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.

E62: Elizabeth Holmes verdict, fraud origins & takeaways, navigating

E62: Elizabeth Holmes verdict, fraud origins & takeaways, navigating "The Great Markdown" & more

Sat, 08 Jan 2022 06:11

0:00 Bestie intro and poker recap

3:14 Elizabeth Holmes verdict, origins of the fraud, breakdown of the Theranos promise

17:51 Lessons for founders and investors from the Theranos debacle, bad behavior a sign of the top

26:09 Implications of "The Great Markdown" on public and private markets, confusing FED decisions

45:56 Advice for founders on navigating a downturn

1:00:01 a16z's new mega funds; should they go public? How does that change partner dynamics?

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Happy New Year, happy New Year, New Year. Guys, listen, it's now. It's candle season. Oh God, look at the equanimity, equanimity. This candle costs $24,000. It is an extremely rare Brazilian sandalwood. You literally have to go into the Amazon and like, you know you, you basically have to like, I mean extinct trees. No, bro, you got it. You got to tear out like 2 acres of rainforest and then you find this one tree completely, you know, sacred. And then you chop it down. You make this, reduce it, and it lasts for a full 45 minutes. How do you like that sweater, Karen? Happy New year. Sharon, Kendall Karens are calling it right now. The DM's are coming. Do you guys want to hear about poker last night? Oh, did you go? So I go down, I take my 8 hour drive down South to Chamotte house and I pull in and you know the security guard greets me nicely as always. I walk in and I walked towards the poker room and everyone's in there with the door open like someone just got shot. Masks on freaking out and chamath is inside the house and I wave and he's like get in here. And then I go and he's like, oh, who was positive? Max? The dealer tested positive and everyone been hanging out in the poker room with no mask. So and so, you know, they're super spreader. The only the only two people that were exposed to Max, we sent home. Yeah. So everyone starts freaking out, shuts the shuts the poker game down, Tiamat kicks everyone out, sends everyone home. And then he's like, all right, let's go have dinner inside. You know, we're, we're not, we're going to, we open up all the doors. We're going to kind of Lysol the room tomorrow. We all go in and have dinner. Or, you know, chamath and I go in and have dinner with Matt and the kids, and then chamath starts thinking, you know what? It's OK that they were only exposed for a few seconds. Let's call Phil back. OK, let's call shell back. Let's call Keating back. And then they all come back for dinner. And at this point, it's become like a dinner party and then a couple of glasses of wine in. And then it's like, you know what? The rooms probably say they should go. I mean, the whole poker night went through the entire cycle of psychology, of COVID the the whole pandemic is like, Oh my God, get everyone out, lock up. And then by the end of the night it was like, you know what? Let's go in the room and just play poker and give each other COVID. They got to acceptance. They got to acceptance. They went through the whole emotional cycle of the pandemic in one hour. Does anyone know anyone who's a serious case of Macron? No. I mean, I know dozens of people at this point and they all say it was a cold, dozens of people. And that's just. For media. Jake, I was on social media giving everyone the update, like, oh, I sneezed today. I'm oh, I still tested positive. He's like, showing his positive test and he's doing this ski slope. My super fans, my stands were concerned. It's the only good test result Jakkals ever had. Yeah, exactly. It's the only positive that's true. Let your winners ride. Hey, man, David. We open sourced it to the fans and they've just gone crazy. We can. Elizabeth Holmes has been found guilty on 4 counts of fraud, faces 20 years in prison for each guilty count. They would be, I understand, served concurrently. Most people I hear speculating 4 to 10 years and then I think you can get 15% off for good behavior. Again, I'm no expert on that, but that's what I read. Guilty counts were two counts of wire fraud and two counts of conspiracy to commit fraud. She was originally charged with a total of 11 counts of fraud. Four were guilty. Four were not guilty. Three were a split verdict. The jury said they were unable to come to a unanimous unanimous verdict on three of the counts. After more than 45 hours of deliberation. Quote from the Wall Street Journal article, juries were persuaded that Miss Holmes conspired to defraud investors. This outcome could be significant because it means hundreds of millions of dollars of Theranos investors. That there are those investors loss could be taken into consideration during her sentencing is big numbers. The jury was split, however, on which of the six investors who testified were defrauded. The jurors convicted Miss Holmes on 3 counts. These included $100 million from the Family office of former Education, Education secretary tells Jake doing it for the audience. So anyway thoughts on the legal technicalities of the case counselor sex, we've talked about this before. I mean I think so at the end of the day she was convicted on the counts related to deceiving investors. She was not on the Council related to patients. I think that makes sense in that her obligations to investors are very clear whereas I think that the patient related duties are, I mean she had them, but it's a little bit less clear. So I mean look it's. It's what we've always said here. As a founder, you can be as messianic as you want to be. You can promise you know anything about your vision and what you intend into the future. About what you must do is be accurate about the current state of your business. You cannot lie about the deals that you've made, about the current capabilities of your product. And she was putting on, you know, logos of customers she didn't have in her deck. She was lying about the military being a customer. So she simply exactly misrepresented where she was at that time at the at when these investors invested. And that was the red line she should not have crossed. And I think in that sense it's a pretty simple case. I think, you know, the, the, the, the part of this, again, you know, the, the, the, the, the piece of this that's interesting is not the case itself, but really the media coverage. Because the media wants to portray this case as an indictment of Silicon Valley and the thing you keep hearing over and over again. None of us were involved. It just factually, yes, exactly. We weren't involved. But like, still, there's not a single person in Silicon Valley, I think, who put in a single shekel into this thing who actually does this as a real job. Tim Draper. Well, she he doesn't know Tim Draper putting a little bit of money as an Angel, and then he he didn't put a single dollar in after that. I'm saying, you know, you didn't come to social capital or graft ventures or to Sequoia or to TPB or to Google to raise money for this thing. None of that happened. You know, Sax is right, like the the summary of the Wall Street Journal. Nick, you can post it because I I put it in the group chat, basically summarized the fraud. And it's exactly what SAC says she affixed the logo of. Specifically, I think it was Pfizer that had not validated Theranos technology in materials she presented to investors. So she's basically like Pfizer said, this is a go. And apparently that wasn't true. She gave the false impression that the devices were used by the US military. That's what got all these military folks to sign on board and support it. That wasn't true. And then. And then she the biggest coup was that she signed a deal with Walgreens and Safeway to include its devices in hundreds of stores. And then many investors saw these contracts as an endorsement of the technology and growth potential. But basically those folks did know diligence and bought the hype, and so it was just a whole cycle of this thing that basically fell apart because the tests didn't work freeberg. What are your thoughts as our life science guru? What's most interesting to me is how does this get to this point? If you're Elizabeth Holmes, you're 19 years old and you start telling your story, and the more grandiose the story you tell is, the better the reaction you get is. It becomes reinforcing and the behavior extends a little bit further and a little bit further. Every time she told a story about how incredible this tech was, it's just one drop. You take one drop. It can measure everything when she. Simplified it and reduced it to that. And it was such an incredible statement. And she saw the reaction from people. She's like, wow, that works. Let me repeat it. It's like any good salesperson. They figure out what sells, and then they sell it, and then they repeat. And what's interesting to me that, you know, you talk about the media, but when she went out and told her story and got incredible press coverage because she was a young female doing something that was going to save lives. There was this altruistic Steve Jobs Esque kind of combination here. The media wrote a a glowing review of her and then she said, wow, look, they said something great, let me go do that again. And she got a bigger media piece written and a bigger media piece. And the more she said, the bigger she said it, the more she claimed she could do. The bigger the story got, the more coverage she got and the whole thing became this kind of reinforcing cycle. And I do think that the press coverage that she got as she was building this business, which helped her raise capital, helped her attract employees, helped her get Walgreens. And Safeway to the table allows her downfall. It allowed her to build the business, but it's exactly what created the narrative that wasn't true. And so the coverage that the press gave her, and we see this every day. You guys all see these top 50 companies. And we all know, having met a lot of these companies as you go down that list, this this 20 companies are total scam companies. They're fraud. They're not going to work. They're grifters. All the stuff that you guys might say about the quality of those businesses, but the press reporter isn't doing diligence. I'm not a you know, it turns out all the diligence was done after the fact and then it's like, well, maybe we should go do some diligence. Oh wait a second, because the the press coverage has now created this hyped story about who and what she is. The the diligence actually pays off because you have something to take apart. If she was just a nobody startup that raised $30 million and is still trying to figure out their way, there would be no value in any report or doing diligence on her and trying to figure out what was actually there. It was because the story got big that it gave everyone, including John Kerry. You. An incentive. He's the Wall Street Journal reporter who broke all this. An incentive to go in and take this thing apart. And so let me ask you a question. Really unfortunate and it's really self reinforcing that the press coverage that created the circumstance here ultimately also enabled them, the press to take the thing apart and, you know, land, land. This woman in jail. And I'm not saying she did nothing wrong, but I'm just saying that there's a system here and the system is set up in such a way that the press. Yeah, she manipulated. Let me ask one question. You free break. And then I got a question for sacks and Chama. Her basic premise? That one drop of blood could get you hundreds of results? Let me just ask you a question. Free break at what point would one drop of blood? Or so a nanotube be able to at our current technological, you know ramp. Be able to give us 100 different data points on a person. Every time you're generating a data point, you're running what's called an assay, which is a measurement of something. The question is how much of a molecule are you measuring against what volume is there enough of that molecule in that volume to give you a statistically good reading and that is a function of how precisely you can measure that thing. So there are, there are great advances happening right now in an in a domain in life sciences of hardware technology called microfluidics. This is the manipulation of Pico leader, you know, very, very small volumes of liquid and then being able to run chemical assays using biochemical techniques which we now have all these amazing new kind of tools like CRISPR and other things that would allow us to get a much more precise measurement with a much smaller volume than has ever been possible. So we can manipulate small fluids, we can measure them. So there's nothing today that would physically say we cannot do many of the things that she claims to have been able to do, but there are, there's a stacking of technology. Assets that need to be done to make that happen in reality, check again. And each of those assets are very different. So look, you could do it with cholesterol right now, you could do it with blood sugar right now, but you couldn't do both. You could theoretically, you could put them into a device and do that. No. The reason, the reason why lipids work. Can you do 400 things with you cannot. I've, I've actually funded three of these businesses and I've poured almost $100 million of money into it and they've all failed. And the reason is exactly what he said. You can do cholesterol because lipids are big enough, you know, and so you can basically. Build an assay that can pick that off with a drop of blood. You can do a reasonably good job with pretty large error bars on sugar. But all of this other stuff where you're going to replace like a, you know, a CBC or these broad, you know, profile panels that we all get once a year to assess our health. Today, I don't think that that's necessarily within reach. It's not within technological reason. It's not because people aren't, you know, smart enough. It's just that not enough of this investment is happening because then you go back to this whole idea where the funding cycle needs to see a big payoff for the capitalists to want to get involved in this thing, and there really isn't. You know, it's not as if, like, Quest and LabCorp are printing $400 billion of revenue and profits. And so that's not like there's a massive economic incentive to run in. And so even when, you know, we have tried and multiple occasions with completely different teams of incredible people, every single time, we have failed. So there's a physics law here that's just not physically possible. She made this claim sacred. And don't don't make it broad. There are things. There are molecules, there are pathogens, there are things you can absolutely detect. Small molecules, molecules you could you can detect with a drop of blood, you know, counting how many blood cells you have in your whole body. You know, using an estimate from a single droplet of blood because, you know, we have these machines called flow cytometry machines where we sort blood cells and then it'll tell you how many red blood cells you have and how many different kinds of white blood cells. That's a big part of your annual checkup that you'll typically get. You know, you need a good amount of blood to get an accurate reading on how many blood cells there are using, even just using lasers and and, you know, these sophisticated machines, can you reduce that down to a droplet physically? Probably not. Right. And so there's some, it's not universal to say this is possible. It's not possible. There are elements that are absolutely possible, some of which are being done today. And there are some things that are gonna be very hard to pull off. Got it. And she was making these claims as early as 2003 when it was founded. So we're talking about 19 years ago and we're saying here it's not going to be possible to do hundreds of these things maybe in our lifetime. We're talking about decades from there need to be some significant breakthrough. Sacks, let me ask you a legal question. I was on a podcast and I said to them, why haven't the prosecutors had Bill Maris who is a friend of Freeberg's who helped me get him on the podcast. He was great. Thank you for that David on this week in startups, very smart guy, very smart guy. And he came out publicly when he was running Google Ventures and he said we looked at it a couple of times, he's referring to there, but there was so much hand waving like look over here that we couldn't figure it out. So we just had someone from our life science. Investment team go into Walgreens and take the test, and it wasn't that difficult for anyone to determine that things may not have been. Not be what they seem here. Now, Sax, I was on this podcast, the Dropout, which I think is an ABC News one, and I said why didn't the prosecution bring up, you know, GV, let's assume Sequoia, Andreessen and you know, the 20 top firms in the valley who said no and they all said no because she wouldn't show them due diligence. And I asked them, why didn't the prosecutors bring up those 20 firms and compel them to testify about why they didn't invest to give the counterexample? And she said, I don't know. Wouldn't that have been a much better strategy to say here are the credible people who didn't invest? I'm not sure I see the relevance of that because Elizabeth Holmes crime was not promising something that she couldn't ultimately deliver on. It's OK to fail in Silicon Valley. One of the best things about Silicon Valley is that we don't punish failure. Then her mistake wasn't making misrepresentations to the people who did invest, right? If anything I'm saying is, if anything, actually what what Elizabeth Holmes maybe should have done was call up some of those firms and they could have said how easy it was for them to figure out that they should have invested. Maybe that would have been a way to kind of muddy the waters on her side. So was thinking that they would have said, hey, she wouldn't show us the technology and when we did our independent diligence, she wouldn't let us diligence. We did outside backdoor diligence. It failed. There were red flags all over this thing. We we had talked about it in our poker games way before this thing went off. Rails the fact that there were no major VC firms involved who could, who had expertise in biotech, who could do the diligence, it was all sort of. It was basically a family office, money of people who weren't in Silicon Valley, you know, writing big checks, whether it was Rupert Murdoch or the DeVos family or what have you. There were there were just red flags coming off this thing, which is why Silicon Valley was not. By and large, Duke buy it. The people who were duped by it were the people that Elizabeth Holmes was able to sell the patina of Silicon Valley too. And the media, because the media won't want what we've seen over and over again is they don't Fact Check stories when they fit their priors. The prior here is that, you know, what the media want to believe is that the next Steve Jobs is going to be a woman. And so when Elizabeth Holmes served that up to them wearing the black turtleneck. It was too good a story for them to Fact Check too heavily. And so they ran with it. It fit the same way, in the same way that, you know, the ivermectin hoax that Rolling Stone ran with was too good a story to be fact checked because they want to believe that the Maga people in Oklahoma were eating horse paste. I mean, there's there's 100 better examples of just, I mean, just to be generic sacks of other startups that we all know are total nonsense and total nonsense about them. There's a there's a fraud in biotech. Going on right now that David and I, David and I saw up front, I mean, it's like this stuff is crazy. It's really, really crazy. Look, I mean, I think the moral of the story for entrepreneurs, I mean, I think there's a couple of takeaways here. Number one, you gotta be really clear with the present state of your business. It's OK to talk about your grand vision of what you're going to do in the future, but you cannot be inaccurate in any way with respect to your current numbers and partnerships and deals and current capabilities. I think #2. I think when you start working with the media in this way to promote your company, you're playing with fire because the media really has two kinds of stories they build up and they tear down and when they're done building you up, they're going to tear you down because that's the only story left to right. So if you're going to go court the media in that way to try and get publicity, you better be really careful how you do it and you better be really accurate and you better not give them cause to later regret pumping you up because they will tear you down even harder if you do that. I think I think the more important danger that I just like to speak generally to for a second. Is to not let other people do your thinking for you. The investors that came into this business came in under the assumption that this was a real business because the press had written about it and the press wrote about it because the general had joined the board. And the general joined the board because his buddy George Schultz said, hey, you should meet this lady. And the whole thing ended up becoming this roundabout where no one actually did any original thinking and no one did any actual diligence, and the whole thing ended up being this. You know, now you're talking about actually how Silicon Valley. So that's ******* ********. Yeah. OK. You don't think these dopes run around thinking of Sequoia benchmark social capital craft invests, I'm just plowing the money. And of course they do. They don't even think social proof. They assume that we've done our diligence. You think they're doing principal diligence? These, like the the Silicon Valley ecosystem. This is also how the Bernie Madoff scandal, you know, got so far ahead of itself. No one actually went in and did the audits of those financials. Everyone assumed that because someone else has is in this thing and because someone else is involved. There's someone else. Something nice has been written about it or said about it. It's worth backing. And like the lack of original thinking in business and life in general, I think is, you know, one of the biggest, you know, risks that each of us takes and it's why it's really important to learn how to think for yourself. I I have a deep respect for early stage investors because they have to get in and make some critical decisions. Some people make those decisions about the team, right the psychology of the cofounders. Sometimes it's about the end market, and sometimes it's about a deep analysis of the traction. But you have to honest. Let's be honest, there is a valley of funding between the Series A and maybe the D or the E. Where I really think a lot of folks just look for signaling value based on who the Series A investors were. They blind bets. I'm not sure they're making, but I'm not sure that those family offices were any worse or any better. Like maybe the DeVos family looked at Rupert Murdoch and said he's smart. So I'm in. Yeah, that's exactly what happened. That's so different than all these series B&C firms that say ohh benchmarks in admin. Totally. It's the exact same thing. Totally. I literally had a situation. I think I brought it up in a previous episode where I was working on a deal. It wasn't like a major check for us. It was, you know, 6 figure. Back. And they said none of the other firms are asking for diligence. Why should we give it to you? And I was like, how much are they putting crazy? And they were putting in more money than they were putting 7 figures in crazy. And I said because I have you asking diligence when you asked for diligence. Now some of these founders look at you like, how dare you. Yeah, exactly. They were. No. In this case, they were insulted. And they said, we're not giving you diligence. And they. And we walked away. It's this company so that visiting the House. Yeah. Like, buy it without this company that Dave and I called. Called, you know. Well, David was calling it. There are no two. You know, but this couple couldn't even explain gross revenue. They couldn't. They didn't. It was like gross revenue Asterix. And it's like if there's one metric on a P&L that can never have an* ever. The top line, the top line gross revenue, money that came into your bank account. I get charged, but I get it, but I get gap. I I get it OK, but gross revenue asterisks. Just open the register and count the money and so I would just remember asking the simple question like. Can you just take the asterisks away and just tell you this is a company that two of you were looking at together? You you and I have talked about many times. Oh really? You're Theranos 2.0? Sir, that's what this company and I and I learned a lot about Delaware law. I don't know if you guys have had. I've talked about this company. Yeah, yeah. Well, you in the text you were like, I'm shorting this will tell you in a minute. We're alright. Yeah, you know what it is. But anyway, I've been getting a big lesson here about Delaware law. There's something called a section 220. Have any of you? Ever had to file one of these by the way? It worked out really well. Sorry, go ahead. Do any are any of you aware of whatever? Any of you are aware of what a Section 220 is or heard of this before? Basically, in a Delaware corporation, if you're a shareholder of any size, not just like a board member with 10% or whatever, if you feel there's malfeasance going on, you can file this 220 in Delaware. And according to this, a great Skadden Arps article on this, the the Delaware courts are taking it very seriously that if there's any accusation of any kind of malfeasance, especially financial. Any shareholder, even tiny can get all of the books and in detail, not board minutes, not top level P&L like detailed financials. And so for people who are running companies and private companies too or this is in private companies, look up section 220 of the Delaware General corporate law, I remember at Facebook is because we had these vagaries of having to control shareholder account or stuff like that. And information rights, yes, we actually kept the financials on a physical computer that was not. Connected to the Internet. So the people that wanted it would actually have to come to our office and then we would put them in like a windowless room without their phone or something is that I think that's that's that's how they avoided people filing 220 requests. And so just something for people to be aware, aware of on both sides of the table that if they're shenanigans going on at a company a founders think, well, I don't have to give any information to my shareholders is not true and it's not true. Whatever you have an information rights, whatever your lawyers wrote is not. Above section 220 in Delaware. So just just keep that in mind in a case like that right now going on. Where, in fact, it won't give you information. Well, it's not the founder, but there's a company that just sold and they won't tell the shareholders like the terms of the deal. What? Yeah. How's that even possible? Good question, but it's it just reeks of a fraud. I'm not going to say the name yet because I'm hoping that they're going to start acting in a more kosher way, but it's the most egregious thing I've ever seen. All you have to do is talk to your attorney at Wilson. Fenwick or whatever one of the cohort of you literally have the management of the company. They've engaged in a sale, the Salesman publicly announced. We have reason to believe it's in the hundreds of millions and they won't tell anybody the terms. Yeah, file a 220, follow 220 and you know what? They're public. So then the crazy thing about these two 20s is it used to be that all of the information had to be private to sign like nondisclosures, whatever. And now in certain circumstances, I think it's in the best interest of all shareholders. The 2:20 information can be public. And so that is just like. A sniper shot to anybody who is. Doing any kind of shenanigans, we had a company in the same situation who wouldn't tell us about a sale. And then I have a call with the board because I own 7% of the company. This is years ago. And I said, can you explain to me what happened here? And they're like, yeah, we're doing the sale and blah, blah. And it turned out the bankers were taking 40% of the sale, whatever. And I was like, OK, well, I'm not going to approve this and it you need my approval. Let's let's talk about how we can make this work because we have outside funding that the company's turning down to do a sale that everybody was in their money on doesn't make any sense. And they said, well, we can't really do that because we've already sent the eight employees over to the new company that's buying it. I was like, what do you mean? Like we ran out of money to pay them so they all moved over to the payroll of the new company? Like you haven't closed the transaction yet. It was crazy. Like there's some weird stuff that happens in private companies. Yeah, this stuff is always at the peak of when there's a correction, right? I mean, this may be a good segue to talk about what's going on. It's a great segue, but it's like that level of grift happens right before. You know, basically we have to rewrite valuations, you know, because some people, because entrepreneurs, entrepreneurs just take so much. Well, there's just a small, small percentage of them, but they just take so much leeway in pushing the boundary. And and sometimes it's other board members who are acting their interest. But I I solve this problem, really. I called the CEO of the public company that was buying them and explained the situation. He's like, talk to my CFO, a fan of the pod, whatever. And I, they said, how do we solve this with you? I said, well, this is how much money I have in this is the value of your company. How would you like me to be an advisor to your company for the same amount of that value and shares? Also, you grifted, so no, that's great. So basically, you got bamboozled. And so you bamboozled everybody else by letting you use by language. And then they said, OK, we'll make you an advisor. And I took the advisor shares and I wrote a letter and pledged them to my investors. And my investors are now 3X original investment. And I said I'm not letting it go. I'm not signing the paper until I get the 250K that my investors put in. And then they they did it. Now I'm I'm up. All right, let's segue. Crazy market pullback the great write down has occurred. Charts from altimeter, our friend Brad Gerstman I assume show a major regression to the mean for tech stocks, SAS index, median enterprise value, next 12 months, expected revenue, yadda yadda. This includes people like Adobe, Datadog, Shopify, Twilio, Work Day and as you can see here on the chart which will pull up. Sachs, explain to us what's happening here. Well it's a major regression to the mean on value on public company valuations in both SAS but also more generally the the high growth stocks have corrected more than the indices. So that would imply that there might be more correction to come against the indexes. I think the growth stocks already taken the bulk of the hit, but what triggered it this week is you know I predicted and you guys had similar predictions on the just a few weeks ago. That this would be the 2022 would be the year of the correction and it really began in November. You had the the Fed. You have fed governors makes some hawkish statements about the about inflation not being transitory about the need to raise rates. Then we had the the Fed Open Market Committee meeting this is in I think around December 15th and they announced what they were going to do on rates. And now this week the minutes of that meeting were released and it basically it said something that was completely different than what they announced to us just three weeks ago. And so the market basically just seized up and went into convulsions and. Specifically what they said you know in in mid-december was that they were going to taper faster. They were going to Q1, sorry, they were going to NQ E at the end of Q1 instead of Q2 and then we're going to have 1/4 point rate hikes in Q2Q3Q4. That was the plan for 2022. And then there was additional guidance that they were expecting three more quarter point rate hikes in 2023 and two in 2024. So that was sort of the three-year plan that was laid out then we find out from these minutes. And I guess these minutes weren't leaked or anything. They they published them after like a three-week revise and extend my remarks type. But what we find out is that they what they were talking about was having a rate hike as soon as Q1 and not just ending QE but actually shedding assets, which is like the opposite of QE. So instead of basically going out there and creating money, shrinking the balance, yeah, yeah, shrinking their balance sheets, instead of going out and buying bonds, they're going to sell their bonds which will reduce the money supply. So look, if that was their view three weeks ago, why didn't they announce it? I mean, my problem with this is it makes the Fed look like they don't know what they're doing because they announced something just three, 3 1/2 weeks ago that's completely at odds with the statement they just put out. So either something changed in the last three weeks and there's been no data or they don't know what they're doing. Just so you know, they they they have a little bit of a track record of this. So in 2018, it looked like there was going to be inflation and Powell. Had to get ahead of it. And he raised rates and the the market completely collapsed. And they were looking, I think, at Chinese data at the time. And it looked like, you know, China was turning, you know, going crazy. Then China completely turned over. It was a complete head fake. The economy wasn't reboring. Inflation didn't exist, and they basically just curtailed a lot of investment and destroyed a bunch of value. So this time around, I think they're very sensitive to not correcting too quickly. But then the opposite thing happened, which is they probably waited a little too long. And now, you know, we're correcting too slowly, too late into the cycle, and we're just sort of digesting that reality. And so I think that, you know, we're probably, to be honest with you, like actually, like we've puked it all out for the most part, in my opinion, you have to remember, right, like the big difference between now and even 10 and frankly more importantly, 20, thirty 4050 years ago is how many computers are involved that trade, how much passive money is involved. That owns assets and how much of this stuff is sitting on the sidelines still in money market accounts and munis. So if you look at those markets, there is a ton, trillions of dollars waiting to find a home and what we've now done and Brad's charts show this is we've basically chopped the head off of all of these fast growing growth multiple. The underlying companies have not changed once until it right. These companies are still growing by crazy. Sounds like Snowflake is still an incredible business. Unbelievable. But the multiple that one was willing to pay has been has been very much rerated, as is a bunch of other companies. Like your question, if we've gone from these 506070 multiples times sales and now it goes back down to 20? Is that, dare I say, a buy signal and all those trillions of dollars start moving back in? Because who wants to be in a money market? I don't know and I can't really call these things. But one of the really smart person that I talked to this week, you know, he actually liquidated everything in October and November. And you know and I, I don't know we talked about this on the pod, but you know I was feeling so much tension at the end of last year. I actually had when I looked back on Q4, it was probably the most difficult quarter of my professional life. And just trying to manage risk and I exited a ton of positions, all my pipes, you know, my third party pipes, I basically sold off except for one, you know, I generated some liquidity and other places as well. And I was glad that I did that. In part because I saw, you know, what he was doing and in part because, you know, Jeff and Elon were selling and I thought, I mean, this is just, this is crazy to sit on the sidelines and, you know, be the bag holder here. Going into Q1, I talked to the same guys and what he said to me, which I think is very smart, is you have to really look at the 1st and 2nd derivative of the 10 year bond. Because when that stops moving like the 10 year bond is as beautiful barometer of the collective wisdom of every single investor in the world about what they think about long term growth and inflation. And it's a really important market. You know we've talked many times, look at the 10 year break even if you want to understand where inflation is going, we started to talk about that. Seven months ago. And if you look at that, the rate of change, so the volatility in the 10 year yield is slowing way down. And if that continues to hold, that means that people are really saying there's a small amount of real inflation. A reasonable amount of transitory inflation and we're about to kind of wash most of it through the system with, you know, 100 basis points of rate hikes. And if that's the case, then you may see a quick pullback, you know, in Q1 and we're back to the races again because of all this other money. That's going to say I got to get back in and if you look at all these corrections. In the world of computer traded algorithms and ETFs and passive money and. It's all the snapbacks are so fast, you correct 20% and then, whoop, you whip it back and you go. So I don't know. I mean that's one view based on the past, but when when you have these big swings, remember it's not that every. Issue moves perfectly In Sync with every other issue. So there are these, call it over adjustments that happen within a cohort. So within a group of companies, some of them will trade down much farther than others. The multiple will compress much further than others and there's certainly opportunities within as there is in any market that's moving quickly to find businesses that now are prices mature, non growth value businesses and they're profitable and growing and there's a bunch of those out there now. And that wasn't the case a month ago. I don't think a single thing in the last quarter has changed in the underlying fundamentals of the majority of businesses that are public. And I actually think for the most part, nothing has really materially changed for the majority of private companies. All that's changed is what you're willing to pay in the future for it. And the one thing that hasn't changed is what you're willing to pay in the future for the private businesses. So the real question, you know, for sacs and you know, for the active investors in the private markets, which I don't know what to think about is. Will the haircut that we've all taken in the public markets spill into the privates and it's starting, it's starting. But it feels to me it's not just about what's going to happen with new emerging growth companies. But I mean, you guys, correct me if I'm wrong, but there are hundreds of companies that have raised billions of dollars at valuations that if they look in the public markets now, they are never actually going to achieve if they were to go public in the next 3-4 or five years based on their projections. But to your point, so we're nine, yeah, there are 900 unicorns right now, 900. And so once you get to look, it's one thing to be a $200 million company and sell to Microsoft or whatever. But when you're a billion dollar company, there are very few buyers. Just want to point out there's a huge disincentive for an investor or shareholder of VC or private equity firm to take a big write down on a company like that. And so there, there is always this push to what do we do next and it creates the certain. Certainly I can tell you, yeah I'd love your point of view but your this really like unhealthy tension because to take a write down on 900 unicorns is going to cause a write down of hundreds of billions of dollars and not crossing all VC portfolios in aggregate because they're not going to end up going public at sorry just to finish your thought because the end market is only to go public. There are very few companies there are no not in the billions of dollars because you have to think. The sidelines, OK. You know, even if you look at like visa and they're not going to be a big deal there, nobody's allowed to buy these big companies here. And I have an example that I can tell you I'm mid, mid tier maybe. But my point is when you have 900 companies worth a billion dollars and plus they have to go public, they have to go public and correct, you can't go public into evaluation framework that values you at 30 to 40% less of your last private mark, right. Yeah, it's it doesn't work you did or do you actually do. So this is an important question because isn't that going to be the. Case that all these VC's with the, the 2015, 2016, 2017, 2018-2019 vintage are going to end up having. They've all got these great marked books right now. You know, the books are all marked to 3X, you know, multiple on invested capital and now they're going to end up having these liquidity events that are going to come in and shockingly low valuations and there's going to be this great write down in retrenchment. I can tell you there's a couple of examples. One is the athletic yesterday which had raised money at 500 million just two years ago. Just sold for about 500 million to the New York Times. And those investors basically put money in and they got their money back. It's a push. So I think you're gonna see a lot of these pushes. No, I'm agreeing with you. Yes, I'm going to give you the example. Then there's also your acquisition by mid tier acquirer. And so there'll be plenty of those that occur. So there'll be a lot of pushes, I think is my prediction of those 900 unicorns. And then for a lot of these SAS companies, you're saying you think that a bunch of them are going to sell for under a billion dollars and the VC's, because they have preference, they're going to get their money back, correct. I think it's going to be a lot of these pushes where I don't. What is it in Blackjack, David, when you're playing those three hands and you get a push like. And it's like, OK, I'm gonna lift to to fight another hand now which we've seen sacks doing numbers times. And then for the SAS is where Sax I'm interested in your position because we saw in Sass all of a sudden the private market 3040506070 times top line and now it's gone back down to 203040. So those companies now basically have three, the public markets have, but I don't think the private markets, it has happened already. Everybody's pausing. And so for the people who raised that 50X, congratulations, you did the right thing if you have enough money to fill in that. Evaluation. Congratulations, though. I mean, it seems like they're in a pretty tough position now. That is why you used to raise money at a billion dollar valuation with 10 million of revenue. You're like O20, let's say let's say 20 would be more like, I mean like what are you gonna do with what you do in your next round because you're burning 100 million a year now or 40 million or whatever it is you're burning. Almost all the companies I've seen in this exact situation you're talking about have that 20 million, they got a billion, they raised 100 million or 200,000,000 and they're basically now saying, OK, we got to make this last until we can catch up to that valuation and get to 50 to 75 million. So I think you I would take that deal as a founder and as an investor. Because it takes out the downside and now you just have to worry about catching up to the valuation and you have four years of runway. They're not going to, they're the right size. Those companies do not those those companies absolutely do not have four years of runway. I will bet dollars to Donuts they have two years or less. And most of these companies have 18 months, which means they got to be raising in six to nine. No, correct. They're changing. They're changing their spend and they're changing their target, changing they're spend. They're not firing anybody. You're not hearing about layoffs at startups? OK, alright. You're not hearing about it, but maybe they're changing their forward-looking growth plans. What are you seeing, sacks? I'm telling you what I'm seeing. What are you seeing? I think that the trickle down effect is inevitable, but I'm not sure it's fully kicked in yet. It's gonna take a few high profile deals to land at say 50 times AR instead of 100 times AR in order for everybody to know that there's a new valuation level. So if you look at the alternator chart on set public SAS multiples, let's see, I mean they can pull it up. It basically it's the sass index. It shows median, median expected value to next 12 months revenue. And during this sort of late 2020 early 21. It got as high as about 15 times the historical average. Yeah, for well for next 12 months or revenue. The which is sort of that, that kind of makes sense. So, so historically it's around 8:00, right. So, so basically all the valuation levels doubled and now they've come down to about 10 times. So you could say that if it fully reverts to the mean, we still got like another -, 20% to go. I don't know if that's going to happen. I mean I think there has been a greater recognition that SAS businesses are some of the best businesses to own, right. It's they are subscription software. This is great. Gross margins, they just keep compounding. So maybe it will stabilize at 10 times. But I think what we can say with 2020 hindsight is that the record price levels we got to in the public markets in 20 and 21 were sort of unusual and unique, and probably the result of this incredibly expansionary fiscal and monetary policy was coming out of Washington. Now has it trickle down to the again VC markets yet? I mean the way that that has to happen is that the latest stage investors that crossover investors who invest in both public markets and private markets, they have to to pay, they have to start paying less for the latest stage growth companies. And then you know all the downstream VC's are going to start paying less as well because you know if you know the markups are lower, you have to take that into account. So look all of this is underway right now. I mean I gave a Bloomberg interview and. December and I think I went on Maria Bartiromo show around that time as well. And I kind of warned that all of this was coming and yeah, we were in the midst of a of a giant rerating because we're realizing that so much of the peak values we were seeing in 2020 and 21 were the result of artificial liquidity. And it's what you guys predicted, you know, it's one of our big, you know? I guess my big prediction for business losers this year were asset classes that were highly dependent on liquidity. You guys predicted crypto would be one of those. Clearly, it's taking a massive hit. Have you seen how much the crypto markets are off just in the last week? So it's so much for them being uncorrelated? No, it's unrelated. Look the crypto market Bitcoin is going to be uncorrelated, so the markets gonna markets are like a sponge for liquidity and the more liquidity there is out there, the more money can flow into a more speculative asset class. Look, my, my, my, my objection to this, I mean is that if you look at the Feds actions, I mean I think jamath is right that they waited way too long to react and during the crisis they overreacted. I mean they pumped what? I mean we we on the previous pod we showed the assets between underreaction and overreact. Yes, exactly. And and now they're, I think they're in, they're going into overreacting again. Yeah, I actually think they nailed it in in mid-december. They nailed it by giving U.S. business certainty around what? The new rate environment was gonna be and just three weeks later in the minutes to that very meeting, they completely undermine the certainty or the the greater level of certainty in predicting the predictability that they had provided markets. They've now introduced massive uncertainty. So it's just, it's unbelievable. It's like they're pilots and like they stalled the plane and then they're like oh, let's pull back. Well, no stall, there's more. They're kind of pulling out the manual and learning in real time. Yeah. And it's like you need to just point the nose down a bit and add a little bit of speed so you get some lift. Like it's it really is tragic that the performance of our government at every level over since COVID at the last, you know, since 2020, I mean it's been abysmal. I mean first you have the self-inflicted wound of lockdowns, I mean. The economy is going to take a hit no matter what because highly at risk people would have stayed home and reduced their economic activity. But instead of just protecting the at risk people, we had to lock down the entire economy. We padlocked Elon's factories and on and on. So we basically shut down the whole economy for no reason. And states like California kept it going way longer than they had to. So then the government just prints like 5-6 trillion and the Fed double s the size of its balance sheet and then now they're abruptly getting off. Drugs, I mean, look, they put us on drugs and now they're going cold Turkey. And so I think there's actually like a much greater risk now of the economy going to recession this year because of the feds overreaction this week. I mean, they had they had the Goldilocks scenario down about three weeks ago, and I think they're gonna take the thing now or there's a much greater risk of that. Best advice for founders, private companies in this turmoil. Which are best advice fam? You're a founder. You got, I don't know, 18 months of runway. Right now you're going into this, you know, slush, and you want to know, what should I do? What should I do? I think Paul Graham's advice makes the most sense here. You need to focus on being default alive. With that is just for people. Yeah. So you know, Paul Graham wrote this great essay esport, where he's the founder of like Combinator. And you know, he has this very simple, you know, framework of looking at companies, which is your default dead or your default alive and when you're losing money. As a company and you're burning enormous amounts of cash, you're default debt. Now if you're growing fast enough, default debt is a great strategy for value creation. But at some point everybody around you will expect you to be default alive. And what that means is that the cost of what you do are less than the revenues you bring in when the result or profits. And even then that's not good enough. I don't know if you guys saw, but you know if you look inside of big tech. I was shocked to find out that, you know, for example, you know companies like Microsoft specifically and ale, you know these guys traded huge forward multiples, right, for enormous profitability. But companies like Facebook and Google for the same level of profitability, you know trade almost a third less in terms of multiple. So even when you're that good, it's not good enough to be default alive. That's how hard this game is over very long periods of time and so when you have a moment to really understand how to be default. Live and you don't take it. I think it's a huge disservice because we don't do enough of that kind of coaching that really inflicts that kind of discipline and expectation setting. I remember I have a large climate investment. It's actually the single largest investment I've ever done. And so I swept the details pretty significantly and you know, I was with the team in. In November, December. For board meeting and setting up 2022 and my whole thing was guys, you have to get default alive, you have to get contribution margins to be in a certain band. We are going to target this level of free cash flow generation this year and there's no if ends or buts about it. And what's great is the entire team embraced it and we're marching towards that. But if they didn't and they were like, no, we're just going to grow at all costs again, Oh my God, I would be freaking out right now. Freeberg, what do you add to that as advice to founders who have not been through this before? I built my business, my Climate Corp we raised around in November of 2007, we raised 12 and a half, $1,000,000, and then the financial crisis hit in 2008. And Umm, I'd say two things. Were really important. Number one was just keep building, so if you're building a great business. It doesn't matter what the market perturbations are, you know the the market will value you what they're going to value at and if you're a good business, there's going to be money available to you. The the second piece of advice is one that I know it's been said over and over again, but you know, never raise it a valuation beyond, you know what you're reasonably going to be able to kind of deliver returns on at some point in the future because otherwise those nasty dynamics emerge. You know, you could raise money at some crazy high valuation. That's not always the best thing to do because then the expectation of the investors coming in at that valuation are they want to make three times that money or four times that money and it pushes you to do something unhealthy like spend more than you otherwise would, stretch for a bigger outcome and put your entire company at risk. So you know two things to me have always been just stay focused on building your business. Don't let you know kind of market conditions drive your decision making and 2nd define what for you is. The best practice of staying focused on your business, because that is a very general term. What is freeberg? If you're going to say the three top three things of focused on your business tactically means, I have a simple rubric for value creation and a business, you know, number one is can you make a product #2 is, do people want to buy your product #3 is, can you make a positive gross margin selling that product to those people? #4 is, can you make a return on the marketing dollars you have to spend to generate that gross profit? Meaning, you know, can LTV exceed CAC? And #5 is can you scale the amount of money you deploy to grow your business such that as you grow the return goes up not down. If those are the five kind of things you can accomplish in that order you can build the next Google and so and then the sixth thing is can you be a platform which is meaning can you transition to being a multi product company that gets leverage out of the the user base or the technology that you've built. And so you know if you think of the revenue streams, more reliable revenue streams using the same customer base or multiple products or you know whatever. And so if you can achieve those six things. In that order. Every step of the way, every increment you can make across that spectrum drive significant value as a business. Ultimately, what the multiple on your business will be is purely going to be a function of what else is going on in the world, things that you cannot control. And so if you're driving your decisions about building your business using that first rubric, good for you. You're going to succeed. You're going to have money available to you. Awesome if you're driving your decisions based on what the market is telling you to do and what the market is saying is available to you, and money and all that sort of stuff. You know, you're setting yourself up to basically be, you know, blowing up. Are you also saying to be independent of of valuation? Yeah, I I'm always of the opinion that you shouldn't raise money beyond your into evaluation that you're not comfortable saying in different market conditions or what have you. I can return multiple don't think any founder has ever. You know, most of these founders were not around in 2000 and they were. But even 2008 was less important in my mind because it was, it was, it was fast. And again, we had government stimulus. So, you know, like, I think 2008 was an aberrational moment. I was, I was in the middle, you know, inside of Facebook when and I was like, what the hell is going on here? The government's going to step in and, you know, with TARP printing a trillion dollars or whatever it was, it didn't affect you guys. It didn't affect us at all. Yeah, but you were the most powerful company or start out at that time 2008. Wow. You're having two guys were searching. We were not cash, right? No, no. But we were profitable. Here's the thing with that people don't realize. With Facebook, Google with profitable from day 1/2. Yep. We we were always default to live. I want every single person listening to this to understand this. OK. We sold poker ads for party poker in Big banner ads on Facebook and we made money. You got the bag, you got yourself independent. Were profitable. OK. So I don't buy this argument that argument of unprofitable growth is a vestige of fund dynamics and VC's who want to raise larger and larger funds to line their pockets with fees. It's a function of what I mentioned before, which is if you can think about the context of a portfolio of those bets, it makes sense. But if you think about your business, it doesn't make sense. In 2000, that didn't make sense. You could not run an unprofitable growth business. The money would not have been there, right? And the real reason is that was a a market. Check. Meaning you had people reallocating capital because risk rates were different. You know you could put money at 6% in the in the US 10 year bonds. Now obviously you can't do that today. So maybe this cycle is just the new normal. And so you know, maybe you can always be default dead and be able to raise money because the incentives exist. But I wonder when that stops. And so I don't know, Google was an incredibly cash efficient business. I think they raised under 50 million as a private company. Never used any of it because Google the 1st. The first thing Google did is they did a massive search syndication deal with AOL. They paid them hundreds of millions of dollars, and that funded the business. If you can sell ahead of your customers in terms of delivering the service or the product to them, you've got the most beautiful business in the world. That's the definition of bootstrapping. Google, even though they raise venture capital, effectively bootstrap the business by getting customers to prepay long, getting people to prepay for cars. I wrote this in my annual letter like two years ago, but Facebook, Google, Apple, Microsoft and Amazon raised collectively less than $250 million. Yeah, I mean. Yeah, so I mean, I I agree with a lot of what you guys have said. I mean, so I agree with freeberg that recessions are downturns are actually great times to build startups because innovation doesn't stop. And you know, so PayPal is predominantly built crash, Yammer was prominently built after the 2008 sort of Great Recession. So it's absolutely doable and some things actually get easier in a downturn. There's like way fewer startups getting funded and so like talent gets easier to recruit. So, you know, things loosen up. And you know, in terms of the company building side, the only thing that really gets harder in a downturn is fundraising, right? This is. And and by the way, I think it's a good practice for founders not to care what happens in the public markets, the NASD early state founders, right. Because the only time that really touches you is when you need to access the capital markets, right. And then you will be subject to the downstream impact on VC's of what's happening in the market. So. So the only thing that really gets harder is fundraising. And this is where I think. Tamas advice comes in. I I personally think that trying to achieve default a live status is too high a bar. I mean it's a wonderful thing if you can do it. I mean, Facebook did it, Google did it, the very best companies did it, but I know very few SAS companies that could continue to grow if they had to be cash flow positive, I mean at an early stage. So the metric I use is bird multiple, wrote a blog about this once. It's basically just how much are you burning for every dollar of net new AR you're adding. So in other words, like if you're burning $1,000,000, you know, over whatever period of time, a month, quarter, year, to add $1,000,000 of net UAR, that's actually pretty good. So a bundle hole of like one or less is amazing. I'd say even up to two is good. So in other words, like if a SaaS company can say add 10 million of net new ARD year and Burn 20, I think VC's will fund that all day long, even in a recession. 2 year Payback, Yes, but when you start getting to burn multiples of. 3456 and up, that's when like VC's are going to wait a second. Yeah, you're that growth is right. You're not official, not just efficient, but it starts to raise questions about your product market fit because you're effectively spending too much money to grow. So like why is a growth that hard right now the market pull. Yeah. Yeah, exactly. No market pull things, good way of putting it. So I do think you have to like in a downturn or in choppy waters, you have to sharpen the pencil, get more efficient about your burn, look at your burn multiple and then I think, you know, if you have the opportunity to top off your war. Guess like, that's smart, you know? And don't wait too long and be frugal. I mean, God, the amount of like. Crazy spending I'm seeing in some startups, and unnecessary spending. If you're spending something, it's not going into product, it's not going into marketing, you know? It's not going into sales and it's not, you know, just you really have to ask yourself, why am I spending money on going to this conference, going to that conference, on this office space? Like, really be frugal. I know that. It's when you have all this money sloshing around, you're looking for things to spend it on, but stay focused on the summit. Yeah. I mean, yeah, you don't don't spend 7500 on that unless you've got tons of cash laying around and we will be getting back to the people who applied. We're gonna go through and somebody's gonna approve you. Let's have one other thing to this, which is, you're right that like most founders have never even seen a downturn because the last big one was a Great Recession of 2008, 2009. So many founders were even around back there. The most, the most real, the real one was 2000. That's right. That was the IT it froze. I would say it froze to the 2008 was what? Like 12 to 18 months of choppiness and I would say a lot of companies couldn't raise money, had to do down rounds, had to do multiple liquidation preferences. It was nearly on some cap tables during that. And if you don't know what multiple liquidation preferences are, ask your attorney. Understand? But there was no real market check. The market check was really in 2000 and you saw it was a multi year slog. There was a bloodbath. You had to be default vaporized. Yes people, you had to be default alive. Absolutely. Absolutely. Yeah. But I would say 1/3 of the startups went away and. 2008, I don't think we're running into that again. So you know, let's not create a Sequoia graveyard but kind of story here but but you could nobody knows is the point. Look it's a it's a probability of getting your business fungus, right and and that's kind of lower. It's it's not like, but here's the thing, what I, what I what's shocking to me it's like, I don't understand why people think you can grow infinitely forever. It's just not true. Even the best businesses in the world after 15 or 20 years are barely growing at 20% people. Forecast, Facebook and Google. Those are the two best businesses in the world, but it isn't the question what kind of growth feces are willing to finance. No, what I'm saying is if you know that your terminal growth rate, if you are one of the best companies ever created ever, is 20% in 20 years. It doesn't take a genius to do a line of best fit between now where you're at 100% and 20 and realize that at some point, if you don't figure out how to make money by selling what you're selling, there's a lot of people who will be smart enough after enough historical data has come through the transom. Or come over the past to realize that these things are not that fundable. And this is what's shocking to me. It's like that data is hiding in plain sight for anybody to look at. It doesn't make sense unless you believe that those growth rates of 40 fifty 60% are sustainable for 30 years or 40 years. We've seen 0 examples and you have to look at these Canaries in the coal mine because if if the best companies in the world can't do it. You're you have to really scratch your head here or ignore it, whatever. That's fine. Just winging it. Yeah, it'll work out. Don't worry about it. Don't worry about it. Don't worry. Just add like three teachers around. It's one of those features will work and save the day. There's some magical feature that did you see Andreessen announced that they raised $9 billion or something today across a bunch of congratulations to those men. They're building a colossus. Yeah, I mean, there's going to Silicon Valley in terms of capital is. Umm, you know, seeing kind of power returns itself, right. There's going to be a few firms that are going to, you know, control 80% of the entries should go public and drink Tiger, Tiger global. You know, whatever happens. I don't know if something is mentioned too. I mean, there's a few that's a market. But I'm just saying, like if you look at the aggregate capital that's being deployed into private markets right now in a in probably two years, 80% of it's going to come from 3 firms or 4 firms. The problem is if you're running that much money, you're insane to not take your. Public because it's the only way. Like, no, you're not really generating Kerry at that point because you're generating a market beta return. So you'll do OK. But when you're sitting on 20 thirty 40 billion of imputed wealth by being the owner of the GP of Tiger or Endresen, you'd be insane to not go public. I think the odds are going to be pretty high that Andreessen will go public, right? I mean, they're certainly setting themselves up to be a lot more than just the capital allocator though, right? It's never happened. Well, TPG just fall to the public. They're going OK R public. I'm talking about venture, though. No, but I mean, like adventures never scaled up to the point that private equity has until now. And now that they have, it's very likely, it's very likely that you'll see andreesen be the first. I don't know them, you know very well. But sack, you were going to say something? Yeah. Well, I think it's a super interesting point because if you talk to the previous generation of VC's, what they will tell you who retired right is when you ask him, well, did you get anything for your partnership share in the firm, not just in a fund, but in the firm? They'll tell, you know, they basically gave it away. Of the next generation of partners even though they they built the firm and it's because of what they historically the belief on the part of VC's was that there were there was no value to VC firms other than just their interest in each particular fund. But you're right like if they do achieve a much greater level of scale and they can go public then there is actually value in the firm itself. And if you look at the terminal valuation of Blackstone as index to AUM you know once once you pass a couple 100 billion of AUM you can. Trade .2 towards point 1.2 times. And so you know if you have 50 billion of AUM, there's $10 billion market cap there. And if you you know if you're called or and reason or Horowitz, I mean that's $5 billion that just appeared out of nowhere. Why would you not do it right. It's a little bit like Goldman Sachs. They always said that we're a partnership we're never going to IPO because and then they did and then they did and and same thing we did see a do it too. No, I guess there's no what happened with a was Ovitz. Soul disposition to go to Disney. So there would be a conflict, but he could have kept it and the like residuals they were getting from projects they packaged were incredible. Didn't the R Emanuel won it, did endeavor, did endeavor. How are they trading? I haven't even looked at endeavor. I'm not sure. But let me tell you like it's actually. But think about if you're not like the current, like, partner owners of the firm, but you're like on a partnership track there and you're working your way up to partner. Like by the time you get to partner, it's going to be a very different economic equation. Because instead of getting your 1 / N share of the pie when you eventually become partner with ending the number of partners or some version of that, now the company is owned by the public, and the public or the Board of Directors is determining your salary. And maybe you get a salary and bonus and some, you know, essentially options or equity participation, but you're not going to be a true owner anymore because the firm is going to be owned by the public. Wait a second, what if we take each of our businesses, put them together, and then take them public? It's all in capital. And then we get the good, I'm good, I'm good got the we got the startup studio. We agree on a on a conference. So I don't think we'll be combining flowers that we don't agree on the decor and food for our one day event in Miami. That's because the amount of work you guys want to do is slagging me in a slab in a chat. No, what we want is someone to do the work. We want to hire a professional. I have been doing conferences for 25 years stopping people and you know whatever tuning you launch Yammer at my conference. And I put the fix in for you to win. Thank you. TechCrunch was a beautiful conference but for all. And some of it is it just the case that we want people to show up and there's going to be a stage and people talking on stage and this whole conference or we want to create a more magical experience. I'll adapt a Davos or a Sun Valley we're in or something like an agreement. Alright everybody, thanks for tuning in to episode 62 of the All in podcast. We'll see at the all in summit. And if you wanna do us a favor, please go ahead and subscribe and rate US on Apple. We could really use that. And thanks to Spotify for including, uh, Daniel, shout out. Thanks Daniel. He included us in their video. So now if you're on Spotify and you're listening to the pod, you can click a button as of this week and watch the video. Or you can watch the video on YouTube. It was nice. He emailed us and his team and then I see them on the e-mail and he's the best. Would be good for you. Think about having him and Mr Beast. He's super, super super. Here's my idea for a trio. Him, Mr beast. And then one other person to do a media atrio future of media. What is your what is your what is your idea? You don't even know the third person, I mean. Well, I'm putting it out there asking for a suggestion for third person. Mr Beast, you should you just throw this **** out the conference and presario. Oh my God, those are two great guests on the stage at the same time. Let's figure out who besides Jacob gonna produce the conference. OK. You guys are unbelievably. Bye bye, insufferable. Bye. Bye. Let your winners ride, Rain Man, David sat. We open sources to the fans and they've just gone crazy with it. White. Besties? That is my dog taking your driveway. Oh man. We should all just get a room and just have one big huge order because they're always useless. It's like this, like sexual tension that they just need to release stuff out there. B. Let your feet. Where did you get merchants?