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.

E54: Spread trading big tech, capital allocation, Zillow's misfire, Progressives suffer losses

E54: Spread trading big tech, capital allocation, Zillow's misfire, Progressives suffer losses

Sat, 06 Nov 2021 06:04

Show Notes:

0:00 Besties do a Microsoft-themed intro

7:53 Spread trading big tech, amazing power of Google and Microsoft

17:28 Sacks speaks about Bird going public from the NYSE, understanding distributions and evergreen funds, why Friedberg went the startup studio route

30:36 How DAOs fit in to the capital allocation landscape, the balance of consumer-facing products and infrastructure solutions for web 3.0

35:24 Zillow's iBuying implosion

46:05 Wokelash: Progressive democrats take huge hit on election day 2021, what are American voters looking for?

1:14:57 New CO2 to starch conversion discovered by Chinese researchers, future climate incentives

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My body is a Wonderland. If that Wonderland is white, soft, and mushy, sure. And Harry too. You know, the worst thing about skin on skin sleeping with the newborn is that, you know, sometimes she roots and she goes after the the male nip. The problem is my ******* covered in hair. It's really awkward for everybody. Or gagging. I'll tell Kelly that story when she's 18, we're at her wedding. It'll be even better. Let your winners ride. Hey, man, David. We open sources to the fans and they've just gone crazy. Love you guys. I'm going. Hey everybody, welcome to another episode of the All In podcast. I am wearing a blue shirt. I am a pasty, white old Greek man. Who's balding and obnoxious? And with me today is no, no, no, no. You have to you have to say your pronoun, bro am I oh, and my pronouns are. Oh, wait, hold on. My pronouns. My pronouns are beep, beep, and most people just call me a jerk. With me today, of course, is my Sri Lankan Urkel looking wearing a Hillary sweater. Hello, everybody. My name is chamath. I have salt and pepper, black hair, brown eyes. I am tall, 6 foot 2. I go by the pronouns we, king and stud muffin. And I'm here to talk to you about Internet security protocols. I look like article. I think people should just come up and say, well, I don't look like uncle the closest. I don't look like Urkel. I look like a Bollywood when you put your glasses. I like the Sri Lankan article to us. Welcome to The Olive podcast. 2 out of the four of us are cancelled. Next up for cancellation sacks. Yes, I'm coming to you here from the floor of the New York Stock Exchange, which was once land that belonged to the Mohegan, the Montauk, the Oneida, the Erie and Ericoid tribes. Since time immemorial. You forgot the Irish. We only seven points. My God, you really did it. You went for it. Sex. I love you. Important that we at any moment that we're successful, we have to flagellate ourselves and remind ourselves. About one time office land was owned by somebody else. We stole it. Also. The Greeks conquered the Romans and so like to apologize for them. But you forgot to mention you're also wearing a leather shirt that is 4 sizes too large. Slim fit. So that's slim fit. Ohh no. Here we go again. Sax has been upgrading the wardrobe. He's changing. We wait before Freeberg does the intro. Jacob, you wanna tell them why we're we're doing these intros like this? Yeah, I I gotta pause before all kids. OK. Yesterday on the Internet emerged a series of videos that were clipped of Microsoft presenting their new suite of developer tools. Yadda yadda. And corporate people got up and without any explanation started. Describing their physical appearance, their pronouns, their ethnicity, their skin tone, and their hairstyles. And the entire Internet was like, Oh my God, this is crazy woke ISM. Like, what? What is happening here? This. No, I thought it was a skit. I thought it was a Saturday Night Live skit. And so and so then as soon as they got called out by the entire Internet, they claimed that they were doing this for visually impaired people. Which kind of begs the question of why visually impaired people need to know what race you are. Like it's still playing into this like crazy weight race consciousness. But then on top of it, it wasn't just that we we know it's not that because then they start doing this, but also if you if you're blind. Technically, can't see. You may not even know what blue means. Because you will have never seen the color blue or blonde. OK, right, but they're also identifying their races, which kind of begs the question of why that's important. But if you were born blind, you would not know what that means either. You're literally colorblind people explain to people putting you on the same footing as people who are not visually impaired. No, I'm saying I'm saying if you're visually impaired, you're using the wrong language. That language is for the sighted people. OK, but I'm, I'm, I'm just calling ******** on their stated explanation that has anything to do with visually impaired. Because then they went on to basically recite the names of 10 tribes and Native American tribes and no one's ever heard of on on which the Microsoft campus it used to belong to. So which is why I was kind of making fun of that in my initial statement. But so look, this is just woke capitalism. This is woke ISM out of control. Obviously they didn't see the election results earlier in the week. Clearly there was some. Level of virtue signaling. I think in their defense, they were trying to do it, I think for the visually impaired. The problem was they didn't explain the context and they didn't give instructions to the people on what to do so that people came out. But Jake Paul, that video, that was a clip pulled out of a broader context too, right? So like, apparently this is common on campus or common there, that this is happening all over. So we just saw it isn't common because I asked people online, well, it was optional. It was optional. It's optional. But to the common point, I think the reason the Internet reacted the way it was. I asked every single person who came at me because the woke left came at me. I just said, can you show me another clip of this on YouTube, of any event where this occurred and nobody could. So I think this was kind of a first when did you stop being a member of that woke left Jackal? What was the number like? The historical side. I've never been for Bernie. I've never been for Elizabeth Warren. I've always been moderate. Hmm. Always. Wait, can I give Freeberg's intro? Yeah. Freeberg. Can we hear yours? My identity is an illusion. Permit the frog. It's an illusion created by the viewer, and you can call me whatever you want. I sit on the ground where during the Haitian. There was lava and magma and nothing but CO2 and methane. And I represent those gases that are now lost to the oxygenation and the cyanobacteria that swarmed over this earth and took everything over and led to the formation of eukaryotic life. And here we all sit today, our privileged existence. Thank you, saying. That you want to Freiburg is just electrons hitting neurons in interesting ways. Yeah, you know, he's exactly he's like it. It is his pronouncing. His pronouns are proton, atom, dark matter, biochemical quantum bath. Quantum foam is my pronoun. So would you like to formally apologize for colonizing the dark matter during The Big Bang now or would you like to appropriate statement it wasn't fair when the cyanobacteria took over the the face of the Earth. And sucked up all the CO2 and created all the oxygen. And and for that, we all apologize for the genocide of the, for the genocide photos of CO2 and methane. I mean, those molecules were really happy and they had, you know, they had a very kind of like peaceful existence on this earth and, you know, just came in and ripped it away. I just took it all away from there and, you know, and then the offspring ended up being us and here we are. So apologies. All right. Alright. Welcome to episode 54. Everybody's canceled the final episode. Everybody's horrible. Nobody wins. I don't think that the Microsoft thing was bad. When you hear the broader context, it was like, you know, that's just, you know, I think it's a reasonable thing that visually impaired people. I'm still long Microsoft and Google and short the rest of the big tech, so I'm fine with it. There you go back to the stock price. I actually Jamal do you think that the Google Long Netflix short play is the right play based on what's going on. I think the best trade on the best trade on the Internet. The most obvious simple money making trade as long Microsoft Google Short big tech short. The rest of the big tech short IBM, short Netflix. You know meaning you could you can very comfortably short Apple Facebook Amazon Netflix and belong Microsoft Google. So as a spread trade right, right. It's the most it's the best risk parity trade on the Internet right now I mean. In the markets. Can you explain explain the spread trade. Look look I I tweeted this a while ago but it's like and and again the I I think like. Well, let let me be constructive and say the people on Twitter that respond to these threads are not totally stupid, although I think they're kind of idiotic. I said, you know, here's how you can effectively, you know, I I said something about, you know, big tech and I said, oh, I can comfortably put my short on. And I'm kind of trolling people when I do that because I'm not telling them the full trade. And the real trade, whenever you put anything on, in my opinion, is all about managing risk. And the best thing about the Internet and the stock market is that, you know, when you're betting on Internet stocks, you don't necessarily have to be naked long or naked short, which comes with a lot more risk than if you were long one security and short another against it. So, for example. Over the last 10 years, you would have made a lot of money by being long Amazon and short a basket of traditional commerce companies, offline commerce. I'm going to make up a basket, but Macy's, JC Penny, you know, Kmart, sears, right. So if you're short those and long Amazon, that's what's called a spread trade, you're you're basically playing the gap. Between your logs and your shorts, it's independent of where the market generally trades is. It's one of the irrelevant of the market where you're basically saying stocks could go up, but just not everything. We're near Amazon, yeah. When you put that trade on for example, it's I'm going to bet that if everything goes up, Amazon will go up more than Kmart, Walmart, Sears. And if the stock market goes down, Amazon won't go down that much, but these ones will go down a lot and you're playing the spread so to just to just to be very explicit. You know, there was a very, and I talked about this last week, but I that this idea wasn't mine. It's a borrowed trade from somebody who's a very well known hedge fund manager who put it on in massive size. And you know, to be honest not knowing much of anything, I just copied it. But he's his initial trade was long Google, Short Facebook. And that trade basically was at parity, which meant that the long and the short canceled each other out for about the last four years. Until the last year it completely blew out and it returned about 8085%. So if you had put $100 in, you would have made about 8585 bucks on this trade by being long Google, Short Facebook. The the bigger trade at scale is actually long Google and Microsoft and short the rest of big tech and there's a lot of vagaries why that this idea makes a lot of sense but what you're saying is they'll outperform the other basket of tech on a relative basis. On a relative basis. So so it's you know not like you're saying Airbnb can't go up or Facebook can't go up it could it's not going to go as well he's as much as he's saying it too. He's he's saying that the the the the trillion dollar market cap companies. Yeah not not the Airbnb. OK and and the reason and the reason why. Focusing there makes sense as there are hyper liquid markets. They have tremendous ways in which you can have massive size on. So you could put a trade of 10 billion long versus 10 billion short. I mean you can put mega size on, on these things if you if you have real conviction. And then the third thing is when the banks look at that kind of position, they actually, from a risk management perspective treated differently than if you were just naked long. Any one of these things or make it long would be just making one bet, yeah. Or you know, or naked short, which is even more dangerous because if the market collapses by 30%, both stocks might go down 30 roughly, but one will go down 32 and the other one will go down 28. And so you're really only two percent, 2% as opposed to the 30% of the so all the market risk. Taken out when you make trades like that, yeah, the the reason it's possible also today to do so at such a scale, right chamath is interest rates are so low. So when you borrow on margin to go long, the rate is very low. And when you short the stock, if it's a highly liquid stock, it doesn't cost a lot to borrow to short. So your your actual, you know, carrying cost on that trade ends up being pretty low relative to the upside you expect. So just to just to give you a sense of it, my you know when I tweeted that tweet out to complete the picture, I was actually long something. Against my proposed short. And I put it on in in pretty meaningful leverage and it's worked out really well because I was playing the spread. I was basically betting that, you know the the safest company on the Internet today is Google because they're both a platform company and to the extent that they're at risk at being an app company. The risk is to Apple. But because they pay Apple so much for search, they're inoculated. And so in many ways, Google is the safest. And it's also, as we've said before, the purest money making machine on the Internet. You're referring, of course, to Google paying Apple $10 billion to be the default search in their own Android. So one platform, and on the other platform they they pay them so much that they're going to be always protected. And the second best company is Microsoft. And we even saw it, by the way, this past week. I don't know if you guys saw that. But Microsoft decided to take a broadside attack against Notion, which is a productivity app that's been growing very well. I felt this when I was on the Board of Slack. When Microsoft put its gun sights on us, we always thought that they could not out compete with us. And what it turns out is when you have a massive distribution advantage, feature parity is enough. And you can actually be slightly less than good enough on the features because distribution and bundling and packaging overpower a customer's desire to adopt A product. So in the case of slack. It was very difficult, I think, for us to compete against Microsoft's bundling. Of teams with all this other software that they were selling and all the discounting that they could do made it very difficult for us to compete because we had a single product. And lo and behold 18 months later the only real long term protective solution for Slack shareholders was to basically get bought by Salesforce so that you could be part of a bigger hole. This past week Microsoft decided to go after notion and it's going to be I think a very similar story where once they decide to sort of go after this, a product experience, they only need to be 80% as good and then the distribution and bundling and packaging will take care of the other 20%. It doesn't kill the other company, but it creates headwinds that massive headwinds because because a company like notion cannot be fully valued over long periods of time, simply being an SMB company, at a minimum you'll have to move into the mid market. You may necessarily never have. Go to the enterprise, but you probably have to go to the midmarket and in that is a very troublesome path because Microsoft has so much. You know, tentek so many tentacles inside of those businesses. So anyways basically the law, Microsoft, Long Google is a pretty obvious kind of like monopolistic, you know, pear trade. The question is what do you short against it so that you can take up the market volatility and you can place bread. Again, Apple has severe, you know, headwinds with respect to inflation pressures and margins and supply chain issues. Amazon has pretty meaningful headwinds now relative to pricing power and competition. Facebook has pressure with respect to regulatory oversight. I just came up with one, what about Airbnb versus the airlines? And you're talking about trade, you're talking about smaller, rinky **** ideas. Well, listen, I'm not playing on the same chip stack issue. I wasn't there on Tuesday night. On a Thursday night. So no, no, not be a go spread for me. No, that's a stupid idea. And I'll tell you what, OK? If you're gonna put these things on, go to where the deepest liquid markets are because those are the safest, OK? Right. Like, like don't try to be different, being the same here. Tell me why Airbnb, which is an incredible margin business that's incredibly well run and growing versus airlines which are horribly run and low margin, why wouldn't that be a good spread trade? I'm just think it's a very, I think it's a very, very two. You're picking two random companies out of a hat. Well, no, they're both in transportation and vacation and they're completely different businesses with completely different motivations, with different capital pools, with different people that own the stock. There's no point trying to get cute on these things. My point is if you really want to be hedged against market risk. Got it? Coda were heard safest. Find the simplest, most obvious thing. Don't overthink it or don't put it on. So another obvious one here's here's so obvious is within big tech, figure out which ones you want to be long, which ones you want to be short. That's a spread trade that over the next four or five years, where if you expect a lot of market volatility, it makes sense to maybe put some of this kind of stuff on, right. A different version of this idea, which makes sense is in autos. Again, trillions of dollars of market cap and you can make a decision, do I want to be long? Tesla, Lucid and Rivian and short, the traditional. Photos that could be a trade. You know, but trying to like, trying to go after, like, let me pick Airbnb versus United Airlines is too random for me and I don't think they're correlated enough. For it to make any sense. All right, Speaking of the stock market sacks, you've got the background of the New York Stock Exchange as you're zoom background today. What's that about? Yeah. So Bird listed on the New York Stock Exchange today. This is a company that I've been involved in pretty much since the beginning. We led the Series A round back in 2017. It was actually the first check I wrote as a VC to lead around at Kraft and four years later, public company on the New York Stock Exchange. Pretty amazing. And so you're literally at the New York Stock Exchange as we speak, the first remote bestie? Yes, and you can see behind me. That is the floor of the New York Stock Exchange. It's not like, you know, if you see the movie trading places, it's not like that anymore. There are no stockbrokers. There's no like paper flying around. I'm not really sure what the purpose of all those monitors are down there. It feels to me a little bit like a movie set. It's like a movie set, yeah, and so people come here to record things. But as we all know the all the trades are really happening inside giant machines. Can you turn around and just start yelling booyah? Yeah, and let's see if security comes in. No, I'm, I'm, I'm elevated above the floor. No one could really hear me. I'm in like this sort of broadcast booth should take us behind the decision to go public. As a four year old company. We were expecting, you know, Airbnb, Ubers and Lyfts took over 10 years to go public. Now here we are sitting on a four year old public company. Is that a good thing, a bad thing, something in between? And how does the, the board and the management team make that decision to go public? I think it's a good thing. Because the company, well the company wanted to, I think it had the opportunity to it's it grew very, very quickly before COVID then you had COVID was like sort of a huge set back. They, I mean basically the scooter industry just stopped for at least six months because of lockdowns. But then coming out of COVID, they bounced back really strongly. They kind of pivoted their model to what's called a fleet manager model where basically they're putting a business in a box for a local operator, a local entrepreneur to buy the scooters with financing and. Manager, the fleet themselves, so it's a much more highly virtualized model. And so as a result of that in Q2 they just did 60 million in revenue in the last quarter and I think it was gross profit of something like 27% and it was had a loss of like 12 million. So they're very, very close to getting to profitability. And, you know, companies only four years old, you know, it took Uber 12 years or whatever to get through public. So it's been pretty, it's been a pretty amazing ride. There been a lot of big ups and downs, but so it's kind of a pretty sweet event. Switch back was like the SPAC name, right? So it's it. Today was the first day it started trading under the ticker symbol BRDS. I guess all birds took BIRD, so we took BRDS and you know, if there's a total number of shares outstanding of, I want to say roughly 300,000,000. So it's about a 2.4. Billion dollar market cap, you know, as it stands right now. Which you know, first Series A investor is pretty great, really happy for you, sexy. Yeah, congratulations. That's great. Congrats, dude. We heard last week Sequoia is going to do the Sequoia fund, this Evergreen fund, keep owning shares now as a VC. Do you distribute after four years of this investment and you made multiple investments or do you make the decision hey we think it's undervalued we have you know conviction in the company we were going to be in it for 10 years or do you just take the quick win and give everybody their shares. Well I've I'm going I've agreed to be on the board for the next year. So you know I'm planning to do that and are we have a traditional six month lock up and so at that point we have to make a decision about when or how much to distribute the shares and. This is the first time we're confronted with the decision. I mean craft ventures is only a four year Old Firm and like I said this is actually the first round that I LED as a VC. So it's the first time I've been confronted with a distribution of this magnitude. We've had some smaller distributions. So yeah, we have to make those decisions. We haven't decided yet. We're going to do if you if the stock is up let's say meaningfully in the next six months and you get to that you know six months in a day and you have the ability to distribute and it's up 25% and you're looking at it businesses. Driving, you're on the board. Do you consider holding for a year or two so that you can distribute at $1625 or whatever your price target is? Maybe. I mean, we haven't, we haven't gotten to that point yet. So yeah, I mean, I guess what I would say is that our bias would be to distribute shares to our LP's so that they can make their own decisions about whether they're old or not, as long as we think the stock is, you know, price fairly if for some reason we thought it wasn't. Then will there be additional reason to hold on to it and make the distribution later chamath? What are your thoughts on this given it's come up before? And a number of us are going to be faced with this decision and then we see Sequoia has got LP buy in for an Evergreen fund. Well, I think an Evergreen fund is different from having to figure out how to do distributions. So they're they're solving for two different ideas. The Evergreen Fund is really good because you don't have to do this continual fundraising process and you can basically roll gains back into the next tranche of invested companies in an easier way. I like that idea. It was pretty rare at the time. I remember when I was starting social capital, the only fund that did it really well was Sutter Hill. And for a whole host of reasons, I decided to not do an Evergreen fund. In hindsight, I think for me that turned out to be better, because then it was easier for me to wind down and have a clear demarcation of when it was just myself and other LP's versus. When it was just my capital. But there were some really good reasons to do it. The hardest thing I think that Sequoia is going to find in this new iteration is. At some point, somebody's reputation will be on the line for judging public equities. And. It's still not clear to me that people who live and breathe venture. Can context switch well enough to then live and breathe? Public equity such as the best example I would say is like Tiger Global when you look inside that. Organization, which is incredibly well run. There are two superb investors that carve the universe up right. You have chase Coleman, that runs the public book, and you have Schleifer, that runs a private book. What does it prove to me? It proves that it's just very hard to find a person that can do both. And the context switching is very complicated, so maybe Sequoia finds? An incredible public market strategist that can then manage these positions otherwise. But you might think that they've done this for a few years, right? They they've Sequoia. I don't know. People realize this. They set up and run the Heritage fund and they set it up with only GP's money. It's got billions under management and it's been making late stage private but mostly public equity investing. I know, but that's a fund of funds. But what I'm saying is. I'll be very honest with you, if I was an LP of Sequoia. I would want the money back. And the reason is I'm not sure that Sequoia can compound money in the public markets anywhere near what I could. So do you buy in the point that they make that like exiting some of these left most of the, you know, kind of value creation on the table? Because when I think what they're saying something much more subtle, which is they exited and they have regrets for selling, you have to remember when Sequoia distributed Google. Every single partner got Google shares. Now had they held those shares, they wouldn't be saying any of this. And famously, I'll tell you when I and they held their shares, the, you know the well, I actually do. Fair enough. But maybe they did, maybe they didn't. But let's just, let's just put it out there that, for example, I know explicitly when I almost merge social capital with Kleiner Perkins like six years ago. I spent so much time with John Doerr, the most incredible thing that I was so impressed with door was he was, he told me. He had never sold a single share of Amazon that was distributed to him, and he had only sold a handful of shares of Google only to fund future capital requirements of at Kleiner at the time. So I just think that ultimately, I think probably what Sequoia was saying is, man, I wish I had not sold my Google shares when they were distributed to me, because otherwise they wouldn't make that claim. No, I think what they're saying is more subtle. I think they're saying you as our LP's should have held them. We are on the board of these companies from day one. We have better insights in the second decade. In the first production board founder David Friedberg, how do you think about early exits distributing capital? Because you do have also with the startup studio structure, which you should explain to the audience how a startup studio works, because you create companies which is. You know, was a terrible place to be maybe 5 or 10 years ago, but it turns out you're in the best place because zero to one is where all the value is created. Explain the two things. What a startup studio is for people who don't know. And then what's your view of selling early if a company of yours goes public? I think there's a big there's there's a bigger kind of framing here, which is a lot of investors, you know, professional money managers have tried to find ways to create what is called permanent capital, which is a vehicle whereby they can continuously make investments, decide when to sell those investments and recycle the capital into new investments, with the idea being that over time. They're not at risk of capital outflows, meaning investors pull their money out and they're not at risk of. You know, needing to kind of go out and and raise more money and they can, they can share in the value creation as they grow their book value over time. Years ago a bunch of hedge funds set up public reinsurance companies. Dan Loeb did this, what's his name? I Einhorn did this and basically Bill Ackman did it. What they did is they set up a public company and public company, a reinsurer and then they use that, that reinsurer to underwrite reinsurance. And when you underwrite reinsurance you get all this capital that you can then go invest and then the hedge fund managed that. Investment and because it's actually a public company, it's a got a balance sheet the the shareholders can't pull their money out, right. It's just got a balance sheet and the hedge fund was managing that balance sheet and you know generating good returns and this is effectively what Warren Buffett does and everyone looks to Berkshire Hathaway and Warren Buffett. It's kind of the, you know, the, the the the key kind of long term here which is, hey look, if you can keep investing and keep compounding value, this thing can grow you know exponentially over time. So you know the the way we set up the production board, I had the option of raising a fund and being a fund manager I chose to set up the production board because I was much more interested in I think the similar sort of vein of what Sequoia is saying, which is like how do you become a longer term builder and a longer term holder and where you don't have these incentives to return capital because you only get paid if and when you return capital. And you know and then you're kind of making these decisions to, you know because your shareholders are saying, well you had a good return. Quickly give me the shares back and let me and and mark your profit. And take your share and I was also more interested in, look the fact is overtime there's always going to be opportunities to chase with the capital. So if we have a great gain, if something works out really well, we can take the the the gain and we can reinvest that capital and building new things. There's no shortage of opportunities to pursue for the rest of my life. So that's why I set up the production board initially in partnership with Alphabet and then later on we brought in you know Bill Gates and other Allen and Co and other kind of investors that have a similar sort of mindset which is like let's just if we have an exit. Recycle that capital and continuously they're not looking for a quick win. They don't have pension payments to make, right. They don't have a reason to distribute cash. And so same with me like I don't have a reason to take cash out. So the objective was just build this thing over time and grow value over time and that's why I set it up the way I did and I think it allows us to make you know really long term bets that are super risky. Most of what we're doing is super technical and and difficult and may be very hard to pull off, many of which are still after many years in in a very early. Patient capital, patient capital and also the the, you know the preference for not trying to find exits, but I I have found this. I'll tell you one thing. I have been through a number of circumstances where I have seen businesses I've been an investor in or involved in that have traded long term value for short term opportunity. Meaning there's an opportunity to make a business that you can then go raise capital against. You change your strategy to do that, then you go raise VC funding and now the business looks like it's working, but the 10X or 100X opportunity was taken off. The table, because you ended up going down this different path that was a sure thing that was more likely to work, that created value in the short term that allowed you to mark up your investment or raise capital against that. But you gave up the big long term thing, and I think that's something I've been trying to avoid with this structure, and it certainly makes sense with some of these other folks and what they're trying to do. So what we're getting at here, sacks, is decision making by capital allocators and on behalf of their LP's, or letting the LP's make those decisions, inevitably the crypto world. Says well, why aren't you just doing this in a Dow? And, you know, having some decentralized authority make the decisions. I had Vinny Ling, I had a conversation with our friend Vinny Lingham after the Solana stuff and and and multicoin capital, and we were talking about Dows for early stage investing or syndicates and just brainstorming, hey, is there a way to do this? And the problem I came to every time was. Should a bunch of folks be making decisions who are not meeting with the companies or meeting with 2000 companies a year? What are your thoughts on adow? Presenting sort of what we collectively do, but we all do it obviously in different flavours. Does this actually exist? Yeah. Well, there have been doubts that have existed to vote on buying NFT's. So yes, for collectibles, I mean, I kind of feel like I'll let you know when it actually gets here. So, open minded to it, but who knows? Yeah, but I mean, we talk about these things as if they already are here and they're not quite here. I mean, technically I know they they exist, but people haven't really figured out how to. Use them to, you know, to be a fund manager. For example, I think David's right. I think the look I I there are there are these three immutable features of web 3 point O that we're going to have to figure out over the next few years. So the obvious ones are decentralization, right? That makes sense. The second obvious one is the level of composability, which means that your plug and play with everything. But the third one is this idea of democratization and governance, right? And that's where Dows come in, and David's right. We don't really know what the boundaries of that feature is. I think it exists in some small level scale, but we need to have many iterations of companies get built. To figure out what it'll mean. So I don't know. I'm taking a pretty traditional approach, Jason, which is that. You know, it's kind of like a crawl, walk, run strategy. Right now I'm in the crawling phase and I'm kind of saying how did Web 1.0 and Web 2.0 develop and I'm trying to just copying it so, you know, in Web 1.0 and 2.0. You needed companies like Sun Microsystems and Cisco and, you know all of the plumbers foundational stuff to to build plumbing for the Internet to allow the 1000 flowers to bloom at the application level. And, you know, we had a very good reference model, by the way, for Web 1.0 for most people, if you want to look at it, it's called the OSI reference stack. And if you actually look at that OSI stack, you can translate that. To all kinds of value creation over the first, you know, two arcs of the Internet over 20 years, trillions of dollars was created by just following each of those substrates. And in those transitional layers was where these great, beautiful companies were built. And I think similarly we're going to do that again, but we need a different stack to represent what web three is. So. Yeah, you know, this week we did something which is pretty straightforward, which was this idea that if you're going to build all these apps, you're going to need a distributed compute infrastructure, which means you're going to need very simple building blocks like remote procedure calls, RPC. That exists in Web 2.0, it's kind of a something you don't really think about, but in Web 3 doesn't exist. And so it's all this AWS, GCP like infrastructure that has to get built and that's what sindica does. And I think that's a really very interesting observation there because everybody is trying to go to the application level and talk about the consumer experience. But before you even have the ability, you know, we're talking about cars before we've even made a transmission or, you know. That's exactly right. This is why crypto comes across as so delusional and strange sometimes. They wrote 3000 IO papers. None of them were about infrastructure. They were all about some sort of end game. But The thing is, it's a very delicate balancing act, right? You need a handful of companies that capture consumer imagination that then incentivize all of the plumbing companies to come in and build underneath it, right? So it's a very it's a very delicate balancing act, right? So you needed CompuServe in order to enable a bunch of companies. Then you needed AOL in order to enable another set. Then you needed Yahoo. Then you needed Google, and in all of that, what happened was people were pulled through, right? You needed Amazon Commerce to justify AWS. So we're in that world where it's going to be a little back and forth where the pendulum will swing back and forth between consumer experiences that capture imagination, get to some level of scale that then create incentives for the developer ecosystem and the technology infrastructure to catch up. Zillow, which we talked about previously, became an eye buyer. What's an eye buyer? That means you buy a bunch of single family homes in all likelihood, like open door and Redfin have been doing, and then you hope to flip them, maybe improve them. And maybe lower cost to the consumers by taking out real estate brokers. This has created a lot of bad feelings amongst real estate brokers. A Tik T.O.K video trended a couple of months ago where a broker said or accused Zillow of buying up these homes in order to do price fixing and to corner the market on homes. Well, it turns out that Zillow which has an incredible CEO in Rich Barton and has done tremendously over the decades. According ahead of their earnings call this week, Bloomberg reported Zillow is trying to offload 7007 thousand homes for 2.8 billion. That's about a 400K average per home. And Zillow shares dropped 37% this week alone from 100 to 66. Their market cap has dropped 9 billion throughout the week. And they're down 70% from a peak valuation of 48 billion just in February, about six months ago. Zillow is going to reduce its workforce by 25% over the next few months. I'm assuming that's all those eye buyers. Anecdotally, a lot of what I'm hearing is they bought homes indiscriminately. The anecdotal stories that are breaking on Twitter and other forums with real estate brokers are they would look at a home. They didn't know that it had a noisy neighbor or it was near power lines or whatever. The people who came in bought them indiscriminately, maybe too fast. Whereas some other companies may be open door or Redfin were more considered. I actually had Glenn from Redfin on the pod not long ago and he said it's a very hard operational business. You have to be very careful on what you buy and your entry price. That seems to have turned out to be true. What do you think Freeberg Rich Barton, who runs Zillow, is considered a legend in Silicon Valley? You know, he. Has been involved in some of the most successful Internet companies. And you know, when he stepped back in as the founder of Zillow, stepped back in to to run the business a few years ago, it was viewed as kind of a second. You know, resurrection of this business and he was going to take it into new areas. And then 3 1/2 years ago, he announced the side buyer program, which everyone thought was such a, you know, incredibly strong move and obviously chased open door, which Timap is is involved in and I'm sure we'll share more on. But it was such an obvious opportunity that if you could add liquidity to the real estate market, the, the residential real estate market, there's an incredible amount of value to be had. Now the way that they wrote about it when they talked about it initially and then the way that they kind of talked about in their earnings report this week was that they were trying to be a quote. Market maker in the business and it turned out that what they were really doing was being more of a speculator, right. A market maker looks at bids and AFS and the spread and then tries to to to create a gap in that spread and make and take some share of it. And and by adding that liquidity, the idea is the spreads can narrow and they can make money. In this case, they were looking at the historical velocity of selling prices of homes and using that as a way to kind of project what was going to happen, which makes them much more of a speculator than a market maker. And they clearly got this wrong and they're kind of quote UN quote models on, you know, where a price is headed and ended up getting them in trouble. There's also the inherent conflict where they are now competing in a way with the brokers. That generate a lot of revenue for them and are a big part of their core business. And they were clearly, you know, cannibalizing their own business where the Zestimate and some of the other scoring that they provide as a data and analytics platform to both sides of the existing market starts to get blown up because they're coming in and saying we're going to put our, you know, our our foot down and say this is what the value is and it inevitably kind of cannibalizes the core product that they provide to, to, to both sides of the market. So, you know, one could argue this was flawed from the beginning. The execution clearly was way off and it begs the question, you know, where was? Leadership and kind of tracking what was going on here as these guys were buying homes at market prices that are well above what they were actually selling for in the market. No one was actually doing on the ground work. They were all doing kind of speculative models and saying this is what we think will happen and then they woke up way too late and lost way too much money. I think they lost $300 million in the quarter. So you know really a lot of questions and and a lot of challenges on this. I'm sure Tumath has a point of view on you know what makes open door distinct from from Zillow. But there's a really important kind of, you know, underlying here, you know, the, yeah, the maturity of a Silicon Valley entrepreneur who's crushed it so many times doesn't mean that they're perfect. And, you know, this was a big miss. You can go really too fast into a turn here. And clearly they flip the car. Shamatha. I don't know how comfortable you are talking about this since you're very comfortable. OK, well, then, here we go. Number one, you know I'm not on the board of open door of open door. Maybe tell us about your history with open door chamath would be super. Look, I look I I am one of the largest individual shareholders of that company. I think somewhere between 3 and 4% of the business I own. We, you know, I came to own those shares with a large investment as well as. Through the transaction where we merge. One of our spacks into it and took it public. OB yes. Couple things to say. The first is about the CEO and founder of Open Door. Eric Wu is special, special, special. So let me just leave it at that. On that topic, the second is I think that Rich Barton is very special, but it speaks to two big mistakes that Zillow made. The first is that. Catching. A wave of disruption is very difficult when you have an old line business that is fundamentally competitive with the Of business. And Zillow, as David said, had this thing called Zestimate, whose entire job was to directionally Dr Drop top of funnel traffic into the rest of their media business. Now imagine you go to a website to look up your house value or somebody else's house value. Accuracy is a bug. The feature that makes a Zestimate work is an highly inflated house price. Right. Like if you go and you see a crazy house price number, that's interesting, that's more click worthy than if you go in there and it shows some depressed value, you think the site sucks. That's the unfortunate psychological reaction. So I think whether we believe it or not or whether Zillow knew it or not. Zestimate overtime basically calcified this idea of price inflation. So the accuracy was never a goal. So then if you take that business and then you try to Orient it towards home buying and you use probably Zestimate or some version of it to underpin how you buy and take risk, it creates a lot of risk. And I think this is essentially what played out where they were over buying homes and they didn't know how to price this stuff accurately. So you know my partner Ravi. Tweeted this out, but you know, the open door margin on average is about 10%. The Zillow margin on average was 3%. So they had a much more razor thin margin of safety here, which again speaks to pricing and then it speaks to this third thing, which is that. If you start doing one thing and do it really well with software. The gains over years really compound. And so when somebody else shows up and tries to pivot their business to try to copy it, it's very, very difficult. The classic example is Google versus Yahoo. Yahoo had a beautiful directory driven business, but when Larry and Sergey were really Larry invented page rank and then invented that first version of a Google search index. As we saw it play out over the next 10 or 15 years, it was impossible for Yahoo to really invest the technology to the technical capital necessary to catch up with Google. And every day and every week and every year, as Freeberg talked about last week, those technical gains compound and compound, and now Google is completely unassailable with respect to search. I suspect we will look back and the ability to accurately forecast price and volatility and the ability to sell these assets. Had a defined margin of safety in a predictable way. Is something software can solve. And it seems that open door is the first doesn't necessarily mean it'll be the only one. But it has an enormous head start now, and as long as they can keep iterating, those gains will compound. So that's what I think. I just think this is a wonderful business run by an incredible CEO. To wrap up this Zillow story. Sacks, any thoughts on, you know, chamath point here? You know, you're the rating agency and you add this business and the business, it might be orthogonal to the existing money printing machine on a strategic basis. Where do you think any lessons or mistakes here in terms of when you handicap Zillow or do you want to just move on and talk politics? I mean look, I'm a, I was a seed investor in. Open door because Rabbi invited me. It's the seed round. So you know, I'm, I'm a little biased here, but I think it's pretty obvious what happened. Zillow tried to copy them. The business is much more operationally complicated than they realized. It's a little business, low margin business with the which requires a ton of capital. So if you're off a little bit, the losses can be huge and Zillow couldn't figure it out. They underestimate the difficulty. That's what frequently happens when a big company tries to copy a smaller sort of upstart company. So I mean that to me is what happened in a nutshell. Quite frankly, we're an hour into this pot and we haven't discussed issues, any issue that I think is broadly relevant to most Americans. I think this is one of our worst episodes. We're going to bore everyone to tears. I frankly don't understand what you're doing. I don't know why we have a topic list when you start pulling it out of your *** like dowels and I don't know what the **** else. Alright, alright, fine. We'll talk about politics on the Dow. Question sucked. Alright, I'm just giving you the opportunity. That we should even be talking about. Cut it out of the show. Cut. This whole episode should be cut. Jesus Christ. Episodes you ever done? Yeah, I agree. I think we should cut all that going great. No, Jason, Jason, I agree that that part. Got it? That's alright, fine. You got some ******* loser. I'm trying to give you guys the benefit of the doubt to just because it was like no one cares. Alright? Fight. Calm down, everybody. You wanna talk about politics? We talk about politics. It's OK. Sex. Go ahead. Tell us about the election. OK. I'll just rattle off some of the key results here from blue states. We have a woke clash going on all across the country. That's the important thing in Virginia, a state that Biden won by 10. He's cranky. Huge upset. Republican Glenn Youngkin beat Terry McAuliffe. Former governor there he was. This was a huge upset. McAuliffe was supposed to win Younkin won 5148. So that's a 13 point swing versus where Biden was just a year ago in New Jersey, a state that Biden won by 16 points. The Democrat held on to it, but only by 1.5 points. And I bet you anything the RNC is kicking itself that didn't give any money to chat orelli who's the challenger? Who I think almost who came very, very close and. They were down ticket seats that went Republican. So the the. This is really interesting in South Jersey, which is a blue collar bastion for Democrats. Sweeney versus Burr. That's right. The Democratic state Senate leader Steve Sweeney lost to a truck driver named Ed Durr who spent a grand total of $153 on his campaign. OK, so those are some and then we had some other like he was printing out there to say write me in, I think, I don't think he's writing, but but any event so, so implications for 2022 Dave Wasserman of Cook Political report calculates. Somewhere between 44 and 51 C game from the GOP. They only need five seats to win the majority. So it's looking very bleak for the Democrats in 2022. And then I think you also had some very interesting local elections in Minneapolis. Voters rejected a proposal to defund the police with 56% of the vote. They there was a ballot proposition to change that Police Department into some sort of larger public safety group. Voters were having none of it. In Seattle, which is a very liberal city, they voted for a literal Republican as city attorney, which is the office of prosecutes misdemeanors, so against a police abolitionist who said she would stop prosecuting misdemeanors, you're forgetting that in Virginia it wasn't just Glen Younkin that one, but basically it was Terry McAuliffe. And then a Lieutenant governor who is some milktoast individual and an attorney general candidate who was caught in blackface, which by the way there is no more racist thing you can do just to put let you guys let everybody all the non colors. OK that guys please don't do blackface or brownface. It's such a bad, it's just not it's not right. It was a sweep so, so the Lieutenant and and junken and it was a it was a black female Lieutenant governor and a Latino attorney general, right. And they swept, right. So right. That's right. So the Lieutenant governor was winsome. Sears, she's a black woman Republican. If you've seen the photo of her, she's frequently photographed the giant assault rifle in her hands. That's her. And then they Hispanic attorney General Jason Miyares one as well. So, yeah, it was a huge sweep. And then, you know, in Long Island and Staten Island, which again are blue counties, you had two Republican prosecutors beat the local sort of incumbent Democrat Decarceration. I think I think this is very clear, which is. Trump was behaviorally extreme, and after four years, people were sick of it. Nobody wanted that behavioral extremism because it was unpredictable and people felt frankly in danger, and I think that that was legitimate. He also turned out to be extremely lazy and probably pretty dumb. Now what we're realizing is the different form of extremism, which is policy extremism, will also be met with the same response, which is that you you can't sustain election results and wins, right? So people care consistently about three things. They care about the economy, they care about the education of their children, and they care about safety. And the thing that Glenn Younkin did, which I thought was. At least a playbook for centrists and the right, and it's also a playbook for the Democrats, if they choose to embrace it, is to understand that these things are reaching a tipping point where, you know, again, we've said this before, it is possible to live in a state of mind where you believe in Black Lives Matter and you believe in law and order, right? And and when you try to pit those two things against each other, for example, like you would have thought the one place where they would have basically defunded the police in its entirety. Would have been Minneapolis after George Floyd, but instead even they drew the line and said no. Or New York. Or New York. There was a there was a really compelling quote, actually, by this woman, I think it was in the New York Times. And but she said was, I didn't elect Joe Biden to be FDR. I elected him to tack to the middle and just calm things down so that everybody could exhale, so that we could reset. Same with me. And what's that? That was Abigail Spanberger, actually. She's a Virginia Democrat. Yeah, she's a Virginia Democrat who won a seat in one of those blue counties that just flipped red to vote for Younkin and since she got. I'd like to. I guess she got elected last year. She's been telling the Democratic, but she's the one who called out Pelosi in that, you know, caucus meeting saying I don't ever want to hear the words defund the police again, that is electoral poison. And then she said yes, nobody elected Biden to be FDR. They elected to be normal and stop the chaos. And so, yeah, there's a big backlash going on because Biden has decided to start governing like Bernie Sanders. No one elected him to do that. The lesson Dems learned this time around is it's very easy to beat Trump, but it's very hard to beat a moderate Republican. No, no, it's not that. It's like you just have to be a rational, normal person. That's what I mean by a moderate Republican. Well, you just have to be moderate. I don't think it matters when this is, but this is the key take away. Dems, it was so easy for them to use Trump, be Trump, you know? But these three topics are not a Republican tent, Paul, nor are they a Democratic tent pole. They are the tent pole of reasonable people. Yes. Meaning which most people are reasonable. Hey, guys, get out of the way so that we can, you know, have a reasonable life in an economy. Hey, folks, please. Make sure my kids, when I send them to school for 8 hours a day, come back reasonably educated and please keep my streets safe. And I'm not really willing to decarceration ad hoc to such a degree that all of a sudden crime gets out of control. Those are not democratic or Republican tent polls. Those are just moderate, centrist, rational things to believe in. Yeah, and and also behave normally like I I think whatever happened with these progresses where they couldn't pass, you know, the stimulus bills and things that almost everybody agreed on Glenn Youngkin was not behaviorally. Extremist, yes. And and from a policy perspective was pretty much down the middle. Eric Adams. Eric Adams is not behaviorally extreme, and he is politically down the middle. The Mayor of Buffalo who got reelected is not behaviorally extreme, and he's politically down the middle. Do you start to see a pattern here? Yeah. Nobody wants AOC, Bernie, Elizabeth Warren or Trump. I think it's not. It's not a question of AOC or Bernie or Trump. It's just that right now the temperature of America is. Let's just all exhale and justice recenter ourselves as a country, and so moderation and centrism is actually what calls for today. I don't know how to predict what happens in 15 or 20 years, and maybe AOC is the Canary in the coal mine for where the country goes by a plurality of people in 15 or 20 years, but what's clear is it's not where it goes today. And I think that we, it all behooves us to just take a real step back and exhale and just read the tea leaves because every single thing that the Democrats tried to do to sort of like make this extreme really didn't work. The race baiting, all of that stuff really kind of failed. And I think that that's important to listen to, you know, because you had a lot of black Indian, Chinese families that just showed up, Hispanics, you know, that again, reliable Democratic voters and voted for Glenn Younkin in a way that was surprising to me. Right. And then so if you compare New Jersey and and Virginia, Biden won Virginia by 10. He, the the Democratic nominee lost. Biden won New Jersey by 16 and Phil Murphy barely squeaked by, was like 10,000 votes. Jersey's always had a a Republican kind of leaning group. They're very tuned. Biden won by 16. They should have been a cakewalk but I think that's 16. How much of that is get Trump out of office is what we I think the Democrats need to parse and I believe. Updating behavioral extremism and policy extremism. So I think we just need to realize rational, normal, chill people who can do reasonable things, get our kids educated. So for example, on the education front, I don't know if you guys saw this because I tweeted and you can put this nick in the group chat, but in California right now there's a battle over math class. Ridiculous, right? Where the title. I'm just going to read the title because it sets it off. California tries to close the gap in math but sets off a backlash proposed guidelines in the state. Would emphasize calculus. Reject the idea that some children are naturally gifted and build a connection to social justice. Critics say math shouldn't be political. Of course, the the way that those articles are always written, it's always about the backlash. You know, they don't talk about what what the people in charge are trying to do to basically degrade the curriculum. Of course there's a backlash because parents don't like what the people in these school boards are doing. This was the sleeper issue in Virginia, was the school board issue you had, you know, parents were already angry that the teachers unions had kept the schools closed. A year and a half during COVID and while their kids were at home, you know, work, doing classes over zoom, parents got a good look at what some of their kids were learning and then, like what they saw. I mean, we're talking about lessons, plans that incorporated CRT and, you know, the 1619 project view of America singling out kids by their race, making them focus on difference. And then there were some, you know, rather explicit materials at young grade levels about, you know, LGBT issues. And so this led to a whole bunch of confrontations at school. Armies were parents of all races objected to, you know, the least lesson plans for for their kids, and the school boards and administrators just dismiss their complaints out of hand. And you know their message was, well, we're we're not teaching CR teacher kids. But if we were, it's a good thing, and only white supremacists would object. So, you know, that was sort of what was happening in the background. And then McAuliffe comes along and makes this gigantic gas in the last debate, it's about 2 weeks before the election where he says, I don't think parents should be telling the schools what to teach. And yes, this is the customer. He said that on a debate and he said that a debate about two weeks for the election. McAuliffe was leading through this whole thing until that debate where and this was sort of a Kinsley gaffe in the sense that, you know, Michael Kinsley said a gaffe is when a candidate inadvertently said something true. You know, this is Mccall's view is that the teachers union should be controlling the schools, not the parents well. Yes, so this is what younkin jumped all over. All of his ads in the last two weeks of the campaign really focused on this issue. You know, pour gasoline on a fire. And then the most tone deaf thing McAuliffe did is he had Randy Weingarten, who was the head of the the Big Teachers union, come in and campaign from at the 11th hour. Well, of course that's not going to save him because people are sick and tired of the teachers unions. So, you know, this was basically the big sleeper issue CRT and the schools in Virginia. And, you know, this is this, I think specifically is what the Democratic Party has to wake up to is that these progressive ideologies are not popular. The other thing I'll say about Glenn Younkin is that this is another thing that the that the Republicans should hopefully pay attention to, which is. You can look normal, act normal, be normal. You know, this is not an extremist in any way. This guy was the Co CEO of Carlyle, which is a huge and very successful private equity firm. So this is a very rational, reasonable person who, you know, didn't embrace anything that was really that pro Trump. And that should be a real wake up call to the Republicans, which is, hey, let's just run a fleet of normal people. I think what you saw is I think jamath is right, that what you saw in Virginia is that the playbook that Gavin Newsom just used to defeat the recall in California did not work in Virginia, which is he tried to paint younkin as a Trump proxy and younkin very deftly, you know, avoided that. He got Trump's, yes. He got Trump's endorsement very early in the process he did not have. Come to the state and you'd have to say it also helped younkin a lot that social media, that Trump wasn't all over social media because he's been banned. So, you know, in a weird way, Facebook and Twitter deserve and assist here because they helped keep Trump out of the Virginia race. So, you know, this playbook that that Newsom defined, that worked very effectively from California, which is simply to keep running against Trump. I think Democrats ought to be able to win elections for years based on that. That playbook didn't even last two months. So you know. So I think Democrats are going to have to find a new playbook here. OK, so Friedberg on this California issue around education, one of the key or most controversial concepts is detracking, in other words instead of having high performing. Students go to a high performing track and then everybody else stayed behind. Maybe keeps in not all cases, but keep some of the students together because there is some research that shows if done right, if you track people together, the higher performing students will pull up the ones who are slightly behind. Other people say we're basically throttling people who could be the next fienstein or the next World class leader in science, math, etcetera. Any thoughts on the concept of detracking since I'm assuming you were? In the high speed track in science and math. Maybe we should get rid of like? JV and Varsity sports teams as well. And you know AAA baseball and Major League Baseball as well. And you know any distinction of performance or exceptionalism goes away. You know, and and that is kind of the the key social question is are we going to give up exceptionalism to minimize the distance between the exceptional and the average. And that seems to be what makes people makes people feel bad. But I've said this point before, you know, we're doing it when we try and think about, you know, the the billionaire tax or what have you, as soon as you start to limit progress, you reduce inequality, but you limit progress and the same will be true. Not just in science, not just in business, but also in sports and athletics and and any other kind of system where you will have exceptionalism, you will have an average, you will have a distribution amongst human performance and as soon as we try and limit the difference in that distribution, we move the entire curve to the left. Here's the counterfeit bird. What some studies have shown is, yes, you will throttle the high performers. But we're seeing a long race lines, certain demographics being left behind, other ones excelling, and that you can get. Yeah, it's an ethics and values question, right. Like do you think that individual freedom and the opportunity to pursue your opportunity, your, your, your exceptionalism should be taken away from you such that others who aren't as exceptional as you are given, you know, greater progress than they would have had on their own? And that's the the key crux of what all of these social systems are grappling with. Whether it's in sports or business or finance or or or education is what's the right thing to do. And that ethics question is going to be defined by the social agenda of the moment and, you know, the means of the moment and what we all think is, is the right thing to do. And it's different all over the world and it's different within political systems. But it's a very divisive point that I think folks who find themselves on one end of that exceptional spectrum in different aspects are going to have one point of view and folks on the other end of that exceptional spectrum are going to have other points of view. And everyone's gonna be sensitively tuned to where they fall in that spectrum. I will say one thing, though. On that spectrum, exceptionalism is rarer than the average. Therefore, it is likely the case that over the next years and decades we will see the the idea that we should remove exceptionalism in business and exceptionalism and education and exceptionalism in sports. Because it benefits the majority and and and no one kind of recognizes and a lot of folks don't recognize the progress that is made by exceptionalism and and that's and then we're going to wake up one day and be like, oh, wait a second, we don't have the the best sports teams winning all the gold medals. We don't have the smartest kids. We don't have the best businesses. China and Europe and Brazil and whomever else the emerging markets are going to India are going to start to have them such a good point. I think this is a very old debate. It's the debate between equality of opportunity. And equality of results, yeah. And the progressive left is absolutely obsessed with equality of results or outcomes, which they now call equity, which is we're going to take people at the finish line and we're going to move them around. We're going to redistribute the the outcomes to achieve a more proportional representation or something more fair as opposed to giving everybody as much opportunity at the outset as possible. That is the fixation right now. That is why they're taking out advanced math in the schools. They're trying to level people. It's not going to work. It doesn't lead to a more we want to have an exceptional society. Where I think we should be focusing is creating as much opportunity for everybody. The way to do that would be to let every child go to the to the school of their choosing so that we would stop trapping kids in bad schools. But back to kind of bring this back to the election for a second. Because I think it is a very clear repudiation of this progressive mindset. And I think there's essentially two sets of reactions to it if you look at sort of all the left wing commentators, the the one who I thought. Seem to get it the most was CNN's Van Jones actually had I thought you know a rare moment of introspection where he said well this was the the results were a 5 alarm fire he said was a big wake up call for the Democrats to stop annoying voters with woke hectoring. He he actually advised Biden to start triangulating against the woke left in the way that Bill Clinton did I mean which is something that I've been suggesting on this this pod so you're saying something super important the game. Theory now is for Biden to put to the test the progressive left, because now he can go firmly to the center and he can put all of the pressure on the progressive left in the house. And Warren and. Bernie Sanders in the Senate, well, he's right. That's the first thing you should do is he should, he should pull a sister soldier on Bernie Sanders. He he can't keep delegating the domestic agenda to Bernie Sanders. He, if he wants to save his presidency, he'll start triangulating in the way that Bill Clinton did. I'm not sure he's going to. I think there's already a misperception that the reason why they lost this election is because they didn't deliver the goodies in this House reconciliation bill. That, in other words, I think the public cares about the goodies. I mean, they care about this. Normalcy and centrism. Yeah, there, there there's a part of the Democratic base that does want the what's in that House reconciliation bill. But but here's the thing. Democratic turn out in this election was extremely high. The Democratic turnout for McAuliffe was higher than the Democratic turnout four years ago. For the Democrat who won the the turnout that in New Jersey was higher than what Murphy got four years ago when he won. The problem that Democrats have is that Republican turn out was extremely high, even without Trump showing that Trump doesn't matter that much. To turn out, and the independence came out in a big way for Republicans. So this idea that Democrats can just win elections by delivering, you know, programs for their base, that's not going to work. So I think that's a misperception. I think Van Jones has the right idea. They need to triangulate. But you turned the channel to MSNBC and they were just blaming the whole thing on white supremacy, basically hysterical just on the detracking thing. This shows to me a severe lack of creativity. You, if you look at what happened in the NBA. They had this developmental league which they didn't kind of run, then became the G League. They now have the ability to bring players fluidly from the Warriors G League team up to the Warriors or the Knicks team up to the Knicks. What this means is. You don't have to say there's two different tracks and the the two never shall meet in the season. They can move up and down in math. A very easy solution to this would be to have the high track for high performers, have the regular track, and then spend with all this money we have. Say, hey, every school's going to be open from 3:00 to 5:00 o'clock four days a week. If anybody wants to attempt to get into a higher track of math, just stay after school for two hours. Anybody can go and get one-on-one tutoring and just double the number of teachers. The whole country wants excellence. They don't want leveling. They don't want equity. They don't want equality of results. They want to have a quality of opportunity. They do. Country wants people to move up. They do want to see. That's true. And brown students and immigrants do better at math. That's what you're missing. Yes. And that's about a quality of opportunity. Absolutely. No, it's not just about equal opportunity. They're so far behind statistically that you need to do something new. What we're doing is not working, David. That's why people are picking this bad. But they're they're they're they are eliminating advanced math. They don't want to actually look at the the problem. What do you see? The problem is, well, if there's an underperformance discerning group, then you should work hard to raise them up, not eliminate the subject. Give me a suggestion. Charters and school choice? OK, look, if you're if you're going to define structural racism as conditions that that trap people of color in poverty across generations seems like a pretty fair definition. Then you have to say the number one cause of structural racism is the school system. School system. Yeah, it's the school system. Because we know poor kids are trapped in schools that aren't very good. Why? Because they're controlled by the education unions. They don't have a choice. They don't have money. So who is making that argument on the on the side of the left? No one. Why? Because everyone knows the unions, especially the education unions, are the number one donors to the Democratic Party. So the Democrats won't even look at this problem. Although this is the way they could build their base, is by saying we want to fix education. That would be if you feel education. Being contested in Virginia. By the way, 55% of Hispanics in Virginia voted for Younkin. So minorities are shifting on this issue of charters and school choice. In the private chat, these are the new quality of life issues. If Younkin has a a good four years in Virginia, he he can run for president and crush this thing. Can I show you just one one chart and then we can get off the politics thing, which is it was this chart from this guy Patrick Ruffini, who's a pollster, and I think it really illustrates the problem that progresses the Democratic Party. OK, so. What this chart shows is it basically shows where the democratic, the Democratic Party is in the Senate Republican Party is in relation to the center of the country. OK? And basically as you'd expect in a democracy, whichever party is closer to five wins, OK, so in 1994 when Bill Clinton was president, the Democratic Party, the center of it, was smack dab as five. The Republicans weren't that far away, they were six. So the party, even though there is a lot of partisan. Warfare the the the political differences actually weren't that great. And Clinton, I think more accurately found that dead center. OK, Fast forward to 2004. So George W Bush's president now the Democrats are at 4, Republicans are at 5. That's why Republicans won. OK, now go to 2017. This these poll numbers he did and this is a few years ago, the Democrats are all the way at two, OK? And the Republicans are at 6 1/2. So it's true that both parties have moved away from the center. But Republicans are 1 1/2 points away from the center, whereas Democrats are three points away. So the Democrats have actually moved further away from the center. If you look at who are the activists in the Democratic Party, who is the base, who is the energy, who does all the work, who does the contributions, it is the progressives, right? This is why McAuliffe ran as McAuliffe is not a progressive. He was a Clinton Democrat, you know, going way back to the 90s, OK? He was Bill Clinton's, you know, right hand man in the party back in the 90s, but he nevertheless. Ran as a progressive in Virginia who supported the teachers unions. Why? Because he was appealing to the base of the party. Gavin Newsom did the same thing in California. Gavin was never a Bernie bro. I mean he's always been liberal, but he he has moved very far left and Biden has moved very far left as president. Why is that? Because the base of the party has moved very far left. So unless that gets fixed, I see maybe adding to the parties base, but not the countries exactly. You're going to need a strong Democrat who can basically give the Heisman to that part of the base, or they're going to keep losing elections. I think this could be a Republican decade. I know it doesn't seem like it right now because you had Trump and the Republicans lost, but look how quickly the Republicans turned around their electoral fortunes. With Trump on the sidelines, then that's just a huge compliment to the Republican. If Trump is the nominee in 2024, all bets are off. But in 2022, he's not the nominee. He still censored from social networks. He's really nowhere insight and talk, people. People have a very short memory. It turns out they've moved on very quickly. Younkin checked the box because he felt he had to to get the nomination and to run on the Republican platform. But then you think Younkin's going to talk to Trump once? No, not once. And I think, and I honestly think this election is going to help Republicans move past Trump because what Republican believes in, in like that the electoral system is rigged now. Right. I mean, all these blue cities and states just delivered big results for Republicans. So where exactly is the ballot stuffing? Where exactly is the stall? Where are the stolen elections that's going to stop now? They're going to stop talking, stop overnight, right? Because, I mean, by the way, Kristen, Cinema probably knows this, like, you know, the, the, the, The funny thing about all of this is when Peter Thiel put in $10 million into this pack for Blake Masters who used to work for him and said, you know, in Arizona, I'm going to run this guy against you. Cinema attacked heart to the center. Instantly. So she she knew too. Yeah. Well, so just just small point, of course. So Blake is running against the other guy, the astronaut guy from Spacey's name. But but yeah, but but cinema is up, so to speak, in the next election cycle. So she got a little bit more time. But you're right, like cinema is attuned and mansion is attuned. There are some of the few Democrats that are attuned to where the center of the country is. You heard mansion, in the wake of this election, said this is a center, right country. These guys better wake up. You know, they should really. Now, look, I think, I think what's going to happen in the wake of this election is that this infrastructure bill is going to sail through because one of the crazier things that the progressives were doing was holding that Bill hostage. It might help McAuliffe, I don't think would have, I don't think McAuliffe would have won, but it might have helped him by a point or two if they had gotten that infrastructure bill done. Because a lot of those programs are going to be popular in a state like Virginia. But, I mean, but, but I think that, you know, this House reconciliation bill, they just seemed hell bent on jamming it through with all these tax increases. I don't, I don't think that that's not popular. You know what the big issue in New Jersey was big for them. One of the big issues in New Jersey where you almost had this upset within one point was taxes. You know, there was a a gaffe by Murphy who said something like, you know, he said he said that if if taxes are someone's chief concern, he said, quote, maybe we're not your state. Can you imagine that? Wow. And he almost lost the election because of that. So I don't think all these big tax increases are what the country wants and you know. If Biden insists on allowing Bernie to dominate the agenda and Warren, I think it's going. You're going to see. 40 to 50 seat losses by the Democrats in 2022. OK, moving on to our final topic, crazy update out of China, a research team has developed a method of converting carbon dioxide into starch. Science Magazine published this paper from a research team. 100 grams of catalysts converting 5 grams of CO2 per hour into starch. And freeberg, I saw you tweeted that this is 10 times more efficient than corn plants. Uh, what's the impact of something like this? Could it hit scale? Would it have an impact on food security, carbon global warming? Yeah. So I tweeted this paper out because it's just, it's a fantastic demonstration of what's possible in this new emerging, not emerging. It's been around for a long time, but kind of, you know, in the state of art in, in bio manufacturing. You know, photosynthesis is the system by which most starch is produced on planet Earth today. That is, plants convert sunlight and use water and carbon dioxide to make starches and starches and and and sugars, which are where carbohydrates are, account for 60% of human calories. And we get all those calories from rice, wheat, potatoes, which, you know, are grown on about 60% of our acres that we farm on planet Earth. So, you know, in in plants, there's a series of these chemical reactions. And what these guys did is they. Isolated and and created a couple of specific proteins, which are a class of proteins called enzymes. And what an enzyme is, is it's a protein that can take different molecules and combine them and force them to react and make something new. And they identified a couple of enzymes and engineered a few enzymes and put them together in a cell free system, meaning there's no cells involved. It's just a tank with a bunch of fluids in it and and they stick in some carbon dioxide that they can suck in from the atmosphere and they. They can and they have to drive it with some hydrogen gas, which we can just get from water. And the system basically converts that carbon dioxide into starch, which is being done at a rate that's almost 10 times higher than what we see with with corn plants. So it's it's an incredible demonstration. There's there's several steps to this system, like 6 steps. And I did some back of the envelope math and my back of the envelope math on what they've demonstrated and and by the way, everything they did is publicly available for reproducibility. So people are gonna try and resource it open source. So people gonna try and copy this now. But my back of the envelope math is, you know, this system can produce about 10 grams of starch per liter per day. Which would mean it would take about 2.7 trillion liters to suck up all of the carbon dioxide that all of humans are putting in the atmosphere every year from all of industry. That would require about 27 million tanks that are about 40 feet tall and about 8 feet. Side that whole all of those tanks could fit in in the area about 25 by 25 miles. You could attach one nuclear reactor to it to suck up the the water and convert it into hydrogen gas and feed the system. And those tanks 25 miles by 25 miles would take out all of the carbon dioxide on planet earth and convert it into usable starch. And that starts by the way. That system could be tuned not just to make starch for consumption. It could be used to make biofuels, it could be used to make bioplastics. It could be used to make anything that's hydrocarbon based. And so you can kind of think about this being the entry point to a series of production systems that we could use to make stuff freeberg. Why did they open source it? So they're they're a research team of scientists from China and they've been iterating on this, this process. This isn't the only process, right. And So what they're showing is that this is possible. And what I think we will see is a lot of people rattling their brains now saying not only do we use proteins and enzymes that we find in nature. We're going to start to engineer our own proteins and our own enzymes that are even more efficient than what we see in nature. And that's what's starting to happen. This system alone, what I just described as 25 mile by 25 mile system, which is tiny, is the equivalent of starch production from 42 US corn belt. If you took all the corn growing in the United States, it's 42 times. That is what it would produce. That's my back of the envelope math of kind of what these guys did. And so I think what they're showing is this is what's incredibly, yeah, and and the implications we could go in 100. Actions. And we could talk for an hour about what this means and what you could do with it, but I think it it really catalyzes this this point that that, that that we're kind of everyone's always like, how we gonna get all this carbon out of the atmosphere. What are we going to do with this? Where there's a will, there's a way. The science is here today, 27 million tanks made out of plastic. You could probably get that stuff produced, you know, a couple billion dollars. Find a piece of land that's 25 by 25 miles, that's near some water and put a nuclear power plant there and you could suck up all the CO2 in the atmosphere and everyone. Like anyone, but you wanna take a guess of how many people on the team were in advanced math courses? They were funny. The funny thing about this that I think is really interesting is that it came at the same week where we were ending. You know, what was this political theater of COP 26? You know, Greta Thunberg, who's. You know who dare you? How dare you? Yeah, she, she had this. She, well, she had this very funny comment, which is like, uh, you know, it was a bunch of corporate nonsense and the same old blah, blah, blah was sort of description of COP 26. You know, we had this great. Trickle of like, you know, agreements there was like on Monday there was an agreement to stop deforestation and then you realize it's a non binding agreement and you're like, oh, OK, well I guess we're not going to stop deforesting, we're just going to keep, you know, doing that. And all of this stuff just kind of like took a lot of my enthusiasm and I was a little despondent about what was going on. And then when I saw this thing I was, I was really quite impressed. I will say that there is a very tricky thing happening right now, which is that developing countries basically said, listen, if you want us to go after climate change, we want $1.3 trillion a year to support us. And so, you know, the Western world will have to figure out whether we're willing to pay, you know, what is the equivalent of, you know, 6 or 7% of US GDP to a whole bunch of other countries every year for them to slow down. And if we don't make these payments to India and China and a bunch of other developing nations. They they have said we're just going to continue to do what we're doing. Here's an idea. Take half of that money and put it towards science. Yeah, take half that money and go build a plant that uses this system that was just demonstrated and put it in South Texas and suck up ocean water and convert that ocean water into hydrogen gas jobs. By the way, ocean water can be turned into hydrogen gas by running electricity through it. So you're putting a nuclear power plant to make the electricity. You run it through ocean water. You create hydrogen gas. You pump it into these frigging tanks and it sucks up all the CO2 and it makes stuff that humans can consume and that we can use. And suddenly you have this abundance of material. You have this abundance of food and and you can turn this in jobs and you can turn this into a lot of different things. And, you know, this kind of goes to the point I've been making for a while. If we want to invest in infrastructure, this is the sort of thing that both solves climate change, creates jobs and has extraordinary economic return potential built into it. So how does it get politicians reelected? You know, I think the private market may come after this stuff. I'll be honest, I'm, you know, I'm like, I'm talking to people, looking at this, being like, why do we make it? Plant that we can make biofuels and bioplastics and food and other stuff out of this, this technique, and there's going to be other iterations of this technique, but it's such a no brainer cost, like a functional prototype of this. Like a small prototype. Nothing, right? I mean, a couple million bucks? Yeah, like nothing. So, you know, the other thing that happened this week beyond this request for $1.3 trillion is that, you know, we're now seriously considering carbon tariffs. And we talked about this on a pod before, but. You know, I've said I think this is the most disruptive thing in the capital markets and and geopolitics that can happen in the next 10 or 20 years. It's an effective carbon tariff, which is to say that when a good or service enters the borders of a country. They will levy some tax that they think represents. It's drag on the environment. And so, you know, the simple example would be a car. You know, you make a car, you make a Tesla. In Texas. But the minute it crosses the border to Canada, Canada says, well, here's the true carbon intensity of this car all of the energy that you put into the aluminum to the batteries. You know, to the to the buildings where the engineer sat that were that we're building FSD. And you know, I'm going to charge an $8000 tax on this car. Or iPhones coming out of China. Yeah, that's happening. I think that's coming. So I think that, you know, the combination of tariffs and these transfer payments is going to create a real economic incentive for folks to make these kinds of big technological leaps. So I'm pretty bullish on all of that. I'm less bullish on politicians ability to organize because unfortunately, again, this is the first time I really paid attention to COP. And it just looked like a bunch of really useful political theater. There's just a lot of political theater. Sacks, is this a science conversation about saving the planet, do anything for you? Would you like to get back? I mean, I think it's the way to solve the problem is you have to figure out new technologies to actually take carbon out of the atmosphere because you're not going to do it through, you know, these political programs, I mean. You know, China, India, paying them and and other developing nations 1.3 trillion a year. I mean, foreign aid already is one of the least popular parts of of the government's budget. You're going to now pay 1.3 trillion to these countries so that they it's nonsense and you're going to put that in education system, science and technology that solves the problem. Nobody's gonna stand for that. Yeah, and you know the, the, the taxes are education system, right? Pour it in. Yeah. I don't think there's a political solution to this. Problem that's going to be palatable to people, I think it's gonna have to be solved through new technology. Now let me ask you a question. Freeberg they said there's a six step process. Given your experience building science and technology products, is it possible for each of those six steps to get but 20% more efficient a year? Yeah, look, I mean I just say that to describe that there's a series of steps in the system it it, you know, but at the end of the day this is a demonstration of science that has been, you know, probably funded to some small amount. But you know, if you start to iterate on this approach and think big picture and think infrastructure solution here, there's a lot of room for improvement I'm sure. So in other words, you're back of the envelope 25 by 25 mile. If this is getting 50% more efficient, 25% more efficient year over year, we could. Be it becoming, you know, twice as efficient every two to three years and you're 25 mile, might be a five mile radius city. I mean, think about going to Mars, right? What are we gonna do in Mars? We're not gonna grow, grow frigging fields of corn and grow cows and stuff, right? You're going to need a system that literally takes the molecules that are in the atmosphere there, uses some electricity that's probably going to be produced by a nuclear power plant and convert those molecules into what you want to make and consume. And that's what we can do on Earth today. The systems are going to get better, they're going to get cheaper, they're going to get faster. And that's why I'm highly optimistic about solutions to climate change in the century. It's not about an if, it's about a when. And you know the when is going to be defined by the willpower of how we are going to allocate our people and our capital resources to solve these problems. In the near term, we have the tools to do it. I love the fact that we're sort of hitting this fork in the road where it's like, do we just want to give the money to a bunch of governments to pretend they're going to solve this and grifters, or do we want to put it into science, technology, innovation and entrepreneur entrepreneurs? Former that. Execute. Execute. Right. Do you wanna give it? What did you say? I picked the former. We should. Yeah. Let's give it to politicians. Don't know what the **** they're doing. I mean, it really is like when, you know, I don't know if he's Elon. Say, like, yeah, if you want to solve world hunger, can you make a can you? My God, let's let's talk about that. That's just so beautiful. I thought it was, like the greatest. That's dunk of the week. Nothing. Nothing gets me up in the morning. Like funding shenanigans, right? Jacob, tell the stories. I mean, just somebody was like, ohh Elon, you know, made more money. Tesla stocks. An article. It was an article that was written. Sure. And then he's like, well, if you want to solve world hunger, I'm willing to sell shares. Exactly. You describe it. You're doing such a ****** job today. As the moderator. What are you talking about? I will play a role. All I did was put a cyst in your hands. You guys dunked everything. But, but the audience, there was a voice. Do it in his voice. Yeah. Hang on. It's. And there was an article. There was an article that was written that basically said, you know? You know, $6.8 billion? Uh, which is, you know, what Elon made like in a day or something. Could cure world hunger and then the head of the, you know, UN World Food Program retweeted that again trying to further dunk on Elon. And then. Elon responded. Well, if you can just show me a plan and just please reply in line here on Twitter, and it's credible and detailed, I'll just sell this talk and I'll give it to you. And everybody was like, Oh my God, there was this. Oh my God. Moment. Like, wow. Can this really happen? Ending world hunger sounds like a beautiful idea. It can only does. It only cost, you know, $6.8 billion. And obviously it went nowhere because the guy didn't have a plan and it was just a complete joke. But that's what happens. Yeah, and he's like, yeah, just put all of your. Put all of your. Expenses out there. Show us your plan. And it was like, oh crickets, nothing. Alright everybody, on behalf of the dictator Chamath Polly Hypatia, the Queen of Quinoa, the Sultan of Science, David Freedberg and. For the Rain Man himself, reporting from definitely reporting from yeah, he's reporting from the New York Stock Exchange. Congratulations again and my bestie David tax on the triumphant IPO of bird. We'll see you all next time on the Island podcast. Bye bye. Let your winners ride Rain Man, David Saxon. We open sources to the fans and they've just gone crazy with it. Besties? My dog taking notice your driveway. Ohh man. We should all just get a room and just have one big huge **** because they're always useless. It's like this, like sexual tension that they just need to release stuff out there. Let your feet. We need to get merchants.