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.

E96: Adobe acquires Figma for $20B, TPB SPAC, FedEx CEO's recession warning, macro picture & more

E96: Adobe acquires Figma for $20B, TPB SPAC, FedEx CEO's recession warning, macro picture & more

Sat, 17 Sep 2022 03:41

0:00 Bestie intro!

0:59 Adobe agrees to acquire Figma for $20B

19:21 How Adobe might bundle Figma, regulatory implications

38:59 Analyzing Google's "one off" acquisition of YouTube

49:33 Friedberg breaks down the latest TPB SPAC news

1:00:37 Pfizer sued for Title VI violation, substantial legislation change in 2022

1:05:07 FedEx drops after CEO says we're in a global recession, Russia/Ukraine update, UN chimes in on global famine

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I literally don't talk about brigading guys, though. Only because it's getting crazy and I had to, like, mod my stuff. So start the recording. Please start the recording. I'm going to strike it by brigades. You mean like maggot brigades? Alright, listen it. No, I'm serious. You think? Because I can call them all. Try to call him off. Hold on, hold on, hold on, hold on. Hey, Donnie. Hey, Donnie. Yeah, Jake. Paul said he's being brigaded by Maga. Yeah, yeah, yeah. He can't handle it. He's tapping out. Tap out. Orthodox. OK. Alright. It's all good. It's all good. It's it's over. They're not gonna they're not gonna brigade anymore. The sign up is over. Thank you. Thank you. It was getting pretty, getting pretty acute. That's don't worry about it. Let your winners ride. Man David. We open sources to the fans and they've just gone crazy. We. All right, everybody, welcome to episode 96 of the All in podcast. We had a bomb drop just yesterday with Adobe agreeing to acquire Figma. The design tool will get into that in a minute. What it actually does for $20 billion, this is just astounding for this to happen.. It's the largest private company purchase, I believe in history. This company, if you don't know it, helps you design web apps or user interfaces. So if you're a designer we used to make mockups, we'd send them around in the industry. As images or PDFs and then like Google Docs where you can put comments on somebody else's words and you can collaborate in real time. We call it multiplayer mode. Figma is multiplayer mode. The company is just a juggernaut. If you work in startups you get Figma designs all day and. Adobe Stock got crushed because of this. It was down as much as 18% on Thursday. Figma's most recent valuation was $10 billion in June of 2021, their series 8, so peak market, they had raised 200,000,000 at that time. There's a lot of details to get into here, but you know, listen, let's ask the Sultan of SAS here what you think of this because it's double what was an incredible market last year that was overheated. So what does this say about the market? Stigma, you know, figma itself or maybe adobes, you know jumping the fence or being skittish, how do we reconcile this sex? Well, if you Judge Adobe stock price the other day the market hated the deal. I mean the Adobe stock price went down like 15% and there's $150 billion company roughly. So they lost almost the entire purchase price in the market capitalization of Figma, I think that's. That's basically an overreaction. I, you know, I, I know all the news is basically on how Adobe is paying 50 times and that's no longer the multiple, the multiple is more like you know, 8910 times for high growth SaaS companies. There is truth to that but but I think it misses some important details about how fast figma is growing. Could we actually throw up on the the screen the AR history of this company? So and for people who know the multiple, is the multiple times top line revenue substances really? OK. So explain that to folks. Yeah, well, R is just the annually recurring revenue, it's subscription revenue. Sometimes people will look at next 12 months revenue, which is a similar concept, not quite the same, but serve in the ballpark. So you know what's interesting about this company? I think it was founded in 2011, 2012. It had a very long wilderness. That's why I call the period where the founders trying to figure out what the product is going to be really for almost five years. They finally launched a private beta in 2015. They then opened it up to public launch in 2016 and they didn't turn on monetization until 2017. So five years into the company that hadn't made a dime. So you know, it's roughly a 10 year old company. And for the first five years didn't make any money and then they started to make money five years ago and then in 2018, I think they turned on the enterprise tier and then it's been kind of off to the races. That's incredible. Yeah. What I what I can tell you looking at these numbers, by the way, so I don't know if these numbers are perfectly correct. This is sort of, I would call the scuttlebutt numbers. These are numbers that I believe to be true, but it's not like these are numbers that the companies confirmed or anything like that. This is just me gathering, you know, intelligence from talking to people in Silicon Valley. So this is where I believe. You can you read the numbers for people that aren't on YouTube watching this? Yeah. So in 2017 again the first year they monetized, they did 700,000, they ended the year 700,000 of of AR. Remember that AR is kind of a point in time metric. It's the amount of subscription revenue, your annual run rate, subscription revenue at that time. So they ended 2017, 700,000, 2018, they ended with four million. 2019 the end was 23 million. 2020, they ended, it was 77 million, 2020 one 210 million and then the estimated number for this year is 450. So you've seen in the press, I think it has been publicly reported a $400 million AR numbers currently where they're at. I've heard that they're going to end with something more like 450 this year and then the their forecast for next year is or was at some point in time when somebody heard this. 800 million, you know, forecast for 2023. So my point is I've seen a lot of SaaS metrics and I can tell you that this AR ramp is phenomenal. You know, I'm sure people have kind of heard about the triple, triple double, double. That's kind of what VC's want you to do. They want you to 222 years in a row and then they want you to double two years in a row and so forth. This company did way better than that. I mean 700K to 4,000,000 is a really fast ramp and then 4,000,000 to 23 million is incredible. That's like, you know over a 5X and then they did over a 3X going from 23 to 77 million. I can tell you that is super hard. I think most companies, even the ones that hit. You know, low 20s, tripling year over year, they tend to decelerate to 2 1/2 times or something like that. This company was still growing over 3X, then they roughly tripled again to get to 210, and then since they got, yeah, so now they're double that. Do you think the triple in 2020 was a COVID pull forward or do you think that that was a natural, like a zoom or not? That's what I mean. It's possible, but because people were collaborating, I'm not, I don't see, I mean so far in the numbers I don't see a huge slowdown here. I mean look, once the numbers get into the hundreds of 1,000,000 it's really hard to maintain the same growth rate. You're compounding off such a large base that it's just inevitable you can't keep growing 3X year over year once you're at you know, 200,000,000 of R But the fact they got first from 23 to 77 and then 77 to 210 and now 210, they're let's say there are 400 now they're going to be at 4. 50 by the end of the year plus it's it's pretty amazing. And so, OK, so yeah, so Adobe is paying 50 times current AR. But if you believe this, they're only paying divide by two, they're paying 25 times end of next year. So like 18 months from now and then you figure, you know, within say two years after that. They're going to be, you know, somewhere between 1 1/2 and 2 billion of AR. And there has, as you guys know, there just aren't that many SAS companies even get to a billion of R so, so I I don't think Adobe is making a bad deal here. I think there's a question about is there any point at which this product hits some sort of market saturation? But Adobe is in a good position to know that because they understand this market. They are in this market. It feels to me like, I don't know, I've been using Adobe Photoshop right around when it first came out, like 1992. And this product, I've used it. It was built Web first. It was built for collaborative years and Photoshop. Over the years they've really tried to take what is a desktop installed software application and then try and create cloud based features. And it's a terrible, terrible user experience, at least from my perspective having grown up on using Adobe Photoshop. But what's most important I think is a lot of people think about this on is it the right price to pay for the company? But at the end of the day, the right price to pay for the company is what Adobe views to be the risk and reward for their business. And they effectively paid roughly 12% dilution of their company to do this deal. So they're saying, let's take 12% of our company and effectively de risk, the biggest risk to our business, take out the biggest threat to our business for 12% of our company. About 12% was it 12% you have to factor in the actual drawdown of the stock as well. So it's about 33% they they they effectively well I'm talking about like assume take take the price of the stock aside the number of shares they're they're issuing because by the way the the deal value went down with the stock. So I read the the merger terms last night and there's a couple billion of cash and then a good chunk of it is in stock and it's a it's 10 billion of cash and it's 10 billion of shares at the price when the deal was announced into your. Right. So it's a fixed number of shares, the stock, it's a fixed number of shares. It's not a fixed, it's not a fixed monetary value. So it's down 20% from the deal announcement. So that 10 billion of stock is now actually about 8-8 billion of stock. So no, the whole deal is now 18 billion not was it 10 billion of cash, two-month, 10 billion cash. Yeah and there's, there's 2 billion, two billion of deferred RSU's and stock based compensation. But they're but I mean if you think about it at the time of the merger they're they're either you know I think they have they're gonna use some term. One, that they have to get the cash. But they're effectively issuing, you know, 10 divided by their total share count, which is roughly 6% of their total shares outstanding. So, you know, they're kind of taking 6% or let's just aggregate the two together and say they're taking roughly 12% dilution. Sure. The the value of the stock goes down. So look, I think like this deal is really interesting. So first, let's just give huge kudos to the CEO and the team and the investors. What an enormous win for all those folks. That's awesome. It keeps Silicon Valley. Kind of going right. And that's just awesome to see these kind of big wins. I read this incredible profile about the founder. And he sounded like such a fascinating person. He basically it with the profile basically said that he was spending months and months. Going from office to office all around the world. Meeting customers, sitting with customers, reading trouble tickets. That's what he would do. You know, reading help desk tickets about the product on vacation. Whenever you see a CEO that is so customer obsessed, typically there's good outcomes. And so this is just another validating point on that theme. Now let's just put Figma aside and let's just talk about Adobe for a second. What is so incredible is you have a company. Yes, they spent. $20 billion or whatever, 18 billion now. But the way that they did it is really interesting if you go back to Zendesk and SurveyMonkey when those guys announced that merger. It was above a threshold of stock where you had to go to a shareholder vote. And because there was so much turbulence in the market, whether the industrial logic of that deal made sense or not didn't matter as much to shareholders when it came time to vote and they voted it down, right. So interestingly, Adobe was very clever. They said, I'm going to do half cash, half stock so that I'm below the threshold. We are below the threshold where it goes to a shareholder vote. OK, interesting. But then you have to factor in the dilution. Not just the dilution of the stock, but then the rerating of the stock. And this is where, you know you lose 20% of your market cap. And then you tack on this, you're talking about, you know, a 40 thirty $40 billion price tag to get the deal done. And I think that's where the head scratcher was, in the public markets where folks basically rebuilt their model and said, hold on a second. You know, you've been telling me that this problem is a solved problem. But when you pay such a premium, not only does it mean that this product is clearly materially growing and disrupting, but the existing revenue base that I was counting on in my model must be wrong as well. And that's the actual flywheel that now Adobe is in where people are trying to really figure out. How under pressure are those existing cash flows? And then if you compound that with something else, which is nothing specific to Adobe but to the whole market, which is now, interest rates are going up behind the scenes. You have this sort of parade of terribles for Adobe that they're going to have to navigate, right? They have a very large portion of cash, they have a large portion of stock, they have decaying earnings in their core business that they now have to explain, and then they don't really have a lot of earnings. I think Shantanu said that it's going to be year three before it's accretive. Which is is typically a way of saying we're going to lose money and then in year three we'll make at least a penny. That's what a creative means. Doesn't mean you're going to make billions necessarily. And so these guys have to find a way for Figma to drop about a billion and a half dollars of free cash flow into the business for this to kind of make sense in the short term. So I think those are all the mechanics that's sort of putting a lot of pressure on the Adobe stock, but it just goes to show you. The amount of disruption that happens, this movement to the cloud or the movement to collaboration, monolithic products are just sort of very much, you know, that is the key. I think you guys did a great job of summarizing it, summarizing it. This is an absolutely great deal for Adobe. It's a transformative deal in the same way the WhatsApp deal was for Facebook. It removes one of the two existential threats to Adobe. And it turns Adobe I guess into a growth story now as pointed out, Adobe's product was single player mode and Adobe grows at about 12 or 13% quarter right now. And now you have a company that double s and they really have been facing 3 paradigm shifts in the last five or so years. Obviously you pointed out one Friedberg desktop software downloading it versus cloud based software. Well here they go. Now they've got experts in cloud and then the second one, but they have a thing called Creative Cloud. And you know, they are slowly trying to figure that it's a paradigm shift inside the company. They've really struggled. So now they have somebody who's cloud first chamath. Do you guys ever use those products, those Adobe we have. But hold on, let me finish here. There's three paradigm shifts here, feature, feature, they look very similar. So these three paradigm shifts, the one is the desktop versus the web, the other one is subscription. So Adobe was charging $1000 a year for the Creative Cloud. Now they charge 25 bucks a month for it. They successfully did that. Now they've successfully. I think have figured out collaboration software. But Danny has one thing that they have not done, which I think is the real reason they had to buy Figma, Adobe. See, this is the problem with these big public companies. Adobe and all of their investors got very addicted to the free cash flow generation of that stock, and it's been an incredible performer. And let's just be honest, Shantanu is one of the best CEO's of the last few decades in the public markets. Period. End of story. OK, since 2007, he has just run a masterful playbook. At the tail end of that though, you know, in 2022 this is a company that has I think 6 or 7 maybe, I think maybe $8 billion of free cash flow. It is a gargantuan money making business and so they refused and creative cloud to go to that free tier that Figma has. And if you look at all of the stories around Figma, one of the most powerful things they did was basically allow people to use this for free effectively forever. Yeah, bottom up sass. And the problem with Adobe is like. That's a business model disruption that they could not afford in the public markets because if you condition a set of institutional investors to be expecting 7 to $8 billion of annual free cash flow and all of a sudden you're willing to torch it to take 1/4 of that and make it free. That is probably the biggest reason why they had to buy this thing, which was that they needed to tuck it in and they're like, how can I do it? Well, I just have to do it by diluting the stock one time. That was one time stock insurance. Yeah, that was that. It was one, but, you know, 12%. They're still there. It's it's one and done. It's one more to go with the the point, the point you guys are making is more broad, which is it's not just about Adobe. This is the classic innovators dilemma, right. Like any big company that reaches maturity in their market and has scale and has cash flows, you have a different shareholder base. You you move over from growth to value and once you've got value shareholders, I mean I've been to these institutional meetings when I was on the exec team at Monsanto and you know they wanted. Dividends and they wanted stock buybacks and they, they're like, it's nice to see growth. But at the end of the day, I want to know what's my dividend going to be and what's my stock buyback target gonna be. And then to say, hey, I got to go invest in innovating my way out of my corner because you know, in this case, cloud is reinventing my marketplace. It is a very hard place for a manager of a business of that scale to be. By the way. I think it's across every industry. By the way, I think there's another take away that's really interesting here, which is that if you look at big tech companies. I think you almost have to sort them into two buckets at least in the enterprise and sacks, you can tell me if you disagree, but there's one type of enterprise company which makes basically a single linear monolithic product or a handful of those monolithic products, right, think work day, think Adobe, etcetera. But then there's this other type of company which are more platform level businesses that have this, you know, mixture of things that they do relatively well integrated, maybe each product is not so great, but together they're pretty decent and you have distribution leverage. And you have pricing power, think Microsoft and the totality of those products. So what's interesting to me is you cannot effectively compete, as it turns out against Microsoft at any point product. And Slack I think is the best example where, you know, Microsoft Teams was fundamentally cannibalizing this business, which is what drove slack into the arms of Salesforce. And you know, you could say that teams was not as good of a product. I would have, I would make that claim, but what Microsoft had was distribution scale and pricing power where you could discount and effectively. Give it away for free. Adobe isn't in that situation, right? They can't do that kind of stuff. And so when you compete against those kinds of businesses, you have a better chance of winning. The take away, I think, for the entrepreneur is when you're thinking about the next enterprise business to start, I would try to bucket these companies that you want to compete with and say, if I'm going to build a newer version of X, Make sure that version of X is going after a company like Adobe versus a company like Microsoft, because it's much, much, much easier to build value when you're competing against. A monolithic product company versus an entangled platform company Sachs would you bundle? If you were the CEO of Figma, would you now, I'm sorry, CEO of Adobe? Would you bundle Figment into the Creative cloud and then just make it one subscription? Would you Microsoft Teams that? Yeah, maybe. I don't know. I'm not sure about that. I I do think that Microsoft is a little bit unique in its ability to bundle. So what? So Trump is right about the power of the bundling. What they do is, I think it's called the E5 bundle. They have all these products that virtually all enterprises use from office to, you know, Active Directory to, you know, there's a whole long list of them. And So what they've done is they've created one price for all of those products they sold. Mundle under a wall to Wall Enterprise license. And what they do is when they see a new competitor come along, whether it's slack or zoom or or Octa, is they'll basically just clone it, create a worse version of that product and throw it into the bundle. And so now every single enterprise is getting the slack clone or the Zoom clone or whatever for free. And that has a huge material impact on, you know, it pulls the rug out from under those startups. So now that's not to say that Microsoft product is anywhere near as good as those, those competitors, but you know now all of a sudden the the Microsoft product is on a marginal basis free. But then what Microsoft does is, you know every year or two they go raise the price of the bundle. So basically, you know, they get you hooked on the bundle. They then use it to systematically kill or undermine a competitor and then they know you're stuck and then they raise the price. They basically have inflation of the price of the whole bundle. I think it's. Very anticompetitive, actually. I think it's it's akin to dumping. I I'm not sure what the logical stopping point of it is. Like, I don't know if we can have a healthy SAS market if Microsoft is allowed to keep doing this forever. Because think about it. I mean, they will just every year they will take the hot SAS company dejour, clone it, it'll be a ****** version, they'll throw it into their bundle, and now they're dumping, they're dumping the product in the market. It's basically free. It's free until they basically drive. They drive out the competitor or destroy it or basically undermine its market cap to the point where it can no longer make the kinds of investments it needs to pose a real threat to the Microsoft larger entity. Right? So think about how any competitiveness is, and you don't hear a word about this from Lena Khan or Washington. They're only focused on social networks. It's it's so funny. It's like she's more focused on, you know, making sure Amazon doesn't buy Roomba, that, you know, this stuff that's for Facebook doesn't buy one VR app. It's not very sophisticated approach. You're right, this is the kind of stuff that actually really matters. I really think you nailed it on the head sacks. It's a, it's an impossible strategy to defend against the. The other thing that is interesting, by the way, about all of this is, you know, if you think that the valuation, the take out premium was basically 2EX post to post. What that means is that if Figma was last valued at 10, is now worth 20. You know, does that mean that Canva, which was last priced at 40, is worth 80? Well, potentially 2. Well, potentially 2. Adobe, right? And if you add those two together, now, you know what you really have is basically the the entire totality of the creative cloud for Adobe is basically embedded now in these two businesses at an extreme premium. And so it makes it very difficult now, I think, as well for Adobe to execute a strategy here without it being forced to do some more expensive, dilutive M&A. And the other problem chamath is this is going to ring bell. So when I said before there were two existential threats, canvas is the other one. And that is the other paradigm shift that's occurred in computing is that making things radically simple. You talked about a freeberg, Photoshop is complex and it's single player. Canva is how people create, you know, any kind of marketing materials. OK, and they don't hire A designer anymore. The job of graphic designer is now everybody's job. Everybody can make something on Canva, but then I think sacks or freeberg. Maybe you have thoughts on this. If you're a Lena Kahn and they do make a run at Canva Adobe now are you saying, like, hey, wait a second, you now run the table on all design tools, you can't buy it. It's a weird classification. It's only. Called design tools because it was sold to someone that was called a designer before and that's not the case anymore. Now it's a tool that anyone can use in the enterprise setting or in a small, small business setting or in an individual setting to create stuff. And that wasn't the case with Photoshop. And I think that's what makes this arguably a very different business, a bigger business and more transformative business and a farther reaching business. And I don't think that there's necessarily a Speaking of the figma. You're right, a case to be made here that they're preventing the extinction of their monopoly. They're buying what looks like a very different business. And and it's really additive. It's it's a business that can turn anyone into a creator. It's really cool. Yeah. But you're kind of, you're kind of speaking out of both sides of your mouth now because on the one hand you're saying it's a different business, but on the other hand, you said that this is basically protecting them against an existential disruption to their core business. So if it's an existential disruption to their core business, how could it not be? In the same market, of course, it's in the same market. Well, there are new entrants, competitors, right. There are new entrants and there are, you know, different underlying, you know, technology trends. This is all about cloud. But nonetheless, I don't see how these things aren't competitors with each other to some degree. So I don't know how this doesn't get seriously reviewed by antitrust authorities. It feels so similar to Facebook, Instagram and Google, YouTube. And by the way, it's similar in both those examples in a number of ways, both Facebook, Instagram. Was not competing in the same product as Facebook at the time with the news feed or whatever. It was a photo sharing service that clearly created a broader addressable market that got more people to use a social network and YouTube people. And people thought they were overpaying, right? And then YouTube, everyone thought it was crazy. They paid a billion 6 for that business and it's probably the greatest acquisition of all time. It's been the greatest managed acquisition of all time, I should say, and that business. Similarly, I think Google recognized that people were going to move to video content. As an alternative to text based web content and that it was a bigger picture opportunity than what they were pursuing it in the lane that they operated in at that time. And they were right. And in both cases, it was more about paying whatever it took to get the deal done then you know, hey, how many users do you have, how much revenue, how much you, what's your RR, all that stuff goes out the window when you're sitting in that strategic driver seat at that big company and you're saying this is a bigger market, these guys are transforming the market and ultimately over time that will eclipse us and you can say, hey, you're protecting your business. But really you're protecting your market. I mean, the market is going to go away is what the vision is like. The market that you exist in today isn't going to exist in the same way in 5-10 years. And that's what you're trying to buy your way into. I have a question and A and A and a statement. The statement is. I think canvas should absolutely go public versus cell because it seems like they'll have a much easier time competing against whomever that they compete with. I do think that, David, you're right that there is. A lot here for regulatory review because if you go back and think about visa Plaid you know it's not dissimilar. Meaning you have a young startup that has this really credible and viable technology potentially being acquired by. In that case it was you know one of a duopoly, but here you could make a very credible claim that it's it's in a market where it's roughly a monopoly. Because there aren't really that that many meaningful alternatives. So I think Sachs is right that there's that there's some, you know. Yeah, there's a case here where it just depends whether that was literally my question or this. This is Roomba. How, how about, how about that VR game that Facebook was before, like they there was a tiny acquisition that maybe have a million users. Look, it seems punitive. They're just being exactly, they are being punished, I think. I think it seems like, yeah, well, it seems like what the antitrust authorities are doing right now in Washington is they've got a list of companies that they think are putatively suspect. And our job is to stop these companies from accumulating more power. And it's really about seeing everything through this lens of power, but that's not. What the competition authorities are supposed to do, they're supposed to ensure competition. It's about anti should be a rule buck, right? And the problem with just approaching things in this way of of the punitive way, we just have to stop these companies, is it? Creates a chilling effect on on reasonable exists in Silicon Valley. There aren't that many great exits and we want them to go through. Now, I think if monopolies need to be reined in, there are other tools to use besides just saying that those companies can't acquire other companies no matter how unobjectionable they are. I mean, let's do things like allow side loading. Let's basically explain what that is. Well, that's that's basically a way to say that I think Google the Android already does it, but iOS does not. Where you would be able to basically install an app or download an app without going through the Apple App Store, you could enable competitive App Store. It's basically, you know, I think, I think it's a real issue that you have operating system monopolies, I mean Google Android and iOS with Apple and then Amazon with sort of. You know, White label products, those are all operating systems that are competing with apps on their own platform. And there have to be some constraints and rules around that, otherwise the operating system will eventually dominate and replace any app they want to on the platform. We saw that's what the whole Microsoft thing was about. Microsoft, Netscape was 100% about that. So I think if you can show that somebody has an operating system monopoly, they're absolute, should be rules of constraints around that doesn't mean the company should never be able to buy anything. No, I mean, I think all that does is stifle innovation. Without really getting to the crux of what the issue is, I think you now did a good first step would be allow other app stores. So Google's App Store could be on iOS, iOS App Store could be on another platform etc. And then the other issue here is Leena Conn's been pretty clear her entire thesis in taking the job was well I want to prevent a downstream competitive issues so future competition there's no better example of a future competitive issue and future consumer harm I think is how she phrases it. Then this acquisition, if you're gonna do it through the lens of future consumer harm, this creates future consumer harm because figma is not going to compete with Adobe. You're saying that it does it does massively, massively. I mean it it this is the the the the the dissonance here it is great for consumers because they will bundle it, they'll bundle the two things together and it'll it'll make it more valuable and reduce churn and it'll make it simple to buy. So that's good for consumers, right. You get more free stuff but future harm and and a future competitive harm here is the marketplace will be less competitive if there is one less independent strong company in it that's and if you if they buy canvas. That's the definition of downstream competitive harm. It will be a less competitive marketplace with these two companies together. So, Jacob, do you if you're lean akhan? You. Actually, pay attention to this Adobe figma thing in like a serious way. Or are you still more focused on Amazon and you know Facebook and I would hope that they would do multiple things saying what would you do if I was her? I would create a a rule book and apply the rule book evenly and fairly. And this is the problem. And this feels very political. It feels like they're going after Facebook because of the downstream political issues Facebook causes and they're ignoring the Microsoft issue and they're ignoring issues. Yes. It just feels like they have their thumb on the scale. If you look at what happened to the visa plat thing, it was an enormous blessing in disguise because, you know, the the thing went away and that was, I think like a $5 billion acquisition and then Platt turned around and raised money and it's like a, you know, multiple teens billion. It's going to be a wonderful independent company. To your point, Jason, that will now, you know, create more competent competition in a space that desperately needed. Now in that case, that was sort of like financial payments and rails and Visa, MasterCard, blah, blah, blah, but. That that that could also be, you know, if there is a lot of attention paid to the deal and it doesn't end up being consummated, that could be the positive outcome. But if you wanted future competition, if you asked me if I was a betting man, I think this thing is going to close. I think it closes. Yeah, yeah. But I mean it it closes. It closes because it doesn't intrude on the hot buttons of Washington, not because the merits of the antitrust are superior to the Roomba deal or to that VR deal. Facebook wants to have this is all about political and cultural hot buttons, so it's so weird. Yeah, but I think we all understand what's really going on. It's all political. But Jason, I go back to your question. I think it was a really good question and I've had more chance to think about should Adobe change the pricing of Figma? Should they basically bundle it? I've spoken about the merits of what Microsoft does. I don't think that figma should do that here. Now that I've had a chance to think about it, the reason is this, that you have to think of pricing is not an element by itself, but as sort of the most important element of a go to market strategy. And there's no way that you can basically reprice figma completely as part of some other bundle and expect not to create massive disruption to your go to market organization. So for example, you've got now a whole huge sales team at Figma, including. Price sales, they are commissioned based on their the quotas that they close and that's based on the CV of the deals and so on. If all of a sudden you price this is being free because as part of some bundle that enterprises get because they're buying old Adobe, now all of a sudden those sales people can't earn Commission on that sale. They can't be incentivized to take that product to market the same way the marketing team is tasked with feeding the sales team. So now all of a sudden they're like, well, wait a second, can we spend money to basically? Promote this product when it's going to lead to a deal that's priced at 0 because the enterprise already has an ELA with Adobe, so you can't just look at a pricing change in isolation, you have to look at it as the tip of the sphere of the whole go to market. I can tell you what's going to happen because I kind of experienced this with with Yammer when Microsoft bought my company 10 years ago. And by the way, I'm not critical of Microsoft at all. They were an extremely high quality acquirer that lived up to all their promises and did everything they said they were going to do. I think if you ever get an offer from Microsoft you should take it really seriously. I think, like I said, I think they're great. Company, great acquirer. But I can tell you what happened is that once Yammer was folded in to the office suite and didn't have its own independent pricing and didn't have its own independent sales team, it just disappeared. I mean the promotion of it to stop because nobody had an incentive to basically go sell it and nobody in incentive to go market and promote it and it just kind of disappeared. And that is why you remember a couple of years after we sold it, Slack kind of came out of nowhere and there was no one to really oppose them because you know, all the promotional. We had done around the hammer just end it because again we weren't, we, we didn't have the incentive that was created by the sales organization just to explain the pricing thing, David. I think that the way this decision will get made and I'm not saying it's right or wrong. But it will get made not by the sales teams and not by the product teams, but it will get made by the CEO and the CFO in talking to their largest shareholders. And the reason is because there is an implied cost of capital that Adobe has. In fact, right now if you look at like all of the models that all of the analysts use is roughly around 9%. And so you know they're going to have to achieve a return on top of that cost of capital. What that means is that they're going to be forced to find a way. In short order. To make this accretive and to start generating incremental cash flow and I think that they will be hard pressed not. To bundle and not to do these creative packaging strategies. Because otherwise I think that there is a risk that this free cash flow machine that folks have become very addicted to at Adobe starts to shrink. And that will have huge ramifications, I think, to the stock and to the executives and to the morale. And so I think that they're going to do whatever it takes. And by the way, you see that you've seen that in other companies who've gone into this phase of their growth, Oracle being the best example. You know, they have consistently found ways to package, to bundle, to cross sell, to upsell and they have incrementally walked free cash flow generation up. If they do that, they're taking a huge risk because here's what's going to happen is. So I agree with you about what may happen. This may be decided by the CEO and the board. But I think if they do this, they could blow it. I mean the the, you know, Dylan Field, the founder in his blog post on this, said that Adobe is committed to letting them run independently. Well, you can't run independently if you don't have your own independent pricing. You just can't. Because how long is the question, how long does it have to be? 2 years? Four years? If all of a sudden Adobe sales people can sell this product and include it in their bundle, and the marginal price is basically free because it's part of some bundle, that means the sale has been taken away from whoever the dedicated sales people. Are on the figma side of the house. I can tell you that will create irrationality in the sales organization and very soon there'll be pressure to consolidate the Figma sales organization with the larger Adobe sales organization. They will be moved in, they may become product specialists or experts, but the go to market efforts will be consolidated. And then Dylan's going to end up running a a quote standalone version of Figma that doesn't have its own go to market organization and then you don't get the feedback into product from your sales and marketing team. So all of a sudden you're running a product and engineering team, but you don't have eyes and ears in the market. I hear all of that. I think that the Facebook WhatsApp merger is probably pretty instructive, which is Yan had two years roughly where he was left alone to kind of like run independently and then slowly and slowly it was absorbed back into the mothership. And you know, that was a product with zero monetization. But there was a lot of strategic touch points within WhatsApp and and, you know, core Facebook app and everything else that they were. And I think that you have to do that because when you're spending 10s of billions of dollars on something, there needs to be an industrial logic that is beyond just let me just buy this thing and stick it on the shelf and let it be on its own. So I I think that you know that dye is sort of cast. I think we're just debating the timeline in which it happens. Let's talk about that. You know, you're probably right and and that's what usually happens is, is when they promise the founder that you'll be left alone that usually last two years that coincidentally that's coincidentally usually the length of the the urn out or the the golden handcuffs along my golden handcuffs were and they left us alone for one year. By the way our AR tripled that year. But then once they got serious about integration, the organization started merging. And really I was just running a product organization, which is fine, but that's not running an independent company because like I said, you lose your eyes and ears, you lose the pulse of the market when you're not selling into the market. Freeberg, how did YouTube do it so well with very different situation? They were, yes. Google basically took a team of, you know, two dozen people and their infrastructure was terrible. And they basically rebuilt the entire company. So it was the complete opposite. Think about them taking the the front end shell of YouTube and then they rebuilt everything underneath it, ran it. And then they actually put their own people in to optimize the front end. They put their own ad sales team on top of it. I mean, they just bought a skeleton of a growth engine and they built everything. And so it was a very different story. And the one thing that YouTube, the one thing that Google did. So, well, with that acquisition was the conviction bet that they made on the business and they made billions and billions of dollars of investments into that business for years before it started to make money. And that is a very hard thing to do because the chamath point, you often have this question of where you're free cash flows, where's your dividends, where's your buybacks as the business gets to a certain point of maturity. But what Google had that many businesses of that scale have never had before is their extraordinary growth rate that continued. Even as they were of that scale, so the the leeway that Google's executives and board were given by shareholders was extraordinary. Not to mention the dual voting where Larry and Sergey could decide to do whatever the heck they wanted. But they really were able to take advantage of their high growth rate to take all this cash they were generating and reinvest it into this YouTube platform, as well as many other things, many of which haven't worked out. But when they do work out, you have a business that I think YouTube is probably worth, what, 304 hundred, $500 billion at this point. And and it's really paid back multiple. So YouTube are really a one off because it's a one off acquirer and it was a one off kind of acquisition integration scenario that that we haven't seen before. Well Google in effect got when they acquired YouTube was a flywheel. I mean it was a brand and it was a network effect and that and yeah the network effect was massive. It was off to the races and I remember Google had Google videos but they just can't come close to catching YouTube because the flywheel of creators wanting to be where all the viewers were and viewers wanting to be where the most. Content was it was just impossible to catch. But that organization was relatively tiny at the time it was acquired and it didn't have any monetization and it was being deluged. It was being deluged by legal problems that that Google legal could solve. Very unique situation. Yeah, that that was one of the bold acquisitions of all time. But what was incredible is right after the acquisition and Google started to scale this thing, most of the content being watched on YouTube with copyright content. And I was at a conference and I remember Felipe Damon, the CEO of Viacom, stood up. And and Larry Page and Eric or Larry and Sergey or someone was on stage with and he yelled at them and he was like, you guys are making all this money and growing this YouTube business off of the back of our content. And you know, the DMCA, the Digital Millennium Copyright Act, says that someone can file a takedown notice and then the platform has a period of time to respond and to deal with it and the amount of time it was taking them to deal with it. New content was being uploaded and then they have to file another takedown notice. So it created this insurmountable. You know, mouse copyright, copyright thing, and and then what did Google do that YouTube would have never been able to do? To Saxis point, they built an engine that could automatically recognize copyright content and pull it down before it was made publicly available without ruining the user. Experience of instant upload and availability of content for other fingerprint system was even more nuanced than that. The fingerprint system not only told them, hey, this is an SNL skit or this is a music video from Prince, it said what would you like to do? And it put the power in their hands and said turn it off. Blame it and we get the money from it. And then it was like, well, we're telling you before you even know about it and what all these people did was they say, OK, yeah, you can make a remix of my Prince song or this episode of a TV show, we'll collect the money. And that was just the revenue share was the brilliant part about because you put the power in the copyright holders names. This just speaks to how singularly, how singular and unique that deal was. Because I don't think any other company at that time, maybe Microsoft would have been able to develop technology to do this and do it at the scale and do it. With this low latency and high speed for users and so on, it really was. A singular transaction, which Freeburg I think speaks to their accumulation of talent, especially in their early years when they were just like higher smart people. We'll figure out what to do with them later. They actually had those people sitting around who could just go jump on the YouTube team. My God, solar kamangar went and ran YouTube and Solutely crushed it. Probably one of the best CEO runs that's never talked about in the history of tech. He stepped in and he ran YouTube and now Susan runs it. You know, another incredible run of monetizing that thing since, but I mean, and these are people. By the way, both solar and Susan were sub 30 employee. People at Google, so yeah, good point, Nick. Can we throw up the slide contrasting valuation to R? This is actually more interesting than just who made all the money. So I actually created a plot, R is the red chart and the it's the right access. So as we talked about there at around 400 four, 150 million of R right now and then the left axis is expected value. Basically this was their valuation and. It's it's in purple and it obviously it goes up to the 20 billion or 22 billion that Adobe just paid. You could see was the last round they did in 2021 where they were valued at 10 billion. Before that they were valued at 2 billion in 2020. And then you know the series CI think there are valued at like 440 million or something like that. And then I think the B they were valued at like 125 million and then the A, they were valued at like 50 ish million, you know, and then there were seed and so forth. I think what you see here is that. Is how efficient. In a way, venture capital is where it's tracking just slightly ahead of R it is predicting where the hockey stick is going. So first of all, look at R it is as close to a pure hockey stick as I've ever seen in SAS. Kudos to them. I mean, the crazy thing is just how long it took for the hockey stick to get going normally. Why didn't you invest in this company? Did you see it? Well, no, we didn't see it. Also, look at what late bloomer this thing is, you know, like you have to see it. Like, look. Like, like hockey stick didn't really start inflecting until 2018-2019, right? So it's more that your, your, your your table is more striking where these guys for years were toiling away and then all of a sudden this thing just took off, right? It's really, this was such a late bloomer. And for anyone who's doing a SAS company and you're in it five years and you still have zero revenue and like, that doesn't mean you're dead. I mean, they basically were a 0 for five years exactly, and that's $20 billion exit 5 years later. I think, I think the only hard round to invest in this company would have been if you were going to invest in I think the 2014. Time period 2015, because you were investing in a company that hadn't even launched yet, that had been grinding for three or four years with. By the way, the founder was like 19 when he started this. He was a teal fellow. He was one of the first, you know, 20 under 20 Teal Fellows. Yeah. And he dropped out of school to do this. And, you know, and they spent several years in the wilderness. I think that's when it would have been hard to invest is maybe not the first seed round because you could tell this guy was brilliant. He had a really specific idea. Moving design tools to the cloud was. I think like a very clear and sensible vision. Clear. You know why now underlying trends, I always say my, my three biggest traits for entrepreneurial success, one of them is grit. I mean you know if you have a high index on grit you're you're able to to to grind your way there. It's really that's a really incredible this chart is brilliant because you know what we see in the seed stage is right before that Series A is where most people give up sacks. You know you get three or four years in people aren't paying for the products you're under resourced. And they don't get the A and they gotta you know that 2013, fourteen, 15. They were probably trying to get an ad by to take them two years to get the A and then somebody finally decided easy for a young person to give up and go get a freaking job at Google or go back to school and to to grind it out to have the grit and the persistence and commit to your vision. He didn't pivot away, he persisted and he actually clarified, iterated, clarified. He clarified right? Yeah, but he but he didn't. He didn't go 5 steps away and say I'm going to do a new startup. You know, there was no reason his business, right? There's no pivot here. Yeah. Dylan Field, by the way, is the founder. I had him on the pod back in the day. And really the, you know, ultimate customer focus, customer session, like you said that you need to just have your pulse on what your customers are saying constantly because the answer is there. You just have to develop it and give it to them. By the way, also in this chart that's I think very interesting sacks. I'm interested in your position on this. If you look at this chart one more time, they could have turned on monetization. I think a year or two before they did so they purposely didn't charge for it to get the network effects going. I would love to see in here the number of users as a third vector, you know, as a third line on here because I think they started getting a lot of users in 2014, 2015, 2016. That's when that's why they got the seed. But they purposely did not charge to let the network effect. Yeah, 2015 was a private beta. I don't think they were even had a product in 2014 that was usable yet. 2015 was private beta, 2016 was public launched and then they turned on monetization in 2017. And then they turn on enterprise pricing in 2018. So I think that's a pretty sound progression. I I'm not, I mean to be honest, I'm not a big fan of taking three or four years in the wilderness to build your product. I think you need to get to market sooner. But I do think it is a little different in an existing industry where the table stakes are high. So you know Adobe is not a cloud based product, but those were very rich client products and so to get to the point where you could even compete with them with the classic Clay Christensen. Universal lemma, lightweight version of the product that there were significant table stakes there and it was a significant technical challenge to move design tools into the browser. They had to do a lot of cutting edge browser tech. The browser wasn't ready for it. Yeah, this chart is going to be calling in a few years now that I'm doing after all, in 48 hours after. I think that's correct. Come join me with your questions. Specs are back. I don't know if you saw in the news, but Freeberg launched a spec freeway to go. No, no, no. He he he announced a target and a merger agreement. So now he goes into the dpac process. Now we have two out of four. Besties have spat. Freeburg, you want to tell us about what you expect? Well, I mean, we announced that we're merging the Production Board spec, which is TPB Acquisition Corp, with Lavoro, which is the largest. Agricultural inputs retailer in Brazil and operates across Latin America. You know, we've got a good slide in the presentation that I think echoes some of the points I've talked about on our podcast here about the importance of having resiliency and redundancy in global food supply chains and increasing famine risk. So we've got a slide that shows for about 30 years. You know, we've reduced the number of people globally that have been undernourished down to about 600 million as of about three or four years ago. And in the last three years we've seen that number spike back up to 800 million. Which we thought we were done with global famine. And now here we are facing these issues again, climate change, the lockdown, supply chain disruption, the Ukraine war and all the other geopolitical tension issues. So that's been a big thesis of mine. Individually, you guys know we've talked offline about some investments I've made and and my strong interest in the area. Brazil and Latin America is the largest AG export market in the world. So they produce calories for the rest of the world and farmers there are largely lag in terms of technology adoption. I've got a nice Brazilian farm as my background today, but technology adoption doesn't look like it does in the US it's a huge opportunity to influence and drive productivity up in that region. And so we partnered with the largest AG retailer. Age retail is the local locations that work with farmers. They have these teams called agronomists. They meet with the farmers typically weekly, help them make decisions about what products to use, what to do, how to do it. And so with the footprint and the reach that they have and then we can really drive up productivity per acre. Across the region increased total global calorie production and that's why I'm so excited about it. Fundamentally, it's also a great business. It's all the financials are presented in the in in the investor presentation and will be published with the SEC here in the next couple of days. But it's a, it's a scaled business, it's a profitable business and it's growing pretty significantly. So it's got great tailwinds, it's a great base business. But for me there's huge opportunity to continue to drive what they're drive technology through the platform that they've built and that's why you know we're also making $100 million investment off our balance sheet into the company. So that's a big skin in the game. And you know, we put 2/3 of our these founder promote shares, they're, you know, they only vest if we can hit the stock price of 1250 and 15 over the next three years. Otherwise we lose them. So we've really tried to align ourselves with shareholders and really put our money where our mouth is on this and show people that you know that that this is a real strategic partnership for us. It's not just, you know, an investment that we intend to kind of. You know, hold for for a short period of time. This is a key platform for me for our for our TPB business and for many of the companies that we operate at TPB. So I'm super excited. It's been a long time coming. It's been a very hard process, as Chamath can attest, and as we all talk about capital markets are very difficult right now. Getting a transaction announced is is the first step. Now there's a bigger step of getting it closed. But yeah, a lot of work. But I'm, I'm, I'm super excited about this. And yeah, thanks for let me talk about it. Yeah. Well and the other thing I want to double click on there chamath this idea that 2/3 of this the sponsor promote have to hit certain hurdles. I think that's probably a pretty good thing for folks who maybe want to invest to just say, hey, yeah, this is great. We're we're the there's some alignment in how these shares get distributed. Yes. I mean, I think it's a good feature. I think the the the thing with specs in general in a moment like this is that it's it actually performs better in periods of high volatility. And the reason is because you know, you have this, uh, redemption feature, which essentially allows you to get back your. Your basis. And so meanwhile while you know Friedberg was hunting for a deal or whatever, that cash you know that you've contributed into this back sits in a savings account that then actually is generating some, you know reasonable interest as rates go up. So the whole combination of all of this stuff actually makes spack a pretty good risk adjusted vehicle when the markets are highly volatile because if at any point you don't like how you feel, even if you love the deal, you just vote to redeem get your $10 back and effectively when the market right let's say that. Market goes down 30% from here to March of next year when Friedberg's deal closes. Well, an investor could theoretically just say, you know what, I just want my $10 back now all of a sudden they've gotten zero. They felt zero percentage of that drawdown. And that's what's so interesting about this structure in a moment like this. So I think there's a lot of really interesting features that that sparks in the future. I think we'll have to incorporate in order to, in order to be a successful tool in the toolbox. One thing I learned from I guess the pattern AG company that I think you incubated as well or was that a cup you incubated as well? Yeah. And you, you guys invested through the, through your launch platform. So we invested this syndicate. Is that the way this retail works is we have farmers, but then there are these retailers or these. House reps, I guess they call them in the industry that service the farmers. And so that's what this. Yeah, that's exactly. We have this technology. Yeah, that's right. They don't, they don't know how else is a farmer supposed to know what to buy and what to do. So AG retail, the local retail store, the people that work there are called agronomists. And so the agronomists are like technical sales people. They understand the science and the technology of farming. They understand what the farmers have done in the past and then they partner with them to help them. Decide what to do going forward, what products to buy, how to use them, how to get the most out of their land. And so when new technology, when new age technology comes to market, it's the retailer that can influence the farmer to make a decision on making a switch or using a new tool or using some software you know to, to drive that decision. And so that's why AG retail is so important. And why it's critical for any new technology to get adopting it in farming, it has to go through retail. You know, there's the big input companies. They're the seed companies and the chemistry companies and the protection companies and the software companies, they all don't sell direct to farmers. Typically, they're going through these retailers. And so, yeah, is there a version of Lavoro that's been, that's an American company that's public or not? Yeah, it's called nutrien. And so Nutrien owns CPS, which is the largest retail chain in the US at retail. In the US. About I think 7080% of nutrients business is actually fertilizer production and then the rest is the retail business. You know that that's the key comp that we actually show in our financial presentation that we published yesterday. How is nutrient done? Just as a public market, do people understand sort of the value that it creates in the marketplace? Yeah. So in the last year as we've talked about on the show, companies that are in the fertilizer business are making money hand over fist. Because of the the issues with the supply chain for natural gas, potash and phosphates. And so if you have access to supply like nutrient does and various other fertilizer companies do, you are absolutely minting money this year and so they're having record earnings right now. And you know people are kind of estimating that the fertilizer market will kind of reset and as a result these companies are over earning right now, which means that they're getting low forward multiples. But generally speaking, uh, yeah, these businesses have done very well and one of the, you know, I would say the US is about 15 years ahead of of Latin America. And remember Latin America produces and exports more calories than the US and they're and and corn farmers in Brazil, for example, are only getting half the yield of corn farmers in America are a little more than half per acre yield per acre. And the reason is the retailers in the US are so sophisticated that they're introducing services and they make a bunch of money selling. Services. Now, that wasn't the case 20 years ago. So now they're offering farmers advice using software and and other kind of custom, you know, soil testing services and whatnot. And that's really changed agriculture. It's given farmers data that they didn't have before and help them make better decisions using that data that didn't exist before. And that's really. You know, I would say concentrated in the US, that kind of sophisticated behavior. I think it's really important we see it happen around the world now because we need to grow more food and we need to do it without expanding land and acreage and so on. And when you do it more sustainably, which is another kind of key part of this, did you worry a lot about like the FX risk of? You know, all these inputs coming into Brazil, having to deal in local currency, then having to kind of get the revenues out in into U.S. dollars and all of that stuff. How did you think about that? Yeah, it's a good question. So when all AG commodities around the world, most commodities, right, they trade in dollars. And so, you know, if the dollar strengthens against the local currency, the AI, the farmers actually make more money and the input companies charge more money in local currency. So basically the entire ag market and around the world commodity markets, generally speaking, inputs and outputs trade in dollars. And so if you're a local business, you actually make more money when your local currency goes down and you're willing to spend more money and so businesses in a commodity. Cyclical? Business generally. Are our currency hedged because of that, because they're they're selling stuff in dollars and then as a result the places that they're buying stuff from charge them more in their local currency and they can still make a good spread. So you know there there may be fluctuations in FX risk, but generally speaking I think we see and I'm just speaking generally here not about this particular transaction we generally see and we saw this at Monsanto. So that's a good example. All AG input companies when the local currencies devalue. The market that they're selling into, they charge more and the farmers can afford to pay more because they're making more selling their product into the market. I I think this company is super interesting. So I'm, I'm, I'm rooting for you. It looks it looks really, really cool and it seems like a very good entry valuation, good margin of safety too. Yeah, 1.2 billion dollar $1.2 billion valuation, if I'm reading correctly here. So yeah, congratulations. Hard to get a deal done at this time for people don't know FX, foreign exchange, just. Trading $1.00 or one currency for another? Did you guys see that there was a A Title 6 lawsuit? Filed against Fizer for some. You know, in the in the Civil Rights Act, there's something called Title 6, which means that if you take federal funds of any kind, you can't discriminate. And Fizer has a program to recruit African American and Latino people into the company. And they're not being sued because, you know, Pfizer takes NIH grants. They, you know, work with the US government, they work with Medicare, they work with Medicaid. And so as a result of that, it's it's really happening one month before something else that we talked about, which is there's the affirmative action case that's going to the Supreme Court where. You know, I think it's Harvard, actually. You know, push people pushing back on Harvard's ability to. Have some form of race based admissions. So I just don't know if you guys were were monitoring this for me. I just took a step back and I thought look at what has happened legislatively in 2022, we basically repealed Roe V Wade. The Supreme Court also went after a concealed carry in New York and said that New York cannot legislate against concealed carry, which had pretty big ramifications with respect to gun laws. The consensus opinion is that we're going to repeal affirmative action in the next month, or the the Supreme Court is going to do that. These are three pieces of an enormous change in the United States. Civil society that. That has happened in a really small, condensed period of time. So I have these thoughts on affirmative action, but my other thought is like, it's incredible how conservatives have been able to organize and how disorganized, you know, progressives have been in order to create a counter maneuver against them. Because this has been a systematic effort since Karl Rove literally wrote about it in the mid 2000s, said, here's what we're going to do. We're going to raise a bunch of money, we're going to redistrict everything. We're going to get the state legislators on our side. We're going to basically, you know, fund the federalist society. We're going to. And they did it. And in 20 years, they they've created an enormous amount of change that I'm not sure all Americans agree with. Meanwhile, the progressives are just kind of like navel gazing at each other. I mean, and then you left off this past week, chamath, that it seems like the gay marriage bill is going to be put to a vote and that they're not going to be able to find. I didn't see that. What? Yeah. Yeah. And Ted Cruz said he's not going to vote for it because it's attacking religious freedom. So we had talked on a previous episode, and I think you said you didn't think gay marriage. Come up and, well, no. If I had to guess what the political gamesmanship is here because they think it's not gonna pass, they want to bring it up for a vote because it preserves the issue. It intensifies the wedge issue. When it looked like they had enough votes, they weren't going to put it up for a vote. So I don't know. I think a lot of gamesmanship here. Look, I think enough Republicans should vote for this just to pass it. I don't. Well, I think there, I think there's some issues with the way the bill is written in terms of maybe requiring religious organizations to perform gay marriages. I think that somebody should just make an amendment to clarify that's not the case, to solve this religious freedom issue. I think if that happened then you get more Republicans on board, or at least it wouldn't have an excuse. But yeah, look, I would like to see enough Republicans vote for this to take it off the issue. I don't think gay marriage is in at any risk of being. Overturned by the Supreme Court. Remember, it was Gorsuch who wrote that opinion. So I think this is a scare tactic that progressives are able to use to fundraise off. You know, they're their base. Nonetheless, it'd be nice if enough Republicans would vote to canonize. You know, marriage equality so that they wouldn't be able to do that. That's the smart play here for Republicans. Yeah, it looks like, by the way, breaking news in the Washington Post, Democrats have postponed the same sex marriage vote until after the midterms. So, but, I mean, you could understand why people are going to be nervous about this after that. Because they want to, they want to run on it as an issue. They want to have that as an issue. Yeah. I mean, force it. The 70% of people are in favor, right? 80% favor Republicans. Wanna be smart? Fine. 10 Republicans in the Senate. You can support this. Announce now that you're going to support it. Come on, Republicans, have a brain. Don't let them change the issue from this economy that's spiraling out of control. I mean, the Republicans are clueless. What do you guys think is going on there? Oh yeah, the FedEx stock has dropped 25 as much as 25% as we're taping this this Friday after the CEO after a little if you saw the video I sent to the group chat, but. Cramer, Jim Cramer, was kind of pushing him. Do you think this recession, depression? He finally said. Yes, I think there's a global recession. They missed on revenue and they have cut their. Predictions for next year severely and the stocks weighed down. I think based on what I heard on CNBC from and reading some stories right before this breaking news is happening, some people think this is 6040 market versus management. But either way, I think the Fed's interest rates are doing their job and less packages are being shipped because people are chamath you would think spending less money. And that was the whole point of this exercise was to slow the economy down freeberg. I think this is a little bit of a head scratcher. This is a new CEO, so I think the game theory on this is that it made a lot of sense for him to reset expectations. I get that, and I think that that's a. That's a reasonably smart thing to do when you're incoming. You know, leader of a very complicated organization. That really is at the end of the bullwhip, so to speak on, on consumer demand. The problem is, there's just so much conflicting data. You know, retail sales was pretty reasonable. You know, China actually looked a little bit stronger than people expected just this past week on some data that came out there. It looks like Europe is going to really draw a hard line and make sure that they spend whatever it takes to have enough energy so that their productivity doesn't fall off a Cliff. All of those signals would say that, you know, we're not at the precipice of this kind of like cratering of demand. And then you have Powell basically saying, yeah, we're going to go another 75 and you know we're going to take rates to probably somewhere between 4 and 5%. So the the FedEx data point was pretty starkly in contrast with at least some of the data that we've seen over the last few weeks. So I don't know, it was a bit of a head scratcher, but I got three things working against him #1. Amazon just continues to build out local delivery infrastructure at an incredible pace. At the end of 2020, Amazon was already up to 25% market share, which put them ahead of both FedEx and UPS. And FedEx has seen their market share decline for the past eight or nine years now. So that's kind of, you know, a a key point #2 is people are just shipping less stuff, doing more stuff digitally. And #3 is this recession impact? Where they obviously have key economic indicators that allow them to do a better job forecasting deliveries than most companies, I would imagine. And so they can see order volume and trading volume and use that as a predictor for, you know, for what volume for shipping is going to be in the future. And I would guess that all three continue to work against them. It's not like they have a lot of diversified diversification in the business and other ways to expand out into. So you've got a key vertically integrated player, namely Amazon, that is investing. Heavily to replace whatever they use you for. I think as of a few years ago, Amazon was only like 2% or 3% of Fedex's revenue anyway. But still, I would imagine Amazon is playing a key role here. Your first, your first comment to me is, is now that sounds like the most credible explanation. And you know, to blame a recession, it's sort of a little bit of hiding the cheese. It's probably fair to say that their lunches get eaten by Amazon. So I can understand why FedEx is under a lot of pressure because of that. But if you just compare it to just all the other data, it doesn't seem like. This whole thing makes any sense. What you just said about competition makes to me a lot more sense. And, yeah, competition with digital and and Amazon, I mean digital, like how much do you guys sign letters today versus E sign? I mean, there's just, and you know, I'm giving an example, maybe that's a 1% impact and there's probably a few more things and these things all layer up. Well, they could be losing market share while still growing because e-commerce is growing so violently in the world. But sex, what do you think? I think what's going on here is that whatever the issues of FedEx and no matter how overstated these warnings may have been, I think they're directionally correct. He's saying that the world's had it for a global recession, and directionally he appears to be right. I mean, things look really grim. We just had this inflation report that was much worse than what people were expecting. It was inflation was supposed to go down to 8.0% and actually it was 8.3%. That's why the stock market cratered a few days ago is like the worst day in the stock market. I think maybe all year or certainly since June. We're almost towards the June lows. Now this FedEx executive is saying we're headed for global recession. So it seems to me that that the economic news is just pretty grim here. And we're in a, we're in stagflation. the Fed has to keep raising interest rates at the same time that we have persistent high chronic inflation. And you have to wonder, you know, I tweeted a few months ago. That the White House economic adviser, Brian Deese, he said that in this interview with CNN that the administration was willing to endure a global recession in order to keep Russia from controlling the Donbass region. Ukraine? Well, mission accomplished. It looks like it's getting its wish. The administration has made some progress in the Donbass, but we are also having a global recession. So what percentage of this, what percent of the recession and inflation has to do with the Russian invasion of Ukraine? I think it's meaningful. It's meaningful. We know it's a huge exacerbation of all these. What percent if you were gonna put a number on it? Listen, I don't think the economy is going to get better with the risk of war three hanging over our heads. How does that work? Yeah. But what percent of the economic issue do you think is percentage wise impact? I don't think we're maybe you answer, yeah I don't think we're in a recession yet. You know retail sales is still quite strong. There's just a lot of signals that tell us that people are still consuming a lot of things and that and that GDP is pretty reasonable and that jobs and wages, you know are pretty much you know, quite full. So I think sacks, you are right. That we will be there because you can only bring rates up so high until you break things. Did you see, there's a tweet by I think a Charles Schwab analyst today about that issue of wages and she was tweeting off to find it that for the second year in a row we now have, because of inflation, we now have real wage decreases. So you may be right about like where things stand today, but this is about the trajectory right now of the economy and the trajectory is not good. Inflation is not coming down as fast as. People were anticipating it's worse than expected. You have the situation in Ukraine where, listen, we can all cheer on Ukrainians for this counteroffensive that appear to be successful. But we are playing with fire over there. I mean, I I don't recall a time during the Cold War where we did anything remotely this risky. You have America. Listen, we have American generals. American generals. We're taking credit for this counter offensive. Do you see this New York Times story? Talk about the inside moment of this Ukraine counteroffensive. So you now have America. America is now giving Ukraine more and more advanced weapons. OK, there's sort of the the long range artillery. They're telling them where to point the weapons. They're giving them the intelligence for it. They're training them on how to use it. They've got commanders on the ground there and and they actually are hand correcting the battle plans. The Ukrainians had a counter offensive plan. The Americans said that's not good enough and they rewrote it. So the Americans are now doing everything in this war except pulling the triggers and taking the bullets. And I don't want to minimize the sacrifice the Ukrainians are making. Because they are dying in huge numbers and you know, we can all respect and admire the sacrifice they're making for their own country. But this is a very risky strategy for the United States of America to be pursuing. I mean we are, we are basically playing with fire in we are, you know, this close to being at war with a nuclear armed Russia. And we never came close to this type of behavior during the Cold War. And I don't understand what's changed so much that we have to take this kind of risk. Now at the beginning of this conflict I said that I was open. It's arming the Ukrainians under Cold War rules. Cold War rules, meaning covertly, like we did in Afghanistan. We now have multiple examples. The administration boasting and taking credit, taking credit for the counter offensive, for the sinking of the Moskva, for killing Russian generals. This seems very risky to me. So sacks, a court premise of the discussions we've had here is that the United States screwed up the negotiation with Putin by not taking Nate off the table. Reuters. Reported that Putin rejected a Ukrainian peace deal at the start of the war. At the start of the war, Russian chief envoy on Ukraine told Putin that a provisional deal with Kiev had been struck. Deal would have satisfied Russia's demand that Ukraine stay out of NATO, two of three sources said. The push to get a deal finalized occurred immediately after Russia's February 24th invasion. Does that change any of your thinking on what's happened here and Putin's culpability? I think it's a data point, you know? But let me explain why I don't think it's dispositive. And by the way I saw the article. Every neo con on Twitter was basically tweeting this, trying to prove that this year I was CC D on everybody's prove. Seeing your Shimer analysis. Let me tell you why it doesn't. OK, first of all, if you read the article closely, this offer did not come until after the invasion started, OK? And we already knew Zelinsky was publicly saying in the early weeks of the war that they were willing to take Ukraine off the NATO, off the table. So this isn't that much news. It happened after the other key point. Here is that not only did it happen too late, but also the offer did not come from the Americans. This is a really important point to understand about the Russian position on this. And I'm just saying this based on all their public pronouncements. The Russians made an ultimatum in December and then Lavrov negotiated with Lincoln in January. They were absolutely insistent that they they would accept nothing less but a written guarantee from Washington. Why is that? Well, the written guarantee was necessary because they've always claimed. That James Baker Eichert Gorbachev over, you know, German reunification and not one inch eastward. So they've always demanded a written assurance from the Americans. And the reason they wanted from America and not Europe is because they know that Europe or America's poodles and Ukraine is a client state of America. So listen, they wanted a written guarantee from America before the war started. They never got that. Now, if your point is to Putin do everything he could to avoid this war, absolutely not. I will absolutely grant you that. But we already knew that. The question is, did the US State Department do everything they could to avoid this war? And my point is absolutely not. They should have taken this Ukraine issue off the table in writing before the invasion. Got it. OK. And free parking about Ukraine? No, I just it was major news and we have an obligation, I think to close the loop. Obligation to if we're gonna people are taking this one article in this one data point there. I think it's gonna talk about it because listen I've seen it all over Twitter that people take this one article and they're like, see there's nothing to this are giving you the opportunity sax. Now let me ask another follow up question for Freeburg Freeburg the other follow-up people would like us to have made here is we predicted famine and massive disruption in food we debated that here. You were pretty clear that this was going to be or could be disastrous. It hasn't. Turn out to be disastrous. Yet what's the update on, you know, fertilizer is shipping, not shipping. Are we going to have global famine or are we not going to have global famine? What's the update there based on this conflict? Yeah, we have a massive starvation problem, the UN told. Called everyone. I mean, no one writes about this stuff because it's seemingly not interesting and mainstream media, which I don't freaking understand, but the UN thinks that 345 million people now are incrementally marching towards starvation. And so I think they did this at their meeting. Yesterday because of the war in the Ukraine, so David Beasley, who who I know well, he's the executive director of the UN World Food Program. He told the UN Security Council yesterday that 345 million people are now facing acute food insecurity in 82 countries where the UN operates, which is 2 1/2 times the number of acutely food insecure people that existed before the pandemic hit. And so this is creating, like we talked about, these rippling effects in terms of initially it was fertilizer. Cost, which means less food is being produced locally. Then there was the acute crisis of getting food out of the Ukraine and now it's less planted acres and less yield getting out of those acres, which you know we said was going to start to happen in the back half of this year. And if you look at the price, you know a good proxy for this is the price for corn. We're at near record highs, you know, for the last couple of years in terms of corn pricing. The 2023 Futures pricing for next December for corn is at 6:20 a bushel. You know and it kind of peaked out right around the middle part of the the Ukraine crisis in April at 673. So we're getting right back to that high point. And so this is a major problem that's brewing and as I highlighted at the beginning of our talk today which I show in the presentation for the the Lavoro transaction I talked about earlier. We have done an incredible job building a resilient. A food supply and excellent global supply chains to feed people around the world going back 30 years. And we've been able to steadily decrease the number of people that are food insecure or or facing famine and famine in the UN definition is less than 1200 calories per day on average for a year. And so we went from like a billion people around the world facing famine about 30 years ago and and got that number all the way down to 600 million and then in the last two and a half three years it's shot. Back up to 800 million and now the UN thinks it's going to shoot up even more. So we may even be retracing our way all the way back 30 years because of the crises that have enveloped. The the the region around Ukraine and the resulting impact on fertilizer availability, fertilizer pricing and so on. And as I mentioned a few weeks ago, many ammonia fertilizer plants, which is nitrogen fertilizer, the main kind of component of fertilizer in Europe are being shut down because they run on natural gas. And so government agencies and the local producers are turning those plants off to make more natural gas available for heating. Would you describe this freeberg as because we are seeing the EU? You know, they remember they made that decision. This is why. This is why South America is so important. But sorry, go ahead. Yeah. No, makes no sense. Would you describe this though, because the EU was also at the same time the UN was, you know, highlighting these concerns. The EU was also praising the massive progress we made from the the Russia and the Ukraine and Russia and Ukraine allowing fertilizer, allowing exports and this resiliency being built up. So we got wheat moving and then we got some fertilizer exports moving. Right. So two steps forward, one step back would be how you describe this maybe, yeah, Nat gas prices. Still elevated, right. And and that gas availability in Europe is obviously significantly restricted. We get through it. Will we get through it? Do you think we can we can manage this? Yeah. Look, I don't know how many. Look, there's some number of people, some number of them 10s of 1,000,000, maybe hundreds of millions of people who are gonna starve between here and there that otherwise weren't going to be starving. By the way, there's always, you know, some hundreds of 1,000,000, as I mentioned, of people around the world that are starving under 1200 calories a day. And that number climbing some incremental amount, that's an incremental 300, four, 100 million people that didn't need to starve. And that's a condition we're now going to be facing. And so people like, hey, yeah, people are still eating, you know, there's still food around the world. We don't pay much attention to these third world countries. We don't pay much attention to these underdeveloped nations because we don't have press coverage there. And and when people are on the streets and unable to eat, it doesn't seem to make everyday mainstream media coverage. But it is happening and statistically, it is a massive problem. Yeah, we're doing a great job of covering Kanye and Kim. But yeah, we maybe get some reporters to to cover the people starving we've covered. And I appreciate you guys giving me a chance to talk about it because I think it's super important. So yeah, I mean, you know, I think talking about when this show is at its best. I think we're highlighting things that other people are ignoring. Listen, I just want to say on this Ukraine situation, and this applies to this episode as well as all the previous ones. I don't wanna be right about this issue. Just like I'm sure Freeberg doesn't want to be right about famine coming true. We don't want these things to happen. OK? If I could choose an outcome right now, I would say be great if the Russian army collapsed because of its morale problem, tucked its tail between its legs, went back to Moscow, and then the Ukrainians had the good sense to respect the rights of the Russian speakers living in the Donbass and Crimea. And this whole thing basically tamped down and basically was over. OK. But look, I think there's an equal and opposite chance that that doesn't happen. That certainly could happen, OK. But I think there's an equal and opposite chance that instead what happens is that we climb the escalatory ladder that Putin, I think we are backing into a corner. Everybody says that he cannot survive the loss of this war, and yet we're not willing to give him an off ramp. So what choice does he have but to escalate? So what does that mean? It could mean a full mobilization of that. Country. It could mean they resort they if they can't achieve their aims by conventional weapons, maybe they resort to unconventional weapons. We don't know. This seems like a highly volatile, risky situation. And I just think that, you know, we, the United States of America, needs to be thinking very clearly about what is in our interest because all I see is a identification. We're so interested in helping and identifying with the Ukrainians that we've lost sight of an American interest. That's separate and independent of Ukraine's desire for self-determination. I can understand and respect their nationalism and their patriotism, but we are a different nation. We better think really carefully about our interests here. Yeah. And I think, David, sometimes you're misinterpreted as this is a partisan issue for you. You're a dove. You're David the dove. I love you, David the dove. You are not a hawk. You want peace? Listen, I believe that if America is going to risk war with a nuclear armed power, there better be a vital interest at stake. Otherwise we should find every diplomatic off ramp. We can't. So do you feel optimistic about our ability to navigate jamath the Ukraine situation, the war in Ukraine? Famine, supply, disruption, energy. Do you think we'll get through all this, or are you optimistic? I think that rates are going to go somewhere between 4 1/2 to 5%. I think Stan Druckenmiller is right, and I've said this. I don't know. I've now had nauseam, so I'll just keep saying it. But I think everybody has consistently been wrong, and they have wanted inflation to be a transitory phenomenon that goes away, and they've been consistently wrong. Even in our group chat we see these forecasts. They've been utterly, consistently wrong. So rates are going to go higher than people expect. It'll stay around longer than people want. This will have an impact to the economy. That that impact in 2024-2025 will not be that great. So that's one thing. If you want to focus on Ukraine for a second, there's something that I think we should focus on, which I read this interesting article about Russian mothers and, you know, in the 1980s when Russia was at war with Afghanistan. There were these bodies that were sent home to Russia and these mothers got very, very upset and they protested. And then. In, you know, 2000, early 2000s, I think there was a there was a nuclear submarine that basically sank, got shot and sank. And then Russian mothers protested in the Chechen war. They are a group of individuals in Russia that. Have enormous. Organizing power, it turns out, and they, you know, they they really can tell what the real temperature is on the ground. What Putin has done so far is that he's largely recruited people from, you know, these Spartan communities inside of central Russia and use third party contractors. So he's minimized the risk of the real cohort of the Russian population who will really stand, you know, fervently against what's going on. So until you see that happening, those guys. Have a long way to go. And I think that this thing is going to drag on for a really long time. So it's a paid army, therefore it's obscuring the impact on actual citizens in Russia. It's half paid, but the other half are from places where they're organizing. Power is limited. And I think that that was Putin's, you know, calculation, seeing what has happened before, again, sort of like the tip of the spear of these Russian mothers, and we're not seeing that. So that means that the ability for him to manage perception. Inside of Russia. Is pretty apparently pretty greater than people expected, greater than people expected. So this is going to go on for as long for much longer than people think. So I would just. Prepare for this inevitable outcome and just kind of, you know, manage another year of slogging it through a choppy waters might be one way to look at this. And I think that's a very good way of saying I think we're in a very valley choppy market for the foreseeable future. Yeah. And therein lies some opportunities and also maybe some discipline in various markets. One thing too, just keep in mind where most people feel these rate hikes is in the 30 year fixed mortgage, right? This is where most Americans are going to feel it. And if you look at the chart. You know, like this is a big jump up from our absolutely free money environment that most Americans were feeling doing, you know, you know, what do they call it when you take out equity on your mortgage, like a second mortgage or a credit line? Credit line? Yeah, most people credit. Yeah, people were, you know, experiencing a lot of free money and upgrading their kitchens and taking money out of their homes, yadda, yadda. But when you look at it historically, you know, even at 6% or even if it goes to 7% for mortgages. It's a lot less than we, our parents experienced and we experienced for the first half of our adult lives. So I think it's surmountable. And this number you don't think is gonna get up to above 10%, right? The 30 year fixed, you don't see that happening. So I think it's manageable, which is going to be choppy. All right, listen, Sacks didn't get to promote it, but he has a wonderful film at the Toronto, Toronto Film Festival about Dolly and he is doing an awesome Dolly experience with the AI that paints pictures. And so we're just going to insert into the end of the program the beautiful work he's doing there and his Dolly. Trump is supposed to be excellent. It's the second film David is producing after. Thank you for smoking. So congratulations to our own little Scorsese for the Sultan of Science, the dictator and the David the dove. I'm the world's greatest moderator, Jason Calacanis, and we'll see you next time. Bye, bye. Love you, guys. Bye. Bye. Alright, so I'm at the Dali Land exhibit here at the Saint Regis. The Saint Regis Hotel was a very important hotel in dollies life. He actually lived in the penthouse at the Saint Regis in New York. And the Saint Regis Hotel has very graciously agreed to host this exhibition for us. And this exhibition is, it's basically a rendering of Dolly studio or what Dolly Studio might have looked like. And those works of art are actually generated by GPT 3. The so-called dual engine. So thanks to the open AI team and Sam Altman for giving us access to doll, EDA L-E. And so fans can just come here and they can use these tablets to enter, you know what aren't they want to create? They could just enter terms and the, you know, the engine will spit out art that is made not obviously by Salvador Dali, but it's in the style of Salvador Dali. So I thought this is a very cool way to commemorate the film we are premiering at the Toronto International Film Festival this weekend. This independent movie I've had in development for something like. Over a decade and the great Actor Academy award-winning actor Ben Kingsley plays Dolly and gives a phenomenal performance. So we're excited to premiere this movie, show it to the world for the first time this weekend. Alright, thanks for watching. Bye. Let your winners ride Rain Man David Sasson. We open sources to the fans and they've just gone crazy with it. Thank you. Why? Besties are. My dog taking out your driveway? Ohh 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. Beat, beat. See what we need to get merchants?