All-In with Chamath, Jason, Sacks & Friedberg

Industry veterans, degenerate gamblers & besties Chamath Palihapitiya, Jason Calacanis, David Sacks & David Friedberg cover all things economic, tech, political, social & poker.

E19: Breaking down Robinhood's GameStop decision: Why did it happen and how can it be prevented in the future?

E19: Breaking down Robinhood's GameStop decision: Why did it happen and how can it be prevented in the future?

Sat, 30 Jan 2021 02:09

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Referenced in the show:

David Sacks on Bloomberg

Chamath for Governor

DeepFuckingValue's Reddit page

Show Notes:

0:26 Besties intro

2:11 Chamath breaks down the entire WallStreetBets/GameStop saga

15:38 Jason responds, debating Robinhood's liquidity crisis, Citadel's potential involvement & more

39:18 How can this be prevented in the future? Restructuring capital gains tax, censorship, where Robinhood can go from here

53:02 Major learnings from this week's events, risks of decentralization, do stocks need to be reflexive of the underlying business? GameStop's endgame

1:15:01 Chamath for Governor of California, Friedberg on leaders vs. managers & the problem with career politicians

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I'm going all in with you. Yummy. Let your winners ride. Man David. We open sources to the fans and they've just gone crazy. Queen. Hey everybody, welcome to the all in podcast. It was a slow Newsweek so we decided we'd give you a special episode. We're going to go around the horn with our special picks. We're each going to pick 3 picks, everybody. We're going to pick our favorite recipe, our favorite new hobby and our favorite streaming. Guilty pleasure because there was no news with us today. The dictator. Chamath Polly Hypatia Rayman. David Sachs with his new track from Young Spielberg. Just ripping across the charts, young Spielberg added again, this time with a track focused on the Rayman himself and the Queen of Quinoa, who everybody says we should upgrade to the King of quinoa. That's so sexist. Why? Why is that an upgrade? The Queen of Quinoa is better. I don't know. People just felt I was being I I don't know how people could say that anointing him as queen would be derogatory. I think these people are not woke and they need to be cancelled. Jason, here you go again, making a lot of assumptions about people's pronouns. Yeah, they they. Queen of kudwa. I take no offense your insults to me and today I'm having the emotion of excitement and I am ready for the conversation. Good. We got the firmware upgraded alright, so I think we might as well start with, I don't know if you guys caught this, but there's a red subreddit called Wall Street bets and what they do on Wall Street bets is they find angles and thesis and then they bet on a stock. The stock they picked for the past couple of months has been GameStop and. Boy, today, Jason, hold on a second. That's that's that's not true. So do you. I had actually a guy on my team put together. Two really important documents, and I'm just going to read them because it's full of so much interesting ****. And then we can talk about where are these documents from, you saying from the Wall Street bets. Guy, go in one of my team members, one of my colleagues, and go and summarize the entire saga from the beginning, and then we can talk about the the corporatist scumbags of Robin Hood and other ******* people over. So let's let's do that in that order, OK? This is why they call him the dictator. Let's let's start with the read your biased and no, no, shut up boring this document. Go. You're you're an idiot because you you just want to defend people because you blindly stumbled into a ******* trade that actually made a little money. Lo and behold you. Actually invested in a company that literally they got on television yesterday and they ******* lied to Americans right to their face. This is a company that was insolvent because now let's just put a pin in the following data point, which I believe to be true. I know more about this than you do because I live in these markets, OK? So I understand what it means to be putting on trades, to being short, to being gamma squeezed, to have longs to do all of this risk management. You're an early stage investor, so I know the intricacies of this stuff and what's happening in here. This company was insolvent. They did not have the capital requirements to post the margin that was being asked of them by their partners. And so this was a platform level decision to ban and block people from trading securities. It cost individuals hundreds of 1,000,000, probably billions, maybe even 10s of billions and these ************* should go to jail. Now let me give you the timeline before we get into that June 2019. In June of 2019, a Wall Street bets user named deep ******* value began buying long dated January 21 calls, but that means is in June of 19. This person was betting that the stock would go up by January of 2021. He spent $50,000, which by the way, today is worth about $25 million. By the way, we should just highlight that there are forums where individuals that are trading stocks talk to each other and share tips and promote things to one another. That's where this was taking place. Yeah, and by the way, those forums exist in the professional organized world too, amongst hedge funds. You know, I've been invited to idea dinners where we all get together and we talk about the ideas that we have and we're all expected to do fundamental analysis. But some of those ideas are actually momentum driven ideas and a lot of the biggest dislocations in the market just as a setup here. Have been because of momentum driven trading by organized capital. OK, so we've we've been stuck with this for a while so so this guy deep ******* value posts this and every month since he's posted a screenshot of his position and he's titled it GMED, Yolo update, August 22nd to 2019. Michael Burry, who is this guy famous from the big short who's the guy that caught the mortgage thing? He discloses a 3% position in the company. And he highlights that 90%. Nine zero percent of Gamestop's 5700 stores are free cash flow positive. That's like pretty good. He urges a buyback and he notes that the company was trading at or near net cash levels, so he's making a deep value oriented fundamental thesis as well, I think also it's worth saying what GameStop is because even my wife asked me, what the hell is GameStop last night? GameStop is a retail store where people buy video games. I used to go to the mall all the time, and video games and consoles and headphones and other stuff, they'll buy back your old games. And so the stock got beat up over the last couple of years as people stopped going to malls and stopped buying stuff in stores and everyone thought the company was gonna die. And so these guys observed that maybe there's real value in this company and it's making money. Digital downloads are and they know the standard. No one buys DVD ROMs anymore or anything like that. So and and the chewy founder who is very successful at ecommerce came in to run the company. That's the best part of the story. So June 19 was the original post. August 22nd of 19, Michael Burry comes in and says I'm long. Then a year later, August 31st of 2020, Ryan Cohen, who's the founder of Chewy, takes an almost 10% position in GameStop. About two or three weeks later, on September 19th of last year, a member of Wall Street bets writes a post on GameStop, and he notes that GameStop has 120% short interest. Which I'll get to in a second, so hold on. What does that mean? 120% short interest, and he defends the company as a result of a few things, he says #1 there's a new console cycle coming. Just as Jason mentioned, #2 consoles are are not going all digital immediately. GameStop loyalty programs have 55 million users. They have a strong balance sheet. Ryan Cohen just bought a stake and the shorts were underwater and would be forced to cover if the stock ran up. He predicted the convergence of all these. Factors would lead to a big squeeze. Now, November 16th of 2020, Ryan Cohen writes a letter to the GameStop board and he urges the company to conduct a strategic review. And share a credible plan to capture market share in the gaming industry, he said that they need to evolve into a technology company that delights gamers and delivers exceptional digital experiences. I'm just quoting here not remain a video game retailer that over prioritizes its brick and mortar footprint and stumbles around the online ecosystem. November of 2020 someone in Wall Street bets. Highlights. That a hedge fund called Melvin Capital was going long, GameStop puts what does that mean? That they are synthetically shorting the stock by buying the right to sell it at a different price in the future. OK. And that they had been long that position for more than four years, so all the way going back to 2016. Fast forward to now, 2021 of this year, January of 2021, GameStop strikes in agreement with Ryan Cohen and adds them to the Board of Directors and gives two of his affiliates, his former CEO and CFO of Chewy, also two board seats. They collectively, you know, bring their experience in ecommerce, online marketing, finance, and strap planning. The stock goes up 13% on that day and closes at about 20 bucks a share. One day later. And then over the next day after that, so for January 12th and 13th of 2021, there's a ton of activity around GameStop in Wall Street bets. And now in discord and in StockTwits claiming that Brian Cohen is going to be the Savior. And then by January 14th, so three days later, the stock closes at 40 bucks. So now it's up 125%. So now comes the setup, the pros versus the Joes. From January 12th to today, there is basically been a battle by institutional investors on one side shorting GameStop. And retail investors on the other buying the stock and also buying the right to buy the stock or what's called call options. And this is what has created this crazy nonsense we've seen so on the institutional side. After, you know, retail drives the stock up, the institutional guys are like, hey, wait a minute, you know, Ryan Cohen's an idiot, you know, this company is ******. **** these guys. They have too many, you know, cyclical and secular tailwinds. And they become so massively short that the infrastructure that's supposed to even count all the shares can't keep up. And now they are short more than the actual number of shares that actually exist. So now there are 140% short. The Joe's retail they start to aggressively purchase all these cobble options and on January 13th and 14th this price keeps ticking up. Then a bunch of quant funds and momentum hedge funds notice all this activity, and they also participate on the long side. And then over the past seven trading days, we have traded over $100 billion of stock in game stock, which is well in excess of what retail can support. So here's what's crazy to realize. A bunch of value oriented, non computerized, non quantitative, hedge funds short. Retail notices the dislocation initially fundamentally, but then momentum oriented buys other hedge funds realize also buy and this is what's created this massive short squeeze. On January 19th, Citron Research, a research firm that basically tries to, you know, find shorts in the market, announces that they were short GameStop and they gave 5 reasons why it should go to 20 bucks. The stock was at 3550 on January 19th. Then over the next two days, GameStop calls hit an all time high. And it runs a two day rally of almost 70% and this is what really starts what's called a gamma squeeze, OK, which is what we saw in the first part of this week. So January 25th, Ken Griffin, Stevie Cohen, they inject almost $3 billion into Melvin Capital, the firm that was short 2 billion from Citadel and 7:50 from from Stevie Cohen. Stevie Cohen had a billion in it from before. And then now all of a sudden the squeeze keeps happening, the squeeze keeps happening, and then it starts to spill over to the rest of the market. Now all these hedge funds, these original hedge funds, they are getting called by the bank saying, hey, wait a minute, you've run over your collateral limits. You need to post more collateral. We need more money in your bank accounts. So now, not only do they have to cover GameStop, they have to cover all their other shorts. So those go crazy and they have to sell their longs. So now they're selling, you know, Facebook, Netflix, Alibaba. And so those things are going down. That accordion is what's been happening in the market in the last couple of days. And then the coup de grace, what happened on January 28th of 2021 brokerage firms. And this is where, Jason, we should talk about this like Robin Hood and Interactive Brokers. Because in fairness, it wasn't just Robin Hood prevented their users from buying GameStop and a handful of other stocks they were only able to sell, which resulted in such a one-way pressure it caused a 44% sell off. Yesterday. Now that's been reversed today. And So what it speaks to is a bunch of questions. There are questions as to whether or not this was mandated by the platforms or the regulators. Given the fact that it didn't impact all the brokerage accounts, it was a platform level decision. So some organizations like Robin Hood banned it, some organizations did not. And it could be that some of these platforms that banned it. Is likely because and this is where we get to the insolvency question didn't have enough margin and so they knew that if they opened the doors there would be a run on the bank and there would be a run on Robin Hood and that's why they basically I believe had to stop allowing people to trade and it just shows how, how fragile. The whole system is the last thing I'll say and then we can talk about this is how does Robin Hood make money? Which I think is also important to understand. At this Robin Hood makes money. Through a mechanism that's called payment for order flow. So they don't make money from consumers, right? What they do is they watch and monitor your orders. They create a data file about that, and they give it to these prime brokerage, prime brokerage institutions like Citadel milliseconds before you do the trade. What that allows Citadel to do is if they see a lot of people buying milliseconds before you buy, they can buy. And that allows them to make money. So to be clear, Citadel is responsible for 47%. Of all the payment for order flow volume they paid Robin Hood almost $60 million in the third quarter, OK, plus another I think you know seven and a half million for S&P 500 stocks and 31 million for non S&P 500 stocks. They paid them almost 100 million in the quarter or a $400 million run rate so. If we had to summarize all of this in a nutshell, that's what we know we know that it started out as. People debating the true fundamental value of GameStop. And it morphed into a momentum trade where a bunch of folks got dogmatic about a short a bunch of folks got dogmatic about being long and belongs one. And in the middle what happened was a bunch of firms. Basically decided at some point to gate the ability for people to transact in all of this, which I think caused a lot of economic disruption and that was because they didn't have the margin requirements and I think it's because they were insolvent, IE Robin Hood. Jason, over to you. OK. I think we probably agree on a lot of things here. Thank you for the concise over. We agree that Wall Street bets and retail investors are incredibly powerful now and we agree that that's a good thing. We also probably agree that there are shenanigans going on with shorting of stocks, IE 120% or 130% short. And we agree, I think that some of these hedge funds do manipulate the markets with these. You also agree that it's unfortunate that in order to stay solvent, Robin Hood. Apparently, if this is the information, we don't have complete information right now. So the thing I do think that you're being tremendously unfair about, and I'll try not to make it personal to mop, is that you've been uncouth and you're attacking people without with partial information. I'll let you respond to that in a minute, and I think we agree that Robin Hood is responsible. Robin Hood is responsible for this revolution in retail trading. They created the platform and they created the innovation that got millennials to on mass embrace trading stocks. How did they do it? They figured out a clever innovation of how to make it free and friction free. They did that because they did this selling of the data and the order flow. OK, we can debate whether that is fair or not, but. Facebook did the same thing. They created a data business. They provided amazing products and services that you yourself built for five years and made a billion dollars off of in order to make it free for consumers. Now there are unintended consequences of any company at scale, whether it's Uber, Robin Hood, Tesla, etcetera. And they all have to weather these storms. And I think that there are pieces of information that you do not have chamath. And for you to say that they're criminal and for you to say they're scumbags and to act this way is. I think unprofessional does you a disservice and does your argument a disservice. And you did this as well with Uber, another one of my investments. And that company weathered the storm and they've done great things in the world and they and I'm very proud of that investment. No, no. And I will be very proud of what I believe that CEO. And they brought in Dara, who cleaned it up. Agreed. Agreed. But they got there. And so I believe So what do you know that I don't know? Haven't talked to lad. I saw what he says about Vlad. He lied on he lied on television. He believe he lied. I think it's N he lied on Fox. Where did he not lie? What is the lie? Well, Jason, Jason, he was confronted. He was confronted about whether there was a liquidity crisis and he said to their face, no, that is not true. I think this is being misinterpreted. And there'll be a clarification that'll car, I think because they were able to draw down 600 million and because they were able to take down a billion dollar. Investment from the top investors in the world that they sought resolved their liquidity problem. Nobody in history has ever created this many retail investors. Then Robin Hood, they are responsible for the movement. When they pitched me the company, they wanted to create this revolution. It is paradoxical that they are now the enemies of the revolution because they actually created and enabled this, and I and they have been number one in the App Store. This whole fiasco starting nothing. You're saying this is the they are the Lehman Brothers or Bear Stearns of 2008 to me and they will not be. They will get through this and there has this is an unprecedented Black Swan event. I think we would all agree nobody had exactly what Lehman and Bear said. That is exactly what they said and this and they will. I believe Robin, who will ride it out because they throttle the number of people coming to platform. Las Vegas is not designed for everybody. To come to Las Vegas in the same weekend, will you admit it's happened? Will you admit that that the 10s of millions of people that have their hard earned money inside of Robin Hood was prevented from participating in trades that could have been executed other places because of an arbitrary decision by Robin Hood that they added was an arbitrary they want to stay insolvent. How is that, how is that Jason, arbitrary decision? Do you think you need to make that decision, Jason? That's me telling you that they were insolvent. That's not. I'm saying this is what I'm saying right now. Communication was not perfect. I'll agree the communication was not perfect. They should have just said we had no choice but to stop this or we would have been solved it. We cannot take this many trades that, but is that what we call lies when people's money gets ****** over? Just it's inconvenient. Let me just say one thing I'm going to interject your your your vigorous debate. The the important thing I think to note is Robin Hood makes money effectively as Tumath pointed out, through arbitrage of pricing in the markets and by providing. Leverage to their clients so the clients can trade beyond their means. I used to be an investor in a forex trading company. It was the largest Forex trading platform in the world for retail investors and 60% of those accounts went bankrupt over time. So there was a lifetime value on an account because the the customer would come in, they trade foreign exchange rates up and down, they would ultimately just get burnt up and that was it. Robin Hood makes money when the market is non volatile, when there isn't a lot of swings. Suddenly, when there is a swing and that's how they're able to provide their free pricing to people, they're making a spread. But suddenly when there is a swing and the spread start to widen, they are actually exposed to losing money. So Jason, it's true what Chamath is saying, like they did face a liquidity crisis to some extent, that's why they hadn't brought out and we all agree capital. But it was a function of their business model, right? Their business model provides great benefit and value in some extent during good times. But when times get bad, it's like, oh **** things are at risk. And that's very similar to kind of the Lehman. And and you know, I, I don't disagree. I I think this is an unprecedented situation with the number of participants. It reminds me of surge pricing with Uber during snowstorms and that also was an unintended thing that, you know, who knew that it would go up to $400.00 to take a ride. And that's something that companies will be faced with and they will have to then adjust and then make it work. And I think, you know, in in the case of Robin Hood, they should have just came up on Wednesday and said we can't take anymore orders, we can't take any more new customers. We're, we're pausing, sign up. You'll be on a wait list because we will be insolvent if you guys make anymore trades. And that would have, I don't know if you believe that would have. I agree with that. So, Jason, let me just explain the communication for the rookie. It's not, Jason. It's beyond poor communication. People were blocked out of their accounts like there was hundreds of million calculable amounts of economic loss that was going to wind up being true because all these trades are occurring now and the stock is rock is a rocket ship. Who's to say that? I mean, look, I mean. Jason, aren't the shorts all covered by now? That's what they've been saying. CNBC. No, there are still people. How do you know how many people are short right now? How many shares? Because it's the primes put the data together and they send it to us. Do you have it handy? Because I've been looking for it online and they said 10 times the number of shares short have traded hands in the last 10 days or five days. I mean, Jason, I don't. So I don't have it literally in front of me, but I could get it in the next. Yeah, just text one of your people. You got all these researchers there. Go ahead, SAC. OK, look, I'm going to try and thread the needle here. I think Jackal. Is right that we shouldn't impugn people's motives without having all the information. And furthermore, you know, building these rapidly scaling startups is really tough. And it could have just been, you know, a function of, you know, not knowing how to deal with unprecedented growing pains. So I don't think I don't want to be too judgmental. Yeah, yeah. No, that's not, no, but David, that's not. But you guys are not being accurate. They have known for decades, for years, sorry dears, how this business worked. When somebody buys a call option, they are legally obligated. When they send that order through, they have to post margin on behalf of that person. So they saw this building, this happened in March of 2020. They went through this liquidity crisis. They've had to draw credit lines before they saw it building in the system. So this was nothing except negligence. Yeah. So? So I was about to that I hadn't got to the point where I was about to agree with you chamath. I mean, look, all I'm saying is even if it was negligence, I'm not sure I would impune all the motives to them that that's all I'm saying, that I'm trying to find some common ground with Colin at that point, but where I totally agree with you, chamath. Is with respect to the effects of their decision, I mean the effects of that decision they made to stop trading and specifically they didn't stop people from selling. They only stop people from buying. So they shut down one side of the trade. And the effect of that was we had these hedge funds from Wall Street, they were on the ropes, right. I mean, let's discuss who these guys are. These are the apex predators of Wall Street. They are in the business of shorting companies to destroy them. I mean that is their business model. And they are not academic traders, OK, who are just speculating on outcome. They engineer the outcome, right? Look at their tactics. Just watch the show. Billions, right? They hire PR people. They hire private investigators. They're participating on these message boards spreading disinformation. Look at the the year of Hell that Elon went went through, right? They tried to destroy five years. Yeah, yeah, exactly. They tried to destroy companies to engineer that outcome. They create nothing. They are in the business of of of destruction now. The beautiful thing is you had these Reddit kids, these pirates who published this manifesto right on Reddit, basically being the heirs to Occupy Wall Street they recognize. Look, occupying like a like a physical space does nothing to these guys. We are going to hurt them where it counts in their pocketbook. We are going to get together and we're going to basically create a trade mob that's even bigger than their cartel. And they did. They got 2.7 million people taking the other side of this trade, and then the hedge funds doubled down, they said. **** you, we're gonna double, we're gonna triple down. And the guy on Reddit said listen, he, paraphrasing John Maynard Kane, said we can be ******** longer than you can be solvent. And they were winning. That was what they said, right? And they were winning the trade, OK? And Melvin was dead busted and Citron was on its way to being dead busted and they had to go to Big Papa, Stevie Cohen, OK, and Ken Griffin to get to get their rebis to buy their rebis to get back into the game, OK. And then they had these guys on the ropes, they had them felted OK and then what happens just at the moment where they're gonna like basically bust them out of the game for good, Robin Hood shuts down the buy side of the trade. And So what does that do? It gives these hedge funds time to regroup, to unspool the trade, to reposition and save themselves and to get out of the trade. If they want to get out of the trade, you can never take that 24 hour time period back no matter what Robin Hood does now. And so I agree with Jamal. This was like don't you think David on that point, I think it's I am in agreement that the hedge funds deserve to get their ***** kicked 100%. I also as I said we don't have complete information of why. You know, Robin Hood had to pause trading and the other platforms and it was like 5 platforms by the way, that had to stop or else they would be insolvent because nothing like this has ever happened before. This is a run that nobody's ever seen and now we're back in the game. And don't you think all this attention then drives more people to buy GameStop, which is what's happening today, and that they're still going to get crushed cause it's still going to have to cover? I mean we so look, I, I don't like, like I said, look where where I agree with you is I think the consequences of this decision. By Robin Hood were I mean, they were really bad, right? I mean, we finally had these shorts on the ropes where they deserved to be. Finally, they're getting a taste of their own medicine. Yes. And it was really bad to pull the plug on on the wish they wish they didn't have to, I'm sure. OK, exactly. And I don't know what went into that decision, but here's the thing that I think kind of stinks about. It is the point that Chamath is making about who is doing the the trade execution for Robin Hood? Those trades are flowing. To Citadel, well that part is that's part of it, but 4047%, but who is now on the short side of the trade. Citadel went in and bailed out Melvin and Citron and so they're on both sides of this trade now. How does that make sense? Yeah, but I mean what I would like to know specifically OK is did anybody from Citadel reach out and touch Robin Hood? Did anybody at Citadel put in the fix and saying. Robin Hood, of course that's how you washing we're gonna we're gonna cut you off. You know, unless you freeze out the buy side now look, 99% chance that didn't happen. I don't know. But that is a legitimate question we need to actually can I can I just tell you the the question is important but the way that you phrase it is you call them and you basically say, listen, you need to post $500 million of margin. Why? Oh well these trades you know what we're going to arbitrarily change the margin requirements. OK, 08, you need to raise a, you need to post. So then what they did. Was they pulled all the credit lines? OK, they post margin. Trades are still happening like crazy, right? All these people are buying GameStop calls. They have to go. Because look, when you buy a call, when you as a user, when David Friedberg quinoa buys a call, Robin Hood becomes synthetically shorted, right? Robin Hood doesn't have the share to sell you, but it's giving it to you. So they're technically short. They got to go by it. OK, so this is what creates this dynamic where Robin Hood knew. They knew every second of every moment what was happening and more importantly what could happen. At a minimum, it's negligence and at a maximum it's the fix. Well, it was and it was and it was fine to do it before the market started to swing volatile, right. And and so when the market wasn't high volume and when it wasn't volatile, it didn't matter because they had appropriate levels of surplus capital or statutory capital or whatever the definition is in this market to be able to cover the quote UN quote. Var, or the value at risk of their portfolio of their customers. Worst case outcome. But as soon as that spiked, as soon as the VAR spiked, they had to go get more capital. And So what do you do if you're the manager of Robin Hood in that situation where your clients who've been making you a bunch of money by trading stocks over the last couple of years, suddenly they all get themselves in a bind where the bar on the portfolio is more than the cash Robin Hood has to clear. Assuming all these people go bankrupt, that's where Robin Hood had to scramble. And so in that circumstance they drew down debt and they had to go get a billion dollars of equity. But if you guys were running that business and I'm not speaking for Robin Hood's, I'm not making the case for Robin Hood. But what would you guys have done in that circumstance? You know suddenly all your and and by the way I'm saying they they created the problem for themselves because they allowed people to trade on margin with low bank, with low account balances and volatile stocks prior to this. It got away from them in this week. You cannot run a business like that and be selective and arbitrary. You can't say some stocks. On certain days, some stocks on other days, some options over here, some puts over there. That means you're a ******* moron. And what do you do, what do you do on Tuesday or Wednesday when all of a sudden you're not Wednesday or Wednesday? This, if you were a reasonable manager of a business like this, this conversation would have been happening at a board meeting quarters ago. Hold on a second. Let me finish, please, OK. It it needs to happen quarters ago and in quarters ago, what they would have said is, hey, guys, we've run some scenario analysis. We've done some sensitivity analysis. Here's what happens if all of these things can go against us. That's a typical stress test that a bank has to do, right? When you're a structurally important bank, you have legislation that forces you to be under these conditions where you have to make sure that that you can understand some of these scenarios. And then you have to have any, any trading entity or insurance company. They all have to have that analysis of what's the worst case scenario and how do you plan for it. And you have to you. And by the way, coming out of 2008, we actually legislated that we needed to have these two and three Sigma, you know, event scenario planning and you needed to have proper credit. So here's what happened really. Number one, it was under Equitized. Right. At a minimum, the business was massively relative, relative to what they were letting their customers do exactly. And that that's really important because the point is they let people trade with high margin and they let people trade in volatile stocks and it was working until the volatile, not just stocks but options, options what, which is what creates the real spin up the the feedback loop that blows this whole thing up and then #2 is they don't know what they're doing. I think one thing that's really important I, I just want to say this. We should stop pretending that trading in stocks is investing in businesses. And this is something we've said for a long time on Wall Street, but stocks shorting margin and derivatives, those those four things. No longer look like what the capital markets were originally set up for, which was to help capitalize businesses and allow people to exit their investment in helping to capitalize that business to another investor that wants to come along. It has effectively become a synthetic casino or a synthetic gambling model that lets people trade things up and down. And this has been the mainstay of Wall Street for the last couple of decades. And as you pointed out Sachs, it really is a Leech on the system because the amount of money that trading firms and traders. And hedge funds make doing this ultimately is taking away from capital that could be invested in actual businesses that could drive job growth, drive economic prosperity. Dr Innovation and the volatility that I think we've seen is the ultimate feedback loop that emerges from when you allow a casino to operate that sits under the guise of being business capital and investing in businesses. It's not. I'll give you guys a statistic. I downloaded the data. From CBOE. That analyzes how much volume was created across all the equity markets last year in the US. Stocks traded a total volume last year. You guys ready for this $121 trillion of notional? Across 2.7 trillion trades. Do you think that $121 trillion of notional equity value trading provided capital to businesses anywhere close to 1% of that total amount of trading volume? It really is a synthetic instrument that allows people to participate in. I bet that something is going to go up and I bet that something is going to go down with other people of a of a similar ilk. And one person makes money and one person loses money and at the end of the day, the underlying business entity doesn't benefit whatsoever. And you see it when shorts go against businesses. What happened with Elon and Tesla, and you see it when derivatives like CDO's blow up the ******* housing market, where people basically trade these derivatives that sit on top of housing and that capital did not find its way into homes to help people buy homes. It ultimately led to the collapse of the the only the only reason that Lehman and Bear Stearns was shut down was in 2007 and eight, when they were in a liquidity crunch in the same thing and they basically had all these trades blowing up against them and they couldn't collateralize them, was that the people on the other side were hedge funds. And that's why, you know, they were put into the Fed. And that's why we were able to basically like, you know, come out relatively unscathed and but I mean by relatively unscathed. It's like a global calamity. The, the, the tragedy of this is that this is the tragedy of the Commons. It's like, you know, there is no organization of people that can say, hey, listen, I'm really rich and wealthy and what happened here was wrong, even though it's probably on the same scale. And so everybody that was a participant in it is, in my opinion, I think is guilty of all of this. They were, they were complicit in the robbing of America. Do you think calls and puts and shorting should be allowed should those markets exist? I I I do have a sense of common sense. Solutions and let me, uh, let me kind of give you them and then you can tell me what you think. So the first is we need to use modern technology. Let's just start with that, right. To ensure that one share of stock, right, isn't loaned out multiple times so that you can't have a scenario where you have more than 100% sure. No brainer, right? That's a no brain. So you still support shorting them up? Yeah, let me, let me just go through the list and then you can tell me what you think. If if high frequency firms can trade 10s of millions of shares per day, there's no reason why we can't reconcile who the beneficial owner of every share is. So. Maybe that's a you know, now maybe we found the first obvious use case for blockchain, right? Like, you can't borrow a share unless you can prove beneficial ownership in a nanosecond, which can only be done on a decentralized Ledger. But the point is, number one is we need to rebuild this infrastructure. You can't have 136% of a company be short. That makes no sense. The second, what we've learned is that again the like are we going to basically have these blow UPS every 10 years before we actually address the elephant in the room, which is leverage, like you need to have leverage limits. So for example, banks coming out of 08 have super strict oversight and leverage limits and because they're dubbed systematically important, we don't do that for hedge funds. And I think we need to and I think that we need to have the ability to realize that these guys can cause systemic risks, right. So. Just on this example, I don't know if you guys have ever heard about long term Capital Management, LTCM, this guy, John Merriweather, the Asian currency crisis, the whole thing collapsed. There's a good, there's a good book on it well, so it's it's funny, but if you guys think this is the second financial calamity, it's not the first, it's the third because the first one happened in 1998, so in 1998. There was a firm call it was it the whole, the whole economic system was gonna collapse if the bailout couldn't happen. So listen to what these guys did long term Capital Management borrowed. They had $4.8 billion of capital that limited partners and investors gave them. OK, these ******* crooks. We're able to then borrow $125 billion. 125 billion on the 4.8 billion of notional. So they were able to lever themselves up 26 times by the way, synthetic margin, right, no actual capital was allocated to these to, to this transaction set. It was all synthetic like, no, no money moved accounts when no money moved accounts. So it was literally just writing stuff against debt that couldn't have existed. Yeah, so they, so they built 60,000 trading positions and those individual positions represent again. 1.4 trillion, right? U.S. dollars, right. So you took these guys in a room, took 4.8 billion, got knucklehead over here to give them 125 and then got these knuckleheads to sell them positions and all of a sudden 4.8 billion equaled 1.4 trillion. And so then US, US regulators had to step in. They had to orchestrate a bailout from a consortium of banks because they were concerned that if. If LTCM collapsed, the whole system would collapse because they didn't understand so right. So we have to, we have to put leverage limits on top of hedge funds. The third is we need to improve disclosure. The rules that the SEC right now is to discourage disclosure. That doesn't make any sense. We should force everybody to publish what they own on a weekly or monthly basis. You have the ability to do it. The technology is simple. So you need to improve disclosure because then watchdogs and other people. Can basically be looking at it all day and identifying these risks faster, not slower. The third is we need to do something around open trading. Like why is it that you're, you know, people are allowed to go to casinos? Why can you? You know, buy lottery tickets, but all of a sudden, like we're going to decide who's financially literate, a platform like Robin Hood can decide what's bought and what's sold. I don't think that's fair. And then the last thing is I think that we should have a short term trading tax. We tried to pass one in 201810 basis points. If you had passed this 10 basis point tax in 2018 on short term trading, it would have created a trillion dollars almost. I did the math on this because I actually the reason I ran all the equity numbers was to figure this number out. So in the US we generated $160 billion in capital gains tax last year and if you look at the volume I described earlier in terms of notional traded of equities and number of shares traded if you charge point 1%. Every time someone sold a share on the value of the share they sold, it would equal the capital gains tax. So what you could do is you could charge point 1% on every trade. It would reduce all of this high frequency nonsense where people trade in and out of stocks. It would force people to trade for the longer term or basically invest in companies and you could get rid of the capital gains tax. Think about that. If we didn't have to pay capital gains tax and we were only taxed when we traded out of a stock point 1%, you could see an incredible amount of capital making its way into. Businesses. And this would fuel economic growth and jobs and prosperity. And so I think if you could pull that off, put the two together, a .1% sales tax on every share sold and get rid of capital gains tax. The lobby, incredibly powerful. The lobbyists got to that bill. But that 10 basis point tax on high frequency trading, it just means, like, look, if you can trade a whole bunch of **** every eight seconds, you just have to pay 10 basis points in and out $777 billion of incremental revenue to the federal government. And it was lobbied out, and I agree with you. And by the way, the more, more money goes in, more money makes its way into companies, right? And that's the it's you, you stop all the nonsense where people are basically trading to bet that something will go up in the short term and you get people to make investments in the business as opposed to the momentum. Lowering the capital gains rate is genius because I think that if you if you are a retail investor and you could for every year you hold, if you can decrease your cap gains rate by 20% by the 5th year. Now all of a sudden retail folks aren't necessarily gambling their owning and their cap gains rate. Will be 0 after five years. That would be amazing. I have a a basic question I'm interested in. Your position sacks and maybe even around the horn. What happens to the if the short positions get covered, which they're going to be at some point in GameStop I would think, or some large amount of in the short squeeze is off. What happens to the people who are buying in you know to the meme stock as a retail investor let's say over the next 10 days are they going to be left holding the bags? Is there any way this company could be worth 20 billion or 25 billion? Because that's Freeberg points out there people are not buying GameStop. They're they're. Trying to destroy a hedge fund who made a stupid, manipulative bet? Great. We all love the the Robin Hood story of that. Not Robin Hood TM, but the generic term Robin Hood. What what happens to those people? Are they going to be the last people holding the bag? Probably. This is not going to end well. There's no question about that. I totally agree with you that people engaging in this kind of speculation and buying these prices, it's not going to end well. Now, I do think that the Redditors actually had a brilliant strategy, right when they noticed that these hedge funds. Or over short overexposed. And they seized on that vulnerability they did to the hedge funds what the hedge funds usually do to everybody else, which is find the Achilles heel right and pile in. So I think the strategy started brilliant. Now anyone who's piling into it, I'd be real careful because I think the hedge funds have regrouped, you know, and you know the the idea that you're going to beat, beat them at their own game. You know, when look, I mean Citadel is executing your trades. I mean, right that the trades are. Their order flow is going from Robin Hood to citadel. They're not going to be caught flatfooted. They're on the other side of this trade, and so, you know, I just think the house always wins. I'd be real careful about getting into it at this point. I think to see just you guys know Robin Hood. Robin Hood just tweeted that now the the list of restricted names is now up to almost 35 or 40. I think it's worth they're randomly picking companies, guys. RLX what is RLX? I think that's a Ralph Lauren. Nope, you're not allowed to trade that, SND I don't know what that is, but you can only buy 10 shares. Would a better solution chamath be for them if they can't handle this and they have the risk of ruin to just say we're not adding any more accounts. Until we can digest all this and raise enough capital to float all this, and do you think there's a chance the SEC is telling them you got to pump the brakes on this because we can't have a market crash? Two questions tomorrow. I I think that the, the, the, the issue isn't Robin Hood's ability to grow. It's that they don't have their ability to run their business and so their incompetence is going to cause them to, I think have to deal with if they had 20, right? Well, if they had $20 billion in cash right now, this would not be an issue, right. I think you're right. OK. So assuming they can line that up because that's probably what's going on right now is a $10 billion investment is going to go into this company pre IPO so that they can actually take advantage of this situation and grow so. Despite the fact that you have an axiom with them because you have Sofia competitor that's very far behind them that had its own colossal problems, let's put that aside for a second. You're talking your own book without even mentioning it. Do you think that if they had that 10 billion they would just open up all the doors or do you think maybe they just say, hey, we're not going to add anybody else? I think that what's gonna happen is they're going to get sued into oblivion. I think that the class action lawsuits here when people talk about the implied losses that that they that they had over the last 24 hours. David Sacks is right. You can't undo it. The thing is, like, what? In all of these other situations, like in the Uber fiasco, you know you can't claim much damage, right? Because you can't measure it. You're could have taken a bus, you could have taken a taxi. You know, you could have taken a lift, maybe you could have walked. Who knows what it is? But the point is that. That the economic impacts, uhm, I think were much less than maybe the psychological impact, right? Like you were angry here, it's the exact opposite, which is that you prevented people from transacting in an open market and when people signed up to use the service, that's what they thought they were signing up for. And they thought that that the risk on the back end would be managed. You have to remember, it's not that the individuals did anything wrong by buying or selling. It's that Robin Hood did something wrong by not being able to manage their business accurately. And then that then impacted the users to the tune of 10s of billions of dollars that has to get adjudicated. And so, yeah, I think the right thing to do is to stop the business, hit the pause button, allow people to elegantly transfer their money out. Do we have to remember on the back end of this, whenever that you have one of these market failures? The clearinghouses are allowed to instantaneously close your account and transfer it to another broker. Instantaneously, you have that right. And so the market does understand the systemic risk at some level. They just didn't push it all the way through to the end of retail. And so we're going to have to unwind this and unscramble this egg because it's a really, it's a really big problem. Yeah, you mentioned growing, growing Willy nilly because everybody's infatuated with valuations and blah, blah, blah. And and you move into a regulated market where you needed to understand capital constraints, you needed to understand modeling, you need to understand three and four. Sigma events. It just means you're underprepared, which means that at minimum, you can't be doing business until you get that **** under control. Yeah, I I actually think we're almost In Sync on this. You have a little bit of an axe to grind because of your other portfolio company. I think that you still won't recognize that you have no wait, let's talk about horse in the race. Wait, because so far I just did they did they finish resolving all of their harassment lawsuits. Is that all resolved now or is that still open? Yeah, we we met. You took them public. So did did you work all that out before you took in public? Yeah. Jason, we we transitioned the CEO, we completely hired a new team. I mean, it's incredible. So your company that you took public can resolve issues and you can give them time and then you can in fact become their mentor and you can become their savior to get them public and save that company. Jason, you should. Robin Hood can't. Robin Hood can't, can't talk about his company that's going public. Right now. So just as his lawyer, I'm gonna step in and OK, no problem. I just wanna point out, make sure you don't go to him at the saying something he should have said. He's all of our companies. And I don't mean to create a lot of collateral damage here, but sacks had a company that had challenges. Chamat companies are challenges. We all had. Companies have challenges. And I think focusing on what is the role of an investor when your company faces challenges, I think the role of the investor should be, and I take umbrage to you chamath trying to dunk on me because I'm supporting an investment. I think it's a low blow. And I take it personally, I'll be totally honest, I am trying to work with the company to help them resolve the issues and I need to be loyal to my founders and I need to say, hey, how do we resolve this? How do we get here and work with them? And I'm sorry that I'm right or die, but that's how I approach this is I should be trying to be helpful as a shareholder. Could you try to be too, but could you make the argument that someone dunking on your company is the equivalent of a hedge fund shorting a company? I'm talking about my personal relationship with Chamath, which you know, it's different than you know. The the public markets, right. I know, but I what I'm saying is, like, I think in the private markets we hear a lot about venture investors, you know, often speaking good about their own companies. Where people really get irritated is when venture investors speak bad about other companies. It's the equivalent of the hedge fund short and you know, it is Jake. I mean, chamath may be dunking on Robin Hood. I don't hear him dunking on you. I mean, he just said I stumbled into the investment at the opening. Well, you stumbled into Vlad in a bar. I mean, that's you told you told Jason, you told the story, Jason, you told the story, agonized me in a bar and came up and pitched me Jason. But you told the story flippantly on television that you ran into men. Antonio's nut house. What do you want us to think you didn't tell us? Hey, listen, I had. I had systematic scouts reach out based on traffic growth. I sat down, they pitched my that's not how I get Duflo fly by doing a podcast. So then Jake Paul, if you want me to apologize for saying wow is through the process, but Jason, if if you want me to apologize for saying that, you stumbled into it based on your public description on television. And I'm sorry. Yeah, but it doesn't. But it doesn't take away from what we have. I, I think the investors responsibility, this is what I think is fundamentally wrong with Silicon Valley. We are people that basically do this like hero worship around founders and it's stupid. I think we have a job as fiduciaries to the users and to the employees and to everybody else that doesn't have a voice. And most investors are incapable of actually pushing people to do the right thing, OK? I'm pushing to do the right thing and I always have learned the hard way. And in this example, what I'm saying is this problem. Should have been solved 3 and four quarters ago. And that's a governance. Yeah. I mean, look, yeah, so chamath, you're you're right about that. But I mean, just to give Jake a little support here, I mean the reality is I, you know, we've all been on the inside of these hyper growth companies and you know, like mistakes happen all the time because you're moving so fast. And yes, it should have, it should have been fixed, you know? But but, you know, stuff happens. Now the question is when bad stuff happens, is it an integrity issue or is it negligence or is it just people running too fast? And I don't think we know that. This was an integrity problem. I mean it could have just been people running too fast, but David, that's what you knew what the rules were. Meaning I I don't think, I think it is an integrity issue. The rules were not like all of a sudden in a crystal ball and all, there's a magic 8 ball that spits out a rule when you do a deal with DTCC, when you did a deal with your holding company for clearing. You sign contracts. Those contracts should have been modulable. This is an Excel problem. This is not like I hear what you're saying, and I'm saying, I don't completely know. I want to get to the bottom of the relationship between Citadel and Robin Hood, and I want to understand if there was any undue influence there, OK? Or whether this was just a case of hypergrowth catching a company by surprise. I'm not defending them. I'm just saying I don't know. And therefore I think it's a little bit premature to be talking about giving this company to death. And I also. Is there even a possibility that this has ever happened in the history of the stock market or the modern stock market that 10 million new and hold on I even say what it is. 10 million new retail investors came into a stock. You know we're millions of them a day and that the stock Trade Center. I don't think that we've ever had social media collide with finance like this. And it's very reminiscent of our discussions with democracy and journalism, censorship and politics. We we are having weird behaviors because of virality and. That seems to be the common theme. This is the most important. Learning from this experience. Forget about the fiduciary and the governance responsibility of these companies. Whether they were good or bad will be resolved over the next couple of weeks and months, I'm sure, as more information comes to light. But what's super interesting about what happened this week, and I think it's the most impactful societally over time, is that we're seeing this phenomena where individuals in aggregate can believe something to be true and make it true. And we saw this. With Tesla and I, I don't think Tesla got this level of notoriety because it was such a a a longer play out cycle. But Elon, you know, was not hitting numbers that people thought he was going to hit margins, production volume, etcetera. People were shorting the stock. But enough people believed in the story that Elon told about what he wanted the future to look like, that they bought the stock and that gave him the ability to do shelf offerings, raise additional capital and ultimately build the business and make it manifest in reality that he said would happen. And the same is true of Bitcoin, and the same is true of Trump, and the same is true of storming the capital. In all of these cases, there was a belief in something, and there was an aggregation of individuals using social media as a mechanism for sharing and talking and engaging and creating a collective outcome. That wouldn't have happened through a centralized system or a centralized process and wouldn't have happened in the traditional way where history defines the future. And I think that is what's so powerful about what's happening right now. And we're seeing it in financial markets, but we're also seeing it play out in politics and we're seeing it play out in the real world in in a remarkable way. And it goes back to this notion that like a stock is worth the underlying value of the company and that that's not true. People can dream a stock to be anything as they did with Tesla. At the time that people were buying Tesla stock, the historical performance of that business was not what hedge funds considered to be a, you know, a profitable, good business. It shouldn't be worth anything. But the belief in what it could be is what drove the value of that stock and ultimately that value enabled that business to become true. And it's just it's it's amazing to see it happening. And I think the the counter which is really what makes this so striking is the centralized institutions that are trying to block this from happening and the shutting down of parlor and the shutting down of Robin Hood trading are are equivalent from my point of view or at least equivalent I think will be perceived to be equivalent broadly which is if a group of people. Get together and try and use an online service to make a change in the world by sharing and talking with one another and communicating a belief, a collective belief. And that gets yanked away from them. That institution that has the ability to yank it away from them is evil, and it will force people to decentralize, and it will enable new ways of trading, new ways of communicating, new ways of building. And and that's the profound change that I think this decade is going to realize, and we're just seeing it start now. I agree that parlor or Wall Street bets is parlor 2.0. Right. And and what happened as soon as Wall Street bets started, which is the the the the Reddit kids, they started threatening and they wounded these powerful insiders, these rich, you know, hedge fund magnates. What happened? They started getting banned off of discord. They got discord as a tech company to kick them off. How did that happen? They've been talking on there for months and all of a sudden, just magically right at the critical moment where they're also not allowed to trade, they're free. Speech gets cut off. That's a. That that was deliberate. And I'll tell you how it happens is, I guarantee you what these hedge funds did is they went through the discord room and they screenshotted, you know, any post that they could plausibly characterize as, you know, hate speech or what have you. And, you know, and and by the way, I mean those, there's a lot of raunchiness in these rooms, but it's not hate speech and it's not organized for the purpose of hate. It's organized for the purpose of trades. But what they do is they weaponize the censorship rules and they go in and they screenshot and then they give it to discord. And they get these guys kicked off. And this is exactly what I've been talking about with censorship. It starts with something you like and then becomes something you don't. How many of the people who support these, you know, Reddit kids were in favor of D platforming, Trump, and parlor, and now they can see where it goes. This is slippery slope, and we've only had to wait three weeks to see where it goes. It goes to the same place, which is when the people in power get threatened. They use these rules, they weaponize these rules to shut down the outsiders and the upstarts. That is a problem with censorship. That is why you cannot let the beast get started. I completely agree, and I think this is exactly why how I think where we came out was, you know, the deep platforming of Trump made no sense. I think the the economic censorship of Robin Hood makes no sense. Yeah, and you can argue it's the right thing to do with a narrow context, but when you take the broader point of view of the implications, that's where this becomes really shaky and really scary and I think really enables a decentralized movement that is going to be a lot broader. Then, then folks are really realizing at this point, you know, folks don't want to be trading on a system that tells them how to trade and folks don't want to be communicating on a system that tells them how to communicate. If I gave, if I was running Robin Hood and I said, we're going to have two options. There's going to be a Robin Hood diamond membership and you pay by the trade and you know, you get these special features and then the Robin Hood free, you know you, you get your data is sold or however it works. Would that be a possible solution? I think to the optics issue here where consumers could basically pick just like if Facebook or Instagram woke up one day and said for 995 a month you could have none of your data, no advertising ad free like Hulu dot you get Hulu Premium. So here's the thing Jackal. Hope your Robin Hood investment is successful. I just think that there are now three moments in Robin Hood's life. There is pre this week and it is what it is. It's an $11 billion Unicorn, God bless them. Then there was this week where we have to frankly hold people accountable for the economic damage that they created this week because it is measurable, OK? It's not that. It's not like missing it, you know? It's it's it's not like, you know surge pricing and Uber. It's not, you know, Facebook growing too fast and allowing, you know, pictures of breasts getting posted and I'll have to catch up. It's not that, OK. It's not a bunch of like disinformation that we can't really judge. This is very discreetly judge able. And so in this week Robin Hood existed as a different company and I think that there is an implication for that. Then to your point, honestly, I agree with you, it's what happens from here and I and they should survive. But they have to learn and I think what they have to learn is you have to stop the account. Both. You have to massively shore up the balance sheet, take the dilution, get the capital you need. Because let's be honest, I'm sorry, but nobody's going to show up with five or $10 billion at 11 billion pre. They'll show up with five or $10 billion at three billion pre. And they should take the money and then they should allow the platform to work as intended or at least as perceived to be intended to their users. And then they should reopen to everybody. What would you do, David, if you were in charge? And then let's move on to our next topic. Well, I mean, I feel like we probably talked about Robin Hood enough and I kind of want to back go back to the point that that Freeberg was making, just kind of up leveling this a minute, which is I I definitely think this is part of this ongoing populism versus the elites war and social media is now the tool that the people use to organize themselves against these powerful elites. It's why we cannot allow censorship because it always comes down. It to benefit the powerful, the elites, against the people who are trying to organize against them. That was for, to me, one of the biggest takeaways from this week. And and look, the reason why people are organizing is they're asking the question, what is the societal benefit of these big hedge funds in relation to the enormous sums of money they make? Every year you go to, like the Forbes rich list or whatever, and every year these guys are taking down the most money. They're not creating companies, you know, and, and shamatha is right, we can't have founder worship because they make mistakes too. But at least founders are creating things, right? They're taking big risks that they're not providing risk capital like what we do. OK, we're investors but we're funding peoples. You know, we're we're we're we're taking the risk of writing checks to to start the guy who's got nothing, right. So or gal, you know, they they them. It's all good. All of them. All of them. So so but try to keep you from getting cancelled here but but but but but but what what exactly is the societal value of these hedge funds and I know that. To provide some price discovery and they provide greater liquidity to markets. But is that really worth them, really being the richest players in the game? It doesn't make any sense. And then when they lose, like in 2008, they get bailed out. It makes no sense. It makes no sense. Something is wrong here. Now, is this a right wing view of left wing view? It feels to me like there's a political realignment happening here where the left and the right, we're all getting on board with this idea and it's got to get fixed. Yeah, this this might be the legacy of trumpet away sacks that he created so much disruption over those four years that now we're actually finding out where the actual breaking points are in society. And this is one of them. And the health care system is one of them and freedom of speech is one of them. And we need to address each of these. And they're complex, but there is common ground. I mean, when AOC and Ted Cruz are both agreeing on the same issue with something's going on here, like, I think we have to fight the real enemy, chamath. And I should not be fighting over this because I can tell you if Chamath did the series. Again, this he would be backing up Robin Hood like this to the end of the end to end of Earth. And that's totally fine. And I agree with Jason. I just. I just want you to know, number one, I love you with all my heart. And I and I hope you make. I hope you. I hope you make Ditto hundreds and hundreds of millions of dollars. But there's a it's just like, you know, you were you just got upset with me because you thought I was kind of saying that you stumbled into it. I didn't mean it that way. I was just repeating the way that I heard the story. But something that touches me equally ferociously is this idea of like, the little guy. Getting run over by some, like, you know, objective thing over here that makes a decision that's arbitrary, you know, 100% agree with you. And so, like the idea that, like, you know, somebody who's on an app all of a sudden gets censored, somebody that you know, makes a post gets cancelled. Somebody that tries to make a trade can't. It feels unfair. It feels that each individual is suffering some pretty deep inequity. And I can't, I just can't stand that it really just touches me in a way that tilts me and I get very. And you know what? It's interesting. I think the reason I made the Robin Hood investment is because my belief in the underdog and my belief in people's ability to come up from being poor or middle class to middle class or affluent friedburg you haven't chimed in yet. As we wrap here and then move on to our second topic, I think we're at an hour. So it's. So I just want to say, you know, we talked about. Decentralization. And, you know, we all feel the emotional response to the little guy getting screwed by the big guy that controls the system, and we wanna fight the system. That's the basis of every great movie. The the It's worth highlighting though, that decentralization and what I would kind of characterize as swarming behavior, uncontrolled swarming behavior can actually have negative consequences. And there's a reason systems exist. You know when you put a bunch of people in a room, let's put 100 people in a room, and every time and someone says the word door, and every time you hear the word door, you're supposed to repeat it. Within 30 seconds, the entire room will be like deafening with everyone screaming door, door, door. And suddenly everyone will be screaming it. That's a feedback loop that occurs in an uncontrolled social system and that's what's occurred with GameStop and it's what occurred with with with Bitcoin. So there are, as we've seen, remarkable outcomes when you allow systems to operate without centralized control and without centralized brake pads that that kind of slow them down or or put in place some rules and some obligations to how that system operates. The problem with decentralization and this swarming approach to to resolution where lots of people basically work together individually. Is you end up with things like cancel culture, where before a judge and jury determines whether or not someone did something wrong, the community decides that person should be punished and shuts them down in the real world and their career and their life is ended and ruined. And we saw the same and we saw the same with the capital riots. You know, people basically died because of the swarm that occurred, where this idea that the there was fraud in the election became an echoing, deafening noise for these people and they swarmed. And kill people and the system by which you can actually have vigorous debate, and the system by which you can actually have controls and processes and judges and juries and trials is what needs to be improved for this to work. Otherwise people will go to decentralization and you will have a Lord of the flies moment that engulfs civil society, because the tools are there today. And so centralized systems can work, but they have to adapt and adapt quickly to be fair and to enable and to not. Discriminate. Otherwise, we're gonna see Lord of the flies and we're gonna see decentralization being the solution to getting out of the system that's inhibiting US, and we're gonna end up having really ******* ugly outcomes. There's a psychological term for what you're describing. It's the diffusion of responsibility when and also known as mob behavior. When a group of people collectively do something, their individual morality can evaporate. And the larger the group and the more intense the behavior, the less responsibility each person takes for it. So five people on the steps of the Capitol. You know, one person breaks the window, maybe somebody breaks it, but once you have 500 or 5001 person breaks the window, now you got a much higher percentage of people start breaking windows. And that's when tragedies happen. Of course, World War Two was the diffusion of responsibility with the Nazi agrees. Yeah, you're totally right. You're totally just one quick point and then we can just move on. So I think these like viral tools, these social networks, they enable two things. They enable mobs, but they also enable movements. I think the mobs are bad and the movements are good or they can be good. Depending on what their manifesto and what their mission is. And so I think we want to enable the movements, but we want to be really careful about the mobs. And, you know, one of the things that's kind of disturbing about Twitter is I generally find that, like the tweets that seem to go the most viral are the ones that are full of rage and anger and the ones that are trying to make more nuanced points just kind of get lost. And so there there is something a little bit disturbing about the mob behavior. But but the movement, the enabling of these new movements, I think is really powerful. And that's what Wall Street bets was, at least in the early stage, and they did not deserve to get shut down. Like that social social networks are a collective amygdala. They are not a collective cerebral cortex. And I think if someone can solve that problem and get people to think about the rational, objective outcomes in a social way, in its engaging a fashion as it is to kind of be excited by the negative shift that excites the amygdala, you know, it could be really powerful. But that's probably we're going to need politicians who we're going to need some level of politician who has some integrity and some expertise only, well, don't you think, don't you think? Making a transition for each ideas, I was gonna say, don't you guys think that what this means is that entrepreneurs now can really think about decentralization as the key feature? Like in many of these markets or these systems where we have these centralized authority, we have to move to a much more decentralized, democratized way of doing things. Whether it's stock trading or whether it's healthcare records or whether it's, you know, education systems and degrees and accreditation there. There has to be a way where you can't. It's morally, yeah, but with morally and ethically inclined and or legally inclined systems that ensure that the behavior of that system doesn't run amok. And, you know, that's really where things can can go, can go awry, as we've seen lately. But it's a hard problem to solve, and I I don't think we're going to solve it here today. Just a final update. I don't know if this is exactly correct, but I just asked on Twitter how many shares of GameStop Bristol Short. Apparently there's still 55 billion shares are so short. Of the 70 million or so share total shares and 47 million in the float. So something very bad could still happen here. I mean these shorts have not been covered. So this is going to be an ongoing saga where I think every single platform, if if consumers keep buying these shares, what is the end? Does anybody have an idea or a prediction on the end game here and then we'll move on. What is the end game if another 5 million people buy the shares or 10 million people buy it and it goes to 1000 or 2000? What happens if GameStop is worth $100 billion? It's such a great. It's a great question. Happened. Well, can I tell you, Jason, what that means? There is a great article in the information which Sam Lessin wrote. I don't know if you guys read it, but it basically said, why did Tesla win? Now, this is not accurate, but I think his framing is relatively accurate, which is people were buying Elon like they would buy a trading card. That's right. And and Tesla is a manifestation of Elon. That's right. And it actually is. So visually, it makes a ton of sense to me. Like then I think, you know. Why have, like, Richard Branson's businesses worked or why is it Jordan brand work or chamath all the, you know, and at a smaller level, yeah, at a smaller level because we're brands and we have these values and people can imbue their, their collective decision making and support to the person versus the institution. It's a belief. It's a belief in what that person represents, too. You know, I can. Why did MBS buy that frigging painting that wasn't even a Leonardo painting for a billion dollars? You know, there was some belief there. You know, is it really worth a billion dollars? It doesn't matter. At the end of the day, most assets are. Most assets are purchased under the premise that I believe the price will be higher tomorrow than it is today. And if we all believe that, then we will all buy it today and we will all find more people buying it tomorrow. That's what Bitcoin is. Do we all agree though, that GameStop is not Tesla? I don't agree with your premise. I don't think that stocks necessarily need to be reflective of the underlying business, and that's what. But, but no, just think about it. It's that's what's so shocking. About this week because we've all been taught in these frigging economics books and these financial analysis books. Ohh the stock is worth X dollars. Discounted cash flow. What company has ever paid out dividends that equal the amount that you paid to buy the friggin stock? Unless you lived in 1926, it hasn't happened. So everything we've been taught about DCF and future cash flows and everything is nonsense. At the end of the day, every stock trades based on the assumption that someone will pay more for it than I am paying for it today. That is it. That is entirely what a stock is. And so if everyone's belief is completely uncoupled from the underlying asset that that stock is meant to represent, it doesn't freaking matter and it highlights what's really going on. Trading stocks is not investing in businesses. And can I say, can I say something else on top of this, Jason, what was the name of the remember when we were talking about censorship? What was the name of the the the, the Left podcast that got cancelled on Twitter? Red Scare, red scare. Is GameStop Red scare or at the real Donald Trump? And my point is, who the hell are we to decide, right? How does it apply both? You all three got cancelled. All three got cancelled. What's your prediction? We're sitting here a year from now, full year out. What does GameStop, January 2022 look like? What does the stock price look like? What is the business look like? What? How does this all resolve itself? You know, I'm, I'm not a public stock market trader. I'm just not I I just feel like it's. I'm not a day trader. I don't. I don't buy public stocks. It's just kind of like. I mean, it's a distraction. What do you borrow this end? You know, just by vanguard funds like guys, if you're listening to this program, you're wondering where to put your money despite Vanguard funds and stop worrying about it. Index low fees index, yeah. Low fee indexes, yeah. Yeah. I mean, if you want to bet specific companies because you get enjoyment out of it, do it. But yeah, OK. So nobody has any idea what happens if it hits 100 billion or how this adds. So I think that's that's illustrative of. My point is that for somewhat intelligent people who have some degree of expertise in this area, we have no idea how this ends. But this is, this is the point. It is a, it is a collective Ouija board moment. Everyone's got their hand on the wiji board and they're going to craft the sentence. Any one of us individually cannot predict what a collective group of 3,000,000 plus people are going to do. And we've you know, we we try and struggle and think about the underlying value of a business, which is what these hedge funds have done historically. But at the end of the day, this thing is going to be worth what the market tells you it's worth and what the market chooses to do, we wouldn't know because we are not the collective 3,000,000. Jason. Yeah, yeah. So so look, Jason, there's two questions, right? There's always this question of like what should the price be and then who gets to decide and. Look, do I personally think GameStop is overvalued? Yes, of course I think it's going to end very badly. But the question is, who gets to decide, and is the game gonna be rigged by powerful insiders against outsiders? Just it's just like the same question with parlor OK, which is who gets it's not about which. Look, we we can say that there's certain views that are bad, OK? But the question is who gets the power to decide that? And it's and and that's what that's the thing we have to ask is that second order question of who has the power to decide? Is there any outcome? Son got to decide and Robin Hood got to decide, and the victims were parlor and GameStop. 100% so this would be a good segue to move on. Apparently we had a discussion on the last episode about running for governor, and I bought the domain name Governor I had governor, I got governor Sacks and Governor and I redirected him and you guys owned them and they're they're redirected to your Twitter handles. And lo and behold, we wake up one day and chamath for CA. Is live chabat. Everybody wants to know. Jump the gun. We were going to have a vigorous debate and decide which one of those? Yeah, who's gonna run? But somebody jumped in. And I'm not saying other besties might not jump in. Other besties could jump in the head domains. Stay tuned. Stay tuned. Jason, we we do not want to split the best devote. I think we got all the best. This is this is the four Musketeers. We're all behind chamath now. We do not want to split the bestie. Vote on you. Tell us what's going to happen now. What's going to happen? That's where we cut the podcast, right. Yes, we actually actually this is we are going to do an emergency pot and talk about exactly that. So if folks want to know, they're going to have to tune in midweek, but we have to do right now. Well let's talk about the website you put coming up with that we'll we'll wrap on this the website you put out a platform, what's the reaction been and no these reaction been. Midway I want to be, I want to be very clear. Midweek, midweek, but I'll just tell the quick stories. Three young people, three. These three amazing guys just built. They built it and I just retweeted it. Can say the 10s of thousands of people have signed up for updates. I know that much. All these three guys though. Here's the can I just, if I can tell a shout out to these guys, Rahul Samir in Amman, all these three guys, they don't live in California, 2 did but had to leave. One wants to move but can't because he can't afford it. And it's just such a microcosm of like how beautiful California as a place is. And just what people think about when they think about the state is just so. It's so lovely. So for another time. But anyway, shout out to those guys for building the website. Thank you. So essentially the entire market has now been driven by a group of all in. Of the oil in Army built a website, you retweeted it, and that's what this is all about. So there has been no paperwork filed. There is no action committee, however. It has traction. So it makes one wonder, you know, I mean, there may be a shadow cabinet meeting, maybe there may or may not be. There may be a shadow cabinet meeting. What is the chances? Well, I think Jamal, by publishing that website, just went down the escalator. No, it was the golden escalator. Golden escalator was gone down the escalator. And who knows what could happen now? I'll tell you this. I went on, I'll, I'll do a plug. I went on Bloomberg. Amazing this week. Amazing hit. Great. Amazing hit. It's on YouTube. We can put the light show notes. Yeah, put the link in the show notes. Nick, people need to watch that. I went through all the, the ways in which California is hurting. Newsom hasn't done a very good job, and I made my case for chamath. So that's a prelude to what we'll talk about in the next pod. But the, the, the amazing thing is the outpouring. I mean the number of people who have texted me, emailed me and chamath and all of us, like there's a groundswell happening now, 100%. So you know, I would say all the fans of the pod who are now behind this, you guys are making it real. Freedom is pretty crazy manifest destiny here. What's going on? Is this another wisdom of the crowds or a mob, or a movement? Who am I to say? Are you? Are you all in as chief science officer? Will you be our doctor? Fauci, you know here I I think we should have a good debate on our next pod and here the platform and discuss the platform and you know make sure that we all feel like this is this is where we should be. And I think this is going to take a little bit of time to build and I think you know the more we kind of build. Towards it, the more likely we are to have that groundswell that we're going to need, well, let's give the oil industry, let's give the oil. I will tell you it seems pretty likely that this recall effort is going to get the signatures it needs. So we can kind of put that in the sand that it's very likely we're going to end up seeing a recall election. OK, so if people want to participate in recall Gavin Newsom, what do they do? Because that is the first step towards chamath governorship. You gotta go, you gotta go to, go to that website, sign the petition. That is the first step. We are very we only need a few 100,000 more signatures. We have 1.2 million. We need 1.5 million. Go there, sign up, and then go to Chammas website, And sometime first, Jason, I'll make one more point and I think and I made this the other day on that clubhouse that sax and I did, I think we, I made it before you joined. If you think about the difference between a leader and a manager, a manager is someone who typically delegates responsibility and authority. A leader is effective at synthesizing multiple people's points of view and creates an opportunity, defines a vision, defines an objective. That is the synthesis of all the people that that report to him and and for which for whom he is responsible. Or she and I think what we've seen in California in particular, and. And really across leadership positions or or governing positions across the country during this pandemic is a failure of leadership because when times are predictable, if a then B, it is easy to manage and it is easy to look successful. I delegate down to the person who knows best and they are responsible for the outcome and they do it well. Great. All I'm doing is pointing to the right person to run something. The pandemic is difficult and it is unpredictable. It requires the synthesis of economic information. Social information and health information, and more often than not, a person who typically acts like a manager points to the person they think should be in charge under the circumstance to make a decision, and that person is not equipped to synthesize the economic and social ramifications of the decision. So what we have seen during the pandemic is most often people in a governing position have pointed to the health officer or the medical person and said you make the decision and that person does not necessarily account for the social and economic ramifications of the decision they're making. A health person knows how to save lives. The best way to save lives is shut everything down. And so the the test of leadership during this pandemic has been a test of synthesis and recommending an action that's associated with the understanding of the social, economic and health implications of what's going on. And that's really where so many governing bodies and individuals have fallen apart during this pandemic, is an inability to do that effectively. And I think that is what is needed going forward. It is a, it is a moment of test. It is a it is a moment of truth, first of all. About the difference between a manager and a leader. And we're seeing across the nation who is what? And I think it is highlighting why some folks may not be best suited to do this. The second thing I'll say, and I know I'm on a little bit of a diatribe, but the second thing I'll say is career. We've been waiting for your diatribe, by the way. It took 19 episodes go career, career. Politicians, I think simply should not exist. If you go back to the origins of this country, right? Having your place in government and we talked about this over e-mail, having your place in government was meant to be something that everyone was supposed to take. Return doing and the people that were sitting in political seats, it was supposed to be the merchant and the local farmer and the banker. And we were all supposed to take our turn representing our communities, representing our people in government. And what we've seen is people who have made a career out of being a politician and the result of that is that their job depends on them getting reelected. In order to remain in their career they have to get reelected and they ultimately end up making trade-offs that don't necessarily represent the best long term interests of their community. And this is broadly true. Across nations, across centuries. But it's particularly acute in the United States, where we've seen such wealth creation over the last 250 years. And what's happened is when you have career politicians sitting in these seats for so long in an environment of severe wealth creation, you end up having governments that are ineffective and creating systems that fail us. And here we are. And what we need is to have someone go in that's not dependent on the traditional folks that get people elected and fund elections and result in reelections. We need someone that can go in as an outsider. And make a change. And so my advocacy for what's needed in California and I think nationally, and that's a longer conversation, is to find those types of folks to come in and lead and be politicians that can take a leadership role, synthesize information and not be worried about the reelection cycle and not have anything to lose related to a career in politics. So I'm done. On that note, I want to say I love all of you. And. Let's do our emergency pod on Tuesday. Do you guys want to play poker tonight? I'm still in town. I was playing that original graduation. Do you guys come down to town? My mom's in town. You can't come. My parents got vaccinated. Yeah, yeah, I can play. I can play. Here we go. Oh, maybe a little you guys that wants to play, he just just OneNote. OneNote. If you do fill out, if you take, if you go to is that the name says if you go there, you print out the petition and you hold it up and take a selfie with your signature on it and you at the besties. We will like it, possibly retweet it, and possibly follow you. So go ahead and take a picture of your print out with your name on it and that proves that you're part of the all in army. And we will like it. We might follow you and we might even retweet you. You could even four bessies love you, and we'll see you all next time on the all in pocket. See a couples therapy tomorrow. Hey, everyone. Hey, everyone, welcome to baby. I'm the Rain Man. The Rain Man. Protect. You know, a billion here, a billion there. Pretty soon you're talking about real money. Love you, sax baby, I'm the Rain Man. These are really big numbers. It's spread the opportunity that that technology represents. We're probably gonna have 4 Kardashians on there, so 4 besties on there.