I wasn’t paying a huge amount of attention to before.
00:32:16 Speaker 3
One is the price to error of the media and public staff company and so like Microsoft has these great charts where you saw that.
00:32:27 Speaker 3
Historically that number was around six year the media Pass company which was trading at about 6 times for next 12 months Rev.
00:32:35 Speaker 3
And it went all the way to 15 during this sort of COVID bubble in 2021 and for the high growth companies, which are the ones doing 40% said.
00:32:43 Speaker 3
20%.
00:32:44 Speaker 3
It went from you know, like 8 to 35. So I’ll definitely be looking at that. And you know, what you’re looking for is just how off the historical mean are we?
00:32:54 Speaker 3
Positively or negatively because these public valuations are the exit comps for.
00:33:00 Speaker 3
You know, the private markets and those valuations have actually trickle down and so if there is a bubble in the public markets, it will trickle down to.
00:33:07 Speaker 3
The private market.
00:33:07 Speaker 3
So that would be like one metric.
00:33:09 Speaker 3
I mean, again, it’s not something that like effects me daily, but it’s something I’d want to periodically keep tabs on.
00:33:15 Speaker 3
The other is just interest rate policy.
00:33:17 Speaker 3
I mean, I’ve never spent so much time in my entire career.
00:33:21 Speaker 3
Like looking at inflation and interest.
00:33:23 Speaker 3
Rates than I have.
00:33:24 Speaker 3
This year, because who knew how much this stuff?
00:33:27 Speaker 3
Was affecting us.
00:33:28 Speaker 3
I thought I was a micro investor.
00:33:30 Speaker 3
I thought I was picking companies on a micro level.
00:33:33 Speaker 3
As it turns out, we were all massively impacted by macroeconomic policy.
00:33:39 Speaker 3
And, you know, it got so we didn’t even notice that the 00 interest rate policies deserve, along with the quantitative easing, these are supposed to be exceptional measures that started back in 2008, but we stopped noticing them.
00:33:51 Speaker 3
They continued for years and years and years.
00:33:53 Speaker 3
They continued until last year and we again, we just stopped noticing ’cause we got used to it, we kind of got.
00:34:00 Speaker 3
Hold on Prod server the market did so I just.
00:34:04 Speaker 3
Have to pay.
00:34:05 Speaker 3
A little bit more attention to what the.
00:34:07 Speaker 3
Thread is doing now.
00:34:08 Speaker 3
And you know, if you go all the way back to the.com bubble, what’s interesting is that the Fed funds rate back in 1999 wasn’t low.
00:34:16 Speaker 3
It was like 4%. It wasn’t like it was even today and we still had a bubble. But what popped the bubble was that interest rates went from 4 to 6% and it’s from 1999 to 2000. That’s not possible.
00:34:29 Speaker 3
So, you know, I I don’t.
00:34:32 Speaker 3
I don’t.
00:34:32 Speaker 3
Know if we’ll.
00:34:33 Speaker 3
Ever have a situation again like we had over the last years with?
00:34:36 Speaker 3
The with the ZRP.
00:34:37 Speaker 3
But I mean that’s probably looking for that next time is fighting the last battle, so the next one.
00:34:43 Speaker 3
So like you do probably have to be a little bit more aware of monetary policy and what.
00:34:47 Speaker 3
The Fed is doing.
00:34:48 Speaker 2
Yeah, this chart existed 6 from Vision Fund benchmarking against pure funds that she has put into group chat is absolutely spectacular.
00:34:57 Speaker 2
It puts the Sequoia insight in SoftBank, you know, large, large funds.
00:35:03 Speaker 2
Against each other. Fun size 100 billion for SoftBank, Keystone for Sequoia, 6.3 billion for insight and trim off point earlier. The pace is, yeah, really crazy. 100,000 deals for lunch.
00:35:13 Speaker 2
But then the average check size is 620 million versus 130 and 70.
00:35:23 Speaker 2
And the deals per month 3.5 versus 26 versus 4.2, so insight going pretty fast with small checks.
00:35:30 Speaker 2
Doesn’t this recording this here is really, you know, Sequoia has the benefit of being able to backtest against 40 years of returns.
00:35:39 Speaker 2
And so essentially what they’re saying is there’s really no more than five or six companies a year that are worth investing in.
00:35:46 Speaker 2
That’s a really big signal that’s worth thinking about.
00:35:48 Speaker 2
And so, you know, five or six companies.
00:35:51 Speaker 2
Maybe they can afford even $600 million each.
00:35:54 Speaker 2
You know it’s still puts you at three.
00:35:56 Speaker 2
And a half four.
00:35:56 Speaker 2
Billion dollars the superscript.
00:35:58 Speaker 2
+2 which is that you?
00:35:59 Speaker 2
Need to put 100 into the.
00:36:02 Speaker 2
2 billion a month I made.
00:36:03 Speaker 2
My Lord, it’s like Brewster’s millions or something.
00:36:05 Speaker 2
It’s it’s like some.
00:36:06 Speaker 2
Again, I think, I think I think in fairness, in fairness to SoftBank again, you know, these are the same guys that invested in Yahoo.
00:36:14 Speaker 2
They invested in all of these youknow.com companies and brought them into Japan, including great businesses like.
00:36:19 Speaker 2
Cisco, you know these?
00:36:20 Speaker 2
Guys have been big time cereal.
00:36:25 Speaker 2
I think the tactical mistake was not having a 10 year investment life.
00:36:28 Speaker 2
I mean and we could be sitting here next year, Alibaba could double in value a couple of their other positions to recover 50%, OK. But we could be sitting there and they could be, they could have closed the gap massively. Anything possible, I think actually a good jump off point here, great discussions element.
00:36:46 Speaker 2
Do we want to talk about?
00:36:49 Speaker 2
The markets that we got, the inflation print sacks.
00:36:53 Speaker 2
I guess depending on the political parties here and it’s either 8 point.
00:36:56 Speaker 2
5% or 00 percent month.
00:36:58 Speaker 2
Over month.
00:36:59 Speaker 2
If you’re a democratic Republican, it’s 8.5% in our polarized times. But what does this tell us?
00:37:06 Speaker 2
Facts just at least about maybe inflation is tipped over and we’re going to be flat for a little bit.
00:37:12 Speaker 2
That obviously caused the market.
00:37:14 Speaker 2
Rip a little bit and we had this incredible.
00:37:17 Speaker 2
Jobs report we’re now at 3.5% unemployment.
00:37:22 Speaker 3
Yeah, I would love, I think, I said.
00:37:22 Speaker 2
And of course with many jobs as he predicted, I mean, it’s pretty extraordinary what happened in the last 30 days to the to these prints.
00:37:29 Speaker 3
Yeah. Look, I think that overall the economic data is mixed, but we got a couple of good data points in the last month. So inflation did decrease from 9.1 to 8.5%.
00:37:42 Speaker 3
Inflation was until now measured on a year over year basis, not a month over month basis.
00:37:49 Speaker 3
But since we got the first good month over month reading, all of a sudden now it’s been redefined to be in a month or bump base.
00:37:55 Speaker 3
It’s just it’s the same thing that happened with the definition of the recession, where recession used to me two quarters of negative GDP growth.
00:38:04 Speaker 3
Of course that happened, and so all of a sudden the definition became unknowable.
00:38:08 Speaker 3
We have to defer to this economic board that won’t render a decision till next year.
00:38:13 Speaker 3
By the way, if that were true, how can we ever contemporaneously talk about a recession?
00:38:18 Speaker 3
You know, if you’re to wait until this economy sport declares recession a year from now, the press could never have.
00:38:24 Speaker 3
Never reported other sessions.
00:38:24 Speaker 2
I for 1:00 AM shocked.
00:38:26 Speaker 2
Yeah, I’m shocked.
00:38:27 Speaker 3
So what’s the politics of this are?
00:38:28 Speaker 3
Obvious forces to keep redefining terms rather than men.
00:38:32 Speaker 3
That there’s any bad data at all.
00:38:34 Speaker 3
It’s not like I don’t.
00:38:36 Speaker 3
I don’t think the data is catastrophic.
00:38:38 Speaker 3
I don’t, I don’t think so.
00:38:39 Speaker 3
I don’t think it’s anyone.
00:38:40 Speaker 3
‘s interest to catastrophize the data, but there’s a lot of negative data out here.
00:38:44 Speaker 3
He looks inflation is.
00:38:46 Speaker 3
Still very high, 8 1/2% if you had told any of us that in August, that inflation still be half.
00:38:52 Speaker 3
8% at the beginning of this year we would have said that is horrible because remember the investment banks were all saying is we come down to 3% by the end of the year.
00:39:01 Speaker 3
So inflation is so high, the jaws picture is good.
00:39:05 Speaker 3
We’re technically in a recession, if I were to predict, I think what’s gonna happen now, I think, you know, look for a double dip.
00:39:11 Speaker 3
I wouldn’t be surprised at all if in Q3 or Q4 we’re back to positive GDP growth, but I don’t think we must be out of the woods because I think it’s a pretty good chance.
00:39:21 Speaker 3
That next year, these rate hikes really kick in. It takes 59 months, then, to ripple through the economy.
00:39:28 Speaker 3
So if you get a construction industry, the construction industries has been devastated, new housing starts.
00:39:34 Speaker 3
You talked to the builders, they tell you that the construction industry has been clobbered by these rates.
00:39:40 Speaker 3
Like the inventories are piling up and the affordability of there’s a chart today about the affordability of home prices at a 40 year low.
00:39:49 Speaker 3
And so the construction industry is really the bellwether.
00:39:52 Speaker 3
When the recession starts, there are the ones who are first impacted, but it’s probably going to take six, nine months.
00:39:58 Speaker 2
Because the loans are so expensive and cost of capital expenses, it’s not spread inside the accident.
00:39:58 Speaker 3
So that gets.
00:40:02 Speaker 3
Right, exactly. So look, I if I take, I think we’re in a shallow technical recession right now. I bet that we probably bounce out of it in Q3 or Q4, but I think there’s a significant risk that we’re back in.
00:40:15 Speaker 3
We’re back in it next year.
00:40:17 Speaker 3
Just my.
00:40:17 Speaker 2
Guess afraid.
00:40:18 Speaker 2
But we’ve been talking about consumer credit a whole bunch.
00:40:20 Speaker 2
Buy now, pay later. Household debt now totals more than 16 trillion. Credit card balances make up 890 billion of that. Obviously, student loans, mortgages, other things are in there.
00:40:31 Speaker 2
And the number of credit cards is now at a massive high 550 million of them issued here in the United States, we added.
00:40:40 Speaker 2
A massive amount of debt.
00:40:42 Speaker 2
It’s still lower.
00:40:43 Speaker 2
The credit card debt, just to be fair, is so lower than this.
00:40:47 Speaker 2
Pre pandemic level of 930.
00:40:49 Speaker 2
Billion, but consumers seem to be taking our credit, I guess, to deal with inflation.
00:40:54 Speaker 2
Or to enjoy.
00:40:55 Speaker 2
Their lives ’cause, they’re not stopping their spending, and you see that in some of the stocks in the earnings reports that are coming out as well.
00:41:02 Speaker 2
So what’s your, what’s your take on this, you know conflicting data we have or is or have you made some sense of it and and what is your prediction of Q4?
00:41:10 Speaker 2
Sorry, are you asking what my take is on the consumer credit?
00:41:13 Speaker 2
Basically, the overall macro situation here, we’ve got consumer credit.
00:41:17 Speaker 2
You know, people taking on a lot of debt while jobs look great, while inflation is still high.
00:41:23 Speaker 2
What does that look like?
00:41:24 Speaker 2
You know, as we go into Q4 and next year, what is this telling you? Is there some signaling you can take from this?
00:41:31 Speaker 2
Fact that our recession thinks we might double gift.
00:41:34 Speaker 2
I’m kind of getting to your prediction of Q.
00:41:36 Speaker 2
I mean, I just did a little word headed up.
00:41:38 Speaker 2
I mean, I’ve said this a third credit in May at the all in summer and I said it again on the show twice.
00:41:44 Speaker 2
Which is I think that the definition of a recession of negative GDP growth when you’re coming off of inflated GDP is?
00:41:53 Speaker 2
You know it’s.
00:41:54 Speaker 2
Not a binary catchall term.
00:41:56 Speaker 2
I mean the factors.
00:41:57 Speaker 2
We had.
00:41:58 Speaker 2
Inflated assets and as a result of inflated assets, we had inflated earnings and we had inflated valuation including income and.
00:42:06 Speaker 2
You know, now the capital is coming out and things are going to go down inevitably, but I don’t.
00:42:11 Speaker 2
Think that this should be.
00:42:13 Speaker 2
Deemed that there’s something fundamentally negative about the US economy. The biggest risk factor.
00:42:18 Speaker 2
The is this rising consumer credit balance, particularly in a rising rate environment, people are taking on more debt fueled up in New York Fed.
00:42:27 Speaker 2
Here, I’ll just give you the latest this is the household debt and credit reports they put out. Household debt rises to $16 trillion and the growth in housing and helping balancers. And so there are variable rate.
00:42:38 Speaker 2
Loans in there in the auto home and credit card market.
00:42:43 Speaker 2
Those variable rates mean that as interest rates climbs, the amounts to service existing debt will go up each month.
00:42:50 Speaker 2
And the amount of debt that’s being taken on is also going up each month.
00:42:54 Speaker 2
And so the key economic question is, does the income gain that’s being experienced or the asset value gains that’s being experienced?
00:43:03 Speaker 2
Outpaced the increase.
00:43:04 Speaker 2
In monthly debt service needed for a large number of consumers.
00:43:09 Speaker 2
Student loans are also in here, by the way.
00:43:10 Speaker 2
And so when you put that all together, it’s a.
00:43:13 Speaker 2
It’s a very technical question, which is technically, where do you start to see defaults rise?
00:43:18 Speaker 2
And when you have defaults rise, then the money that’s owed and the services that are the service payments that are owed on that debt trickles through the economy.
00:43:25 Speaker 2
Because bonds start to be.
00:43:27 Speaker 2
Fault equity starts to decline and so on.
00:43:30 Speaker 2
So you know, This is why I can speak at a high level from a macro point of view, but the rate at which debt is going up and consumer credit is going up and the rate at which rates are climbing that affect the revolving and variable rate debt.
00:43:49 Speaker 2
Could outpace the income in the acid value gain, particularly when equities are down, 401K’s are down, housing prices are down.
00:43:56 Speaker 2
And so there’s a tipping point, and when that starts to happen, then you start to really hit an economic crunch.
00:44:03 Speaker 2
And I’m, I’ve mentioned this multiple Times Now that it’s the thing, you know, I would kind of watch the most.
00:44:08 Speaker 2
Groceries, while there are core elements of the current economy that look strong.
00:44:14 Speaker 2
There are real concerns around whether consumers can keep up with their debt payments.
00:44:19 Speaker 2
Samantha, you track, are you following this consumer credit surge and do you think that this could be a Black Swan type event?
00:44:27 Speaker 2
This could be, you know, a deeper headwind?
00:44:29 Speaker 2
It’s right here in.
00:44:31 Speaker 2
Front of us so.
00:44:32 Speaker 2
OK, yeah, yeah, I I would say like a massive contagion where there’s massive number of defaults creating a Black Swan container like event.
00:44:39 Speaker 2
But yes, so it’s it’s not, it’s may be hidden in plain sight.
00:44:42 Speaker 2
Where do you think she’ll office this important data or impacting your view on?
00:44:45 Speaker 2
Things I think.
00:44:46 Speaker 2
It’s important.
00:44:47 Speaker 2
It’s part of them, Modric and.
00:44:50 Speaker 2
I I don’t.
00:44:50 Speaker 2
I don’t really know.
00:44:52 Speaker 2
Look, what are we trying to get from this discussion?
00:44:55 Speaker 2
I don’t understand.
00:44:56 Speaker 2
Like, like are we trying to predict what’s going to happen, I mean.
00:45:02 Speaker 2
He, David basically said.
00:45:03 Speaker 2
It best like.
00:45:05 Speaker 2
If you actually just take a step.
00:45:06 Speaker 2
Back and stop.
00:45:07 Speaker 2
Overlaying what we want to happen.
00:45:10 Speaker 2
So the reality is all servers want things to go up.
00:45:14 Speaker 2
And we like it when there’s money in the system.
00:45:16 Speaker 2
And everything is flushed.
00:45:19 Speaker 2
But if we had said last year that we would open an envelope and, you know, we would show these inflation prints.
00:45:24 Speaker 2
He would be.
00:45:24 Speaker 2
Shocked and we would have been scared.
00:45:27 Speaker 2
And quite honestly, you know, in the process, in November when I heard of selling elements told even more violently.
00:45:34 Speaker 1
Than I sold.
00:45:35 Speaker 2
And all I can say is I saved my apps in November of last year.
00:45:39 Speaker 2
Looking at what’s happened in the last six months.
00:45:41 Speaker 2
So I don’t know, I think that.
00:45:45 Speaker 2
If you look at the CPI print.
00:45:47 Speaker 2
And you look at the components.
00:45:50 Speaker 2
We were saved because energy.
00:45:52 Speaker 2
Basically fell off a Cliff.
00:45:55 Speaker 2
And for whatever reason, a bunch of people decided not to travel and you know, we didn’t import as much oil and we were able to keep cost contains and not checked CPI from being really out of control.
00:46:07 Speaker 2
But again, during the summer where we don’t have the pressure on energy that we’re going to have in October, November this year.
00:46:15 Speaker 2
So I I really don’t know.
00:46:16 Speaker 2
I mean I just think that there is like free bird has his pet issue, I have my pet issues as his pet issues.
00:46:23 Speaker 2
You asked 100 economists. They’ll have their.
00:46:25 Speaker 2
Own pet issue.
00:46:25 Speaker 2
Housing affordability, whatever.
00:46:27 Speaker 2
It is the point is we have.
00:46:30 Speaker 2
100 vacul problems.
00:46:33 Speaker 2
And the question is, which mouse traps has stopped the rest of the mouse traps?
00:46:38 Speaker 2
I have no idea.
00:46:39 Speaker 2
And and so, you know, I just think that right now things are a little bit too calm.
00:46:46 Speaker 2
That makes me feel very.
00:46:49 Speaker 2
Another shoe might drop.
00:46:50 Speaker 2
I mean the point of the conversation is to try to understand and make better decisions in capital allocation, company formation and placing bets in the next year so that I don’t think that’s the point of the discussions.
00:46:59 Speaker 3
We now have the spectacle of the.
00:47:03 Speaker 3
President saying he’s going to.
00:47:04 Speaker 3
Pass an inflation reduction act.
00:47:07 Speaker 3
To solve a 0% inflation problem, to get us out of a recession that he says doesn’t exist. You guys know this, but the the politics must end the political commentary on this service.
00:47:17 Speaker 3
3rd I think what we’re describing here is simply more honest, which is to say that the data is mixed.
00:47:24 Speaker 3
We don’t exactly know what’s going.
00:47:25 Speaker 3
To happen, yeah, I mean.
00:47:27 Speaker 2
The thing that I think is encouraging is you.
00:47:29 Speaker 2
Look at this job data.
00:47:31 Speaker 2
And you look at the debt that consumers are putting on my Berry is, and I could be wrong, that people want to keep spending.
00:47:40 Speaker 2
They want to keep living their lives or taking on a little bit of debt to deal with inflation and to keep spending.
00:47:44 Speaker 2
But they’re also going back to work and I’m seeing that anecdotally a lot more people going back to work and the numbers show.
00:47:49 Speaker 2
That that feels to me and I said this on previous episodes.
00:47:52 Speaker 2
But that feels like a possible, you know, very helpful path out here and I think you brought it up fast as well, which is, hey, if we have increased participation, that’s great, increases monetary velocity, increases, participates in the economy, that’s a possible path out.
00:48:05 Speaker 2
Do you feel like that’s still holding strong sense?
00:48:07 Speaker 2
Decline on that trend for 20.
00:48:11 Speaker 2
So maybe maybe on the margins, a few folks.
00:48:15 Speaker 2
Ron got stimulus and decided to go to get a job, but I don’t think.
00:48:19 Speaker 2
Again, it’s it’s kind of like, you know?
00:48:22 Speaker 2
When you’re when.
00:48:22 Speaker 2
You’re at the blackjack table in Vegas.
00:48:25 Speaker 2
And somebody is slapping, he’s knocking you out as.
00:48:28 Speaker 2
Far as.
00:48:29 Speaker 2
You know, like, like what we’re talking about, right?
00:48:31 Speaker 2
Now, is clapping as a strategy?
00:48:33 Speaker 2
Maybe this can happen, maybe that’s happening.
00:48:35 Speaker 2
Or maybe it’ll start raining gold.
00:48:37 Speaker 2
Talking points that.
00:48:38 Speaker 4
We can use and just.
00:48:41 Speaker 3
I think I did.
00:48:42 Speaker 2
I feel like the last 15 minutes have been like, not a good conversation.
00:48:45
I think.
00:48:45 Speaker 2
Like I think it’s a great conversation, but it’s.
00:48:48 Speaker 3
I think totally repetitive.
00:48:49 Speaker 2
It’s like having it.
00:48:49 Speaker 3
Actually Jake out, because look this structure, the problem I think is very well defined which is we have an inflation problem.
00:48:57 Speaker 3
Great. It went down from 9.18 point, 5%. It’s still really.
00:49:00 Speaker 3
High two or.
00:49:01 Speaker 3
3% would be would be normal.
00:49:03 Speaker 3
OK, so that’s.
00:49:04 Speaker 3
Half the problem is how fast is inflation going to go back down to normal based on interest rate?
00:49:10 Speaker 3
The other side of the problem is is very interest rate increases, not cut.
00:49:14 Speaker 3
The other side of the problem is how much will the economy be hurt by these rising rates?
00:49:19 Speaker 3
And those are the two variables.
00:49:21 Speaker 3
And yet we see that there is a slowdown.
00:49:23 Speaker 3
There’s still a lot of jobs being sold, which is good, but there is unquestionably an economic slowdown, and those are the two sides.
00:49:29 Speaker 3
This equation, and we just need to see some economic data, is still play out on this server.
00:49:34 Speaker 2
We ask you the same questions for three ******* weeks.
00:49:38 Speaker 2
If you guys don’t want to talk about the new days, that’s fine.
00:49:40 Speaker 1
Who’s here?
00:49:40 Speaker 2
How about you?
00:49:40 Speaker 2
That’s why.
00:49:41 Speaker 3
I dare of never here.
00:49:44 Speaker 2
None of us smoked we don’t have.
00:49:44 Speaker 1
OK.
00:49:45 Speaker 2
An opinion? Other?
00:49:45 Speaker 3
Than we don’t know how many ways.
00:49:47 Speaker 2
That’s I don’t want to go to that inflation or recession or jobs or any of that **** anymore, unless there’s something really for us all to.
00:49:53 Speaker 2
Say like something new. Come.
00:49:54 Speaker 2
Well, I think it’s almost was really important, I mean.
00:49:58 Speaker 2
That was a.
00:49:59 Speaker 2
That was a.
00:49:59 Speaker 2
Not it’s not, it’s obvious.
00:50:02 Speaker 2
Yeah, back to what we’ve already said.
00:50:03 Speaker 3
It’s one data point, it’s one data.
00:50:05 Speaker 3
Point it’s almost every other words.
00:50:07 Speaker 3
There were some bad jobs reports before that.
00:50:09 Speaker 3
Print though.
00:50:10 Speaker 2
Yeah, you should stop doing the recession.
00:50:12 Speaker 2
Inflation chat every week and honestly, it’s like repetitively.
00:50:15 Speaker 2
Job moderating.
00:50:16 Speaker 2
Can you not dial it in?
00:50:17 Speaker 2
You got no you.
00:50:18 Speaker 2
Guys asked to talk about it.
00:50:19 Speaker 2
You guys put somebody.
00:50:20 Speaker 2
Things on this I don’t want.
00:50:21 Speaker 2
To talk about.
00:50:21 Speaker 2
It anymore, I think we’re going to.
00:50:22 Speaker 2
Let’s move on.
00:50:23 Speaker 2
What do you what do you want to move on?
00:50:25 Speaker 2
Chinese Soft Bank was a great town.
00:50:26 Speaker 2
I mean, you know, that was a.
00:50:27 Speaker 2
Good talk.
00:50:28 Speaker 2
We should do that kind of shape we talked about.
00:50:29 Speaker 1
I want to know.
00:50:29 Speaker 2
What you guys think about this Sequoia Evergreen fund?
00:50:32 Speaker 2
Tell me what you guys think about that.
00:50:33 Speaker 2
Come on, geniuses.
00:50:34 Speaker 2
Sequoia Love winning, restructured.
00:50:37 Speaker 2
Are you joking?
00:50:39 Speaker 2
I love, I love Wendy’s you go silent.
00:50:42 Speaker 2
No, I didn’t.
00:50:44 Speaker 2
I don’t understand what you’re saying.
00:50:45 Speaker 2
I don’t.
00:50:45 Speaker 3
Understand why you guys are trying so hard to avoid the obvious news of this week.
00:50:50 Speaker 2
So something else in the news this week?
00:50:52 Speaker 2
That’s it.
00:50:54 Speaker 2
Trump actually had some material in Mar-a-lago that was related to the nuclear program and you know, there was an attempt to try and get recover those documents through normal means and they were not recoverable.
00:51:09 Speaker 2
What would your course?
00:51:10 Speaker 2
Have been if you were the director, the FBI, or the President of the USA in that condition, ’cause.
00:51:14 Speaker 2
I think that seems to be the party line of what’s going on here.
00:51:17 Speaker 3
Well, you know.
00:51:17 Speaker 2
But the democratic kind of spin on what’s going on here, but like, you know, honestly, in that circumstance, what do you think would have been appropriate?
00:51:25 Speaker 2
So there’s there’s some sort of confidential material related to our nuclear program or nuclear weapons something, something there in those materials that were attempted to be recovered or we’re taking without approval and then they try to.
00:51:36 Speaker 2
Recover it for.
00:51:37 Speaker 2
You know, assume there’s no nefarious intent.
00:51:40 Speaker 2
What would be the right kind of course here?
00:51:42 Speaker 3
Well, so I I don’t know exactly what’s going on.
00:51:46 Speaker 3
I just think that you can’t necessarily give the sadly, I don’t think you necessarily give the FBI the benefit, the doubt here and why they’re in history.
00:51:54 Speaker 3
So let’s back up.
00:51:55 Speaker 3
I mean, first you have this, this raid on marlago where you got 30 FBI.
00:51:59 Speaker 3
Agents, they’re not.
00:52:00 Speaker 3
Wearing suits with holster side.
00:52:02 Speaker 3
Carrying AR15.
00:52:04 Speaker 3
You know weapons.
00:52:05 Speaker 3
Of war fingers inside the trigger guards there, wearing body armor.
00:52:09 Speaker 3
It looks like a pair of military radar.
00:52:11 Speaker 3
Mar-a-lago, it’s utterly unprecedented.
00:52:13 Speaker 3
And you look at tweets by Andrew Cuomo, for example, or Andrew Yang I.
00:52:19 Speaker 3
Mean these guys actually turn out to be?
00:52:20 Speaker 3
Pretty, I think, intellectually honest Democrats on this point, saying this is unprecedented and it’s really unfair.
00:52:27 Speaker 3
Want to read?
00:52:27 Speaker 2
This by why don’t you dance history back home listening to answer?
00:52:28 Speaker 1
Andrew ever yell.
00:52:30 Speaker 2
Freebirds questions.
00:52:32 Speaker 3
I’m getting there.
00:52:33 Speaker 3
I know you’re going to help me.
00:52:34 Speaker 3
Also, I’d like to just read these tweets so maybe you will, because you know, maybe you’ll give more credence to Andrew Yang, he said.
00:52:40 Speaker 3
I’m no Trump fan.
00:52:41 Speaker 3
I want most far away from the White House as possible.
00:52:43 Speaker 3
But a fundamental part of his appeal has been that it’s him against a corrupt government establishment.
00:52:47 Speaker 3
This raise strengthens that case per millions of Americans will see this is unjust persecution.
00:52:53 Speaker 3
You have Andrew Cuomo saying DOJ must immediately explain the reason for its.
00:52:56 Speaker 3
Rating must be.
00:52:56 Speaker 3
More than a search for inconsequential archives or B.
00:52:59 Speaker 3
Viewed as a political tactic and undermine any future credible investigation and legitimacy of generous investigations and blue, reads one other tweet by Elon.
00:53:09 Speaker 3
That’s not directly about the speech.
00:53:10 Speaker 3
We did this on July 11th, so months ago and he said, I don’t hate the man, but it’s time.
00:53:15 Speaker 3
For Trump to.
00:53:16 Speaker 3
Hang up his hat and seal.
00:53:17 Speaker 3
At the sunset, that was the part.
00:53:19 Speaker 3
That was widely reported, but he also said them should also call off the attack, don’t make it so that Trump’s only way to survive.
00:53:25 Speaker 3
To regain the Presidency, I.
00:53:27 Speaker 3
Think there was.
00:53:28 Speaker 3
A lot of lives.
00:53:29 Speaker 3
They’re not.
00:53:30 Speaker 3
And, you know, I’m old enough to remember when the case for Biden getting elected is we have to move past this partisan warfare, this extreme rancor and arrangement.
00:53:42 Speaker 3
And we were told that the media, you know, all these people at TDs, that that their psychosis was due to Trump.
00:53:49 Speaker 3
And if we could?
00:53:50 Speaker 3
This move past from this, all this sort of partisan warfare would end.
00:53:54 Speaker 3
And now and and I was certainly hoping that would be true.
00:53:58 Speaker 3
And now sadly, it seems like we’re right back.
00:54:00 Speaker 1
In this frame.
00:54:02 Speaker 3
Where we write.
00:54:03 Speaker 3
That with the media being obsessed with PDS portraying this narrative, that finale is a traitor.
00:54:09 Speaker 3
And what is this whole thing?
00:54:10 Speaker 3
Hang on.
00:54:10 Speaker 3
Just these two words.
00:54:12 Speaker 3
Nuclear documents will listen.
00:54:13 Speaker 3
Until they actually produce those documents, I’m gonna suspend judgment because the FBI is the last time they did this.
00:54:21 Speaker 3
They manufactured.
00:54:22 Speaker 3
A falsified warrant to the FISA court for this type of investigation.
00:54:28 Speaker 1
They have that.
00:54:29 Speaker 3
History. So I’m just.
00:54:31 Speaker 3
Gonna suspend judgment on what’s going on here until they actually produce the documents are talking about because dialysis stinks.
00:54:39 Speaker 2
Do you honestly question the integrity of leadership and agents of the FBI?
00:54:45 Speaker 2
Like, honestly.
00:54:45 Speaker 3
Are you serious?
00:54:46 Speaker 3
Like you don’t think?
00:54:48 Speaker 3
Alright, let me read.
00:54:48 Speaker 3
You this tweet.
00:54:49 Speaker 3
From Michael Berg from the big tree.
00:54:50 Speaker 2
I don’t hear the tweet.
00:54:51 Speaker 2
I want to hear your point being right.
00:54:51 Speaker 3
Well, no.
00:54:52 Speaker 3
Well, I I agree with what Michael Burry saying, so I think somebody help.
00:54:55 Speaker 3
There’s a lot of thoughtful commentary about this, and what Bernie says is Jagger.
00:54:59 Speaker 3
Hoover led the FBI for five decades, denied the mafia existed.
00:55:03 Speaker 3
Foster civil rights movement still did the KKK.
00:55:06 Speaker 3
Multiple presences, knowledge Europeans that he’s saying is.
00:55:09 Speaker 3
That the FBI since its inception has political origins and basically meddled politically in the affairs of the country.
00:55:18 Speaker 3
Then he says, the FBI lied to the FISA court.
00:55:21 Speaker 3
This is back in 2016. To recruit all 30 emails. Least lies to the press to get Trump. Nothing shocking. So friebert listens. I don’t know.
00:55:30 Speaker 3
Whether the API?
00:55:30 Speaker 3
Is telling the truth, but are.
00:55:31 Speaker 3
You honestly going to say?
00:55:33 Speaker 3
That the FBI leadership has never.
00:55:35 Speaker 3
Been political, that it’s never harbored or.
00:55:37 Speaker 3
Pursue their own agenda.
00:55:39 Speaker 3
And that it’s never had a desire to.
00:55:40 Speaker 2
Go after I’m I’m not.
00:55:42 Speaker 2
Opinions here.
00:55:42 Speaker 3
Lower secondary school we saw the text.
00:55:44 Speaker 3
Just told me.
00:55:46 Speaker 3
Front page McCain.
00:55:48 Speaker 3
I mean these guys.
00:55:49 Speaker 3
Basically took it upon themselves when Trump was elected to be the quote UN quote insurance policy. Yes, and an FBI lawyer pled guilty to falsifying documents to seek a warrant from the FISA court.
00:56:04 Speaker 3
So I just think anything.
00:56:05 Speaker 3
Is possible here and now?
00:56:07 Speaker 3
I’m not saying the FBI is.
00:56:08 Speaker 3
Lying about this, I don’t know.
00:56:10 Speaker 3
But the idea that the FBI is automatically entitled to the benefit of the doubt in light of their proven history of basically pursuing Trump like a hot pursuit the white.
00:56:20 Speaker 3
Well, I mean, yeah.
00:56:21 Speaker 3
These guys have been asking him.
00:56:23 Speaker 2
I’m just going to do that for a second.
00:56:24 Speaker 2
The reason I’m interrogating sacks on this is like, it’s just so telling for me that a guy like like you got in your position.
00:56:33 Speaker 2
Are are actually questioning the integrity of like the highest justice authority in a situation in the United States.
00:56:41 Speaker 2
Really says a lot about kind of the state of the US citizen rings the state of our society today. I think it speaks.
00:56:49 Speaker 2
At least 1/3 of Americans. I know, it’s incredible. And what Ray Dalio says in his book about how during these periods when the Empire begins their decline and, you know, when you’re challenged with kind of the economic condition.
00:57:02 Speaker 2
Things that the US is challenged by printing lots of money, lots of debt, very hard to service all that debt and we have a ton of obligations over the next decade or two that are going to be very hard to meet given our economic growth and inflation conditions right now.
00:57:15 Speaker 2
That you start to see these sorts of behaviors historically happened six times in the last 500 years were large empires.
00:57:22 Speaker 2
Like the United States or large.
00:57:24 Speaker 2
You know, economic powerhouses like the United States starts to decline, that the civil war begins, that the institutions get challenged by a minority, and then my majority of the citizenry, and it really starts to crumble and challenge the the integrity of the institution and its ability to hold itself together and and.
00:57:41 Speaker 3
Well, I’m not horrified, I’m not.
00:57:43 Speaker 2
And by the way.
00:57:43 Speaker 3
I’m not challenging.
00:57:44 Speaker 3
Hold on a second, I’m not always getting it.
00:57:45 Speaker 2
With your corrected integrity, you’re questioning the integrity of the Department of Justice right now.
00:57:49 Speaker 3
Listen, I I’m not.
00:57:49 Speaker 2
And by the way, I’m not.
00:57:50 Speaker 2
I’m not arguing, uh, pointing like it’s it’s an incredible condition for us to find.
00:57:54 Speaker 2
Ourselves in.
00:57:55 Speaker 3
Yeah, but but but my question did not raise that condition.
00:57:58 Speaker 3
There is this lack of trust is earned.
00:58:00 Speaker 1
I know, I know.
00:58:01 Speaker 3
It’s earned by the FBI in.
00:58:03 Speaker 3
Side of behaviors they tricked us a few years ago that listen, I’m not defending Trump personally.
00:58:09 Speaker 3
I don’t know what he did or didn’t do.
00:58:12 Speaker 3
OK, but I think that if you can’t just accept at face value without further proof, these leaks water basically comments by the FBI.
00:58:24 Speaker 3
Right.
00:58:25 Speaker 3
But it’s not.
00:58:25 Speaker 1
You guys.
00:58:26 Speaker 3
It’s not a naive child.
00:58:28 Speaker 3
I mean, the fact that matter is that power can be.
00:58:31 Speaker 3
Rot and power corrupts, OK?
00:58:33 Speaker 3
And we have seen that the FBI from its earliest days did engage in corruption and more recently against Trump himself had a vendetta against Trump and will constantly across.
00:58:44 Speaker 3
All I’m doing is I’m not going to automatically accept at face value what they’re saying until I see some proofs that I’m not.
00:58:52 Speaker 3
Things are wrong, or they’re lying about this.
00:58:55 Speaker 3
I’m simply saying nothing, especially face value.
00:58:58 Speaker 2
And remember Trump?
00:58:59 Speaker 2
Trump was elected on on on the platform that there is this deep state, that there is institutional corruption, that there is Malays and lethargy in these institutions of the governments that are funded on the order of trillions of dollars a year.
00:59:14 Speaker 2
And that that’s what he was intended to, you know, to go and and blow up.
00:59:17 Speaker 2
And repair and there’s a very strong and potentially close to majority percentage of voting Americans that that feel that there is this core deep state corruption.
00:59:27 Speaker 2
Institutional lethargy that is challenging our ability to give everyone the freedom and liberties that they deserve.
00:59:34 Speaker 3
That’s true.
00:59:34 Speaker 3
But these agencies are supposed to be nonpartisan.
00:59:36 Speaker 3
They’re not sustainable personal rates.
00:59:38 Speaker 3
And what we saw is that when Trump is in office and these texts came out clearly the top levels of the FBI, these top agents are not talking about the rank and file, not talking about the field agents.
00:59:50 Speaker 3
I understand that a lot of them are long or tries to.
00:59:53 Speaker 3
Vote Republican. I get it.
00:59:54 Speaker 3
But I’m talking about the leadership, the highly political leadership in Washington.
00:59:57 Speaker 3
And it was pretty clear that they had a horse in the race they did not like.
01:00:00 Speaker 3
Trump and they were out to get Trump.
01:00:02 Speaker 3
And you know, again, Trump is not my preferred candidate for 2024. But once the FBI is done with this raised, quite frankly, I think it’s polarizing outcomes.
01:00:13 Speaker 3
They’re basically to.
01:00:14 Speaker 3
Send Trump to the big house or the White House, I mean, because now the Republicans have rallied around Trump.
01:00:20 Speaker 3
I think he’s made very, very hard to beat.
01:00:22 Speaker 3
That’s for as nominee in 2024, unless the FBI comes up with ironclad evidence to show that he did something significantly wrong.
01:00:31 Speaker 2
I care less about.
01:00:32 Speaker 2
Who did what, and what was done wrong?
01:00:33 Speaker 2
I care more about the fact that this conflict is escalating and it’s creating a real condition of continuing polarization.
01:00:40 Speaker 2
And it really is.
01:00:41 Speaker 2
The conditioning that, you know, Biden has some historians in in the White House.
01:00:45 Speaker 2
There was a report on this last week and these historians spoke about how.
01:00:48 Speaker 2
The conditions in the United States.
01:00:50 Speaker 2
And just as they were right before the Civil War and that.
01:00:54 Speaker 2
There’s real concern.
01:00:54 Speaker 1
It’s not her house.
01:00:56 Speaker 2
That’s, yeah.
01:00:56 Speaker 2
Well, I mean, you know, they, you know, read the, the anecdotal reporting that was done on this thing, but that was the general theme of the conversation and, you know, it really, it really kind of concerns me more that this level of discourse is escalating to a point of, you know, there’s corruption.
01:01:16 Speaker 2
This person is a criminal, and that sort of discussion happens in, you know, in in more dire circumstances and more and economic circumstances than has ever been seen.
01:01:27 Speaker 2
You know, the US is the largest economy in history, and we’re.
01:01:30 Speaker 2
Now having these sorts.
01:01:31 Speaker 2
Of conversations that typically lead to some degree of conflict, and it’s really concerning.
01:01:35 Speaker 3
We just said, hey, listen, I I think that Trump was out of office.
01:01:39 Speaker 3
We were told that this part of the rancor would stop once he was out, and it’s, you know, they’re pulling him back.
01:01:45 Speaker 3
In and all I can say is that when this I think we know maybe 1% of the story OK I think this leak around nuclear documents is it feels like a selective.
01:01:56 Speaker 3
Week is not serviceable story here.
01:01:56 Speaker 2
For, all sides are explanatory, all sides are cantankerous after.
01:01:58 Speaker 1
So we will understand I’m.
01:02:00 Speaker 2
It’s just.
01:02:01 Speaker 3
Suspending judgment, what I’m saying is that when all the information comes out, there better be a very significant there.
01:02:07 Speaker 1
There no, no.
01:02:08 Speaker 2
No, we’ve made that impossible to because he.
01:02:10 Speaker 2
Trump came out and he basically.
01:02:12 Speaker 2
Said he listen, if you defeat guys, find something that was planted and now you’re going to have at least, uh, you know, 10 or 15% of the population that believes, OK, this was planted, it wasn’t actually there and, you know, so whatever.
01:02:25 Speaker 2
The outcome is.
01:02:26 Speaker 2
Will not be good, nobody will be satisfied.
01:02:29 Speaker 2
And both both of the extremes in the United States will be even more angry.
01:02:34 Speaker 1
Pain further inflamed. Yeah, yeah.
01:02:37 Speaker 1
Right.
01:02:37 Speaker 4
That’s right. That’s right.
01:02:38 Speaker 2
The inflammatory index has now has now skyrocketed, yeah.
01:02:42 Speaker 2
But This is why I think at some level, maybe the lack of faith in these institutions is well deserved.
01:02:47 Speaker 2
Because where is the the, you know, the, the?
01:02:52 Speaker 2
The prudence of all of this, like, where is the the circumspect, thoughtful, methodical thinking about all of the different outcomes that could be possible so that you exhaust every option and this is the only option left.
01:03:08 Speaker 2
And even then.
01:03:10 Speaker 2
If Merrick Garland was open to basically saying unseal the warrants, why didn’t you do this before and say we’re going to have to serve this?
01:03:18 Speaker 2
Guy, unless he actually gives those reasons, there’s all kinds of things you could have done.
01:03:23 Speaker 2
Clearly they did that.
01:03:24 Speaker 2
Hold on a second to keep the.
01:03:26 Speaker 2
Temperature of this.
01:03:26 Speaker 2
Thing way, way down and that’s what struck created.
01:03:29 Speaker 3
To your point, Tomas, they could have.
01:03:31 Speaker 3
Let Trump lawyers watch them do the search.
01:03:34 Speaker 3
So that nobody could.
01:03:35 Speaker 3
Claim anything about anything being planted.
01:03:38 Speaker 2
Yeah, you flammatory index is spiking. I think that’s my key take away on all of.
01:03:38 Speaker 3
So, faces, let’s not happen either.
01:03:43 Speaker 2
I I care less about what prompted and what the dealer did here and what the FBI did like.
01:03:48 Speaker 2
I’m more concerned about where this.
01:03:50 Speaker 2
Takes us because the.
01:03:51 Speaker 2
What number it takes us in overtakers when we run tilt at the poker table?
01:03:56 Speaker 2
What’re you doing?
01:03:56 Speaker 2
It cannot space properly.
01:03:58 Speaker 2
I pushed.
01:03:58 Speaker 1
Right.
01:03:59 Speaker 2
And so when people and people are so inflamed with emotion, they start to make very poor decisions.
01:04:05 Speaker 2
I don’t know whether the DOJ and main justice made a poor decision or not.
01:04:09 Speaker 2
I think this is where we.
01:04:10 Speaker 2
Have to build our profit.
01:04:12 Speaker 2
Hope they didn’t.
01:04:13 Speaker 2
I don’t know whether the White House knew anything or not, but the whole point of all of this is that we.
01:04:19 Speaker 4
Pulled this guy right back in.
01:04:22 Speaker 2
This to the main stage.
01:04:25 Speaker 3
I mean you’re like I said, you’ve polarized the outcomes.
01:04:27 Speaker 3
You’re either going to basically send this guy to jail, or even some of the white.
01:04:31 Speaker 3
House back to work.
01:04:31 Speaker 2
No, I think it’s very less, you know, I think it’s very likely a middle password.
01:04:35 Speaker 2
Nothing happens.
01:04:36 Speaker 2
But people further eroded what Freeport says, which is it’s just a little bit less trust in the DOJ.
01:04:42 Speaker 2
Integrity is eroding and when using digital impact, the fabric of what keeps everything working starts to fall apart.
01:04:43 Speaker 4
And the FBI?
01:04:51 Speaker 2
And I’m not saying this is some cataclysmic civil war happening, city clearer launching this, some cataclysmic civil war happening out here.
01:04:58 Speaker 2
But it’s an unfortunate decline.
01:05:00 Speaker 2
In everyone’s face and the stability of the institutions that we all rely on to support and service us because the inflammatory index is going to go up and everyone going to be criticizing everything and that’s.
01:05:10 Speaker 2
When it happens like today.
01:05:10 Speaker 3
This is why I.
01:05:11 Speaker 3
Think we really have to ask, was this really necessary?
01:05:13 Speaker 3
I mean, why did the DOJ and the FBI think?
01:05:16 Speaker 3
This was Nestor.
01:05:17 Speaker 2
Yeah, I think the judgment, I think that’s a reasonable question is like if these things were actually sitting in a box with a lot, but they change.
01:05:17 Speaker 3
Boxes were just through there.
01:05:26 Speaker 2
There must have been something more that was so grievous for you had to do something like this now, by the way, David, I just want to, I read.
01:05:33 Speaker 2
So I don’t know if it’s true or not.
01:05:34 Speaker 2
I think maybe it was in very license abstract format i.e.
01:05:37 Speaker 2
Subjects he folks weren’t armed to the teeth they came in. Jeans and shorts and T-shirts, in fact, mean Judge has told them, like, do it as well.
01:05:45 Speaker 3
Not seeing the.
01:05:45 Speaker 3
Photos that I’ve seen, the photos that it has been.
01:05:47 Speaker 2
So you saw the photos outside.
01:05:49 Speaker 2
I’m saying the people inside were there for six or seven hours and only a few people knew about it.
01:05:53 Speaker 3
They were there for 9 hours, they basically told.
01:05:54 Speaker 2
What we’ve written.
01:05:56 Speaker 3
Trump people, they couldn’t be there.
01:05:57 Speaker 3
They had to leave.
01:05:58 Speaker 3
They told to turn the cameras off and they had like highly militarized got there.
01:06:03 Speaker 2
There was something like 40 people, and so, like 30 of them were heavily armed.
01:06:07 Speaker 2
The optics were terrible.
01:06:08 Speaker 2
If there was some nuclear cost, confidence on nuclear materials in Mar-a-lago and through normal means of communication, they had asked several times to have it.
01:06:16 Speaker 2
Returned and identified this for him, and he had refused which I.
01:06:19 Speaker 2
Think is a very reasonable kind of.
01:06:22 Speaker 2
You know, conditioning for what may have happened there.
01:06:24 Speaker 2
And then they said, OK, we gotta go get it.
01:06:25 Speaker 2
There’s no this is like super confidential nuclear material.
01:06:29 Speaker 2
We gotta get this.
01:06:29 Speaker 2
Stuff the only way.
01:06:30 Speaker 2
To get it is to serve a warrant and go in there and get it.
01:06:34 Speaker 2
You know, under those circumstances, you know, do you think that this would have been kind of inappropriate, like assume all other kind of communication?
01:06:41 Speaker 2
Things were exhausted, like.
01:06:42 Speaker 2
You know, what would you have?
01:06:43 Speaker 2
Done if you were president.
01:06:44 Speaker 3
Listen, I think there is information that could still come out to convince me that this raid was warranted.
01:06:50 Speaker 3
I just haven’t seen that information yet.
01:06:52 Speaker 3
And I think the optics of it were terrible.
01:06:54 Speaker 3
I’d like right?
01:06:55 Speaker 3
The point I was making, I don’t know why it wouldn’t have been good enough to send them the FBI agents with holsters, sidearms, you know, not AR15 weapons of war.
01:07:05 Speaker 3
You know where the fingers were?
01:07:06 Speaker 3
Just outside the trigger guard and it looked like a paramilitary rate.
01:07:09 Speaker 3
So whenever we’re thinking about the political ramifications, this clearly they do a very good job.
01:07:13 Speaker 3
I also don’t know, yeah, I also don’t know why you wouldn’t give the courtesy to a former president United States to give them either more of a heads up or to lettuce and lawyers attend so that just for their own protection, so they can’t be accused.
01:07:14 Speaker 2
Looking through the object, yeah.
01:07:30 Speaker 3
Of planning anything that would be smart.
01:07:32 Speaker 3
And I don’t know why they would.
01:07:33 Speaker 3
Have said to trust people that they.
01:07:35 Speaker 3
Couldn’t record it.
01:07:36 Speaker 3
And I don’t know why it is in the ports of the FBI went through my closet.
01:07:40 Speaker 3
I mean, seriously, they’re like going through this, Melania.
01:07:43 Speaker 3
It’s just weird.
01:07:44 Speaker 3
It’s weird.
01:07:45 Speaker 3
So there’s a lot about this that we don’t know are not consistently rendering judgment about it because there are things that absolutely come out to convince me that it was warranted, but I haven’t heard.
01:07:55 Speaker 4
Them yet?
01:07:56 Speaker 4
OK, everybody will see on the.
01:07:57 Speaker 2
Next episode of the All in podcast.
01:08:00 Speaker 2
Love you, Bessie.
01:08:02 Speaker 3
What you’re wondering like?
01:08:05 Speaker 2
Rain Man.
01:08:09 Speaker 3
And instead we open source system with fans and it did fine.
01:08:13 Speaker 1
But when I.
01:08:22 Speaker 1
These are parents.
01:08:33 Speaker 2
Room and just have one big Georgie.
01:08:35 Speaker 2
They’re all just initial sexual tension.
01:08:38 Speaker 2
Previously released.